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): September 25, 1996
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.
(AS DEPOSITOR UNDER THE POOLING AND SERVICING AGREEMENT,
DATED AS OF SEPTEMBER 1, 1996, PROVIDING FOR THE ISSUANCE OF
ASSET-BACKED FLOATING RATE CERTIFICATES, SERIES 1996-LB1)
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 33-84924 13-3439681
-------- -------- ----------
(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification Number)
Seven World Trade Center
NEW YORK, NEW YORK 10048
- ------------------ -----
(Address of Principal (Zip Code)
Executive Offices)
Registrant's telephone number, including area code: (212) 783-5659
<PAGE>
-2-
Item 2. ACQUISITION OR DISPOSITION OF ASSETS
Description of the Certificates and the Mortgage Pools
On September 25, 1996, a single series of certificates,
entitled Salomon Brothers Mortgage Securities VII, Inc., Asset-Backed Floating
Rate Certificates, Series 1996-LB1 (the "Certificates"), were issued pursuant to
a pooling and servicing agreement, dated as of September 1, 1996 (the
"Agreement"), attached hereto as Exhibit 4.1, among Salomon Brothers Mortgage
Securities VII, Inc. as depositor (the "Depositor"), Long Beach Mortgage Company
("Long Beach") as master servicer (in such capacity, the "Master Servicer") and
Norwest Bank Minnesota, N.A., as trustee (the "Trustee"). The Certificates
consist of two classes of certificates (together, the "Certificates"),
designated as the "Class A Certificates" and the "Class R Certificates." The
Certificates evidence in the aggregate the entire beneficial ownership interest
in a trust fund (the "Trust Fund"), consisting primarily of a segregated pool
(the "Mortgage Pool") of conventional, one- to four- family, adjustable rate,
first lien mortgage loans having original terms to maturity ranging from 10
years to 30 years (the "Mortgage Loans"). The Mortgage Pool consists of Mortgage
Loans having an aggregate principal balance of $153,320,388.94 as of September
1, 1996 (the "Cut-off Date"). The Mortgage Loans were purchased pursuant to the
Mortgage Loan Purchase Agreement (the "Purchase Agreement"), dated September 20,
1996, among the Depositor, Salomon Brothers Realty Corp. and Long Beach. The
Certificates were sold by the Depositor to Salomon Brothers Inc, an affiliate of
the Depositor, pursuant to an underwriting agreement, dated September 20, 1996,
between the Depositor and Salomon.
The Certificates have the following initial Certificate
Balances and initial PassThrough Rates:
===============================================================================
Initial Certificate
CLASS PRINCIPAL BALANCE INITIAL PASS-THROUGH RATE
- -------------------------------------------------------------------------------
A $149,564,000.00 5.82875%
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R $3,756,388.94 N/A
===============================================================================
The Class A Certificates and the Mortgage Loans are more
particularly described in the Prospectus, dated September 20, 1996, and the
Prospectus Supplement, dated September 20, 1996, as previously filed with the
Securities and Exchange Commission pursuant to Rule 424(b). The Class R
Certificates have not been and will not be publicly offered by the Depositor.
Capitalized terms used but not otherwise defined herein shall have the meanings
assigned to them in the Prospectus Supplement.
<PAGE>
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Item 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Not applicable
(b) Not applicable
(c) Exhibits
EXHIBIT NO. DESCRIPTION
----------- -----------
4.1 Pooling and Servicing Agreement, dated as of
September 1, 1996, by and among Salomon Brothers
Mortgage Securities VII, Inc. as Depositor, Long
Beach Mortgage Company as Master Servicer and
Norwest Bank Minnesota, N.A., as Trustee,
relating to the Series 1996-LB1 Certificates.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
Dated: September 25, 1996
SALOMON BROTHERS MORTGAGE
SECURITIES VII, INC.
By: /s/ Susan S. Woodbury
------------------------------
Name: Susan S. Woodbury
Title: Assistant Vice President
<PAGE>
INDEX TO EXHIBITS
-----------------
SEQUENTIALLY
EXHIBIT NO. DESCRIPTION NUMBERED PAGE
----------- ----------- -------------
4.1 Pooling and Servicing Agreement, dated as of 7
September 1, 1996, by and among Salomon
Brothers Mortgage Securities VII, Inc. as
Depositor, Long Beach Mortgage Company as
Master Servicer and Norwest Bank Minnesota,
N.A. as Trustee, relating to the Series 1996-
LB1 Certificates.
Exhibit 4.1
<PAGE>
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.,
Depositor
LONG BEACH MORTGAGE COMPANY,
Master Servicer
and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
Trustee
-----------------------------------------
POOLING AND SERVICING AGREEMENT
Dated as of September 1, 1996
-----------------------------------------
Asset-Backed Floating Rate Certificates
Series 1996-LB1
<PAGE>
TABLE OF CONTENTS
-----------------
SECTION PAGE
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ARTICLE I
DEFINITIONS
1.01. Defined Terms.................................................. 2
Accrued Certificate Interest................................... 2
Adjustment Date................................................ 2
Affiliate...................................................... 2
Agreement...................................................... 2
Assignment..................................................... 2
Available Distribution Amount.................................. 2
Available Funds Pass-Through Rate.............................. 3
Bankruptcy Amount.............................................. 3
Bankruptcy Code................................................ 3
Bankruptcy Loss................................................ 4
Basis Risk Shortfall........................................... 4
Book-Entry Certificate......................................... 4
Business Day................................................... 4
Certificate.................................................... 4
Certificate Factor............................................. 4
Certificate Insurer............................................ 4
Certificate Insurer Default.................................... 4
Certificate Insurer Premium.................................... 5
Certificate Insurer Premium Rate............................... 5
Certificateholder or Holder.................................... 5
Certificate Owner.............................................. 6
Certificate Principal Balance.................................. 6
Certificate Register and Certificate Registrar................. 6
Class ....................................................... 6
Class A Certificate............................................ 6
Class A Principal Distribution Amount.......................... 6
Class R Certificate............................................ 7
Closing Date................................................... 7
Code ....................................................... 7
Collection Account............................................. 7
Corporate Trust Office......................................... 8
Cumulative Insurance Payments.................................. 8
Custodial Agreement............................................ 8
Custodian...................................................... 8
Cut-off Date................................................... 8
Debt Service Reduction......................................... 8
Deficiency Amount.............................................. 8
i
<PAGE>
SECTION PAGE
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Deficiency Event............................................... 9
Deficient Valuation............................................ 9
Definitive Certificates........................................ 9
Deleted Mortgage Loan.......................................... 9
Delinquency Percentage......................................... 9
Delinquent..................................................... 9
Depositor...................................................... 9
Depository..................................................... 9
Depository Institution......................................... 9
Depository Participant......................................... 10
Determination Date............................................. 10
Directly Operate............................................... 10
Disqualified Organization...................................... 10
Distribution Account........................................... 10
Distribution Date.............................................. 11
Due Date....................................................... 11
Due Period..................................................... 11
Eligible Account............................................... 11
Estate in Real Property........................................ 11
Excess Bankruptcy Loss......................................... 11
Excess Extraordinary Loss...................................... 11
Excess Fraud Loss.............................................. 11
Excess Special Hazard Loss..................................... 11
Excess Subordinated Amount..................................... 11
Expense Account................................................ 11
Expense Adjusted Mortgage Rate................................. 11
Expense Adjusted Maximum Mortgage Rate......................... 12
Extraordinary Loss............................................. 12
Extraordinary Loss............................................. 12
FDIC ....................................................... 12
FHLMC ....................................................... 13
Final Recovery Determination................................... 13
FNMA ....................................................... 13
Fraud Loss..................................................... 13
Fraud Loss Amount.............................................. 13
Gross Margin................................................... 13
Guaranteed Distribution........................................ 13
Independent.................................................... 13
Independent Contractor......................................... 14
Index ....................................................... 14
Insurance Agreement............................................ 14
Insurance Payment.............................................. 14
Insurance Proceeds............................................. 14
Interest Accrual Period........................................ 14
Interest Determination Date.................................... 15
Interest Distribution Amount................................... 15
Late Collections............................................... 15
ii
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SECTION PAGE
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Liquidation Event.............................................. 15
Liquidation Proceeds........................................... 15
Loan-to-Value Ratio............................................ 15
London Business Day............................................ 15
Majority Class R Certificateholder............................. 15
Master Servicer................................................ 16
Master Servicer Event of Default............................... 16
Master Servicer Remittance Date................................ 16
Maximum Class A Pass-Through Rate.............................. 16
Maximum Mortgage Rate.......................................... 16
Minimum Mortgage Rate.......................................... 16
Minimum Spread................................................. 16
Monthly Payment................................................ 16
Moody's ....................................................... 16
Mortgage....................................................... 16
Mortgage File.................................................. 17
Mortgage Loan.................................................. 17
Mortgage Loan Purchase Agreement............................... 17
Mortgage Loan Schedule......................................... 17
Mortgage Note.................................................. 19
Mortgage Pool.................................................. 19
Mortgage Rate.................................................. 19
Mortgaged Property............................................. 20
Mortgagor...................................................... 20
Net Monthly Excess Cashflow.................................... 20
Net Mortgage Rate.............................................. 20
New Lease...................................................... 20
Nonrecoverable P&I Advance..................................... 20
Non-United States Person....................................... 20
Officers' Certificate.......................................... 20
One-Month LIBOR................................................ 20
One-Month LIBOR Pass-Through Rate.............................. 21
Opinion of Counsel............................................. 21
Original Mortgage Loan......................................... 21
Originator..................................................... 21
Ownership Interest............................................. 21
Pass-Through Rate.............................................. 21
Percentage Interest............................................ 21
Periodic Rate Cap.............................................. 22
Permitted Investments.......................................... 22
Permitted Transferee........................................... 23
Person ....................................................... 23
P&I Advance.................................................... 23
Policy ....................................................... 23
Policy Payments Account........................................ 23
iii
<PAGE>
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Prepayment Assumption.......................................... 23
Prepayment Interest Shortfall.................................. 23
Prepayment Period.............................................. 24
Principal Prepayment........................................... 24
Purchase Price................................................. 24
Qualified Substitute Mortgage Loan............................. 24
Rating Agency or Rating Agencies............................... 25
Realized Loss.................................................. 25
Record Date.................................................... 26
Reference Banks................................................ 26
Refinanced Mortgage Loan....................................... 27
Regular Certificate............................................ 27
Regular Interest............................................... 27
Relief Act..................................................... 27
Relief Act Interest Shortfall.................................. 27
REMIC ....................................................... 27
REMIC Provisions............................................... 27
Remittance Report.............................................. 27
Rents from Real Property....................................... 27
REO Account.................................................... 27
REO Disposition................................................ 27
REO Imputed Interest........................................... 27
REO Principal Amortization..................................... 28
REO Property................................................... 28
Request for Release............................................ 28
Required Subordinated Amount................................... 28
Reserve Interest Rate.......................................... 28
Residential Dwelling........................................... 29
Residual Certificate........................................... 29
Residual Interest.............................................. 29
Responsible Officer............................................ 29
Scheduled Principal Balance.................................... 29
Seller ....................................................... 30
Servicing Account.............................................. 30
Servicing Advances............................................. 30
Servicing Fee.................................................. 30
Servicing Fee Rate............................................. 30
Servicing Officer.............................................. 30
Single Certificate............................................. 31
Special Hazard Amount.......................................... 31
Special Hazard Loss............................................ 31
S&P ....................................................... 31
Startup Day.................................................... 31
Stated Principal Balance....................................... 31
Stayed Funds................................................... 32
iv
<PAGE>
SECTION PAGE
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Stepped Down Required Subordinated Percentage.................. 32
Stepped Up Required Subordinated Amount........................ 32
Subordinated Amount............................................ 32
Subordination Deficiency Amount................................ 33
Subordination Increase Amount.................................. 33
Subordination Reduction Amount................................. 33
Sub-Servicer................................................... 33
Sub-Servicing Account.......................................... 33
Sub-Servicing Agreement........................................ 33
Tax Returns.................................................... 33
Termination Price.............................................. 33
Terminator..................................................... 33
Transfer....................................................... 33
Transferee..................................................... 34
Transferor..................................................... 34
Trust Fund..................................................... 34
Trustee ....................................................... 34
Trustee's Fee.................................................. 34
Trustee's Fee Rate............................................. 34
Uninsured Cause................................................ 34
United States Person........................................... 34
Unpaid Basis Risk Shortfalls................................... 35
Value ....................................................... 35
Voting Rights.................................................. 35
1.02. Allocation of Certain Interest Shortfalls...................... 35
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS;
ORIGINAL ISSUANCE OF CERTIFICATES
2.01. Conveyance of Mortgage Loans................................... 36
2.02. Acceptance by Trustee.......................................... 38
2.03. Repurchase or Substitution of Mortgage Loans by the Originator,
the Seller or the Depositor.................................... 39
2.04. Representations and Warranties of the Depositor................ 43
2.05. Representations, Warranties and Covenants of the Master
Servicer....................................................... 45
2.06. Issuance of Certificates....................................... 47
ARTICLE III
ADMINISTRATION AND SERVICING
OF THE TRUST FUND
3.01. Master Servicer to Act as Master Servicer...................... 48
v
<PAGE>
SECTION PAGE
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3.02. Sub-Servicing Agreements Between Master Servicer and
Sub-Servicers.................................................. 49
3.03. Successor Sub-Servicers........................................ 51
3.04. Liability of the Master Servicer............................... 51
3.05. No Contractual Relationship Between Sub-Servicers and Trustee
or Certificateholders.......................................... 51
3.06. Assumption or Termination of Sub-Servicing Agreements by
Trustee........................................................ 52
3.07. Collection of Certain Mortgage Loan Payments................... 52
3.08. Sub-Servicing Accounts......................................... 52
3.09. Collection of Taxes, Assessments and Similar Items; Servicing
Accounts....................................................... 53
3.10. Collection Account and Distribution Account.................... 53
3.11. Withdrawals from the Collection Account and Distribution
Account........................................................ 56
3.12. Investment of Funds in the Collection Account, the Expense
Account and the Distribution Account........................... 57
3.13. [intentionally omitted]........................................ 58
3.14. Maintenance of Hazard Insurance and Errors and Omissions and
Fidelity Coverage.............................................. 58
3.15. Enforcement of Due-On-Sale Clauses; Assumption Agreements...... 60
3.16. Realization Upon Defaulted Mortgage Loans...................... 61
3.17. Trustee to Cooperate; Release of Mortgage Files................ 63
3.18. Servicing Compensation......................................... 64
3.19. Reports to the Trustee; Collection Account Statements.......... 65
3.20. Statement as to Compliance..................................... 65
3.21. Independent Public Accountants' Servicing Report............... 65
3.22. Access to Certain Documentation................................ 66
3.23. Title, Management and Disposition of REO Property.............. 66
3.24. Obligations of the Master Servicer in Respect of Prepayment
Interest Shortfalls............................................ 69
3.25. Expense Account................................................ 70
3.26. Obligations of the Master Servicer in Respect of Mortgage Rates
and Monthly Payments........................................... 70
ARTICLE IV
PAYMENTS TO CERTIFICATEHOLDERS
4.01. Distributions.................................................. 71
4.02. Statements to Certificateholders............................... 74
4.03. Remittance Reports; P&I Advances............................... 77
4.04. Allocation of Realized Losses.................................. 79
4.05. Compliance with Withholding Requirements....................... 80
ARTICLE V
THE CERTIFICATES
vi
<PAGE>
SECTION PAGE
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5.01. The Certificates............................................... 81
5.02. Registration of Transfer and Exchange of Certificates.......... 82
5.03. Mutilated, Destroyed, Lost or Stolen Certificates.............. 87
5.04. Persons Deemed Owners.......................................... 87
5.05. Certain Available Information.................................. 88
ARTICLE VI
THE DEPOSITOR AND THE MASTER SERVICER
6.01. Liability of the Depositor and the Master Servicer............. 89
6.02. Merger or Consolidation of the Depositor or the Master
Servicer....................................................... 89
6.03. Limitation on Liability of the Depositor, the Master Servicer
and Others..................................................... 89
6.04. Limitation on Resignation of the Master Servicer............... 90
6.05. Rights of the Depositor in Respect of the Master Servicer...... 91
ARTICLE VII
DEFAULT
7.01. Master Servicer Events of Default.............................. 92
7.02. Trustee to Act; Appointment of Successor....................... 94
7.03. Notification to Certificateholders............................. 96
7.04. Waiver of Master Servicer Events of Default.................... 97
ARTICLE VIII
CONCERNING THE TRUSTEE
8.01. Duties of Trustee.............................................. 98
8.02. Certain Matters Affecting the Trustee.......................... 99
8.03. Trustee Not Liable for Certificates or Mortgage Loans..........100
8.04. Trustee May Own Certificates...................................100
8.05. Trustee's Fees and Expenses....................................101
8.06. Eligibility Requirements for Trustee...........................101
8.07. Resignation and Removal of the Trustee.........................102
8.08. Successor Trustee..............................................102
8.09. Merger or Consolidation of Trustee.............................103
8.10. Appointment of Co-Trustee or Separate Trustee..................103
8.11. Appointment of Custodians......................................105
8.12. Appointment of Office or Agency................................105
8.13. Representations and Warranties of the Trustee..................105
ARTICLE IX
vii
<PAGE>
SECTION PAGE
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CERTAIN MATTERS REGARDING THE CERTIFICATE INSURER
9.01. Rights of the Certificate Insurer To Exercise Rights of Class A
Certificateholders.............................................107
9.02. Trustee To Act Solely with Consent of the Certificate Insurer..107
9.03. Trust Fund and Accounts Held for Benefit of the Certificate
Insurer........................................................108
9.04. Claims Upon the Policy; Policy Payments Account................108
9.05 Effect of Payments by the Certificate Insurer; Subrogation.....110
9.06. Notices to the Certificate Insurer.............................110
9.07. Third-Party Beneficiary........................................110
9.08. Trustee to Hold the Policy.....................................110
9.09. Termination of Master Servicer.................................111
ARTICLE X
TERMINATION
10.01 Termination Upon Repurchase or Liquidation of All Mortgage
Loans..........................................................112
10.02 Additional Termination Requirements............................114
ARTICLE XI
REMIC PROVISIONS
11.01. REMIC Administration...........................................115
11.02. Prohibited Transactions and Activities.........................117
11.03. Master Servicer and Trustee Indemnification....................118
ARTICLE XII
MISCELLANEOUS PROVISIONS
12.01. Amendment......................................................119
12.02. Recordation of Agreement; Counterparts.........................120
12.03. Limitation on Rights of Certificateholders.....................120
12.04. Governing Law..................................................121
12.05. Notices........................................................121
12.06. Severability of Provisions.....................................122
12.07. Notice to Rating Agencies and Certificate Insurer..............122
12.08. Article and Section References.................................123
viii
<PAGE>
EXHIBITS
Exhibit A-1 Form of Class A Certificate
Exhibit A-2 Form of Class R Certificate
Exhibit B Form of Financial Guaranty Insurance Policy
Exhibit C-1 Form of Trustee's Initial Certification
Exhibit C-2 Form of Trustee's Final Certification
Exhibit D Form of Mortgage Loan Purchase Agreement
Exhibit E-1 Request for Release
Exhibit E-2 Request for Release Mortgage Loans paid in full
Exhibit F-1 Form of Transferor Representation Letter and Form of
Transferee Representation Letter in Connection with
Transfer of Class R Certificates Pursuant to Rule 144A
Under the 1933 Act
Exhibit F-2 Form of Transfer Affidavit and Agreement and Form of
Transferor Affidavit in Connection with Transfer of
Residual Certificates
Exhibit G [Intentionally Omitted]
Exhibit H Form of Custodial Agreement
Schedule 1 Mortgage Loan Schedule
ix
<PAGE>
This Pooling and Servicing Agreement, is dated and effective
as of September 1, 1996, among SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.,
as Depositor, LONG BEACH MORTGAGE COMPANY, as Master Servicer, and NORWEST BANK
MINNESOTA, NATIONAL ASSOCIATION, as Trustee.
PRELIMINARY STATEMENT:
The Depositor intends to sell pass-through certificates
(collectively, the "Certificates"), to be issued hereunder in multiple classes,
which in the aggregate will evidence the entire beneficial ownership interest in
the Trust Fund created hereunder.
As provided herein, the Trustee will elect to treat the
segregated pool of assets consisting of the Mortgage Loans and certain other
related assets subject to this Agreement as a real estate mortgage investment
conduit (a "REMIC") for federal income tax purposes. The Class R Certificates
will be the sole class of "residual interests" in the REMIC for purposes of the
REMIC Provisions. The Class A Certificates will be the "regular interests" in
the REMIC.
The following table irrevocably sets forth the Pass-Through
Rate, initial aggregate Certificate Principal Balance and "latest possible
maturity date" for the respective Classes of Certificates.
<TABLE>
<CAPTION>
Initial Aggregate Latest Possible
DESCRIPTION PASS-THROUGH RATE CERTIFICATE PRINCIPAL BALANCE MATURITY DATE(1)
<S> <C> <C> <C>
Class A Variable(2) $149,564,000.00 September 25, 2026
Class R N/A $ 3,756,388.94 September 25, 2026
</TABLE>
(1) Solely for purposes of Section 1.860G-1(a)(4)(iii) of the Treasury
regulations, the Distribution Date immediately following the maturity date
for the Mortgage Loans with the latest maturity date has been designated
as the "latest possible maturity date" for each Class of Certificates.
(2) Calculated in accordance with the definition of "Pass-Through Rate"
herein.
As of the Cut-off Date, the Original Mortgage Loans had an
aggregate Scheduled Principal Balance equal to $153,320,388.94.
In consideration of the mutual agreements herein contained,
the Depositor, the Master Servicer and the Trustee agree as follows:
<PAGE>
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ARTICLE I
DEFINITIONS
SECTION 1.01. Defined Terms.
Whenever used in this Agreement, including, without
limitation, in the Preliminary Statement hereto, the following words and
phrases, unless the context otherwise requires, shall have the meanings
specified in this Article. Unless otherwise specified, all calculations
described herein shall be made on the basis of a 360-day year consisting of
twelve 30-day months.
"Accrued Certificate Interest": With respect to each
Distribution Date, as to any Class A Certificate, interest accrued during the
related Interest Accrual Period at the PassThrough Rate for such Certificate for
such Distribution Date on the Certificate Principal Balance of such Certificate
immediately prior to such Distribution Date. All distributions of interest on
the Class A Certificates will be calculated on the basis of a 360-day year and
the actual number of days in the applicable Interest Accrual Period. Accrued
Certificate Interest with respect to each Distribution Date, as to any Class A
Certificate, shall be reduced by an amount equal to the portion allocable to
such Certificate pursuant to Section 1.02 hereof of the sum of (a) the aggregate
Prepayment Interest Shortfall, if any, for such Distribution Date to the extent
not covered by payments pursuant to Section 3.24 and (b) the aggregate amount of
any Relief Act Shortfall, if any, for such Distribution Date.
"Adjustment Date": With respect to each Mortgage Loan, the
first day of the month in which the Mortgage Rate of a Mortgage Loan changes
pursuant to the related Mortgage Note. The first Adjustment Date following the
Cut-off Date as to each Mortgage Loan is set forth in the Mortgage Loan
Schedule.
"Affiliate": With respect to any specified Person, any other
Person controlling or controlled by or under common control with such specified
Person. For the purposes of this definition, "control" when used with respect to
any specified Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Agreement": This Pooling and Servicing Agreement and all
amendments hereof and supplements hereto.
"Assignment": An assignment of Mortgage, notice of transfer or
equivalent instrument, in recordable form, which is sufficient under the laws of
the jurisdiction wherein the related Mortgaged Property is located to reflect of
record the sale of the Mortgage.
"Available Distribution Amount": With respect to any
Distribution Date, an amount equal to (1) the sum of (a) the aggregate of the
amounts on deposit in the Collection
<PAGE>
-3-
Account and Distribution Account as of the close of business on the related
Determination Date, (b) the aggregate of any amounts received in respect of an
REO Property withdrawn from any REO Account and deposited in the Distribution
Account for such Distribution Date pursuant to Section 3.23, (c) the aggregate
of any amounts deposited in the Distribution Account by the Master Servicer in
respect of Prepayment Interest Shortfalls for such Distribution Date pursuant to
Section 3.24, (d) the aggregate of any P&I Advances made by the Master Servicer
for such Distribution Date pursuant to Section 4.03 and (e) the aggregate of any
advances made by the Trustee for such Distribution Date pursuant to Section
7.02, reduced (to not less than zero) by (2) the sum of (x) the portion of the
amount described in clause (1)(a) above that represents (i) Monthly Payments on
the Mortgage Loans received from a Mortgagor on or prior to the Determination
Date but due during any Due Period subsequent to the related Due Period, (ii)
Principal Prepayments on the Mortgage Loans received after the related
Prepayment Period (together with any interest payments received with such
Principal Prepayments to the extent they represent the payment of interest
accrued on the Mortgage Loans during a period subsequent to the related
Prepayment Period), (iii) Liquidation Proceeds and Insurance Proceeds received
in respect of the Mortgage Loans after the related Prepayment Period, (iv)
amounts reimbursable or payable to the Depositor, the Master Servicer, the
Trustee, the Originator, the Seller or any Sub-Servicer pursuant to Section 3.11
or Section 3.12 or otherwise payable in respect of extraordinary Trust Fund
expenses, (v) Stayed Funds, (vi) the amount of the Certificate Insurer Premium
payable from the Distribution Account to the Expense Account pursuant to Section
3.25(b) for payment to the Certificate Insurer and the Trustee Fee payable from
the Distribution Account pursuant to Section 8.05 and/or (vii) amounts deposited
in the Collection Account or the Distribution Account in error, and (y) amounts
reimbursable to the Trustee for an advance made pursuant to Section 7.02(b)
which advance the Trustee has determined to be nonrecoverable from the Stayed
Funds in respect of which it was made.
"Available Funds Pass-Through Rate": With respect to the Class
A Certificates and each Distribution Date, a per annum rate equal to the
fraction, expressed as a percentage, the numerator of which is (i) an amount
equal to (A) 1/12 of the aggregate Scheduled Principal Balance of the then
outstanding Mortgage Loans and REO Properties times the weighted average of the
Expense Adjusted Mortgage Rates on the then outstanding Mortgage Loans and REO
Properties minus (B) the amount of the Certificate Insurer Premium with respect
to the Class A Certificates payable to the Certificate Insurer with respect to
the Policy for such Distribution Date, and the denominator of which is (ii) an
amount equal to (A) the then outstanding aggregate Certificate Principal Balance
of the Class A Certificates multiplied by (B) the actual number of days elapsed
in the related Interest Accrual Period divided by 360.
"Bankruptcy Amount": As of any date of determination, $100,000
minus the aggregate amount of Bankruptcy Losses on the Mortgage Loans, if any,
previously allocated to the Residual Certificates in accordance with Section
4.04.
"Bankruptcy Code": The Bankruptcy Reform Act of 1978 (Title 11
of the United States Code), as amended.
<PAGE>
-4-
"Bankruptcy Loss": With respect to any Mortgage Loan, a
Realized Loss resulting from a Deficient Valuation or Debt Service Reduction.
"Basis Risk Shortfall": With respect to the Class A
Certificates and any Distribution Date on which the Pass-Through Rate thereon is
calculated pursuant to the definition thereof using the Available Funds
Pass-Through Rate, an amount equal to interest accrued during the related
Interest Accrual Period on the Certificate Principal Balance of the Class A
Certificates immediately prior to such Distribution Date at a rate equal to the
excess of (a) the lesser of (i) the One-Month LIBOR Pass-Through Rate for such
Distribution Date and (ii) the Maximum Class A Pass-Through Rate over (b) the
Available Funds Pass-Through Rate for such Distribution Date.
"Book-Entry Certificate": The Class A Certificates for so long
as the Certificates of such Class shall be registered in the name of the
Depository or its nominee.
"Business Day": Any day other than a Saturday, a Sunday or a
day on which banking or savings and loan institutions in the State of California
or the State of 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.
"Certificate": Any one of the Depositor's Asset-Backed
Floating Rate Certificates, Series 1996-LB1, Class A or Class R, issued under
this Agreement.
"Certificate Factor": With respect to any Class of Regular
Certificates as of any Distribution Date, a fraction, expressed as a decimal
carried to six places, the numerator of which is the aggregate Certificate
Principal Balance of such Class of Certificates on such Distribution Date (after
giving effect to any distributions of principal and allocations of Realized
Losses in reduction of the Certificate Principal Balance of such Class of
Certificates to be made on such Distribution Date), and the denominator of which
is the initial aggregate Certificate Principal Balance of such Class of
Certificates as of the Closing Date.
"Certificate Insurer": Financial Security Assurance Inc., a
stock insurance company organized and created under the laws of the State of New
York, and any successors thereto.
"Certificate Insurer Default": The existence and continuance
of any of the following:
(a) The Certificate Insurer fails to make a payment
required under the Policy in accordance with its terms; or
(b)(i) the entry by a court having jurisdiction in
the premises of (A) a decree or order for relief in respect of
the Certificate Insurer in an involuntary case or proceeding
under any applicable United States federal or state
bankruptcy, insolvency, rehabilitation, reorganization or
other similar law or (B) a decree or
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order adjudging the Certificate Insurer a bankrupt or
insolvent, or approving as properly filed a petition seeking
reorganizing, rehabilitation, arrangement, adjustment or
composition of or in respect of the Certificate Insurer under
any applicable United States federal or state law, or
appointing a custodian, receiver, liquidator, rehabilitator,
assignee, trustee, sequestrator or other similar official of
the Certificate Insurer or of any substantial part of its
property, or ordering the winding-up or liquidation of its
affairs, and the continuance of any such decree or order for
relief or any such other decree or order unstayed and in
effect for a period of 60 consecutive days; or
(ii) the commencement by the Certificate Insurer of a
voluntary case or proceeding under any applicable United
States federal or state bankruptcy, insolvency, reorganization
or other similar law or of any other case or proceeding to be
adjudicated a bankrupt or insolvent, or the consent of the
Certificate Insurer to the entry of a decree or order for
relief in respect of the Certificate Insurer in an involuntary
case or proceeding under any applicable United States federal
or state bankruptcy, insolvency case or proceeding against the
Certificate Insurer, or the filing by the Certificate Insurer
of a petition or answer or consent seeking reorganization or
relief under any applicable United States federal or state
law, or the consent by the Certificate Insurer to the filing
of such petition or to the appointment of or the taking
possession by a custodian, receiver, liquidator, assignee,
trustee, sequestrator or similar official of the Certificate
Insurer or of any substantial part of its property, or the
failure by the Certificate Insurer to pay debts generally as
they become due, or the admission by the Certificate Insurer
in writing of its inability to pay its debts generally as they
become due, or the taking of corporate action by the
Certificate Insurer in furtherance of any such action.
"Certificate Insurer Premium": The Policy premium payable
pursuant to Section 3.25(b) hereof.
"Certificate Insurer Premium Rate": 0.22% per annum.
"Certificateholder" or "Holder": The Person in whose name a
Certificate is registered in the Certificate Register, and the Certificate
Insurer to the extent of Cumulative Insurance Payments, except that a
"disqualified organization" (as defined in Section 860E(e)(5) of the Code) or a
Non-United States Person shall not be a Holder of a Residual Certificate for any
purposes hereof and, solely for the purposes of giving any consent pursuant to
this Agreement, any Certificate registered in the name of the Depositor or the
Master Servicer or any Affiliate thereof shall be deemed not to be outstanding
and the Voting Rights to which it is entitled shall not be taken into account in
determining whether the requisite percentage of Voting Rights necessary to
effect any such consent has been obtained, except as otherwise provided in
Section 12.01. The Trustee may conclusively rely upon a certificate of the
Depositor or the Master Servicer in determining whether a Certificate is held by
an Affiliate thereof. All references herein to "Holders" or "Certificateholders"
shall reflect the rights of Certificate
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Owners as they may indirectly exercise such rights through the Depository and
participating members thereof, except as otherwise specified herein; provided,
however, that the Trustee shall be required to recognize as a "Holder" or
"Certificateholder" only the Person in whose name a Certificate is registered in
the Certificate Register.
"Certificate Owner": With respect to a Book-Entry Certificate,
the Person who is the beneficial owner of such Certificate as reflected on the
books of the Depository or on the books of a Depository Participant or on the
books of an indirect participating brokerage firm for which a Depository
Participant acts as agent.
"Certificate Principal Balance": With respect to each Class A
Certificate as of any date of determination, the Certificate Principal Balance
of such Class A Certificate on the Distribution Date immediately prior to such
date of determination, minus all distributions allocable to principal made
thereon and Realized Losses allocated thereto on such immediately prior
Distribution Date (or, in the case of any date of determination up to and
including the first Distribution Date, the initial Certificate Principal Balance
of such Class A Certificate, as stated on the face thereof). With respect to
each Class R Certificate as of any date of determination, an amount equal to the
Percentage Interest evidenced by such Certificate times the excess, if any, of
(A) the then aggregate Stated Principal Balance of the Mortgage Loans over (B)
the then aggregate Certificate Principal Balance of all Class A Certificates
then outstanding.
"Certificate Register" and "Certificate Registrar": The
register maintained and the registrar appointed pursuant to Section 5.02.
"Class": Collectively, all of the Certificates bearing the
same class designation.
"Class A Certificate": Any one of the Class A Certificates
executed by the Trustee, and authenticated and delivered by the Certificate
Registrar, substantially in the form annexed hereto as Exhibit A-1 and
evidencing a Regular Interest in the Trust Fund for purposes of the REMIC
Provisions.
"Class A Principal Distribution Amount": With respect to any
Distribution Date, the lesser of:
(a) the excess of the Available Distribution Amount over
the amount payable on the Class A Certificates
pursuant to Section 4.01(a)(i); and
(b) THE SUM OF:
(i) the principal portion of each Monthly Payment due
during the related Due Period, to the extent received
or advanced, on each Mortgage Loan;
(ii) the Stated Principal Balance of any Mortgage
Loan that was purchased during the related Prepayment
Period pursuant to or as
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contemplated by Section 2.03, 3.16(b), 3.26 or 10.01
and the amount of any shortfall deposited in the
Collection Account in connection with the
substitution of a Deleted Mortgage Loan pursuant to
Section 2.03 during the related Prepayment Period;
(iii) the principal portion of all other unscheduled
collections (including, without limitation, Principal
Prepayments, Insurance Proceeds, Liquidation Proceeds
and REO Principal Amortization) received during the
related Prepayment Period, net of any portion thereof
that represents a recovery of principal for which an
advance was made by the Master Servicer pursuant to
Section 4.03 in respect of a preceding Distribution
Date;
(iv) the principal portion of any Realized Losses
incurred (or deemed to have been incurred) on any
Mortgage Loans in the calendar month preceding such
Distribution Date, and the principal portion of any
Realized Losses allocated to the Class A Certificates
on previous Distribution Dates, but not paid under
the Policy due to a Certificate Insurer Default and
not previously paid pursuant to Section
4.01(a)(iii)(B), in each case to the extent covered
by Net Monthly Excess Cashflow for such Distribution
Date; and
(v) the amount of any Subordination Increase Amount
for the Class A Certificates for such Distribution
Date;
MINUS:
(vi) the amount of any Subordination Reduction Amount
for the Class A Certificates for such Distribution
Date.
"Class R Certificate": Any one of the Class R Certificates
executed by the Trustee, and authenticated and delivered by the Certificate
Registrar, substantially in the form annexed hereto as Exhibit A-2 and
evidencing the Residual Interest in the Trust Fund for purposes of the REMIC
Provisions.
"Closing Date": September 25, 1996.
"Code": The Internal Revenue Code of 1986.
"Collection Account": The account or accounts created and
maintained by the Master Servicer pursuant to Section 3.10(a), which shall be
entitled "Long Beach Mortgage Company, as Master Servicer for Norwest Bank
Minnesota, National Association, as Trustee, in trust for (A) registered holders
of Salomon Brothers Mortgage Securities VII, Inc., AssetBacked Floating Rate
Certificates, Series 1996-LB1, and (B) Financial Security Assurance Inc." and
which must be an Eligible Account.
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"Corporate Trust Office": The principal corporate trust office
of the Trustee at which at any particular time its corporate trust business in
connection with this Agreement shall be administered, which office at the date
of the execution of this instrument is located at Sixth Street and Marquette
Avenue, Minneapolis, Minnesota, Attention: Corporate Trust Services or at such
other address as the Trustee may designate from time to time by notice to the
Certificateholders, the Depositor, the Master Servicer and the Certificate
Insurer.
"Cumulative Insurance Payments": As of any time of
determination, the aggregate of all Insurance Payments previously made by the
Certificate Insurer under the Policy plus interest thereon from the date such
amount became due until paid in full, at a rate of interest calculated as
provided in the Insurance Agreement minus the sum of (i) all payments previously
made to the Certificate Insurer pursuant to Section 4.01 hereof as reimbursement
for such amounts and (ii) any payments made by the Certificate Insurer
attributable to Excess Bankruptcy Losses, Excess Fraud Losses, Excess Special
Hazard Losses and Excess Extraordinary Losses.
"Custodial Agreement": An agreement that may be entered into
among the Depositor, the Master Servicer, the Trustee and a Custodian in the
form of Exhibit H annexed hereto or an agreement assigned to the Trustee with
respect to the Mortgage Loans.
"Custodian": A Custodian, which shall not be the Originator,
the Depositor, the Master Servicer, the Seller or any affiliate of any of them,
appointed pursuant to a Custodial Agreement.
"Cut-off Date": With respect to each Original Mortgage Loan,
September 1, 1996. With respect to all Qualified Substitute Mortgage Loans,
their respective dates of substitution. References herein to the "Cut-off Date",
when used with respect to more than one Mortgage Loan, shall be to the
respective Cut-off Dates for such Mortgage Loans.
"Debt Service Reduction": With respect to any Mortgage Loan, a
reduction in the scheduled Monthly Payment for such Mortgage Loan by a court of
competent jurisdiction in a proceeding under the Bankruptcy Code, except such a
reduction resulting from a Deficient Valuation.
"Deficiency Amount": With respect to the Class A Certificates
as of any Distribution Date the sum of (i) any shortfall in amounts available in
the Distribution Account to pay interest on the Class A Certificates for the
related Interest Accrual Period on the aggregate Certificate Principal Balance
of such Class at the then applicable Pass-Through Rate thereon, net of any
Prepayment Interest Shortfalls and Relief Act Interest Shortfalls allocated to
such Class, (ii) the principal portion of any Realized Loss allocated to the
Class A Certificates for such Distribution Date and, without duplication, the
excess, if any, of (a) the aggregate Certificate Principal Balances of the Class
A Certificates then outstanding over (b) the aggregate Stated Principal Balances
of the Mortgage Loans then outstanding, and (iii) without duplication of the
amount specified in clause (ii), the aggregate Certificate Principal Balance of
the Class
<PAGE>
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A Certificates to the extent unpaid on the final Distribution Date or earlier
termination of the Trust Fund pursuant to the terms of this Agreement.
"Deficiency Event": The inability of the Trustee to make the
Guaranteed Distribution on any Distribution Date due to a shortage of funds for
such purpose then held in the Distribution Account and the failure of the
Certificate Insurer to pay in full a claim made in accordance with Policy with
respect to such Distribution Date.
"Deficient Valuation": With respect to any Mortgage Loan, a
valuation of the related Mortgaged 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 Bankruptcy
Code.
"Definitive Certificates": As defined in Section 5.01(b).
"Deleted Mortgage Loan": A Mortgage Loan replaced or to be
replaced by a Qualified Substitute Mortgage Loan.
"Delinquency Percentage": As of any Determination Date, the
percentage equivalent of a fraction, the numerator of which equals the aggregate
Stated Principal Balances of all Mortgage Loans that are 90 or more days
Delinquent or converted to REO Properties as of such Determination Date, and the
denominator of which is the aggregate Stated Principal Balance of the Mortgage
Loans as of such Determination Date.
"Delinquent": A Mortgage Loan is "Delinquent" if any Monthly
Payment due thereon is not made by the close of business on the Determination
Date of the month succeeding the month in which the Due Date for such Monthly
Payment was due. A Mortgage Loan is 90 days Delinquent if such Monthly Payment
has not been received by the close of business on the Determination Date of the
third month succeeding the month in which such Monthly Payment was due.
"Depositor": Salomon Brothers Mortgage Securities VII, Inc., a
Delaware corporation, or its successor in interest.
"Depository": The Depository Trust Company, or any successor
Depository hereafter named. The nominee of the initial Depository, for purposes
of registering those Certificates that are to be Book-Entry Certificates, is
CEDE & Co. The Depository shall at all times be a "clearing corporation" as
defined in Section 8-102(3) of the Uniform Commercial Code of the State of New
York and a "clearing agency" registered pursuant to the provisions of Section
17A of the Securities Exchange Act of 1934, as amended.
"Depository Institution": Any depository institution or trust
company, including the Trustee, that (a) is incorporated under the laws of the
United States of America or any State thereof, (b) is subject to supervision and
examination by federal or state banking authorities and (c) has outstanding
unsecured commercial paper or other short-term unsecured debt obligations
<PAGE>
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that are rated P-1 by Moody's and A-1 by S&P (or comparable ratings if Moody's
and S&P are not the Rating Agencies).
"Depository Participant": A broker, dealer, bank or other
financial institution or other Person for whom from time to time a Depository
effects book-entry transfers and pledges of securities deposited with the
Depository.
"Determination Date": With respect to each Distribution Date,
the 15th day of the calendar month in which such Distribution Date occurs or, if
such 15th day is not a Business Day, the Business Day immediately preceding such
15th day.
"Directly Operate": With respect to any REO Property, the
furnishing or rendering of services to the tenants thereof, the management or
operation of such REO Property, the holding of such REO Property primarily for
sale to customers, the performance of any construction work thereon or any use
of such REO Property in a trade or business conducted by the Trust Fund other
than through an Independent Contractor; provided, however, that the Trustee (or
the Master Servicer on behalf of the Trustee) shall not be considered to
Directly Operate an REO Property solely because the Trustee (or the Master
Servicer on behalf of the Trustee) establishes rental terms, chooses tenants,
enters into or renews leases, deals with taxes and insurance, or makes decisions
as to repairs or capital expenditures with respect to such REO Property.
"Disqualified Organization": Any of the following: (i) the
United States, any State or political subdivision thereof, any possession of the
United States, or any agency or instrumentality of any of the foregoing (other
than an instrumentality which is a corporation if all of its activities are
subject to tax and, except for the FHLMC, a majority of its board of directors
is not selected by such governmental unit), (ii) any foreign government, any
international organization, or any agency or instrumentality of any of the
foregoing, (iii) any organization (other than certain farmers' cooperatives
described in Section 521 of the Code) which is exempt from the tax imposed by
Chapter 1 of the Code (including the tax imposed by Section 511 of the Code on
unrelated business taxable income), (iv) rural electric and telephone
cooperatives described in Section 1381(a)(2)(C) of the Code and (v) any other
Person so designated by the Trustee based upon an Opinion of Counsel that the
holding of an Ownership Interest in a Residual Certificate by such Person may
cause the Trust Fund or any Person having an Ownership Interest in any Class of
Certificates (other than such Person) to incur a liability for any federal tax
imposed under the Code that would not otherwise be imposed but for the Transfer
of an Ownership Interest in a Residual Certificate to such Person. The terms
"United States", "State" and "international organization" shall have the
meanings set forth in Section 7701 of the Code or successor provisions.
"Distribution Account": The trust account or accounts created
and maintained by the Trustee pursuant to Section 3.10(b) which shall be
entitled "Norwest Bank Minnesota, National Association, as Trustee, in trust for
(A) registered holders of Salomon Brothers Mortgage Securities VII, Inc.,
Asset-Backed Floating Rate Certificates, Series 1996-LB1, and (B) Financial
Security Assurance Inc." and which must be an Eligible Account.
<PAGE>
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"Distribution Date": The 25th day of any month, or if such
25th day is not a Business Day, the Business Day immediately following such 25th
day, commencing in October 1996.
"Due Date": With respect to each Distribution Date, the first
day of the calendar month in which such Distribution Date occurs, which is the
day of the month on which the Monthly Payment is due on a Mortgage Loan,
exclusive of any days of grace.
"Due Period": With respect to any Distribution Date, the
period commencing on the second day of the calendar month preceding the calendar
month in which such Distribution Date occurs and ending on the related Due Date.
"Eligible Account": Any of (i) an account or accounts
maintained with a federal or state chartered depository institution or trust
company the short-term unsecured debt obligations of which are rated P-1 by
Moody's and A-1 by S&P (or comparable ratings if Moody's and S&P are not the
Rating Agencies) at the time any amounts are held on deposit therein, (ii) an
account or accounts the deposits in which are fully insured by the FDIC or (iii)
a trust account or accounts maintained with the corporate trust department of a
federal or state chartered depository institution or trust company acting in its
fiduciary capacity. Eligible Accounts may bear interest.
"Estate in Real Property": A fee simple estate in a parcel of
land.
"Excess Bankruptcy Loss": Any Bankruptcy Loss, or portion
thereof, which exceeds the then applicable Bankruptcy Amount.
"Excess Extraordinary Loss": Any Extraordinary Loss, or
portion thereof, which exceeds the then applicable Extraordinary Loss Amount.
"Excess Fraud Loss": Any Fraud Loss, or portion thereof, which
exceeds the then applicable Fraud Loss Amount.
"Excess Special Hazard Loss": Any Special Hazard Loss, or
portion thereof, that exceeds the then applicable Special Hazard Amount.
"Excess Subordinated Amount": With respect to the Class A
Certificates and any Distribution Date, the excess, if any, of (i) the
Subordinated Amount for such Distribution Date over (ii) the Required
Subordinated Amount for such Distribution Date.
"Expense Account": The account established and maintained
pursuant to Section 3.25.
"Expense Adjusted Mortgage Rate": With respect to any Mortgage
Loan, the then applicable Mortgage Rate thereon minus the sum of (i) the Minimum
Spread, (ii) the Trustee's Fee Rate and (iii) the Servicing Fee Rate.
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"Expense Adjusted Maximum Mortgage Rate": With respect to any
Mortgage Loan, the Maximum Mortgage Rate thereon minus the sum of (i) the
Minimum Spread, (ii) the Trustee's Fee Rate and (iii) the Servicing Fee Rate.
"Extraordinary Loss": Any Realized Loss or portion thereof
caused by or resulting from:
(i) wear and tear, deterioration, rust or corrosion, mold, wet or
dry rot; inherent vice or latent defect; animals, birds,
vermin, insects;
(ii) smog, smoke, vapor, liquid or dust discharge from agricultural
or industrial operations; pollution; contamination;
(iii) settling, subsidence, cracking, shrinkage, bulging or
expansion of pavements, foundations, walls, floors, roofs or
ceilings;
(iv) errors in design, faulty workmanship or faulty materials,
unless the collapse of the property or a part thereof ensues
and then only for the ensuing loss;
(v) nuclear or chemical reaction or nuclear radiation or
radioactive or chemical contamination, all whether controlled
or uncontrolled and whether such loss be direct or indirect,
proximate or remote or be in whole or in part caused by,
contributed to or aggravated by a peril covered by the
definition of the term "Special Hazard Loss";
(vi) hostile or warlike action in time of peace or war, including
action in hindering, combating or defending against an actual,
impending or expected attack by any government or sovereign
power, DE JURE or DE FACTO, or by any authority maintaining or
using military, naval or air forces, or by military, naval or
air forces, or by an agent of any such government, power,
authority or forces;
(vii) any weapon of war employing atomic fission or radioactive
forces whether in time of peace or war, and
(viii) insurrection, rebellion, revolution, civil war, usurped power
or action taken by governmental authority in hindering,
combating or defending against such an occurrence, seizure or
destruction under quarantine or customs regulations,
confiscation by order of any government or public authority,
or risks of contraband or illegal transactions or trade.
"Extraordinary Loss Amount": As of any date of determination,
$153,788, minus the aggregate amount of Extraordinary Losses on the Mortgage
Loans, if any, previously allocated to the Residual Certificates in accordance
with Section 4.04.
"FDIC": Federal Deposit Insurance Corporation or any successor
thereto.
<PAGE>
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"FHLMC": Federal Home Loan Mortgage Corporation or any
successor thereto.
"Final Recovery Determination": With respect to any defaulted
Mortgage Loan or any REO Property (other than a Mortgage Loan or REO Property
purchased by the Originator, the Seller, the Depositor, the Master Servicer or
the Certificate Insurer pursuant to or as contemplated by Section 2.03, 3.16(c)
or 10.01), a determination made by the Master Servicer that all Insurance
Proceeds, Liquidation Proceeds and other payments or recoveries which the Master
Servicer, in its reasonable good faith judgment, expects to be finally
recoverable in respect thereof have been so recovered. The Master Servicer shall
maintain records, prepared by a Servicing Officer, of each Final Recovery
Determination made thereby.
"FNMA": Federal National Mortgage Association or any successor
thereto.
"Fraud Loss": Any Realized Loss or portion thereof sustained
by reason of a default arising from intentional fraud, dishonesty or
misrepresentation in connection with the related Mortgage Loan.
"Fraud Loss Amount": As of any date of determination after the
Cut-off Date, an amount equal to: (X) prior to the first anniversary of the
Cut-off Date, 3.00% (initially, $4,600,680) of the aggregate outstanding
principal balance of all of the Mortgage Loans as of the Cut-off Date minus the
aggregate amount of Fraud Losses on the Mortgage Loans allocated solely to the
Residual Certificates in accordance with Section 4.04 since the Cut-off Date up
to such date of determination, (Y) from the first to the second anniversary of
the Cut-off Date, (1) the lesser of (a) the Fraud Loss Amount as of the most
recent anniversary of the Cut-off Date and (b) 2.00% of the aggregate
outstanding principal balance of all of the Mortgage Loans as of the most recent
anniversary of the Cut-off Date minus (2) the Fraud Losses on the Mortgage Loans
allocated solely to the Residual Certificates in accordance with Section 4.04
since the most recent anniversary of the Cut-off Date up to such date of
determination and (Z) from the second anniversary to the fifth anniversary of
the Cut-off Date, (1) the lesser of (a) the Fraud Loss Amount as of the most
recent anniversary of the Cut-off Date and (b) 1.00% of the aggregate
outstanding principal balance of all of the Mortgage Loans as of the most recent
anniversary of the Cut-off Date minus (2) the Fraud Losses on the Mortgage Loans
allocated solely to the Residual Certificates in accordance with Section 4.04
since the most recent anniversary of the Cut-off Date up to such date of
determination. On and after the fifth anniversary of the Cut-off Date, the Fraud
Loss Amount shall be zero.
"Gross Margin": With respect to each Mortgage Loan, the fixed
percentage set forth in the related Mortgage Note that is added to the Index on
each Adjustment Date in accordance with the terms of the related Mortgage Note
used to determine the Mortgage Rate for such Mortgage Loan.
"Guaranteed Distribution": As defined in the Policy.
"Independent": When used with respect to any specified Person,
any such Person who (a) is in fact independent of the Depositor, the Master
Servicer, the Originator and their
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respective Affiliates, (b) does not have any direct financial interest in or any
material indirect financial interest in the Depositor, the Originator, the
Master Servicer or any Affiliate thereof, and (c) is not connected with the
Depositor, the Originator, the Master Servicer or any Affiliate thereof as an
officer, employee, promoter, underwriter, trustee, partner, director or Person
performing similar functions; provided, however, that a Person shall not fail to
be Independent of the Depositor, the Originator, the Master Servicer or any
Affiliate thereof merely because such Person is the beneficial owner of 1% or
less of any class of securities issued by the Depositor or the Master Servicer
or any Affiliate thereof, as the case may be.
"Independent Contractor": Either (i) any Person (other than
the Master Servicer) that would be an "independent contractor" with respect to
the Trust Fund within the meaning of Section 856(d)(3) of the Code if the Trust
Fund were a real estate investment trust (except that the ownership tests set
forth in that section shall be considered to be met by any Person that owns,
directly or indirectly, 35 percent or more of any Class of Certificates), so
long as the Trust Fund does not receive or derive any income from such Person
and provided that the relationship between such Person and the Trust Fund is at
arm's length, all within the meaning of Treasury Regulation Section
1.856-4(b)(5), or (ii) any other Person (including the Master Servicer) if the
Trustee has received an Opinion of Counsel to the effect that the taking of any
action in respect of any REO Property by such Person, subject to any conditions
therein specified, that is otherwise herein contemplated to be taken by an
Independent Contractor will not cause such REO Property to cease to qualify as
"foreclosure property" within the meaning of Section 860G(a)(8) of the Code
(determined without regard to the exception applicable for purposes of Section
860D(a) of the Code), or cause any income realized in respect of such REO
Property to fail to qualify as Rents from Real Property.
"Index": With respect to each Mortgage Loan and each related
Adjustment Date the average of the interbank offered rates for six-month United
States dollar deposits in the London market as published in THE WALL STREET
JOURNAL and as most recently available as of the first business day 45 days
prior to such Adjustment Date, as specified in the related Mortgage Note.
"Insurance Agreement": The Insurance and Indemnity Agreement,
dated as of September 25, 1996, among the Depositor, the Master Servicer and the
Certificate Insurer, as amended or supplemented in accordance with the
provisions thereof.
"Insurance Payment": Any payment made by the Certificate
Insurer under the Policy with respect to the Class A Certificates.
"Insurance Proceeds": Proceeds of any title policy, hazard
policy or other insurance policy covering a Mortgage Loan, to the extent such
proceeds are not to be applied to the restoration of the related Mortgaged
Property or released to the Mortgagor in accordance with the procedures that the
Master Servicer would follow in servicing mortgage loans held for its own
account, subject to the terms and conditions of the related Mortgage Note and
Mortgage.
"Interest Accrual Period": With respect to any Distribution
Date and the Class A Certificates, the period commencing on the Distribution
Date of the month immediately
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preceding the month in which such Distribution Date occurs (or in the case of
the first Interest Accrual Period, commencing on the Closing Date) and ending on
the day preceding such Distribution Date.
"Interest Determination Date": With respect to the Class A
Certificates and any Interest Accrual Period therefor, the second London
Business Day preceding the commencement of such Interest Accrual Period.
"Interest Distribution Amount": With respect to any
Distribution Date and the Class A Certificates, the aggregate Accrued
Certificate Interest on the Certificates of such Class for such Distribution
Date.
"Late Collections": With respect to any Mortgage Loan, all
amounts received subsequent to the Determination Date immediately following any
Due Period, whether as late payments of Monthly Payments or as Insurance
Proceeds, Liquidation Proceeds or otherwise, which represent late payments or
collections of principal and/or interest due (without regard to any acceleration
of payments under the related Mortgage and Mortgage Note) but delinquent for
such Due Period and not previously recovered.
"Liquidation Event": With respect to any Mortgage Loan, any of
the following events: (i) such Mortgage Loan is paid in full; (ii) a Final
Recovery Determination is made as to such Mortgage Loan; or (iii) such Mortgage
Loan is removed from the Trust Fund by reason of its being purchased, sold or
replaced pursuant to or as contemplated by Section 2.03, Section 3.16(c) or
Section 10.01. With respect to any REO Property, either of the following events:
(i) a Final Recovery Determination is made as to such REO Property; or (ii) such
REO Property is removed from the Trust Fund by reason of its being purchased
pursuant to Section 10.01.
"Liquidation Proceeds": The amount (other than Insurance
Proceeds or amounts received in respect of the rental of any REO Property prior
to REO Disposition) received by the Master Servicer in connection with (i) the
taking of all or a part of a Mortgaged Property by exercise of the power of
eminent domain or condemnation, (ii) the liquidation of a defaulted Mortgage
Loan through a trustee's sale, foreclosure sale or otherwise, or (iii) the
repurchase, substitution or sale of a Mortgage Loan or an REO Property pursuant
to or as contemplated by Section 2.03, Section 3.16(c), Section 3.23 or Section
10.01.
"Loan-to-Value Ratio": As of any date of determination, the
fraction, expressed as a percentage, the numerator of which is the principal
balance of the related Mortgage Loan at such date and the denominator of which
is the Value of the related Mortgaged Property.
"London Business Day": Any day on which banks in the City of
London are open and conducting transactions in United States dollars.
"Majority Class R Certificateholder": Any single Holder of
Class R Certificates representing a greater than 50% Percentage Interest in such
Class.
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"Master Servicer": Long Beach Mortgage Company or any
successor master servicer appointed as herein provided, in its capacity as
Master Servicer hereunder.
"Master Servicer Event of Default": One or more of the events
described in Section 7.01.
"Master Servicer Remittance Date": With respect to any
Distribution Date, 3:00 p.m. New York time on the 18th day of the calendar month
in which such Distribution Date occurs or, if such 18th day is not a Business
Day, the Business Day immediately preceding such 18th day; provided, however,
that if such immediately preceding Business Day is the Determination Date, the
Master Servicer Remittance Date shall be the next succeeding Business Day.
"Maximum Class A Pass-Through Rate": With respect to the Class
A Certificates and each Distribution Date, a per annum rate equal to the
fraction, expressed as a percentage, the numerator of which is (i) an amount
equal to (A) 1/12 of the aggregate Scheduled Principal Balance of the then
outstanding Mortgage Loans and REO Properties times the weighted average of the
Expense Adjusted Maximum Mortgage Rates on the then outstanding Mortgage Loans
and REO Properties minus (B) the amount of the Certificate Insurer Premium with
respect to the Class A Certificates payable to the Certificate Insurer with
respect to the Policy for such Distribution Date, and the denominator of which
is (ii) an amount equal to (A) the then outstanding aggregate Certificate
Principal Balance of the Class A Certificates multiplied by (B) the actual
number of days elapsed in the related Interest Accrual Period divided by 360.
"Maximum Mortgage Rate": With respect to each Mortgage Loan,
the percentage set forth in the related Mortgage Note as the maximum Mortgage
Rate thereunder.
"Minimum Mortgage Rate": With respect to each Mortgage Loan,
the percentage set forth in the related Mortgage Note as the minimum Mortgage
Rate thereunder.
"Minimum Spread": 0.50% per annum.
"Monthly Payment": With respect to any Mortgage Loan, the
scheduled monthly payment of principal and interest on such Mortgage Loan which
is payable by the related Mortgagor from time to time under the related Mortgage
Note, determined: (a) after giving effect to (i) any Deficient Valuation and/or
Debt Service Reduction with respect to such Mortgage Loan and (ii) any reduction
in the amount of interest collectible from the related Mortgagor pursuant to the
Relief Act; (b) without giving effect to any extension granted or agreed to by
the Master Servicer pursuant to Section 3.07; and (c) on the assumption that all
other amounts, if any, due under such Mortgage Loan are paid when due.
"Moody's": Moody's Investors Service, Inc. or its successor in
interest.
"Mortgage": The mortgage, deed of trust or other instrument
creating a first lien on, or first priority security interest in, a Mortgaged
Property securing a Mortgage Note.
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"Mortgage File": The mortgage documents listed in Section 2.01
pertaining to a particular Mortgage Loan and any additional documents required
to be added to the Mortgage File pursuant to this Agreement.
"Mortgage Loan": Each mortgage loan transferred and assigned
to the Trustee pursuant to Section 2.01 or Section 2.03(d) as from time to time
held as a part of the Trust Fund, the Mortgage Loans so held being identified in
the Mortgage Loan Schedule.
"Mortgage Loan Purchase Agreement": The agreement among the
Depositor, the Seller and the Originator, regarding the transfer of the Mortgage
Loans by the Seller to or at the direction of the Depositor, substantially in
the form of Exhibit D annexed hereto.
"Mortgage Loan Schedule": As of any date, the list of Mortgage
Loans included in the Trust Fund on such date, attached hereto as Schedule 1.
The Mortgage Loan Schedule shall set forth the following information with
respect to each Mortgage Loan:
(i) the Originator's Mortgage Loan identifying number;
(ii) the Mortgagor's name;
(iii) the street address of the Mortgaged Property including the
state and zip code;
(iv) a code indicating whether the Mortgaged Property is
owner-occupied;
(v) the type of Residential Dwelling constituting the Mortgaged
Property;
(vi) the original months to maturity;
(vii) [intentionally omitted];
(viii) the Loan-to-Value Ratio at origination;
(ix) the Mortgage Rate in effect immediately following the Cut-off
Date;
(x) (A) the date on which the first Monthly Payment was due on the
Mortgage Loan and, (B) [intentionally omitted];
(xi) the stated maturity date;
(xii) [intentionally omitted];
(xiii) the amount of the Monthly Payment due on the first Due Date
after the Cut-off Date;
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(xiv) the last Due Date on which a Monthly Payment was actually
applied to the unpaid Stated Principal Balance;
(xv) the original principal amount of the Mortgage Loan;
(xvi) the Scheduled Principal Balance of the Mortgage Loan as of the
close of business on the Cut-off Date;
(xvii) [intentionally omitted];
(xviii) the Gross Margin;
(xix) a code indicating the purpose of the Mortgage Loan (i.e.,
purchase financing, rate/term refinancing, cash-out
refinancing);
(xx) the Maximum Mortgage Rate;
(xxi) the Minimum Mortgage Rate;
(xxii) the Mortgage Rate at origination;
(xxiii) the Periodic Rate Cap and the maximum first Adjustment Date
Mortgage Rate adjustment;
(xxiv) a code indicating the documentation program (I.E., Full
Documentation, Fast Trac, QuickCredit, QuickCredit Fast Trac,
Stated Income, INSTA Credit, INSTA Credit Fast Trac);
(xxv) [intentionally omitted];
(xxvi) the first Adjustment Date immediately following the Cut-off
Date;
(xxvii) the risk grade;
(xxviii) [intentionally omitted];
(xxix) [intentionally omitted];
(xxx) [intentionally omitted];
(xxxi) the Value of the Mortgaged Property;
(xxxii) the sale price of the Mortgaged Property, if applicable;
(xxxiii) [intentionally omitted];
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(xxxiv) [intentionally omitted];
(xxxv) [intentionally omitted];
(xxxvi) [intentionally omitted];
(xxxvii) [intentionally omitted];
(xxxviii) [intentionally omitted];
(xxxix) [intentionally omitted]; and
(xl) [intentionally omitted].
The Mortgage Loan Schedule shall set forth the following
information, as of the Cut-off Date with respect to the Mortgage Loans in the
aggregate: (1) the number of Mortgage Loans; (2) the current principal balance
of the Mortgage Loans; (3) the weighted average Mortgage Rate of the Mortgage
Loans; and (4) the weighted average maturity of the Mortgage Loans. The Mortgage
Loan Schedule shall be amended from time to time by the Depositor in accordance
with the provisions of this Agreement. With respect to any Qualified Substitute
Mortgage Loan, Cut-off Date shall refer to the related Cut-off Date for such
Mortgage Loan, determined in accordance with the definition of Cut-off Date
herein.
"Mortgage Note": The original executed note or other evidence
of indebtedness evidencing the indebtedness of a Mortgagor under a Mortgage
Loan.
"Mortgage Pool": The pool of Mortgage Loans, identified on
Schedule 1 from time to time, and any REO Properties acquired in respect
thereof.
"Mortgage Rate": With respect to each Mortgage Loan, the
annual rate at which interest accrues on such Mortgage Loan from time to time in
accordance with the provisions of the related Mortgage Note, which rate (A) as
of any date of determination until the first Adjustment Date following the
Cut-off Date shall be the rate set forth in the Mortgage Loan Schedule as the
Mortgage Rate in effect immediately following the Cut-off Date and (B) as of any
date of determination thereafter shall be the rate as adjusted on the most
recent Adjustment Date, to equal the sum, rounded to the nearest 0.125% as
provided in the Mortgage Note, of the Index, as most recently available as of a
date prior to the Adjustment Date as set forth in the related Mortgage Note,
plus the related Gross Margin; provided that the Mortgage Rate on such Mortgage
Loan on any Adjustment Date shall never be more than the lesser of (i) the sum
of the Mortgage Rate in effect immediately prior to the Adjustment Date plus the
related Periodic Rate Cap, if any, and (ii) the related Maximum Mortgage Rate,
and shall never be less than the greater of (i) the Mortgage Rate in effect
immediately prior to the Adjustment Date less the Periodic Rate Cap, if any, and
(ii) the related Minimum Mortgage Rate. With respect to each Mortgage Loan that
becomes an REO Property, as of any date of determination, the annual rate
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determined in accordance with the immediately preceding sentence as of the date
such Mortgage Loan became an REO Property.
