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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 22, 1998
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.
(AS DEPOSITOR UNDER THE POOLING AND SERVICING AGREEMENT,
DATED AS OF SEPTEMBER 1, 1998, PROVIDING FOR THE ISSUANCE OF
ASSET-BACKED FLOATING RATE CERTIFICATES, SERIES 1998-OPT2)
Salomon Brothers Mortgage Securities VII, Inc.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
- --------------------------------------------------------------------------------
Delaware 333-50153 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 Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (212) 783-5659
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<PAGE>
-2-
Item 2. Acquisition or Disposition of Assets
------------------------------------
Description of the Certificates and the Mortgage Pools
On September 25, 1998, a single series of certificates,
entitled Salomon Brothers Mortgage Securities VII, Inc., Asset-Backed Floating
Rate Certificates, Series 1998-OPT2 (the "Certificates"), were issued pursuant
to a pooling and servicing agreement, dated as of September 1, 1998 (the
"Agreement"), attached hereto as Exhibit 4.1, among Salomon Brothers Mortgage
Securities VII, Inc. as depositor (the "Depositor"), Option One Mortgage
Corporation ("Option One") as master servicer (in such capacity, the "Master
Servicer") and U.S. Bank National Association as trustee (the "Trustee"). The
Certificates consist of nine classes of certificates (collectively, the
"Certificates"), designated as the "Class A Certificates", the "Class M-1
Certificates," the "Class M-2 Certificates," the "Class M-3 Certificates," the
"Class CE Certificates," the "Class P Certificates," the "Class R-I
Certificates," the "Class R-II Certificates" and the "Class R-III 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 up
to 30 years (the "Mortgage Loans"). The Mortgage Pool consists of Mortgage Loans
having an aggregate principal balance of $342,799,764 as of September 1, 1998
(the "Cut-off Date"). The Mortgage Loans were purchased pursuant to the Mortgage
Loan Purchase Agreement, dated September 22, 1998 (the "Mortgage Loan Purchase
Agreement") among the Depositor, Salomon Brothers Realty Corp. and Option One.
The Certificates were sold by the Depositor to Salomon Brothers Inc ("Salomon"),
an affiliate of the Depositor, pursuant to an underwriting agreement, dated
September 22, 1998 between the Depositor and Salomon.
The Certificates have the following initial Certificate
Balances and Pass-Through Rates:
Initial Certificate
Class Principal Balance Pass-Through Rate
- ----- ----------------- -----------------
A $274,239,000.00 Variable
M-1 $ 25,710,000.00 Variable
M-2 $ 18,854,000.00 Variable
M-3 $ 14,569,000.00 Variable
CE $ 9,427,363.98 Variable
P $ 100.00 N/A
R-I $ 100.00 Variable
R-II $ 100.00 Variable
<PAGE>
-3-
Initial Certificate
Class Principal Balance Pass-Through Rate
- ----- ----------------- -----------------
R-III $ 100.00 Variable
The Certificates, other than the Class CE Certificates and the
Class P Certificates, and the Mortgage Loans are more particularly described in
the Prospectus, dated September 22, 1998, and the Prospectus Supplement, dated
September 22, 1998, as previously filed with the Securities and Exchange
Commission pursuant to Rule 424(b). The Class CE 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>
-4-
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, 1998, by
and among Salomon Brothers Mortgage
Securities VII, Inc. as Depositor,
Option One Mortgage Corporation as
Master Servicer and U.S. Bank
National Association as Trustee,
relating to the Series 1998-OPT2
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, 1998
SALOMON BROTHERS MORTGAGE
SECURITIES VII, INC.
By: /s/ Matthew R. Bollo
----------------------------
Name: Matthew R. Bollo
Title: Assistant Vice President
<PAGE>
Index to Exhibits
-----------------
Exhibit No. Description
----------- -----------
4.1 Pooling and Servicing Agreement, dated as of
September 1, 1998, by and among Salomon
Brothers Mortgage Securities VII, Inc. as
Depositor, Option One Mortgage Corporation
as Master Servicer and U.S. Bank National
Association as Trustee, relating to the Series
1998-OPT2 Certificates.
Exhibit 4.1
<PAGE>
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.
Depositor
OPTION ONE MORTGAGE CORPORATION
Master Servicer
and
U.S. BANK NATIONAL ASSOCIATION
Trustee
-----------------------------------------
POOLING AND SERVICING AGREEMENT
Dated as of September 1, 1998
-----------------------------------------
Asset-Backed Floating Rate Certificates
Series 1998-OPT2
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
SECTION PAGE
ARTICLE I
DEFINITIONS
<S> <C> <C>
1.01. Defined Terms...................................................................................4
Accepted Servicing Practices....................................................................4
Accrued Certificate Interest....................................................................4
Adjustment Date.................................................................................4
Affiliate.......................................................................................4
Agreement.......................................................................................5
Assignment......................................................................................5
Available Distribution Amount...................................................................5
Bankruptcy Code.................................................................................5
Bankruptcy Loss.................................................................................5
Book-Entry Certificate..........................................................................6
Book-Entry Custodian............................................................................6
Business Day....................................................................................6
Cash-Out Refinancing............................................................................6
Certificate.....................................................................................6
Certificate Factor..............................................................................6
Certificateholder" or "Holder...................................................................6
Certificate Owner...............................................................................7
Certificate Principal Balance...................................................................7
Certificate Register............................................................................7
Class .......................................................................................7
Class A Certificate.............................................................................7
Class A Principal Distribution Amount...........................................................7
Class CE Certificate............................................................................7
Class Exemption.................................................................................8
Class M-1 Certificate...........................................................................8
Class M-1 Principal Distribution Amount.........................................................8
Class M-2 Certificate...........................................................................8
Class M-2 Principal Distribution Amount.........................................................8
Class M-3 Certificate...........................................................................8
Class M-3 Principal Distribution Amount.........................................................8
Class P Certificate.............................................................................9
Class R-I Certificate...........................................................................9
Class R-II Certificate..........................................................................9
Class R-III Certificates........................................................................9
Closing Date....................................................................................9
Code .......................................................................................9
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
SECTION PAGE
<S> <C>
Collection Account..............................................................................9
Commission......................................................................................9
Corporate Trust Office..........................................................................9
Corresponding Certificate.......................................................................9
Credit Enhancement Percentage..................................................................10
Cumulative Loss Percentage.....................................................................10
Cumulative Loss Test...........................................................................10
Cut-off Date...................................................................................10
DCR ......................................................................................10
Debt Service Reduction.........................................................................10
Deficient Valuation............................................................................10
Definitive Certificates........................................................................11
Deleted Mortgage Loan..........................................................................11
Delinquency Percentage.........................................................................11
Delinquency Test...............................................................................11
Depositor......................................................................................11
Depository.....................................................................................11
Depository Institution.........................................................................11
Depository Participant.........................................................................11
Determination Date.............................................................................11
Directly Operate...............................................................................11
Disqualified Organization......................................................................12
Distribution Account...........................................................................12
Distribution Date..............................................................................12
DOL ......................................................................................12
DOL Regulations................................................................................12
Due Date ......................................................................................12
Due Period.....................................................................................13
Eligible Account...............................................................................13
ERISA ......................................................................................13
Estate in Real Property........................................................................13
Excess Overcollateralized Amount...............................................................13
Expense Adjusted Mortgage Rate.................................................................13
Fannie Mae.....................................................................................13
FDIC ......................................................................................13
Final Recovery Determination...................................................................13
Freddie Mac....................................................................................13
Gross Margin...................................................................................13
Independent....................................................................................14
Independent Contractor.........................................................................14
Index ......................................................................................14
Insurance Proceeds.............................................................................14
Interest Accrual Period........................................................................14
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
SECTION PAGE
<S> <C>
Interest Carry Forward Amount..................................................................15
Interest Determination Date....................................................................15
Interest Distribution Amount...................................................................15
Interest Remittance Amount.....................................................................15
Late Collections...............................................................................15
Liquidation Event..............................................................................15
Liquidation Proceeds...........................................................................16
Loan-to-Value Ratio............................................................................16
London Business Day............................................................................16
Majority Class CE Certificateholder............................................................16
Master Servicer................................................................................16
Master Servicer Event of Default...............................................................16
Master Servicer Remittance Date................................................................16
Master Servicer Termination Test...............................................................16
Maximum I-LT6 Uncertificated Interest Deferral Amount..........................................16
Maximum Mortgage Rate..........................................................................16
Mezzanine Certificate..........................................................................17
Minimum Mortgage Rate..........................................................................17
Monthly Payment................................................................................17
Moody's ......................................................................................17
Mortgage ......................................................................................17
Mortgage File..................................................................................17
Mortgage Loan..................................................................................17
Mortgage Loan Purchase Agreement...............................................................17
Mortgage Loan Schedule.........................................................................17
Mortgage Note..................................................................................19
Mortgage Pool..................................................................................20
Mortgage Rate..................................................................................20
Mortgaged Property.............................................................................20
Mortgagor......................................................................................20
Net Monthly Excess Cashflow....................................................................20
Net Mortgage Rate..............................................................................20
Net WAC Pass-Through Rate......................................................................20
New Lease......................................................................................21
Nonrecoverable P&I Advance.....................................................................21
Nonrecoverable Servicing Advance...............................................................21
Non-United States Person.......................................................................21
Notional Amount................................................................................21
Officers' Certificate..........................................................................21
One-Month LIBOR................................................................................21
One-Month LIBOR Pass-Through Rate..............................................................22
Opinion of Counsel.............................................................................22
Original Mortgage Loan.........................................................................23
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
SECTION PAGE
<S> <C>
Originator.....................................................................................23
Overcollateralized Amount......................................................................23
Overcollateralization Deficiency Amount........................................................23
Overcollateralization Increase Amount..........................................................23
Overcollateralization Reduction Amount.........................................................23
Overcollateralization Reduction Lockout Event..................................................23
Ownership Interest.............................................................................23
Pass-Through Rate..............................................................................23
Percentage Interest............................................................................24
Periodic Rate Cap..............................................................................25
Permitted Investments..........................................................................25
Permitted Transferee...........................................................................26
Person ......................................................................................26
P&I Advance....................................................................................26
Plan ......................................................................................26
Prepayment Assumption..........................................................................26
Prepayment Charge..............................................................................26
Prepayment Charge Schedule.....................................................................26
Prepayment Interest Shortfall..................................................................27
Prepayment Period..............................................................................27
Principal Distribution Amount..................................................................27
Principal Prepayment...........................................................................28
PTCE ......................................................................................28
Purchase Price.................................................................................28
Qualified Substitute Mortgage Loan.............................................................29
Rate/Term Refinancing..........................................................................29
Rating Agency or Rating Agencies...............................................................30
Realized Loss..................................................................................30
Record Date....................................................................................31
Reference Banks................................................................................31
Refinanced Mortgage Loan.......................................................................31
Regular Certificate............................................................................31
Regular Interest...............................................................................31
Relief Act.....................................................................................31
Relief Act Interest Shortfall..................................................................31
REMIC ......................................................................................31
REMIC I ......................................................................................32
REMIC I Interest Loss Allocation Amount........................................................32
REMIC I Overcollateralized Amount..............................................................32
REMIC I Principal Loss Allocation Amount.......................................................32
REMIC I Regular Interest.......................................................................32
REMIC I Regular Interest I-LT1.................................................................33
REMIC I Regular Interest I-LT2.................................................................33
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
SECTION PAGE
<S> <C> <C>
REMIC I Regular Interest I-LT3.................................................................33
REMIC I Regular Interest I-LT4.................................................................33
REMIC I Regular Interest I-LT5.................................................................33
REMIC I Regular Interest I-LT6.................................................................33
REMIC I Regular Interest I-LTP.................................................................34
REMIC I Remittance Rate........................................................................34
REMIC I Required Overcollateralized Amount.....................................................34
REMIC II ......................................................................................34
REMIC II Regular Interest......................................................................34
REMIC II Regular Interest II-LT1...............................................................34
REMIC II Regular Interest II-LT2...............................................................34
REMIC II Regular Interest II-LT3...............................................................34
REMIC II Regular Interest II-LT4...............................................................35
REMIC II Regular Interest II-LT5...............................................................35
REMIC II Regular Interest II-LT6...............................................................35
REMIC II Regular Interest II-LTP...............................................................35
REMIC II Regular Interest II-LT2S..............................................................35
REMIC II Regular Interest II-LT3S..............................................................35
REMIC II Regular Interest II-LT4S..............................................................35
REMIC II Regular Interest II-LT5S..............................................................36
REMIC II Remittance Rate.......................................................................36
REMIC III......................................................................................36
REMIC III Certificate..........................................................................36
Remittance Report..............................................................................36
Rents from Real Property.......................................................................36
REO Account....................................................................................36
REO Disposition................................................................................36
REO Imputed Interest...........................................................................37
REO Principal Amortization.....................................................................37
REO Property...................................................................................37
Request for Release............................................................................37
Required Overcollateralized Amount.............................................................37
Reserve Interest Rate..........................................................................37
Residential Dwelling...........................................................................37
Residual Certificate...........................................................................38
Residual Interest..............................................................................38
Responsible Officer............................................................................38
Scheduled Principal Balance....................................................................38
Senior Interest Distribution Amount............................................................39
Servicing Account..............................................................................39
Servicing Advances.............................................................................39
Servicing Fee..................................................................................39
Servicing Fee Rate.............................................................................39
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
SECTION PAGE
<S> <C>
Servicing Officer..............................................................................39
Single Certificate.............................................................................39
Startup Day....................................................................................40
Stated Principal Balance.......................................................................40
Stayed Funds...................................................................................40
Stepdown Date..................................................................................40
Sub-Servicer...................................................................................41
Sub-Servicing Account..........................................................................41
Sub-Servicing Agreement........................................................................41
Tax Returns....................................................................................41
Telerate Page 3750.............................................................................41
Termination Price..............................................................................41
Terminator.....................................................................................41
Transfer ......................................................................................41
Transferee.....................................................................................41
Transferor.....................................................................................41
Trigger Event..................................................................................41
Trust Fund.....................................................................................41
Trustee ......................................................................................41
Trustee's Fee..................................................................................42
Uncertificated Balance.........................................................................42
Uncertificated Corresponding Component.........................................................42
Uncertificated Interest........................................................................42
Uncertificated Notional Amount.................................................................43
Uninsured Cause................................................................................43
United States Person...........................................................................43
Value ......................................................................................43
Voting Rights..................................................................................44
1.02. Allocation of Certain Interest Shortfalls......................................................44
</TABLE>
<TABLE>
<CAPTION>
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS;
ORIGINAL ISSUANCE OF CERTIFICATES
<S> <C> <C>
2.01. Conveyance of the Mortgage Loans...............................................................46
2.02. Acceptance of REMIC I by Trustee...............................................................48
2.03. Repurchase or Substitution of Mortgage Loans by the Originator, the Seller
or the Depositor...............................................................................49
2.04. Representations and Warranties of the Depositor................................................52
2.05. Representations, Warranties and Covenants of the Master Servicer...............................54
2.06. Issuance of the Class R-I Certificates.........................................................57
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
SECTION PAGE
<S> <C>
2.07. Conveyance of the REMIC I Regular Interests; Acceptance of REMIC II by
the Trustee....................................................................................57
2.08. Issuance of Class R-II Certificates............................................................58
2.09. Conveyance of REMIC II Regular Interests; Acceptance of REMIC III by
the Trustee....................................................................................58
2.10. Issuance of REMIC III Certificates.............................................................58
</TABLE>
<TABLE>
<CAPTION>
ARTICLE III
ADMINISTRATION AND SERVICING
OF THE MORTGAGE LOANS
<S> <C> <C>
3.01. Master Servicer to Act as Master Servicer......................................................59
3.02. Sub-Servicing Agreements Between Master Servicer and Sub-Servicers.............................61
3.03. Successor Sub-Servicers........................................................................62
3.04. Liability of the Master Servicer...............................................................62
3.05. No Contractual Relationship Between Sub-Servicers and Trustee or
Certificateholders.............................................................................63
3.06. Assumption or Termination of Sub-Servicing Agreements by Trustee...............................63
3.07. Collection of Certain Mortgage Loan Payments...................................................63
3.08. Sub-Servicing Accounts.........................................................................64
3.09. Collection of Taxes, Assessments and Similar Items; Servicing Accounts.........................64
3.10. Collection Account and Distribution Account....................................................65
3.11. Withdrawals from the Collection Account and Distribution Account...............................68
3.12. Investment of Funds in the Collection Account and the Distribution
Account70........................................................................................
