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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
October 15, 1996
Accredited Home Lenders, Inc.
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(Exact name of registrant as specified in its charter)
California 333-07219 33-0426859
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(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
15030 Avenue of Science, 92128
Suite 100 ------------
San Diego, California (Zip Code)
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(Address of Principal
Executive Offices)
Registrant's telephone number, including area code (619) 676-2100
No Change
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(Former name or former address, if changed since last report)
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Item 2. Acquisition or Disposition of Assets
Description of the Certificates and the Mortgage Loans
Accredited Home Lenders, Inc. (the "Registrant") registered
issuances of up to $500,000,000 principal amount of Asset-Backed Notes and
Asset-Backed Certificates on a delayed or continuous basis pursuant to Rule 415
under the Securities Act of 1933, as amended (the "Act"), by a Registration
Statement on Form S-3 (Registration File No. 333-07219) (as amended, the
"Registration Statement"). Pursuant to the Registration Statement, Accredited
Mortgage Loan Trust 1996-1 (the "Trust") issued $92,121,000,00 in aggregate
principal amount of its Mortgage Loan Asset-Backed Certificates, Series 1996-1
(the "Certificates"), on September 27, 1996 (the "Closing Date"). This Current
Report on Form 8-K is being filed to satisfy an undertaking to file copies of
certain agreements executed in connection with the issuance of the Certificates,
the forms of which were filed as Exhibits to the Registration Statement.
The Certificates were issued pursuant to a Pooling and Servicing
Agreement (the "Pooling and Servicing Agreement") attached hereto as Exhibit
4.1, dated as of September 1, 1996, among Accredited Home Lenders, Inc. as
sponsor (the "Sponsor"), and as master servicer (the "Master Servicer"), and
Bankers Trust Company, as trustee (the "Trustee"). The Certificates consist of
one class of fixed rate certificates, the Class A-1 Certificates (the "Class A-1
Certificates") and one class of variable rate certificates, the Class A-2
Certificates (the "Class A-2 Certificates"). In addition to the Class A
Certificates, the Trust will also issue one or more Classes of subordinate
Certificates (the "Class B Certificates") and one or more Classes of Residual
Certificates. Only the Class A Certificates were issued pursuant to the
Registration Statement. The Certificates initially evidence, in the aggregate,
100% of the undivided beneficial ownership interests in the Trust.
The assets of the Trust consist primarily of two pools of mortgage
loans, the first consisting of fixed-rate, amortizing mortgage loans ("Group I
Mortgage Loans") relating to the Class A-1 Certificates and the second
consisting of adjustable rate amortizing mortgage loans ("Group II Mortgage
Loans") relating to the Class A-2 Certificates; each of the Group I Mortgage
Loans and the Group II Mortgage Loans are secured by first or second liens on
residential properties (collectively, Group I Mortgage Loans and Group II
Mortgage Loans, the "Mortgage Loans").
Interest distributions on the Class A Certificates are based on the
Certificate Principal Balance thereof and the then applicable Pass-Through Rate
thereof. The Pass-Through Rate for the Class A-1 will be 7.600% per annum. The
Pass-Through Rate for the Class A-2 Certificates will be equal to the lesser of
(i)(a) with respect to any Distribution Date which occurs on or prior to
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the Step-Up Distribution Date, the London interbank offered rate for one-month
United States dollar deposits ("LIBOR") plus 0.32% per annum or (b) with respect
to any Distribution Date thereafter, one-month LIBOR plus 0.64% per annum or
(ii) the Class A-2 Available Funds Pass-Through Rate for such Distribution Date.
The "Class A-2 Available Funds Pass-Through Rate," as of any Distribution Date,
equals an amount, expressed as a per annum rate, equal to (a)(i) the aggregate
amount of interest due on all of the Group II Mortgage Loans for the related
remittance period, plus (ii) the amount, if any by which the subordinated amount
for Group II exceeds the specified subordinated amount for Group II, but only to
the extent of the amount otherwise distributable to the Owners of the Class A-2
Certificates as distributions of principal, minus (iii) the aggregate of the
servicing fee and the trustee's fee and the premium due to the Certificate
Insurer, in each case relating to Group II, on such Distribution Date and minus
(iv) commencing on the 13th Distribution Date following the Closing Date, an
amount equal to 0.50% per annum times the aggregate principal balance of the
Group II Mortgage Loans as of the beginning of such related remittance period,
divided by (b) the Class A-2 certificate principal balance immediately prior to
such Distribution Date calculated on the basis of a 360 day year and the actual
number of days elapsed.
The "Step-Up Distribution Date" is the second Distribution Date
which follows the Clean-Up Call Date.
Distributions on the Certificates are required to be made on the
twenty-fifth day of each calendar month, or if such day is not a Business Day,
the next succeeding Business Day (each, a "Distribution Date") to the Owners as
of the related record date.
The "Clean-Up Call Date" is the first date on which a majority
percentage interest of the Residual Certificates will have the right to purchase
from the Trust all of the Mortgage Loans after the first remittance date on
which the aggregate principal balance of the Mortgage Loans had declined to 10%
or less of the original aggregate principal balance of the Mortgage Loans.
The Class A-1 Certificates have an aggregate principal amount of
$14,073,000 and the Class A-2 Certificates have an aggregate principal amount of
$78,048,000.
The Class B Certificates represent the right to receive excess
amounts in the Supplemental Interest Payment Account as calculated and described
in the Pooling and Servicing Agreement.
As of the Closing Date, the Mortgage Loans possessed the
characteristics described in the Prospectus dated September 18, 1996 and the
Prospectus Supplement dated September 23, 1996, filed pursuant to Rule 424(b)(3)
of the Act on September 26, 1996.
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Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Not applicable
(b) Not applicable
(c) Exhibits:
1.1 Underwriting Agreement, dated September 23, 1996, among
Accredited Home Lenders, Inc. and Lehman Brothers Inc.
1.2 Terms Agreement, dated September 23, 1996, among Accredited Home
Lenders, Inc. and Lehman Brothers Inc.
4.1 Pooling and Servicing Agreement, dated as of September 1, 1996,
among Accredited Home Lenders, Inc., as sponsor and as master servicer, and
Bankers Trust Company, as trustee.
10.1 Indemnification Agreement, dated as of September 23, 1996,
among Financial Security Assurance Inc., Accredited Home Lenders, Inc. and
Lehman Brothers Inc.
10.2 Insurance and Indemnity Agreement dated as of September 1, 1996
between Financial Security Assurance Inc. and Accredited Home Lenders, Inc.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly authorized.
ACCREDITED HOME LENDERS, INC. as
Sponsor and on behalf of ACCREDITED
MORTGAGE LOAN TRUST 1996-1
Registrant
By: /s/ James A. Konrath
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Name: James A. Konrath
Title: President
Dated: October 15, 1996
<PAGE>
EXHIBIT INDEX
Exhibit No. Description Page No.
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1.1 Underwriting Agreement, dated as of
September 23, 1996, among Accredited Home
Lenders, Inc. and Lehman Brothers Inc.
1.2 Terms Agreement, dated September 23,
1996, among Accredited Home Lenders, Inc.
and Lehman Brothers Inc.
4.1 Pooling and Servicing Agreement, dated as
of September 1, 1996, among Accredited
Home Lenders, Inc. as sponsor and as
master servicer, and Bankers Trust
Company, as trustee.
10.1 Indemnification Agreement, dated as of
September 23, 1996, among Financial
Security Assurance Inc., Accredited Home
Lenders, Inc. and Lehman Brothers Inc.
10.2 Insurance and Indemnity Agreement dated
as of September 1, 1996 between Financial
Security Assurance Inc. and Accredited
Home Lenders, Inc.
ACCREDITED HOME LENDERS, INC.,
SPONSOR AND MASTER SERVICER
Asset-Backed Certificates, Asset-Backed Notes
UNDERWRITING AGREEMENT
September 23, 1996
LEHMAN BROTHERS INC.
Three World Financial Center
New York, New York 10285
Dear Sirs:
Accredited Home Lenders, Inc. (the "Company") is a California
corporation with its principal place of business in San Diego, California. The
Company has registered with the Commission (as defined below) $500 million of
Asset-Backed Certificates and Asset-Backed Notes (collectively, the
"Certificates"). The Certificates may be issued in one or more series (each, a
"Series"), and, within each Series, in one or more classes (each, a "Class") on
terms determined at the time of sale. Each Series will be issued under a
separate Pooling and Servicing Agreement (each, a "Pooling and Servicing
Agreement") among the Company, as sponsor and master servicer, and a trustee to
be identified in the prospectus supplement for each such Series (the "Trustee").
The Certificates of each Series will evidence specified interests in a separate
pool of Mortgage Loans (the "Pool") and certain other property held in trust
with respect to such Series (each, a "Trust Fund"). A form of Pooling and
Servicing Agreement has been filed as an exhibit to the Registration Statement
(as defined below).
The Certificates are more fully described in a Registration
Statement which the Company has furnished to Lehman Brothers Inc. (the
"Underwriter"). Capitalized terms used but not defined herein have the meanings
given to them in the Pooling and Servicing Agreement.
Each offering of Certificates pursuant to this Underwriting
Agreement (the "Agreement") will be made through the Underwriter. Whenever the
Company decides to make an offering of Certificates under this Agreement, it
will enter into an agreement (the "Terms Agreement") providing for the sale of
such Certificates to, and the purchase and offering
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thereof by the Underwriter. The Terms Agreement relating to each offering of
Certificates shall specify, among other things, the principal amount or amounts
of Certificates to be issued, the price or prices at which the Certificates are
to be purchased by the Underwriter from the Company and the initial public
offering price or prices or the method by which the price or prices at which
such Certificates are to be sold will be determined. A Terms Agreement, which
shall be substantially in the form of Exhibit A hereto, may take the form of an
exchange of any standard form of written telecommunication between the
Underwriter and the Company. Each such offering of Certificates will be governed
by this Agreement, as supplemented by the applicable Terms Agreement, and this
Agreement and such Terms Agreement shall inure to the benefit of and be binding
upon the Underwriter.
The Company has filed with the Securities and Exchange Commission
(the "Commission") a registration statement on Form S-3 (No. 33-07219) (the
"Registration Statement"), relating to the Certificates, and the offering
thereof from time to time in accordance with Rule 415 under the Securities Act
of 1933, as amended (the "1933 Act"), and has filed, and proposes to file, such
amendments thereto as may have been required to the date hereof pursuant to the
1933 Act and the rules of the Commission thereunder (the "Regulations"). Such
Registration Statement, as amended at the time when it becomes effective under
the 1933 Act, and the prospectus relating to the sale of Certificates by the
Company constituting a part thereof, as from time to time each is amended or
supplemented pursuant to the 1933 Act or otherwise, are referred to herein as
the "Registration Statement" and the "Prospectus" respectively; provided,
however, that a supplement to the Prospectus contemplated by Section 3(a) hereof
(a "Prospectus Supplement") shall be deemed to have supplemented the Prospectus
only with respect to the offering or offerings of Certificates to which it
relates.
SECTION 1. Representations and Warranties. The Company represents
and warrants to the Underwriter as of the date hereof and as of the date of each
Terms Agreement (in each case, the "Representation Date"), as follows:
(a) The Registration Statement and the Prospectus, at the time the
Registration Statement became effective did, and as of the applicable
Representation Date will, comply in all material respects with the
requirements of the 1933 Act and the Regulations. The Registration
Statement, at the time it became effective did not, and as of the
applicable Representation Date will not, contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not
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misleading. The Prospectus, as amended or supplemented at the time the
Registration Statement became effective did not, and as amended or
supplemented as of the applicable Representation Date 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,
however, that the representations and warranties in this subsection shall
not apply to statements in, or omissions from, the Registration Statement
or Prospectus made in reliance upon and in conformity with information
furnished to the Company in writing by the Underwriter expressly for use
in the Registration Statement or Prospectus. The conditions to the use by
the Company of a registration statement on Form S-3 under the 1933 Act, as
set forth in the General Instructions to Form S-3, have been satisfied
with respect to the Registration Statement, as applicable, and the
Prospectus. There are no contracts or documents of the Company which are
required to be filed as exhibits to the Registration Statement pursuant to
the 1933 Act or the Regulations which have not been so filed.
(b) The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the State of
California with corporate power and authority to own, lease and operate
its properties and conduct its business as described in the Prospectus and
to enter into and perform its obligations under this Agreement, the
applicable Pooling and Servicing Agreement and the applicable Terms
Agreement; and the Company is duly qualified as a foreign corporation to
transact business and is in good standing in each jurisdiction in which
the ownership or lease of its properties or the conduct of its business
requires such qualification.
(c) The Company is not in violation of its certificate of
incorporation or by-laws or in default in the performance or observance of
any material obligation, agreement, covenant or condition contained in any
contract, indenture, mortgage, loan agreement, note, lease or other
instrument to which it is a party or by which it or its properties may be
bound, which default might result in any material adverse change in the
financial condition, earnings, affairs or business of the Company or which
might materially and adversely affect the properties or assets thereof.
(d) The execution and delivery by the Company of this Agreement, the
applicable Terms Agreement and the applicable Pooling and Servicing
Agreement are within the corporate power of the Company and have been duly
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authorized by all necessary corporate action on the part of the Company;
and neither the issuance and sale of the Certificates to the Underwriter,
nor the execution and delivery by the Company of this Agreement and the
applicable Pooling and Servicing Agreement, nor the consummation by the
Company of the transactions therein contemplated, nor compliance by the
Company with the provisions hereof or thereof, will materially conflict
with or result in a material breach of, or constitute a material default
under, any of the provisions of any law, governmental rule, regulation,
judgment, decree or order binding on the Company or its properties or the
certificate of incorporation or by-laws of the Company, or any of the
provisions of any indenture, mortgage, contract or other instrument to
which the Company is a party or by which it is bound or result in the
creation or imposition of any lien, charge or encumbrance upon any of its
property pursuant to the terms of any such indenture, mortgage, contract
or other instrument.
(e) This Agreement has been, and each applicable Terms Agreement
when executed and delivered as contemplated hereby and thereby will have
been, duly authorized, executed and delivered by the Company, and each
constitutes, or will constitute when so executed and delivered, a legal,
valid and binding instrument enforceable against the Company in accordance
with its terms, subject (i) to applicable bankruptcy, reorganization,
insolvency, moratorium or other similar laws affecting creditors' rights
generally, (ii) as to enforceability, to general principles of equity
(regardless of whether enforcement is sought in a proceeding in equity or
at law) and (iii) as to enforceability with respect to rights of indemnity
thereunder, to limitations of public policy under applicable securities
laws.
(f) The applicable Pooling and Servicing Agreement when executed and
delivered as contemplated hereby and thereby will have been duly
authorized, executed and delivered by the Company, and will constitute
when so executed and delivered, a legal, valid and binding instrument
enforceable against the Company in accordance with its terms, subject (i)
to applicable bankruptcy, reorganization, insolvency, moratorium or other
similar laws affecting creditors' rights generally and (ii) as to
enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law).
(g) As of the applicable Closing Time (as defined below), the
applicable Certificates will have been duly and validly authorized by the
Company, and, when executed
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and authenticated as specified in the Pooling and Servicing Agreement,
will be validly issued and outstanding and will be entitled to the
benefits of the applicable Pooling and Servicing Agreement.
(h) No filing or registration with, notice to or consent, approval,
authorization or order of any court or governmental authority or agency is
required for the consummation by the Company of the transactions
contemplated by this Agreement, the applicable Pooling and Servicing
Agreement or the applicable Terms Agreement, except such as has already
been made or obtained or as may be required under the 1933 Act, the
Regulations, or state securities or Blue Sky laws.
(i) The Company 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
operated by it and as described in the Prospectus and the Company has
received no notice of proceedings relating to the revocation or
modification of any such license, certificate, authority or permit which,
singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would materially and adversely affect the conduct of
the business, operations, financial condition or income of the Company.
(j) As of the applicable Closing Time, the applicable Mortgage Loans
constituting a portion of the Trust Fund will have been duly and validly
assigned to the Trustee in accordance with the applicable Pooling and
Servicing Agreement; and when such assignment is effected, a duly and
validly perfected transfer of all such Mortgage Loans subject to no prior
lien, mortgage, security interest, pledge, charge or other encumbrance
created by the Company will occur.
(k) As of the applicable Closing Time, each of the applicable
Mortgage Loans will meet the eligibility criteria described in the
Prospectus.
(l) Neither the Company nor the Trust Fund created by the applicable
Pooling and Servicing Agreement will be subject to registration as an
"investment company" under the Investment Company Act of 1940, as amended
(the "1940 Act").
(m) The applicable Certificates, the applicable Pooling and
Servicing Agreement and the applicable Terms Agreement conform in all
material respects to the descriptions thereof contained in the Prospectus.
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(n) At the applicable Closing Time, the applicable Certificates
shall have received the certificate rating or ratings specified in the
related Terms Agreement.
(o) At the applicable Closing Time, each of the representations and
warranties of the Company set forth in the applicable Pooling and
Servicing Agreement will be true and correct.
(p) As of the applicable Closing Time, the applicable Pooling and
Servicing Agreement will have been duly authorized, executed and delivered
by, and will constitute a legal, valid and binding obligation of, the
applicable master servicer, enforceable against such master servicer in
accordance with its terms, subject to applicable bankruptcy,
reorganization, insolvency, moratorium or other similar laws affecting
creditors' rights generally and as to enforceability, to general
principles of equity (regardless whether enforcement is sought in a
proceeding in equity or at law).
The Company shall not be deemed to have made the representations and
warranties contained in clause (p) with respect to, and to the extent of,
representations and warranties made to the Underwriter by such master servicer
as to the matters covered in such clause in a certificate in form satisfactory
to your counsel and delivered to the Underwriter at the applicable Closing Time.
Any certificate signed by an officer of the Company or an applicable
master servicer and delivered to the Underwriter or counsel for the Underwriter
in connection with an offering of Certificates shall be deemed, and shall state
that it is, a representation and warranty as to the matters covered thereby to
each person to whom the representations and warranties in this Section 1 are
made.
The Company believes that it is justified in relying on any of the
representations, opinions and certificates relied upon by the Company or
furnished to the Underwriter as described above.
SECTION 2. Purchase and Sale. The commitment of the Underwriter to
purchase Certificates pursuant to any Terms Agreements shall be deemed to have
been made on the basis of the representations and warranties herein contained
and shall be subject to the terms and conditions herein set forth.
Payment of the purchase price for, and delivery of, any Certificates
to be purchased by the Underwriter shall be made at the offices of Dewey
Ballantine, New York, New York, or at such other place as shall be agreed upon
by the Underwriter and the Company, at such time or date as shall be
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agreed upon by the Underwriter and the Company in the Terms Agreement (each such
time and date being referred to as a "Closing Time"). Unless otherwise specified
in the applicable Terms Agreement, payment shall be made to the Company, at the
option of the Company, either (a) by certified or official bank check or checks
in New York Clearing House or similar next day funds payable to the order of the
Company, or (b)in immediately available Federal funds wired to such bank as may
be designated by the Company. Such Certificates shall be in such denominations
and registered in such names as the Underwriter may request in writing at least
two business days prior to the applicable Closing Time. Such Certificates, which
may be in temporary form, will be made available for examination and packaging
by the Underwriter no later than 12:00 noon on the first business day prior to
the applicable Closing Time.
SECTION 3. Covenants of the Company. The Company covenants with the
Underwriter as follows:
(a) Immediately following the execution of each Terms Agreement, the
Company will prepare a Prospectus Supplement setting forth the principal
amount of Certificates covered thereby, the price or prices at which such
Certificates are to be purchased by the Underwriter from the Trust, either
the initial public offering price or prices or the method by which the
price or prices by which such Certificates are to be sold will be
determined, the selling concession(s) and reallowance(s), if any, any
delayed delivery arrangements, and such other information as the
Underwriter and the Company deem appropriate in connection with the
offering of such Certificates. The Company will promptly transmit copies
of the Prospectus Supplement to the Commission for filing pursuant to Rule
424 under the 1933 Act and will furnish to the Underwriter as many copies
of the Prospectus and such Prospectus Supplement as the Underwriter shall
reasonably request.
(b) If at any time when the Prospectus is required by the 1933 Act
to be delivered in connection with sales of any Certificates by the
Underwriter, any event shall occur or condition exist as a result of which
it is necessary, in the opinion of your counsel, counsel for the Company,
or otherwise, to further amend or supplement the Prospectus in order that
the Prospectus will not include an untrue statement of a material fact or
omit to state any material fact necessary to make the statements therein,
in the light of circumstances existing at the time it is delivered to a
purchaser, not misleading or if it shall be necessary, in the opinion of
any such counsel or otherwise, at any such time to amend or supplement
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the Registration Statement or the Prospectus in order to comply with the
requirements of the 1933 Act or the Regulations thereunder, the Company
will promptly prepare and file with the Commission such amendment or
supplement as may be necessary to correct such untrue statement or
omission or to make the Registration Statement comply with such
requirements, and within two business days will furnish to the Underwriter
as many copies of the Prospectus, as so amended or supplemented, as the
Underwriter shall reasonably request.
(c) The Company will give the Underwriter reasonable notice of its
intention to file any amendment to the Registration Statement or any
amendment or supplement to the Prospectus, whether pursuant to the 1933
Act or otherwise, will furnish the Underwriter with copies of any such
amendment or supplement or other documents proposed to be filed a
reasonable time in advance of filing, and will not file any such amendment
or supplement or other documents in a form to which the Underwriter or
your counsel shall object.
(d) The Company will notify the Underwriter immediately, and confirm
the notice in writing, (i) of the effectiveness of any amendment to the
Registration Statement, (ii) of the mailing or the delivery to the
Commission for filing of any supplement to the Prospectus or any document
other than quarterly and annual reports to be filed pursuant to the
Securities Exchange Act of 1934, as amended (the "1934 Act"), (iii) of the
receipt of any comments from the Commission with respect to the
Registration Statement, the Prospectus or any Prospectus Supplement, (iv)
of any request by the Commission for any amendment to the Registration
Statement or any amendment or supplement to the Prospectus or for
additional information, and (v) of the issuance by the Commission of any
stop order suspending the effectiveness of the Registration Statement or
the initiation of any proceedings for that purpose. The Company will make
every reasonable effort to prevent the issuance of any such stop order
and, if any such stop order is issued, to obtain the lifting thereof at
the earliest possible moment.
(e) The Company will deliver to the Underwriter as many signed and
as many conformed copies of the Registration Statement and of each
amendment thereto (including exhibits filed therewith or incorporated by
reference therein and documents incorporated by reference in the
Prospectus) as you may reasonably request.
(f) The Company will endeavor, in cooperation with the Underwriter,
to qualify the Certificates for offering
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and sale under the applicable securities laws of such states and other
jurisdictions of the United States as the Underwriter may designate, and
will maintain or cause to be maintained such qualifications in effect for
as long as may be required for the distribution of the Certificates. The
Company will file or cause the filing of such statements and reports as
may be required by the laws of each jurisdiction in which the Certificates
have been qualified as above provided.
(g) If the Company has elected to cause the applicable Pool to be
treated as a real estate mortgage investment conduit (a "REMIC"), the
Company will prepare, or cause to be prepared, and file, or cause to be
filed a timely election to treat the Pool as a REMIC for federal income
tax purposes and will file, or cause to be filed, such tax returns and
take such actions, all on a timely basis, as are required to elect and
maintain such status.
(h) The Company will file with the Commission within fifteen days of
the issuance of the Certificates a current report on Form 8-K setting
forth specific information concerning the Certificates and the Pool to the
extent that such information is not set forth in the Prospectus. The
Company will also file with the Commission a current report on Form 8-K
setting forth all Computational Materials, ABS Term Sheets and Collateral
Term Sheets (as such terms are defined below) provided to the Company by
the Underwriter within the applicable time periods allotted for such
filing pursuant to the No-Action Letters (as defined below).
(i) In connection with any Computational Materials, ABS Term Sheets
or Collateral Term Sheets provided by the Underwriter pursuant to Section
5, the Company must receive a letter from Deloitte & Touche, LLP,
certified public accountants, satisfactory in form and substance to the
Company, to the effect that such accountants have performed certain
specified procedures, all of which have been agreed to by the Company, as
a result of which they have determined that the information included in
the Computational Materials, ABS Term Sheets or Collateral Term Sheets (if
any), provided by the Underwriter to the Company for filing on Form 8-K
pursuant to Section 5 and subsection (h), is accurate except as to such
matters that are not deemed by the Company to be material. The foregoing
letter shall be obtained at the expense of the Company.
(j) In the event that the Underwriter must prepare corrected
Computational Materials, ABS Term Sheets or Collateral Term Sheets
pursuant to Section 5(d), the
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Company shall file any corrected Computational Materials, ABS Term Sheets
or Collateral Term Sheets no later than two days following receipt
thereof.
SECTION 4. Conditions of Underwriter's Obligations. The obligations
of the Underwriter to purchase Certificates pursuant to any Terms Agreement are
subject to the accuracy of the representations and warranties on the part of the
Company herein contained, to the accuracy of the statements of the Company's
officers made pursuant hereto, to the performance by the Company of all of its
obligations hereunder and to the following further conditions:
(a) At the applicable Closing Time (i) no stop order suspending the
effectiveness of the Registration Statement shall have been issued or
proceedings therefor initiated or threatened by the Commission, (ii) the
Certificates shall have received the rating or ratings specified in the
applicable Terms Agreement, and (iii) there shall not have come to your
attention any facts that would cause the Underwriter to believe that the
Prospectus, together with the applicable Prospectus Supplement at the time
it was required to be delivered to a purchaser of the Certificates,
contained an untrue statement of a material fact or omitted to state a
material fact necessary in order to make the statements therein, in light
of the circumstances existing at such time, not misleading.
(b) At the applicable Closing Time the Underwriter
shall have received:
(1) The favorable opinion, dated as of the applicable Closing
Time, of Dewey Ballantine, special counsel for the Company, as
sponsor and master servicer of the applicable Mortgage Loans, in
form and substance satisfactory to the Underwriter and your counsel,
to the effect that:
(i) This Agreement and the applicable Terms Agreement have
been duly authorized, executed and delivered by the
Company, and each is a valid and binding obligation of
the Company enforceable against the Company in
accordance with its terms, except that (A) such
enforcement may be subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to creditors'
or secured parties' rights generally, (B) such
enforcement may be limited by general
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principles of equity, including (without limitation)
concepts of materiality, reasonableness, good faith and
fair dealing, and other similar doctrines affecting the
enforceability of agreements generally (regardless of
whether enforcement is sought in a proceeding in equity
or at law), and (C) the enforceability as to rights to
indemnity thereunder is subject to the effect of federal
and state securities laws and public policy relating
thereto.
(ii) The applicable Pooling and Servicing Agreement and the
Registration Statement have been duly authorized,
executed and delivered by the Company, and are the valid
and binding obligations of the Company enforceable
against the Company in accordance with its terms, except
that (A) such enforcement may be subject to bankruptcy,
insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to creditors'
rights generally and (B) such enforcement may be limited
by general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at
law).
(iii) The applicable Certificates have been duly authorized
and, when executed and authenticated as specified in the
applicable Pooling and Servicing Agreement and delivered
and paid for pursuant to this Agreement and the
applicable Terms Agreement, will be duly issued and
entitled to the benefits of the applicable Pooling and
Servicing Agreement.
(iv) To the best of such counsel's knowledge, no filing or
registration with or notice to or consent, approval,
authorization or order of any New York or federal court
or governmental authority or agency is required to be
obtained by the Company for the consummation by the
Company of the transactions contemplated by the
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applicable Pooling and Servicing Agreement, except such
as has already been made or obtained or as may be
required under the 1933 Act or the Regulations, or state
securities or Blue Sky laws.
(v) The Registration Statement is effective under the 1933
Act and, to the best of such counsel's knowledge and
information, no stop order suspending the effectiveness
of the Registration Statement has been issued under the
1933 Act or proceedings therefor initiated or threatened
by the Commission.
(vi) The applicable Pooling and Servicing Agreement is not
required to be qualified under the Trust Indenture Act
of 1939, as amended.
(vii) The conditions to the use by the Company of a
registration statement on Form S-3 under the 1933 Act,
as set forth in the General Instructions to Form S-3,
have been satisfied with respect to the Registration
Statement and the Prospectus. To the best of such
counsel's knowledge, there are no contracts or documents
of the Company which are required to be filed as
exhibits to the Registration Statement pursuant to the
1933 Act or the Regulations thereunder which have not
been so filed or incorporated by reference.
(viii) The statements in the applicable Prospectus Supplement
under the headings "Summary - Federal Tax Aspects" and
"Federal Income Tax Considerations" and the statements
in the Prospectus under the heading "Federal Income Tax
Considerations," to the extent that they constitute
statements of law or legal conclusions as to the likely
outcome of material issues under the federal income tax
laws, have been prepared or reviewed by such counsel and
are correct in all material respects.
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(ix) The Trust created by the applicable Pooling and
Servicing Agreement is not, and will not as a result of
the offer and sale of the applicable Certificates as
contemplated in the Prospectus and in this Agreement
become, an "investment company" or "under the control of
an investment company" as such terms are defined in the
1940 Act.
(x) The statements in the Prospectus under the caption
"Description of the Securities" and in the applicable
Prospectus Supplement under the caption "Description of
the Certificates," insofar as such statements purport to
summarize certain terms of the applicable Certificates
and the applicable Pooling and Servicing Agreement,
constitute a fair and accurate summary of such
documents.
(xi) The Registration Statement and the Prospectus (other
than the financial statements and other financial,
statistical and numerical information included therein,
as to which no opinion need be rendered) as of their
respective effective or issue dates, complied as to form
in all material respects with the requirements of the
1933 Act and the Regulations thereunder.
(xii) The execution, delivery and performance by the Company
of the applicable Pooling and Servicing Agreement do not
require the consent or approval of, the giving of notice
to, the registration with, or the taking of any other
action in respect of any federal, state or other
governmental agency or authority which has not
previously been effected.
(xiii) The applicable Pooling and Servicing Agreement creates
a valid security interest in favor of the applicable
Trustee in the applicable Mortgage Loans and other
property included in the applicable Trust Fund on the
date hereof, which security interest of such Trustee in
such Mortgage Loans and the Trust Fund will be perfected
and will
13
<PAGE>
constitute a first perfected security interest upon such
Trustee's taking possession of such Mortgage Loans and
the filing of Uniform Commercial Code ("UCC") financing
statements in the offices of the Secretary of State of
California; provided, however, that such counsel may
take customary exceptions acceptable to the Underwriter.
Such counsel shall deliver to the Underwriter such additional
opinions addressing the transfer by the Company to the Trustee of
its right title and interest in and to the applicable Mortgage Loans
and other property included in the applicable Trust Fund on the
applicable Closing Time as may be required by each Rating Agency
rating the applicable Certificates.
Such counsel shall state that it has participated in the
conferences with officers and other representatives of the Company,
your counsel, representatives of the independent accountants for the
Company and the Underwriter at which the contents of the
Registration Statement and the Prospectus were discussed and,
although such counsel is not passing upon and does not assume
responsibility for, the factual accuracy, completeness or fairness
of the statements contained in the Registration Statement or the
Prospectus (except as stated in paragraphs (xii) and (xiv) above)
and has made no independent check or verification thereof for the
purpose of rendering this opinion, on the basis of the foregoing
(relying as to materiality to a large extent upon the certificates
of officers and other representatives of the Company), nothing has
come to their attention that leads such counsel to believe that the
Registration Statement, when it became effective, contained any
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 or that the Registration Statement
and the Prospectus on the date of the applicable Terms Agreement
contained, and the Prospectus on the date hereof contains, any
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, except that such counsel need express no view with
respect to the financial statements,
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<PAGE>
schedules and other financial, statistical and numerical data
included in or incorporated by reference into the Registration
Statement or the Prospectus.
Said counsel may state that they are admitted to practice only
in the State of New York, that they are not admitted to the Bar in
any other State and are not experts in the law of any other State
and to the extent that the foregoing opinions concern the laws of
any other State such counsel may rely upon the opinion of counsel
satisfactory to the Underwriter and admitted to practice in such
jurisdiction. Any opinions relied upon by such counsel as aforesaid
shall be addressed to the Underwriter and shall be delivered
together with the opinion of such counsel, which shall state that
such counsel believes that their reliance thereon is justified.
(2) The favorable opinion, dated as of the applicable Closing
Time, of David Hertzel, Esq., General Counsel to the Company, as
sponsor and master servicer of the applicable Mortgage Loans, in
form and substance satisfactory to you and your counsel, to the
effect that:
(i) The Company has been duly organized and is validly
existing as a corporation in good standing under the
laws of the State of California.
(ii) The Company is qualified to do business, and is in
good standing, as a foreign corporation in each U.S.
jurisdiction in which the character of the business
owned or leased by it makes such qualification
necessary, except where the failure to be so qualified
would not have a material adverse effect on the
financial condition of the Company.
(iii) There is no pending or, to the best of such counsel's
knowledge threatened litigation or administrative
proceeding of or before any court, tribunal or
governmental agency, authority or body or any arbitrator
which, if adversely determined, would have a material
adverse effect on the financial condition of the
Company.
15
<PAGE>
(iv) The execution and delivery by the Company of this
Agreement, the applicable Terms Agreement and the
applicable Pooling and Servicing Agreement and the
signing of the Registration Statement by the Company are
within the corporate power of the Company and have been
duly authorized by all necessary corporate action on the
part of the Company.
(v) None of the transfer of the applicable Mortgage Loans to
the applicable Trust, the issue and sale of the
applicable Certificates or the consummation of the
transactions contemplated herein nor the fulfillment of
the terms hereof will, to the best of such counsel's
knowledge, conflict with or constitute a breach of, or
default under, any contract, indenture, mortgage, loan
agreement, note, lease or other instrument to which the
Company is a party or by which it may be bound or to
which the property or assets of the Company are subject
(which contracts, indentures, mortgages, loan
agreements, notes, leases and other such instruments
have been identified by the Company to such counsel),
nor will such action result in any violation of the
provisions of the articles of incorporation or by-laws
of the Company or, to the best of such counsel's
knowledge, any order or regulation known to such counsel
to be applicable to the Company of any state or federal
court, regulatory body, administrative agency,
governmental body or arbitrator having jurisdiction over
the Company.
(vi) To such counsel's knowledge, there are no pending or
overtly threatened lawsuits or claims against the
Company or relating to the transactions contemplated by
this Agreement and the applicable Pooling and Servicing
Agreement which, if adversely determined, would have a
material adverse effect on the transactions contemplated
by this Agreement and the applicable Pooling and
Servicing Agreement.
16
<PAGE>
(3) The favorable opinion of counsel to the applicable
Trustee, dated as of the applicable Closing Time, addressed to you
and in form and scope satisfactory to your counsel, to the effect
that:
(i) The applicable Trustee has duly authorized, executed and
delivered the applicable Pooling and Servicing Agreement
and such Pooling and Servicing Agreement is enforceable
against such Trustee in accordance with its terms,
except as such enforceability may be limited by
bankruptcy, insolvency, reorganization or other similar
laws affecting the enforcement of creditors' rights in
general and by general principles of equity regardless
of whether such enforcement is considered in a
proceeding in equity or at law.
(ii) The applicable Trustee has full power and authority to
execute and deliver the applicable Pooling and Servicing
Agreement and to perform its obligations thereunder.
(iii) No consent, approval or authorization of, or
registration, declaration or filing with, any court or
governmental agency or body of the jurisdiction of
incorporation of the applicable Trustee is required for
the execution, delivery or performance by such Trustee
of the applicable Pooling and Servicing Agreement.
In rendering such opinion, such counsel may rely, as to
matters of fact, to the extent deemed proper and stated therein, on
certificates of responsible officers of the applicable Trustee or
public officials.
(4) The favorable opinion or opinions, dated as of the
applicable Closing Time, of counsel for the Underwriter with respect
to the issue and sale of the Certificates, the Registration
Statement, this Agreement, the Prospectus, the applicable Prospectus
Supplement and other related matters as the Underwriter may require.
17
<PAGE>
(c) At the applicable Closing Time you shall have received a
certificate of the President or a Vice President of the Company, dated as
of such Closing Time, to the effect that the representations and
warranties of the Company contained in Section 1 are true and correct with
the same force and effect as though such Closing Time were a
Representation Date.
(d) The Underwriter shall have received from Deloitte & Touche, LLP,
or other independent certified public accountants acceptable to you, a
letter, dated as of the date of the applicable Terms Agreement and as of
the applicable Closing Time, delivered at such times, in the form
heretofore agreed to.
(e) At the applicable Closing Time the Underwriter shall have
received, addressed to you, any additional opinions delivered by counsel
pursuant to the request of the Rating Agency or Rating Agencies rating the
applicable Certificates.
(f) At the applicable Closing Time, counsel for the Underwriter
shall have been furnished with such documents and opinions as they
reasonably may require for the purpose of enabling them to pass upon the
issuance and sale of the applicable 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 Company in connection with the issuance and sale
of the applicable Certificates as herein contemplated shall be
satisfactory in form and substance to the Underwriter and counsel for the
Underwriter.
If any condition specified in this Section shall not have been
fulfilled when and as required to be fulfilled, the applicable Terms Agreement
may be terminated by you by notice to the Company at any time at or prior to the
applicable Closing Time, and such termination shall be without liability of any
party to any other party except as provided in Section 6.
SECTION 5. Investor Information. The Underwriter may prepare and
provide to prospective investors certain Computational Materials, ABS Term
Sheets or Collateral Term Sheets in connection with its offering of the
Certificates, subject to the following conditions:
(a) The Underwriter shall comply with the requirements of the
No-Action Letter of May 20, 1994 issued by the Commission to Kidder,
Peabody Acceptance Corporation I, Kidder, Peabody & Co. Incorporated and
18
<PAGE>
Kidder Structured Asset Corporation, as made applicable to other issuers
and underwriters by the Commission in response to the request of the
Public Securities Association dated May 24, 1994 (collectively, the
"Kidder/PSA Letter"), and the requirements of the No-Action Letter of
February 17, 1995 issued by the Commission to the Public Securities
Association (the "PSA Letter" and, together with the Kidder/PSA Letter,
the "No-Action Letters").
(b) For purposes hereof, "Computational Materials" shall have the
meaning given such term in the No-Action Letters, but shall include only
those Computational Material that have been prepared or delivered to
prospective investors by the Underwriter. For purposes hereof, "ABS Term
Sheets" and "Collateral Term Sheets" shall have the meanings given such
terms in the PSA Letter but shall include only those ABS Term Sheets or
Collateral Term Sheets that have been prepared or delivered to prospective
investors by the Underwriter.
(c) The Underwriter shall provide to the Company any Computational
Materials, ABS Term Sheets or Collateral Term Sheets which are provided to
investors no later than the date preceding the date such Computational
Materials, ABS Term Sheets or Collateral Term Sheets are required to be
filed pursuant to the applicable No-Action Letters. The Underwriter may
provide copies of the foregoing in a consolidated or aggregated form
including all information required to be filed.
(d) In the event that the Company or the Underwriter discovers an
error in the Computational Materials, ABS Term Sheets or Collateral Term
Sheets, the Underwriter that prepared such material shall prepare
corrected Computation Materials, ABS Term Sheets or Collateral Term Sheets
and deliver it to the Company for filing pursuant to Section 3(h).
SECTION 6. Payment of Expenses. The Company will pay all expenses
incident to the performance of its obligations under this Agreement, including
without limitation those related to (i) the filing of the Registration Statement
and all amendments thereto, (ii) the printing and delivery to the Underwriter,
in such quantities as you may reasonably request, of copies of this Agreement
and each Terms Agreement, (iii) the preparation, issuance and delivery of the
Certificates to the Underwriter, (iv) the fees and disbursements of the
Company's counsel and accountants, (v) the qualification of the Certificates
under securities and Blue Sky laws and the determination of the eligibility of
the Certificates for investment in accordance with the provisions of Section
3(f), including filing fees, and the fees and
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<PAGE>
disbursements of counsel for the Underwriter in connection therewith and in
connection with the preparation of any Blue Sky Survey and Legal Investment
Survey, (vi) the printing and delivery to the Underwriter, in such quantities as
you may reasonably request, hereinafter stated, of copies of the Registration
Statement and Prospectus and all amendments and supplements thereto, and of any
Blue Sky Survey and Legal Investment Survey, (vii) the printing and delivery to
the Underwriter, in such quantities as you may reasonably request, of copies of
the Pooling and Servicing Agreement, (viii) the fees charged by investment
rating agencies for rating the Certificates, (ix) the fees and expenses incurred
in connection with the listing of the Certificates on any national securities
exchange, (x) the fees and expenses incurred with respect to the National
Association of Securities Dealers, Inc., including the fees and disbursements of
counsel for the Underwriter in connection therewith and (xi) the fees and
expenses of the Trustee and its counsel.
If a Terms Agreement is terminated by the Underwriter in accordance
with the provisions of Section 4 or Section 10(i) hereof, the Company shall
reimburse the Underwriter for all reasonable out-of-pocket expenses, including
the reasonable fees and disbursements of counsel for the Underwriter.
SECTION 7. Indemnification. (a) The Company agrees to indemnify and
hold harmless the Underwriter and each person, if any, who controls the
Underwriter within the meaning of Section 15 of the 1933 Act as follows:
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred (x) arising out of any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement (or any amendment thereto), or the omission or alleged omission
therefrom of a material fact required to be stated therein or necessary to
make the statements therein not misleading or (y) arising out of any
untrue statement or alleged untrue statement of a material fact contained
in the Prospectus (or any amendment or supplement thereto) or the omission
or alleged omission therefrom of a material fact necessary in order to
make the statements therein, in light of the circumstances under which
they were made, not misleading, unless, under either clause (x) or (y),
such untrue statement or omission or alleged untrue statement or omission
was made in reliance upon and in conformity with written information
furnished to the Company by the Underwriter expressly for use in the
Registration Statement (or any amendment thereto) or the Prospectus (or
any amendment or supplement thereto);
20
<PAGE>
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue statement or
alleged untrue statement of a material fact contained in the Computational
Materials, ABS Term Sheets or Collateral Term Sheets distributed by the
Underwriter; unless such untrue statement or alleged untrue statement of a
material fact was made in reliance upon and in conformity with Derived
Information (as defined below) provided by the Underwriter expressly for
use in the Computational Materials, the ABS Term Sheets or the Collateral
Term Sheets and the untrue statement or alleged untrue statement did not
derive from an inaccuracy in the Seller-Provided Information (as defined
below) used in the preparation of such Computational Materials, ABS Term
Sheets or Collateral Term Sheets;
(iii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or investigation or proceeding by
any governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, if such
settlement is effected with the written consent of the Company; and
(iv) against any and all expense whatsoever (including the
fees and disbursements of counsel chosen by you with the Company's
consent, subject to the restrictions contained in subsection (c) of this
Section, reasonably incurred in investigating, preparing or defending
against any litigation, or investigation or proceeding by any governmental
agency or body, commenced or threatened, or any claim whatsoever based
upon any such untrue statement or omission, to the extent that any such
expense is not paid under (i), (ii) or (iii) above).
This indemnity agreement will be in addition to any liability which
the Company may otherwise have. Insofar as this indemnity may permit
indemnification for liabilities under the 1933 Act of any person who is a
partner of the Underwriter entitled to indemnity hereby or who controls the
Underwriter within the meaning of Section 15 of the 1933 Act and who, at the
date of this Agreement, is a director, officer or controlling person of the
Company, such indemnity agreement is subject to the undertaking of the Company
in the Registration Statement.
(b) The Underwriter agrees to indemnify and hold harmless the
Company, each of the Company's directors, each of the Company's officers who
signed the Registration Statement, and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act as follows:
21
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(i) against any and all loss, liability, claim, damage and
expense described in the indemnity contained in subsection (a) of this
Section, as incurred, but only with respect to untrue statements or
omissions, or alleged untrue statements or omissions, made in the
Registration Statement (or any amendment thereto) or the Prospectus (or
any amendment or supplement thereto) in reliance upon and in conformity
with written information furnished to the Company by the Underwriter
expressly for use in the Registration Statement (or any amendment thereto)
or the Prospectus (or any amendment or supplement thereto); and
(ii) against any and all loss, liability, claim, damage and
expense described in the indemnity contained in subsection (a) of this
Section, as incurred, but only with respect to untrue statements or
alleged untrue statements made in the Computational Materials, Collateral
Term Sheets or ABS Term Sheets to the extent that such untrue statement or
alleged untrue statement of a material fact was made in reliance upon and
in conformity with Derived Information provided by the Underwriter
expressly for use in the Computational Materials, the ABS Term Sheets or
the Collateral Term Sheets and the untrue statements or alleged untrue
statements did not derive from an inaccuracy in the Seller-Provided
Information used in the preparation of such Computational Materials, ABS
Term Sheets or Collateral Term Sheets.
This indemnity agreement will be in addition to any liability which
the Underwriter may otherwise have.
For purposes of this Agreement, as to the Underwriter, "Derived
Information" means such portion, if any, of the information delivered to the
Company by the Underwriter pursuant to Section 5 for filing with the Commission
on Form 8-K and:
(i) is not contained in the Prospectus, or is furnished by the
Underwriter for use in the Prospectus, without taking into account
information incorporated therein by reference; and
(ii) does not constitute Seller-Provided Information.
"Seller-Provided Information" means any computer tape (or other information)
furnished to the Underwriter by or on behalf of the Company concerning the
assets of the Trust Fund.
(c) Each indemnified party shall give prompt notice to each
indemnifying party of any action commenced against it
22
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with respect to which indemnity may be sought hereunder but failure to so notify
an indemnifying party shall not relieve it from any liability which it may have
otherwise than on account of this indemnity agreement. An indemnifying party may
participate at its own expense in the defense of such action. In no event shall
the indemnifying parties be liable for the fees and expenses of more than one
counsel for all indemnified parties in connection with any one action or
separate but similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances.
SECTION 8. Contribution. In order to provide for just and equitable
contribution in circumstances in which the indemnity agreement provided for in
Section 7 hereof is for any reason held to be unenforceable by the indemnified
parties although applicable in accordance with its terms, the Company on the one
hand, and the Underwriter, 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 Company and the Underwriter in such
proportions that the Underwriter is responsible for that portion represented by
the percentage that the underwriting discount or discounts on the cover of such
Prospectus Supplement bears to the initial public offering price or prices as
set forth thereon and the Company shall be responsible for the balance;
provided, however, that no person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution
from any person who was not guilty of such fraudulent misrepresentation and,
provided further, the Underwriter shall not be required to contribute any amount
in excess of the amount by which the total price of the Certificates purchased
by such Underwriter pursuant to the Terms Agreement exceeds the amount of any
damages which the Underwriter has otherwise paid or become liable to pay by
reason of any untrue or alleged untrue statement or omission or alleged
omission. For purposes of this Section, each person, if any, who controls the
Underwriter within the meaning of Section 15 of the 1933 Act shall have the same
rights to contribution as the Underwriter and each director of the Company, each
officer of the Company who signed the Registration Statement, and each person,
if any, who controls the Company within the meaning of Section 15 of the 1933
Act shall have the same rights to contribution as the Company.
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 Company submitted
pursuant hereto, shall remain operative and in full force and effect, regardless
of any termination of this Agreement, or any investigation made by or on behalf
of the Underwriter or
23
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controlling person thereof, or by or on behalf of the Company and shall survive
delivery of any Certificates to the Underwriter.
SECTION 10. Termination of Agreement. This Agreement may be
terminated for any reason at any time by either the Company or the Underwriter
upon the giving of thirty days' written notice of such termination to the other
party hereto. You may also terminate a Terms Agreement, immediately upon notice
to the Company, at any time at or prior to the applicable Closing Time (i) if
there has been, since the date of such Terms Agreement or since the respective
dates as of which information is given in the Registration Statement or
Prospectus any change, or any development involving a prospective change in, or
affecting, the condition, financial or otherwise, earnings, affairs or business
of the Company whether or not arising in the ordinary course of business, which
in your judgment would materially impair the market for, or the investment
quality of, the Certificates, or (ii) if there has occurred any outbreak of
hostilities or other calamity or crisis the effect of which on the financial
markets of the United States is such as to make it, in your judgment,
impracticable to market the Certificates or enforce contracts for the sale of
the Certificates, or (iii) if trading generally on either the New York Stock
Exchange or the American Stock Exchange has been suspended, or minimum or
maximum prices for securities have been required, by either of said exchanges or
by order of the Commission or any other governmental authority, or if a banking
moratorium has been declared by either Federal or New York authorities. In the
event of any such termination, (A) the covenants set forth in Section 3 with
respect to any offering of Certificates shall remain in effect so long as the
Underwriter own any such Certificates purchased from the Company pursuant to the
applicable Terms Agreement and (B) the covenant set forth in Section 3(c), the
provisions of Section 6, the indemnity agreement set forth in Section 7, and the
contribution provisions set forth in Section 8, and the provisions of Sections 9
and 14 shall remain in effect.
SECTION 11. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the
Underwriter shall be directed to you at the address set forth on the first page
hereof, attention of the [Lehman to provide]. Notices to the Company shall be
directed to Accredited Home Lenders, Inc., 15030 Avenue of Science, San Diego,
California 92128, attention of the President, with a copy to the Executive Vice
President.
SECTION 12. Parties. This Agreement shall inure to the benefit of
and be binding upon you and the Company and any
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Terms Agreement shall inure to the benefit of and be binding upon the Company
and the Underwriter, and its successors. Nothing expressed or mentioned in this
Agreement or a Terms Agreement is intended or shall be construed to give any
person, firm or corporation, other than the parties hereto or thereto and their
respective successors and the controlling persons and officers and directors
referred to in Sections 7 and 8 and their heirs and legal representatives any
legal or equitable right, remedy or claim under or with respect to this
Agreement or a Terms Agreement or any provision herein or therein contained.
This Agreement and any Terms Agreement and all conditions and provisions hereof
or thereof are intended to be for the sole and exclusive benefit of the parties
and their respective successors and said controlling persons and officers and
directors and their heirs and legal representatives (to the extent of their
rights as specified herein and therein) and for the benefit of no other person,
firm or corporation. No purchaser of Certificates from the Underwriter shall be
deemed to be a successor by reason merely of such purchase.
SECTION 13. Governing Law and Time. This Agreement and each Terms
Agreement shall be governed by the laws of the State of New York. Specified
times of day refer to New York City time.
SECTION 14. Counterparts. This Agreement and any Terms Agreement may
be executed in counterparts, each of which shall constitute an original of any
party whose signature appears on it, and all of which shall together constitute
a single instrument.
[Remainder of Page Intentionally Left Blank]
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If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us a counterpart hereof, whereupon this
instrument along with all counterparts will become a binding agreement between
you and the Company in accordance with its terms.
Very truly yours,
ACCREDITED HOME LENDERS, INC.
By:/s/ Ray W. McKewon
-------------------------------
Name: Ray W. McKewon
Title: Executive Vice President
CONFIRMED AND ACCEPTED, as of
the date first above written:
LEHMAN BROTHERS INC.
By:/s/ Theodore P. Janulis
------------------------------
Name: Theodore P. Janulis
Title: Managing Director
<PAGE>
Exhibit A
ACCREDITED HOME LENDERS, INC.,
SPONSOR AND MASTER SERVICER
Mortgage Loan Asset-Backed Certificates,
Series 1996-__
Classes __
FORM OF TERMS AGREEMENT
Dated: _______, 1996
To: Accredited Home Lenders, Inc., (the "Company") under the
Pooling and Servicing Agreement, dated as of _______ 1,
1996 (the "Pooling and Servicing Agreement")
Re: Underwriting Agreement dated _______, 1996
Series Designation: Mortgage Loan Asset-Backed Certificates,
Series 1996-_, Class
Underwriter: Lehman Brothers Inc. ("Lehman Brothers")
Terms of the Certificates:
Original
Principal Remittance
Class Amount* Rate
- ----- --------- ----------
* Approximate. Subject to permitted variance of plus or minus 5%.
Certificate Ratings:
REMIC Election:
The Company intends to elect to cause the Trust to be treated as a REMIC.
A-1
<PAGE>
Master Servicer:
Accredited Home Lenders, Inc. (in such capacity, the
"Master Servicer")
Trust:
The Trust shall include mortgage loans ("Mortgage Loans") conveyed by the
Company listed in an exhibit to the assignment by the Company to the Trustee of
such loans.
Credit Enhancement:
Payment Dates:
Purchase Price:
Payment of the purchase price shall be in immediately available Federal
funds wired to such bank as may be designated by the Company.
Underwriting Commission:
Notwithstanding anything to the contrary in the Underwriting Agreement, no
additional underwriting commission shall be payable by the Company to the
Underwriter in connection with the purchase of the Certificates.
Public Offering price and/or method of determining price at which the
Underwriter will sell the Certificates:
Class :
Class :
Class :
Class :
Class :
Class :
Closing Date and Location:
On or about _______, 1996, at the offices of Dewey Ballantine, New York,
New York.
A-2
<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us a counterpart hereof, whereupon this
instrument along with all counterparts will become a binding agreement between
you and the Company in accordance with its terms.
LEHMAN BROTHERS INC.
By:__________________________________
Name:
Title:
ACCEPTED:
ACCREDITED HOME LENDERS, INC.
By:_____________________________
Name:
Title:
A-3
ACCREDITED HOME LENDERS, INC.,
SPONSOR AND MASTER SERVICER
Mortgage Loan Asset-Backed Certificates,
Series 1996-1
Classes A-1 and A-2
TERMS AGREEMENT
Dated: September 23, 1996
To: Accredited Home Lenders, Inc., (the "Company") under
the Pooling and Servicing Agreement, dated as of
September 1, 1996 (the "Pooling and Servicing
Agreement")
Re: Underwriting Agreement dated September 23, 1996
Series Designation: Mortgage Loan Asset-Backed Certificates,
Series 1996-1, Class A-1 and Class A-2
Underwriter: Lehman Brothers Inc. ("Lehman Brothers")
Terms of the Certificates:
Original
Principal Remittance
Class Amount* Rate
- ----- --------- ----------
A-1 $ 14,073,000 7.60%
A-2 $ 78,048,000 Variable
* Approximate. Subject to permitted variance of plus or
minus 5%.
Certificate Ratings:
Class A-1 and Class A-2 shall be rated AAA by Standard & Poor's Ratings
Services and Aaa by Moody's Investors
Service, Inc.
1
<PAGE>
REMIC Election:
The Company intends to elect to cause the Trust to be treated as a REMIC.
Master Servicer:
Accredited Home Lenders, Inc. (in such capacity, the
"Master Servicer")
Trust:
The Trust shall include mortgage loans ("Mortgage Loans") conveyed by the
Company listed in an exhibit to the assignment by the Company to the Trustee of
such loans.
Credit Enhancement:
Accredited Home Lenders, Inc. shall obtain from
Financial Security Assurance Inc. (the "Certificate
Insurer") a noncancelable certificate guaranty insurance
policy relating to the Class A-1 Certificates and the Class
A-2 Certificates in favor of the Trustee.
Payment Dates:
Each month the Distribution Date shall be the 25th day of the month or if
such 25th day is not a business day the next succeeding business day thereafter
commencing October 25, 1996. The Final Scheduled Distribution Date is expected
to be October 25, 2027.
Purchase Price: $92,121,000.00
Payment of the purchase price shall be in immediately available Federal
funds wired to such bank as may be designated by the Company.
Underwriting Commission:
Notwithstanding anything to the contrary in the Underwriting Agreement, no
additional underwriting commission shall be payable by the Company to the
2
<PAGE>
Underwriter in connection with the purchase of the Certificates.
Public Offering price and/or method of determining price at which the
Underwriter will sell the Certificates:
================================================================================
Price to Public Underwriting Proceeds to
Discount Sponsor (2)
- --------------------------------------------------------------------------------
Per Class A-1 Certificate..... 100.00%(1) 0.35% 99.65%
- --------------------------------------------------------------------------------
Per Class A-1 Certificate..... 100.00% 0.35% 99.65%
- --------------------------------------------------------------------------------
Total.........................$92,1221,000.00 $322,423.50 $91,798,576.50
================================================================================
(1) Plus accrued interest from September 1, 1996 at the Class A-1 Pass-Through
Rate.
(2) Before deducting expenses, estimated to be $750,000.
Closing Date and Location:
On or about September 27, 1996, at the offices of Dewey Ballantine, New
York, New York.
3
<PAGE>
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to us a counterpart hereof, whereupon this instrument
along with all counterparts will become a binding agreement between you and the
Company in accordance with its terms.
LEHMAN BROTHERS INC.
By: /s/ Theodore P. Janulis
-----------------------------------
Name: Theodore P. Janulis
Title: Managing Director
ACCEPTED:
ACCREDITED HOME LENDERS, INC.