"Mortgaged Property": The underlying property securing a
Mortgage Loan, including any REO Property, consisting of an Estate in Real
Property improved by a Residential Dwelling.
"Mortgagor": The obligor on a Mortgage Note.
"Net Monthly Excess Cashflow": With respect to any
Distribution Date, the excess of (x) the Available Distribution Amount for such
Distribution Date over (y) the sum for such Distribution Date of (A) the
Interest Distribution Amount payable to the holders of the Class A Certificates
and (B) the sum of the amounts described in clauses (b)(i) through (iii) of the
definition of Class A Principal Distribution Amount minus the amount of any
Subordination Reduction Amount for the Class A Certificates for such
Distribution Date.
"Net Mortgage Rate": With respect to any Mortgage Loan (or the
related REO Property) as of any date of determination, a per annum rate of
interest equal to the then applicable Mortgage Rate for such Mortgage Loan minus
the Servicing Fee Rate.
"New Lease": Any lease of REO Property entered into on behalf
of the Trust Fund, including any lease renewed or extended on behalf of the
Trust Fund if the Trust Fund has the right to renegotiate the terms of such
lease.
"Nonrecoverable P&I Advance": Any P&I Advance previously made
or proposed to be made in respect of a Mortgage Loan or REO Property that, in
the good faith business judgment of the Master Servicer, will not or, in the
case of a proposed P&I Advance, would not be ultimately recoverable from related
late payments, Insurance Proceeds or Liquidation Proceeds on such Mortgage Loan
or REO Property as provided herein.
"Non-United States Person": Any Person other than a United
States Person.
"Officers' Certificate": A certificate signed by the Chairman
of the Board, the Vice Chairman of the Board, the President or a vice president
(however denominated), and by the Treasurer, the Secretary, or one of the
assistant treasurers or assistant secretaries of the Originator, the Seller or
the Depositor, as applicable; with respect to the Master Servicer, any officer
who is authorized to act for the Master Servicer in matters relating to this
Agreement, and whose action is binding upon, the Master Servicer, initially
including those individuals whose names appear on the list of authorized
officers delivered at the closing.
"One-Month LIBOR": With respect to the Class A Certificates
and any Interest Accrual Period therefor, 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)
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on such Interest Determination Date. On each Interest Determination Date,
One-Month LIBOR for the related Interest 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, One-Month LIBOR for the
related Interest Accrual Period shall be the arithmetic mean
of such offered quotations (rounded 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, One-Month
LIBOR for the related Interest Accrual Period shall be the
higher of (i) LIBOR as determined on the previous Interest
Determination Date and (ii) the Reserve Interest Rate.
"One-Month LIBOR Pass-Through Rate": With respect to the Class
A Certificates and any Distribution Date, a per annum rate equal to One-Month
LIBOR plus 0.36%, in the case of each Distribution Date through and including
the Distribution Date on which the aggregate Stated Principal Balance of the
Mortgage Loans is reduced to 10% or less of the aggregate Stated Principal
Balance of the Mortgage Loans as of the Cut-off Date, or OneMonth LIBOR plus
1.36%, in the case of any Distribution Date thereafter.
"Opinion of Counsel": A written opinion of counsel, who may,
without limitation, be salaried counsel for the Depositor or the Master Servicer
acceptable to the Trustee and the Certificate Insurer, except that any opinion
of counsel relating to (a) the qualification of the Trust Fund as a REMIC or (b)
compliance with the REMIC Provisions must be an opinion of Independent counsel.
"Original Mortgage Loan": Any of the Mortgage Loans included
in the Trust Fund as of the Closing Date.
"Originator": Long Beach Mortgage Company, or its successor in
interest, in its capacity as originator under the Mortgage Loan Purchase
Agreement.
"Ownership Interest": As to any Certificate, any ownership or
security interest in such Certificate, including any interest in such
Certificate as the Holder thereof and any other interest therein, whether direct
or indirect, legal or beneficial, as owner or as pledgee.
"Pass-Through Rate": With respect to the Class A Certificates
and any Distribution Date after the first Distribution Date, a rate per annum
equal to the lesser of (i) the One-Month LIBOR Pass-Through Rate for such
Distribution Date and (ii) the Available Funds Pass-Through Rate for such
Distribution Date. With respect to the Class A Certificates and the first
Distribution Date, approximately 5.82875% per annum.
"Percentage Interest": With respect to the Class A
Certificates, the undivided percentage ownership in such Class evidenced by such
Certificate, expressed as a percentage, the numerator of which is the initial
Certificate Principal Balance represented by such Certificate
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and the denominator of which is the aggregate initial Certificate Principal
Balance of all of the Certificates of such Class. The Class A Certificates are
issuable only in minimum Percentage Interests corresponding to minimum initial
Certificate Principal Balances of $1,000 and increments of $1.00 in excess
thereof. With respect to any Class R Certificate, the undivided percentage
ownership in such Class evidenced by such Certificate, as set forth on the face
of such Class R Certificate. The Class R Certificates are issuable only in
minimum Percentage Interests of 25%.
"Periodic Rate Cap": With respect to each Mortgage Loan and
any Adjustment Date therefor, the fixed percentage set forth in the related
Mortgage Note, which is the maximum amount by which the Mortgage Rate for such
Mortgage Loan may increase or decrease (without regard to the Maximum Mortgage
Rate or the Minimum Mortgage Rate) on such Adjustment Date from the Mortgage
Rate in effect immediately prior to such Adjustment Date.
"Permitted Investments": Any one or more of the following
obligations or securities acquired at a purchase price of not greater than par,
regardless of whether issued by the Depositor, the Master Servicer, the Trustee
or any of their respective Affiliates:
(i) direct obligations of, or obligations fully
guaranteed as to timely payment of principal and interest by, the
United States or any agency or instrumentality thereof, provided such
obligations are backed by the full faith and credit of the United
States, provided, however, that any obligation of, or guaranteed by,
FHLMC or FNMA, other than a senior debt or a mortgage participation or
pass-through certificate guaranteed by FHLMC or FNMA shall be a
Permitted Investment only if, at the time of investment, such
investment is acceptable to the Certificate Insurer.
(ii) demand and time deposits in, certificates of
deposit of, or bankers' acceptances issued by, any Depository
Institution;
(iii) repurchase obligations with respect to any
security described in clause (i) above entered into with a Depository
Institution (acting as principal);
(iv) securities bearing interest or sold at a
discount that are issued by any corporation incorporated under the laws
of the United States of America or any state thereof and that are rated
by each Rating Agency in its highest long-term unsecured rating
categories at the time of such investment or contractual commitment
providing for such investment;
(v) commercial paper (including both
non-interest-bearing discount obligations and interest-bearing
obligations payable on demand or on a specified date not more than 30
days after the date of acquisition thereof) that is rated by each
Rating Agency in its highest short-term unsecured debt rating available
at the time of such investment;
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(vi) units of money market funds that have been rated
"Aaa" by Moody's and "AAA" by S&P; and
(viii) if previously confirmed in writing to the
Trustee, any other demand, money market or time deposit, or any other
obligation, security or investment, as may be acceptable to the Rating
Agencies and the Certificate Insurer as a permitted investment of funds
backing securities having ratings equivalent to its highest initial
rating of the Class A Certificates;
provided that no instrument described hereunder shall evidence either the right
to receive (a) only interest with respect to the obligations underlying such
instrument or (b) both principal and interest payments derived from obligations
underlying such instrument and the interest and principal payments with respect
to such instrument provide a yield to maturity at par greater than 120% of the
yield to maturity at par of the underlying obligations.
"Permitted Transferee": Any Transferee of a Residual
Certificate other than a Disqualified Organization or Non-United States Person.
"Person": Any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"P&I Advance": As to any Mortgage Loan or REO Property, any
advance made by the Master Servicer in respect of any Distribution Date pursuant
to Section 4.03.
"Policy": The Financial Guaranty Insurance Policy (No.
50511-N) issued by the Certificate Insurer relating to the Class A Certificates,
including any endorsements thereto, attached hereto as Exhibit B.
"Policy Payments Account": The account established pursuant to
Section 9.04 hereof.
"Prepayment Assumption": A prepayment rate for the Mortgage
Loans of 20% CPR. The Prepayment Assumption is used solely for determining the
accrual of original issue discount on the Certificates for federal income tax
purposes. A CPR (or Constant Prepayment Rate) represents an annualized constant
assumed rate of prepayment each month of a pool of mortgage loans relative to
its outstanding principal balance for the life of such pool.
"Prepayment Interest Shortfall": With respect to any
Distribution Date, for each Mortgage Loan that was during the related Prepayment
Period the subject of a Principal Prepayment in full or in part that was applied
by the Master Servicer to reduce the outstanding principal balance of such loan
on a date preceding the Due Date in the succeeding Prepayment Period, an amount
equal to interest at the applicable Net Mortgage Rate on the amount of such
Principal Prepayment for the number of days commencing on the date on which the
prepayment
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is applied and ending on the last day of the related Prepayment Period. The
obligations of the Master Servicer in respect of any Prepayment Interest
Shortfall are set forth in Section 3.24.
"Prepayment Period": With respect to any Distribution Date,
the calendar month preceding the calendar month in which such Distribution Date
occurs.
"Principal Prepayment": Any payment of principal made by the
Mortgagor on a Mortgage Loan which is received in advance of its scheduled Due
Date and which is not accompanied by an amount of interest representing the full
amount of scheduled interest due on any Due Date in any month or months
subsequent to the month of prepayment.
"Purchase Price": With respect to any Mortgage Loan or REO
Property to be purchased pursuant to or as contemplated by Section 2.03, 3.16(c)
or 10.01, and as confirmed by an Officers' Certificate from the Master Servicer
to the Trustee, an amount equal to the sum of (i) 100% of the Stated Principal
Balance thereof as of the date of purchase (or such other price as provided in
Section 10.01), (ii) in the case of (x) a Mortgage Loan, accrued interest on
such Stated Principal Balance at the applicable Net Mortgage Rate in effect from
time to time from the Due Date as to which interest was last covered by a
payment by the Mortgagor or an advance by the Master Servicer, which payment or
advance had as of the date of purchase been distributed pursuant to Section
4.01, through the end of the calendar month in which the purchase is to be
effected, and (y) an REO Property, the sum of (1) accrued interest on such
Stated Principal Balance at the applicable Net Mortgage Rate in effect from time
to time from the Due Date as to which interest was last covered by a payment by
the Mortgagor or an advance by the Master Servicer through the end of the
calendar month immediately preceding the calendar month in which such REO
Property was acquired, plus (2) REO Imputed Interest for such REO Property for
each calendar month commencing with the calendar month in which such REO
Property was acquired and ending with the calendar month in which such purchase
is to be effected, net of the total of all net rental income, Insurance
Proceeds, Liquidation Proceeds and P&I Advances that as of the date of purchase
had been distributed as or to cover REO Imputed Interest pursuant to Section
4.01, (iii) any unreimbursed Servicing Advances and P&I Advances and any unpaid
Servicing Fees allocable to such Mortgage Loan or REO Property, (iv) any amounts
previously withdrawn from the Collection Account in respect of such Mortgage
Loan or REO Property pursuant to Sections 3.11(ix) and 3.16(b), and (v) in the
case of a Mortgage Loan required to be purchased pursuant to Section 2.03,
expenses reasonably incurred or to be incurred by the Master Servicer or the
Trustee in respect of the breach or defect giving rise to the purchase
obligation.
"Qualified Substitute Mortgage Loan": A mortgage loan
substituted for a Deleted Mortgage Loan pursuant to the terms of this Agreement
which must, on the date of such substitution, (i) have an outstanding principal
balance, after application of all scheduled payments of principal and interest
due during or prior to the month of substitution, not in excess of the Scheduled
Principal Balance of the Deleted Mortgage Loan as of the Due Date in the
calendar month during which the substitution occurs, (ii) have a Mortgage Rate
not less than (and not more than one percentage point in excess of) the Mortgage
Rate of the Deleted Mortgage Loan, (iii) have a Maximum Mortgage Rate not less
than the Maximum Mortgage Rate on the Deleted
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Mortgage Loan, (iv) have a Minimum Mortgage Rate not less than the Minimum
Mortgage Rate of the Deleted Mortgage Loan, (v) have a Gross Margin equal to the
Gross Margin of the Deleted Mortgage Loan, (vi) have a next Adjustment Date not
more than two months later than the next Adjustment Date on the Deleted Mortgage
Loan, (vii) have a remaining term to maturity not greater than (and not more
than one year less than) that of the Deleted Mortgage Loan, (viii) have the same
Due Date as the Due Date on the Deleted Mortgage Loan, (ix) have a Loan-to-Value
Ratio as of the date of substitution equal to or lower than the Loan-to-Value
Ratio of the Deleted Mortgage Loan as of such date, (x) have a risk grading
determined by the Originator at least equal to the risk grading assigned on the
Deleted Mortgage Loan and (xi) conform to each representation and warranty set
forth in Section 6 of the Mortgage Loan Purchase Agreement applicable to the
Deleted Mortgage Loan. In the event that one or more mortgage loans are
substituted for one or more Deleted Mortgage Loans, the amounts described in
clause (i) hereof shall be determined on the basis of aggregate principal
balances, the Mortgage Rates described in clause (ii) hereof shall be determined
on the basis of weighted average Mortgage Rates, the risk gradings described in
clause (x) hereof shall be satisfied as to each such mortgage loan, the terms
described in clause (vii) hereof shall be determined on the basis of weighted
average remaining term to maturity, the Loan-to-Value Ratios described in clause
(ix) hereof shall be satisfied as to each such mortgage loan and, except to the
extent otherwise provided in this sentence, the representations and warranties
described in clause (xi) hereof must be satisfied as to each Qualified
Substitute Mortgage Loan or in the aggregate, as the case may be.
"Rating Agency or Rating Agencies": Moody's and S&P 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 Depositor and the
Certificate Insurer, notice of which designation shall be given to the Trustee
and Master Servicer.
"Realized Loss": With respect to each Mortgage Loan as to
which a Final Recovery Determination has been made an amount (not less than
zero) equal to (i) the unpaid principal balance of such Mortgage Loan as of the
commencement of the calendar month in which the Final Recovery Determination was
made, plus (ii) accrued interest from the Due Date as to which interest was last
paid by the Mortgagor through the end of the calendar month in which such Final
Recovery Determination was made, calculated in the case of each calendar month
during such period (A) at an annual rate equal to the annual rate at which
interest was then accruing on such Mortgage Loan and (B) on a principal amount
equal to the Stated Principal Balance of such Mortgage Loan as of the close of
business on the Distribution Date during such calendar month, plus (iii) any
amounts previously withdrawn from the Collection Account in respect of such
Mortgage Loan pursuant to Sections 3.11(ix) and 3.16(b), minus (iv) the
proceeds, if any, received in respect of such Mortgage Loan during the calendar
month in which such Final Recovery Determination was made, net of amounts that
are payable therefrom to the Master Servicer with respect to such Mortgage Loan
pursuant to clause (iii) of Section 3.11.
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With respect to any REO Property as to which a Final Recovery
Determination has been made an amount (not less than zero) equal to (i) the
unpaid principal balance of the related Mortgage Loan as of the date of
acquisition of such REO Property on behalf of the Trust Fund, plus (ii) accrued
interest from the Due Date as to which interest was last paid by the Mortgagor
in respect of the related Mortgage Loan through the end of the calendar month
immediately preceding the calendar month in which such REO Property was
acquired, calculated in the case of each calendar month during such period (A)
at an annual rate equal to the annual rate at which interest was then accruing
on the related Mortgage Loan and (B) on a principal amount equal to the Stated
Principal Balance of the related Mortgage Loan as of the close of business on
the Distribution Date during such calendar month, plus (iii) REO Imputed
Interest for such REO Property for each calendar month commencing with the
calendar month in which such REO Property was acquired and ending with the
calendar month in which such Final Recovery Determination was made, plus (iv)
any amounts previously withdrawn from the Collection Account in respect of the
related Mortgage Loan pursuant to Sections 3.11(ix) and 3.16(b), minus (v) the
aggregate of all P&I Advances made by the Master Servicer in respect of such REO
Property or the related Mortgage Loan for which the Master Servicer has been or,
in connection with such Final Recovery Determination, will be reimbursed
pursuant to Section 3.23 out of rental income, Insurance Proceeds and
Liquidation Proceeds received in respect of such REO Property, minus (vi) the
total of all net rental income, Insurance Proceeds and Liquidation Proceeds
received in respect of such REO Property that has been, or in connection with
such Final Recovery Determination, will be transferred to the Distribution
Account pursuant to Section 3.23.
With respect to each Mortgage Loan which has become the
subject of a Deficient Valuation, the difference between the principal balance
of the Mortgage Loan outstanding immediately prior to such Deficient Valuation
and the principal balance of the Mortgage Loan as reduced by the Deficient
Valuation.
With respect to each Mortgage Loan which has become the
subject of a Debt Service Reduction, the portion, if any, of the reduction in
each affected Monthly Payment attributable to a reduction in the Mortgage Rate
imposed by a court of competent jurisdiction. Each such Realized Loss shall be
deemed to have been incurred on the Due Date for each affected Monthly Payment.
"Record Date": With respect to each Distribution Date, the
last Business Day of the month immediately preceding the month in which such
Distribution Date occurs.
"Reference Banks": Bankers Trust Company, Barclay's Bank PLC,
The Bank of Tokyo and National Westminster Bank PLC and their successors in
interest; 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 Depositor 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.
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"Refinanced Mortgage Loan": A Mortgage Loan the proceeds of
which were not used to purchase the related Mortgaged Property.
"Regular Certificate": Any Class A Certificate.
"Regular Interest": A "regular interest" in a REMIC within the
meaning of Section 860G(a)(1) of the Code.
"Relief Act": The Soldiers' and Sailors' Civil Relief Act of
1940, as amended.
"Relief Act Interest Shortfall": With respect to any
Distribution Date and any Mortgage Loan, any reduction in the amount of interest
collectible on such Mortgage Loan for the most recently ended calendar month as
a result of the application of the Relief Act.
"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 Section
860A through 860G of the Code, and related provisions, and proposed, temporary
and final regulations and published rulings, notices and announcements
promulgated thereunder, as the foregoing may be in effect from time to time.
"Remittance Report": A report in form and substance that would
be acceptable to FNMA on a magnetic disk or tape prepared by the Master Servicer
pursuant to Section 4.03 with such additions, deletions and modifications as
agreed to by the Trustee and the Master Servicer.
"Rents from Real Property": With respect to any REO Property,
gross income of the character described in Section 856(d) of the Code as being
included in the term "rents from real property".
"REO Account": The account or accounts maintained by the
Master Servicer in respect of an REO Property pursuant to Section 3.23.
"REO Disposition": The sale or other disposition of an REO
Property on behalf of the Trust Fund.
"REO Imputed Interest": As to any REO Property, for any
calendar month during which such REO Property was at any time part of the Trust
Fund, one month's interest at the applicable Net Mortgage Rate on the Stated
Principal Balance of such REO Property (or, in the case of the first such
calendar month, of the related Mortgage Loan if appropriate) as of the close of
business on the Distribution Date in such calendar month.
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"REO Principal Amortization": With respect to any REO
Property, for any calendar month, the excess, if any, of (a) the aggregate of
all amounts received in respect of such REO Property during such calendar month,
whether in the form of rental income, sale proceeds (including, without
limitation, that portion of the Termination Price paid in connection with a
purchase of all of the Mortgage Loans and REO Properties pursuant to Section
10.01 that is allocable to such REO Property) or otherwise, net of any portion
of such amounts (i) payable pursuant to Section 3.23(c) in respect of the proper
operation, management and maintenance of such REO Property or (ii) payable or
reimbursable to the Master Servicer pursuant to Section 3.23(d) for unpaid
Servicing Fees in respect of the related Mortgage Loan and unreimbursed
Servicing Advances and P&I Advances in respect of such REO Property or the
related Mortgage Loan, over (b) the REO Imputed Interest in respect of such REO
Property for such calendar month.
"REO Property": A Mortgaged Property acquired by the Master
Servicer on behalf of the Trust Fund through foreclosure or deed-in-lieu of
foreclosure, as described in Section 3.23.
"Request for Release": A release signed by a Servicing
Officer, in the form of Exhibit E-1 or Exhibit E-2 attached hereto.
"Required Subordinated Amount": With respect to the Class A
Certificates and any Distribution Date on or before the 30th Distribution Date,
an amount equal to the greater of (i) 2.45% of the aggregate Stated Principal
Balance of the Mortgage Loans as of the Cut-off Date and (ii) the Stepped Up
Required Subordinated Amount; PROVIDED, HOWEVER, that if the amount described in
clause (ii) of this sentence was greater than the amount described in clause (i)
of this sentence for any of the three immediately preceding Distribution Dates,
then the Required Subordinated Amount for the current Distribution Date shall
equal the highest of the four Stepped Up Required Subordinated Amounts as
calculated for the three immediately preceding Distribution Dates and the
applicable Distribution Date. With respect to the Class A Certificates and any
Distribution Date after the 30th Distribution Date, an amount equal to the
greater of (i) the lesser of (x) 2.45% of the aggregate Stated Principal Balance
of the Mortgage Loans as of the Cut-off Date and (y) the Stepped Down Required
Subordinated Percentage of the aggregate Stated Principal Balance of the
Mortgage Loans as of such Distribution Date and (ii) the Stepped Up Required
Subordinated Amount; PROVIDED, HOWEVER, that if the amount described in clause
(ii) of this sentence was greater than the amount described in clause (i) of
this sentence for any of the three immediately preceding Distribution Dates that
occurred after the 30th Distribution Date, or if the amount described in clause
(ii) of the preceding sentence was greater than the amount described in clause
(i) of the preceding sentence for any of the three immediately preceding
Distribution Dates that occurred on or before the 30th Distribution Date, then
the Required Subordinated Amount for the current Distribution Date shall equal
the highest of the four Stepped Up Required Subordinated Amounts as calculated
for the three immediately preceding Distribution Dates and the applicable
Distribution Date.
"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
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necessary to the nearest whole multiple of 1/16%) of the one-month U.S. dollar
lending rates which 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 New York City banks selected by the Trustee are quoting on
such Interest Determination Date to leading European banks.
"Residential Dwelling": Any one of the following: (i) an
attached or detached one-family dwelling, (ii) a detached two- to four-family
dwelling, (iii) a one-family dwelling unit in a FNMA eligible condominium
project, or (iv) a detached one-family dwelling in a planned unit development,
none of which is a co-operative, mobile or manufactured home (as defined in 42
United States Code, Section 5402(6)).
"Residual Certificate": Any one of the Class R Certificates.
"Residual Interest": The sole class of "residual interests" in
a REMIC within the meaning of Section 860G(a)(2) of the Code.
"Responsible Officer": When used with respect to the Trustee,
the Chairman or Vice Chairman of the Board of Directors or Trustees, the
Chairman or Vice Chairman of the Executive or Standing Committee of the Board of
Directors or Trustees, the President, the Chairman of the Committee on Trust
Matters, any vice president, any assistant vice president, the Secretary, any
assistant secretary, the Treasurer, any assistant treasurer, the Cashier, any
assistant cashier, any trust officer or assistant trust officer, the Controller
and any assistant controller or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and, with respect to a particular matter, to whom such matter is
referred because of such officer's knowledge of and familiarity with the
particular subject.
"Scheduled Principal Balance": With respect to any Mortgage
Loan: (a) as of the Cut-off Date, the outstanding principal balance of such
Mortgage Loan as of such date, net of the principal portion of all unpaid
Monthly Payments, if any, due on or before such date; (b) as of any Due Date
subsequent to the Cut-off Date up to and including the Due Date in the calendar
month in which a Liquidation Event occurs with respect to such Mortgage Loan,
the Scheduled Principal Balance of such Mortgage Loan as of the Cut-off Date,
minus the sum of (i) the principal portion of each Monthly Payment due on or
before such Due Date but subsequent to the Cut-off Date, whether or not
received, (ii) all Principal Prepayments received before such Due Date but after
the Cut-off Date, (iii) the principal portion of all Liquidation Proceeds and
Insurance Proceeds received before such Due Date but after the Cut-off Date, net
of any portion thereof that represents principal due (without regard to any
acceleration of payments under the related Mortgage and Mortgage Note) on a Due
Date occurring on or before the date on which such proceeds were received and
(iv) any Realized Loss incurred with respect thereto as a result of a Deficient
Valuation occurring before such Due Date, but only to the extent such Realized
Loss represents a reduction in the portion of principal of such Mortgage Loan
not yet due (without regard to any acceleration of payments under the related
Mortgage
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and Mortgage Note) as of the date of such Deficient Valuation; and (c) as of any
Due Date subsequent to the occurrence of a Liquidation Event with respect to
such Mortgage Loan, zero. With respect to any REO Property: (a) as of any Due
Date subsequent to the date of its acquisition on behalf of the Trust Fund up to
and including the Due Date in the calendar month in which a Liquidation Event
occurs with respect to such REO Property, an amount (not less than zero) equal
to the Scheduled Principal Balance of the related Mortgage Loan as of the Due
Date in the calendar month in which such REO Property was acquired, minus the
aggregate amount of REO Principal Amortization, if any, in respect of such REO
Property for all previously ended calendar months; and (b) as of any Due Date
subsequent to the occurrence of a Liquidation Event with respect to such REO
Property, zero.
"Seller": Salomon Brothers Realty Corp. or its successor in
interest, in its capacity as seller under the Mortgage Loan Purchase Agreement.
"Servicing Account": The account or accounts created and
maintained pursuant to Section 3.09.
"Servicing Advances": The reasonable "out-of-pocket" costs and
expenses incurred by the Master Servicer in connection with a default,
delinquency or other unanticipated event by the Master Servicer in the
performance of its servicing obligations, including, but not limited to, the
cost of (i) the preservation, restoration and protection of a Mortgaged
Property, (ii) any enforcement or judicial proceedings, including foreclosures,
in respect of a particular Mortgage Loan, (iii) the management (including
reasonable fees in connection therewith) and liquidation of any REO Property,
and (iv) the performance of its obligations under Sections 3.01, 3.09, 3.14,
3.16 and 3.23. The Master Servicer shall not be required to make any Servicing
Advance in respect of a Mortgage Loan or REO Property that, in the good faith
business judgment of the Master Servicer, would not be ultimately recoverable
from related Insurance Proceeds or Liquidation Proceeds on such Mortgage Loan or
REO Property as provided herein.
"Servicing Fee": With respect to each Mortgage Loan and for
any calendar month, an amount equal to one month's interest (or in the event of
any payment of interest which accompanies a Principal Prepayment in full made by
the Mortgagor during such calendar month, interest for the number of days
covered by such payment of interest) at the applicable Servicing Fee Rate on the
same principal amount on which interest on such Mortgage Loan accrues for such
calendar month. A portion of such Servicing Fee may be retained by any
SubServicer as its servicing compensation.
"Servicing Fee Rate": 0.50% per annum.
"Servicing Officer": Any officer of the Master Servicer
involved in, or responsible for, the administration and servicing of Mortgage
Loans, whose name and specimen signature appear on a list of servicing officers
furnished by the Master Servicer to the Trustee and the Certificate Insurer and
the Depositor on the Closing Date, as such list may from time to time be
amended.
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"Single Certificate": With respect to any Class of
Certificates (other than the Residual Certificates), a hypothetical Certificate
of such Class evidencing a Percentage Interest for such Class corresponding to
an initial Certificate Principal Balance or Notional Amount of $1,000. With
respect to the Residual Certificates, a hypothetical Certificate of such Class
evidencing a 100% Percentage Interest in such Class.
"Special Hazard Amount": As of any Distribution Date, an
amount equal to $1,533,878, minus the sum of (i) the aggregate amount of Special
Hazard Losses on the Mortgage Loans allocated solely to the Class R Certificates
in accordance with Section 4.04 and (ii) the Adjustment Amount (as defined
below) as most recently calculated. For each anniversary of the Cut-off Date,
the Adjustment Amount shall be equal to the amount, if any, by which the amount
calculated in accordance with the preceding sentence (without giving effect to
the deduction of the Adjustment Amount for such anniversary) exceeds the
greatest of (i) twice the outstanding principal balance of the Mortgage Loan
which has the largest outstanding principal balance on the Distribution Date
immediately preceding such anniversary, (ii) the product of 1.00% multiplied by
the outstanding principal balance of all Mortgage Loans on the Distribution Date
immediately preceding such anniversary and (iii) the aggregate outstanding
principal balance (as of the immediately preceding Distribution Date) of the
Mortgage Loans in any five-digit California zip code area with the largest
amount of Mortgage Loans by aggregate principal balance as of such anniversary.
"Special Hazard Loss": Any Realized Loss or portion thereof
not in excess of the lesser of the cost of repair or replacement of a Mortgaged
Property suffered by such Mortgaged Property by reason of damage caused by
certain hazards (including earthquakes, mudflows, and, to a limited extent,
floods) not insured against under the hazard insurance policies or fire or flood
insurance policies required to be maintained in respect of such Mortgaged
Property pursuant to Section 3.14, or by reason of the application of any
co-insurance provision, in any event exclusive of any Extraordinary Loss.
"S&P": Standard & Poor's Ratings Services, a division of the
McGraw-Hill Companies, Inc., or its successor in interest.
"Startup Day": The day designated as such pursuant to Section
11.01(b) hereof.
"Stated Principal Balance": With respect to any Mortgage Loan:
(a) as of any date of determination up to but not including the Distribution
Date on which the proceeds, if any, of a Liquidation Event with respect to such
Mortgage Loan would be distributed, the Scheduled Principal Balance of such
Mortgage Loan as of the Cut-off Date, as shown in the Mortgage Loan Schedule,
minus the sum of (i) the principal portion of each Monthly Payment due on a Due
Date subsequent to the Cut-off Date, to the extent received from the Mortgagor
or advanced by the Master Servicer and distributed pursuant to Section 4.01 on
or before such date of determination, (ii) all Principal Prepayments received
after the Cut-off Date, to the extent distributed pursuant to Section 4.01 on or
before such date of determination, (iii) all Liquidation Proceeds and Insurance
Proceeds applied by the Master Servicer as recoveries of principal in accordance
with the provisions of Section 3.16, to the extent distributed pursuant to
Section 4.01
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on or before such date of determination, and (iv) any Realized Loss incurred
with respect thereto as a result of a Deficient Valuation made during or prior
to the Prepayment Period for the most recent Distribution Date coinciding with
or preceding such date of determination; and (b) as of any date of determination
coinciding with or subsequent to the Distribution Date on which the proceeds, if
any, of a Liquidation Event with respect to such Mortgage Loan would be
distributed, zero. With respect to any REO Property: (a) as of any date of
determination up to but not including the Distribution Date on which the
proceeds, if any, of a Liquidation Event with respect to such REO Property would
be distributed, an amount (not less than zero) equal to the Stated Principal
Balance of the related Mortgage Loan as of the date on which such REO Property
was acquired on behalf of the Trust Fund, minus the sum (i) if such REO Property
was acquired before the Distribution Date in any calendar month, the principal
portion of the Monthly Payment due on the Due Date in the calendar month of
acquisition, to the extent advanced by the Master Servicer and distributed
pursuant to Section 4.01 on or before such date of determination, and (ii) the
aggregate amount of REO Principal Amortization in respect of such REO Property
for all previously ended calendar months, to the extent distributed pursuant to
Section 4.01 on or before such date of determination; and (b) as of any date of
determination coinciding with or subsequent to the Distribution Date on which
the proceeds, if any, of a Liquidation Event with respect to such REO Property
would be distributed, zero.
"Stayed Funds": As defined in Section 7.02(b).
"Stepped Down Required Subordinated Percentage": For the Class
A Certificates and any Distribution Date after the 30th Distribution Date, a
percentage equal to (i) the percentage equivalent of a fraction, the numerator
of which is 2.45% of the aggregate Stated Principal Balance of the Mortgage
Loans as of the Cut-off Date, and the denominator of which is the aggregate
Stated Principal Balance of the 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 4.90%,
multiplied by (B) the number of consecutive Distribution Dates occurring after
the 30th Distribution Date through and including the Distribution Date for which
the Stepped Down Required Subordinated Percentage is being calculated, up to a
maximum of twelve, and the denominator of which is twelve.
"Stepped Up Required Subordinated Amount": With respect to the
Class A Certificates and any Distribution Date, an amount (but not less than
zero) equal to (i) the product obtained by multiplying (x) three times one half
of the Delinquency Percentage as of the most recent Determination Date by (y)
the aggregate Stated Principal Balance of the Mortgage Loans as of such
Distribution Date minus (ii) three times the Net Monthly Excess Cashflow for
such Distribution Date.
"Subordinated Amount": With respect to the Class A
Certificates as of any Distribution Date, the excess, if any, of (a) the
aggregate Stated Principal Balances of the Mortgage Loans immediately following
such Distribution Date over (b) the aggregate Certificate Principal Balance of
the Class A Certificates as of such Distribution Date (after taking into account
the payment of the amounts described in clauses (b)(i) through (iv) of the
definition of Class A Principal Distribution Amount on such Distribution Date).
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"Subordination Deficiency Amount": With respect to the Class A
Certificates and any Distribution Date, the excess, if any, of (a) the Required
Subordinated Amount applicable to such Distribution Date over (b) the
Subordinated Amount applicable to such Distribution Date prior to taking into
account the payment of any Subordination Increase Amount on such Distribution
Date.
"Subordination Increase Amount": With respect to the Class A
Certificates and any Distribution Date, the lesser of (a) the Subordination
Deficiency Amount as of such Distribution Date (after taking into account the
payment of the Class A Principal Distribution Amount on such Distribution Date,
exclusive of the payment of any Subordination Increase Amount) and (b) the
amount of Net Monthly Excess Cashflow on such Distribution Date as reduced by
any Cumulative Insurance Payments or Realized Losses allocated thereto with
respect to such Distribution Date pursuant to Section 4.04.
"Subordination Reduction Amount": With respect to the Class A
Certificates and any Distribution Date, an amount equal to the lesser of (a) the
Excess Subordinated Amount and (b) the sum of the amounts available for
distribution specified in clauses (b)(i) through (iii) of the definition of
Class A Principal Distribution Amount.
"Sub-Servicer": Any Person with which the Master Servicer has
entered into a Sub-Servicing Agreement and which meets the qualifications of a
Sub-Servicer pursuant to Section 3.02.
"Sub-Servicing Account": An account established by a
Sub-Servicer which meets the requirements set forth in Section 3.08 and is
otherwise acceptable to the Master Servicer.
"Sub-Servicing Agreement": The written contract between the
Master Servicer and a Sub-Servicer relating to servicing and administration of
certain Mortgage Loans as provided in Section 3.02.
"Tax Returns": The federal income tax return on Internal
Revenue Service Form 1066, U.S. Real Estate Mortgage Investment Conduit Income
Tax Return, including Schedule Q thereto, Quarterly Notice to Residual Interest
Holders of REMIC Taxable Income or Net Loss Allocation, or any successor forms,
to be filed on behalf of the Trust Fund due to its classification as a REMIC
under the REMIC Provisions, together with any and all other information reports
or returns that may be required to be furnished to the Certificateholders or
filed with the Internal Revenue Service or any other governmental taxing
authority under any applicable provisions of federal, state or local tax laws.
"Termination Price": As defined in Section 10.01.
"Terminator": As defined in Section 10.01.
"Transfer": Any direct or indirect transfer, sale, pledge,
hypothecation, or other form of assignment of any Ownership Interest in a
Certificate.
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"Transferee": Any Person who is acquiring by Transfer any
Ownership Interest in a Certificate.
"Transferor": Any Person who is disposing by Transfer of any
Ownership Interest in a Certificate.
"Trust Fund": The segregated pool of assets subject hereto,
constituting the primary trust created hereby and to be administered hereunder,
with respect to which a REMIC election is to be made, consisting of: (i) such
Mortgage Loans as from time to time are subject to this Agreement, together with
the Mortgage Files relating thereto, and together with all collections thereon
and proceeds thereof, (ii) any REO Property, together with all collections
thereon and proceeds thereof, (iii) the Trustee's rights with respect to the
Mortgage Loans under all insurance policies required to be maintained pursuant
to this Agreement and any proceeds thereof, (iv) the Depositor's rights under
the Mortgage Loan Purchase Agreement (including any security interest created
thereby) and (v) the Collection Account, the Distribution Account, any REO
Account and the Expense Account and such assets that are deposited therein from
time to time and any investments thereof, together with any and all income,
proceeds and payments with respect thereto. Notwithstanding the foregoing,
however, the Trust Fund specifically excludes the Policy and all payments and
other collections of principal and interest due on the Mortgage Loans on or
before the Cut-off Date.
"Trustee": Norwest Bank Minnesota, National Association, a
national banking association, or its successor in interest, or any successor
trustee appointed as herein provided.
"Trustee's Fee": The amount payable to the Trustee on each
Distribution Date pursuant to Section 8.05 as compensation for all services
rendered by it in the execution of the trust hereby created and in the exercise
and performance of any of the powers and duties of the Trustee hereunder, which
amount shall equal one twelfth of the product of (i) the Trustee's Fee Rate,
multiplied by (ii) the aggregate Scheduled Principal Balance of the Mortgage
Loans and any REO Properties as of the second preceding Due Date (or, in the
case of the initial Distribution Date, as of the Cut-off Date).
"Trustee's Fee Rate": 0.002% per annum.
"Uninsured Cause": Any cause of damage to a Mortgaged Property
such that the complete restoration of such property is not fully reimbursable by
the hazard insurance policies required to be maintained pursuant to Section
3.14.
"United States Person": A citizen or resident of the United
States, a corporation, partnership or other entity created or organized in, or
under the laws of, the United States or any political subdivision thereof, or an
estate or trust whose income from sources without the United States is
includible in gross income for United States federal income tax purposes
regardless of its connection with the conduct of a trade or business within the
United States. The term "United States" shall have the meaning set forth in
Section 7701 of the Code.
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"Unpaid Basis Risk Shortfalls": With respect to the Class A
Certificates and any Distribution Date, the aggregate of all Basis Risk
Shortfalls for any previous Distribution Dates plus interest accrued at the
Pass-Through Rate on each such Basis Risk Shortfall less all payments made in
respect of such Basis Risk Shortfalls on or prior to such Distribution Date
pursuant to Section 4.01(a).
"Value": With respect to any Mortgaged Property, the lesser of
(i) the value thereof as determined by an appraisal made for the originator of
the Mortgage Loan at the time of origination of the Mortgage Loan by an
appraiser who met the minimum requirements of FNMA and FHLMC, and (ii) the
purchase price paid for the related Mortgaged Property by the Mortgagor with the
proceeds of the Mortgage Loan, provided, however, in the case of a Refinanced
Mortgage Loan, such value of the Mortgaged Property is based solely upon the
value determined by an appraisal made for the originator of such Refinanced
Mortgage Loan at the time of origination of such Refinanced Mortgage Loan by an
appraiser who met the minimum requirements of FNMA and FHLMC.
"Voting Rights": The portion of the voting rights of all of
the Certificates which is allocated to any Certificate. With respect to any date
of determination, the percentage of all the Voting Rights allocated among
Holders of each Class of Certificates shall be the fraction, expressed as a
percentage, the numerator of which is the aggregate Certificate Principal
Balance of all the Certificates of such Class then outstanding and the
denominator of which is the aggregate Stated Principal Balance of the Mortgage
Loans then outstanding. The Voting Rights allocated to each Class of Certificate
shall be allocated among Holders of each such Class in accordance with their
respective Percentage Interests as of the most recent Distribution Date.
SECTION 1.02. Allocation of Certain Interest Shortfalls.
For purposes of calculating the amount of Accrued Certificate
Interest and the amount of the Interest Distribution Amount for the Class A
Certificates for any Distribution Date, the aggregate amount of any Prepayment
Interest Shortfalls (to the extent not covered by payments by the Master
Servicer pursuant to Section 3.24) and Relief Act Interest Shortfalls incurred
in respect of the Mortgage Loans for any Distribution Date shall be allocated
among the Class A Certificates on a PRO RATA basis based on, and to the extent
of, one month's interest at the then applicable respective Pass-Through Rate on
the respective Certificate Principal Balance of each such Certificate.
Notwithstanding the foregoing, on any Distribution Date, the amount of any
Prepayment Interest Shortfalls or Relief Act Shortfalls so allocated to any of
the Class A Certificates shall be paid to the holders of such Class A
Certificates prior to any distributions on such Distribution Date to the holders
of the Residual Certificates.
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ARTICLE II
CONVEYANCE OF MORTGAGE LOANS;
ORIGINAL ISSUANCE OF CERTIFICATES
SECTION 2.01. Conveyance of Mortgage Loans.
The Depositor, concurrently with the execution and delivery
hereof, does hereby transfer, assign, set over and otherwise convey to the
Trustee without recourse for the benefit of the Certificateholders and the
Certificate Insurer all the right, title and interest of the Depositor,
including any security interest therein for the benefit of the Depositor, in and
to the Mortgage Loans identified on the Mortgage Loan Schedule, the rights of
the Depositor under the Mortgage Loan Purchase Agreement, and all other assets
included or to be included in the Trust Fund. Such assignment includes all
interest and principal received by the Depositor or the Master Servicer on or
with respect to the Mortgage Loans (other than payments of principal and
interest due on such Mortgage Loans on or before the Cut-off Date).
In connection with such transfer and assignment, the Depositor
does hereby deliver to, and deposit with, the Trustee, or to one or more
Custodians as the agent or agents of the Trustee, the following documents or
instruments with respect to each Mortgage Loan (a "Mortgage File") so
transferred and assigned:
(i) the original Mortgage Note, endorsed in the
following form: "Pay to the order of Norwest Bank Minnesota,
National Association, as Trustee for the registered holders of
Salomon Brothers Mortgage Securities VII, Inc., Series
1996-LB1, without recourse", with all prior and intervening
endorsements showing a complete chain of endorsement from the
originator to the Person so endorsing to the Trustee;
(ii) the original Mortgage with evidence of recording
thereon, and the original recorded power of attorney, if the
Mortgage was executed pursuant to a power of attorney, with
evidence of recording thereon;
(iii) an original Assignment of the Mortgage executed in
the following form: "Norwest Bank Minnesota, National
Association, as Trustee for the registered holders of Salomon
Brothers Mortgage Securities VII, Inc., Series 1996-LB1";
(iv) the original recorded Assignment or Assignments of
the Mortgage showing a complete chain of assignment from the
originator to the Person assigning the Mortgage to the Trustee
as contemplated by the immediately preceding clause (iii);
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(v) the original or copies of each assumption,
modification, written assurance or substitution agreement, if
any; and
(vi) the original lender's title insurance policy,
together with all endorsements or riders which were issued
with or subsequent to the issuance of such policy, insuring
the priority of the Mortgage as a first lien on the Mortgaged
Property represented therein as a fee interest vested in the
Mortgagor, or in the event such original title policy is
unavailable, a written commitment or uniform binder or
preliminary report of title issued by the title insurance or
escrow company.
The Master Servicer (in its capacity as Originator) shall
promptly (and in no event later than five Business Days following the later of
the Closing Date and the date of receipt by the Master Servicer of the recording
information for a Mortgage) submit or cause to be submitted for recording, at no
expense to the Trust Fund, the Trustee or the Certificate Insurer, in the
appropriate public office for real property records, each Assignment referred to
in Sections 2.01(iii) and (iv) above. In the event that any such Assignment is
lost or returned unrecorded because of a defect therein, the Master Servicer (in
its capacity as Originator) shall promptly prepare or cause to be prepared a
substitute Assignment or cure or cause to be cured such defect, as the case may
be, and thereafter cause each such Assignment to be duly recorded.
If any of the documents referred to in Sections 2.01(ii),
(iii) or (iv) above has as of the Closing Date been submitted for recording but
either (x) has not been returned from the applicable public recording office or
(y) has been lost or such public recording office has retained the original of
such document, the obligations of the Depositor to deliver such documents shall
be deemed to be satisfied upon (1) delivery to the Trustee, or to the
appropriate Custodian on behalf of the Trustee, of a copy of each such document
certified by the Originator in the case of (x) above or the applicable public
recording office in the case of (y) above to be a true and complete copy of the
original that was submitted for recording and (2) if such copy is certified by
the Originator, delivery to the Trustee, or to the appropriate Custodian on
behalf of the Trustee, promptly upon receipt thereof of either the original or a
copy of such document certified by the applicable public recording office to be
a true and complete copy of the original. If the original lender's title
insurance policy was not delivered pursuant to Section 2.01(vi) above, the
Depositor shall deliver or cause to be delivered to the Trustee, or to the
appropriate Custodian on behalf of the Trustee, promptly after receipt thereof,
the original lender's title insurance policy. The Depositor shall deliver or
cause to be delivered to the Trustee, or to the appropriate Custodian on behalf
of the Trustee, promptly upon receipt thereof any other original documents
constituting a part of a Mortgage File received with respect to any Mortgage
Loan, including, but not limited to, any original documents evidencing an
assumption or modification of any Mortgage Loan.
All original documents relating to the Mortgage Loans that are
not delivered to the Trustee, or to the appropriate Custodian on behalf of the
Trustee, are and shall be held by or on behalf of the Originator, the Seller,
the Depositor or the Master Servicer, as the case may be, in trust for the
benefit of the Trustee on behalf of the Certificateholders and the Certificate
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Insurer. In the event that any such original document is required pursuant to
the terms of this Section to be a part of a Mortgage File, such document shall
be delivered promptly to the Trustee, or to the appropriate Custodian on behalf
of the Trustee. Any such original document delivered to or held by the Depositor
that is not required pursuant to the terms of this Section to be a part of a
Mortgage File, shall be delivered promptly to the Master Servicer.
The Depositor herewith delivers to the Trustee an executed
copy of the Mortgage Loan Purchase Agreement.
In addition to the foregoing, the Depositor shall cause the
Certificate Insurer to deliver the Policy to the Trustee for the benefit of the
Certificateholders.
SECTION 2.02. Acceptance by Trustee.
The Trustee acknowledges receipt (or, with respect to Mortgage
Loans subject to a Custodial Agreement, receipt by the respective Custodian as
the duly appointed agent of the Trustee) of the Policy and, subject to the
provisions of Section 2.01 and subject to any exceptions noted on the exception
report described in the next paragraph below, the documents referred to in
Section 2.01 (other than such documents described in Section 2.01(v)) above and
all other assets included in the definition of "Trust Fund" under clauses (i),
(iii), (iv) and (v) (to the extent of amounts deposited into the Distribution
Account) and declares that it, or such Custodian as its agent, holds and will
hold such documents and the other documents delivered to it constituting a
Mortgage File, and that it holds or will hold all such assets and such other
assets included in the definition of "Trust Fund" in trust for the exclusive use
and benefit of all present and future Certificateholders and the Certificate
Insurer.
The Trustee agrees, for the benefit of the Certificateholders,
to review (or cause a Custodian on its behalf to review) each Mortgage File on
or before the Closing Date and to certify in substantially the form attached
hereto as Exhibit C-1 (or cause the Custodian to certify in the form of the
Initial Certification attached to the Custodial Agreement) that, as to each
Mortgage Loan listed in the Mortgage Loan Schedule (other than any Mortgage Loan
paid in full or any Mortgage Loan specifically identified in the exception
report annexed thereto as not being covered by such certification), (i) all
documents constituting part of such Mortgage File (other than such documents
described in Section 2.01(v)) required to be delivered to it pursuant to this
Agreement are in its possession, (ii) such documents have been reviewed by it or
such Custodian and appear regular on their face and relate to such Mortgage
Loan, (iii) based on its or the Custodian's examination and only as to the
foregoing, the information set forth in the Mortgage Loan Schedule that
corresponds to items (i) through (iii), (vi), (x)(A), (xi), (xv), (xviii) and
(xx) through (xxiii) of the definition of "Mortgage Loan Schedule" accurately
reflects information set forth in the Mortgage File. It is herein acknowledged
that, in conducting such review, the Trustee or such Custodian was under no duty
or obligation (i) to inspect, review or examine any such documents, instruments,
certificates or other papers to determine whether they are genuine, enforceable,
or appropriate for the represented purpose or whether they have actually been
recorded or that they are other than what they purport to be on their face, or
(ii)
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to determine whether any Mortgage File should include any of the documents
specified in clause (v) of Section 2.01.
Prior to the first anniversary date of this Agreement the
Trustee shall deliver to the Depositor, the Master Servicer and the Certificate
Insurer a final certification in the form annexed hereto as Exhibit C-2 (or
shall cause the Custodian to deliver to the Trustee, the Depositor, the Master
Servicer and the Certificate Insurer a final certification in the form attached
to the Custodial Agreement) evidencing the completeness of the Mortgage Files,
with any applicable exceptions noted thereon.
If in the process of reviewing the Mortgage Files and making
or preparing, as the case may be, the certifications referred to above, the
Trustee or any Custodian finds any document or documents constituting a part of
a Mortgage File to be missing or defective in any material respect, at the
conclusion of its review the Trustee (or a Custodian on behalf of the Trustee)
shall so notify the Depositor, the Master Servicer and the Certificate Insurer.
In addition, upon the discovery by the Depositor, the Master Servicer or the
Trustee of a breach of any of the representations and warranties made by either
the Originator or the Seller in the Mortgage Loan Purchase Agreement in respect
of any Mortgage Loan which materially adversely affects such Mortgage Loan or
the interests of the related Certificateholders in such Mortgage Loan, the party
discovering such breach shall give prompt written notice to the other parties
and the Certificate Insurer.
The Trustee (or a Custodian on behalf of the Trustee) shall,
at the written request and expense of any Certificateholder, provide a written
report to such Certificateholder of all Mortgage Files released to the Master
Servicer for servicing purposes.
SECTION 2.03. Repurchase or Substitution of Mortgage Loans
by the Originator, the Seller or the
Depositor.
(a) Upon discovery or receipt of notice of any materially
defective document in, or that a document is missing from, a Mortgage File or of
the breach by the Originator or the Seller of any representation, warranty or
covenant under the Mortgage Loan Purchase Agreement in respect of any Mortgage
Loan which materially adversely affects the value of such Mortgage Loan or the
interest therein of the Certificateholders, the Trustee (or a Custodian on
behalf of the Trustee) shall promptly notify the Originator, the Seller, the
Master Servicer and the Certificate Insurer of such defect, missing document or
breach and request that the Originator or the Seller, as the case may be,
deliver such missing document or cure such defect or breach within 90 days from
the date the Originator or the Seller, as the case may be, was notified of such
missing document, defect or breach, and if the Originator or the Seller, as the
case may be, does not deliver such missing document or cure such defect or
breach in all material respects during such period, the Master Servicer (or, in
accordance with Section 3.02(b), the Trustee) shall enforce the obligations of
the Originator or the Seller, as the case may be, under the Mortgage Loan
Purchase Agreement to repurchase such Mortgage Loan from the Trust Fund at the
Purchase Price within 90 days after the date on which the Originator or the
Seller, as the case may be, was notified (subject to Section 2.03(e)) of such
missing
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document, defect or breach, if and to the extent that the Originator or the
Seller, as the case may be, is obligated to do so under the Mortgage Loan
Purchase Agreement. The Purchase Price for the repurchased Mortgage Loan shall
be deposited in the Collection Account, and the Trustee, upon receipt of written
certification from the Master Servicer of such deposit, shall release to the
Originator or the Seller, as the case may be, the related Mortgage File and
shall execute and deliver such instruments of transfer or assignment, in each
case without recourse, as the Originator or the Seller, as the case may be,
shall furnish to it and as shall be necessary to vest in the Originator or the
Seller, as the case may be, any Mortgage Loan released pursuant hereto, and the
Trustee shall have no further responsibility with regard to such Mortgage File.
In lieu of repurchasing any such Mortgage Loan as provided above, if so provided
in the Mortgage Loan Purchase Agreement, the Originator or the Seller, as the
case may be, may cause such Mortgage Loan to be removed from the Trust Fund (in
which case it shall become a Deleted Mortgage Loan) and substitute one or more
Qualified Substitute Mortgage Loans in the manner and subject to the limitations
set forth in Section 2.03(d). It is understood and agreed that the obligation of
the Originator or the Seller, as the case may be, to cure or to repurchase (or
to substitute for) any Mortgage Loan as to which a document is missing, a
material defect in a constituent document exists or as to which such a breach
has occurred and is continuing shall constitute the sole remedy respecting such
omission, defect or breach available to the Trustee on behalf of the
Certificateholders and the Certificate Insurer.
(b) Subject to Section 2.03(e), within 90 days of the earlier
of discovery by the Depositor or receipt of notice by the Depositor of the
breach of any representation or warranty of the Depositor set forth in Section
2.04 with respect to any Mortgage Loan, which materially adversely affects the
value of such Mortgage Loan or the interest therein of the Certificateholders,
the Depositor shall (i) cure such breach in all material respects, (ii)
repurchase the Mortgage Loan from the Trust Fund at the Purchase Price or (iii)
remove such Mortgage Loan from the Trust Fund (in which case it shall become a
Deleted Mortgage Loan) and substitute one or more Qualified Substitute Mortgage
Loans in the manner and subject to the limitations set forth in Section 2.03(d).
If any such breach is a breach of any of the representations and warranties
included in Section 2.04(a)(iv), and the Depositor is unable to cure such
breach, the Depositor shall repurchase or substitute the smallest number of
Mortgage Loans as shall be required to make such representation or warranty true
and correct. The Purchase Price for any repurchased Mortgage Loan shall be
delivered to the Master Servicer for deposit in the Collection Account, and the
Trustee, upon receipt of written certification from the Master Servicer of such
deposit, shall at the Depositor's direction release to the Depositor the related
Mortgage File and shall execute and deliver such instruments of transfer or
assignment furnished by the Depositor, in each case without recourse, as the
Depositor shall furnish to it and as shall be necessary to vest in the Depositor
any Mortgage Loan released pursuant hereto.
(c) Within 90 days of the earlier of discovery by the Master
Servicer or receipt of notice by the Master Servicer of the breach of any
representation, warranty or covenant of the Master Servicer set forth in Section
2.05 which materially and adversely affects the interests of the
Certificateholders in any Mortgage Loan, the Master Servicer shall cure such
breach in all material respects.
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(d) Any substitution of Qualified Substitute Mortgage Loans
for Deleted Mortgage Loans made pursuant to Section 2.03(a), in the case of the
Originator or the Seller, or Section 2.03(b), in the case of the Depositor, must
be effected prior to the date which is two years after the Startup Day for the
Trust Fund.
As to any Deleted Mortgage Loan for which the Originator, the
Seller or the Depositor substitutes a Qualified Substitute Mortgage Loan or
Loans, such substitution shall be effected by the Originator, the Seller or the
Depositor, as the case may be, delivering to the Trustee (or a Custodian on
behalf of the Trustee), for such Qualified Substitute Mortgage Loan or Loans,
the Mortgage Note, the Mortgage, the Assignment to the Trustee, and such other
documents and agreements, with all necessary endorsements thereon, as are
required by Section 2.01, together with an Officers' Certificate providing that
each such Qualified Substitute Mortgage Loan satisfies the definition thereof
and specifying the Substitution Shortfall Amount (as described below), if any,
in connection with such substitution. The Trustee (or a Custodian on behalf of
the Trustee) shall acknowledge receipt for such Qualified Substitute Mortgage
Loan or Loans and, within ten Business Days thereafter, review such documents as
specified in Section 2.02 and deliver to the Depositor, the Master Servicer and
the Certificate Insurer, with respect to such Qualified Substitute Mortgage Loan
or Loans, a certification substantially in the form attached hereto as Exhibit
C-1, with any applicable exceptions noted thereon. Within one year of the date
of substitution, the Trustee shall deliver to the Depositor, the Master Servicer
and the Certificate Insurer a certification substantially in the form of Exhibit
C-2 hereto with respect to such Qualified Substitute Mortgage Loan or Loans,
with any applicable exceptions noted thereon. Monthly Payments due with respect
to Qualified Substitute Mortgage Loans in the month of substitution are not part
of the Trust Fund and will be retained by the Depositor, the Originator or the
Seller, as the case may be. For the month of substitution, distributions to
Certificateholders will reflect the Monthly Payment due on such Deleted Mortgage
Loan on or before the Due Date in the month of substitution, and the Depositor,
the Originator or the Seller, as the case may be, shall thereafter be entitled
to retain all amounts subsequently received in respect of such Deleted Mortgage
Loan. The Depositor shall give or cause to be given written notice to the
Certificateholders that such substitution has taken place, shall amend the
Mortgage Loan Schedule to reflect the removal of such Deleted Mortgage Loan from
the terms of this Agreement and the substitution of the Qualified Substitute
Mortgage Loan or Loans and shall deliver a copy of such amended Mortgage Loan
Schedule to the Trustee. Upon such substitution, such Qualified Substitute
Mortgage Loan or Loans shall constitute part of the Mortgage Pool and shall be
subject in all respects to the terms of this Agreement and, in the case of a
substitution effected by the Originator or the Seller, the Mortgage Loan
Purchase Agreement, including, in the case of a substitution effected by the
Originator or the Seller, all applicable representations and warranties thereof
included in the Mortgage Loan Purchase Agreement, and in the case of a
substitution effected by the Depositor, all applicable representations and
warranties thereof set forth in Section 2.04, in each case as of the date of
substitution.
For any month in which the Depositor, the Originator or the
Seller substitutes one or more Qualified Substitute Mortgage Loans for one or
more Deleted Mortgage Loans, the Master Servicer will determine the amount (the
"Substitution Shortfall Amount"), if any, by
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which the aggregate Purchase Price of all such Deleted Mortgage Loans exceeds
the aggregate of, as to each such Qualified Substitute Mortgage Loan, the
Scheduled Principal Balance thereof as of the date of substitution, together
with one month's interest on such Scheduled Principal Balance at the applicable
Net Mortgage Rate. On the date of such substitution, the Depositor, the
Originator or the Seller, as the case may be, will deliver or cause to be
delivered to the Master Servicer for deposit in the Collection Account an amount
equal to the Substitution Shortfall Amount, if any, and the Trustee, upon
receipt of the related Qualified Substitute Mortgage Loan or Loans and
certification by the Master Servicer of such deposit, shall release to the
Depositor, the Originator or the Seller, as the case may be, the related
Mortgage File or Files and shall execute and deliver such instruments of
transfer or assignment, in each case without recourse, as the Depositor, the
Originator or the Seller, as the case may be, shall deliver to it and as shall
be necessary to vest therein any Deleted Mortgage Loan released pursuant hereto.
In addition, the Depositor, the Originator or the Seller, as
the case may be, shall obtain at its own expense and deliver to the Trustee and
the Certificate Insurer an Opinion of Counsel to the effect that such
substitution will not cause (a) any federal tax to be imposed on the Trust Fund,
including without limitation, any federal tax imposed on "prohibited
transactions" under Section 860F(a)(1) of the Code or on "contributions after
the startup date" under Section 860G(d)(1) of the Code, or (b) the Trust Fund to
fail to qualify as a REMIC at any time that any Certificate is outstanding.
(e) Upon discovery by the Depositor, the Originator, the
Seller, the Master Servicer, the Trustee or the Certificate Insurer that any
Mortgage Loan does not constitute a "qualified mortgage" within the meaning of
Section 860G(a)(3) of the Code, the party discovering such fact shall within two
Business Days give written notice thereof to the other parties and the
Certificate Insurer. In connection therewith, the Originator, the Seller or the
Depositor shall repurchase or, subject to the limitations set forth in Section
2.03(d), substitute one or more Qualified Substitute Mortgage Loans for the
affected Mortgage Loan within 90 days of the earlier of discovery or receipt of
such notice with respect to such affected Mortgage Loan. Such repurchase or
substitution shall be made by (i) the Originator or the Seller, as the case may
be, if the affected Mortgage Loan's status as a non-qualified mortgage is or
results from a breach of any representation, warranty or covenant made by the
Originator or the Seller under the Mortgage Loan Purchase Agreement, or (ii) the
Depositor, if the affected Mortgage Loan's status as a non-qualified mortgage is
a breach of any representation or warranty of the Depositor set forth in Section
2.04 or if the status as a non-qualified mortgage is a breach of no
representation or warranty. Any such repurchase or substitution shall be made in
the same manner as set forth in Sections 2.03(a), if made by the Originator or
the Seller, or 2.03(b), if made by the Depositor. The Trustee shall reconvey to
the Depositor, the Originator or the Seller, as the case may be, the Mortgage
Loan to be released pursuant hereto in the same manner, and on the same terms
and conditions, as it would a Mortgage Loan repurchased for breach of a
representation or warranty.
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SECTION 2.04. Representations and Warranties of the
Depositor.
(a) The Depositor hereby represents and warrants to the
Trustee for the benefit of the Certificateholders and the Certificate Insurer
that as of the Closing Date or as of such other date specifically provided
herein:
(i) The information set forth in the Mortgage Loan
Schedule for the Original Mortgage Loans is complete, true and
correct in all material respects at the date or dates
respecting which such information is furnished;
(ii) As of the Cut-off Date, the Monthly Payment due
under each Original Mortgage Loan is not 30 or more days
delinquent in payment and has not been 30 or more days
delinquent in payment more than once in the twelve month
period prior to the Cut-off Date (assuming that a "rolling" 30
day delinquency is considered to be one time delinquent);
(iii) Each Original Mortgage Loan had an original term to
maturity of between 10 and 30 years; each Original Mortgage
Loan is an adjustable-rate mortgage loan with payments due on
the first day of each month and each such Mortgage Loan is
fully amortizing; effective with the first payment due after
each Adjustment Date, the monthly payment amount for each
Original Mortgage Loan will be adjusted to an amount which
would amortize fully the outstanding principal balance of such
Mortgage Loan over its remaining term and pay interest at the
Mortgage Rate so adjusted; on the first Adjustment Date and on
each Adjustment Date thereafter the Mortgage Rate on each
Original Mortgage Loan will be adjusted to equal the sum of
the Index and the related Gross Margin, rounded to the nearest
multiple of 0.125%, subject to the Periodic Rate Cap, the
Maximum Mortgage Rate and the Minimum Mortgage Rate applicable
to such Mortgage Loan;
(iv) (A) no more than approximately 36.47%,
approximately 6.90%, approximately 6.68%, approximately 5.21%,
approximately 4.52%, approximately 3.80%, approximately 3.38%,
and approximately 3.37% of the Original Mortgage Loans, by
outstanding principal balance of the Original Mortgage Loans
as of the Cut-off Date, will be secured by Mortgaged
Properties located in California, Illinois, Colorado,
Washington, Minnesota, Arizona, Utah and Michigan,
respectively, and no more than approximately 3.00% of the
Original Mortgage Loans, by outstanding principal balance of
the Original Mortgage Loans as of the Cut-off Date, will be
secured by Mortgaged Properties located in any other state;
(B) as of the Cut-off Date, no more than approximately 0.56%
of the Original Mortgage Loans, by outstanding principal
balance of the Original Mortgage Loans as of the Cut-off Date,
are secured by Mortgaged Properties located in any one
California zip code area, and no more than approximately
16.39% of the Original Mortgage Loans, by outstanding
principal balance of the Original Mortgage Loans as of the
Cut-off Date are secured by
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units in two- to four-family dwellings, condominiums, town
houses, planned unit developments or manufactured housing; and
(C) at least approximately 83.61% of the Original Mortgage
Loans, by outstanding principal balance of the Original
Mortgage Loans as of the Cut-off Date, are secured by real
property with a single family residence erected thereon;
(v) If the Mortgaged Property securing an Original
Mortgage Loan is identified in the Federal Register by the
Federal Emergency Management Agency ("FEMA") as having special
flood hazards, a flood insurance policy is in effect at the
Closing Date which met the requirements of FEMA at the time
such policy was issued;
(vi) With respect to each Original Mortgage Loan, the
Loan-to-Value Ratio was less than or equal to 85.00% at the
origination of such Original Mortgage Loan; and
(vii) With respect to at least approximately 90.66% of
the Original Mortgage Loans by outstanding principal balance
as of the Cut-off Date, at the time that the Mortgage Loan was
made, the Mortgagor represented that the Mortgagor would
occupy the Mortgaged Property as the Mortgagor's primary
residence. With respect to approximately 9.34% of the Original
Mortgage Loans by outstanding principal balance as of the
Cut-off Date, at the time that the Mortgage Loan was made, the
Mortgagor represented that the Mortgagor would occupy the
Mortgaged Property as the Mortgagor's secondary residence or
that the Mortgaged Property would be an investor property.