3.13. [intentionally omitted]........................................................................71
3.14. Maintenance of Hazard Insurance and Errors and Omissions and Fidelity
Coverage.......................................................................................71
3.15. Enforcement of Due-On-Sale Clauses; Assumption Agreements......................................73
3.16. Realization Upon Defaulted Mortgage Loans......................................................74
3.17. Trustee to Cooperate; Release of Mortgage Files................................................76
3.18. Servicing Compensation.........................................................................77
3.19. Reports to the Trustee; Collection Account Statements..........................................77
3.20. Statement as to Compliance.....................................................................78
3.21. Independent Public Accountants' Servicing Report...............................................78
3.22. Access to Certain Documentation................................................................79
3.23. Title, Management and Disposition of REO Property..............................................79
3.24. Obligations of the Master Servicer in Respect of Prepayment Interest
Shortfall......................................................................................82
3.25. Obligations of the Master Servicer in Respect of Mortgage Rates and
Monthly Payments...............................................................................82
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
SECTION PAGE
<S> <C> <C>
3.26. Solicitations..................................................................................83
</TABLE>
<TABLE>
<CAPTION>
ARTICLE IV
PAYMENTS TO CERTIFICATEHOLDERS
<S> <C> <C>
4.01. Distributions..................................................................................84
4.02. Statements to Certificateholders...............................................................90
4.03. Remittance Reports; P&I Advances...............................................................93
4.04. Allocation of Realized Losses..................................................................95
4.05. Compliance with Withholding Requirements.......................................................96
4.06. Exchange Commission; Additional Information....................................................96
</TABLE>
<TABLE>
<CAPTION>
ARTICLE V
THE CERTIFICATES
<S> <C> <C>
5.01. The Certificates...............................................................................98
5.02. Registration of Transfer and Exchange of Certificates.........................................100
5.03. Mutilated, Destroyed, Lost or Stolen Certificates.............................................104
5.04. Persons Deemed Owners.........................................................................104
5.05. Certain Available Information.................................................................105
</TABLE>
<TABLE>
<CAPTION>
ARTICLE VI
THE DEPOSITOR AND THE MASTER SERVICER
<S> <C> <C>
6.01. Liability of the Depositor and the Master Servicer............................................106
6.02. Merger or Consolidation of the Depositor or the Master Servicer...............................106
6.03. Limitation on Liability of the Depositor, the Master Servicer and Others......................106
6.04. Limitation on Resignation of the Master Servicer..............................................107
6.05. Rights of the Depositor in Respect of the Master Servicer.....................................108
</TABLE>
<TABLE>
<CAPTION>
ARTICLE VII
DEFAULT
<S> <C> <C>
7.01. Master Servicer Events of Default.............................................................109
7.02. Trustee to Act; Appointment of Successor......................................................111
7.03. Notification to Certificateholders............................................................112
7.04. Waiver of Master Servicer Events of Default...................................................112
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
SECTION PAGE
ARTICLE VIII
CONCERNING THE TRUSTEE
<S> <C> <C>
8.01. Duties of Trustee.............................................................................114
8.02. Certain Matters Affecting the Trustee.........................................................115
8.03. Trustee Not Liable for Certificates or Mortgage Loans.........................................116
8.04. Trustee May Own Certificates..................................................................116
8.05. Trustee's Fees and Expenses...................................................................117
8.06. Eligibility Requirements for Trustee..........................................................117
8.07. Resignation and Removal of the Trustee........................................................117
8.08. Successor Trustee.............................................................................118
8.09. Merger or Consolidation of Trustee............................................................119
8.10. Appointment of Co-Trustee or Separate Trustee.................................................119
8.11. Appointment of Office or Agency...............................................................120
8.12. Representations and Warranties of the Trustee.................................................120
</TABLE>
<TABLE>
<CAPTION>
ARTICLE IX
TERMINATION
<S> <C> <C>
9.01 Termination Upon Repurchase or Liquidation of All Mortgage Loans..............................122
9.02 Additional Termination Requirements...........................................................124
</TABLE>
<TABLE>
<CAPTION>
ARTICLE X
REMIC PROVISIONS
<S> <C> <C>
10.01. REMIC Administration..........................................................................126
10.02. Prohibited Transactions and Activities........................................................129
10.03. Master Servicer and Trustee Indemnification...................................................129
</TABLE>
<TABLE>
<CAPTION>
ARTICLE XI
MISCELLANEOUS PROVISIONS
<S> <C> <C>
11.01. Amendment.....................................................................................130
11.02. Recordation of Agreement; Counterparts........................................................131
11.03. Limitation on Rights of Certificateholders....................................................131
11.04. Governing Law.................................................................................132
11.05. Notices.......................................................................................132
11.06. Severability of Provisions....................................................................133
11.07. Notice to Rating Agencies.....................................................................133
11.08. Article and Section References................................................................134
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
SECTION PAGE
<S> <C> <C>
11.09. Grant of Security Interest....................................................................134
</TABLE>
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<PAGE>
EXHIBITS
Exhibit A-1 Form of Class A Certificate
Exhibit A-2 Form of Class M-1 Certificate
Exhibit A-3 Form of Class M-2 Certificate
Exhibit A-4 Form of Class M-3 Certificate
Exhibit A-5 Form of Class CE Certificate
Exhibit A-6 Form of Class P Certificate
Exhibit A-7 Form of Class R-I Certificate
Exhibit A-8 Form of Class R-II Certificate
Exhibit A-9 Form of Class R-III Certificate
Exhibit B [Reserved]
Exhibit C Form of Trustee's Initial Certification
Exhibit C-1 Form of Trustee's Interim 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 the Class CE Certificates or the Class P
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 Form of Certification with respect to ERISA and the
Code
Exhibit H Form of Report Pursuant to Section 4.06
Exhibit I Form of Lost Note Affidavit
Schedule 1 Mortgage Loan Schedule
Schedule 2 Prepayment Charge Schedule
-xi-
<PAGE>
This Pooling and Servicing Agreement, is dated and effective
as of September 1, 1998, among SALOMON BROTHERS MORTGAGE SECURITIES VII, INC. as
Depositor, OPTION ONE MORTGAGE CORPORATION as Master Servicer and U.S. BANK
NATIONAL ASSOCIATION as Trustee.
PRELIMINARY STATEMENT:
The Depositor intends to sell pass-through certificates to be
issued hereunder in multiple classes, which in the aggregate will evidence the
entire beneficial ownership interest in each REMIC (as defined herein) created
hereunder. The Trust Fund will consist of a segregated pool of assets comprising
of the Mortgage Loans and certain other related assets subject to this
Agreement.
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 REMIC (as defined herein) for
federal income tax purposes, and such segregated pool of assets will be
designated as "REMIC I." The Class R-I Certificates will be the sole class of
"residual interests" in REMIC I for purposes of the REMIC Provisions (as defined
herein) and will have an initial Certificate Principal Balance of $100 and a
Pass-Through Rate as described herein. The following table irrevocably sets
forth the designation, the REMIC I Remittance Rate, the initial Uncertificated
Balance and, solely for purposes of satisfying Treasury regulation Section
1.860G- 1(a)(4)(iii), the "latest possible maturity date" for each of the REMIC
I Regular Interests (as defined herein). None of the REMIC I Regular Interests
will be certificated.
<TABLE>
<CAPTION>
REMIC I Initial Latest Possible
Designation Remittance Rate Uncertificated Balance Maturity Date(1)
----------- --------------- ---------------------- ----------------
<S> <C> <C> <C> <C>
I-LT1 Variable(2) $335,943,576.70 October 25, 2028
I-LT2 Variable(2) $2,742,390.00 October 25, 2028
I-LT3 Variable(2) $257,100.00 October 25, 2028
I-LT4 Variable(2) $188,540.00 October 25, 2028
I-LT5 Variable(2) $145,690.00 October 25, 2028
I-LT6 Variable(2) $3,522,267.28 October 25, 2028
I-LTP (3) $100.00 October 25, 2028
</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 Loan with the latest maturity date has been designated as
the "latest possible maturity date" for each REMIC I Regular Interest.
(2) Calculated in accordance with the definition of "REMIC I Remittance Rate"
herein. (3) The REMIC I Regular Interest I-LTP will not accrue interest.
-1-
<PAGE>
As provided herein, the Trustee will elect to treat the
segregated pool of assets consisting of the REMIC I Regular Interests as a REMIC
for federal income tax purposes, and such segregated pool of assets will be
designated as "REMIC II." The Class R-II Certificates will evidence the sole
class of "residual interests" in REMIC II for purposes of the REMIC Provisions
and will have an initial Certificate Principal Balance of $100 and a
Pass-Through Rate as described herein. The following table irrevocably sets
forth the designation, the REMIC II Remittance Rate, the initial Uncertificated
Balance and, solely for purposes of satisfying Treasury regulation Section
1.860G-1(a)(4)(iii), the "latest possible maturity date" for each of the REMIC
II Regular Interests. None of the REMIC II Regular Interests will be
certificated.
<TABLE>
<CAPTION>
REMIC II Initial Latest Possible
Designation Remittance Rate Uncertificated Balance Maturity Date(1)
----------- --------------- ---------------------- ----------------
<S> <C> <C> <C> <C>
II-LT1 Variable(2) $335,943,476.70 October 25, 2028
II-LT2 Variable(2) $2,742,390.00 October 25, 2028
II-LT3 Variable(2) $257,100.00 October 25, 2028
II-LT4 Variable(2) $188,540.00 October 25, 2028
II-LT5 Variable(2) $145,690.00 October 25, 2028
II-LT6 Variable(2) $3,522,267.28 October 25, 2028
II-LTP (3) 100.00 October 25, 2028
II-LT2S Variable(2) (4) October 25, 2028
II-LT3S Variable(2) (4) October 25, 2028
II-LT4S Variable(2) (4) October 25, 2028
II-LT5S Variable(2) (4) October 25, 2028
</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 Loan with the latest maturity date has been designated as
the "latest possible maturity date" for each REMIC II Regular Interest.
(2) Calculated in accordance with the definition of "REMIC II Remittance Rate"
herein.
(3) The REMIC II Regular Interest II-LTP will not accrue interest.
(4) This REMIC II Regular Interest has no Uncertificated Principal Balance but
will accrue interest at the related REMIC II Remittance Rate on the related
Uncertificated Notional Amount, which is equal to the Uncertificated
Balance of the Uncertificated Corresponding Component.
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<PAGE>
As provided herein, the Trustee will elect to treat the
segregated pool of assets consisting of the REMIC II Regular Interests as a
REMIC for federal income tax purposes, and such segregated pool of assets will
be designated as "REMIC III." The Class R-III Certificates will evidence the
sole class of "residual interests" in REMIC III for purposes of the REMIC
Provisions under federal income tax law. The following table irrevocably sets
forth the designation, the Pass- Through Rate, the initial aggregate Certificate
Principal Balance and, solely for purposes of satisfying Treasury regulation
Section 1.860G-1(a)(4)(iii), the "latest possible maturity date" for the
indicated Classes of Certificates.
<TABLE>
<CAPTION>
Initial Aggregate Latest Possible
Designation Pass-through Rate Certificate Principal Balance Maturity Date(1)
----------- ----------------- ----------------------------- ----------------
<S> <C> <C> <C>
Class A Variable(2) $274,239,000.00 October 25, 2028
Class M-1 Variable(2) $ 25,710,000.00 October 25, 2028
Class M-2 Variable(2) $ 18,854,000.00 October 25, 2028
Class M-3 Variable(2) $ 14,569,000.00 October 25, 2028
Class CE Variable(2) $ 9,427,363.98(3) October 25, 2028
Class P (4) $ 100.00 October 25, 2028
Class R-III Variable(2)( $ 100.00 N/A
</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.
(3) The Class CE Certificates will accrue interest at their variable
Pass-Through Rate on the Notional Amount of the Class CE Certificates
outstanding from time to time which shall equal the Uncertificated Balance
of the REMIC II Regular Interests (other than the Uncertificated Balance of
REMIC II Regular Interest II-LTP). The Class CE Certificates will not
accrue interest on their Certificate Principal Balance.
(4) The Class P Certificates will not accrue interest.
(5) The Class R-III Certificates will only receive interest on the Distribution
Date in October 1998.
As of the Cut-off Date, the Original Mortgage Loans had an
aggregate Scheduled Principal Balance equal to $342,799,763.98.
In consideration of the mutual agreements herein contained,
the Depositor, the Master Servicer and the Trustee agree as follows:
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<PAGE>
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.
"Accepted Servicing Practices": The servicing standards set
forth in Section 3.01.
"Accrued Certificate Interest": With respect to any Class of
Certificates other than the Class P Certificates and each Distribution Date,
interest accrued during the related Interest Accrual Period at the Pass-Through
Rate for such Certificate for such Distribution Date on the Certificate
Principal Balance, in the case of the Class A Certificates, the Mezzanine
Certificates and the Residual Certificates, or on the Notional Amount, in the
case of the Class CE Certificate, of such Certificate immediately prior to such
Distribution Date. The Class P Certificates are not entitled to distributions in
respect of interest and, accordingly, will not accrue interest. All
distributions of interest on the Class A Certificates and the Mezzanine
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,
Mezzanine Certificate or Class CE 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 Interest Shortfall,
if any, for such Distribution Date. In addition, Accrued Certificate Interest
with respect to each Distribution Date, as to any Class CE Certificate, shall be
reduced by an amount equal to the portion allocable to such Class CE Certificate
of Realized Losses, if any, pursuant to Section 4.04 hereof.
"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.
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<PAGE>
"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, which assignment, notice of transfer or
equivalent instrument may be in the form of one or more blanket assignments
covering Mortgages secured by Mortgaged Properties located in the same county,
if permitted by law.
"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 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(b) 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 Trustee Fee payable from the
Distribution Account pursuant to Section 8.05, (vii) amounts deposited in the
Collection Account or the Distribution Account in error and (viii) the amount of
any Prepayment Charges collected by the Master Servicer in connection with the
Principal Prepayment of any of the Mortgage Loans, 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.
"Bankruptcy Code": The Bankruptcy Reform Act of 1978 (Title
11 of the United States Code), as amended.