By: /s/ Ray W. McKewon
------------------------------------
Name: Ray W. McKewon
Title: Executive Vice President
4
POOLING AND SERVICING AGREEMENT
Relating to
ACCREDITED MORTGAGE LOAN TRUST
1996-1
Among
ACCREDITED HOME LENDERS, INC.
as Sponsor and Master Servicer
and
BANKERS TRUST COMPANY,
as Trustee
Dated as of September 1, 1996
<PAGE>
TABLE OF CONTENTS
(Not a Part of this Agreement)
Page
Parties..................................................................... 1
Recitals.................................................................... 1
ARTICLE I
DEFINITIONS; RULES OF CONSTRUCTION.............................. 2
1.1. Definitions...................................................... 2
Accepted Servicing Practices.................................... 2
Account......................................................... 2
Accrual Period.................................................. 2
Agreement....................................................... 2
Appraised Value................................................. 2
Authorized Officer.............................................. 2
Available Funds................................................. 2
Balloon Loan.................................................... 3
Business Day.................................................... 3
Certificate..................................................... 3
Certificate Insurance Policy.................................... 3
Certificate Insurer............................................. 3
Certificate Insurer Default..................................... 3
Certificate Insurer Premium Rate................................ 4
Certificate Principal Balance................................... 4
Civil Relief Act................................................ 4
Civil Relief Act Interest Shortfall............................. 4
Class........................................................... 4
Class A Certificate............................................. 4
Class A Certificate Principal Balance........................... 4
Class A Distribution Account.................................... 5
Class A-1 Certificate........................................... 5
Class A-1 Distribution Account.................................. 5
Class A-1 Insured Distribution Amount........................... 5
Class A-1 Pass-Through Rate..................................... 5
Class A-2 Available Funds Pass-Through
Rate......................................................... 5
Class A-2 Certificate........................................... 5
Class A-2 Distribution Account.................................. 6
Class A-2 Formula Pass-Through Rate............................. 6
Class A-2 Full Interest Distribution
Amount....................................................... 6
Class A-2 Insured Distribution Amount........................... 6
Class BI-S Certificate.......................................... 6
Class BII-S Certificate......................................... 6
Class R Certificate............................................. 7
Class RS Certificate............................................ 7
Clean-Up Call Date.............................................. 7
Code............................................................ 7
Collection Account.............................................. 7
Combined Loan-to-Value Ratio.................................... 7
i
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Page
Compensating Interest........................................... 7
Coupon Rate..................................................... 7
Cumulative Loss Percentage...................................... 7
Cumulative Realized Losses...................................... 8
Cut-Off Date.................................................... 8
Debt Service Reduction.......................................... 8
Deficient Valuation............................................. 8
Delinquency Advance............................................. 8
Delinquency Percentage.......................................... 8
Delinquent...................................................... 8
Delivery Order.................................................. 8
Depository...................................................... 8
Designated Depository Institution............................... 9
Designated Residual Holder...................................... 9
Determination Date.............................................. 9
Direct Participant" or "DTC Participant......................... 9
Disqualified Organization....................................... 9
Distribution Account............................................ 10
Distribution Date............................................... 10
Document Delivery Requirements.................................. 10
Eligible Investments............................................ 10
Excess Spread Rate.............................................. 10
Excess Spread Trigger........................................... 10
Excess Subordinated Amount...................................... 10
Event of Default................................................ 10
FDIC............................................................ 10
Final Determination............................................. 10
First Mortgage Loan............................................. 11
Fiscal Agent.................................................... 11
FNMA............................................................ 11
Freddie Mac..................................................... 11
Group" or "Mortgage Loan Group.................................. 11
Group I Specified Subordinated Amount........................... 11
Group I Stepped Down Required
Subordinated Percentage...................................... 11
Group II........................................................ 12
Group II Adjusted Pass-Through Rate............................. 12
Group II Specified Subordinated Amount.......................... 12
Group II Stepped Down Required
Subordinated Percentage...................................... 12
Indemnification Agreement....................................... 13
Indirect Participant............................................ 13
Initial Premiums................................................ 13
Insurance Agreement............................................. 13
Insurance Policy................................................ 13
Insurance Proceeds.............................................. 13
Insured Payment................................................. 13
Insured Principal Distribution Amount........................... 13
Interest Determination Date..................................... 14
Interest Distribution Amount.................................... 14
ii
<PAGE>
Page
Interest Remittance Amount...................................... 14
Interest Remittance Period...................................... 14
Late Payment Rate............................................... 14
LIBOR........................................................... 14
Liquidation Expenses............................................ 15
Liquidated Loan................................................. 15
Liquidation Proceeds............................................ 15
Loan Balance.................................................... 15
Loan Purchase Price............................................. 15
London Business Day............................................. 16
Master Servicer................................................. 16
Master Servicer's Trust Receipt................................. 16
Master Servicing Fee............................................ 16
Monthly Remittance Amount....................................... 16
Moody's......................................................... 16
Mortgage........................................................ 16
Mortgage File................................................... 16
Mortgage Loans.................................................. 17
Mortgagor....................................................... 17
Net Liquidation Proceeds........................................ 17
Nonrecoverable Advances......................................... 17
Note............................................................ 17
Officer's Certificate........................................... 17
Operative Documents............................................. 18
Opinion of Counsel.............................................. 18
Original Aggregate Loan Balance................................. 18
Original Certificate Principal Balance.......................... 18
Original Principal Amount....................................... 18
Originator...................................................... 18
Outstanding..................................................... 18
Owner........................................................... 19
Pass-Through Rate............................................... 19
Percentage Interest............................................. 19
Person.......................................................... 19
Pool Principal Balance.......................................... 19
Preference Amount............................................... 19
Premium Amount.................................................. 19
Prepaid Installment............................................. 20
Prepayment...................................................... 20
Prepayment Interest Shortfall................................... 20
Preservation Expenses........................................... 20
Principal Distribution Amount................................... 20
Principal Prepayment in Full.................................... 20
Principal Remittance Amount..................................... 20
Prohibited Transaction.......................................... 21
Property........................................................ 21
Purchase Option Period.......................................... 21
Qualified Liquidation........................................... 21
Qualified Mortgage.............................................. 21
Qualified Replacement Mortgage.................................. 21
iii
<PAGE>
Page
Rating Agency" or "Rating Agencies............................. 22
Realized Loss................................................... 22
Record Date..................................................... 22
Reference Banks................................................. 22
Register........................................................ 22
Registrar....................................................... 23
Registration Statement.......................................... 23
Reimbursement Amount............................................ 23
Released Property Proceeds...................................... 23
REMIC........................................................... 23
REMIC Provisions................................................ 23
REMIC Trust..................................................... 23
Remittance Date................................................. 23
Remittance Period............................................... 23
REO Property.................................................... 24
Replacement Cut-Off Date........................................ 24
Representation Letter........................................... 24
Reserve Interest Rate........................................... 24
Residual Certificate............................................ 24
Responsible Officer............................................. 24
Rolling Delinquency Percentage.................................. 24
Rolling Loss Percentage......................................... 24
Schedules of Mortgage Loans..................................... 25
Second Mortgage Loan............................................ 25
Securities Act.................................................. 25
Senior Lien..................................................... 25
Servicing Advance............................................... 25
Shortfall Amount................................................ 25
Specified Subordinated Amount................................... 25
Sponsor......................................................... 25
Standard & Poor's............................................... 26
Startup Day..................................................... 26
Step-Down Cumulative Loss Test.................................. 26
Step-Down Rolling Delinquency Test.............................. 26
Step-Down Rolling Loss Test..................................... 26
Step-Down Trigger............................................... 26
Step-Up Cumulative Loss Test.................................... 26
Step-up Distribution Date....................................... 26
Step-Up Rolling Delinquency Test................................ 26
Step-Up Rolling Loss Test....................................... 27
Step-Up Trigger................................................. 27
Subordinated Amount............................................. 27
Subordination Deficiency Amount................................. 27
Subordination Deficit........................................... 27
Subordination Increase Amount................................... 27
Subordination Reduction Amount.................................. 28
Substitution Amount............................................. 28
Subservicer..................................................... 28
Subservicing Agreement.......................................... 28
Supplemental Interest Payment Account........................... 28
iv
<PAGE>
Page
Supplemental Interest Payment Amount
Available.................................................... 28
Supplemental Interest Trust..................................... 28
Tax Matters Person.............................................. 28
Termination Notice.............................................. 28
Termination Price............................................... 28
Total Available Funds........................................... 28
Total Monthly Excess Spread..................................... 29
Transaction Documents........................................... 29
Trust........................................................... 29
Trust Estate.................................................... 29
Trustee......................................................... 29
Trustee's Fees.................................................. 29
Underwriter..................................................... 29
1.2. Use of Words and Phrases........................................ 29
1.3. Captions; Table of Contents..................................... 30
1.4. Opinions........................................................ 30
ARTICLE II
ESTABLISHMENT AND ORGANIZATION OF THE TRUST.................. 30
2.1. Establishment of the Trust...................................... 30
2.2. Office.......................................................... 30
2.3. Purposes and Powers............................................. 30
2.4. Appointment of the Trustee; Declaration of
Trust...................................................... 31
2.5. Expenses of the Trust........................................... 31
2.6. Ownership of the Trust.......................................... 31
2.7. Situs of the Trust.............................................. 31
2.8. Miscellaneous REMIC Provisions.................................. 31
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE SPONSOR AND THE MASTER SERVICER;
COVENANT OF SPONSOR TO CONVEY MORTGAGE LOANS.................. 32
3.1. Representations and Warranties of the
Sponsor.................................................... 32
3.2. Representations and Warranties of the Master
Servicer................................................... 34
3.3. Representations and Warranties of the
Sponsor with Respect to the Mortgage
Loans...................................................... 38
3.4. Covenants of Sponsor to Take Certain Actions
with Respect to the Mortgage Loans In
Certain Situations......................................... 45
3.5. Conveyance of the Mortgage Loans................................ 47
3.6. Acceptance by Trustee; Certain Substitutions
of Mortgage Loans; Certification by
Trustee.................................................... 49
v
<PAGE>
Page
3.7. Cooperation Procedures........................................... 51
ARTICLE IV
ISSUANCE AND SALE OF CERTIFICATES........................ 51
4.1. Issuance of Certificates......................................... 51
4.2. Sale of Certificates............................................. 51
ARTICLE V
CERTIFICATES AND TRANSFER OF INTERESTS...................... 51
5.1. Terms............................................................ 51
5.2. Forms............................................................ 52
5.3. Execution, Authentication and Delivery........................... 52
5.4. Registration and Transfer of Certificates........................ 53
5.5. Mutilated, Destroyed, Lost or Stolen
Certificates................................................ 55
5.6. Persons Deemed Owners............................................ 56
5.7. Cancellation..................................................... 56
5.8. Limitation on Transfer of Ownership Rights....................... 56
5.9. Assignment of Rights............................................. 57
ARTICLE VI
COVENANTS.................................... 58
6.1. Distributions.................................................... 58
6.2. Money for Distributions to be Held in Trust;
Withholding................................................. 58
6.3. Protection of Trust Estate....................................... 59
6.4. Performance of Obligations....................................... 60
6.5. Negative Covenants............................................... 60
6.6. No Other Powers.................................................. 61
6.7. Limitation of Suits.............................................. 61
6.8. Unconditional Rights of Owners to Receive
Distributions............................................... 62
6.9. Rights and Remedies Cumulative................................... 62
6.10. Delay or Omission Not Waiver.................................... 62
6.11. Control by Owners............................................... 62
ARTICLE VII
ACCOUNTS, DISBURSEMENTS AND RELEASES....................... 63
7.1. Collection of Money.............................................. 63
7.2. Establishment of Accounts........................................ 63
7.3. The Certificate Insurance Policy................................. 63
7.4. RESERVED......................................................... 65
7.5. Flow of Funds.................................................... 65
7.6. Investment of Accounts........................................... 67
7.7. Eligible Investments............................................. 68
7.8. Reports by Trustee............................................... 69
vi
<PAGE>
Page
7.9. Additional Reports by Trustee................................... 73
7.10. Supplemental Interest Payment Account,
Supplement Interest Payments............................... 73
ARTICLE VIII
SERVICING AND ADMINISTRATION
OF MORTGAGE LOANS............................... 74
8.1. Master Servicer and Subservicers................................ 74
8.2. RESERVED........................................................ 77
8.3. Collection of Certain Mortgage Loan
Payments.................................................... 77
8.4. Delinquency Advances, Compensating Interest
and Servicing Advances...................................... 77
8.5. Subservicing Agreements Between Master
Servicer and Subservicers.................................. 79
8.6. Successor Subservicers.......................................... 79
8.7. Liability of Master Servicer.................................... 79
8.8. No Contractual Relationship Between
Subservicer and Trustee or the Owners...................... 79
8.9. Assumption or Termination of Subservicing
Agreement by Trustee....................................... 80
8.10. Collection Account............................................. 80
8.11. Purchase or Substitution of Certain
Mortgage Loans............................................. 82
8.12. Maintenance of Insurance....................................... 82
8.13. Due-on-Sale Clauses; Assumption and
Substitution Agreements.................................... 84
8.14. Realization Upon Defaulted Mortgage Loans...................... 85
8.15. Trustee to Cooperate; Release of Mortgage
Files...................................................... 86
8.16. Servicing Compensation......................................... 88
8.17. Annual Statement as to Compliance.............................. 89
8.18. Annual Independent Certified Public
Accountants' Reports....................................... 89
8.19. Access to Certain Documentation and
Information Regarding the Mortgage Loans;
Confidentiality............................................ 89
8.20. Payment of Taxes, Insurance and Other
Charges.................................................... 90
8.21. Assignment of Agreement........................................ 90
8.22. Removal of Master Servicer; Resignation of
Master Servicer............................................ 91
8.23. Inspections by Certificate Insurer; Errors
and Omissions Insurance.................................... 95
8.24. Merger, Conversion, Consolidation or
Succession to Business of Master
Servicer................................................... 95
8.25. Notices of Material Events..................................... 96
vii
<PAGE>
Page
8.26. Limitation on Liability of the Sponsor and
the Master Servicer......................................... 96
ARTICLE IX
TERMINATION OF TRUST............................... 97
9.1. Termination of Trust............................................. 97
9.2. Termination Upon Option of Owners of a
Majority in Percentage Interest
represented by the Class R Certificates..................... 98
9.3. Termination Upon Loss of REMIC Status............................ 99
9.4. Disposition of Proceeds..........................................101
9.5. Netting of Amounts...............................................101
ARTICLE X
THE TRUSTEE...................................102
10.1. Certain Duties and Responsibilities.............................102
10.2. Removal of Trustee for Cause....................................103
10.3. Certain Rights of the Trustee...................................105
10.4. Not Responsible for Recitals or Issuance of
Certificates................................................106
10.5. May Hold Certificates...........................................106
10.6. Money Held in Trust.............................................106
10.7. No Lien for Fees................................................106
10.8. Corporate Trustee Required; Eligibility.........................106
10.9. Resignation and Removal; Appointment of
Successor...................................................107
10.10. Acceptance of Appointment by Successor
Trustee.....................................................109
10.11. Merger, Conversion, Consolidation or
Succession to Business of the Trustee.......................109
10.12. Reporting; Withholding.........................................110
10.13. Liability of the Trustee.......................................110
10.14. Appointment of Co-Trustee or Separate
Trustee.....................................................110
10.15. Trustee to Furnish Reports to the
Securities and Exchange Commission..........................112
ARTICLE XI
MISCELLANEOUS..................................112
11.1. Compliance Certificates and Opinions............................112
11.2. Form of Documents Delivered to the Trustee......................113
11.3. Acts of Owners..................................................114
11.4. Notices, etc., to Trustee.......................................115
11.5. Notices and Reports to Owners; Waiver of
Notices.....................................................115
11.6. Rules by Trustee and Sponsor....................................115
11.7. Successors and Assigns..........................................116
viii
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Page
11.8. Severability....................................................116
11.9. Benefits of Agreement...........................................116
11.10. Legal Holidays.................................................116
11.11. Governing Law..................................................116
11.12. Counterparts...................................................116
11.13. Usury..........................................................116
11.14. Amendment......................................................117
11.15. REMIC Status; Taxes............................................118
11.16. Additional Limitation on Action and
Imposition of Tax...........................................120
11.17. Appointment of Tax Matters Person..............................121
11.18. RESERVED.......................................................121
11.19. [RESERVED......................................................121
11.20. Notices........................................................121
ARTICLE XII
CERTAIN MATTERS REGARDING THE CERTIFICATE INSURER................123
12.1. Rights of the Certificate Insurer to Exercise
Rights of the Owners of the Class A Certifi-
cates..........................................................123
12.2. Trustee to Act Solely with Consent of the
Certificate Insurer............................................124
12.3. Trust Fund and Accounts Held for Benefit
of the Certificate Insurer.....................................124
12.4. Claims Upon the Policy; Policy Payments
Account........................................................124
12.5. Effects of Payments by the Certificate
Insurer........................................................126
12.6. Notices to the Certificate Insurer.............................126
12.7. Third-Party Beneficiary........................................126
ix
<PAGE>
SCHEDULE I -- Schedules of Mortgage Loans
EXHIBIT A-1 -- Form of Class A-1 Certificate
EXHIBIT A-2 -- Form of Class A-2 Certificate
EXHIBIT B-1 -- Form of Class B I-S Certificate
EXHIBIT B-2 -- Form of Class B II-S Certificate
EXHIBIT B-3 -- Form of Class RS Certificate
EXHIBIT C -- Contents of Mortgage Loan File
EXHIBIT D -- Form of Certificate Re: Mortgage Loans
Prepaid in full After the Cut-Off Date
EXHIBIT E -- Form of Trustee's Acknowledgement of
Receipt
EXHIBIT F -- Form of Certification
EXHIBIT G -- Form of Delivery Order
EXHIBIT H -- Form of Class RS Tax Matters Transfer
Certificate
EXHIBIT I -- Form of Monthly Report
EXHIBIT J -- Form of Master Servicer's Trust Receipt
EXHIBIT K -- Form of Investment Letter
x
<PAGE>
POOLING AND SERVICING AGREEMENT, relating to ACCREDITED MORTGAGE
LOAN TRUST 1996-1, dated as of September 1, 1996, between ACCREDITED HOME
LENDERS, INC., a California corporation, in its capacity as sponsor of the Trust
(the "Sponsor") and as master servicer (the "Master Servicer"), and BANKERS
TRUST COMPANY, a New York banking corporation, in its capacity as trustee (the
"Trustee").
WHEREAS, the Sponsor wishes to establish a trust and two subtrusts,
and to provide for the allocation and sale of the beneficial interests therein
and the maintenance and distribution of the trust estate;
WHEREAS, the Master Servicer has agreed to service the Mortgage
Loans, which constitute the principal assets of the trust estate;
WHEREAS, all things necessary to make the Certificates, when
executed and authenticated by the Trustee valid instruments, and to make this
Agreement a valid agreement, in accordance with their and its terms, have been
done;
WHEREAS, Bankers Trust Company is willing to serve in the capacity
of Trustee hereunder; and
WHEREAS, Financial Security Assurance Inc. (the "Certificate
Insurer") is intended to be a third party beneficiary of this Agreement and is
hereby recognized by the parties hereto to be a third-party beneficiary of this
Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the Sponsor, the Master Servicer and the Trustee
hereby agree as follows:
<PAGE>
ARTICLE I
DEFINITIONS; RULES OF CONSTRUCTION
Section 1.1. Definitions. For all purposes of this Agreement, the
following terms shall have the meanings set forth below, unless the context
clearly indicates otherwise:
"Accepted Servicing Practices": The Master Servicer's normal
servicing practices, which in general will conform to the mortgage servicing
practices of prudent mortgage lending institutions which service for their own
account mortgage loans of the same type as the Mortgage Loans in the
jurisdictions in which the related Properties are located.
"Account": Any account established in accordance with Section 7.2 or
8.10 hereof each of which shall be established at a Designated Depository
Institution.
"Accrual Period": With respect to the Class A-1 Certificates and any
Distribution Date, the calendar month immediately preceding such Distribution
Date. With respect to the Class A-2 Certificates and any Distribution Date, the
period commencing on the prior Distribution Date (or on Startup Day, with
respect to the October, 1996 Distribution Date) and ending on the day
immediately preceding such Distribution Date.
"Agreement": This Pooling and Servicing Agreement, as it may be
amended from time to time, and including the Exhibits hereto.
"Appraised Value": The appraised value of any Property based upon
the appraisal or other valuation made at the time of the origination of the
related Mortgage Loan, or, in the case of a Mortgage Loan which is a purchase
money mortgage, the sales price of the Property at such time of origination, if
such sales price is less than such appraised value.
"Authorized Officer": With respect to any Person, any person who is
authorized to act for such Person in matters relating to this Agreement, and
whose action is binding upon such Person and, with respect to the Sponsor and
the Master Servicer, initially including those individuals whose names appear on
the lists of Authorized Officers delivered on the Startup Day and, with respect
to the Trustee, a Responsible Officer.
"Available Funds": With respect to either Group, the sum of (i) the
related Monthly Remittance Amount plus
2
<PAGE>
(ii) the related proceeds received by the Trustee with respect to any
termination of the Trust.
"Balloon Loan": Any Mortgage Loan which has an amortization schedule
which extends beyond its maturity date, resulting in a relatively large
unamortized principal balance due in a single payment at maturity.
"Business Day": Any day that is not a Saturday, Sunday or other day
on which commercial banking institutions in the State of New York, the State of
California or in the city in which the principal corporate trust office of the
Trustee is located, are authorized or obligated by law or executive order to be
closed.
"Certificate": Any one of the Class A Certificates, the Class BI-S
Certificates, the Class BII-S Certificates or the Residual Certificates, each
representing the interests and the rights described in this Agreement.
"Certificate Insurance Policy": The certificate guaranty insurance
policy dated September 27, 1996 issued by the Certificate Insurer to the Trustee
for the benefit of the Owners of the Class A Certificates.
"Certificate Insurer": Financial Security Assurance Inc. or any
successor thereto, as issuer of the Certificate Insurance Policy.
"Certificate Insurer Default": The existence and continuance of any
of the following:
(a) the Certificate Insurer shall have failed to make a required
payment when due under the Certificate Insurance Policy;
(b) the Certificate Insurer shall have (i) filed a petition or
commenced any case or proceeding under any provision or chapter of the United
States Bankruptcy Code, the New York State Insurance Law or any other similar
federal or state law relating to insolvency, bankruptcy, rehabilitation,
liquidation, or reorganization, (ii) made a general assignment for the benefit
of its creditors or (iii) had an order for relief entered against it under the
United States Bankruptcy Code, the New York State Insurance Law or any other
similar federal or state law relating to insolvency, bankruptcy, rehabilitation,
liquidation, or reorganization that is final and nonappealable; or
(c) a court of competent jurisdiction, the New York Department of
Insurance or any other competent regulatory authority shall have entered a final
and nonappealable order, judgment or decree (i) appointing a custodian, trustee,
agent,
3
<PAGE>
or receiver for the Certificate Insurer or for all or any material portion of
its property or (ii) authorizing the taking of possession by a custodian,
trustee, agent, or receiver of the Security Insurer or of all or any material
portion of its property.
"Certificate Insurer Premium Rate": 0.18% per annum with respect to
the Class A-1 Certificates and 0.20% per annum with respect to the Class A-2
Certificates.
"Certificate Principal Balance": As to the Class A Certificates, the
related Class A Certificate Principal Balance. As to any particular Class A
Certificate, the product of the Percentage Interest evidenced thereby and the
Certificate Principal Balance of all Class A Certificates of the same Class. The
Class BI-S Certificates, the Class BII-S Certificates and Residual Certificates
do not have a "Certificate Principal Balance".
"Civil Relief Act": The Soldiers' and Sailors' Civil Relief Act of
1940, as amended.
"Civil Relief Act Interest Shortfall": With respect to any
Distribution Date, for any Mortgage Loan as to which there has been a reduction
in the amount of interest collectible thereon for the most recently ended
Interest Remittance Period as a result of the application of the Civil Relief
Act, the amount, if any, by which (a) interest collectible on such Mortgage Loan
during the most recently ended calendar month is less than (b) interest accrued
for the related Accrual Period on the Loan Balance of such Mortgage Loan,
calculated at a rate equal to the sum of (A) the related Pass-Through Rate and
(B) the per annum rates at which the Master Servicing Fee and Trustee's Fee
accrue, together with the related Certificate Insurer Premium Rate.
"Class": All of the Class A-1 Certificates, all of the Class A-2
Certificates, all of the Class BI-S Certificates, all of the Class BII-S
Certificates or all of the Residual Certificates.
"Class A Certificate": Any one of the Class A-1 Certificates or the
Class A-2 Certificates.
"Class A Certificate Principal Balance": As of any time of
determination and with respect to either Class of Class A Certificates, the
Original Certificate Principal Balance of the related Class A Certificates less
amounts actually distributed as part of the related Class A Distribution Amount
pursuant to Section 7.5(c) hereof made with respect to principal thereon on all
prior Distribution Dates; provided, that, this amount is exclusive of Insured
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Payments for the sole purpose of effecting the Certificate Insurer's subrogation
rights.
"Class A Distribution Account": Either the Class A-1 Distribution
Account or the Class A-2 Distribution Account.
"Class A-1 Certificate": Any Certificate designated as a "Class A-1
Certificate" on the face thereof, in the form of Exhibit A-1 hereto. The Class
A-1 Certificates shall be issued with an initial aggregate Certificate Principal
Balance equal to the Original Certificate Principal Balance therefor.
"Class A-1 Distribution Account": The Class A-1 Distribution Account
created pursuant to Section 7.2 hereof.
"Class A-1 Insured Distribution Amount": With respect to any
Distribution Date and the Class A-1 Certificates, the sum of (i) Interest
Distribution Amount with respect to the Class A-1 Certificates for such
Distribution Date, less any related Civil Relief Act Shortfalls and related
Prepayment Interest Shortfalls and (ii) the Insured Principal Distribution
Amount for Group I for such Distribution Date.
"Class A-1 Pass-Through Rate": 7.60% per annum.
"Class A-2 Available Funds Pass-Through Rate": With respect to any
Distribution Date, an amount, expressed as a per annum rate, equal to:
(a) (i) the aggregate amount of interest due on all of the Mortgage
Loans in Group II for the related Remittance Period plus the Subordination
Reduction Amount for Group II, if any, for such Distribution Date, minus,
(ii) the aggregate of the Master Servicing Fee, the Trustee's Fee
and the Premium Amount, in each case relating to Group II, on such Distribution
Date minus,
(iii) commencing on the 13th Distribution Date following the Startup
Day, an amount equal to 0.50% per annum times the aggregate Loan Balances of the
Mortgage Loans in Group II as of the beginning of such related Remittance
Period, divided by
(b) the Certificate Principal Balance for the Class A-2 Certificates
immediately prior to such Distribution Date, multiplied by the actual number of
days elapsed in the related Accrual Period divided by 360.
"Class A-2 Certificate": Any Certificate designated as a "Class A-2
Certificate" on the face thereof, in the form of Exhibit A-2 hereto. The Class
A-2 Certificates shall be
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issued with an initial aggregate Certificate Principal Balance equal to the
Original Certificate Principal Balance therefor.
"Class A-2 Distribution Account": The Class A-2 Distribution Account
created pursuant Section 7.2 hereof.
"Class A-2 Formula Pass-Through Rate": As of any Distribution Date,
the rate described in clause (i) of the definition of "Class A-2 Pass-Through
Rate".
"Class A-2 Full Interest Distribution Amount": With respect to any
Distribution Date, the Class A-2 Interest Distribution Amount for such
Distribution Date calculated using the Class A-2 Formula Pass-Through Rate for
such Distribution Date rather than the Class A-2 Pass-Through Rate for such
Distribution Date plus, if the full amount of the Class A-2 Formula Interest
Shortfall, if any, was not funded on any prior Distribution Date and remains
unpaid on such Distribution Date, such amount, together with interest thereon
(from the Distribution Date on which such Class A-2 Formula Interest Shortfall
was calculated) at the Class A-2 Formula Pass-Through Rate for such Distribution
Date.
"Class A-2 Insured Distribution Amount": With respect to any
Distribution Date and the Class A-2 Certificates, the sum of (i) Interest
Distribution Amount with respect to the Class A-2 Certificates for such
Distribution Date, less any related Civil Relief Act Shortfalls and any
Prepayment Interest Shortfalls and (ii) the Insured Principal Distribution
Amount for Group II for such Distribution Date.
"Class A-2 Pass-Through Rate": With respect to any Distribution Date
and Accrual Period, the lesser of (i) (a) with respect to any Distribution Date
which occurs on or prior to the Step-Up Distribution Date, LIBOR as of the
second to last Business Day prior to the immediately preceding Distribution Date
plus 0.32% per annum, or (b) with respect to any Distribution after the Step-Up
Distribution Date, LIBOR as of the second to last Business Day prior to the
immediately preceding Distribution Date, plus 0.64% per annum and (ii) the Class
A-2 Available Funds Pass-Through Rate for such Distribution Date.
"Class BI-S Certificate": Any of those Certificates representing the
right to receive excess amounts in the Supplemental Interest Payment Account,
and designated as a "Class BI-S Certificate" on the face thereof, in the form of
Exhibit B-1 hereto.
"Class BII-S Certificate": Any of those Certificates representing
the right to receive excess amounts in the Supplemental Interest Payment
Account, and designated
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as a "Class BII-S Certificate" on the face thereof, in the form of Exhibit B-2
hereto.
"Class R Certificate": The uncertificated interest having right to
receive the amounts described in Section 7.5(c)(x)(b) on each Distribution Date,
and evidencing an interest designated as a "residual interest" in the REMIC for
purposes of the REMIC Provisions.
"Class RS Certificate": Any of those Certificates designated as a
"Class RS Certificate" on the face thereof, representing the rights described
therein, in the form of Exhibit B-3 hereto.
"Clean-Up Call Date": The first Remittance Date following the date
on which the aggregate Loan Balances of all Mortgage Loans has declined to 10%
or less of the aggregate principal balance of the Mortgage Loans as of the
Closing Date.
"Code": The Internal Revenue Code of 1986, as amended and any
successor statute.
"Collection Account": The Account or Accounts interest account
created by the Master Servicer or any Subservicer pursuant to Section 8.10
hereof, or pursuant to any Subservicing Agreement.
"Combined Loan-to-Value Ratio": With respect to any First Mortgage
Loan, the percentage equal to the Original Principal Amount of the related Note
divided by the Appraised Value of the related Property and with respect to any
Second Mortgage Loan, the percentage equal to (a) the sum of (i) the remaining
principal balance, as of origination of the Second Mortgage Loan, of the Senior
Lien note(s) relating to such Second Mortgage Loan, and (ii) the Original
Principal Amount of the Note relating to such Second Mortgage Loan divided by
(b) the Appraised Value.
"Compensating Interest": As defined in Section 8.4(a)(ii) hereof.
"Coupon Rate": The rate of interest borne by each Note.
"Cumulative Loss Percentage": As to any Distribution Date and the
Mortgage Loans, the percentage equivalent of the fraction obtained by dividing
(i) the principal amount of Cumulative Realized Losses on the Mortgage Loans
from the Cut-Off Date through such Distribution Date by (ii) the sum of the
Original Aggregate Loan Balance for both Groups.
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"Cumulative Realized Losses": As of any Distribution Date, the sum
of all Realized Losses with respect to Mortgage Loans experienced on all prior
Distribution Dates.
"Cut-Off Date": The opening of business September 1, 1996.
"Debt Service Reduction": With respect to any Mortgage Loan, a
reduction by a court of competent jurisdiction of the monthly payment due on
such Mortgage Loan in a proceeding under the United States Bankruptcy Code,
except such a reduction that constitutes a Deficient Valuation or a permanent
forgiveness of principal.
"Deficient Valuation": With respect to any Mortgage Loan, a
valuation of the related Property by a court of competent jurisdiction in an
amount less than the then outstanding principal balance of the Mortgage Loan,
which valuation results from a proceeding initiated under the United States
Bankruptcy Code.
"Delinquency Advance": As defined in Section 8.4(a)(i) hereof.
"Delinquency Percentage": As of the last day of any Remittance
Period and with respect to the Mortgage Loans, the percentage equivalent of a
fraction, the numerator of which equals the aggregate Loan Balances of all
Mortgage Loans that are 90 or more days delinquent, in foreclosure or converted
to REO Properties as of such last day of such Remittance Period, and the
denominator of which is the aggregate Loan Balance of all Mortgage Loans as of
the last day of such Remittance Period.
"Delinquent": A Mortgage Loan is "delinquent" if any payment due
thereon is not made by the close of business on the day such payment is
scheduled to be due. A Mortgage Loan is "30 days delinquent" if such payment has
not been received by the close of business on the corresponding day of the month
immediately succeeding the month in which such payment was due, or, if there is
no such corresponding day (e.g., as when a 30-day month follows a 31-day month
in which a payment was due on the 31st day of such month) then on the last day
of such immediately succeeding month. Similarly for "60 days delinquent," "90
days delinquent" and so on.
"Delivery Order": The delivery order in the form set forth as
Exhibit G hereto and delivered by the Sponsor to the Trustee on the Startup Day
pursuant to Section 4.1 hereof.
"Depository": The Depository Trust Company, 7 Hanover Square, New
York, New York 10004 and any successor Depository hereafter named.
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"Designated Depository Institution": With respect to each Account, a
federal or state chartered depository institution (i) the short-term obligations
of which are rated by each of the Rating Agencies in its highest rating at the
time of any deposit therein, or (ii) insured by the FDIC (to the limits
established by such corporation), the uninsured deposits in which account are
otherwise secured such that, as evidenced by an Opinion of Counsel (obtained by
the Person requesting that the account be held pursuant to this clause (ii))
delivered to the Trustee prior to the establishment of such Account, the Owners
will have a claim with respect to the funds in such account and a perfected
first priority security interest against any collateral (which shall be limited
to Eligible Investments, each of which shall mature not later than the Business
Day immediately preceding the Distribution Date next following the date of
investment in such collateral or the Distribution Date if such Eligible
Investment is an obligation of the institution that maintains such Account)
securing such funds that is superior to claims of any other depositors or
general creditors of the depository institution with which such account is
maintained, or (iii) a trust account or accounts maintained with a federal or
state chartered depository institution or trust company with trust powers acting
in its fiduciary capacity or (iv) an account or accounts of a depository
institution acceptable to the Certificate Insurer and the Rating Agencies as
determined without regard to the Certificate Insurance Policy (as evidenced in
writing by the Rating Agencies that use of any such account as such Account will
not have an adverse effect on the then-current ratings assigned to the Classes
of the Certificates then rated by the Rating Agencies as determined without
regard to the Certificate Insurance Policy). Accounts may bear interest.
"Designated Residual Holder": Accredited Home Lenders, Inc.
"Determination Date": As to each Distribution Date, the third
Business Day preceding such Distribution Date or such earlier day as shall be
agreed by the Certificate Insurer and Trustee.
"Direct Participant" or "DTC Participant" means any broker-dealer,
bank or other financial institution for which the Depository holds Class A
Certificates from time to time as a securities depository.
"Disqualified Organization": "Disqualified Organization" shall have
the meaning set forth from time to time in the definition thereof at Section
860E(e)(5) of the Code (or any successor statute thereto) and applicable to the
Trust.
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"Distribution Account": The Distribution Account established in
accordance with Section 7.2 hereof and maintained by the Trustee.
"Distribution Date": Any date on which the Trustee is required to
make distributions to the Owners, which shall be the 25th day of each month or,
if such day is not a Business Day, the next succeeding Business Day, commencing
in the month following the Startup Day.
"Document Delivery Requirements": The Sponsor's obligations to
deliver certain legal documents, to prepare and record certain Mortgage
assignments or to deliver certain opinions relating to Mortgage assignments, in
each case with respect to the Mortgage Loans and as set forth in Section 3.5
hereof.
"Eligible Investments": Those investments so designated pursuant to
Section 7.7 hereof.
"Excess Spread Rate": With respect to any Group II Mortgage Loan and
for any Distribution Date, the Coupon Rate thereof as of the beginning of the
related Interest Remittance Period minus the sum of (i) the rate at which the
Master Servicing Fee is calculated, (ii) the rate at which the Trustee's Fees
are calculated, (iii) the Class A-2 Pass-Through Rate applicable to such
Distribution Date and (iv) the related Certificate Insurer Premium Rate.
"Excess Spread Trigger": For any Distribution Date following the 6th
Distribution Date, an Excess Spread Trigger will have occurred if the weighted
average Excess Spread Rate is less than 300 basis points.
"Excess Subordinated Amount": With respect to any Distribution Date
and with respect to either Mortgage Loan Group, the excess, if any, of (x) the
related Subordinated Amount that would apply on such Distribution Date after
taking into account the payment of the related Principal Distribution Amount
(except for any distributions of related Subordination Reduction Amounts on such
Distribution Date) over (y) the related Specified Subordinated Amount.
"Event of Default": Any event described in clauses (a) or (b) of
Section 8.22 hereof.
"FDIC": The Federal Deposit Insurance Corporation, or any successor
thereto.
"Final Determination": As defined in Section 9.3(a) hereof.
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"First Mortgage Loan": A Mortgage Loan which constitutes a first
priority mortgage lien with respect to any Property.
"Fiscal Agent": As defined in the Insurance Agreement.
"FNMA": The Federal National Mortgage Association, a
federally-chartered and privately-owned corporation existing under the Federal
National Mortgage Association Charter Act, as amended, or any successor thereof.
"Freddie Mac": The Federal Home Loan Mortgage Corporation, a
corporate instrumentality of the United States created pursuant to the Emergency
Home Finance Act of 1970, as amended, or any successor thereof.
"Group" or "Mortgage Loan Group": Either Group I or Group II.
References herein to the related Class of Class A Certificates, when used with
respect to a Mortgage Loan Group, shall mean (A) in the case of Group I, the
Class A-1 Certificates, and (B) in the case of Group II, the Class A-2
Certificates.
"Group I": The pool of Mortgage Loans identified in the related
Schedule of Mortgage Loans as having been assigned to Group I, including any
Qualified Replacement Mortgages delivered in replacement thereof.
"Group I Specified Subordinated Amount": With respect to Group I and
any Distribution Date, an amount equal to (i) 2.50% of the related Original
Aggregate Loan Balance or (ii) if the Step-Up Trigger has occurred, an amount
equal to 7.75% of the related Original Aggregate Loan Balance or (iii) if the
Step-Up Trigger has not occurred but the StepDown Trigger has occurred, an
amount equal to the greater of (a) .50% of the related Original Aggregate Loan
Balances and (b) the lesser of (x) 2.50% of the related Original Aggregate Loan
Balance and (y) the Group I Stepped Down Required Subordinated Percentage of the
aggregate Loan Balance of the related Mortgage Loans as of such Distribution
Date.
"Group I Stepped Down Required Subordinated Percentage": With
respect to Group I and any Distribution Date for which the Step-Down Trigger has
occurred, a percentage equal to (i) the percentage equivalent of a fraction, the
numerator of which is 2.50% of the related Original Aggregate Loan Balance, and
the denominator of which is the aggregate Loan Balance of the related Mortgage
Loans as of such Distribution Date, minus (ii) the percentage equivalent of a
fraction, the numerator of which is the product of (A) the percentage calculated
under clause (i) above minus 5.00%, multiplied by (B) the number of consecutive
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Distribution Dates through and including the Distribution Date for which the
Group I Stepped Down Required Subordinated Percentage is being calculated, up to
a maximum of six, for which the Step-Down Trigger has occurred, and the
denominator of which is six.
"Group II": The pool of Mortgage Loans identified in the related
Schedule of Mortgage Loans as having been assigned to Group II, including any
Qualified Replacement Mortgages delivered in replacement thereof.
"Group II Adjusted Pass-Through Rate": With respect to any
Distribution Date, the product of (x) the sum of (i) the Class A-2 Pass-Through
Rate immediately prior to such Distribution Date, and (ii) the Certificate
Insurer Premium Rate and (y) a fraction, the numerator of which is the Class A-2
Certificate Principal Balance immediately prior to such Distribution Date and
the denominator of which is the aggregate Loan Balance of all Group II Mortgage
Loans as of the beginning of the related Remittance Period.
"Group II Specified Subordinated Amount": With respect to Group II
and any Distribution Date on which an Excess Spread Trigger has not occurred, an
amount equal to (i) 3.25% of the related Original Aggregate Loan Balance, or
(ii) if the Step-Up Trigger has occurred, an amount equal to 7.75% of the
related Original Aggregate Loan Balance or (iii) if the Step-Up Trigger has not
occurred but the StepDown Trigger has occurred, an amount equal to the greater
of (a) .50% of the related Original Aggregate Loan Balances and (b) lesser of
(x) 3.25% of the related Original Aggregate Loan Balance and (y) the Group II
Stepped Down Required Subordinated Percentage of the aggregate Loan Balance of
the related Mortgage Loans as of such Distribution Date. Notwithstanding the
foregoing, if an Excess Spread Trigger has occurred, the Group II Specified
Subordinate Amount for such Distribution Date shall be the sum of (a) the Group
II Specified Subordinated Amount otherwise obtained hereunder and (b) the
product of (i) three times the excess of (A) 300 basis points over (B) the
Excess Spread Rate for such Distribution Date, and (ii) the related Original
Aggregate Loan Balance.
"Group II Stepped Down Required Subordinated Percentage": With
respect to Group II and any Distribution Date for which the Step-Down Trigger
has occurred, a percentage equal to (i) the percentage equivalent of a fraction,
the numerator of which is 3.25% of the related Original Aggregate Loan Balance,
and the denominator of which is the aggregate Loan Balance of the related
Mortgage Loans as of such Distribution Date, minus (ii) the percentage
equivalent of a fraction, the numerator of which is the product of (A) the
percentage calculated under clause (i) above minus 6.50%, multiplied by (B) the
number of consecutive
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Distribution Dates through and including the Distribution Date for which the
Group II Stepped Down Required Subordinated Percentage is being calculated, up
to a maximum of six, for which the Group II Step-Down Trigger has occurred, and
the denominator of which is six.
"Indemnification Agreement": The Indemnification Agreement dated as
of September 23, 1996 among the Certificate Insurer, the Sponsor, and the
Underwriter.
"Indirect Participant" shall mean any financial institution for whom
any Direct Participant holds an interest in a Class A Certificate.
"Initial Premiums": The initial premiums payable by the Sponsor on
behalf of the Trust to the Certificate Insurer in consideration of the delivery
to the Trustee of the Certificate Insurance Policy.
"Insurance Agreement": The Insurance and Indemnity Agreement dated
as of September 1, 1996 between the Sponsor and the Certificate Insurer, as it
may be amended from time to time.
"Insurance Policy": Any hazard, title or primary mortgage insurance
policy relating to a Mortgage Loan.
"Insurance Proceeds": Proceeds paid by any insurer pursuant to any
insurance policy covering a Mortgage Loan to the extent such proceeds are not
applied to the restoration of the related Property or released to the related
Mortgagor in accordance with Accepted Servicing Practices. "Insurance Proceeds"
do not include "Insured Payments."
"Insured Payment": With respect to either Class of Class A
Certificates and any Distribution Date, the sum of (x) the related Shortfall
Amount and (y) any Preference Amounts with respect to the related Class A
Certificates with respect to which the affected Owners have complied with the
provisions of Section 12.4(c) hereof during the related Remittance Period.
"Insured Principal Distribution Amount": With respect to either
Group for any Distribution Date, the sum of:
(i) the lesser of
(a) the excess of (i) the related Total Available Funds over
(ii) the related Interest Distribution Amount; and
(b) the related Principal Remittance Amount, plus the
proceeds of any termination of
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the Trust to the extent such proceeds relate to
principal of the related Group minus the amount of any
related Subordination Reduction Amount; plus
(ii) the related Subordination Deficit.
"Interest Determination Date": With respect to any Accrual Period
for the Class A-2 Certificates (other than the initial Accrual Period), the
second London Business Day preceding the first day of such Accrual Period.
"Interest Distribution Amount": As of any Distribution Date and with
respect to either Class of Class A Certificates, interest accrued during the
related Accrual Period at the related Pass-Through Rate on the related
Certificate Principal Balance immediately prior to such Distribution Date.
"Interest Remittance Amount": As of any Remittance Date and with
respect to either Group, the sum, without duplication, of (i) all interest
collected by the Master Servicer during the related Interest Remittance Period
with respect to the related Mortgage Loans, (ii) all related Delinquency
Advances made by the Master Servicer on such Remittance Date and (iii) all
related Compensating Interest paid by the Master Servicer on such Remittance
Date net of amounts allowed to be retained pursuant to Section 8.10(c).
"Interest Remittance Period": With respect to each Distribution
Date, the period (inclusive) beginning on the second day of the calendar month
immediately preceding such Distribution Date and ending on the first day of the
calendar month in which such Distribution Date occurs.
"Late Payment Rate": As defined in the Insurance Agreement.
"LIBOR": With respect to any Accrual Period for the Class A-2
Certificates, the rate determined by the Trustee on the related Interest
Determination Date on the basis of the offered rates of the Reference Banks for
one-month U.S. dollar deposits, as such rates appear on the Reuters Screen LIBO
Page, as of 11:00 a.m. (London time) on such Interest Determination Date. On
each Interest Determination Date, LIBOR for the related Accrual Period will be
established by the Trustee as follows:
(i) If on such Interest Determination Date two or more Reference Banks
provide such offered quotations, LIBOR for the related Accrual
Period shall be the arithmetic mean of such offered quotations
(rounded
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upwards if necessary to the nearest whole multiple of 1/16%).
(ii) If on such Interest Determination Date fewer than two Reference
Banks provide such offered quotations, LIBOR for the related Accrual
Period shall be the higher of (i) LIBOR as determined on the
previous Interest Determination Date and (ii) the Reserve Interest
Rate.
"Liquidation Expenses": Expenses which are incurred by the Master
Servicer or any Subservicer in connection with the liquidation of any defaulted
Mortgage Loan, such expenses, including, without limitation, legal fees and
expenses, and any unreimbursed Servicing Advances expended by the Master
Servicer or any Subservicer with respect to the related Mortgage Loan.
"Liquidated Loan": As defined in Section 8.14(c) hereof. A Mortgage
Loan which is purchased from the Trust pursuant to Section 3.3, 3.4, 3.6(b) or
8.11 hereof is not a "Liquidated Loan".
"Liquidation Proceeds": With respect to any Liquidated Loan, any
amounts (including the proceeds of any Insurance Policy) recovered by the Master
Servicer in connection with such Liquidated Loan, whether through trustee's
sale, foreclosure sale or otherwise.
"Loan Balance": With respect to each Mortgage Loan, the outstanding
principal balance thereof as of the Cut-Off Date, less any related Principal
Remittance Amounts relating to such Mortgage Loan included in previous related
Monthly Remittances that were transferred by the Master Servicer or any
Subservicer to the Trustee for deposit in the related Distribution Account;
provided, however, (x) that the Loan Balance for any Mortgage Loan which has
become a Liquidated Loan shall be zero as of the first day of the Remittance
Period following the Remittance Period in which such Mortgage Loan becomes a
Liquidated Loan, and at all times thereafter and (y) the Loan Balance "as of the
Cut-Off Date" for any Mortgage Loan originated during the period from the
Cut-Off Date to the Startup Day shall be the original principal balance thereof.
"Loan Purchase Price": With respect to any Mortgage Loan purchased
from the Trust on a Remittance Date pursuant to Section 3.3, 3.4, 3.6(b) or 8.11
hereof, an amount equal to the Loan Balance of such Mortgage Loan as of the date
of purchase, plus one month's interest on the outstanding Loan Balance thereof
as of the beginning of the preceding Remittance Period computed at the Coupon
Rate less the Master Servicing Fee (expressed as an annual percentage rate), if
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any, together with, without duplication, the aggregate amount of (i) all
delinquent interest, all Delinquency Advances and Servicing Advances theretofore
made with respect to such Mortgage Loan and not subsequently recovered from the
related Mortgage Loan, (ii) all Delinquency Advances which the Master Servicer
or any Subservicer has theretofore failed to remit with respect to such Mortgage
Loan and (iii) any Reimbursement Amount relating to such Mortgage Loan.
"London Business Day": A day on which banks are open for dealing in
foreign currency, and exchange in London and New York City.
"Master Servicer": Accredited Home Lenders, Inc., a California
corporation, and its permitted successors and assigns.
"Master Servicer's Trust Receipt": The Master Servicer's trust
receipt in the form set forth as Exhibit J hereto.
"Master Servicing Fee": An amount retained by the Master Servicer or
by any successor thereto as compensation for servicing and administration duties
relating to such Mortgage Loan pursuant to Section 8.15 hereof and equal to the
product of (a) one-twelfth of (x) 0.50% per annum, for such Mortgage Loan with
respect to which four or more consecutive monthly payments are not past due as
of the close of business on the last day of the related Remittance Period or (y)
0.65% per annum for such other Mortgage Loan (including REO Properties) and (b)
the aggregate outstanding Loan Balance of such Mortgage Loan as of the opening
of business on the first day of the related Remittance Period.
"Monthly Remittance Amount": As of any Remittance Date and with
respect to either Group, the sum of (i) the related Interest Remittance Amount
Date and (ii) the related Principal Remittance Amount.
"Moody's": Moody's Investors Service, Inc.
"Mortgage": The mortgage, deed of trust or other instrument creating
a first or second or third lien on an estate in fee simple interest in real
property securing a Note.
"Mortgage File": The mortgage documents listed in Exhibit C attached
hereto and required to be delivered to the Trustee pursuant to Section 3.5
hereof pertaining to a particular Mortgage Loan and any additional documents
required to be added to the Mortgage File pursuant to this Agreement; provided
that whenever the term "Mortgage File" is used to refer to documents actually
received by the Trustee, such term
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shall not be deemed to include such additional documents required to be added
unless they are actually so added.
"Mortgage Loans": Such of the mortgage loans transferred and
assigned to the Trust pursuant to Section 3.5(a) hereof, together with any
Qualified Replacement Mortgages substituted therefor in accordance with this
Agreement, as from time to time are held as a part of the Trust Estate, the
Mortgage Loans originally so held being identified in the Schedules of Mortgage
Loans. The term "Mortgage Loan" includes the terms "First Mortgage Loan" and
"Second Mortgage Loan". The term "Mortgage Loan" includes any Mortgage Loan
which is Delinquent, which relates to a foreclosure or which relates to a
Property which is REO Property prior to such Property's disposition by the
Trust. Any mortgage loan which, although intended by the parties hereto to have
been, and which purportedly was, transferred and assigned to the Trust by the
Sponsor, in fact was not transferred and assigned to the Trust for any reason
whatsoever shall nevertheless be considered a "Mortgage Loan" for all purposes
of this Agreement.
"Mortgagor": The obligor on a Note.
"Net Liquidation Proceeds": As to any Liquidated Loan, Liquidation
Proceeds net of, without duplication, Liquidation Expenses, unreimbursed
Servicing Advances, unreimbursed Delinquency Advances and accrued and unpaid
Master Servicing Fees through the date of liquidation relating to such
Liquidated Loan. In no event shall Net Liquidation Proceeds with respect to any
Liquidated Loan be less than zero.
"Nonrecoverable Advances": With respect to any Mortgage Loan, (a)
any Delinquency Advance or Servicing Advance previously made and not reimbursed
or (b) a Delinquency Advance or Servicing Advance proposed to be made in respect
of a Mortgage Loan or REO Property either of which, in the good faith judgment
of the Master Servicer, as evidenced by an Officer's Certificate delivered to
the Certificate Insurer and the Trustee would not be ultimately recoverable.
"Note": The note or other evidence of indebtedness evidencing the
indebtedness of a Mortgagor under a Mortgage Loan.
"Officer's Certificate": A certificate signed by any Authorized
Officer of any Person delivering such certificate and delivered to the Trustee.
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"Operative Documents": Collectively, this Agreement, the Certificate
Insurance Policy, the Certificates and the Insurance Agreement.
"Opinion of Counsel": A written opinion of counsel, who may be
counsel for the Sponsor or the Master Servicer, reasonably acceptable to the
Person to whom such opinion is delivered; except that any opinion of counsel
relating to (a) the qualification of any account required to be maintained
pursuant to this Agreement as an Account maintained in a Designated Depository
Institution, (b) qualification of the Trust as a REMIC, (c) compliance with the
REMIC Provisions or (d) resignation of the Master Servicer must be an opinion of
counsel who (i) is in fact independent of the Sponsor and the Master Servicer,
(ii) does not have any direct financial interest or any material indirect
financial interest in the Sponsor or the Master Servicer or in an affiliate of
either and (iii) is not connected with the Sponsor or the Master Servicer as an
officer, employee, director or person performing similar functions.
"Original Aggregate Loan Balance": With respect to each Group, the
aggregate Loan Balances of all related Mortgage Loans as of the Cut-Off Date,
i.e., $14,073,699.73 for Group I and $78,048,303.22 for Group II.
"Original Certificate Principal Balance": As of the Startup Day and
as to each Class of Class A Certificates, the original Certificate Principal
Balances thereof, as follows:
Class A-1 Certificates $14,073,000
Class A-2 Certificates $78,048,000
None of the Class BI-S Certificates, the Class BII-S Certificates or
the Residual Certificates have an Original Certificate Principal Balance.
"Original Principal Amount": With respect to each Note, the
principal amount of such Note on the date of origination thereof.
"Originator": Any entity from which the Sponsor has purchased
Mortgage Loans.
"Outstanding": With respect to all Certificates of
a Class, as of any date of determination, all such
Certificates theretofore executed and delivered hereunder
except:
(i) Certificates theretofore cancelled by the Trustee or
delivered to the Trustee for cancellation;
(ii) Certificates or portions thereof for which full and final
payment money in the necessary amount has
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been theretofore deposited with the Trustee in trust for
the Owners of such Certificates;
(iii) Certificates in exchange for or in lieu of which other
Certificates have been executed and delivered pursuant to this Agreement,
unless proof satisfactory to the Trustee is presented that any such
Certificates are held by a bona fide purchaser; and
(iv) Certificates alleged to have been destroyed, lost or
stolen for which replacement Certificates have been issued as provided for
in Section 5.5 hereof.
"Owner": The Person in whose name a Certificate is registered in the
Register, to the extent described in Section 5.6.
"Pass-Through Rate". As to the Class A-1 Certificates, the Class A-1
Pass-Through Rate; as to the Class A-2 Certificates, the Class A-2 Pass-Through
Rate.
"Percentage Interest": As to any Class A Certificate, that
percentage, expressed as a fraction, the numerator of which is the Certificate
Principal Balance of such Certificate as of the Cut-Off Date and the denominator
of which is the Original Certificate Principal Balance of all Class A
Certificates of the same Class; and as to any Class BI-S, Class BII-S, or Class
RS Certificate, that Percentage Interest set forth on such Certificate.
"Person": Any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Pool Principal Balance": The aggregate principal balances of all
Mortgage Loans.
"Preference Amount": With respect to either Class of Class A
Certificates and any Distribution Date, any amounts distributed in respect of
the related Class of Class A Certificates which are recovered from any Owner of
such Class A Certificates as a voidable preference by a trustee in bankruptcy
pursuant to the United States Bankruptcy Code or other similar law in accordance
with a final, nonappealable order of a court having competent jurisdiction and
which have not theretofore been repaid to such Owner.
"Premium Amount": With respect to either Group and each Distribution
Date, an amount equal to the product of (x) one-twelfth of the related
Certificate Insurer Premium Rate and (y) the Certificate Principal Balance of
the related Class of Class A Certificates, after taking into account all
distributions of principal to be made on such Distribution Date.
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"Prepaid Installment": With respect to any Mortgage Loan, any
installment of principal thereof and interest thereon received prior to the
scheduled due date for such installment, intended by the Mortgagor as an early
payment thereof and not as a Prepayment with respect to such Mortgage Loan.
"Prepayment": Any payment of principal of a Mortgage Loan which is
received by the Master Servicer in advance of the scheduled due date for the
payment of such principal (other than the principal portion of any Prepaid
Installment), and the proceeds of any Insurance Policy which are to be applied
as a payment of principal on the related Mortgage Loan shall be deemed to be
Prepayments for all purposes of this Agreement.
"Prepayment Interest Shortfall": With respect to any Distribution
Date, for each Mortgage Loan that was the subject during the related Interest
Remittance Period of a Principal Prepayment in Full, an amount equal to (a) 30
days' interest on the Loan Balance of such Mortgage Loan at a per annum rate
equal to the related Pass-Through Rate, plus the per annum rate at which the
Trustee's Fee accrues, plus the related Certificate Insurer Premium Rate minus
(b) the amount of interest actually remitted by the Mortgagor in connection with
such Principal Prepayment in Full less the Master Servicing Fee for such
Mortgage Loan in such period.
"Preservation Expenses": Expenditures made by the Master Servicer or
any Subservicer in connection with a foreclosed Mortgage Loan prior to the
liquidation thereof, including, without limitation, expenditures for real estate
property taxes, hazard insurance premiums, property restoration or preservation.
"Principal Distribution Amount": With respect to either Class of
Class A Certificates and any Distribution Date, the excess, if any, of (x) the
amount distributed to the Owners of such Class A Certificates on such
Distribution Date (net of, in the case of the Class A-2 Certificates, any amount
transferred from the Supplemental Interest Payment Account to the Class A-2
Distribution Account on such Distribution Date) over (y) the related Interest
Distribution Amount.
"Principal Prepayment in Full": Any payment or other recovery of
principal on a Mortgage Loan equal to the outstanding principal balance thereof,
received in advance of the final scheduled due date which is not intended as an
advance payment of a scheduled monthly payment.
"Principal Remittance Amount": As of any Remittance Date and with
respect to either Group, the sum, without duplication, of (i) the principal
actually collected by the Master Servicer with respect to the related Mortgage
Loans during the related Remittance Period, (ii) the Loan Balance of each
related Mortgage Loan that either was repurchased by the
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Sponsor or purchased by the Master Servicer on such Remittance Date, to the
extent such Loan Balance was actually deposited in the Collection Account, (iii)
any Substitution Amounts delivered by the Sponsor in connection with a
substitution of a related Mortgage Loan, to the extent such Substitution Amounts
were actually deposited in the Collection Account on such Remittance Date, and
(iv) all Net Liquidation Proceeds actually collected by the Master Servicer with
respect to the related Mortgage Loans during the related Remittance Period (to
the extent such Net Liquidation Proceeds related to principal) net of amounts
allowed to be retained pursuant to Section 8.10(d)(i).
"Prohibited Transaction": "Prohibited transaction" shall have the
meaning set forth from time to time in the definition thereof at Section
860F(a)(2) of the Code (or any successor statute thereto) and applicable to the
Trust.
"Property": The underlying property securing a Mortgage Loan.
"Purchase Option Period": As defined in Section 9.3(b) hereof.
"Qualified Liquidation": "Qualified liquidation" shall have the
meaning set forth from time to time in the definition thereof at Section
860F(a)(4) of the Code (or any successor statute thereto) and applicable to the
Trust.
"Qualified Mortgage": "Qualified Mortgage" shall have the meaning
set forth from time to time in the definition thereof at Section 860G(a)(3) of
the Code (or any successor statute thereto) and applicable to the Trust and the
Mortgage Loan Groups.
"Qualified Replacement Mortgage": A Mortgage Loan substituted for
another pursuant to Section 3.3, 3.4 or 3.6(b) hereof, which (i) bears a
variable rate of interest if the Mortgage Loan to be substituted for is in Group
II or bears a fixed rate of interest if the Mortgage Loan to be substituted for
is in Group I, (ii) has a Coupon Rate at least equal to the Coupon Rate of the
Mortgage Loan being replaced, (which, in the case of a Mortgage Loan in Group
II, shall mean a Mortgage Loan having the same interest rate index, a margin
over such index and a maximum interest rate at least equal to those applicable
to the Mortgage Loan being replaced), (iii) is of the same or better property
type and the same or better occupancy status as the replaced Mortgage Loan, (iv)
shall mature no later than September 30, 2026, (v) has a Combined Loan-to-Value
Ratio as of the Cut-Off Date no higher than the Combined Loan-to-Value Ratio of
the replaced Mortgage Loan at such time, (vi) has a Loan Balance as of the
related Replacement Cut-Off Date equal to or less than the Loan Balance of the
replaced Mortgage Loan as of such Replacement Cut-Off Date, (vii) satisfies all
of the representations and warranties set forth in Section 3.3 and the criteria
set forth
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from time to time in the definition thereof at Section 860G(a)(4) of the Code
(or any successor statute thereto) and applicable to the Trust, all as evidenced
by an Officer's Certificate of the Sponsor delivered to the Trustee and the
Certificate Insurer prior to any such substitution and (viii) is a valid First
Mortgage Loan if the Mortgage Loan to be substituted for is a valid First
Mortgage Loan or Second Mortgage Loan if the Mortgage Loan to be substituted for
is a Second Mortgage Loan. In the event that one or more Mortgage Loans are
proposed to be substituted for one or more Mortgage Loans, the Certificate
Insurer may allow the foregoing tests to be met on a weighted average basis or
other aggregate basis acceptable to the Certificate Insurer, as evidenced by a
written approval delivered to the Trustee by the Certificate Insurer, except
that the requirement of clauses (v) and (vii) hereof must be satisfied as to
each Qualified Replacement Mortgage. All Qualified Replacement Mortgages shall
be approved by the Certificate Insurer.
"Rating Agency" or "Rating Agencies": Standard & Poor's and Moody's
or their successors. If such agencies or their successors are no longer in
existence, "Rating Agencies" shall be such nationally recognized statistical
rating agencies, or other comparable Persons, designated by the Sponsor and the
Certificate Insurer, notice of which designation shall be given to the Trustee
and Master Servicer.
"Realized Loss": As to any Liquidated Loan, the amount, if any, by
which the Loan Balance thereof as of the date of liquidation is in excess of Net
Liquidation Proceeds realized thereon.
"Record Date": With respect to each Distribution Date, the last day
of the calendar month immediately preceding the calendar month in which such
Distribution Date occurs or, if such day is not a Business Day, the next
preceding Business Day.
"Reference Banks": Bankers Trust Company, Barclay's Bank PLC, The
Bank of Tokyo and National Westminster Bank PLC; provided that if any of the
foregoing banks are not suitable to serve as a Reference Bank, then any leading
banks selected by the Trustee which are engaged in transactions in Eurodollar
deposits in the international Eurocurrency market (i) with an established place
of business in London, (ii) not controlling, under the control of or under
common control with the Sponsor or any affiliate thereof, (iii) whose quotations
appear on the Reuters Screen LIBO Page on the relevant Interest Determination
Date and (iv) which have been designated as such by the Trustee.
"Register": The register maintained by the Trustee in accordance
with Section 5.4 hereof, in which the names of the Owners are set forth.
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"Registrar": The Trustee, acting in its capacity as Trustee
appointed pursuant to Section 5.4 hereof, or any duly appointed and eligible
successor thereto.
"Registration Statement": The Registration Statement filed by the
Sponsor with the Securities and Exchange Commission, including all amendments
thereto and including the Prospectus and Prospectus Supplement relating to the
Class A Certificates constituting a part thereof.
"Reimbursement Amount": With respect to either Class of Class A
Certificates and for any Distribution Date, the sum of (x)(i) all related
Insured Payments previously received by the Trustee not previously repaid to the
Certificate Insurer pursuant to Section 7.5(c), together with interest accrued
on each such related Insured Payment not previously repaid calculated from the
date the Trustee received the related Insured Payment at the Late Payment Rate
and (y) any amounts then due and owing to the Certificate Insurer relating to
such Class A Certificates under the Insurance Agreement.
"Released Property Proceeds": As to any Mortgage Loan, proceeds
received by the Master Servicer in connection with (a) a taking of an entire
Property by exercise of the power of eminent domain or condemnation or (b) any
release of part of the Property from the lien of the related Mortgage, whether
by partial condemnation, sale or otherwise, which are not released to the
Mortgagor in accordance with applicable law, Accepted Servicing Practices and
this Agreement.
"REMIC": A "real estate mortgage investment conduit" within the
meaning of Section 860D of the Code.
"REMIC Provisions": Provisions of the federal income tax law
relating to real estate mortgage investment conduits, which appear at Sections
860A through 860G of the Code, and related provisions, and regulations and
rulings promulgated thereunder, as the foregoing may be in effect from time to
time.
"REMIC Trust": The segregated pool of assets consisting of the Trust
Estate except for the Supplemental Interest Payment Account, the Class A-1
Distribution Account and the Class A-2 Distribution Account.
"Remittance Date": Any date on which the Master Servicer is required
to remit moneys on deposit in the Collection Account to the Trustee, which shall
be not later than the 18th day of each month, or, if such day is not a Business
Day, the next preceding Business Day, commencing in the month following the
month in which the Startup Day occurs.
"Remittance Period": With respect to each Distribution Date, the
period (inclusive) beginning on the first day of the calendar month immediately
preceding such
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Distribution Date and ending on the last day of such immediately preceding
calendar month.
"REO Property": A Property acquired by the Master Servicer or any
Subservicer on behalf of the Trust through foreclosure or deed-in-lieu of
foreclosure in connection with a defaulted Mortgage Loan.
"Replacement Cut-Off Date": With respect to any Qualified
Replacement Mortgage, the first day of the calendar month in which such
Qualified Replacement Mortgage is conveyed to the Trust.
"Representation Letter" shall mean letters to, or agreements with,
the Depository to effectuate a book-entry system with respect to the Class A
Certificates registered in the Register under the nominee name of the
Depository.
"Reserve Interest Rate": With respect to any Interest Determination
Date, the rate per annum that the Trustee determines to be either (i) the
arithmetic mean (rounded upwards if necessary to the nearest whole multiple of
1/16%) of the one-month U.S. dollar lending rates which three New York City
banks selected by the Trustee are quoting on the relevant Interest Determination
Date to the principal London offices of leading banks in the London interbank
market or (ii) in the event that the Trustee can determine no such arithmetic
mean, the lowest one-month U.S. dollar lending rate which three New York City
banks selected by the Trustee are quoting on such Interest Determination Date to
leading European banks.
"Residual Certificate": Any Class R or Class RS Certificate.
"Responsible Officer": When used with respect to the Trustee, any
officer assigned to the Corporate Trust Division (or any successor thereto),
including any Vice President, any Assistant Secretary, any trust officer or any
other officer of the Trustee customarily performing functions similar to those
performed by any of the above designated officers and to whom, with respect to a
particular matter, such matter is referred because of such officer's knowledge
of and familiarity with the particular subject.
"Rolling Delinquency Percentage": For any Distribution Date, the
average of the Delinquency Percentages for the Mortgage Loans as of the last day
of each of the six (or 1, 2, 3, 4, and 5 in the case of the first five
Distribution Dates, as applicable) most recently ended Remittance Periods.
"Rolling Loss Percentage": As of any Distribution Date, the
percentage equivalent of a fraction, the numerator of which is the aggregate
amount of Realized Losses incurred during the preceding twelve (or 1 though 11,
in the case of
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the first 11 Distribution Dates, as applicable) calendar months, and the
denominator of which is the aggregate Loan Balance of the Mortgage Loans as of
the first day of the twelfth preceding calendar month.
"Schedules of Mortgage Loans": The Schedules of Mortgage Loans,
attached hereto as Schedule I listing each Mortgage Loan, setting forth the
following information with respect to each Mortgage Loan: (1) the Mortgagor's
name, (2) the street address of the Property, (3) the town or city in which the
Property is located, (4) the Loan Balance as of the Cut-Off Date, (5) the loan
number, (6) the original principal amount, (7) the original interest rate, (8)
the first date on which a monthly payment is due under the Note, (9) the
original stated term-to-maturity of the Note, (10) the state in which the
Property is located, (11) the zip code of the Property, (12) the Combined
Loan-to-Value Ratio, (13) whether the Property is owner-occupied or non
owner-occupied, (14) whether the Property is a single family residence, two-to
four-family residence or a condominium, (15) if such Mortgage Loan is a Balloon
Loan, the amortization terms (e.g., 30 due in 15) and (16) whether such Mortgage
Loan is subject to Section 32 of the Home Ownership and Equity Protection Act of
1994.
The information contained on each Mortgage Loan Schedule shall be
delivered to the Trustee on a computer readable magnetic tape or disk.
"Second Mortgage Loan": A Mortgage Loan which constitutes a second
priority mortgage lien with respect to the related Property.
"Securities Act": The Securities Act of 1933, as amended.
"Senior Lien": With respect to any Second Mortgage Loan, the
mortgage loan relating to the corresponding Property having a first priority
lien.
"Servicing Advance": As defined in Section 8.4(c) hereof.
"Shortfall Amount": With respect to either Group and as of any
Distribution Date, the excess, if any, of (x) the related Insured Distribution
Amount over (y) the related Total Available Funds minus the related amounts
described in Sections 7.5(c)(i), 7.5(c)(ii) and 7.5(c)(iii) on such Distribution
Date.
"Specified Subordinated Amount": The Group I Specified Subordinated
Amount or the Group II Specified Subordinated Amount.
"Sponsor": Accredited Home Lenders, Inc., a California corporation.
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"Standard & Poor's": Standard & Poor's Ratings Group, a division of
The McGraw Hill Companies.
"Startup Day": September 27, 1996.