(b) It is understood and agreed that the representations and
warranties set forth in this Section 2.04 shall survive delivery of the Mortgage
Files to the Trustee or to a Custodian, as the case may be, and shall inure to
the benefit of the Certificateholders and the Certificate Insurer
notwithstanding any restrictive or qualified endorsement or assignment. Upon
discovery by any of the Depositor, the Master Servicer or the Trustee of a
breach of any of the foregoing representations and warranties which materially
and adversely affects the value of any Mortgage Loan or the interests therein of
the Certificateholders and the Certificate Insurer, the party discovering such
breach shall give prompt written notice to the other parties, and in no event
later than two Business Days from the date of such discovery. It is understood
and agreed that the obligations of the Depositor set forth in Section 2.03(b) to
cure, substitute for or repurchase a Mortgage Loan constitute the sole remedies
available to the Certificateholders or to the Trustee on their behalf respecting
a breach of the representations and warranties contained in this Section 2.04.
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SECTION 2.05. Representations, Warranties and Covenants of
the Master Servicer.
The Master Servicer hereby represents, warrants and covenants
to the Trustee, for the benefit of each of the Trustee, the Certificateholders,
the Certificate Insurer and to the Depositor that as of the Closing Date or as
of such date specifically provided herein:
(i) The Master Servicer is a corporation duly
organized, validly existing and in good standing under the
laws of the State of Delaware and is duly authorized and
qualified to transact any and all business contemplated by
this Agreement to be conducted by the Master Servicer in any
state in which a Mortgaged Property is located or is otherwise
not required under applicable law to effect such qualification
and, in any event, is in compliance with the doing business
laws of any such State, to the extent necessary to ensure its
ability to enforce each Mortgage Loan and to service the
Mortgage Loans in accordance with the terms of this Agreement;
(ii) The Master Servicer has the full corporate power
and authority to originate, hold, sell and service each
Mortgage Loan, and to execute, deliver and perform, and to
enter into and consummate the transactions contemplated by
this Agreement and has duly authorized by all necessary
corporate action on the part of the Master Servicer the
execution, delivery and performance of this Agreement; and
this Agreement, assuming the due authorization, execution and
delivery thereof by the Depositor and the Trustee, constitutes
a legal, valid and binding obligation of the Master Servicer,
enforceable against the Master Servicer in accordance with its
terms, except to the extent that (a) the enforceability
thereof may be limited by bankruptcy, insolvency, moratorium,
receivership and other similar laws relating to creditors'
rights generally and (b) the remedy of specific performance
and injunctive and other forms of equitable relief may be
subject to the equitable defenses and to the discretion of the
court before which any proceeding therefor may be brought;
(iii) The execution and delivery of this Agreement by the
Master Servicer, the servicing of the Mortgage Loans by the
Master Servicer hereunder, the consummation of any other of
the transactions herein contemplated, and the fulfillment of
or compliance with the terms hereof are in the ordinary course
of business of the Master Servicer and will not (A) result in
a breach of any term or provision of the charter or by-laws of
the Master Servicer or (B) conflict with, result in a breach,
violation or acceleration of, or result in a default under,
the terms of any other material agreement or instrument to
which the Master Servicer is a party or by which it may be
bound, or any statute, order or regulation applicable to the
Master Servicer of any court, regulatory body, administrative
agency or governmental body having jurisdiction over the
Master Servicer; and the Master Servicer is not a party to,
bound by, or in breach or violation of any indenture or other
agreement or instrument, or subject to or in violation of any
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statute, order or regulation of any court, regulatory body,
administrative agency or governmental body having jurisdiction
over it, which materially and adversely affects or, to the
Master Servicer's knowledge, would in the future materially
and adversely affect, (x) the ability of the Master Servicer
to perform its obligations under this Agreement or (y) the
business, operations, financial condition, properties or
assets of the Master Servicer taken as a whole;
(iv) The Master Servicer is an approved seller/servicer
for FNMA or FHLMC in good standing and is a HUD approved
mortgagee pursuant to Section 203 of the National Housing Act;
(v) No litigation is pending against the Master
Servicer that would materially and adversely affect the
execution, delivery or enforceability of this Agreement or the
ability of the Master Servicer to service the Mortgage Loans
or to perform any of its other obligations hereunder in
accordance with the terms hereof; and
(vi) No consent, approval, authorization or order of any
court or governmental agency or body is required for the
execution, delivery and performance by the Master Servicer of,
or compliance by the Master Servicer with, this Agreement or
the consummation of the transactions contemplated by this
Agreement, except for such consents, approvals, authorizations
or orders, if any, that have been obtained prior to the
Closing Date.
It is understood and agreed that the representations,
warranties and covenants set forth in this Section 2.05 shall survive delivery
of the Mortgage Files to the Trustee or to a Custodian, as the case may be, and
shall inure to the benefit of the Trustee, the Depositor, the Certificateholders
and the Certificate Insurer. Upon discovery by any of the Depositor, the Master
Servicer or the Trustee of a breach of any of the foregoing representations,
warranties and covenants which materially and adversely affects the value of any
Mortgage Loan or the interests therein of the Certificateholders and the
Certificate Insurer, the party discovering such breach shall give prompt written
notice (but in no event later than two Business Days following such discovery)
to the Trustee and the Certificate Insurer. The obligation of the Master
Servicer set forth in Section 2.03(c) to cure breaches shall constitute the sole
remedies against the Master Servicer available to the Certificateholders, the
Depositor or the Trustee on behalf of the Certificateholders respecting a breach
of the representations, warranties and covenants contained in this Section 2.05.
The preceding sentence shall not, however, limit any remedies available to the
Certificateholders, the Depositor or the Trustee on behalf of the
Certificateholders, pursuant to the Mortgage Loan Purchase Agreement signed by
the Master Servicer in its capacity as Originator, respecting a breach of the
representations, warranties and covenants of the Master Servicer in its capacity
as Originator contained in such Mortgage Loan Purchase Agreement.
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SECTION 2.06. Issuance of Certificates.
The Trustee acknowledges the assignment to it of the Mortgage
Loans and the delivery to it, or any Custodian on its behalf, of the Mortgage
Files, subject to the provisions of Sections 2.01 and 2.02, together with the
assignment to it of all other assets included in the Trust Fund, receipt of
which is hereby acknowledged. Concurrently with such assignment and delivery and
in exchange therefor, the Trustee, pursuant to the written request of the
Depositor executed by an officer of the Depositor, has executed, authenticated
and delivered to or upon the order of the Depositor, the Certificates in
authorized denominations. The interests evidenced by the Certificates,
constitute the entire beneficial ownership interest in the Trust Fund.
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ARTICLE III
ADMINISTRATION AND SERVICING
OF THE TRUST FUND
SECTION 3.01. Master Servicer to Act as Master Servicer.
The Master Servicer shall service and administer the Mortgage
Loans on behalf of the Trustee and in the best interests of and for the benefit
of the Certificateholders and the Certificate Insurer (as determined by the
Master Servicer in its reasonable judgment) in accordance with the terms of this
Agreement and the respective Mortgage Loans and, to the extent consistent with
such terms, in the same manner in which it services and administers similar
mortgage loans for its own portfolio, giving due consideration to customary and
usual standards of practice of prudent mortgage lenders and loan servicers
administering similar mortgage loans but without regard to:
(i) any relationship that the Master Servicer, any
Sub-Servicer or any Affiliate of the Master Servicer or any
Sub-Servicer may have with the related Mortgagor;
(ii) the ownership of any Certificate by the Master
Servicer or any Affiliate of the Master Servicer;
(iii) the Master Servicer's obligation to make P&I
Advances or Servicing Advances; or
(iv) the Master Servicer's or any Sub-Servicer's right
to receive compensation for its services hereunder or with
respect to any particular transaction.
To the extent consistent with the foregoing, the Master Servicer shall also seek
to maximize the timely and complete recovery of principal and interest on the
Mortgage Notes. Subject only to the above-described servicing standards and the
terms of this Agreement and of the respective Mortgage Loans, the Master
Servicer shall have full power and authority, acting alone or through
Sub-Servicers as provided in Section 3.02, to do or cause to be done any and all
things in connection with such servicing and administration which it may deem
necessary or desirable. Without limiting the generality of the foregoing, the
Master Servicer in its own name or in the name of a Sub-Servicer is hereby
authorized and empowered by the Trustee when the Master Servicer believes it
appropriate in its best judgment, to execute and deliver, on behalf of the
Certificateholders and the Trustee or any of them, and upon notice to the
Trustee, any and all instruments of satisfaction or cancellation, or of partial
or full release or discharge, and all other comparable instruments, with respect
to the Mortgage Loans and the Mortgaged Properties and to institute foreclosure
proceedings or obtain a deed-in-lieu of foreclosure so as to convert the
ownership of such properties, and to hold or cause to be held title to such
properties, on behalf of the Trustee and Certificateholders. The Master Servicer
shall service and administer the
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Mortgage Loans in accordance with applicable state and federal law and shall
provide to the Mortgagors any reports required to be provided to them thereby.
The Master Servicer shall also comply in the performance of this Agreement with
all reasonable rules and requirements of each insurer under any standard hazard
insurance policy. Subject to Section 3.17, the Trustee shall execute, at the
written request of the Master Servicer, and furnish to the Master Servicer and
any Sub-Servicer such documents as are necessary or appropriate to enable the
Master Servicer or any Sub-Servicer to carry out their servicing and
administrative duties hereunder, and the Trustee hereby grants to the Master
Servicer a power of attorney to carry out such duties. The Trustee shall not be
liable for the actions of the Master Servicer or any Sub-Servicers under such
powers of attorney.
In accordance with the standards of the preceding paragraph,
the Master Servicer shall advance or cause to be advanced funds as necessary for
the purpose of effecting the timely payment of taxes and assessments on the
Mortgaged Properties, which advances shall be Servicing Advances reimbursable in
the first instance from related collections from the Mortgagors pursuant to
Section 3.09, and further as provided in Section 3.11. Any cost incurred by the
Master Servicer or by Sub-Servicers in effecting the timely payment of taxes and
assessments on a Mortgaged Property shall not, for the purpose of calculating
distributions to Certificateholders, be added to the unpaid principal balance of
the related Mortgage Loan, notwithstanding that the terms of such Mortgage Loan
so permit.
Notwithstanding anything in this Agreement to the contrary,
the Master Servicer may not make any future advances with respect to a Mortgage
Loan and the Master Servicer shall not (unless the Mortgagor is in default with
respect to the Mortgage Loan or such default is, in the judgment of the Master
Servicer, reasonably foreseeable) (i) permit any modification with respect to
any Mortgage Loan that would change the Mortgage Rate, reduce or increase the
principal balance (except for reductions resulting from actual payments of
principal) or change the final maturity date on such Mortgage Loan or (ii)
permit any modification, waiver or amendment of any term of any Mortgage Loan
that would both (A) effect an exchange or reissuance of such Mortgage Loan under
Section 1001 of the Code (or final, temporary or proposed Treasury regulations
promulgated thereunder) and (B) cause the Trust Fund to fail to qualify as a
REMIC under the Code or the imposition of any tax on "prohibited transactions"
or "contributions after the startup date" under the REMIC Provisions.
The Master Servicer may delegate its responsibilities under
this Agreement; provided, however, that no such delegation shall release the
Master Servicer from the responsibilities or liabilities arising under this
Agreement.
SECTION 3.02. Sub-Servicing Agreements Between Master
Servicer and Sub-Servicers.
(a) The Master Servicer may enter into Sub-Servicing
Agreements (provided that the Master Servicer shall have obtained the consent of
the Certificate Insurer and provided such agreements would not result in a
withdrawal or a downgrading by any Rating Agency of
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the rating or any shadow rating on any Class of Certificates) with
Sub-Servicers, for the servicing and administration of the Mortgage Loans.
Each Sub-Servicer shall be (i) authorized to transact business
in the state or states where the related Mortgaged Properties it is to service
are situated, if and to the extent required by applicable law to enable the
Sub-Servicer to perform its obligations hereunder and under the Sub-Servicing
Agreement, (ii) an institution approved as a mortgage loan originator by the
Federal Housing Administration or an institution the deposit accounts in which
are insured by the FDIC and (iii) a FHLMC or FNMA approved mortgage servicer.
Each Sub-Servicing Agreement must impose on the Sub-Servicer requirements
conforming to the provisions set forth in Section 3.08 and provide for servicing
of the Mortgage Loans consistent with the terms of this Agreement. The Master
Servicer will examine each Sub-Servicing Agreement and will be familiar with the
terms thereof. The terms of any Sub-Servicing Agreement will not be inconsistent
with any of the provisions of this Agreement. The Master Servicer and the
SubServicers may enter into and make amendments to the Sub-Servicing Agreements
or enter into different forms of Sub-Servicing Agreements; provided, however,
that any such amendments or different forms shall be consistent with and not
violate the provisions of this Agreement, and that no such amendment or
different form shall be made or entered into which could be reasonably expected
to be materially adverse to the interests of the Certificateholders, without the
consent of the Certificate Insurer and the Holders of Certificates entitled to
at least 66% of the Voting Rights. Any variation without the consent of the
Certificate Insurer and the Holders of Certificates entitled to at least 66% of
the Voting Rights from the provisions set forth in Section 3.08 relating to
insurance or priority requirements of Sub-Servicing Accounts, or credits and
charges to the Sub-Servicing Accounts or the timing and amount of remittances by
the SubServicers to the Master Servicer, are conclusively deemed to be
inconsistent with this Agreement and therefore prohibited. The Master Servicer
shall deliver to the Trustee and the Certificate Insurer copies of all
Sub-Servicing Agreements, and any amendments or modifications thereof, promptly
upon the Master Servicer's execution and delivery of such instruments.
(b) As part of its servicing activities hereunder, the Master
Servicer (except as otherwise provided in the last sentence of this paragraph),
for the benefit of the Trustee, the Certificateholders and the Certificate
Insurer, shall enforce the obligations of each Sub-Servicer under the related
Sub-Servicing Agreement and of the Originator and the Seller under the Mortgage
Loan Purchase Agreement, including, without limitation, any obligation to make
advances in respect of delinquent payments as required by a Sub-Servicing
Agreement, or to purchase a Mortgage Loan on account of missing or defective
documentation or on account of a breach of a representation, warranty or
covenant, as described in Section 2.03(a). Such enforcement, including, without
limitation, the legal prosecution of claims, termination of SubServicing
Agreements, and the pursuit of other appropriate remedies, shall be in such form
and carried out to such an extent and at such time as the Master Servicer, in
its good faith business judgment, would require were it the owner of the related
Mortgage Loans. The Master Servicer shall pay the costs of such enforcement at
its own expense, and shall be reimbursed therefor only (i) from a general
recovery resulting from such enforcement, to the extent, if any, that such
recovery exceeds all amounts due in respect of the related Mortgage Loans, or
(ii) from a specific recovery of costs, expenses or attorneys' fees against the
party against whom such
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enforcement is directed. Enforcement of the Mortgage Loan Purchase Agreement
against the Originator shall be effected by the Master Servicer to the extent it
is not the Originator, and otherwise by the Trustee, in accordance with the
foregoing provisions of this paragraph.
SECTION 3.03. Successor Sub-Servicers.
The Master Servicer shall be entitled to terminate any
Sub-Servicing Agreement and the rights and obligations of any Sub-Servicer
pursuant to any Sub-Servicing Agreement in accordance with the terms and
conditions of such Sub-Servicing Agreement. In the event of termination of any
Sub-Servicer, all servicing obligations of such Sub-Servicer shall be assumed
simultaneously by the Master Servicer without any act or deed on the part of
such Sub-Servicer or the Master Servicer, and the Master Servicer either shall
service directly the related Mortgage Loans or shall enter into a Sub-Servicing
Agreement with a successor Sub-Servicer which qualifies under Section 3.02.
Any Sub-Servicing Agreement shall include the provision that
such agreement may be immediately terminated by the Trustee without fee, in
accordance with the terms of this Agreement, in the event that the Master
Servicer shall, for any reason, no longer be the Master Servicer (including
termination due to a Master Servicer Event of Default).
SECTION 3.04. Liability of the Master Servicer.
Notwithstanding any Sub-Servicing Agreement, any of the
provisions of this Agreement relating to agreements or arrangements between the
Master Servicer and a SubServicer or reference to actions taken through a
Sub-Servicer or otherwise, the Master Servicer shall remain obligated and
primarily liable to the Trustee, the Certificateholders and the Certificate
Insurer for the servicing and administering of the Mortgage Loans in accordance
with the provisions of Section 3.01 without diminution of such obligation or
liability by virtue of such Sub-Servicing Agreements or arrangements or by
virtue of indemnification from the SubServicer and to the same extent and under
the same terms and conditions as if the Master Servicer alone were servicing and
administering the Mortgage Loans. The Master Servicer shall be entitled to enter
into any agreement with a Sub-Servicer for indemnification of the Master
Servicer by such Sub-Servicer and nothing contained in this Agreement shall be
deemed to limit or modify such indemnification.
SECTION 3.05. No Contractual Relationship Between
Sub-Servicers and Trustee or
Certificateholders.
Any Sub-Servicing Agreement that may be entered into and any
transactions or services relating to the Mortgage Loans involving a Sub-Servicer
in its capacity as such shall be deemed to be between the Sub-Servicer and the
Master Servicer alone, and the Trustee and Certificateholders or the Certificate
Insurer shall not be deemed parties thereto and shall have no claims, rights,
obligations, duties or liabilities with respect to the Sub-Servicer except as
set forth in Section 3.06. The Master Servicer shall be solely liable for all
fees owed by it to any
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Sub-Servicer, irrespective of whether the Master Servicer's compensation
pursuant to this Agreement is sufficient to pay such fees.
SECTION 3.06. Assumption or Termination of Sub-Servicing
Agreements by Trustee.
In the event the Master Servicer shall for any reason no
longer be the master servicer (including by reason of the occurrence of a Master
Servicer Event of Default), the Trustee or its designee shall thereupon assume
all of the rights and obligations of the Master Servicer under each
Sub-Servicing Agreement that the Master Servicer may have entered into, unless
the Trustee elects to terminate any Sub-Servicing Agreement in accordance with
its terms as provided in Section 3.03. Upon such assumption, the Trustee, its
designee or the successor servicer for the Trustee appointed pursuant to Section
7.02 shall be deemed, subject to Section 3.03, to have assumed all of the Master
Servicer's interest therein and to have replaced the Master Servicer as a party
to each Sub-Servicing Agreement to the same extent as if each SubServicing
Agreement had been assigned to the assuming party, except that the Master
Servicer shall not thereby be relieved of any liability or obligations under any
Sub-Servicing Agreement.
The Master Servicer at its expense shall, upon request of the
Trustee, deliver to the assuming party all documents and records relating to
each Sub-Servicing Agreement and the Mortgage Loans then being serviced and an
accounting of amounts collected and held by or on behalf of it, and otherwise
use its best efforts to effect the orderly and efficient transfer of the
Sub-Servicing Agreements to the assuming party.
SECTION 3.07. Collection of Certain Mortgage Loan
Payments.
The Master Servicer shall make reasonable efforts to collect
all payments called for under the terms and provisions of the Mortgage Loans,
and shall, to the extent such procedures shall be consistent with this
Agreement, follow such collection procedures as it would follow with respect to
mortgage loans comparable to the Mortgage Loans and held for its own account.
Consistent with the foregoing, the Master Servicer may in its discretion (i)
waive any late payment charge or, if applicable, penalty interest, (ii) extend
the due dates for the Monthly Payments due on a Mortgage Note for a period of
not greater than 90 days or (iii) if the Master Servicer provides prior written
notice to the Certificate Insurer to which the Certificate Insurer does not
object within two Business Days, extend the due dates for Monthly Payments due
on a Mortgage Loan for a period of not greater than 180 days; provided that any
extension pursuant to clause (ii) or clause (iii) above shall not affect the
amortization schedule of any Mortgage Loan for purposes of any computation
hereunder.
SECTION 3.08. Sub-Servicing Accounts.
In those cases where a Sub-Servicer is servicing a Mortgage
Loan pursuant to a Sub-Servicing Agreement, the Sub-Servicer will be required to
establish and maintain one or more accounts (collectively, the "Sub-Servicing
Account"). The Sub-Servicing Account shall be an Eligible Account and shall
comply with all requirements of this Agreement relating to the
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Collection Account. The Sub-Servicer will be required to deposit into the
Sub-Servicing Account no later than the first Business Day after receipt all
proceeds of Mortgage Loans received by the Sub-Servicer, less its servicing
compensation to the extent permitted by the SubServicing Agreement and to remit
such proceeds to the Master Servicer for deposit in the Collection Account not
later than the first Business Day thereafter. For purposes of this Agreement,
the Master Servicer shall be deemed to have received payments on the Mortgage
Loans when the Sub-Servicer receives such payments.
SECTION 3.09. Collection of Taxes, Assessments and Similar
Items; Servicing Accounts.
The Master Servicer shall, establish and maintain one or more
accounts (the "Servicing Accounts"), into which all collections from the
Mortgagors (or related advances from Sub-Servicers) for the payment of taxes,
assessments, hazard insurance premiums, and comparable items for the account of
the Mortgagors ("Escrow Payments") shall be deposited and retained. Servicing
Accounts shall be Eligible Accounts. The Master Servicer shall deposit in the
Servicing Accounts on a daily basis, and retain therein, all Escrow Payments
collected on account of the Mortgage Loans, for the purpose of effecting the
timely payment of any such items as required under the terms of this Agreement.
Withdrawals of amounts from a Servicing Account may be made only to (i) effect
timely payment of taxes, assessments, hazard insurance premiums, and comparable
items; (ii) reimburse the Master Servicer (or a Sub-Servicer to the extent
provided in the related Sub-Servicing Agreement) out of related collections for
any advances made pursuant to Section 3.01 (with respect to taxes and
assessments) and Section 3.14 (with respect to hazard insurance); (iii) refund
to Mortgagors any sums as may be determined to be overages; (iv) pay interest,
if required and as described below, to Mortgagors on balances in the Servicing
Account; or (v) clear and terminate the Servicing Account at the termination of
the Master Servicer's obligations and responsibilities in respect of the
Mortgage Loans under this Agreement in accordance with Article X. As part of its
servicing duties, the Master Servicer or Sub-Servicers shall pay to the
Mortgagors interest on funds in Servicing Accounts, to the extent required by
law and, to the extent that interest earned on funds in the Servicing Accounts
is insufficient, to pay such interest from its or their own funds, without any
reimbursement therefor. To the extent that a Mortgage does not provide for
Escrow Payments, the Master Servicer shall determine that any such payments are
made by the Mortgagor at the time they first become due. The Master Servicer
assumes full responsibility for the timely payment of all such bills and shall
effect timely payments of all such bills irrespective of the Mortgagor's
faithful performance in the payment of same or the making of the Escrow Payments
and shall make advances from its own funds to effect such payments.
SECTION 3.10. Collection Account and Distribution Account.
(a) On behalf of the Trust Fund, the Master Servicer shall
establish and maintain one or more accounts (such account or accounts, the
"Collection Account"), held in trust for the benefit of the Trustee, the
Certificateholders and the Certificate Insurer. On behalf of the Trust Fund, the
Master Servicer shall deposit or cause to be deposited in the Collection Account
on a daily basis, as and when received or as otherwise required hereunder, the
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following payments and collections received or made by it subsequent to the
Cut-off Date (other than in respect of principal or interest on the related
Mortgage Loans due on or before the Cutoff Date), or payments (other than
Principal Prepayments) received by it on or prior to the Cutoff Date but
allocable to a Due Period subsequent thereto:
(i) all payments on account of principal, including
Principal Prepayments, on the Mortgage Loans;
(ii) all payments on account of interest (net of the
related Servicing Fee) on each Mortgage Loan;
(iii) all Insurance Proceeds and Liquidation Proceeds
(other than proceeds collected in respect of any particular
REO Property and amounts paid by the Master Servicer in
connection with a purchase of Mortgage Loans and REO
Properties pursuant to Section 10.01);
(iv) any amounts required to be deposited pursuant to
Section 3.12 in connection with any losses realized on
Permitted Investments with respect to funds held in the
Collection Account; and
(v) any amounts required to be deposited by the Master
Servicer pursuant to the second paragraph of Section 3.14(a)
in respect of any blanket policy deductibles.
For purposes of the immediately preceding sentence, the Cut-off Date with
respect to any Qualified Substitute Mortgage Loan shall be deemed to be the date
of substitution.
The foregoing requirements for deposit in the Collection
Accounts shall be exclusive, it being understood and agreed that, without
limiting the generality of the foregoing, payments in the nature of prepayment
or late payment charges or assumption fees need not be deposited by the Master
Servicer in the Collection Account. In the event the Master Servicer shall
deposit in the Collection Account any amount not required to be deposited
therein, it may at any time withdraw such amount from the Collection Account,
any provision herein to the contrary notwithstanding.
(b) On behalf of the Trust Fund, the Trustee shall establish
and maintain one or more accounts (such account or accounts, the "Distribution
Account"), held in trust for the benefit of the Certificateholders and the
Certificate Insurer. On behalf of the Trust Fund, the Master Servicer shall
deliver to the Trustee in immediately available funds for deposit in the
Distribution Account on or before 3:00 p.m. New York time (i) on the Master
Servicer Remittance Date, that portion of the Available Distribution Amount
(calculated without regard to the references in clause (2) of the definition
thereof to amounts that may be withdrawn from the Distribution Account) for the
related Distribution Date then on deposit in the Collection Account, and (ii) on
each Business Day as of the commencement of which the balance on deposit in the
Collection Account exceeds $75,000 following any withdrawals pursuant to the
next
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succeeding sentence, the amount of such excess, but only if the Collection
Account constitutes an Eligible Account solely pursuant to clause (ii) of the
definition of "Eligible Account". If the balance on deposit in the Collection
Account exceeds $75,000 as of the commencement of business on any Business Day
and the Collection Account constitutes an Eligible Account solely pursuant to
clause (ii) of the definition of "Eligible Account", the Master Servicer shall,
on or before 3:00 p.m. New York time on such Business Day, withdraw from the
Collection Account any and all amounts payable or reimbursable to the Depositor,
the Master Servicer, the Trustee, the Originator, the Seller or any Sub-Servicer
pursuant to Section 3.11 and shall pay such amounts to the Persons entitled
thereto.
(c) Funds in the Collection Account and the Distribution
Account may be invested in Permitted Investments in accordance with the
provisions set forth in Section 3.12. The Master Servicer shall give notice to
the Trustee and the Certificate Insurer of the location of the Collection
Account maintained by it when established and prior to any change thereof. The
Trustee shall give notice to the Master Servicer, the Depositor and the
Certificate Insurer of the location of the Distribution Account when established
and prior to any change thereof.
(d) Funds held in the Collection Account at any time may be
delivered by the Master Servicer to the Trustee for deposit in an account (which
may be the Distribution Account and must satisfy the standards for the
Distribution Account as set forth in the definition thereof) and for all
purposes of this Agreement shall be deemed to be a part of the Collection
Account; provided, however, that the Trustee shall have the sole authority to
withdraw any funds held pursuant to this subsection (d). In the event the Master
Servicer shall deliver to the Trustee for deposit in the Distribution Account
any amount not required to be deposited therein, it may at any time request that
the Trustee withdraw such amount from the Distribution Account and remit to it
any such amount, any provision herein to the contrary notwithstanding. In
addition, the Master Servicer shall deliver to the Trustee from time to time for
deposit, and the Trustee shall so deposit, in the Distribution Account:
(i) any P&I Advances, as required pursuant to Section
4.03;
(ii) any amounts required to be deposited pursuant to
Section 3.23(d) or (f) in connection with any REO Property;
(iii) any amounts to be paid by the Master Servicer in
connection with a purchase of Mortgage Loans and REO
Properties pursuant to Section 10.01;
(iv) any amounts required to be deposited pursuant to
Section 3.24 in connection with any Prepayment Interest
Shortfalls;
(v) any Stayed Funds, as soon as permitted by the
federal bankruptcy court having jurisdiction in such matters;
and
(vi) any amounts required to be transferred from the
Policy Payments Account pursuant to Section 9.04(b) on any
Distribution Date.
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(e) Promptly upon receipt of any Stayed Funds, whether from
the Master Servicer, a trustee in bankruptcy, or federal bankruptcy court or
other source, the Trustee shall deposit such funds in the Distribution Account,
subject to withdrawal thereof pursuant to Section 7.02(b) or as otherwise
permitted hereunder. In addition, the Master Servicer shall deposit in the
Distribution Account any amounts required to be deposited pursuant to Section
3.12 in connection with losses realized on Permitted Investments with respect to
funds held in the Distribution Account.
SECTION 3.11. Withdrawals from the Collection Account and
Distribution Account.
The Master Servicer shall, from time to time, make withdrawals
from the Collection Account for any of the following purposes or as described in
Section 4.03:
(i) to remit to the Trustee for deposit in the
Distribution Account the amounts required to be so remitted
pursuant to Section 3.10(b) or permitted to be so remitted
pursuant to the first sentence of Section 3.10(d);
(ii) subject to Section 3.16(d), to reimburse the Master
Servicer for P&I Advances, but only to the extent of amounts
received which represent Late Collections (net of the related
Servicing Fees) of Monthly Payments on Mortgage Loans with
respect to which such P&I Advances were made in accordance
with the provisions of Section 4.03;
(iii) subject to Section 3.16(d), to pay the Master
Servicer or any SubServicer any unpaid Servicing Fees and
reimburse any unreimbursed Servicing Advances with respect to
each Mortgage Loan, but only to the extent of any Liquidation
Proceeds and Insurance Proceeds received with respect to such
Mortgage Loan;
(iv) to pay to the Master Servicer as servicing
compensation (in addition to the Servicing Fee) on the Master
Servicer Remittance Date any interest or investment income
earned on funds deposited in the Collection Account;
(v) to pay to the Master Servicer, the Depositor, the
Originator or the Seller, as the case may be, with respect to
each Mortgage Loan that has previously been purchased or
replaced pursuant to Section 2.03 or Section 3.16(c) all
amounts received thereon subsequent to the date of purchase or
substitution, as the case may be;
(vi) to reimburse the Master Servicer for any P&I
Advance previously made which the Master Servicer has
determined to be a Nonrecoverable P&I Advance in accordance
with the provisions of Section 4.03;
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(vii) to reimburse the Master Servicer or the Depositor
for expenses incurred by or reimbursable to the Master
Servicer or the Depositor, as the case may be, pursuant to
Section 6.03;
(viii) to reimburse the Master Servicer or the Trustee, as
the case may be, for expenses reasonably incurred in respect
of the breach or defect giving rise to the purchase obligation
under Section 2.03 or Section 2.04 of this Agreement that were
included in the Purchase Price of the Mortgage Loan, including
any expenses arising out of the enforcement of the purchase
obligation;
(ix) to pay, or to reimburse the Master Servicer for
advances in respect of, expenses incurred in connection with
any Mortgage Loan pursuant to Section 3.16(b); and
(x) to clear and terminate the Collection Account
pursuant to Section 10.01.
The Master Servicer shall keep and maintain separate
accounting, on a Mortgage Loan by Mortgage Loan basis, for the purpose of
justifying any withdrawal from the Collection Account, to the extent held by or
on behalf of it, pursuant to subclauses (ii), (iii), (v), (vi), (viii) and (ix)
above. The Master Servicer shall provide written notification to the Trustee, on
or prior to the next succeeding Master Servicer Remittance Date, upon making any
withdrawals from the Collection Account pursuant to subclause (vii) above.
SECTION 3.12. Investment of Funds in the Collection
Account, the Expense Account and the
Distribution Account.
(a) The Master Servicer may direct any depository institution
maintaining the Collection Account and the Expense Account (each, for purposes
of this Section 3.12, an "Investment Account"), and the Trustee, in its
individual capacity, may direct any depository institution maintaining the
Distribution Account (for purposes of this Section 3.12, also an "Investment
Account"), to invest the funds in such Investment Account in one or more
Permitted Investments bearing interest or sold at a discount, and maturing,
unless payable on demand, (i) no later than the Business Day immediately
preceding the date on which such funds are required to be withdrawn from such
account pursuant to this Agreement, if a Person other than the Trustee is the
obligor thereon, and (ii) no later than the date on which such funds are
required to be withdrawn from such account pursuant to this Agreement, if the
Trustee is the obligor thereon. All such Permitted Investments shall be held to
maturity, unless payable on demand. Any investment of funds in an Investment
Account shall be made in the name of the Trustee (in its capacity as such) or in
the name of a nominee of the Trustee. The Trustee shall be entitled to sole
possession (except with respect to investment direction of funds held in the
Collection Account and the Expense Account) over each such investment and the
income thereon, and any certificate or other instrument evidencing any such
investment shall be delivered directly to the Trustee or its agent, together
with any document of transfer necessary to transfer title to such investment to
the Trustee or its nominee. In the event amounts on deposit in an Investment
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Account are at any time invested in a Permitted Investment payable on demand,
the Trustee shall:
(x) consistent with any notice required to be given
thereunder, demand that payment thereon be made on
the last day such Permitted Investment may otherwise
mature hereunder in an amount equal to the lesser of
(1) all amounts then payable thereunder and (2) the
amount required to be withdrawn on such date; and
(y) demand payment of all amounts due thereunder promptly
upon determination by a Responsible Officer of the
Trustee that such Permitted Investment would not
constitute a Permitted Investment in respect of funds
thereafter on deposit in the Investment Account.
(b) All income and gain realized from the investment of funds
deposited in the Collection Account and the Expense Account held by or on behalf
of the Master Servicer, shall be for the benefit of the Master Servicer and
shall be subject to its withdrawal in accordance with Section 3.11. The Master
Servicer shall deposit in the Collection Account or the Expense Account, as
applicable, the amount of any loss of principal incurred in respect of any such
Permitted Investment made with funds in such accounts immediately upon
realization of such loss.
(c) All income and gain realized from the investment of funds
deposited in the Distribution Account held by or on behalf of the Trustee, shall
be for the benefit of the Trustee and shall be subject to its withdrawal at any
time. The Trustee shall deposit in the Distribution Account, the amount of any
loss of principal incurred in respect of any such Permitted Investment made with
funds in such accounts immediately upon realization of such loss.
(d) Except as otherwise expressly provided in this Agreement,
if any default occurs in the making of a payment due under any Permitted
Investment, or if a default occurs in any other performance required under any
Permitted Investment, the Trustee may and, subject to Section 8.01 and Section
8.02(v), upon the request of the Certificate Insurer or the Holders of
Certificates representing more than 50% of the Voting Rights allocated to any
Class of Certificates, shall take such action as may be appropriate to enforce
such payment or performance, including the institution and prosecution of
appropriate proceedings.
SECTION 3.13. [intentionally omitted]
SECTION 3.14. Maintenance of Hazard Insurance and Errors
and Omissions and Fidelity Coverage.
(a) The Master Servicer shall cause to be maintained for each
Mortgage Loan fire insurance with extended coverage on the related Mortgaged
Property in an amount which is at least equal to the least of (i) the current
principal balance of such Mortgage Loan, (ii) the amount necessary to fully
compensate for any damage or loss to the improvements that are a part
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of such property on a replacement cost basis and (iii) the maximum insurable
value of the improvements which are a part of such Mortgaged Property, in each
case in an amount not less than such amount as is necessary to avoid the
application of any coinsurance clause contained in the related hazard insurance
policy. The Master Servicer shall also cause to be maintained fire insurance
with extended coverage on each REO Property in an amount which is at least equal
to the lesser of (i) the maximum insurable value of the improvements which are a
part of such property and (ii) the outstanding principal balance of the related
Mortgage Loan at the time it became an REO Property, plus accrued interest at
the Mortgage Rate and related Servicing Advances. The Master Servicer will
comply in the performance of this Agreement with all reasonable rules and
requirements of each insurer under any such hazard policies. Any amounts to be
collected by the Master Servicer under any such policies (other than amounts to
be applied to the restoration or repair of the property subject to the related
Mortgage or amounts to be released to the Mortgagor in accordance with the
procedures that the Master Servicer would follow in servicing loans held for its
own account, subject to the terms and conditions of the related Mortgage and
Mortgage Note) shall be deposited in the Collection Account, subject to
withdrawal pursuant to Section 3.11, if received in respect of a Mortgage Loan,
or in the REO Account, subject to withdrawal pursuant to Section 3.23, if
received in respect of an REO Property. Any cost incurred by the Master Servicer
in maintaining any such insurance shall not, for the purpose of calculating
distributions to Certificateholders and the Certificate Insurer, be added to the
unpaid principal balance of the related Mortgage Loan, notwithstanding that the
terms of such Mortgage Loan so permit. It is understood and agreed that no
earthquake or other additional insurance is to be required of any Mortgagor
other than pursuant to such applicable laws and regulations as shall at any time
be in force and as shall require such additional insurance. If the Mortgaged
Property or REO Property is at any time in an area identified in the Federal
Register by the Federal Emergency Management Agency as having special flood
hazards, the Master Servicer will cause to be maintained a flood insurance
policy in respect thereof. Such flood insurance shall be in an amount equal to
the lesser of (i) the unpaid principal balance of the related Mortgage Loan and
(ii) the maximum amount of such insurance available for the related Mortgaged
Property under the national flood insurance program (assuming that the area in
which such Mortgaged Property is located is participating in such program).
In the event that the Master Servicer shall obtain and
maintain a blanket policy with an insurer having a General Policy Rating of A:X
or better in Best's Key Rating Guide insuring against hazard losses on all of
the Mortgage Loans, it shall conclusively be deemed to have satisfied its
obligations as set forth in the first two sentences of this Section 3.14, it
being understood and agreed that such policy may contain a deductible clause, in
which case the Master Servicer shall, in the event that there shall not have
been maintained on the related Mortgaged Property or REO Property a policy
complying with the first two sentences of this Section 3.14, and there shall
have been one or more losses which would have been covered by such policy,
deposit to the Collection Account from its own funds the amount not otherwise
payable under the blanket policy because of such deductible clause. In
connection with its activities as administrator and servicer of the Mortgage
Loans, the Master Servicer agrees to prepare and present, on behalf of itself,
the Trustee, Certificateholders and the Certificate
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Insurer, claims under any such blanket policy in a timely fashion in accordance
with the terms of such policy.
(b) The Master Servicer shall keep in force during the term of
this Agreement a policy or policies of insurance covering errors and omissions
for failure in the performance of the Master Servicer's obligations under this
Agreement, which policy or policies shall be in such form and amount that would
meet the requirements of FNMA or FHLMC if it were the purchaser of the Mortgage
Loans, unless the Master Servicer has obtained a waiver of such requirements
from FNMA or FHLMC. The Master Servicer shall also maintain a fidelity bond in
the form and amount that would meet the requirements of FNMA or FHLMC, unless
the Master Servicer has obtained a waiver of such requirements from FNMA or
FHLMC. The Master Servicer shall be deemed to have complied with this provision
if an Affiliate of the Master Servicer has such errors and omissions and
fidelity bond coverage and, by the terms of such insurance policy or fidelity
bond, the coverage afforded thereunder extends to the Master Servicer. Any such
errors and omissions policy and fidelity bond shall by its terms not be
cancelable without thirty days' prior written notice to the Trustee. The Master
Servicer shall also cause each Sub-Servicer to maintain a policy of insurance
covering errors and omissions and a fidelity bond which would meet such
requirements.
SECTION 3.15. Enforcement of Due-On-Sale Clauses;
Assumption Agreements.
The Master Servicer will, to the extent it has knowledge of
any conveyance or prospective conveyance of any Mortgaged Property by any
Mortgagor (whether by absolute conveyance or by contract of sale, and whether or
not the Mortgagor remains or is to remain liable under the Mortgage Note and/or
the Mortgage), exercise its rights to accelerate the maturity of such Mortgage
Loan under the "due-on-sale" clause, if any, applicable thereto; provided,
however, that the Master Servicer shall not exercise any such rights if
prohibited by law from doing so. If the Master Servicer reasonably believes it
is unable under applicable law to enforce such "due-on-sale" clause, or if any
of the other conditions set forth in the proviso to the preceding sentence
apply, the Master Servicer will enter into an assumption and modification
agreement from or with the person to whom such property has been conveyed or is
proposed to be conveyed, pursuant to which such person becomes liable under the
Mortgage Note and, to the extent permitted by applicable state law, the
Mortgagor remains liable thereon. The Master Servicer is also 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 the Mortgagor and becomes liable under the Mortgage Note,
provided that no such substitution shall be effective unless such person
satisfies the underwriting criteria of the Master Servicer and has a credit risk
rating at least equal to that of the original Mortgagor. In connection with any
assumption or substitution, the Master Servicer shall apply such underwriting
standards and follow such practices and procedures as shall be normal and usual
in its general mortgage servicing activities and as it applies to other mortgage
loans owned solely by it. The Master Servicer shall not take or enter into any
assumption and modification agreement, however, unless (to the extent
practicable in the circumstances) it shall have received confirmation, in
writing, of the continued effectiveness of any applicable hazard insurance
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policy, or a new policy meeting the requirements of this Section is obtained.
Any fee collected by the Master Servicer in respect of an assumption or
substitution of liability agreement will be retained by the Master Servicer as
additional servicing compensation. In connection with any such assumption, no
material term of the Mortgage Note (including but not limited to the related
Mortgage Rate and the amount of the Monthly Payment) may be amended or modified,
except as otherwise required pursuant to the terms thereof. The Master Servicer
shall notify the Trustee and any respective Custodian that any such substitution
or assumption agreement has been completed by forwarding to the Trustee or to
such Custodian, as the case may be, the executed original of such substitution
or assumption agreement, which document shall be added to the related Mortgage
File and 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.
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 by the terms of the
Mortgage Note or any assumption which the Master Servicer may be restricted by
law from preventing, for any reason whatever. For purposes of this Section 3.15,
the term "assumption" is deemed to also include a sale (of the Mortgaged
Property) subject to the Mortgage that is not accompanied by an assumption or
substitution of liability agreement.
SECTION 3.16. Realization Upon Defaulted Mortgage Loans.
(a) The Master Servicer shall, consistent with the servicing
standard set forth in Section 3.01, foreclose upon or otherwise comparably
convert the ownership of properties securing such of the Mortgage Loans as come
into and continue in default and as to which no satisfactory arrangements can be
made for collection of delinquent payments pursuant to Section 3.07. The Master
Servicer shall be responsible for all costs and expenses incurred by it in any
such proceedings; provided, however, that such costs and expenses will be
recoverable as Servicing Advances by the Master Servicer as contemplated in
Section 3.11 and 3.23. The foregoing is subject to the provision that, in any
case in which Mortgaged Property shall have suffered damage from an Uninsured
Cause, the Master Servicer shall not be required to expend its own funds toward
the restoration of such property unless it shall determine in its discretion
that such restoration will increase the proceeds of liquidation of the related
Mortgage Loan after reimbursement to itself for such expenses.
(b) Notwithstanding the foregoing provisions of this Section
3.16 or any other provision of this Agreement, with respect to any Mortgage Loan
as to which the Master Servicer has received actual notice of, or has actual
knowledge of, the presence of any toxic or hazardous substance on the related
Mortgaged Property, the Master Servicer shall not, on behalf of the Trustee,
either (i) obtain title to such Mortgaged Property as a result of or in lieu of
foreclosure or otherwise, or (ii) otherwise acquire possession of, or take any
other action with respect to, such Mortgaged Property, if, as a result of any
such action, the Trustee, the Certificateholders or the Certificate Insurer
would be considered to hold title to, to be a "mortgagee-in-possession" of, or
to be an "owner" or "operator" of such Mortgaged Property within the meaning of
the
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Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended from time to time, or any comparable law, unless the Master Servicer has
also previously determined, based on its reasonable judgment and a report
prepared by a Person who regularly conducts environmental audits using customary
industry standards, that:
(1) such Mortgaged Property is in compliance with
applicable environmental laws or, if not, that it would be in
the best economic interest of the Trust Fund to take such
actions as are necessary to bring the Mortgaged Property into
compliance therewith; and
(2) there are no circumstances present at such
Mortgaged Property relating to the use, management or disposal
of any hazardous substances, hazardous materials, hazardous
wastes, or petroleum-based materials for which investigation,
testing, monitoring, containment, clean-up or remediation
could be required under any federal, state or local law or
regulation, or that if any such materials are present for
which such action could be required, that it would be in the
best economic interest of the Trust Fund to take such actions
with respect to the affected Mortgaged Property.
The cost of the environmental audit report contemplated by
this Section 3.23 shall be advanced by the Master Servicer, subject to the
Master Servicer's right to be reimbursed therefor from the Collection Account as
provided in Section 3.11(ix), such right of reimbursement being prior to the
rights of Certificateholders to receive any amount in the Collection Account
received in respect of the affected Mortgage Loan or other Mortgage Loans.
If the Master Servicer determines, as described above, that it
is in the best economic interest of the Trust Fund to take such actions as are
necessary to bring any such Mortgaged Property into compliance with applicable
environmental laws, or to take such action with respect to the containment,
clean-up or remediation of hazardous substances, hazardous materials, hazardous
wastes or petroleum-based materials affecting any such Mortgaged Property, then
the Master Servicer shall take such action as it deems to be in the best
economic interest of such Trust Fund. The cost of any such compliance,
containment, cleanup or remediation shall be advanced by the Master Servicer,
subject to the Master Servicer's right to be reimbursed therefor from the
Collection Account as provided in Section 3.11(ix), such right of reimbursement
being prior to the rights of Certificateholders to receive any amount in the
Collection Account received in respect of the affected Mortgage Loan or other
Mortgage Loans.
(c) The Master Servicer may at its option purchase from the
Trust Fund any Mortgage Loan that is 90 days or more delinquent, which the
Master Servicer determines in good faith will otherwise become subject to
foreclosure proceedings (evidence of such determination to be delivered in
writing to the Trustee and the Certificate Insurer prior to purchase), at a
price equal to the Purchase Price. The Purchase Price for any Mortgage Loan
purchased hereunder shall be deposited in the Collection Account, and the
Trustee, upon receipt of written certification from the Master Servicer of such
deposit, shall release or cause to be released to the Master Servicer the
related Mortgage File and shall execute and deliver such
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instruments of transfer or assignment, in each case without recourse, as the
Master Servicer shall furnish and as shall be necessary to vest in the Master
Servicer title to any Mortgage Loan released pursuant hereto.
(d) Proceeds received in connection with any Final Recovery
Determination, as well as any recovery resulting from a partial collection of
Insurance Proceeds or Liquidation Proceeds, in respect of any Mortgage Loan,
will be applied in the following order of priority: FIRST, to reimburse the
Master Servicer or any Sub-Servicer for any related unreimbursed Servicing
Advances and P&I Advances, pursuant to Section 3.11(ii) or (iii); SECOND, to
accrued and unpaid interest on the Mortgage Loan, to the date of the Final
Recovery Determination, or to the Due Date prior to the Distribution Date on
which such amounts are to be distributed if not in connection with a Final
Recovery Determination; and THIRD, as a recovery of principal of the Mortgage
Loan. If the amount of the recovery so allocated to interest is less than the
full amount of accrued and unpaid interest due on such Mortgage Loan, the amount
of such recovery will be allocated by the Master Servicer as follows: FIRST, to
unpaid Servicing Fees; and SECOND, to the balance of the interest then due and
owing. The portion of the recovery so allocated to unpaid Servicing Fees shall
be reimbursed to the Master Servicer or any Sub-Servicer pursuant to Section
3.11(iii).
SECTION 3.17. 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 shall be
escrowed in a manner customary for such purposes, the Master Servicer will
immediately notify the Trustee, any related Custodian and the Certificate
Insurer by a certification in the form of Exhibit E-2 (which certification shall
include a statement to the effect that all amounts received or to be received in
connection with such payment which are required to be deposited in the
Collection Account pursuant to Section 3.10 have been or will be so deposited)
of a Servicing Officer and shall request delivery to it of the Mortgage File.
Upon receipt of such certification and request, the Trustee or such Custodian,
as the case may be, shall promptly release the related Mortgage File to the
Master Servicer. No expenses incurred in connection with any instrument of
satisfaction or deed of reconveyance shall be chargeable to the Collection
Account or the Distribution Account.
(b) From time to time and as appropriate for the servicing or
foreclosure of any Mortgage Loan, including, for this purpose, collection under
any insurance policy relating to the Mortgage Loans, the Trustee and any related
Custodian shall, upon request of the Master Servicer and delivery to the Trustee
or such Custodian, as the case may be, of a Request for Release in the form of
Exhibit E-l, release the related Mortgage File to the Master Servicer, and the
Trustee shall, at the direction of the Master Servicer, execute such documents
as shall be necessary to the prosecution of any such proceedings. Such Request
for Release shall obligate the Master Servicer to return each and every document
previously requested from the Mortgage File to the Trustee or to such Custodian
when the need therefor by the Master Servicer no longer exists, unless the
Mortgage Loan has been liquidated and the Liquidation Proceeds relating to the
Mortgage Loan have been deposited in the Collection Account or the Mortgage File
or such
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document has been delivered to an attorney, or to a public trustee or other
public official as required by law, for purposes of initiating or pursuing legal
action or other proceedings for the foreclosure of the Mortgaged Property either
judicially or non-judicially, and the Master Servicer has delivered to the
Trustee a certificate of a Servicing Officer certifying as to the name and
address of the Person to which such Mortgage File or such document was delivered
and the purpose or purposes of such delivery. Upon receipt of a certificate of a
Servicing Officer stating that such Mortgage Loan was liquidated and that all
amounts received or to be received in connection with such liquidation that are
required to be deposited into the Collection Account have been so deposited, or
that such Mortgage Loan has become an REO Property, a copy of the Request for
Release shall be released by the Trustee or such Custodian to the Master
Servicer.
(c) Upon written certification of a Servicing Officer, the
Trustee shall execute and deliver to the Master Servicer, with copies to the
Certificate Insurer, any court pleadings, requests for trustee's sale or other
documents reasonably necessary to the foreclosure or trustee's sale in respect
of a Mortgaged Property or to any legal action brought to obtain judgment
against any Mortgagor on the Mortgage Note or Mortgage or to obtain a deficiency
judgment, or to enforce any other remedies or rights provided by the Mortgage
Note or Mortgage or otherwise available at law or in equity. Each such
certification shall include a request that such pleadings or documents be
executed by the Trustee and a statement as to the reason such documents or
pleadings are required and that the execution and delivery thereof by the
Trustee will not invalidate or otherwise affect the lien of the Mortgage, except
for the termination of such a lien upon completion of the foreclosure or
trustee's sale.
SECTION 3.18. Servicing Compensation.
As compensation for the activities of the Master Servicer
hereunder, the Master Servicer shall be entitled to the Servicing Fee with
respect to each Mortgage Loan payable solely from payments of interest in
respect of such Mortgage Loan, subject to Section 3.24. In addition, the Master
Servicer shall be entitled to recover unpaid Servicing Fees out of Insurance
Proceeds or Liquidation Proceeds to the extent permitted by Section 3.11(iii)
and out of amounts derived from the operation and sale of an REO Property to the
extent permitted by Section 3.23. The right to receive the Servicing Fee may not
be transferred in whole or in part except in connection with the transfer of all
of the Master Servicer's responsibilities and obligations under this Agreement.
Additional servicing compensation in the form of prepayment
charges, assumption fees, late payment charges and other similar fees and
charges shall be retained by the Master Servicer (subject to Section 3.24) only
to the extent such fees or charges are received by the Master Servicer. The
Master Servicer shall also be entitled pursuant to Section 3.11(iv) to withdraw
from the Collection Account, pursuant to Section 3.25 to withdraw from the
Expense Account, and pursuant to Section 3.23(b) to withdraw from any REO
Account, as additional servicing compensation, interest or other income earned
on deposits therein, subject to Section 3.12 and Section 3.24. The Master
Servicer shall be required to pay all expenses incurred by it in connection with
its servicing activities hereunder (including premiums for the insurance
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required by Section 3.14, to the extent such premiums are not paid by the
related Mortgagors or by a Sub-Servicer, servicing compensation of each
Sub-Servicer, and to the extent provided herein in Section 8.05, the fees and
expenses of the Trustee) and shall not be entitled to reimbursement therefor
except as specifically provided herein.
SECTION 3.19. Reports to the Trustee; Collection Account
Statements.
Not later than fifteen days after each Distribution Date, the
Master Servicer shall forward to the Trustee, the Certificate Insurer and the
Depositor a statement prepared by the Master Servicer setting forth the status
of the Collection Account as of the close of business on such Distribution Date
and showing, for the period covered by such statement, the aggregate amount of
deposits into and withdrawals from the Collection Account of each category of
deposit specified in Section 3.10(a) and each category of withdrawal specified
in Section 3.11. Such statement may be in the form of the then current FNMA
Monthly Accounting Report for its Guaranteed Mortgage Pass-Through Program with
appropriate additions and changes, and shall also include information as to the
aggregate of the outstanding principal balances of all of the Mortgage Loans as
of the last day of the calendar month immediately preceding such Distribution
Date. Copies of such statement shall be provided by the Trustee to any
Certificateholder and to any Person identified to the Trustee as a prospective
transferee of a Certificate, upon request at the expense of the requesting
party, provided such statement is delivered by the Master Servicer to the
Trustee.
SECTION 3.20. Statement as to Compliance.
The Master Servicer will deliver to the Trustee, the
Certificate Insurer, the Depositor and each Rating Agency on or before April 15
of each calendar year commencing in 1997, an Officers' Certificate stating, as
to each signatory thereof, that (i) a review of the activities of the Master
Servicer during the preceding year and of performance under this Agreement has
been made under such officers' supervision and (ii) to the best of such
officers' knowledge, based on such review, the Master Servicer has fulfilled all
of its obligations under this Agreement throughout such year, or, if there has
been a default in the fulfillment of any such obligation, specifying each such
default known to such officer and the nature and status thereof. Copies of any
such statement shall be provided by the Trustee to any Certificateholder and to
any Person identified to the Trustee as a prospective transferee of a
Certificate, upon request at the expense of the requesting party, provided such
statement is delivered by the Master Servicer to the Trustee.
SECTION 3.21. Independent Public Accountants' Servicing
Report.
Not later than April 15 of each calendar year commencing in
1997, the Master Servicer, at its expense, shall cause a nationally recognized
firm of independent certified public accountants to furnish to the Master
Servicer a report stating that (i) it has obtained a letter of representation
regarding certain matters from the management of the Master Servicer which
includes an assertion that the Master Servicer has complied with certain minimum
residential mortgage loan servicing standards, identified in the Uniform Single
Attestation Program for
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Mortgage Bankers established by the Mortgage Bankers Association of America,
with respect to the servicing of residential mortgage loans during the most
recently completed fiscal year and (ii) on the basis of an examination conducted
by such firm in accordance with standards established by the American Institute
of Certified Public Accountants, such representation is fairly stated in all
material respects, subject to such exceptions and other qualifications that may
be appropriate. In rendering its report such firm may rely, as to matters
relating to the direct servicing of residential mortgage loans by Sub-Servicers,
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
Sub-Servicers. 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. Copies of such statement shall be provided by the Trustee to
any Certificateholder upon request at the Master Servicer's expense, provided
that such statement is delivered by the Master Servicer to the Trustee.
SECTION 3.22. Access to Certain Documentation.
The Master Servicer shall provide to the Office of Thrift
Supervision, the FDIC, and any other federal or state banking or insurance
regulatory authority that may exercise authority over any Certificateholder,
access to the documentation regarding the Mortgage Loans required by applicable
laws and regulations. Such access shall be afforded without charge, but only
upon reasonable request and during normal business hours at the offices of the
Master Servicer designated by it. In addition, access to the documentation
regarding the Mortgage Loans will be provided to any Certificateholder, the
Certificate Insurer, the Trustee and to any Person identified to the Master
Servicer as a prospective transferee of a Certificate, upon reasonable request
during normal business hours at the offices of the Master Servicer designated by
it at the expense of the Person requesting such access.
SECTION 3.23. Title, Management and Disposition of REO
Property.
(a) The deed or certificate of sale of any REO Property shall
be taken in the name of the Trustee, or its nominee, in trust for the benefit of
the Certificateholders and the Certificate Insurer. The Master Servicer, on
behalf of the Trust Fund, shall either sell any REO Property within two years
after the Trust Fund acquires ownership of such REO Property for purposes of
Section 860(a)(8) of the Code or request from the Internal Revenue Service, no
later than 60 days before the day on which the two-year grace period would
otherwise expire, an extension of the two-year grace period, unless the Master
Servicer shall have delivered to the Trustee an Opinion of Counsel, addressed to
the Trustee, the Depositor and the Certificate Insurer, to the effect that the
holding by the Trust Fund of such REO Property subsequent to two years after its
acquisition will not result in the imposition on the Trust Fund of taxes on
"prohibited transactions" thereof, as defined in Section 860F of the Code, or
cause the Trust Fund to fail to qualify as a REMIC under Federal law at any time
that any Certificates are outstanding. The Master Servicer shall manage,
conserve, protect and operate each REO Property for the Certificateholders
solely for the purpose of its prompt disposition and sale in a manner which does
not cause such REO Property to fail to qualify as "foreclosure property"
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within the meaning of Section 860G(a)(8) of the Code or result in the receipt by
the Trust Fund of any "income from non-permitted assets" within the meaning of
Section 860F(a)(2)(B) of the Code, or any "net income from foreclosure property"
which is subject to taxation under the REMIC Provisions.
(b) The Master Servicer shall segregate and hold all funds
collected and received in connection with the operation of any REO Property
separate and apart from its own funds and general assets and shall establish and
maintain with respect to REO Properties an account held in trust for the Trustee
for the benefit of the Certificateholders and the Certificate Insurer (the "REO
Account"), which shall be an Eligible Account. The Master Servicer shall be
permitted to allow the Collection Account to serve as the REO Account, subject
to separate ledgers for each REO Property. The Master Servicer shall be entitled
to retain or withdraw any interest income paid on funds deposited in the REO
Account.
(c) The Master Servicer shall have full power and authority,
subject only to the specific requirements and prohibitions of this Agreement, to
do any and all things in connection with any REO Property as are consistent with
the manner in which the Master Servicer manages and operates similar property
owned by the Master Servicer or any of its Affiliates, all on such terms and for
such period as the Master Servicer deems to be in the best interests of
Certificateholders. In connection therewith, the Master Servicer shall deposit,
or cause to be deposited, on a daily basis in the REO Account all revenues
received by it with respect to an REO Property and shall withdraw therefrom
funds necessary for the proper operation, management and maintenance of such REO
Property including, without limitation:
(i) all insurance premiums due and payable in respect
of such REO Property;
(ii) all real estate taxes and assessments in respect
of such REO Property that may result in the imposition of a
lien thereon; and
(iii) all costs and expenses necessary to maintain such
REO Property.
To the extent that amounts on deposit in the REO Account with respect to an REO
Property are insufficient for the purposes set forth in clauses (i) through
(iii) above with respect to such REO Property, the Master Servicer shall advance
from its own funds such amount as is necessary for such purposes if, but only
if, the Master Servicer would make such advances if the Master Servicer owned
the REO Property and if in the Master Servicer's judgment, the payment of such
amounts will be recoverable from the rental or sale of the REO Property.
Notwithstanding the foregoing, neither the Master Servicer nor
the Trustee shall:
(i) authorize the Trust Fund to enter into, renew or
extend any New Lease with respect to any REO Property, if the
New Lease by its terms will give rise to any income that does
not constitute Rents from Real Property;
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(ii) authorize any amount to be received or accrued
under any New Lease other than amounts that will constitute
Rents from Real Property;
(iii) authorize any construction on any REO Property,
other than the completion of a building or other improvement
thereon, and then only if more than ten percent of the
construction of such building or other improvement was
completed before default on the related Mortgage Loan became
imminent, all within the meaning of Section 856(e)(4)(B) of
the Code; or
(iv) authorize any Person to Directly Operate any REO
Property on any date more than 90 days after its date of
acquisition by the Trust Fund;
unless, in any such case, the Master Servicer has obtained an Opinion of
Counsel, provided to the Trustee and the Certificate Insurer, to the effect that
such action will not cause such REO Property to fail to qualify as "foreclosure
property" within the meaning of Section 860G(a)(8) of the Code at any time that
it is held by the Trust Fund, in which case the Master Servicer may take such
actions as are specified in such Opinion of Counsel.
The Master Servicer may contract with any Independent
Contractor for the operation and management of any REO Property, provided that:
(i) the terms and conditions of any such contract shall
not be inconsistent herewith;
(ii) any such contract shall require, or shall be
administered to require, that the Independent Contractor pay
all costs and expenses incurred in connection with the
operation and management of such REO Property, including those
listed above and remit all related revenues (net of such costs
and expenses) to the Master Servicer as soon as practicable,
but in no event later than thirty days following the receipt
thereof by such Independent Contractor;
(iii) none of the provisions of this Section 3.23(c)
relating to any such contract or to actions taken through any
such Independent Contractor shall be deemed to relieve the
Master Servicer of any of its duties and obligations to the
Trustee on behalf of the Certificateholders and the
Certificate Insurer with respect to the operation and
management of any such REO Property; and
(iv) the Master Servicer shall be obligated with respect
thereto to the same extent as if it alone were performing all
duties and obligations in connection with the operation and
management of such REO Property.
The Master Servicer shall be entitled to enter into any agreement with any
Independent Contractor performing services for it related to its duties and
obligations hereunder for indemnification of the Master Servicer by such
Independent Contractor, and nothing in this Agreement shall be deemed to limit
or modify such indemnification. The Master Servicer shall
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be solely liable for all fees owed by it to any such Independent Contractor,
irrespective of whether the Master Servicer's compensation pursuant to Section
3.18 is sufficient to pay such fees.
(d) In addition to the withdrawals permitted under Section
3.23(c), the Master Servicer may from time to time make withdrawals from the REO
Account for any REO Property: (i) to pay itself or any Sub-Servicer unpaid
Servicing Fees in respect of the related Mortgage Loan; and (ii) to reimburse
itself or any Sub-Servicer for unreimbursed Servicing Advances and P&I Advances
made in respect of such REO Property or the related Mortgage Loan. On the Master
Servicer Remittance Date, the Master Servicer shall withdraw from each REO
Account maintained by it and deposit into the Distribution Account in accordance
with Section 3.10(d)(ii), for distribution on the related Distribution Date in
accordance with Section 4.01, the income from the related REO Property received
during the prior calendar month, net of any withdrawals made pursuant to Section
3.23(c) or this Section 3.23(d).
(e) Subject to the time constraints set forth in Section
3.23(a), each REO Disposition shall be carried out by the Master Servicer at
such price and upon such terms and conditions as the Master Servicer shall deem
necessary or advisable, as shall be normal and usual in its general servicing
activities for similar properties.
(f) The proceeds from the REO Disposition, net of any amount
required by law to be remitted to the Mortgagor under the related Mortgage Loan
and net of any payment or reimbursement to the Master Servicer or any
Sub-Servicer as provided above, shall be deposited in the Distribution Account
in accordance with Section 3.10(d)(ii) on the Master Servicer Remittance Date in
the month following the receipt thereof for distribution on the related
Distribution Date in accordance with Section 4.01. Any REO Disposition shall be
for cash only (unless changes in the REMIC Provisions made subsequent to the
Startup Day allow a sale for other consideration).
(g) The Master Servicer shall file information returns with
respect to the receipt of mortgage interest received in a trade or business,
reports of foreclosures and abandonments of any Mortgaged Property and
cancellation of indebtedness income with respect to any Mortgaged Property as
required by Sections 6050H, 6050J and 6050P of the Code, respectively. Such
reports shall be in form and substance sufficient to meet the reporting
requirements imposed by such Sections 6050H, 6050J and 6050P of the Code.