"Bankruptcy Loss": With respect to any Mortgage Loan, a
Realized Loss resulting from a Deficient Valuation or Debt Service Reduction.
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<PAGE>
"Book-Entry Certificate": The Class A Certificates and the
Mezzanine Certificates for so long as the Certificates of such Class shall be
registered in the name of the Depository or its nominee.
"Book-Entry Custodian": The custodian appointed pursuant to
Section 5.01.
"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, the State of New York, State of Pennsylvania 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.
"Cash-Out Refinancing": A Refinanced Mortgage Loan, the
proceeds of which were more than the greater of (a) $1,000 or (b) 1% of the
principal balance of an existing first mortgage on the related Mortgaged
Property and the principal balance of any existing subordinate mortgages on the
related Mortgaged Property, in either case, in excess of the principal balance
of an existing first mortgage on the related Mortgaged Property, the principal
balance of any existing subordinate mortgages on the related Mortgaged Property
and related closing costs, and were used to satisfy such existing first
mortgage, or any such subordinate mortgages, to pay related closing costs and to
provide to the Mortgagor more than $1,000 or the amount calculated in clause (b)
above, as applicable, in addition thereto. Notwithstanding the foregoing, any
Refinanced Mortgage Loan with a Loan-to-Value Ratio less than or equal to 80%
that was used for the purpose of debt consolidation is considered a Cash-Out
Refinancing.
"Certificate": Any one of the Depositor's Asset-Backed
Floating Rate Certificates, Series 1998-OPT2, Class A, Class M-1, Class M-2,
Class M-3, Class CE, Class P, Class R-I, Class R-II or Class R-III, 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 (or the Notional Amount, in the case of the Class CE
Certificates) 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 (or the Notional
Amount, in the case of the Class CE Certificates) of such Class of Certificates
to be made on such Distribution Date), and the denominator of which is the
initial aggregate Certificate Principal Balance (or the Notional Amount, in the
case of the Class CE Certificates) of such Class of Certificates as of the
Closing Date.
"Certificateholder" or "Holder": The Person in whose name a
Certificate is registered in the Certificate Register, except that a
Disqualified Organization 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 11.01. The Trustee may conclusively
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<PAGE>
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 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, Mezzanine Certificate, Class P Certificate or Residual Certificate
as of any date of determination, the Certificate Principal Balance of such
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
Certificate, as stated on the face thereof). With respect to each Class CE
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 Uncertificated Balances of REMIC II Regular Interests over (B) the
then aggregate Certificate Principal Balances of the Class A Certificates, the
Mezzanine Certificates, the Class P Certificates and the Residual Certificates
then outstanding.
"Certificate Register": The register maintained 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, authenticated and delivered by the Trustee, substantially in the form
annexed hereto as Exhibit A-1 and evidencing a Regular Interest in REMIC III for
purposes of the REMIC Provisions.
"Class A Principal Distribution Amount": With respect to any
Distribution Date on or after the Stepdown Date and on which a Trigger Event is
not in effect, the excess of (x) the Certificate Principal Balance of the Class
A Certificates immediately prior to such Distribution Date over (y) the lesser
of (A) the product of (i) 60.00% and (ii) the aggregate Stated Principal Balance
of the Mortgage Loans as of the last day of the related Due Period and (B) the
aggregate Stated Principal Balance of the Mortgage Loans as of the last day of
the related Due Period minus $2,570,998.
"Class CE Certificate": Any one of the Class CE Certificates
executed, authenticated and delivered by the Trustee, substantially in the form
annexed hereto as Exhibit A-5 and evidencing a Regular Interest in REMIC III for
purposes of the REMIC Provisions.
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<PAGE>
"Class Exemption": A class exemption granted by the DOL, which
provides relief from certain of the prohibited transaction provisions of ERISA
and the related excise tax provisions of the Code.
"Class M-1 Certificate": Any one of the Class M-1 Certificates
executed, authenticated and delivered by the Trustee, substantially in the form
annexed hereto as Exhibit A-2 and evidencing a Regular Interest in REMIC III for
purposes of the REMIC Provisions.
"Class M-1 Principal Distribution Amount": With respect to any
Distribution Date on or after the Stepdown Date and on which a Trigger Event is
not in effect, the excess of (x) the sum of (i) the Certificate Principal
Balance of the Class A Certificates (after taking into account the payment of
the Class A Principal Distribution Amount on such Distribution Date) and (ii)
the Certificate Principal Balance of the Class M-1 Certificates immediately
prior to such Distribution Date over (y) the lesser of (A) the product of (i)
75.00% and (ii) the aggregate Stated Principal Balance of the Mortgage Loans as
of the last day of the related Due Period and (B) the aggregate Stated Principal
Balance of the Mortgage Loans as of the last day of the related Due Period minus
$2,570,998.
"Class M-2 Certificate": Any one of the Class M-2 Certificates
executed, authenticated and delivered by the Trustee, substantially in the form
annexed hereto as Exhibit A-3 and evidencing a Regular Interest in REMIC III for
purposes of the REMIC Provisions.
"Class M-2 Principal Distribution Amount": With respect to any
Distribution Date on or after the Stepdown Date and on which a Trigger Event is
not in effect, the excess of (x) the sum of (i) the Certificate Principal
Balance of the Class A Certificates (after taking into account the payment of
the Class A Principal Distribution Amount on such Distribution Date), (ii) the
Certificate Principal Balance of the Class M-1 Certificates (after taking into
account the payment of the Class M-1 Principal Distribution Amount on such
Distribution Date) and (iii) the Certificate Principal Balance of the Class M-2
Certificates immediately prior to such Distribution Date over (y) the lesser of
(A) the product of (i) 86.00% and (ii) the aggregate Stated Principal Balance of
the Mortgage Loans as of the last day of the related Due Period and (B) the
aggregate Stated Principal Balance of the Mortgage Loans as of the last day of
the related Due Period minus $2,570,998.
"Class M-3 Certificate": Any one of the Class M-3 Certificates
executed, authenticated and delivered by the Trustee, substantially in the form
annexed hereto as Exhibit A-4 and evidencing a Regular Interest in REMIC III for
purposes of the REMIC Provisions.
"Class M-3 Principal Distribution Amount": With respect to any
Distribution Date on or after the Stepdown Date and on which a Trigger Event is
not in effect, the excess of (x) the sum of (i) the Certificate Principal
Balance of the Class A Certificates (after taking into account the payment of
the Class A Principal Distribution Amount on such Distribution Date), (ii) the
Certificate Principal Balance of the Class M-1 Certificates (after taking into
account the payment of the Class M-1 Principal Distribution Amount on such
Distribution Date), (iii) the Certificate Principal Balance of the Class M-2
Certificates (after taking into account the payment of the Class
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<PAGE>
M-2 Principal Distribution Amount on such Distribution Date) and (iv) the
Certificate Principal Balance of the Class M-3 Certificates immediately prior to
such Distribution Date over (y) the lesser of (A) the product of (i) 94.50% and
(ii) the aggregate Stated Principal Balance of the Mortgage Loans as of the last
day of the related Due Period and (B) the aggregate Stated Principal Balance of
the Mortgage Loans as of the last day of the related Due Period minus
$2,570,998.
"Class P Certificate": Any one of the Class P Certificates
executed, authenticated and delivered by the Trustee, substantially in the form
annexed hereto as Exhibit A-6 and evidencing a Regular Interest in REMIC III for
purposes of the REMIC Provisions.
"Class R-I Certificate": Any one of the Class R-I Certificates
executed, authenticated and delivered by the Trustee, substantially in the form
annexed hereto as Exhibit A-7 and evidencing the Residual Interest in REMIC I
for purposes of the REMIC Provisions.
"Class R-II Certificate": Any one of the Class R-II
Certificates executed, authenticated and delivered by the Trustee, substantially
in the form annexed hereto as Exhibit A-8 and evidencing the Residual Interest
in REMIC II for purposes of the REMIC Provisions.
"Class R-III Certificates": Any one of the Class R-III
Certificates executed, authenticated and delivered by the Trustee, substantially
in the form annexed hereto as Exhibit A-9 and evidencing the Residual Interest
in REMIC III for purposes of the REMIC Provisions.
"Closing Date": September 25, 1998.
"Code": The Internal Revenue Code of 1986.
"Collection Account": The account or accounts created and
maintained, or caused to be created and maintained, by the Master Servicer
pursuant to Section 3.10(a), which shall be entitled "Option One Mortgage
Corporation, as Master Servicer for U.S. Bank National Association, as Trustee,
in trust for the registered holders of Salomon Brothers Mortgage Securities VII,
Inc., Asset-Backed Floating Rate Certificates, Series 1998-OPT2." The Collection
Account must be an Eligible Account.
"Commission": The Securities and Exchange Commission.
"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 180 East Fifth Street, St.
Paul, Minnesota 55101, or at such other address as the Trustee may designate
from time to time by notice to the Certificateholders, the Depositor and the
Master Servicer.
"Corresponding Certificate": With respect to REMIC I Regular
Interest I-LT2, REMIC I Regular Interest I-LT3, REMIC I Regular Interest I-LT4,
REMIC I Regular Interest I- LT5 and REMIC I Regular Interest I-LTP, the Class A
Certificates, Class M-1 Certificates, Class M-2 Certificates, Class M-3
Certificates and Class P Certificates, respectively. With respect to
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<PAGE>
REMIC II Regular Interest II-LT2, REMIC II Regular Interest II-LT3, REMIC II
Regular Interest II-LT4, REMIC II Regular Interest II-LT5 and REMIC II Regular
Interest II-LTP, the Class A Certificates, Class M-1 Certificates, Class M-2
Certificates, Class M-3 Certificates and Class P Certificates, respectively.
"Credit Enhancement Percentage": For any Distribution Date,
the percentage equivalent of a fraction, the numerator of which is the sum of
the aggregate Certificate Principal Balances of the Mezzanine Certificates and
the Class CE Certificates, and the denominator of which is the aggregate Stated
Principal Balance of the Mortgage Loans, calculated after taking into account
distributions of principal on the Mortgage Loans and distribution of the
Principal Distribution Amount to the Certificates then entitled to distributions
of principal on such Distribution Date.
"Cumulative Loss Percentage": With respect to any Distribution
Date, the percentage equivalent of a fraction, the numerator of which is the
aggregate amount of Realized Losses incurred from the Cut-off Date to the last
day of the preceding calendar month and the denominator of which is the
aggregate Stated Principal Balance of the Mortgage Loans as of the Cut-off Date.
"Cumulative Loss Test": The Cumulative Loss Test will be met
with respect to a Distribution Date as follows: (i) for the 37th through the
48th Distribution Dates, if the Cumulative Loss Percentage for such Distribution
Date is greater than 3.7%; (ii) for the 49th through the 60th Distribution
Dates, if the Cumulative Loss Percentage for such Distribution Date is greater
than 4.7%; (iii) for the 61st through the 72nd Distribution Dates, if the
Cumulative Loss Percentage for such Distribution Date is greater than 5.3%; (iv)
for the 73rd through the 84th Distribution Dates, if the Cumulative Loss
Percentage for such Distribution Date is greater than 5.7%; and (v) for the 85th
Distribution Date or any Distribution Date thereafter, if the Cumulative Loss
Percentage for such Distribution Date is greater than 6.0%.
"Cut-off Date": With respect to each Original Mortgage Loan,
September 1, 1998. 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.
"DCR": Duff & Phelps Credit Rating Co., or its successor in
interest.
"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.
"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.
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<PAGE>
"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 the last day of the related
Due Period, the percentage equivalent of a fraction, the numerator of which is
the aggregate Stated Principal Balance of all Mortgage Loans that, as of the
last day of the previous calendar month, are 60 or more days delinquent, are in
foreclosure, have been converted to REO Properties or have been discharged by
reason of bankruptcy, and the denominator of which is the aggregate Stated
Principal Balance of the Mortgage Loans as of the last day of the previous
calendar month.
"Delinquency Test": The Delinquency Test will be met with
respect to any Distribution Date, if the Delinquency Percentage for such
Distribution Date is greater than 12.0%.
"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 (or,
in the case of a depository institution that is the principal subsidiary of a
holding company, such holding company has unsecured commercial paper or other
short-term unsecured debt obligations) that are rated P-1 by Moody's and D-1 by
DCR (or comparable ratings if Moody's and DCR 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
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<PAGE>
thereon or any use of such REO Property in a trade or business conducted by
REMIC I 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 Freddie Mac, 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, (v) an "electing
large partnership" and (vi) 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 any of REMIC I, REMIC II or REMIC
III 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 "U.S. Bank National Association, as Trustee, in trust for the
registered holders of Salomon Brothers Mortgage Securities VII, Inc.,
Asset-Backed Floating Rate Certificates, Series 1998-OPT2." The Distribution
Account must be an Eligible Account.
"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 1998.
"DOL": The United States Department of Labor or any successor
in interest.
"DOL Regulations": The regulations promulgated by the DOL at
29 C.F.R. ss.2510.3-101.
"Due Date": With respect to each Distribution Date, the first
day of the calendar month in which such Distribution Date occurs, which is
generally the day of the month on which the Monthly Payment is due on a Mortgage
Loan, exclusive of any days of grace.
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"Due Period": With respect to any Distribution Date, the
period commencing on the second day of the month immediately preceding the 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 Depository Institution, (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.
"ERISA": The Employee Retirement Income Security Act of 1974,
as amended.
"Estate in Real Property": A fee simple estate in a parcel of
land.
"Excess Overcollateralized Amount": With respect to the Class
A Certificates and the Mezzanine Certificates and any Distribution Date, the
excess, if any, of (i) the Overcollateralized Amount for such Distribution Date
over (ii) the Required Overcollateralized Amount for such Distribution Date.
"Expense Adjusted Mortgage Rate": With respect to any Mortgage
Loan or REO Property, the then applicable Mortgage Rate thereon minus the
Servicing Fee Rate.
"Fannie Mae": Fannie Mae, formerly known as the Federal
National Mortgage Association ("FNMA"), or any successor thereto.
"FDIC": Federal Deposit Insurance 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 Majority Class CE
Certificateholder or the Master Servicer pursuant to or as contemplated by
Section 2.03, Section 3.16(c) or Section 9.01), 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.
"Freddie Mac": Freddie Mac, formerly known as the Federal Home
Loan Mortgage Corporation ("FHLMC"), or any successor thereto.
"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.
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"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 respective Affiliates, (b) does not have any
direct financial interest in or any material indirect financial interest in the
Depositor, the Master Servicer, the Originator or any Affiliate thereof, and (c)
is not connected with the Depositor, the Master Servicer, the Originator 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 Master
Servicer, the Originator 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, the Master Servicer, the Originator 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
REMIC I within the meaning of Section 856(d)(3) of the Code if REMIC I 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% or more of any Class of Certificates), so long as REMIC I does
not receive or derive any income from such Person and provided that the
relationship between such Person and REMIC I 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 either (i) as of the first business day
45 days prior to such Adjustment Date or (ii) as of the first business day of
the month preceding the month of such Adjustment Date, as specified in the
related Mortgage Note.