"Step-Down Cumulative Loss Test": The Step-Down Cumulative Loss Test
will be met with respect to a Distribution Date as follows: (i) for the 30th
through the 41st Distribution Dates, if the Cumulative Loss Percentage for such
Distribution Date is 1.00% or less, (ii) for the 42nd through the 53rd
Distribution Dates, if the Cumulative Loss Percentage for such Distribution Date
is 1.75% or less, (iii) for the 54th through the 65th Distribution Dates, if the
Cumulative Loss Percentage for such Distribution Date is 2.25% or less and (iv)
for the 66th Distribution Date and any Distribution Date thereafter, if the
Cumulative Loss Percentage for such Distribution Date is 2.90% or less.
"Step-Down Rolling Delinquency Test": The Step-Down Rolling
Delinquency Test will be met, with respect to a Distribution Date, if the
Rolling Delinquency Percentage for such Distribution Date is less than 10.0%.
"Step-Down Rolling Loss Test": The Step-Down Rolling Loss Test will
be met, with respect to a Distribution Date, if the Rolling Loss Percentage for
such Distribution Date and such Group is less than 1.00%.
"Step-Down Trigger": For any Distribution Date after the 30th
Distribution Date, the Step-Down Trigger will have occurred if each of the
Step-Down Cumulative Loss Test, the Step-Down Rolling Delinquency Test and the
Step-Down Rolling Loss Test is met. In no event will the Step-Down Trigger be
deemed to have occurred for the 30th Distribution Date or any preceding
Distribution Date.
"Step-Up Cumulative Loss Test": The Step-Up Cumulative Loss Test
will be met with respect to a Distribution Date as follows: (i) for the 1st
through the 12th Distribution Dates, if the Cumulative Loss Percentage for such
Distribution Date is more than 0.75%, (ii) for the 13th through the 24th
Distribution Dates, if the Cumulative Loss Percentage for such Distribution Date
is more than 1.25%, (iii) for the 25th through the 36th Distribution Dates, if
the Cumulative Loss Percentage for such Distribution Date is more than 3.00%,
(iv) for the 37th through the 48th Distribution Dates, if the Cumulative Loss
percentage and Distribution Date is more than 3.75% and (v) for the 49th
Distribution Date and any Distribution Date thereafter, if the Cumulative Loss
Percentage for such Distribution Date is more than 4.25%.
"Step-up Distribution Date": The second Distribution Date which
follows the Clean-Up Call Date.
"Step-Up Rolling Delinquency Test": The Step-Up Rolling Delinquency
Test will be met with respect to a
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Distribution Date if the Rolling Delinquency Percentage for such Distribution
Date is more than 12.0%.
"Step-Up Rolling Loss Test": The Step-Up Rolling Loss Test will be
met with respect to a Distribution Date if the Rolling Loss Percentage for such
Distribution Date is 1.40% or more.
"Step-Up Trigger": For any Distribution Date, the Step-Up Trigger
will have occurred if any one of the Step-Up Cumulative Loss Test, the Step-Up
Rolling Delinquency Test or the Step-Up Rolling Loss Test is met.
"Subordinated Amount": As of any Distribution Date and with respect
to either Group, the excess, if any, of (x) the aggregate Loan Balances of the
related Mortgage Loans in such Group as of the close of business on the last day
of the related Remittance Period and (y) the Certificate Principal Balance of
the related Class A Certificates as of such Distribution Date (assuming the
payment of the Principal Distribution Amount for the related Class A
Certificates on such Distribution Date except for any portion thereof related to
an Insured Payment for the related Class A Certificates).
"Subordination Deficiency Amount": With respect to any Mortgage Loan
Group and Distribution Date, the excess, if any, of (i) the Specified
Subordinated Amount applicable to such Mortgage Loan Group and Distribution Date
over (ii) the Subordinated Amount applicable to such Mortgage Loan Group and
Distribution Date prior to taking into account the payment of any related
Subordination Increase Amounts on such Distribution Date.
"Subordination Deficit": With respect to any Distribution Date and
with respect to either Group, the amount, if any, by which (x) the aggregate
Certificate Principal Balance of the related Class A Certificates, assuming the
payment of the related Principal Distribution Amount (calculated for this
purpose only without regard to any portion of any Insured Payment used to fund
any portion of such Subordination Deficit) on such Distribution Date, exceeds
(y) the aggregate Loan Balances of the related Mortgage Loans as of the close of
business on the last day of the prior Remittance Period.
"Subordination Increase Amount": With respect to either Mortgage
Loan Group and any Distribution Date, the lesser of (i) the Subordination
Deficiency Amount as of such Distribution Date (after taking into account the
payment of the related Group Principal Distribution Amount on such Distribution
Date (except for any Subordination Increase Amount)) and (ii) the aggregate
amount to be allocated to the related Class A Distribution Account pursuant to
Sections 7.5(c)(viii) and 7.5(c)(ix) on such Distribution Date.
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"Subordination Reduction Amount": With respect to any Mortgage Loan
Group and Distribution Date, an amount equal to the lesser of (x) the Excess
Subordinated Amount for such Mortgage Loan Group and Distribution Date and (y)
the Principal Remittance Amount with respect to such Mortgage Loan Group for the
related Remittance Period.
"Substitution Amount": In connection with the delivery of any
Qualified Replacement Mortgage, if the outstanding principal amount of such
Qualified Replacement Mortgage as of the applicable Replacement Cut-Off Date is
less than the Loan Balance of the Mortgage Loan being replaced as of such
Replacement Cut-Off Date, an amount equal to such difference together with
accrued and unpaid interest on such amount calculated at the Coupon Rate net of
the Master Servicing Fee of the Mortgage Loan being replaced.
"Subservicer": Advanta Mortgage Corp. USA or any Person with whom
the Master Servicer has entered into a Subservicing Agreement and who satisfies
any requirements set forth in Section 8.5 hereof in respect of the qualification
of a Subservicer.
"Subservicing Agreement": The written contract between the Master
Servicer and any Subservicer relating to servicing and/or administration of
certain Mortgage Loans as permitted by Section 8.5.
"Supplemental Interest Payment Account": The Supplemental Interest
Payment Account established in accordance with Section 7.10(a) hereof and
maintained by the Trustee.
"Supplemental Interest Payment Amount Available": As defined in
Section 7.10(b) hereof.
"Supplemental Interest Trust": The Accredited Mortgage Loan Trust
Supplemental Interest Trust 1996-1 created pursuant to Section 7.10(a) hereof.
"Tax Matters Person": The Tax Matters Person appointed pursuant to
Section 11.17 hereof.
"Termination Notice": As defined in Section 9.3(b) hereof.
"Termination Price": As defined in Section 9.2(a) hereof.
"Total Available Funds": With respect to any Distribution Date and
either Group, the sum of (i) the related Available Funds and (ii) the amounts
allocated to such Group from the Available Funds with respect to the other Group
pursuant to Section 7.5(c)(v).
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"Total Monthly Excess Spread": With respect to each Group as of any
Distribution Date, the excess of (i) the interest which is collected on the
related Mortgage Loans during the prior Interest Remittance Period, plus any
Delinquency Advances and Compensating Interest paid by the Master Servicer with
respect to the related Mortgage Loans with respect to such Interest Remittance
Period and less the related Master Servicing Fees, Trustee's Fees and Premium
Amount over (ii) the related Interest Distribution Amount.
"Transaction Documents": Collectively this Agreement, the Insurance
Agreement, the Underwriting Agreement relating to the Class A Certificates, any
Subservicing Agreement, the Indemnification Agreement, the Registration
Statement relating to the Class A Certificates and the Certificates.
"Trust": Accredited Mortgage Loan Trust 1996-1, the trust created
under this Agreement.
"Trust Estate": Collectively, all money, instruments and other
property, to the extent such money, instruments and other property are subject
or intended to be held in trust, and in the subtrusts, for the benefit of the
Owners, including all proceeds thereof, including, without limitation, (i) the
Mortgage Loans, (ii) such amounts, including Eligible Investments, as from time
to time may be held in all Accounts (except as otherwise provided herein), (iii)
any Property, the ownership of which has been effected on behalf of the Trust as
a result of foreclosure or acceptance by the Master Servicer of a deed in lieu
of foreclosure and that has not been withdrawn from the Trust, (iv) any
Insurance Policies relating to the Mortgage Loans and any rights of the Sponsor
under any Insurance Policies, (v) Net Liquidation Proceeds with respect to any
Liquidated Loan and (vi) the Certificate Insurance Policy.
"Trustee": Bankers Trust Company, located on the date of execution
of this Agreement at Four Albany Street, New York, New York 10006, a New York
banking corporation, not in its individual capacity but solely as Trustee under
this Agreement, and any successor hereunder.
"Trustee's Fees": With respect to any Distribution Date and Mortgage
Loan Group, the product of (x) one-twelfth of .01% and (y) the aggregate Loan
Balance of the Mortgage Loans in the related Mortgage Loan Group as of the
beginning of the related Remittance Period.
"Underwriter": Lehman Brothers Inc.
Section 1.2. Use of Words and Phrases. "Herein", "hereby",
"hereunder", "hereof", "hereinbefore", "hereinafter" and other equivalent words
refer to this Agreement as a whole and not solely to the particular section of
this Agreement in which any such word is used. The definitions set forth in
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Section 1.1 hereof include both the singular and the plural. Whenever used in
this Agreement, any pronoun shall be deemed to include both singular and plural
and to cover all genders.
Section 1.3. Captions; Table of Contents. The captions or headings
in this Agreement and the Table of Contents are for convenience only and in no
way define, limit or describe the scope and intent of any provisions of this
Agreement.
Section 1.4. Opinions. Each opinion with respect to the validity,
binding nature and enforceability of documents or Certificates may be qualified
to the extent that the same may be limited by applicable 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 may state that no
opinion is expressed on the availability of the remedy of specific enforcement,
injunctive relief or any other equitable remedy. Any opinion required to be
furnished by any Person hereunder must be delivered by counsel upon whose
opinion the addressee of such opinion may reasonably rely, and such opinion may
state that it is given in reasonable reliance upon an opinion of another, a copy
of which must be attached, concerning the laws of a foreign jurisdiction.
ARTICLE II
ESTABLISHMENT AND ORGANIZATION OF THE TRUST
Section 2.1. Establishment of the Trust. The parties hereto do
hereby create and establish, pursuant to the laws of the State of New York and
this Agreement, the Trust, which, for convenience, shall be known as "Accredited
Mortgage Loan Trust 1996-1". Each Mortgage Loan Group shall constitute a
sub-trust of the Trust.
Section 2.2. Office. The office of the Trust shall be in care of the
Trustee, addressed to Bankers Trust Company Four Albany Street, New York, New
York 10006, or at such other address as the Trustee may designate by notice to
the Sponsor, the Master Servicer, the Owners and the Certificate Insurer.
Section 2.3. Purposes and Powers. The purpose of the Trust is to
engage in the following activities, and only such activities: (i) the issuance
of the Certificates and the acquiring, owning and holding of Mortgage Loans and
the Trust Estate in connection therewith; (ii) activities that are necessary,
suitable or convenient to accomplish the foregoing or are incidental thereto or
connected therewith, including the investment of moneys in accordance with this
Agreement; and (iii) such other activities as may be required in connection with
conservation of the Trust Estate and distributions to the Owners; provided,
however, that nothing
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contained herein shall permit the Trustee to take any action which would result
in the loss of REMIC status for the REMIC Trust.
Section 2.4. Appointment of the Trustee; Declaration of Trust. The
Sponsor hereby appoints the Trustee as trustee of the Trust effective as of the
Startup Day, to have all the rights, powers and duties set forth herein. The
Trustee hereby acknowledges and accepts such appointment, represents and
warrants its eligibility as of the Startup Day to serve as Trustee pursuant to
Section 10.8 hereof and declares that it will hold the Trust Estate in trust
upon and subject to the conditions set forth herein for the benefit of the
Owners.
Section 2.5. Expenses of the Trust. The expenses of the Trust,
including the annual fees of the Trustee, and any other expenses of the Trust,
including the reasonable expenses of the Trustee shall be paid by the Sponsor to
the Trustee or to such other Person to whom such amounts may be due. Failure by
the Sponsor to pay any such fees or other expenses shall not relieve the Trustee
of its obligations hereunder. The Trustee hereby covenants with the Owners that
every material contract or other material agreement entered into by the Trustee
on behalf of the Trust shall expressly state therein that no Owner shall be
personally liable in connection with such contract or agreement.
Section 2.6. Ownership of the Trust. On the Startup Day the
ownership interests in the Trust and the subtrusts shall be transferred as set
forth in Section 4.2 hereof, such transfer to be evidenced by sale of the
Certificates as described therein. Thereafter, transfer of any ownership
interest shall be governed by Sections 5.4 and 5.8 hereof.
Section 2.7. Situs of the Trust. It is the intention of the parties
hereto that the Trust constitute a trust under the laws of the State of New
York. The Trust will be created in, and all Accounts maintained by the Trustee
on behalf of the Trust will be located in, the State of New York. The Trust will
not have any employees and will not have any real or personal property (other
than property acquired pursuant to Section 8.14 hereof) located in any state
other than in the State of New York and payments will be received by the Trust
only in the State of New York and payments from the Trust will be made only from
the State of New York. The Trust's only office will be at the office of the
Trustee as set forth in Section 2.2 hereof.
Section 2.8. Miscellaneous REMIC Provisions. (a) The REMIC Trust
shall elect to be treated as a REMIC under Section 860D of the Code, as
described in Section 11.15. Any inconsistencies or ambiguities in this Agreement
or in the administration of the Trust shall be resolved in a manner that
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preserves the validity of the election of the REMIC Trust to be treated as a
REMIC.
(b) The Class A Certificates are hereby designated as "regular
interests" with respect to the REMIC and the Class R Certificates are hereby
designated as the single class of "residual interest" with respect to the REMIC.
(c) The Startup Day is hereby designated as the "startup day" of the
REMIC within the meaning of Section 860G(a)(9) of the Code.
(d) The final scheduled Distribution Date for each Class of
Certificates is the Distribution Date occurring in October 2027.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE SPONSOR AND THE MASTER SERVICER;
COVENANT OF SPONSOR TO CONVEY MORTGAGE LOANS
Section 3.1. Representations and Warranties of the Sponsor. The
Sponsor hereby represents, warrants and covenants to the Trustee, the
Certificate Insurer and to the Owners as of the Startup Day that:
(a) The Sponsor is a corporation duly organized, validly existing
and in good standing under the laws of the State of California and is in
good standing as a foreign corporation in each jurisdiction in which the
nature of its business, or the properties owned or leased by it make such
qualification necessary. The Sponsor has all requisite corporate power and
authority to own and operate its properties, to carry out its business as
presently conducted and as proposed to be conducted and to enter into and
discharge its obligations under this Agreement and the other Operative
Documents to which it is a party.
(b) The execution and delivery of this Agreement and the other
Operative Documents to which the Sponsor is a party by the Sponsor and its
performance and compliance with the terms of this Agreement and of the
other Operative Documents to which it is a party have been duly authorized
by all necessary corporate action on the part of the Sponsor and will not
violate the Sponsor's Articles of Incorporation or Bylaws or constitute a
default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, or result in the breach of, any material
contract, agreement or other instrument to which the Sponsor is a party or
by which the Sponsor is bound, or violate any statute or any order, rule
or regulation of any court, governmental
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agency or body or other tribunal having jurisdiction over the Sponsor or
any of its properties.
(c) This Agreement and the other Operative Documents to which the
Sponsor is a party, assuming due authorization, execution and delivery by
the other parties hereto and thereto, each constitutes a valid, legal and
binding obligation of the Sponsor, enforceable against it in accordance
with the terms hereof and thereof, except as the enforcement hereof and
thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors'
rights generally and by general principles of equity (whether considered
in a proceeding or action in equity or at law).
(d) The Sponsor 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 might have consequences
that would materially and adversely affect the condition (financial or
other) or operations of the Sponsor or its properties or might have
consequences that would materially and adversely affect its performance
hereunder and under the other Operative Documents to which it is a party.
(e) No litigation is pending or, to the best of the Sponsor's
knowledge, threatened against the Sponsor which litigation might have
consequences that would prohibit its entering into this Agreement or any
other Operative Document to which it is a party or that would materially
and adversely affect the condition (financial or otherwise) or operations
of the Sponsor or its properties or might have consequences that would
materially and adversely affect its performance hereunder and under the
other Operative Documents to which it is a party.
(f) No certificate of an officer, statement furnished in writing or
report delivered pursuant to the terms hereof by the Sponsor contains any
untrue statement of a material fact or omits to state any material fact
necessary to make the certificate, statement or report not misleading.
(g) The statements contained in the Registration Statement which
describe the Sponsor or matters or activities for which the Sponsor is
responsible in accordance with the Operative Documents or which are
attributed to the Sponsor therein are true and correct in all material
respects, and the Registration Statement does not contain any untrue
statement of a material fact with respect to the Sponsor or omit to state
a material fact required to be stated therein or necessary in order to
make the statements contained therein with respect to the Sponsor not
misleading. To the best of the Sponsor's
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knowledge and belief, the Registration Statement does not contain any
untrue statement of a material fact required to be stated therein or omit
to state any material fact required to be stated therein or necessary to
make the statements contained therein not misleading.
(h) All actions, approvals, consents, waivers, exemptions,
variances, franchises, orders, permits, authorizations, rights and
licenses required to be taken, given or obtained, as the case may be, by
or from any federal, state or other governmental authority or agency
(other than any such actions, approvals, etc., under any state securities
laws, real estate syndication or "Blue Sky" statutes, as to which the
Sponsor makes no such representation or warranty), that are necessary or
advisable in connection with the purchase and sale of the Certificates and
the execution and delivery by the Sponsor of the Operative Documents to
which it is a party, have been duly taken, given or obtained, as the case
may be, are in full force and effect on the date hereof, are not subject
to any pending proceedings or appeals (administrative, judicial or
otherwise) and either the time within which any appeal therefrom may be
taken or review thereof may be obtained has expired or no review thereof
may be obtained or appeal therefrom taken, and are adequate to authorize
the consummation of the transactions contemplated by this Agreement and
the other Operative Documents on the part of the Sponsor and the
performance by the Sponsor of its obligations under this Agreement and
such of the other Operative Documents to which it is a party.
(i) The transactions contemplated by this Agreement are in the
ordinary course of business of the Sponsor.
(j) The Sponsor received fair consideration and reasonably
equivalent value in exchange for the sale of the interests in the Mortgage
Loans evidenced by the Certificates.
(k) The Sponsor did not sell any interest in any Mortgage Loan
evidenced by the Certificates with any intent to hinder, delay or defraud
any of its respective creditors.
(l) The Sponsor is solvent and the Sponsor will not be rendered
insolvent as a result of the sale of the Mortgage Loans to the Trust or
the sale of the Certificates.
It is understood and agreed that the representations and warranties
set forth in this Section 3.1 shall survive delivery of the Mortgage Loans to
the Trustee.
Section 3.2. Representations and Warranties of the Master Servicer.
The Master Servicer hereby represents,
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warrants and covenants to the Trustee, the Certificate Insurer
and to the Owners as of the Startup Day that:
(a) The Master Servicer is a corporation duly organized, validly
existing and in good standing under the laws of the State of California,
is, and each Subservicer is, in compliance with the laws of each state in
which any Property is located to the extent necessary to enable it to
perform its obligations hereunder and is in good standing as a foreign
corporation in each jurisdiction in which the nature of its business, or
the properties owned or leased by it make such qualification necessary.
The Master Servicer and each Subservicer has all requisite corporate power
and authority to own and operate its properties, to carry out its business
as presently conducted and as proposed to be conducted and to enter into
and discharge its obligations under this Agreement and the other Operative
Documents to which it is a party.
(b) The execution and delivery of this Agreement by the Master
Servicer and its performance and compliance with the terms of this
Agreement and the other Operative Documents to which it is a party have
been duly authorized by all necessary corporate action on the part of the
Master Servicer and will not violate the Master Servicer's Articles of
Incorporation or Bylaws or constitute a default (or an event which, with
notice or lapse of time, or both, would constitute a default) under, or
result in the breach of, any material contract, agreement or other
instrument to which the Master Servicer is a party or by which the Master
Servicer is bound or violate any statute or any order, rule or regulation
of any court, governmental agency or body or other tribunal having
jurisdiction over the Master Servicer or any of its properties.
(c) This Agreement and the other Operative Documents to which the
Master Servicer is a party, assuming due authorization, execution and
delivery by the other parties hereto and thereto, each constitutes a
valid, legal and binding obligation of the Master Servicer, enforceable
against it in accordance with the terms hereof, except as the enforcement
hereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors'
rights generally and by general principles of equity (whether considered
in a proceeding or action in equity or at law).
(d) The Master Servicer is not in default with respect to any order
or decree of any court or any order, regulation or demand of any federal,
state, municipal or governmental agency, which might have consequences
that would materially and adversely affect the condition (financial or
other) or operations of the Master Servicer
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or its properties or might have consequences that would materially and
adversely affect its performance hereunder and under the other Operative
Documents to which the Master Servicer is a party.
(e) No litigation is pending or, to the best of the Master
Servicer's knowledge, threatened against the Master Servicer which
litigation might have consequences that would prohibit its entering into
this Agreement or any other Operative Document to which it is a party or
that would materially and adversely affect the condition (financial or
otherwise) or operations of the Master Servicer or its properties or might
have consequences that would materially and adversely affect its
performance hereunder and under the other Operative Documents to which the
Master Servicer is a party.
(f) No certificate of an officer, statement furnished in writing or
report delivered pursuant to the terms hereof by the Master Servicer
contains any untrue statement of a material fact or omits to state any
material fact necessary to make the certificate, statement or report not
misleading.
(g) The statements contained in the Registration Statement which
describe the Master Servicer or matters or activities for which the Master
Servicer is responsible in accordance with the Operative Documents or
which are attributed to the Master Servicer therein are true and correct
in all material respects, and the Registration Statement does not contain
any untrue statement of a material fact with respect to the Master
Servicer or omit to state a material fact required to be stated therein or
necessary to make the statements contained therein with respect to the
Master Servicer not misleading. To the best of the Master Servicer's
knowledge and belief, the Registration Statement does not contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
contained therein not misleading.
(h) The Master Servicing Fee is a "current (normal) servicing fee
rate" as that term is used in Statement of Financial Accounting Standards
No. 65 issued by the Financial Accounting Standards Board. Neither the
Master Servicer nor any affiliate thereof will report on any financial
statements any part of the Master Servicing Fee as an adjustment to the
sales price of the Mortgage Loans.
(i) All actions, approvals, consents, waivers, exemptions,
variances, franchises, orders, permits, authorizations, rights and
licenses required to be taken, given or obtained, as the case may be, by
or from any federal, state or other governmental authority or agency
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(other than any such actions, approvals, etc., under any state securities
laws, real estate syndication or "Blue Sky" statutes, as to which the
Master Servicer makes no such representation or warranty), that are
necessary or advisable in connection with the execution and delivery by
the Master Servicer of the Operative Documents to which it is a party,
have been duly taken, given or obtained, as the case may be, are in full
force and effect on the date hereof, are not subject to any pending
proceedings or appeals (administrative, judicial or otherwise) and either
the time within which any appeal therefrom may be taken or review thereof
may be obtained has expired or no review thereof may be obtained or appeal
therefrom taken, and are adequate to authorize the consummation of the
transactions contemplated by this Agreement and the other Operative
Documents on the part of the Master Servicer and the performance by the
Master Servicer of its obligations under this Agreement and such of the
other Operative Documents to which it is a party.
(j) The collection practices used by the Master Servicer with
respect to the Mortgage Loans directly serviced by it have been, in all
material respects, legal, proper, prudent and customary in the mortgage
loan servicing business.
(k) The transactions contemplated by this Agreement are in the
ordinary course of business of the Master Servicer.
(l) The terms of each existing Subservicing Agreement and each
designated Subservicer are acceptable to the Master Servicer and any new
Subservicing Agreements or Subservicers will comply with the provisions of
Section 8.5.
It is understood and agreed that the representations and warranties
set forth in this Section 3.2 shall survive delivery of the Mortgage Loans to
the Trustee.
Upon discovery by the Master Servicer, the Sponsor, any Subservicer,
the Certificate Insurer or the Trustee of a breach of any of the representations
and warranties set forth in this Section 3.2 which materially and adversely
affects the interests of the Owners or of the Certificate Insurer, the party
discovering such breach shall give prompt written notice to the other parties.
Within 30 days of its discovery or its receipt of notice of breach, the Master
Servicer shall cure such breach in all material respects and, upon the Master
Servicer's continued failure to cure such breach, may thereafter be removed by
the Trustee at the direction of the Certificate Insurer or otherwise pursuant to
Section 8.22 hereof; provided, however, that if the Master Servicer can
demonstrate to the reasonable satisfaction of the Certificate Insurer that it is
diligently pursuing remedial action, then
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the cure period may be extended with the written approval of the Certificate
Insurer.
Section 3.3. Representations and Warranties of the Sponsor with
Respect to the Mortgage Loans.
(a) The Sponsor makes the following representations and warranties
to the Master Servicer and the Trustee for the benefit of the Owners and the
Certificate Insurer as to the Mortgage Loans on which the Trustee relies in
accepting the Mortgage Loans in trust and executing and authenticating the
Certificates. Such representations and warranties speak as of the Startup Day,
but shall survive the sale, transfer, and assignment of the Mortgage Loans to
the Trustee:
(i) The information with respect to each Mortgage Loan set forth in
the Schedules of Mortgage Loans is true and correct as of the Cut-Off
Date.
(ii) Each Mortgage Loan is being serviced either (x) through the
Master Servicer, (y) a Person controlling, controlled by or under common
control with the Master Servicer and qualified to service mortgage loans
or (z) a qualified subservicer.
(iii) Each Mortgage Loan was underwritten or reunderwritten pursuant
to the Sponsor's credit underwriting guidelines which conform in all
material respects to the description thereof set forth in the Registration
Statement.
(iv) All of the original or certified documentation required to be
delivered to the Trustee pursuant to this Agreement (including all
material documents related thereto) with respect to each Mortgage Loan has
been or will be delivered to the Trustee in accordance with the terms of
this Agreement. Each of the documents and instruments specified to be
included therein has been 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.
(v) Each Mortgage Loan being transferred to the Sponsor is a
Qualified Mortgage.
(vi) Each Property is improved by a single (one to four) family
residential dwelling, which may include condominiums and townhouses but
shall not include cooperatives.
(vii) No Mortgage Loan had a Combined Loan-to-Value Ratio in excess
of 100%.
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(viii) Each Mortgage is either a valid and subsisting first or
second lien as identified on the Schedule of Mortgage Loans on the
Property (subject in the case of any Second Mortgage Loan only to a Senior
Lien on such Property) and subject in all cases to the exceptions to title
set forth in the title insurance policy, with respect to the related
Mortgage Loan, which exceptions are generally acceptable to banking
institutions in connection with their regular mortgage lending activities,
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.
(ix) Immediately prior to the transfer and assignment herein
contemplated, the Sponsor held good and indefeasible title to, and was the
sole owner of, each Mortgage Loan subject to no liens, charges, mortgages,
encumbrances or rights of others except liens which will be released
simultaneously with such transfer and assignment; and immediately upon the
transfer and assignment herein contemplated, the Trustee will hold good
and indefeasible title to, and be the sole owner of, each Mortgage Loan
subject to no liens, charges, mortgages, encumbrances or rights of others
except liens which will be released simultaneously with such transfer and
assignment.
(x) There is no delinquent tax or assessment lien on any Property,
and each Property is free of substantial damage and is in good repair.
(xi) There is no valid and enforceable right of rescission offset,
defense or counterclaim to any Note or Mortgage, including the obligation
of the related Mortgagor to pay the unpaid principal of or interest on
such Note or the defense of usury, nor will the operation of any of the
terms of the Mortgage Note or the 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.
(xii) There is no mechanics' lien or claim for work, labor or
material affecting any Property which is or may be a lien prior to, or
equal with, the lien of the related Mortgage except those which are
insured against by any title insurance policy referred to in paragraph
(xxii) below.
(xiii) Each Mortgage Loan at the time it was made complied in all
material respects with all applicable
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state and federal laws and regulations, including, without limitation, the
federal Truth-in-Lending Act and other consumer protection laws, the Home
Ownership and Equity Protection Act of 1994, real estate settlement
procedure, usury, equal credit opportunity, disclosure and recording laws.
(xiv) With respect to each Mortgage Loan, a lender's title insurance
policy, issued in standard California Land Title Association form or
American Land Title Association form, or other form acceptable in a
particular jurisdiction by a title insurance company authorized to
transact business in the state in which the related Property is situated,
in an amount at least equal to the Original Principal Amount of such
Mortgage Loan insuring the mortgagee's interest under the related Mortgage
Loan as the holder of a valid first or second mortgage lien of record on
the real property described in the related Mortgage, as the case may be,
subject only to exceptions of the character referred to in paragraph (xv)
above, was effective on the date of the origination of such Mortgage Loan,
and, as of the Start-up Day such policy will be valid and inure to the
benefit of the Trustee on behalf of the Owners.
(xv) The improvements upon each Property are covered by a valid and
existing hazard insurance policy (which may be a blanket policy of the
type described in this Agreement) with a generally acceptable carrier that
provides for fire and extended coverage representing coverage not less
than the least of (A) the outstanding principal balance of the related
Mortgage Loan (together, in the case of a Second Mortgage Loan, with the
outstanding principal balance of the Senior Lien), (B) the minimum amount
required to compensate for damage or loss on a replacement cost basis or
(C) the full insurable value of the Property.
(xvi) If any Property is in an area identified in the Federal
Register by the Federal Emergency Management Agency as having special
flood hazards, a flood insurance policy (which may be a blanket policy of
the type described in this Agreement) in a form meeting the requirements
of the current guidelines of the Federal Insurance Administration is in
effect with respect to such Property with a generally acceptable carrier
in an amount representing coverage not less than the least of (A) the
outstanding principal balance of the related Mortgage Loan (together, in
the case of a Second Mortgage Loan, with the outstanding principal balance
of the Senior Lien), (B) the minimum amount required to compensate for
damage or loss on a replacement cost basis or (C) the maximum amount of
insurance that is available under the Flood Disaster Protection Act of
1973.
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(xvii) Each Mortgage and Note is the legal, valid and binding
obligation of the maker thereof and is enforceable 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 had full legal capacity to execute
all documents relating to such Mortgage Loan and convey the estate therein
purported to be conveyed.
(xviii) The Sponsor has caused to be performed any and all acts
required to be performed to preserve the rights and remedies of the
servicer in any Insurance Policies applicable to any Mortgage Loan
delivered by the Sponsor including, to the extent such Mortgage Loan is
not covered by a blanket policy described in this Agreement, any necessary
notifications of insurers, assignments of policies or interests therein,
and establishments of co-insured, joint loss payee and mortgagee rights in
favor of the servicer.
(xix) Each original Mortgage and all subsequent assignments of the
original Mortgage have been recorded or are in the process of being
recorded, in the appropriate jurisdictions wherein such recordation is
necessary to perfect the lien thereof for the benefit of the Sponsor,
subject to the provisions of Section 3.5(b) of this Agreement.
(xx) The terms of each Note and each Mortgage have not been
impaired, altered or modified in any respect, except by a written
instrument which has been recorded, if necessary, to protect the interest
of the Owners and which has been delivered to the Trustee. The substance
of any such alteration or modification is reflected on the related
Schedule of Mortgage Loans and has been approved by the primary mortgage
guaranty insurer, if any.
(xxi) 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. All costs, fees and expenses incurred in making or
closing or recording such Mortgage Loans were paid.
(xxii) Except as otherwise required by law or pursuant to the
statute under which the related Mortgage Loan was made, the related Note
is not and has not been secured by any collateral, pledged account or
other security except the lien of the corresponding Mortgage.
(xxiii) No Mortgage Loan was originated under a buydown plan.
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(xxiv) No Mortgage Loan provides for negative amortization, has a
shared appreciation feature, or other contingent interest feature.
(xxv) Each Property is located in the state identified in the
Schedule of Mortgage Loans and consists of one or more parcels of real
property with a residential dwelling erected thereon.
(xxvi) Each Mortgage securing a Note assigned to Group I contains a
provision for the acceleration of the payment of the unpaid principal
balance of the related Mortgage Loan in the event the related Property is
sold without the prior consent of the mortgagee thereunder; each Mortgage
securing a Note assigned to Group II either (i) contains a provision for
the acceleration of the payment of the unpaid principal balance of the
related Mortgage Loan in the event the related Property is sold without
the prior consent of the mortgagee thereunder or (ii) may be assumable by
a creditworthy borrower.
(xxvii) Any advances made after the date of origination of a
Mortgage Loan but prior to the Cut-Off Date, have been consolidated with
the outstanding principal amount secured by the related Mortgage, and the
secured principal amount, as consolidated, bears a single interest rate
and single repayment term reflected on the Schedule of Mortgage Loans. The
consolidated principal amount does not exceed the original principal
amount of the related Mortgage Loan. No Note permits or obligates the
Master Servicer, the Subservicer, the Sponsor or any other Person to make
future advances to the related Mortgagor at the option of the Mortgagor.
(xxviii) There is no proceeding pending or threatened for the total
or partial condemnation of any Property, nor is such a proceeding
currently occurring, and each Property is undamaged by waste, fire,
earthquake or earth movement, flood, tornado or other casualty, so as to
affect adversely the value of the Property as security for the Mortgage
Loan or the use for which the premises were intended.
(xxix) All of the improvements which were included for the purposes
of determining the Appraised Value of any Property lie wholly within the
boundaries and building restriction lines of such Property, and no
improvements on adjoining properties encroach upon such Property, except
as stated in the related title insurance policy and affirmatively insured.
(xxx) No improvement located on or being part of any Property is in
violation of any applicable zoning law or regulation. As of the related
date of origination, all inspections, licenses and certificates required
to be made or issued with respect to all occupied portions of
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each 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 Property is lawfully occupied under the applicable
law.
(xxxi) With respect to each Mortgage constituting a deed of trust, a
trustee, duly qualified under applicable law to serve as such, has been
properly designated and currently so serves and is named in such Mortgage,
and no fees or expenses are or will become payable by the Sponsor or the
related Trust to the trustee under the deed of trust, except in connection
with a trustee's sale after default by the related Mortgagor.
(xxxii) With respect to each Second Mortgage Loan, either (A) no
consent for such Mortgage Loan was required by the holder of the related
Senior Lien prior to the making of such Mortgage Loan or (B) such consent
has been obtained and is contained in the related Mortgage File.
(xxxiii) Each Mortgage contains customary and enforceable provisions
which render the rights and remedies of the holder thereof adequate for
the realization against the related 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 foreclosure. There
is no homestead or other exemption available which materially interferes
with the right to sell the related Property at a trustee's sale or the
right to foreclose the related Mortgage.
(xxxiv) Except as provided in clause (v) of this Section, there is
no default, breach, violation or event of acceleration existing under any
Mortgage or the related 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 the
Sponsor has not waived any default, breach, violation or event of
acceleration.
(xxxv) 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, except in connection with an assumption agreement which
has been approved by the primary mortgage guaranty insurer, if any, and
which has been delivered to the Trustee.
(xxxvi) The maturity date of each Mortgage Loan which is a Second
Mortgage Loan is at least twelve months prior to the maturity date of the
related Senior Lien if such Senior Lien provides for a balloon payment.
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(xxxvii) The Sponsor has no actual knowledge that there exist on any
Property any hazardous substances, hazardous wastes or solid wastes, as
such terms are defined in the Comprehensive Environmental Response
Compensation and Liability Act, the Resource Conservation and Recovery Act
of 1976, or other federal, state or local environmental legislation.
(xxxviii) (a) No action, error, omission, misrepresentation,
negligence, fraud or similar occurrence with respect to a Mortgage Loan
has taken place on the part of any person, including, without limitation,
the Mortgagor, any appraiser, any builder or developer, or any other party
involved in the origination of the Mortgage Loan or in the application of
any insurance in relation to such Mortgage Loan and (b) no action has been
taken or failed to be taken, no event has occurred and no state of facts
exists or had existed on or prior to the related Startup Day (whether or
not known to the Sponsor on or prior to such date) which has resulted or
will result in an exclusion from, denial of, or defense to coverage under
any primary mortgage insurance policy issued in connection therewith
(including, without limitation, any exclusions, denials or defenses which
would limit or reduce the availability of the timely payment of the full
amount of the loss otherwise due thereunder to the insured) whether
arising out of actions, representations, errors, omissions, negligence, or
fraud of the Sponsor, the related Mortgagor or any party involved in the
application for such coverage, including the appraisal, plans and
specifications and other exhibits or documents submitted therewith to the
insurer under such insurance policy, or for any other reason under such
coverage, but not including the failure of such insurer to pay by reason
of such insurer's breach of such insurance policy or such insurer's
financial inability to pay.
(xxxix) The Sponsor has not solicited the Mortgagor in connection
with any refinancing.
(xl) If the Mortgage Loan is an adjustable rate Mortgage Loan, all
of the adjustments to the Coupon Rate, to the amount of the monthly
payment, and to the principal balance have been made in accordance with
the terms of the related Note.
(xli) The origination and collection practices used with respect to
the Mortgage Loan have been in all respects legal, proper, prudent and
customary in the mortgage origination and servicing business.
(xlii) An appraisal of the related Property was made and signed,
prior to the approval of the Mortgage Loan application, by a qualified
appraiser who met the requirements of the Sponsor's appraisal policy and
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procedures and who had no interest, direct or indirect in the Property or
in any loan made on the security thereof, whose compensation is not
affected by the approval or disapproval of the Mortgage Loan.
(xliii) The Mortgagor has received all disclosure materials required
by applicable law with respect to the making of adjustable rate mortgage
loans; and if the Mortgage Loan is a refinanced Mortgage Loan, the
Mortgagor has received all disclosure and rescission materials required by
applicable law with respect to the making of a refinanced Mortgage Loan,
and evidence of such receipt is and will remain in the Master Servicer's
file;
(xliv) If the residential dwelling on the Property is a condominium
unit or a unit in a planned unit development (other than a de minimis
planned unit development), such condominium or planned unit development
project meets the Sponsor's eligibility requirements.
(b) Upon the discovery by the Sponsor, the Master Servicer, the
Certificate Insurer or the Trustee of a breach of any of the representations and
warranties made herein which materially and adversely affects the interests of
the Owners or of the Certificate Insurer in such Mortgage Loan, the party
discovering such breach shall give prompt written notice to the other parties.
The Master Servicer shall promptly notify the Sponsor of such breach and request
that the Sponsor cure such breach or take the actions described in Section
3.4(b) hereof within the time periods required thereby, and if the Sponsor does
not cure such breach in all material respects, the Master Servicer shall cure
such breach or take such actions. The obligations of the Sponsor or Master
Servicer, as the case may be, set forth herein with respect to any Mortgage Loan
as to which such a breach has occurred and is continuing shall constitute the
sole obligations of the Master Servicer and of the Sponsor in respect of such
breach.
Section 3.4. Covenants of Sponsor to Take Certain Actions with
Respect to the Mortgage Loans In Certain Situations. (a) With the provisos and
limitations as to remedies set forth in this Section 3.4, upon the discovery by
the Sponsor, the Master Servicer, the Certificate Insurer, any Subservicer or
the Trustee that the representations and warranties set forth in Section 3.3 of
this Agreement were untrue in any material respect as of the Startup Day and
such breaches of the representations and warranties materially and adversely
affect the interests of the Owners or of the Certificate Insurer, the party
discovering such breach shall give prompt written notice to the other parties.
(b) Upon the earliest to occur of the Sponsor's discovery, its
receipt of notice of breach from any one of the other parties hereto or from the
Certificate Insurer or such
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time as a breach of any representation and warranty materially and adversely
affects the interests of the Owners or of the Certificate Insurer as set forth
above, the Sponsor hereby covenants and warrants that it shall promptly cure
such breach in all material respects or it shall (or shall cause an affiliate of
the Sponsor to or an Originator to), subject to the further requirements of this
paragraph, on the second Remittance Date next succeeding such discovery, receipt
of notice or such other time (i) substitute in lieu of each Mortgage Loan in the
related Mortgage Loan Group which has given rise to the requirement for action
by the Sponsor a Qualified Replacement Mortgage and deliver the Substitution
Amount applicable thereto, together, without duplication, with the aggregate
amount of all Delinquency Advances and Servicing Advances theretofore made with
respect to such Mortgage Loan, to the Master Servicer for deposit in the
Collection Account or (ii) purchase such Mortgage Loan from the REMIC Trust at a
purchase price equal to the Loan Purchase Price thereof, which purchase price
shall be delivered to the Master Servicer for deposit in the Collection Account.
In connection with any such proposed purchase or substitution, the Sponsor at
its expense, shall cause to be delivered to the Trustee and to the Certificate
Insurer an opinion of counsel experienced in federal income tax matters stating
whether or not such a proposed purchase or substitution would constitute a
Prohibited Transaction for the REMIC Trust or would jeopardize the status of the
REMIC Trust as a REMIC, and the Sponsor shall only be required to take either
such action to the extent such action would not constitute a Prohibited
Transaction for the REMIC Trust or would not jeopardize the status of the REMIC
Trust as a REMIC. Any required purchase or substitution, if delayed by the
absence of such opinion shall nonetheless occur if so directed by the
Certificate Insurer upon the earlier of (i) the occurrence of a default or
imminent default with respect to the Mortgage Loan or (ii) the delivery of such
opinion. It is understood and agreed that the obligation of the Sponsor to cure
the defect, or substitute for, or purchase any Mortgage Loan as to which a
representation or warranty is untrue in any material respect and has not been
remedied shall constitute the sole remedy available to the Owners, the Trustee
or the Certificate Insurer.
(c) In the event that any Qualified Replacement Mortgage is
delivered by the Sponsor (or by an affiliate of the Sponsor, as the case may be)
to the Trust pursuant to Section 3.3, Section 3.4 or Section 3.6 hereof, the
Sponsor shall be obligated to take the actions described in Section 3.4(b) with
respect to such Qualified Replacement Mortgage upon the discovery by any of the
Owners, the Sponsor, the Master Servicer, the Certificate Insurer, any
Subservicer or the Trustee that the representations and warranties set forth in
Section 3.3 above are untrue in any material respect on the date such Qualified
Replacement Mortgage is conveyed to the Trust such that the interests of the
Owners or the Certificate Insurer in the related Qualified Replacement Mortgage
are
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materially and adversely affected; provided, however, that for the purposes of
this subsection (c) the representations and warranties in Section 3.3 above
referring to items "as of the Cut-Off Date" or "as of the Startup Day" shall be
deemed to refer to such items as of the date such Qualified Replacement Mortgage
is conveyed to the Trust.
(d) It is understood and agreed that the covenants set forth in this
Section 3.4 shall survive delivery of the respective Mortgage Loans (including
Qualified Replacement Mortgage Loans) to the Trustee.
Section 3.5. Conveyance of the Mortgage Loans. (a) The Sponsor,
concurrently with the execution and delivery hereof, hereby transfers, sells,
assigns, sets over and otherwise conveys without recourse, to the Trustee, all
right, title and interest in and to each Mortgage Loan listed on the Schedules
of Mortgage Loans delivered by the Sponsor on the Startup Day, all its right,
title and interest in and to principal collected and interest accruing on each
such Mortgage Loan on and after the Cut-Off Date and all its right, title and
interest in and to all Insurance Policies. The transfer of the Mortgage Loans
set forth on the Schedules of Mortgage Loans to the Trustee is absolute and is
intended by the Owners and all parties hereto to be treated as a sale.
(b) In connection with the transfer and assignment of the Mortgage
Loans, the Sponsor agrees to:
(i) cause to be delivered, on the Startup Day, without recourse, to
the Trustee the items listed in the definition of "Mortgage File".
(ii) cause, within 75 Business Days following the Startup Day, the
assignments of all Mortgages to be submitted for recording in the
appropriate jurisdictions wherein such recordation is necessary to perfect
the lien thereof as against creditors of or purchasers from the Sponsor to
the Trustee; provided, however, that assignments of the Mortgages shall
not be required to be submitted for recording with respect to any Mortgage
Loan which relates to the Mortgage Files, unless (x) otherwise directed in
writing by the Certificate Insurer, or (y) upon the occurrence of any
Event of Default.
All recording required pursuant to this Section 3.5 shall be
accomplished at the expense of the Sponsor. Notwithstanding anything to the
contrary contained in this Section 3.5, in those instances where the public
recording office retains the original Mortgage, the assignment of a Mortgage or
the intervening assignments of the Mortgage after it has been recorded, the
Sponsor shall be deemed to have satisfied its obligations hereunder upon
delivery to the Trustee of a copy of such Mortgage, such assignment or
assignments of Mortgage certified by the public recording office to be a true
copy of the recorded original thereof.
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Copies of all Mortgage assignments received by the Trustee shall be
kept in the related Mortgage File.
(c) In the case of Mortgage Loans which have been prepaid in full on
or after the Cut-Off Date and prior to the Startup Day, the Sponsor, in lieu of
the foregoing, will deliver within 15 Business Days after the Startup Day, to
the Trustee a certification of an Authorized Officer in the form set forth in
Exhibit D.
(d) The Sponsor shall transfer, sell, assign, set over and otherwise
convey without recourse, to the Trustee all right, title and interest of the
Sponsor in and to any Qualified Replacement Mortgage delivered to the Trustee
pursuant to Section 3.3, Section 3.4 or Section 3.6 hereof and all its right,
title and interest to principal collected and interest accruing on such
Qualified Replacement Mortgage on and after the applicable Replacement Cut-Off
Date; provided, however, that the Sponsor shall reserve and retain all right,
title and interest in and to payments of principal and interest due on such
Qualified Replacement Mortgage prior to the applicable Replacement Cut-Off Date.
(e) As to each Mortgage Loan released from the Trust in connection
with the conveyance of a Qualified Replacement Mortgage therefor, the Trustee
will transfer, sell, assign, set over and otherwise convey without recourse, on
the Sponsor's order, all of its right, title and interest in and to such
released Mortgage Loan and all the Trust's right, title and interest to
principal collected and interest accruing on such released Mortgage Loan on and
after the applicable Replacement Cut-Off Date; provided, however, that the Trust
shall reserve and retain all right, title and interest in and to payments of
principal collected and interest accruing on such released Mortgage Loan prior
to the applicable Replacement Cut-Off Date.
(f) In connection with any transfer and assignment of a Qualified
Replacement Mortgage to the Trustee on behalf of the Trust, the Sponsor agrees
to cause to be delivered to the Trustee the items described in Section 3.5(b) on
the date of such transfer and assignment or, if a later delivery time is
permitted by Section 3.5(b), then no later than such later delivery time.
(g) As to each Mortgage Loan released from the Trust in connection
with the conveyance of a Qualified Replacement Mortgage, the Trustee shall
deliver on the date of conveyance of such Qualified Replacement Mortgage and on
the order of the Sponsor (i) the original Note, or the certified copy, relating
thereto, endorsed without recourse, to the Sponsor, (ii) a duly executed
assignment of the related Mortgage if the assignment to the Trustee has been
recorded and (iii) such other documents as constituted the Mortgage File with
respect thereto.
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(h) If a Mortgage assignment is lost during the process of
recording, or is returned from the recorder's office unrecorded due to a defect
therein, the Sponsor shall prepare a substitute assignment or cure such defect,
as the case may be, and thereafter cause each such assignment to be duly
recorded.
(i) The Sponsor shall cause to be reflected on its records that the
Mortgage Loans have been sold to the Trust.
(j) To the extent that the ratings, if any, then assigned to the
unsecured debt of the Sponsor are satisfactory to the Certificate Insurer,
Moody's and Standard & Poor's, then any of the Document Delivery Requirements
described above may be waived by an instrument signed by the Certificate
Insurer, Standard & Poor's and Moody's (or any documents theretofore delivered
to the Trustee returned to the Sponsor) on such terms and subject to such
conditions as the Certificate Insurer, Moody's and Standard & Poor's may permit.
Section 3.6. Acceptance by Trustee; Certain Substitutions of
Mortgage Loans; Certification by Trustee. (a) The Trustee agrees to execute and
deliver on the Startup Day an acknowledgment of receipt of the Notes delivered
by the Sponsor in the form attached as Exhibit E hereto, and declares that it
will hold such documents and any amendments, replacement or supplements thereto,
as well as any other assets included in the definition of Trust Estate and
delivered to the Trustee, as Trustee in trust upon and subject to the conditions
set forth herein for the benefit of the Owners. The Trustee further agrees to
review any other documents delivered by the Sponsor within 90 days after the
Startup Day (or within 90 days with respect to any Qualified Replacement
Mortgage after the assignment thereof) and to deliver to the Sponsor, the Master
Servicer and the Certificate Insurer a Certification in the form attached as
Exhibit F hereto.
It is herein acknowledged that, in conducting such review, the
Trustee makes no representations and is under no duty or obligation (i) to
inspect, review or examine any such documents, instruments, certificates or
other papers to determine that they are legal, valid, sufficient, genuine, duly
authorized, enforceable, or appropriate for the represented purpose or that they
are other than what they purport to be on their face or that such documents were
executed by an Authorized Officer of the executing party, (ii) the
collectibility, insurability, effectiveness or suitability of any Mortgage Loan.
On the 360th day following the Startup Day, the Trustee shall
deliver to the Master Servicer, the Sponsor and the Certificate Insurer an
updated exception report in the form annexed hereto as Exhibit F from the
previous certification issued on the Startup Day.
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If, in the process of reviewing the Mortgage Files and making or
preparing the certifications referred to above, the Trustee finds, at the end of
360 day period (or any later period as approved by the Sponsor and/or the
Certificate Insurer, notice of which has been provided to the Trustee in
writing) referenced above, that all recorded original Mortgages or certified
copies thereof have not been delivered to it, the Trustee shall promptly so
notify the Sponsor, the Certificate Insurer and the Master Servicer. If the
Certificate Insurer so requires, the Sponsor shall repurchase such Mortgage Loan
as set forth in Section 3.4 hereof.
(b) If the Trustee during such 90-day period finds any document
constituting a part of a Mortgage File which is not properly executed, has not
been received within the specified period, or is unrelated to the Mortgage Loans
identified in the Schedules of Mortgage Loans, or that any Mortgage Loan does
not conform in a material respect to the description thereof as set forth in the
Schedules of Mortgage Loans, the Trustee shall promptly so notify the Sponsor
and the Certificate Insurer. In performing any such review, the Trustee may
conclusively rely on the Sponsor as to the purported genuineness of any such
document and any signature thereon. The Sponsor agrees to use reasonable efforts
to remedy a material defect in a document constituting part of a Mortgage File
of which it is so notified by the Trustee. If, however, within 60 days after the
Trustee's notice to it respecting such defect the Sponsor has not remedied or
caused to be remedied the defect and the defect materially and adversely affects
the interest in the related Mortgage Loan of the Owners or of the Certificate
Insurer, the Sponsor will on the next succeeding Remittance Date (i) substitute
in lieu of such Mortgage Loan a Qualified Replacement Mortgage and, deliver the
Substitution Amount applicable thereto to the Master Servicer for deposit in the
Collection Account or (ii) purchase such Mortgage Loan at a purchase price equal
to the Loan Purchase Price thereof, which purchase price shall be delivered to
the Master Servicer for deposit in the Collection Account. In connection with
any such proposed purchase or substitution the Sponsor shall cause at the
Sponsor's expense to be delivered to the Trustee and to the Certificate Insurer
an Opinion of Counsel experienced in federal income tax matters stating whether
or not such a proposed purchase or substitution would constitute a Prohibited
Transaction for the REMIC Trust or would jeopardize the status of the REMIC
Trust as a REMIC, and the Sponsor shall only be required to take either such
action to the extent such action would not constitute a Prohibited Transaction
for the REMIC Trust or would not jeopardize the status of the REMIC Trust as a
REMIC. Any required purchase or substitution, if delayed by the absence of such
opinion shall nonetheless occur upon the earlier of (i) the occurrence of a
default or imminent default with respect to the Mortgage Loan or (ii) the
delivery of such opinion or (iii) at the direction of the Certificate Insurer.
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Section 3.7. Cooperation Procedures. (a) The Sponsor shall, in
connection with the delivery of each Qualified Replacement Mortgage to the
Trustee, provide the Trustee and the Certificate Insurer with the information
set forth in the Schedules of Mortgage Loans with respect to such Qualified
Replacement Mortgage.
(b) The Sponsor, the Master Servicer and the Trustee covenant to
provide each other with all data and information required to be provided by them
hereunder at the times required hereunder, and additionally covenant reasonably
to cooperate with each other in providing any additional information required by
any of them in connection with their respective duties hereunder.
ARTICLE IV
ISSUANCE AND SALE OF CERTIFICATES
Section 4.1. Issuance of Certificates. On the Startup Day, upon the
Trustee's receipt from the Sponsor of an executed Delivery Order in the form set
forth as Exhibit G hereto, the Trustee shall execute, authenticate and deliver
the Certificates on behalf of the Trust in accordance with the directions set
forth in such Delivery Order.
Section 4.2. Sale of Certificates. On the Startup Day, at the
offices of Dewey Ballantine, 1301 Sixth Avenue, New York, New York, the Sponsor
will sell and convey the Mortgage Loans and the money, instruments and other
property related thereto to the Trustee, and the Trustee will (i) deliver to the
Underwriter, the Class A Certificates with an aggregate Percentage Interest in
each Class equal to 100%, registered in the name of Cede & Co. or in such other
names as the Underwriter shall direct, against payment of the purchase price
thereof by wire transfer of immediately available funds to the Trustee and (ii)
deliver to the Sponsor, the Class B Certificates and the Residual Certificates,
with an aggregate Percentage Interest in each Class equal to 100%, registered as
the Sponsor shall request. Upon receipt of the proceeds of the sale of the
Certificates, the Trustee shall, from the proceeds of the sale of the
Certificates (a) pay other fees and expenses identified by the Sponsor and (b)
pay to the Sponsor the balance after deducting such amounts. The Sponsor shall
pay directly to the Certificate Insurer the Initial Premiums.
ARTICLE V
CERTIFICATES AND TRANSFER OF INTERESTS
Section 5.1. Terms. (a) The Certificates are pass-through securities
having the rights described therein
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and herein. Notwithstanding references herein or therein with respect to the
Certificates as to "principal" and "interest", no debt of any Person is
represented thereby, nor are the Certificates or the underlying Notes guaranteed
by any Person (except that the Notes may be recourse to the Mortgagors thereof
to the extent permitted by law and except for the rights of the Trustee with
respect to the Certificate Insurance Policy to the extent described herein). The
Certificates issued with respect to a Mortgage Loan Group represent beneficial
ownership interests in the related Mortgage Loans and in the Accounts.
Distributions on the Certificates are payable solely from payments received on
or with respect to the Mortgage Loans (other than the Master Servicing Fees,
Trustee's Fees or Premium Amount), moneys in the Collection Account, except as
otherwise provided herein, from earnings on moneys and the proceeds of property
held as a part of the Trust Estate and, upon the occurrence of certain events,
from Insured Payments. Each Certificate entitles the Owner thereof to receive
monthly on each Distribution Date, in order of priority of distributions with
respect to such Class of Certificates, a specified portion of such payments with
respect to the Mortgage Loans in the related Mortgage Loan Group, certain
related Insured Payments, pro rata in accordance with such Owner's Percentage
Interest and in the case of the Class A-2 Certificates, certain amounts payable
from the Supplemental Interest Payment Account.
(b) Each Owner is required, and hereby agrees, to return to the
Trustee any Certificate with respect to which the Trustee has made the final
distribution due thereon. Any such Certificate as to which the Trustee has made
the final distribution thereon shall be deemed cancelled and shall no longer be
Outstanding for any purpose of this Agreement, whether or not such Certificate
is ever returned to the Trustee.
Section 5.2. Forms. The Class A-1 Certificates, the Class A-2
Certificates, the Class BI-S Certificates, the Class BII-S Certificates, and the
Class RS Certificates shall be in substantially the forms set forth in Exhibits
A-1, A-2, B-1, B-2 and Exhibit B-3 hereof, respectively, with such appropriate
insertions, omissions, substitutions and other variations as are required or
permitted by this Agreement or as may in the Sponsor's judgment be necessary,
appropriate or convenient to comply, or facilitate compliance, with applicable
laws, and may have such letters, numbers or other marks of identification and
such legends or endorsements placed thereon as may be required to comply with
the rules of any applicable securities laws or as may, consistently herewith, be
determined by the Authorized Officer of the Sponsor executing such Certificates,
as evidenced by his execution thereof.
Section 5.3. Execution, Authentication and Delivery. Each
Certificate shall be executed on behalf of the Trust, by the manual signature of
one of the Trustee's
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Authorized Officers and shall be authenticated by the manual signature of one of
the Trustee's Authorized Officers.
Certificates bearing the manual signature of individuals who were at
any time the proper officers of the Trustee shall, upon proper authentication by
the Trustee, bind the Trust, notwithstanding that such individuals or any of
them have ceased to hold such offices prior to the execution and delivery of
such Certificates or did not hold such offices at the date of authentication of
such Certificates.
The initial Certificates shall be dated as of the Startup Day and
delivered to the parties specified in Section 4.2 hereof.
No Certificate shall be valid until executed and authenticated as
set forth above.
Section 5.4. Registration and Transfer of Certificates. (a) The
Trustee, as Registrar, shall cause to be kept a register (the "Register") in
which, subject to such reasonable regulations as it may prescribe, the Trustee
shall provide for the registration of Certificates and the registration of
transfer of Certificates. The Trustee is hereby appointed Registrar for the
purpose of registering Certificates and transfers of Certificates as herein
provided. The Owners shall have the right to inspect the Register at all
reasonable times and to obtain copies thereof.
(b) Subject to the provisions of Section 5.8 hereof, upon surrender
for registration of transfer of any Certificate at the office designated as the
location of the Register, 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 in the aggregate principal amount of the
Certificate so surrendered.
(c) At the option of any Owner, Certificates of any Class owned by
such Owner may be exchanged for other Certificates authorized of like Class,
tenor and a like aggregate original principal amount and bearing numbers not
contemporaneously outstanding, upon surrender of the Certificates to be
exchanged at the office designated as the location of the Register. Whenever any
Certificate is so surrendered for exchange, the Trustee shall execute,
authenticate and deliver the Certificate or Certificates which the Owner making
the exchange is entitled to receive.
(d) All Certificates issued upon any registration of transfer or
exchange of Certificates shall be valid evidence of the same ownership interests
in the Trust and entitled to the same benefits under this Agreement as the
Certificates surrendered upon such registration of transfer or exchange.
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(e) Every Certificate presented or surrendered for registration of
transfer or exchange shall be duly endorsed, or be accompanied by a written
instrument of transfer in form satisfactory to the Trustee duly executed by the
Owner thereof or his attorney duly authorized in writing.
(f) No service charge shall be made to an Owner for any registration
of transfer or exchange of Certificates, but the Trustee may require payment of
a sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any registration of transfer or exchange of
Certificates; any other expenses in connection with such transfer or exchange
shall be an expense of the Trust.
(g) It is intended that the Class A Certificates be registered so as
to participate in a global book-entry system with the Depository, as set forth
herein. Each Class of Class A Certificates shall, except as otherwise provided
in the next paragraph, be initially issued in the form of a single fully
registered Class A Certificate with a denomination equal to the related Original
Certificate Principal Balance. Upon initial issuance, the ownership of each such
Class A Certificate shall be registered in the Register in the name of Cede &
Co., or any successor thereto, as nominee for the Depository.
The minimum denominations shall be $1,000 for any Class A
Certificate, $100,000 for any Class B Certificate and 10% Percentage Interest
for any Residual Certificate.
The Sponsor and the Trustee are hereby authorized to execute and
deliver the Representation Letter with the Depository.
With respect to Class A Certificates registered in the Register in
the name of Cede & Co., as nominee of the Depository, the Sponsor, the Master
Servicer, the Certificate Insurer and the Trustee shall have no responsibility
or obligation to Direct or Indirect Participants or beneficial owners for which
the Depository holds Class A Certificates from time to time as a Depository.
Without limiting the immediately preceding sentence, the Sponsor, the Master
Servicer, the Certificate Insurer and the Trustee shall have no responsibility
or obligation with respect to (i) the accuracy of the records of the Depository,
Cede & Co., or any Direct or Indirect Participant with respect to the ownership
interest in the Class A Certificates, (ii) the delivery to any Direct or
Indirect Participant or any other Person, other than a registered Owner of a
Class A Certificate as shown in the Register, of any notice with respect to the
Class A Certificates or (iii) the payment to any Direct or Indirect Participant
or any other Person, other than a registered Owner of a Class A Certificate as
shown in the Register, of any amount with respect to any distribution of
principal or interest on the Class A Certificates. No Person other than a
registered Owner of a Class A Certificate as shown in the
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Register shall receive a certificate evidencing such Class A Certificate.
Upon delivery by the Depository to the Trustee of written notice to
the effect that the Depository has determined to substitute a new nominee in
place of Cede & Co., and subject to the provisions hereof with respect to the
payment of interest by the mailing of checks or drafts to the registered Owners
of Class A Certificates appearing as registered Owners in the registration books
maintained by the Trustee at the close of business on a Record Date, the name
"Cede & Co." in this Agreement shall refer to such new nominee of the
Depository.
(h) In the event that (i) the Depository or the Sponsor advises the
Trustee in writing that the Depository is no longer willing or able to discharge
properly its responsibilities as nominee and depository with respect to the
Class A Certificates and the Sponsor or the Trustee is unable to locate a
qualified successor or (ii) the Sponsor at its sole option elects to terminate
the book-entry system through the Depository, the Class A Certificates shall no
longer be restricted to being registered in the Register in the name of Cede &
Co. (or a successor nominee) as nominee of the Depository. At that time, the
Sponsor may determine that the Class A Certificates shall be registered in the
name of and deposited with a successor depository operating a global book-entry
system, as may be acceptable to the Sponsor and the Certificate Insurer, or such
depository's agent or designee but, if the Sponsor does not select such
alternative global book-entry system, then the Class A Certificates may be
registered in whatever name or names registered Owners of Class A Certificates
transferring Class A Certificates shall designate, in accordance with the
provisions hereof.
(i) Notwithstanding any other provision of this Agreement to the
contrary, so long as any Class A Certificate is registered in the name of Cede &
Co., as nominee of the Depository, all distributions of principal or interest on
such Class A Certificates as the case may be and all notices with respect to
such Class A Certificates as the case may be shall be made and given,
respectively, in the manner provided in the Representation Letter.
Section 5.5. Mutilated, Destroyed, Lost or Stolen Certificates. If
(i) any mutilated Certificate is surrendered to the Trustee, or the Trustee
receives evidence to its satisfaction of the destruction, loss or theft of any
Certificate, and (ii) in the case of any mutilated Certificate, such mutilated
Certificate shall first be surrendered to the Trustee, and in the case of any
destroyed, lost or stolen Certificate, there shall be first delivered to the
Trustee such security or indemnity as may be reasonably required by it to hold
the Trustee harmless, then, in the absence of notice to the Trustee that such
Certificate has been acquired by a bona fide purchaser, the Trustee shall
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execute, authenticate and deliver, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Certificate, a new Certificate of like
Class, tenor and aggregate principal amount, bearing a number not
contemporaneously outstanding.