SECTION 3.24. Obligations of the Master Servicer in
Respect of Prepayment Interest Shortfalls.
The Master Servicer shall deliver to the Trustee for deposit
into the Distribution Account on or before 3:00 p.m. New York time on the Master
Servicer Remittance Date from its own funds an amount equal to the lesser of (i)
the aggregate of the Prepayment Interest Shortfalls for the related Distribution
Date resulting solely from Principal Prepayments during the related Prepayment
Period and (ii) the amount of its aggregate Servicing Fee for the most recently
ended calendar month.
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SECTION 3.25. Expense Account.
(a) The Trustee shall establish and maintain in its name, for
the benefit of the Trustee in trust for (1) the Certificateholders and (2) the
Certificate Insurer, the Expense Account. The Expense Account shall be an
Eligible Account, and funds on deposit therein shall be held separate and apart
from, and shall not be commingled with, any other moneys, including, without
limitation, other moneys of the Trustee held pursuant to this Agreement.
(b) On the Business Day immediately preceding each
Distribution Date, the Trustee shall withdraw from the Distribution Account and
deposit into the Expense Account an amount equal to 1/12 of the Certificate
Insurer Premium Rate on the aggregate Certificate Principal Balance of the Class
A Certificates for such Distribution Date.
(c) The Trustee shall make withdrawals from the Expense
Account to pay the Certificate Insurer Premium on each Distribution Date.
(d) Funds in the Expense Account may be invested in Permitted
Investments in accordance with the provisions set forth in Section 3.12. Any
earnings on such amounts shall be payable to the Master Servicer as additional
servicing compensation. The Trustee shall give notice to the Depositor and the
Certificate Insurer of the location of the Expense Account on the Closing Date
and prior to any change thereof.
(e) Upon termination of the Trust Fund in accordance with
Section 10.01, any amounts remaining in the Expense Account following the
payment of all unpaid Certificate Insurer Premiums shall be released to the
Master Servicer as additional servicing compensation.
SECTION 3.26. Obligations of the Master Servicer in
Respect of Mortgage Rates and Monthly
Payments.
In the event that a shortfall in any collection on or
liability with respect to any Mortgage Loan results from or is attributable to
adjustments to Mortgage Rates, Monthly Payments or Stated Principal Balances
that were made by the Master Servicer in a manner not consistent with the terms
of the related Mortgage Note and this Agreement, the Master Servicer, upon
discovery or receipt of notice thereof, immediately shall deliver to the Trustee
for deposit in the Distribution Account from its own funds the amount of any
such shortfall and shall indemnify and hold harmless the Trust Fund, the
Trustee, the Certificate Insurer, the Depositor and any successor master
servicer in respect of any such liability. Such indemnities shall survive the
termination or discharge of this Agreement.
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ARTICLE IV
PAYMENTS TO CERTIFICATEHOLDERS
SECTION 4.01. Distributions.
(a) On each Distribution Date, the Trustee shall withdraw from
the Distribution Account an amount equal to the Available Distribution Amount
(other than any amount in the Distribution Account that was transferred from the
Policy Payments Account to the Distribution Account pursuant to Section 9.04)
and distribute to the Certificateholders the following amounts, in the following
order of priority:
(i) to the Holders of the Class A Certificates, in an
amount equal to (A) the Interest Distribution Amount for such
Distribution Date, plus (B) any undistributed amount described
in the immediately preceding clause (i)(A) from any previous
Distribution Date for which no Insurance Payment has been
previously paid to Holders of the Class A Certificates;
(ii) to the Holders of the Class A Certificates, in an
amount equal to the Class A Principal Distribution Amount
(except for any portion thereof consisting of any
Subordination Increase Amount and any amount payable pursuant
to clause (iii) below), applied to reduce the Certificate
Principal Balances of the Class A Certificates, until the
aggregate Certificate Principal Balance of the Class A
Certificates is reduced to zero;
(iii) to the Holders of the Class A Certificates, payable
from Net Monthly Excess Cashflow, in an amount equal to (A)
the principal portion of any Realized Losses incurred or
deemed to have been incurred on the Mortgage Loans, applied to
reduce the Certificate Principal Balances of the Class A
Certificates, until the aggregate Certificate Principal
Balance of the Class A Certificates is reduced to zero, plus
(B) the principal portion of any Realized Losses allocated to
the Class A Certificates on previous Distribution Dates but
not paid under the Policy due to a Certificate Insurer Default
and not previously paid pursuant to this clause (iii)(B);
(iv) to the Certificate Insurer, payable from Net
Monthly Excess Cashflow, to reimburse the Certificate Insurer
for claims under the Policy, to the extent of Cumulative
Insurance Payments;
(v) to the Holders of the Class A Certificates, payable
from Net Monthly Excess Cashflow, in an amount equal to the
portion of the Class A Principal Distribution Amount
consisting of any Subordination Increase Amount, applied to
reduce the Certificate Principal Balances of the Class A
Certificates, until the aggregate Certificate Principal
Balance of the Class A Certificates is reduced to zero;
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(vi) to the Holders of the Class A Certificates, payable
from Net Monthly Excess Cashflow, in an amount equal to any
Prepayment Interest Shortfalls and any Relief Act Shortfalls
that were allocated pursuant to Section 1.02 and therefore not
distributed pursuant to clause (i) above;
(vii) to the Holders of the Class A Certificates, payable
from Net Monthly Excess Cashflow, in an amount equal to any
Basis Risk Shortfall for such Distribution Date;
(viii) to the Holders of the Class A Certificates, payable
from Net Monthly Excess Cashflow, in an amount equal to any
Unpaid Basis Risk Shortfall on such Distribution Date;
(ix) to the Certificate Insurer, payable from Net
Monthly Excess Cashflow, any amounts remaining due to the
Insurer under the terms of the Insurance Agreement (other than
those attributable to Excess Bankruptcy Losses, Excess Fraud
Losses, Excess Special Hazard Losses and Excess Extraordinary
Losses); and
(x) to the Holders of the Class R Certificates, payable
from Net Monthly Excess Cashflow, the remainder, if any, of
Net Monthly Excess Cashflow for such Distribution Date.
On the final Distribution Date, any excess funds in the Distribution Account,
after the distributions required under clauses (i) through (x) above have been
made, will be paid to the Holders of the Class R Certificates.
All Realized Losses to be allocated to the Certificate
Principal Balances of all Classes on any Distribution Date shall be so allocated
after the actual distributions to be made on such date as provided above. All
references above to the Certificate Principal Balance of any Class of
Certificates shall be to the Certificate Principal Balance of such Class
immediately prior to the relevant Distribution Date, before reduction thereof by
any Realized Losses, in each case to be allocated to such Class of Certificates,
on such Distribution Date pursuant to Section 4.04.
(b) In addition to making the distributions required pursuant
to Section 4.01(a), on each Distribution Date for which there exists a
Deficiency Amount, the Trustee shall withdraw from the Distribution Account any
amount therein that was transferred from the Policy Payments Account to the
Distribution Account pursuant to Section 9.04 and distribute to the Holders of
the Class A Certificates (i) an amount equal to any amount required to be paid
to such Class pursuant to Section 4.01(a)(i) for such Distribution Date
remaining unpaid after giving effect to all distributions made pursuant to
Section 4.01(a) for such Distribution Date, (ii) an amount equal to the
principal portion of any Realized Losses allocated to such Class on such
Distribution Date after giving effect to all distributions made pursuant to
Section 4.01(a) for such Distribution Date and (iii) without duplication, any
other amount constituting a Deficiency Amount.
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(c) Each Holder of a Certificate, by its acceptance of such
Certificate, hereby agrees that, in the event any distribution is made to any
Holder of a Class A Certificate from amounts paid under the Policy, (i) the
Certificate Insurer shall be subrogated in the manner herein provided to the
rights of the Holder of such Class A Certificate to receive from amounts on
deposit in the Distribution Account the distributions allocable to principal and
interest that would have been distributable to such Holder if no such
distribution to such Holder had been made from amounts paid under the Policy;
and (ii) in addition to the rights of the Class A Certificateholders that the
Certificate Insurer may exercise in accordance with the provisions of Section
9.01, the Certificate Insurer may exercise any option, vote, right, power or the
like with respect to each Class A Certificate for which Cumulative Insurance
Payments are outstanding.
(d) All distributions made with respect to each Class of
Certificates on each Distribution Date shall be allocated PRO RATA among the
outstanding Certificates in such Class based on their respective Percentage
Interests. Payments in respect of each Class of Certificates on each
Distribution Date will be made to the Holders of the respective Class of record
on the related Record Date (except as otherwise provided in Section 4.01(f) or
Section 10.01 respecting the final distribution on such Class), based on the
aggregate Percentage Interest represented by their respective Certificates, and
shall be made by wire transfer of immediately available funds to the account of
any such Holder at a bank or other entity having appropriate facilities
therefor, if such Holder shall have so notified the Trustee in writing at least
five Business Days prior to the Record Date immediately prior to such
Distribution Date and is the registered owner of Certificates having an initial
aggregate Certificate Principal Balance that is in excess of the lesser of (i)
$5,000,000 or (ii) two-thirds of the initial Certificate Principal Balance (or,
in the case of the Class R Certificates, a 66% Percentage Interest) of such
Class of Certificates, or otherwise by check mailed by first class mail to the
address of such Holder appearing in the Certificate Register. The final
distribution on each Certificate will be made in like manner, but only upon
presentment and surrender of such Certificate at the Corporate Trust Office or
such other location specified in the notice to Certificateholders of such final
distribution. Payments to the Certificate Insurer on any Distribution Date will
be made by wire transfer of immediately available funds to the account
designated by the Certificate Insurer under the Premium Letter (as defined in
the Insurance Agreement).
Each distribution with respect to a Book-Entry Certificate
shall be paid to the Depository, as Holder thereof, and the Depository shall be
responsible for crediting the amount of such distribution to the accounts of its
Depository Participants in accordance with its normal procedures. Each
Depository Participant shall be responsible for disbursing such distribution to
the Certificate Owners that it represents and to each indirect participating
brokerage firm (a "brokerage firm" or "indirect participating firm") for which
it acts as agent. Each brokerage firm shall be responsible for disbursing funds
to the Certificate Owners that it represents. None of the Trustee, the
Certificate Registrar, the Depositor or the Master Servicer shall have any
responsibility therefor except as otherwise provided by this Agreement or
applicable law.
(e) The rights of the Certificateholders to receive
distributions in respect of the Certificates, and all interests of the
Certificateholders in such distributions, shall be as set forth in this
Agreement. Neither the Holders of any Class of Certificates nor the Trustee nor
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the Master Servicer shall in any way be responsible or liable to the Holders of
any other Class of Certificates in respect of amounts properly previously
distributed on the Certificates.
(f) Except as otherwise provided in Section 10.01, whenever
the Trustee expects that the final distribution with respect to any Class of
Certificates will be made on the next Distribution Date, the Trustee shall, no
later than five (5) days after the related Determination Date, mail on such date
to each Holder of such Class of Certificates and to the Certificate Insurer a
notice to the effect that:
(i) the Trustee expects that the final distribution with respect
to such Class of Certificates will be made on such Distribution Date
but only upon presentation and surrender of such Certificates at the
office of the Trustee therein specified, and
(ii) no interest shall accrue on such Certificates from and after
the end of the related Interest Accrual Period.
Any funds not distributed to any Holder or Holders of Certificates of such Class
on such Distribution Date because of the failure of such Holder or Holders to
tender their Certificates shall, on such date, be set aside and held in trust by
the Trustee and credited to the account of the appropriate non-tendering Holder
or Holders. If any Certificates as to which notice has been given pursuant to
this Section 4.01(f) shall not have been surrendered for cancellation within six
months after the time specified in such notice, the Trustee shall mail a second
notice to the remaining non-tendering Certificateholders to surrender their
Certificates for cancellation in order to receive the final distribution with
respect thereto. If within one year after the second notice all such
Certificates shall not have been surrendered for cancellation, the Trustee
shall, directly or through an agent, (i) mail a final notice to remaining
non-tendering Certificateholders concerning surrender of their Certificates and
(ii) pay to the Certificate Insurer any amount of such funds which were paid by
the Certificate Insurer under the Policy but shall continue to hold any
remaining funds for the benefit of non-tendering Certificateholders, and all
liability of the Certificate Insurer with respect to such trust funds shall
thereupon cease. The costs and expenses of maintaining the funds in trust and of
contacting such Certificateholders shall be paid out of the assets remaining in
such trust fund. If within one year after the final notice any such Certificates
shall not have been surrendered for cancellation, the Trustee shall pay to
Salomon Brothers Inc all such amounts, and all rights of non-tendering
Certificateholders in or to such amounts shall thereupon cease. No interest
shall accrue or be payable to any Certificateholder on any amount held in trust
by the Trustee as a result of such Certificateholder's failure to surrender its
Certificate(s) for final payment thereof in accordance with this Section
4.01(f).
SECTION 4.02. Statements to Certificateholders.
On each Distribution Date, the Trustee shall prepare and
forward by mail to each Holder of the Regular Certificates, a statement as to
the distributions made on such Distribution Date setting forth:
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(i) the amount of the distribution made on such
Distribution Date to the Holders of the Class A Certificates
allocable to principal;
(ii) the amount of the distribution made on such
Distribution Date to the Holders of the Class A Certificates
allocable to interest;
(iii) the aggregate amount of servicing compensation
received by the Master Servicer during the related Due Period
and such other customary information as the Trustee deems
necessary or desirable, or which a Certificateholder
reasonably requests, to enable Certificateholders to prepare
their tax returns;
(iv) the Guaranteed Distribution for such Distribution
Date and the respective portions thereof allocable to
principal and interest;
(v) the amount of any Insurance Payment made to Class A
Certificateholders on such Distribution Date, the amount of
any reimbursement payment made to the Certificate Insurer on
such Distribution Date pursuant to Section 4.01(a)(iv) and the
amount of Cumulative Insurance Payments after giving effect to
any such Insurance Payment to Class A Certificateholders or
any such reimbursement payment to the Certificate Insurer;
(vi) the aggregate amount of P&I Advances for such
Distribution Date;
(vii) the aggregate Stated Principal Balance of the
Mortgage Loans and any REO Properties at the close of business
on such Distribution Date;
(viii) the number, aggregate principal balance, weighted
average remaining term to maturity and weighted average
Mortgage Rate of the Mortgage Loans as of the related Due
Date;
(ix) the number and aggregate unpaid principal balance
of Mortgage Loans (a) Delinquent 30-59 days, (b) Delinquent
60-89 days, (c) Delinquent 90 or more days and (d) as to which
foreclosure proceedings have been commenced;
(x) with respect to any Mortgage Loan that became an
REO Property during the preceding calendar month, the loan
number of such Mortgage Loan, the unpaid principal balance and
the Stated Principal Balance of such Mortgage Loan as of the
date it became an REO Property;
(xi) the book value of any REO Property as of the close
of business on the last Business Day of the calendar month
preceding the Distribution Date;
(xii) the aggregate amount of Principal Prepayments
made during the related Prepayment Period;
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(xiii) the aggregate amount of Realized Losses incurred
during the related Prepayment Period (or, in the case of
Bankruptcy Losses allocable to interest, during the related
Due Period), separately identifying whether such Realized
Losses constituted Extraordinary Losses, Fraud Losses, Special
Hazard Losses or Bankruptcy Losses;
(xiv) the aggregate amount of extraordinary Trust Fund
expenses withdrawn from the Collection Account or the
Distribution Account for such Distribution Date;
(xv) the aggregate Certificate Principal Balance of the
Class A Certificates, after giving effect to the
distributions, and allocations of Realized Losses, made on
such Distribution Date, separately identifying any reduction
thereof due to allocations of Realized Losses;
(xvi) the Certificate Factor for each such Class of
Certificates applicable to such Distribution Date;
(xvii) the Interest Distribution Amount in respect of the
Class A Certificates for such Distribution Date and the
respective portions thereof, if any, paid under the Policy or
(in the event of a Deficiency Event) remaining unpaid
following the distributions made in respect of such
Certificates on such Distribution Date;
(xviii) the aggregate amount of any Prepayment Interest
Shortfalls for such Distribution Date, to the extent not
covered by payments by the Master Servicer pursuant to Section
3.24;
(xix) the aggregate amount of Relief Act Interest
Shortfalls for such Distribution Date;
(xx) the then-applicable Bankruptcy Amount, Fraud Loss
Amount, Special Hazard Amount and Extraordinary Loss Amount;
(xxi) the Basis Risk Shortfall, if any, for such
Distribution Date;
(xxii) the Unpaid Basis Risk Shortfalls, if any,
outstanding after reimbursements therefor on such Distribution
Date;
(xxiii) the Required Subordinated Amount for such
Distribution Date;
(xxiv) the Subordination Increase Amount, if any, for
such Distribution Date;
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(xxv) the Subordination Reduction Amount, if any, for
such Distribution Date; and
(xxvi) the Pass-Through Rate applicable to the Class A
Certificates for such Distribution Date and the immediately
succeeding Distribution Date
In the case of information furnished pursuant to subclauses
(i) through (iii) above, the amounts shall be expressed as a dollar amount per
Single Certificate of the relevant Class.
Within a reasonable period of time after the end of each
calendar year, the Trustee shall furnish to each Person who at any time during
the calendar year was a Holder of a Regular Certificate a statement containing
the information set forth in subclauses (i) through (iii) above, aggregated for
such calendar year or applicable portion thereof during which such person was a
Certificateholder. Such obligation of the Trustee shall be deemed to have been
satisfied to the extent that substantially comparable information shall be
provided by the Trustee pursuant to any requirements of the Code as from time to
time are in force.
On each Distribution Date, the Trustee shall forward to the
Depositor, to each Holder of a Residual Certificate, to the Certificate Insurer
and to the Master Servicer, a copy of the reports forwarded to the Regular
Certificateholders on such Distribution Date and a statement setting forth the
amounts, if any, actually distributed with respect to the Residual Certificates,
respectively, on such Distribution Date.
Within a reasonable period of time after the end of each
calendar year, the Trustee shall furnish to each Person who at any time during
the calendar year was a Holder of a Residual Certificate a statement setting
forth the amount, if any, actually distributed with respect to the Residual
Certificates, as appropriate, aggregated for such calendar year or applicable
portion thereof during which such Person was a Certificateholder.
The Trustee shall, upon request, furnish to each
Certificateholder, during the term of this Agreement, such periodic, special, or
other reports or information, whether or not provided for herein, as shall be
reasonable with respect to the Certificateholder, or otherwise with respect to
the purposes of this Agreement, all such reports or information to be provided
at the expense of the Certificateholder in accordance with such reasonable and
explicit instructions and directions as the Certificateholder may provide. For
purposes of this Section 4.02, the Trustee's duties are limited to the extent
that the Trustee receives timely reports as required from the Master Servicer.
On each Distribution Date the Trustee shall provide Bloomberg
Financial Markets, L.P. ("Bloomberg") Cusip Level Factors for each class of
Certificates as of such Distribution Date, using a format and media mutually
acceptable to the Trustee and Bloomberg.
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SECTION 4.03. Remittance Reports; P&I Advances.
(a) On the Business Day following each Determination Date, the
Master Servicer shall deliver to the Trustee and the Certificate Insurer by
telecopy (or by such other means as the Master Servicer and the Trustee or the
Certificate Insurer, as the case may be, may agree from time to time) a
Remittance Report with respect to the related Distribution Date. Such Remittance
Report will include (i) the amount of P&I Advances to be made by the Master
Servicer in respect of the related Distribution Date, the aggregate amount of
P&I Advances outstanding after giving effect to such P&I Advances, and the
aggregate amount of Nonrecoverable P&I Advances in respect of such Distribution
Date and (ii) such other information with respect to the Mortgage Loans as the
Trustee may reasonably require to perform the calculations necessary to make the
distributions contemplated by Section 4.01 and to prepare the statements to
Certificateholders contemplated by Section 4.02. Not later than the close of
business New York time on the second Business Day following the Master Servicer
Remittance Date, the Trustee shall deliver or cause to be delivered to the
Certificate Insurer, in addition to the information provided on the Remittance
Report, a report setting forth (i) the Guaranteed Distribution for such
Distribution Date, separately identifying the portions thereof allocable to
principal and interest; (ii) the Available Distribution Amount for such
Distribution Date; (iii) whether the Available Distribution Amount expected to
be on deposit in the Distribution Account on such Distribution Date will be
sufficient to cover the Guaranteed Distribution and, if not, the amount of the
shortfall; (iv) with respect to any reimbursement to be made to the Certificate
Insurer on such Distribution Date pursuant to Section 4.01(a)(iv), the amount,
if any, allocable to principal and the amount allocable to interest; and (v)
Cumulative Insurance Payments after giving effect to the distributions to be
made on such Distribution Date. The Trustee shall not be responsible to
recompute, recalculate or verify any information provided to it by the Master
Servicer.
(b) The amount of P&I Advances to be made by the Master
Servicer for any Distribution Date shall equal, subject to Section 4.03(d), the
sum of (i) the aggregate amount of Monthly Payments (with each interest portion
thereof net of the related Servicing Fee), due on the related Due Date in
respect of the Mortgage Loans, which Monthly Payments were delinquent as of the
close of business on the related Determination Date and (ii) with respect to
each REO Property, which REO Property was acquired during or prior to the
related Prepayment Period and as to which REO Property an REO Disposition did
not occur during the related Prepayment Period, an amount equal to the excess,
if any, of the Monthly Payments (with each interest portion thereof net of the
related Servicing Fee) that would have been due on the related Due Date in
respect of the related Mortgage Loans, over the net income from such REO
Property transferred to the Distribution Account pursuant to Section 3.23 for
distribution on such Distribution Date.
On or before 3:00 p.m. New York time on the Master Servicer
Remittance Date, the Master Servicer shall remit in immediately available funds
to the Trustee for deposit in the Distribution Account an amount equal to the
aggregate amount of P&I Advances, if any, to be made in respect of the Mortgage
Loans and REO Properties for the related Distribution Date either (i) from its
own funds or (ii) from the Collection Account, to the extent of funds held
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therein for future distribution (in which case it will cause to be made an
appropriate entry in the records of Collection Account that amounts held for
future distribution have been, as permitted by this Section 4.03, used by the
Master Servicer in discharge of any such P&I Advance) or (iii) in the form of
any combination of (i) and (ii) aggregating the total amount of P&I Advances to
be made by the Master Servicer with respect to the Mortgage Loans and REO
Properties. Any amounts held for future distribution and so used shall be
appropriately reflected in the Master Servicer's records and replaced by the
Master Servicer by deposit in the Collection Account on or before any future
Master Servicer Remittance Date to the extent that the Available Distribution
Amount for the related Distribution Date (determined without regard to P&I
Advances to be made on the Master Servicer Remittance Date) shall be less than
the total amount that would be distributed to the Classes of Certificateholders
pursuant to Section 4.01 on such Distribution Date if such amounts held for
future distributions had not been so used to make P&I Advances. The Trustee will
provide notice to the Master Servicer and the Certificate Insurer by telecopy by
the close of business on any Master Servicer Remittance Date in the event that
the amount remitted by the Master Servicer to the Trustee on such date is less
than the P&I Advances required to be made by the Master Servicer for the related
Distribution Date.
(c) The obligation of the Master Servicer to make such P&I
Advances is mandatory, notwithstanding any other provision of this Agreement but
subject to (d) below, and, with respect to any Mortgage Loan or REO Property,
shall continue until a Final Recovery Determination in connection therewith or
the removal thereof from the Trust Fund pursuant to any applicable provision of
this Agreement, except as otherwise provided in this Section.
(d) Notwithstanding anything herein to the contrary, no P&I
Advance shall be required to be made hereunder by the Master Servicer if such
P&I Advance would, if made, constitute a Nonrecoverable P&I Advance. The
determination by the Master Servicer that it has made a Nonrecoverable P&I
Advance or that any proposed P&I Advance, if made, would constitute a
Nonrecoverable P&I Advance, shall be evidenced by an Officers' Certificate of
the Master Servicer delivered to the Depositor, the Trustee and the Certificate
Insurer.
(e) If, at the close of business on the third Business Day
prior to any Distribution Date, the funds on deposit in the Distribution Account
are less than the Guaranteed Distribution for such Distribution Date, the
Trustee shall give notice by telephone or telecopy of the amount of such
deficiency, confirmed in writing in the form set forth as Exhibit A to the
Endorsement of the Policy, to the Certificate Insurer and the Fiscal Agent (as
defined in the Policy), if any, at or before 10:00 a.m., New York time, on the
second Business Day prior to such Distribution Date.
SECTION 4.04. Allocation of Realized Losses.
(a) Prior to each Determination Date, the Master Servicer
shall determine as to each Mortgage Loan and REO Property: (i) the total amount
of Realized Losses, if any, incurred in connection with any Final Recovery
Determinations made during the related Prepayment Period; (ii) whether and the
extent to which such Realized Losses constituted Fraud Losses, Special Hazard
Losses or Extraordinary Losses; and (iii) the respective portions of such
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Realized Losses allocable to interest and allocable to principal. Prior to each
Determination Date, the Master Servicer shall also determine as to each Mortgage
Loan: (i) the total amount of Realized Losses, if any, incurred in connection
with any Deficient Valuations made during the related Prepayment Period; and
(ii) the total amount of Realized Losses, if any, incurred in connection with
Debt Service Reductions in respect of Monthly Payments due during the related
Due Period. The information described in the two preceding sentences that is to
be supplied by the Master Servicer shall be evidenced by an Officers'
Certificate delivered to the Trustee and the Certificate Insurer by the Master
Servicer prior to the Determination Date immediately following the end of (i) in
the case of Bankruptcy Losses allocable to interest, the Due Period during which
any such Realized Loss was incurred, and (ii) in the case of all other Realized
Losses, the Prepayment Period during which any such Realized Loss was incurred.
(b) All Realized Losses on the Mortgage Loans, other than
Excess Special Hazard Losses, Excess Fraud Losses, Excess Extraordinary Losses
and Excess Bankruptcy Losses on the Mortgage Loans shall be allocated by the
Trustee on each Distribution Date as follows: first, to Net Monthly Excess
Cashflow; second, to the Class R Certificates, until the Certificate Principal
Balance thereof has been reduced to zero; and, third, to the Class A
Certificates. Notwithstanding anything to the contrary herein, for purposes of
determining the Special Hazard Amount, the Fraud Loss Amount, the Bankruptcy
Amount and the Extraordinary Amount as of any date of determination, Special
Hazard Losses, Fraud Losses, Bankruptcy Losses and Extraordinary Losses paid
from Net Monthly Excess Cashflow which would otherwise have been payable to the
holders of the Residual Certificates shall be deemed to have been allocated to
the Residual Certificates. Any Excess Special Hazard Losses, Excess Bankruptcy
Losses, Excess Fraud Losses and Excess Extraordinary Losses will be allocated
between the Class A Certificates and the Class R Certificates on a PRO RATA
basis. No allocations of Realized Losses pursuant to this Section 4.04 shall
affect any liability of the Certificate Insurer with respect to such amounts
under the Policy. Any allocation of Realized Losses to a Class A Certificate or
a Class R Certificate on any Distribution Date shall be made by reducing the
Certificate Principal Balance thereof by the amount so allocated. All Realized
Losses allocated to a Class of Certificates hereunder will be allocated among
the Certificates of such Class in proportion to the Percentage Interests
evidenced thereby.
As used herein, an allocation of a Realized Loss on a "PRO
RATA basis" among two or more specified Classes of Certificates means an
allocation on a PRO RATA basis, among the various Classes so specified, to each
such Class of Certificates on the basis of their then outstanding Certificate
Principal Balances prior to giving effect to distributions to be made on such
Distribution Date. All Realized Losses and all other losses allocated to a Class
of Certificates hereunder will be allocated among the Certificates of such Class
in proportion to the Percentage Interests evidenced thereby.
SECTION 4.05. Compliance with Withholding Requirements.
Notwithstanding any other provision of this Agreement, the
Trustee shall comply with all federal withholding requirements respecting
payments to Certificateholders of interest or original issue discount that the
Trustee reasonably believes are applicable under the Code.
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The consent of Certificateholders shall not be required for such withholding. In
the event the Trustee does withhold any amount from interest or original issue
discount payments or advances thereof to any Certificateholder pursuant to
federal withholding requirements, the Trustee shall indicate the amount withheld
to such Certificateholders.
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ARTICLE V
THE CERTIFICATES
SECTION 5.01. The Certificates.
(a) The Certificates in the aggregate will represent the
entire beneficial ownership interest in the Mortgage Loans and all other assets
included in the Trust Fund. At the Closing Date, the aggregate Certificate
Principal Balance of the Class A Certificates will equal the aggregate Scheduled
Principal Balance of the Original Mortgage Loans in the Mortgage Pool as of the
Cut-off Date.
The Certificates will be substantially in the forms annexed
hereto as Exhibits A-1 and A-2. The Certificates of each Class will be issuable
in registered form only, in denominations of authorized Percentage Interests as
described in the definition thereof. Each Certificate will share ratably in all
rights of the related Class.
Upon original issue, the Certificates shall be executed and
delivered by the Trustee, and the Trustee shall cause the Certificates to be
authenticated by the Certificate Registrar to or upon the order of the
Depositor. The Certificates shall be executed and attested by manual or
facsimile signature on behalf of the Trustee by an authorized signatory.
Certificates bearing the manual or facsimile signatures of individuals who were
at any time the proper officers of the Trustee shall bind the Trustee,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Certificates or did not
hold such offices at the date of such Certificates. No Certificate shall be
entitled to any benefit under this Agreement or be valid for any purpose, unless
there appears on such Certificate a certificate of authentication substantially
in the form provided herein executed by the Certificate Registrar by manual
signature, and such certificate of authentication shall be conclusive evidence,
and the only evidence, that such Certificate has been duly authenticated and
delivered hereunder. All Certificates shall be dated the date of their
authentication.
(b) The Class A Certificates shall initially be issued as one
or more Certificates registered in the name of the Depository or its nominee
and, except as provided below, registration of such Certificates may not be
transferred by the Trustee except to another Depository that agrees to hold such
Certificates for the respective Certificate Owners with Ownership Interests
therein. The Certificate Owners shall hold their respective Ownership Interests
in and to such Certificates through the book-entry facilities of the Depository
and, except as provided below, shall not be entitled to definitive, fully
registered Certificates ("Definitive Certificates") in respect of such Ownership
Interests. All transfers by Certificate Owners of their respective Ownership
Interests in the Book-Entry Certificates shall be made in accordance with the
procedures established by the Depository Participant or brokerage firm
representing such Certificate Owner. Each Depository Participant shall only
transfer the Ownership Interests in the Book-Entry Certificates of Certificate
Owners it represents or of
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brokerage firms for which it acts as agent in accordance with the Depository's
normal procedures.
The Trustee, the Master Servicer, the Depositor and the
Certificate Insurer may for all purposes (including the making of payments due
on the Book-Entry Certificates) deal with the Depository as the authorized
representative of the Certificate Owners with respect to the Book-Entry
Certificates for the purposes of exercising the rights of Certificateholders
hereunder. The rights of Certificate Owners with respect to the Book-Entry
Certificates shall be limited to those established by law and agreements between
such Certificate Owners and the Depository Participants and brokerage firms
representing such Certificate Owners. Multiple requests and directions from, and
votes of, the Depository as Holder of the Book-Entry Certificates with respect
to any particular matter shall not be deemed inconsistent if they are made with
respect to different Certificate Owners. The Trustee may establish a reasonable
record date in connection with solicitations of consents from or voting by
Certificateholders and shall give notice to the Depository of such record date.
If (i)(A) the Depositor advises the Trustee in writing that
the Depository is no longer willing or able to properly discharge its
responsibilities as Depository, and (B) the Depositor is unable to locate a
qualified successor, (ii) the Depositor at its option advises the Trustee in
writing that it elects to terminate the book-entry system through the Depository
or (iii) after the occurrence of a Master Servicer Event of Default, Certificate
Owners representing in the aggregate not less than 51% of the Ownership
Interests of the Book-Entry Certificates advise the Trustee through the
Depository, in writing, that the continuation of a book-entry system through the
Depository is no longer in the best interests of the Certificate Owners, the
Trustee shall notify all Certificate Owners, through the Depository, of the
occurrence of any such event and of the availability of Definitive Certificates
to Certificate Owners requesting the same. Upon surrender to the Trustee of the
Book-Entry Certificates by the Depository, accompanied by registration
instructions from the Depository for registration of transfer, the Trustee shall
issue the Definitive Certificates. Such Definitive Certificates will be issued
in minimum denominations of $1,000, except that any beneficial ownership that
was represented by a BookEntry Certificate in an amount less than $1,000
immediately prior to the issuance of a Definitive Certificate shall be issued in
a minimum denomination equal to the amount represented by such Book-Entry
Certificate. None of the Depositor, the Master Servicer or the Trustee shall be
liable for any delay in the delivery of such instructions and may conclusively
rely on, and shall be protected in relying on, such instructions. Upon the
issuance of Definitive Certificates all references herein to obligations imposed
upon or to be performed by the Depository shall be deemed to be imposed upon and
performed by the Trustee, to the extent applicable with respect to such
Definitive Certificates, and the Trustee shall recognize the Holders of the
Definitive Certificates as Certificateholders hereunder.
SECTION 5.02. Registration of Transfer and Exchange of
Certificates.
(a) The Trustee shall cause to be kept at one of the offices
or agencies to be appointed by the Trustee in accordance with the provisions of
Section 8.11 a Certificate Register for the Certificates in which, subject to
such reasonable regulations as it may prescribe, the
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Trustee shall provide for the registration of Certificates and of transfers and
exchanges of Certificates as herein provided. The Trustee will initially serve
as Certificate Registrar for the purpose of registering Certificates and
transfers and exchanges of Certificates as herein provided. The Certificate
Registrar may appoint, by a written instrument delivered to the Master Servicer
and the Depositor, any other bank or trust company to act as Certificate
Registrar under such conditions as the predecessor Certificate Registrar may
prescribe, provided that the predecessor Certificate Registrar shall not be
relieved of any of its duties or responsibilities hereunder by reason of such
appointment. If the Trustee shall at any time not be the Certificate Registrar,
the Trustee shall have and maintain the right to inspect the Certificate
Register or to obtain a copy thereof at all reasonable times, and to rely
conclusively upon a certificate of the Certificate Registrar as to the
information set forth in the Certificate Register.
(b) No transfer of any Residual Certificate shall be made
unless that transfer is made pursuant to an effective registration statement
under the Securities Act of 1933, as amended (the "1933 Act"), and effective
registration or qualification under applicable state securities laws, or is made
in a transaction that does not require such registration or qualification. In
the event that such a transfer of a Residual Certificate is to be made without
registration or qualification, the Trustee and the Certificate Registrar shall
each require receipt of: (i) if such transfer is purportedly being made in
reliance upon Rule 144A under the 1933 Act, written certifications from the
Certificateholder desiring to effect the transfer and from such
Certificateholder's prospective transferee, substantially in the forms attached
hereto as Exhibit F-1; and (ii) in all other cases, an Opinion of Counsel
satisfactory to it that such transfer may be made without such registration or
qualification (which Opinion of Counsel shall not be an expense of the Trust
Fund or of the Depositor, the Trustee or the Master Servicer in its capacity as
such), together with copies of the written certification(s) of the
Certificateholder desiring to effect the transfer and/or such
Certificateholder's prospective transferee upon which such Opinion of Counsel is
based, if any. None of the Depositor, the Certificate Registrar or the Trustee
is obligated to register or qualify the Residual Certificates under the 1933 Act
or any other securities laws or to take any action not otherwise required under
this Agreement to permit the transfer of such Certificates without registration
or qualification. Any Certificateholder desiring to effect the transfer of a
Residual Certificate shall, and does hereby agree to, indemnify the Trustee, the
Depositor, the Certificate Registrar, the Master Servicer and the Certificate
Insurer against any liability that may result if the transfer is not so exempt
or is not made in accordance with such federal and state laws.
(c) No transfer of a Residual Certificate or any interest
therein shall be made to (i) any employee benefit plan or other retirement
arrangement, including individual retirement accounts and annuities, Keogh plans
and collective investment funds and separate accounts in which such plans,
accounts or arrangements are invested, that is subject to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or the Code (each,
a "Plan") or (ii) any Person who is directly or indirectly purchasing the
Residual Certificate or interest therein on behalf of, as named fiduciary of, as
trustee of, or with assets of a Plan, unless the Trustee and the Certificate
Registrar are provided with an Opinion of Counsel which establishes to the
satisfaction of each that such transfer will not result in a violation of
Section 406 of ERISA or Section 4975 of the Code or cause any of the Trustee,
the Certificate Registrar or the
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Master Servicer to be deemed a fiduciary of such Plan or result in the
imposition of an excise tax under Section 4975 of the Code. In the absence of
its having received the Opinion of Counsel contemplated by the preceding
sentence, the Trustee and the Certificate Registrar shall require the
prospective transferee of any Residual Certificate to certify that it is neither
(i) a Plan nor (ii) a Person who is directly or indirectly purchasing the
Residual Certificate on behalf of, as named fiduciary of, as trustee of, or with
assets of a Plan (including any insurance company using funds in its general or
separate accounts that may constitute "plan assets").
(d) (i) Each Person who has or who acquires any Ownership
Interest in a Residual Certificate shall be deemed by the acceptance or
acquisition of such Ownership Interest to have agreed to be bound by the
following provisions and to have irrevocably authorized the Trustee or its
designee under clause (iii)(A) below to deliver payments to a Person other than
such Person and to negotiate the terms of any mandatory sale under clause
(iii)(B) below and to execute all instruments of Transfer and to do all other
things necessary in connection with any such sale. The rights of each Person
acquiring any Ownership Interest in a Residual Certificate are expressly subject
to the following provisions:
(A) Each Person holding or acquiring any
Ownership Interest in a Residual Certificate shall be
a Permitted Transferee and shall promptly notify the
Trustee of any change or impending change in its
status as a Permitted Transferee.
(B) In connection with any proposed Transfer
of any Ownership Interest in a Residual Certificate,
the Trustee shall require delivery to it and shall
not register the Transfer of any Residual Certificate
until its receipt of an affidavit and agreement (a
"Transfer Affidavit and Agreement" attached hereto as
Exhibit F-2) from the proposed Transferee, in form
and substance satisfactory to the Trustee,
representing and warranting, among other things, that
such Transferee is a Permitted Transferee, that it is
not acquiring its Ownership Interest in the Residual
Certificate that is the subject of the proposed
Transfer as a nominee, trustee or agent for any
Person that is not a Permitted Transferee, that for
so long as it retains its Ownership Interest in a
Residual Certificate, it will endeavor to remain a
Permitted Transferee, and that it has reviewed the
provisions of this Section 5.02(d) and agrees to be
bound by them.
(C) Notwithstanding the delivery of a
Transfer Affidavit and Agreement by a proposed
Transferee under clause (B) above, if a Responsible
Officer of the Trustee who is assigned to this
transaction has actual knowledge that the proposed
Transferee is not a Permitted Transferee, no Transfer
of an Ownership Interest in a Residual Certificate to
such proposed Transferee shall be effected.
(D) Each Person holding or acquiring any
Ownership Interest in a Residual Certificate shall
agree (x) to require a Transfer Affidavit and
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Agreement (in the form attached hereto as Exhibit
F-2) from any other Person to whom such Person
attempts to transfer its Ownership Interest in a
Residual Certificate and (y) not to transfer its
Ownership Interest unless it provides a Transferor
Affidavit (in the form attached hereto as Exhibit
F-2) to the Trustee stating that, among other things,
it has no actual knowledge that such other Person is
not a Permitted Transferee.
(E) Each Person holding or acquiring an
Ownership Interest in a Residual Certificate, by
purchasing an Ownership Interest in such Certificate,
agrees to give the Trustee written notice that it is
a "pass-through interest holder" within the meaning
of temporary Treasury regulation Section
1.67-3T(a)(2)(i)(A) immediately upon acquiring an
Ownership Interest in a Residual Certificate, if it
is, or is holding an Ownership Interest in a Residual
Certificate on behalf of, a "pass-through interest
holder".
(ii) The Trustee will register the Transfer of any
Residual Certificate only if it shall have received the
Transfer Affidavit and Agreement and all of such other
documents as shall have been reasonably required by the
Trustee as a condition to such registration. In addition, no
Transfer of a Residual Certificate shall be made unless the
Trustee shall have received a representation letter from the
Transferee of such Certificate to the effect that such
Transferee is a Permitted Transferee.
(iii) (A) If any purported Transferee shall become a
Holder of a Residual Certificate in violation of the
provisions of this Section 5.02(d), then the last preceding
Permitted Transferee shall be restored, to the extent
permitted by law, to all rights as holder thereof retroactive
to the date of registration of such Transfer of such Residual
Certificate. The Trustee shall be under no liability to any
Person for any registration of Transfer of a Residual
Certificate that is in fact not permitted by this Section
5.02(d) or for making any payments due on such Certificate to
the holder thereof or for taking any other action with respect
to such holder under the provisions of this Agreement.
(B) If any purported Transferee shall become
a holder of a Residual Certificate in violation of the
restrictions in this Section 5.02(d) and to the extent that
the retroactive restoration of the rights of the holder of
such Residual Certificate as described in clause (iii)(A)
above shall be invalid, illegal or unenforceable, then the
Trustee shall have the right, without notice to the holder or
any prior holder of such Residual Certificate, to sell such
Residual Certificate to a purchaser selected by the Trustee on
such terms as the Trustee may choose. Such purported
Transferee shall promptly endorse and deliver each Residual
Certificate in accordance with the instructions of the
Trustee. Such purchaser may be the Trustee itself or any
Affiliate of the Trustee. The proceeds of such sale, net of
the commissions (which may include commissions payable to
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the Trustee or its Affiliates), expenses and taxes due, if
any, will be remitted by the Trustee to such purported
Transferee. The terms and conditions of any sale under this
clause (iii)(B) shall be determined in the sole discretion of
the Trustee, and the Trustee shall not be liable to any Person
having an Ownership Interest in a Residual Certificate as a
result of its exercise of such discretion.
(iv) The Trustee shall make available to the Internal
Revenue Service and those Persons specified by the REMIC
Provisions all information necessary to compute any tax
imposed (A) as a result of the Transfer of an Ownership
Interest in a Residual Certificate to any Person who is a
Disqualified Organization, including the information described
in Treasury regulations sections 1.860D-1(b)(5) and
1.860E-2(a)(5) with respect to the "excess inclusions" of such
Residual Certificate and (B) as a result of any regulated
investment company, real estate investment trust, common trust
fund, partnership, trust, estate or organization described in
Section 1381 of the Code that holds an Ownership Interest in a
Residual Certificate having as among its record holders at any
time any Person which is a Disqualified Organization.
Reasonable compensation for providing such information may be
accepted by the Trustee.
(v) The provisions of this Section 5.02(d) set forth
prior to this subsection (v) may be modified, added to or
eliminated, provided that there shall have been delivered to
the Trustee at the expense of the party seeking to modify, add
to or eliminate any such provision the following:
(A) written notification from each Rating
Agency to the effect that the modification, addition
to or elimination of such provisions will not cause
such Rating Agency to downgrade its then-current
ratings of any Class of Certificates; and
(B) an Opinion of Counsel, in form and
substance satisfactory to the Trustee, to the effect
that such modification of, addition to or elimination
of such provisions will not cause the Trust Fund to
cease to qualify as a REMIC and will not cause the
Trust Fund to be subject to an entity-level tax
caused by the Transfer of any Residual Certificate to
a Person that is not a Permitted Transferee or (y) a
Person other than the prospective transferee to be
subject to a REMIC-tax caused by the Transfer of a
Residual Certificate to a Person that is not a
Permitted Transferee.
(e) Subject to the preceding subsections, upon surrender for
registration of transfer of any Certificate at any office or agency of the
Trustee maintained for such purpose pursuant to Section 8.11, the Trustee shall
execute and the Certificate Registrar shall authenticate and deliver, in the
name of the designated Transferee or Transferees, one or more new Certificates
of the same Class of a like aggregate Percentage Interest.
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(f) At the option of the Holder thereof, any Certificate may
be exchanged for other Certificates of the same Class with authorized
denominations and a like aggregate Percentage Interest, upon surrender of such
Certificate to be exchanged at any office or agency of the Trustee maintained
for such purpose pursuant to Section 8.11. Whenever any Certificates are so
surrendered for exchange the Trustee shall execute and cause the Certificate
Registrar to authenticate and deliver the Certificates which the
Certificateholder making the exchange is entitled to receive. Every Certificate
presented or surrendered for transfer or exchange shall (if so required by the
Trustee) be duly endorsed by, or be accompanied by a written instrument of
transfer in the form satisfactory to the Trustee and the Certificate Registrar
duly executed by, the Holder thereof or his attorney duly authorized in writing.
(g) No service charge to the Certificateholders shall be made
for any transfer or exchange of Certificates, but the Trustee may require
payment of a sum sufficient to cover any tax or governmental charge that may be
imposed in connection with any transfer or exchange of Certificates.
(h) All Certificates surrendered for transfer and exchange
shall be canceled and destroyed by the Certificate Registrar in accordance with
its customary procedures.
(i) The Trustee will cause the Certificate Registrar (unless
the Trustee is acting as Certificate Registrar) to provide notice to the Trustee
of each transfer of a Certificate and to provide the Trustee with an updated
copy of the Certificate Register on the first Business Day in January and June
of each year, commencing January 1997.
SECTION 5.03. Mutilated, Destroyed, Lost or Stolen
Certificates.
If (i) any mutilated Certificate is surrendered to the Trustee
or the Certificate Registrar, or the Trustee and the Certificate Registrar
receive evidence to their satisfaction of the destruction, loss or theft of any
Certificate, and (ii) there is delivered to the Trustee and the Certificate
Registrar such security or indemnity as may be required by them to save each of
them harmless, then, in the absence of actual knowledge by the Trustee or the
Certificate Registrar that such Certificate has been acquired by a bona fide
purchaser, the Trustee shall execute and deliver, in exchange for or in lieu of
any such mutilated, destroyed, lost or stolen Certificate, a new Certificate of
the same Class and of like denomination and Percentage Interest. 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 and any other expenses (including the fees
and expenses of the Certificate Registrar) connected therewith. Any replacement
Certificate issued pursuant to this Section shall constitute complete and
indefeasible evidence of ownership in the applicable REMIC created hereunder, as
if originally issued, whether or not the lost, stolen or destroyed Certificate
shall be found at any time.
SECTION 5.04. Persons Deemed Owners.
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The Depositor, the Master Servicer, the Trustee, the
Certificate Registrar, the Certificate Insurer and any agent of any of them may
treat the Person in whose name any Certificate is registered as the owner of
such Certificate for the purpose of receiving distributions pursuant to Section
4.01 and for all other purposes whatsoever, and none of the Depositor, the
Master Servicer, the Trustee, the Certificate Registrar or any agent of any of
them shall be affected by notice to the contrary.
SECTION 5.05. Certain Available Information.
On or prior to the date of the first sale of any Residual
Certificate to an Independent third party, the Depositor shall provide to the
Trustee 10 copies of any private placement memorandum or other disclosure
document used by the Depositor in connection with the offer and sale of the
Residual Certificates. In addition, if any such private placement memorandum or
disclosure document is revised, amended or supplemented at any time following
the delivery thereof to the Trustee, the Depositor promptly shall inform the
Trustee of such event and shall deliver to the Trustee 10 copies of the private
placement memorandum or disclosure document, as revised, amended or
supplemented. The Trustee shall maintain at its Corporate Trust Office and shall
make available free of charge during normal business hours for review by any
Holder of a Certificate or any Person identified to the Trustee as a prospective
transferee of a Certificate, originals or copies of the following items: (i) in
the case of a Holder or prospective transferee of a Residual Certificate, the
private placement memorandum or other disclosure document relating to the
Residual Certificates, in the form most recently provided to the Trustee; and
(ii) in all cases, (A) this Agreement and any amendments hereof entered into
pursuant to Section 12.01, (B) all monthly statements required to be delivered
to Certificateholders of the relevant Class pursuant to Section 4.02 since the
Closing Date, and all other notices, reports, statements and written
communications delivered to the Certificateholders of the relevant Class
pursuant to this Agreement since the Closing Date, (C) all certifications
delivered by a Responsible Officer of the Trustee since the Closing Date
pursuant to Section 11.01(h), (D) any and all Officers' Certificates delivered
to the Trustee by the Master Servicer since the Closing Date to evidence the
Master Servicer's determination that any P&I Advance was, or if made, would be a
Nonrecoverable P&I Advance and (E) any and all Officers' Certificates delivered
to the Trustee by the Master Servicer since the Closing Date pursuant to Section
4.04(a). Copies and mailing of any and all of the foregoing items will be
available from the Trustee upon request at the expense of the person requesting
the same.
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ARTICLE VI
THE DEPOSITOR AND THE MASTER SERVICER
SECTION 6.01. Liability of the Depositor and the Master
Servicer.
The Depositor and the Master Servicer each shall be liable in
accordance herewith only to the extent of the obligations specifically imposed
by this Agreement and undertaken hereunder by the Depositor and the Master
Servicer herein.
SECTION 6.02. Merger or Consolidation of the Depositor or
the Master Servicer.
Subject to the following paragraph, the Depositor will keep in
full effect its existence, rights and franchises as a corporation under the laws
of the jurisdiction of its incorporation. Subject to the following paragraph,
the Master Servicer will keep in full effect its existence, rights and
franchises as a corporation under the laws of the jurisdiction of its
incorporation and its qualification as an approved conventional seller/servicer
for FNMA or FHLMC in good standing. The Depositor and the Master Servicer each
will obtain and preserve its qualification to do business as a foreign
corporation in each jurisdiction in which such qualification is or shall be
necessary to protect the validity and enforceability of this Agreement, the
Certificates or any of the Mortgage Loans and to perform its respective duties
under this Agreement.
The Depositor or the Master Servicer may be merged or
consolidated with or into any Person, or transfer all or substantially all of
its assets to any Person, in which case any Person resulting from any merger or
consolidation to which the Depositor or the Master Servicer shall be a party, or
any Person succeeding to the business of the Depositor or the Master Servicer,
shall be the successor of the Depositor or the Master Servicer, as the case may
be, hereunder, without the execution or filing of any paper or any further act
on the part of any of the parties hereto, anything herein to the contrary
notwithstanding; provided, however, that the successor or surviving Person to
the Master Servicer shall be qualified to service mortgage loans on behalf of
FNMA or FHLMC; and provided further that the Rating Agencies' ratings and shadow
ratings of the Class A Certificates in effect immediately prior to such merger
or consolidation will not be qualified, reduced or withdrawn as a result thereof
(as evidenced by a letter to such effect from the Rating Agencies).
SECTION 6.03. Limitation on Liability of the Depositor,
the Master Servicer and Others.
None of the Depositor, the Master Servicer or any of the
directors, officers, employees or agents of the Depositor or the Master Servicer
shall be under any liability to the Trust Fund or the Certificateholders for any
action taken or for refraining from the taking of any action in good faith
pursuant to this Agreement, or for errors in judgment; provided, however, that
this provision shall not protect the Depositor, the Master Servicer or any such
person against
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any breach of warranties, representations or covenants made herein, or against
any specific liability imposed on the Master Servicer pursuant hereto, or
against any liability which would otherwise be imposed by reason of willful
misfeasance, bad faith or gross negligence in the performance of duties or by
reason of reckless disregard of obligations and duties hereunder. The Depositor,
the Master Servicer and any director, officer, employee or agent of the
Depositor or the Master Servicer may rely in good faith on any document of any
kind which, PRIMA FACIE, is properly executed and submitted by any Person
respecting any matters arising hereunder. The Depositor, the Master Servicer and
any director, officer, employee or agent of the Depositor or the Master Servicer
shall be indemnified and held harmless by the Trust Fund against any loss,
liability or expense incurred in connection with any legal action relating to
this Agreement or the Certificates, other than any loss, liability or expense 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 any
loss, liability or expense incurred by reason of willful misfeasance, bad faith
or gross negligence in the performance of duties hereunder or by reason of
reckless disregard of obligations and duties hereunder. Neither the Depositor
nor the Master Servicer shall be under any obligation to appear in, prosecute or
defend any legal action unless such action is related to its respective duties
under this Agreement and, in its opinion, does not involve it in any expense or
liability; provided, however, that each of the Depositor and the Master Servicer
may in its 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 Certificateholders hereunder. In such
event, unless the Depositor or the Master Servicer acts without the consent of
the Certificate Insurer prior to a Certificate Insurer Default or without the
consent of Holders of Certificates entitled to at least 51% of the Voting Rights
after a Certificate Insurer Default (to the extent such consent is required by
Section 9.03), the legal expenses and costs of such action and any liability
resulting therefrom (except any loss, liability or expense incurred by reason of
willful misfeasance, bad faith or gross negligence in the performance of duties
hereunder or by reason of reckless disregard of obligations and duties
hereunder) shall be expenses, costs and liabilities of the Trust Fund, and the
Depositor and the Master Servicer shall be entitled to be reimbursed therefor
from the Collection Account as and to the extent provided in Section 3.11, any
such right of reimbursement being prior to the rights of the Certificateholders
to receive any amount in the Collection Account.
SECTION 6.04. Limitation on Resignation of the Master
Servicer.
The Master Servicer shall not resign from the obligations and
duties hereby imposed on it except (i) upon determination that its duties
hereunder are no longer permissible under applicable law or (ii) with the
written consent of the Trustee and the Certificate Insurer, and written
confirmation from each Rating Agency (which confirmation shall be furnished to
the Depositor, the Trustee and the Certificate Insurer) that such resignation
will not cause such Rating Agency to reduce the then current rating or any
shadow rating of the Class A Certificates. Any such determination pursuant to
clause (i) of the preceding sentence permitting the resignation of the Master
Servicer shall be evidenced by an Opinion of Counsel to such effect obtained at
the expense of the Master Servicer and delivered to the Trustee. No resignation
of the Master Servicer shall become effective until the Trustee or a successor
servicer shall have
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assumed the Master Servicer's responsibilities, duties, liabilities (other than
those liabilities arising prior to the appointment of such successor) and
obligations under this Agreement.
Except as expressly provided herein, the Master Servicer shall
not assign or transfer any of its rights, benefits or privileges hereunder to
any other Person, or delegate to or subcontract with, or authorize or appoint
any other Person to perform any of the duties, covenants or obligations to be
performed by the Master Servicer hereunder. If, pursuant to any provision
hereof, the duties of the Master Servicer are transferred to a successor master
servicer, the entire amount of the Servicing Fee and other compensation payable
to the Master Servicer pursuant hereto shall thereafter be payable to such
successor master servicer.
SECTION 6.05. Rights of the Depositor in Respect of the
Master Servicer.
The Master Servicer shall afford (and any Sub-Servicing
Agreement shall provide that each Sub-Servicer shall afford) the Depositor, the
Trustee and the Certificate Insurer, upon reasonable notice, during normal
business hours, access to all records maintained by the Master Servicer (and any
such Sub-Servicer) in respect of the Master Servicer's rights and obligations
hereunder and access to officers of the Master Servicer (and those of any such
Sub-Servicer) responsible for such obligations. Upon request, the Master
Servicer shall furnish to the Depositor, the Trustee and the Certificate Insurer
its (and any such Sub-Servicer's) most recent financial statements and such
other information relating to the Master Servicer's capacity to perform its
obligations under this Agreement as it possesses. To the extent such information
is not otherwise available to the public, the Depositor, the Trustee and the
Certificate Insurer shall not disseminate any information obtained pursuant to
the preceding two sentences without the Master Servicer's written consent,
except as required pursuant to this Agreement or to the extent that it is
appropriate to do so (i) in working with legal counsel, auditors, taxing
authorities or other governmental agencies or (ii) pursuant to any law, rule,
regulation, order, judgment, writ, injunction or decree of any court or
governmental authority having jurisdiction over the Depositor, the Trustee, the
Certificate Insurer or the Trust Fund, and in either case, the Depositor, the
Certificate Insurer or the Trustee, as the case may be, shall use its best
efforts to assure the confidentiality of any such disseminated non-public
information. The Depositor may, but is not obligated to, enforce the obligations
of the Master Servicer under this Agreement and may, but is not obligated to,
perform, or cause a designee to perform, any defaulted obligation of the Master
Servicer under this Agreement or exercise the rights of the Master Servicer
under this Agreement; provided that the Master Servicer shall not be relieved of
any of its obligations under this Agreement by virtue of such performance by the
Depositor or its designee. The Depositor shall not have any responsibility or
liability for any action or failure to act by the Master Servicer and is not
obligated to supervise the performance of the Master Servicer under this
Agreement or otherwise.
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ARTICLE VII
DEFAULT
SECTION 7.01. Master Servicer Events of Default.
"Master Servicer Event of Default", wherever used herein,
means any one of the following events:
(i) any failure by the Master Servicer to remit to the
Trustee for distribution to the Certificateholders any payment
(other than a P&I Advance required to be made from its own
funds on any Master Servicer Remittance Date pursuant to
Section 4.03) required to be made under the terms of the
Certificates and this Agreement which continues unremedied for
a period of one Business Day after the date upon which written
notice of such failure, requiring the same to be remedied,
shall have been given to the Master Servicer by the Depositor,
the Certificate Insurer or the Trustee (in which case notice
shall be provided by telecopy), or to the Master Servicer, the
Depositor, the Certificate Insurer and the Trustee by the
Holders of Certificates entitled to at least 25% of the Voting
Rights; or
(ii) any failure on the part of the Master Servicer duly
to observe or perform in any material respect any other of the
covenants or agreements on the part of the Master Servicer
contained in the Certificates or in this Agreement (or, if the
Master Servicer is the Originator, the failure of the
Originator to repurchase a Mortgage Loan as to which a breach
has been established that requires a repurchase pursuant to
the terms of Section 7 of the Mortgage Loan Purchase
Agreement) which continues unremedied for a period of 45 days
after the earlier of (i) the date on which written notice of
such failure, requiring the same to be remedied, shall have
been given to the Master Servicer by the Depositor, the
Certificate Insurer or the Trustee, or to the Master Servicer,
the Depositor, the Certificate Insurer and the Trustee by the
Holders of Certificates entitled to at least 25% of the Voting
Rights and (ii) actual knowledge of such failure by a
Servicing Officer of the Master Servicer; provided, however,
that if, prior to a Certificate Insurer Default, the Master
Servicer shall have given notice to the Certificate Insurer of
corrective action it proposes to take, which corrective action
is agreed in writing by the Certificate Insurer to be
satisfactory, such period may be extended by the Certificate
Insurer; or
(iii) a decree or order of a court or agency or
supervisory authority having jurisdiction in the premises in
an involuntary case under any present or future federal or
state bankruptcy, insolvency or similar law or the appointment
of a conservator or receiver or liquidator in any insolvency,
readjustment of debt, marshalling of assets and liabilities or
similar proceeding, or for the winding-up or liquidation of
its affairs, shall have been entered against the Master
Servicer
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and such decree or order shall have remained in force
undischarged or unstayed for a period of 90 days; or
(iv) the Master Servicer shall consent to the
appointment of a conservator or receiver or liquidator in any
insolvency, readjustment of debt, marshalling of assets and
liabilities or similar proceedings of or relating to it or of
or relating to all or substantially all of its property; or
(v) the Master Servicer shall admit in writing its
inability to pay its debts generally as they become due, file
a petition to take advantage of any applicable insolvency or
reorganization statute, make an assignment for the benefit of
its creditors, or voluntarily suspend payment of its
obligations; or
(vi) there shall have occurred, and the Certificate
Insurer shall have notified the Master Servicer and the
Trustee of, an event of default by the Master Servicer under
the Insurance Agreement; or
(vii) any failure of the Master Servicer to make any P&I
Advance on any Master Servicer Remittance Date required to be
made from its own funds pursuant to Section 4.03 which
continues unremedied until 3:00 p.m. New York time on the
Business Day immediately following the Master Servicer
Remittance Date.
Subject to Article IX, if a Master Servicer Event of Default described in
clauses (i) through (vi) of this Section shall occur, then, and in each and
every such case, so long as such Master Servicer Event of Default shall not have
been remedied, the Depositor, the Certificate Insurer or the Trustee may, and at
the written direction of the Holders of Certificates entitled to at least 51% of
Voting Rights, the Trustee shall, by notice in writing to the Master Servicer
(and to the Depositor and the Certificate Insurer if given by the Trustee or to
the Trustee if given by the Depositor or the Certificate Insurer), terminate all
of the rights and obligations of the Master Servicer in its capacity as Master
Servicer under this Agreement, to the extent permitted by law, and in and to the
Mortgage Loans and the proceeds thereof. If a Master Servicer Event of Default
described in clause (vii) hereof shall occur, the Trustee shall, by notice in
writing to the Master Servicer, the Certificate Insurer and the Depositor,
terminate all of the rights and obligations of the Master Servicer in its
capacity as Master Servicer under this Agreement and in and to the Mortgage
Loans and the proceeds thereof. On or after the receipt by the Master Servicer
of such written notice, all authority and power of the Master Servicer under
this Agreement, whether with respect to the Certificates (other than as a Holder
of any Certificate) or the Mortgage Loans or the Policy or otherwise, shall pass
to and be vested in the Trustee pursuant to and under this Section, and, without
limitation, the Trustee is hereby authorized and empowered, as attorney-in-fact
or otherwise, to execute and deliver, on behalf of and at the expense of the
Master Servicer, any and all documents and other instruments and to do or
accomplish all other acts or things necessary or appropriate to effect the
purposes of such notice of termination, whether to complete the transfer and
endorsement or assignment of the Mortgage Loans and related documents, or
otherwise. The Master Servicer agrees, at its sole cost and
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expense, promptly (and in any event no later than ten Business Days subsequent
to such notice) to provide the Trustee with all documents and records requested
by it to enable it to assume the Master Servicer's functions under this
Agreement, and to cooperate with the Trustee in effecting the termination of the
Master Servicer's responsibilities and rights under this Agreement, including,
without limitation, the transfer within one Business Day to the Trustee for
administration by it of all cash amounts which at the time shall be or should
have been credited by the Master Servicer to the Collection Account held by or
on behalf of the Master Servicer, the Distribution Account or any REO Account or
Servicing Account held by or on behalf of the Master Servicer or thereafter be
received with respect to the Mortgage Loans or any REO Property serviced by the
Master Servicer (provided, however, that the Master Servicer shall continue to
be entitled to receive all amounts accrued or owing to it under this Agreement
on or prior to the date of such termination, whether in respect of P&I Advances
or otherwise, and shall continue to be entitled to the benefits of Section 6.03
notwithstanding any such termination). For purposes of this Section 7.01, the
Trustee shall not be deemed to have knowledge of a Master Servicer Event of
Default unless a Responsible Officer of the Trustee assigned to and working in
the Trustee's Corporate Trust Office has actual knowledge thereof or unless
written notice of any event which is in fact such a Master Servicer Event of
Default is received by the Trustee and such notice references the Certificates,
the Trust Fund or this Agreement.
The Master Servicer hereby covenants and agrees to act as the
Master Servicer under this Agreement for an initial term, commencing on the
Closing Date and ending on December 31, 1996, which term shall be extendable by
the Certificate Insurer for successive terms of three calendar months
thereafter, until the termination of the Trust Fund pursuant to Article X. Each
such notice of extension (a "Master Servicer Extension Notice") shall be
delivered by the Certificate Insurer to the Trustee and the Master Servicer. The
Master Servicer hereby agrees that, upon its receipt of any such Master Servicer
Extension Notice, the Master Servicer shall become bound for the duration of the
term covered by such Master Servicer Extension Notice to continue as the Master
Servicer subject to and in accordance with the other provisions of this
Agreement. The Trustee agrees that if as of the fifteenth (15th) day prior to
the last day of any term of the Master Servicer the Trustee shall not have
received any Master Servicer Extension Notice from the Certificate Insurer, the
Trustee will within five (5) days thereafter, give written notice of such
non-receipt to the Certificate Insurer and the Master Servicer. The failure of
the Certificate Insurer to deliver a Master Servicer Extension Notice by the end
of a calendar term shall result in the termination of the Master Servicer. The
foregoing provisions of this paragraph shall not apply to the Trustee in the
event the Trustee succeeds to the rights and obligations of the Master Servicer
and the Trustee shall continue in such capacity until the earlier of the
termination of this Agreement pursuant to Article X or the appointment of a
successor master servicer.