"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 Mezzanine Certificates, the Residual
Certificates, REMIC II Regular Interest II-LT2, REMIC II Regular Interest
II-LT3, REMIC II Regular Interest II-LT4, REMIC II Regular Interest II-LT5,
REMIC II Regular Interest II-LT2S, REMIC II Regular Interest II-LT3S, REMIC II
Regular Interest II-LT4S and REMIC II Regular Interest II-LT5S, the period
commencing on the Distribution Date of the month immediately preceding the month
in which such Distribution Date occurs (or, in the case of the first
Distribution Date, commencing on the Closing Date) and
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ending on the day preceding such Distribution Date. With respect to any
Distribution Date and REMIC II Regular Interest II-LT1, REMIC II Regular
Interest II-LT6 and the REMIC I Regular Interest, the one-month period ending on
the last day of the calendar month preceding the month in which such
Distribution Date occurs.
"Interest Carry Forward Amount": With respect to any
Distribution Date and any Class of Class A Certificates or Mezzanine
Certificates, the sum of (i) the amount, if any, by which (a) the Interest
Distribution Amount for such Class of Certificates as of the immediately
preceding Distribution Date exceeded (b) the actual amount distributed on such
Class of Certificates in respect of interest on such immediately preceding
Distribution Date and (ii) the amount of any Interest Carry Forward Amount for
such Class of Certificates remaining unpaid from previous Distribution Dates.
With respect to such Classes of Certificates, any Interest Carry Forward Amount
paid pursuant to Section 4.01 will include accrued interest on such amount,
calculated at the related Pass-Through Rate for each Interest Accrual Period
such amount remained outstanding.
"Interest Determination Date": With respect to the Class A
Certificates, the Mezzanine Certificates, REMIC II Regular Interest II-LT2,
REMIC II Regular Interest II-LT2S, REMIC II Regular Interest II-LT3, REMIC II
Regular Interest II-LT3S, REMIC II Regular Interest II-LT4, REMIC II Regular
Interest II-LT4S, REMIC II Regular Interest II-LT5, REMIC II Regular Interest
II-LT5S, REMIC I Regular Interest I-LT2, REMIC I Regular Interest I-LT3, REMIC I
Regular Interest I-LT4 and REMIC I Regular Interest I-LT5, 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 any Class of Certificates other than the Class P
Certificates, the aggregate Accrued Certificate Interest on the Certificates of
such Class for such Distribution Date.
"Interest Remittance Amount": With respect to any Distribution
Date, that portion of the Available Distribution Amount for such Distribution
Date allocable to interest.
"Late Collections": With respect to any Mortgage Loan and any
Due Period, all amounts received subsequent to the Determination Date
immediately following such 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 REMIC I by reason of its being purchased, sold or replaced
pursuant to or as contemplated by Section 2.03, Section 3.16(c) or Section 9.01.
With respect to any REO Property, either of the following events: (i) a Final
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Recovery Determination is made as to such REO Property; or (ii) such REO
Property is removed from REMIC I by reason of its being purchased pursuant to
Section 9.01.
"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
9.01.
"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 CE Certificateholder": Any single Holder or
group of Holders of Class CE Certificates representing a greater than 50%
Percentage Interest in such Class.
"Master Servicer": Option One Mortgage Corporation 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, 5:00 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 succeeding such 18th day.
"Master Servicer Termination Test": With respect to any
Distribution Date, the Master Servicer Termination Test will be failed if the
Cumulative Loss Percentage exceeds 6.625%.
"Maximum I-LT6 Uncertificated Interest Deferral Amount": With
respect to any Distribution Date, the excess of (i) accrued interest at the
REMIC I Remittance Rate applicable to REMIC I Regular Interest I-LT6 for such
Distribution Date on a balance equal to the Uncertificated Balance of REMIC I
Regular Interest I-LT6 minus the REMIC I Overcollateralized Amount, in each case
for such Distribution Date, over (ii) Uncertificated Interest on REMIC I Regular
Interest I-LT2, REMIC I Regular Interest I-LT3, REMIC I Regular Interest I-LT4
and REMIC I Regular Interest I-LT5 for such Distribution Date.
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"Maximum Mortgage Rate": With respect to each Mortgage Loan,
the percentage set forth in the related Mortgage Note as the maximum Mortgage
Rate thereunder.
"Mezzanine Certificate": Any Class M-1 Certificate, Class M-2
Certificate or Class M-3 Certificate.
"Minimum Mortgage Rate": With respect to each Mortgage Loan,
the percentage set forth in the related Mortgage Note as the minimum Mortgage
Rate thereunder.
"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.
"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) of this Agreement,
the Mortgage Loans so held being identified in the Mortgage Loan Schedule.
"Mortgage Loan Purchase Agreement": The agreement among the
Depositor, the Originator and the Seller, 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 REMIC I 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;
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(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) the stated remaining months to maturity from the Cut-off
Date based on the original amortization schedule;
(viii) the Loan-to-Value Ratio at origination;
(ix) the Mortgage Rate in effect immediately following the
Cut-off Date;
(x) the date on which the first Monthly Payment was due on the
Mortgage Loan;
(xi) the stated maturity date;
(xii) the amount of the Monthly Payment at origination;
(xiii) the amount of the Monthly Payment due on the first Due
Date after the Cut-off
Date;
(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) (A) the Periodic Rate Cap and (B) the maximum first
Adjustment Date Mortgage Rate adjustment;
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(xxiv) a code indicating the documentation program (I.E., Full
Documentation or Stated Income Documentation);
(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) the actual unpaid principal balance of the Mortgage Loan
as of the Cut-off Date;
(xxxiv) the type and term of the related Prepayment Charge;
(xxxv) [intentionally omitted];
(xxxvi) [intentionally omitted];
(xxxvii) the rounding code (I.E., nearest 0.125%, next highest
0.125%);
(xxxviii) [intentionally omitted];
(xxxix) [intentionally omitted];
(xl) the program code.
The Mortgage Loan Schedule shall set forth the following
information with respect to the Mortgage Loans in the aggregate as of the
Cut-Off Date: (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, the 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.
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"Mortgage Note": The original executed note or other evidence
of 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 equal to the sum, rounded to the nearest or next highest
multiple of 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 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 sum of (i) any Overcollateralization Reduction Amount for
such Distribution Date and (ii) 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, the Mezzanine Certificates and the Residual Certificates and (B)
the sum of the amounts described in clauses (b)(i) through (iii) of the
definition of Principal Distribution Amount.
"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.
"Net WAC Pass-Through Rate": With respect to the REMIC II
Regular Interests, the Class A Certificates, the Mezzanine Certificates and the
Residual Certificates and any Distribution Date, a per annum rate equal to the
fraction, expressed as a percentage, the numerator of which is (i) an amount
equal to 1/12 of the aggregate Scheduled Principal Balance of the then
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outstanding Mortgage Loans and REO Properties multiplied by the weighted average
of the Expense Adjusted Mortgage Rates on such Mortgage Loans and REO
Properties, and the denominator of which is (ii) an amount equal to (A) the sum
of the aggregate Scheduled Principal Balance of the then outstanding Mortgage
Loans and REO Properties multiplied by (B) the actual number of days elapsed in
the related Interest Accrual Period divided by 360.
"New Lease": Any lease of REO Property entered into on behalf
of REMIC I, including any lease renewed or extended on behalf of REMIC I, if
REMIC I 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 Collections, Insurance Proceeds or Liquidation Proceeds on such Mortgage
Loan or REO Property as provided herein.
"Nonrecoverable Servicing Advance": Any Servicing 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 Servicing Advance, would not be ultimately
recoverable from related Late Collections, 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.
"Notional Amount": With respect to the Class CE Certificates
and any Distribution Date, the Uncertificated Balance of the REMIC II Regular
Interests (other than the Uncertificated Balance of REMIC II Regular Interest
II-LTP) for such Distribution Date.
"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 Master Servicer, the
Seller, the Originator or the Depositor, as applicable.
"One-Month LIBOR": With respect to the Class A Certificates,
the Mezzanine Certificates and the Residual Certificates and REMIC II Regular
Interest II-LT2, REMIC II Regular Interest II-LT3, REMIC II Regular Interest
II-LT4 and REMIC II Regular Interest II-LT5 and any Interest Accrual Period
therefor, the rate determined by the Trustee on the related Interest
Determination Date on the basis of the offered rate for one-month U.S. dollar
deposits, as such rate appears on Telerate Page 3750 as of 11:00 a.m. (London
time) on such Interest Determination Date; provided that if such rate does not
appear on Telerate Page 3750, the rate for such date will be determined on the
basis of the offered rates of the Reference Banks for one-month U.S. dollar
deposits, as of 11:00 a.m. (London time) on such Interest Determination Date. In
such event, the Trustee will request the principal London office of each of the
Reference Banks to provide a quotation of its rate. 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
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be the arithmetic mean of such offered quotations (rounded upwards if necessary
to the nearest whole multiple of 1/16%). 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. Notwithstanding the foregoing, if, under the priorities described
above, LIBOR for an Interest Determination Date would be based on LIBOR for the
previous Interest Determination Date for the third consecutive Interest
Determination Date, the Trustee shall select an alternative comparable index
(over which the Trustee has no control), used for determining one-month
Eurodollar lending rates that is calculated and published (or otherwise made
available) by an independent party.
"One-Month LIBOR Pass-Through Rate": With respect to the Class
A Certificates, the Residual Certificates and REMIC II Regular Interest II-LT2,
a per annum rate equal to One- Month LIBOR plus 0.180% in the case of each
Distribution Date through and including the Distribution Date on which the
aggregate Stated Principal Balance of the Mortgage Loans and each REO Property
remaining in the Trust Fund is reduced to less than 5% of the aggregate Stated
Principal Balance of the Mortgage Loans as of the Cut-off Date, or One-Month
LIBOR plus 0.360%, in the case of any Distribution Date thereafter.
With respect to the Class M-1 Certificates and REMIC II
Regular Interest II-LT3, a per annum rate equal to One-Month LIBOR plus 0.370%,
in the case of each Distribution Date through and including the Distribution
Date on which the aggregate Stated Principal Balance of the Mortgage Loans and
each REO Property remaining in the Trust Fund is reduced to less than 5% of the
aggregate Stated Principal Balance of the Mortgage Loans as of the Cut-off Date,
or One-Month LIBOR plus 0.555%, in the case of any Distribution Date thereafter.
With respect to the Class M-2 Certificates and REMIC II
Regular Interest II-LT4, a per annum rate equal to One-Month LIBOR plus 0.630%,
in the case of each Distribution Date through and including the Distribution
Date on which the aggregate Stated Principal Balance of the Mortgage Loans and
each REO Property remaining in the Trust Fund is reduced to less than 5% of the
aggregate Stated Principal Balance of the Mortgage Loans as of the Cut-off Date,
or One-Month LIBOR plus 0.945%, in the case of any Distribution Date thereafter.
With respect to the Class M-3 Certificates and REMIC II
Regular Interest II-LT5, a per annum rate equal to One-Month LIBOR plus 1.200%,
in the case of each Distribution Date through and including the Distribution
Date on which the aggregate Stated Principal Balance of the Mortgage Loans and
each REO Property remaining in the Trust Fund is reduced to less than 5% of the
aggregate Stated Principal Balance of the Mortgage Loans as of the Cut-off Date,
or One-Month LIBOR plus 1.800%, 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, except that any opinion of counsel relating to (a)
the qualification of any of REMIC I, REMIC II or REMIC III as a REMIC or (b)
compliance with the REMIC Provisions must be an opinion of Independent counsel.
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"Original Mortgage Loan": Any of the Mortgage Loans included
in REMIC I as of the Closing Date.
"Originator": Option One Mortgage Corporation, or its
successor in interest, in its capacity as originator under the Mortgage Loan
Purchase Agreement.
"Overcollateralized Amount": With respect to 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 sum of
the aggregate Certificate Principal Balances of the Class A Certificates, the
Mezzanine Certificates and the Class P 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 Principal Distribution Amount on such
Distribution Date).
"Overcollateralization Deficiency Amount": With respect to any
Distribution Date, the excess, if any, of (a) the Required Overcollateralized
Amount applicable to such Distribution Date over (b) the Overcollateralized
Amount applicable to such Distribution Date prior to taking into account the
payment of any Overcollateralization Increase Amount on such Distribution Date.
"Overcollateralization Increase Amount": With respect to any
Distribution Date, the lesser of (a) the Overcollateralization Deficiency Amount
as of such Distribution Date (after taking into account the payment of the
Principal Distribution Amount on such Distribution Date, exclusive of the
payment of any Overcollateralization Increase Amount) and (b) the amount of
Accrued Certificate Interest payable on the Class CE Certificates on such
Distribution Date as reduced by Realized Losses allocated thereto with respect
to such Distribution Date pursuant to Section 4.04.
"Overcollateralization Reduction Amount": With respect to any
Distribution Date, an amount equal to the lesser of (a) the Excess
Overcollateralized Amount and (b) the sum of the amounts available for
distribution specified in clauses (b)(i) through (iii) of the definition of
Principal Distribution Amount.
"Overcollateralization Reduction Lockout Event": An
Overcollateralization Reduction Lockout Event has occurred with respect to any
Distribution Date on or after October 2001 if both the Cumulative Loss Test and
the Delinquency Loss Test are met.
"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 Residual Certificates
and the first Distribution Date and with respect to the Class A Certificates and
the Mezzanine Certificates and any Distribution Date, a rate per annum equal to
the lesser of (i) the related One-Month LIBOR Pass-Through Rate for such
Distribution Date and (ii) the Net WAC Pass-Through Rate for such Distribution
Date. With respect to the Class CE Certificates and any Distribution Date, a
rate per
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annum equal to the percentage equivalent of a fraction, the numerator of which
is the sum of the amounts calculated pursuant to clauses (i) through (vii)
below, and the denominator of which is the Uncertificated Balance of the REMIC
II Regular Interests (other than the Uncertificated Balance of REMIC II Regular
Interest II-LTP). For purposes of calculating the Pass-Through Rate for the
Class CE Certificates, the numerator is equal to the sum of the following
components:
(i) the REMIC II Remittance Rate for REMIC II Regular Interest
II-LT1 minus two (2) times the weighted average of the REMIC II
Remittance Rates for REMIC II Regular Interest II-LT2, REMIC II Regular
Interest II-LT3, REMIC II Regular Interest II-LT4, REMIC II Regular
Interest II-LT5 and REMIC II Regular Interest II-LT6, with the rate on
REMIC II Regular Interest II-LT6 equal to zero for the purpose of this
calculation, applied to an Uncertificated Notional Amount equal to the
Uncertificated Balance of REMIC II Regular Interest II-LT1;
(ii) the weighted average of the REMIC II Remittance Rates for
REMIC II Regular Interest II-LT2, REMIC II Regular Interest II-LT3,
REMIC II Regular Interest II-LT4 and REMIC II Regular Interest II-LT5
minus two (2) times the weighted average of the REMIC II Remittance
Rates for REMIC II Regular Interest II-LT2, REMIC II Regular Interest
II-LT3, REMIC II Regular Interest II-LT4, REMIC II Regular Interest
II-LT5 and REMIC II Regular Interest II-LT6, with the rate on REMIC II
Regular Interest II-LT6 equal to zero for the purpose of this
calculation, applied to an Uncertificated Notional Amount equal to the
Uncertificated Balance of REMIC II Regular Interest II-LT2, REMIC II
Regular Interest II-LT3, REMIC II Regular Interest II-LT4 and REMIC II
Regular Interest II-LT5;
(iii) the REMIC II Remittance Rate for REMIC II Regular
Interest II-LT6 minus two (2) times the weighted average of the REMIC
II Remittance Rates for REMIC II Regular Interest II-LT2, REMIC II
Regular Interest II-LT3, REMIC II Regular Interest II-LT4, REMIC II
Regular Interest II-LT5 and REMIC II Regular Interest II-LT6, with the
rate on REMIC II Regular Interest II-LT6 equal to zero for the purpose
of this calculation, applied to an Uncertificated Notional Amount equal
to the Uncertificated Balance of REMIC II Regular Interest II-LT6;
(iv) 100% of the interest on REMIC II Regular Interest
II-LT2S;
(v) 100% of the interest on REMIC II Regular Interest
II-LT3S;
(iv) 100% of the interest on REMIC II Regular Interest
II-LT4S; and
(vii) 100% of the interest on REMIC II Regular Interest
II-LT5S.