Upon the issuance of any new Certificate under this Section, the
Trustee may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto; any other expenses
in connection with such issuance shall be an expense of the Trust.
Every new Certificate issued pursuant to this Section in exchange
for or in lieu of any mutilated, destroyed, lost or stolen Certificate shall
constitute evidence of a substitute interest in the Trust, and shall be entitled
to all the benefits of this Agreement equally and proportionately with any and
all other Certificates of the same Class duly issued hereunder and such
mutilated, destroyed, lost or stolen Certificate shall not be valid for any
purpose.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Certificates.
Section 5.6. Persons Deemed Owners. The Trustee and any agent of the
Trustee may treat the Person in whose name any Certificate is registered as the
Owner of such Certificate for the purpose of receiving distributions with
respect to such Certificate and for all other purposes whatsoever, and neither
the Trustee nor any agent of the Trustee shall be affected by notice to the
contrary.
Section 5.7. Cancellation. All Certificates surrendered for
registration of transfer or exchange shall, if surrendered to any Person other
than the Trustee, be delivered to the Trustee and shall be promptly cancelled by
it. No Certificate shall be authenticated in lieu of or in exchange for any
Certificate cancelled as provided in this Section, except as expressly permitted
by this Agreement. All cancelled Certificates may be held by the Trustee in
accordance with its standard retention policy.
Section 5.8. Limitation on Transfer of Ownership Rights. (a) No sale
or other transfer of any Class A Certificate shall be made to the Sponsor.
(b) No sale or other transfer of record or beneficial ownership of a
Class RS Certificate (whether pursuant to a purchase, a transfer resulting from
a default under a secured lending agreement or otherwise) shall be made to a
Disqualified Organization or agent of a Disqualified Organization. The transfer,
sale or other disposition of a Class RS Certificate (whether pursuant to a
purchase, a
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transfer resulting from a default under a secured lending agreement or
otherwise) to a Disqualified Organization shall be deemed to be of no legal
force or effect whatsoever and such transferee shall not be deemed to be an
Owner for any purpose hereunder, including, but not limited to, the receipt of
distributions on such Residual Certificate. Furthermore, in no event shall the
Trustee accept surrender for transfer, registration of transfer, or register the
transfer, of any Residual Certificates nor authenticate and make available any
Residual Certificates unless the Trustee has received an affidavit from the
proposed transferee in the form attached hereto as Exhibit H. Each holder of a
Class RS Certificate, by his acceptance thereof, shall be deemed for all
purposes to have consented to the provisions of this Section 5.8(b).
(c) No other sale or other transfer of record or beneficial
ownership of a Class BI-S, Class BII-S or Class RS Certificates shall be made
unless such transfer is exempt from the registration requirements of the
Securities Act of 1933, as amended, and any applicable state securities laws or
is made in accordance with said Act and laws. In the event such a transfer is to
be made within three years from the Startup Day, the Transferee shall execute an
investment letter ("Investment Letter") in substantially the form of Exhibit K
hereto certifying to the Trustee and the Sponsor the facts surrounding such
transfer, which Investment Letter shall not be an expense of the Trustee or the
Sponsor; provided, however, that such Investment Letter will not be required in
connection with any transfer of any such Certificate by the Sponsor to an
affiliate of the Sponsor and the Trustee shall be entitled to conclusively rely
upon a representation (which, upon the request of the Trustee, shall be a
written representation) from the Sponsor of the status of such transferee as an
affiliate of the Sponsor. The Owner of a Class BI-S, Class BII-S Certificate or
Class RS Certificate desiring to effect such transfer shall, and does hereby
agree to, indemnify the Trustee, the Certificate Insurer and the Sponsor 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 Class BI-S, Class BII-S or Class
RS Certificate shall be acquired by or transferred to (i) an employee benefit
plan (as defined in section 3(3) of the Employee Retirement Security Act of
1974, as amended ("ERISA")) subject to the provisions of Title I of ERISA, (ii)
a plan described in section 4975(e)(1) of the Internal Revenue Code of 1986, or
(iii) an entity whose underlying assets are deemed to be assets of a plan
described in (i) or (ii) above by reason of such plan's investment in the
entity. Any purchaser of a Class BI-S, Class BII-S or Class RS Certificate shall
(x) certify that it is not any of the above and (y) deliver an Opinion of
Counsel to that effect.
Section 5.9. Assignment of Rights. An Owner may pledge, encumber,
hypothecate or assign all or any part of its right to receive distributions
hereunder, but such pledge, encumbrance, hypothecation or assignment shall not
constitute
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a transfer of an ownership interest sufficient to render the transferee an Owner
of the Trust without compliance with the provisions of Section 5.4 and Section
5.8 hereof.
ARTICLE VI
COVENANTS
Section 6.1. Distributions. The Trustee will duly and punctually pay
distributions with respect to the Certificates in accordance with the terms of
the Certificates and this Agreement. Such distributions shall be made (i) by
check mailed on each Distribution Date or (ii) if requested by any Owner, to
such Owner by wire transfer to an account within the United States designated no
later than five Business Days prior to the related Record Date, made on each
Distribution Date, in each case to each Owner of record on the immediately
preceding Record Date; provided, however, that an Owner shall only be entitled
to payment by wire transfer if such Owner owns Certificates in the aggregate
denomination of at least $5,000,000.
Section 6.2. Money for Distributions to be Held in Trust;
Withholding. (a) All payments of amounts due and payable with respect to any
Certificate that are to be made from amounts withdrawn from the Distribution
Account pursuant to Section 7.5 hereof or from Insured Payments shall be made by
and on behalf of the Trustee, and no amounts so withdrawn from the Distribution
Account for payments of the Certificates and no Insured Payment shall be paid
over to the Trustee except as provided in this Section.
(b) The Trustee on behalf of the Trust shall comply with all
requirements of the Code and applicable state and local law with respect to the
withholding from any distributions made by it to any Owner of any applicable
withholding taxes imposed thereon and with respect to any applicable reporting
requirements in connection therewith.
(c) Any money held by the Trustee in trust for the payment of any
amount due with respect to any Certificate and remaining unclaimed by the Owner
of such Certificate for the period then specified in the escheat laws of the
State of New York after such amount has become due and payable shall be
discharged from such trust and be paid to the Sponsor, and the Owner of the
Certificate shall thereafter, as an unsecured general creditor, look only to the
Sponsor for payment thereof (but only to the extent of the amounts so paid to
the Sponsor), and all liability of the Trustee or the Certificate Insurer with
respect to such trust money shall thereupon cease; provided, however, that the
Trustee, before being required to make any such payment, shall, to the extent
such money is sufficient to cover the expenses thereof, cause to be published
once, in the eastern edition of The Wall Street Journal, notice that such money
remains unclaimed and that,
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after a date specified therein, which shall be not fewer than 30 days from the
date of such publication, any unclaimed balance of such money then remaining
will be paid to the Sponsor. The Trustee shall, at the direction of the Sponsor,
also adopt and employ, to the extent such money is sufficient to cover the
expenses thereof, any other reasonable means of notification of such payment
(including, but not limited to, mailing notice of such payment to Owners whose
right to or interest in moneys due and payable but not claimed is determinable
from the Register at the last address of record for each such Owner).
Section 6.3. Protection of Trust Estate. (a) The Trustee will hold
the Trust Estate in trust for the benefit of the Owners and, upon request of the
Certificate Insurer, or, with the consent of the Certificate Insurer, at the
request and expense of the Sponsor, will from time to time execute and deliver
all such supplements and amendments hereto pursuant to Section 11.14 hereof and
all instruments of further assurance and other instruments, and will take such
other action upon such request as it deems reasonably necessary or advisable,
to:
(i) more effectively hold in trust all or any portion of the Trust
Estate;
(ii) perfect, publish notice of, or protect the validity of any
grant made or to be made by this Agreement;
(iii) enforce any of the Mortgage Loans; or
(iv) preserve and defend title to the Trust Estate and the rights of
the Trustee, and the ownership interests of the Owners represented
thereby, in such Trust Estate against the claims of all Persons and
parties.
The Trustee shall send copies of any request received from the
Certificate Insurer or the Sponsor to take any action pursuant to this Section
6.3 to the other party.
(b) The Trustee shall have the power to enforce, and shall enforce
the obligations of the other parties to this Agreement and of the Certificate
Insurer, by action, suit or proceeding at law or equity, and shall also have the
power to enjoin, by action or suit in equity, any acts or occurrences which may
be unlawful or in violation of the rights of the Owners or the Certificate
Insurer; provided, however, that nothing in this Section shall require any
action by the Trustee not otherwise expressly required hereunder unless the
Trustee shall first (i) have been furnished indemnity reasonably satisfactory to
it and (ii) (A) have been requested by the Certificate Insurer to take such
action or (B) when required by this Agreement, have been requested to take such
action by a majority of the Percentage Interests of the
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affected Class or Classes of Class A Certificates then Outstanding or, if there
are no longer any affected Class A Certificates then Outstanding, by such
majority of the Percentage Interests of the Class of Class RS Certificates then
Outstanding.
(c) The Trustee shall execute any instrument required pursuant to
this Section so long as such instrument does not conflict with this Agreement or
with the Trustee's fiduciary duties.
Section 6.4. Performance of Obligations. The Trustee will not take
any action that would release the Sponsor or the Certificate Insurer from any of
their respective covenants or obligations under any instrument or document
relating to the Trust Estate or the Certificates or which would result in the
amendment, hypothecation, subordination, termination or discharge of, or impair
the validity or effectiveness of, any such instrument or document, except as
expressly provided in this Agreement or such other instrument or document.
The Trustee may contract with other Persons to assist it in
performing its duties hereunder but no such contract shall in any way reduce or
limit the Trustee's duties hereunder.
Section 6.5. Negative Covenants. The Trustee will
not, to the extent within the control of the Trustee, take any
of the following actions:
(i) sell, transfer, exchange or otherwise dispose of any of the
Trust Estate except as expressly permitted by this Agreement;
(ii) claim any credit on or make any deduction from the
distributions payable in respect of, the Certificates (other than amounts
properly withheld from such payments under the Code) or assert any claim
against any present or former Owner by reason of the payment of any taxes
levied or assessed upon any of the Trust Estate;
(iii) incur, assume or guaranty on behalf of the Trust any
indebtedness of any Person except pursuant to this Agreement;
(iv) dissolve or liquidate the Trust Estate in whole or in part,
except pursuant to Article IX hereof; or
(v) (A) impair the validity or effectiveness of this Agreement, or
release any Person from any covenants or obligations with respect to the
Trust or to the Certificates under this Agreement, except as may be
expressly permitted hereby or (B) create or extend any
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lien, charge, adverse claim, security interest, mortgage or other
encumbrance to or upon the Trust Estate or any part thereof or any
interest therein or the proceeds thereof.
Section 6.6. No Other Powers. The Trustee will not, to the extent
within the control of the Trustee, permit the Trust to engage in any business
activity or transaction other than those activities permitted by Section 2.3
hereof.
Section 6.7. Limitation of Suits. No Owner shall have any right to
institute any proceeding, judicial or otherwise, with respect to this Agreement
or the Certificate Insurance Policy or for the appointment of a receiver or
trustee, or for any other remedy hereunder, unless:
(1) such Owner has previously given written notice to the Sponsor, the
Certificate Insurer and the Trustee of such Owner's intention to
institute such proceeding;
(2) the Owners of not less than 25% of the Percentage Interests
represented by the affected Class or Classes of Class A Certificates
then Outstanding or, if there are no affected Classes of Class A
Certificates then Outstanding, by such percentage of the Percentage
Interests of the Class RS Certificates then Outstanding shall have
made written request to the Trustee to institute such proceeding in
respect of an Event of Default;
(3) such Owner or Owners have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred
in compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity has failed to institute such proceeding;
(5) as long as the Certificate Insurance Policy is Outstanding, the
Certificate Insurer has consented in writing thereto; and
(6) no direction inconsistent with such written request has been given
to the Trustee during such 60-day period by the Certificate Insurer
or by the Owners of a majority of the Percentage Interests of the
affected Class or Classes of Class A Certificates then Outstanding
or, if there are no Class A Certificates then Outstanding, by a
majority of the Percentage Interests of the Class RS Certificates;
it being understood and intended that no one or more Owners shall have any right
in any manner whatever by virtue of, or by availing themselves of, any provision
of this Agreement to
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affect, disturb or prejudice the rights of any other Owner of the same Class or
to obtain or to seek to obtain priority or preference over any other Owner of
the same Class or to enforce any right under this Agreement, except in the
manner herein provided and for the equal and ratable benefit of all the Owners
of the same Class.
In the event the Trustee shall receive conflicting or inconsistent
requests and indemnity from two or more groups of Owners, each representing less
than a majority of the applicable Class of Certificates, the Trustee shall act
at the direction of the Certificate Insurer, notwithstanding any other provision
of this Agreement.
Section 6.8. Unconditional Rights of Owners to Receive
Distributions. Notwithstanding any other provision in this Agreement, the Owner
of any Certificate shall have the right, which is absolute and unconditional, to
receive distributions to the extent provided herein and therein with respect to
such Certificate or to institute suit for the enforcement of any such
distribution, and such right shall not be impaired without the consent of such
Owner.
Section 6.9. Rights and Remedies Cumulative. Except as otherwise
provided herein, no right or remedy herein conferred upon or reserved to the
Trustee, the Certificate Insurer or to the Owners is intended to be exclusive of
any other right or remedy, and every right and remedy shall, to the extent
permitted by law, be cumulative and in addition to every other right and remedy
given hereunder or now or hereafter existing at law or in equity or otherwise.
Except as otherwise provided herein, the assertion or employment of any right or
remedy hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
Section 6.10. Delay or Omission Not Waiver. No delay of the Trustee,
the Certificate Insurer or any Owner of any Certificate to exercise any right or
remedy under this Agreement shall impair any such right or remedy or constitute
a waiver of any such right or constitute acquiescence in an Event of Default.
Every right and remedy given by this Article VI or by law to the Trustee, the
Certificate Insurer or to the Owners may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee, the Certificate Insurer or by
the Owners, as the case may be.
Section 6.11. Control by Owners. The Certificate Insurer or the
Owners of a majority of the Percentage Interests of the affected Class or
Classes of the Class A Certificates then Outstanding, with the consent of the
Certificate Insurer (which may not be unreasonably withheld) or, if there are no
longer any Class A Certificates then Outstanding, by a majority of the
Percentage Interests of the Class RS Certificates then Outstanding, may direct
the time, method and place of conducting any proceeding for any remedy
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available to the Trustee with respect to the Certificates or exercising any
trust or power conferred on the Trustee with respect to the Certificates or the
Trust Estate, including, but not limited to, those powers set forth in Section
6.3 and Section 8.22 hereof; provided that:
(1) such direction shall not be in conflict with any rule of law or with
this Agreement;
(2) the Trustee shall have been provided with indemnity satisfactory to
it; and
(3) the Trustee may take any other action deemed proper by the Trustee,
which is not inconsistent with such direction; provided, however,
that the Trustee need not take any action which it determines might
involve it in liability or may be unjustly prejudicial to the Owners
not so directing or the Certificate Insurer; provided, further, that
in the event that any directions provided by the Trustee and the
Certificate Insurer conflict with each other, the Certificate
Insurer's direction shall prevail.
ARTICLE VII
ACCOUNTS, DISBURSEMENTS AND RELEASES
Section 7.1. Collection of Money. Except as otherwise expressly
provided herein, the Trustee may demand payment or delivery of all money and
other property payable to or receivable by the Trustee pursuant to this
Agreement, including (a) all payments due on the Mortgage Loans in accordance
with the respective terms and conditions of such Mortgage Loans and required to
be paid over to the Trustee by the Master Servicer or by any Subservicer and (b)
Insured Payments. The Trustee shall hold all such money and property received by
it, other than pursuant to or as contemplated by Section 6.2(b) hereof, as part
of the Trust Estate and shall apply it as provided in this Agreement.
Section 7.2. Establishment of Accounts. The Sponsor shall cause to
be established, and the Trustee shall maintain, at the corporate trust office of
the Trustee, a Distribution Account, a Class A-1 Distribution Account and Class
A-2 Distribution Account, each a separate account and to be held by the Trustee
in the name of the Trust for the benefit of the Owners of the Certificates and
the Certificate Insurer, as their interests may appear.
Section 7.3. The Certificate Insurance Policy.
(a) On each Determination Date the Trustee shall determine with
respect to the immediately following Distribution Date whether a Shortfall
Amount will exist with
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respect to either Mortgage Loan Group on the related Distribution Date, and, if
so, the Trustee shall complete a Notice of Claim in the form of Exhibit A to the
Certificate Insurance Policy and submit such Notice of Claim to the Certificate
Insurer no later than 12:00 noon New York City time on the second Business Day
preceding such Distribution Date as a claim for the related Insured Payment.
Upon receipt of Insured Payments from the Certificate Insurer under the
Certificate Insurance Policy, the Trustee shall deposit such Insured Payments in
the Policy Payments Account.
(b) The Trustee shall distribute all Insured Payments received, or
the proceeds thereof, in accordance with Section 7.5(d) to the Owners of the
Class A Certificates of the related Class.
(c) The Trustee shall (i) receive Insured Payments as
attorney-in-fact of each Owner of the Class A Certificates of the related Class
receiving any Insured Payment from the Certificate Insurer and (ii) disburse
such Insured Payment to the Owners of the related Class A Certificates as set
forth in Section 7.5(d). The Certificate Insurer shall be entitled to receive
the related Reimbursement Amount pursuant to Sections 7.5(c)(vi) and 7.5(c)(vii)
hereof with respect to each Insured Payment made by the Certificate Insurer. The
Trustee hereby agrees on behalf of each Owner of Class A Certificates and the
Trust for the benefit of the Certificate Insurer that it recognizes that to the
extent the Certificate Insurer makes Insured Payments, either directly or
indirectly (as by paying through the Trustee), to the Owners of such Class A
Certificates, the Certificate Insurer will be entitled to receive the related
Reimbursement Amount pursuant to Sections 7.5(c)(vi) and 7.5(c)(vii) hereof.
(d) Insured Payments disbursed by the Trustee from proceeds of the
Certificate Insurance Policy shall not be considered payment by the Trust Fund
nor shall such payments discharge the obligation of the Trust Fund with respect
to the related Class A Certificates, and the Certificate Insurer shall become
the owner of such unpaid amounts due from the Trust Fund in respect of the
related Class A Certificates. The Trustee hereby agrees on behalf of each Holder
of a related Class A Certificate for the benefit of the Certificate Insurer that
it recognizes that to the extent the Certificate Insurer makes Insured Payments,
either directly or indirectly (as by paying through the Trustee), to the Owners
of any Class A Certificates, the Certificate Insurer will be subrogated to the
rights of such Owners with respect to such Insured Payment, shall be deemed to
the extent of payments so made to be a registered Owner of such Class A
Certificates and shall receive all future distributions until all such Insured
Payments by the Certificate Insurer, together with interest thereon at the
interest rate borne by the related Class A Certificates, have been fully
reimbursed. To evidence such subrogation, the Trustee shall, or shall cause the
Registrar to, note the Certificate Insurer's rights as subrogee on the
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registration books maintained by the Trustee or the Registrar upon receipt from
the Certificate Insurer of proof of payment of any Insured Payment.
Section 7.4. RESERVED.
Section 7.5. Flow of Funds. (a) The Trustee shall deposit in the
Distribution Account, without duplication, upon receipt, the proceeds of any
liquidation of the assets of the Trust, and the Monthly Remittance Amount
remitted by the Master Servicer or any Subservicer.
(b) [reserved]
(c) Subject to any superseding provisions of clause (d) below during
the continuance of a Certificate Insurer Default, on each Distribution Date the
Trustee shall make the following allocations, disbursements and transfers of
amounts then on deposit in the Distribution Account for each Mortgage Loan Group
in the following order of priority, and each such allocation, transfer and
disbursement shall be treated as having occurred only after all preceding
allocations, transfers and disbursements have occurred:
(i) first, to the Master Servicer, an amount equal to any Master
Servicing Fees then due to it on account of the Mortgage Loans not
theretofore received by the Master Servicer pursuant to Section
8.10(c)(i) hereof, as reported by the Master Servicer to the
Trustee;
(ii) second, to the Certificate Insurer, the related Premium Amount;
(iii) third, to the Trustee, an amount equal to the Trustee's Fees then
due to it;
(iv) fourth, to the related Class A Distribution Account, an amount equal
to the related Insured Distribution Amount (without regard to the
amount of any related Insured Payment for such Distribution Date)
for such Distribution Date;
(v) fifth, to the Class A Distribution Account for the other Group, the
excess of (A) the Insured Distribution Amount (without regard to the
amount of any related Insured Payment for such Distribution Date)
for such other Group over (B) the amount deposited to such other
Class A Distribution Account pursuant to clause (iv) above;
(vi) sixth, to the Certificate Insurer, the amount of any related
Reimbursement Amount (together with any other amounts due to the
Certificate Insurer with respect to the related Group under the
Insurance Agreement);
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(vii) seventh, to the Certificate Insurer, the excess of (A) the amount of
any Reimbursement Amount with respect to the other Group (together
with any other amounts due to the Certificate Insurer with respect
to the other Group under the Insurance Agreement) over (B) the
amount paid to the Certificate Insurer with respect to the other
Group pursuant to clause (vi) above;
(viii) eighth, to the related Class A Distribution Account, an amount
equal to the related Subordination Deficiency Amount, if any, as of
such Distribution Date;
(ix) ninth, to the Class A Distribution Account for the other Group, the
excess of (A) the Subordination Deficiency Amount, if any, for such
other Group for such Distribution Date over (B) the amount deposited
to such other Class A Distribution Account pursuant to clause (viii)
above;
(x) tenth, following the making by the Trustee of all allocations,
transfers and disbursements described above under Section 7.3 hereof
and the prior clauses of this Section 7.5, to the Supplemental
Interest Account, the amount then remaining in the Distribution
Account on such Distribution Date, as a distribution on the Class R
Certificate.
(d) On any Distribution Date during the continuance of any
Certificate Insurer Default set forth in clause (a) of the definition thereof,
no Premium Amounts shall be paid to the Certificate Insurer, and any amounts
otherwise payable to the Certificate Insurer as Premium Amounts shall be applied
in accordance with Section 7.5(c) hereof as part of the related Available Funds.
(e) The Trustee shall distribute on each Distribution Date to the
Owners of the related Class A Certificates, the amount then on deposit in the
related Class A Distribution Account (including, with respect to the Class A-2
Distribution Account, any amount deposited thereto from the Supplemental
Interest Payment Account on such Distribution Date). Any application of such
amount shall be first made to interest (as the related Interest Distribution
Amount) and then to principal (as the related Principal Distribution Amount).
(f) Notwithstanding any of the foregoing provisions, the aggregate
amount distributed to the Owners of any Class A Certificates on account of
principal shall not exceed the Original Certificate Principal Balance for the
related Class.
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Section 7.6. Investment of Accounts.
(a) Any institution maintaining the Collection Account shall at the
direction of the Master Servicer invest the funds in such account in Eligible
Investments, each of which shall mature not later than the Business Day
immediately preceding the Remittance Date next following the date of such
investment (except that if such Eligible Investment is an obligation of the
institution that maintains such account, then such Eligible Investment shall
mature not later than such Remittance Date) and shall not be sold or disposed of
prior to its maturity. All income and gain realized from any such investment as
well as any interest earned on deposits in the Collection Account shall be for
the benefit of the Master Servicer. The Master Servicer shall deposit in the
Collection Account (with respect to investments made hereunder of funds held
therein) an amount equal to the amount of any loss incurred in respect of any
such investment immediately upon realization of such loss without right of
reimbursement.
(b) The Trustee shall, upon written request from the Master
Servicer, invest or cause the institution maintaining the Distribution Account
to invest the funds in the Distribution Account in Eligible Investments
designated in the name of the Trustee for the benefit of the Owners, which shall
mature not later than the Business Day next preceding the Distribution Date,
next following the date of such investment (except that any investment in
obligations of the institution with which the Distribution Account is maintained
may mature on such Distribution Date) and shall not be sold or disposed of prior
to maturity. All income and gain realized from any such investment shall be for
the benefit of the Master Servicer and shall be subject to its withdrawal or
order from time to time. The amount of any losses incurred in respect of any
such investments shall be deposited in the Distribution Account by the Master
Servicer out of its own funds immediately as realized without right of
reimbursement.
(c) Subject to Section 10.1 hereof, the Trustee shall not in any way
be held liable by reason of any insufficiency in any Account held by the Trustee
resulting from any loss on any Eligible Investment included therein (except to
the extent that the bank serving as Trustee is the obligor thereon).
(d) The Trustee shall hold funds in the Accounts held by the Trustee
uninvested upon the occurrence of either of the following events:
(i) the Master Servicer or the Certificate Insurer, as the case may
be, shall have failed to give investment directions to the Trustee within
ten days after receipt of a written request for such directions from the
Trustee; or
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(ii) the Master Servicer or the Certificate Insurer, as the case may
be, shall have failed to give investment directions to the Trustee during
the ten-day period described in clause (i) preceding, by 11:15 a.m. New
York time (or such other time as may be agreed by the Master Servicer or
the Certificate Insurer, as the case may be, and the Trustee) on any
Business Day (any such investment by the Trustee pursuant to this clause
(ii) to mature on the next Business Day after the date of such
investment).
(e) For purposes of investment, the Trustee shall aggregate all
amounts on deposit in the Accounts.
Section 7.7. Eligible Investments. The following are Eligible
Investments:
(a) Direct general obligations of the United States or the
obligations of any agency or instrumentality of the United States fully and
unconditionally guaranteed, the timely payment or the guarantee of which
constitutes a full faith and credit obligation of the United States;
(b) Demand and time deposits in, certificates of depositors of, or
bankers' acceptances issued by, any depository institution or trust company
(including the Trustee or any agent of the Trustee, acting in its respective
commercial capacities) incorporated under the laws of the United States of
America or any state thereof and subject to supervision and examination by
federal and/or state banking authorities, so long as at the time of such
investment or contractual commitment providing for such investment the
commercial paper or other short-term debt obligations of such depository
institution or trust company (or, in the case of a depository institution which
is the principal subsidiary of a holding company, the commercial paper or other
short-term debt obligations of such holding company) have a credit rating of
"A-1+" and P-1 from Standard & Poor's and Moody's, respectively;
(c) Repurchase obligations with respect to any security described in
clause (a) above where such security has a remaining maturity of one year or
less and where such repurchase obligation has been entered into with a
depository institution or trust company (acting as principal) described in
clause (b) above;
(d) Security bearing interest or sold at a discount issued by any
corporation incorporated under the laws of the United States of America or any
state thereof which securities are rated "AAA" and Aaa by Standard & Poor's and
Moody's, respectively, at the time of such investment or contractual commitment
providing for such investment; provided, however, that securities issued by any
particular corporation will not be Eligible Investments to the extent that
investment therein will cause the then outstanding principal amount of
securities
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issued by such corporation and held as part of the Trust Estate to exceed 10% of
the sum of the aggregate outstanding principal balance of all Mortgage Loans and
the aggregate principal amount of all Eligible Investments in the related
Account;
(e) Commercial paper (including both non-interest-bearing discount
obligations and interest-bearing obligations payable on demand or on a specified
date not more than one year after the date of issuance thereof) that is rated
"A-1+" and P-1 by Standard & Poor's and Moody's, respectively, at the time of
such investment;
(f) Certificates or receipts representing ownership interests in
future principal payments on obligations of the United States of America or its
agencies or instrumentalities (which obligations are backed by the full faith
and credit of the United States of America) held by a custodian on behalf of the
holders of such receipts;
(g) Any other demand, money market or time deposit obligation, or
interest-bearing security or investment as may be acceptable to the Certificate
Insurer that is rated "A1+" and P-1 by Standard & Poor's and Moody's,
respectively, at the time of such investment;
(h) Commercial paper (having original maturities of not more than
365 days) rated A-1 or better by Standard & Poor's and P-1 or better by Moody's;
(i) Investments in money market funds rated AAAm or
AAAm-G by Standard & Poor's and Aaa or P-1 by Moody's;
(j) Investments approved in writing by the
Certificate Insurer and acceptable to Moody's and Standard &
Poor's;
provided that no instrument described above is permitted to evidence either the
right to receive (a) only interest with respect to 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 above 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 stated maturity; provided, further, that each such Eligible
Investment shall be a "permitted investment" within the meaning of Code Section
860G(a)(5).
Section 7.8. Reports by Trustee. (a) On each Distribution Date the
Trustee shall provide to each Owner, to the Master Servicer, to the Certificate
Insurer, to each Underwriter, to the Sponsor, to Standard & Poor's, to Moody's
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and to Bloomberg and Intex (as defined in clause (d) below) a written report in
substantially the form set forth as Exhibit I hereto with respect to each
Mortgage Loan Group, as such form may be revised by the Trustee, with the
consent of the Master Servicer, the Certificate Insurer, Moody's and Standard &
Poor's from time to time, but in every case setting forth the information
requested on Exhibit I hereto and the following information:
(i) the amount of the distribution with respect to the related Class
of the Class A Certificates and the Residual Certificates;
(ii) the amount of such distributions allocable to principal,
separately identifying the aggregate amount of any Prepayments or other
unscheduled recoveries of principal included therein and separately
identifying any Subordination Increase Amounts;
(iii) the amount of such distributions allocable to interest;
(iv) the Certificate Principal Balance for each Class of Class A
Certificates as of such Distribution Date, together with the principal
amount of such Class of Class A Certificates (based on a Certificate in an
original principal amount of $1,000) then outstanding, in each case after
giving effect to any payment of principal on such Distribution Date;
(v) the amount of any Insured Payment included in the amounts
distributed to any Class of Certificates on such Distribution Date;
(vi) information furnished by the Sponsor pursuant to Section
6049(d)(7)(C) of the Code and the regulations promulgated thereunder to
assist the Owners in computing their market discount;
(vii) the total of any Substitution Amounts and any Loan Purchase
Price amounts included in such distribution;
(viii) the amount of any Supplemental Interest Payment, Class BI-S
and Class BII-S Certificate distribution, Class R Certificate distribution
and any Interest Advance on such Distribution Date, together with the
amount of any unreimbursed Interest Advance then owed to the Trustee;
(ix) the amount of any Subordination Reduction Amount with respect
to each Mortgage Loan Group;
(x) the amounts, if any, of any Realized Losses in each Mortgage
Loan Group for the related Remittance Period;
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(xi) the Rolling Delinquency Percentage, the Rolling Loss
Percentage, Cumulative Loss Percentage, Cumulative Realized Losses, and
Excess Spread Rate, each as of the related Distribution Date;
(xii) a number with respect to each Class (the "Pool Factor" for
such Class) computed by dividing the Certificate Principal Balance for
such Class (after giving effect to any distribution of principal to be
made on such Distribution Date) by the Original Certificate Principal
Balance for such Class on the Startup Day; and
(xiii) the Class A-2 Pass-Through Rate.
Items (i) through (iii) above shall, with respect to each Class of
Class A Certificates, be presented on the basis of a Certificate having a $1,000
denomination. In addition, by January 31 of each calendar year following any
year during which the Certificates are outstanding, the Trustee shall furnish a
report to each Owner of record at any time during each calendar year as to the
aggregate of amounts reported pursuant to (i), (ii) and (iii) with respect to
the Certificates for such calendar year.
(b) In addition, on each Distribution Date the Trustee will
distribute to each Owner, to the Certificate Insurer, to each Underwriter, to
the Master Servicer, to the Sponsor, to Standard & Poor's, to Moody's and to
Bloomberg and Intex (as defined in clause (d) below), together with the
information described in Subsection (a) preceding, the following information
with respect to each Mortgage Loan Group as of the close of business on the last
Business Day of the prior calendar month, which is hereby required to be
prepared by the Master Servicer and furnished to the Trustee for such purpose on
or prior to the related Remittance Date:
(i) the total number of Mortgage Loans in each Mortgage Loan Group
and the aggregate Loan Balances thereof, together with the number,
aggregate principal balances of such Mortgage Loans in such Mortgage Loan
Group and the percentage (based on the aggregate Loan Balances of the
Mortgage Loans in such Mortgage Loan Group) of the aggregate Loan Balances
of such Mortgage Loans to the aggregate Loan Balance of all Mortgage Loans
in the related Mortgage Loan Group (a) 30-59 days Delinquent, (b) 60-89
days Delinquent and (c) 90 or more days Delinquent;
(ii) the number, aggregate Loan Balances of all Mortgage Loans in
each Mortgage Loan Group and percentage (based on the aggregate Loan
Balances of the Mortgage Loans in such Mortgage Loan Group) of the
aggregate Loan Balances of such Mortgage Loans to the aggregate Loan
Balance of all Mortgage Loans in the related Mortgage Loan Group in
foreclosure proceedings (and whether any
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such Mortgage Loans are also included in any of the statistics described
in the foregoing clause (i));
(iii) the number, aggregate Loan Balances of all Mortgage Loans in
each Mortgage Loan Group and percentage (based on the aggregate Loan
Balances of the Mortgage Loans in such Mortgage Loan Group) of the
aggregate Loan Balances of such Mortgage Loans to the aggregate Loan
Balance of all Mortgage Loans in the related Mortgage Loan Group relating
to Mortgagors in bankruptcy proceedings (and whether any such Mortgage
Loans are also included in any of the statistics described in the
foregoing clause (i));
(iv) the number, aggregate Loan Balances of all Mortgage Loans in
each Mortgage Loan Group and percentage (based on the aggregate Loan
Balances of the Mortgage Loans in such Mortgage Loan Group) of the
aggregate Loan Balances of such Mortgage Loans to the aggregate Loan
Balance of all Mortgage Loans in the related Mortgage Loan Group relating
to REO Properties (and whether any such Mortgage Loans are also included
in any of the statistics described in the foregoing clause (i)); and
(v) the book value of any REO Property in each Mortgage Loan Group.
(c) The foregoing reports shall be sent be to an Owner only insofar
as such Owner owns a Certificate with respect to the related Mortgage Loan
Group.
(d) The Sponsor, the Master Servicer and the Trustee on behalf of
Owners and the Trust (the "Trust Parties") hereby authorize the Trustee to
include the information contained in reports provided to the Certificate Insurer
or the Trustee hereunder and reports prepared by the Trustee pursuant to Section
7.8(a) and (b) hereof (the "Information") on The Bloomberg, an on-line computer
based information network maintained by Bloomberg L.P. ("Bloomberg"), and Intex
Solutions, an on-line computer based information network maintained by Intex
Solutions ("Intex") or in other electronic or print information services (each,
an "Information Network") specified in writing to the Trustee by an Authorized
Officer of the Sponsor. The Trust Parties agree not to commence any actions or
proceedings, or otherwise assert any claims, against the Trustee or their
affiliates or any of the Trustee's or its affiliates' respective agents,
representatives, directors, officers or employees (collectively, the "Designated
Parties"), arising out of, or related to or in connection with the dissemination
and/or use of any Information by the Trustee, including, but not limited to,
claims based on allegations of inaccurate, incomplete or erroneous transfer of
information by the Trustee to an Information Network or otherwise (other than in
connection with the Trustee's negligence or willful misconduct). The Trust
Parties waive their rights to assert any such claims
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against the Designated Parties and fully and finally release the Designated
Parties from any and all such claims, demands, obligations, actions and
liabilities (other than in connection with such Designated Party's gross
negligence or willful misconduct). The Trustee makes no representations or
warranties, expressed or implied, of any kind whatsoever with respect to the
accuracy, adequacy, timeliness, completeness, merchantability or fitness for any
particular purpose of any Information in any form or manner. The authorizations,
covenants and obligations of the Trust Parties under this section shall be
irrevocable and shall survive the termination of this Agreement.
Section 7.9. Additional Reports by Trustee. The Trustee shall report
to the Sponsor, the Master Servicer and the Certificate Insurer with respect to
the amount then held in each Account (including investment earnings accrued or
scheduled to accrue) held by the Trustee and the identity of the investments
included therein, as the Sponsor, the Master Servicer or the Certificate Insurer
may from time to time request. Without limiting the generality of the foregoing,
the Trustee shall, at the request of the Sponsor, the Master Servicer or the
Certificate Insurer, transmit promptly to the Sponsor, the Master Servicer and
the Certificate Insurer copies of all accounting of receipts in respect of the
Mortgage Loans furnished to it by the Master Servicer and shall notify the
Sponsor, the Master Servicer and the Certificate Insurer if any such receipts
have not been received by the Trustee.
Section 7.10. Supplemental Interest Payment Account, Supplement
Interest Payments.
(a) The parties hereto do hereby create and establish a trust, the
"Accredited Supplemental Interest Trust 1996-1" (the "Supplemental Interest
Trust"). The Supplemental Interest Trust shall hold the "Supplemental Interest
Payment Account" to be held by the Trustee in its name on behalf of the
Supplemental Interest Trust.
(b) The amount, if any, on deposit in the Supplemental Interest
Payment Account on any Distribution Date is the "Supplemental Interest Payment
Amount Available" on
such Distribution Date.
(c) On each Distribution Date the Trustee shall withdraw from the
Supplemental Interest Payment Account and deposit in the Class A-2 Distribution
Account the lesser of (x) the amount by which the Class A-2 Full Interest
Distribution Amount exceeds the Class A-2 Interest Distribution Amount and (y)
the Supplemental Interest Payment Amount Available.
If, on the final Determination Date with respect to the Class A-2
Certificates, the Trustee determines that the Supplemental Interest Payment
Amount Available to be available
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on the next Distribution Date will be less than the excess of (x) the excess of
(i) the Class A-2 Full Interest Distribution Amount over (ii) the Class A-2
Interest Distribution Amount over (y) the Supplemental Interest Payment Amount
Available as of such Distribution Date, the Trustee shall demand that the
Designated Residual Owner fund such amount on such Distribution Date.
(d) Any portion of the Supplemental Interest Payment Amount
Available after application of clause (b) above shall be paid to the Owners of
the Class BI-S Certificates and the Class BII-S Certificates, such amounts to be
distributed between such Classes based proportionately upon the relative amounts
of the Total Monthly Excess Spread for Group I and Group II, respectively, on
such Distribution Date, in each case to such Owners pro rata in accordance with
the Percentage Interests.
ARTICLE VIII
SERVICING AND ADMINISTRATION
OF MORTGAGE LOANS
Section 8.1. Master Servicer and Subservicers. (a) Acting directly
or through one or more Subservicers as provided in Section 8.5, the Master
Servicer, as master servicer, shall service and administer the Mortgage Loans in
accordance with this Agreement and in accordance with Accepted Servicing
Practices, and shall have full power and authority, acting alone, to do or cause
to be done any and all things in connection with such servicing and
administration which it may deem necessary or desirable.
(b) The duties of the Master Servicer shall include collecting and
posting of all payments, responding to inquiries of Mortgagors or by federal,
state or local government authorities with respect to the Mortgage Loans,
investigating delinquencies, reporting tax information to Mortgagors in
accordance with its customary practices and accounting for collections and
furnishing monthly and annual statements to the Trustee with respect to
distributions, paying Compensating Interest and making Delinquency Advances and
Servicing Advances pursuant hereto. The Master Servicer shall follow its
customary standards, policies and procedures in performing its duties as Master
Servicer. The Master Servicer shall cooperate with the Trustee and furnish to
the Trustee with reasonable promptness information in its possession as may be
necessary or appropriate to enable the Trustee to perform its tax reporting
duties hereunder. The Trustee shall furnish the Master Servicer with any powers
of attorney and other documents necessary or appropriate to enable the Master
Servicer to carry out its servicing and administrative duties hereunder.
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(c) The Trustee is authorized to acknowledge, as required, any
subservicing agreement between a Subservicer and the Master Servicer; provided,
however, that notwithstanding the terms of any such subservicing agreement, the
provisions of Section 8.7 hereof shall control.
(d) The Master Servicer shall, in accordance with Accepted Servicing
Practices, have the right to approve requests of Mortgagors for consent to (i)
partial releases of Mortgage Loans and (ii) alterations, removal, demolition or
division of Properties subject to Mortgage Loans. No such request shall be
approved by the Master Servicer unless: (x) the provisions of the related Note
have been complied with; (y) the Combined Loan-to-Value Ratio (which may, for
this purpose, be determined at the time of any such action in a manner
reasonably acceptable to the Certificate Insurer) after any release does not
exceed the Combined Loan-to-Value Ratio set forth for such Mortgage Loan in the
Schedules of Mortgage Loans; and (z) the lien priority, monthly payment, Coupon
Rate or maturity date of the related Mortgage is not affected except in
accordance with Section 8.3; provided, however, that the foregoing requirements
(x), (y) and (z) shall not apply to any such situation described in this
paragraph if such situation results from any condemnation or easement activity
by a governmental entity. The Master Servicer shall not permit any modification
with respect to any Mortgage Loan that would change the Coupon Rate, reduce or
increase the principal balance or change the final maturity date on such
Mortgage Loan unless the Mortgagor is in default with respect to the Mortgage
Loan or such default is, in the judgment of the Master Servicer, imminent. Any
such modification by the Master Servicer shall not materially and adversely
affect the interests of the Owners or the Certificate Insurer.
(e) The parties intend that the REMIC Trust shall constitute, and
that the affairs of the REMIC Trust shall be conducted so as to qualify it as a
REMIC. In furtherance of such intention, the Master Servicer covenants and
agrees that it shall act as agent (and the Master Servicer is hereby appointed
to act as agent) on behalf of the REMIC Trust and that in such capacity it
shall: (i) use its best efforts to conduct the affairs of the REMIC Trust at all
times that any Class of Certificates are outstanding so as to maintain the
status of the REMIC Trust as a REMIC under the REMIC Provisions; (ii) not
knowingly or intentionally take any action or omit to take any action that would
cause the termination of the REMIC status of REMIC Trust or that would subject
the Trust to tax and (iii) exercise reasonable care not to allow the REMIC Trust
to receive income from the performance of services or from assets not permitted
under the REMIC Provisions to be held by a REMIC.
(f) The Master Servicer may, and is hereby authorized to, perform
any of its servicing responsibilities with respect to all or certain of the
Mortgage Loans through
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a Subservicer as it may from time to time designate with the approval of the
Certificate Insurer as provided in 8.5, but no such designation of a Subservicer
shall serve to release the Master Servicer from any of its obligations under
this Agreement. Such Subservicer shall have all the rights and powers of the
Master Servicer with respect to such Mortgage Loans under this Agreement.
(g) Without limiting the generality of the foregoing, but subject to
Sections 8.13 and 8.14, the Master Servicer in its own name or in the name of a
Subservicer may be authorized and empowered pursuant to a power of attorney
executed and delivered by the Trustee to execute and deliver, and may be
authorized and empowered by the Trustee, to execute and deliver, on behalf of
itself, the Owners and the Trustee or any of them, (i) 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 Properties, (ii) and to institute foreclosure proceedings or
obtain a deed in lieu of foreclosure so as to effect ownership of any Property
on behalf of the Trustee, and (iii) to hold title to any Property upon such
foreclosure or deed in lieu of foreclosure on behalf of the Trustee; provided,
however, that Section 8.15(a) shall constitute a power of attorney from the
Trustee to the Master Servicer or a Subservicer to execute an instrument of
satisfaction (or assignment of mortgage without recourse) with respect to any
Mortgage Loan paid in full (or with respect to which payment in full has been
escrowed). Subject to Sections 8.13 and 8.14, the Trustee shall furnish the
Master Servicer and any Subservicer with any powers of attorney and other
documents as the Master Servicer or such Subservicer shall reasonably request to
enable the Master Servicer and such Subservicer to carry out their respective
servicing and administrative duties hereunder.
(h) The Master Servicer shall give prompt notice to the Trustee and
the Certificate Insurer of any action, of which the Master Servicer has actual
knowledge, to (i) assert a claim against the Trust or (ii) assert jurisdiction
over the Trust.
(i) Servicing Advances incurred by the Master Servicer or any
Subservicer in connection with the servicing of the Mortgage Loans (including
any penalties in connection with the payment of any taxes and assessments or
other charges) on any Property shall be recoverable by the Master Servicer or
such Subservicer to the extent described herein.
(j) The Master Servicer shall be entitled to rely, and shall be
fully protected in relying, upon any promissory note, writing, resolution,
notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy,
telex or teletype message, statement, order or other document reasonably
believed by it to be genuine and correct and to have been signed, sent or made
by the proper person or persons
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and upon advice and statements of legal counsel (including, without limitation,
counsel to the Mortgagor(s)), independent accountants and other experts selected
by the Master Servicer.
(k) The Master Servicer shall have no liability to the Sponsor, the
Trustee, the Certificate Insurer, any Owner or any other Person for any action
taken, or for refraining from the taking of any action, in good faith pursuant
to this Agreement, or for errors in judgment; provided, however, that the
foregoing shall not apply to any breach of representations or warranties made by
the Master Servicer herein, or to any specific liability imposed upon the Master
Servicer pursuant to this Agreement or any liability that would otherwise be
imposed upon the Master Servicer by reason of its willful misconduct, bad faith
or negligence in the performance of its duties hereunder or by reason of its
reckless disregard of its obligations or duties hereunder.
Section 8.2. RESERVED.
Section 8.3. Collection of Certain Mortgage Loan Payments. The
Master Servicer shall generally service the Mortgage Loans in accordance with
Accepted Servicing Practices. Consistent with the foregoing, the Master Servicer
may (i) in its discretion waive or permit to be waived any late payment charge
or assumption fee or any other fee or charge which the Master Servicer would be
entitled to receive as servicing compensation, (ii) extend the due date for
payments due on a Note for a period (with respect to each payment as to which
the due date is extended) not greater than 90 days after the initially scheduled
due date for such payment, (iii) amend any Note to extend the maturity thereof,
provided that no maturity shall be extended beyond the maturity date of the
Mortgage Loan with the latest maturity date and (iv) reduce the Coupon Rate or
principal balance of any Note; provided that no such action by the Master
Servicer shall materially and adversely affect the interests of the Certificate
Insurer or the Owners.
The Master Servicer may waive prepayment charges or penalty interest
in connection with Prepayments. Any such prepayment charges so received shall be
retained by the Master Servicer as additional compensation.
Section 8.4. Delinquency Advances, Compensating Interest and
Servicing Advances. (a) (i) On or before each Remittance Date, the Master
Servicer shall deposit from its own funds into the Collection Account, an amount
equal to the sum of the interest portions due, but not collected in the related
Remittance Period (net of any amount equal to the Master Servicing Fee) with
respect to Delinquent Mortgage Loans during the prior Remittance Period, but
only if, in its good faith business judgment, the Master Servicer reasonably
believes that such amount will ultimately be recovered from subsequent
collections with respect to the related Mortgage Loan. Such amounts of the
Master Servicer's own funds so
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deposited are "Delinquency Advances". Any Delinquency Advances funded by the
Master Servicer from its own funds are reimbursable from subsequent collections
on or with respect to any Mortgage Loan, including Liquidation Proceeds,
Insurance Proceeds, Released Property Proceeds, and payments from the
related Mortgagor.
(ii) Not later than each Remittance Date, the Master Servicer
or any Subservicer shall remit to the Trustee for deposit into the Distribution
Account an amount equal to the lesser of (a) the aggregate of the Prepayment
Interest Shortfalls for the related Distribution Date resulting from Principal
Prepayments in Full during the related Remittance Period and (b) its aggregate
Master Servicing Fees payable in the related Remittance Period and shall not
have the right to reimbursement therefor (the "Compensating Interest").
(b) The Master Servicer shall be permitted to fund its payment of
Delinquency Advances from collections on any Mortgage Loan deposited to the
Collection Account but not required to be remitted to the Trustee on the related
Remittance Date. To the extent the Master Servicer uses such funds, the Master
Servicer must reimburse the Collection Account by the next Remittance Date to
the extent funds then on deposit in the Collection Account are insufficient to
cover the required remittance to the Trustee on such Remittance Date.
(c) The Master Servicer will pay all reasonable and customary
"out-of-pocket" costs and expenses (including reasonable legal fees) incurred in
the performance of its servicing obligations, including, but not limited to, the
cost of (i) Preservation Expenses, (ii) any enforcement or judicial proceedings,
including foreclosures, (iii) the management and liquidation of REO Property
(including, without limitation, realtors' commissions) and (iv) advances made
for taxes, insurance and other charges against the Property. Each such
expenditure will constitute a "Servicing Advance"; provided, that the Master
Servicer shall only be required to pay such amounts to the extent it reasonably
believes that such amount will be recovered from subsequent collections on or
with respect to the related Mortgage Loan. The Master Servicer may recover
Servicing Advances from the Mortgagors to the extent permitted by the Mortgage
Loans or, if not theretofore recovered from the Mortgagor on whose behalf such
Servicing Advance was made, from Liquidation Proceeds, Insurance Proceeds and/or
Released Mortgage Property Proceeds realized with respect to the related
Mortgage Loan or, if the Master Servicer, following receipt of all amounts on a
Mortgage Loan which the Master Servicer expects to recover with respect to such
Mortgage Loan, has any unreimbursed Servicing Advances with respect to such
Mortgage Loan ("Nonrecoverable Advances"), the Master Servicer may recover the
amount thereof from collections on the Mortgage Loans generally.
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Section 8.5. Subservicing Agreements Between Master Servicer and
Subservicers. The Master Servicer may enter into Subservicing Agreements for any
servicing and administration of Mortgage Loans with any institution which is in
compliance with the laws of each state necessary to enable it to perform its
obligations under such Subservicing Agreement. The Master Servicer shall give
notice to the Certificate Insurer and the Trustee of the appointment of any
Subservicer and shall furnish to the Certificate Insurer and the Trustee a copy
of the Subservicing Agreement. The Master Servicer shall give notice to each
Rating Agency of the appointment of any Subservicer. No such appointment of a
Subservicer shall be effective without the consent of the Certificate Insurer.
For purposes of this Agreement, the Master Servicer shall be deemed to have
received payments on Mortgage Loans when any Subservicer has received such
payments. Any such Subservicing Agreement shall be consistent with and not
violate the provisions of this Agreement.
Section 8.6. Successor Subservicers. The Master Servicer may, with
the consent of the Certificate Insurer, terminate any Subservicing Agreement in
accordance with the terms and conditions of such Subservicing Agreement and
thereafter directly service the related Mortgage Loans itself or enter into a
Subservicing Agreement with a successor Subservicer that qualifies under Section
8.5. The Master Servicer shall give notice to each Rating Agency of the
termination of any Subservicer and the appointment of any successor Subservicer.
Section 8.7. Liability of Master Servicer. The Master Servicer shall
not be relieved of its obligations under this Agreement notwithstanding any
Subservicing Agreement or any of the provisions of this Agreement relating to
agreements or arrangements between the Master Servicer and a Subservicer or
otherwise, and the Master Servicer shall be obligated to the same extent and
under the same terms and conditions as if it alone were servicing and
administering the Mortgage Loans. The Master Servicer shall be entitled to enter
into any agreement with a Subservicer for indemnification of the Master Servicer
by such Subservicer and nothing contained in such Subservicing Agreement shall
be deemed to limit or modify this Agreement. The Trust shall not indemnify the
Master Servicer for any losses due to the Master Servicer's negligence.
Section 8.8. No Contractual Relationship Between Subservicer and
Trustee or the Owners. Any Subservicing Agreement and any other transactions or
services relating to the Mortgage Loans involving a Subservicer shall be deemed
to be between the Subservicer and the Master Servicer alone and the Certificate
Insurer, the Trustee and the Owners shall not be deemed parties thereto and
shall have no claims, rights, obligations, duties or liabilities with respect to
any Subservicer except as set forth in Section 8.9 and the related Subservicing
Agreement.
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Section 8.9. Assumption or Termination of Subservicing Agreement by
Trustee. In connection with the assumption of the responsibilities, duties and
liabilities and of the authority, power and rights of the Master Servicer
hereunder by the Trustee pursuant to Section 8.22, it is understood and agreed
that the Master Servicer's rights and obligations under any Subservicing
Agreement then in force between the Master Servicer and a Subservicer may be
assumed or terminated by the Trustee at its option subject to Section 12.2 as
successor to the Master Servicer.
The Master Servicer shall, upon request of the Trustee or the
Certificate Insurer, but at the expense of the Master Servicer, deliver to the
assuming party documents and records relating to each Subservicing Agreement and
an accounting of amounts collected and held by it and otherwise use its best
reasonable efforts to effect the orderly and efficient transfer of the
Subservicing Agreements to the assuming party, without the payment of any fee by
the Trustee, any Owner or the Certificate Insurer, notwithstanding any contrary
provision in any Subservicing Agreement.
Section 8.10. Collection Account.
(a) The Master Servicer and/or each Subservicer, as applicable,
shall establish in the name of the Trust for the benefit of the Owners of the
Certificates and the Certificate Insurer maintain at one or more Designated
Depository Institutions the Collection Account.
Subject to Subsections (c) and (e) below, the Master Servicer and
any Subservicer shall deposit all receipts related to the Mortgage Loans to the
Collection Account on a daily basis (but no later than the second Business Day
after receipt).
On the Startup Day the Sponsor and/or the Master Servicer shall
deposit to the Collection Account all receipts related to the Mortgage Loans
which relate to or are received on or after the Cut-Off Date.
(b) All funds in the Collection Account may only be held (i)
uninvested, up to the limits insured by the FDIC or (ii) invested in Eligible
Investments. The Collection Account shall be held in trust in the name of the
Trust and for the benefit of the Owners of the Certificates. Any investment
earnings on funds held in the Collection Account shall be for the account of the
Master Servicer and may only be withdrawn from the Collection Account by the
Master Servicer immediately following the remittance of the Monthly Remittance
Amounts by the Master Servicer. Any references herein to amounts on deposit in
the Collection Account shall refer to amounts net of such investment earnings.
Any investment losses are at the expense of the Master Servicer and shall be
replaced on or prior to the Remittance Date.
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(c) Subject to Subsection (e) below, the Master Servicer shall
deposit to the Collection Account all principal and interest collections on the
Mortgage Loans received on or after the Cut-Off Date including any Prepaid
Installments, Prepayments and Net Liquidation Proceeds, all Loan Purchase Prices
and Substitution Amounts received or paid by the Master Servicer with respect to
the Mortgage Loans, other recoveries or amounts related to the Mortgage Loans
received by the Master Servicer, Compensating Interest and Delinquency Advances
together with any amounts which are reimbursable from the Collection Account,
but net of (i) the Master Servicing Fee with respect to each Mortgage Loan and
other servicing compensation to the Master Servicer as permitted by Section 8.16
hereof, (ii) principal (including Prepayments) collected on the related Mortgage
Loans prior to the Cut-Off Date, (iii) interest accruing on the related Mortgage
Loans prior to the Cut-Off Date and (iv) Net Liquidation Proceeds to the extent
such Net Liquidation Proceeds exceed the Loan Balance of the related Mortgage
Loan, plus accrued and unpaid interest thereon at the related Coupon Rate net of
the Master Servicing Fee.
(d) (i) The Master Servicer may make withdrawals from the Collection
Account only for the following purposes:
(A) to effect the timely remittance to the Trustee of the Monthly
Remittance Amounts due on the Remittance Date;
(B) to reimburse itself, from collections on the related Mortgage
Loans, for unrecovered Delinquency Advances and Servicing
Advances;
(C) to reimburse itself for any Delinquency Advances or Servicing
Advances determined in good faith to have become
Nonrecoverable Advances;
(D) to pay itself the Master Servicing Fee to the extent not
retained or paid pursuant to Section 8.10(c);
(E) to pay the Sponsor with respect to each Mortgage Loan or
property acquired in respect thereof that has been repurchased
or replaced pursuant to this Agreement all amounts received
thereon and not required to be distributed as of the date on
which the related repurchase or purchase price was determined;
(F) to withdraw investment earnings on amounts on deposit in the
Collection Account;
(G) to withdraw amounts that have been deposited to the Collection
Account in error;
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(H) to reimburse itself or the Sponsor pursuant to Section 8.26;
and
(I) to clear and terminate the Collection Account following the
termination of the Trust Estate pursuant to Article X.
(ii) On the fifteenth day of each month, the Master Servicer shall
send to the Trustee a report, in the form of a computer tape, detailing the
payments on the Mortgage Loans during the prior Remittance Period. Such tape
shall be in the form and have the specifications as may be agreed to between the
Master Servicer and the Trustee from time to time.
(iii) On each Remittance Date the Master Servicer shall remit to the
Trustee by wire transfer, or otherwise make funds available in immediately
available funds, each Monthly Remittance Amount.
(e) To the extent that the ratings, if any, then assigned to the
unsecured debt of the Master Servicer or of the Master Servicer's ultimate
corporate parent are satisfactory to the Certificate Insurer, Moody's and
Standard & Poor's, then the requirement to maintain the Collection Account may
be waived by an instrument signed by the Certificate Insurer, Standard & Poor's
and Moody's, and the Master Servicer may be allowed to co-mingle with its
general funds the amounts otherwise required to be deposited to the Collection
Account, on such terms and subject to such conditions as the Certificate
Insurer, Moody's and Standard & Poor's may permit.
Section 8.11. Purchase or Substitution of Certain Mortgage Loans.
The Master Servicer may, but is not obligated to, purchase for its own account
any Mortgage Loan which becomes Delinquent, in whole or in part, as to four
consecutive monthly installments or any Mortgage Loan as to which enforcement
proceedings have been brought by the Master Servicer or by any Subservicer
pursuant to Section 8.14. Any such Loan so purchased shall be purchased by the
Master Servicer on a Remittance Date at a purchase price equal to the Loan
Purchase Price thereof, which purchase price shall be deposited in the
Collection Account.
In lieu of such a purchase, the Master Servicer may substitute a
Qualified Replacement Mortgage (and deposit the related Substitution Amount, if
any). Any such substitution shall be effected in a similar manner to
substitutions described in Section 3.4 hereof.
Section 8.12. Maintenance of Insurance. (a) The Master Servicer
shall cause to be maintained with respect to each Mortgage Loan a hazard
insurance policy with a carrier licensed in the state in which the Property is
located that provides for fire and extended coverage, and which provides
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for a recovery by the named insured of insurance proceeds relating to such
Mortgage Loan in an amount not less than the least of (i) the outstanding
principal balance of the Mortgage Loan (together in the case of a Second
Mortgage Loan, with the outstanding principal balance of the Senior Lien), (ii)
the minimum amount required to compensate for loss or damage on a replacement
cost basis and (iii) the full insurable value of the premises.
(b) If the Mortgage Loan at the time of origination relates to a
Property in an area identified in the Federal Register by the Federal Emergency
Management Agency as having special flood hazards as designated to the Master
Servicer by the Sponsor, the Master Servicer will cause to be maintained with
respect thereto a flood insurance policy in a form meeting the requirements of
the current guidelines of the Federal Insurance Administration with a generally
acceptable carrier in an amount representing coverage, and which provides for a
recovery by the Master Servicer on behalf of the Trust of insurance proceeds
relating to such Mortgage Loan of not less than the least of (i) the outstanding
principal balance of the Mortgage Loan (together, in the case of a Second
Mortgage Loan, with the outstanding principal balance of the Senior Lien), (ii)
the minimum amount required to compensate for damage or loss on a replacement
cost basis and (iii) the maximum amount of insurance that is available under the
Flood Disaster Protection Act of 1973. The Master Servicer shall indemnify the
Trust and the Certificate Insurer out of the Master Servicer's own funds for any
loss to the Trust and the Certificate Insurer resulting from the Master
Servicer's failure to maintain the insurance required by this Section.
(c) In the event that the Master Servicer shall obtain and maintain
a blanket policy with an insurer either (i) having a General Policy rating of
A:VIII or better in Best's Key Rating Guide or (ii) approved in writing by the
Certificate Insurer, such approval not to be unreasonably withheld, insuring
against fire, flood and hazards of extended coverage on all of the Mortgage
Loans, then, to the extent such policy names the Master Servicer as loss payee
and provides coverage in an amount equal to the aggregate unpaid principal
balance on the Mortgage Loans without co-insurance, and otherwise complies with
the requirements of this Section 8.12, the Master Servicer shall be deemed
conclusively to have satisfied its obligations with respect to fire and hazard
insurance coverage under this Section 8.12, it being understood and agreed that
such blanket policy may contain a deductible clause, in which case the Master
Servicer shall, in the event that there shall not have been maintained on the
related Property a policy complying with the preceding paragraphs of this
Section 8.12, and there shall have been a loss which would have been covered by
such policy, deposit in the Collection Account from the Master Servicer's own
funds the difference, if any, between the amount that would have been payable
under a policy complying with the preceding paragraphs of this Section 8.12 and
the amount paid under such
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blanket policy. Upon the request of the Trustee or the Certificate Insurer, the
Master Servicer shall cause to be delivered to the Trustee or the Certificate
Insurer, a certified true copy of such policy.
Section 8.13. Due-on-Sale Clauses; Assumption and Substitution
Agreements. When a Property has been or is about to be conveyed by the
Mortgagor, the Master Servicer shall, to the extent it has knowledge of such
conveyance or prospective conveyance, exercise its rights to accelerate the
maturity of the related Mortgage Loan under any "due-on-sale" clause contained
in the related Mortgage or Note; provided, however, that the Master Servicer
shall not exercise any such right if (i) the "due-on-sale" clause, in the
reasonable belief of the Master Servicer, is not enforceable under applicable
law or (ii) the Master Servicer reasonably believes that to permit an assumption
of the Mortgage Loan would not materially and adversely affect the interest of
the Owners or of the Certificate Insurer. In such event, the Master Servicer
shall enter into an assumption and modification agreement with the person to
whom such property has been or is about to be conveyed, pursuant to which such
person becomes liable under the Note and, unless prohibited by applicable law or
the mortgage documents, the Mortgagor remains liable thereon. If the foregoing
is not permitted under applicable law, the Master Servicer is authorized to
enter into a substitution of liability agreement with such person, pursuant to
which the original Mortgagor is released from liability and such person is
substituted as Mortgagor and becomes liable under the Note; provided, however,
that to the extent any such substitution of liability agreement would be
delivered by the Master Servicer outside of its usual procedures for mortgage
loans held in its own portfolio the Master Servicer shall, prior to executing
and delivering such agreement, obtain the prior written consent of the
Certificate Insurer. The Mortgage Loan, if assumed, shall conform in all
respects to the requirements and representations and warranties of this
Agreement. The Master Servicer shall notify the Trustee that any applicable
assumption or substitution agreement has been completed by forwarding to the
Trustee the original copy of such assumption or substitution agreement, which
copy shall be added by the Trustee to the related Mortgage File and which shall,
for all purposes, be considered a part of such Mortgage File to the same extent
as all other documents and instruments constituting a part thereof. The Master
Servicer shall be responsible for promptly recording any such assumption or
substitution agreements. In connection with any such assumption or substitution
agreement, the required monthly payment on the related Mortgage Loan shall not
be changed but shall remain as in effect immediately prior to the assumption or
substitution, the stated maturity or outstanding principal amount of such
Mortgage Loan shall not be changed, the Coupon Rate shall not be changed nor
shall any required monthly payments of principal or interest be deferred or
forgiven. Any fee collected by the Master Servicer or the Subservicer for
consenting to any such conveyance or entering into an
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assumption or substitution agreement shall be retained by or paid to the Master
Servicer as additional servicing compensation.