SECTION 7.02. Trustee to Act; Appointment of Successor.
(a) On and after the time the Master Servicer receives a
notice of termination or the Master Servicer's term is not extended pursuant to
Section 7.01, the Trustee shall be the successor in all respects to the Master
Servicer in its capacity as Master Servicer under this
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Agreement and the transactions set forth or provided for herein and shall be
subject to all the responsibilities, duties and liabilities relating thereto and
arising thereafter placed on the Master Servicer (except for any representations
or warranties of the Master Servicer under this Agreement, the responsibilities,
duties and liabilities contained in Section 2.03(c) and its obligation to
deposit amounts in respect of losses pursuant to Section 3.12) by the terms and
provisions hereof including, without limitation, the Master Servicer's
obligations to make P&I Advances pursuant to Section 4.03; provided, however,
that if the Trustee is prohibited by law or regulation from obligating itself to
make advances regarding delinquent mortgage loans, then the Trustee shall not be
obligated to make P&I Advances pursuant to Section 4.03; and provided further,
that any failure to perform such duties or responsibilities caused by the Master
Servicer's failure to provide information required by Section 7.01 shall not be
considered a default by the Trustee as successor to the Master Servicer
hereunder. As compensation therefor, the Trustee shall be entitled to the
Servicing Fees and all funds relating to the Mortgage Loans to which the Master
Servicer would have been entitled if it had continued to act hereunder (other
than amounts which were due or would become due to the Master Servicer prior to
its termination or resignation). Notwithstanding the above and subject to the
next paragraph, the Trustee may, if it shall be unwilling to so act, or shall,
if it is unable to so act or if it is prohibited by law from making advances
regarding delinquent mortgage loans or if the Certificate Insurer or if the
Holders of Certificates entitled to at least 51% of the Voting Rights so request
in writing to the Trustee, promptly appoint, with the consent of the Certificate
Insurer, or petition a court of competent jurisdiction to appoint, an
established mortgage loan servicing institution acceptable to each Rating Agency
and the Certificate Insurer and having a net worth of not less than $15,000,000,
as the successor to the Master Servicer under this Agreement in the assumption
of all or any part of the responsibilities, duties or liabilities of the Master
Servicer under this Agreement. No appointment of a successor to the Master
Servicer under this Agreement shall be effective until the assumption by the
successor of all of the Master Servicer's responsibilities, duties and
liabilities hereunder. In connection with such appointment and assumption
described herein, the Trustee may make such arrangements for the compensation of
such successor out of payments on Mortgage Loans as it and such successor shall
agree; provided, however, that no such compensation shall be in excess of that
permitted the Master Servicer as such hereunder. The Depositor, the Trustee and
such successor shall take such action, consistent with this Agreement, as shall
be necessary to effectuate any such succession. Pending appointment of a
successor to the Master Servicer under this Agreement, the Trustee shall act in
such capacity as hereinabove provided.
Upon removal or resignation of the Master Servicer, the
Trustee with the cooperation of the Seller and the Certificate Insurer, (x)
shall solicit bids for a successor Master 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 of the Mortgage Loans serviced by such
predecessor Master Servicer. 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 (including the Trustee
or any affiliate thereof). Such public announcement shall specify that the
successor Master Servicer shall be entitled to the servicing compensation agreed
upon between the Trustee, the successor Master Servicer and the Seller;
provided, however, that no such fee shall exceed the related Servicing Fee.
Within thirty days
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after any such public announcement, the Trustee, with the cooperation of the
Seller and the Certificate Insurer, shall negotiate in good faith and effect the
sale, transfer and assignment of the servicing rights and responsibilities
hereunder to the qualified party submitting the highest satisfactory bid as to
the price they will pay to obtain such servicing. The Trustee upon receipt of
the purchase price shall pay such purchase price to the Master Servicer being so
removed, after deducting from any sum received by the Trustee from the successor
to such 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 reasonably incurred
hereunder. After such deductions, the remainder of such sum shall be paid by the
Trustee to such Master Servicer at the time of such sale.
(b) If the Master Servicer fails to remit to the Trustee for
distribution to the Certificateholders any payment required to be made under the
terms of the Certificates and this Agreement (for purposes of this Section
7.02(b), a "Remittance") because the Master Servicer is the subject of a
proceeding under the federal Bankruptcy Code and the making of such Remittance
is prohibited by Section 362 of the federal Bankruptcy Code, the Trustee shall
upon notice of such prohibition, regardless of whether it has received a notice
of termination under Section 7.01, advance the amount of such Remittance by
depositing such amount in the Distribution Account on the related Distribution
Date. The Trustee shall be obligated to make such advance only if (i) such
advance, in the good faith judgment of the Trustee, can reasonably be expected
to be ultimately recoverable from funds which are in the custody of the Master
Servicer, a trustee in bankruptcy or a federal bankruptcy court and should have
been the subject of such Remittance absent such prohibition (the "Stayed Funds")
and (ii) the Trustee is not prohibited by law from making such advance or
obligating itself to do so. Upon remittance of the Stayed Funds to the Trustee
or the deposit thereof in the Distribution Account by the Master Servicer, a
trustee in bankruptcy or a federal bankruptcy court, the Trustee may recover the
amount so advanced, without interest, by withdrawing such amount from the
Distribution Account; however, nothing in this Agreement shall be deemed to
affect the Trustee's rights to recover from the Master Servicer's own funds
interest on the amount of any such advance. If the Trustee at any time makes an
advance under this Subsection which it later determines in its good faith
judgment will not be ultimately recoverable from the Stayed Funds with respect
to which such advance was made, the Trustee shall be entitled to reimburse
itself for such advance, without interest, by withdrawing from the Distribution
Account, out of amounts on deposit therein, an amount equal to the portion of
such advance attributable to the Stayed Funds.
SECTION 7.03. Notification to Certificateholders.
(a) Upon any termination of the Master Servicer pursuant to
Section 7.01 above or any appointment of a successor to the Master Servicer
pursuant to Section 7.02 above, the Trustee shall give prompt written notice
thereof to Certificateholders at their respective addresses appearing in the
Certificate Register.
(b) Not later than the later of 60 days after the occurrence
of any event, which constitutes or which, with notice or lapse of time or both,
would constitute a Master Servicer Event of Default or five days after a
Responsible Officer of the Trustee becomes aware of the
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occurrence of such an event, the Trustee shall transmit by mail to all Holders
of Certificates notice of each such occurrence, unless such default or Master
Servicer Event of Default shall have been cured or waived.
SECTION 7.04. Waiver of Master Servicer Events of Default.
The Holders representing at least 66% of the Voting Rights
evidenced by all Classes of Certificates affected by any default or Master
Servicer Event of Default hereunder, with the written consent of the Certificate
Insurer, may waive such default or Master Servicer Event of Default; PROVIDED,
HOWEVER, that a default or Master Servicer Event of Default under clause (i) or
(vi) of Section 7.01 may be waived only by all of the Holders of the Regular
Certificates with the written consent of the Certificate Insurer. Upon any such
waiver of a default or Master Servicer Event of Default, such default or Master
Servicer Event of Default shall cease to exist and shall be deemed to have been
remedied for every purpose hereunder. No such waiver shall extend to any
subsequent or other default or Master Servicer Event of Default or impair any
right consequent thereon except to the extent expressly so waived.
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ARTICLE VIII
CONCERNING THE TRUSTEE
SECTION 8.01. Duties of Trustee.
The Trustee, prior to the occurrence of a Master Servicer
Event of Default and after the curing of all Master Servicer Events of Default
which may have occurred, undertakes to perform such duties and only such duties
as are specifically set forth in this Agreement. During a Master Servicer Event
of Default, the Trustee shall exercise such of the rights and powers vested in
it by this Agreement, and use the same degree of care and skill in their
exercise as a prudent person would exercise or use under the circumstances in
the conduct of such person's own affairs. Any permissive right of the Trustee
enumerated in this Agreement shall not be construed as a duty.
The Trustee, upon receipt of all resolutions, certificates,
statements, opinions, reports, documents, orders or other instruments furnished
to the Trustee which are specifically required to be furnished pursuant to any
provision of this Agreement, shall examine them to determine whether they
conform to the requirements of this Agreement. If any such instrument is found
not to conform to the requirements of this Agreement in a material manner, the
Trustee shall take such action as it deems appropriate to have the instrument
corrected, and if the instrument is not corrected to the Trustee's satisfaction,
the Trustee will provide notice thereof to the Certificateholders and the
Certificate Insurer.
No provision of this Agreement shall be construed to relieve
the Trustee from liability for its own negligent action, its own negligent
failure to act or its own misconduct; provided, however, that:
(i) Prior to the occurrence of a Master Servicer Event
of Default, and after the curing of all such Master Servicer
Events of Default which may have occurred, the duties and
obligations of the Trustee shall be determined solely by the
express provisions of this Agreement, the Trustee shall not be
liable except for the performance of such duties and
obligations as are specifically set forth in this Agreement,
no implied covenants or obligations shall be read into this
Agreement against the Trustee and, in the absence of bad faith
on the part of the Trustee, the Trustee may conclusively rely,
as to the truth of the statements and the correctness of the
opinions expressed therein, upon any certificates or opinions
furnished to the Trustee that conform to the requirements of
this Agreement;
(ii) The Trustee shall not be personally liable for an
error of judgment made in good faith by a Responsible Officer
or Responsible Officers of the Trustee, unless it shall be
proved that the Trustee was negligent in ascertaining the
pertinent facts; and
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(iii) The Trustee shall not be personally liable with
respect to any action taken, suffered or omitted to be taken
by it in good faith in accordance with the direction of the
Certificate Insurer or Holders of Certificates entitled to at
least 25% of the Voting Rights relating to the time, method
and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power
conferred upon the Trustee, under this Agreement.
SECTION 8.02. Certain Matters Affecting the Trustee.
(a) Except as otherwise provided in Section 8.01:
(i) The Trustee may request and rely upon and shall be
protected in acting or refraining from acting upon any
resolution, Officers' Certificate, certificate of auditors or
any other certificate, statement, instrument, opinion, report,
notice, request, consent, order, appraisal, bond or other
paper or document reasonably believed by it to be genuine and
to have been signed or presented by the proper party or
parties;
(ii) The Trustee may consult with counsel and any
Opinion of Counsel shall be full and complete authorization
and protection in respect of any action taken or suffered or
omitted by it hereunder in good faith and in accordance with
such Opinion of Counsel;
(iii) The Trustee shall be under no obligation to
exercise any of the trusts or powers vested in it by this
Agreement or to institute, conduct or defend any litigation
hereunder or in relation hereto at the request, order or
direction of any of the Certificateholders, pursuant to the
provisions of this Agreement, unless such Certificateholders
shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which
may be incurred therein or thereby; nothing contained herein
shall, however, relieve the Trustee of the obligation, upon
the occurrence of a Master Servicer Event of Default (which
has not been cured or waived), to exercise such of the rights
and powers vested in it by this Agreement, and to use the same
degree of care and skill in their exercise as a prudent person
would exercise or use under the circumstances in the conduct
of such person's own affairs;
(iv) The Trustee shall not be personally liable for any
action taken, suffered or omitted by it in good faith and
believed by it to be authorized or within the discretion or
rights or powers conferred upon it by this Agreement;
(v) Prior to the occurrence of a Master Servicer Event
of Default hereunder and after the curing of all Master
Servicer Events of Default which may have occurred, the
Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request,
consent, order, approval, bond or other paper or
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document, unless requested in writing to do so by the
Certificate Insurer or by Holders of Certificates entitled to
at least 25% of the Voting Rights; provided, however, that if
the payment within a reasonable time to the Trustee of the
costs, expenses or liabilities likely to be incurred by it in
the making of such investigation is, in the opinion of the
Trustee, not reasonably assured to the Trustee by such
Certificateholders, the Trustee may require reasonable
indemnity against such expense, or liability from such
Certificateholders as a condition to taking any such action;
(vi) The Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or
by or through agents or attorneys; and
(vii) The Trustee shall not be personally liable for any
loss resulting from the investment of funds held in the
Collection Account at the direction of the Master Servicer
pursuant to Section 3.12.
(b) All rights of action under this Agreement or under any of
the Certificates, enforceable by the Trustee, may be enforced by it without the
possession of any of the Certificates, or the production thereof at the trial or
other proceeding relating thereto, and any such suit, action or proceeding
instituted by the Trustee shall be brought in its name for the benefit of all
the Holders of such Certificates, subject to the provisions of this Agreement.
SECTION 8.03. Trustee Not Liable for Certificates or
Mortgage Loans.
The recitals contained herein and in the Certificates (other
than the signature of the Trustee, the authentication of the Certificate
Registrar on the Certificates, the acknowledgments of the Trustee contained in
Article II and the representations and warranties of the Trustee in Section
8.12) shall be taken as the statements of the Depositor and the Trustee assumes
no responsibility for their correctness. The Trustee makes no representations or
warranties as to the validity or sufficiency of this Agreement (other than as
specifically set forth in Section 8.12) or of the Certificates (other than the
signature of the Trustee and authentication of the Certificate Registrar on the
Certificates) or of any Mortgage Loan or related document. The Trustee shall not
be accountable for the use or application by the Depositor of any of the
Certificates or of the proceeds of such Certificates, or for the use or
application of any funds paid to the Depositor or the Master Servicer in respect
of the Mortgage Loans or deposited in or withdrawn from the Collection Account
by the Master Servicer, other than any funds held by or on behalf of the Trustee
in accordance with Section 3.10.
SECTION 8.04. Trustee May Own Certificates.
The Trustee in its individual capacity or any other capacity
may become the owner or pledgee of Certificates with the same rights it would
have if it were not Trustee.
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SECTION 8.05. Trustee's Fees and Expenses.
The Trustee shall withdraw from the Distribution Account on
each Distribution Date and pay to itself the Trustee Fee and, to the extent that
the funds therein are at anytime insufficient for such purpose, the Depositor
shall pay such fees. The Trustee and any director, officer, employee or agent of
the Trustee shall be indemnified by the Trust Fund and held harmless against any
loss, liability or expense (not including expenses, disbursements and advances
incurred or made by the Trustee, including the compensation and the expenses and
disbursements of its agents and counsel, in the ordinary course of the Trustee's
performance in accordance with the provisions of this Agreement) incurred by the
Trustee in connection with any claim or legal action or any pending or
threatened claim or legal action arising out of or in connection with the
acceptance or administration of its obligations and duties under this Agreement,
other than any loss, liability or expense (i) resulting from the Master
Servicer's actions or omissions in connection with this Agreement and the
Mortgage Loans, (ii) that constitutes a specific liability of the Trustee
pursuant to Section 11.01(c) or (iii) 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 or as a result of a breach of the Trustee's obligations under Article
XI hereof. It is understood by the parties hereto that a "claim" as used in the
preceding sentence includes any claim for indemnification made by the Custodian
under Section 3.2 of the Custodial Agreement. The Master Servicer agrees to
indemnify the Trustee from, and hold it harmless against, any loss, liability or
expense resulting from a breach of the Master Servicer's obligations and duties
under this Agreement. Such indemnity shall survive the termination or discharge
of this Agreement and the resignation or removal of the Trustee. Any payment
hereunder made by the Master Servicer to the Trustee shall be from the Master
Servicer's own funds, without reimbursement from the related Trust Fund
therefor.
The Trustee shall pay any annual rating agency fees of Moody's
and S&P for ongoing surveillance from its own funds without right of
reimbursement.
SECTION 8.06. Eligibility Requirements for Trustee.
The Trustee hereunder shall at all times be a corporation or
an association (other than the Depositor, the Originator, the Seller, the Master
Servicer or any Affiliate of the foregoing) organized and doing business under
the laws of any state or the United States of America, authorized under such
laws to exercise corporate trust powers, having a combined capital and surplus
of at least $50,000,000 and subject to supervision or examination by federal or
state authority. If such corporation or association publishes reports of
conditions 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 conditions so published. In case at any time the Trustee shall
cease to be eligible in accordance with the provisions of this Section, the
Trustee shall resign immediately in the manner and with the effect specified in
Section 8.07.
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SECTION 8.07. Resignation and Removal of the Trustee.
The Trustee may at any time resign and be discharged from the
trust hereby created by giving written notice thereof to the Depositor, the
Certificate Insurer, the Master Servicer and to the Certificateholders. Upon
receiving such notice of resignation, the Depositor shall, with the written
consent of the Certificate Insurer, promptly appoint a successor trustee by
written instrument, in duplicate, which instrument shall be delivered to the
resigning Trustee and to the successor trustee. A copy of such instrument shall
be delivered to the Certificateholders, the Certificate Insurer, and the Master
Servicer by the Depositor. If no successor trustee shall have been so appointed
and have accepted appointment within 30 days after the giving of such notice of
resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor trustee.
If at any time the Trustee shall cease to be eligible in
accordance with the provisions of Section 8.06 and shall fail to resign after
written request therefor by the Depositor or the Certificate Insurer, or if at
any time the Trustee shall become incapable of acting, or shall be adjudged
bankrupt or insolvent, or a receiver of the Trustee or of its property shall be
appointed, or any public officer shall take charge or control of the Trustee or
of its property or affairs for the purpose of rehabilitation, conservation or
liquidation, then the Depositor may remove the Trustee and appoint a successor
trustee by written instrument, in duplicate, which instrument shall be delivered
to the Trustee so removed and to the successor trustee. A copy of such
instrument shall be delivered to the Certificateholders, the Certificate Insurer
and the Master Servicer by the Depositor.
The Certificate Insurer or the Holders of Certificates
entitled to at least 51% of the Voting Rights, with the written consent of the
Certificate Insurer, may at any time remove the Trustee and appoint a successor
trustee by written instrument or instruments, in triplicate, signed by the
Certificate Insurer or such Holders or their attorneys-in-fact duly authorized,
one complete set of which instruments shall be delivered to the Depositor, one
complete set to the Trustee so removed and one complete set to the successor so
appointed. A copy of such instrument shall be delivered to the
Certificateholders, the Certificate Insurer and the Master Servicer by the
Depositor.
Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to any of the provisions of this Section shall not
become effective until acceptance of appointment by the successor trustee as
provided in Section 8.08.
SECTION 8.08. Successor Trustee.
Any successor trustee appointed as provided in Section 8.07
shall execute, acknowledge and deliver to the Depositor, the Certificate Insurer
and to its predecessor trustee an instrument accepting such appointment
hereunder, and thereupon the resignation or removal of the predecessor trustee
shall become effective and such successor trustee, without any further act, deed
or conveyance, shall become fully vested with all the rights, powers, duties and
obligations of its predecessor hereunder, with the like effect as if originally
named as trustee
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herein. The predecessor trustee shall deliver to the successor trustee all
Mortgage Files and related documents and statements, as well as all moneys, held
by it hereunder (other than any Mortgage Files at the time held by a Custodian,
which Custodian shall become the agent of any successor trustee hereunder), and
the Depositor and the predecessor trustee shall execute and deliver such
instruments and do such other things as may reasonably be required for more
fully and certainly vesting and confirming in the successor trustee all such
rights, powers, duties and obligations.
No successor trustee shall accept appointment as provided in
this Section unless at the time of such acceptance such successor trustee shall
be eligible under the provisions of Section 8.06 and the appointment of such
successor trustee shall not result in a downgrading of any Class of Certificates
by either Rating Agency, as evidenced by a letter from each Rating Agency.
Upon acceptance of appointment by a successor trustee as
provided in this Section, the Depositor shall mail notice of the succession of
such trustee hereunder to the Certificate Insurer and to all Holders of
Certificates at their addresses as shown in the Certificate Register. If the
Depositor fails to mail such notice within 10 days after acceptance of
appointment by the successor trustee, the successor trustee shall cause such
notice to be mailed at the expense of the Depositor.
Notwithstanding anything to the contrary contained herein, so
long as no Certificate Insurer Default has occurred and is continuing, the
appointment of any successor trustee pursuant to any provision of this Agreement
will be subject to the prior written consent of the Certificate Insurer.
SECTION 8.09. Merger or Consolidation of 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 the
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation or association shall be eligible under the provisions
of Section 8.06, without the execution or filing of any paper or any further act
on the part of any of the parties hereto, anything herein to the contrary
notwithstanding.
SECTION 8.10. Appointment of Co-Trustee or Separate
Trustee.
Notwithstanding any other provisions hereof, at any time, for
the purpose of meeting any legal requirements of any jurisdiction in which any
part of the Trust Fund or property securing the same may at the time be located,
the 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 to act as co-trustee or co-trustees, jointly with the
Trustee, or separate trustee or separate trustees, of all or any part of the
Trust Fund, and to vest in such Person or Persons, in such capacity, such title
to the Trust Fund, or any part thereof,
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and, subject to the other provisions of this Section 8.10, 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 case a Master Servicer Event of Default shall have occurred and be
continuing, the Trustee alone shall have the power to make such appointment. No
co-trustee or separate trustee hereunder shall be required to meet the terms of
eligibility as a successor trustee under Section 8.06 hereunder and no notice to
Holders of Certificates of the appointment of co-trustee(s) or separate
trustee(s) shall be required under Section 8.08 hereof.
In the case of any appointment of a co-trustee or separate
trustee pursuant to this Section 8.10 all rights, powers, duties and obligations
conferred or imposed upon the Trustee shall be conferred or imposed upon and
exercised or performed by the Trustee and such separate trustee or co-trustee
jointly, except to the extent that under any law of any jurisdiction in which
any particular act or acts are to be performed by the Trustee (whether as
Trustee hereunder or as successor to a defaulting Master Servicer hereunder),
the Trustee shall be incompetent or unqualified to perform such act or acts, in
which event such rights, powers, duties and obligations (including the holding
of title to the Trust Fund or any portion thereof in any such jurisdiction)
shall be exercised and performed by such separate trustee or co-trustee at the
direction of the Trustee.
Any notice, request or other writing given to the Trustee
shall be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement and
the conditions of this Article VIII. Each separate trustee and co-trustee, upon
its acceptance of the trust 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.
Any separate trustee or co-trustee may, at any time,
constitute the Trustee, its agent or attorney-in-fact, with full power and
authority, to the extent not prohibited by law, to do any lawful act under or in
respect of this Agreement on its behalf and in its name. If any separate trustee
or co-trustee shall die, become incapable of acting, resign or be removed, all
of its estates, properties, rights, remedies and trusts shall vest in and be
exercised by the Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.
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SECTION 8.11. Appointment of Custodians.
The Trustee may, with the consent of the Depositor, the Master
Servicer and the Certificate Insurer, appoint one or more Custodians to hold all
or a portion of the Mortgage Files as agent for the Trustee, by entering into a
Custodial Agreement. The appointment of any Custodian may at any time be
terminated and a substitute Custodian appointed therefor upon the reasonable
request of the Master Servicer to the Trustee, the consent to which shall not be
unreasonably withheld. The Trustee shall pay any and all fees and expenses of
any Custodian in accordance with each Custodial Agreement. The Trustee initially
appoints Texas Commerce Bank National Association, as Custodian, and the
Depositor, the Master Servicer and the Certificate Insurer consent to such
appointment. Subject to Article VIII hereof, the Trustee agrees to comply with
the terms of each Custodial Agreement and to enforce the terms and provisions
thereof against the Custodian for the benefit of the Certificateholders having
an interest in any Mortgage File held by such Custodian. Each Custodian shall be
a depository institution or trust company subject to supervision by federal or
state authority, shall have combined capital and surplus of at least $10,000,000
and shall be qualified to do business in the jurisdiction in which it holds any
Mortgage File. Each Custodial Agreement may be amended only as provided in
Section 11.01. In no event shall the appointment of any Custodian pursuant to a
Custodial Agreement diminish the obligations of the Trustee hereunder.
SECTION 8.12. Appointment of Office or Agency.
The Trustee will appoint an office or agency in the City of
New York where the Certificates may be surrendered for registration of transfer
or exchange, and presented for final distribution, and where notices and demands
to or upon the Trustee in respect of the Certificates and this Agreement may be
served.
SECTION 8.13. Representations and Warranties of the
Trustee.
The Trustee hereby represents and warrants to the Master
Servicer, the Depositor and the Certificate Insurer, as of the Closing Date,
that:
(i) The Trustee is a national banking association duly
organized, validly existing and in good standing under the laws of the
United States.
(ii) The execution and delivery of this Agreement by the
Trustee, and the performance and compliance with the terms of this
Agreement by the Trustee, will not violate the Trustee's charter 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 agreement or other instrument to which it is a
party or which is applicable to it or any of its assets.
(iii) The Trustee has the full power and authority to enter
into and consummate all transactions contemplated by this Agreement,
has duly authorized the execution,
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delivery and performance of this Agreement, and has duly executed and
delivered this Agreement.
(iv) This Agreement, assuming due authorization, execution and
delivery by the Master Servicer and the Depositor, constitutes a valid,
legal and binding obligation of the Trustee, enforceable against the
Trustee in accordance with the terms hereof, subject to (A) applicable
bankruptcy, insolvency, receivership, reorganization, moratorium and
other laws affecting the enforcement of creditors' rights generally,
and (B) general principles of equity, regardless of whether such
enforcement is considered in a proceeding in equity or at law.
(v) The Trustee is not in violation of, and its execution and
delivery of this Agreement and its performance and compliance with the
terms of this Agreement will not constitute a violation of, any law,
any order or decree of any court or arbiter, or any order, regulation
or demand of any federal, state or local governmental or regulatory
authority, which violation, in the Trustee's good faith and reasonable
judgment, is likely to affect materially and adversely either the
ability of the Trustee to perform its obligations under this Agreement
or the financial condition of the Trustee.
(vi) No litigation is pending or, to the best of the Trustee's
knowledge, threatened against the Trustee which would prohibit the
Trustee from entering into this Agreement or, in the Trustee's good
faith reasonable judgment, is likely to materially and adversely affect
either the ability of the Trustee to perform its obligations under this
Agreement or the financial condition of the Trustee.
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ARTICLE IX
CERTAIN MATTERS REGARDING THE CERTIFICATE INSURER
SECTION 9.01. Rights of the Certificate Insurer To
Exercise Rights of Class A
Certificateholders.
Each of the Depositor, the Master Servicer and the Trustee,
and, by accepting its Certificate, each Class A Certificateholder, agrees that
unless a Certificate Insurer Default has occurred and is continuing, the
Certificate Insurer shall have the right to exercise all rights of the Class A
Certificateholders under this Agreement (except as provided in clause (i) of the
second paragraph of Section 12.01) without any further consent of the Class A
Certificateholders, including, without limitation:
(a) the right to direct foreclosures upon Mortgage Loans upon
failure of the Master Servicer to do so;
(b) the right to require the Originator, the Seller or the
Depositor, as the case may be, to repurchase or substitute for Mortgage
Loans pursuant to Section 2.03;
(c) the right to give notices of breach or to terminate the
rights and obligations of the Master Servicer as Master Servicer
pursuant to Section 7.01;
(d) the right to direct the actions of the Trustee during the
continuance of a Master Servicer Event of Default pursuant to Sections
7.01 and 7.02;
(e) the right to consent to or direct any waivers of Master
Servicer Events of Default pursuant to Section 7.04;
(f) the right to direct the Trustee to investigate certain
matters pursuant to Section 8.02(a)(v); and
(g) the right to remove the Trustee pursuant to Section 8.07
hereof.
In addition, each Class A Certificateholder agrees that,
unless a Certificate Insurer Default has occurred and is continuing, the rights
specifically set forth above may be exercised by the Class A Certificateholders
only with the prior written consent of the Certificate Insurer.
SECTION 9.02. Trustee To Act Solely with Consent of the
Certificate Insurer.
Unless a Certificate Insurer Default has occurred and is
continuing, the Trustee shall not:
(a) agree to any amendment pursuant to Section 12.01; or
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(b) undertake any litigation pursuant to Section 8.02(a)(iii);
without the prior written consent of the Certificate Insurer which consent shall
not be unreasonably withheld.
SECTION 9.03. Trust Fund and Accounts Held for Benefit of
the Certificate Insurer.
The Trustee shall hold the Trust Fund and the Trustee shall
hold (or cause the Custodian to hold) the Mortgage Files for the benefit of the
Certificateholders and the Certificate Insurer and all references in this
Agreement (including, without limitation, in Sections 2.01 and 2.02) and in the
Certificates to the benefit of Holders 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 and any REO Account, for the benefit of
the Certificateholders and for the benefit of the Certificate Insurer, and all
references in this Agreement (including, without limitation, in Sections 3.01
and 3.10) to the benefit of or actions on behalf of the Certificateholders shall
be deemed to include the Certificate Insurer. Unless a Certificate Insurer
Default has occurred and is continuing, the Master Servicer shall not terminate
any Sub-Servicing Agreements without cause without the prior consent of the
Certificate Insurer. Unless a Certificate Insurer Default has occurred and is
continuing, neither the Master Servicer nor the Depositor shall undertake any
litigation pursuant to Section 6.03 (other than litigation to enforce their
respective rights or defend themselves hereunder) without the prior consent of
the Certificate Insurer.
SECTION 9.04. Claims Upon the Policy; Policy Payments
Account.
(a) If, by the close of business on the third Business Day
prior to a Distribution Date, the Trustee determines that a Deficiency Amount
for any Distribution Date is greater than zero, then the Trustee shall give
notice to the Certificate Insurer by telephone or telecopy of the amount of such
Deficiency Amount. Such notice of such Deficiency Amount shall be confirmed in
writing in the form set forth as Exhibit A to the Endorsement of the Policy, to
the Certificate Insurer and the Fiscal Agent (as defined in the Policy), if any,
at or before 10:00 a.m. New York time on the second Business Day prior to such
Distribution Date. Following Receipt (as defined in the Policy) by the
Certificate Insurer of such notice in such form, the Certificate Insurer or the
Fiscal Agent will pay any amount payable under the Policy on the later to occur
of (i) 12:00 noon New York time on the second Business Day following such
receipt and (ii) 12:00 noon New York time on the Distribution Date to which such
deficiency relates, as provided in the Endorsement to the Policy.
(b) The Trustee shall establish a separate special purpose
trust account for the benefit of Holders of the Class A Certificates and the
Certificate Insurer referred to herein as
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the "Policy Payments Account" over which the Trustee shall have exclusive
control and sole right of withdrawal. The Trustee shall deposit any amount paid
under the Policy in the Policy Payments Account and distribute such amount only
for purposes of payment to Holders of Class A Certificates of the Guaranteed
Distribution 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 Fund. Amounts paid under the Policy shall be transferred to the
Distribution Account in accordance with the next succeeding paragraph and
disbursed by the Trustee to Holders of Class A Certificates in accordance with
Section 4.01(b) or Section 10.01, as applicable. 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 Guaranteed Distribution 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 (c)
below in the Certificate Register and in the statement to be furnished to
Holders of the Class A Certificates and Residual Certificates pursuant to
Section 4.02. Funds held in the Policy Payments Account shall not be invested by
the Master Servicer.
On any Distribution Date with respect to which a claim has
been made under the Policy, the amount of any funds received by the Trustee as a
result of any claim under the Policy, to the extent required to make the
Guaranteed Distribution on such Distribution 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 Distribution
Account pursuant to Section 4.01(b) or Section 10.01, as applicable, directly to
the payment in full of the Guaranteed Distribution due on the Class A
Certificates. Funds received by the Trustee as a result of any claim under the
Policy shall be deposited by the Trustee in the Policy Payments Account and used
solely for payment to the Holders 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.
(c) 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 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.
(d) 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
or similar law (a "Preference Claim") of any distribution made with respect to
the Class A Certificates. Each Class A Certificateholder, 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 has occurred and
is continuing) 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
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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 Class A Certificateholder 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 9.05 Effect of Payments by the Certificate
Insurer; Subrogation.
Anything herein to the contrary notwithstanding, any payment
with respect to principal of or interest on any of the Class A Certificates
which is made with moneys received pursuant to the terms of the Policy shall not
be considered payment of such Class A Certificates from the Trust Fund and shall
not result in the payment of or the provision for the payment of the principal
of or interest on such Class A Certificates within the meaning of Section 4.01.
The Depositor, the Master Servicer and the Trustee acknowledge, and each Holder
by its acceptance of a Certificate agrees, that without the need for any further
action on the part of the Certificate Insurer, the Depositor, the Master
Servicer, the Trustee or the Certificate Registrar (a) to the extent the
Certificate Insurer makes payments, directly or indirectly, on account of
principal of or interest on any Class A Certificates to the Holders of such
Certificates, the Certificate Insurer will be fully subrogated to the rights of
such Holders to receive such principal and interest from the Trust Fund and (b)
the Certificate Insurer shall be paid such principal and interest but only from
the sources and in the manner provided herein for the payment of such principal
and interest.
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 which does not limit the rights or affect the interests of the Holders
as otherwise set forth herein.
SECTION 9.06. Notices to the Certificate Insurer.
All notices, statements, reports, certificates or opinions
received by a party pursuant to this Agreement in respect of another party or
the Certificateholders or sent to the Certificateholders shall be sent to the
Certificate Insurer.
SECTION 9.07. 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.
SECTION 9.08. Trustee to Hold the Policy.
The Trustee will hold the Policy in trust as agent for the
Holders of the Class A Certificates for the purpose of making claims thereon and
distributing the proceeds thereof. Neither the Policy nor the amounts paid on
the Policy will constitute part of the Trust Fund or assets of the REMIC created
by this Agreement. Each Holder of Class A Certificates, by
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accepting its Class A Certificates, appoints the Trustee as attorney-in-fact for
the purpose of making claims on the Policy.
SECTION 9.09. Termination of Master Servicer.
Notwithstanding anything in this Agreement, the Certificate
Insurer may terminate the Master Servicer at such time as is permitted under any
separate agreements between them, so long as no Certificate Insurer Default has
occurred and is continuing.
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ARTICLE X
TERMINATION
SECTION 10.01 Termination Upon Repurchase or Liquidation
of All Mortgage Loans.
(a) Subject to Section 10.02, the respective obligations and
responsibilities under this Agreement of the Depositor, the Master Servicer and
the Trustee (other than the obligations of the Master Servicer to the Trustee
pursuant to Section 8.05 and of the Master Servicer to provide for and the
Trustee to make payments to Certificateholders as hereafter set forth) shall
terminate upon payment to the Certificateholders and the deposit of all amounts
held by or on behalf of the Trustee and required hereunder to be so paid or
deposited on the Distribution Date coinciding with or following the earlier to
occur of (i) the purchase by the Terminator (as defined below) of all Mortgage
Loans and each REO Property remaining in the Trust Fund at a price equal to the
greater of (A) the aggregate Purchase Price of all the Mortgage Loans included
in the Trust Fund, plus the appraised value of each REO Property, if any,
included in the Trust Fund, such appraisal to be conducted by an appraiser
mutually agreed upon by such Terminator and the Trustee in their reasonable
discretion (and approved by the Certificate Insurer in its reasonable
discretion) and (B) the aggregate fair market value of all of the assets of the
Trust Fund (as determined by such Terminator, the Certificate Insurer (to the
extent the Certificate Insurer is not the Terminator) and the Trustee, as of the
close of business on the third Business Day next preceding the date upon which
notice of any such termination is furnished to Certificateholders pursuant to
the third paragraph of this Section 10.01) and (ii) the final payment or other
liquidation (or any advance with respect thereto) of the last Mortgage Loan or
REO Property remaining in the Trust Fund; provided, however, that in no event
shall the trust created hereby continue beyond the expiration of 21 years from
the death of the last survivor of the descendants of Joseph P. Kennedy, the late
ambassador of the United States to the Court of St. James, living on the date
hereof.
(b) The Majority Class R Certificateholder shall have the
right and, to the extent the Majority Class R Certificateholder fails to
exercise such right, the Certificate Insurer shall have the right and, to the
extent neither the Majority Class R Certificateholder nor the Certificate
Insurer exercises such right, the Master Servicer shall have the right (the
party exercising such right, the "Terminator"), to purchase all of the Mortgage
Loans and each REO Property remaining in the Trust Fund pursuant to clause (i)
of the preceding paragraph no later than the Determination Date in the month
immediately preceding the Distribution Date on which the Certificates will be
retired; provided, however, that the Terminator may elect to purchase all of the
Mortgage Loans and each REO Property remaining in the Trust Fund pursuant to
clause (i) above only if the aggregate Stated Principal Balance of the Mortgage
Loans and each REO Property remaining in the Trust Fund at the time of such
election is less than 10% of the aggregate Stated Principal Balance of the
Mortgage Loans at the Cut-off Date.
(c) Notice of any termination shall be given promptly by the
Trustee by letter to Certificateholders and the Certificate Insurer mailed (a)
in the event such notice is given in
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connection with the purchase of the Mortgage Loans and each REO Property by the
Terminator, not earlier than the 15th day and not later than the 25th day of the
month next preceding the month of the final distribution on the Certificates or
(b) otherwise during the month of such final distribution on or before the
Determination Date in such month, in each case specifying (i) the Distribution
Date upon which the Trust Fund will terminate and final payment of the
Certificates will be made upon presentation and surrender of Certificates at the
office of the Trustee therein designated, (ii) the amount of any such final
payment, (iii) that no interest shall accrue in respect of the Certificates from
and after the Interest Accrual Period relating to the final Distribution Date
therefor and (iv) that the Record Date otherwise applicable to such Distribution
Date is not applicable, payments being made only upon presentation and surrender
of the Certificates at the office of the Trustee. The Trustee shall give such
notice to the Certificate Registrar at the time such notice is given to
Certificateholders. In the event such notice is given in connection with the
purchase of all of the Mortgage Loans and each REO Property remaining in the
Trust Fund by the Terminator, the Terminator shall deliver to the Trustee for
deposit in the Distribution Account not later than the last Business Day of the
month next preceding the month of the final distribution on the Certificates an
amount in immediately available funds equal to the above-described purchase
price. Upon certification to the Trustee by a Servicing Officer (a copy of which
certification shall be delivered to the Certificate Insurer) of the making of
such final deposit, the Trustee shall promptly release or cause to be released
to the Terminator the Mortgage Files for the remaining Mortgage Loans, and the
Trustee shall execute all assignments, endorsements and other instruments
necessary to effectuate such transfer.
(d) Upon presentation of the Certificates by the
Certificateholders on the final Distribution Date, the Trustee shall distribute
to each Certificateholder so presenting and surrendering its Certificates the
amount otherwise distributable on such Distribution Date in accordance with
Section 4.01 in respect of the Certificates so presented and surrendered. Any
funds not distributed to any Holder or Holders of Certificates being retired on
such Distribution Date because of the failure of such Holder or Holders to
tender their Certificates shall, on such date, be set aside and held in trust by
the Trustee and credited to the account of the appropriate non-tendering Holder
or Holders. If any Certificates as to which notice has been given pursuant to
this Section 10.01 shall not have been surrendered for cancellation within six
months after the time specified in such notice, the Trustee shall mail a second
notice to the remaining nontendering Certificateholders to surrender their
Certificates for cancellation in order to receive the final distribution with
respect thereto. If within one year after the second notice all such
Certificates shall not have been surrendered for cancellation, the Trustee
shall, directly or through an agent, mail a final notice to remaining related
non-tendering Certificateholders concerning surrender of their Certificates. The
costs and expenses of maintaining the funds in trust and of contacting such
Certificateholders shall be paid out of the assets remaining in the trust funds.
If within one year after the final notice any such Certificates shall not have
been surrendered for cancellation, the Trustee shall pay to Salomon Brothers Inc
all such amounts, and all rights of non-tendering Certificateholders in or to
such amounts shall thereupon cease. No interest shall accrue or be payable to
any Certificateholder on any amount held in trust by the Trustee as a result of
such Certificateholder's failure to surrender its Certificate(s) for final
payment thereof in accordance with this Section 10.01.
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Immediately following the deposit of funds in trust hereunder
in respect of the Certificates, the Trust Fund shall terminate.
SECTION 10.02 Additional Termination Requirements.
(a) In the event that the Terminator purchases all the
Mortgage Loans and each REO Property or the final payment on or other
liquidation of the last Mortgage Loan or REO Property remaining in the Trust
Fund pursuant to Section 10.01, the Trust Fund shall be terminated in accordance
with the following additional requirements:
(i) The Trustee shall specify the first day in the
90-day liquidation period in a statement attached to the Trust
Fund's final Tax Return pursuant to Treasury regulation
Section 1.860F-1 and shall satisfy all requirements of a
qualified liquidation under Section 860F of the Code and any
regulations thereunder, as evidenced by an Opinion of Counsel
obtained at the expense of the Terminator;
(ii) During such 90-day liquidation period, and at or
prior to the time of making of the final payment on the
Certificates, the Trustee shall sell all of the assets of the
Trust Fund to the Terminator for cash; and
(iii) At the time of the making of the final payment on
the Certificates, the Trustee shall distribute or credit, or
cause to be distributed or credited, to the Holders of the
Residual Certificates all cash on hand in the Trust Fund
(other than cash retained to meet claims), and the Trust Fund
shall terminate at that time.
(b) At the expense of the applicable Terminator (or in the
event of termination under Section 10.01(a)(ii), at the expense of the Trustee),
the Trustee shall prepare or cause to be prepared the documentation required in
connection with the adoption of a plan of liquidation of a Trust Fund pursuant
to this Section 10.02.
(c) By their acceptance of Certificates, the Holders thereof
hereby agree to authorize the Trustee to specify the 90-day liquidation period
for the Trust Fund, which authorization shall be binding upon all successor
Certificateholders.
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ARTICLE XI
REMIC PROVISIONS
SECTION 11.01. REMIC Administration.
(a) The Trustee shall elect to treat the Trust Fund as a REMIC
under the Code and, if necessary, under applicable state law. Such election will
be made on Form 1066 or other appropriate federal tax or information return or
any appropriate state return for the taxable year ending on the last day of the
calendar year in which the Certificates are issued. For the purposes of the
REMIC election in respect of the Trust Fund, the Class A Certificates shall be
designated as the Regular Interests in the REMIC and the Residual Certificates
shall be designated as the single class of Residual Interest in the REMIC. The
Trustee shall not permit the creation of any "interests" in the REMIC (within
the meaning of Section 860G of the Code) other than the interests represented by
the Certificates.
(b) The Closing Date is hereby designated as the "Startup Day"
of the Trust Fund within the meaning of Section 860G(a)(9) of the Code.
(c) The Trustee shall pay out of its own funds, without any
right of reimbursement, any and all expenses relating to any tax audit of the
Trust Fund (including, but not limited to, any professional fees or any
administrative or judicial proceedings with respect to the Trust Fund that
involve the Internal Revenue Service or state tax authorities), other than the
expense of obtaining any tax related Opinion of Counsel except as specified
herein. The Trustee, as agent for the Trust Fund's tax matters person, shall (i)
act on behalf of the Trust Fund in relation to any tax matter or controversy
involving the Trust Fund and (ii) represent the Trust Fund in any administrative
or judicial proceeding relating to an examination or audit by any governmental
taxing authority with respect thereto. The holder of the largest Percentage
Interest of the Residual Certificates shall be designated, in the manner
provided under Treasury regulations section 1.860F-4(d) and temporary Treasury
regulations section 301.6231(a)(7)-IT, as the tax matters person of the Trust
Fund. By their acceptance thereof, the holder of the largest Percentage Interest
of the Residual Certificates hereby agrees to irrevocably appoint the Trustee or
an Affiliate as its agent to perform all of the duties of the tax matters person
for the Trust Fund.
(d) The Trustee shall prepare, sign and file all of the Tax
Returns in respect of the REMIC created hereunder. The expenses of preparing and
filing such returns shall be borne by the Trustee without any right of
reimbursement therefor. The Master Servicer shall provide on a timely basis to
the Trustee or its designee such information with respect to the assets of the
Trust Fund as is in its possession and reasonably required by the Trustee to
enable it to perform its obligations under this Article.
(e) The Trustee shall perform on behalf of the Trust Fund all
reporting and other tax compliance duties that are the responsibility of the
REMIC under the Code, the REMIC Provisions or other compliance guidance issued
by the Internal Revenue Service or any
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state or local taxing authority. Among its other duties, as required by the
Code, the REMIC Provisions or other such compliance guidance, the Trustee shall
provide (i) to any Transferor of a Residual Certificate such information as is
necessary for the application of any tax relating to the transfer of a Residual
Certificate to any Person who is not a Permitted Transferee, (ii) to the
Certificateholders such information or reports as are required by the Code or
the REMIC Provisions including reports relating to interest, original issue
discount and market discount or premium (using the Prepayment Assumption as
required) and (iii) to the Internal Revenue Service the name, title, address and
telephone number of the person who will serve as the representative of the Trust
Fund. The Master Servicer shall provide on a timely basis to the Trustee such
information with respect to the assets of the Trust Fund, including, without
limitation, the Mortgage Loans, as is in its possession and reasonably required
by the Trustee to enable it to perform its obligations under this subsection. In
addition, the Depositor shall provide or cause to be provided to the Trustee,
within ten (10) days after the Closing Date, all information or data that the
Trustee reasonably determines to be relevant for tax purposes as to the
valuations and issue prices of the Certificates, including, without limitation,
the price, yield, prepayment assumption and projected cash flow of the
Certificates.
(f) The Trustee shall take such action and shall cause the
REMIC created hereunder to take such action as shall be necessary to create or
maintain the status thereof as a REMIC under the REMIC Provisions (and the
Master Servicer shall assist it, to the extent reasonably requested by it). The
Trustee shall not take any action, cause the Trust Fund to take any action or
fail to take (or fail to cause to be taken) any action that, under the REMIC
Provisions, if taken or not taken, as the case may be, could (i) endanger the
status of the Trust Fund as a REMIC or (ii) result in the imposition of a tax
upon the Trust Fund (including but not limited to the tax on prohibited
transactions as defined in Section 860F(a)(2) of the Code and the tax on
contributions to a REMIC set forth in Section 860G(d) of the Code) (either such
event, an "Adverse REMIC Event") unless the Trustee has received an Opinion of
Counsel, addressed to the Trustee and the Certificate Insurer (at the expense of
the party seeking to take such action but in no event at the expense of the
Trustee) to the effect that the contemplated action will not, with respect to
the REMIC created hereunder, endanger such status or result in the imposition of
such a tax, nor shall the Master Servicer take or fail to take any action
(whether or not authorized hereunder) as to which the Trustee has advised it in
writing that it has received an Opinion of Counsel to the effect that an Adverse
REMIC Event could occur with respect to such action. In addition, prior to
taking any action with respect to the Trust Fund or the assets of the Trust
Fund, or causing the Trust Fund to take any action, which is not contemplated
under the terms of this Agreement, the Master Servicer will consult with the
Trustee or its designee, in writing, with respect to whether such action could
cause an Adverse REMIC Event to occur with respect to the Trust Fund, and the
Master Servicer shall not take any such action or cause the Trust Fund to take
any such action as to which the Trustee has advised it in writing that an
Adverse REMIC Event could occur. The Trustee may consult with counsel to make
such written advice, and the cost of same shall be borne by the party seeking to
take the action not permitted by this Agreement, but in no event shall such cost
be an expense of the Trustee. At all times as may be required by the Code, the
Trustee will ensure that substantially all of the assets of the REMIC created
hereunder will consist of "qualified
<PAGE>
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mortgages" as defined in Section 860G(a)(3) of the Code and "permitted
investments" as defined in Section 860G(a)(5) of the Code.
(g) In the event that any tax is imposed on "prohibited
transactions" of the REMIC created hereunder as defined in Section 860F(a)(2) of
the Code, on the "net income from foreclosure property" of the REMIC as defined
in Section 860G(c) of the Code, on any contributions to the REMIC after the
Startup Day therefor pursuant to Section 860G(d) of the Code, or any other tax
is imposed by the Code or any applicable provisions of state or local tax laws,
such tax shall be charged (i) to the Trustee pursuant to Section 11.03 hereof,
if such tax arises out of or results from a breach by the Trustee of any of its
obligations under this Article XI, (ii) to the Master Servicer pursuant to
Section 11.03 hereof, if such tax arises out of or results from a breach by the
Master Servicer of any of its obligations under Article III or this Article XI,
or otherwise (iii) against amounts on deposit in the Distribution Account and
shall be paid by withdrawal therefrom.
(h) On or before April 15 of each calendar year, commencing
April 15, 1997, the Trustee shall deliver to the Master Servicer and each Rating
Agency a Certificate from a Responsible Officer of the Trustee stating the
Trustee's compliance with this Article XI.
(i) The Trustee shall, for federal income tax purposes,
maintain books and records with respect to the Trust Fund on a calendar year and
on an accrual basis.
(j) Following the Startup Day, the Trustee shall not accept
any contributions of assets to the Trust Fund other than in connection with any
Qualified Substitute Mortgage Loan delivered in accordance with Section 2.03
unless it shall have received an Opinion of Counsel to the effect that the
inclusion of such assets in the REMIC will not cause the REMIC to fail to
qualify as a REMIC at any time that any Certificates are outstanding or subject
the REMIC to any tax under the REMIC Provisions or other applicable provisions
of federal, state and local law or ordinances.
(k) Neither the Trustee nor the Master Servicer shall enter
into any arrangement by which the Trust Fund will receive a fee or other
compensation for services nor permit the REMIC to receive any income from assets
other than "qualified mortgages" as defined in Section 860G(a)(3) of the Code or
"permitted investments" as defined in Section 860G(a)(5) of the Code.
SECTION 11.02. Prohibited Transactions and Activities.
None of the Depositor, the Master Servicer or the Trustee
shall sell, dispose of or substitute for any of the Mortgage Loans (except in
connection with (i) the foreclosure of a Mortgage Loan, including but not
limited to, the acquisition or sale of a Mortgaged Property acquired by deed in
lieu of foreclosure, (ii) the bankruptcy of the Trust Fund, (iii) the
termination of the Trust Fund pursuant to Article X of this Agreement, (iv) a
substitution pursuant to Article II of this Agreement or (v) a purchase of
Mortgage Loans pursuant to Article II or III of this Agreement), nor acquire any
assets for the Trust Fund (other than REO Property
<PAGE>
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acquired in respect of a defaulted Mortgage Loan), nor sell or dispose of any
investments in the Collection Account or the Distribution Account for gain, nor
accept any contributions to the Trust Fund after the Closing Date (other than a
Qualified Substitute Mortgage Loan delivered in accordance with Section 2.03),
unless it has received an Opinion of Counsel, addressed to the Certificate
Insurer and the Trustee (at the expense of the party seeking to cause such sale,
disposition, substitution, acquisition or contribution but in no event at the
expense of the Trustee) that such sale, disposition, substitution, acquisition
or contribution will not (a) affect adversely the status of the Trust Fund as a
REMIC or (b) cause the Trust Fund to be subject to a tax on "prohibited
transactions" or "contributions" pursuant to the REMIC Provisions.
SECTION 11.03. Master Servicer and Trustee Indemnification.
(a) The Trustee agrees to indemnify the Trust Fund, the
Depositor, the Certificate Insurer and the Master Servicer for any taxes and
costs including, without limitation, any reasonable attorneys fees imposed on or
incurred by the Trust Fund, the Depositor, the Certificate Insurer or the Master
Servicer, as a result of a breach of the Trustee's covenants set forth in this
Article XI.
(b) The Master Servicer agrees to indemnify the Trust Fund,
the Depositor, the Certificate Insurer and the Trustee for any taxes and costs
including, without limitation, any reasonable attorneys' fees imposed on or
incurred by the Trust Fund, the Depositor, the Certificate Insurer or the
Trustee, as a result of a breach of the Master Servicer's covenants set forth in
Article III or this Article XI.
<PAGE>
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ARTICLE XII
MISCELLANEOUS PROVISIONS
SECTION 12.01. Amendment.
This Agreement or any Custodial Agreement may be amended from
time to time by the Depositor, the Master Servicer, the Trustee and, if
applicable, the Custodian without the consent of any of the Certificateholders,
(i) to cure any ambiguity, (ii) to correct, modify or supplement any provisions
herein or in any Custodial Agreement, or (iii) to make any other provisions with
respect to matters or questions arising under this Agreement or in any Custodial
Agreement which shall not be inconsistent with the provisions of this Agreement
or such Custodial Agreement, provided that such action shall not, as evidenced
by an Opinion of Counsel delivered to the Trustee and the Certificate Insurer,
adversely affect in any material respect the interests of any Certificateholder
or the Certificate Insurer.
This Agreement or any Custodial Agreement may also be amended
from time to time by the Depositor, the Master Servicer and the Trustee with the
consent of the Certificate Insurer and the Holders of Certificates entitled to
at least 66% of the Voting Rights for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Agreement or
any Custodial Agreement or of modifying in any manner the rights of the Holders
of Certificates; provided, however, that no such amendment shall (i) reduce in
any manner the amount of, or delay the timing of, payments received on Mortgage
Loans which are required to be distributed on any Certificate without the
consent of the Holder of such Certificate, (ii) adversely affect in any material
respect the interests of the Holders of any Class of Certificates in a manner,
other than as described in (i), without the consent of the Holders of
Certificates of such Class evidencing at least 66% of the Voting Rights
allocated to such Class, or (iii) modify the consents required by the
immediately preceding clauses (i) and (ii) without the consent of the
Certificate Insurer and the Holders of all Certificates then outstanding.
Notwithstanding any other provision of this Agreement, for purposes of the
giving or withholding of consents pursuant to this Section 12.01, Certificates
registered in the name of the Depositor or the Master Servicer or any Affiliate
thereof shall be entitled to Voting Rights with respect to matters affecting
such Certificates.
Notwithstanding any contrary provision of this Agreement, the
Trustee shall not consent to any amendment to this Agreement unless it shall
have first received an Opinion of Counsel to the effect that such amendment will
not result in the imposition of any tax on the Trust Fund pursuant to the REMIC
Provisions or cause the Trust Fund to fail to qualify as a REMIC at any time
that any Certificates are outstanding. Any such amendment pursuant to the first
paragraph of this Section 12.01 shall not be deemed to adversely affect in any
material respect the interests of any Certificateholder if such change is
required by the Certificate Insurer, so long as no Certificate Insurer Default
has occurred and is continuing, and the Trustee receives written confirmation
from each Rating Agency that such amendment will not cause such Rating Agency to
reduce the then current rating or any shadow rating of the affected
Certificates.
<PAGE>
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Promptly after the execution of any such amendment the Trustee
shall furnish a copy of such amendment to each Certificateholder and the
Certificate Insurer.
It shall not be necessary for the consent of
Certificateholders under this Section 12.01 to approve the particular form of
any proposed amendment, but it shall be sufficient if such consent shall approve
the substance thereof. The manner of obtaining such consents and of evidencing
the authorization of the execution thereof by Certificateholders shall be
subject to such reasonable regulations as the Trustee may prescribe.
The cost of any Opinion of Counsel to be delivered pursuant to
this Section 12.01 shall be borne by the Person seeking the related amendment,
but in no event shall such Opinion of Counsel be an expense of the Trustee.
The Trustee may, but shall not be obligated to enter into any
amendment pursuant to this Section that affects its rights, duties and
immunities under this Agreement or otherwise.
SECTION 12.02. Recordation of Agreement; Counterparts.
To the extent permitted by applicable law, this Agreement is
subject to recordation in all appropriate public offices for real property
records in all the counties or other comparable jurisdictions in which any or
all of the properties subject to the Mortgages are situated, and in any other
appropriate public recording office or elsewhere, such recordation to be
effected by the Master Servicer at the expense of the Certificateholders, but
only upon direction of the Trustee accompanied by an Opinion of Counsel to the
effect that such recordation materially and beneficially affects the interests
of the Certificateholders.
For the purpose of facilitating the recordation of this
Agreement as herein provided and for other purposes, this Agreement may be
executed simultaneously in any number of counterparts, each of which
counterparts shall be deemed to be an original, and such counterparts shall
constitute but one and the same instrument.
SECTION 12.03. Limitation on Rights of Certificateholders.
The death or incapacity of any Certificateholder shall not
operate to terminate this Agreement or the Trust Fund, nor entitle such
Certificateholder's legal representatives or heirs to claim an accounting or to
take any action or proceeding in any court for a partition or winding up of the
Trust Fund, nor otherwise affect the rights, obligations and liabilities of the
parties hereto or any of them.
No Certificateholder shall have any right to vote (except as
expressly provided for herein) or in any manner otherwise control the operation
and management of the Trust Fund, or the obligations of the parties hereto, nor
shall anything herein set forth, or contained in the terms of any of the
Certificates, be construed so as to constitute the Certificateholders from time
to time as partners or members of an association; nor shall any
Certificateholder be under any
<PAGE>
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liability to any third person by reason of any action taken by the parties to
this Agreement pursuant to any provision hereof.
No Certificateholder shall have any right by virtue of any
provision of this Agreement to institute any suit, action or proceeding in
equity or at law upon or under or with respect to this Agreement, unless such
Holder previously shall have given to the Trustee a written notice of default
and of the continuance thereof, as hereinbefore provided, and unless also the
Holders of Certificates entitled to at least 25% of the Voting Rights shall have
made written request upon the Trustee to institute such action, suit or
proceeding in its own name as Trustee hereunder and shall have offered to the
Trustee such reasonable indemnity as it may require against the costs, expenses
and liabilities to be incurred therein or thereby, and the Trustee, for 15 days
after its receipt of such notice, request and offer of indemnity, shall have
neglected or refused to institute any such action, suit or proceeding. It is
understood and intended, and expressly covenanted by each Certificateholder with
every other Certificateholder and the Trustee, that no one or more Holders of
Certificates shall have any right in any manner whatsoever by virtue of any
provision of this Agreement to affect, disturb or prejudice the rights of the
Holders of any other of such Certificates, or to obtain or seek to obtain
priority over or preference to any other such Holder, or to enforce any right
under this Agreement, except in the manner herein provided and for the equal,
ratable and common benefit of all Certificateholders. For the protection and
enforcement of the provisions of this Section, each and every Certificateholder
and the Trustee shall be entitled to such relief as can be given either at law
or in equity.
SECTION 12.04. Governing Law.
This Agreement shall be construed in accordance with the laws
of the State of New York and the obligations, rights and remedies of the parties
hereunder shall be determined in accordance with such laws.
SECTION 12.05. Notices.
All directions, demands and notices hereunder shall be in
writing and shall be deemed to have been duly given when received if personally
delivered at or mailed by first class mail, postage prepaid, or by express
delivery service or delivered in any other manner specified herein, to (a) in
the case of the Depositor, Seven World Trade Center, New York, New York 10048,
Attention: Mortgage Finance Group (telecopy number (212) 783-3895), or such
other address or telecopy number as may hereafter be furnished to the Master
Servicer, the Certificate Insurer and the Trustee in writing by the Depositor,
(b) in the case of the Master Servicer, 1100 Town & Country Road, 11th Floor,
Orange, California 92868, Attention: Del Dillingham (telecopy number: (714)
973-4535), or such other address or telecopy number as may hereafter be
furnished to the Trustee and the Depositor in writing by the Master Servicer,
(c) in the case of the Trustee, Sixth Street & Marquette Avenue, Minneapolis,
Minnesota 55479-0070, Attention: Corporate Trust Services (telecopy number (612)
832-3539), with a copy to the Trustee at 11000 Broken Land Parkway, Columbia,
Maryland 21044, Attention: Securities Administration Services (telecopy number
(410) 884-2360), or such other address or telecopy
<PAGE>
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number as may hereafter be furnished to the Master Servicer and the Depositor in
writing by the Trustee and (d) in the Case of the Certificate Insurer, Financial
Security Assurance Inc., 350 Park Avenue, New York, New York 10022, Attention:
Surveillance Department (telecopy number (212) 339-3518 or (212) 339-3529) or
such other address or telecopy number as may hereafter be furnished to the
Trustee, the Depositor 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 a Master Servicer Event of Default or a claim
under the 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". Any notice required or permitted to be
given to a Certificateholder shall be given by first class mail, postage
prepaid, at the address of such Holder as shown in the Certificate Register. Any
notice so mailed within the time prescribed in this Agreement shall be
conclusively presumed to have been duly given when mailed, whether or not the
Certificateholder receives such notice. A copy of any notice required to be
telecopied hereunder also shall be mailed to the appropriate party in the manner
set forth above.
SECTION 12.06. Severability of Provisions.
If any one or more of the covenants, agreements, provisions or
terms of this Agreement shall be for any reason whatsoever held invalid, then
such covenants, agreements, provisions or terms shall be deemed severable from
the remaining covenants, agreements, provisions or terms of this Agreement and
shall in no way affect the validity or enforceability of the other provisions of
this Agreement or of the Certificates or the rights of the Holders thereof.
SECTION 12.07. Notice to Rating Agencies and Certificate
Insurer.
The Trustee shall use its best efforts promptly to provide
notice to the Rating Agencies and the Certificate Insurer (in the case of the
Certificate Insurer, without duplication of the items required to be sent to the
Certificate Insurer pursuant to Section 9.06) with respect to each of the
following of which it has actual knowledge:
1. Any material change or amendment to this Agreement;
2. The occurrence of any Master Servicer Event of
Default that has not been cured or waived;
3. The resignation or termination of the Master Servicer
or the Trustee;
4. The repurchase or substitution of Mortgage Loans
pursuant to or as contemplated by Section 2.03;
5. The final payment to the Holders of any Class of
Certificates;
<PAGE>
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6. Any change in the location of the Collection Account
or the Distribution Account;
7. Any event that would result in the inability of the
Trustee to make advances regarding delinquent
Mortgage Loans; and
8. Any Certificate Insurer Default that has not been
cured.
In addition, the Trustee shall promptly furnish to each Rating
Agency and the Certificate Insurer copies of each report to Certificateholders
described in Section 4.02 and the Master Servicer, as required pursuant to
Section 3.20 and Section 3.21, shall promptly furnish to each Rating Agency
copies of the following:
1. Each annual statement as to compliance described in
Section 3.20; and
2. Each annual independent public accountants' servicing
report described in Section 3.21.
Any such notice pursuant to this Section 12.07 shall be in
writing and shall be deemed to have been duly given if personally delivered at
or mailed by first class mail, postage prepaid, or by express delivery service
to Moody's Investors Service, Inc., 99 Church Street, New York, New York 10007,
and to Standard & Poor's Ratings Services, 25 Broadway, New York, New York
10004, or such other addresses as the Rating Agencies may designate in writing
to the parties hereto.
SECTION 12.08. Article and Section References.
All article and section references used in this Agreement,
unless otherwise provided, are to articles and sections in this Agreement.
<PAGE>
IN WITNESS WHEREOF, the Depositor, the Master Servicer and the
Trustee have caused their names to be signed hereto by their respective officers
thereunto duly authorized, in each case as of the day and year first above
written.
SALOMON BROTHERS MORTGAGE
SECURITIES VII, INC.,
as Depositor
By: /s/ Susan S. Woodbury
------------------------------
Name: Susan S. Woodbury
Title: Assistant Vice President
LONG BEACH MORTGAGE COMPANY,
as Master Servicer
By: /s/ Jeffery A Sorensen
------------------------------
Name: Jeffery A Sorensen
----------------------------
Title: Vice President
---------------------------
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION,
as Trustee
By: /s/ Patrick Bassett
------------------------------
Name: Patrick Bassett
----------------------------
Title: Vice President
---------------------------
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the ____ day of September 1996, before me, a notary public
in and for said State, personally appeared Susan S. Woodbury, known to me to be
an Assistant Vice President of Salomon Brothers Mortgage Securities VII, Inc.,
one of the corporations that executed the within instrument, and also known to
me to be the person who executed it on behalf of said corporation, and
acknowledged to me that such corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
---------------------------------
Notary Public
[Notarial Seal]
<PAGE>
STATE OF CALIFORNIA )
) ss.:
COUNTY OF ORANGE )
On the _____ day of September 1996, before me, a notary public
in and for said State, personally appeared ____________________________________,
known to me to be a ___________________________ of Long Beach Mortgage Company,
one of the corporations that executed the within instrument, and also known to
me to be the person who executed it on behalf of said corporation, and
acknowledged to me that such corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
----------------------------
Notary Public
[Notarial Seal]
<PAGE>
STATE OF______________________ )
) ss.:
COUNTY OF_____________________ )
On the ____ day of September 1996, before me, a notary public
in and for said State, personally appeared _________________________________,
known to me to be an __________________________ of Norwest Bank Minnesota,
National Association, one of the entities that executed the within instrument,
and also known to me to be the person who executed it on behalf of said
corporation, and acknowledged to me that such entity executed the within
instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
----------------------------
Notary Public
[Notarial Seal]
<PAGE>
EXHIBIT A-1
-----------
FORM OF CLASS A CERTIFICATE
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
"REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS
THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE
INTERNAL REVENUE CODE OF 1986 (THE "CODE").