"Percentage Interest": With respect to any Class of
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 and the
denominator of which is the aggregate initial Certificate Principal Balance of
all of the
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Certificates of such Class. The Class A Certificates and the Mezzanine
Certificates are issuable only in minimum Percentage Interests corresponding to
minimum initial Certificate Principal Balances of $10,000 and integral multiples
of $1.00 in excess thereof. The Class CE Certificates are issuable only in
minimum Percentage Interests corresponding to minimum initial Certificate
Principal Balances of $10,000 and integral multiples of $1.00 in excess thereof;
provided, however, that a single Certificate of such Class of Certificates may
be issued having a Percentage Interest corresponding to the remainder of the
aggregate initial Certificate Principal Balance of such Class or to an otherwise
authorized denomination for such Class plus such remainder. With respect to any
Class P Certificate or Residual Certificate, the undivided percentage ownership
in such Class evidenced by such Certificate, as set forth on the face of such
Certificate. The Class P Certificates and the Residual Certificates are issuable
only in Percentage Interests corresponding to initial Certificate Principal
Balances of $20 and integral multiples thereof.
"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;
(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 that rates such securities 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 that rates such securities 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 DCR (if rated by DCR) and "Aaa" by Moody's; 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 as a permitted investment of funds backing securities having
ratings equivalent to its highest initial rating of the Class A
Certificates;
provided, however, 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.
"Plan": Any employee benefit plan or certain other retirement
plans and arrangements, including individual retirement accounts and annuities,
Keogh plans and bank collective investment funds and insurance company general
or separate accounts in which such plans, accounts or arrangements are invested,
that are subject to ERISA and Section 4975 of the
Code.
"Prepayment Assumption": A prepayment rate for the Mortgage
Loans of 25% 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 Charge": With respect to any Prepayment Period,
any prepayment premium, penalty or charge payable by a Mortgagor in connection
with any Principal Prepayment on a Mortgage Loan pursuant to the terms of the
related Mortgage Note.
"Prepayment Charge Schedule": As of any date, the list of
Prepayment Charges included in REMIC I on such date, attached hereto as Schedule
2 (including the Prepayment Charge Summary attached thereto). The Prepayment
Charge Schedule shall set forth the following information with respect to each
Prepayment Charge:
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(i) the Originator's Mortgage Loan identifying number;
(ii) a code indicating the type of Prepayment Charge;
(iii) the date on which the first monthly payment was due on the
related Mortgage Loan;
(iv) the term of the related Mortgage Loan; and
(v) the principal balance of the related Mortgage Loan as of the
Cut-off Date.
The Prepayment Charge Schedule shall be amended from time to
time by the Depositor in accordance with the provisions of this Agreement.
"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 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 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, the
Mezzanine Certificates pursuant to Section
4.01(a)(2); and
(b) the sum of:
(i) the principal portion of each Monthly Payment on
the Mortgage Loans due during the related Due Period,
whether or not received on or prior to the related
Determination Date;
(ii) the Stated Principal Balance of any Mortgage
Loan that was purchased during the related Prepayment
Period pursuant to or as contemplated by Section
2.03, Section 3.16(c) or Section 9.01 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;
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(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 the
Mortgage Loans in the calendar month preceding such
Distribution Date; and
(v) the amount of any Overcollateralization Increase
Amount for such Distribution Date;
minus:
(vi) the amount of any Overcollateralization
Reduction Amount for such Distribution Date.
"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.
"PTCE": A Prohibited Transaction Class Exemption.
"Purchase Price": With respect to any Mortgage Loan or REO
Property to be purchased pursuant to or as contemplated by Section 2.03, Section
3.16(c) or Section 9.01, 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 9.01), (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
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Section 4.01, (iii) any unreimbursed Servicing Advances and P&I Advances
(including Nonrecoverable P&I Advances and Nonrecoverable Servicing 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(a)(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 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 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, the risk gradings described in clause (x) 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.
"Rate/Term Refinancing": A Refinanced Mortgage Loan, the
proceeds of which were not more than the greater of (a) $1,000 or (b) 1% of the
principal balance of an existing first mortgage on the related Mortgaged
Property and the principal balance of any existing subordinate mortgages on the
related Mortgaged Property, in either case, in excess of the principal balance
of an existing first mortgage on the related Mortgaged Property, the principal
balance of any existing subordinate mortgages on the related Mortgaged Property
and related closing costs, and were used to satisfy such existing first
mortgage, or any such subordinate mortgages, to pay related closing costs and to
provide to the Mortgagor not more than $1,000 or the amount calculated in clause
(b)
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above, as applicable, in addition thereto. Notwithstanding the foregoing, any
Refinanced Mortgage Loan with a Loan-to-Value Ratio greater than 80% that was
used for the purpose of debt consolidation is considered a Rate/Term
Refinancing.
"Rating Agency or Rating Agencies": DCR and Moody's or their
successors. If such agencies or their successors are no longer in existence,
"Rating Agencies" shall be such nationally recognized statistical rating
agencies, or other comparable Persons, designated by the Depositor, notice of
which designation shall be given to the Trustee and the 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 Section 3.11(a)(ix) and Section 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 Section 3.11(a)(iii).
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 REMIC I, 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 Section 3.11(a)(ix) and Section 3.16(b), minus
(v) the aggregate of all P&I Advances and Servicing Advances (in the case of
Servicing Advances, without duplication of amounts netted out of the rental
income, Insurance Proceeds and Liquidation Proceeds described in clause (vi)
below) 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
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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 and any
Book-Entry Certificate, the Business Day immediately preceding such Distribution
Date. With respect to each Distribution Date and any other Class of
Certificates, including any Definitive Certificates, 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 Tokyo Mitsubishi Bank and National Westminster Bank PLC and their successors
in interest; provided, however, 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 and (iii) which have been designated as
such by the Trustee.
"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, Mezzanine
Certificate, Class CE Certificate or Class P 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.
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"REMIC I": 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 and Prepayment Charges 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); (v) the Collection Account, the Distribution
Account and any REO 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, REMIC I specifically excludes all payments and other collections of
principal and interest due on the Mortgage Loans on or before the Cut-off Date
and all Prepayment Charges payable in connection with Principal Prepayments made
before the Cut-off Date.
"REMIC I Interest Loss Allocation Amount": With respect to any
Distribution Date, an amount equal to (a) the product of (i) the aggregate
Stated Principal Balance of the Mortgage Loans and REO Properties then
outstanding and (ii) the REMIC I Remittance Rate for REMIC I Regular Interest
I-LT1 minus two (2) times the weighted average of the REMIC II Remittance Rates
for REMIC I Regular Interest I-LT2, REMIC I Regular Interest I-LT3, REMIC I
Regular Interest I-LT4, REMIC I Regular Interest I-LT5 and REMIC I Regular
Interest I-LT6, with the rate on REMIC I Regular Interest I-LT6 equal to zero
for purposes of this calculation, divided by (b) 12.
"REMIC I Overcollateralized Amount": With respect to any date
of determination, (i) 1% of the aggregate Uncertificated Balances of the REMIC I
Regular Interests minus (ii) the Uncertificated Balances of REMIC I Regular
Interest I-LT2, REMIC I Regular Interest I-LT3, REMIC I Regular Interest I-LT4
and REMIC I Regular Interest I-LT5, in each case as of such date of
determination.
"REMIC I Principal Loss Allocation Amount": With respect to
any Distribution Date, an amount equal to the product of (i) the aggregate
Stated Principal Balance of the Mortgage Loans and REO Properties then
outstanding and (ii) 1 minus a fraction, the numerator of which is two times the
Uncertificated Balance of REMIC I Regular Interest I-LT2, REMIC I Regular
Interest I-LT3, REMIC I Regular Interest I-LT4 and REMIC I Regular Interest
I-LT5 and the denominator of which is the sum of the Uncertificated Balances of
REMIC I Regular Interest I- LT2, REMIC I Regular Interest I-LT3, REMIC I Regular
Interest I-LT4, REMIC I Regular Interest I-LT5 and REMIC I Regular Interest
I-LT6.
"REMIC I Regular Interest": Any of the seven separate
non-certificated beneficial ownership interests in REMIC I issued hereunder and
designated as a "regular interest" in REMIC I. Each REMIC I Regular Interest
shall accrue interest at the related REMIC I Remittance Rate in effect from time
to time, and shall be entitled to distributions of principal, subject to the
terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set
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forth in the Preliminary Statement hereto. The designations for the respective
REMIC I Regular Interests are set forth in the Preliminary Statement hereto.
"REMIC I Regular Interest I-LT1": One of the separate
non-certificated beneficial ownership interests in REMIC I issued hereunder and
designated as a Regular Interest in REMIC I. REMIC I Regular Interest I-LT1
shall accrue interest at the related REMIC I Remittance Rate in effect from time
to time, and shall be entitled to distributions of principal, subject to the
terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto.
"REMIC I Regular Interest I-LT2": One of the separate
non-certificated beneficial ownership interests in REMIC I issued hereunder and
designated as a Regular Interest in REMIC I. REMIC I Regular Interest I-LT2
shall accrue interest at the related REMIC I Remittance Rate in effect from time
to time, and shall be entitled to distributions of principal, subject to the
terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto.
"REMIC I Regular Interest I-LT3": One of the separate
non-certificated beneficial ownership interests in REMIC I issued hereunder and
designated as a Regular Interest in REMIC I. REMIC I Regular Interest I-LT3
shall accrue interest at the related REMIC I Remittance Rate in effect from time
to time, and shall be entitled to distributions of principal, subject to the
terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto.
"REMIC I Regular Interest I-LT4": One of the separate
non-certificated beneficial ownership interests in REMIC I issued hereunder and
designated as a Regular Interest in REMIC I. REMIC I Regular Interest I-LT4
shall accrue interest at the related REMIC I Remittance Rate in effect from time
to time, and shall be entitled to distributions of principal, subject to the
terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto.
"REMIC I Regular Interest I-LT5": One of the separate
non-certificated beneficial ownership interests in REMIC I issued hereunder and
designated as a Regular Interest in REMIC I. REMIC I Regular Interest I-LT5
shall accrue interest at the related REMIC I Remittance Rate in effect from time
to time, and shall be entitled to distributions of principal, subject to the
terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto.
"REMIC I Regular Interest I-LT6": One of the separate
non-certificated beneficial ownership interests in REMIC I issued hereunder and
designated as a Regular Interest in REMIC I. REMIC I Regular Interest I-LT6
shall accrue interest at the related REMIC I Remittance Rate in effect from time
to time, and shall be entitled to distributions of principal, subject to the
terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto.
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"REMIC I Regular Interest I-LTP": One of the separate
non-certificated beneficial ownership interests in REMIC I issued hereunder and
designated as a Regular Interest in REMIC I. REMIC I Regular Interest I-LTP
shall be entitled to any Prepayment Charges collected by the Master Servicer and
to a distribution of principal, subject to the terms and conditions hereof, in
an aggregate amount equal to its initial Uncertificated Balance as set forth in
the Preliminary Statement hereto.
"REMIC I Remittance Rate": With respect to each REMIC I
Regular Interest, the weighted average of the Expense Adjusted Mortgage Rates on
the then outstanding Mortgage Loans and REO Properties.
"REMIC I Required Overcollateralized Amount": 1% of the
Required Overcollateralization Amount.
"REMIC II": The segregated pool of assets consisting of all of
the REMIC I Regular Interests conveyed in trust to the Trustee for the benefit
of REMIC III, as holder of the REMIC II Regular Interests, and the Class R-II
Certificateholders pursuant to Section 2.07, and all amounts deposited therein,
with respect to which a separate REMIC election is to be made.
"REMIC II Regular Interest": Any of the eleven separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a "regular interest" in REMIC II. Each REMIC II Regular Interest
shall accrue interest at the related REMIC II Remittance Rate in effect from
time to time, and shall be entitled to distributions of principal, subject to
the terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto. The
designations for the respective REMIC II Regular Interests are set forth in the
Preliminary Statement hereto.
"REMIC II Regular Interest II-LT1": One of the separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a Regular Interest in REMIC II. REMIC II Regular Interest II-LT1
shall accrue interest at the related REMIC II Remittance Rate in effect from
time to time, and shall be entitled to distributions of principal, subject to
the terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto.
"REMIC II Regular Interest II-LT2": One of the separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a Regular Interest in REMIC II. REMIC II Regular Interest II-LT2
shall accrue interest at the related REMIC II Remittance Rate in effect from
time to time, and shall be entitled to distributions of principal, subject to
the terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto.
"REMIC II Regular Interest II-LT3": One of the separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a Regular Interest in REMIC II. REMIC II Regular Interest II-LT3
shall accrue interest at the related REMIC II Remittance Rate in effect from
time to time, and shall be entitled to distributions of principal, subject to
the
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terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto.
"REMIC II Regular Interest II-LT4": One of the separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a Regular Interest in REMIC II. REMIC II Regular Interest II-LT4
shall accrue interest at the related REMIC II Remittance Rate in effect from
time to time, and shall be entitled to distributions of principal, subject to
the terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto.
"REMIC II Regular Interest II-LT5": One of the separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a Regular Interest in REMIC II. REMIC II Regular Interest II-LT5
shall accrue interest at the related REMIC II Remittance Rate in effect from
time to time, and shall be entitled to distributions of principal, subject to
the terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto.
"REMIC II Regular Interest II-LT6": One of the separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a Regular Interest in REMIC II. REMIC II Regular Interest II-LT6
shall accrue interest at the related REMIC II Remittance Rate in effect from
time to time, and shall be entitled to distributions of principal, subject to
the terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto.
"REMIC II Regular Interest II-LTP": One of the separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a Regular Interest in REMIC II. REMIC II Regular Interest II-LTP
shall be entitled to any Prepayment Charges collected by the Master Servicer and
to a distribution of principal, subject to the terms and conditions hereof, in
an aggregate amount equal to its initial Uncertificated Balance as set forth in
the Preliminary Statement hereto.
"REMIC II Regular Interest II-LT2S": One of the separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a Regular Interest in REMIC II. REMIC II Regular Interest II-LT2S
shall accrue interest at the related REMIC II Remittance Rate in effect from
time to time on its related Uncertificated Notional Amount.
"REMIC II Regular Interest II-LT3S": One of the separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a Regular Interest in REMIC II. REMIC II Regular Interest II-LT3S
shall accrue interest at the related REMIC II Remittance Rate in effect from
time to time on its related Uncertificated Notional Amount.