Notwithstanding the foregoing paragraph or any other provision of
this Agreement, the Master Servicer shall not be deemed to be in default, breach
or any other violation of its obligations hereunder by reason of any assumption
of a Mortgage Loan by operation of law or any assumption which the Master
Servicer may be restricted by law from preventing, for any reason whatsoever.
Section 8.14. Realization Upon Defaulted Mortgage Loans. (a) The
Master Servicer shall foreclose upon or otherwise comparably effect the
ownership on behalf of the Trust of Properties relating to defaulted Mortgage
Loans as to which no satisfactory arrangements can be made for collection of
Delinquent payments and which the Master Servicer has not purchased or replaced
pursuant to Section 8.11, unless the Master Servicer reasonably believes that
Net Liquidation Proceeds with respect to such Mortgage Loan would not be
increased as a result of such foreclosure or other action, in which case, such
Mortgage Loan will be charged-off and will become a Liquidated Loan. The Master
Servicer shall have no obligation to purchase any Property at any foreclosure
sale. In connection with such foreclosure or other conversion, the Master
Servicer shall exercise foreclosure procedures with the same degree of care and
skill in their exercise or use, as it would ordinarily exercise or use under the
circumstances in the conduct of their own affairs. Any amounts including
Liquidation Expenses, advanced by the Master Servicer in connection with such
foreclosure or other action shall constitute "Servicing Advances" within the
meaning of Section 8.4(c) hereof. The Master Servicer shall sell any REO
Property within 23 months of its acquisition by the Trust, unless the Master
Servicer obtains for the Trustee an opinion of counsel experienced in federal
income tax matters, addressed to the Trustee, the Certificate Insurer and the
Master Servicer, to the effect that the holding by the Trust of such REO
Property for any greater period will not result in the imposition of taxes on
"Prohibited Transactions" of the REMIC Trust as defined in Section 860F of the
Code or cause the Trust to fail to qualify as a REMIC under the REMIC Provisions
at any time that any Certificates are outstanding, in which case the Master
Servicer shall sell any REO Property by the end of any extended period specified
in any such opinion.
Pursuant to its efforts to sell any REO Property, the Master
Servicer either itself or through an agent selected by the Master Servicer shall
manage, conserve, protect and operate such REO Property in the same manner and
to such extent as is customary in the locality where such REO Property is
located and may, incident to its conservation and protection of the interests of
the Master Servicer, rent the same, or any part thereof, as the Master Servicer
deems to be
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in the best interest of the Master Servicer for the period prior to the sale of
such REO Property. The net income generated from the REO Property and the
proceeds from a sale of any REO Property shall be deposited in the Collection
Account.
(b) If the Master Servicer has reason to believe that a Property
which the Master Servicer is contemplating acquiring in foreclosure or by deed
in lieu of foreclosure contains environmental or hazardous waste risks known to
the Master Servicer, the Master Servicer shall notify the Trustee and the
Certificate Insurer prior to acquiring the Property. The Master Servicer shall
not institute foreclosure actions with respect to such a property if it
reasonably believes that such action would not be consistent with the Accepted
Servicing Practices, and in no event shall the Master Servicer be required to
manage, operate or take any other action with respect thereto which the Master
Servicer in good faith believes will result in "clean-up" or other liability
under applicable law, unless the Master Servicer receives an indemnity
acceptable to it in its sole discretion.
(c) The Master Servicer shall determine, with respect to each
defaulted Mortgage Loan, when it has recovered, whether through trustee's sale,
foreclosure sale or otherwise, all amounts if any it expects to recover from or
on account of such defaulted Mortgage Loan, whereupon such Mortgage Loan shall
become a "Liquidated Loan".
(d) To the extent Net Liquidation Proceeds exceed the sum of (i) the
Loan Balance of the related Mortgage Loan and (ii) accrued and unpaid interest
on such Mortgage Loan at the related Coupon Rate, net of the related Master
Servicing Fee, such amount shall, to the extent required by law, be paid over to
the related Mortgagor, or otherwise, paid directly to the Sponsor.
(e) With respect to its obligations under this Section 8.14, the
Master Servicer shall take all such actions as it reasonably believes are
consistent with Accepted Servicing Practices.
Section 8.15. Trustee to Cooperate; Release of Mortgage Files. (a)
Upon the payment in full of any Mortgage Loan or the receipt by the Master
Servicer of a notification that payment in full will be escrowed in a manner
customary for such purposes, the Master Servicer or a Subservicer shall deliver
to the Trustee a Master Servicer's Trust Receipt. Upon receipt of such Master
Servicer's Trust Receipt, the Trustee shall promptly release the related
Mortgage File, in trust to (i) the Master Servicer or a Subservicer, as the case
may be, (ii) an escrow agent or (iii) any employee, agent or attorney of the
Trustee, in each case pending its release by the Master Servicer or a
Subservicer, as the case may be, such escrow agent or such employee, agent or
attorney of the Trustee, as the case may be. Upon any such payment in full,
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or the receipt of such notification that such funds have been placed in escrow,
the Master Servicer or a Subservicer is authorized to give, as attorney-in-fact
for the Trustee and the mortgagee under the Mortgage which secured the Note, an
instrument of satisfaction (or assignment of Mortgage without recourse)
regarding the Property relating to such Mortgage, which instrument of
satisfaction or assignment, as the case may be, shall be delivered to the Person
or Persons entitled thereto against receipt therefor of payment in full, it
being understood and agreed that no expense incurred in connection with such
instrument of satisfaction or assignment, as the case may be, shall be
chargeable to the Collection Account. In lieu of executing any such satisfaction
or assignment, as the case may be, the Master Servicer or a Subservicer, as the
case may be, may prepare and submit to the Trustee, a satisfaction (or
assignment without recourse, if requested by the Person or Persons entitled
thereto) in form for execution by the Trustee with all requisite information
completed by the Master Servicer or a Subservicer, as the case may be; in such
event, the Trustee shall execute and acknowledge such satisfaction or
assignment, as the case may be, and deliver the same with the related Mortgage
File, as aforesaid.
(b) (i) From time to time and as appropriate in the servicing of any
Mortgage Loan, including, without limitation, foreclosure or other comparable
conversion of a Mortgage Loan or collection under any applicable Insurance
Policy, the Trustee shall (except in the case of the payment or liquidation
pursuant to which the related Mortgage File is released to an escrow agent or an
employee, agent or attorney of the Trustee), upon request of the Master Servicer
or a Subservicer and delivery to the Trustee of a Master Servicer's Trust
Receipt, release the related Mortgage File to the Master Servicer or a
Subservicer and shall execute such documents as shall be necessary to the
prosecution of any such proceedings, including, without limitation, an
assignment without recourse of the related Mortgage to the Master Servicer;
provided that there shall not be released and unreturned at any one time more
than 10% of the entire number of Mortgage Files. The Trustee shall complete in
the name of the Trustee any endorsement in blank on any Note prior to releasing
such Note to the Master Servicer or a Subservicer. Such receipt shall obligate
the Master Servicer to return the Mortgage File to the Trustee when the need
therefor by the Master Servicer or a Subservicer no longer exists unless the
Mortgage Loan shall be liquidated, in which case, upon receipt of the
liquidation information, in physical or electronic form, a copy of the Master
Servicer's Trust Receipt shall be released by the Trustee to the Master Servicer
or a Subservicer as the case may be.
(ii) Each Master Servicer's Trust Receipt may be delivered to the
Trustee (i) via mail or courier, (ii) via facsimile or (iii) by such other
means, including, without limitation, electronic or computer readable medium, as
the Master Servicer or any Subservicer and the Trustee shall
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mutually agree. The Trustee shall promptly release the related Mortgage File(s)
within five (5) to seven (7) Business Days of receipt of a properly completed
Master Servicer's Trust Receipt pursuant to clauses (i), (ii) or (iii) above or
such shorter period as may be agreed upon by the Master Servicer or any
Subservicer and the Trustee. Receipt of a Master Servicer's Trust Receipt
pursuant to clauses (i), (ii) or (iii) above shall be authorization to the
Trustee to release such Mortgage Files, provided the Trustee has determined that
such Master Servicer's Trust Receipt has been executed, with respect to clauses
(i) or (ii) above, or approved, with respect to clause (iii) above, by an
Authorized Officer of the Master Servicer or Subservicer, as the case may be. If
the Trustee is unable to release the Mortgage Files within the time frames
previously specified, the Trustee shall immediately notify the Master Servicer
or Subservicer, as the case may be, indicating the reason for such delay, but in
no event shall such notification be later than five Business Days after receipt
of a Master Servicer's Trust Receipt. If the Master Servicer or Subservicer, as
the case may be, is required to pay penalties or damages due solely to the
Trustee's negligent failure to release the related Mortgage File or the
Trustee's negligent failure to execute and release documents in a timely manner,
the Trustee shall be liable for such penalties or damages.
On each day that the Master Servicer or Subservicer, as the case may be,
delivers to the Trustee Master Servicer's Trust Receipts pursuant to clauses
(ii) or (iii) above, the Master Servicer or Subservicer, as the case may be,
shall also submit to the Trustee a summary of the total number of such Master
Servicer's Trust Receipts requested on such day by the same method as described
in such clauses (ii) or (iii) above.
(c) No costs associated with the procedures described in this
Section 8.15 shall be an expense of the Trust.
(d) The provisions set forth in Subsections (a) and (b) may be
superseded by any waiver of the Document Delivery Requirement as may be given by
the Certificate Insurer, Moody's and Standard & Poor's pursuant to Section
3.5(j) hereof.
Section 8.16. Servicing Compensation. As compensation for its
activities hereunder, the Master Servicer shall be entitled to retain the amount
of the Master Servicing Fee with respect to each Mortgage Loan. Additional
servicing compensation in the form of prepayment charges, release fees, bad
check charges, assumption fees, late payment charges, or any other
servicing-related fees, Net Liquidation Proceeds not required to be deposited in
the Collection Account pursuant to Section 8.10(c) and similar items may, to the
extent collected from Mortgagors, be retained by the Master Servicer.
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Section 8.17. Annual Statement as to Compliance. The Master
Servicer, at its own expense, will deliver to the Trustee, Certificate Insurer,
Standard & Poor's and Moody's, on or before the last day of March of each year,
commencing in 1997, an Officer's Certificate stating, as to each signer thereof,
that (i) a review of the activities of the Master Servicer during such preceding
calendar year and of performance under this Agreement has been made under such
officer's supervision, and (ii) to the best of such officer's knowledge, based
on such review, the Master Servicer has fulfilled all its obligations under this
Agreement for such year, or, if there has been a default in the fulfillment of
all such obligations, specifying each such default known to such officer and the
nature and status thereof including the steps being taken by the Master Servicer
to remedy such defaults.
Section 8.18. Annual Independent Certified Public Accountants'
Reports. On or before the last day of March of each year, commencing in 1997,
the Master Servicer, at its own expense, shall cause to be delivered to the
Trustee, the Certificate Insurer, Standard & Poor's and Moody's a letter or
letters of Arthur Andersen & Co., or other firm of independent, nationally
recognized certified public accountants reasonably acceptable to the Certificate
Insurer stating that such firm has, with respect to the Master Servicer's
overall servicing operations (i) performed applicable tests in accordance with
the compliance testing procedures as set forth in Appendix 3 of the Audit Guide
for Audits of HUD Approved Nonsupervised Mortgages or (ii) examined such
operations in accordance with the requirements of the Uniform Single Attestation
Program for Mortgage Bankers, and in either case stating such firm's conclusions
relating thereto. In rendering its report such firm may rely, as to matters
relating to the direct servicing of residential mortgage loans by Subservicers,
upon comparable reports of firms of independent certified public accountants
rendered on the basis of examinations conducted in accordance with the same
standards (rendered within one year of such report) with respect to those
Subservicers. Immediately upon receipt of such report, the Master Servicer shall
furnish a copy of such report to the Trustee, the Certificate Insurer and each
Rating Agency.
To the extent that 100% of the Mortgage Loans are being sub-serviced
by a single Subservicer with respect to all collection activity, comparable
reports of such Subservicer shall satisfy the requirements of this Section 8.18.
Section 8.19. Access to Certain Documentation and Information
Regarding the Mortgage Loans; Confidentiality. The Master Servicer shall provide
to the Trustee, the Certificate Insurer, the FDIC and the supervisory agents and
examiners (as required in the latter case by applicable State and federal
regulations) of each of the foregoing access to the documentation regarding the
Mortgage Loans, such access
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being afforded without charge but only upon reasonable request and during normal
business hours at the offices of the Master Servicer designated by it.
Upon any change in the format of the computer tape maintained by the
Master Servicer in respect of the Mortgage Loans, the Master Servicer shall
deliver a copy of such computer tape to the Trustee and in addition shall
provide a copy of such computer tape to the Trustee and the Certificate Insurer
at such other times as the Trustee or the Certificate Insurer may reasonably
request.
The Master Servicer shall keep confidential (including from
affiliates thereof) information concerning the Mortgage Loans, except as
required by law.
Section 8.20. Payment of Taxes, Insurance and Other Charges. If any
Mortgage Loan requires the Mortgagor to make any of the payments specified
below, the Master Servicer shall cause to be established and maintained one or
more escrow accounts, which may be interest-bearing, and shall deposit and
retain therein all collections received from Mortgagors for the payment of
taxes, assessments, fire, hazard, and flood insurance premiums, and comparable
items for the account of the Mortgagors pursuant to the terms of the Mortgage
and applicable federal and state laws. Withdrawal of amounts so collected from a
Mortgagor may be made only to (i) effect payment of taxes, assessments, fire,
hazard and flood insurance premiums, and comparable items; (ii) reimburse the
Master Servicer out of related collections for any payments made for payment of
taxes, assessments, fire, hazard and flood insurance premiums, and comparable
items; (iii) refund to Mortgagors any sums as may be determined to be
overpayments; (iv) pay interest, if required, to Mortgagors, or otherwise to the
Master Servicer, on balances in such escrow accounts; (v) remove from the escrow
accounts any deposit made therein in error; or (vi) clear and terminate such
escrow accounts upon satisfaction of the related Mortgage or the termination of
this Agreement. The Master Servicer shall pay interest to the Mortgagors on
funds collected and deposited in the escrow accounts to the extent required by
law; and to the extent that interest earned on funds in such escrow accounts is
insufficient to pay such interest, the Master Servicer shall pay such interest
from its own funds, without any reimbursement therefor.
Section 8.21. Assignment of Agreement. The Master Servicer may not
assign its obligations under this Agreement, in whole or in part, unless it
shall have first obtained the written consent of the Trustee, the Certificate
Insurer and any Subservicer, which consent shall not be unreasonably withheld;
provided, however, that any assignee must meet the eligibility requirements set
forth in Section 8.22(f) hereof for a successor servicer. Notice of any such
assignment shall be given by the Master Servicer to the Trustee, the Certificate
Insurer and Moody's.
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Section 8.22. Removal of Master Servicer; Resignation of Master
Servicer. (a) The Trustee with the consent of the Certificate Insurer, or the
Certificate Insurer (or the Owners pursuant to Section 6.11 hereof) may remove
the Master Servicer and terminate the rights and obligations of the Master
Servicer under this Agreement by written notice to the Master Servicer upon the
occurrence of any of the following events:
(i) The Master Servicer shall fail to remit any amounts to be
deposited in the Distribution Account hereunder or deliver to the Trustee
any proceeds or required payment, which failure continues unremedied for
three Business Days following written notice to an Authorized Officer of
the Master Servicer from the Trustee or from any Owners of Certificates
representing 25% or more of the Percentage Interests of each Class of
Class A Certificates.
(ii) The Master Servicer shall (I) apply for or consent to the
appointment of a receiver, trustee, liquidator or custodian or similar
entity with respect to itself or its property, (II) admit in writing its
inability to pay its debts generally as they become due, (III) make a
general assignment for the benefit of creditors, (IV) be adjudicated a
bankrupt or insolvent, (V) commence a voluntary case under the federal
bankruptcy laws of the United States of America or file a voluntary
petition or answer seeking reorganization, an arrangement with creditors
or an order for relief or seeking to take advantage of any insolvency law
or file an answer admitting the material allegations of a petition filed
against it in any bankruptcy, reorganization or insolvency proceeding or
(VI) take corporate action for the purpose of effecting any of the
foregoing;
(iii) If without the application, approval or consent of the Master
Servicer, a proceeding shall be instituted in any court of competent
jurisdiction, under any law relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking in respect of the Master
Servicer an order for relief or an adjudication in bankruptcy,
reorganization, dissolution, winding up, liquidation, a composition or
arrangement with creditors, a readjustment of debts, the appointment of a
trustee, receiver, liquidator or custodian or similar entity with respect
to the Master Servicer or of all or any substantial part of its assets, or
other like relief in respect thereof under any bankruptcy or insolvency
law, and, if such proceeding is being contested by the Master Servicer in
good faith, the same shall (A) result in the entry of an order for relief
or any such adjudication or appointment or (B) continue undismissed or
pending and unstayed for any period of sixty (60) consecutive days; or
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(iv) The Master Servicer shall fail to perform any one or more of
its obligations hereunder other than the obligations contemplated by
Subsection 8.22(i) above which materially and adversely affects the
interests of the Owners or the Certificate Insurer, and shall continue in
default thereof for a period of thirty (30) days after notice by the
Trustee or the Certificate Insurer of said failure; provided, however,
that if the Master Servicer can demonstrate to the reasonable satisfaction
of the Certificate Insurer that it is diligently pursuing remedial action,
then the cure period may be extended with the written approval of the
Certificate Insurer; or
(v) The Master Servicer shall fail to cure any breach of any of its
representations and warranties set forth in Section 3.2 which materially
and adversely affects the interests of the Owners or Certificate Insurer
for a period of thirty (30) days after the Master Servicer's discovery or
receipt of notice thereof; provided, however, that if the Master Servicer
can demonstrate to the reasonable satisfaction of the Certificate Insurer
that it is diligently pursuing remedial action, then the cure period may
be extended with the written approval of the Certificate Insurer.
(b) In addition, the Certificate Insurer may remove the Master
Servicer upon the occurrence of either of the following events:
(x) (i) for the 1st through the 12th Distribution Dates, if
the Cumulative Loss Percentage for such Distribution Date is more
than 1.75%, (ii) for the 13th through the 24th Distribution Dates,
if the Cumulative Loss Percentage for such Distribution Date is more
than 2.25%, (iii) for the 25th through the 36th Distribution Dates,
if the Cumulative Loss Percentage for such Distribution Date is more
than 4.00%, (iv) for the 37th through the 48th Distribution Dates,
if the Cumulative Loss percentage and Distribution Date is more than
4.75% and (v) for the 49th Distribution Date and any Distribution
Date thereafter, if the Cumulative Loss Percentage for such
Distribution Date is more than 5.25%, or
(y) the Rolling Delinquency Percentage for any Distribution
Date is more than 13.0%.
Upon the Trustee's determination that a required Delinquency Advance or payment
of Compensating Interest has not been made by the Master Servicer, the Trustee
shall so notify in writing an Authorized Officer of the Master Servicer and the
Certificate Insurer as soon as is reasonably practical.
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(c) The Master Servicer shall not resign from the obligations and
duties hereby imposed on it, except upon determination that its 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, the other
activities of the Master Servicer so causing such a conflict being of a type and
nature carried on by the Master Servicer at the date of this Agreement. Any such
determination permitting the resignation of the Master Servicer shall be
evidenced by an opinion of counsel to such effect which shall be delivered to
the Trustee and the Certificate Insurer.
(d) No removal or resignation of the Master Servicer shall become
effective until the Subservicer if it so elects and with the consent of the
Certificate Insurer, and if not the Subservicer, the Trustee or a successor
servicer shall have assumed the Master Servicer's responsibilities, with the
consent of the Certificate Insurer, and obligations in accordance with this
Section. If no successor servicer is available, the Trustee shall act as
successor servicer and perform all of the obligations of this Section,
including, without limitation, making Delinquency Advances and paying
Compensating Interest; provided, however, that the Trustee will not be obligated
to act as successor servicer if it is legally unable to perform its duties
hereunder.
(e) Upon removal or resignation of the Master Servicer, the Master
Servicer also shall promptly deliver or cause to be delivered to a successor
servicer or the Trustee all the books and records (including, without
limitation, records kept in electronic form) that the Master Servicer has
maintained for the Mortgage Loans, including all tax bills, assessment notices,
insurance premium notices and all other documents as well as all original
documents then in the Master Servicer's possession.
(f) Any collections received by the Master Servicer after removal or
resignation shall be endorsed by it to the Trustee and remitted directly and
immediately to the Trustee or the successor Master Servicer.
(g) If the Subservicer does not become the successor Master
Servicer, upon removal or resignation of the Master Servicer, the Trustee (x)
may solicit bids for a successor servicer as described below, and (y) pending
the appointment of a successor Master Servicer as a result of soliciting such
bids, shall serve as Master Servicer. The Trustee shall, if it is unable to
obtain a qualifying bid and is prevented by law from acting as Master Servicer,
appoint, or petition a court of competent jurisdiction to appoint, any housing
and home finance institution, bank or mortgage servicing institution which has
shareholders' equity of not less than $15,000,000, as determined in accordance
with generally accepted accounting principles, and acceptable to the Certificate
Insurer as the successor to the Master
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Servicer hereunder in the assumption of all or any part of the responsibilities,
duties or liabilities of the Master Servicer hereunder. The compensation of any
successor servicer (including, without limitation, the Trustee) so appointed
shall be the aggregate Master Servicing Fees, together with the other servicing
compensation in the form of assumption fees, late payment charges or otherwise
as provided herein.
(h) In the event the Trustee solicits bids as provided above, the
Trustee shall solicit, by public announcement, bids from housing and home
finance institutions, banks and mortgage servicing institutions meeting the
qualifications set forth above. Such public announcement shall specify that the
successor Master Servicer shall be entitled to the full amount of the aggregate
Master Servicing Fees as servicing compensation, together with the other
servicing compensation in the form of assumption fees, late payment charges or
otherwise as provided herein. Within thirty days after any such public
announcement, the Trustee shall negotiate and effect the sale, transfer and
assignment of the servicing rights and responsibilities hereunder to the
qualified party submitting the highest satisfactory bid. The Trustee shall
deduct from any sum received by the Trustee from the successor to the Master
Servicer in respect of such sale, transfer and assignment all costs and expenses
of any public announcement and of any sale, transfer and assignment of the
servicing rights and responsibilities hereunder. After such deductions, the
remainder of such sum shall be paid by the Trustee to the Master Servicer at the
time of such sale, transfer and assignment to the Master Servicer's successor.
Notwithstanding the foregoing or anything to the contrary herein, no appointment
of a successor Master Servicer shall be effective without the prior written
consent of the Certificate Insurer.
(i) The Trustee and such successor shall take such action,
consistent with this Agreement, as shall be necessary to effectuate any such
succession. The Master Servicer agrees to cooperate with the Trustee and any
successor Master Servicer in effecting the termination of the Master Servicer's
servicing responsibilities and rights hereunder and shall promptly provide the
Trustee or such successor Master Servicer, as applicable, all documents and
records reasonably requested by it to enable it to assume the Master Servicer's
functions hereunder and shall promptly also transfer to the Trustee or such
successor Master Servicer, as applicable, all amounts which then have been or
should have been deposited in the Collection Account by the Master Servicer or
which are thereafter received with respect to the Mortgage Loans. Neither the
Trustee nor any other successor Master Servicer shall be held liable by reason
of any failure to make, or any delay in making, any distribution hereunder or
any portion thereof caused by (i) the failure of the Master Servicer to deliver,
or any delay in delivering, cash, documents or records to it, or (ii)
restrictions imposed by any regulatory
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authority having jurisdiction over the Master Servicer or (iii) any breaches of
a predecessor Servicer.
(j) The Trustee or any other successor Master Servicer, upon
assuming the duties of Master Servicer hereunder, shall immediately make all
Delinquency Advances and pay all Compensating Interest which the Master Servicer
has theretofore failed to remit with respect to the Mortgage Loans; provided,
however, that if the Trustee is acting as successor Master Servicer, the Trustee
shall only be required to make Delinquency Advances (including the Delinquency
Advances described in this clause (i)) if, in the Trustee's reasonable good
faith judgment, such Delinquency Advances will ultimately be recoverable from
the related Mortgage Loans.
(k) The Master Servicer which is being removed or is resigning shall
give notice to the Mortgagors and to Moody's and Standard & Poor's of the
transfer of the servicing to the successor.
(l) The Trustee shall give prompt notice to the Certificate Insurer,
Moody's and Standard & Poor's and to the Owners of the occurrence of any event
specified in Section 8.22(a) of which the Trustee has knowledge.
Section 8.23. Inspections by Certificate Insurer; Errors and
Omissions Insurance. (a) At any reasonable time and from time to time upon
reasonable notice, the Certificate Insurer, the Trustee, or any agents or
representatives thereof may inspect the Master Servicer's servicing operations
and discuss the servicing operations of the Master Servicer with any of its
officers or directors. The costs and expenses incurred by the Master Servicer or
its agents or representatives in connection with any such examinations or
discussions shall be paid by the Master Servicer.
(b) The Master Servicer agrees to maintain errors and omissions
coverage and a fidelity bond, each at least to the extent generally maintained
by prudent mortgage loan servicers having direct servicing portfolios of a
similar size.
Section 8.24. Merger, Conversion, Consolidation or Succession to
Business of Master Servicer. Any corporation into which the Master Servicer may
be merged or converted or with which it may be consolidated, or any corporation
resulting from any merger, conversion or consolidation to which the Master
Servicer shall be a party, or any corporation succeeding to all or substantially
all of the business of the Master Servicer, shall be the successor of the Master
Servicer hereunder, without the execution or filing of any paper or any further
act on the part of any of the parties hereto provided that such corporation
meets the qualifications set forth in Section 8.22(f).
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Section 8.25. Notices of Material Events. The Master Servicer shall
give prompt notice to the Certificate Insurer, the Trustee, Moody's and Standard
& Poor's of the occurrence of any of the following events:
(a) Any default or any fact or event which results, or which with
notice or the passage of time, or both, would result in the occurrence of an
"Event of Default" by the Sponsor or the Master Servicer under any Transaction
Document or would constitute a material breach of a representation, warranty or
covenant under any Transaction Document;
(b) The submission of any claim or the initiation of any legal
process, litigation or administrative or judicial investigation against the
Sponsor or the Master Servicer in any federal, state or local court or before
any governmental body or agency, or before any arbitration board, or any such
proceedings threatened by any governmental agency, which, if adversely
determined, would have a material adverse effect upon any the Sponsor's or the
Master Servicer's ability to perform its obligations under any Transaction
Document;
(c) The commencement of any proceedings by or against the Sponsor or
the Master Servicer under any applicable bankruptcy, reorganization,
liquidation, insolvency or other similar law now or hereafter in effect or of
any proceeding in which a receiver, liquidator, trustee or other similar
official shall have been, or may be, appointed or requested for the Sponsor or
the Master Servicer; and
(d) The receipt of notice from any agency or governmental body
having authority over the conduct of any of the Sponsor's or the Master
Servicer's business that the Sponsor or the Master Servicer is to cease and
desist, or to undertake any practice, program, procedure or policy employed by
the Sponsor or the Master Servicer in the conduct of the business of any of
them, and such cessation or undertaking will materially adversely affect the
conduct of the Sponsor's or the Master Servicer's business or its ability to
perform under the Transaction Documents or materially adversely affect the
financial affairs of the Sponsor or the Master Servicer.
Section 8.26. Limitation on Liability of the Sponsor and the Master
Servicer. Neither the Sponsor, the Master Servicer nor any of the directors,
officers, employees or agents of the Sponsor or the Master Servicer shall be
under any liability to the Certificate Insurer, the Trust Estate or the Owners
for any action taken or for refraining from the taking of any action in good
faith pursuant to this Agreement, or for errors in judgment; provided, however,
that this provision shall not protect the Sponsor or the Master Servicer (but
this provision shall protect the above described persons) against any breach of
warranties or representations made herein, or against any specific liability
imposed on the Master Servicer or the Sponsor pursuant to any other Section
hereof; and provided further that this provision shall not
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protect the Sponsor, the Master Servicer or any such person, against any
liability which would otherwise be imposed by reason of willful misfeasance, bad
faith or negligence in the performance of duties or by reason of reckless
disregard of obligations and duties hereunder. The Sponsor, the Master Servicer
and any director, officer, employee or agent of the Sponsor or the Master
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 Sponsor, the Master Servicer and any director, officer, employee or agent of
the Sponsor or the Master Servicer shall be indemnified and held harmless by the
Trust against any loss, liability or expense incurred in connection with any
legal action relating to this Agreement or Certificates, with respect to the
Master Servicer, other than any loss, liability or expense related to Master
Servicer's servicing obligations with respect to any specific Mortgage Loan or
Mortgage Loans (except as any such loss, liability or expense shall be otherwise
reimbursable pursuant to this Agreement) or related to the Master Servicer's
obligations under this Agreement, or with respect to the Sponsor and the Master
Servicer, any loss, liability or expense incurred by reason of willful
misfeasance, bad faith or negligence in the performance of duties hereunder or
by reason of reckless disregard of obligations and duties hereunder. Neither the
Sponsor nor the Master Servicer shall be under any obligation to appear in,
prosecute or defend any legal action which is not incidental to its respective
duties under this Agreement and which in its opinion may involve it in any
expense or liability; provided, however, that the Sponsor or the Master Servicer
may in its sole discretion undertake any such action which it may deem necessary
or desirable with respect to this Agreement and the rights and duties of the
parties hereto and the interests of the Owners hereunder. In the event the
Sponsor or the Master Servicer take any action as described in the preceding
sentence, the legal expenses and costs of such action, if previously approved in
writing by the Certificate Insurer, which approval shall not be unreasonably
withheld, and any liability resulting therefrom will be expenses, costs and
liabilities of the Trust, and the Master Servicer or the Sponsor, as the case
may be, will be entitled to be reimbursed therefor out of funds in the
Collection Account.
ARTICLE IX
TERMINATION OF TRUST
Section 9.1. Termination of Trust. The Trust created hereunder and
all obligations created by this Agreement will terminate upon the earlier of (i)
the payment to the Owners of all Certificates from amounts other than those
available under the Certificate Insurance Policy of all amounts held by the
Trustee and required to be paid to such Owners pursuant to this Agreement upon
the later to occur of (a) the final payment or other liquidation (or any advance
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made with respect thereto) of the last Mortgage Loan in the Trust Estate or (b)
the disposition of all property acquired in respect of any Mortgage Loan
remaining in the Trust Estate, (ii) at any time when a Qualified Liquidation of
the REMIC Trust is effected as described below or (iii) as described in Section
9.2 or 9.3 hereof. To effect a termination of this Agreement pursuant to clause
(ii) above, the Owners of all Certificates then Outstanding shall (x)
unanimously direct the Trustee on behalf of the Trust to adopt a plan of
complete liquidation with respect to the REMIC Trust, as contemplated by Section
860F(a)(4) of the Code and (y) provide to the Trustee an opinion of counsel
experienced in federal income tax matters to the effect that such liquidation
constitutes a Qualified Liquidation, and the Trustee either shall sell the
Mortgage Loans and distribute the proceeds of the liquidation of the Trust
Estate, or shall distribute equitably in kind all of the assets of the Trust
Estate to the remaining Owners of the Certificates based on their interests in
the Trust, each in accordance with such plan, so that the liquidation or
distribution of the Trust Estate, the distribution of any proceeds of the
liquidation and the termination of this Agreement occur no later than the close
of the 90th day after the date of adoption of the plan of liquidation and such
liquidation qualifies as a Qualified Liquidation; provided, however, that no
such liquidation plan shall be adopted without the consent of the Certificate
Insurer if such liquidation would result in a claim under the Certificate
Insurance Policy. In no event, however, will the Trust created by this Agreement
continue beyond the expiration of twenty-one (21) years from the death of the
last survivor of the descendants of Joseph P. Kennedy, the late Ambassador of
the United States to the United Kingdom, living on the date hereof. The Trustee
shall give written notice of termination of the Agreement to each Owner in the
manner set forth in Section 11.5.
Section 9.2. Termination Upon Option of Owners of a Majority in
Percentage Interest represented by the Class R Certificates. (a) On any
Remittance Date on or after the Clean-Up Call Date, the Owners of a majority in
Percentage Interest represented by the Class R Certificates acting directly or
through one or more affiliates may determine to purchase and may cause the
purchase from the Trust of all (but not fewer than all) Mortgage Loans in the
Trust Estate and all property theretofore acquired in respect of any such
Mortgage Loan by foreclosure, deed in lieu of foreclosure, or otherwise then
remaining in the Trust Estate at a price equal to the sum of (v) the greater of
(i) 100% of the aggregate Loan Balances of the related Mortgage Loans as of the
day of purchase minus the amount actually remitted by the Master Servicer
representing the related Monthly Principal Remittance Amount on such Remittance
Date for the related Remittance Period and (ii) the fair market value of such
Mortgage Loans (disregarding accrued interest), (w) the amount of any difference
between the related Monthly Interest Remittance Amount actually remitted by the
Master Servicer on such
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Remittance Date and the related Monthly Interest Remittance Amount due on such
Remittance Date, (x) any Reimbursement Amount as of such Remittance Date and (y)
the aggregate amount of any Delinquency Advances and Servicing Advances
remaining unreimbursed, together with any accrued and unpaid Master Servicing
Fees, as of such Remittance Date (such amount, the "Termination Price"). In
connection with such purchase, the Master Servicer shall remit to the Trustee
all amounts then on deposit in the Collection Account for deposit to the
Distribution Account, which deposit shall be deemed to have occurred immediately
preceding such purchase. Notwithstanding the foregoing, no termination under
this Section 9.2 may be effected without the consent of the Certificate Insurer
if it would result in a claim under the Certificate Insurance Policy.
(b) In connection with any such purchase, the Owners of a majority
in Percentage Interest represented by the Class R Certificates shall provide to
the Trustee an opinion of counsel experienced in federal income tax matters to
the effect that such purchase constitutes a Qualified Liquidation of the REMIC
Trust.
(c) Promptly following any such purchase, the Trustee will release
the Mortgage Files to the Owners of a majority in Percentage Interest
represented by the Class R Certificates or otherwise upon their order, in a
manner similar to that described in Section 8.15 hereof.
(d) If the Owners of a majority in Percentage Interest represented
by the Class R Certificates do not exercise their option pursuant to this
Section 9.2 with respect to the Trust Estate, then the Certificate Insurer may
do so on the same terms.
Section 9.3. Termination Upon Loss of REMIC Status. (a) Following a
(x) final determination by the Internal Revenue Service, or by a court of
competent jurisdiction, in either case from which no appeal is taken within the
permitted time for such appeal, or (y) if any appeal is taken, following a final
determination of such appeal from which no further appeal can be taken, to the
effect that the REMIC Trust does not and will no longer qualify as a "REMIC"
pursuant to Section 860D of the Code (the "Final Determination") or (z)
following the delivery of an opinion of counsel ("REMIC Opinion") to the effect
that the effect of the Final Determination is to increase substantially the
probability that the REMIC Trust will no longer qualify as a "REMIC" pursuant to
Section 860D of the Code, on any Remittance Date on or after the date which is
30 calendar days following such Final Determination, (i) the Owners of a
majority in Percentage Interest represented by each Class of the Class A
Certificates then Outstanding may direct the Trustee to adopt a plan of complete
liquidation with respect to the Trust Estate and (ii) the Certificate Insurer
may notify the Trustee of the Certificate Insurer's determination to purchase
from
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the Trust all (but not fewer than all) Mortgage Loans in the Trust Estate and
all property theretofore acquired by foreclosure, deed in lieu of foreclosure,
or otherwise in respect of any Mortgage Loan then remaining in the Trust Estate
at a price equal to the Termination Price. In connection with such purchase, the
Master Servicer shall remit to the Trustee all amounts then on deposit in the
Collection Account for deposit in the Distribution Account, which deposit shall
be deemed to have occurred immediately preceding such purchase.
(b) Upon receipt of such direction from the Owners of such Class A
Certificates or such notice from the Certificate Insurer, the Trustee shall
notify the holders of the Residual Certificates of such election to liquidate or
such determination to purchase, as the case may be, (the "Termination Notice").
The Owners of a majority of the Percentage Interest of the Residual Certificates
then Outstanding may, on any Remittance Date, within 60 days from the date of
receipt of the Termination Notice (the "Purchase Option Period"), at their
option, purchase from the Trust all (but not fewer than all) Mortgage Loans in
the Trust Estate, and all property theretofore acquired by foreclosure, deed in
lieu of foreclosure, or otherwise in respect of any Mortgage Loan then remaining
in the Trust Estate at a purchase price equal to the Termination Price.
(c) If, during the Purchase Option Period, the Owners of the
Residual Certificates have not exercised the option described in the immediately
preceding paragraph, then upon the expiration of the Purchase Option Period (i)
in the event that the Owners of the Class A Certificates have given the Trustee
the direction described in clause (a)(i) above, the Trustee shall sell the
Mortgage Loans and distribute the proceeds of the liquidation of the Trust
Estate, such that, if so directed, the liquidation of the Trust Estate, the
distribution of the proceeds of such liquidation occur no later than the close
of the 60th day, or such later day as the Owners of the Class A Certificates
shall permit or direct in writing, after the expiration of the Purchase Option
Period and (ii) in the event that the Certificate Insurer has given the Trustee
notice of the Certificate Insurer's determination to purchase the Mortgage Loans
in the Trust Estate described in clause (a)(ii) preceding, the Certificate
Insurer shall, on any Remittance Date within 60 days, purchase all (but not
fewer than all) Mortgage Loans in the Trust Estate, and all property theretofore
acquired by foreclosure, deed in lieu of foreclosure or otherwise in respect of
any Mortgage Loan then remaining in the Trust Estate at a purchase price equal
to the Termination Price. In connection with such purchase, the Master Servicer
shall remit to the Trustee all amounts then on deposit in the Collection Account
for deposit to the Distribution Account, which deposit shall be deemed to have
occurred immediately preceding such purchase.
(d) Following a Final Determination, the Owners of a majority of the
Percentage Interest of the Residual
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Certificates then Outstanding may, at their option on any Remittance Date and
upon delivery to the Owners of the Class A Certificates and the Certificate
Insurer of an opinion of counsel experienced in federal income tax matters
selected by the Owners of such Residual Certificates which opinion shall be
reasonably satisfactory in form and substance to a majority of the Percentage
Interests represented by the Class A Certificates then Outstanding and the
Certificate Insurer, to the effect that the effect of the Final Determination is
to increase substantially the probability that the gross income of the REMIC
Trust will be subject to federal taxation, purchase from the Trust all (but not
fewer than all) Mortgage Loans in the Trust Estate, and all property theretofore
acquired by foreclosure, deed in lieu of foreclosure, or otherwise in respect of
any Mortgage Loan then remaining in the Trust Estate at a purchase price equal
to the Termination Price. In connection with such purchase, the Master Servicer
shall remit to the Trustee all amounts then on deposit in the Collection Account
for deposit to the Distribution Account, which deposit shall be deemed to have
occurred immediately preceding such purchase. The foregoing opinion shall be
deemed satisfactory unless the Owners of a majority of the Percentage Interest
represented by the Class A Certificates then Outstanding or the Certificate
Insurer give the Owners of a majority of the Percentage Interest of the Residual
Certificates notice that such opinion is not satisfactory within thirty days
after receipt of such opinion.
(e) Notwithstanding anything to the contrary herein, no termination
or liquidation under this Section 9.3 shall be effective without the consent of
the Certificate Insurer if it would result in a claim under the Certificate
Insurance Policy.
Section 9.4. Disposition of Proceeds. The Trustee shall, upon
receipt thereof, deposit the proceeds of any liquidation of the Trust Estate
pursuant to this Article IX to the Distribution Account; provided, however, that
any amounts representing Master Servicing Fees, unreimbursed Delinquency
Advances or unreimbursed Servicing Advances theretofore funded by the Master
Servicer from the Master Servicer's own funds shall be paid by the Trustee to
the Master Servicer.
Section 9.5. Netting of Amounts. If any Person paying the
Termination Price would receive a portion of the amount so paid, such Person may
net any such amount against the Termination Price otherwise payable.
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ARTICLE X
THE TRUSTEE
Section 10.1. Certain Duties and Responsibilities.
(a) The Trustee (i) undertakes to perform such duties and only such
duties as are specifically set forth in this Agreement, and no implied covenants
or obligations shall be read into this Agreement against the Trustee and (ii) in
the absence of bad faith on its part, may conclusively rely, as to the truth of
the statements and the correctness of the opinions expressed therein, upon
certificates or opinions furnished pursuant to and conforming to the
requirements of this Agreement; but in the case of any such certificates or
opinions which by any provision hereof are specifically required to be furnished
to the Trustee, shall be under a duty to examine the same to determine whether
or not they conform to the requirements of this Agreement.
(b) Notwithstanding the appointment of the Master Servicer
hereunder, the Trustee is hereby empowered to perform the duties of the Master
Servicer hereunder following the failure of the Master Servicer to perform,
whether pursuant to Section 8.22 hereof or otherwise. Specifically, and not in
limitation of the foregoing, the Trustee shall have the power:
(i) to collect Mortgagor payments;
(ii) to foreclose on defaulted Mortgage Loans;
(iii) to enforce due-on-sale clauses and to enter into assumption
and substitution agreements as permitted by Section 8.13
hereof;
(iv) to deliver instruments of satisfaction pursuant to Section
8.15;
(v) to make Delinquency Advances and Servicing Advances and to pay
Compensating Interest, and
(vi) to enforce the Mortgage Loans.
(c) No provision of this Agreement shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act or its own willful misconduct, except that:
(i) this subsection shall not be construed to limit the effect of
subsection (a) of this Section;
(ii) the Trustee shall not be liable for any error of judgment made
in good faith by an Authorized Officer, unless it shall be
proved
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that the Trustee was negligent in ascertaining
the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in good faith in accordance
with the direction of the Certificate Insurer or of the Owners
of a majority in Percentage Interest of the Certificates of
the affected Class or Classes and the Certificate Insurer
relating to the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred upon the Trustee,
under this Agreement relating to such Certificates.
(d) Whether or not therein expressly so provided, every provision of
this Agreement relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of this
Section.
(e) No provision of this Agreement shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder, or in the exercise of any of its
rights or powers, if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
(f) The permissive right of the Trustee to take actions enumerated
in this Agreement shall not be construed as a duty and the Trustee shall not be
answerable for other than its own negligence or willful misconduct.
(g) The Trustee shall be under no obligation to institute any suit,
or to take any remedial proceeding under this Agreement, or to take any steps in
the execution of the trusts hereby created or in the enforcement of any rights
and powers hereunder until it shall be indemnified to its satisfaction against
any and all costs and expenses, outlays and counsel fees and other reasonable
disbursements and against all liability, except liability which is adjudicated
to have resulted from its negligence or willful misconduct, in connection with
any action so taken.
Section 10.2. Removal of Trustee for Cause. (a) The Trustee may be
removed pursuant to paragraph (b) hereof upon the occurrence of any of the
following events (whatever the reason for such event and whether it shall be
voluntary or involuntary or be effected by operation of law or pursuant to any
judgment, decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(1) the Trustee shall fail to distribute to the Owners entitled thereto
on any Distribution Date amounts
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available for distribution in accordance with the terms hereof; or
(2) the Trustee shall fail in the performance of, or breach, any
covenant or agreement of the Trustee in this Agreement, or if any
representation or warranty of the Trustee made in this Agreement or
in any certificate or other writing delivered pursuant hereto or in
connection herewith shall prove to be incorrect in any material
respect as of the time when the same shall have been made, and such
failure or breach shall continue or not be cured for a period of 30
days after there shall have been given, by registered or certified
mail, to the Trustee by the Sponsor, the Certificate Insurer or by
the Owners of at least 25% of the aggregate Percentage Interests
represented by each Class of the Class A Certificates then
Outstanding, or, if there are no Class A Certificates then
Outstanding, by such Percentage Interests represented by any Class
of Class B Certificates, a written notice specifying such failure or
breach and requiring it to be remedied; or
(3) a decree or order of a court or agency or supervisory authority
having jurisdiction for the appointment of a conservator or receiver
or liquidator in any insolvency, readjustment of debt, marshalling
of assets and liabilities or similar proceedings, or for the
winding-up or liquidation of its affairs, shall have been entered
against the Trustee, and such decree or order shall have remained in
force undischarged or unstayed for a period of 30 days; or
(4) a conservator or receiver or liquidator or sequestrator or custodian
of the property of the Trustee is appointed in any insolvency,
readjustment of debt, marshalling of assets and liabilities or
similar proceedings of or relating to the Trustee or relating to all
or substantially all of its property; or
(5) the Trustee shall become insolvent (however insolvency is
evidenced), generally fail to pay its debts as they come due, file
or consent to the filing of a petition to take advantage of any
applicable insolvency or reorganization statute, make an assignment
for the benefit of its creditors, voluntarily suspend payment of its
obligations, or take corporate action for the purpose of any of the
foregoing.
The Sponsor shall give to the Certificate Insurer, Moody's and
Standard & Poor's notice of the occurrence of any such event of which the
Sponsor is aware.
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(b) If any event described in Paragraph (a) occurs and is
continuing, then and in every such case (i) the Certificate Insurer or (ii) with
the prior written consent (which shall not be unreasonably withheld) of the
Certificate Insurer (x) the Sponsor or (y) the Owners of a majority of the
Percentage Interests represented by each Class of the Class A Certificates, or,
if there are no Class A Certificates then Outstanding, by such Percentage
Interest represented by any Class of Class B Certificates then Outstanding may,
whether or not the Trustee resigns pursuant to Section 10.9 hereof, immediately,
concurrently with the giving of notice to the Trustee, and without delaying the
30 days required for notice therein, appoint a successor Trustee pursuant to the
terms of Section 10.9 hereof.
Section 10.3. Certain Rights of the Trustee. Except as otherwise
provided in Section 10.1 hereof:
(a) the Trustee may in good faith rely and shall be protected in
acting or refraining from acting upon any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, note or other paper or document believed by it to be
genuine and to have been signed or presented by the proper party or
parties;
(b) any request or direction of the Sponsor, the Certificate Insurer
or the Owners of any Class of Certificates mentioned herein shall be
sufficiently evidenced in writing;
(c) whenever in the administration of this Agreement the Trustee
shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless
other evidence be herein specifically prescribed) may, in the absence of
bad faith on its part, rely upon an Officer's Certificate;
(d) the Trustee may consult with counsel, and the written advice of
such counsel shall be full and complete authorization and protection in
respect of any action taken, suffered or omitted by it hereunder in good
faith and in reasonable reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Agreement at the request or
direction of any of the Owners pursuant to this Agreement, unless such
Owners shall have offered to the Trustee reasonable security or indemnity
against the costs, expenses and liabilities which might be incurred by it
in compliance with such request or direction;
(f) the Trustee shall not be bound to make any investigation into
the facts or matters stated in any
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resolution, certificate, statement, instrument, opinion, report, notice,
request, direction, consent, order, bond, note or other paper or document,
but the Trustee in its discretion may make such further inquiry or
investigation into such facts or matters as it may see fit;
(g) 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 and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed and supervised
with due care by it hereunder; and
(h) the Trustee shall not be liable for any action it takes or omits
to take in good faith which it reasonably believes to be authorized by the
Authorized Officer of any Person or within its rights or powers under this
Agreement other than as to validity and sufficiency of its authentication
of the Certificates.
Section 10.4. Not Responsible for Recitals or Issuance of
Certificates. The recitals contained herein and in the Certificates, except any
such recitals relating to the Trustee, shall be taken as the statements of the
Sponsor and the Trustee assumes no responsibility for their correctness. The
Trustee makes no representation as to the validity or sufficiency of this
Agreement or of the Certificates other than as to validity and sufficiency of
its authentication of the Certificates.
Section 10.5. May Hold Certificates. The Trustee or any agent of the
Trust, in its individual or any other capacity, may become an Owner or pledgee
of Certificates and may otherwise deal with the Trust with the same rights it
would have if it were not Trustee or such agent.
Section 10.6. Money Held in Trust. The Trustee shall be under no
liability for interest on any money received by it hereunder except as otherwise
agreed with the Sponsor and except to the extent of income or other gain on
investments which are deposits in or certificates of deposit of the Trustee in
its commercial capacity and income or other gain actually received by the
Trustee on Eligible Investments.
Section 10.7. No Lien for Fees. The Trustee shall have no lien on
the Trust Estate for the payment of any fees and expenses.
Section 10.8. Corporate Trustee Required; Eligibility. There shall
at all times be a Trustee hereunder which shall be a corporation or association
organized and doing business under the laws of the United States of America or
of any State authorized under such laws to exercise corporate trust powers,
having a combined capital and surplus of at least $100,000,000, subject to
supervision or examination by the United States of America or any such State
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having a rating or ratings acceptable to the Certificate Insurer and having (x)
long-term, unsecured debt rated at least A2 by Moody's (or such lower rating as
may be acceptable to Moody's) and (y) a long-term deposit rating of at least A
from Standard & Poor's (or such lower rating as may be acceptable to Standard &
Poor's). If such Trustee publishes reports of condition at least annually,
pursuant to law or to the requirements of the aforesaid supervising or examining
authority, then for the purposes of this Section, the combined capital and
surplus of such corporation or association shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published. If at any time the Trustee shall cease to be eligible in accordance
with the provisions of this Section, it shall, upon the request of the Sponsor
with the consent of the Certificate Insurer (which consent shall not be
unreasonably withheld) or of the Certificate Insurer, resign immediately in the
manner and with the effect hereinafter specified in this Article X.
Section 10.9. Resignation and Removal; Appointment of Successor. (a)
No resignation or removal of the Trustee and no appointment of a successor
trustee pursuant to this Article X shall become effective until the acceptance
of appointment by the successor trustee under Section 10.10 hereof.
(b) The Trustee, or any trustee or trustees hereafter appointed, may
resign at any time by giving written notice of resignation to the Sponsor and by
mailing notice of resignation by first-class mail, postage prepaid, to the
Certificate Insurer and the Owners at their addresses appearing on the Register.
A copy of such notice shall be sent by the resigning Trustee to Moody's and
Standard & Poor's. Upon receiving notice of resignation, the Sponsor, with the
consent of the Certificate Insurer, shall promptly appoint a successor trustee
or trustees by written instrument, in duplicate, executed on behalf of the Trust
by an Authorized Officer of the Sponsor, one copy of which instrument shall be
delivered to the Trustee so resigning and one copy to the successor trustee or
trustees. If no successor trustee shall have been appointed and have accepted
appointment within 30 days after the giving of such notice of resignation, the
resigning trustee may petition any court of competent jurisdiction for the
appointment of a successor trustee, or any Owner may, on behalf of itself and
all others similarly situated, petition any such court for the appointment of a
successor trustee. Such court may thereupon, after such notice, if any, as it
may deem proper and prescribe, appoint a successor trustee.
(c) If at any time the Trustee shall cease to be eligible under
Section 10.8 hereof and shall fail to resign after written request therefor by
the Sponsor or by the Certificate Insurer, the Certificate Insurer or the
Sponsor with the written consent of the Certificate Insurer may remove the
Trustee and appoint a successor trustee by written
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instrument, in duplicate, executed on behalf of the Trust by an Authorized
Officer of the Sponsor, one copy of which instrument shall be delivered to the
Trustee so removed and one copy to the successor trustee.
(d) The Owners of a majority of the Percentage Interests represented
by each Class of the Class A Certificates, with the consent of the Certificate
Insurer, or, if there are no Class A Certificates then Outstanding, by such
majority of the Percentage Interests represented by any Class of Class B
Certificates then Outstanding may at any time remove the Trustee and appoint a
successor trustee by delivering to the Trustee to be removed, to the successor
trustee so appointed, to the Sponsor and to the Certificate Insurer, copies of
the record of the act taken by the Owners, as provided for in Section 11.3
hereof.
(e) If the Trustee fails to perform its duties in accordance with
the terms of this Agreement or becomes ineligible to serve as Trustee, the
Certificate Insurer may remove the Trustee and appoint a successor trustee by
written instrument, in triplicate, signed by the Certificate Insurer duly
authorized, one complete set of which instruments shall be delivered to the
Sponsor, one complete set to the Trustee so removed and one complete set to the
successor Trustee so appointed.
(f) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of the Trustee for any cause,
the Sponsor shall promptly appoint a successor Trustee reasonably acceptable to
the Certificate Insurer. If within one year after such resignation, removal or
incapability or the occurrence of such vacancy, a successor Trustee shall be
appointed by act of the Owners of a majority of the Percentage Interests
represented by each Class of the Class A Certificates then Outstanding, with the
consent of the Certificate Insurer, or, if there are no Class A Certificates
then Outstanding, by majority of the Percentage Interest of the Residual
Certificates delivered to the Sponsor and the retiring Trustee, the successor
Trustee so appointed shall forthwith upon its acceptance of such appointment
become the successor Trustee and supersede the successor Trustee appointed by
the Sponsor. If no successor Trustee shall have been so appointed by the Sponsor
or the Owners and shall have accepted appointment in the manner hereinafter
provided, any Owner may, on behalf of himself and all others similarly situated,
petition any court of competent jurisdiction for the appointment of a successor
Trustee. Such court may thereupon, after such notice, if any, as it may deem
proper and prescribe, appoint a successor Trustee.
(g) The Sponsor shall give notice of any removal of the Trustee by
mailing notice of such event by first-class mail, postage prepaid, to the
Certificate Insurer and to the Owners as their names and addresses appear in the
Register.
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Each notice shall include the name of the successor Trustee and the address of
its corporate trust office.
Section 10.10. Acceptance of Appointment by Successor Trustee. Every
successor Trustee appointed hereunder shall execute, acknowledge and deliver to
the Sponsor on behalf of the Trust, to the Certificate Insurer, and to its
predecessor Trustee an instrument accepting such appointment hereunder and
stating its eligibility to serve as Trustee 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 vested with all the rights, powers, trusts, duties and obligations of its
predecessor hereunder; but, on request of the Sponsor or the successor Trustee,
such predecessor Trustee shall, upon payment of its charges then unpaid, execute
and deliver an instrument transferring to such successor Trustee all of the
rights, powers and trusts of the Trustee so ceasing to act, and shall duly
assign, transfer and deliver to such successor Trustee all property and money
held by such Trustee so ceasing to act hereunder. Upon request of any such
successor Trustee, the Sponsor on behalf of the Trust shall execute any and all
instruments for more fully and certainly vesting in and confirming to such
successor Trustee all such rights, powers and trusts.
Upon acceptance of appointment by a successor Trustee as provided in
this Section, the Sponsor shall mail notice thereof by first-class mail, postage
prepaid, to the Owners at their last addresses appearing upon the Register. The
Sponsor shall send a copy of such notice to Moody's and Standard & Poor's. If
the Sponsor fails to mail such notice within ten days after acceptance of
appointment by the successor Trustee, the successor Trustee shall cause such
notice to be mailed at the expense of the Trust.
No successor Trustee shall accept its appointment unless at the time
of such acceptance such successor shall be qualified and eligible under this
Article X.
Section 10.11. Merger, Conversion, Consolidation or Succession to
Business of the Trustee. Any corporation or association into which the Trustee
may be merged or converted or with which it may be consolidated, or any
corporation or association resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any corporation or
association succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto; provided, however, that such corporation or
association shall be otherwise qualified and eligible under this Article X. In
case any Certificates have been executed, but not delivered, by the Trustee then
in office, any successor by merger, conversion or consolidation to such Trustee
may adopt such execution and deliver the
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Certificates so executed with the same effect as if such successor Trustee had
itself executed such Certificates.
Section 10.12. Reporting; Withholding. The Trustee shall timely
provide to the Owners the Internal Revenue Service's Form 1099 and any other
statement required by applicable Treasury regulations, and shall withhold, as
required by applicable law, federal, state or local taxes, if any, applicable to
distributions to the Owners, including but not limited to backup withholding
under Section 3406 of the Code and the withholding tax on distributions to
foreign investors under Sections 1441 and 1442 of the Code.
Section 10.13. Liability of the Trustee. The Trustee shall be liable
in accordance herewith only to the extent of the obligations specifically
imposed upon and undertaken by the Trustee herein. Neither the Trustee nor any
of the directors, officers, employees or agents of the Trustee shall be under
any liability on any Certificate or otherwise to any Account, the Sponsor, the
Master Servicer or any Owner for any action taken or for refraining from the
taking of any action in good faith pursuant to this Agreement, or for errors in
judgment; provided, however, that this provision shall not protect the Trustee
or any such Person against any liability which would otherwise be imposed by
reason of willful misconduct, negligent action, negligent failure to act or bad
faith in the performance of duties or by reason of reckless disregard of
obligations and duties hereunder. Subject to the foregoing sentence, the Trustee
shall not be liable for losses on investments of amounts in any Account (except
for any losses on obligations on which the bank serving as Trustee is the
obligor). In addition, the Sponsor and Master Servicer covenant and agree to
indemnify the Trustee, and its officers, directors, employees and agents and its
officers, directors, employees and agents from, and hold it harmless against,
any and all losses, liabilities, damages, claims or expenses (including legal
fees and expenses) other than those resulting from the willful misconduct,
negligence, bad faith or reckless disregard of the Trustee. The Trustee and any
director, officer, employee or agent of the Trustee may rely and shall be
protected in acting or refraining from acting in good faith on any certificate,
notice or other document of any kind prima facie properly executed and submitted
by the Authorized Officer of any Person respecting any matters arising
hereunder.
Section 10.14. 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 Estate or Property may at the time be located, the Master Servicer
and the Trustee acting jointly shall have the power and shall execute and
deliver all instruments to appoint one or more Persons approved by the Trustee
and the Certificate Insurer to act as co-Trustee or co-Trustees, jointly with
the Trustee, of all or any part of the Trust
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Estate or separate Trustee or separate Trustees of any part of the Trust Estate,
and to vest in such Person or Persons, in such capacity and for the benefit of
the Owners and the Certificate Insurer, such title to the Trust Estate, or any
part thereof, and, subject to the other provisions of this Section 10.14 and the
consent of the Certificate Insurer, such powers, duties, obligations, rights and
trusts as the Master Servicer and the Trustee may consider necessary or
desirable. If the Master Servicer shall not have joined in such appointment
within 15 days after the receipt by it of a request so to do, or in the case any
event indicated in Section 8.22(a) shall have occurred and be continuing, the
Trustee alone shall have the power to make such appointment with the consent of
the Certificate Insurer. No co-Trustee or separate Trustee hereunder shall be
required to meet the terms of eligibility as a successor Trustee under Section
10.8 and no notice to Owner of the appointment of any co-Trustee or separate
Trustee shall be required under Section 10.8.
Every separate Trustee and co-Trustee shall, to the extent
permitted, be appointed and act subject to the following provisions and
conditions:
(i) All rights, powers, duties and obligations conferred or imposed
upon the Trustee shall be conferred or imposed upon and exercised or
performed by the Trustee and such separate Trustee or co-Trustee jointly
(it being understood that such separate Trustee or co-Trustee is not
authorized to act separately without the Trustee joining in such act),
except to the extent that under any law of any jurisdiction in which any
particular act or acts are to be performed (whether as Trustee hereunder
or as successor to the Master Servicer hereunder), the Trustee shall be
incompetent or unqualified to perform such act or acts, in which event
such rights, powers, duties and obligations (including the holding of
title to the Trust Estate or any portion thereof in any such jurisdiction)
shall be exercised and performed singly by such separate Trustee or
co-Trustee, but solely at the direction of the Trustee;
(ii) No co-Trustee hereunder shall be held personally liable by
reason of any act or omission of any other co-Trustee hereunder; and
(iii) The Certificate Insurer acting alone may or the Master
Servicer and the Trustee acting jointly may at any time accept the
resignation of or remove any separate Trustee or co-Trustee.
Any notice, request or other writing given to the 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 Section 10.14. Each separate Trustee and
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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 Master Servicer and the Certificate
Insurer.
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.
The Trustee shall give to Moody's, the Sponsor and the Certificate
Insurer notice of the appointment of any Co-Trustee or separate Trustee.
Section 10.15. Trustee to Furnish 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 (except that the Sponsor shall file or cause to be filed the Current
Report on Form 8-K in connection with any computational materials and the
initial 8-K with respect to issuance of the Certificates) 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 Sponsor and the Master Servicer 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
within their control as the Trustee may reasonably request in connection with
the performance of its duties and obligations under this Section 10.15.
ARTICLE XI
MISCELLANEOUS
Section 11.1. Compliance Certificates and Opinions. Upon any
application or request by the Sponsor, the Certificate Insurer or the Owners to
the Trustee to take any action under any provision of this Agreement, the
Sponsor, the Certificate Insurer or the Owners, as the case may be, shall
furnish to the Trustee a certificate stating that all conditions precedent, if
any, provided for in this Agreement
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relating to the proposed action have been complied with, except that in the case
of any such application or request as to which the furnishing of any documents
is specifically required by any provision of this Agreement relating to such
particular application or request, no additional certificate need be furnished.
Except as otherwise specifically provided herein, each certificate
or opinion with respect to compliance with a condition or covenant provided for
in this Agreement shall include:
(a) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(b) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based; and
(c) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
Section 11.2. Form of Documents Delivered to the Trustee. In any
case where several matters are required to be certified by, or covered by an
opinion of, any specified Person, it is not necessary that all such matters be
certified by, or covered by the opinion of, only one such Person, or that they
be so certified or covered by only one document, but one such Person may certify
or give an opinion with respect to some matters and one or more other such
Persons as to other matters, and any such Person may certify or give an opinion
as to such matters in one or several documents.
Any certificate of an Authorized Officer of the Trustee may be
based, insofar as it relates to legal matters, upon an opinion of counsel,
unless such Authorized Officer knows, or in the exercise of reasonable care
should know, that the opinion is erroneous. Any such certificate of an
Authorized Officer of the Trustee or any opinion of counsel may be based,
insofar as it relates to factual matter upon a certificate or opinion of, or
representations by, one or more Authorized Officers of the Sponsor or of the
Master Servicer, stating that the information with respect to such factual
matters is in the possession of the Sponsor or of the Master Servicer, unless
such Authorized Officer or counsel knows, or in the exercise of reasonable care
should know, that the certificate or opinion or representations with respect to
such matters are erroneous. Any opinion of counsel may also be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an Authorized Officer of the Trustee, stating that the
information with respect to such matters is in the possession of the Trustee,
unless such counsel knows, or in the exercise
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of reasonable care should know, that the certificate or opinion or
representations with respect to such matters are erroneous. Any opinion of
counsel may be based on the written opinion of other counsel, in which event
such opinion of counsel shall be accompanied by a copy of such other counsel's
opinion and shall include a statement to the effect that such counsel believes
that such counsel and the Trustee may reasonably rely upon the opinion of such
other counsel.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Agreement, they may, but need not, be consolidated and
form one instrument.