Series 1996-LB1, Class A Aggregate Certificate Principal Balance of
the Class A Certificates as of the Issue Date:
Variable Pass-Through Rate $__________________
Date of Pooling and Servicing Denomination: $_____________
Agreement and Cut-off Date:
September 1, 1996
Master Servicer: Long Beach Mortgage
First Distribution Date: Company
October 25, 1996
No. ___ Trustee: Norwest Bank Minnesota, N.A.
Issue Date: September 25, 1996
CUSIP: _________________
DISTRIBUTIONS IN REDUCTION OF THE CERTIFICATE PRINCIPAL
BALANCE OF THIS CERTIFICATE MAY BE MADE MONTHLY AS SET
FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING CERTIFICATE
PRINCIPAL BALANCE HEREOF AT ANY TIME MAY BE LESS THAN
THE AMOUNT SHOWN BELOW.
<PAGE>
ASSET-BACKED FLOATING RATE CERTIFICATE
evidencing a beneficial ownership interest in a portion of a Trust Fund
consisting primarily of a pool of conventional one- to four-family first
mortgage loans formed and sold by
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC., THE MASTER SERVICER,
THE TRUSTEE OR ANY OF THEIR AFFILIATES. NEITHER THIS CERTIFICATE NOR
THE UNDERLYING MORTGAGE LOANS ARE GUARANTEED BY ANY AGENCY OR
INSTRUMENTALITY OF THE UNITED STATES.
This certifies that _____________ is the registered owner of a
Percentage Interest (obtained by dividing the denomination of this Certificate
by the aggregate Certificate Principal Balance of the Class A Certificates) in
that certain beneficial ownership interest evidenced by all the Class A
Certificates in the Trust Fund created pursuant to a Pooling and Servicing
Agreement, dated as specified above (the "Agreement"), among Salomon Brothers
Mortgage Securities VII, Inc. (hereinafter called the "Depositor," which term
includes any successor entity under the Agreement), the Master Servicer and the
Trustee, a summary of certain of the pertinent provisions of which is set forth
hereafter. To the extent not defined herein, the capitalized terms used herein
have the meanings assigned in the Agreement. This Certificate is issued under
and is subject to the terms, provisions and conditions of the Agreement, to
which Agreement the Holder of this Certificate by virtue of the acceptance
hereof assents and by which such Holder is bound.
Pursuant to the terms of the Agreement, distributions will be
made on the 25th day of each month or, if such 25th day is not a Business Day,
the Business Day immediately following (a "Distribution Date"), commencing on
the First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the last Business Day of the month immediately
preceding the month of such distribution (the "Record Date"), from the Available
Distribution Amount in an amount equal to the product of the Percentage Interest
evidenced by this Certificate and the amount required to be distributed to the
Holders of Class A Certificates on such Distribution Date pursuant to the
Agreement.
All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by or on behalf of the Trustee by
wire transfer in immediately available funds to the account of the Person
entitled thereto if such Person shall have so notified the Trustee in writing at
least five Business Days prior to the Record Date immediately prior to such
Distribution Date and is the registered owner of Class A Certificates the
aggregate initial Certificate Principal Balance of which is in excess of
$5,000,000, or by check mailed by first class mail to the address of the Person
entitled thereto, as such name and address shall appear on the Certificate
Register, provided that the Trustee may deduct a reasonable wire transfer fee
from any payment made by wire transfer. Notwithstanding the above, the final
distribution on this Certificate will be made after due notice by the Trustee of
the pendency of such distribution
<PAGE>
-2-
and only upon presentation and surrender of this Certificate at the office or
agency appointed by the Trustee for that purpose as provided in the Agreement.
The Pass-Through Rate applicable to the calculation of
interest payable with respect to this Certificate on any Distribution Date shall
equal a rate per annum equal to the lesser of (i) the One-Month LIBOR plus
_____%, in the case of each Distribution Date through and including the
Distribution Date on which the aggregate principal balance of the Mortgage Loans
is reduced to 10% or less of the aggregate principal balance of the Mortgage
Loans as of the Cut-off Date, or One-Month LIBOR plus _______% per annum, in the
case of any Distribution Date thereafter, and (ii) the Available Funds
Pass-Through Rate for such Distribution Date.
This Certificate is one of a duly authorized issue of
Certificates designated as Asset-Backed Floating Rate Certificates of the Series
specified on the face hereof (herein called the "Certificates") and representing
a Percentage Interest in the Class A Certificates specified on the face hereof
equal to the denomination specified on the face hereof divided by the aggregate
Certificate Principal Balance of the Class of Certificates specified on the face
hereof.
The Class A Certificates are limited in right of payment to
certain collections and recoveries respecting the Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Accounts and the Distribution Account
may be made from time to time for purposes other than distributions to
Certificateholders, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Mortgage Loans.
The Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Depositor, the Master Servicer, the Trustee and the rights of
the Certificateholders under the Agreement at any time by the Depositor, the
Master Servicer, the Trustee and the Certificate Insurer with the consent of the
Holders of Certificates entitled to at least 66% of the Voting Rights and the
Certificate Insurer. Any such consent by the Holder of this Certificate shall be
conclusive and binding on such Holder and upon all future Holders of this
Certificate and of any Certificate issued upon the transfer hereof or in
exchange herefor or in lieu hereof whether or not notation of such consent is
made upon this Certificate. The Agreement also permits the amendment thereof, in
certain limited circumstances, without the consent of the Holders of any of the
Certificates but with the consent of the Certificate Insurer.
As provided in the Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate is registrable
in the Certificate Register upon surrender of this Certificate for registration
of transfer at the offices or agencies appointed by the Trustee as provided in
the Agreement, duly endorsed by, or accompanied by an assignment in the form
below or other written instrument of transfer in form satisfactory to the
Trustee and the Certificate Registrar duly executed by, the Holder hereof or
such Holder's attorney duly authorized in writing, and thereupon one or more new
Certificates of the same Class in
<PAGE>
-3-
authorized denominations evidencing the same aggregate Percentage Interest will
be issued to the designated transferee or transferees.
The Certificates are issuable in fully registered form only
without coupons in Classes and denominations representing Percentage Interests
specified in the Agreement. As provided in the Agreement and subject to certain
limitations therein set forth, Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.
No service charge will be made for any such 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 transfer or exchange of Certificates.
The Depositor, the Master Servicer, the Trustee, the
Certificate Insurer and the Certificate Registrar and any agent of the
Depositor, any Master Servicer, the Trustee, the Certificate Insurer or the
Certificate Registrar may treat the Person in whose name this Certificate is
registered as the owner hereof for all purposes, and none of the Depositor, the
Master Servicer, the Trustee, the Certificate Insurer, the Certificate Registrar
nor any such agent shall be affected by notice to the contrary.
The obligations created by the Agreement and the Trust Fund
created thereby shall terminate upon payment to the Certificateholders of all
amounts held by or on behalf of the Trustee and required to be paid to them
pursuant to the Agreement following the earlier of (i) the final payment or
other liquidation (or any advance with respect thereto) of the last Mortgage
Loan remaining in the Trust Fund, and (ii) the purchase by the party designated
in the Agreement at a price determined as provided in the Agreement from the
Trust Fund of all Mortgage Loans and all property acquired in respect of such
Mortgage Loans. The Agreement permits, but does not require, the party
designated in the Agreement to purchase from the Trust Fund all Mortgage Loans
and all property acquired in respect of any Mortgage Loan at a price determined
as provided in the Agreement. The exercise of such right will effect early
retirement of the Certificates; however, such right to purchase is subject to
the aggregate Stated Principal Balance of the Mortgage Loans at the time of
purchase being 10% or less of the aggregate Stated Principal Balance of the
Mortgage Loans at the Cut-off Date.
The recitals contained herein shall be taken as statements of
the Depositor and the Trustee assumes no responsibility for their correctness.
Unless the certificate of authentication hereon has been
executed by the Certificate Registrar, by manual signature, this Certificate
shall not be entitled to any benefit under the Agreement or be valid for any
purpose.
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed under its official seal.
Dated:
NORWEST BANK MINNESOTA, N.A.
[SEAL] as Trustee
By:_________________________
Authorized Officer
CERTIFICATE OF AUTHENTICATION
This is one of the Class A Certificates referred to in the
within-mentioned Agreement.
NORWEST BANK MINNESOTA, N.A.
as Certificate Registrar
By:_________________________
Authorized Signatory
<PAGE>
ABBREVIATIONS
The following abbreviations, when used in the inscription on
the face of this instrument, shall be construed as though they were written out
in full according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT - CUSTODIAN
-------------
(Cust)(Minor)
TEN ENT - as tenants by the entireties under Uniform Gifts
to Minors Act
JT TEN - as joint tenants with right _________________
if survivorship and not as (State)
tenants in common
Additional abbreviations may also be used though not in
the above list.
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s)
and transfer(s) unto ___________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Please print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee)
a Percentage Interest equal to ____% evidenced by the within Asset-Backed
Floating Rate Certificate and hereby authorize(s) the registration of transfer
of such interest to assignee on the Certificate Register of the Trust Fund.
I (we) further direct the Certificate Registrar to issue a new
Certificate of a like Percentage Interest and Class to the above named assignee
and deliver such Certificate to the following address:__________________________
_______________________________________________________________________________.
Dated:
____________________________________________
Signature by or on behalf of assignor
____________________________________________
Signature Guaranteed
<PAGE>
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for purposes of
distribution:
Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to _________________________________________________
________________________________________________________________________________
for the account of _______________________________, account number ____________,
or, if mailed by check, to _____________________________________________________
_______________________________________________________________________________.
Applicable statements should be mailed to ______________________________________
_______________________________________________________________________________.
This information is provided by _______________________________________________,
the assignee named above, or ____________________________________, as its agent.
<PAGE>
EXHIBIT A-2
FORM OF CLASS R CERTIFICATE
THIS CERTIFICATE MAY NOT BE TRANSFERRED TO A NON- UNITED STATES PERSON.
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
"RESIDUAL INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT"
("REMIC"), AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G
AND 860D OF THE INTERNAL REVENUE CODE OF 1986 (THE "CODE").
THIS CLASS R CERTIFICATE IS SUBORDINATE TO THE CLASS A CERTIFICATES OF
THIS SERIES TO THE EXTENT DESCRIBED HEREIN AND IN THE POOLING AND
SERVICING AGREEMENT REFERRED TO HEREIN.
THIS CLASS R CERTIFICATE WILL NOT BE ENTITLED TO PAYMENTS CONSTITUTING
THE AVAILABLE DISTRIBUTION AMOUNT UNTIL SUCH TIME AS DESCRIBED IN THE
POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN.
THIS CLASS R CERTIFICATE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR THE SECURITIES
LAWS OF ANY STATE. ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS
CERTIFICATE WITHOUT SUCH REGISTRATION OR QUALIFICATION MAY BE MADE ONLY
IN A TRANSACTION THAT DOES NOT REQUIRE SUCH REGISTRATION OR
QUALIFICATION AND IN ACCORDANCE WITH THE PROVISIONS OF SECTION 5.02 OF
THE POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN.
NO TRANSFER OF THIS CERTIFICATE TO AN EMPLOYEE BENEFIT PLAN OR OTHER
RETIREMENT ARRANGEMENT SUBJECT TO THE EMPLOYEE RETIREMENT INCOME
SECURITY ACT OF 1974, AS AMENDED, OR THE CODE WILL BE REGISTERED EXCEPT
IN COMPLIANCE WITH THE PROCEDURES DESCRIBED HEREIN.
ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CLASS R CERTIFICATE
MAY BE MADE ONLY IF THE PROPOSED TRANSFEREE PROVIDES (1) AN AFFIDAVIT
TO THE CERTIFICATE REGISTRAR AND THE TRUSTEE THAT SUCH TRANSFEREE IS
NOT (A) THE UNITED STATES, ANY STATE OR POLITICAL SUBDIVISION THEREOF,
ANY FOREIGN GOVERNMENT, ANY INTERNATIONAL ORGANIZATION, OR ANY AGENCY
OR INSTRUMENTALITY OF ANY OF THE FOREGOING, (B) ANY ORGANIZATION (OTHER
THAN A COOPERATIVE DESCRIBED IN
<PAGE>
SECTION 521 OF THE CODE) WHICH IS EXEMPT FROM THE TAX IMPOSED BY
CHAPTER 1 OF THE CODE UNLESS SUCH ORGANIZATION IS SUBJECT TO THE TAX
IMPOSED BY SECTION 511 OF THE CODE, (C) ANY ORGANIZATION DESCRIBED IN
SECTION 1381(A)(2)(C) OF THE CODE (ANY SUCH PERSON DESCRIBED IN THE
FOREGOING CLAUSES (A), (B) OR (C) BEING HEREINAFTER REFERRED TO AS A
"DISQUALIFIED ORGANIZATION"), OR (D) AN AGENT OF A DISQUALIFIED
ORGANIZATION AND (2) NO PURPOSE OF SUCH TRANSFER IS TO IMPEDE THE
ASSESSMENT OR COLLECTION OF TAX, AND (3) SUCH TRANSFEREE SATISFIES
CERTAIN ADDITIONAL CONDITIONS RELATING TO THE FINANCIAL CONDITION OF
THE PROPOSED TRANSFEREE. NOTWITHSTANDING THE REGISTRATION IN THE
CERTIFICATE REGISTER OR ANY TRANSFER, SALE OR OTHER DISPOSITION OF THIS
CLASS R CERTIFICATE TO A DISQUALIFIED ORGANIZATION OR AN AGENT OF A
DISQUALIFIED ORGANIZATION, SUCH REGISTRATION SHALL BE DEEMED TO BE OF
NO LEGAL FORCE OR EFFECT WHATSOEVER AND SUCH PERSON SHALL NOT BE DEEMED
TO BE A CERTIFICATEHOLDER FOR ANY PURPOSE HEREUNDER, INCLUDING, BUT NOT
LIMITED TO, THE RECEIPT OF DISTRIBUTIONS ON THIS CERTIFICATE. EACH
HOLDER OF A CLASS R CERTIFICATE BY ACCEPTANCE OF THIS CERTIFICATE SHALL
BE DEEMED TO HAVE CONSENTED TO THE PROVISIONS OF THIS PARAGRAPH AND THE
PROVISIONS OF SECTION 5.02(D) OF THE POOLING AND SERVICING AGREEMENT
REFERRED TO HEREIN. ANY PERSON THAT IS A DISQUALIFIED ORGANIZATION IS
PROHIBITED FROM ACQUIRING BENEFICIAL OWNERSHIP OF THIS CLASS R
CERTIFICATE.
Series 1996-LB1, Class R Aggregate Certificate Principal Balanace
of the Class R Certificates as of the
Date of Pooling and Servicing Issue Date: $_______________
Agreement and Cut-off Date:
September 1, 1996
Master Servicer: Long Beach Mortgage
First Distribution Date: Company
October 25, 1996
No. ___ Trustee: Norwest Bank Minnesota, N.A.
Percentage Interest: ____% Issue Date: September 25, 1996
<PAGE>
ASSET-BACKED FLOATING RATE CERTIFICATE
evidencing a beneficial ownership interest in a portion of a Trust Fund
consisting primarily of a pool of conventional one- to four-family first
mortgage loans formed and sold by
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC., THE MASTER SERVICER,
THE TRUSTEE OR ANY OF THEIR AFFILIATES. NEITHER THIS CERTIFICATE NOR
THE UNDERLYING MORTGAGE LOANS ARE GUARANTEED BY ANY AGENCY OR
INSTRUMENTALITY OF THE UNITED STATES.
This certifies that ________________ is the registered owner
of a Percentage Interest (obtained by dividing the denomination of this
Certificate by the aggregate Certificate Principal Balance of the Class R
Certificates) in that certain beneficial ownership interest evidenced by all the
Class R Certificates in the Trust Fund created pursuant to a Pooling and
Servicing Agreement, dated as specified above (the "Agreement"), among Salomon
Brothers Mortgage Securities VII, Inc. (hereinafter called the "Depositor,"
which term includes any successor entity under the Agreement), the Master
Servicer and the Trustee, a summary of certain of the pertinent provisions of
which is set forth hereafter. To the extent not defined herein, the capitalized
terms used herein have the meanings assigned in the Agreement. This Certificate
is issued under and is subject to the terms, provisions and conditions of the
Agreement, to which Agreement the Holder of this Certificate by virtue of the
acceptance hereof assents and by which such Holder is bound.
Pursuant to the terms of the Agreement, distributions will be
made on the 25th day of each month or, if such 25th day is not a Business Day,
the Business Day immediately following (a "Distribution Date"), commencing on
the First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the last Business Day of the month immediately
preceding the month of such distribution (the "Record Date"), from the Available
Distribution Amount in an amount equal to the product of the Percentage Interest
evidenced by this Certificate and the amount required to be distributed to the
Holders of Class R Certificates on such Distribution Date pursuant to the
Agreement.
All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by or on behalf of the Trustee by
wire transfer in immediately available funds to the account of the Person
entitled thereto if such Person shall have so notified the Trustee in writing at
least five Business Days prior to the Record Date immediately prior to such
Distribution Date and is the registered owner of Class R Certificates the
aggregate Percentage Interest of which is in excess of a 66% Percentage Interest
of the Class R Certificates, or by check mailed by first class mail to the
address of the Person entitled thereto, as such name and address shall appear on
the Certificate Register, provided that the Trustee may deduct a reasonable wire
transfer fee from any payment made by wire transfer. Notwithstanding the above,
the final distribution on this Certificate will be made after due notice by the
Trustee of the pendency of such distribution
<PAGE>
-2-
and only upon presentation and surrender of this Certificate at the office or
agency appointed by the Trustee for that purpose as provided in the Agreement.
This Certificate is one of a duly authorized issue of
Certificates designated as Asset-Backed Floating Rate Certificates of the Series
specified on the face hereof (herein called the "Certificates") and representing
the Percentage Interest specified on the face hereof.
The Class R Certificates are limited in right of payment to
certain collections and recoveries respecting the Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Accounts and the Distribution Account
may be made from time to time for purposes other than distributions to
Certificateholders, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Mortgage Loans.
The Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Depositor, the Master Servicer, the Trustee and the rights of
the Certificateholders under the Agreement at any time by the Depositor, the
Master Servicer, the Trustee and the Certificate Insurer with the consent of the
Holders of Certificates entitled to at least 66% of the Voting Rights and the
Certificate Insurer. Any such consent by the Holder of this Certificate shall be
conclusive and binding on such Holder and upon all future Holders of this
Certificate and of any Certificate issued upon the transfer hereof or in
exchange herefor or in lieu hereof whether or not notation of such consent is
made upon this Certificate. The Agreement also permits the amendment thereof, in
certain limited circumstances, without the consent of the Holders of any of the
Certificates but with the consent of the Certificate Insurer.
As provided in the Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate is registrable
in the Certificate Register upon surrender of this Certificate for registration
of transfer at the offices or agencies appointed by the Trustee as provided in
the Agreement, duly endorsed by, or accompanied by an assignment in the form
below or other written instrument of transfer in form satisfactory to the
Trustee and the Certificate Registrar duly executed by, the Holder hereof or
such Holder's attorney duly authorized in writing, and thereupon one or more new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest will be issued to the designated transferee or
transferees.
The Certificates are issuable in fully registered form only
without coupons in Classes and denominations representing Percentage Interests
specified in the Agreement. As provided in the Agreement and subject to certain
limitations therein set forth, Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.
No transfer of this Certificate shall be made unless that
transfer is made pursuant to an effective registration statement under the 1933
Act and effective registration
<PAGE>
-3-
or qualification under applicable state securities laws, or is made in a
transaction that does not require such registration or qualification. In the
event that a transfer is to be made without registration or qualification, the
Trustee and the Certificate Registrar shall require, in order to assure
compliance with such laws, either (i) that the Certificateholder desiring to
effect the transfer and such Certificateholder's prospective transferee each
execute a representation letter in the form described by the Agreement
certifying to the Trustee and the Certificate Registrar the facts surrounding
the transfer, or (ii) that the Trustee and the Certificate Registrar shall
require an Opinion of Counsel satisfactory to them that such transfer may be
made without such registration or qualification, which Opinion of Counsel shall
not be an expense of the Depositor, the Trustee or the Certificate Registrar, in
their respective capacities as such. None of the Depositor, the Certificate
Registrar nor the Trustee is obligated to register or qualify the Class of
Certificates specified on the face hereof under the 1933 Act or any other
securities law or to take any action not otherwise required under the Agreement
to permit the transfer of such Certificates without registration or
qualification. Any such Certificateholder desiring to effect such transfer
shall, and does hereby agree to, indemnify the Trustee, the Depositor, the
Certificate Registrar and any Master Servicer against any liability that may
result if the transfer is not so exempt or is not made in accordance with such
federal and state laws.
Except as otherwise set forth in the next succeeding
paragraph, no transfer of a Certificate or any interest therein may be made to
employee benefit plans and certain other retirement plans and arrangements,
including individual retirement accounts and annuities, Keogh plans and
collective investment funds and separate accounts in which such plans, accounts
or arrangements are invested that are subject to the fiduciary responsibility
provisions of ERISA and Section 4975 of the Code ("Plans") or any person who is
directly or indirectly purchasing the Certificate or interest therein on behalf
of, as named fiduciary of, as trustee of, or with assets of a Plan, unless the
prospective transferee provides the Trustee with an opinion of counsel which
establish to the satisfaction of the Trustee that such transfer will not result
in a violation of Section 406 of ERISA or Section 4975 of the Code or cause the
Master Servicer or Trustee to be deemed a fiduciary of such Plan or result in
the imposition of an excise tax under Section 4975 of the Code. In the absence
of its having received the opinion of counsel contemplated by the preceding
sentence, the Trustee shall (unless the next succeeding paragraph applies)
require the prospective transferee of any Certificate to certify that it is
neither (i) a Plan nor (ii) a Person who is directly or indirectly purchasing
such Certificate on behalf of, as named fiduciary of, as trustee of, or with
assets of a Plan (including any insurance company using funds in its general or
separate accounts that may constitute "plan assets").
The Holder of this Certificate, by its acceptance hereof,
shall be deemed for all purposes to have consented to the provisions of Section
5.02 of the Agreement and to any amendment of the Agreement deemed necessary by
counsel of the Depositor to ensure that the transfer of this Certificate to any
Person other than a Permitted Transferee or any other Person will not cause the
Trust Fund to cease to qualify as a REMIC or cause the imposition of a tax upon
the REMIC.
<PAGE>
-4-
No service charge will be made for any such 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 transfer or exchange of Certificates.
The Depositor, the Master Servicer, the Trustee, the
Certificate Insurer and the Certificate Registrar and any agent of the
Depositor, any Master Servicer, the Trustee, the Certificate Insurer or the
Certificate Registrar may treat the Person in whose name this Certificate is
registered as the owner hereof for all purposes, and none of the Depositor, the
Master Servicer, the Trustee, the Certificate Insurer, the Certificate Registrar
nor any such agent shall be affected by notice to the contrary.
The obligations created by the Agreement and the Trust Fund
created thereby shall terminate upon payment to the Certificateholders of all
amounts held by or on behalf of the Trustee and required to be paid to them
pursuant to the Agreement following the earlier of (i) the final payment or
other liquidation (or any advance with respect thereto) of the last Mortgage
Loan remaining in the Trust Fund, and (ii) the purchase by the party designated
in the Agreement at a price determined as provided in the Agreement from the
Trust Fund of all Mortgage Loans and all property acquired in respect of such
Mortgage Loans. The Agreement permits, but does not require, the party
designated in the Agreement to purchase from the Trust Fund all Mortgage Loans
and all property acquired in respect of any Mortgage Loan at a price determined
as provided in the Agreement. The exercise of such right will effect early
retirement of the Certificates; however, such right to purchase is subject to
the aggregate Stated Principal Balance of the Mortgage Loans at the time of
purchase being 10% or less of the aggregate Stated Principal Balance of the
Mortgage Loans at the Cut-off Date.
The recitals contained herein shall be taken as statements of
the Depositor and the Trustee assumes no responsibility for their correctness.
Unless the certificate of authentication hereon has been
executed by the Certificate Registrar, by manual signature, this Certificate
shall not be entitled to any benefit under the Agreement or be valid for any
purpose.
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed under its official seal.
Dated:
NORWEST BANK MINNESOTA, N.A.
[SEAL] as Trustee
By:_____________________________
Authorized Officer
CERTIFICATE OF AUTHENTICATION
This is one of the Class R Certificates referred to in the
within-mentioned Agreement.
NORWEST BANK MINNESOTA, N.A.
as Certificate Registrar
By:___________________________
Authorized Signatory
<PAGE>
ABBREVIATIONS
The following abbreviations, when used in the inscription on
the face of this instrument, shall be construed as though they were written out
in full according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT - CUSTODIAN
_______________
(Cust) Minor)
TEN ENT - as tenants by the entireties under Uniform Gifts
to Minors Act
JT TEN - as joint tenants with right ______________
if survivorship and not as (State)
tenants in common
Additional abbreviations may also be used though not in
the above list.
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s)
and transfer(s) unto ___________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Please print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee)
a Percentage Interest equal to ____% evidenced by the within Asset-Backed
Floating Rate Certificate and hereby authorize(s) the registration of transfer
of such interest to assignee on the Certificate Register of the Trust Fund.
I (we) further direct the Certificate Registrar to issue a new
Certificate of a like Percentage Interest and Class to the above named assignee
and deliver such Certificate to the following address:__________________________
_______________________________________________________________________________.
Dated:
_____________________________________
Signature by or on behalf of assignor
_____________________________________
Signature Guaranteed
<PAGE>
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for purposes of
distribution:
Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to _________________________________________________
________________________________________________________________________________
for the account of _______________________________, account number ____________,
or, if mailed by check, to _____________________________________________________
_______________________________________________________________________________.
Applicable statements should be mailed to _____________________________________,
_______________________________________________________________________________,
This information is provided by _______________________________________________,
the assignee named above, or ____________________________________, as its agent.
<PAGE>
EXHIBIT B
FORM OF FINANCIAL GUARANTY INSURANCE POLICY
FINANCIAL FINANCIAL GUARANTY
SECURITY INSURANCE POLICY
ASSURANCE SM
Trust: As described in Endorsement No. 1 Policy No.: 50511-N
Certificates: $149,564,000 Salomon Brothers Date of Issuance: 9/25/96
Mortgage Securities VII, Inc.,
Asset-Backed Floating Rate Certificates,
Series 1996-LB1,
Class A
FINANCIAL SECURITY ASSURANCE INC. ("Financial Security"), for
consideration received, hereby UNCONDITIONALLY AND IRREVOCABLY GUARANTEES to the
Trustee for the benefit of each Holder, subject only to the terms of this Policy
(which includes each endorsement hereto), the full and complete payment of
Guaranteed Distributions with respect to the Certificates of the Trust referred
to above.
For the further protection of each Holder, Financial Security
irrevocably and unconditionally guarantees payment of the amount of any
distribution of principal or interest with respect to the Certificates made
during the Term of this Policy to such Holder that is subsequently avoided in
whole or in part as a preference payment under applicable law.
Payment of any amount required to be paid under this Policy will be
made following receipt by Financial Security of notice as described in
Endorsement No. 1 hereto.
Financial Security shall be subrogated to the rights of each Holder to
receive distributions with respect to each Certificate held by such Holder to
the extent of any payment by Financial Security hereunder.
Except to the extent expressly modified by Endorsement No. 1 hereto,
the following terms shall have the meanings specified for all purposes of this
Policy. "Holder" means the registered owner of any Certificate as indicated on
the registration books maintained by or on behalf of the Trustee for such
purpose or, if the Certificate is in bearer form, the holder of the Certificate.
"Trustee", "Guaranteed Distributions" and "Term of this Policy" shall have the
meanings set forth in Endorsement No. 1 hereto.
This Policy sets forth in full the undertaking of Financial Security,
and shall not be modified, altered or affected by any other agreement or
instrument, including any modification or amendment thereto. Except to the
extent expressly modified by an endorsement hereto, the premiums paid in respect
of this Policy are nonrefundable for any reason whatsoever. This Policy may not
be canceled or revoked during the Term of this Policy. An acceleration payment
shall not be due under this Policy unless such acceleration is at the sole
option of Financial Security. THIS POLICY IS NOT COVERED BY THE
PROPERTY/CASUALTY INSURANCE SECURITY FUND SPECIFIED IN ARTICLE 76 OF THE NEW
YORK INSURANCE LAW.
In witness whereof, FINANCIAL SECURITY ASSURANCE INC. has caused this
Policy to be executed on its behalf by its Authorized Officer.
FINANCIAL SECURITY ASSURANCE INC.
By_______________________________
AUTHORIZED OFFICER
A subsidiary of Financial Security Assurance Holdings Ltd.
350 Park Avenue, New York, N.Y. 10022-6022 (212) 826-0100
Form 101NY (5/89)
<PAGE>
ENDORSEMENT NO. 1 TO FINANCIAL GUARANTY INSURANCE POLICY
FINANCIAL SECURITY ASSURANCE INC.
TRUST: Established pursuant to the Pooling and Servicing Agreement
dated as of September 1, 1996 among Salomon Brothers
Mortgage Securities VII, Inc., as Depositor, Long Beach
Mortgage Company, as Master Servicer, and Norwest Bank
Minnesota, National Association, as Trustee
POLICY NO.: 50511-N
CERTIFICATES: $149,564,000 Salomon Brothers Mortgage Securities VII, Inc.,
Asset-Backed Floating Rate Certificates, Series 1996-LB1, Class
A
DATE OF ISSUANCE: September 25, 1996
1. DEFINITIONS. For all purposes of this Policy, the terms specified
below shall have the meanings or constructions provided below. Capitalized terms
used herein and not otherwise defined herein shall have the meanings provided in
the Pooling and Servicing Agreement unless the context shall otherwise require.
"BUSINESS DAY" means any day other than (i) a Saturday or Sunday, or
(ii) a day on which banking institutions in the State of New York are authorized
or obligated by law or executive order to be closed.
"FINAL DISTRIBUTION DATE" means the Distribution Date coinciding with
or following a purchase by the Terminator in accordance with the terms of clause
(i) of the first paragraph of Section 10.01 of the Pooling and Servicing
Agreement.
"GUARANTEED DISTRIBUTIONS" means, with respect to each Distribution
Date, the distribution to be made to the Holders of the Certificates on such
Distribution Date, in an aggregate amount equal to the sum of (i) the Accrued
Certificate Interest on the Certificates, (ii) the principal portion of any
Realized Losses allocated to the Certificates and, without duplication, the
excess, if any, of (a) the aggregate Certificate Principal Balance of all of the
Class A Certificates then outstanding over (b) the aggregate principal balances
of the Mortgage Loans then outstanding and (iii) if (but only if) such
Distribution Date is the final Distribution Date for the Certificates, the
outstanding Certificate Principal Balance of the Certificates (without
duplication of amounts included pursuant to clause (ii)), in each case in
accordance with the original terms of the Certificates when issued and without
regard to any amendment or modification of the Certificates or the Pooling and
Servicing Agreement which has not been consented to by Financial Security.
Guaranteed Distributions shall not include, nor shall coverage be provided under
this Policy in respect of, Basis Risk Shortfalls, Unpaid Basis Risk Shortfalls
or any taxes, withholding or other charge imposed by any governmental authority.
<PAGE>
Policy No. 50511-N Date of Issuance: September 25, 1996
"MATURITY DATE" means the Distribution Date coinciding with or
following the final payment or other liquidation of the last Mortgage Loan or
REO Property as described in clause (ii) of the first paragraph of Section 10.01
of the Pooling and Servicing Agreement, subject to the proviso set forth
therein.
"POLICY" means this Financial Guaranty Insurance Policy and includes
each endorsement thereto.
"POOLING AND SERVICING AGREEMENT" means the Pooling and Servicing
Agreement dated as of September 1, 1996 among Salomon Brothers Mortgage
Securities VII, Inc., Long Beach Mortgage Company, and Norwest Bank Minnesota,
National Association.
"RECEIPT" and "RECEIVED" mean actual delivery to Financial Security and
to the Fiscal Agent (as defined below), if any, at or prior to 12:00 noon, New
York City time, on a Business Day; delivery either on a day that is not a
Business Day, or after 12:00 noon, New York City time, shall be deemed to be
Received on succeeding Business Day. If any notice or certificate given
hereunder by the Trustee is not in proper form or is not properly completed,
executed or delivered, it shall be deemed not to have been Received, and
Financial Security or its Fiscal Agent shall promptly so advise the Trustee and
the Trustee may submit an amended notice.
"TERM OF THIS POLICY" means the period from and including the Date of
Issuance to and including the date on which (i) the Certificate Principal
Balance of all of the Certificates is zero, (ii) any period during which any
payment on the Certificates could have been avoided in whole or in part as a
preference payment under applicable bankruptcy, insolvency, receivership or
similar law has expired, and (iii) if any proceedings requisite to avoidance as
a preference payment have been commenced prior to the occurrence of (i) and
(ii), a final and nonappealable order in resolution of each such proceeding has
been entered.
"TRUSTEE" means Norwest Bank Minnesota, National Association, in its
capacity as Trustee under the Pooling and Servicing Agreement and any successor
in such capacity.
2. NOTICES AND CONDITIONS TO PAYMENT IN RESPECT OF GUARANTEED
DISTRIBUTIONS. Following Receipt by Financial Security of a notice and
certificate from the Trustee in the form attached as Exhibit A to this
Endorsement, Financial Security will pay any amount payable hereunder in respect
of Guaranteed Distributions out of the funds of Financial Security on the later
to occur of (a) 12:00 noon, New York City time, on the second Business Day
following such Receipt; and (b) 12:00 noon, New York City time, on the
Distribution Date to which such claim relates. Payments due hereunder in respect
of Guaranteed distributions will be disbursed by wire transfer of immediately
available funds to the Policy Payments Account established pursuant to the
Pooling and Servicing Agreement or, if no such Policy Payments Account has been
established, to the Trustee.
2
<PAGE>
Policy No. 50511-N Date of Issuance: September 25, 1996
Financial Security shall be entitled to pay any amount hereunder in
respect of Guaranteed Distributions whether or not any notice and certificate
shall have been Received by Financial Security as provided above. Financial
Security's obligations hereunder in respect of guaranteed Distributions shall be
discharged to the extent funds are disbursed by Financial Security as provided
herein whether or not such funds are properly applied by the Trustee.
3. NOTICES AND CONDITIONS TO PAYMENT IN RESPECT OF SCHEDULED PAYMENTS
AVOIDED AS PREFERENCE PAYMENTS. If any Guaranteed Distribution is avoided as a
preference payment under applicable bankruptcy, insolvency, receivership or
similar law, Financial Security will pay such amount out of the funds of
Financial Security on the later of (a) the date when due to be paid pursuant to
the Order referred to below or (b) the first to occur of (i) the fourth Business
Day following Receipt by Financial Security from the Trustee of (A) a certified
copy of the order to the court or other governmental body which exercised
jurisdiction to the effect that the Holder is required to return principal of or
interest distributed with respect to the Certificates during the Term of this
Policy because such distributions were avoidable as preference payments under
applicable bankruptcy law (the "Order"), (B) a certificate of the Holder that
the Order has been entered and is not subject to any stay and (C) an assignment
duly executed and delivered by the Holder, in such form as is reasonably
required by Financial Security, and provided to the Holder by Financial
Security, irrevocably assigning to Financial Security all rights and claims of
the Holder relating to or arising under the Certificates against the debtor
which made such preference payment or otherwise with respect to such preference
payment or (ii) the date of Receipt by Financial Security from the Trustee of
the items referred to in clauses (A), (B) and (C) above if, at least four
Business Days prior to such date of Receipt, Financial Security shall have
Received written notice from the Trustee that such items were to be delivered on
such date and such date was specified in such notice. Such payment shall be
disbursed to the receiver, conservator, debtor-in-possession or trustee in
bankruptcy named in the Order and not to the Trustee or any Holder directly
(unless a Holder has previously paid such amount to the receiver, conservator,
debtor-in-possession or trustee in bankruptcy named in the Order, in which case
such payment shall be disbursed to the Trustee for distribution to such Holder
upon proof of such payment reasonably satisfactory to Financial Security). In
connection with the foregoing, Financial Security shall have the rights provided
pursuant to Section 9.04(d) of the Pooling and Servicing Agreement.
4. GOVERNING LAW. This Policy shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to the
conflict of laws principles thereof.
5. FISCAL AGENT. At any time during the Term of this Policy, Financial
Security may appoint a fiscal agent (the "Fiscal Agent") for purposes of this
Policy by written notice to the Trustee at the notice address specified in the
Pooling and Servicing Agreement specifying the name and notice address of the
Fiscal Agent. From and after the date of receipt of such notice by the Trustee,
(i) copies of all notices and documents required to be delivered to Financial
Security pursuant to this Policy shall be simultaneously delivered to the
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Policy No. 50511-N Date of Issuance: September 25, 1996
Fiscal Agent and to Financial Security and shall not be deemed Received until
Received by both and (ii) all payments required to be made by Financial Security
under this Policy may be made directly by Financial Security or by the Fiscal
Agent on behalf of Financial Security. The Fiscal Agent is the agent of
Financial Security only and the Fiscal Agent shall in no event be liable to any
Holder for any acts of the Fiscal Agent or any failure of Financial Security to
deposit, or cause to be deposited, sufficient funds to make payments due under
this Policy.
6. WAIVER OF DEFENSES. To the fullest extent permitted by applicable
law, Financial Security agrees not to assert, and hereby waives, for the benefit
of each Holder, all rights (whether by counterclaim, setoff or otherwise) and
defenses (including, without limitation, the defense of fraud), whether acquired
by subrogation, assignment or otherwise, to the extent that such rights and
defenses may be available to Financial Security to avoid payment of its
obligations under this Policy in accordance with the express provisions of this
Policy.
7. NOTICES. All notices 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 Financial Security as
follows:
Financial Security Assurance Inc.
350 Park Avenue
New York, NY 10022
Attention: Senior Vice President
- Surveillance
Re: Salomon Brothers Mortgage Securities VII, Inc.,
Asset-Backed Floating Rate Certificates, Series 1996-LB1
Telecopy No.: (212) 339-3518
Confirmation: (212) 826-0100
Financial Security may specify a different address or addresses by writing
mailed or delivered to the Trustee.
8. PRIORITIES. In the event any term or provisions of the face of this
Policy is inconsistent with the provisions of this Endorsement, the provisions
of this Endorsement shall take precedence and shall be binding.
9. EXCLUSIONS FROM INSURANCE GUARANTY FUNDS. This Policy is not covered
by the Property/Casualty Insurance Security Fund specified in Article 76 of the
New York Insurance Law. This Policy is not covered by the Florida Insurance
Guaranty Association created under Part II of Chapter 631 of the Florida
Insurance Code. In the event Financial Security were to become insolvent, any
claims arising under this Policy are excluded from coverage by the California
Insurance Guaranty Association, established pursuant to Article 14.2 of Chapter
1 of Part 2 of Division 1 of the California Insurance Code.
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<PAGE>
Policy No. 50511-N Date of Issuance: September 25, 1996
10. SURRENDER OF POLICY. The Trustee shall surrender this Policy to
Financial Security for cancellation upon expiration of the Term of this Policy.
IN WITNESS WHEREOF, FINANCIAL SECURITY ASSURANCE INC. has caused
this Endorsement No. 1 to be executed by its Authorized Officer.
FINANCIAL SECURITY ASSURANCE INC.
By:______________________________
Authorized Officer
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Exhibit A
To Endorsement 1
NOTICE OF CLAIM AND CERTIFICATE
Financial Security Assurance Inc.
350 Park Avenue
New York, NY 10022
The undersigned, a duly authorized officer of Norwest Bank Minnesota,
National Association (the "Trustee"), hereby certifies to Financial Security
Assurance Inc. ("Financial Security"), with reference to Financial Guaranty
Insurance Policy No. 50511-N dated September 25, 1996 (the "Policy") issued by
Financial Security in respect of the Salomon Brothers Mortgage Securities VII,
Inc., Asset-Backed Floating Rate Certificates, Series 1996- LB1, Class A (the
"Certificates)i), that:
(i) The Trustee is the Trustee under the Pooling and Servicing
Agreement for the Holders.
(ii) The sum of all amounts on deposit (or scheduled to be on
deposit) in the Certificate Account and available to the Holders of the
Guaranteed Distributions pursuant to the Pooling and Servicing
Agreement will be $____________ (the "Shortfall") less than the
Guaranteed Distributions with respect to the Distribution Date
occurring on ________________.
(iii) The Trustee is making a claim under the Policy for the
Shortfall to be applied to distributions of principal or interest or
both with respect to the Certificates.
(iv) The Trustee agrees that, following receipt of funds from
Financial Security, it shall (a) hold such amounts in trust and apply
the same directly to the payment of Guaranteed Distributions on the
Certificates when due; (b) not apply such funds for any other purpose;
(c) not commingle such funds with other funds held by the Trustee and
(d) maintain an accurate record of such payments with respect to each
Certificate and the corresponding claim on the Policy and proceeds
thereof and, if the Certificate is required to be surrendered for such
payment, shall stamp on each such Certificate the legend "$[INSERT
APPLICABLE AMOUNT] paid by Financial Security and the balance hereof
has been canceled and reissued" and then shall deliver such Certificate
to Financial Security.
(v) The Trustee, on behalf of the Holders, hereby assigns to
Financial Security the rights of the Holders with respect to the
Certificates to the extent of any payments under the Policy, including,
without limitation, any amounts due to the Holders in respect of
securities law violations arising from the offer and sale of the
Certificates. The foregoing assignment is in addition to, and not in
limitation of, rights of subrogation otherwise available to Financial
Security in respect of such
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Policy No. 50511-N Date of Issuance: September 25, 1996
payments. The Trustee shall take such action and deliver such
instruments as may be reasonably requested or required by Financial
Security to effectuate the purpose or provisions of this clause (v).
(vi) The Trustee, on its behalf and on behalf of the Holders,
hereby appoints Financial Security as agent and attorney-in-fact for
the Trustee and each such Holder in any legal proceeding with respect
to the Certificates. The Trustee hereby agrees that, so long as a
Certificate Insurer Default (as defined in the Pooling and Servicing
Agreement) shall not exist, Financial Security may at any time during
the continuation of any proceeding by or against the Depositor under
the United States Bankruptcy Code or any other applicable bankruptcy,
insolvency, receivership, rehabilitation or similar law (an "Insolvency
Proceeding") direct all matters relating to such Insolvency Proceeding.
In addition, the Trustee hereby agrees that Financial Security shall be
subrogated to, and the Trustee on its behalf and on behalf of each
Holder, hereby delegates and assigns, to the fullest extent permitted
by law, the rights of the Trustee and each Holder in the conduct of any
Insolvency Proceeding, including, without limitation, all rights of any
party to an adversary proceeding or action with respect to any court
order issued in connection with any such Insolvency Proceeding.
(vii) Payment should be made by wire transfer directed to
Policy Payments Account.
Unless the context otherwise requires, capitalized terms used in this
Notice of Claim and Certificate and not defined herein shall have the meanings
provided in the Policy.
IN WITNESS WHEREOF, the Trustee has executed and delivered this Notice
of Claim and Certificate as of the ______ day of _________________, _______.
___________________________________
By: _____________________________
Title:_____________________________
_________________________________
For Financial Security or Fiscal Agent Use Only
Wire transfer sent on ___________________ by __________________________
Confirmation Number _________________________________
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<PAGE>
EXHIBIT C-1
FORM OF TRUSTEE'S INITIAL CERTIFICATION
[Date]
Salomon Brothers Mortgage
Securities VII, Inc.
Seven World Trade Center
New York, New York 10048
Long Beach Mortgage Company
1100 Town & Country Road
Orange, California 92868
Re: Pooling and Servicing Agreement, dated as of September 1, 1996,
among Salomon Brothers Mortgage Securities VII, Inc.,
Long Beach Mortgage Company and Norwest Bank Minnesota, N.A.
Asset-BAcked Floating Rate Certificates, Series 1996-LB1
--------------------------------------------------------
Ladies and Gentlemen:
Pursuant to Section 2.02 of the Pooling and Servicing Agreement,
attached hereto is the Custodial Initial Certification delivered by Texas
Commerce Bank National Association, as Custodian, pursuant to the Custodial
Agreement dated as of September 1, 1996, by and among Norwest Bank Minnesota,
N.A., Salomon Brothers Mortgage Securities VII, Inc., Long Beach Mortgage
Company and Texas Commerce Bank National Association.
The Trustee (nor the Custodian on its behalf) has made no independent
examination of any documents contained in each Mortgage File beyond the review
specifically required in the above-referenced Pooling and Servicing Agreement.
The Trustee makes no representations as to: (i) the validity, legality,
sufficiency, enforceability due authorization, recordability or genuineness of
any of the documents contained in the Mortgage File of any of the Mortgage Loans
identified on the Mortgage Loan Schedule, or (ii) the collectability,
insurability, effectiveness or suitability of any such Mortgage Loan.
NORWEST BANK MINNESOTA, N.A.
By: ________________________________
Name: ________________________________
Title:________________________________
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<PAGE>
EXHIBIT C-2
FORM OF TRUSTEE FINAL CERTIFICATION
[Date]
Salomon Brothers Mortgage
Securities VII, Inc.
Seven World Trade Center
New York, New York 10048
Long Beach Mortgage Company
1100 Town & Country Road
Orange, California 92868
Re: Pooling and Servicing Agreement, dated as of September 1, 1996,
among Salomon Brothers Mortgage Securities VII, Inc.,
Long Beach Mortgage Company and Norwest Bank Minnesota, N.A.
Asset-Backed Floating Rate Certificates, Series 1996-LB1
--------------------------------------------------------
Ladies and Gentlemen:
In accordance with Section 2.02 of the above-captioned Pooling and
Servicing Agreement, the undersigned, as Trustee, hereby certifies that as to
each Mortgage Loan listed in the Mortgage Loan Schedule (other than any Mortgage
Loan paid in full or listed on the attachment hereto), it or a Custodian on its
behalf has received:
(i) the original recorded Mortgage, and the original recorded
power of attorney, if the Mortgage was executed pursuant to a power of
attorney, or a certified copy thereof in those instances where the
public recording office retains the original or where the original has
been lost; and
(ii) an original recorded Assignment of the Mortgage to the
Trustee together with the original recorded Assignment or Assignments
of the Mortgage showing a complete chain of assignment from the
originator, or a certified copy of such Assignments in those instances
where the public recording retains the original or where original has
been lost; and
(iii) the original lender's title insurance policy.
The Trustee has made no independent examination of any documents
contained in each Mortgage File beyond the review specifically required in the
above-referenced Pooling and Servicing Agreement. The Trustee makes no
representations as to: (i) the validity, legality, sufficiency, enforceability
or genuineness of any of the documents contained in the
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<PAGE>
Mortgage File of any of the Mortgage Loans identified on the Mortgage Loan
Schedule, or (ii) the collectability, insurability, effectiveness or suitability
of any such Mortgage Loan.
Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the above-captioned Pooling and Servicing
Agreement.
NORWEST BANK MINNESOTA, N.A.
By: _____________________________
Name: _____________________________
Title:_____________________________
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<PAGE>
EXHIBIT D
FORM OF MORTGAGE LOAN PURCHASE AGREEMENT
This is a Mortgage Loan Purchase Agreement (the "Agreement"),
dated September 20, 1996, among Salomon Brothers Mortgage Securities VII, Inc.,
a Delaware corporation (the "Purchaser"), Long Beach Mortgage Company, a
Delaware corporation (the "Originator") and Salomon Brothers Realty Corp., a New
York corporation (the "Seller").
PRELIMINARY STATEMENT
The Seller intends to sell the Mortgage Loans (as hereinafter
defined) to the Purchaser on the terms and subject to the conditions set forth
in this Agreement. The Mortgage Loans were purchased by the Seller from the
Originator pursuant to a certain Master Mortgage Loan Purchase and Servicing
Agreement, dated as of May 1, 1996 (the "Purchase and Servicing Agreement"),
among the Seller, as initial purchaser and the Originator, as seller and
servicer. The Purchaser intends to deposit the Mortgage Loans into a mortgage
pool comprising the trust fund. The trust fund will be evidenced by a single
series of asset-backed floating rate certificates designated as Series 1996-LB1,
(the "Certificates"). The Certificates will consist of two classes of
certificates. The Certificates will be issued pursuant to a Pooling and
Servicing Agreement, dated as of September 1, 1996 (the "Pooling and Servicing
Agreement"), among the Purchaser, as depositor, Norwest Bank Minnesota, National
Association, as trustee, and the Originator, as master servicer (in such
capacity, the "Master Servicer"). Capitalized terms used but not defined herein
shall have the meanings set forth in the Pooling and Servicing Agreement.
The parties hereto agree as follows:
SECTION 1. AGREEMENT TO PURCHASE. The Seller agrees to sell,
and the Purchaser agrees to purchase, on or before September 25, 1996 (the
"Closing Date"), certain adjustable-rate conventional residential mortgage loans
(the "Mortgage Loans"), having an aggregate principal balance as of the close of
business on September 1, 1996 (the "Cut-off Date") of approximately
$153,320,388.94 (the "Closing Balance"), after giving effect to all payments due
on the Mortgage Loans on or before the Cut-off Date, whether or not received.
SECTION 2. MORTGAGE LOAN SCHEDULE. The Purchaser and the
Seller have agreed upon which of the mortgage loans owned by the Seller are to
be purchased by the Purchaser pursuant to this Agreement and the Seller will
prepare or cause to be prepared on or prior to the Closing Date a final schedule
(the "Closing Schedule") that together shall describe such Mortgage Loans and
set forth all of the Mortgage Loans to be purchased under this Agreement. The
Closing Schedule will conform to the requirements set forth in this Agreement
and to the definition of "Mortgage Loan Schedule" under the Pooling and
Servicing Agreement. The Closing Schedule shall be used as the Mortgage Loan
Schedule under the Pooling and Servicing Agreement.
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<PAGE>
SECTION 3. CONSIDERATION.
(a) In consideration for the Mortgage Loans to be
purchased hereunder, the Purchaser shall, as described in Section 8, pay to or
upon the order of the Seller in immediately available funds an amount (the
"Purchase Price") equal to approximately 106.8125% times the Closing Balance,
plus accrued interest thereon from the Cut-off Date up to but not including the
Closing Date.
(b) The Purchaser or any assignee, transferee or
designee of the Purchaser shall be entitled to all scheduled payments of
principal due after the Cut-off Date, all other payments of principal due and
collected after the Cut-off Date, and all payments of interest on the Mortgage
Loans allocable to the period after the Cut-off Date. All scheduled payments of
principal and interest due on or before the Cut-off Date and collected after the
Cut-off Date shall belong to the Seller.
(c) Pursuant to the Pooling and Servicing Agreement,
the Purchaser will assign all of its right, title and interest in and to the
Mortgage Loans, together with its rights under this Agreement, to the Trustee
for the benefit of the related Certificateholders.
SECTION 4. TRANSFER OF THE MORTGAGE LOANS.
(a) POSSESSION OF MORTGAGE FILES. The Seller does
hereby sell, transfer, assign, set over and convey to the Purchaser, without
recourse but subject to the terms of this Agreement, all of its right, title and
interest in, to and under the Mortgage Loans. The contents of each Mortgage File
not delivered to the Purchaser or to any assignee, transferee or designee of the
Purchaser on or prior to the Closing Date are and shall be held in trust by the
Seller for the benefit of the Purchaser or any assignee, transferee or designee
of the Purchaser. Upon the sale of the Mortgage Loans the ownership of each
Mortgage Note, the related Mortgage and the other contents of the related
Mortgage File is vested in the Purchaser and the ownership of all records and
documents with respect to the related Mortgage Loan prepared by or that come
into the possession of the Seller on or after the Closing Date shall immediately
vest in the Purchaser and shall be delivered immediately to the Purchaser or as
otherwise directed by the Purchaser. (b) DELIVERY OF MORTGAGE LOAN DOCUMENTS.
The Seller will, on or prior to the Closing Date, deliver or cause to be
delivered to the Purchaser or any assignee, transferee or designee of the
Purchaser each of the following documents for each Mortgage Loan:
(i) the original Mortgage Note, endorsed in the following
form: "Pay to the order of Norwest Bank Minnesota, National
Association, as Trustee for the registered holders of Salomon Brothers
Mortgage Securities VII, Inc., Asset-Backed Floating Rate Certificates,
Series 1996-LB1, without recourse," with all prior and intervening
endorsements showing a complete chain of endorsement from the
originator to the Person so endorsing to the Trustee;
(ii) the original Mortgage with evidence of recording thereon;
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<PAGE>
(iii) an original Assignment of Mortgage executed in the
following form: "Norwest Bank Minnesota, National Association, as
Trustee for the registered holders of Salomon Brothers Mortgage
Securities VII, Inc., Asset-Backed Floating Rate Certificates, Series
1996-LB1";
(iv) the original recorded Assignment or Assignments of the
Mortgage showing a complete chain of assignment from the originator to
the Person assigning the Mortgage to the Trustee as contemplated by the
immediately preceding clause (iii);
(v) the original or copies of each assumption, modification,
written assurance or substitution agreement, if any; and
(vi) the original lender's title insurance policy, together
with all endorsements or riders which were issued with or subsequent to
the issuance of such policy, insuring the priority of the Mortgage as a
first lien on the Mortgaged Property represented therein as a fee
interest vested in the Mortgagor.
Notwithstanding anything to the contrary contained in this
Section 4, if any document referred to in Section 4(b)(ii) or 4(b)(iv) above has
been submitted for recording but either (x) has not been returned from the
applicable public recording office or (y) has been lost or such public recording
office has retained the original of such document, the obligations of the Seller
hereunder shall be deemed to have been satisfied upon (1) delivery by or on
behalf of the Seller promptly upon receipt thereof to or on behalf of the
Purchaser or any assignee, transferee or designee of the Purchaser of either the
original or a copy of such document certified by the Originator in the case of
(x) above or the public recording office in the case of (y) above to be a true
and complete copy of the recorded original thereof and (2) if such copy is
certified by the Originator delivery promptly upon receipt thereof of either the
original or a copy of such document certified by the public recording office to
be a true and complete copy of the original.
In the event that the original lender's title insurance policy
has not yet been issued, the Seller shall deliver to the Purchaser or any
assignee, transferee or designee of the Purchaser a written commitment or
interim binder or preliminary report of title issued by the title insurance or
escrow company. The Seller shall deliver to the Purchaser or any assignee,
transferee or designee of the Purchaser promptly upon receipt by the Seller of
any such original title insurance policy or original Primary Mortgage Insurance
Policy.
(c) ACCEPTANCE OF MORTGAGE LOANS. The documents
delivered pursuant to Section 4(b) hereof shall be reviewed by the Purchaser or
any assignee, transferee or designee of the Purchaser at any time before or
after the Closing Date (and with respect to each document permitted to be
delivered after the Closing Date within seven days of its delivery) to ascertain
that all required documents have been executed and received and that such
documents relate to the Mortgage Loans identified on the Mortgage Loan Schedule.
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<PAGE>
(d) TRANSFER OF INTEREST IN AGREEMENTS. The Purchaser
has the right to assign its interest under this Agreement, in whole or in part,
to the Trustee, as may be required to effect the purposes of the Pooling and
Servicing Agreement, without the consent of the Seller or the Originator, and
the assignee shall succeed to the rights and obligations hereunder of the
Purchaser. Any expense reasonably incurred by or on behalf of the Purchaser or
the Trustee in connection with enforcing any obligations of the Seller or the
Originator under this Agreement will be promptly reimbursed by the Seller or the
Originator, as applicable.
(e) EXAMINATION OF MORTGAGE FILES. Prior to the
Closing Date, the Seller shall either (i) deliver in escrow to the Purchaser or
to any assignee, transferee or designee of the Purchaser, for examination, the
Mortgage File pertaining to each Mortgage Loan, or (ii) make such Mortgage Files
available to the Purchaser or to any assignee, transferee or designee of the
Purchaser for examination. Such examination may be made by the Purchaser or the
Trustee, and their respective designees, upon reasonable notice to the Seller
during normal business hours before the Closing Date and within 60 days after
the Closing Date. If any such person makes such examination prior to the Closing
Date and identifies any Mortgage Loans that do not conform to the requirements
of the Purchaser as described in this Agreement, such Mortgage Loans shall be
deleted from the Closing Schedule. The Purchaser may, at its option and without
notice to the Seller, purchase all or part of the Mortgage Loans without
conducting any partial or complete examination. The fact that the Purchaser or
any person has conducted or has failed to conduct any partial or complete
examination of the Mortgage Files shall not affect the rights of the Purchaser
or any assignee, transferee or designee of the Purchaser to demand repurchase or
other relief as provided herein or under the Pooling and Servicing Agreement.
SECTION 5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
SELLER AND THE ORIGINATOR.
(a) The Originator hereby represents and warrants to the
Seller and the Purchaser, as of the date hereof and as of the Closing Date, and
covenants, that:
(i) The Originator is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and is duly authorized and qualified to transact any and all business
contemplated by this Agreement to be conducted by the Originator in any state in
which a Mortgaged Property is located or is otherwise not required under
applicable law to effect such qualification and, in any event, is in compliance
with the doing business laws of any such State, to the extent necessary to
ensure its ability to enforce each Mortgage Loan and to service the Mortgage
Loans in accordance with the terms of the Pooling and Servicing Agreement;
(ii) The Originator has the full corporate power and
authority to originate, hold, sell and service each Mortgage Loan, and to
execute, deliver and perform, and to enter into and consummate the transactions
contemplated by this Agreement and has duly authorized by all necessary
corporate action on the part of the Originator the execution, delivery and
performance of this Agreement; and this Agreement, assuming the due
authorization, execution and delivery thereof by the Purchaser, constitutes a
legal, valid and
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binding obligation of the Originator, enforceable against the Originator in
accordance with its terms, except to the extent that (a) the enforceability
thereof may be limited by bankruptcy, insolvency, moratorium, receivership and
other similar laws relating to creditors' rights generally and (b) the remedy of
specific performance and injunctive and other forms of equitable relief may be
subject to the equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought;
(iii) The execution and delivery of this Agreement by
the Originator, the servicing of the Mortgage Loans by the Originator under the
Pooling and Servicing Agreement, the consummation of any other of the
transactions herein contemplated, and the fulfillment of or compliance with the
terms hereof are in the ordinary course of business of the Originator and will
not (A) result in a breach of any term or provision of the charter or by-laws of
the Originator or (B) conflict with, result in a breach, violation or
acceleration of, or result in a default under, the terms of any other material
agreement or instrument to which the Originator is a party or by which it may be
bound, or any statute, order or regulation applicable to the Originator of any
court, regulatory body, administrative agency or governmental body having
jurisdiction over the Originator; and the Originator is not a party to, bound
by, or in breach or violation of any indenture or other agreement or instrument,
or subject to or in violation of any statute, order or regulation of any court,
regulatory body, administrative agency or governmental body having jurisdiction
over it, which materially and adversely affects or, to the Originator's
knowledge, would in the future materially and adversely affect, (x) the ability
of the Originator to perform its obligations under this Agreement or (y) the
business, operations, financial condition, properties or assets of the
Originator taken as a whole;
(iv) No consent, approval, authorization or order of
any court or governmental agency or body is required for the execution, delivery
and performance by the Originator of, or compliance by the Originator with, this
Agreement or the consummation of the transactions contemplated hereby, or if any
such consent, approval, authorization or order is required, the Originator has
obtained the same;
(v) The Originator is an approved seller/servicer for
FNMA or FHLMC in good standing and is a HUD approved mortgagee pursuant to
Section 203 of the National Housing Act; and
(vi) No litigation is pending against the Originator
that would materially and adversely affect the execution, delivery or
enforceability of this Agreement or the ability of the Originator to service the
Mortgage Loans or to perform any of its other obligations hereunder in
accordance with the terms hereof;
(b) The Seller hereby represents and warrants, as of the date
hereof and as of the Closing Date, and covenants, that:
(i) The Seller is a corporation, duly organized and
validly existing and in good standing under the laws of the State of New York
with full corporate power and authority to conduct its business as presently
conducted by it to the extent material to the consummation of the transactions
contemplated herein. The Seller had the full corporate
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power and authority to acquire the Mortgage Loans. The Seller has the full
corporate power and authority to own the Mortgage Loans and to transfer and
convey the Mortgage Loans to the Purchaser and has the full corporate power and
authority to execute and deliver, engage in the transactions contemplated by,
and perform and observe the terms and conditions of this Agreement;
(ii) This Agreement has been duly and validly
authorized, executed and delivered by the Seller, all requisite corporate action
having been taken, and (assuming the due authorization, execution and delivery
hereof by the Purchaser and the Originator) constitutes the valid, legal and
binding obligation of the Seller, enforceable in accordance with its terms,
except as such enforcement may be limited by (A) bankruptcy, insolvency,
reorganization, receivership, moratorium or other similar laws relating to or
affecting the rights of creditors generally, (B) general equity principles
(regardless of whether such enforcement is considered in a proceeding in equity
or at law) or (C) public policy considerations underlying the securities laws,
to the extent that such public policy considerations limit the enforceability of
the provisions of this Agreement which purport to provide indemnification from
securities laws liabilities;
(iii) No consent, approval, authorization or order
of, registration or filing with, or notice to any governmental authority or
court is required, under federal laws or the laws of the State of New York, for
the execution, delivery and performance by the Seller of, or compliance by the
Seller with, this Agreement or the consummation by the Seller of any other
transaction contemplated hereby and by the Pooling and Servicing Agreement;
provided, however, that the Seller makes no representation or warranty regarding
federal or state securities laws in connection with the sale or distribution of
the Certificates;
(iv) Neither the sale of the Mortgage Loans to the
Purchaser, nor the execution, delivery or performance of this Agreement by the
Seller, conflicts or will conflict with or results or will result in a breach of
or constitutes or will constitute a default (or an event, which with notice or
lapse of time or both, would constitute a default) under (A) any terms or
provisions of the certificate of incorporation or by-laws of the Seller, (B) any
term or provision of any material agreement, contract, instrument or indenture,
to which the Seller is a party or by which the Seller or any of its property is
bound, or (C) any law, rule, regulation, order, judgment, writ, injunction or
decree of any court or governmental authority having jurisdiction over the
Seller or any of its property, or results or will result in the creation or
imposition of any lien, charge or encumbrance which would have a material
adverse effect upon the Mortgage Loans or any documents or instruments
evidencing or securing the Mortgage Loans;
(v) The Seller has not dealt with any broker,
investment banker, agent or other person, except for the Purchaser or any of its
affiliates, that may be entitled to any commission or compensation in connection
with the sale of the Mortgage Loans;
(vi) There is no litigation currently pending or, to
the best of the Seller's knowledge, threatened against the Seller that would
reasonably be expected to adversely affect the transfer of the Mortgage Loans,
the issuance of the Certificates, the
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execution, delivery, performance or enforceability of this Agreement or that
would result in a material adverse change in the financial condition of the
Seller;
(vii) Each Mortgage Note, each Mortgage, each
Assignment and any other document required to be delivered by or on behalf of
the Seller under this Agreement or the Pooling and Servicing Agreement to the
Purchaser or any assignee, transferee or designee of the Purchaser for each
Mortgage Loan has been or will be, in accordance with Section 4(b) hereof,
delivered to the Purchaser or any such assignee, transferee or designee. With
respect to each Mortgage Loan, the Seller is in possession of a complete
Mortgage File in compliance with the Pooling and Servicing Agreement, except for
such documents that (A) have been delivered (1) to the Purchaser or any
assignee, transferee or designee of the Purchaser or (2) for recording to the
appropriate public recording office and have not yet been returned or (B) are
not required to be delivered to the Purchaser or any assignee, transferee or
designee of the Purchaser until 90 days following the Closing Date or such later
date as provided in Section 4;
(viii) The transfer, assignment and conveyance of the
Mortgage Notes and the Mortgages by the Seller pursuant to this Agreement are
not subject to the bulk transfer or any similar statutory provisions in effect
in any relevant jurisdiction, except any as may have been complied with;
(ix) The Seller (A) is a solvent entity and is paying
its debts as they become due and (B) after giving effect to the transfer of the
Mortgage Loans, will be a solvent entity and will have sufficient resources to
pay its debts as they become due;
(x) The form of endorsement of each Mortgage Note
satisfied the requirement, if any, of endorsement in order to transfer all
right, title and interest of the party so endorsing, as noteholder or assignee
thereof, in and to that Mortgage Note; and each Assignment to be delivered
hereunder is in recordable form and is sufficient to effect the assignment of
and to transfer to the assignee thereunder the benefits of the assignor, as
mortgagee or assignee thereof, under each Mortgage to which that Assignment
relates;
(xi) The transfer of the Mortgage Loans to the
Purchaser at the Closing Date will be treated by the Seller for financial
accounting and reporting purposes as a sale of assets; and
(xii) Immediately prior to the sale of the Mortgage
Loans to the Purchaser as herein contemplated, the Seller had good title to, and
was the sole owner of, the Mortgage Loans, and such sale validly transfers the
Mortgage Loans to the Purchaser free and clear of any pledge, lien, encumbrance
or security interest.