"REMIC II Regular Interest II-LT4S": One of the separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a Regular Interest in REMIC II. REMIC II Regular Interest II-LT4S
shall accrue interest at the related REMIC II Remittance Rate in effect from
time to time on its related Uncertificated Notional Amount.
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"REMIC II Regular Interest II-LT5S": One of the separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a Regular Interest in REMIC II. REMIC II Regular Interest II-LT5S
shall accrue interest at the related REMIC II Remittance Rate in effect from
time to time on its related Uncertificated Notional Amount.
"REMIC II Remittance Rate": With respect to REMIC II Regular
Interest II-LT1 and REMIC II Regular Interest II-LT6, the weighted average of
the Expense Adjusted Mortgage Rates on the then outstanding Mortgage Loans and
REO Properties. With respect to REMIC II Regular Interest II-LT2, REMIC II
Regular Interest II-LT3, REMIC II Regular Interest II-LT4 and REMIC II Regular
Interest II-LT5, the lesser of (i) the related One-Month LIBOR Pass- Through
Rate (based on the actual number of days elapsed in the applicable Interest
Accrual Period and a 360-day year) and (ii) the Net WAC Pass-Through Rate,
multiplied by the actual number of days elapsed in the related Interest Accrual
Period divided by 360. With respect to REMIC II Regular Interest II-LT2S, REMIC
II Regular Interest II-LT3S, REMIC II Regular Interest II-LT4S and REMIC II
Regular Interest II-LT5S, a rate per annum equal to excess of the REMIC I
Remittance Rate for the related Uncertificated Corresponding Component over the
REMIC II Remittance Rate for REMIC II Regular Interest II-LT2, REMIC II Regular
Interest II- LT3, REMIC II Regular Interest II-LT4 and REMIC II Regular Interest
II-LT5, respectively.
"REMIC III": The segregated pool of assets consisting of all
of the REMIC II Regular Interests conveyed in trust to the Trustee for the
benefit of the REMIC III Certificateholders pursuant to Section 2.09, and all
amounts deposited therein, with respect to which a separate REMIC election is to
be made.
"REMIC III Certificate": Any Regular Certificate or Class
R-III Certificate.
"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 acceptable
to the Trustee 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, or caused
to be 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 REMIC I.
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"REO Imputed Interest": As to any REO Property, for any
calendar month during which such REO Property was at any time part of REMIC I,
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.
"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
9.01 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 REMIC I 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 Overcollateralized Amount": With respect to any
Distribution Date (i) prior to the Stepdown Date, $9,427,364, (ii) on or after
the Stepdown Date and provided that neither a Trigger Event nor an
Overcollateralization Reduction Lockout Event is in effect, the greater of (x)
5.50% of the aggregate Stated Principal Balance of the Mortgage Loans as of the
last day of the related Due Period and (y) $2,570,998, and (iii) on or after the
Stepdown Date and either a Trigger Event or an Overcollateralization Reduction
Lockout Event is in effect, the Required Overcollateralized Amount for the
immediately preceding 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 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, detached or semi-detached one-family dwelling, (ii) an attached,
detached or semi-detached two- to four-family dwelling, (iii) a one-family
dwelling unit in a Fannie Mae eligible condominium project, or (iv)
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an attached, detached or semi-detached one-family dwelling in a planned unit
development, none of which is a co-operative or mobile home.
"Residual Certificate": Any one of the Class R-I Certificates,
Class R-II Certificates or Class R-III 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 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.
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"Seller": Salomon Brothers Realty Corp., or its successor in
interest, in its capacity as seller under the Mortgage Loan Purchase Agreement.
"Senior Interest Distribution Amount": With respect to any
Distribution Date, an amount equal to the sum of (i) the Interest Distribution
Amounts for such Distribution Date for the Class A Certificates and, on the
first Distribution Date, the Residual Certificates and (ii) the Interest Carry
Forward Amount with respect to the Class A Certificates.
"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 Section 3.01, Section 3.09,
Section 3.14, Section 3.16 and Section 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 or in
part 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 Sub- Servicer 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 Depositor on the Closing
Date, as such list may from time to time be amended.
"Single Certificate": With respect to any Class of
Certificates (other than the Class P Certificates and 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 Class P Certificates
and the Residual Certificates, a hypothetical Certificate of such Class
evidencing a 100% Percentage Interest in such Class.
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"Startup Day": With respect to each of REMIC I, REMIC II and
REMIC III, the day designated as such pursuant to Section 10.01(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 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 REMIC I, minus the sum of (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": If the Master Servicer is the subject of a
proceeding under the federal Bankruptcy Code and the making of a Remittance (as
defined in Section 7.02(b)) is prohibited by Section 362 of the federal
Bankruptcy Code, funds that 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.
"Stepdown Date": The later to occur of (i) the Distribution
Date occurring in October 2001 and (ii) the first Distribution Date on which the
Credit Enhancement Percentage (calculated for this purpose only after taking
into account distributions of principal on the Mortgage Loans but prior to any
distribution of the Principal Distribution Amount to the Certificates then
entitled to distributions of principal on such Distribution Date) is equal to or
greater than 40.00%.
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"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.
"Telerate Page 3750": The display designated as page "3750" on
the Dow Jones Telerate Capital Markets Report (or such other page as may replace
page 3750 on that report for the purpose of displaying London interbank offered
rates of major banks).
"Termination Price": As defined in Section 9.01.
"Terminator": As defined in Section 9.01.
"Transfer": Any direct or indirect transfer, sale, pledge,
hypothecation, or other form of assignment of any Ownership Interest in a
Certificate.
"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.
"Trigger Event": A Trigger Event has occurred with respect to
a Distribution Date if the Delinquency Percentage exceeds 40% of the Credit
Enhancement Percentage.
"Trust Fund": Collectively, all of the assets of REMIC I,
REMIC II and REMIC III.
"Trustee": U.S. Bank National Association, a national banking
association, or its successor in interest, or any successor trustee appointed as
herein provided.
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"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.
"Uncertificated Balance": The amount of any REMIC I Regular
Interest or REMIC II Regular Interest outstanding as of any date of
determination. As of the Closing Date, the Uncertificated Balance of each REMIC
I Regular Interest and each REMIC II Regular Interest shall equal the amount set
forth in the Preliminary Statement hereto as its initial uncertificated balance.
On each Distribution Date, the Uncertificated Balance of each REMIC I Regular
Interest and each REMIC II Regular Interest shall be reduced by all
distributions of principal made on such REMIC I Regular Interest or such REMIC
II Regular Interest, as applicable, on such Distribution Date pursuant to
Section 4.01 and, if and to the extent necessary and appropriate, shall be
further reduced on such Distribution Date by Realized Losses as provided in
Section 4.04. The Uncertificated Balance of each REMIC I Regular Interest and
each REMIC II Regular Interest shall never be less than zero.
"Uncertificated Corresponding Component": With respect to:
REMIC II Regular Interest II-LT1, REMIC I Regular Interest I-LT1; REMIC II
Regular Interest II-LT2 and REMIC II Regular Interest II-LT2S, REMIC I Regular
Interest I-LT2; REMIC II Regular Interest II-LT3 and REMIC II Regular Interest
II-LT3S, REMIC I Regular Interest I-LT3; REMIC II Regular Interest II-LT4 and
REMIC II Regular Interest II-LT4S, REMIC I Regular Interest I-LT4; REMIC II
Regular Interest II-LT5 and REMIC II Regular Interest II-LT5S, REMIC I Regular
Interest I- LT5; REMIC II Regular Interest II-LT6, REMIC I Regular Interest
I-LT6; and REMIC II Regular Interest II-LTP, REMIC I Regular Interest I-LTP.
"Uncertificated Interest": With respect to any REMIC I Regular
Interest for any Distribution Date, one month's interest at the REMIC I
Remittance Rate applicable to such REMIC I Regular Interest for such
Distribution Date, accrued on the Uncertificated Balance thereof immediately
prior to such Distribution Date. With respect to any REMIC II Regular Interest
for any Distribution Date, one month's interest at the REMIC II Remittance Rate
applicable to such REMIC II Regular Interest for such Distribution Date, accrued
on the Uncertificated Balance thereof immediately prior to such Distribution
Date. Uncertificated Interest in respect of any REMIC I Regular Interest I-LT1,
REMIC I Regular Interest I-LT6, REMIC II Regular Interest II-LT1 and REMIC II
Regular Interest II-LT6, shall accrue on the basis of a 360- day year consisting
of twelve 30-day months; Uncertificated Interest in respect of REMIC I Regular
Interest I-LT2, REMIC I Regular Interest I-LT3, REMIC I Regular Interest I-LT4,
REMIC I Regular Interest I-LT5 and REMIC II Regular Interest II-LT2, REMIC II
Regular Interest II-LT3, REMIC II Regular Interest II-LT4, REMIC II Regular
Interest II-LT5, REMIC II Regular Interest II-LT2S, REMIC II Regular Interest
II-LT3S, REMIC II Regular Interest II- LT4S and REMIC II Regular Interest
II-LT5S shall accrue on the basis of a 360-day year and the actual number of
days in the applicable Interest Accrual Period. Uncertificated Interest with
respect to each Distribution Date, as to any REMIC I Regular Interest or REMIC
II Regular Interest, shall be reduced by an amount equal to a pro rata portion
of the sum of (a) the aggregate Prepayment Interest Shortfall, if any, for such
Distribution Date to the extent not covered by
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payments pursuant to Section 3.24 and (b) the aggregate amount of any Relief Act
Interest Shortfall, if any, for such Distribution Date. In addition,
Uncertificated Interest with respect to each Distribution Date, as to any REMIC
I Regular Interest or REMIC II Regular Interest, shall be reduced by Realized
Losses, if any, allocated to such REMIC I Regular Interest or REMIC II Regular
Interest pursuant to Section 1.02 and Section 4.04.
"Uncertificated Notional Amount": With respect to REMIC II
Regular Interest II-LT2S, REMIC II Regular Interest II-LT3S, REMIC II Regular
Interest II-LT4S and REMIC II Regular Interest II-LT5S, the Uncertificated
Balance of REMIC I Regular Interest I-LT2, REMIC I Regular Interest I-LT3, REMIC
I Regular Interest I-LT4 and REMIC I Regular Interest I-LT5, respectively.
"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
(except, in the case of a partnership, to the extent provided in regulations) or
an estate whose income is subject to United States federal income tax regardless
of its source, or a trust if a court within the United States is able to
exercise primary supervision over the administration of the trust and one or
more United States persons have the authority to control all substantial
decisions of the trust. To the extent prescribed in regulations by the Secretary
of the Treasury, which have not yet been issued, a trust which was in existence
on August 20, 1996 (other than a trust treated as owned by the grantor under
subpart E of part I of subchapter J of chapter 1 of the Code), and which was
treated as a United States person on August 20, 1996 may elect to continue to be
treated as a United States person notwithstanding the previous sentence. The
term "United States" shall have the meaning set forth in Section 7701 of the
Code.
"Value": With respect to any Mortgaged Property, the lesser of
(i) the lesser of (a) 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 Fannie Mae and Freddie
Mac and (b) the value thereof as determined by a review appraisal conducted by
the Originator in the event any such review appraisal determines an appraised
value more than 10% lower than the value thereof, in the case of a Mortgage Loan
with a Loan-to-Value Ratio less than or equal to 80%, or more than 5% lower than
the value thereof, in the case of a Mortgage Loan with a Loan-to-Value Ratio
greater than 80%, as determined by the appraisal referred to in clause (i)(a)
above; and (ii) the purchase price paid for the related Mortgaged Property by
the Mortgagor with the proceeds of the Mortgage Loan; provided, however, that
(A) in the case of a Refinanced Mortgage Loan, such value of the Mortgaged
Property is based solely upon the lesser of (1) 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 Fannie Mae and Freddie Mac and (2) the value thereof as
determined by a review appraisal conducted by the Originator in the event any
such review appraisal determines an appraised value more than 10% lower than the
value thereof, in
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the case of a Mortgage Loan with a Loan-to-Value Ratio less than or equal to
80%, or more than 5% lower than the value thereof, in the case of a Mortgage
Loan with a Loan-to-Value Ratio greater than 80%, as determined by the appraisal
referred to in clause (ii)(A)(1) above; and (B) in the case of a Mortgage Loan
originated in connection with a "lease-option purchase," such value of the
Mortgaged Property is based on the lower of the value determined by an appraisal
made for the originator of such Mortgage Loan at the time of origination or the
sale price of such Mortgaged Property if the "lease option purchase price" was
set less than 12 months prior to origination, and is based on the value
determined by an appraisal made for the originator of such Mortgage Loan at the
time of origination if the "lease option purchase price" was set 12 months or
more prior to origination.
"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, 98% of all Voting Rights will be allocated among the holders
of the Class A Certificates, the Mezzanine Certificates and the Class CE
Certificates in proportion to the then outstanding Certificate Principal
Balances of their respective Certificates, 1% of all Voting Rights will be
allocated to the holders of the Class P Certificates and 1% of all Voting Rights
will be allocated among the holders of the Residual Certificates. 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 Record 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, the Mezzanine Certificates and the Class CE Certificates for any
Distribution Date, (1) 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 any Relief Act Interest Shortfalls incurred in
respect of the Mortgage Loans for any Distribution Date shall be allocated
first, among the Class CE 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 Notional Amount of each such Certificate and, thereafter,
among the Class A Certificates and the Mezzanine 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 and (2) the aggregate amount of any Realized
Losses incurred for any Distribution Date shall be allocated among the Class CE
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
Notional Amount of each such Certificate.
For purposes of calculating the amount of Uncertificated
Interest for the REMIC I Regular Interests 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 first, to Uncertificated Interest payable
to REMIC I Regular Interest I-LT1 and REMIC I Regular Interest I-LT6 up to an
aggregate amount equal to the REMIC I Interest
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Loss Allocation Amount, 98% and 2%, respectively, and thereafter among REMIC I
Regular Interest I-LT1, REMIC I Regular Interest I-LT2, REMIC I Regular Interest
I-LT3, REMIC I Regular Interest I-LT4, REMIC I Regular Interest I-LT5 and REMIC
I Regular Interest I-LT6 PRO RATA based on, and to the extent of, one month's
interest at the then applicable respective Pass- Through Rate on the respective
Uncertificated Balance of each such REMIC I Regular Interest.
All Prepayment Interest Shortfalls and Relief Act Interest
Shortfalls on the REMIC II Regular Interests shall be allocated by the Trustee
on each Distribution Date among the REMIC II Regular Interests in the proportion
that Prepayment Interest Shortfalls and Relief Act Interest Shortfalls are
allocated to the related Uncertificated Corresponding Component.
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ARTICLE II
CONVEYANCE OF MORTGAGE LOANS;
ORIGINAL ISSUANCE OF CERTIFICATES
SECTION 2.01. Conveyance of the 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, 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 REMIC I. 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 the following documents or
instruments with respect to each Mortgage Loan so transferred and assigned, the
following documents or instruments (with respect
to a Mortgage Loan, a "Mortgage File"):
(i) the original Mortgage Note, endorsed in the
following form: "Pay to the order of U.S. Bank National
Association, as Trustee for the registered holders of Salomon
Brothers Mortgage Securities VII, Inc., under the applicable
pooling and servicing agreement, 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: "U.S. Bank National Association, as
Trustee for the registered holders of Salomon Brothers
Mortgage Securities VII, Inc., under the applicable pooling
and servicing agreement";
(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
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(vi) the original lender's title insurance policy,
together with all endorsements or riders that 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, at its own expense, shall promptly
(within sixty Business Days following the later of the Closing Date and the date
of receipt by the Trustee of the recording information for a Mortgage, but in no
event later than ninety days following the Closing Date) submit or cause to be
submitted for recording, at no expense to the Trust Fund, the Trustee or the
Depositor, 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 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.