Section 11.3. Acts of Owners. (a) Any request, demand,
authorization, direction, notice, consent, waiver or other action provided by
this Agreement to be given or taken by the Owners may be embodied in and
evidenced by one or more instruments of substantially similar tenor signed by
such Owners in person or by an agent duly appointed in writing; and, except as
herein otherwise expressly provided, such action shall become effective when
such instrument or instruments are delivered to the Trustee, and, where it is
hereby expressly required, to the Sponsor and/or the Certificate Insurer. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "act" of the Owners signing
such instrument or instruments. Proof of execution of any such instrument or of
a writing appointing any such agent shall be sufficient for any purpose of this
Agreement and conclusive in favor of the Trustee and the Trust, if made in the
manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by the certificate of any notary public or other officer authorized
by law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Whenever
such execution is by an officer of a corporation or a member of a partnership on
behalf of such corporation or partnership, such certificate or affidavit shall
also constitute sufficient proof of his authority.
(c) The ownership of Certificates shall be proved
by the Register.
(d) Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Owner of any Certificate shall bind the Owner of
every Certificate issued upon the registration of transfer thereof or in
exchange therefor or in lieu thereof, in respect of anything done, omitted or
suffered to be done by the Trustee or the Trust in reliance thereon, whether or
not notation of such action is made upon such Certificates.
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Section 11.4. Notices, etc., to Trustee. Any request, demand,
authorization, direction, notice, consent, waiver or act of the Owners or other
documents provided or permitted by this Agreement to be made upon, given or
furnished to, or filed with the Trustee by any Owner, the Certificate Insurer or
by the Sponsor shall be sufficient for every purpose hereunder if made, given,
furnished or filed in writing to or with and received by the Trustee at its
corporate trust office as set forth in Section 2.2 hereof.
Section 11.5. Notices and Reports to Owners; Waiver of Notices.
Where this Agreement provides for notice to Owners of any event or the mailing
of any report to Owners, such notice or report shall be sufficiently given
(unless otherwise herein expressly provided) if mailed, first-class postage
prepaid, to each Owner affected by such event or to whom such report is required
to be mailed, at the address of such Owner as it appears on the Register, not
later than the latest date, and not earlier than the earliest date, prescribed
for the giving of such notice or the mailing of such report. In any case where a
notice or report to Owners is mailed in the manner provided above, neither the
failure to mail such notice or report nor any defect in any notice or report so
mailed to any particular Owner shall affect the sufficiency of such notice or
report with respect to other Owners, and any notice or report which is mailed in
the manner herein provided shall be conclusively presumed to have been duly
given or provided.
Where this Agreement provides for notice in any manner, such notice
may be waived in writing by any Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Owners shall be filed with the Trustee, but such
filing shall not be a condition precedent to the validity of any action taken in
reliance upon such waiver.
In case, by reason of the suspension of regular mail service as a
result of a strike, work stoppage or similar activity, it shall be impractical
to mail notice of any event to Owners when such notice is required to be given
pursuant to any provision of this Agreement, then any manner of giving such
notice as shall be satisfactory to the Trustee shall be deemed to be a
sufficient giving of such notice.
Where this Agreement provides for notice to any rating agency that
rated any Certificates, failure to give such notice shall not affect any other
rights or obligations created hereunder.
Section 11.6. Rules by Trustee and Sponsor. The Trustee may make
reasonable rules for any meeting of Owners. The Sponsor may make reasonable
rules and set reasonable requirements for its functions.
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Section 11.7. Successors and Assigns. All covenants and agreements
in this Agreement by any party hereto shall bind its successors and assigns,
whether so expressed or not.
Section 11.8. Severability. In case any provision in this Agreement
or in the Certificates shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
Section 11.9. Benefits of Agreement. Nothing in this Agreement or in
the Certificates, expressed or implied, shall give to any Person, other than the
Owners, the Certificate Insurer and the parties hereto and their successors
hereunder, any benefit or any legal or equitable right, remedy or claim under
this Agreement.
Section 11.10. Legal Holidays. In any case where the date of any
Remittance Date, any Distribution Date, any other date on which any distribution
to any Owner is proposed to be paid, or any date on which a notice is required
to be sent to any Person pursuant to the terms of this Agreement shall not be a
Business Day, then (notwithstanding any other provision of the Certificates or
this Agreement) payment or mailing need not be made on such date, but may be
made on the next succeeding Business Day with the same force and effect as if
made or mailed on the nominal date of any such Remittance Date, such
Distribution Date, or such other date for the payment of any distribution to any
Owner or the mailing of such notice, as the case may be, and no interest shall
accrue for the period from and after any such nominal date, provided such
payment is made in full on such next succeeding Business Day.
Section 11.11. Governing Law. In view of the fact that Owners are
expected to reside in many states and outside the United States and the desire
to establish with certainty that this Agreement will be governed by and
construed and interpreted in accordance with the law of a state having a
well-developed body of commercial and financial law relevant to transactions of
the type contemplated herein, this Agreement and each Certificate shall be
construed in accordance with and governed by the laws of the State of New York
applicable to agreements made and to be performed therein.
Section 11.12. 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 11.13. Usury. The amount of interest payable or paid on any
Certificate under the terms of this Agreement shall be limited to an amount
which shall not exceed
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the maximum nonusurious rate of interest allowed by the applicable laws of the
State of New York or any applicable law of the United States permitting a higher
maximum nonusurious rate that preempts such applicable New York laws, which
could lawfully be contracted for, charged or received (the "Highest Lawful
Rate"). In the event any payment of interest on any Certificate exceeds the
Highest Lawful Rate, the Trust stipulates that such excess amount will be deemed
to have been paid to the Owner of such Certificate as a result of an error on
the part of the Trustee acting on behalf of the Trust and the Owner receiving
such excess payment shall promptly, upon discovery of such error or upon notice
thereof from the Trustee on behalf of the Trust, refund the amount of such
excess or, at the option of such Owner, apply the excess to the payment of
principal of such Certificate, if any, remaining unpaid. In addition, all sums
paid or agreed to be paid to the Trustee for the benefit of Owners of
Certificates for the use, forbearance or detention of money shall, to the extent
permitted by applicable law, be amortized, prorated, allocated and spread
throughout the full term of such Certificates.
Section 11.14. Amendment. (a) The Trustee, the Sponsor and the
Master Servicer, may at any time and from time to time, with the prior written
approval of the Certificate Insurer but without the giving of notice to or the
receipt of the consent of the Owners, amend this Agreement, and the Trustee
shall consent to such amendment, for the purpose of (i) curing any ambiguity, or
correcting or supplementing any provision hereof which may be inconsistent with
any other provision hereof, or to add provisions hereto which are not
inconsistent with the provisions hereof, (ii) upon receipt of an opinion of
counsel experienced in federal income tax matters to the effect that no
entity-level tax will be imposed on the REMIC Trust or upon the transferor of a
Class R Certificate as a result of the ownership of any Class R Certificate by a
Disqualified Organization, removing the restriction on transfer set forth in
Section 5.8(b) hereof or (iii) complying with the requirements of the Code and
the regulations proposed or promulgated thereunder; provided, however, that any
such action shall not, as evidenced by an opinion of counsel delivered to the
Trustee, materially and adversely affect the interests of any Owner (without its
written consent).
(b) The Trustee, the Sponsor and the Master Servicer may, at any
time and from time to time, with the prior written approval of the Certificate
Insurer but without the giving of notice to or the receipt of the consent of the
Owners, amend this Agreement, and the Trustee shall consent to such amendment,
for the purpose of changing the definition of "Specified Subordinated Amount"
with respect to any Mortgage Loan Group; provided, however, that no such change
shall affect the weighted average life of the related Class of Class A
Certificates (assuming an appropriate prepayment speed as
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determined by the Underwriter) by more than five percent, as determined by the
Underwriter.
(c) This Agreement may also be amended by the Trustee, the Sponsor,
and the Master Servicer at any time and from time to time, with the prior
written approval of the Certificate Insurer and not less than a majority of the
Percentage Interest represented by each affected Class of Certificates then
Outstanding, for the purpose of adding any provisions or changing in any manner
or eliminating any of the provisions of this Agreement or of modifying in any
manner the rights of the Owners hereunder; provided, however, that no such
amendment shall (a) change in any manner the amount of, or change the timing of,
payments which are required to be distributed to any Owner without the consent
of the Owner of such Certificate, (b) reduce the aforesaid percentages of
Percentage Interests which are required to consent to any such amendments or (c)
result in a down-rating or withdrawal of any ratings then assigned to the Class
A Certificates, without the consent of the Owners of all Certificates of the
Class or Classes affected then Outstanding.
(d) Each proposed amendment to this Agreement shall be accompanied
by an opinion of counsel nationally recognized in federal income tax matters
addressed to the Trustee and to the Certificate Insurer to the effect that such
amendment would not adversely affect the status of the REMIC Trust as a REMIC.
(e) The Certificate Insurer, the Owners, Moody's and Standard &
Poor's shall be provided with copies of any amendments to this Agreement,
together with copies of any opinions or other documents or instruments executed
in connection therewith.
(f) The Master Servicer shall not consent to any amendment hereunder
which adversely affects the rights or obligations of the Subservicer without the
prior written consent of the Subservicer, which consent shall not be
unreasonably withheld.
Section 11.15. REMIC Status; Taxes. (a) The Tax Matters Person shall
prepare and file or cause to be filed with the Internal Revenue Service Federal
tax or information returns with respect to the REMIC Trust and the Certificates
containing such information and at the times and in such manner as may be
required by the Code or applicable Treasury regulations, and shall furnish to
Owners such statements or information at the times and in such manner as may be
required thereby. For this purpose, the Tax Matters Person may, but need not,
rely on any proposed regulations of the United States Department of the
Treasury. The Tax Matters Person shall indicate the election to treat the REMIC
Trust as a REMIC (which election shall apply to the taxable period ending
December 31, 1996 and each calendar year thereafter) in such manner as the Code
or applicable Treasury regulations may
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prescribe. The Trustee, as Tax Matters Person appointed pursuant to Section
11.17 hereof shall sign all tax information returns filed pursuant to this
Section 11.15. The Tax Matters Person shall provide information necessary for
the computation of tax imposed on the transfer of a Class R Certificate to a
Disqualified Organization, or an agent of a Disqualified Organization, or a
pass-through entity in which a Disqualified Organization is the record holder of
an interest. The Tax Matters Person shall provide the Trustee with copies of any
Federal tax or information returns filed, or caused to be filed, by the Tax
Matters Person with respect to the REMIC Trust or the Certificates.
(b) The Tax Matters Person shall timely file all reports required to
be filed by the Trust with any federal, state or local governmental authority
having jurisdiction over the Trust, including other reports that must be filed
with the Owners, such as the Internal Revenue Service's Form 1066 and Schedule Q
and the form required under Section 6050K of the Code, if applicable to REMICs.
Furthermore, the Tax Matters Person shall report to Owners, if required, with
respect to the allocation of expenses pursuant to Section 212 of the Code in
accordance with the specific instructions to the Tax Matters Person by the
Sponsor with respect to such allocation of expenses. The Tax Matters Person
shall collect any forms or reports from the Owners determined by the Sponsor to
be required under applicable federal, state and local tax laws.
(c) The Tax Matters Person shall provide to the Internal Revenue
Service and to persons described in Section 860E(e)(3) and (6) of the Code the
information described in Proposed Treasury Regulation Section
1.860D-1(b)(5)(ii), or any successor regulation thereto. Such information will
be provided in the manner described in Proposed Treasury Regulation Section
1.860E(2)(a)(5), or any successor regulation thereto.
(d) The Sponsor covenants and agrees that within ten Business Days
after the Startup Day it shall provide to the Trustee any information necessary
to enable the Trustee to meet its obligations under subsections (b) and (c)
above.
(e) The Trustee, the Sponsor and the Master Servicer each covenants
and agrees for the benefit of the Owners and the Certificate Insurer (i) to take
no action which would result in the termination of "REMIC" status for the REMIC
Trust, (ii) not to engage in any "prohibited transaction", as such term is
defined in Section 860F(a)(2) of the Code and (iii) not to engage in any other
action which may result in the imposition on the REMIC Trust of any other taxes
under the Code.
(f) The REMIC Trust shall, for federal income tax purposes, maintain
books on a calendar year basis and report income on an accrual basis.
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(g) Except as otherwise permitted by Section 7.6(b), no Eligible
Investment shall be sold prior to its stated maturity (unless sold pursuant to a
plan of liquidation in accordance with Article IX hereof).
(h) Neither the Sponsor nor the Trustee shall enter into any
arrangement by which the Trustee will receive a fee or other compensation for
services rendered pursuant to this Agreement, which fee or other compensation is
paid from the Trust Estate, other than as expressly contemplated by this
Agreement.
(i) Notwithstanding the foregoing clauses (g) and (h), the Trustee
or the Sponsor may engage in any of the transactions prohibited by such clauses,
provided that the Trustee shall have received the prior written consent of the
Certificate Insurer and an opinion of counsel experienced in federal income tax
matters to the effect that such transaction does not result in a tax imposed on
the Trustee or cause a termination of REMIC status for the REMIC Trust;
provided, however, that such transaction is otherwise permitted under this
Agreement.
Section 11.16. Additional Limitation on Action and Imposition of
Tax. (a) Any provision of this Agreement to the contrary notwithstanding, the
Trustee shall not, without having obtained an opinion of counsel experienced in
federal income tax matters to the effect that such transaction does not result
in a tax imposed on the Trust or cause a termination of REMIC status for the
REMIC Trust, (i) sell any assets in the Trust Estate, (ii) accept any
contribution of assets after the Startup Day or (iii) agree to any modification
of this Agreement.
(b) In the event that any tax is imposed on "prohibited
transactions" of the REMIC Trust as defined in Section 860F(a)(2) of the Code,
on the "net income from foreclosure property" as defined in Section 860G(c) of
the Code, on any contribution to the REMIC Trust after the Startup Day pursuant
to Section 860G(d) of the Code, or any other tax (other than any minimum tax
imposed by Sections 23151(a) or 23153(a) of the California Revenue and Taxation
Code) is imposed, such tax shall be paid by (i) the Trustee, if such tax arises
out of or results from a breach by the Trustee of any of its obligations under
this Agreement, (ii) the Master Servicer, if such tax arises out of or results
from a breach by the Master Servicer of any of its obligations under this
Agreement, or otherwise (iii) the Owners of the Residual Certificates in
proportion to their Percentage Interests. To the extent such tax is chargeable
against the Owners of the Residual Certificates, notwithstanding anything to the
contrary contained herein, the Trustee is hereby authorized to retain from
amounts otherwise distributable to the Owners of the Residual Certificates on
any Distribution Date sufficient funds to reimburse the Trustee for the payment
of such tax (to
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<PAGE>
the extent that the Trustee has not been previously reimbursed or indemnified
therefor).
Section 11.17. Appointment of Tax Matters Person. The Owners of the
Residual Certificates hereby appoint the Trustee as their agent to act as the
Tax Matters Person for REMIC Trust for all purposes of the Code and such Tax
Matters Person will perform, or cause to be performed, such duties and take, or
cause to be taken, such actions as are required to be performed or taken by the
Tax Matters Person under the Code.
Section 11.18. RESERVED.
Section 11.19. [RESERVED].
Section 11.20. Notices. All notices hereunder shall be given as
follows, until any superseding instructions are given to all other Persons
listed below:
The Trustee: Bankers Trust Company
of California, N.A.
3 Park Plaza
Irvine, CA 92714
Attention: Accredited Home
Lenders, Inc.1996-1
Tel: (714) 253-7575
Fax: (714) 253-7577
The Sponsor: Accredited Home Lenders, Inc.
15030 Avenue of Science
Suite 100
San Diego, CA 92128
Attention: President and
Executive Vice
President
Tel: (619) 676-2100
Fax: (619) 676-2170
The Master
Servicer: Accredited Home Lenders, Inc.
15030 Avenue of Science
Suite 100
San Diego, CA 92128
Attention: President and
Executive Vice
President
Tel: (619) 676-2100
Fax: (619) 676-2170
121
<PAGE>
The Certificate
Insurer : Financial Security Assurance Inc.
350 Park Avenue
New York, New York 10022
Attention: Senior Vice President,
Surveillance Department
Tel: (212)
Fax: (212) 688-3101 or
(212) 755-5165,
or such other address or telecopy number as
may hereafter be furnished to the Trustee
and the Master Servicer in writing by the
Certificate Insurer. In each case in which a
notice or other communication to the
Certificate Insurer refers to an Event of
Default or a claim under the Certificate
Insurance Policy or with respect to which
failure on the part of the Certificate
Insurer to respond shall be deemed to
constitute consent or acceptance, then a
copy of such notice or other communication
should also be sent to the attention of the
General Counsel and the Head-Financial
Guaranty Group and shall be marked to
indicate "URGENT MATERIAL ENCLOSED."
Moody's: Moody's Investors Service
99 Church Street
New York, New York 10007
Attention: The Home Equity
Monitoring
Department
Standard & Poor's: Standard & Poor's Corporation
26 Broadway
15th Floor
New York, New York 10004
Attention: Surveillance Dept.
Underwriter: Lehman Brothers Inc.
Three World Financial Center
New York, New York 10285
Attention:
Tel: (212)
Fax: (212)
122
<PAGE>
ARTICLE XII
CERTAIN MATTERS REGARDING THE CERTIFICATE INSURER
Section 12.1. Rights of the Certificate Insurer to
Exercise Rights of the Owners of the
Class A Certificates.
By accepting its Certificate, each Owner of a Class A Certificate
agrees that unless a Certificate Insurer Default exists, the Certificate Insurer
shall have the following rights without any consent of the Owners of Class A
Certificates:
(a) the right to direct foreclosures upon Mortgage Loans upon
failure of the Master Servicer to do so;
(b) the right to require the Sponsor to repurchase or substitute for
Mortgage Loans pursuant to Section 3.4;
(c) the right to give notices of breach or to terminate the rights
and obligations of the Master Servicer as Servicer pursuant to Section
8.22;
(d) the right to direct the actions of the Trustee during the
continuance of an Event of Default pursuant to Sections 8.22;
(e) the right to consent to or direct any waivers of Event of
Defaults pursuant to Section 8.22;
(f) the right to direct the Trustee to exercise the trusts powers
vested in it by this Agreement; and
(g) the right to remove the Trustee pursuant to Section 10.2 hereof.
In addition, each Owner of a Class A Certificate agrees that, unless
a Certificate Insurer Default exists, the rights specifically set forth above
may be exercised by the Owners of Class A Certificates only with the prior
written consent of the Certificate Insurer.
Upon the occurrence of, and during the continuance of, any
Certificate Insurer Default, all rights and remedies of the Certificate Insurer
hereunder, including, without limitation, the right to consent or not to consent
to certain actions hereunder, shall vest in the Owners, and may be exercised by
a majority of the Owners of each Class of the Class A Certificates.
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Section 12.2. Trustee to Act Solely with Consent of
the Certificate Insurer.
Unless a Certificate Insurer Default exists, the Trustee shall not:
(i) agree to any amendment to this Agreement; or
(ii) undertake any litigation pursuant to or in connection with
this Agreement; or
(iii) terminate or assume any Subservicing Agreement pursuant to
this Agreement;
without the prior written consent of the Certificate Insurer which consent shall
not be unreasonably withheld; provided, however, if a Certificate Insurer
Default occurs hereunder, the Trustee shall act hereunder without Certificate
Insurer consent.
Section 12.3. Trust Fund and Accounts Held for
Benefit of the Certificate Insurer.
The Trustee shall hold the Trust Estate and the Mortgage Files for
the benefit of the Owners and the Certificate Insurer and all references in this
Agreement and in the Certificates to the benefit of Owners of the Certificates
shall be deemed to include the Certificate Insurer. The Trustee shall cooperate
in all reasonable respects with any reasonable request by the Certificate
Insurer for action to preserve or enforce the Certificate Insurer's rights or
interests under this Agreement and the Certificates.
The Master Servicer hereby acknowledges and agrees that it shall
service and administer the Mortgage Loans and any REO Properties, and shall
maintain the Collection Account, for the benefit of the Owners and for the
benefit of the Certificate Insurer, and all references in this Agreement to the
benefit of or actions on behalf of the Owners shall be deemed to include the
Certificate Insurer. Unless a Certificate Insurer Default exists, the Master
Servicer shall not terminate any Subservicing Agreements without cause without
the prior consent of the Certificate Insurer. Unless a Certificate Insurer
Default exists, the Master Servicer shall not undertake any litigation pursuant
to or in connection with this Agreement (other than foreclosure actions and
litigation to enforce its rights hereunder) without the prior consent of the
Certificate Insurer.
Section 12.4. Claims Upon the Policy; Policy
Payments Account.
(a) The Trustee shall establish a separate special purpose trust
account for the benefit of Owners of the Class A Certificates and the
Certificate Insurer referred to herein as the "Policy Payments Account" over
which the Trustee shall have exclusive control and sole right of withdrawal. The
Trustee
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shall deposit any amount paid under the Certificate Insurance Policy in the
Policy Payments Account and distribute such amount only for purposes of payment
to Owners of Class A Certificates of the Insured Payments for which a claim was
made and such amount may not be applied to satisfy any costs, expenses or
liabilities of the Master Servicer, the Trustee or the Trust. Amounts paid under
the Certificate Insurance Policy shall be transferred to the related Class A
Distribution Account in accordance with the next succeeding paragraph and
disbursed by the Trustee to Owners of Class A Certificates in accordance with
Section 7.5. It shall not be necessary for such payments to be made by checks or
wire transfers separate from the checks or wire transfers used to pay the
Insured Payments with other funds available to make such payment. However, the
amount of any payment of principal of or interest on the Class A Certificates to
be paid from funds transferred from the Policy Payments Account shall be noted
as provided in paragraph (b) below in the Register and in the statement to be
furnished to Owners of the Certificates pursuant to Section 7.8. Funds held in
the Policy Payments Account shall not be invested by the Trustee.
On any Distribution Date with respect to which a claim has been made
under the Certificate Insurance Policy, the amount of any funds received by the
Trustee as a result of any claim under the Certificate Insurance Policy, to the
extent required to pay the Insured Distribution Amount on such Remittance Date
shall be withdrawn from the Policy Payments Account and deposited in the
Distribution Account and applied by the Trustee, together with the other funds
to be withdrawn from the related Class A Distribution Account pursuant to this
Agreement, directly to the payment in full of the Insured Distribution Amount
due on the Class A Certificates. Funds received by the Trustee as a result of
any claim under the Certificate Insurance Policy shall be deposited by the
Trustee in the Policy Payments Account and used solely for payment to the Owners
of the Class A Certificates and may not be applied to satisfy any costs,
expenses or liabilities of the Master Servicer, the Trustee or the Trust Fund.
Any funds remaining in the Policy Payments Account on the first Business Day
following a Distribution Date shall be remitted to the Certificate Insurer,
pursuant to the instructions of the Certificate Insurer, by the end of such
Business Day.
(b) The Trustee shall keep a complete and accurate record of the
amount of interest and principal paid in respect of any Class A Certificate from
moneys received under the Certificate Insurance Policy. The Certificate Insurer
shall have the right to inspect such records at reasonable times during normal
business hours upon one Business Day's prior notice to the Trustee.
(c) The Trustee shall promptly notify the Certificate Insurer and
Fiscal Agent of any proceeding or the institution of any action, of which a
Responsible Officer of the Trustee has actual knowledge, seeking the avoidance
as a preferential transfer under applicable bankruptcy, insolvency, receivership
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<PAGE>
or similar law (a "Preference Claim") of any distribution made with respect to
the Class A Certificates. Each Owner of a Class A Certificate, by its purchase
of Class A Certificates, the Master Servicer and the Trustee hereby agree that,
the Certificate Insurer (so long as no Certificate Insurer Default exists) may
at any time during the continuation of any proceeding relating to a Preference
Claim direct all matters relating to such Preference Claim, including, without
limitation, (i) the direction of any appeal of any order relating to such
Preference Claim and (ii) the posting of any surety, supersedeas or performance
bond pending any such appeal. In addition and without limitation of the
foregoing, the Certificate Insurer shall be subrogated to the rights of the
Master Servicer, the Trustee and each Owner of a Class A Certificate in the
conduct of any such Preference Claim, including, without limitation, all rights
of any party to an adversary proceeding action with respect to any court order
issued in connection with any such Preference Claim.
Section 12.5. Effects of Payments by the Certificate
Insurer.
To the extent that the Certificate Insurer makes Insured Payments it
will be entitled to receive the related Reimbursement Amounts, pursuant to
Section 7.5(c) hereof.
The Trustee and the Master Servicer shall cooperate in all respects
with any reasonable request by the Certificate Insurer for action to preserve or
enforce the Certificate Insurer's rights or interests under this Agreement
without limiting the rights or affecting the interests of the Owners as
otherwise set forth herein.
Section 12.6. Notices to the Certificate Insurer.
All notices, statements, reports, certificates or opinions required
by this Agreement to be sent to any other party hereto or to any of the Owners
shall also be sent to the Certificate Insurer.
Section 12.7. Third-Party Beneficiary.
The Certificate Insurer shall be a third-party beneficiary of this
Agreement, entitled to enforce the provisions hereof as if a party hereto.
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<PAGE>
IN WITNESS WHEREOF, the Sponsor, the Master Servicer and the Trustee
have caused this Agreement to be duly executed by their respective officers
thereunto duly authorized, all as of the day and year first above written.
ACCREDITED HOME LENDERS, INC.
as Sponsor
By:/s/ Ray W. McKewon
-------------------------------------
Name: Ray W. McKewon
Title: Executive Vice President
ACCREDITED HOME LENDERS, INC.
as Master Servicer
By:/s/ Ray W. McKewon
-------------------------------------
Name: Ray W. McKewon
Title: Executive Vice President
BANKERS TRUST COMPANY,
as Trustee
By:/s/ Holly Holland
-------------------------------------
Name: Holly Holland
Title: Vice President
[Pooling and Servicing Agreement]
<PAGE>
STATE OF CALIFORNIA )
: ss.:
COUNTY OF __________ )
On the 27th day of September, 1996, before me personally came Ray W.
McKewon, to me known, who, being by me duly sworn, did depose and say that his
office address is Accredited Home Lenders, Inc. 15030 Avenue of Science, Suite
100, San Diego, California 92128; that he is the Executive Vice President of
each of Accredited Home Lenders, Inc. which are described in and which executed
the above instrument; and that he signed his name thereto by order of the
respective Board of Directors of said corporations.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
[NOTARIAL SEAL]
______________________________________
Notary Public
<PAGE>
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On the 27th day of September, 1996, before me personally came Holly
Holland, to me known, who, being by me duly sworn did depose and say that her
office is located at Four Albany Street, New York, New York 10006; that she is
Vice President of Bankers Trust Company, the New York banking corporation
described in and that executed the above instrument as Trustee; and that she
signed her name thereto under authority granted by the Board of Directors of
said New York banking corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
[NOTARIAL SEAL]
______________________________________
Notary Public
129
<PAGE>
SCHEDULE I
SCHEDULES OF MORTGAGE LOANS
SI-1
<PAGE>
EXHIBIT A-1
FORM OF CLASS A-1 CERTIFICATES
ACCREDITED MORTGAGE LOAN TRUST 1996-1
MORTGAGE LOAN ASSET-BACKED CERTIFICATE
CLASS A-1 CERTIFICATES
(____% Class A-1 Certificate)
Representing Certain Interests Relating to a Pool
of Mortgage Loans in Group I formed by Accredited
Home Lenders, Inc., as Sponsor, and Serviced by
ACCREDITED HOME LENDERS, INC., as Master Servicer
Unless this certificate is presented by an authorized representative
of the Depository Trust Company, a New York corporation ("DTC"), to Sponsor or
its agent for registration of transfer, exchange, or payment, and any
certificate issued is registered in the name of Cede & Co. or in such other name
as is requested by an authorized representative of DTC (and any payment is made
to Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.
(This certificate does not represent an interest in, or an
obligation of, nor are the underlying Mortgage Loans insured or guaranteed by,
Accredited Home Lenders, Inc., Advanta Mortgage Corp. USA, the Trustee or any of
their respective subsidiaries and affiliates. This certificate represents a
fractional ownership interest in Group I described herein, moneys in certain
Accounts created pursuant to the Pooling and Servicing Agreement and certain
other rights relating thereto and is payable only from amounts received by the
Trustee (i) relating to the Mortgage Loans in Group I held by the Trust, (ii)
moneys held in such Accounts and (iii) pursuant to the Certificate Insurance
Policy.)
No: A-1 September 27, 1996
------------------- ---------------
Date CUSIP
$14,073,000 October 25, 2027
------------------------- -----------------
Original Principal Amount Final Scheduled
Distribution Date
CEDE & CO.
---------------------------------
Registered Owner
A-1-1
<PAGE>
The registered Owner named above is the registered Owner of a
fractional interest in (i) a pool consisting of fixed-rate mortgage loans (the
"Mortgage Loans") assigned to a particular mortgage loan group ("Group I") which
has been formed by Accredited Home Lenders, Inc. ("Accredited" or the
"Sponsor"), a California corporation and sold by the Sponsor to Bankers Trust
Company, a New York banking corporation, as trustee (the "Trustee") on behalf of
Accredited Mortgage Loan Trust 1996-1 (the "Trust") pursuant to that certain
Pooling and Servicing Agreement dated as of September 1, 1996 (the "Pooling and
Servicing Agreement") by and among the Sponsor, the Trustee and Accredited, as
Master Servicer (the "Master Servicer"), (ii) such amounts, including Eligible
Investments and the proceeds of payments under the Certificate Insurance Policy,
as from time to time may be held in the related Accounts (except as otherwise
provided in the Pooling and Servicing Agreement), each created pursuant to the
Pooling and Servicing Agreement, (iii) any Property relating to the Mortgage
Loans in Group I, the ownership of which has been effected as a result of
foreclosure or acceptance by the Master Servicer of a deed in lieu of
foreclosure and that has not been withdrawn from the Trust, (iv) any Insurance
Policies relating to the Mortgage Loans in Group I and any rights of the Sponsor
in any Insurance Policies relating to the Mortgage Loans in Group I and (v) Net
Liquidation Proceeds relating to the Mortgage Loans in Group I and (vi) the
Certificate Insurance Policy. Such Mortgage Loans in Group I and other amounts
and property enumerated above are hereinafter referred to as "Group I."
The Original Principal Amount set forth above is equal to the
product of (i) the Percentage Interest represented by this Certificate and (ii)
the aggregate original principal amount of the Class A-1 Certificates on
September 27, 1996 (the "Startup Day"), which aggregate amount as of September
27, 1996 was $14,073,000. The Owner hereof is entitled to principal payments on
each Distribution Date, as hereinafter described, which will fully amortize such
Original Principal Amount over the period from the date of initial delivery
hereof to the final Distribution Date of the Class A- 1 Certificates. Therefore,
the actual outstanding principal amount of this Certificate, on any date
subsequent to October 25, 1996 (the first Distribution Date) will be less than
the Original Principal Amount set forth above.
Upon receiving the final distribution hereon, the Owner hereof is
required to send this Certificate to the Trustee. The Pooling and Servicing
Agreement provides that, in any event, upon the making of the final distribution
due on this Certificate, this Certificate shall be deemed cancelled for all
purposes under the Pooling and Servicing Agreement.
A-1-2
<PAGE>
SOLELY FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS
AN INTEREST IN A CLASS OF "REGULAR INTERESTS" IN A "REAL ESTATE MORTGAGE
INVESTMENT CONDUIT" ("REMIC") AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN
SECTION 860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE
"CODE"), ASSUMING COMPLIANCE WITH THE REMIC PROVISIONS OF THE CODE.
THIS CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND,
NOTWITHSTANDING REFERENCES HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY
PERSON IS REPRESENTED HEREBY.
NEITHER THIS CERTIFICATE NOR THE UNDERLYING MORTGAGE LOANS ARE
INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION OR ANY OTHER GOVERNMENTAL AGENCY.
This Certificate is one of a Class of duly-authorized Certificates
designated as Accredited Mortgage Loan Trust 1996-1, Mortgage Loan Asset-Backed
Certificates, Class A-1 Certificates (the "Class A-1 Certificates") and issued
under and subject to the terms, provisions and conditions of the Pooling and
Servicing Agreement, to which Pooling and Servicing Agreement the Owner of this
Certificate by virtue of acceptance hereof assents and by which such Owner is
bound. Also issued under the Pooling and Servicing Agreement are (i) the Class
BI-S Certificates, together with the Class A-1 Certificates, referred to as the
"Group I Certificates", (ii) the Class A-2 Certificates and the Class BII-S
Certificates, together referred to as the "Group II Certificates and (iii) Class
RS Certificates; all such Certificates are collectively referred to herein as
the "Certificates."
Terms capitalized herein and not otherwise defined herein shall have
the respective meanings set forth in the Pooling and Servicing Agreement.
On the 25th day of each month, or, if such day is not a Business
Day, then the next succeeding Business Day (each such day being a "Distribution
Date") commencing October 25, 1996, the Owners of the Class A-1 Certificates as
of the close of business on the last business day of the calendar month
immediately preceding the calendar month in which such Distribution Date occurs
(the "Record Date") will be entitled to receive the Class A-1 Distribution
Amount relating to such Distribution Date. Distributions will be made in
immediately available funds to such Owners, by wire transfer or otherwise, to
the account of an Owner at a domestic bank or other entity having appropriate
facilities therefor, if such Owner has so notified the Trustee at least five
business days prior to the related record date, or by check mailed to the
address of the person entitled thereto as it appears on the Register.
A-1-3
<PAGE>
Each Owner of record of a Class A-1 Certificate will be entitled to
receive such Owner's Percentage Interest in the amounts distributed on such
Distribution Date to the Owners of the Class A-1 Certificates. The Percentage
Interest of each Class A-1 Certificate as of any date of determination will be
equal to the percentage obtained by dividing the Original Principal Amount set
forth on such Class A-1 Certificate by $14,073,000.
Pursuant to the Certificate Insurance Policy, the Certificate
Insurer is required, to the extent of any insufficiency in Total Available Funds
for Group I, to make Insured Payments available to the Trustee necessary to
distribute the full amount of the Insured Distribution Amount for Group I on
each Distribution Date.
Upon receipt of amounts under the Certificate Insurance Policy on
behalf of the Owners of the Class A-1 Certificates, the Trustee shall distribute
in accordance with the Pooling and Servicing Agreement to the Owners of the
Class A-1 Certificates any portion thereof to which such Owners may be entitled.
The Trustee is required to duly and punctually pay distributions
with respect to this Certificate in accordance with the terms hereof and the
Pooling and Servicing Agreement. Amounts properly withheld under the Code or
applicable to any Owner shall be considered as having been paid by the Trustee
to such Owner for all purposes of the Pooling and Servicing Agreement.
The Mortgage Loans will be serviced by the Master Servicer pursuant
to the Pooling and Servicing Agreement. The Pooling and Servicing Agreement
permits the Master Servicer to enter into Subservicing Agreements with certain
institutions eligible for appointment as Subservicers for the servicing and
administration of certain Mortgage Loans. No appointment of any Subservicer
shall release the Master Servicer from any of its obligations under the Pooling
and Servicing Agreement.
This Certificate does not represent a deposit or other obligation
of, or an interest in, nor are the underlying Mortgage Loans insured or
guaranteed by, Accredited Home Lenders, Inc., any subservicer, the Trustee or
any of their respective subsidiaries and affiliates and are not insured or
guaranteed by the Federal Deposit Insurance Corporation, the Government National
Mortgage Association, or any other governmental agency. This Certificate is
limited in right of payment to certain collections and recoveries relating to
the Mortgage Loans in Group I and amounts on deposit in the Accounts (except as
otherwise provided in the Pooling and Servicing Agreement) and payments received
by the Trustee pursuant to the Certificate Insurance Policy, all as more
A-1-4
<PAGE>
specifically set forth hereinabove and in the Pooling and Servicing Agreement.
No Owner shall have any right to institute any proceeding, judicial
or otherwise, with respect to the Pooling and Servicing Agreement, or for the
appointment of a receiver or trustee, or for any other remedy under the Pooling
and Servicing Agreement except in compliance with the terms hereof.
Notwithstanding any other provisions in the Pooling and Servicing
Agreement, the Owner of this Certificate shall have the right which is absolute
and unconditional to receive distributions to the extent provided in the Pooling
and Servicing Agreement with respect to such Certificate or to institute suit
for the enforcement of this such distribution, and such right shall not be
impaired without the consent of such Owner.
The Pooling and Servicing Agreement provides that the obligations
created thereby will terminate upon the earlier of (i) the payment to the Owners
of all Certificates from amounts other than those available under the
Certificate Insurance Policy of all amounts held by the Trustee and required to
be paid to such Owners pursuant to the Pooling and Servicing Agreement upon the
later to occur of (a) the final payment or other liquidation (or any advance
made with respect thereto) of the last Mortgage Loan in the Trust or (b) the
disposition of all property acquired in respect of any Mortgage Loan remaining
in the Trust or (ii) at any time when a Qualified Liquidation of the Trust is
effected pursuant to the Pooling and Servicing Agreement.
The Pooling and Servicing Agreement additionally provides that (i)
the Owners of a majority percentage interest of the Class R Certificates or the
Certificate Insurer may, at its option, purchase from the Trust all (but not
fewer than all) remaining Mortgage Loans and other property then constituting
the Trust, and thereby effect early retirement of the Class A Certificates, on
any Remittance Date when the aggregate outstanding Loan Balances of the Mortgage
Loans in the Trust Estate is 10% or less of the sum of the original aggregate
Loan Balance of the Mortgage Loans in the Trust Estate as of the Cut-Off Date
and (ii) under certain circumstances relating to the qualification of the Trust
as a REMIC under the Code the Mortgage Loans may be sold, thereby affecting the
early retirement of the Class A-1 Certificates.
The Trustee shall give written notice of termination of the Pooling
and Servicing Agreement to each Owner in the manner set forth therein.
A-1-5
<PAGE>
The Owners of a majority of the Percentage Interests represented by
the Class A-1 Certificates, upon compliance with the requirements set forth in
the Pooling and Servicing Agreement, have the right, with the consent of the
Certificate Insurer, to exercise any trust or power set forth in the Pooling and
Servicing Agreement with respect to the Certificates or the Trust.
As provided in the Pooling and Servicing Agreement and subject to
certain limitations therein set forth and referred to on the face hereof, the
transfer of this Certificate is registrable in the Register upon surrender of
this Certificate for registration of transfer at the office designated as the
location of the Register, and thereupon one or more new Certificates of like
Class, tenor and a like Percentage Interest will be issued to the designated
transferee or transferees.
The Trustee is required to furnish certain information on each
Distribution Date to the Owner of this Certificate, as more fully described in
the Pooling and Servicing Agreement.
The Class A-1 Certificates are issuable only as registered
Certificates in denominations of $1,000 original principal amount and integral
multiples of $1,000 (except for one odd Certificate). As provided in the Pooling
and Servicing Agreement and subject to certain limitations therein set forth,
Class A-1 Certificates are exchangeable for new Class A-1 Certificates of
authorized denominations evidencing the same aggregate principal amount.
The Trustee and any agent of the Trustee may treat the Person in
whose name this Certificate is registered as the owner hereof for all purposes,
and neither the Trustee or any such agent shall be affected by notice to the
contrary.
A-1-6
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be
duly executed on behalf of the Trust.
BANKERS TRUST COMPANY,
as Trustee
By:_________________________
Name:
Title:
Trustee Authentication
BANKERS TRUST COMPANY,
as Trustee
By:______________________
Name:
Title:
A-1-7
<PAGE>
EXHIBIT A-2
FORM OF CLASS A-2 CERTIFICATES
ACCREDITED MORTGAGE LOAN TRUST 1996-1
CLASS A-2 CERTIFICATE
AND RELATED
RIGHT TO RECEIVE SUPPLEMENTAL INTEREST PAYMENTS
Comprised of (i) a certificate representing Certain
Interests Relating to a Pool of Mortgage Loans in Group II,
and (ii) the uncertificated right to receive Supplemental
Interest Payments. The Mortgage Loans are serviced by
ACCREDITED HOME LENDERS, INC., as Master Servicer
Unless this certificate and security document (this "Certificate")
is presented by an authorized representative of the Depository Trust Company, a
New York corporation ("DTC"), to Sponsor or its agent for registration of
transfer, exchange, or payment, and any Certificate issued is registered in the
name of Cede & Co. or in such other name as is requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or to such other
entity as is requested by an authorized representative of DTC), ANY TRANSFER,
PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
(This Certificate does not represent an interest in, or an
obligation of, nor are the underlying Mortgage Loans insured or guaranteed by,
Accredited Home Lenders, Inc., Advanta Mortgage Corp. USA, the Trustee or any of
their respective subsidiaries and affiliates. This Certificate is comprised of
(A) a certificate (the "Class A-2 Certificate") representing (i) a fractional
ownership interest in Group II described herein, moneys in certain Accounts
created pursuant to the Pooling and Servicing Agreement and certain other rights
relating thereto and is payable only from amounts received by the Trustee
relating to the Mortgage Loans in Group II held by the Trust and (ii) moneys
received pursuant to the Certificate Insurance Policy and (B) the uncertificated
right to receive Supplemental Interest Payments.)
No.: A-2 September 27, 1996
------------------ ---------
Date CUSIP
$78,048,000 October 25, 2027
- ------------------------- -----------------
Original Principal Amount Final Scheduled
Distribution Date
CEDE & CO.
--------------------------
Registered Owner
A-2-1
<PAGE>
The registered Owner named above is the registered Owner of a
fractional interest in (A) (i) a pool of variable-rate mortgage loans (the
"Mortgage Loans") assigned to a particular mortgage loan group ("Group II")
which has been formed by Accredited Home Lenders, Inc. ("Accredited" or the
"Sponsor"), a California corporation and sold by the Sponsor to Bankers Trust
Company, a New York banking corporation, as trustee (the "Trustee") on behalf of
Accredited Mortgage Loan Trust 1996-1 (the "Trust") pursuant to that certain
Pooling and Servicing Agreement dated as of September 1, 1996 (the "Pooling and
Servicing Agreement") by and among the Sponsor, the Trustee and Accredited, as
Master Servicer (the "Master Servicer"), (ii) such amounts, including Eligible
Investments and the proceeds of payments under the Certificate Insurance Policy,
as from time to time may be held in the related Accounts (except as otherwise
provided in the Pooling and Servicing Agreement), each created pursuant to the
Pooling and Servicing Agreement, (iii) any Property relating to the Mortgage
Loans in Group II, the ownership of which has been effected as a result of
foreclosure or acceptance by the Master Servicer of a deed in lieu of
foreclosure and that has not been withdrawn from the Trust, (iv) any Insurance
Policies relating to the Mortgage Loans in Group II and any rights of the
Sponsor in any Insurance Policies relating to the Mortgage Loans in Group II and
(v) Net Liquidation Proceeds relating to the Mortgage Loans in Group II and (vi)
the Certificate Insurance Policy and (B) the right to receive Supplemental
Interest Payments. The Mortgage Loans in Group II and other amounts and property
enumerated in (A) above are hereinafter referred to as "Group II."
The Original Principal Amount set forth above is equal to the
product of (i) the Percentage Interest represented by this Class A-2 Certificate
and (ii) the aggregate original principal amount of the Class A-2 Certificates
on September 27, 1996 (the "Startup Day"), which aggregate amount as of
September 27, 1996 was $78,048,000. The Owner hereof is entitled to principal
payments on each Distribution Date, as hereinafter described, which will fully
amortize such Original Principal Amount over the period from the date of initial
delivery hereof to the final Distribution Date of the Class A-2 Certificates.
Therefore, the actual outstanding principal amount of this Class A-2
Certificate, on any date subsequent to October 25, 1996 (the first Distribution
Date) will be less than the Original Principal Amount set forth above.
Upon receiving the final distribution hereon, the Owner hereof is
required to send this Class A-2 Certificate to the Trustee. The Pooling and
Servicing Agreement provides that, in any event, upon the making of the final
distribution due on this Certificate, this Class A-2 Certificate shall be
A-2-2
<PAGE>
deemed cancelled for all purposes under the Pooling and Servicing Agreement.
THIS CERTIFICATE IS COMPRISED OF (X) THE CLASS A-2 CERTIFICATE
REPRESENTING AN INTEREST IN A CLASS OF "REGULAR INTERESTS" IN A "REAL ESTATE
MORTGAGE INVESTMENT CONDUIT" ("REMIC") AS THOSE TERMS ARE DEFINED, RESPECTIVELY,
IN SECTION 860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE
"CODE"), ASSUMING COMPLIANCE WITH THE REMIC PROVISIONS OF THE CODE AND (Y) THE
UNCERTIFIED RIGHT TO RECEIVE SUPPLEMENTAL INTEREST PAYMENTS.
THIS CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND,
NOTWITHSTANDING REFERENCES HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY
PERSON IS REPRESENTED HEREBY.
NEITHER THIS CERTIFICATE NOR THE UNDERLYING MORTGAGE LOANS ARE
INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION OR ANY OTHER GOVERNMENTAL AGENCY.
This Class A-2 Certificate is one of a Class of duly-authorized
Certificates designated as Accredited Home Lenders, Inc. Loan Trust 1996-1,
Mortgage Loan Asset-Backed Certificates, Class A-2 Variable Rate Certificates
and issued under and subject to the terms, provisions and conditions of the
Pooling and Servicing Agreement, to which Pooling and Servicing Agreement the
Owner of this Class A-2 Certificate by virtue of acceptance hereof assents and
by which such Owner is bound. Also issued under the Pooling and Servicing
Agreement are (i) the Class BII-S Certificates, together, with the Class A-2
Certificates, referred to as the "Group II Certificates"), (ii) the Class A-1
Certificates, together with the Class BI-S Certificates, together referred to as
the "Group I Certificates" and (iii) the Class RS Certificates; all such
Certificates are collectively referred to herein as the "1996- 1 Trust
Certificates."
Terms capitalized herein and not otherwise defined herein shall have
the respective meanings set forth in the Pooling and Servicing Agreement.
On the 25th day of each month, or, if such day is not a Business
Day, then the next succeeding Business Day (each such day being a "Distribution
Date") commencing October 25, 1996, the Owners of the Class A-2 Certificates as
of the close of business on the last business day of the calendar month
immediately preceding the calendar month in which such Distribution Date occurs
(the "Record Date") will be entitled to receive the Class A-2 Distribution
Amount relating to such Distribution Date, and will be entitled to any payments
due under the related right to receive Supplemental Interest Payments.
Distributions will be made in immediately available
A-2-3
<PAGE>
funds to such Owners, by wire transfer or otherwise, to the account of an Owner
at a domestic bank or other entity having appropriate facilities therefor, if
such Owner has so notified the Trustee at least five business days prior to the
related record date, or by check mailed to the address of the person entitled
thereto as it appears on the Register.
Each Owner of record of a Class A-2 Certificate will be entitled to
receive such Owner's Percentage Interest in the amounts distributed on such
Distribution Date to the Owners of the Class A-2 Certificates, together with
such Owner's Supplemental Interest Payments. The Percentage Interest of each
Class A-2 Certificate as of any date of determination will be equal to the
percentage obtained by dividing the Original Principal Amount set forth on such
Class A-2 Certificate by $78,048,000.
Pursuant to the Certificate Insurance Policy, the Certificate
Insurer is required, to the extent of any insufficiency in Total Available Funds
for Group I, to make Insured Payments available to the Trustee necessary to
distribute the full amount of the Insured Distribution Amount for Group I on
each Distribution Date.
Upon receipt of amounts under the Certificate Insurance Policy on
behalf of the Owners of the Class A-2 Certificates, the Trustee shall distribute
in accordance with the Pooling and Servicing Agreement to the Owners of the
Class A-2 Certificates any portion thereof to which such Owners may be entitled.
The Trustee is required to duly and punctually pay distributions
with respect to this Certificate in accordance with the terms hereof and the
Pooling and Servicing Agreement. Amounts properly withheld under the Code or
applicable to any Owner shall be considered as having been paid by the Trustee
to such Owner for all purposes of the Pooling and Servicing Agreement.
The Mortgage Loans will be serviced by the Master Servicer pursuant
to the Pooling and Servicing Agreement. The Pooling and Servicing Agreement
permits the Master Servicer to enter into Subservicing Agreements with certain
institutions eligible for appointment as Subservicers for the servicing and
administration of certain Mortgage Loans. No appointment of any Subservicer
shall release the Master Servicer from any of its obligations under the Pooling
and Servicing Agreement.
This Certificate does not represent a deposit or other obligation
of, or an interest in, nor are the underlying Mortgage Loans insured or
guaranteed by, Accredited Home Lenders, Inc., any subservicer, the Trustee or
any of their respective subsidiaries and affiliates and are not insured or
A-2-4
<PAGE>
guaranteed by the Federal Deposit Insurance Corporation, the Government National
Mortgage Association, or any other governmental agency. This Class A-2
Certificate is limited in right of payment to certain collections and recoveries
relating to the Mortgage Loans in Group II and amounts on deposit in the
Accounts (except as otherwise provided in the Pooling and Servicing Agreement)
and payments received by the Trustee pursuant to the Certificate Insurance
Policy, all as more specifically set forth hereinabove and in the Pooling and
Servicing Agreement.
No Owner shall have any right to institute any proceeding, judicial
or otherwise, with respect to the Pooling and Servicing Agreement, or for the
appointment of a receiver or trustee, or for any other remedy under the Pooling
and Servicing Agreement except in compliance with the terms hereof.
Notwithstanding any other provisions in the Pooling and Servicing
Agreement, the Owner of this Certificate shall have the right which is absolute
and unconditional to receive distributions to the extent provided in the Pooling
and Servicing Agreement with respect to this Certificate or to institute suit
for the enforcement of this such distribution, and such right shall not be
impaired without the consent of such Owner.
The Pooling and Servicing Agreement provides that the obligations
created thereby will terminate upon the earlier of (i) the payment to the Owners
of all Certificates from amounts other than those available under the
Certificate Insurance Policy of all amounts held by the Trustee and required to
be paid to such Owners pursuant to the Pooling and Servicing Agreement upon the
later to occur of (a) the final payment or other liquidation (or any advance
made with respect thereto) of the last Mortgage Loan in the Trust or (b) the
disposition of all property acquired in respect of any Mortgage Loan remaining
in the Trust or (ii) at any time when a Qualified Liquidation of the Trust is
effected pursuant to the Pooling and Servicing Agreement.
The Pooling and Servicing Agreement additionally provides that (i)
the Owners of a majority percentage interest of the Class R Certificates or the
Certificate Insurer may, at its option, purchase from the Trust all (but not
fewer than all) remaining Mortgage Loans and other property then constituting
the Trust, and thereby effect early retirement of the Class A Certificates, on
any Remittance Date when the aggregate outstanding Loan Balances of the Mortgage
Loans in the Trust Estate is 10% or less of the sum of the original aggregate
Loan Balance of the Mortgage Loans in the Trust Estate as of the Cut-Off Date
and (ii) under certain circumstances relating to the qualification of the Trust
as a
A-2-5
<PAGE>
REMIC under the Code the Mortgage Loans may be sold, thereby affecting the early
retirement of the Class A-2 Certificates.
The Trustee shall give written notice of termination of the Pooling
and Servicing Agreement to each Owner in the manner set forth therein.
The Owners of a majority of the Percentage Interests represented by
the Class A-2 Certificates, upon compliance with the requirements set forth in
the Pooling and Servicing Agreement, have the right, with the consent of the
Certificate Insurer, to exercise any trust or power set forth in the Pooling and
Servicing Agreement with respect to the Certificates or the Trust.
As provided in the Pooling and Servicing Agreement and subject to
certain limitations therein set forth and referred to on the face hereof, the
transfer of this Certificate is registrable in the Register upon surrender of
this Certificate for registration of transfer at the office designated as the
location of the Register, and thereupon one or more new Certificates of like
Class, tenor and a like Percentage Interest will be issued to the designated
transferee or transferees.
The Trustee is required to furnish certain information on each
Distribution Date to the Owner of this Certificate, as more fully described in
the Pooling and Servicing Agreement.
The Class A-2 Certificates are issuable only as registered
Certificates in denominations of $1,000 original principal amount and integral
multiples of $1,000 (except for one odd Class A-2 Certificate). As provided in
the Pooling and Servicing Agreement and subject to certain limitations therein
set forth, Class A-2 Certificates are exchangeable for new Class A-2 of
authorized denominations evidencing the same aggregate principal amount.
The Trustee and any agent of the Trustee may treat the Person in
whose name this Certificate is registered as the owner hereof for all purposes,
and neither the Trustee or any such agent shall be affected by notice to the
contrary.
A-2-6
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be
duly executed on behalf of the Trust.
BANKERS TRUST COMPANY,
as Trustee
By:_________________________
Name:
Title:
Trustee Authentication
BANKERS TRUST COMPANY,
as Trustee
By:______________________
Name:
Title:
A-2-7
<PAGE>
EXHIBIT B-1
FORM OF CLASS BI-S CERTIFICATE
SOLELY FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS
AN INTEREST IN A GRANTOR TRUST WHICH HOLDS AMONG OTHER THINGS CERTAIN "REGULAR
INTERESTS" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT" ("REMIC") AS THOSE
TERMS ARE DEFINED, RESPECTIVELY, IN SECTION 860G AND 860D OF THE INTERNAL
REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), ASSUMING COMPLIANCE WITH THE
REMIC PROVISIONS OF THE CODE.
NEITHER THIS CERTIFICATE NOR THE UNDERLYING MORTGAGE LOANS ARE
INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION OR ANY OTHER GOVERNMENTAL AGENCY.
THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"). ANY RESALE OR TRANSFER OF THIS CERTIFICATE WITHOUT
REGISTRATION THEREOF UNDER THE ACT MAY BE MADE ONLY IN A TRANSACTION EXEMPT FROM
THE REGISTRATION REQUIREMENTS OF THE ACT AND IN ACCORDANCE WITH THE PROVISIONS
OF SECTION 5.8 OF THE POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN.
TRANSFER OF THIS CLASS BI-S CERTIFICATE IS RESTRICTED AS SET FORTH
IN THE POOLING AND SERVICING AGREEMENT.
SUPPLEMENTAL INTEREST PAYMENT ACCOUNT
RELATING TO
ACCREDITED MORTGAGE LOAN TRUST 1996-1
CLASS BI-S
This Certificate does not represent an interest in, or an obligation
of, nor are the underlying Mortgage Loans insured or guaranteed by Accredited
Home Lenders, the Trustee, any Subservicer or any Originator or any of their
respective subsidiaries and affiliates. This Certificate represents a fractional
ownership interest in certain excess moneys of the Supplemental Interest Payment
Account described herein.
No: BI-S Date: September 27, 1996
Percentage Interest: ____%
Final Scheduled Distribution Date:
October 25, 2027
----------------
__________________________________
Registered Owner
B-1-1
<PAGE>
The registered Owner named above is the registered Owner of a
fractional interest in certain excess moneys of the Group I Supplemental
Interest Payment Account pursuant to that certain Pooling and Servicing
Agreement dated as of September 1, 1996 (the "Pooling and Servicing Agreement")
by and among Bankers Trust Company, as the Trustee (the "Trustee") and
Accredited Home Lenders, Inc., as Master Servicer (the "Master Servicer") and as
Sponsor (the "Sponsor").
This Certificate is one of a Class of duly authorized Certificates
designated as Accredited Mortgage Loan Trust 1996-1, Class BI-S Certificates
(the "Class BI-S Certificates") and issued under and subject to the terms,
provisions and conditions of the Pooling and Servicing Agreement, to which
Pooling and Servicing Agreement the Owner of this Certificate by virtue of
acceptance hereof assents and by which such Owner is bound.
Terms capitalized herein and not otherwise defined herein shall have
the respective meanings set forth in the Pooling and Servicing Agreement.
On the 25th day of each month or, if such day is not a Business Day,
then the next succeeding Business Day (each such day being a "Distribution
Date"), commencing October 25, 1996, to the persons in whose names the Class
BI-S Certificates are registered at the close of business on the last business
day of the calendar month immediately preceding the calendar month in which such
Distribution Date occurs (the "Record Date"), the Trustee will distribute to
each Owner of the Class BI-S Certificates such Owner's Percentage Interest
multiplied by any amounts then available to be distributed to the Owners of the
Class BI-S Certificates. As provided in Section 6.1 of the Pooling and Servicing
Agreement, distributions will be made in immediately available funds, by wire
transfer or otherwise, to the account of such Owner at a domestic bank or other
entity having appropriate facilities therefor, if such Owner has so notified the
Trustee at least five business days prior to the related record date, or by
check mailed to the address of the person entitled thereto as it appears on the
Register.
Upon receiving the final distribution hereon, the Owner hereof is
required to send this Certificate to the Trustee. The Pooling and Servicing
Agreement provides that, in any event, upon the making of the final distribution
due on this Certificate, this Certificate shall be deemed cancelled for all
purposes under the Pooling and Servicing Agreement.
The Trustee is required to duly and punctually pay distributions
with respect to this Certificate in accordance with the terms hereof and the
Pooling and Servicing Agreement. Amounts properly withheld under the Code or
applicable state
B-1-2
<PAGE>
or local law by any person from a distribution to any Owner shall be considered
as having been paid by the Trustee to such Owner for all purposes of the Pooling
and Servicing Agreement.
The Master Servicer, pursuant to the Pooling and Servicing Agreement
will service the Mortgage Loans. The Pooling and Servicing Agreement permits the
Master Servicer to enter into Subservicing Agreements with certain institutions
eligible for appointments as Subservicers for the servicing and administration
of the Mortgage Loans. No appointment of any Subservicer shall release the
Master Servicer from any of its obligations under the Pooling and Servicing
Agreement.
This Certificate does not represent a deposit or other obligation
of, or an interest in, nor are the underlying Mortgage Loans insured or
guaranteed by, Accredited Home Lenders, Inc., the Trustee, any Subservicer or
any of their subsidiaries and affiliates and are not insured or guaranteed by
the Federal Deposit Insurance Corporation, the Government National Mortgage
Association, or any other governmental agency. This Certificate is limited in
right of payment to certain collections and recoveries relating to the Mortgage
Loans, all as more specifically set forth hereinabove and in the Pooling and
Servicing Agreement.
No Owner shall have the right to institute any proceeding, judicial
or otherwise, with respect to the Pooling and Servicing Agreement, or for the
appointment of a receiver or trustee, or for any other remedy under the Pooling
and Servicing Agreement except in compliance with the terms thereof.
Notwithstanding any other provisions in the Pooling and Servicing
Agreement, the Owner of any Certificate shall have the right which is absolute
and unconditional to receive distributions to the extent provided in the Pooling
and Servicing Agreement with respect to such Certificate or to institute suit
for the enforcement of any such distribution, and such right shall not be
impaired without the consent of such Owner.
The Trustee shall give written notice of termination of the Pooling
and Servicing Agreement to each Owner in the manner set forth therein.
As provided in the Pooling and Servicing Agreement and subject to
certain limitations therein set forth and referred to on the face hereof, the
transfer of this Certificate is registrable in the Register upon surrender of
this Certificate for registration of transfer at the office designated as the
location of the Register duly endorsed by, or accompanied by a written
instrument of transfer in the form required by the Pooling and Servicing
Agreement duly executed
B-1-3
<PAGE>
by, the Owner hereof or his attorney duly authorized in writing, and thereupon
one or more new Certificates of like Class, tenor and a like Percentage Interest
in the Trust Estate will be issued to the designated transferee or transferees.
The Trustee is required to furnish certain information on each
Distribution Date to the Owner of this Certificate, as more fully described in
the Pooling and Servicing Agreement.
The Class BI-S Certificates are issuable only as registered
Certificates. As provided in the Pooling and Servicing Agreement and subject to
certain limitations therein set forth, Class BI-S Certificates are exchangeable
for new Class BI-S Certificates evidencing the same Percentage Interest as the
Class BI-S Certificates exchanged.
No service charge will be made for any such registration of transfer
or exchange, but the Trustee may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
The Trustee and any agent of the Trustee may treat the Person in
whose name this Certificate is registered as the owner hereof for all purposes,
and neither the Trustee or any such agent shall be affected by notice to the
contrary.
B-1-4
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be
duly executed on behalf of the Trust.
BANKERS TRUST COMPANY,
as Trustee,
By:______________________
Name:
Title:
Trustee's Authentication
BANKERS TRUST COMPANY,
as Trustee
By:___________________________________
Name:
Title:
B-1-5
<PAGE>
EXHIBIT B-2
FORM OF CLASS BII-S CERTIFICATE
SOLELY FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS
AN INTEREST IN A GRANTOR TRUST WHICH HOLDS AMONG OTHER THINGS CERTAIN "REGULAR
INTERESTS" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT" ("REMIC") AS THOSE
TERMS ARE DEFINED, RESPECTIVELY, IN SECTION 860G AND 860D OF THE INTERNAL
REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), ASSUMING COMPLIANCE WITH THE
REMIC PROVISIONS OF THE CODE.
NEITHER THIS CERTIFICATE NOR THE UNDERLYING MORTGAGE LOANS ARE
INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION OR ANY OTHER GOVERNMENTAL AGENCY.
THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"). ANY RESALE OR TRANSFER OF THIS CERTIFICATE WITHOUT
REGISTRATION THEREOF UNDER THE ACT MAY BE MADE ONLY IN A TRANSACTION EXEMPT FROM
THE REGISTRATION REQUIREMENTS OF THE ACT AND IN ACCORDANCE WITH THE PROVISIONS
OF SECTION 5.8 OF THE POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN.
TRANSFER OF THIS CLASS BI-S CERTIFICATE IS RESTRICTED AS SET FORTH
IN THE POOLING AND SERVICING AGREEMENT.
SUPPLEMENTAL INTEREST PAYMENT ACCOUNT
RELATING TO
ACCREDITED MORTGAGE LOAN TRUST 1996-1
CLASS BII-S
This Certificate does not represent an interest in, or an obligation
of, nor are the underlying mortgage loans insured or guaranteed by, Accredited
Home Lenders, Inc., the Trustee, any Subservicer, any Originator or any of their
respective subsidiaries and affiliates. This Certificate represents a fractional
ownership interest in certain excess moneys of the Supplemental Interest Payment
Account described herein.
No: BII-S Date: October 27, 1996
Percentage Interest: ____%
Final Scheduled Distribution Date:
October 25, 2027
-----------------
_______________________________
Registered Owner
B-2-1
<PAGE>
The registered Owner named above is the registered Owner of a
fractional interest in certain excess moneys of the Group II Supplemental
Interest Payment Account pursuant to that certain Pooling and Servicing
Agreement dated as of September 1, 1996 (the "Pooling and Servicing Agreement")
by and among the Bankers Trust Company, as the Trustee (the "Trustee") and
Accredited Home Lenders, Inc., as Master Servicer (the "Master Servicer") and
the Sponsor.