SECTION 6. REPRESENTATIONS AND WARRANTIES OF THE ORIGINATOR
RELATING TO THE MORTGAGE LOANS.
(a) REPRESENTATIONS AND WARRANTIES AS TO INDIVIDUAL MORTGAGE LOANS. The
Originator hereby represents and warrants to the Seller and the Purchaser, that
as to each Mortgage Loan as of the Closing Date:
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(i) The information set forth on the related Mortgage
Loan Schedule with respect to each Mortgage Loan is true and correct in all
material respects;
(ii) Except as set forth on Exhibit 1, all payments
due prior to the Cut-off Date have been made and none of the Mortgage Loans will
have been contractually delinquent for more than one calendar month more than
once since the origination thereof;
(iii) Each Mortgage is a valid and enforceable first
lien on the Mortgaged Property, including all improvements thereon, subject only
to (a) the lien of nondelinquent current real property taxes and assessments,
(b) covenants, conditions and restrictions, rights of way, easements and other
matters of public record as of the date of recording of such Mortgage, such
exceptions appearing of record being acceptable to mortgage lending institutions
generally or specifically reflected in the appraisal made in connection with the
origination of the related Mortgage Loan, and (c) other matters to which like
properties are commonly subject which do not materially interfere with the
benefits of the security intended to be provided by such Mortgage;
(iv) Immediately prior to the assignment of the
Mortgage Loans to the Purchaser pursuant to the Purchase and Servicing
Agreement, the Originator had good title to, and was the sole legal and
beneficial owner of, each Mortgage Loan free and clear of any pledge, lien,
encumbrance or security interest and has full right and authority, subject to no
interest or participation of, or agreement with, any other party to sell and
assign the same;
(v) To the best of the Originator's knowledge, there
is no delinquent tax or assessment lien against any Mortgaged Property;
(vi) There is no valid offset, defense or
counterclaim to any Mortgage Note or Mortgage, including the obligation of the
Mortgagor to pay the unpaid principal of or interest on such Mortgage Note, nor
will the operation of any of the terms of the Mortgage Note and the Mortgage, or
the exercise of any right thereunder, render 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;
(vii) To the best of the Originator's knowledge,
there are no mechanics' liens or claims for work, labor or material affecting
any Mortgaged Property which are or may be a lien prior to, or equal with, the
lien of the related Mortgage, except those which are insured against by the
title insurance policy referred to in (xi) below;
(viii) To the best of the Originator's knowledge,
each Mortgaged Property is free of material damage and is in good repair;
(ix) Each Mortgage Loan at origination complied in
all material respects with applicable local, state and federal laws, including,
without limitation, usury, equal credit opportunity, real estate settlement
procedures, truth-in-lending and disclosure
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laws, and consummation of the transactions contemplated hereby will not involve
the violation of any such laws;
(x) Neither the Originator nor any prior holder of
any Mortgage has modified the Mortgage in any material respect (except that a
Mortgage Loan may have been modified by a written instrument which has been
recorded, if necessary, to protect the interests of the Seller and the Purchaser
and which has been delivered to the Custodian); satisfied, cancelled or
subordinated such Mortgage in whole or in part; released the related Mortgaged
Property in whole or in part from the lien of such Mortgage; or executed any
instrument of release, cancellation, modification or satisfaction with respect
thereto;
(xi) A lender's policy of title insurance together
with a condominium endorsement and extended coverage endorsement, if applicable,
and, with respect to each Mortgage Loan, an adjustable rate mortgage endorsement
in an amount at least equal to the Cut-off Date Principal Balance of each such
Mortgage Loan or a commitment (binder) to issue the same was effective on the
date of the origination of each Mortgage Loan, each such policy is valid and
remains in full force and effect, the transfer of the related Mortgage Loan to
the Seller and Purchaser will not affect the validity or enforceability of such
policy and each such policy was issued by a title insurer qualified to do
business in the jurisdiction where the Mortgaged Property is located and
acceptable to FNMA or FHLMC and in a form acceptable to FNMA or FHLMC, which
policy insures the Originator and successor owners of indebtedness secured by
the insured Mortgage, as to the first priority lien of the Mortgage; to the best
of the Originator's knowledge, no claims have been made under such mortgage
title insurance policy and no prior holder of the related Mortgage, including
the Originator, has done, by act or omission, anything which would impair the
coverage of such mortgage title insurance policy;
(xii) Each Mortgage Loan was originated by the
Originator or by a savings and loan association, savings bank, commercial bank,
credit union, insurance company or similar institution which is supervised and
examined by a federal or state authority, or by a mortgagee approved by the
Secretary of Housing and Urban Development pursuant to sections 203 and 211 of
the National Housing Act and, if originated on behalf of the Originator by a
Person other than the Originator, is subject to the same standards and
procedures used by the Originator in originating mortgage loans directly;
(xiii) With respect to each Mortgage Loan on each
Adjustment Date, the Mortgage Interest Rate will be adjusted to equal the Index
plus the Margin, rounded to the nearest 0.125%, subject to the Periodic Rate
Cap, the Maximum Rate and the Minimum Rate. Except for Balloon Loans, the
related Mortgage Note is payable on the first day of each month in
self-amortizing monthly installments of principal and interest, with interest
payable in arrears, and requires a Monthly Payment which is sufficient to fully
amortize the outstanding principal balance of the Mortgage Loan over its
remaining term and to pay interest at the applicable Mortgage Interest Rate. No
Mortgage Loan is subject to negative amortization. All rate adjustments have
been performed in accordance with the terms of the related Mortgage Note or
subsequent modifications, if any.
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(xiv) To the best of the Originator's knowledge, all
of the improvements which were included for the purpose of determining the
Appraised Value of the Mortgaged Property lie wholly within the boundaries and
building restriction lines of such property, and no improvements on adjoining
properties encroach upon the Mortgaged Property;
(xv) All inspections, licenses and certificates
required to be made or issued with respect to all occupied portions of the
Mortgaged Property and, with respect to the use and occupancy of the same,
including but not limited to certificates of occupancy, have been made or
obtained from the appropriate authorities and the Mortgaged Property is lawfully
occupied under applicable law;
(xvi) All parties which have had any interest in the
Mortgage, whether as mortgagee, assignee, pledgee or otherwise, are (or, during
the period in which they held and disposed of such interest, were) in compliance
with any and all applicable licensing requirements of the laws of the state
wherein the Mortgaged Property is located;
(xvii) The Mortgage Note and the related Mortgage are
genuine, and each is the legal, valid and binding obligation of the maker
thereof, enforceable in accordance with its terms and with applicable laws. All
parties to the Mortgage Note and the Mortgage had legal capacity to execute the
Mortgage Note and the Mortgage and each Mortgage Note and Mortgage have been
duly and properly executed by such parties;
(xviii) The proceeds of each Mortgage Loan have been
fully disbursed, there is no requirement for future advances thereunder and any
and all requirements as to completion of any on-site or off-site improvements
and as to disbursements of any escrow funds therefor have been complied with.
All costs, fees and expenses incurred in making, closing or recording the
Mortgage Loans were paid;
(xix) The related Mortgage contains customary and
enforceable provisions which render the rights and remedies of the holder
thereof adequate for the realization against the Mortgaged Property of the
benefits of the security, including, (i) in the case of a Mortgage designated as
a deed of trust, by trustee's sale, and (ii) otherwise by judicial foreclosure.
There is no homestead or other exemption available to the Mortgagor which would
interfere with the right to sell the Mortgaged Property at a trustee's sale or
the right to foreclose the Mortgage;
(xx) 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 Purchaser to
the trustee under the deed of trust, except in connection with a trustee's sale
after default by the Mortgagor;
(xxi) Each Mortgage Note and each Mortgage is in
substantially one of the forms attached hereto as Exhibit 2;
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(xxii) There exist no deficiencies with respect to
escrow deposits and payments, if such are required, for which customary
arrangements for repayment thereof have not been made, and no escrow deposits or
payments of other charges or payments due the Originator have been capitalized
under the Mortgage or the related Mortgage Note;
(xxiii) The origination, underwriting and collection
practices used by the Originator with respect to each Mortgage Loan have been in
all respects legal, proper, prudent and customary in the mortgage servicing
business;
(xxiv) There is no pledged account or other security
other than real estate securing the Mortgagor's obligations;
(xxv) No Mortgage Loan has a shared appreciation
feature, or other contingent interest feature;
(xxvi) No Mortgage Loan provides for primary mortgage
insurance;
(xxvii) The improvements upon each Mortgaged Property
are covered by a valid and existing hazard insurance policy with a generally
acceptable carrier that provides for fire extended coverage and such other
hazards as are customary in the area where the Mortgaged Property is located
representing coverage not less than the lesser of the outstanding principal
balance of the related Mortgage Loan or the minimum amount required to
compensate for damage or loss on a replacement cost basis. All individual
insurance policies and flood policies referred to in clause (xxviii) below
contain a standard mortgagee clause naming the Originator or the original
mortgagee, and its successors in interest, as mortgagee, and the Originator has
received no notice that any premiums due and payable thereon have not been paid;
the Mortgage obligates the Mortgagor thereunder to maintain all such insurance,
including flood insurance, at the Mortgagor's cost and expense, and upon the
Mortgagor's failure to do so, authorizes the holder of the Mortgage to obtain
and maintain such insurance at the Mortgagor's cost and expense and to seek
reimbursement therefor from the Mortgagor;
(xxviii) If the Mortgaged 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 in a form meeting the
requirements of the current guidelines of the Flood Insurance Administration is
in effect with respect to such Mortgaged Property with a generally acceptable
carrier in an amount representing coverage not less than the least of (A) the
original outstanding principal balance of the Mortgage Loan, (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;
(xxix) There is no default, breach, violation or
event of acceleration existing under the Mortgage or the related Mortgage Note;
and the Originator has not waived any default, breach, violation or event of
acceleration;
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(xxx) Each Mortgaged Property is improved by a one-
to four-family residential dwelling, including condominium units and dwelling
units in planned unit developments, which, to the best of the Originator's
knowledge, does not include cooperatives or mobile homes and does not constitute
other than real property under state law;
(xxxi) There is no obligation on the part of the
Originator or any other party under the terms of the Mortgage or related
Mortgage Note to make payments in addition to those made by the Mortgagor;
(xxxii) Any future advances made prior to the Cut-off
Date have been consolidated with the outstanding principal amount secured by the
Mortgage, and the secured principal amount, as consolidated, bears a single
interest rate and single repayment term reflected on the related Mortgage Loan
Schedule. The consolidated principal amount does not exceed the original
principal amount of the Mortgage Loan;
(xxxiii) Each Mortgage Loan was underwritten in
accordance with the Originator's underwriting guidelines as described in the
Prospectus Supplement;
(xxxiv) The Mortgage File contains an appraisal which
was performed by an appraiser who satisfied, and which was conducted in
accordance with, all of the applicable requirements of the Financial
Institutions Reform, Recovery and Enforcement Act of 1989, as amended;
(xxxv) None of the Mortgage Loans is a graduated
payment mortgage loan, nor is any Mortgage Loan subject to a temporary buydown
or similar arrangement;
(xxxvi) With respect to each Mortgage Loan, no loan
junior in lien priority to such Mortgage Loan and secured by the related
Mortgaged Property was originated by the Originator at the time of origination
of such Mortgage Loan;
(xxxvii) The characteristics of the Mortgage Loans
are as set forth in the form of Exhibit 1 delivered in respect of the Closing
Date;
(xxxviii) The Mortgage contains an enforceable
provision for the acceleration of the payment of the unpaid principal balance of
the Mortgage Loan in the event that the Mortgaged Property is sold or
transferred without the prior written consent of the mortgagee thereunder;
(xxxix) The Originator has not advanced funds, or
induced, solicited or knowingly received any advance of funds by a party other
than the mortgagor, directly or indirectly, for the payment of any amount
required under the mortgage loan; and
(xl) There is no proceeding pending, or to best of
the Originator's knowledge threatened, for the total or partial condemnation of
the Mortgaged Property or the taking by eminent domain of any Mortgaged
Property.
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SECTION 7. REPURCHASE OBLIGATION FOR DEFECTIVE DOCUMENTATION
AND FOR BREACH OF REPRESENTATION AND WARRANTY.
(a) The representations and warranties contained in Section 6
shall not be impaired by any review and examination of loan files or other
documents evidencing or relating to the Mortgage Loans or any failure on the
part of the Seller or the Purchaser to review or examine such documents and
shall inure to the benefit of any assignee, transferee or designee of the
Purchaser, including the Trustee for the benefit of holders of asset-backed
floating rate certificates evidencing an interest in all or a portion of the
Mortgage Loans. With respect to the representations and warranties contained
herein which are made to the knowledge or the best of knowledge of the
Originator or the Seller, as the case may be, or as to which the Originator or
the Seller, as the case may be, has no knowledge, if it is discovered that the
substance of any such representation and warranty was inaccurate as of the date
such representation and warranty was made or deemed to be made, and such
inaccuracy materially and adversely affects the value of the related Mortgage
Loan or the interest therein of the Purchaser or the Purchaser's assignee,
transferee or designee, then notwithstanding the lack of knowledge by the
Originator or the Seller, as the case may be, with respect to the substance of
such representation and warranty being inaccurate at the time the representation
and warranty was made, the Originator or the Seller, as the case may be, shall
take such action described in the following paragraph in respect of such
Mortgage Loan.
Upon discovery by the Originator, the Seller, the Purchaser or
any assignee, transferee or designee of the Purchaser of any materially
defective document in, or that any material document was not transferred by the
Seller, and not transferred by the Originator to the Seller (as listed on the
Trustee's Preliminary Exception Report), as part of, any Mortgage File or of a
breach of any of the representations and warranties contained in Section 6 that
materially and adversely affects the value of any Mortgage Loan or the interest
therein of the Purchaser or the Purchaser's assignee, transferee or designee,
the party discovering the breach shall give prompt written notice to the others.
Within ninety (90) days of its discovery or its receipt of notice of any such
missing documentation which was not transferred to the Seller as described above
or materially defective documentation or any such breach of a representation and
warranty the Originator promptly shall deliver such missing document or cure
such defect or breach in all material respects, or in the event the Originator
cannot deliver such missing document or such defect or breach cannot be cured,
the Originator shall, within 90 days of its discovery or receipt of notice,
either (i) repurchase the affected Mortgage Loan at the Purchase Price (as such
term is defined in the Pooling and Servicing Agreement) or (ii) pursuant to the
provisions of the Pooling and Servicing Agreement, cause the removal of such
Mortgage Loan from the Trust Fund and substitute one or more Qualified
Substitute Mortgage Loans. With respect to Mortgage Loans where the Mortgage
File is missing a material document that was transferred from the Originator to
the Seller, within ninety (90) days of its discovery or its receipt of notice of
any such missing document the Seller promptly shall deliver such missing
document or in the event the Seller cannot deliver such missing document, the
Seller shall, within 90 days of its discovery or receipt of notice, either (i)
repurchase the affected Mortgage Loan at the Purchase Price (as such term is
defined in the Pooling and Servicing Agreement) or (ii) pursuant to the
provisions of the Pooling and Servicing Agreement, cause the removal of such
Mortgage Loan from the Trust
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Fund and substitute one or more Qualified Substitute Mortgage Loans. The
Originator or the Seller, as the case may be, shall amend the Closing Schedule
to reflect the withdrawal of such Mortgage Loan from the terms of this Agreement
and the Pooling and Servicing Agreement and the addition, if any, of a Qualified
Substitute Mortgage Loan. The Originator or the Seller, as the case may be,
shall deliver to the Purchaser such amended Closing Schedule and shall deliver
such other documents as are required by this Agreement or the Pooling and
Servicing Agreement within five (5) days of any such amendment. Any repurchase
pursuant to this Section 7(a) shall be accomplished by deposit in the Collection
Account of the amount of the Purchase Price in accordance with Section 2.03 of
the Pooling and Servicing Agreement. Any repurchase or substitution required by
this Section shall be made in a manner consistent with Section 2.03 of the
Pooling and Servicing Agreement.
(b) It is understood and agreed that the obligations of the
Originator or the Seller, as the case may be, set forth in this Section 7 to
cure, repurchase or substitute for a defective Mortgage Loan constitute the sole
remedies of the Seller and the Purchaser against the Originator respecting a
missing or defective document or a breach of the representations and warranties
contained in Section 6. It is understood and agreed that the obligations of the
Seller set forth in this Section 7 to repurchase or substitute for a Mortgage
Loan as to which a material document is missing constitute the sole remedies of
the Purchaser against the Seller respecting a missing document.
SECTION 8. CLOSING; PAYMENT FOR THE MORTGAGE LOANS. The
closing of the purchase and sale of the Mortgage Loans shall be held at the New
York City office of Thacher Proffitt & Wood at 10:00 AM New York City time on
the Closing Date.
The closing shall be subject to each of the following
conditions:
(a) All of the representations and warranties of the
Seller under this Agreement shall be true and correct
in all material respects as of the date as of which
they are made and no event shall have occurred which,
with notice or the passage of time, would constitute
a default under this Agreement;
(b) All of the representations and warranties of the
Originator under this Agreement shall be true and
correct in all material respects as of the date as of
which they are made and no event shall have occurred
which, with notice or the passage of time, would
constitute a default under this Agreement;
(c) The Purchaser shall have received, or the attorneys
of the Purchaser shall have received in escrow (to be
released from escrow at the time of closing), all
Closing Documents as specified in Section 9 of this
Agreement, in such forms as are agreed upon and
acceptable to the Purchaser, duly executed by all
signatories other than the Purchaser as required
pursuant to the respective terms thereof;
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(d) The Seller shall have delivered or caused to be
delivered and released to the Purchaser or to its
designee, all documents (including without
limitation, the Mortgage Loans) required to be so
delivered by the Purchaser pursuant to Section 2.01
of the Pooling and Servicing Agreement; and
(e) All other terms and conditions of this Agreement
shall have been complied with.
Subject to the foregoing conditions, the Purchaser shall
deliver or cause to be delivered to the Seller on the Closing Date, against
delivery and release by the Seller to the Trustee of all documents required
pursuant to the Pooling and Servicing Agreement, the consideration for the
Mortgage Loans as specified in Section 3 of this Agreement, by delivery to the
Seller of the Purchase Price in immediately available funds.
SECTION 9. CLOSING DOCUMENTS. Without limiting the generality
of Section 8 hereof, the closing shall be subject to delivery of each of the
following documents:
(a) An Officers' Certificate of the Seller,
dated the Closing Date, upon which the
Originator, the Purchaser, Financial
Security Assurance Inc. ("FSA") and Salomon
Brothers Inc (the "Underwriter") may rely,
in the form of Exhibit 3 hereto, and
attached thereto copies of the certificate
of incorporation, by-laws and certificate of
good standing of the Seller under the laws
of New York;
(b) An Officers' Certificate of the Seller,
dated the Closing Date, upon which the
Purchaser, FSA and the Underwriter may rely,
in the form of Exhibit 4 hereto, with
respect to certain facts regarding the sale
of the Mortgage Loans by the Seller to the
Purchaser;
(c) An Opinion of Counsel of the Seller, dated
the Closing Date and addressed to the
Originator, the Purchaser, FSA and the
Underwriter, substantially in the form
attached hereto as Exhibit 5;
(d) An Officer's Certificate of the Originator,
dated the Closing Date, upon which the
Seller, the Purchaser, FSA and the
Underwriter may rely, in the form of Exhibit
6 hereto, and attached thereto copies of the
certificate of incorporation, by-laws and
certificate of good standing of the
Originator under the laws of Delaware;
(e) An opinion of Counsel of the Originator,
dated the Closing Date and addressed to the
Seller, the Purchaser, FSA and the
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Underwriter, substantially in the form
attached hereto as Exhibit 7;
(f) Such opinions of counsel as the Rating
Agencies or the Trustee may request in
connection with the sale of the Mortgage
Loans by the Seller to the Purchaser or the
Seller's execution and delivery of, or
performance under, this Agreement;
(g) A letter from Deloitte & Touche L.L.P.,
certified public accountants, dated the date
hereof and to the effect that they have
performed certain specified procedures as a
result of which they determined that certain
information of an accounting, financial or
statistical nature set forth in the
Purchaser's Prospectus Supplement, dated
September 20, 1996 in the Summary under the
subheading "The Mortgage Pool" and under the
captions "The Mortgage Pool" and "Pooling
and Servicing Agreement-- The Originator and
Master Servicer" agrees with the records of
the Originator;
(h) The Originator shall deliver to the Seller
for inclusion in the Prospectus Supplement
for Salomon Brothers Mortgage Securities
VII, Inc., Asset-Backed Floating Rate
Certificates, Series 1996-LB1, under the
captions "The Mortgage Pool-- Underwriting
Standards; Representations" and "Pooling and
Servicing Agreement-- The Originator and
Master Servicer" , or for inclusion in other
offering material such publicly available
information regarding the Originator, its
financial condition and its mortgage loan
delinquency, foreclosure and loss
experience, underwriting standards, lending
activities and loan sales, production, and
servicing and collection practices, and any
similar nonpublic, unaudited financial
information;
(i) A letter from Deloitte & Touche L.L.P.,
certified public accountants, dated the date
hereof and to the effect that they have
performed certain specified procedures as a
result of which they determined that certain
information of an accounting, financial or
statistical nature set forth in the
Purchaser's Prospectus Supplement, dated
September 20, 1996 under the captions
"Summary of Prospectus Supplement", "Yield
on the Certificates" and "Description of the
Certificates" agrees with the records of the
Seller; and
(j) Such further information, certificates,
opinions and documents as the Purchaser or
the Underwriter may reasonably request.
SECTION 10. COSTS. The Originator shall pay (or shall
reimburse the Purchaser or any other Person to the extent that the Purchaser or
such other Person shall
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pay) all costs and expenses incurred in connection with the transfer and
delivery of the Mortgage Loans, including without limitation, recording fees,
fees for title policy endorsements and continuations and the fees for recording
Assignments of Mortgage, the fees and expenses of the Originator's accountants
and in-house attorneys, the costs and expenses incurred in connection with
producing the Originator's loan loss, foreclosure and delinquency experience,
and the costs and expenses incurred in connection with obtaining the documents
referred to in Sections 9(d) and 9(e). The Seller shall pay (or shall reimburse
the Purchaser or any other Person to the extent that the Purchaser or such other
Person shall pay) the costs and expenses of printing (or otherwise reproducing)
and delivering this Agreement, the Pooling and Servicing Agreement, the
Certificates, the prospectus, prospectus supplement, and private placement
memorandum relating to the Certificates, the Insurance Agreement and other
related documents, the initial fees, costs and expenses of the Trustee, the
initial fees, costs and expenses of FSA, the fees and expenses of the Seller's
counsel in connection with the preparation of all documents relating to the
securitization of the Mortgage Loans, the filing fee charged by the Securities
and Exchange Commission for registration of the Certificates, the cost of
outside special counsel that may be required for the Originator, the cost of
obtaining the documents referred to in Section 9(g) and the fees charged by any
rating agency to rate the Certificates. All other costs and expenses in
connection with the transactions contemplated hereunder shall be borne by the
party incurring such expense.
SECTION 11. SERVICING. The Seller has represented to the
Purchaser that the Mortgage Loans are being serviced under the Purchase and
Servicing Agreement with the Originator, and it is understood and agreed by and
among the Seller, the Originator and the Purchaser that the interim servicing
arrangements under the Purchase and Servicing Agreement with the Originator will
be superseded by the servicing arrangements set forth in the Pooling and
Servicing Agreement.
SECTION 12. MANDATORY DELIVERY; GRANT OF SECURITY INTEREST.
The sale and delivery on the Closing Date of the Mortgage Loans described on the
Mortgage Loan Schedule in accordance with the terms and conditions of this
Agreement is mandatory. It is specifically understood and agreed that each
Mortgage Loan is unique and identifiable on the date hereof and that an award of
money damages would be insufficient to compensate the Purchaser for the losses
and damages incurred by the Purchaser in the event of the Seller's failure to
deliver the Mortgage Loans on or before the Closing Date. The Seller hereby
grants to the Purchaser a lien on and a continuing security interest in the
Seller's interest in each Mortgage Loan and each document and instrument
evidencing each such Mortgage Loan to secure the performance by the Seller of
its obligation hereunder, and the Seller agrees that it holds such Mortgage
Loans in custody for the Purchaser, subject to the Purchaser's (i) right, prior
to the Closing Date, to reject any Mortgage Loan to the extent permitted by this
Agreement, and (ii) obligation to deliver or cause to be delivered the
consideration for the Mortgage Loans pursuant to Section 8 hereof. Any Mortgage
Loans rejected by the Purchaser shall concurrently therewith be released from
the security interest created hereby. All rights and remedies of the Purchaser
under this Agreement are distinct from, and cumulative with, any other rights or
remedies under this Agreement or afforded by law or equity and all such rights
and remedies may be exercised concurrently, independently or successively.
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Notwithstanding the foregoing, if on the Closing Date, each of
the conditions set forth in Section 8 hereof shall have been satisfied and the
Purchaser shall not have paid or caused to be paid the Purchase Price, or any
such condition shall not have been waived or satisfied and the Purchaser
determines not to pay or cause to be paid the Purchase Price, the Purchaser
shall immediately effect the redelivery of the Mortgage Loans, if delivery to
the Purchaser has occurred and the security interest created by this Section 12
shall be deemed to have been released.
SECTION 13. NOTICES. All demands, notices and communications
hereunder shall be in writing and shall be deemed to have been duly given if
personally delivered to or mailed by registered mail, postage prepaid, or
transmitted by telex or telegraph and confirmed by a similar mailed writing, if
to the Purchaser, addressed to the Purchaser at Seven World Trade Center, New
York, New York 10048, Attention: Mortgage Finance Group, or such other address
as may hereafter be furnished to the Seller and the Originator in writing by the
Purchaser; if to the Seller, addressed to the Seller at Seven World Trade
Center, New York, New York 10048, Attention: Mortgage Finance Group, or to such
other address as the Seller may designate in writing to the Purchaser and the
Originator; and if to the Originator, addressed to the Originator at 1100 Town
and Country Road, Orange, California 92668, Attention: Del Dillingham, Esq., or
to such other address as the Originator may designate in writing to the
Purchaser and the Seller.
SECTION 14. SEVERABILITY OF PROVISIONS. Any part, provision,
representation or warranty of this Agreement which is prohibited or which is
held to be void or unenforceable shall be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions
hereof. Any part, provision, representation or warranty of this Agreement which
is prohibited or unenforceable or is held to be void or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction as to any Mortgage Loan shall not invalidate or render
unenforceable such provision in any other jurisdiction. To the extent permitted
by applicable law, the parties hereto waive any provision of law which prohibits
or renders void or unenforceable any provision hereof.
SECTION 15. AGREEMENT OF PARTIES. The Originator, the Seller
and the Purchaser each agree to execute and deliver such instruments and take
such actions as either of the others may, from time to time, reasonably request
in order to effectuate the purpose and to carry out the terms of this Agreement
and the Pooling and Servicing Agreement.
SECTION 16. SURVIVAL. (a) The Seller agrees that the
representations, warranties and agreements made by it herein and in any
certificate or other instrument delivered pursuant hereto shall be deemed to be
relied upon by the Purchaser, notwithstanding any investigation heretofore or
hereafter made by the Purchaser or on its behalf, and that the representations,
warranties and agreements made by the Seller herein or in any such certificate
or other instrument shall survive the delivery of and payment for the Mortgage
Loans and shall continue in full force and effect, notwithstanding any
restrictive or qualified endorsement on the Mortgage Notes and notwithstanding
subsequent termination of this Agreement, the Pooling and Servicing Agreement or
the Trust Fund.
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(b) The Originator agrees that the representations, warranties
and agreements made by it herein and in any certificate or other instrument
delivered pursuant hereto shall be deemed to be relied upon by the Seller and
the Purchaser, notwithstanding any investigation heretofore or hereafter made by
the Seller or the Purchaser or on the behalf of either, and that the
representations, warranties and agreements made by the Originator herein or in
any such certificate shall continue in full force and effect, notwithstanding
subsequent termination of this Agreement, the Pooling and Servicing Agreement or
the Trust Fund.
SECTION 17. INDEMNIFICATION. (a) The Originator will indemnify
and hold harmless the Purchaser and each person, if any, who controls the
Purchaser within the meaning of the Securities Act of 1933, as amended (the
"1933 Act"), against any losses, claims, damages or liabilities to which such
Purchaser or such controlling person may become subject, under the 1933 Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Prospectus Supplement
dated September 20, 1996 (the "Prospectus Supplement"), as amended or
supplemented, relating to the public offering of the Certificates, representing
interests in the Mortgage Loans, or in any other offering document (the "Private
Placement Memorandum") relating to the offering by the Purchaser or an affiliate
thereof, of the Residual Certificates, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading to the extent that such
untrue statement or alleged untrue statement or omission or alleged omission
relates to information set forth in the Prospectus Supplement on the front cover
in the fifth paragraph, in the Summary under the subheadings "Originator,"
"Master Servicer" and "The Mortgage Pool" and under the captions "The Mortgage
Pool -- General", "-- Underwriting Standards; Representations" and "Pooling and
Servicing Agreement -- The Originator and Master Servicer" (and substantially
identical information approved by the Originator set forth in the Private
Placement Memorandum relating to the Residual Certificates) (collectively, the
"Originator Information") and will reimburse the Purchaser and each such
controlling person for any legal or other expenses reasonably incurred by such
Purchaser and each such controlling person in connection with investigating or
defending any such loss, claim, damage, liability or action. The Originator's
liability under this Section 17 shall be in addition to any other liability the
Originator may otherwise have.
(b) The Purchaser agrees to indemnify and hold harmless the
Originator, its officers and its directors, and each person who controls the
Seller within the meaning of either the 1933 Act or the 1934 Act against any and
all losses, claims, damages or liabilities, joint or several, to which they may
become subject under the 1933 Act, the 1934 Act, or other federal or state
statutory law or regulation, at common law or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based in whole or in part upon any untrue statement or alleged untrue
statement of a material fact contained in the Prospectus Supplement, the
Prospectus or Private Placement Memorandum, or in any revision or amendment
thereof or supplement thereto, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein, in the light of the
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circumstances in which they were made, not misleading, as of the date thereof
and as of the Closing Date, except insofar as such losses, claims, damages or
liabilities are caused by any untrue statement or omission or alleged untrue
statement or omission made therein in reliance upon and in conformity with the
Originator's Information and will reimburse the Originator and each such
controlling person for any legal or other expenses reasonably incurred by such
Originator and each such controlling person in connection with investigating or
defending any such loss, claim, damage, liability or action. The Purchaser's
liability under this Section 17 shall be in addition to any other liability the
Purchaser may otherwise have.
(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of which
indemnity may be sought pursuant to either Section 17(a) or 17(b) above, such
person (the "indemnified party") shall promptly notify the person against whom
such indemnity may be sought (the "indemnifying party") in writing and the
indemnifying party, upon request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party and any others the indemnifying party may designate in such proceeding and
shall pay the reasonable fees and disbursements of such counsel related to such
proceeding. In any such proceeding, any indemnified party shall have the right
to retain its own counsel, but the reasonable fees and expenses of such counsel
shall be at the expense of such indemnified party unless (i) the indemnifying
party and the indemnified party shall have mutually agreed to the retention of
such counsel or (ii) the named parties to any such proceeding (including any
impleaded parties) include both the indemnifying party and the indemnified party
and representation of both parties by the same counsel would be inappropriate
due to actual or potential differing interests between them. It is understood
that the indemnifying party shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the reasonable fees
and expenses of more than one separate firm for all such indemnified parties.
Such firm shall be designated in writing by the Purchaser, in the case of
parties indemnified pursuant to clause 17(a) and by the Originator, in the case
of parties indemnified pursuant to clause 17(b). The indemnifying party may, at
its option, at any time upon written notice to the indemnified party, assume the
defense of any proceeding and may designate counsel satisfactory to the
indemnified party in connection therewith provided that the counsel so
designated would have no actual or potential conflict of interest in connection
with such representation. Unless it shall assume the defense of any proceeding,
the indemnifying party shall not be liable for any settlement of any proceeding
effected without its written consent, but if settled with such consent or if
there be a final judgment for the plaintiff, the indemnifying party agrees to
indemnify the indemnified party from and against any loss or liability by reason
of such settlement or judgment. If the indemnifying party assumes the defense of
any proceeding, it shall be entitled to settle such proceeding with the consent
of the indemnified party or, if such settlement provides for release of the
indemnified party in connection with all matters relating to the proceeding
which have been asserted against the indemnified party in such proceeding by the
other parties to such settlement, without the consent of the indemnified party.
(d) If the indemnification provided for in this Section 17 is
unavailable to an indemnified party under Section 17(a) or 17(b) hereof or
insufficient in respect of any losses, claims, damages or liabilities referred
to therein, then the indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by
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such indemnified party as a result of such losses, claims, damages or
liabilities, in such proportion as is appropriate to reflect the relative fault
of the indemnified and indemnifying parties in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities, as well
as any other relevant equitable considerations. The relative fault of the
indemnified and indemnifying parties shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by such parties and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
(e) The Purchaser and the Originator agree that it would not
be just and equitable if contribution pursuant to Section 17 were determined by
pro rata allocation or by any other method of allocation which does not take
account of the considerations referred to in Section 17(d) above. The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages and liabilities referred to in this Section 17 shall be deemed to
include, subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim, except where the indemnified party is
required to bear such expenses pursuant to this Section 17, which expenses the
indemnifying party shall pay as and when incurred, at the request of the
indemnified party, to the extent that the indemnifying party will be ultimately
obligated to pay such expenses. In the event that any expenses so paid by the
indemnifying party are subsequently determined to not be required to be borne by
the indemnifying party hereunder, the party which received such payment shall
promptly refund the amount so paid to the party which made such payment. 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.
(f) The indemnity and contribution agreements contained in
this Section 17 shall remain operative and in full force and effect regardless
of (i) any termination of this Agreement, (ii) any investigation made by the
Purchaser or any person controlling the Purchaser or by or on behalf of the
Originator and their respective directors or officers or any person controlling
the Originator, and (iii) acceptance of and payment for any of the Certificates.
SECTION 18. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS,
DUTIES, OBLIGATIONS AND RESPONSIBILITIES OF THE PARTIES HERETO SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS (INCLUDING THE CHOICE OF LAW
PROVISIONS) AND DECISIONS OF THE STATE OF NEW YORK. THE PARTIES HERETO INTEND
THAT THE PROVISIONS OF SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW
SHALL APPLY TO THIS AGREEMENT.
SECTION 19. MISCELLANEOUS. This Agreement may be executed in
two or more counterparts, each of which when so executed and delivered shall be
an original, but all of which together shall constitute one and the same
instrument. This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective successors and assigns. This Agreement
supersedes all prior agreements and understandings relating to
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the subject matter hereof. Neither this Agreement nor any term hereof may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against whom enforcement of the change, waiver,
discharge or termination is sought. The headings in this Agreement are for
purposes of reference only and shall not limit or otherwise affect the meaning
hereof.
It is the express intent of the parties hereto that the
conveyance of the Mortgage Loans by the Seller to the Purchaser as provided in
Section 4 hereof be, and be construed as, a sale of the Mortgage Loans by the
Seller to the Purchaser and not as a pledge of the Mortgage Loans by the Seller
to the Purchaser to secure a debt or other obligation of the Seller. However, in
the event that, notwithstanding the aforementioned intent of the parties, the
Mortgage Loans are held to be property of the Seller, then, (a) it is the
express intent of the parties that such conveyance be deemed a pledge of the
Mortgage Loans by the Seller to the Purchaser to secure a debt or other
obligation of the Seller and (b) (1) this Agreement shall also be deemed to be a
security agreement within the meaning of Articles 8 and 9 of the New York
Uniform Commercial Code; (2) the conveyance provided for in Section 4 hereof
shall be deemed to be a grant by the Seller to the Purchaser of a security
interest in all of the Seller's right, title and interest in and to the Mortgage
Loans and all amounts payable to the holders of the Mortgage Loans in accordance
with the terms thereof and all proceeds of the conversion, voluntary or
involuntary, of the foregoing into cash, instruments, securities or other
property, including without limitation all amounts, other than investment
earnings, from time to time held or invested in the Collection Account whether
in the form of cash, instruments, securities or other property; (3) the
possession by the Purchaser or its agent of Mortgage Notes, the related
Mortgages and such other items of property that constitute instruments, money,
negotiable documents or chattel paper shall be deemed to be "possession by the
secured party" for purposes of perfecting the security interest pursuant to
Section 9-305 of the New York Uniform Commercial Code; and (4) notifications to
persons holding such property, and acknowledgments, receipts or confirmations
from persons holding such property, shall be deemed notifications to, or
acknowledgments, receipts or confirmations from, financial intermediaries,
bailees or agents (as applicable) of the Purchaser for the purpose of perfecting
such security interest under applicable law. Any assignment of the interest of
the Purchaser pursuant to Section 4(d) hereof shall also be deemed to be an
assignment of any security interest created hereby. The Seller and the Purchaser
shall, to the extent consistent with this Agreement, take such actions as may be
necessary to ensure that, if this Agreement were deemed to create a security
interest in the Mortgage Loans, such security interest would be deemed to be a
perfected security interest of first priority under applicable law and will be
maintained as such throughout the term of this Agreement and the Pooling and
Servicing Agreement.
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<PAGE>
IN WITNESS WHEREOF, the Purchaser, the Seller and the
Originator have caused their names to be signed by their respective officers
thereunto duly authorized as of the date first above written.
SALOMON BROTHERS MORTGAGE
SECURITIES VII, INC.
By:___________________________________
Name:
Title:
SALOMON BROTHERS REALTY CORP.
By:__________________________________
Name:
Title:
LONG BEACH MORTGAGE COMPANY
By:__________________________________
Name: ___________________________
Title: ___________________________
<PAGE>
EXHIBIT 1
Pool Characteristics of the Mortgage Loans as delivered on the
Closing Date:
All percentages set forth herein are based upon the aggregate
unpaid principal balances of the Mortgage Loans as of the Cut-off Date.
(1) No Mortgage Loan had a Loan-to-Value Ratio at origination in
excess of 85.00%;
(2) No more than ____% of the Mortgage Loans (measured by the
Cut-off Date Principal Balance), are related to Mortgaged
Properties located in any one zip code area;
(3) Each Mortgaged Property is located in one of the states of
Arizona, California, Colorado, Connecticut, Delaware, Florida,
Georgia, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky,
Louisiana, Maine, Maryland, Massachusetts, Michigan,
Minnesota, Missouri, Montana, Nevada, New Hampshire, New
Jersey, New Mexico, New York, North Carolina, Ohio, Oregon,
Pennsylvania, Rhode Island, South Carolina, Texas, Utah,
Washington, West Virginia and Wisconsin;
(4) No more than ___% of the Mortgage Loans (measured by the
Cut-off Date Principal Balance) are secured by a leasehold
estate (the term of each such leasehold estate is not less
than 30 years);
(5) No more than approximately ____% of the Mortgage Loans
(measured by the Cut-off Date Principal Balance) are secured
by condominium units; no more than ____% of the Mortgage Loans
are secured by investor condominium units; and all condominium
Mortgage Loans have been originated on a form acceptable to
FNMA or FHLMC with such riders as have been acceptable to FNMA
or FHLMC, as the case may be;
(6) No more than ___% of the Mortgage Loans (measured by the
Cut-off Date Principal Balance) are secured by two- to
four-family dwellings. No more than ____% of the Mortgage
Loans (measured by the Cut-off Date Principal Balance) are
secured by dwelling units in PUDs. Approximately _____% of the
Mortgage Loans (measured by the Cut-off Date Principal
Balance) are secured by detached one-family dwellings;
(7) No Mortgage Loan had a principal balance in excess of
$____________ at origination;
(8) Each Mortgage Loan was originated on or after ________ [date]
and each Mortgage Loan has an initial Adjustment Date no later
than ________ [date];
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(9) On the basis of representations made by the Mortgagors in
their loan applications, no more than ____% of the Mortgage
Loans are secured by investor properties and at least _____%
of the owner-occupied Mortgage Loans are secured by
owner-occupied Mortgaged Properties which are primary
residences (in each case measured by the Cut-off Date
Principal Balance);
(10) The Mortgage Interest Rates borne by the Mortgage Loans as of
the Cut-off Date ranged from ____% per annum to _____% per
annum and the weighted average Mortgage Interest Rate as of
the Cut-off Date was ____% per annum;
(11) As of the Cut-off Date, approximately _____% of the Mortgage
Loans were made to refinance the related Mortgaged Properties,
approximately _____% of the Mortgage Loans were cash out
refinancings and approximately _____% of the Mortgage Loans
were made to purchase the related Mortgaged Properties, in
each case measured by the Cut-off Date Principal Balance;
(12) The Margins on the Mortgage Loans range from ____% to ____%
and the weighted average Margin as of the Cut-off Date was
approximately ____%;
(13) No more than _____% of the Mortgage Loans (measured by the
Cut-off Date Principal Balance) were originated by the
Originator under the Originator's "Fast Trac" mortgage loan
program, and no more than ____% of the Mortgage Loans
(measured by the Cut-off Date Principal Balance) were
originated by the Originator under the Originator's
"QuickCredit Fast Trac" mortgage loan program;
(14) With respect to the Originator's underwriting risk categories,
_____%, _____%, ____%, _____%, _____% and ____% of the
Mortgage Loans constitute A-Risk Mortgage Loans, B+ Risk
Mortgage Loans, B Risk Mortgage Loans, B-Risk Mortgage Loans,
C Risk Mortgage Loans and C-Risk Mortgage Loans, respectively,
in each case measured by the Cut-off Date Principal Balance;
and
(15) Mortgage Loan exceptions referred to in Section 6(a)(ii) are
set forth below:
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EXHIBIT 2
FORM OF MORTGAGE NOTE AND MORTGAGE/DEED OF TRUST
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<PAGE>
EXHIBIT 3
[FORM OF OFFICER'S CERTIFICATE OF THE SELLER]
Salomon Brothers Realty Corp.
Officer's Certificate
I, ________________, hereby certify that I am the duly
appointed Authorized Agent of Salomon Brothers Realty Corp., a New York
corporation (the "Seller"), and further certify as follows:
1. Attached hereto is a true and correct copy of the
Certificate of Incorporation and By-laws of the Seller, all of which
are in full force and effect on the date hereof. There has been no
amendment or other document filed affecting the Certificate of
Incorporation of the Seller since December 20, 1982, and no such
amendment has been authorized. There has been no amendment or other
document filed affecting the By-laws of the Seller since October 7,
1986, and no such amendment has been authorized. Attached hereto is a
good standing certificate issued by the Secretary of State of the State
of New York with respect to the Seller. No event has occurred since the
date thereof that, to the best knowledge of the undersigned, has
affected the good standing of the Seller under the laws of New York.
2. There are no actions, suits or proceedings pending or, to
the best of my knowledge, threatened against or affecting the Seller
which, if adversely determined, individually or in the aggregate, would
materially and adversely affect the Seller's ability to perform its
obligations under the Mortgage Loan Purchase Agreement (the "Mortgage
Loan Purchase Agreement"), dated September 20, 1996, among the Seller,
Long Beach Mortgage Company and Salomon Brothers Mortgage Securities
VII, Inc (the "Depositor"). No proceedings looking toward merger,
consolidation or liquidation, dissolution or bankruptcy of the Seller
are pending or contemplated.
3. Each person who, as an officer or representative of the
Seller, signed the Mortgage Loan Purchase Agreement and any other
document delivered prior hereto or on the date hereof in connection
with the purchase described in the Mortgage Loan Purchase Agreement
was, at the respective times of such signing and delivery, and is now,
duly elected or appointed, qualified and acting as such officer or
representative, and the signatures of such persons appearing on such
documents are their genuine signatures.
4. All of the representations and warranties of the Seller
under the Mortgage Loan Purchase Agreement are true and correct in all
material respects as of the Closing Date subject, in the case of the
Closing Schedule delivered pursuant to the Mortgage Loan Purchase
Agreement, to such amendments thereto as were duly made
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on or before the date hereof and no event has occurred with respect to
the Seller which, with notice or the passage of time or both, would
constitute a default under the Mortgage Loan Purchase Agreement.
5. The information set forth in the Mortgage Loan Schedule
attached as an exhibit to the Pooling and Servicing Agreement is true
and correct in all material respects.
6. The transactions contemplated in the Mortgage Loan Purchase
Agreement will be reported as a sale in the Seller's financial reports.
7. The information contained in the Depositor's Prospectus
Supplement, Asset-Backed Floating Rate Certificates, Series 1996-LB1,
dated September 20, 1996, and the Depositor's Private Placement
Memorandum, dated September 25, 1996, relating to the Mortgage Loans,
the Seller and its loan portfolio, specifically the information in the
summary under the caption "The Mortgage Pool," is true and accurate in
all material respects and does not contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
8. With respect to its sale of the Mortgage Loans and the
transactions and undertakings contemplated by the Mortgage Loan
Purchase Agreement, the Seller has complied in all material respects
with all the obligations by which it is bound and has satisfied in all
material respects all the conditions on its part to be performed or
satisfied prior to the Closing Date.
9. Capitalized terms used but not defined herein shall have
the meanings assigned in the Mortgage Loan Purchase Agreement.
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IN WITNESS WHEREOF, I have hereunto signed my name.
Dated:
By:________________________________
Name:
Title: Authorized Agent
I, ___________________, an ________________ of Salomon
Brothers Realty Corp., hereby certify that ________________ is a duly appointed,
qualified and acting Authorized Agent of the Seller and that the signature
appearing above is his genuine signature.
IN WITNESS WHEREOF, I have hereunto signed my name.
Dated:
By:________________________________
Name:
Title:
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EXHIBIT 4
[FORM OF OFFICER'S CERTIFICATE OF THE SELLER]
Salomon Brothers Mortgage Securities VII, Inc.
Asset-Backed Floating Rate Certificates
Series 1996-LB1
CERTIFICATE OF
SALOMON BROTHERS REALTY CORP.
Reference is made to the sale of mortgage loans (the "Mortgage
Loans") by Salomon Brothers Realty Corp. ("SBRC") to Salomon Brothers Mortgage
Securities VII, Inc. (the "Depositor") pursuant to a Mortgage Loan Purchase
Agreement, dated September 20, 1996, among SBRC, Long Beach Mortgage Company and
the Depositor (the "Purchase Agreement"), and the simultaneous issuance of
Asset-Backed Floating Rate Certificates, Series 1996-LB1, Class A and Class R
(the "Certificates"), pursuant to a Pooling and Servicing Agreement, dated as of
September 1, 1996 (the "Pooling and Servicing Agreement") among the Depositor,
as depositor, Long Beach Mortgage Company, as master servicer (the "Master
Servicer"), and Norwest Bank Minnesota, National Association, as trustee (the
"Trustee"). In consideration for its purchase of the Mortgage Loans, the
Depositor will deliver to SBRC immediately available funds. The Depositor will
sell the Certificates to Salomon Brothers Inc (the "Underwriter") for offer and
sale pursuant to the terms of an Underwriting Agreement, dated September 20,
1996 (the "Underwriting Agreement"), between the Depositor and the Underwriter.
The Purchase Agreement, the Pooling and Servicing Agreement and the Underwriting
Agreement together, are hereinafter collectively referred to as the
"Agreements". Capitalized terms not otherwise defined herein shall have the
meanings set forth in the Agreements.
The undersigned is a duly appointed Authorized Agent of
Salomon Brothers Realty Corp. and hereby certifies after reasonable
investigation that:
1. The price to be paid to SBRC for the Mortgage Loans will
have been paid in full at the closing of the sale pursuant to the Mortgage Loan
Purchase Agreement, and no agreement or arrangement exists or will exist that
permits the modification of the consideration for the Mortgage Loans subsequent
to that sale. SBRC will not have any right or obligation to repurchase any
Mortgage Loan, except as provided in the Mortgage Loan Purchase Agreement.
2. Each Mortgage Note and each related Mortgage has been
appropriately prepared and duly executed and delivered by the related Mortgagor,
and each Mortgage has been appropriately recorded in the applicable jurisdiction
and any intervening endorsement of any Mortgage Note, and any intervening
assignment of any Mortgage, which was required in order to transfer to SBRC
ownership of the Mortgage Loans, was obtained and completed.
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3. Each Mortgage Note has been endorsed or assigned in a
manner that satisfies any requirement necessary to transfer to the Trustee all
right, title and interest of the party so endorsing or assigning, as noteholder
or transferee thereof, in and to that Mortgage Note, as provided in the Purchase
Agreement and the Pooling and Servicing Agreement. Each Assignment to the
Trustee is in recordable form and is sufficient to effect the assignment and
transfer to the Depositor of the benefits of the assignor, as original mortgagee
or assignee thereof, under each Mortgage to which that Assignment relates, as
provided in the Purchase Agreement and the Pooling and Servicing Agreement. Each
Assignment to the Trustee has been or will be appropriately recorded to the
extent required under applicable law, as provided in the Pooling and Servicing
Agreement.
4. Each original Mortgage Note, each original recorded
Mortgage, each original recorded intervening Assignment and each Assignment to
the Trustee has been delivered to the Trustee at the direction of the Depositor,
and the Trustee will maintain continuous actual possession of each of the
foregoing in the State of New York. Neither the Trustee nor any agent of the
Trustee that has or will have possession of any Mortgage Note, Mortgage or
Assignment is, or will be, at any time during the term of the Pooling and
Servicing Agreement, an affiliate of SBRC or otherwise under the direct or
indirect control of SBRC.
5. Immediately prior to the transfer of the Mortgage Loans by
SBRC to the Depositor, SBRC was the sole owner of each Mortgage Loan, free and
clear of any and all prior liens, mortgages, security interests, pledges,
participation interests, adverse claims, charges or other equities or
encumbrances of any nature, and had full right and authority to sell, assign and
transfer the Mortgage Loans.
6. No Mortgage Note, Mortgage or other document constituting
part of the Mortgage File reflects or will reflect on its face any interest that
is inconsistent with the ownership interest of SBRC in and to the Mortgage Loans
or the transfer of the Mortgage Loans by SBRC to the Depositor.
7. The transfer of the Mortgage Loans by SBRC to the Depositor
as provided in the Purchase Agreement is intended by SBRC to be, and is in fact,
a contemporaneous exchange in which SBRC receives new value.
8. SBRC was solvent at all relevant times prior to, and will
not be rendered insolvent by, the transfer of the Mortgage Loans to the
Depositor.
9. SBRC did not transfer the Mortgage Loans to the Depositor
with any intent to hinder, delay or defraud any of SBRC's creditors.
10. None of SBRC, the Depositor, the Master Servicer or the
Trustee, or any agent acting on behalf of any of them, has been or will become a
party to any fraud or illegality affecting any Mortgage Loan or Certificate.
11. No breach of the Agreements by any party,
misrepresentation or failure by any party to perform all acts required to be
performed prior to the Closing Date, or fraud
A-2
<PAGE>
or mistake on the part of any party to the Agreements in connection with the
transactions contemplated by the Agreements, has occurred or will occur.
12. No party to the Agreements has taken or will take any
action that is unreasonable, arbitrary or capricious, or that is not taken in
good faith or in a commercially reasonable manner, affecting the Mortgage Loans
in connection with the transactions contemplated by the Agreements.
13. There is not and will not be any other agreement among the
parties to the Agreements that modifies or otherwise supplements the agreement
of the parties as expressed in the Agreements.
14. SBRC does not have and will not have any right to modify
or alter the terms of the transfer of the Mortgage Loans by SBRC to the
Depositor, or to substitute or add any mortgage loan thereafter, except as
provided in the Agreements.
15. SBRC will not take any action that is inconsistent with
the ownership interest in the Mortgage Loans evidenced by the Certificates. SBRC
will promptly indicate to other persons or entities, when a response is
appropriate, that the Mortgage Loans were transferred by SBRC to the Depositor.
SBRC will not claim any ownership interest directly in the Mortgage Loans other
than that represented by Certificates in which it may have an ownership interest
from time to time.
16. Under generally accepted accounting principles ("GAAP")
and for federal income tax purposes, SBRC will report the transfer of the
Mortgage Loans to the Depositor, as provided in the respective Purchase
Agreements as a sale of all of its interest in the Mortgage Loans. SBRC has been
advised by or has confirmed with its independent public accountants for similar
transactions that the sale will be so classified under GAAP in accordance with
Statement No. 77 of the Financial Accounting Standards Board (December 1983).
A-3
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this
Certificate as of September 25, 1996.
SALOMON BROTHERS REALTY
CORP.
By:____________________________
Name:
Title: Authorized Agent
A-4
<PAGE>
EXHIBIT 5
[FORM OF OPINION OF COUNSEL TO THE SELLER]
September __, 1996
Salomon Brothers Mortgage
Securities VII, Inc.
Seven World Trade Center
New York, New York 10048
Salomon Brothers Inc
Seven World Trade Center
New York, New York 10048
Financial Security Assurance Inc.
350 Park Avenue
New York, New York 10022
Long Beach Mortgage Company
1100 Town & Country Road
Orange, California 92868
Re: Salomon Brothers Mortgage Securities VII, Inc.
Asset-Backed Floating Rate Certificates
Series 1996-LB1
----------------------------------------------
Ladies and Gentlemen:
We have acted as counsel to Salomon Brothers Realty Corp. (the
"Seller") in connection with the sale of mortgage loans (the "Mortgage Loans")
by the Seller to Salomon Brothers Mortgage Securities VII, Inc. (the
"Depositor") pursuant to a Mortgage Loan Purchase Agreement, dated September 20,
1996, among the Seller, Long Beach Mortgage Company and the Depositor (the
"Agreement"). This opinion is being delivered to you pursuant to Section 9(c) of
the Agreement. Capitalized terms used but not defined herein have the meanings
set forth in the Agreement or in agreements referred to therein.
In rendering this opinion letter, we do not express any
opinion concerning any law other than the law of the State of New York and the
federal law of the United States, and we do not express any opinion concerning
the application of the "doing business" laws or the securities laws of any
jurisdiction other than the federal securities laws of the United States. In
addition, we do not express any opinion on any issue not expressly addressed
below.
A-1
<PAGE>
Salomon Brothers Mortgage Securities VII, Inc.
Salomon Brothers Inc
Financial Security Assurance Inc.
September __, 1996 Page 2.
In rendering this opinion letter, we have examined the
Agreement, the certificate of incorporation and by-laws of the Seller and such
records and other documents as we have deemed necessary. As to matters of fact,
we have examined and relied upon representations of the Seller contained in the
Agreement, and where we have deemed appropriate, representations or
certifications of officers of the Seller, the Depositor or public officials. We
have assumed the authenticity of all documents submitted to us as originals, the
genuineness of all signatures, the legal capacity of natural persons and the
conformity to the originals of all documents submitted to us as copies. We have
assumed, except as to the Seller, that all parties had the corporate power and
authority to enter into and perform all obligations thereunder and, as to such
parties, we also have assumed the due authorization by all requisite corporate
action, the due execution and delivery and the validity and binding effect and
enforceability of such documents. We have further assumed that there is not and
will not be any other agreement that materially supplements or otherwise
modifies the agreements expressed in the Agreements. We have further assumed the
conformity of the Mortgage Loans and related documents to the requirements of
the Agreement.
Based upon the foregoing, we are of the opinion that:
1. The Seller is a corporation duly organized and validly
existing and in good standing under the laws of the State of
New York and has the requisite corporate power to own its
properties, to conduct its business as presently conducted by
it, to own the Mortgage Loans, to transfer and convey the
Mortgage Loans to the Depositor and to enter into and perform
its obligations under the Agreement.
2. The Agreement has been duly authorized, executed and delivered
by the Seller and, upon due authorization, execution and
delivery by the other parties thereto, it will constitute a
valid, legal and binding agreement of the Seller, enforceable
against the Seller in accordance with its terms, except as
enforceability may be limited by (a) bankruptcy, insolvency,
liquidation, receivership, moratorium, reorganization or other
similar laws affecting the rights of creditors and (b) general
principles of equity, whether enforcement is sought in a
proceeding in equity or at law.
3. No consent, approval, authorization or order of any State of
New York or federal court or governmental agency or body is
required for the consummation by the Seller of the
transactions contemplated by the Agreement except for those
consents, approvals, authorizations or orders that previously
have been obtained.
A-2
<PAGE>
Salomon Brothers Mortgage Securities VII, Inc.
Salomon Brothers Inc
Financial Security Assurance Inc.
September __, 1996 Page 3.
4. Neither the transfer of the Mortgage Loans as provided in the
Agreement, nor the fulfillment of the terms of or the
consummation of any other of the transactions contemplated by
the Agreement, will result in a breach of any term or
provision of the certificate of incorporation or by-laws of
the Seller or, to the best of our knowledge, will conflict
with, result in a breach, violation or acceleration of or
constitute a default under, the terms of any indenture or
other agreement or instrument to which the Seller is a party
or by which it is bound, or any State of New York or federal
statute applicable to the Seller, or any order or regulation
of any State of New York or federal court, regulatory body,
administrative agency or governmental body having jurisdiction
over the Seller.
5. To the best of our knowledge, there are no actions,
proceedings or investigations pending or threatened against
the Seller before any court, administrative agency or other
tribunal (a) asserting the invalidity of the Agreement, (b)
seeking to prevent the consummation of any of the transactions
contemplated in the Agreement or (c) that might materially and
adversely affect the performance by the Seller of its
obligations under, or the validity or enforceability of, the
Agreement.
This opinion letter is rendered for the sole benefit of each
addressee hereof, and no other person is entitled to rely hereon. Copies of this
letter may not be furnished to any other person, nor may any portion of this
letter be quoted, circulated or referred to in any other document, without our
prior written consent.
Very truly yours,
THACHER PROFFITT & WOOD
By
A-3
<PAGE>
EXHIBIT 6
[FORM OF OFFICER'S CERTIFICATE OF THE ORIGINATOR]
Long Beach Mortgage Company
Officer's Certificate
I, ____________________________, hereby certify that I am the
duly elected _____________________________________, of Long Beach Mortgage
Company, a Delaware corporation (the "Company"), and further certify, on behalf
of the Company as
follows:
1. Attached hereto as Attachment I is a true and correct copy
of the Certificate of Incorporation and By-laws of the Company as in full force
and effect on the date hereof. No event has occurred since ________________
which has affected the good standing of the Company under the laws of the State
of Delaware
2. No proceedings looking toward merger, liquidation,
dissolution or bankruptcy of the Company are pending or contemplated.
3. Each person who, as an officer or attorney-in-fact of the
Company, signed (a) the Mortgage Loan Purchase Agreement (the "Purchase
Agreement") dated September 20, 1996 among the Company, Salomon Brothers Realty
Corp. and Salomon Brothers Mortgage Securities VII, Inc. ("SBMS VII"), or (b)
any other document delivered prior hereto or on the date hereof in connection
with the transactions contemplated by the Purchase Agreement and the Pooling and
Servicing Agreement dated as of September 1, 1996 among SBMS VII, the Company
and Norwest Bank Minnesota, National Association (the "Pooling Agreement") was,
at the respective times of such signing and delivery, and is as of the date
hereof, duly elected or appointed, qualified and acting as such officer or
attorney-in-fact, and the signatures of such persons appearing on such documents
are their genuine signatures.
4. Attached hereto as Attachment II is a true and correct copy
of the resolutions duly adopted by the board of directors of the Company on ,
199_ (the "Resolutions") with respect to the transactions contemplated by the
Purchase Agreement and the Pooling Agreement; said Resolutions have not been
amended or modified, annulled or revoked and are in full force and effect on the
date hereof.
5. All of the representations and warranties of the Company
contained in the Purchase Agreement are true and correct in all material
respects as of the Closing Date, and no event has occurred which, with notice or
the passage of time or both, would constitute a default under the Purchase
Agreement.
A-1
<PAGE>
6. The Company has performed all of its duties and has
satisfied all of the material conditions on its part to be performed or
satisfied prior to the Closing Date.
All capitalized terms used herein and not otherwise defined
shall have the meanings assigned to them in the Pooling Agreement.
IN WITNESS WHEREOF, I have hereunto signed my name and affixed
the seal of the Company.
Dated: September 25, 1996
(Seal) LONG BEACH MORTGAGE COMPANY
By:___________________________________
Name:
Title:
I, ________________________________, [Assistant] Secretary of
Loan Beach Mortgage Company, hereby certify that _______________________________
is the duly elected, qualified and acting ______________________________________
of Long Beach Mortgage Company and that the signature appearing above is his
genuine signature.
IN WITNESS WHEREOF, I have hereunto signed my name.
Dated: September 25, 1996
LONG BEACH MORTGAGE COMPANY
By:___________________________________
Name:
Title:
A-2
<PAGE>
EXHIBIT 7
[FORM OF OPINION OF COUNSEL TO THE ORIGINATOR]
TO: Addressees on Schedule A
September 25, 1996
Re: Salomon Brothers Mortgage Securities VII, Inc. Asset-Backed
Floating Rate Certificates' Series 1996-LB1
-----------------------------------------------------------
Ladies and Gentlemen:
I am General Counsel of Long Beach Mortgage Company (the "Company") and
have acted as counsel to the Company in connection with the servicing by the
Company of ownership interests in certain residential first mortgage loans (the
"Long Beach Loans") pursuant to the Pooling and Servicing Agreement, dated as of
September 1, 1996 (the "Pooling and Servicing Agreement"), among Salomon
Brothers Mortgage Securities VII, Inc., as depositor (the "Depositor"), the
Company, and Norwest Bank Minnesota, N.A., as trustee (the "Trustee"), relating
to the issuance and sale by the Depositor of Asset-Backed Floating Rate
Certificates, Series 1996-LB1, designated Class A (collectively, the "Class A
Certificates") and Class R (collectively, the "Certificates"). In connection
with the sale and servicing of the Long Beach Loans, the Company has entered
into the Insurance and Indemnity Agreement, dated as of September 25, 1996,
among Financial Security Assurance Inc. ("FSA"), the Company and the Depositor
(the "Insurance Agreement"), the Indemnification Agreement, dated as of
September 25, 1996, among FSA, the Depositor, the Company and the Underwriter
(the "Indemnification Agreement"), the Custodial Agreement, dated as of
September 25, 1996, among the Trustee, the Company, the Depositor and Texas
Commerce Bank National Association, as custodian (the "Custodial Agreement") and
the Mortgage Loan Purchase Agreement, dated September 20, 1996, among the
Depositor, the Company and Salomon Brothers Realty Corp. (the "Purchase
Agreement"); the Purchase Agreement, the Custodial Agreement, the Insurance
Agreement, the Indemnification Agreement and the Pooling and Servicing
Agreement, the "Agreements"). Capitalized terms not defined herein have the
meanings set forth in the Agreements.