With respect to a maximum of approximately 1.0% of the
Original Mortgage Loans, by outstanding principal balance of the Original
Mortgage Loans as of the Cut-off Date, if any original Mortgage Note referred to
in Section 2.01(i) above cannot be located, the obligations of the Depositor to
deliver such documents shall be deemed to be satisfied upon delivery to the
Trustee of a photocopy of such Mortgage Note, if available, with a lost note
affidavit substantially in the form of Exhibit I attached hereto. If any of the
original Mortgage Notes for which a lost note affidavit was delivered to the
Trustee is subsequently located, such original Mortgage Note shall be delivered
to the Trustee within three Business Days. 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 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
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. Notice shall be provided to the Trustee and the Rating
Agencies by the Originator if delivery pursuant to clause (2) above will be made
more than 270 days after the Closing Date. 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, promptly after
receipt thereof, the original lender's title insurance policy. The Depositor
shall deliver or cause to be delivered to 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.
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All original documents relating to the Mortgage Loans that are
not delivered to 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.
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. 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.
SECTION 2.02. Acceptance of REMIC I by Trustee.
The Trustee acknowledges receipt, 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 "REMIC I" under clauses (i), (iii), (iv)
and (v) (to the extent of amounts deposited into the Distribution Account) and
declares that it 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 "REMIC I" in
trust for the exclusive use and benefit of all present and future
Certificateholders.
The Trustee agrees, for the benefit of the Certificateholders,
to review each Mortgage File on or before the Closing Date (or Subsequent
Transfer Date, with respect to the Subsequent Mortgage Loans) and to certify in
substantially the form attached hereto as Exhibit C that, as to each Initial
Mortgage Loan or Subsequent Mortgage Loan, as the case may be, 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), the documents constituting part of
such Mortgage File described in Section 2.01(i), (ii) and (iii) are in its
possession.
The Trustee agrees, for the benefit of the Certificateholders,
to review each Mortgage File within 30 days after the Closing Date and to
certify in substantially the form attached hereto as Exhibit C-1 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
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), (xii), (xv), (xvii), (xviii) and (xx) through (xxiii)(A) 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 was under no duty or obligation (i) to inspect, review or examine
any
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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) 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 and the Master Servicer a final
certification in the form annexed hereto as Exhibit C-2 evidencing the
completeness of the Mortgage Files, with any applicable exceptions noted
thereon, with respect to all of the Mortgage Loans, and the Master Servicer
shall forward a copy thereof to any Sub-Servicer.
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 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 shall so notify the Depositor and the Master Servicer. 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 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.
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 that materially adversely affects the value of such Mortgage Loan or the
interest therein of the Certificateholders, the Trustee shall promptly notify
the Originator, the Seller and the Master Servicer of such defect, missing
document or breach and request that the Originator or the Seller deliver such
missing document or cure such defect or breach within 60 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 Trustee, in accordance with Section
3.02(b), 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 REMIC I 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 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
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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 REMIC I (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.
(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 REMIC I at the Purchase Price or (iii) remove
such Mortgage Loan from REMIC I (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 or Prepayment Charge, the Master
Servicer shall cure such breach in all material respects.
(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
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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 REMIC I.
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, 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 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 and the Master Servicer,
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 and the Master Servicer
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 REMIC I 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 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, plus all
outstanding P&I Advances and Servicing Advances (including Nonrecoverable P&I
Advances and Nonrecoverable Servicing Advances) related
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thereto. 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 an
Opinion of Counsel to the effect that such substitution will not cause (a) any
federal tax to be imposed on any of REMIC I, REMIC II or REMIC III, 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) any of REMIC I, REMIC II or REMIC
III 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 or the Trustee 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. 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 its
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 Section 2.03(a), if made by the Originator or the Seller, or Section
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.
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 that as of the Closing Date or
as of such other date specifically provided herein:
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(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) Except with respect to approximately 1.55% of the
Original Mortgage Loans which were 30 days or more but less
than 60 days delinquent in their Monthly Payment and with
respect to approximately 0.19% of the Original Mortgage Loans
which were 60 days or more but less than 90 days delinquent in
their Monthly Payment as of the Cut-off Date, in each case by
outstanding principal balance of the Original Mortgage Loans
as of the Cut-off Date, 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 delinquent only once);
(iii) Each Original Mortgage Loan had an original term to
maturity of not greater than 30 years; each Original Mortgage
Loan is an adjustable-rate mortgage loan with payments
generally 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 or next highest 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 16.11%,
approximately 3.90%, approximately 4.83%, approximately
5.26%, approximately 3.06%, approximately 8.18%,
approximately 6.01%, approximately 6.07%, approximately
4.28%, approximately 3.68% and approximately 5.48% 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,
Colorado, Connecticut, Florida, Georgia, Illinois,
Massachusetts, Michigan, Ohio, Texas and Washington,
respectively, and no more than 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 single
state; (B) as of the Cut-off Date, no more than
approximately 0.32% 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 4.51% of the Original Mortgage Loans, by
outstanding principal balance of the
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Original Mortgage Loans as of the Cut-off Date, are secured by
units in two- to four-family dwellings, condominiums or
planned unit developments and; (C) at least approximately
80.11% 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, as of the Closing Date, such Mortgaged Property
is covered by a flood insurance policy that 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 95% at the
origination of such Original Mortgage Loan; and
(vii) With respect to at least approximately 94.92% of
the Original Mortgage Loans by outstanding principal balance
as of the Cut-off Date, at the time that such 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 1.36% of the Original
Mortgage Loans by outstanding principal balance as of the
Cut-off Date, at the time that such 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 and shall inure to the benefit of the Certificateholders
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, Prepayment Charge or the
interests therein of the Certificateholders, 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.
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
and to the Depositor that as of the Closing Date or as of such date specifically
provided herein:
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(i) The Master Servicer is a corporation duly
organized, validly existing and in good standing under the
laws of the State of California 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 power and
authority to conduct its business as presently conducted by it
and to execute, deliver and perform, and to enter into and
consummate, all transactions contemplated by this Agreement.
The Master Servicer has duly authorized the execution,
delivery and performance of this Agreement, has duly executed
and delivered this Agreement, and this Agreement, assuming due
authorization, execution and delivery by the Depositor and the
Trustee, constitutes a legal, valid and binding obligation of
the Master Servicer, enforceable against it in accordance with
its terms except as the enforceability thereof may be limited
by bankruptcy, insolvency, reorganization or similar laws
affecting the enforcement of creditors' rights generally and
by general principles of equity;
(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 by the Master
Servicer 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 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 a HUD approved mortgagee
pursuant to Section 203 of the National Housing Act. No event
has occurred, including but not limited to a change in
insurance coverage, that would make the Master Servicer
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unable to comply with HUD eligibility requirements or that
would require notification to HUD;
(v) The Master Servicer does not believe, nor does it
have any reason or cause to believe, that it cannot perform
each and every covenant made by it and contained in this
Agreement;
(vi) With respect to each Mortgage Loan, the Master
Servicer, or Sub- Servicer if any, is in possession of a
complete Mortgage File, except for such documents as have been
delivered to the Trustee;
(vii) No litigation is pending against the Master
Servicer that would materially and adversely affect the
execution, deliver 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;
(viii) There are no actions or proceedings against, or
investigations known to it of, the Master Servicer before
any court, administrative or other tribunal (A) that might
prohibit its entering into this Agreement, (B) seeking to
prevent the consummation of the transactions contemplated by
this Agreement or (C) that might prohibit or materially and
adversely affect the performance by the Master Servicer of
its obligations under, or validity or enforceability of,
this Agreement;
(ix) 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 by it 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;
(x) The information set forth in the Prepayment Charge
Schedule (including the prepayment charge summary attached
thereto) is complete, true and correct in all material
respects, and each Prepayment Charge is permissible,
enforceable and collectible under applicable state law subject
to bankruptcy and equitable enforcement limitations;
(xi) The Master Servicer will not waive any Prepayment
Charge unless it is waived in accordance with the standard set
forth in Section 3.01.
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 and shall inure to the benefit of the
Trustee, the Depositor and the Certificateholders. 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
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Mortgage Loan or the interests therein of the Certificateholders, 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. Subject to
Section 7.01, unless such breach shall not be susceptible of cure within 90
days, the obligation of the Master Servicer set forth in Section 2.03(c) to cure
breaches shall constitute the sole remedy 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. Notwithstanding the foregoing, within
90 days of the earlier of discovery by the Master Servicer or receipt of notice
by the Master Servicer of the breach of the representation or covenant of the
Master Servicer set forth in Sections 2.05(x) or 2.05(xi) above which materially
and adversely affects the interests of the Holders of the Class P Certificates
in any Prepayment Charge, the Master Servicer shall remedy such breach as
follows: (a) if the representation made by the Master Servicer in Section
2.05(x) above is breached, the Master Servicer must pay the amount of the
scheduled Prepayment Charge, for the benefit of the holder of the Class P
Certificate, by depositing such amount into the Collection Account, net of any
amount previously collected by the Master Servicer or paid by the Master
Servicer, for the benefit of the Holders of the Class P Certificates, in respect
of such Prepayment Charge; and (b) if any of the covenants made by the Master
Servicer in Section 2.05(xi) above is breached, the Master Servicer must pay the
amount of such waived Prepayment Charge, for the benefit of the holders of the
Class P Certificates, by depositing such amount into the Collection Account. The
foregoing 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 the Mortgage Loan Purchase Agreement.
SECTION 2.06. Issuance of the Class R-I Certificates.
The Trustee acknowledges the assignment to it of the Mortgage
Loans and the delivery to it of the Mortgage Files, subject to the provisions of
Section 2.01 and Section 2.02, together with the assignment to it of all other
assets included in REMIC I, the 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 Class R-I Certificates in authorized denominations. The
interests evidenced by the Class R-I Certificates, together with the REMIC I
Regular Interests, constitute the entire beneficial ownership interest in REMIC
I. The rights of the Class R-I Certificateholders and REMIC II (as holder of the
REMIC I Regular Interests) to receive distributions from the proceeds of REMIC I
in respect of the Class R-I Certificates and the REMIC I Regular Interests,
respectively, and all ownership interests evidenced or constituted by the Class
R-I Certificates and the REMIC I Regular Interests, shall be as set forth in
this Agreement.
SECTION 2.07. Conveyance of the REMIC I Regular Interests;
Acceptance of REMIC II by the Trustee.
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The Depositor, concurrently with the execution and delivery
hereof, does hereby transfer, assign, set over and otherwise convey to the
Trustee without recourse all the right, title and interest of the Depositor in
and to the REMIC I Regular Interests for the benefit of the Class R-II and REMIC
III Certificateholders. The Trustee acknowledges receipt of the REMIC I Regular
Interests and declares that it holds and will hold the same in trust for the
exclusive use and benefit of all present and future Class R-II
Certificateholders and REMIC III Certificateholders. The rights of the Class
R-II Certificateholders and REMIC III (as holder of the REMIC II Regular
Interests) to receive distributions from the proceeds of REMIC II in respect of
the Class R-II Certificates and REMIC II Regular Interests, respectively, and
all ownership interests evidenced or constituted by the Class R-II Certificates
and the REMIC II Regular Interests, shall be as set forth in this Agreement.
SECTION 2.08. Issuance of Class R-II Certificates.
The Trustee acknowledges the assignment to it of the REMIC I
Regular Interests and, concurrently therewith and in exchange therefor, pursuant
to the written request of the Depositor executed by an officer of the Depositor,
the Trustee has executed, authenticated and delivered to or upon the order of
the Depositor, the Class R-II Certificates in authorized denominations. The
interests evidenced by the Class R-II Certificates, together with the REMIC II
Regular Interests, constitute the entire beneficial ownership interest in REMIC
II.
SECTION 2.09. Conveyance of REMIC II Regular Interests;
Acceptance of REMIC III by the Trustee.
The Depositor, concurrently with the execution and delivery
hereof, does hereby transfer, assign, set over and otherwise convey to the
Trustee without recourse all the right, title and interest of the Depositor in
and to the REMIC II Regular Interests for the benefit of the REMIC III
Certificateholders. The Trustee acknowledges receipt of the REMIC II Regular
Interests and declares that it holds and will hold the same in trust for the
exclusive use and benefit of all present and future REMIC III
Certificateholders. The rights of the REMIC III Certificateholders to receive
distributions from the proceeds of REMIC III in respect of the REMIC III
Certificates, and all ownership interests evidenced or constituted by the REMIC
III Certificates, shall be as set forth in this Agreement.
SECTION 2.10. Issuance of REMIC III Certificates.
The Trustee acknowledges the assignment to it of the REMIC II
Regular Interests and, concurrently therewith and in exchange therefor, pursuant
to the written request of the Depositor executed by an officer of the Depositor,
the Trustee has executed, authenticated and delivered to or upon the order of
the Depositor, the REMIC III Certificates in authorized denominations evidencing
the entire beneficial ownership interest in REMIC III.
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ARTICLE III
ADMINISTRATION AND SERVICING
OF THE MORTGAGE LOANS
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 (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 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 or non-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 (a) shall seek
to maximize the timely and complete recovery of principal and interest on the
Mortgage Notes and (b) shall only waive (or permit a subservicer to waive) a
Prepayment Charge or part of a Prepayment Charge if such waiver would maximize
recovery of total proceeds taking into account the value of such Prepayment
Charge and the related Mortgage Loan, and doing so is standard and customary in
servicing similar Mortgage Loans. The Master Servicer may waive a Prepayment
Charge on any Mortgage Loan if the related Mortgagor has chosen to refinance
such Mortgage Loan through the same lender; provided, however, the Master
Servicer must pay the amount of the waived Prepayment Charge, for the benefit of
the Holders of the Class P Certificates, by depositing such amount into the
Collection Account together with and at the time that the amount prepaid on the
related Mortgage Loan is required to be deposited into the Collection Account.
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
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name of a Sub-Servicer is hereby authorized and empowered by the Trustee when
the Master Servicer believes it appropriate in its best judgment in accordance
with the servicing standards set forth above, to execute and deliver, on behalf
of the Certificateholders and the Trustee, 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 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 any special or limited
powers of attorney and other documents necessary or appropriate to enable the
Master Servicer or any Sub-Servicer to carry out their servicing and
administrative duties hereunder and the Trustee shall not be liable for the
actions of the Master Servicer or any Sub-Servicers under such powers of
attorney.
Subject to Section 3.09 hereof, 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 (except as provided in Section 4.03) and the Master Servicer shall not (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 (unless, as provided in Section 3.07, the Mortgagor is in
default with respect to the Mortgage Loan or such default is, in the judgment of
the Master Servicer, reasonably foreseeable) 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 Treasury regulations promulgated thereunder) and (B) cause any of REMIC I,
REMIC II or REMIC III 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.
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SECTION 3.02. Sub-Servicing Agreements Between Master
Servicer and Sub-Servicers.