This Certificate is one of a Class of duly authorized Certificates
designated as Accredited Mortgage Loan Trust 1996-1, Class BII-S Certificates
(the Class BII-S Certificates") and issued under and subject to the terms,
provisions, and conditions of the Pooling and Servicing Agreement, to which
Pooling and Servicing Agreement the Owner of this Certificate by virtue of
acceptance hereof assents and by which such Owner is bound.
Terms capitalized herein and to otherwise defined herein shall have
the respective meanings set forth in the Pooling and Servicing Agreement.
On the 25th day of each month or, if such day is not a Business Day,
then the next succeeding Business Day (each such day being a "Distribution
Date"), commencing October 25, 1996, to the persons in whose names the Class
BII-S Certificates are registered at the close of business on the last business
day of the calendar month immediately preceding the calendar month in which such
Distribution Date occurs (the "Record Date"), the Trustee will distribute to
each Owner of the Class BII-S Certificates such Owner's Percentage Interest
multiplied by any amounts then available to be distributed to the Owners of the
Class BII-S Certificates. As provided in Section 6.1 of the Pooling and
Servicing Agreement, distributions will be made in immediately available funds,
by wire transfer or otherwise, to the account of such Owner at a domestic bank
or other entity having appropriate facilities therefor, if such Owner has so
notified the Trustee at least five business days prior to the related record
date, or by check mailed to the address of the person entitled thereto as it
appears on the Register.
Upon receiving the final distribution hereon, the Owner hereof is
required to send this Certificate to the Trustee. The Pooling and Servicing
Agreement provides that, in any event, upon the making of the final distribution
due on this Certificate, this Certificate shall be deemed cancelled for all
purposes under the Pooling and Servicing Agreement.
The Trustee is required to duly and punctually pay
distributions with respect to this Certificate in accordance
B-2-2
<PAGE>
with the terms hereof and the Pooling and Servicing Agreement. Amounts properly
withheld under the Code or applicable state or local law by any person from a
distribution to any Owner shall be considered as having been paid by the Trustee
to such Owner for all purposes of the Pooling and Servicing Agreement.
The Master Servicer, pursuant to the Pooling and Servicing Agreement
will service the Mortgage Loans. The Pooling and Servicing Agreement permits the
Master Servicer to enter into Subservicing Agreements with certain institutions
eligible for appointments as Subservicers for the servicing and administration
of the Mortgage Loans. No appointment of any Subservicer shall release the
Master Servicer from any of its obligations under the Pooling and Servicing
Agreement.
This Certificate does not represent a deposit or other obligation
of, or an interest in, nor are the underlying Mortgage Loans insured or
guaranteed by, Accredited Home Lenders, Inc., the Trustee, any Subservicer or
any of their respective subsidiaries and affiliates and are not insured or
guaranteed by the Federal Deposit Insurance Corporation, the Government National
Mortgage Association, or any other governmental agency. This Certificate is
limited in right of payment to certain collections and recoveries relating to
the Mortgage Loans, all as more specifically set forth hereinabove and in the
Pooling and Servicing Agreement.
No Owner shall have the right to institute any proceeding, judicial
or otherwise, with respect to the Pooling and Servicing Agreement, or for the
appointment of a receiver or trustee, or for any other remedy under the Pooling
and Servicing Agreement except in compliance with the terms thereof.
Notwithstanding any other provisions in the Pooling and Servicing
Agreement, the Owner of any Certificate shall have the right which is absolute
and unconditional to receive distributions to the extent provided in the Pooling
and Servicing Agreement with respect to such Certificate or to institute suit
for the enforcement of any such distribution, and such right shall not be
impaired without the consent of such Owner.
The Trustee shall give written notice of termination of the Pooling
and Servicing Agreement to each Owner in the manner set forth therein.
As provided in the Pooling and Servicing Agreement and subject to
certain limitations therein set forth and referred to on the face hereof, the
transfer of this Certificate is registrable in the Register upon surrender of
this Certificate for registration of transfer at the office designated as the
location of the Register duly endorsed by,
B-2-3
<PAGE>
or accompanied by a written instrument of transfer in the form required by he
Pooling and Servicing Agreement duly executed by, the Owner hereof or his
attorney duly authorized in writing, and thereupon one or more new Certificates
of like Class, tenor and a like Percentage Interest in the Trust Estate will be
issued to the designated transferee or transferees.
The Trustee is required to furnish certain information on each
Distribution Date to the Owner of this Certificate, as more fully described in
the Pooling and Servicing Agreement.
The Class BII-S Certificates are issuable only as registered
Certificates. As provided in the Pooling and Servicing Agreement and subject to
certain limitations therein set forth, Class BII-S Certificates are exchangeable
for new Class BII-S Certificates evidencing the same Percentage Interest as the
Class BII-S Certificates exchanged.
No service charge will be made for any such registration of transfer
or exchange, but the Trustee may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
The Trustee and any agent of the Trustee may treat the Person in
whose name this Certificate is registered as the owner hereof for all purposes,
and neither the Trustee or any such agent shall be affected by notice to the
contrary.
B-2-4
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be
duly executed on behalf of the Trust.
BANKERS TRUST COMPANY,
as Trustee,
By:______________________
Name:
Title:
Trustee's Authentication
BANKERS TRUST COMPANY,
as Trustee
By:___________________________________
Name:
Title:
B-2-5
<PAGE>
EXHIBIT B-3
FORM OF RS CERTIFICATE
SOLELY FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS
AN INTEREST IN A GRANTOR TRUST WHICH HOLDS AMONG OTHER THINGS THE ONLY "RESIDUAL
INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT" ("REMIC") AS THOSE
TERMS ARE DEFINED, RESPECTIVELY, IN SECTION 860G and 860d OF THE INTERNAL
REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), ASSUMING COMPLIANCE WITH THE
REMIC PROVISIONS OF THE CODE.
THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"). ANY RESALE OR TRANSFER OF THIS CERTIFICATE WITHOUT
REGISTRATION THEREOF UNDER THE ACT MAY BE MADE ONLY IN A TRANSACTION EXEMPT FROM
THE REGISTRATION REQUIREMENTS OF THE ACT AND IN ACCORDANCE WITH THE PROVISIONS
OF SECTION 5.8 OF THE POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN.
TRANSFER OF THIS CLASS RS CERTIFICATE IS RESTRICTED AS SET FORTH IN
THE POOLING AND SERVICING AGREEMENT. NO TRANSFER OF THIS CLASS RS CERTIFICATE
MAY BE MADE TO A "DISQUALIFIED ORGANIZATION" AS DEFINED IN SECTION 860(e)(5) OF
THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"). SUCH TERM INCLUDES
THE UNITED STATES, ANY STATE OR POLITICAL SUBDIVISION THEREOF, ANY FOREIGN
GOVERNMENT, ANY INTERNATIONAL ORGANIZATION, ANY AGENCY OR INSTRUMENTALITY OF ANY
OF THE FOREGOING (OTHER THAN CERTAIN TAXABLE INSTRUMENTALITIES), ANY COOPERATIVE
ORGANIZATION FURNISHING ELECTRIC ENERGY OR PROVIDING THEREOF SERVICE TO PERSONS
IN RURAL AREAS, OR ANY ORGANIZATION (OTHER THAN A FARMERS' COOPERATIVE) THAT IS
EXEMPT FROM FEDERAL INCOME TAX UNLESS SUCH ORGANIZATION IS SUBJECT TO THE TAX ON
UNRELATED BUSINESS INCOME. NO TRANSFER OF THIS CLASS RS CERTIFICATE WILL BE
REGISTERED BY THE TRUSTEE UNLESS THE PROPOSED TRANSFEREE HAS DELIVERED AN
AFFIDAVIT AFFIRMING, AMONG OTHER THINGS, THAT THE PROPOSED TRANSFEREE IS NOT A
DISQUALIFIED ORGANIZATION AND IS NOT ACQUIRING THE CLASS RS CERTIFICATE FOR THE
ACCOUNT OF A DISQUALIFIED ORGANIZATION. A COPY OF THE FORM OF AFFIDAVIT REQUIRED
OF EACH PROPOSED TRANSFEREE IS ON FILE AND AVAILABLE FROM THE TRUSTEE.
A TRANSFER IN VIOLATION OF THE APPLICABLE RESTRICTIONS MAY GIVE RISE
TO A SUBSTANTIAL TAX UPON THE TRANSFEROR OR, IN CERTAIN CASES, UPON AN AGENT
ACTING FOR THE TRANSFEREE. A PASS-THRU ENTITY THAT HOLDS THIS CLASS RS
CERTIFICATE AND THAT HAS A DISQUALIFIED ORGANIZATION AS A RECORD OWNER IN ANY
TAXABLE YEAR GENERALLY WILL BE SUBJECT TO A TAX FOR EACH SUCH YEAR EQUAL TO THE
PRODUCT OF (A) THE AMOUNT OF EXCESS INCLUSIONS WITH RESPECT TO THE PORTION OF
THIS CERTIFICATE OWNED THROUGH SUCH PASS-THRU ENTITY BY SUCH
B-3-1
<PAGE>
DISQUALIFIED ORGANIZATION AND (B) THE HIGHEST MARGINAL FEDERAL TAX RATE ON
CORPORATIONS. FOR PURPOSES OF THE PRECEDING SENTENCE, THE TERM "PASS-THRU"
ENTITY INCLUDES REGULATED INVESTMENT COMPANIES, REAL ESTATE INVESTMENT TRUSTS,
COMMON TRUST FUNDS, PARTNERSHIPS, TRUSTS, ESTATES, COOPERATIVES TO WHICH PART I
OF SUBCHAPTER 1T OF THE CODE APPLIES AND, EXCEPT AS PROVIDED IN REGULATIONS,
NOMINEES.
NEITHER THIS CERTIFICATE NOR THE UNDERLYING MORTGAGE LOANS ARE
INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION OR ANY OTHER GOVERNMENTAL AGENCY.
SUPPLEMENTAL INTEREST PAYMENT ACCOUNT
RELATING TO
ACCREDITED MORTGAGE LOAN TRUST 1996-1
CLASS RS
This Certificate does not represent an interest in, or an obligation
of, nor are the underlying Mortgage Loans insured or guaranteed by, Accredited
Home Lenders, Inc., or any of their subsidiaries and affiliates.
No: RS Date: September 27, 1996
Percentage Interest: ____% October 25, 2027
------------------
Final Scheduled
Distribution Date
________________________________________________________________________________
Registered Owner
This Certificate is one of a Class of duly authorized Certificates
designated as Accredited Mortgage Loan Trust 1996-1, Class RS Certificates (the
"Class RS Certificates") and issued under and subject to the terms, provisions
and conditions of the Pooling and Servicing Agreement dated as of September 1,
1996 (the "Pooling and Servicing Agreement") by and among the Sponsor, the
Trustee and Accredited Home Lenders, Inc., as Master Servicer (the "Master
Servicer") and as Sponsor (the "Sponsor"), to which Pooling and Servicing
Agreement the Owner of this Certificate by virtue of acceptance hereof assents
and by which such Owner is bound.
Terms capitalized herein and not otherwise defined herein shall have
the respective meanings set forth in the Pooling and Servicing Agreement.
B-3-2
<PAGE>
The Owners of the Class RS Certificates, by virtue of their
ownership, shall be deemed to be the Owners of the Class R Certificates issued
under the Pooling and Servicing Agreement and held by the Supplemental Interest
Trust.
The Trustee shall give written notice of termination of the Pooling
and Servicing Agreement to each Owner in the manner set forth therein.
As provided in the Pooling and Servicing Agreement and subject to
certain limitations therein set forth and referred to on the face hereof, the
transfer of this Certificate is registrable in the Register upon surrender of
this Certificate for registration of transfer at the office designated as the
location of the Register duly endorsed by, or accompanied by a written
instrument of transfer in the form required by the Pooling and Servicing
Agreement duly executed by, the Owner hereof or his attorney duly authorized in
writing, and thereupon one or more new Certificates of like Class, tenor and a
like aggregate fractional undivided interest in the Trust Estate will be issued
to the designated transferee or transferees.
The Trustee is required to furnish certain information on each
Distribution Date to the Owner of this Certificate, as more fully described in
the Pooling and Servicing Agreement.
The Class RS Certificates are issuable only as registered
Certificates. As provided in the Pooling and Servicing Agreement and subject to
certain limitations therein set forth, Class RS Certificates are exchangeable
for new Class RS Certificates evidencing the same Percentage Interest as the
Class RS Certificates exchanged.
No service charge will be made for any such registration of transfer
or exchange, but the Trustee may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
The Trustee and any agent of the Trustee may treat the Person in
whose name this Certificate is registered as the owner hereof for all purposes,
and neither the Trustee or any such agent shall be affected by notice to the
contrary.
B-3-3
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be
duly executed, pursuant to the provisions of the Pooling and Servicing
Agreement.
BANKERS TRUST COMPANY,
as Trustee
By:___________________________
Name:
Title:
Trustee's Authentication
BANKERS TRUST COMPANY,
as Trustee
By:___________________
Name:
Title:
B-3-4
<PAGE>
EXHIBIT C
FORM OF CONTENTS OF MORTGAGE LOAN FILE
(a) the original Note and any riders thereto or, if any original
Note has been lost or destroyed, a lost Note affidavit with respect thereto,
endorsed by the originator (or most recent payee) thereof "Pay to the order of
___________________________, without recourse";
(b) the originals of all intervening assignments of Mortgage,
showing a complete chain of assignment from origination to assignment to the
last endorsee, with evidence of recording thereon (to be included in the
Mortgage File when available in accordance with the customary procedures of the
relevant jurisdiction relating to items in the process of being recorded and
until any such original has been returned from the recording office a copy
thereof, certified by either an Authorized Officer of the Sponsor, a title
company or an escrow company) and an assignment of Mortgage from the last
endorsee in blank, in recordable form;
(c) the originals of all guarantees executed in
connection with such Mortgage Loan, if any;
(d) all assumption, modification, consolidation or extension
agreements, if any, with evidence of recording thereon (to be included in the
Mortgage File when available in accordance with the customary procedures of the
relevant jurisdiction relating to items in the process of being recorded and
until any such original has been returned from the recording office, a copy
thereof, certified by either an Authorized Officer of the Sponsor, a title
company or an escrow company), if any;
(e) either (i) the original Mortgage with evidence of recording
thereon (to be included in the Mortgage File when available in accordance with
the customary procedures of the relevant jurisdiction relating to items in the
process of being recorded and until any such original has been returned from the
recording office, a copy thereof, certified by either an Authorized Officer of
the Sponsor, a title company or an escrow company), or (ii) a copy of the
Mortgage certified by the public recording office in those instances where the
original recorded Mortgage has been lost or has been retained by the public
recording office; and
(f) the original lender's title insurance policy issued on the date
of origination of the Mortgage Loan; provided, however, that pending the
issuance of the final
C-1
<PAGE>
title policy, the Sponsor shall deliver the preliminary title report, title
commitment or title binder to insure same.
C-2
<PAGE>
EXHIBIT D
FORM OF CERTIFICATE RE: PREPAID LOANS
I, ____________, [officer] of Accredited Home Lenders, Inc., a
__________ corporation, as sponsor (the "Sponsor"), hereby certify that between
the "Cut-Off Date" (as defined in the Pooling and Servicing Agreement dated as
of September 1, 1996 among the Sponsor, master servicer and Bankers Trust
Company, a New York banking corporation, as trustee) and the date hereof the
following schedule of "Mortgage Loans" (each as defined in the Pooling and
Servicing Agreement) has been prepaid in full.
Dated:
By:___________________________
Name:______________________
Title:_____________________
D-1
<PAGE>
EXHIBIT E
FORM OF TRUSTEE'S ACKNOWLEDGMENT OF RECEIPT
Bankers Trust Company, a New York banking corporation in its
capacity as trustee (the "Trustee") under that certain Pooling and Servicing
Agreement dated as of September 1, 1996 (the "Pooling and Servicing Agreement")
by and among Accredited Home Lenders, Inc., as sponsor (the "Sponsor"), and as
master servicer, and the Trustee, hereby acknowledges receipt of the items
delivered to it by the Sponsor with respect to the Mortgage Loans pursuant to
the Pooling and Servicing Agreement.
The Schedules of Mortgage Loans are attached to this Receipt.
The Trustee hereby additionally acknowledges that it shall review
such items as required by Section 3.6(a) of the Pooling and Servicing Agreement
and shall otherwise comply with Section 3.6(b) of the Pooling and Servicing
Agreement as required thereby.
BANKERS TRUST COMPANY,
as Trustee
By:________________________
Name:___________________
Title:__________________
Dated: _________________________
E-1
<PAGE>
EXHIBIT F
FORM OF CERTIFICATION
WHEREAS, the undersigned is an Authorized Officer of Bankers Trust
Company, a New York banking corporation, acting in its capacity as trustee (the
"Trustee") of a certain pool of mortgage loans (the "Pool") heretofore conveyed
in trust to the Trustee, pursuant to that certain Pooling and Servicing
Agreement dated as of September 1, 1996 (the "Pooling and Servicing Agreement")
by and among Accredited Home Lenders, Inc., as sponsor (the "Sponsor"), and as
Master Servicer, and the Trustee; and
WHEREAS, the Trustee is required, pursuant to Section 3.6(a) of the
Pooling and Servicing Agreement, to review the Mortgage Files relating to the
Pool within a specified period following the Startup Day and to notify the
Sponsor promptly of any defects with respect to the Pool, and the Sponsor is
required to remedy such defects or take certain other action, all as set forth
in Section 3.6(b) of the Pooling and Servicing Agreement; and
WHEREAS, Section 3.6(a) of the Pooling and Servicing Agreement
requires the Trustee to deliver this Certification upon the satisfaction of
certain conditions set forth therein.
F-1
<PAGE>
NOW, THEREFORE, it has determined that (i) all documents required to
be delivered to it pursuant to paragraphs (a), (b), (e) and (f), and to the
extent provided in the Mortgage Files, (c) and (d) are in its possession; (ii)
such documents have been reviewed by it and appear regular on their face and
related to such Mortgage Loan, (iii) based on its examination and only as to the
foregoing documents, the information set forth in items 1, 2, 3, 5, 6, 7, 9, 10
and 11 of the definition of Schedules of Mortgage Loan respecting such Mortgage
Loan accurately reflects the information on the Schedules of Mortgage Loan; and
(iv) each Note has been endorsed as provided.
The Trustee makes no representations or warranties as to and shall
not be responsible to verify (i) the validity, legality, enforceability,
recordability, sufficiency, value, due authorization or genuineness of any
document in the Mortgage File or of any of the Mortgage Loans or (ii) the
collectability, insurability, effectiveness or suitability of any of the
Mortgage Loans.
BANKERS TRUST COMPANY
By:__________________________
F-2
<PAGE>
EXHIBIT G
FORM OF DELIVERY ORDER
___________________, 1996
Bankers Trust Company
Four Albany Street
New York, New York 10006
Attention: Corporate Trust Dept./Accredited 1996-1
Ladies and Gentlemen:
Pursuant to Article IV of the Pooling and Servicing Agreement, dated
as of September 1, 1996 (the "Pooling and Servicing Agreement") by and among
Accredited Home Lenders, Inc., as sponsor (the "Sponsor"), and as master
servicer, and Bankers Trust Company, a New York banking corporation as trustee,
the Sponsor HEREBY CERTIFIES that all conditions precedent to the issuance of
Accredited Mortgage Loan Trust 1996-1, Mortgage Loan Asset-Backed Certificates,
Class A, Class BI-S, BII-S and Class RS (the "Certificates"), HAVE BEEN
SATISFIED and HEREBY REQUESTS YOU TO AUTHENTICATE AND DELIVER said Certificates,
and to RELEASE said Certificates to the Owners thereof, or otherwise upon their
order.
Very truly yours,
ACCREDITED HOME LENDERS, INC.
By:________________________
Name:____________________
Title:____________________
G-1
<PAGE>
EXHIBIT H
FORM OF CLASS RS TAX MATTERS TRANSFER CERTIFICATE
AFFIDAVIT PURSUANT TO SECTION
860E(e) OF THE INTERNAL REVENUE
CODE OF 1986, AS AMENDED
STATE OF )
) ss:
COUNTY OF )
[NAME OF OFFICER], being first duly sworn, deposes
and says:
1. That he is [Title of Officer] of [Name of Investor] (the
"Investor"), a [savings institution] [corporation] duly organized and existing
under the laws of [the State of __________] [the United States], on behalf of
which he makes this affidavit.
2. That (i) the Investor is not a "disqualified organization" and
will not be a "disqualified organization" as of [date of transfer] (For this
purpose, a "disqualified organization" means the United States, any state or
political subdivision thereof, any foreign government, any international
organization, any agency or instrumentality of any of the foregoing (other than
certain taxable instrumentalities), any cooperative organization furnishing
electric energy or providing telephone service to persons in rural areas, or any
organization (other than a farmers' cooperative) that is exempt from federal
income tax unless such organization is subject to the tax on unrelated business
income); (ii) it is not acquiring the Class RS Certificates for the account of
disqualified organization; (iii) it consents to any amendment of the Pooling and
Servicing Agreement that shall be deemed necessary by the Trustee (upon advice
of counsel) to constitute a reasonable arrangement to ensure that the Class RS
Certificates will not be owned directly or indirectly by a disqualified
organization; and (iv) it will not transfer any such Class RS Certificate unless
(a) it has received from the transferee an affidavit in substantially the same
form as this affidavit containing these same four representations and (b) as of
the time of the transfer, it does not have actual knowledge that such affidavit
is false.
H-1
<PAGE>
IN WITNESS WHEREOF, the Investor has caused this instrument to be
executed on its behalf, pursuant to authority of its Board of Directors, by its
[Title of Officer] and its corporate seal to be hereunto attached, attested by
its [Assistant] Secretary, this __ day of __________, ____.
[NAME OF INVESTOR]
By:___________________________
[Name of Officer]
[Title of Officer]
[Corporate Seal]
Attest:
___________________________
[Assistant] Secretary
Personally appeared before me the above-named [Name of Officer],
known or proved to be the same person who executed the foregoing instrument and
to be the [Title of Officer] of the Investor, and acknowledged to me that he
executed the same as his free act and deed and the free act and deed of the
Investor.
Subscribed and sworn before me this ____ day of _________, ____.
___________________________
NOTARY PUBLIC
COUNTY OF ________________
STATE OF _________________
My commission expires the ____ day of _______________, ____.
H-2
<PAGE>
EXHIBIT I
FORM OF MONTHLY REPORT
Accredited Home Lenders, Inc.
Mortgage Loan Asset-Backed Certificates
Series 1996-1
Statement to Owners
PRIOR CURRENT
ORIGINAL PRINCIPAL PRINCIPAL
CLASS FACE VALUE BALANCE INTEREST PRINCIPAL TOTAL BALANCE
- --------- ----------- --------- --------- --------- -------- ----------
A-1
A-2
- ------------------------------------------------------------------------
TOTALS
- ------------------------------------------------------------------------
FACTOR INFORMATION PER $1000 OF ORIGINAL FACE PASS-THROUGH RATES
PRIOR CURRENT
ORIGINAL PRINCIPAL PRINCIPAL
CLASS FACE VALUE BALANCE INTEREST PRINCIPAL TOTAL BALANCE
- --------- ----------- --------- --------- --------- -------- ----------
A-1
A-2
- ------------------------------------------------------------------------
TOTALS
- ------------------------------------------------------------------------
SPONSOR: Accredited Home Lenders, Inc. ACCOUNT
MASTER SERVICER: Accredited Home Lenders, Inc. MANAGER: ___________________
LEAD UNDERWRITER: Lehman Brothers Inc.
RECORD DATE:
DISTRIBUTION DATE:
FACTOR INFORMATION:
I-1
<PAGE>
Accredited Home Lenders, Inc.
Mortgage Loan Asset-Backed Certificates
Series 1996-1
Statement to Owners
AS TO EACH MORTGAGE LOAN GROUP
DISTRIBUTION DATE:
DELINQUENCY ADVANCES MADE:
ACCRUED MASTER SERVICING FEE FOR THE CURRENT PERIOD:
PLUS ADDITIONAL SERVICING FEES:
LESS PERMITTED REDUCTIONS TO MASTER SERVICING FEES:
TOTAL MASTER SERVICING FEES DUE MASTER SERVICER (INCLUDING MASTER SERVICING
FEE):
COLLECTED MASTER SERVICING FEES FOR CURRENT PERIOD:
- --------------------------------------------------------------------------------
Total Delinquency (Excluding Foreclosure & Loans in
REO, Including delinquent bankruptcies Foreclosure
------------------------------------------- (Including
30-59 60-89 90 + Total bankruptcies
Days Days Days Delinquency in F/C)
-------- --------- -------- ---------- -------------
UPS-$
%-$
Loans-#
%-#
- --------------------------------------------------------------------------------
BOOK VALUE OF REO PROPERTY:
NUMBER OF LOANS AS OF THE CURRENT DISTRIBUTION DATE:
NUMBER OF LOANS AS OF THE NEXT DISTRIBUTION DATE:
WEIGHTED AVERAGE COUPON AS OF THE CURRENT DISTRIBUTION DATE:
WEIGHTED AVERAGE COUPON AS OF THE NEXT DISTRIBUTION DATE:
SUBSTITUTION AMOUNTS:
I-2
<PAGE>
LOAN PURCHASE PRICES
Bankruptcy
Proceedings
--------------
Loans-# UPB-$
Status
Current
Delinquent*
Foreclosure*
Total
Modified Loans
--------------
Loans-# UPB-$
Status
Current
Delinquent*
Foreclosure*
Total
* included in delinquency and foreclosure statistics above
CURTAILMENTS INCLUDED IN CURRENT DISTRIBUTION:
PREPAYMENTS IN FULL INCLUDED IN CURRENT DISTRIBUTION:
RECOVERIES OF PRINCIPAL INCLUDED IN CURRENT DISTRIBUTION:
CARRY-FORWARD AMOUNT:
AMOUNT OF SUBORDINATION INCREASE OR DECREASE WITH
RESPECT TO A MORTGAGE LOAN GROUP:
AMOUNT OF ANY INSURED PAYMENT DISTRIBUTED TO THE OWNERS:
INFORMATION PURSUANT TO
SECTION 6049(d)(7)(C):
AMOUNT PAID TO CERTIFICATE INSURER FOR PREMIUM OR REIMBURSEMENT:
BALANCE OF LARGEST LOAN:
I-3
<PAGE>
TRUST ACTIVITY
DISTRIBUTION ACCOUNT DEPOSIT
AS TO EACH MORTGAGE LOAN GROUP:
INSURED PAYMENTS:
PROCEEDS OF LIQUIDATION OF TRUST ESTATE:
AMOUNT ON DEPOSIT IN THE CERTIFICATE ACCOUNT:
LOAN PURCHASE PRICE AMOUNTS:
SUBSTITUTION AMOUNT:
INVESTMENT EARNINGS: ON CERT. ACCT.
MONTHLY REMITTANCE FOR EACH CLASS:
AMOUNT OF TOTAL MONTHLY EXCESS CASH FLOW ALLOCABLE TO A GROUP USED TO COVER
SHORTFALLS WITH RESPECT TO ANOTHER GROUP:
AMOUNT REMAINING IN DISTRIBUTION ACCOUNT:
PREMIUM AMOUNT:
I-4
<PAGE>
EXHIBIT J
FORM OF MASTER SERVICER'S TRUST RECEIPT
To: Bankers Trust Company
Four Albany Street
New York, New York 10006
Attn: Corporate Trust Dept./Accredited 1996-1
Date:
In connection with the administration of the mortgage loans held by
you as Trustee under a certain Pooling and Servicing Agreement dated as of
September 1, 1996 and by and among Accredited Home Lenders, Inc., as Sponsor and
as Master Servicer, and you, as Trustee (the "Agreement"), the Master Servicer
hereby requests a release of the Mortgage File held by you as Trustee with
respect to the following described Mortgage Loan for the reason indicated below:
Mortgagor's Name:
Loan No.:
Reason for requesting file:
_______ 1. Mortgage Loan paid in full.
(The Master Servicer hereby certifies that all amounts
received in connection with the loan have been or will
be credited to the Distribution Account (whichever is
applicable) pursuant to the
Agreement.)
_______ 2. Mortgage Loan repurchased pursuant to Section
3.3, 3.4, 3.6(b) or 8.11 of the Agreement.
(The Master Servicer hereby certifies that the Loan
Purchase Price has been or will be paid to the
Distribution Account pursuant to the Agreement.)
_______ 3. Mortgage Loan substituted.
(The Master Servicer hereby certifies that a Qualified
Replacement Mortgage has been or will be assigned and
delivered to
J-1
<PAGE>
you along with the related Mortgage File
pursuant to the Agreement.)
_______ 4. The Mortgage Loan is being foreclosed.
_______ 5. Other. (Describe)
The undersigned acknowledges that the above Mortgage File will be held by
the undersigned in accordance with the provisions of the Agreement and will be
returned to you, except if the Mortgage Loan has been paid in full, or
repurchased or substituted for by a Qualified Replacement Mortgage (in which
case the Mortgage File will be retained by us permanently) and except if the
Mortgage Loan is being foreclosed (in which case the Mortgage File will be
returned when no longer required by us for such purpose).
Capitalized terms used herein shall have the meanings ascribed to them in
the Agreement.
ACCREDITED HOME LENDERS, INC.
By__________________________
Name:_____________________
Title:____________________
J-2
<PAGE>
EXHIBIT K
FORM OF INVESTMENT LETTER
Description of Rule 144A Securities, including numbers:
Accredited Mortgage Loan Asset-Backed Certificates
Series 1996-1, Class ___, No. ___
The undersigned seller, as registered holder (the "Transferor"), intends to
transfer the Rule 144A Securities described above to the undersigned buyer (the
"Buyer").
1. In connection with such transfer and in accordance with the agreements
pursuant to which the Rule 144A Securities were issued, the Transferor hereby
certifies the following facts: Neither the Transferor nor anyone acting on its
behalf has offered, transferred, pledged, sold or otherwise disposed of the Rule
144A Securities, any interest in the Rule 144A Securities or any other similar
security to, or solicited any offer to buy or accept a transfer, pledge or other
disposition of the Rule 144A Securities, or otherwise approached or negotiated
with respect to the Rule 144A Securities, any interest in the Rule 144A
Securities or any other similar security with, any person in any manner, or made
any general solicitation by means of general advertising or in any other manner,
or taken any other action, which would constitute a distribution of the Rule
144A Securities under the Securities Act of 1933, as amended (the "1933 Act"),
or which would render the disposition of the Rule 144A Securities a violation of
Section 5 of the 1933 Act or require registration pursuant thereto, and that the
Transferor has not offered the Rule 144A Securities to any person other than the
Buyer or another "qualified institutional buyer" as defined in Rule 144A under
the 1933 Act.
2. The Buyer warrants and represents to, and covenants with, the
Transferor, the Trustee and the Master Servicer pursuant to Section 5.8 of the
Pooling and Servicing Agreement as follows:
a. The Buyer understands that the Rule 144A Securities have not been
registered under the 1933 Act or the securities laws of any state.
b. The Buyer considers itself a substantial, sophisticated
institutional investor having such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks of
investment in the Rule 144A Securities.
J-3
<PAGE>
c. The Buyer has been furnished with all information regarding the
Rule 144A Securities that it has requested from the Transferor, the Trustee
or the Master Servicer.
d. Neither the Buyer nor anyone acting on its behalf has offered,
transferred, pledged, sold or otherwise disposed of the Rule 144A
Securities, any interest in the Rule 144A Securities or any other similar
security to, or solicited any offer to buy or accept a transfer, pledge or
other disposition of the Rule 144A Securities, any interest in the Rule 144A
Securities or any other similar security from, or otherwise approached or
negotiated with respect to the Rule 144A Securities, any interest in the
Rule 144A Securities or any other similar security with, any person in any
manner, or made any general solicitation by means of general advertising or
in any other manner, or taken any other action, that would constitute a
distribution of the Rule 144A Securities under the 1933 Act or that would
render the disposition of the Rule 144A Securities a violation of Section 5
of the 1933 Act or require registration pursuant thereto, nor will it act,
nor has it authorized or will it authorize any person to act, in such manner
with respect to the Rule 144A Securities.
e. The Buyer is a "qualified institutional buyer" as that term is
defined in Rule 144A under the 1933 Act and has completed either of the
forms of certification to that effect attached hereto as Annex 1 or Annex 2.
The Buyer is aware that the sale to it is being made in reliance on Rule
144A. The Buyer is acquiring the Rule 144A Securities for its own account or
the account of other qualified institutional buyers, understands that such
Rule 144A Securities may be resold, pledged or transferred only (i) to a
person reasonably believed to be a qualified institutional buyer that
purchases for its own account or for the account of a qualified
institutional buyer to whom notice is given that the resale, pledge or
transfer is being made in reliance on Rule 144A, or (ii) pursuant to another
exemption from registration under the 1933 Act.
4. This document 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; such counterparts, together, shall
constitute one and the same document.
J-4
<PAGE>
IN WITNESS WHEREOF, each of the parties has executed this document as of
the date set forth below.
________________________________ _________________________________
Print Name of Transferor Print Name of Buyer
By:_____________________________ By:______________________________
Name: Name:
Title: Title:
Taxpayer Identification: Taxpayer Identification:
No._____________________________ No.______________________________
Date:___________________________ Date:____________________________
J-5
<PAGE>
ANNEX 1 TO EXHIBIT J
QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
[For Buyers Other Than Registered Investment Companies]
The undersigned hereby certifies as follows in connection with the Rule
144A Investment Representation to which this Certification is attached:
1. As indicated below, the undersigned is the
President, Chief Financial Officer, Senior Vice President or other executive
officer of the Buyer.
2. In connection with purchases by the Buyer, the Buyer is a "qualified
institutional buyer" as that term is defined in Rule 144A under the Securities
Act of 1933 ("Rule 144A") because (i) the Buyer owned and/or invested on a
discretionary basis $_______________1 in securities (except for the excluded
securities referred to below) as of the end of the Buyer's most recent fiscal
year (such amount being calculated in accordance with Rule 144A) and (ii) the
Buyer satisfies the criteria in the category marked below.
_____ Corporation, etc. The Buyer is a corporation (other than a bank,
savings and loan association or similar institution), Massachusetts
or similar business trust, partnership, or charitable organization
described in Section 501(c)(3) of the Internal Revenue Code.
_____ Bank. The Buyer (a) is a national bank or banking institution
organized under the laws of any State, territory or the District of
Columbia, the business of which is substantially confined to banking
and is supervised by the State or territorial banking commission or
similar official or is a foreign bank or equivalent institution, and
(b) has an audited net worth of at least $25,000,000 as demonstrated
in its latest annual financial statements.
_____ Savings and Loan. The Buyer (a) is a savings and loan association,
building and loan association, cooperative bank, homestead
association or similar institution, which is supervised and examined
by a State or Federal authority having supervision over
- -------
1 Buyer must own and/or invest on a discretionary basis at least $100,000,000 in
securities unless Buyer is a dealer, and, in that case, Buyer must own and/or
invest on a discretionary basis at least $10,000,000 in securities.
<PAGE>
any such institutions or is a foreign savings and loan association
or equivalent institution and (b) has an audited net worth of at
least $25,000,000 as demonstrated in its latest annual financial
statements.
_____ Broker-dealer. The Buyer is a dealer registered pursuant to
Section 15 of the Securities Exchange Act of 1934.
_____ Insurance Company. The Buyer is an insurance company whose primary
and predominant business activity is the writing of insurance or the
reinsuring of risks underwritten by insurance companies and which is
subject to supervision by the insurance commissioner or a similar
official or agency of a State, territory or the District of
Columbia.
_____ State or Local Plan. The Buyer is a plan established and maintained
by a State, its political subdivisions, or any agency or
instrumentality of the State or its political subdivisions, for the
benefit of its employees.
_____ ERISA Plan. The Buyer is an employee benefit plan within the meaning
of Title I of the Employee Retirement Income Security Act of 1974.
_____ Investment Adviser. The Buyer is an investment adviser registered
under the Investment Advisers Act of 1940.
_____ SBIC. The Buyer is a Small Business Investment Company licensed by
the U.S. Small Business Administration under Section 301(c) or (d)
of the Small Business Investment Act of 1958.
_____ Business Development Company. The Buyer is a business development
company as defined in Section 202(a)(22) of the Investment Advisers
Act of 1940.
_____ Trust Fund. The Buyer is a trust fund whose trustee is a bank or
trust company and whose participants are exclusively (a) plans
established and maintained by a State, its political subdivisions,
or any agency or instrumentality of the State or its political
subdivisions, for the benefit of its employees, or (b) employee
benefit plans within the meaning of Title I of the Employee
Retirement Income Security Act of 1974, but is not a trust fund that
includes as participants individual retirement accounts or H.R. 10
plans.
J-2
<PAGE>
3. The term "securities" as used herein does not include (i) securities of
issuers that are affiliated with the Buyer, (ii) securities that are part of an
unsold allotment to or subscription by the Buyer, if the Buyer is a dealer,
(iii) bank deposit notes and certificates of deposit, (iv) loan participations,
(v) repurchase agreements, (vi) securities owned but subject to a repurchase
agreement and (vii) currency, interest rate and commodity swaps.
4. For purposes of determining the aggregate amount of securities owned
and/or invested on a discretionary basis by the Buyer, the Buyer used the cost
of such securities to the Buyer and did not include any of the securities
referred to in the preceding paragraph. Further, in determining such aggregate
amount, the Buyer may have included securities owned by subsidiaries of the
Buyer, but only if such subsidiaries are consolidated with the Buyer in its
financial statements prepared in accordance with generally accepted accounting
principles and if the investments of such subsidiaries are managed under the
Buyer's direction. However, such securities were not included if the Buyer is a
majority-owned, consolidated subsidiary of another enterprise and the Buyer is
not itself a reporting company under the Securities Exchange Act of 1934.
5. The Buyer acknowledges that it is familiar with Rule 144A and
understands that the seller to it and other parties related to the Certificates
are relying and will continue to rely on the statements made herein because one
or more sales to the Buyer may be in reliance on Rule 144A.
_____ _____ Will the Buyer be
purchasing the Rule
144A
Yes No Securities only for the Buyer's own account?
6. If the answer to the foregoing question is "no", the Buyer agrees that,
in connection with any purchase of securities sold to the Buyer for the account
of a third party (including any separate account) in reliance on Rule 144A, the
Buyer will only purchase for the account of a third party that at the time is a
"qualified institutional buyer" within the meaning of Rule 144A. In addition,
the Buyer agrees that the Buyer will not purchase securities for a third party
unless the Buyer has obtained a current representation letter from such third
party or taken other appropriate steps contemplated by Rule 144A to conclude
that such third party independently meets the definition of "qualified
institutional buyer" set forth in Rule 144A.
7. The Buyer will notify each of the parties to which this
certification is made of any changes in the information and conclusions herein.
Until such notice is given, the
J-3
<PAGE>
Buyer's purchase of Rule 144A Securities will constitute a reaffirmation of this
certification as of the date of such purchase.
____________________________________
Print Name of Buyer
By:_________________________________
Name:
Title:
Date:_______________________________
J-4
<PAGE>
ANNEX 2 TO EXHIBIT J
QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
[For Buyers That Are Registered Investment Companies]
The undersigned hereby certifies as follows in connection with the Rule
144A Investment Representation to which this Certification is attached:
1. As indicated below, the undersigned is the President, Chief Financial
Officer or Senior Vice President of the Buyer or, if the Buyer is a "qualified
institutional buyer" as that term is defined in Rule 144A under the Securities
Act of 1933 ("Rule 144A") because Buyer is part of a Family of Investment
Companies (as defined below), is such an officer of the Adviser.
2. In connection with purchases by Buyer, the Buyer is a "qualified
institutional buyer" as defined in SEC Rule 144A because (i) the Buyer is an
investment company registered under the Investment Company Act of 1940, and (ii)
as marked below, the Buyer alone, or the Buyer's Family of Investment Companies,
owned at least $100,000,000 in securities (other than the excluded securities
referred to below) as of the end of the Buyer's most recent fiscal year. For
purposes of determining the amount of securities owned by the Buyer or the
Buyer's Family of Investment Companies, the cost of such securities was used.
_____ The Buyer owned $____________ in securities (other than the excluded
securities referred to below) as of the end of the Buyer's most
recent fiscal year (such amount being calculated in accordance with
Rule 144A).
_____ The Buyer is part of a Family of Investment Companies which owned in
the aggregate $____________ in securities (other than the excluded
securities referred to below) as of the end of the Buyer's most
recent fiscal year (such amount being calculated in accordance with
Rule 144A).
3. The term "Family of Investment Companies" as used herein means two or
more registered investment companies (or series thereof) that have the same
investment adviser or investment advisers that are affiliated (by virtue of
being majority owned subsidiaries of the same parent or because one investment
adviser is a majority owned subsidiary of the other).
<PAGE>
4. The term "securities" as used herein does not include (i) securities of
issuers that are affiliated with the Buyer or are part of the Buyer's Family of
Investment Companies, (ii) bank deposit notes and certificates of deposit, (iii)
loan participations, (iv) repurchase agreements, (v) securities owned but
subject to a repurchase agreement and (vi) currency, interest rate and commodity
swaps.
5. The Buyer is familiar with Rule 144A and understands that each of the
parties to which this certification is made are relying and will continue to
rely on the statements made herein because one or more sales to the Buyer will
be in reliance on Rule 144A. In addition, the Buyer will only purchase for the
Buyer's own account.
6. The undersigned will notify each of the parties to which this
certification is made of any changes in the information and conclusions herein.
Until such notice, the Buyer's purchase of Rule 144A Securities will constitute
a reaffirmation of this certification by the undersigned as of the date of such
purchase.
____________________________________
Print Name of Buyer
By:_________________________________
Name:_______________________________
Title:______________________________
IF AN ADVISER:
____________________________________
Print Name of Buyer
____________________________________
Date:
2
- --------------------------------------------------------------------------------
INDEMNIFICATION AGREEMENT
among
FINANCIAL SECURITY ASSURANCE INC.,
ACCREDITED HOME LENDERS, INC.,
and
LEHMAN BROTHERS INC.
Dated as of September 23, 1996
$14,073,000 Class A-1 Certificates
$78,048,000 Class A-2 Certificates
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
SECTION 1. Definitions ................................................. 1
SECTION 2. Representations, Warranties and
Agreements of Financial Security ............................ 3
SECTION 3. Representations, Warranties and
Agreements of the Underwriter................................ 6
SECTION 4. Indemnification ............................................. 7
SECTION 5. Indemnification Procedures................................... 8
SECTION 6. Contribution ................................................ 9
SECTION 7. Miscellaneous................................................ 10
EXHIBIT A Opinion of General Counsel
2
<PAGE>
INDEMNIFICATION AGREEMENT
INDEMNIFICATION AGREEMENT, dated as of September 23, 1996, among
FINANCIAL SECURITY ASSURANCE INC. ("Financial Security"), ACCREDITED HOME
LENDERS, INC. (the "Issuer"), and LEHMAN BROTHERS INC. (the "Underwriter"):
Section 1. Definitions. For purposes of this Agreement, the
following terms shall have the meanings provided below. Capitalized terms used
but not otherwise defined herein shall have the meaning ascribed thereto in the
Pooling and Servicing Agreement.
"Agreement" means this Indemnification Agreement, as amended from
time to time.
"Federal Securities Laws" means the Securities Act, the Securities
Exchange Act of 1934, the Trust Indenture Act of 1939, the Investment Company
Act of 1940, the Investment Advisers Act of 1940 and the Public Utility Holding
Company Act of 1935, each as amended from time to time, and the rules
regulations in effect from time to time under such Acts.
"Financial Security Agreements" means this Agreement and the
Insurance Agreement.
"Financial Security Financial Information" has the meaning provided
in Section 2(f).
"Financial Security Information" has the meaning provided in Section
2(g) hereof.
"Financial Security Party" means any of Financial Security, its
parent, subsidiaries and affiliates, and any shareholder, director, officer,
employee, agent or "controlling person" (as such term is used in the Securities
Act) of any of the foregoing.
"Indemnified Party" means any party entitled to any indemnification
pursuant to Section 4 hereof.
"Indemnifying Party" means any party required to provide
indemnification pursuant to Section 4 hereof.
"Insurance Agreement" means the Insurance and Indemnity Agreement,
dated as of September 1, 1996, by and between Financial Security and the Issuer.
<PAGE>
"Issuer Party" means any of the Issuer, its parent, subsidiaries and
affiliates and any shareholder, director, officer, employee, agent or
"controlling person" (as such term is used in the Securities Act) of any of the
foregoing.
"Losses" means (a) any actual out-of-pocket damages incurred by the
party entitled to indemnification or contribution hereunder, (b) any actual
out-of-pocket costs or actual expenses incurred by such party, including
reasonable fees or expenses of its counsel and other expenses incurred in
connection with investigating or defending any claim, action or other proceeding
which entitle such party to be indemnified hereunder (subject to the limitations
set forth in Section 5 hereof), to the extent not paid, satisfied or reimbursed
from funds provided by any other Person other than an affiliate of such party
(provided that the foregoing shall not create or imply any obligation to pursue
recourse against any such other Person), plus (c) interest on the amount paid by
the party entitled to indemnification or contribution from the date of such
payment to the date of payment by the party who is obligated to indemnify or
contribute hereunder at the statutory rate applicable to judgments for breach of
contract.
"Offering Circular" means the Prospectus Supplement relating to the
Securities dated September 23, 1996.
"Offering Document" means the Offering Circular (including the
Financial Security Financial Information incorporated by reference therein) and
any other material or documents delivered by the Underwriter to any Person in
connection with the offer or sale of the Securities.
"Person" means any individual, partnership, joint venture,
corporation, trust, unincorporated organization or other organization or entity
(whether governmental or private).
"Pooling and Servicing Agreement" means the Pooling and Servicing
Agreement, dated as of September 1, 1996, between the Issuer, as sponsor and
master servicer, and Bankers Trust Company, as trustee.
"Policy" means the financial guaranty insurance policy delivered by
Financial Security with respect to the Securities.
"Securities" means the Class A-1 Certificates and Class A-2
Certificates issued by the Issuer pursuant to the Pooling and Servicing
Agreement.
2
<PAGE>
"Securities Act" means the Securities Act of 1933, as amended from
time to time.
"Underwriter Information" has the meaning provided in Section 3(b)
hereof.
"Underwriter" means Lehman Brothers Inc.
"Underwriter Party" means, the Underwriter, its parent, subsidiaries
and affiliates and any shareholder, director, officer, employee, agent or
"controlling person" (as such item is used in the Securities Act) of any of the
foregoing.
"Underwriting Agreement" means the Underwriting Agreement dated
September 23, 1996, between the Issuer and the Underwriter.
Section 2. Representations, Warranties and Agreements of Financial
Security. Financial Security represents, warrants and agrees as follows:
(a) Organization, Etc. Financial Security is a stock insurance
company duly organized, validly existing and authorized to transact financial
guaranty insurance business under the laws of the State of New York.
(b) Authorization, Etc. The Policy and the Financial Security
Agreements have been duly authorized, executed and delivered by Financial
Security.
(c) Validity, Etc. The Policy and the Financial Security Agreements
constitute valid and binding obligations of Financial Security, enforceable
against Financial Security in accordance with their terms, subject, as to the
enforcement of remedies, to bankruptcy, insolvency, reorganization,
rehabilitation, moratorium and other similar laws affecting the enforceability
of creditors' rights generally applicable in the event of the bankruptcy or
insolvency of Financial Security and to the application of general principles of
equity and subject, in the case of this Agreement, to principles of public
policy limiting the right to enforce the indemnification provisions contained
herein.
(d) Exemption From Registration. The Policy is exempt from
registration under the Securities Act.
(e) No Conflicts. Neither the execution or delivery by Financial
Security of the Policy or the Financial Security Agreements, nor the performance
by Financial Security of its obligations thereunder, will conflict with any
provision of the certificate of incorporation or the
3
<PAGE>
bylaws of Financial Security nor result in a breach of, or constitute a default
under, any material agreement or other instrument to which Financial Security is
a party or by which any of its property is bound nor violate any judgment, order
or decree applicable to Financial Security of any governmental or regulatory
body, administrative agency, court or arbitrator having jurisdiction over
Financial Security (except that, in the published opinion of the Securities and
Exchange Commission, the indemnification provisions of this Agreement, insofar
as they relate to indemnification for liabilities arising under the Securities
Act, are against public policy as expressed in the Securities Act and are
therefore unenforceable).
(f) Financial Information. The consolidated balance sheets of
Financial Security as of December 31, 1995 and December 31, 1994 and the related
consolidated statements of income, changes in shareholder's equity and cash
flows for the fiscal years then ended and the interim consolidated balance sheet
of Financial Security as of June 30, 1996, and the related statements of income,
changes in shareholder's equity and cash flows for the interim period then
ended, furnished by Financial Security for use, or incorporated by reference, in
the Offering Circular (collectively, the "Financial Security Financial
Information"), fairly present in all material respects the financial condition
of Financial Security as of such dates and for such periods in accordance with
generally accepted accounting principles consistently applied (subject as to
interim statements to normal year-end adjustments) and since the date of the
most current interim consolidated balance sheet referred to above there has been
no change in the financial condition of Financial Security which would
materially and adversely affect its ability to perform its obligations under the
Policy.
(g) Financial Security Information. The information in the Offering
Circular set forth under the caption "The Certificate Insurer," including the
Financial Security Financial Information, (as revised from time to time in
accordance with the provisions hereof, the "Financial Security Information") is
limited and does not purport to provide the scope of disclosure required to be
included in a prospectus with respect to a registrant in connection with the
offer and sale of securities of such registrant registered under the Securities
Act. Within such limited scope of disclosure, however, as of the date of the
Offering Circular and as of the date hereof, the Financial Security Information
does not contain any untrue statement of a material fact, or omit to state a
material fact necessary to make the statements contained therein, in the light
of the circumstances under which they were made, not misleading.
4
<PAGE>
(h) Additional Information. Financial Security will furnish to the
Underwriter and the Issuer, copies of Financial Security's most recent financial
statements (annual or interim, as the case may be) which fairly present in all
material respects the financial condition of Financial Security as of the dates
and for the periods indicated, in accordance with generally accepted accounting
principles consistently applied except as noted therein (subject, as to interim
statements, to normal year-end adjustments); provided, however, that, if the
Underwriter or the Issuer shall require a manually signed report or consent of
Financial Security's auditors in connection with such financial statements, such
report or consent shall be at the expense of the Underwriter or the Issuer, as
the case may be. In addition, if the delivery of an Offering Circular relating
to the Securities is required at any time prior to the expiration of nine months
after the time of issue of the Offering Circular in connection with the offering
or sale of the Securities, the Issuer or the Underwriter will notify Financial
Security of such requirement to deliver an Offering Circular and Financial
Security will promptly provide the Underwriter and the Issuer with any revisions
to the Financial Security Information that are in the judgment of Financial
Security necessary to prepare an amended Offering Circular or a supplement to
the Offering Circular which will correct such statement or omission.
(i) Opinion of Counsel. Financial Security will furnish to the
Underwriter and the Issuer on the closing date for the sale of the Securities an
opinion of its General Counsel, to the effect set forth in Exhibit A attached
hereto, dated such closing date and addressed to the Issuer and the Underwriter.
(j) Consents and Reports of Independent Accountants. Financial
Security will furnish to the Underwriter and the Issuer, upon request, as
comfort from its independent accountants in respect of its financial condition,
(i) at the expense of the Person specified in the Insurance Agreement, a copy of
the Offering Circular, including either a manually signed consent or a manually
signed report of Financial Security's independent accountants and (ii) the
quarterly review letter by Financial Security's independent accountants in
respect of the most recent interim financial statements of Financial Security.
Nothing in this Agreement shall be construed as a representation or warranty by
Financial Security concerning the rating of its claims-paying ability by
Standard & Poor's, a division of the McGraw-Hill Companies, Inc. or Moody's
Investors Service or any other rating agency (collectively, the "Rating
Agencies"). The Rating Agencies, in assigning such ratings, take into account
facts and
5
<PAGE>
assumptions not described in the Offering Circular and the facts and assumptions
which are considered by the Rating Agencies, and the ratings issued thereby, are
subject to change over time.
Section 3. Representations, Warranties and Agreements of the
Underwriter. The Underwriter represents, warrants and agrees as follows:
(a) Offering Document. The Underwriter will not use, or distribute
to other broker-dealers for use, any Offering Document in connection with the
offer and sale of the Securities unless such Offering Document includes such
information as has been furnished by Financial Security for inclusion therein
and the information therein concerning Financial Security has been approved by
Financial Security in writing. Financial Security hereby consents to the
information in respect of Financial Security included in the Offering Circular.
Each Offering Document will include the following statement: "The Certificate
Insurance Policy is not covered by the property/casualty insurance security fund
specified in Article 76 of the New York Insurance Law".
(b) Underwriting Information. The following information constitutes
the only information furnished by the Underwriter (the "Underwriter
Information"): (i) the statements set forth in the last paragraph on the front
cover page of the Offering Circular; and (ii) the statements set forth in the
third paragraph under the heading "Underwriting". The Underwriter confirms that
such statements (to such extent) are correct.
Section 4. Indemnification. (a) Financial Security agrees, upon the
terms and subject to the conditions provided herein, to indemnify, defend and
hold harmless each Issuer Party and each Underwriter Party against (i) any and
all Losses incurred by them with respect to the offer and sale of the Securities
and resulting from Financial Security's breach of any of its representations,
warranties or agreements set forth in Section 2 hereof and (ii) any and all
Losses to which any Issuer Party or Underwriter Party may become subject, under
the Securities Act or otherwise, insofar as such Losses arise out of or result
from an untrue statement of a material fact contained in any Offering Document
or the omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or omission was made
in the Financial Security Information included therein in accordance with the
provisions hereof.
(b) The Underwriter agrees, upon the terms and subject to the
conditions provided herein, to indemnify,
6
<PAGE>
defend and hold harmless each Financial Security Party against (i) any and all
Losses incurred by them with respect to the offer and sale of the Securities and
resulting from the Underwriter's breach of any of its representations,
warranties or agreements set forth in Section 3 hereof and (ii) any and all
Losses to which any Financial Security Party may become subject, under the
Securities Act or otherwise, insofar as such Losses arise out of or result from
an untrue statement of a material fact contained in any Offering Document or
Form 8-K or the omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in each case
to the extent, but only to the extent, that such untrue statement or omission
was made in the Underwriter Information included therein.
(c) Each Issuer Party agrees, upon the terms and subject to the
conditions provided herein, to indemnify, defend and hold harmless each
Financial Security Party against any and all Losses to which any Financial
Security Party may become subject, under the Securities Act or otherwise,
insofar as such Losses arise out of or result from an untrue statement of a
material fact contained in any Offering Document or the omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as such Losses arise out of or
are based upon any untrue statement or omission in the Financial Security
Information.
(d) Upon the incurrence of any Losses for which a party is entitled
to indemnification hereunder, the Indemnifying Party shall reimburse the
Indemnified Party promptly upon establishment by the Indemnified Party to the
Indemnifying Party of the Losses incurred.
Section 5. Indemnification Procedures. Except as provided below in
Section 6 with respect to contribution, the indemnification provided herein by
an Indemnifying Party shall be the exclusive remedy of any and all Indemnified
Parties for the breach of a representation, warranty or agreement hereunder by
an Indemnifying Party; provided, however, that each Indemnified Party shall be
entitled to pursue any other remedy at law or in equity for any such breach. In
the event that any action or regulatory proceeding shall be commenced or claim
asserted which may entitle an Indemnified Party to be indemnified under this
Agreement, such party shall give the Indemnifying Party written or facsimile
notice of such action or claim reasonably promptly after receipt of written
notice thereof. The Indemnifying Party shall be entitled to participate in and,
upon notice to the Indemnified Party, assume the defense of any such action or
claim in reasonable cooperation with, and with the reasonable cooperation of,
7
<PAGE>
the Indemnified Party. The Indemnified Party will have the right to employ its
own counsel in any such action in addition to the counsel of the Indemnifying
Party, but the fees and expenses of such counsel will be at the expense of such
Indemnified Party, unless (a) the employment of counsel by the Indemnified Party
at its expense has been authorized in writing by the Indemnifying Party, (b) the
Indemnifying Party has not in fact employed counsel to assume the defense of
such action within a reasonable time after receiving notice of the commencement
of the action, or (c) the named parties to any such action or proceeding
(including any impleaded parties) include both the Indemnifying Party and one or
more Indemnified Parties, and the Indemnified Parties shall have been advised by
counsel that there may be one or more legal defenses available to them which are
different from or additional to those available to the Indemnifying Party (it
being understood, however, that the Indemnifying Party shall not, in connection
with any one such action or proceeding or separate but substantially similar or
related actions or proceedings 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 at any time for all Issuer
Parties, one such firm for all Underwriter Parties relating to the Underwriter
and one such firm for all Financial Security Parties, as the case may be, which
firm shall be designated in writing by the Issuer in respect of the Issuer
Parties, by the Underwriter in respect of the Underwriter Parties and by
Financial Security in respect of the Financial Security Parties), in each of
which cases the fees and expenses of counsel will be at the expense of the
Indemnifying Party and all such fees and expenses will be reimbursed promptly as
they are incurred. The Indemnifying Party shall not be liable for any settlement
of any such claim or action unless the Indemnifying Party shall have consented
thereto or be in default in its obligations hereunder. Any failure by an
Indemnified Party to comply with the provisions of this Section shall relieve
the Indemnifying Party of liability only if such failure is prejudicial to the
position of the Indemnifying Party and then only to the extent of such
prejudice.
Section 6. Contribution. (a) To provide for just and equitable
contribution if the indemnification provided by any Indemnifying Party is
determined to be unavailable for any Indemnified Party (other than due to
application of this Section), each Indemnifying Party shall contribute to the
Losses arising from any breach of any of its representations, warranties or
agreements contained in this Agreement on the basis of the relative fault of
each of the parties as set forth in Section 6(b) below; provided, however, that
an Indemnifying Party shall in no event be required to contribute to all
Indemnified Parties an
8
<PAGE>
aggregate amount in excess of the Losses incurred by such Indemnified Parties
resulting from the breach of representations, warranties or agreements contained
in this Agreement.
(b) The relative fault of each Indemnifying Party, on the one hand,
and of each Indemnified Party, on the other, shall be determined by reference
to, among other things, whether the breach of, or alleged breach of, any
representations, warranties or agreements contained in this Agreement relates to
information supplied by, or action within the control of, the Indemnifying Party
or the Indemnified Party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such breach.
(c) For purposes of this Agreement, the parties agree that Financial
Security shall be solely responsible for the Financial Security Information and
the Underwriter shall be solely responsible for the Underwriter Information and
that the balance of each Offering Document shall be the responsibility of the
Issuer.
(d) Notwithstanding anything in this Section 6 to the contrary, the
Underwriter shall not be required to contribute an amount greater than the
excess, if any, of (x) the purchase prices paid by investors to the Underwriter
for the Certificates over (y) the purchase price paid by the Underwriter for the
Certificates.
(e) 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.
(f) Upon the incurrence of any Losses entitled to contribution
hereunder, the contributor shall reimburse the party entitled to contribution
promptly upon establishment by the party entitled to contribution to the
contributor of the Losses incurred.
Section 7. Miscellaneous.
(a) Notices. All notices and other communications provided for under
this Agreement shall be delivered to the address set forth below or to such
other address as shall be designated by the recipient in a written notice to the
other party or parties hereto.
If to Financial Security:
Financial Security Assurance Inc.
350 Park Avenue
9
<PAGE>
New York, NY 10022
Attention:
Surveillance Department
Re: Accredited Mortgage Loan Trust 1996-1,
Mortgage Loan Asset-Backed Certificates,
Series 1996-1
If to Issuer:
Accredited Home Lenders, Inc.
15030 Avenue of Science, Suite 100
San Diego, California 92128
If to the Underwriter:
Lehman Brothers Inc.
3 World Financial Center
American Express Tower
New York, New York 10285
Attention: President and Executive Vice President
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(b) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York.
(c) Assignments. This Agreement may not be assigned by any party
without the express written consent of each other party. Any assignment made in
violation of this Agreement shall be null and void.
(d) Amendments. Amendments of this Agreement shall be in writing
signed by each party hereto.
(e) Survival, Etc. The indemnity and contribution agreements
contained in this Agreement shall remain operative and in full force and effect,
regardless of (i) any investigation made by or on behalf of any Indemnifying
Party, (ii) the issuance of the Securities or (iii) any termination of this
Agreement or the Policy. The indemnification provided in this Agreement will be
in addition to any liability which the parties may otherwise have and shall in
no way limit any obligations of the Issuer under the Underwriting Agreement or
the Insurance Agreement.
(f) Counterparts. This Agreement may be executed in counterparts by
the parties hereto, and all such counterparts shall constitute one and the
same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered as of the date first above written.
FINANCIAL SECURITY ASSURANCE
INC.
By /s/ Daniel Farrell
---------------------------
Name Daniel Farrell
Authorized Officer
ACCREDITED HOME LENDERS, INC.
By /s/ Ray W. McKewon
---------------------------
Name Ray W. McKewon
Title Executive Vice President
LEHMAN BROTHERS INC., as
Underwriter
By /s/ Theodore P. Janulis
---------------------------
Name Theodore P. Janulis
Title Managing Director
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EXHIBIT A
OPINION OF GENERAL COUNSEL
Based upon the foregoing, I am of the opinion that:
1. Financial Security is a stock insurance company duly organized, validly
existing and authorized to transact financial guaranty insurance business under
the laws of the State of New York.
2. The Policy and the Agreements have been duly authorized, executed and
delivered by Financial Security.
3. The Policy and the Agreements constitute valid and binding obligations
of Financial Security, enforceable against Financial Security in accordance with
their terms, subject, as to the enforcement of remedies, to bankruptcy,
insolvency, reorganization, rehabilitation, moratorium and other similar laws
affecting the enforceability of creditors' rights generally applicable in the
event of the bankruptcy or insolvency of Financial Security and to the
application of general principles of equity and subject, in the case of the
Indemnification Agreement, to principles of public policy limiting the right to
enforce the indemnification provisions contained therein insofar as they relate
to indemnification for liabilities arising under applicable securities laws.
4. The Policy is exempt from registration under the Securities Act of 1933,
as amended (the "Act").
5. Neither the execution or delivery by Financial Security of the Policy or
the Agreements, nor the performance by Financial Security of its obligations
thereunder, will conflict with any provision of the certificate of incorporation
or the by-laws of Financial Security or, to the best of my knowledge, result in
a breach of, or constitute a default under, any agreement or other instrument to
which Financial Security is a party or by which it or any of its property is
bound or, to the best of my knowledge, violate any judgment, order or decree
applicable to Financial Security of any governmental or regulatory body,
administrative agency, court or arbitrator having jurisdiction over Financial
Security (except that in the published opinion of the Securities and Exchange
Commission the indemnification provisions of the Indemnification Agreement,
insofar as they relate to indemnification for liabilities arising under the Act,
are
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against public policy as expressed in the Act and are therefore unenforceable).