As such counsel, I have examined original or reproduced or certified
copies of the certificate of incorporation and bylaws of the Company, as amended
to date, records of actions taken by the Board of Directors of the Company and
copies of the Agreements, the Prospectus Supplement, dated September 20, 1996
(the "Prospectus Supplement"), to the Prospectus, dated September 20, 1996,
relating to the Class A Certificates. I have also examined such other documents,
papers, statutes and authorities as I deem necessary as a basis for the opinions
hereinafter set forth. In all such examinations made by me in connection with
this opinion, I have assumed the genuineness of all signatures and the
completeness and authenticity of all records and all documents submitted to me
as copies
A-1
<PAGE>
- 2 -
thereof. As to various matters of fact relevant to the opinions hereinafter
expressed, I have relied upon the representations and warranties contained in
the Agreements and statements and certificates of officers and representatives
of the Company. As to matters in Paragraph 5 below with respect to which I opine
based on my knowledge, I have relied solely upon inquiries made to and responses
received from officers and representatives of the Company and the documents
furnished to me by representatives of the Company, which documents such
representatives have informed me include the only material indentures,
agreements and instruments to which the Company is a party or by which it or any
of its properties or assets are bound.
In addition to the foregoing, I have assumed that, if the Trustee, the
Company or any Certificateholder seeks to enforce any of their respective rights
under the Agreements, they will do so only in good faith and only in
circumstances and in a manner in which it is commercially reasonable to do so.
In addition to rendering legal advice and assistance to the Company in
the course of the negotiation and preparation of the Agreements, involving,
among other things, discussions and inquiries concerning various legal matters
and the review of certain corporate records, documents and proceedings, I also
participated in conferences with representatives of the Depositor and the
Company's independent certified public accountants, at which the contents of the
Prospectus Supplement and related matters were discussed and revised. I have
not, however, except with respect to matters expressly covered by this opinion,
independently verified the accuracy, completeness or fairness of the statements
contained in the Prospectus Supplement, and, due to the limitations inherent in
the information available to me and the nature and extent of my participation in
such conferences, I am unable to assume, and I do not assume, any responsibility
for the accuracy, completeness or fairness of such statements.
I express no opinion except as to (i) United States federal law and
(ii) the laws of the State of California.
Based upon and subject to the foregoing, I am of the opinion that:
1. The Company is duly authorized and qualified to transact any and all
business contemplated by the Agreements in any state in which a Mortgaged
Property securing a Long Beach Loan is located or is otherwise not required
under applicable law to effect such qualification and, in any event, is in
compliance with the doing business laws of any such State, to the extent
necessary to ensure the enforceability of each Long Beach Loan and the servicing
of the Long Beach Loans in accordance with the terms of the Pooling and
Servicing Agreement.
2. The Company has the power to engage in the transactions contemplated
by each and all of the Agreements and has all requisite power, authority and
legal right to execute and deliver the Agreements and any other documents
delivered in connection therewith and to perform and observe the terms and
conditions of such instruments.
A-2
<PAGE>
- 3 -
3. Each of the Agreements has been duly authorized, executed and
delivered by the Company and is a legal, valid and binding agreement enforceable
in accordance with its respective terms against the Company, except as such
enforcement may be limited by bankruptcy, insolvency, reorganization,
receivership, moratorium or other laws relating to or affecting the rights of
creditors generally and by general equity principles regardless of whether such
enforcement is considered in a proceeding in equity or at law.
4. No consent, approval, authorization, license, permit or order of any
court or governmental agency or body is required for the execution, delivery and
performance by the Company of, or compliance by the Company with, any or all of
the Agreements or the consummation of the transactions contemplated by the
Agreements.
5. The execution and delivery of the Agreements by the Company, the
servicing of the Long Beach Loans by the Company, the consummation of any other
of the transactions contemplated by the Agreements and the fulfillment of or
compliance with the terms of the Agreements are in the ordinary course of
business of the Company and will not (A) result in a material breach of any term
or provision of the charter or by-laws of the Company or (B) materially conflict
with, result in a material breach, violation or acceleration of or result in a
material default under the terms of any other material agreement or instrument
of which I have knowledge to which the Company is a party or by which it may be
bound, or any statute, order or regulation applicable to the Company of any
court, regulatory body, administrative agency or governmental body having
jurisdiction over the Company; and the Company is not a party to, bound by or in
material breach or violation of any material indenture or other material
agreement or instrument of which I have knowledge, or subject to or in violation
of any statute, order or regulation of any court, regulatory body,
administrative agency or governmental body having jurisdiction over it, which
materially and adversely affects or, to the best of my knowledge, will in the
future materially and adversely affect, (x) the ability of the Company to
perform its obligations under the Agreements or (y) the business, operations,
financial condition, properties or assets of the Company taken as a whole.
6. To the best of my knowledge, there is no action, suit, proceeding or
investigation pending or threatened against the Company which, in my judgment,
either in any one instance or in the aggregate, may result in any material
adverse change in the business, operations, financial condition, properties or
assets of the Company or in any material impairment of the right or ability of
the Company to carry on its business substantially as now conducted or in any
material liability on the part of the Company or which would draw into question
the validity of the Agreements, the Certificates or the Long Beach Loans or of
any action taken or to be taken in connection with the transactions contemplated
thereby, or which would be likely to impair materially the ability of the
Company to perform its obligations under the terms of the Agreements.
7. Based upon my participation, nothing has come to my attention that
has caused me to believe that the information contained in the Prospectus
Supplement on the front cover in the fifth paragraph, in the Summary under the
subheadings "Originator", "Master
A-3
<PAGE>
- 4 -
Servicer" and "The Mortgage Pool" and under the captions "The Mortgage
Pool--General", "--Underwriting Standards; Representations" and "Pooling and
Servicing Agreement--The Originator and Master Servicer" in particular (but
excluding the financial statements, the schedules and other financial and
statistical data included therein as to which I express no opinion) includes an
untrue statement of a material fact, or omits to state a material fact as of the
date hereof, necessary in order to make the statements therein, in light of the
circumstances under which they were made. not misleading.
This opinion is solely for the benefit of the addressees hereof, and
may not be relied upon in any manner by any other person or entity.
Respectfully submitted,
Del Dillingham
A-4
<PAGE>
- 5 -
SCHEDULE A
Salomon Brothers Mortgage Moody's Investors Service, Inc.
Securities VII, Inc. 99 Church Street
Seven World Trade Center, 29th Floor New York, New York 10007
New York, New York 10048
Standard and Poor's, A Division Norwest Bank Minnesota, N.A.
of The McGraw-Hill Companies Norwest Center
25 Broadway Sixth & Marquette
New York, New York 10004 Minneapolis, Minnesota 55479
Financial Security Assurance Inc. Texas Commerce Bank National Association
350 Park Avenue 712 Main Street
New York, New York 10022 Houston, Texas 77002
Salomon Brothers Inc
Seven World Trade Center
New York, New York 10048
<PAGE>
- 1 -
EXHIBIT E-1
REQUEST FOR RELEASE
(for Trustee/Custodian)
LOAN INFORMATION
Name of Mortgagor: ______________________
Master Servicer
Loan No.: ______________________
TRUSTEE/CUSTODIAN
Name: ______________________
Address: ______________________
Trustee/Custodian
Mortgage File No.: ______________________
DEPOSITOR
Name: SALOMON BROTHERS MORTGAGE
SECURITIES VII, INC.
Address: ___________________________
___________________________
Certificates: Asset-Backed Floating Rate
Certificates, Series 1996-LB1.
<PAGE>
- 2 -
The undersigned Master Servicer hereby acknowledges that it
has received from _______________________, as Trustee for the Holders of
Asset-Backed Floating Rate Certificates, Series 1996-LB1, the documents referred
to below (the "Documents"). All capitalized terms not otherwise defined in this
Request for Release shall have the meanings given them in the Pooling and
Servicing Agreement, dated as of September 1, 1996, among the Trustee, the
Depositor and the Master Servicer (the "Pooling and Servicing Agreement").
( ) Promissory Note dated _______________, 19__, in the original principal
sum of $__________, made by _____________________, payable to, or
endorsed to the order of, the Trustee.
( ) Mortgage recorded on _________________________ as instrument no.
____________________ in the County Recorder's Office of the County of
_________________, State of __________________ in book/reel/docket
_________________ of official records at page/image _____________.
( ) Deed of Trust recorded on ___________________ as instrument no.
________________ in the County Recorder's Office of the County of
_________________, State of ____________________ in book/reel/docket
_________________ of official records at page/image ______________.
( ) Assignment of Mortgage or Deed of Trust to the Trustee, recorded on
___________________ as instrument no. _________ in the County
Recorder's Office of the County of _______________, State of
_______________________ in book/reel/docket ____________ of official
records at page/image ____________.
( ) Other documents, including any amendments, assignments or other
assumptions of the Mortgage Note or Mortgage.
( ) ---------------------------------------------
( ) ---------------------------------------------
( ) ---------------------------------------------
( ) ---------------------------------------------
The undersigned Master Servicer hereby acknowledges and agrees
as follows:
(1) The Master Servicer shall hold and retain possession of
the Documents in trust for the benefit of the Trustee, solely for the
purposes provided in the Agreement.
(2) The Master Servicer shall not cause or permit the
Documents to become subject to, or encumbered by, any claim, liens,
security interest, charges, writs of
<PAGE>
- 3 -
attachment or other impositions nor shall the Master Servicer assert or
seek to assert any claims or rights of setoff to or against the
Documents or any proceeds thereof.
(3) The Master Servicer shall return each and every Document
previously requested from the Mortgage File to the Trustee when the
need therefor no longer exists, unless the Mortgage Loan relating to
the Documents has been liquidated and the proceeds thereof have been
remitted to the Collection Account and except as expressly provided in
the Agreement.
(4) The Documents and any proceeds thereof, including any
proceeds of proceeds, coming into the possession or control of the
Master Servicer shall at all times be earmarked for the account of the
Trustee, and the Master Servicer shall keep the Documents and any
proceeds separate and distinct from all other property in the Master
Servicer's possession, custody or control.
Dated:
LONG BEACH MORTGAGE COMPANY
By:________________________
Name:______________________
Title:_____________________
<PAGE>
- 1 -
EXHIBIT E-2
REQUEST FOR RELEASE
[Mortgage Loans Paid in Full]
OFFICERS' CERTIFICATE AND TRUST RECEIPT
ASSET-BACKED FLOATING RATE CERTIFICATES
SERIES 1996-LB1
____________________________________________________ HEREBY CERTIFIES THAT
HE/SHE IS AN OFFICER OF THE MASTER SERVICER, HOLDING THE OFFICE SET
FORTH BENEATH HIS/HER SIGNATURE, AND HEREBY FURTHER CERTIFIES AS
FOLLOWS:
WITH RESPECT TO THE MORTGAGE LOANS, AS THE TERM IS DEFINED IN THE
POOLING AND SERVICING AGREEMENT DESCRIBED IN THE ATTACHED
SCHEDULE:
ALL PAYMENTS OF PRINCIPAL, PREMIUM (IF ANY), AND INTEREST HAVE BEEN
MADE.
LOAN NUMBER:_______________ BORROWER'S NAME:_________________
COUNTY:______________
WE HEREBY CERTIFY THAT ALL AMOUNTS RECEIVED IN CONNECTION WITH SUCH PAYMENTS,
WHICH ARE REQUIRED TO BE DEPOSITED IN THE COLLECTION ACCOUNT PURSUANT TO SECTION
3.10 OF THE POOLING AND SERVICING AGREEMENT, HAVE BEEN OR WILL BE CREDITED.
_____________________ DATED:__________________
/ / VICE PRESIDENT
/ / ASSISTANT VICE PRESIDENT
<PAGE>
- 1 -
EXHIBIT F-1
FORM OF TRANSFEROR REPRESENTATION LETTER
[Date]
[Trustee]
__________________
__________________
[Certificate Registrar]
_______________________
_______________________
Re: Salomon Brothers Mortgage Securities VII, Inc.,
Asset-Backed Floating Rate Certificates, Series 1996-LB1,
Class ___, Representing a ___% Class ___ Percentage Interest
------------------------------------------------------------
Ladies and Gentlemen:
In connection with the transfer by ________________ (the
"Transferor") to ________________ (the "Transferee") of the captioned
asset-backed certificates (the "Certificates"), the Transferor hereby certifies
as follows:
Neither the Transferor nor anyone acting on its behalf has (a)
offered, pledged, sold, disposed of or otherwise transferred any Certificate,
any interest in any Certificate or any other similar security to any person in
any manner, (b) has solicited any offer to buy or to accept a pledge,
disposition or other transfer of any Certificate, any interest in any
Certificate or any other similar security from any person in any manner, (c) has
otherwise approached or negotiated with respect to any Certificate, any interest
in any Certificate or any other similar security with any person in any manner,
(d) has made any general solicitation by means of general advertising or in any
other manner, (e) has taken any other action, that (in the case of each of
subclauses (a) through (e) above) would constitute a distribution of the
Certificates under the Securities Act of 1933, as amended (the "1933 Act"), or
would render the disposition of any Certificate a violation of Section 5 of the
1933 Act or any state securities law or would require registration or
qualification pursuant thereto. The Transferor will not act, nor has it
authorized or will it authorize any person to act, in any manner set forth in
the foregoing sentence with respect to any Certificate. The Transferor will not
sell or otherwise transfer any of the Certificates, except in compliance with
the provisions of that certain Pooling and Servicing Agreement, dated as of
<PAGE>
- 2 -
September 1, 1996, among Salomon Brothers Mortgage Securities VII, Inc. as
Depositor, Long Beach Mortgage Company as Master Servicer and Norwest Bank
Minnesota, N.A. as Trustee (the "Pooling and Servicing Agreement"), pursuant to
which Pooling and Servicing Agreement the Certificates were issued.
Capitalized terms used but not defined herein shall have the
meanings assigned thereto in the Pooling and Servicing Agreement.
Very truly yours,
[Transferor]
By:_________________________
Name:_______________________
Title:______________________
<PAGE>
- 1 -
FORM OF TRANSFEREE REPRESENTATION LETTER
[Date]
[Trustee]
_________________
_________________
[Certificate Registrar]
_________________
_________________
Re: Salomon Brothers Mortgage Securities VII, Inc.,
Asset-Backed Floating Rate Certificates, Series 1996-LB1,
Class ___, Representing a ___% Class ___ Percentage Interest
------------------------------------------------------------
Ladies and Gentlemen:
In connection with the purchase from ______________________
(the "Transferor") on the date hereof of the captioned trust certificates (the
"Certificates"), _______________ (the "Transferee") hereby certifies as follows:
1. The Transferee is a "qualified institutional buyer" as that
term is defined in Rule 144A ("Rule 144A") under the Securities Act of
1933 (the "1933 Act") and has completed either of the forms of
certification to that effect attached hereto as Annex 1 or Annex 2. The
Transferee is aware that the sale to it is being made in reliance on
Rule 144A. The Transferee is acquiring the Certificates for its own
account or for the account of a qualified institutional buyer, and
understands that such Certificate 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.
2. The Transferee has been furnished with all information
regarding (a) the Certificates and distributions thereon, (b) the
nature, performance and servicing of the Mortgage Loans, (c) the
Pooling and Servicing Agreement referred to below, and (d) any credit
enhancement mechanism associated with the Certificates, that it has
requested.
<PAGE>
- 2 -
All capitalized terms used but not otherwise defined herein
have the respective meanings assigned thereto in the Pooling and Servicing
Agreement, dated as of September 1, 1996, among Salomon Brothers Mortgage
Securities VII, Inc. as Depositor, Long Beach Mortgage Company as Master
Servicer and Norwest Bank Minnesota, N.A. as Trustee, pursuant to which the
Certificates were issued.
[TRANSFEREE]
By:________________________
Name:______________________
Title:_____________________
<PAGE>
- 1 -
ANNEX 1 TO EXHIBIT F-1
QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
[For Transferees Other Than Registered Investment Companies]
The undersigned hereby certifies as follows to [name of
Transferor] (the "Transferor") and Norwest Bank Minnesota, N.A., as Trustee and
Certificate Registrar, with respect to the asset-backed certificates (the
"Certificates") described in the Transferee Certificate to which this
certification relates and to which this certification is an Annex:
1. As indicated below, the undersigned is the President, Chief
Financial Officer, Senior Vice President or other executive officer of the
entity purchasing the Certificates (the "Transferee").
2. In connection with purchases by the Transferee, the
Transferee is a "qualified institutional buyer" as that term is defined in Rule
144A under the Securities Act of 1933 ("Rule 144A") because (i) the Transferee
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 Transferee's most recent fiscal year (such amount being calculated in
accordance with Rule 144A) and (ii) the Transferee satisfies the criteria in the
category marked below.
___ CORPORATION, ETC. The Transferee is a corporation (other than
a bank, savings and loan association or similar institution),
Massachusetts or similar business trust, partnership, or any
organization described in Section 501(c)(3) of the Internal
Revenue Code of 1986.
___ BANK. The Transferee (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, A COPY OF WHICH IS
ATTACHED HERETO.
___ SAVINGS AND LOAN. The Transferee (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 any such institutions or is a foreign savings
- --------
1 Transferee must own and/or invest on a discretionary basis at least
$100,000,000 in securities unless Transferee is a dealer, and, in that case,
Transferee must own and/or invest on a discretionary basis at least $10,000,000
in securities.
<PAGE>
- 2 -
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, A COPY OF WHICH IS
ATTACHED HERETO.
___ BROKER-DEALER. The Transferee is a dealer registered pursuant
to Section 15 of the Securities Exchange Act of 1934.
___ INSURANCE COMPANY. The Transferee 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 Transferee 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 Transferee is an employee benefit plan within
the meaning of Title I of the Employee Retirement Income
Security Act of 1974.
___ INVESTMENT ADVISOR. The Transferee is an investment advisor
registered under the Investment Advisers Act of 1940.
3. The term "SECURITIES" as used herein DOES NOT INCLUDE (i)
securities of issuers that are affiliated with the Transferee, (ii) securities
that are part of an unsold allotment to or subscription by the Transferee, if
the Transferee is a dealer, (iii) securities issued or guaranteed by the U.S. or
any instrumentality thereof, (iv) bank deposit notes and certificates of
deposit, (v) loan participations, (vi) repurchase agreements, (vii) securities
owned but subject to a repurchase agreement and (viii) 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 Transferee, the
Transferee used the cost of such securities to the Transferee and did not
include any of the securities referred to in the preceding paragraph. Further,
in determining such aggregate amount, the Transferee may have included
securities owned by subsidiaries of the Transferee, but only if such
subsidiaries are consolidated with the Transferee in its financial statements
prepared in accordance with generally accepted accounting principles and if the
investments of such subsidiaries are managed under the Transferee's direction.
However, such securities were not included if the Transferee is a
majority-owned, consolidated subsidiary of another enterprise and the Transferee
is not itself a reporting company under the Securities Exchange Act of 1934.
5. The Transferee acknowledges that it is familiar with Rule
144A and understands that the Transferor and other parties related to the
Certificates are relying and
<PAGE>
- 3 -
will continue to rely on the statements made herein because one or more sales to
the Transferee may be in reliance on Rule 144A.
___ ___ Will the Transferee be purchasing the Certificates
Yes No only for the Transferee's own account?
6. If the answer to the foregoing question is "no", the
Transferee agrees that, in connection with any purchase of securities sold to
the Transferee for the account of a third party (including any separate account)
in reliance on Rule 144A, the Transferee 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 Transferee agrees that the Transferee
will not purchase securities for a third party unless the Transferee 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 Transferee 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 Transferee's purchase of the
Certificates will constitute a reaffirmation of this certification as of the
date of such purchase. In addition, if the Transferee is a bank or savings and
loan as provided above, the Transferee agrees that it will furnish to such
parties updated annual financial statements promptly after they become
available.
Dated:
________________________________
Print Name of Transferee
By:_____________________________
Name:___________________________
Title:__________________________
<PAGE>
- 1 -
ANNEX 2 TO EXHIBIT F-1
QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
[For Transferees That Are Registered Investment Companies]
The undersigned hereby certifies as follows to [name of
Transferor] (the "Transferor") and Norwest Bank Minnesota, N.A., as Trustee and
Certificate Registrar, with respect to the asset-backed certificates (the
"Certificates") described in the Transferee Certificate to which this
certification relates and to which this certification is an Annex:
1. As indicated below, the undersigned is the President, Chief
Financial Officer or Senior Vice President of the entity purchasing the
Certificates (the "Transferee") or, if the Transferee is a "qualified
institutional buyer" as that term is defined in Rule 144A under the Securities
Act of 1933 ("Rule 144A") because the Transferee is part of a Family of
Investment Companies (as defined below), is such an officer of the investment
adviser (the "Adviser").
2. In connection with purchases by the Transferee, the
Transferee is a "qualified institutional buyer" as defined in Rule 144A because
(i) the Transferee is an investment company registered under the Investment
Company Act of 1940, and (ii) as marked below, the Transferee alone, or the
Transferee'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 Transferee's most recent fiscal year. For purposes of determining the
amount of securities owned by the Transferee or the Transferee's Family of
Investment Companies, the cost of such securities was used.
____ The Transferee owned $___________________ in securities (other
than the excluded securities referred to below) as of the end
of the Transferee's most recent fiscal year (such amount being
calculated in accordance with Rule 144A).
____ The Transferee 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 Transferee'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>
- 2 -
4. The term "SECURITIES" as used herein does not include (i)
securities of issuers that are affiliated with the Transferee or are part of the
Transferee's Family of Investment Companies, (ii) securities issued or
guaranteed by the U.S. or any instrumentality thereof, (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.
5. The Transferee is familiar with Rule 144A and understands
that the parties to which this certification is being made are relying and will
continue to rely on the statements made herein because one or more sales to the
Transferee will be in reliance on Rule 144A. In addition, the Transferee will
only purchase for the Transferee's own account.
6. The undersigned will notify the parties to which this
certification is made of any changes in the information and conclusions herein.
Until such notice, the Transferee's purchase of the Certificates will constitute
a reaffirmation of this certification by the undersigned as of the date of such
purchase.
Dated:
___________________________________
Print Name of Transferee or Advisor
By:________________________________
Name:______________________________
Title:_____________________________
IF AN ADVISER:
___________________________________
Print Name of Transferee
<PAGE>
- 1 -
FORM OF TRANSFEREE REPRESENTATION LETTER
The undersigned hereby certifies on behalf of the purchaser
named below (the "Purchaser") as follows:
1. I am an executive officer of the Purchaser.
2. The Purchaser is a "qualified institutional buyer", as
defined in Rule 144A, ("Rule 144A") under the Securities Act of 1933,
as amended.
3. As of the date specified below (which is not earlier than
the last day of the Purchaser's most recent fiscal year), the amount of
"securities", computed for purposes of Rule 144A, owned and invested on
a discretionary basis by the Purchaser was in excess of $100,000,000.
Name of Purchaser_______________________________________________________________
By: (Signature)_______________________________________________________________
Name of Signatory_______________________________________________________________
Title___________________________________________________________________________
Date of this certificate________________________________________________________
Date of information provided in paragraph 3_____________________________________
<PAGE>
- 1 -
EXHIBIT F-2
FORM OF TRANSFER AFFIDAVIT AND AGREEMENT
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
_______________, being duly sworn, deposes, represents and
warrants as follows:
17. I am a ______________________ of _________________________
(the "Owner") a corporation duly organized and existing under the laws of
______________, the record owner of Salomon Brothers Mortgage Securities VII,
Inc., Asset-Backed Floating Rate Certificates, Series 1996-LB1, Class R (the
"Class R Certificates"), on behalf of whom I make this affidavit and agreement.
Capitalized terms used but not defined herein have the respective meanings
assigned thereto in the Pooling and Servicing Agreement pursuant to which the
Class R Certificates were issued.
18. The Owner (i) is and will be a "Permitted Transferee" as
of ____________________, 199___ and (ii) is acquiring the Class R Certificates
for its own account or for the account of another Owner from which it has
received an affidavit in substantially the same form as this affidavit. A
"Permitted Transferee" is any person other than a "disqualified organization" or
a possession of the United States. For this purpose, a "disqualified
organization" means the United States, any state or political subdivision
thereof, any agency or instrumentality of any of the foregoing (other than an
instrumentality all of the activities of which are subject to tax and, except
for the Federal Home Loan Mortgage Corporation, a majority of whose board of
directors is not selected by any such governmental entity) or any foreign
government, international organization or any agency or instrumentality of such
foreign government or organization, any rural electric or telephone cooperative,
or any organization (other than certain farmers' cooperatives) that is generally
exempt from federal income tax unless such organization is subject to the tax on
unrelated business taxable income.
19. The Owner is aware (i) of the tax that would be imposed on
transfers of the Class R Certificates to disqualified organizations under the
Internal Revenue Code of 1986 that applies to all transfers of the Class R
Certificates after March 31, 1988; (ii) that such tax would be on the transferor
or, if such transfer is through an agent (which person includes a broker,
nominee or middleman) for a non-Permitted Transferee, on the agent; (iii) that
the person otherwise liable for the tax shall be relieved of liability for the
tax if the transferee furnishes to such person an affidavit that the transferee
is a Permitted Transferee and, at the time of transfer, such person does not
have actual knowledge that the affidavit is false; and (iv) that each of the
Class R Certificates may be a "noneconomic residual interest"
<PAGE>
- 2 -
within the meaning of proposed Treasury regulations promulgated under the Code
and that the transferor of a "noneconomic residual interest" will remain liable
for any taxes due with respect to the income on such residual interest, unless
no significant purpose of the transfer is to impede the assessment or collection
of tax.
20. The Owner is aware of the tax imposed on a "pass-through
entity" holding the Class R Certificates if, at any time during the taxable year
of the pass-through entity, a non-Permitted Transferee is the record holder of
an interest in such entity. (For this purpose, a "pass-through entity" includes
a regulated investment company, a real estate investment trust or common trust
fund, a partnership, trust or estate, and certain cooperatives.)
21. The Owner is aware that the Trustee will not register the
transfer of any Class R Certificate unless the transferee, or the transferee's
agent, delivers to the Trustee, among other things, an affidavit in
substantially the same form as this affidavit. The Owner expressly agrees that
it will not consummate any such transfer if it knows or believes that any of the
representations contained in such affidavit and agreement are false.
22. The Owner consents to any additional restrictions or
arrangements that shall be deemed necessary upon advice of counsel to constitute
a reasonable arrangement to ensure that the Class R Certificates will only be
owned, directly or indirectly, by an Owner that is a Permitted Transferee.
23. The Owner's taxpayer identification number is
___________________.
24. The Owner has reviewed the restrictions set forth on the
face of the Class R Certificates and the provisions of Section 5.02(d) of the
Pooling and Servicing Agreement under which the Class R Certificates were issued
(in particular, clauses (iii)(A) and (iii)(B) of Section 5.02(d) which authorize
the Trustee to deliver payments to a person other than the Owner and negotiate a
mandatory sale by the Trustee in the event that the Owner holds such Certificate
in violation of Section 5.02(d)); and that the Owner expressly agrees to be
bound by and to comply with such restrictions and provisions.
25. The Owner is not acquiring and will not transfer the Class
R Certificates in order to impede the assessment or collection of any tax.
26. The Owner anticipates that it will, so long as it holds
the Class R Certificates, have sufficient assets to pay any taxes owed by the
holder of such Class R Certificates, and hereby represents to and for the
benefit of the person from whom it acquired the Class R Certificates that the
Owner intends to pay taxes associated with holding such Class R Certificates as
they become due, fully understanding that it may incur tax liabilities in excess
of any cash flows generated by the Class R Certificates.
27. The Owner has no present knowledge that it may become
insolvent or subject to a bankruptcy proceeding for so long as it holds the
Class R Certificates.
<PAGE>
- 3 -
28. The Owner has no present knowledge or expectation that it
will be unable to pay any United States taxes owed by it so long as any of the
Certificates remain outstanding.
29. The Owner is not acquiring the Class R Certificates with
the intent to transfer the Class R Certificates to any person or entity that
will not have sufficient assets to pay any taxes owed by the holder of such
Class R Certificates, or that may become insolvent or subject to a bankruptcy
proceeding, for so long as the Class R Certificates remain outstanding.
30. The Owner will, in connection with any transfer that it
makes of the Class R Certificates, obtain from its transferee the
representations required by Section 5.02(d) of the Pooling and Servicing
Agreement under which the Class R Certificate were issued and will not
consummate any such transfer if it knows, or knows facts that should lead it to
believe, that any such representations are false.
31. The Owner will, in connection with any transfer that it
makes of the Class R Certificates, deliver to the Trustee an affidavit, which
represents and warrants that it is not transferring the Class R Certificates to
impede the assessment or collection of any tax and that it has no actual
knowledge that the proposed transferee: (i) has insufficient assets to pay any
taxes owed by such transferee as holder of the Class R Certificates; (ii) may
become insolvent or subject to a bankruptcy proceeding for so long as the Class
R Certificates remains outstanding; and (iii) is not a "Permitted Transferee".
32. The Owner is a citizen or resident of the United States, a
corporation, partnership or other entity created or organized in, or under the
laws of, the United States or any political subdivision thereof, or an estate or
trust whose income from sources without the United States may be included in
gross income for United States federal income tax purposes regardless of its
connection with the conduct of a trade or business within the United States.
<PAGE>
IN WITNESS WHEREOF, the Owner has caused this instrument to be
executed on its behalf, pursuant to the authority of its Board of Directors, by
its [Vice] President, attested by its [Assistant] Secretary, this ____ day of
__________, 199___.
[OWNER]
By:________________________
Name:______________________
Title: [Vice] President
ATTEST:
By:_____________________
Name:___________________
Title: [Assistant] Secretary
Personally appeared before me the above-named _______________,
known or proved to me to be the same person who executed the foregoing
instrument and to be a [Vice] President of the Owner, and acknowledged to me
that [he/she] executed the same as [his/her] free act and deed and the free act
and deed of the Owner.
Subscribed and sworn before me this ____ day of __________,
199___.
___________________________
Notary Public
County of _________________
State of __________________
My Commission expires:
<PAGE>
- 1 -
FORM OF TRANSFEROR AFFIDAVIT
STATE OF NEW YORK )
: ss. :
COUNTY OF NEW YORK )
_____________________, being duly sworn, deposes, represents
and warrants as follows:
1. I am a ____________________ of ____________________________
(the "Owner"), a corporation duly organized and existing under the laws of
______________, on behalf of whom I make this affidavit.
2. The Owner is not transferring the Residual Certificates to
impede the assessment or collection of any tax.
3. The Owner has no actual knowledge that the Person that is
the proposed transferee (the "Purchaser") of the Class R Certificates: (i) has
insufficient assets to pay any taxes owed by such proposed transferee as holder
of the Class R Certificates; (ii) may become insolvent or subject to a
bankruptcy proceeding for so long as the Class R Certificates remain outstanding
and (iii) is not a Permitted Transferee.
4. The Owner understands that the Purchaser has delivered to
the Trustee a transfer affidavit and agreement in the form attached to the
Pooling and Servicing Agreement as Exhibit F-2. The Owner does not know or
believe that any representation contained therein is false.
5. At the time of transfer, the Owner has conducted a
reasonable investigation of the financial condition of the Purchaser as
contemplated by Treasury Regulations Section 1.860E-1(c)(4)(i) and, as a result
of that investigation, the Owner has determined that the Purchaser has
historically paid its debts as they became due and has found no significant
evidence to indicate that the Purchaser will not continue to pay its debts as
they become due in the future. The Owner understands that the transfer of a
Residual Certificate may not be respected for United States income tax purposes
(and the Owner may continue to be liable for United States income taxes
associated therewith) unless the Owner has conducted such an investigation.
6. Capitalized terms not otherwise defined herein shall have
the meanings ascribed to them in the Pooling and Servicing Agreement
<PAGE>
IN WITNESS WHEREOF, the Owner has caused this instrument to be
executed on its behalf, pursuant to the authority of its Board of Directors, by
its [Vice] President, attested by its [Assistant] Secretary, this ____ day of
___________, 199___.
[OWNER]
By:________________________
Name:______________________
Title: [Vice] President
ATTEST:
By:___________________
Name:_________________
Title: [Assistant] Secretary
Personally appeared before me the above-named , known or
proved to me to be the same person who executed the foregoing instrument and to
be a [Vice] President of the Owner, and acknowledged to me that [he/she]
executed the same as [his/her] free act and deed and the free act and deed of
the Owner.
Subscribed and sworn before me this ____ day of __________,
199___.
___________________________
Notary Public
County of _________________
State of __________________
My Commission expires:
<PAGE>
- 1 -
EXHIBIT G
INTENTIONALLY OMITTED
<PAGE>
- 1 -
EXHIBIT H
FORM OF CUSTODIAL AGREEMENT
THIS CUSTODIAL AGREEMENT (as amended and supplemented from
time to time, the "Agreement"), dated as of September 25, 1996, by and among
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, not individually, but solely as
Trustee (including its successors under the Pooling and Servicing Agreement
defined below, the "Trustee"), LONG BEACH MORTGAGE COMPANY (together with any
successor in interest or successor under the Pooling and Servicing Agreement
referred to below, the "Master Servicer"), SALOMON BROTHERS MORTGAGE SECURITIES
VII, INC. (the "Depositor") and TEXAS COMMERCE BANK NATIONAL ASSOCIATION,
(together with any successor in interest or any successor appointed hereunder,
the "Custodian").
W I T N E S S E T H T H A T :
- - - - - - - - - - - - - -
WHEREAS, the Master Servicer, the Trustee and the Depositor
have entered into a Pooling and Servicing Agreement, dated as of September 1,
1996, relating to the issuance of Salomon Brothers Mortgage Securities VII,
Inc., Asset-Backed Floating Rate Certificates, Series 1996-LB1 (as in effect on
the date of this Agreement, the "Original Pooling and Servicing Agreement", and
as amended and supplemented from time to time, the "Pooling and Servicing
Agreement"); and
WHEREAS, the Custodian has agreed to act as agent for the
Trustee for the purposes of receiving and holding certain documents and other
instruments delivered by the Depositor under the Pooling and Servicing
Agreement, all upon the terms and conditions and subject to the limitations
hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements hereinafter set forth, the Trustee, the
Depositor, the Master Servicer and the Custodian hereby agree as follows:
ARTICLE I
Definitions
Capitalized terms used in this Agreement and not defined
herein shall have the meanings assigned in the Original Pooling and Servicing
Agreement, unless otherwise required by the context herein.
ARTICLE II
Custody of Mortgage Documents
<PAGE>
- 2 -
Section 2.1. CUSTODIAN TO ACT AS AGENT; ACCEPTANCE OF MORTGAGE
FILES. The Custodian, as the duly appointed agent and bailee of the Trustee for
these purposes, hereby accepts the agency contemplated hereunder and
acknowledges receipt as of the Closing Date of the documents listed in Section
2.1(a) and (b) and, as agent for the Trustee, agrees to verify receipt of the
following documents pertaining to each of the Mortgage Loans identified on the
Mortgage Loan Schedule attached to the Pooling and Servicing Agreement listed in
Section 2.1(c), (d), (e) and (f) in accordance with Section 2.2 hereof:
(a) the original Mortgage Note, endorsed in the following form:
"Pay to the order of Norwest Bank Minnesota, National Association, as
Trustee for the registered holders of Salomon Brothers Mortgage
Securities VII, Inc., Series 1996-LB1, without recourse", with all
prior and intervening endorsements showing a complete chain of
endorsement from the originator to the Person so endorsing to the
Trustee;
(b) the original Mortgage with evidence of recording thereon,
and the original recorded power of attorney, if the Mortgage was
executed pursuant to a power of attorney, with evidence of recording
thereon;
(c) an original Assignment of the Mortgage executed in the
following form: "Norwest Bank Minnesota, National Association, as
Trustee for the registered holders of Salomon Brothers Mortgage
Securities VII, Inc., Series 1996-LB1";
(d) the original recorded Assignment or Assignments of the
Mortgage showing a complete chain of assignment from the originator to
the Person assigning the Mortgage to the Trustee as contemplated by the
immediately preceding clause (c);
(e) the original or copies of each assumption, modification,
written assurance or substitution agreement, if any; and
(f) the original lender's title insurance policy, together with
all endorsements or riders which were issued with or subsequent to the
issuance of such policy, insuring the priority of the Mortgage as a
first lien on the Mortgaged Property represented therein as a fee
interest vested in the Mortgagor, or in the event such original title
policy is unavailable, a written commitment or uniform binder or
preliminary report of title issued by the title insurance or escrow
company.
In furtherance of facilitating the acknowledgement of such
receipt by the Custodian, the Trustee hereby instructs the Custodian to cause
the endorsement or execution, as the case may be, of the documents listed in
Section 2.1(a) and (c) to be completed by the Custodian in the forms prescribed
by Section 2.1(a) and (c).
The Master Servicer (in its capacity as Originator) promptly
shall (and in no event later than five Business Days following the later of the
Closing Date and the date of receipt by the Master Servicer of the recording
information for a Mortgage) submit or cause to be submitted for recording, at no
expense to the Trust Fund, the Depositor, the Custodian,
<PAGE>
- 3 -
the Certificate Insurer or the Trustee, in the appropriate public office for
real property records, each Assignment referred to in clauses (c) and (d) of
this Section 2.1. In the event that any such Assignment is lost or returned
unrecorded because of a defect therein, the Master Servicer (in its capacity as
Originator) promptly shall prepare a substitute Assignment or cure such defect,
as the case may be, and thereafter cause each such Assignment to be duly
recorded.
Notwithstanding anything to the contrary contained in this
Section 2.1, in those instances where either (x) the public recording office has
not returned the original Mortgage, power of attorney or Assignment or (y) the
public recording office retains the original Mortgage, power of attorney or
Assignment after it has been recorded or such document has been lost, the
obligations of the Depositor hereunder shall be deemed to have been satisfied
upon (1) delivery by the Depositor, the Originator or the Trustee to the
Custodian of a copy of such Mortgage, power of attorney or Assignment certified
by the Originator in the case of (x) above or the public recording office in the
case of (y) above to be a true and complete copy of the recorded original
thereof and (2) if such copy is certified by the Originator delivery to the
Custodian, promptly upon receipt thereof of either the original or a copy of
such document certified by the public recording office to be a true and complete
copy of the original. Upon delivery to the Depositor, the Originator or the
Trustee (x) by the public recording office of any recorded original Mortgage,
power of attorney or Assignment or (y) by a title insurance or escrow company of
any lender's title insurance policy, the Depositor, the Originator or the
Trustee, as the case may be, promptly shall (and in no event later than five
Business Days following such receipt) deliver such document to the Custodian.
The Depositor shall deliver or cause to be delivered to the Custodian promptly
upon receipt thereof any other original documents constituting a part of a
Mortgage File received with respect to any Mortgage Loan, including, but not
limited to, any original documents evidencing an assumption or modification of
any Mortgage Loan. All Mortgage Loan documents held by the Custodian as to each
Mortgage Loan shall hereinafter be referred to as the "Mortgage File".
In the event that any original document is required pursuant
to the terms of this Section to be a part of a Mortgage File, such document
shall be delivered promptly to the Custodian.
In the event of any failure of any party to deliver any
document as provided above, the Custodian shall give prompt written notice of
such failure to the other parties to this Agreement. Once the Custodian has
given notice of such failure it is to continue to hold the Mortgage Loan and
Mortgage File unless otherwise directed.
<PAGE>
- 4 -
The parties hereto agree and acknowledge that prior to the
transfer and sale of the Mortgage Loans pursuant to the Mortgage Loan Purchase
Agreement, all Mortgage Loan documents delivered to the Custodian for the
benefit of the Depositor and the possession by the Custodian of such Mortgage
Loan Documents shall be at the will of the Depositor and such possession by the
Custodian shall be in a custodial capacity only.
Section 2.2. REVIEW OF MORTGAGE FILES. The Custodian agrees,
for the benefit of the Trustee and the Certificateholders, to review each
Mortgage File within 5 days after receipt of such Mortgage File (but in no event
later than two Business Days prior to the Closing Date) and to certify in
substantially the form attached hereto as Exhibit One that, as to each Mortgage
Loan listed in the Mortgage Loan Schedule (other than any Mortgage Loan paid in
full or any Mortgage Loan specifically identified in the exception report
annexed thereto as not being covered by such certification), (i) all documents
constituting part of such Mortgage File (other than such documents described in
Section 2.1(e)) required to be delivered to it pursuant to this Agreement are in
its possession, (ii) such documents have been reviewed by it and appear regular
on their face and relate to such Mortgage Loan, and (iii) based on its
examination and only as to the foregoing, the information set forth in the
Mortgage Loan Schedule that corresponds to items (i) through (iii), (vi),
(x)(A), (xi), (xv), (xviii) and (xx) through (xxiii) of the definition of
"Mortgage Loan Schedule" accurately reflects information set forth in the
Mortgage File. It is herein acknowledged that, in conducting such review, the
Custodian 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 genuine, enforceable, or appropriate for the represented purpose or that
they have actually been recorded or that they are other than what they purport
to be on their face, or (ii) to determine whether any Mortgage File should
include any of the documents specified in clause (e) of Section 2.1.
The Mortgage Files will be delivered to the Custodian not less
than 2 days prior to the Closing Date.
Prior to the first anniversary date of this Agreement the
Custodian shall deliver to the Trustee, the Depositor, the Certificate Insurer
and the Master Servicer a final certification in the form annexed hereto as
Exhibit Two evidencing the completeness of the Mortgage Files, with any
applicable exceptions noted thereon.
If in the process of reviewing the Mortgage Files and making
or preparing, as the case may be, the certifications referred to above the
Custodian finds any document or documents constituting a part of a Mortgage File
to be missing or defective in any material respect, at the conclusion of its
review the Custodian shall so notify the Trustee, the Depositor, the Master
Servicer and the Certificate Insurer.
Section 2.3. NOTIFICATION OF DEFECTS. Upon discovery by the
Custodian of a defect with respect to a Mortgage File (including without
limitation a missing or defective
<PAGE>
- 5 -
document contained therein), the Custodian shall give prompt written notice
specifying such defect to the Trustee.
Section 2.4. RELEASE OF MORTGAGE FILES. Upon (i) the payment
in full of any Mortgage Loan, or (ii) the purchase or repurchase of any Mortgage
Loan pursuant to Section 2.03 of the Pooling and Servicing Agreement, or (iii)
substitution of a Qualified Substitute Mortgage Loan for a Deleted Mortgage
Loan, and upon receipt by the Custodian of a certificate signed by a Servicing
Officer stating that all amounts required by the Pooling and Servicing Agreement
in connection with such payment, repurchase or substitution have been deposited
in the Collection Account pursuant to Section 3.10 of the Pooling and Servicing
Agreement, the Custodian shall promptly release the related Mortgage File to the
Depositor or the Master Servicer, as the case may be.
From time to time as appropriate for the servicing or
foreclosure of any Mortgage Loan, the Custodian, shall, upon request of the
Master Servicer and delivery to the Custodian of a Request for Release, release
the related Mortgage File to the Master Servicer. Such Request for Release shall
obligate the Master Servicer to return each and every document previously
requested from the Mortgage File to the Custodian when the need therefor by the
Master Servicer no longer exists, unless: (i) the Mortgage Loan has been
liquidated and the Liquidation Proceeds relating to the Mortgage Loan have been
deposited in the Certificate Account; or (ii) the Mortgage File or such document
has been delivered to an attorney, or to a public trustee or other public
official as required by law, for purposes of initiating or pursuing legal action
or other proceedings for the foreclosure of the Mortgaged Property either
judicially or non-judicially, and the Master Servicer has delivered to the
Custodian a certificate of a Servicing Officer certifying as to the name and
address of the Person to which such Mortgage File or such document was delivered
and the purpose or purposes of such delivery. Upon receipt of a certificate of a
Servicing Officer stating that such Mortgage Loan was liquidated and that all
amounts received or to be received in connection with such liquidation which are
required to be deposited into the Certificate Account have been so deposited, or
that such Mortgage Loan has become an REO Property, the related Mortgage File
shall be released by the Custodian to the Master Servicer.
The Custodian shall, at the expense of any Certificateholder
and upon such Certificateholder's request, provide a written report to such
Certificateholder of all Mortgage Files released to the Master Servicer for
servicing purposes.
Section 2.5. AUDIT AND EXAMINATION OF MORTGAGE FILES. Upon
reasonable notice to the Custodian, the Trustee, the Master Servicer, the
Depositor, the Certificate Insurer or any agent of any of them will be
permitted, during normal business hours, to examine the Mortgage Files,
documents, records and other papers in possession of or under the control of
Custodian relating to any or all of the Mortgage Loans.
Section 2.6. COPIES OF MORTGAGE FILES. Upon the reasonable
request of the Trustee, the Master Servicer, the Certificate Insurer or the
Depositor, the Custodian shall
<PAGE>
- 6 -
provide to the Trustee, the Master Servicer, the Certificate Insurer or the
Depositor, as the case may be, copies of the documents which constitute the
Mortgage Files. The Trustee shall pay all reasonable costs and expenses incurred
by the Custodian in preparing such copies, which shall be in accordance with the
Custodian's then-current fee schedule.
Section 2.7. SAFEKEEPING. The Custodian shall segregate the
Mortgage Files from all other mortgages and mortgage notes and similar records
in its possession, and agrees to hold the Mortgage Files on behalf of the
Trustee for the use and benefit of all present and future Certificateholders and
to maintain accurate records pertaining to each Mortgage Note and Mortgage in
the Mortgage Files as will enable the Trustee to comply with the terms and
conditions of the Pooling and Servicing Agreement, and at all times to maintain
a current inventory thereof and to conduct periodic physical inspections of the
Mortgage Files held by it under this Agreement in such a manner as shall enable
the Trustee to verify the accuracy of such inventory and record keeping. The
Custodian will promptly report to the Trustee any failure on its part to hold
the Mortgage Files as herein provided and promptly take appropriate action to
remedy any such failure.
Section 2.8. ADMINISTRATION; REPORTS. In general, the
Custodian shall attend to all nondiscretionary details in connection with
maintaining custody of the Mortgage Files on behalf of the Trustee, and to
provide the Trustee with notification of any change in status of any Mortgage
File. In addition, the Custodian shall assist the other parties hereto, who are
preparing routine reports to Certificateholders, at the request of any such
party, or to regulatory bodies, to the extent necessitated by the Custodian's
custody of the Mortgage Files.
ARTICLE III
Concerning the Custodian
Section 3.1. CUSTODIAN A BAILEE AND AGENT OF THE TRUSTEE. With
respect to each Mortgage Note, Mortgage and other documents constituting each
Mortgage File which are delivered to the Custodian, the Custodian hereby agrees
to act as the agent and bailee of the Trustee, and to hold such documents, in
trust, for the exclusive use and benefit of all present and future
Certificateholders and undertakes to perform such duties and only such duties as
are specifically set forth in this Agreement. The Custodian may not delegate any
of its duties hereunder without the prior written consent of the Trustee. The
Custodian shall segregate and maintain all documents constituting the
Custodian's Mortgage File received by it for the benefit of the
Certificateholders in secure facilities in accordance with customary standards
for such custody. The Mortgage Note and Assignment of Mortgage shall be
maintained in secure fireproof facilities. Except upon compliance with the
provisions of Section 2.4 of this Agreement, no Mortgage Note, Mortgage or other
document constituting a part of a Mortgage File shall be delivered by the
Custodian to the Depositor, the Certificate Insurer or the Master Servicer or
otherwise released from the possession of the Custodian.
<PAGE>
- 7 -
Section 3.2. INDEMNIFICATION. The parties hereto acknowledge
that the Trustee, the Depositor and the Master Servicer shall not be liable for
the acts of the Custodian hereunder. The Custodian agrees to indemnify the
Trustee, the Depositor and the Master Servicer and any director, officer,
employee or agent of the Trustee, the Depositor and the Master Servicer for, and
to hold them harmless against, any liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever, including reasonable attorney's fees, incurred by
them arising out of, or in connection with, any suit, claim or other action
relating to the Custodian's performance of this Agreement. Such indemnification
shall survive the termination or discharge of this Agreement, and the
resignation or removal of the Custodian hereunder.
The Trustee agrees to indemnify and hold the Custodian and its
directors, officers, agents and employees harmless against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever, including
reasonable attorney's fees, that may be imposed on, incurred by, or asserted
against it or them in any way relating to or arising out of this Custodial
Agreement or any action taken or not taken by it or them hereunder unless such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements were imposed on, incurred by or asserted
against the Custodian because of the breach by the Custodian of its obligations
hereunder, or because of the Custodian's negligence, lack of good faith or
willful misconduct on the part of the Custodian or any of its directors,
officers, agents or employees. The foregoing indemnification shall survive any
termination or assignment of this Custodial Agreement.
Section 3.3. CUSTODIAN MAY OWN CERTIFICATES. The Custodian in
its individual or any other capacity may become the owner or pledgee of
Certificates with the same rights it would have if it were not Custodian.
Section 3.4. TRUSTEE TO PAY CUSTODIAN'S FEES AND EXPENSES. The
Trustee covenants and agrees to pay to the Custodian monthly on each
Distribution Date, and the Custodian shall be entitled to, a fee of 1/12 of
0.0005% per annum multiplied by the aggregate Scheduled Principal Balance of the
Mortgage Loans and any REO Properties as of the second preceding Due Date (or,
in the case of the first Distribution Date, as of the Cutoff Date) as
compensation for all services rendered by it in the exercise and performance of
any of the powers and duties hereunder of the Custodian, and the Trustee will
pay or reimburse the Custodian upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Custodian in accordance with
any of the provisions of this Agreement (including the reasonable compensation
and the expenses and disbursements of its counsel and of all persons not
regularly in its employ), except any such expense, disbursement or advance as
may arise from its negligence or bad faith.
Section 3.5. CUSTODIAN MAY RESIGN; TRUSTEE MAY REMOVE
CUSTODIAN. The Custodian may resign from the obligations and duties hereby
imposed upon it as such obligations and duties relate to its acting as Custodian
of the Mortgage Loans by giving written notice thereof to the Depositor, the
Master Servicer, the Certificate Insurer and the
<PAGE>
- 8 -
Trustee. Upon receiving such notice of resignation, the Trustee shall either:
(1) take custody of the Mortgage Files itself and give prompt notice thereof to
the Depositor, the Master Servicer, the Certificate Insurer and the Custodian or
(2) promptly appoint a successor Custodian by written instrument, in duplicate,
which instrument shall be delivered to the resigning Custodian and to the
successor Custodian. If the Trustee shall not have taken custody of the Mortgage
Files and no successor Custodian shall have been so appointed and have accepted
appointment within 30 days after the giving of such notice of resignation, the
resigning Custodian may petition any court of competent jurisdiction for the
appointment of a successor Custodian.
The Trustee may remove the Custodian at any time. In such
event, the Trustee shall appoint, or petition a court of competent jurisdiction
to appoint, a successor Custodian hereunder. Any successor Custodian shall be a
depository institution or a trust company subject to supervision by federal or
state authority and shall be able to satisfy the other requirements contained in
Section 3.7.
Any resignation or removal of the Custodian and appointment of
a successor Custodian pursuant to any of the provisions of this Section 3.5
shall become effective upon acceptance of appointment by the successor
Custodian. The Trustee shall give prompt notice to the Depositor, the Master
Servicer and the Certificate Insurer of the appointment of any successor
Custodian. No successor Custodian shall be appointed by the Trustee without the
prior approval of the Depositor.
In the event of the removal or resignation of the Custodian,
the Custodian shall transfer all files to the successor Custodian within 60 days
after receipt of tender of notice of removal or resignation.
Section 3.6. MERGER OR CONSOLIDATION OF CUSTODIAN. Any Person
into which the Custodian may be merged or converted or with which it may be
consolidated, or any Person resulting from any merger, conversion or
consolidation to which the Custodian shall be a party, or any Person succeeding
to the business of the Custodian, shall be the successor of the Custodian
hereunder, provided such Person shall be able to satisfy the requirements in
Section 3.7, without the execution or filing of any paper or any further act on
the part of any of the parties hereto, anything herein to the contrary
notwithstanding.
Section 3.7. REPRESENTATIONS OF THE CUSTODIAN. The Custodian
hereby represents that it is a depository institution or a trust company subject
to supervision by a federal or state authority, has a combined capital and
surplus of at least $10,000,000 and is qualified to do business in the
jurisdiction in which it will hold any Mortgage File.
Section 3.8. LIABILITY OF THE CUSTODIAN. In the absence of bad
faith on the part of the Custodian, the Custodian may conclusively rely, as to
the truth of the statements and the correctness of the opinions expressed
therein, upon any request, instructions, certificate, opinion or other document
furnished to the Custodian, reasonably believed by the Custodian to be genuine
and to have been signed or presented by the proper party or parties
<PAGE>
- 9 -
and conforming to the requirements of this Custodial Agreement; but in the case
of any loan document or other request, instruction, document or certificate
which by any provision hereof is specifically required to be furnished to the
Custodian, the Custodian shall be under a duty to examine the same in accordance
with the requirements of this Custodial Agreement.
Neither the Custodian nor any of its directors, officers,
agents or employees, shall be liable for any action taken or omitted to be taken
by it or them hereunder or in connection herewith in good faith and believed by
it or them to be within the purview of this Custodial Agreement, except for its
or their breach of its or their obligations hereunder, or by its or their own
negligence, lack of good faith or willful misconduct. In no event shall the
Custodian or its directors, officers, agents and employees be held liable for
any special, indirect or consequential damages resulting from any action taken
or omitted to be taken by it or them hereunder or in connection herewith in good
faith and reasonably believed by it or them to be within the purview of this
Custodial Agreement, even if advised of the possibility of such damages.
Section 3.9. INSURANCE. The Custodian shall, at its own
expense, maintain in full force and effect at all times during the existence of
this Agreement the following:
(a) fidelity insurance;
(b) theft of documents insurance; and
(c) forgery insurance.
All such insurance shall be in amounts with standard coverage and subject to
deductibles as is customary for insurance typically maintained by depository
institutions or trust companies which act as custodians, which insurance may be
self-insurance. The minimum coverage under any such insurance shall be at least
equal to the corresponding amounts required by FNMA in the FNMA Mortgage-Backed
Securities Selling and Servicing Guide or by FHLMC in the FHLMC Sellers' &
Servicers' Guide. The Custodian shall, upon written request, provide to the
Depositor or the Trustee a copy of any policy or certificate of insurance
required to be maintained by the Custodian pursuant to this Agreement.
ARTICLE IV
Miscellaneous Provisions
Section 4.1. NOTICES. All notices, requests, consents and
demands and other communications required under this Agreement or pursuant to
any other instrument or document delivered hereunder shall be in writing and,
unless otherwise specifically provided, may be delivered personally, by telegram
or telex, or by first class mail, postage prepaid, or by express delivery
service, at the addresses shown on the first page hereof, or such other address
as may hereafter be furnished to the other parties by like notice. Any such
demand, notice or communication hereunder shall be deemed to have been received
on the date delivered to or received at the premises of the addressee.
<PAGE>
- 10 -
Section 4.2. AMENDMENTS. No modification or amendment of or
supplement to this Agreement shall be valid or effective unless the same is in
writing and signed by all parties hereto, and neither the Depositor, the Master
Servicer nor the Trustee shall enter into any amendment hereof except as
permitted by the Pooling and Servicing Agreement. The Trustee shall give prompt
notice to the Custodian of any amendment or supplement to the Pooling and
Servicing Agreement and furnish the Custodian with written copies thereof.
Section 4.3. GOVERNING LAW. This Agreement shall be deemed a
contract made under the laws of the State of New York and shall be construed and
enforced in accordance with and governed by the laws of the State of New York.
Section 4.4. COUNTERPARTS. For purpose of facilitating the
recordation of this Agreement as herein provided and for other purposes, this
Agreement may be executed simultaneously in any number of counterparts, each of
which counterparts shall be deemed to be an original, and such counterparts
shall constitute but one and the same instrument.
Section 4.5. SEVERABILITY OF PROVISIONS. If any one or more of
the covenants, agreements, provisions or terms of this Agreement shall be for
any reason whatsoever held invalid, then such covenants, agreements, provisions
or terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement or of the Certificates
or the rights of the Holders thereof.
<PAGE>
- 11 -
IN WITNESS WHEREOF, this Agreement is executed as of the date
first above written.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
as Trustee
Address:
By:________________________________________
Norwest Center Name:___________________________________
Sixth & Marquette Title:__________________________________
Minneapolis, Minnesota 55479
TEXAS COMMERCE BANK NATIONAL
ASSOCIATION,
as Custodian
Address:
By:________________________________________
Name:______________________________________
Title:__________________________________
LONG BEACH MORTGAGE COMPANY,
as Master Servicer
Address:
By:________________________________________
1100 Town & Country Road Name:___________________________________
Orange, California 92868 Title:__________________________________
SALOMON BROTHERS MORTGAGE
SECURITIES VII, INC.,
as Depositor
Address:
By:________________________________________
Seven World Trade Center Name:___________________________________
New York, New York 10048 Title:__________________________________
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the ____ day of September, 1996 before me, a notary public
in and for said State, personally appeared _________________________________,
known to me to be an Assistant Vice President of Salomon Brothers Mortgage
Securities VII, Inc., one of the corporations that executed the within
instrument, and also known to me to be the person who executed it on behalf of
said corporation, and acknowledged to me that such corporation executed the
within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
___________________________________
Notary Public
[Notarial Seal]
<PAGE>
STATE OF _____________ )
) ss.:
COUNTY OF ____________ )
On the ____ day of September, 1996 before me, a notary public
in and for said State, personally appeared ____________________________________,
known to me to be a ___________________________________ of Long Beach Mortgage
Company, one of the corporations that executed the within instrument, and also
known to me to be the person who executed it on behalf of said corporation, and
acknowledged to me that such corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
_______________________________
Notary Public
[Notarial Seal]
<PAGE>
STATE OF _____________ )
) ss.:
COUNTY OF ____________ )
On the ____ day of September, 1996 before me, a notary public
in and for said State, personally appeared ____________________________________,
known to me to be a ___________________________________ of Norwest Bank
Minnesota, N.A., one of the corporations that executed the within instrument,
and also known to me to be the person who executed it on behalf of said
corporation, and acknowledged to me that such corporation executed the within
instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
_______________________________
Notary Public
[Notarial Seal]
<PAGE>
STATE OF ______________ )
) ss.:
COUNTY OF _____________ )
On the ____ day of September, 1996 before me, a notary public
in and for said State, personally appeared ____________________________________,
known to me to be a ___________________________________ of Texas Commerce Bank
National Association, one of the corporations that executed the within
instrument, and also known to me to be the person who executed it on behalf of
said corporation, and acknowledged to me that such corporation executed the
within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
________________________________
Notary Public
[Notarial Seal]
<PAGE>
- 1 -
EXHIBIT ONE TO THE CUSTODIAL AGREEMENT
FORM OF CUSTODIAN INITIAL CERTIFICATION
September __, 1996
Salomon Brothers Mortgage
Securities VII, Inc.
Seven World Trade Center
New York, New York 10048
Attention: ___________________
[Master Servicer]
[Trustee]
Re: Custodial Agreement, dated September 25, 1996, among Salomon
Brothers Mortgage VII, Securities Inc., Long Beach Mortgage Company,
Norwest Bank Minnesota, N.A., and Texas Commerce Bank National
Association Asset-Backed Floating Rate Certificates, Series 1996-LB1
--------------------------------------------------------------------
Ladies and Gentlemen:
In accordance with Section 2.2 of the above-referenced
Custodial Agreement, the undersigned, as Custodian, hereby certifies, subject to
the exceptions noted on the attached report, that as to each Mortgage Loan
listed in the Mortgage Loan Schedule (other than any Mortgage Loan paid in full
or any Mortgage Loan specifically identified in the exception report as not
being covered by this certification), it has reviewed the Mortgage File and
determined that (i) all documents constituting part of such Mortgage File (other
than such documents described in Section 2.1(e)) required to be delivered to it
pursuant to the Custodial Agreement are in its possession, (ii) such documents
have been reviewed by it and appear regular on their face and relate to such
Mortgage Loan, (iii) based on its examination and only as to the foregoing, the
information set forth in the Mortgage Loan Schedule that corresponds to items
(i) through (iii), (vi), (x)(A), (xi), (xv), (xviii), and (xx) through (xxiii)
of the definition of "Mortgage Loan Schedule" in the Pooling and Servicing
Agreement accurately reflects information set forth in the Mortgage File.
<PAGE>
- 2 -
The Custodian has made no independent examination of any
documents contained in each Mortgage File beyond the review specifically
required in the above-referenced Custodial Agreement. The Custodian makes no
representations as to: (i) the validity, legality, sufficiency, enforceability
or genuineness of any of the documents contained in the Mortgage File of any of
the Mortgage Loans identified on the Mortgage Loan Schedule, (ii) the
collectability, insurability, effectiveness or suitability of any such Mortgage
Loan, or (iii) whether any Mortgage File included any of the documents specified
in clause (e) of Section 2.1 of the Custodial Agreement.
Capitalized words and phrases used herein shall have the
meanings assigned to them in the above-captioned Custodial Agreement.
TEXAS COMMERCE BANK NATIONAL
ASSOCIATION
By:_____________________________
Name:
Title:
<PAGE>
- 1 -
EXHIBIT TWO TO THE CUSTODIAL AGREEMENT
FORM OF CUSTODIAN FINAL CERTIFICATION
[Date]
Salomon Brothers Mortgage
Securities VII, Inc.
Seven World Trade Center
New York, New York 10048
Attention: ___________________
[Master Servicer]
[Trustee]
Re: Custodial Agreement, dated September 25, 1996, among Salomon
Brothers Mortgage VII, Securities Inc., Long Beach Mortgage Company,
Norwest Bank Minnesota, N.A., and Texas Commerce Bank National
Association Asset-Backed Floating Rate Certificates,
SERIES 1996-LB1
--------------------------------------------------------------------
Ladies and Gentlemen:
In accordance with Section 2.2 of the above-captioned
Custodial Agreement, the undersigned, as Custodian, hereby certifies that as to
each Mortgage Loan listed in the Mortgage Loan Schedule (other than any Mortgage
Loan paid in full or listed on the attachment hereto), it has received:
(i) the original Mortgage Note, endorsed in the following
form: "Pay to the order of Norwest Bank Minnesota, N.A., as Trustee for
the registered holders of Salomon Brothers Mortgage Securities VII,
Inc., Series 1996-LB1, without recourse", with all prior and
intervening endorsements showing a complete chain of endorsement from
the originator to the Person so endorsing to the Trustee;
(ii) the original recorded Mortgage, and the original recorded
power of attorney, if the Mortgage was executed pursuant to a power of
attorney, or a certified
<PAGE>
- 2 -
copy thereof in those instances where the public recording office
retains the original or where the original has been lost; and
(iii) an original recorded Assignment of the Mortgage to the
Trustee together with the original recorded Assignment or Assignments
of the Mortgage showing a complete chain of assignment from the
originator, or a certified copy of such Assignments in those instances
where the public recording retains the original or where original has
been lost; and
(iv) the original lender's title insurance policy.
The Custodian has made no independent examination of any
documents contained in each Mortgage File beyond the review specifically
required in the above-referenced Pooling and Servicing Agreement. The Custodian
makes no representations as to: (i) the validity, legality, sufficiency,
enforceability or genuineness of any of the documents contained in the Mortgage
File of any of the Mortgage Loans identified on the Mortgage Loan Schedule, or
(ii) the collectability, insurability, effectiveness or suitability of any such
Mortgage Loan.
Capitalized words and phrases used herein shall have the
meanings assigned to them in the above-captioned Custodial Agreement.
TEXAS COMMERCE BANK NATIONAL
ASSOCIATION
By:___________________________________
Name:
Title:
<PAGE>
- 1 -
SCHEDULE 1
MORTGAGE LOAN SCHEDULE