In addition, please be advised that I have reviewed the description of
Financial Security under the caption "The Certificate Insurer" in the Prospectus
Supplement dated September 23, 1996 (the "Offering Document") of the Issuer with
respect to the Securities. The information provided in the Offering Document
with respect to Financial Security is limited and does not purport to provide
the scope of disclosure required to be included in a prospectus with respect to
a registrant under the Act in connection with the public offer and sale of
securities of such registrant. Within such limited scope of disclosure, however,
there has not come to my attention any information which would cause me to
believe that the description of Financial Security referred to above, as of the
date of the Offering Document or as of the date of this opinion, contained or
contains any untrue statement of a material fact or omitted or omits to state a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading (except that I express
no opinion with respect to any financial statements or other financial
information contained or referred to therein).
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INSURANCE AND INDEMNITY AGREEMENT
between
FINANCIAL SECURITY ASSURANCE INC.
and
ACCREDITED HOME LENDERS, INC.
Dated as of September 1, 1996
$92,121,000
------------------------------------------------------
Mortgage Loan Asset-Backed Certificates, Series 1996-1
- --------------------------------------------------------------------------------
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TABLE OF CONTENTS
Page
INTRODUCTORY STATEMENTS
ARTICLE I DEFINITIONS; LIMITED RECOURSE
Section 1.01. Definitions...................................... 1
Section 1.02. Limited Recourse................................. 1
ARTICLE II REPRESENTATIONS, WARRANTIES AND
COVENANTS
Section 2.01. Representations and Warranties of
the Company............................................... 2
Section 2.02. [Intentionally Omitted........................... 5
Section 2.03. Affirmative Covenants of the
Company................................................... 5
Section 2.04. [Intentionally Omitted........................... 7
Section 2.05. Negative Covenants of the Company................ 7
Section 2.06. [Intentionally Omitted........................... 8
ARTICLE III THE POLICY; REIMBURSEMENT;
INDEMNIFICATION
Section 3.01. Issuance of the Policy........................... 8
Section 3.02. Payment of Fees and Premium...................... 8
Section 3.03. Reimbursement and Additional Payment
Obligation................................................ 9
Section 3.04. Indemnification.................................. 10
Section 3.05. Subrogation...................................... 11
ARTICLE IV FURTHER AGREEMENTS
Section 4.01. Effective Date: Term of Agreement................ 12
Section 4.02. Obligations Absolute............................ 12
Section 4.03. Assignments; Reinsurance;
Third-Party Rights........................................ 13
Section 4.04. Liability of FSA................................ 13
Section 5.01. Events of Default................................ 14
Section 5.02. Remedies: Waivers................................ 15
ARTICLE VI MISCELLANEOUS
Section 6.01. Amendments. Etc.................................. 16
Section 6.02. Notices.......................................... 16
Section 6.03. Payment Procedure................................ 17
Section 6.04. Severability..................................... 17
Section 6.05. Governing Law.................................... 17
Section 6.06. Consent to Jurisdiction.......................... 17
Section 6.07. Consent of FSA................................... 18
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Section 6.08. Counterparts..................................... 18
Section 6.09. Trial by Jury Waived............................. 18
Section 6.10. Limited Liability................................ 18
Section 6.11. Entire Agreement................................. 19
APPENDIX I
DEFINITIONS
Appendix I--Definitions
Appendix II--Opinions of Counsel
Annex I--Form of Policy
Appendix A--Conditions Precedent to Issuance of the Policy
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INSURANCE AND INDEMNITY AGREEMENT
INSURANCE AND INDEMNITY AGREEMENT (this "Agreement"), dated as of September 1,
1996, between FINANCIAL SECURITY ASSURANCE INC. ("FSA") and ACCREDITED HOME
LENDERS, INC. (the "Company").
INTRODUCTORY STATEMENTS
Pursuant to a Pooling and Servicing Agreement, dated as of September 1,
1996, made by and between the Company, as sponsor and master servicer, and
Bankers Trust Company, as trustee (the "Trustee"), $92,121,000 Accredited
Mortgage Loan Trust 1996-1 Mortgage Loan Asset-Backed Certificates, Series
1996-1, Class A-1 and Class A-2 Certificates (collectively, the "Securities"),
together with Class B-1, Class B-2 and Class R Certificates, are being issued.
The Company has requested that FSA issue a financial guaranty insurance
policy guarantying certain distributions of the principal of and interest on the
Securities (including any such distributions subsequently avoided as a
preference under applicable bankruptcy law) upon the terms and subject to the
conditions provided herein.
The parties hereto desire to specify the conditions precedent to the
issuance of the Policy by FSA, the payment of premium in respect of the Policy,
the indemnity and reimbursement to be provided to FSA in respect of amounts paid
by FSA under the Policy or otherwise and certain other matters.
In consideration of the premises and of the agreements herein contained,
FSA and the Company hereby agree as follows:
ARTICLE I
DEFINITIONS; LIMITED RECOURSE
Section 1.01. Definitions. Capitalized terms used herein shall have the
meanings provided in Appendix I hereto or, if not defined in Appendix I shall
have the meanings provided in the Pooling and Servicing Agreement.
Section 1.02. Limited Recourse. Notwithstanding any provision of this
Agreement to the contrary, the payment obligations of the Company set forth
herein (other than those set forth in Sections 3.02 and Section 3.04) shall be
non-recourse obligations and shall be payable only from monies available for
such payment in accordance with the provisions of the Pooling and Servicing
Agreement (except to the extent that any such payment obligation arises from a
failure to perform or default of the Company or any affiliate thereof in
accordance with the Pooling and Servicing Agreement or any other Transaction
Document or by reason of gross negligence, willful misconduct or bad faith on
the part of the Company in the performance of its duties and
<PAGE>
obligations thereunder or reckless disregard by the Company of its duties and
obligations thereunder).
ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 2.01. Representations and Warranties of the Company. The Company
represents, warrants and covenants, as of the date hereof and as of the Date of
Issuance, as follows:
(a) Due Organization and Qualification. The Company is a
corporation, duly organized, validly existing and in good standing under
the laws of the state of California. The Company is duly qualified to do
business, is in good standing and has obtained all necessary licenses,
permits, charters, registrations and approvals (together, "approvals")
necessary for the conduct of its business as currently conducted and as
described in the Offering Document and the performance of its obligations
under the Transaction Documents to which it is a party, in each
jurisdiction in which the failure to be so qualified or to obtain such
approvals would, in any respect, have a material adverse effect upon the
Transaction.
(b) Power and Authority. The Company has all necessary corporate
power and authority to conduct its business as currently conducted and as
described in the Offering Document, to execute the Transaction Documents
to which it is a party, to deliver and perform its obligations under such
Transaction Documents and to consummate the Transaction.
(c) Due Authorization. The execution, delivery and performance by
the Company of the Transaction Documents to which it is a party have been
duly authorized by all necessary corporate action on the part of the
Company and do not require any additional approvals or consents or other
action by, or any notice to or filing by the Company (other than filings
contemplated by the Pooling and Servicing Agreement and routine filings by
the Company under the Securities Exchange Act of 1934, as amended) or any
affiliate thereof with, any Person, including, without limitation, any
governmental entity or the Company's stockholders.
(d) Noncontravention. Neither the execution and delivery of the
Transaction Documents to which it is a party by the Company, the
consummation of the transactions contemplated thereby nor the satisfaction
of the terms and conditions of such Transaction Documents,
(i) conflicts with or results in any breach or violation of
any provision of the charter or Bylaws of the Company or any law,
rule,
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regulation, order, writ, judgment, injunction, decree, determination
or award currently in effect having applicability to the Company or
any of its properties, including regulations issued by an
administrative agency or other governmental authority having
supervisory powers over the Company,
(ii) constitutes a default by the Company under or a breach of
any provision of any loan agreement, mortgage, indenture or other
agreement or instrument to which the Company is a party or by which
it or any of its affiliates or their properties is or may be bound
or affected, or
(iii) results in or requires the creation of any Lien upon or
in respect of any of the Company's assets except as otherwise
expressly contemplated by the Transaction Documents.
(e) Legal Proceedings. There is no action, proceeding or
investigation by or before any court, governmental or administrative
agency or arbitrator against or affecting all or any of the Mortgage
Loans, or the Company, or any properties or rights of the Company, pending
or, to the Company's knowledge after reasonable inquiry, threatened,
which, in any case, if decided adversely to the Company, would result in a
Material Adverse Change with respect to the Company or a material portion
of the Mortgage Loans.
(f) Valid and Binding Obligations. The Transaction Documents to
which Company is a party, when executed and delivered by the Company, will
constitute the legal, valid and binding obligations of the Company
enforceable in accordance with their respective terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors' rights generally and
general equitable principles. The Securities, when executed, authenticated
and delivered in accordance with the Pooling and Servicing Agreement, will
be validly issued and outstanding and entitled to the benefits of the
Pooling and Servicing Agreement and, together with the Class B and Class R
Certificates, will evidence the entire beneficial ownership interest in
the Trust Estate.
(g) ERISA. No Accumulated Funding Deficiency, whether or not waived,
has occurred with respect to any Plan. No Plan has been terminated, and no
Commonly Controlled Entity has withdrawn from any Multiemployer Plan which
could result in any liability under ERISA of a Commonly Controlled Entity.
No Reportable Event or other event or condition has occurred which could
result in the termination of any Plan by the PBGC. No Plan has an
Underfunding greater than $100,000. The aggregate amount of Underfunding
for all Underfunded Plans does not exceed $100,000. The liability to which
the Commonly Controlled Entities would become subject under ERISA if they
were to withdraw completely from all Multiemployer Plans as of the most
recent
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valuation date is not in excess of $100,000. The Multiemployer Plans are
neither in Reorganization (as defined in Section 4241 of ERISA) nor
Insolvent (as defined in Section 4245 of ERISA). The Company is in
compliance in all material respects with ERISA and has not incurred and
does not reasonably expect to incur any liabilities to the PBGC (other
than premiums due to the PBGC) in connection with any Plan or
Multiemployer Plan.
(h) Accuracy of Information. None of the Related Documents contains
any statement of a material fact with respect to the Company or the
Transaction that was untrue or misleading in any material respect when
made. Since the furnishing of the Related Documents, including any
revisions thereto, there has been no change, nor any development or event
involving a prospective change known to the Company, that would render any
of the Related Documents untrue or misleading in any material respect.
There is no fact known to the Company which has a material possibility of
causing a Material Adverse Change with respect to the Company or a
material portion of the Mortgage Loans.
(i) Transaction Documents. Each of the representations and
warranties of the Company contained in the Transaction Documents is true
and correct in all material respects and the Company hereby makes each
such representation and warranty to, and for the benefit of, FSA as if the
same were set forth in full herein.
(j) Compliance With Law. Etc. No practice, procedure or policy
employed or proposed to be employed by the Company in the conduct of its
business violates any law, regulation, judgment, agreement, order or
decree applicable to the Company which, if enforced, would result in a
Material Adverse Change with respect to the Company.
(k) Compliance With Securities Laws. The offer and sale of the
Securities comply in all material respects with all requirements of law,
including all registration requirements of applicable securities laws.
Without limitation of the foregoing, and except with respect to
information provided in writing by FSA to the Underwriter and the Company
(such information being limited to the information included under the
caption "The Certificate Insurer" and the financial statements
incorporated by reference in the Offering Document), the Offering Document
does not contain any untrue statement of a material fact and does not omit
to state a material fact required to be stated therein or necessary to
make the statements made therein, in light of the circumstances under
which they were made, not misleading. The Trust Estate is not required to
be registered as an "investment company" under the Investment Company Act.
The Pooling and Servicing Agreement is not required to be qualified under
the Trust Indenture Act.
(l) Taxes. Any taxes, fees and other governmental charges due and
payable by the Company in connection with the Transaction, the execution
and
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delivery of the Transaction Documents and the issuance of the Securities
have been paid or shall have been paid at or prior to the Date of
Issuance.
(m) Good Title: Absence of Liens: Security Interest. The Company is
the owner of, and has good and marketable title to, the Mortgage Loans
free and clear of all Liens and Restrictions on Transferability other than
such Liens or Restrictions on Transferability as will be satisfied or
removed concurrently with the transfer of the Mortgage Loans to the Trust
Estate, and has full right, corporate power and lawful authority to
assign, transfer and pledge the Mortgage Loans. In the event that, in
contravention of the intention of the parties, the transfer of the
Mortgage Loans by the Company to the Trust Estate is characterized as
other than a sale, such transfer shall be characterized as a secured
financing, and the Trustee shall, for the benefit of the Owners and FSA,
have a valid and perfected first priority security interest in the
Mortgage Loans free and clear of all Liens and Restrictions on
Transferability.
(n) Solvency; Fraudulent Conveyance. The Company is solvent and will
not be rendered insolvent by the transactions contemplated by the
Transaction Documents and, after giving effect to such transactions, the
Company will not be left with an unreasonably small amount of capital with
which to engage in its business. The Company does not intend to incur, or
believe that it has incurred, debts beyond its ability to pay such debts
as they mature. The Company does not contemplate the commencement of
insolvency, bankruptcy, liquidation or consolidation proceedings or the
appointment of a receiver, liquidator, conservator, trustee or similar
official in respect of the Company or any of its assets. The amount of
consideration being received by the Company upon the sale of the
Securities to the Underwriter constitutes reasonably equivalent value and
fair consideration for the interest in the Mortgage Loans evidenced by the
Securities. The Company is not selling the Securities to the Underwriter,
as provided in the Transaction Documents, with any intent to hinder, delay
or defraud any of the Company's creditors.
Section 2.02. [Intentionally Omitted].
Section 2.03. Affirmative Covenants of the Company. The Company hereby
agrees that during the Term of the Agreement, unless FSA shall otherwise
expressly consent in writing:
(a) Compliance With Agreements and Applicable Laws. The Company
shall perform each of its obligations under the Transaction Documents and
shall comply with all material requirements of, and the Securities shall
be offered and sold in accordance with, any law, rule or regulation
applicable to it or thereto, or that are required in connection with its
performance under any of the Transaction Documents.
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(b) Corporate Existence. The Company shall maintain its corporate
existence and shall at all times continue to be duly organized under the
laws of the state of its incorporation and duly qualified and duly
authorized (as described in Sections 2.01(a), (b) and (c) hereof) and
shall conduct its business in accordance with the terms of its articles of
incorporation and bylaws.
(c) Financial Statements; Accountants' Reports; Other Information.
The Company shall keep or cause to be kept in reasonable detail books and
records of account of the Company's assets and business, and shall clearly
reflect therein the transfer of the Mortgage Loans to the Trust and the
sale of the Securities to the Underwriter as a sale of the Company's
interest in the Mortgage Loans evidenced by the Securities. The Company
shall furnish or caused to be furnished to FSA:
(i) Promptly upon receipt thereof, copies of all reports,
statements, certifications, schedules, or other similar items
delivered to or by the Company pursuant to the terms of the
Transaction Documents and, promptly upon request, such other data as
FSA may reasonably request; provided, however, that the Company
shall not be required to deliver any such items if provision by some
other party to FSA is required under the Related Documents unless
such other party wrongfully fails to deliver such item. The Company
shall, upon the request of FSA, permit FSA or its authorized agents
(A) to inspect the books and records of the Company as they may
relate to the Securities, the Mortgage Loans, the obligations of the
Company under the Transaction Documents, the Transaction and, but
only following the occurrence of a Trigger Event, the Company's
business; (B) to discuss the affairs, finances and accounts of the
Company with the Chief Operating Officer and the Chief Financial
Officer of the Company, no more frequently than annually unless a
Trigger Event has occurred; and (C) upon the occurrence of a Trigger
Event, to discuss the affairs, finances and accounts of the Company
with the Company's independent accountants, provided that an officer
of the Company shall have the right to be present during such
discussions. Such inspections and discussions shall be conducted
during normal business hours and shall not unreasonably disrupt the
business of the Company. In addition, the Company shall promptly
(but in no case more than 30 days following issuance or receipt by
the Commonly Controlled Entity) provide to FSA a copy of all
correspondence between a Commonly Controlled Entity and the PBGC,
IRS, Department of Labor or the administrators of a Multiemployer
Plan relating to any Reportable Event or the underfunded status,
termination or possible termination of a Plan or a Multiemployer
Plan. The books and records of the Company will be maintained at the
address of the Company designated herein for receipt of notices,
unless the Company shall otherwise advise the parties hereto in
writing.
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(ii) The Company shall provide or cause to be provided to FSA
an executed original copy of each document executed in connection
with the Transaction within 30 days after the date of closing.
(d) Compliance Certificate. The Company shall deliver to FSA within
90 days after the close of each fiscal year of the Company a certificate
signed by an officer of the Company stating that:
(i) a review of the Company's performance under the
Transaction Documents to which it is a party during such period has
been made under such officer's supervision; and
(ii) to the best of such individual's knowledge following
reasonable inquiry, no Trigger Event, Default or Event of Default
has occurred, or if a Trigger Event, Default or Event of Default has
occurred, specifying the nature thereof and, if the Company has a
right to cure any such Default or Event of Default, stating in
reasonable detail the steps, if any, being taken by the Company to
cure such Default or to otherwise comply with the terms of the
agreement to which such Default or Event of Default relates.
(e) Notice of Material Events. The Company shall promptly inform
FSA in writing of the occurrence of any of the following:
(i) the submission of any claim or the initiation of any legal
process, litigation or administrative or judicial investigation (A)
with respect to a material portion of the Mortgage Loans or (B) in
which a request has been made for certification as a class action
(or equivalent relief) that would involve a material portion of the
Mortgage Loans;
(ii) any change in the location of the Company's principal
office or any change in the location of the Company's books and
records;
(iii) the occurrence of any Trigger Event, Default or Event of
Default; or
(iv) any other event, circumstance or condition that has
resulted, or has a material possibility of resulting, in a Material
Adverse Change in respect of the Company.
(f) Further Assurances. The Company shall, upon the request of FSA,
from time to time, execute, acknowledge and deliver, or cause to be
executed, acknowledged and delivered, within thirty (30) days of such
request, such amendments hereto and such further instruments and take such
further action as may be reasonably necessary to effectuate the intention,
performance and provisions of the Transaction Documents or to protect the
interest of the Trustee,
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for the benefit of the Owners and FSA, in the Mortgage Loans, free and
clear of all Liens and Restrictions on Transferability except the Lien in
favor of the Trustee, for the benefit of the Owners and FSA, and the
Restrictions on Transferability imposed by the Pooling and Servicing
Agreement. In addition, the Company agrees to cooperate in good faith with
S&P and Moody's in connection with any review of the Transaction which may
be undertaken by S&P and Moody's after the date hereof.
(g) Existence. The Company shall maintain its existence and shall at
all times continue to be duly organized under the laws of the state of
California and duly qualified and duly authorized (as described in
Sections 2.01(a), (b) and (c) hereof) and shall conduct its business in
accordance with the terms of its Articles of Incorporation and By-Laws.
(h) Third-Party Beneficiary. The Company agrees that FSA shall have
all rights of a third-party beneficiary in respect of the Pooling and
Servicing Agreement and hereby incorporates and restates its
representations, warranties and covenants as set forth therein for the
benefit of FSA.
Section 2.04. [Intentionally Omitted.]
Section 2.05. Negative Covenants of the Company. The Company hereby agrees
that during the Term of the Agreement, unless FSA shall otherwise expressly
consent in writing:
(a) Restrictions on Liens. The Company shall not (i) create, incur
or suffer to exist, or agree to create, incur or suffer to exist, or
consent to cause or permit in the future (upon the happening of a
contingency or otherwise) the creation, incurrence or existence of any
Lien or Restriction on Transferability on the Mortgage Loans except for
the Lien in favor of the Trustee, for the benefit of the Owners and FSA,
and the Restrictions on Transferability imposed by the Pooling and
Servicing Agreement or (ii) sign or file under the Uniform Commercial Code
of any jurisdiction any financing statement which names the Company as a
debtor, or sign any security agreement authorizing any secured party
thereunder to file such financing statement, with respect to the Mortgage
Loans, except in each case any such instrument solely securing the rights
and preserving the Lien of the Trustee, for the benefit of the Owners and
FSA.
(b) Impairment of Rights. The Company shall not take any action, or
fail to take any action, if such action or failure to take action may (i)
interfere with the enforcement of any rights under the Transaction
Documents that are material to the rights, benefits or obligations of the
Trustee, the Owners or FSA, (ii) result in a Material Adverse Change in
respect of any Mortgage Loan or (iii)
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impair the ability of the Company to perform its obligations under the
Transaction Documents.
(c) Waiver, Amendments, Etc. The Company shall not waive, modify or
amend, or consent to any waiver, modification or amendment of, any of the
provisions of any of the Transaction Documents.
Section 2.06. [Intentionally Omitted.]
ARTICLE III
THE POLICY; REIMBURSEMENT; INDEMNIFICATION
Section 3.01. Issuance of the Policy. FSA agrees to issue the Policy
subject to satisfaction of the conditions precedent set forth in Appendix A
hereto.
Section 3.02. Payment of Fees and Premium.
(a) Legal Fees. On the Date of Issuance, the Company shall pay or
cause to be paid legal fees and disbursements incurred by FSA in
connection with the issuance of the Policy pursuant to the terms of the
Premium Letter.
(b) Rating Agency Fees. The initial fees of S&P and Moody's with
respect to the Securities and the transactions contemplated hereby shall
be paid by the Company in full on the Date of Issuance, or otherwise
provided for to the satisfaction of FSA. All periodic and subsequent fees
of S&P or Moody's with respect to, and directly allocable to, the
Securities shall be the responsibility of the Company. The fees for any
other rating agency shall be paid by the party requesting such other
agency's rating, unless such other agency is a substitute for S&P or
Moody's in the event that S&P or Moody's is no longer rating the
Securities, in which case the cost for such agency shall be the
responsibility of the Company.
(c) Auditors' Fees. In the event that FSA's auditors are required to
provide information or any consent in connection with the Offering
Document prepared prior to the Date of Issuance, fees therefor in an
amount set forth in the Premium Letter shall be paid by the Company. The
Company shall pay on demand any additional fees of FSA's auditors payable
in respect of any Offering Document that are reasonably incurred after the
Date of Issuance. It is understood that FSA's auditors shall not incur any
additional fees in respect of future offering documents except at the
request of or with the consent of the Company.
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(d) Premium. In consideration of the issuance by FSA of the Policy,
FSA shall be entitled to receive the Premium as and when due in accordance
with the terms of the Premium Letter (i) in the case of Premium due on or
before the Date of Issuance, directly from the Company and (ii) in the
case of Premium due after the Date of Issuance pursuant to Section 7.5 of
the Pooling and Servicing Agreement. The Premium paid hereunder or under
the Pooling and Servicing Agreement shall be nonrefundable without regard
to whether FSA makes any payment under the Policy or any other
circumstances relating to the Securities or provision being made for
payment of the Securities prior to maturity.
Section 3.03. Reimbursement and Additional Payment Obligation. The
Company agrees to pay to FSA the following amounts as and when incurred:
(a) a sum equal to the total of all amounts paid by FSA under the
Policy;
(b) any and all out-of-pocket charges, fees, costs and expenses
which FSA may reasonably pay or incur, including, but not limited to,
attorneys' and accountants' fees and expenses, in connection with (i) in
the event of payments under the Policy, any accounts established to
facilitate payments under the Policy, to the extent FSA has not been
immediately reimbursed on the date that any amount is paid by FSA under
the Policy, or other administrative expenses relating to such payments
under the Policy, (ii) the enforcement, defense or preservation of any
rights in respect of any of the Related Documents, including defending,
monitoring or participating in any litigation or proceeding (including any
insolvency or bankruptcy proceeding in respect of any participant in the
Transaction or any affiliate thereof) relating to any of the Related
Documents, any party to any of the Related Documents or the Transaction,
(iii) any amendment, waiver or other action with respect to, or related
to, any Related Document whether or not executed or completed, and (iv)
any review or investigation made by FSA in those circumstances where its
approval or consent is sought under any of the Related Documents;
(c) interest on any and all amounts described in Section 3.03 or
Section 3.02(d) from the date due to FSA pursuant to the provisions hereof
until payment thereof in full, payable to FSA at the Late Payment Rate per
annum; and
(d) any payments made by FSA on behalf of, or advanced to, the
Company including, without limitation, any amounts payable by the Company
pursuant to the Securities or any other Related Documents; and any
payments made by FSA as, or in lieu of, any servicing, management,
trustee, custodial or administrative fees payable, in the reasonable
discretion of FSA to third parties in connection with the Transaction.
Notwithstanding any provision of this Section to the contrary, the payment
obligations set forth herein shall be non-recourse obligations with respect to
the Company and shall
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be payable only from monies available for such payment in accordance with the
provisions of the Pooling and Servicing Agreement (except to the extent that any
such payment obligation arises from a failure to perform or default of the
Company or any affiliate thereof under any Transaction Document or by reason of
gross negligence, willful misconduct or bad faith on the part of the Company in
the performance of its duties and obligations thereunder or reckless disregard
by the Company of its duties and obligations thereunder).
Section 3.04. Indemnification.
(a) Indemnification by the Company. In addition to any and all
rights of reimbursement, indemnification, subrogation and any other rights
pursuant hereto or under law or in equity, the Company agrees to pay, and
to protect, indemnify and save harmless, FSA and its officers, directors,
shareholders, employees, agents and each Person, if any, who controls FSA
within the meaning of either Section 15 of the Securities Act or Section
20 of the Exchange Act from and against any and all claims, losses,
liabilities (including penalties), actions, suits, judgments, demands,
damages, costs or expenses (including, without limitation, reasonable fees
and expenses of attorneys, consultants and auditors and reasonable costs
of investigations) of any nature arising out of or relating to the
transactions contemplated by the Related Documents by reason of:
(i) the gross negligence, bad faith, willful misconduct,
misfeasance, malfeasance or theft committed by any director,
officer, employee or agent of the Company;
(ii) the breach by the Company of any representation, warranty
or covenant under any of the Transaction Documents or the
occurrence, in respect of the Company, under any of the Transaction
Documents of any "event of default" or any event which, with the
giving of notice or the lapse of time or both, would constitute any
"event of default" with respect to the Company;
(iii) any untrue statement or alleged untrue statement of a
material fact contained in any Offering Document or any omission or
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, except insofar as such claims arise out of or are based
upon any untrue statement or omission in information included in an
Offering Document and furnished by FSA in writing expressly for use
therein (all such information so furnished being referred to herein
as "FSA Information"), it being understood that, in respect of the
initial Offering Document, the FSA Information is limited to the
information included under the caption "The Certificate Insurer" and
the financial statements of FSA incorporated therein by reference.
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(b) Intentionally Omitted.
(c) Conduct of Actions or Proceedings. If any action or proceeding
(including any governmental investigation) shall be brought or asserted
against FSA, any officer, director, shareholder, employee or agent of FSA
or any Person controlling FSA (individually, an "Indemnified Party" and,
collectively, the "Indemnified Parties") in respect of which indemnity may
be sought from the Company (the "Indemnifying Party") hereunder, FSA shall
promptly notify the Indemnifying Party in writing, and the Indemnifying
Party shall assume the defense thereof, including the employment of
counsel reasonably satisfactory to FSA and the payment of all expenses. An
Indemnified Party shall have the right to employ separate counsel in any
such action and to participate in the defense thereof at the expense of
the Indemnified Party; provided, however, that the fees and expenses of
such separate counsel shall be at the expense of the Indemnifying Party if
(i) the Indemnifying Party has agreed to pay such fees and expenses, (ii)
the Indemnifying Party shall have failed, within a reasonable period of
time, to assume the defense of such action or proceeding and employ
counsel reasonably satisfactory to FSA in any such action or proceeding or
(iii) the named parties to any such action or proceeding (including any
impleaded parties) include both the Indemnified Party and the Indemnifying
Party, and the Indemnified Party shall have been advised by counsel that
(A) 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 (B) the representation of the Indemnifying Party and the Indemnified
Party by the same counsel would be inappropriate or contrary to prudent
practice (in which case, if the 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 or proceeding on
behalf of such Indemnified Party, it being understood, however, that the
Indemnifying Party shall not, in connection with any one such action or
proceeding or separate but substantially similar or related actions or
proceedings 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 at any time for the
Indemnified Parties, which firm shall be designated in writing by FSA).
The Indemnifying Party shall not be liable for any settlement of any such
action or proceeding effected without its written consent to the extent
that any such settlement shall be prejudicial to the Indemnifying Party,
but, if settled with its written consent, or if there be a final judgment
for the plaintiff in any such action or proceeding with respect to which
the Indemnifying Party shall have received notice in accordance with this
subsection (c), the Indemnifying Party agrees to indemnify and hold the
Indemnified Parties harmless from and against any loss or liability by
reason of such settlement or judgment.
(d) Contribution. To provide for just and equitable contribution if
the indemnification provided by the Indemnifying Party is determined to be
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unavailable for any Indemnified Party (other than due to application of
this Section), each Indemnifying Party shall contribute to the losses
incurred by the Indemnified Party on the basis of the relative fault of
the Indemnifying Party, on the one hand, and the Indemnified Party, on the
other hand.
Section 3.05. Subrogation. Subject only to the priority of payment
provisions of the Pooling and Servicing Agreement, the Company acknowledges
that, to the extent of any payment made by FSA pursuant to the Policy, FSA is to
be fully subrogated to the extent of such payment and any additional interest
due on any late payment, to the rights of the Owners to any moneys paid or
payable in respect of the Securities under the Related Documents or otherwise.
The Company agrees to such subrogation and, further, agrees to execute such
instruments and to take such actions as, in the reasonable judgment of FSA, are
necessary to evidence such subrogation and to perfect the rights of FSA to
receive any moneys paid or payable in respect of the Securities under the
Related Documents or otherwise.
ARTICLE IV
FURTHER AGREEMENTS
Section 4.01. Effective Date: Term of Agreement. This Insurance Agreement
shall take effect on the Date of Issuance and shall remain in effect until the
later of (a) such time as FSA is no longer subject to a claim under the Policy
and the Policy shall have been surrendered to FSA for cancellation and (b) all
amounts payable to FSA and the Owners under the Related Documents and under the
Securities have been paid in full; provided, however, that the provisions of
Sections 3.02, 3.03 and 3.04 hereof shall survive any termination of this
Agreement.
Section 4.02. Obligations Absolute.
(a) The payment obligations of the Company hereunder shall be
absolute and unconditional, and shall be paid strictly in accordance with
this Agreement under all circumstances irrespective of (i) any lack of
validity or enforceability of, or any amendment or other modifications of,
or waiver with respect to, any of the Related Documents, the Securities or
the Policy; (ii) any exchange or release of any other obligations
hereunder; (iii) the existence of any claim, setoff, defense, reduction,
abatement or other right which the Company may have at any time against
FSA or any other Person; (iv) any document presented in connection with
the Policy proving to be forged, fraudulent, invalid or insufficient in
any respect, including any failure to strictly comply with the terms of
the Policy, or any statement therein being untrue or inaccurate in any
respect; (v) any failure of the Company to receive the proceeds from the
sale of the Securities; (vii) any breach by the Company of any
representation, warranty or covenant contained in any of the Related
Documents; or (viii) any other circumstances, other than
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payment in full, which might otherwise constitute a defense available to,
or discharge of, the Company in respect of any Related Document.
(b) The Company and any and all others who are now or may become
liable for all or part of the obligations of the Company under this
Agreement agree to be bound by this Agreement and (i) to the extent
permitted by law, waive and renounce any and all redemption and exemption
rights and the benefit of all valuation and appraisement privileges
against the indebtedness, if any, and obligations evidenced by any Related
Document or by any extension or renewal thereof; (ii) waive presentment
and demand for payment, notices of nonpayment and of dishonor, protest of
dishonor and notice of protest; (iii) waive all notices in connection with
the delivery and acceptance hereof and all other notices in connection
with the performance, default or enforcement of any payment hereunder
except as required by the Related Documents; (iv) waive all rights of
abatement, diminution, postponement or deduction, or to any defense other
than payment, or to any right of setoff or recoupment arising out of any
breach under any of the Related Documents, by any party thereto or any
beneficiary thereof, or out of any obligation at any time owing to the
Company; (v) agree that any consent, waiver or forbearance hereunder with
respect to an event shall operate only for such event and not for any
subsequent event; (vi) consent to any and all extensions of time that may
be granted by FSA with respect to any payment hereunder or other
provisions hereof and to the release of any security at any time given for
any payment hereunder, or any part thereof, with or without substitution,
and to the release of any Person or entity liable for any such payment;
and (vii) consent to the addition of any and all other makers, endorsers,
guarantors and other obligors for any payment hereunder, and to the
acceptance of any and all other security for any payment hereunder, and
agree that the addition of any such obligors or security shall not affect
the liability of the parties hereto for any payment hereunder.
(c) Nothing herein shall be construed as prohibiting the Company
from pursuing any rights or remedies it may have against any Person other
than FSA in a separate legal proceeding.
Section 4.03. Assignments; Reinsurance; Third-Party Rights.
(a) This Agreement shall be a continuing obligation of the parties
hereto and shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns. The Company
may not assign its rights under this Agreement, or delegate any of its
duties hereunder, without the prior written consent of FSA. Any assignment
made in violation of this Agreement shall be null and void.
(b) FSA shall have the right to give participations in its rights
under this Agreement and to enter into contracts of reinsurance with
respect to the Policy upon such terms and conditions as FSA may in its
discretion determine;
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provided, however, that no such participation or reinsurance agreement or
arrangement shall relieve FSA of any of its obligations hereunder or under
the Policy.
(c) In addition, FSA shall be entitled to assign or pledge to any
bank or other lender providing liquidity or credit with respect to the
Transaction or the obligations of FSA in connection therewith any rights
of FSA under the Related Documents or with respect to any real or personal
property or other interests pledged to FSA, or in which FSA has a security
interest, in connection with the Transaction.
(d) Except as provided herein with respect to participants and
reinsurers, nothing in this Agreement shall confer any right, remedy or
claim, express or implied, upon any Person, including, particularly, any
Owner, other than FSA, against the Company, and all the terms, covenants,
conditions, promises and agreements contained herein shall be for the sole
and exclusive benefit of the parties hereto and their successors and
permitted assigns. Neither the Trustee nor any Owner shall have any right
to payment from any premiums paid or payable hereunder or from any other
amounts paid by the Company pursuant to Section 3.02, 3.03 or 3.04 hereof.
Section 4.04. Liability of FSA. Neither FSA nor any of its officers,
directors or employees shall be liable or responsible for: (a) the use which may
be made of the Policy by the Trustee or for any acts or omissions of the Trustee
in connection therewith or (b) the validity, sufficiency, accuracy or
genuineness of documents delivered to FSA (or its Fiscal Agent) in connection
with any claim under the Policy, or of any signatures thereon, even if such
documents or signatures should in fact prove to be in any or all respects
invalid, insufficient, fraudulent or forged (unless FSA had actual knowledge
thereof). In furtherance and not in limitation of the foregoing, FSA (or its
Fiscal Agent) may accept documents that appear on their face to be in order,
without responsibility for further investigation.
ARTICLE V
EVENTS OF DEFAULT; REMEDIES
Section 5.01. Events of Default. The occurrence of any of the following
events shall constitute an Event of Default with respect to the Company
hereunder:
(a) any representation or warranty made by the Company under any of
the Related Documents, or in any certificate or report furnished under any
of the Related Documents, shall prove to be untrue or incorrect in any
material respect; provided, however, that if the Company effectively cures
any such defect in any representation or warranty under any Related
Document, or certificate or report furnished under any Related Document,
within the time period specified
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in the relevant Related Document as the cure period therefor, or, in
respect of this Agreement, if the Company effectively cures any such
defect in any representation or warranty hereunder, or certificate or
report furnished hereunder, within thirty (30) days of notice to the
Company or discovery thereof by the Company, such defect shall not in and
of itself constitute an Event of Default hereunder;
(b) (i) the Company shall fail to pay when due any amount payable by
the Company under any of the Related Documents unless such amounts are
paid in full within any applicable cure period explicitly provided for
under the relevant Related Document; (ii) the Company shall have asserted
that any of the Related Documents to which it is a party is not valid and
binding on the parties thereto; or (iii) any court, governmental authority
or agency having jurisdiction over any of the parties to any of the
Related Documents or any property thereof shall find or rule that any
material provision of any of the Related Documents is not valid and
binding on the parties thereto;
(c) the Company shall fail to perform or observe any other covenant
or agreement contained in any of the Related Documents (except for the
obligations described under clause (b) above) and such failure shall
continue for a period of 30 days after written notice given it; provided,
however, that, if such failure shall be of a nature that it cannot be
cured within 30 days, such failure shall not constitute an Event of
Default hereunder if within such 30-day period the Company shall have
given notice to FSA of corrective action it proposes to take, which
corrective action is agreed in writing by FSA to be satisfactory, such
written agreement not to be unreasonably withheld, and the Company shall
thereafter pursue such corrective action diligently until such default is
cured;
(d) the Company shall fail to pay its debts generally as they come
due, or shall admit in writing its inability to pay its debts generally,
or shall make a general assignment for the benefit of creditors, or shall
institute any proceeding seeking to adjudicate itself insolvent or seeking
a liquidation, or shall take advantage of any insolvency act, or shall
commence a case or other proceeding naming itself as debtor under the
United States Bankruptcy Code or similar law, domestic or foreign, or a
case or other proceeding shall be commenced against the Company under the
United States Bankruptcy Code or similar law, domestic or foreign, or any
proceeding shall be instituted against the Company seeking liquidation of
its assets and the Company shall fail to take appropriate action resulting
in the withdrawal or dismissal of such proceeding within 30 days or there
shall be appointed or the Company shall consent to, or acquiesce in, the
appointment of a receiver, liquidator, conservator, trustee or similar
official in respect of the Company or the whole or any substantial part of
its properties or assets or the Company shall take any corporate action in
furtherance of any of the foregoing; and
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(e) the occurrence of an "event of default" under any of the Related
Documents.
Section 5.02. Remedies: Waivers. (a) Upon the occurrence of an Event of
Default, FSA may exercise any one or more of the rights and remedies set forth
below:
(i) exercise any rights and remedies available under the Related
Documents with respect to the Company in its own capacity or in its
capacity as the Person entitled to exercise the rights of the Owners in
respect of the Securities; or
(ii) take whatever action at law or in equity that may appear
necessary or desirable in its judgment to enforce performance of any
obligation of the Company under the Related Documents.
(b) Unless otherwise expressly provided, no remedy herein conferred upon
or reserved is intended to be exclusive of any other available remedy, but each
remedy shall be cumulative and shall be in addition to other remedies given
under the Related Documents or existing at law or in equity. No delay or failure
to exercise any right or power accruing under any Related Document upon the
occurrence of any Event of Default or otherwise shall impair any such right or
power or shall be construed to be a waiver thereof, but any such right and power
may be exercised from time to time and as often as may be deemed expedient. In
order to entitle FSA to exercise any remedy reserved to FSA in this Article, it
shall not be necessary to give any notice, other than such notice as may be
expressly required in this Article.
(c) If any proceeding has been commenced to enforce any right or remedy
under this Agreement and such proceeding has been discontinued or abandoned for
any reason, or has been determined adversely to FSA, then and in every such case
the parties hereto shall, subject to any determination in such proceeding, be
restored to their respective former positions hereunder, and, thereafter, all
rights and remedies of FSA shall continue as though no such proceeding had been
instituted.
(d) FSA shall have the right, to be exercised in its complete discretion,
to waive any covenant, Default or Event of Default by a writing setting forth
the terms, conditions and extent of such waiver signed by FSA and delivered to
the Company. Any such waiver may only be effected in a writing duly executed by
FSA, and no other course of conduct shall constitute a waiver of any provision
hereof. Unless such writing expressly provides to the contrary, any waiver so
granted shall extend only to the specific event or occurrence so waived and not
to any other similar event or occurrence.
ARTICLE VI
MISCELLANEOUS
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Section 6.01. Amendments. Etc. This Agreement may be amended, modified or
terminated only by written instrument or written instruments signed by the
parties hereto. No act or course of dealing shall be deemed to constitute an
amendment, modification or termination hereof.
Section 6.02. Notices. All demands, notices and other communications to be
given hereunder shall be in writing (except as otherwise specifically provided
herein) and shall be mailed by registered mail or personally delivered or
telecopied to the recipient as follows:
(a) To FSA: Financial Security Assurance Inc.
350 Park Avenue
New York, NY 10022
Attention: Surveillance Department
Re: Accredited Mortgage Loan Trust 1996-1
Mortgage Loan Asset-Backed Certificates,
Series 1996-1
Confirmation: (212) 826-0100
Telecopy Nos.: (212) 339-3518, (212) 339-3529
(in each case in which notice or other
communication to FSA refers to an Event of
Default, a claim on the Policy or with
respect to which failure on the part of FSA
to respond shall be deemed to constitute
consent or acceptance, then a copy of such
notice or other communication should also be
sent to the attention of each of the General
Counsel and the Head--Financial Guaranty
Group and shall be marked to indicate
"URGENT MATERIAL ENCLOSED.")
(b) To the Trustee: [Bankers Trust Company
Corporate Trust and Agency Group
Four Albany Street
New York, New York 10006
Attention: ____________________]
(c) To the Company: Accredited Home Lenders, Inc.
15030 Avenue of Science, Suite 100
San Diego, California 92128
Attention: President and Executive Vice President
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A party may specify an additional or different address or addresses by
writing mailed or delivered to the other party as aforesaid. All such notices
and other communications shall be effective upon receipt.
Section 6.03. Payment Procedure. In the event of any payment by FSA for
which it is entitled to be reimbursed or indemnified as provided above, the
Company agrees to accept the voucher or other evidence of payment as prima facie
evidence of the propriety thereof and the liability therefor to FSA. All
payments to be made to FSA under this Agreement shall be made to FSA in lawful
currency of the United States of America in immediately available funds to the
account number provided in the Premium Letter before 1:00 p.m. (New York, New
York time) on the date when due or as FSA shall otherwise direct by written
notice to the Company. In the event that the date of any payment to FSA or the
expiration of any time period hereunder occurs on a day which is not a Business
Day, then such payment or expiration of time period shall be made or occur on
the next succeeding Business Day with the same force and effect as if such
payment was made or time period expired on the scheduled date of payment or
expiration date. Payments to be made to FSA under this Agreement shall bear
interest at the Late Payment Rate from the date when due to the date paid.
Section 6.04. Severability. In the event that any provision of this
Agreement shall be held invalid or unenforceable by any court of competent
jurisdiction, the parties hereto agree that such holding shall not invalidate or
render unenforceable any other provision hereof. The parties hereto further
agree that the holding by any court of competent jurisdiction that any remedy
pursued by any party hereto is unavailable or unenforceable shall not affect in
any way the ability of such party to pursue any other remedy available to it.
Section 6.05. Governing Law. THIS AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK.
Section 6.06. Consent to Jurisdiction. (a) THE PARTIES HERETO HEREBY
IRREVOCABLY SUBMIT TO THE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR
THE SOUTHERN DISTRICT OF NEW YORK AND ANY COURT IN THE STATE OF NEW YORK LOCATED
IN THE CITY AND COUNTY OF NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, IN
ANY ACTION, SUIT OR PROCEEDING BROUGHT AGAINST IT AND TO OR IN CONNECTION WITH
ANY OF THE TRANSACTION DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREUNDER OR
FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND THE PARTIES HERETO HEREBY
IRREVOCABLY AND UNCONDITIONALLY AGREE THAT ALL CLAIMS IN RESPECT OF ANY SUCH
ACTION OR PROCEEDING MAY BE HEARD OR DETERMINED IN SUCH NEW YORK STATE COURT OR,
TO THE EXTENT PERMITTED BY LAW, IN SUCH FEDERAL COURT. THE PARTIES HERETO AGREE
THAT A FINAL JUDGMENT IN ANY SUCH ACTION, SUIT OR PROCEEDING SHALL BE CONCLUSIVE
AND MAY BE ENFORCED IN OTHER
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JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. TO
THE EXTENT PERMITTED BY APPLICABLE LAW, EACH PARTY HERETO HEREBY WAIVES AND
AGREES NOT TO ASSERT BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE IN ANY SUCH
SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE
JURISDICTION OF SUCH COURTS, THAT THE SUIT, ACTION OR PROCEEDING IS BROUGHT IN
AN INCONVENIENT FORUM, THAT THE VENUE OF THE SUIT, ACTION OR PROCEEDING IS
IMPROPER OR THAT THE TRANSACTION DOCUMENTS OR THE SUBJECT MATTER THEREOF MAY NOT
BE LITIGATED IN OR BY SUCH COURTS.
(b) To the extent permitted by applicable law, the parties hereto shall
not seek and hereby waive the right to any review of the judgment of any such
court by any court of any other nation or jurisdiction which may be called upon
to grant an enforcement of such judgment.
(c) The Company hereby irrevocably appoints and designates CT Corporation
System, whose address is 1633 Broadway, New York, New York 10019, as its true
and lawful attorney and duly authorized agent for acceptance of service of legal
process. The Company agrees that service of such process upon such Person shall
constitute personal service of such process upon it.
(d) Nothing contained in this Agreement shall limit or affect FSA's right
to serve process in any other manner permitted by law or to start legal
proceedings relating to any of the Transaction Documents against the Company or
its property in the courts of any jurisdiction.
Section 6.07. Consent of FSA. In the event that FSA's consent is required
under any of the Transaction Documents, the determination whether to grant or
withhold such consent shall be made by FSA in its sole discretion without any
implied duty towards any other Person, except as otherwise expressly provided
therein.
Section 6.08. Counterparts. This Agreement may be executed in counterparts
by the parties hereto, and all such counterparts shall constitute one and the
same instrument.
Section 6.09. Trial by Jury Waived. EACH PARTY HERETO HEREBY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO A TRIAL BY JURY IN RESPECT OF
ANY LITIGATION ARISING DIRECTLY OR INDIRECTLY OUT OF, UNDER OR IN CONNECTION
WITH ANY OF THE TRANSACTION DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED
THEREUNDER. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT IT
WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND
(B) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THE
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TRANSACTION DOCUMENTS TO WHICH IT IS A PARTY BY, AMONG OTHER THINGS, THIS
WAIVER.
Section 6.10. Limited Liability. No recourse under any Transaction
Document shall be had against, and no personal liability shall attach to, any
officer, employee, director, affiliate or shareholder of any party hereto, as
such, by the enforcement of any assessment or by any legal or equitable
proceeding, by virtue of any statute or otherwise in respect of any of the
Transaction Documents, the Securities or the Policy, it being expressly agreed
and understood that each Transaction Document is solely a corporate obligation
of each party hereto, and that any and all personal liability, either at common
law or in equity, or by statute or constitution, of every such officer,
employee, director, affiliate or shareholder for breaches by any party hereto of
any obligations under any Transaction Document is hereby expressly waived as a
condition of and in consideration for the execution and delivery of this
Agreement.
Section 6.11. Entire Agreement. This Agreement, the Premium Letter and the
Policy set forth the entire agreement between the parties with respect to the
subject matter thereof, and this Agreement supersedes and replaces any agreement
or understanding that may have existed between the parties prior to the date
hereof in respect of such subject matter.
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IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement, all as of the day and year first above written.
FINANCIAL SECURITY ASSURANCE INC.
By /s/ Russell Brewer
-----------------------------
Authorized Officer
ACCREDITED HOME LENDERS, INC.
By /s/ Ray W. McKewon
-----------------------------
Authorized Officer
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APPENDIX I
DEFINITIONS
"Accumulated Funding Deficiency" shall have the meaning provided in
Section 412 of the Code and Section 302 of ERISA, whether or not waived.
"Agreement" means this Insurance and Indemnity Agreement.
"Business Day" means any day other than (a) a Saturday or Sunday or (b) a
day on which banking institutions in the City of New York, New York, or in the
city in which the Corporate Trust Office of the Trustee is located, are
authorized or obligated by law or executive order to be closed.
"Class B and Class R Certificates" means the Series 1996-1 Class B-1,
Class B-2 and Class R Certificates issued under the Pooling and Servicing
Agreement.
"Closing Date" means September 27, 1996.
"Code" means the Internal Revenue Code of 1986, including, unless the
context otherwise requires, the rules and regulations thereunder, as amended
from time to time.
"Commission" means the Securities and Exchange Commission.
"Commonly Controlled Entity" means the Company and each entity, whether or
not incorporated, which is affiliated with the Company pursuant to Section
414(b), (c), (m) or (o) of the Code.
"Company" means Accredited Home Lenders, Inc. and its successors.
"Date of Issuance" means the date on which the Policy is issued as
specified therein.
"Default" means any event which results, or which with the giving of
notice or the lapse of time or both would result, in an Event of Default.
"ERISA" means the Employee Retirement Income Security Act of 1974,
including, unless the context otherwise requires, the rules and regulations
thereunder, as amended from time to time.
"Event of Default" means any event of default specified in Section 5.01 of
the Insurance Agreement.
"Expiration Date" means the final date of the Term of the Policy, as
specified in the Policy.
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"FSA" means Financial Security Assurance Inc., a New York stock insurance
company, its successors and assigns.
"Financial Statements" means with respect to the Company the balance
sheets as of December 31, 1994 and 1995 and the statements of income, retained
earnings and cash flows for the 12-month period then ended and the notes thereto
and the balance sheet and the statement of income, retained earnings and cash
flows for the fiscal quarter ended June 30, 1996 and the notes thereto.
"Fiscal Agent" means the Fiscal Agent, if any, designated pursuant to the
terms of the Policy.
"Indemnification Agreement" means the Indemnification Agreement, dated as
of September 23, 1996 among FSA, the Company and the Underwriter, as the same
may be amended from time to time.
"Insurance Agreement" means this Insurance and Indemnity Agreement dated
as of September 1, 1996, between FSA and the Company, as the same may be amended
from time to time.
"Investment Company Act" means the Investment Company Act of 1940,
including, unless the context otherwise requires, the rules and regulations
thereunder, as amended from time to time.
"IRS" means the Internal Revenue Service.
"Late Payment Rate" means the lesser of (a) the then applicable highest
rate of interest on the Securities and (b) the maximum rate permissible under
applicable usury or similar laws limiting interest rates. The Late Payment Rate
shall be computed on the basis of the actual number of days elapsed over a year
of 360 days.
"Lien" means, as applied to the property or assets (or the income or
profits therefrom) of any Person, in each case whether the same is consensual or
nonconsensual or arises by contract, operation of law, legal process or
otherwise: (a) any mortgage, lien, pledge, attachment, charge, lease,
conditional sale or other title retention agreement, or other security interest
or encumbrance of any kind; or (b) any arrangement, express or implied, under
which such property or assets are transferred, sequestered or otherwise
identified for the purpose of subjecting or making available the same for the
payment of debt or performance of any other obligation in priority to the
payment of the general, unsecured creditors of such Person.
"Material Adverse Change" means, (a) in respect of any Person, a material
adverse change in the ability of such Person to perform its obligations under
any of the Transaction Documents to which it is a party and (b) in respect of
any Mortgage Loan, a material adverse change in (i) the value or marketability
of such Mortgage Loan or (ii)
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the probability that amounts now or hereafter due in respect of such Mortgage
Loan will be collected in full.
"Moody's" means Moody's Investors Service, Inc., a Delaware corporation,
and any successor thereto, and, if such corporation shall for any reason no
longer perform the functions of a securities rating agency, "Moody's" shall be
deemed to refer to any other nationally recognized rating agency designated by
FSA.
"Mortgage Documents" means the Mortgage Notes, Mortgages, assignments of
Mortgages and other related documents required to be delivered to the Trustee
pursuant to Section ____ of the Pooling and Servicing Agreement.
"Mortgage Loan" has the meaning provided in the Pooling and Servicing
Agreement.
"Multiemployer Plan" means a multiemployer plan (within the meaning of
Section 4001(a)(3) of ERISA) in respect of which a Commonly Controlled Entity
makes contributions or has liability.
"Offering Document" means the Prospectus dated September 23, 1996 of the
Company in respect of the Securities and any amendment or supplement thereto and
any other offering document in respect of the Securities that makes reference to
the Policy.
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
agency, corporation or instrumentality of the United States to which the duties
and powers of the Pension Benefit Guaranty Corporation are transferred.
"Person" means an individual, joint stock the Company, trust,
unincorporated association, joint venture, corporation, business or owner trust,
partnership or other organization or entity (whether governmental or private).
"Plan" means any pension plan (other than a Multiemployer Plan) covered by
Title IV of ERISA, which is maintained by a Commonly Controlled Entity or in
respect of which a Commonly Controlled Entity has liability.
"Policy" means the financial guaranty insurance policy, including any
endorsements thereto, issued by FSA with respect to the Securities,
substantially in the form attached as Annex I to this Agreement.
"Pooling and Servicing Agreement" means the Pooling and Servicing
Agreement, dated as of September 1, 1996, among the Company, as sponsor and
master servicer, and the Trustee on behalf of FSA and the Owners, pursuant to
which the Securities are to be issued and the Mortgage Loans are to be serviced
and administered, as the same may be amended from time to time.
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"Premium" means the premium payable in accordance with Section 3.02 of
this Insurance Agreement.
"Premium Letter" means the side letter between FSA and the Company dated
the date hereof in respect of the premium payable by the Company in
consideration of the issuance of the Policy.
"Prospectus" means the form of prospectus, as supplemented, relating to
the Securities, as first filed with the Commission pursuant to Rule 424 under
the Securities Act.
"Related Documents" means the Transaction Documents and any documents,
agreements, instruments, schedules, certificates, statements, cash flow
schedules, number runs or other writings or data furnished to FSA by or on
behalf of the Company with respect to either of them, or the Transaction.
"Registration Statement" means the registration statement on Form S-3 (No.
33- 07219), including a form of prospectus, relating to the Securities, as
amended to the date hereof.
"Reportable Event" means any of the events set forth in Section 4043(b) of
ERISA or the regulations thereunder.
"Restrictions on Transferability" means, as applied to the property or
assets (or the income or profits therefrom) of any Person, in each case whether
the same is consensual or nonconsensual or arises by contract, operation of law,
legal process or otherwise, any material condition to, or restriction on, the
ability of such Person or any transferee therefrom to sell, assign, transfer or
otherwise liquidate such property or assets in a commercially reasonable time
and manner or which would otherwise materially deprive such Person or any
transferee therefrom of the benefits of ownership of such property or assets.
"Securities" means $92,121,000 of the Accredited Mortgage Loan Trust
1996-1 Mortgage Loan Asset-Backed Certificates, Series 1996-1, Class A-1 and
Class A-2 Certificates issued pursuant to the Pooling and Servicing Agreement.
"Securities Act" means the Securities Act of 1933, including, unless the
context otherwise requires, the rules and regulations thereunder, as amended
from time to time.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
including, unless the context otherwise requires, the rules and regulations
thereunder, as amended from time to time.
"S&P" means Standard & Poor's Corporation, a New York corporation, and any
successor thereto, and, if such corporation shall for any reason no longer
perform the
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functions of a securities rating agency, "S&P" shall be deemed to refer to any
other nationally recognized rating agency designated by FSA.
"Subsidiary" means, with respect to any Person, any corporation of which a
majority of the outstanding shares of capital stock having ordinary voting power
for the election of directors is at the time owned by such Person directly or
through one or more Subsidiaries.
"Term of the Agreement" shall be determined as provided in Section 4.01 of
this Insurance Agreement.
"Term of the Policy" has the meaning provided in the Policy.
"Transaction" means the transaction contemplated by the Transaction
Documents, including the transaction described in the Offering Document.
"Transaction Documents" means this Insurance Agreement, the
Indemnification Agreement, the Pooling and Servicing Agreement, the Underwriting
Agreement and the Premium Letter.
"Trigger Event" means the occurrence of any one of the following: (a) an
Event of Default under this Insurance Agreement has occurred and is continuing,
(b) any legal proceeding or binding arbitration is instituted with respect to
the Transaction, (c) any governmental or administrative investigation, action or
proceeding is instituted that would, if adversely decided, result in a Material
Adverse Change in respect of the Company or of a material portion of the
Mortgage Loans or (d) FSA pays a claim under the Policy.
"Trust" has the meaning provided in the Pooling and Servicing Agreement.
"Trustee" means Bankers Trust Company, a New York banking corporation, as
trustee under the Pooling and Servicing Agreement, and any successor thereto as
trustee under the Pooling and Servicing Agreement.
"Trust Estate" has the meaning provided in the Pooling and Servicing
Agreement.
"Trust Indenture Act" means the Trust Indenture Act of 1939, including,
unless the context otherwise requires, the rules and regulations thereunder, as
amended from time to time.
"Underfunded Plan" means any Plan that has an Underfunding.
"Underfunding" means, with respect to any Plan, the excess, if any, of (a)
the present value of all benefits under the Plan (based on the assumptions used
to fund the Plan pursuant to Section 412 of the Code) as of the most recent
valuation date over (b) the fair market value of the assets of such Plan as of
such valuation date.
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"Underwriter" means any of Lehman Brothers Inc., or its parents,
subsidiaries and affiliates and any shareholder, director, officer, employee,
agent or "controlling person" (as such item is used in the Securities Act) of
any of the foregoing.
"Underwriting Agreement" means the Underwriting Agreement between the
Underwriter and the Company with respect to the offer and sale of the
Securities, as the same may be amended from time to time.
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APPENDIX II
OPINIONS OF COUNSEL
There shall be delivered to FSA opinions of counsel as follows:
(i) opinions to the effect that the Securities have been duly
issued, and the Transaction Documents have been duly executed and
delivered and constitute legal, valid and binding obligations, enforceable
in accordance with their respective terms;
(ii) opinions as to compliance with applicable securities laws,
including, but not limited to, opinions to the effect that:
(A) to the best of counsel's knowledge, no filing or
registration with or notice to or consent, approval, authorization
or order of any court or governmental authority or agency is
required for the consummation of the Transaction, except such as may
be required and have been obtained under the Securities Act and
state securities or "blue sky" laws;
(B) the Registration Statement is effective under the
Securities Act and, to the best of counsel's knowledge and
information, no stop order suspending the effectiveness of the
Registration Statement has been issued under the Securities Act or
proceedings therefor initiated or threatened by the Commission;
(C) the Trust Estate is not required to be registered under
the Investment Company Act; and
(D) the Pooling and Servicing Agreement is not required to be
qualified under the Trust Indenture Act;
(iii) an opinion to the effect that (A) the Trustee is the owner
of the Mortgage Loans, holding good and marketable title thereto; (B) the
Mortgage Loans would not be included as part of the estate of the Company
in the event of any receivership or insolvency proceedings in respect of
the Company; and (C) the transfer of the Mortgage Loans by the Company to
the Trustee would be characterized by a court of competent jurisdiction as
sales of such Mortgage Loans and not as a borrowing by the Company or a
relationship of joint ownership, partnership, joint venture or similar
arrangement;
(iv) an opinion to the effect that (A) the Trust Estate qualifies
as a REMIC for federal income tax purposes; and (B) the Trust Estate will
not be subject to income taxes in the State of New York.
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APPENDIX A
TO INSURANCE AND INDEMNITY AGREEMENT
CONDITIONS PRECEDENT TO ISSUANCE OF THE POLICY
(a) Payment of Initial Premium and Expenses; Premium Letter. FSA
shall have been paid, by or on behalf of the Company; a nonrefundable Premium
and shall have been reimbursed, by or on behalf the Company, for other fees and
expenses identified in Section 3.02 of the Agreement payable at closing as
provided in the Premium Letter and FSA shall have received a fully executed copy
of the Premium Letter.
(b) Transaction Documents. FSA shall have received a copy of each of
the Transaction Documents, in form and substance satisfactory to FSA, duly
authorized, executed and delivered by each party thereto. Without limiting the
foregoing, the provisions of the Pooling and Servicing Agreement relating to the
payment to FSA of Premium due on the Policy and the reimbursement to FSA of
amounts paid under the Policy shall be in form and substance acceptable to FSA
in its sole discretion.
(c) Certified Documents and Resolutions. FSA shall have received a
copy of (i) the articles of incorporation and bylaws of the Company and (ii) the
resolutions of the Company's Board of Directors authorizing the transfer of the
Mortgage Loans to the Trust and the execution, delivery and performance by the
Company of the Transaction Documents and the transactions contemplated thereby,
certified by the Secretary or an Assistant Secretary of the Company (which
certificate shall state that such certificate of incorporation, bylaws and
resolutions are in full force and effect without modification on the Date of
Issuance).
(d) Incumbency Certificate. FSA shall have received a certificate of
the Secretary or an Assistant Secretary of the Company certifying the names and
signatures of the officers of the Company authorized to execute and deliver the
Transaction Documents and that shareholder consent to the execution and delivery
of such documents is not necessary.
(e) Representations and Warranties; Certificate. The representations
and warranties of the Company in this Agreement shall be true and correct as of
the Date of Issuance as if made on the Date of Issuance and FSA shall have
received a certificate of appropriate officers of the Company to that effect.
(f) Opinions of Counsel. FSA shall have received opinions of counsel
addressed to FSA, Moody's and S&P in respect of the Company, the other parties
to the Transaction Documents and the Transaction in form and substance
satisfactory to FSA, addressing such matters as FSA may reasonably request,
including without limitation, the items set forth in Appendix II hereto, and the
counsel providing each such opinion shall have been instructed by its client to
deliver such opinion to the addressees thereof.
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(g) Approvals, Etc. FSA shall have received true and correct copies
of all approvals, licenses and consents, if any, including, without limitation,
any approval of the shareholders of the Company required in connection with the
Transaction.
(h) No Litigation, Etc. No suit, action or other proceeding,
investigation, or injunction or final judgment relating thereto, shall be
pending or threatened before any court or governmental agency in which it is
sought to restrain or prohibit or to obtain damages or other relief in
connection with any of the Transaction Documents or the consummation of the
Transaction.
(i) Legality. No statute, rule, regulation or order shall have been
enacted, entered or deemed applicable by any government or governmental or
administrative agency or court which would make the transactions contemplated by
any of the Transaction Documents illegal or otherwise prevent the consummation
thereof.
(j) Satisfaction of Conditions of Underwriting Agreement. All
conditions in the Underwriting Agreement to the Underwriter's obligation to
purchase the Securities shall have been satisfied.
(k) Issuance of Ratings. FSA shall have received confirmation that
the risk secured by the Policy constitutes an investment grade risk by S&P and
an insurable risk by Moody's and that the Securities, when issued, will be rated
"AAA" by S&P and "Aaa" by Moody's.
(l) Delivery of Mortgage Documents. FSA shall have received evidence
satisfactory to it that: (i) delivery has been made to the Trustee of the
Mortgage Documents required to be so delivered pursuant to Section ____ of the
Pooling and Servicing Agreement; and (ii) each Mortgage Note is endorsed as
provided in Section ____ of the Pooling and Servicing Agreement.
(m) No Default. No Default or Event of Default shall have occurred.
(n) Additional Items. FSA shall have received such other documents,
instruments, approvals or opinions requested by FSA as may be reasonably
necessary to effect the Transaction, including but not limited to evidence
satisfactory to FSA that all conditions precedent, if any, in the Related
Documents have been satisfied.
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