(a) The Master Servicer may enter into Sub-Servicing
Agreements with Sub- Servicers for the servicing and administration of the
Mortgage Loans; provided, however, that such agreements would not result in a
withdrawal or a downgrading by any Rating Agency of the rating on any Class of
Certificates. The Trustee is hereby authorized to acknowledge, at the request of
the Master Servicer, any Sub-Servicing Agreement that meets the requirements
applicable to Sub-Servicing Agreements set forth in this Agreement and that is
otherwise permitted under this Agreement.
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 and (ii) a Freddie Mac or Fannie Mae 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
Sub-Servicers 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 Holders of Certificates entitled to at least 66% of the Voting
Rights; provided, further, that the consent of the Holders of Certificates
entitled to at least 66% of the Voting Rights shall not be required (i) to cure
any ambiguity or defect in a Sub-Servicing Agreement, (ii) to correct, modify or
supplement any provisions of a Sub-Servicing Agreement, or (iii) to make any
other provisions with respect to matters or questions arising under a Sub-
Servicing Agreement, which, in each case, shall not be inconsistent with the
provisions of this Agreement. Any variation without the consent of 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
Sub-Servicers to the Master Servicer, are conclusively deemed to be inconsistent
with this Agreement and therefore prohibited. The Master Servicer shall deliver
to the Trustee 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, for the benefit of the Trustee and the Certificateholders, 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
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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 Sub- Servicing 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
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 Sub- Servicer or reference to actions taken through a
Sub-Servicer or otherwise, the Master Servicer shall remain obligated and
primarily liable to the Trustee and the Certificateholders 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 Sub-Servicer 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.
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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 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
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 Sub-Servicing
Agreement had been assigned to the assuming party, except that (i) the Master
Servicer shall not thereby be relieved of any liability or obligations under any
Sub-Servicing Agreement that arose before it ceased to be the Master Servicer
and (ii) none of the Trustee, its designee or any successor Master Servicer
shall be deemed to have assumed any liability or obligation of the Master
Servicer that arose before it ceased to be the Master Servicer.
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
and the terms and provisions of any applicable insurance policies, 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, any penalty interest, or (ii) extend the due
dates for the Monthly Payments due on a Mortgage Note
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for a period of not greater than 180 days; provided, however, that any extension
pursuant to clause (ii) above shall not affect the amortization schedule of any
Mortgage Loan for purposes of any computation hereunder, except as provided
below. In the event of any such arrangement pursuant to clause (ii) above, the
Master Servicer shall make timely advances on such Mortgage Loan during such
extension pursuant to Section 4.03 and in accordance with the amortization
schedule of such Mortgage Loan without modification thereof by reason of such
arrangement. Notwithstanding the foregoing, in the event that any Mortgage Loan
is in default or, in the judgment of the Master Servicer, such default is
reasonably foreseeable, the Master Servicer, consistent with the standards set
forth in Section 3.01, may also waive, modify or vary any term of such Mortgage
Loan (including modifications that would change the Mortgage Rate, forgive the
payment of principal or interest or extend the final maturity date of such
Mortgage Loan), accept payment from the related Mortgagor of an amount less than
the Stated Principal Balance in final satisfaction of such Mortgage Loan (such
payment, a "Short Pay-off"), or consent to the postponement of strict compliance
with any such term or otherwise grant indulgence to any Mortgagor.
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 Collection
Account. The Sub-Servicer shall deposit in the clearing account in which it
customarily deposits payments and collections on mortgage loans in connection
with its mortgage loan servicing activities on a daily basis, and in no event
more than one Business Day after the Sub- Servicer's receipt thereof, all
proceeds of Mortgage Loans received by the Sub-Servicer less its servicing
compensation to the extent permitted by the Sub-Servicing Agreement, and shall
thereafter deposit such amounts in the Sub-Servicing Account, in no event more
than two Business Days after the receipt of such amounts. The Sub-Servicer shall
thereafter deposit such proceeds in the Collection Account or remit such
proceeds to the Master Servicer for deposit in the Collection Account not later
than two Business Days after the deposit of such amounts in the Sub- Servicing
Account. 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, or cause to
be established and maintained, 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 clearing account in which it customarily
deposits payments and collections on mortgage loans in connection with its
mortgage loan servicing activities on a daily basis, and in no event more than
one Business Day after the Master Servicer's receipt
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thereof, all Escrow Payments collected on account of the Mortgage Loans and
shall thereafter deposit such Escrow Payments in the Servicing Accounts, in no
event more than two Business Days after the receipt of such Escrow Payments, 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 payment of taxes, assessments, hazard insurance premiums, and
comparable items in a manner and at a time that assures that the lien priority
of the Mortgage is not jeopardized (or, with respect to the payment of taxes, in
a manner and at a time that avoids the loss of the Mortgaged Property due to a
tax sale or the foreclosure as a result of a tax lien); (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 IX. The Master Servicer will be responsible
for the administration of the Servicing Accounts and will be obligated to make
advances to such accounts when and as necessary to avoid the lapse of insurance
coverage on the Mortgaged Property, or which the Master Servicer knows, or in
the exercise of the required standard of care of the Master Servicer hereunder
should know, is necessary to avoid the loss of the Mortgaged Property due to a
tax sale or the foreclosure as a result of a tax lien. If any such payment has
not been made and the Master Servicer receives notice of a tax lien with respect
to the Mortgage being imposed, the Master Servicer will, within 10 business days
of such notice, advance or cause to be advanced funds necessary to discharge
such lien on the Mortgaged Property. As part of its servicing duties, the Master
Servicer or Sub- Servicers shall pay to the Mortgagors interest on funds in the
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.
SECTION 3.10. Collection Account and Distribution Account.
(a) On behalf of the Trust Fund, the Master Servicer shall
establish and maintain, or cause to be established and maintained, one or more
accounts (such account or accounts, the "Collection Account"), held in trust for
the benefit of the Trustee and the Certificateholders. On behalf of the Trust
Fund, the Master Servicer shall deposit or cause to be deposited in the clearing
account in which it customarily deposits payments and collections on mortgage
loans in connection with its mortgage loan servicing activities on a daily
basis, and in no event more than one Business Day after the Master Servicer's
receipt thereof, and shall thereafter deposit in the Collection Account, in no
event more than two Business Days after the Master Servicer's receipt thereof,
as and when received or as otherwise required hereunder, the 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 Cut-off Date), payments (other than Principal Prepayments) received
by it on or prior to the Cut-off Date but allocable to a Due Period subsequent
thereto:
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(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 in connection with a purchase of
Mortgage Loans and REO Properties pursuant to
Section 9.01);
(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;
(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;
(vi) all proceeds of any Mortgage Loan repurchased or
purchased in accordance with Section 2.03 or Section 9.01;
(vii) all amounts required to be deposited in connection
with shortfalls in principal amount of Qualified Substitute
Mortgage Loans pursuant to Section 2.03; and
(viii) all Prepayment Charges collected by the Master
Servicer in connection with the Principal Prepayment of any of
the Mortgage Loans.
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 late payment
charges, ancillary income and assumption fees, or insufficient funds charges
need not be deposited by the Master Servicer in the Collection Account and may
be retained by the Master Servicer as additional compensation. 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. 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 5:00 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
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Distribution Date then on deposit in the Collection Account and the amount of
all Prepayment Charges collected by the Master Servicer in connection with the
Principal Prepayment of any of the Mortgage Loans 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 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 5:00 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 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 and the Depositor 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 in connection with a
purchase of Mortgage Loans and REO Properties pursuant to
Section 9.01;
(iv) any amounts required to be deposited pursuant to
Section 3.24 in connection with any Prepayment Interest
Shortfall; and
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(v) any Stayed Funds, as soon as permitted by the
federal bankruptcy court having jurisdiction in such matters.
(e) Promptly upon receipt of any Stayed Funds, whether from
the Master Servicer, a trustee in bankruptcy, 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.
(f) The Master Servicer shall deposit in the Collection
Account any amounts required to be deposited pursuant to Section 3.12(b) in
connection with losses realized on Permitted Investments with respect to funds
held in the Collection Account.
SECTION 3.11. Withdrawals from the Collection Account and
Distribution Account.
(a) 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, Liquidation Proceeds and
Insurance Proceeds 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 Sub- Servicer (a) any unpaid Servicing Fees,
(b) any unreimbursed Servicing Advances with respect to each
Mortgage Loan, but only to the extent of any Late
Collections, Liquidation Proceeds and Insurance Proceeds
received with respect to such Mortgage Loan, and (c) any
Nonrecoverable Servicing Advances with respect to the final
liquidation of a Mortgage Loan, but only to the extent that
Late Collections, Liquidation Proceeds and Insurance
Proceeds received with respect to such Mortgage Loan are
insufficient to reimburse the Master Servicer or any Sub-
Servicer for Servicing Advances;
(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
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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;
(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
connection with any breach or defect giving rise to the
purchase obligation under Section 2.03 or Section 2.04 of this
Agreement, including any expenses arising out of the
enforcement of the purchase obligation;
(ix) to pay, or to reimburse the Master Servicer for
Servicing 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 9.01.
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), (iv), (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 subclauses (vi) and (vii)
above; provided that an Officer's Certificate in the form described under
Section 4.03(d) shall suffice for such written notification to the Trustee in
respect hereof.
(b) The Trustee shall, from time to time, make withdrawals
from the Distribution Account, for any of the following purposes, without
priority:
(i) to make distributions to Certificateholders in
accordance with Section 4.01;
(ii) to pay to itself amounts to which it is entitled
pursuant to Section 8.05;
(iii) to pay to itself any interest or investment income
earned on funds deposited in the Distribution Account pursuant
to Section 3.12(c);
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(iv) to reimburse itself pursuant to Section 7.02;
(v) to pay any amounts in respect of taxes pursuant to
Section 10.01(g)(iii); and
(vi) to clear and terminate the Distribution Account
pursuant to Section 9.01.
SECTION 3.12. Investment of Funds in the Collection Account
and the Distribution Account.
(a) The Master Servicer may direct any depository institution
maintaining the Collection Account (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 any income and gain realized thereon)
over each such investment, 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 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 the Collection Account and any REO 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
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Section 3.11 or Section 3.23, as applicable. The Master Servicer shall deposit
in the Collection Account or any REO 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 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 account 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 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 lesser of the current
principal balance of such Mortgage Loan and the amount necessary to fully
compensate for any damage or loss to the improvements that are a part of such
property on a replacement cost basis, in each case in an amount not less than
such amount as is necessary to avoid the application of any 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. 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, be
added to the unpaid principal balance of the
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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 and flood insurance
has been made available, 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 (or such other rating that is comparable to
such rating) 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 and Certificateholders,
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 Fannie Mae or Freddie Mac if it were the purchaser of
the Mortgage Loans, unless the Master Servicer has obtained a waiver of such
requirements from Fannie Mae or Freddie Mac. The Master Servicer shall also
maintain a fidelity bond in the form and amount that would meet the requirements
of Fannie Mae or Freddie Mac, unless the Master Servicer has obtained a waiver
of such requirements from Fannie Mae or Freddie Mac. 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.
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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 be required to take such action if
in its sole business judgment the Master Servicer believes it is not in the best
interests of the Trust Fund and 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 policy. Any fee collected by
the Master Servicer in respect of an assumption, modification or substitution of
liability agreement shall 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 that any such substitution, modification or assumption
agreement has been completed by forwarding to the Trustee the executed original
of such substitution, modification 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
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"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 use its best efforts, consistent
with Accepted Servicing Practices, to foreclose upon or otherwise comparably
convert the ownership of properties securing such of the Mortgage Loans
(including selling any such Mortgage Loans other than converting the ownership
of the related properties) 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 Section 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 Trust Fund or the Certificateholders 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
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
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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 3.16 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(a)(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 the Trust Fund; provided that any amounts disbursed by the
Master Servicer pursuant to this Section 3.16(b) shall constitute Servicing
Advances, subject to Section 4.03(d). 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(a)(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 REMIC
I 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 prior to purchase), at a price equal to the Purchase
Price;
provided, however, that the Master Servicer shall purchase any such Mortgage
Loans on the basis of delinquency, purchasing the most delinquent Mortgage Loans
first. 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 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(a)(ii) or (a)(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
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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(a)(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
notify or cause to be notified the Trustee 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 shall, within five Business Days, release and send by overnight mail, at
the expense of the Master Servicer, the related Mortgage File to the Master
Servicer. The Trustee agrees to indemnify the Master Servicer, out of its own
funds, for any loss, liability or expense incurred by the Master Servicer as a
proximate result of the Trustee's breach of its obligations pursuant to this
Section 3.17. 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 shall, upon any
request made by or on behalf of the Master Servicer and delivery to the Trustee
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 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 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, or caused to be delivered, to the Trustee an additional
Request for Release certifying as to such liquidation or action or proceedings.
Upon the request of the Trustee, the Master Servicer shall provide notice to the
Trustee of 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, any outstanding Requests for Release
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with respect to such Mortgage Loan shall be released by the Trustee to the
Master Servicer or its designee.
(c) Upon written certification of a Servicing Officer, the
Trustee shall execute and deliver to the Master Servicer or the Sub-Servicer, as
the case may be, any court pleadings, requests for trustee's sale or other
documents 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(a)(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;
provided, however, that the Master Servicer may pay from the Servicing Fee any
amounts due to a Sub-Servicer pursuant to a Sub-Servicing Agreement entered into
under Section 3.02.
Additional servicing compensation in the form of assumption
fees, ancillary income and late payment charges, insufficient funds charges or
otherwise (subject to Section 3.24 and other than Prepayment Charges) shall be
retained by the Master Servicer 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(a)(iv) to withdraw from the Collection 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 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.
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SECTION 3.19. Reports to the Trustee; Collection
Account Statements.
Not later than twenty days after each Distribution Date, the
Master Servicer shall forward, upon request, to the Trustee and the Depositor
the most current available bank statement for the Collection Account. 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 and the
Depositor not later than 90 days following the end of the fiscal year of the
Master Servicer, commencing in 1999, which as of the Closing Date ends on the
last day in April, 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 90 days following the end of each fiscal year
of the Master Servicer, commencing in 1999, 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 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 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.
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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
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. The Master Servicer, on behalf of REMIC I, shall either
sell any REO Property within three years after REMIC I acquires ownership of
such REO Property for purposes of Section 860G(a)(8) of the Code or request from
the Internal Revenue Service, no later than 60 days before the day on which the
three-year grace period would otherwise expire, an extension of the three-year
grace period, unless the Master Servicer shall have delivered to the Trustee an
Opinion of Counsel, addressed to the Trustee and the Depositor, to the effect
that the holding by REMIC I of such REO Property subsequent to three years after
its acquisition will not result in the imposition on REMIC I, REMIC II or REMIC
III of taxes on "prohibited transactions" thereof, as defined in Section 860F of
the Code, or cause any of REMIC I, REMIC II or REMIC III 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" within the meaning of Section 860G(a)(8) of the Code or
result in the receipt by REMIC I, REMIC II or REMIC III 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 separately account for all funds
collected and received in connection with the operation of any REO Property and
shall establish and maintain, or cause to be established and maintained, with
respect to REO Properties an account held in trust for the Trustee for the
benefit of the Certificateholders (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
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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 in the
clearing account in which it customarily deposits payments and collections on
mortgage loans in connection with its mortgage loan servicing activities on a
daily basis, and in no event more than one Business Day after the Master
Servicer's receipt thereof, and shall thereafter deposit in the REO Account, in
no event more than two Business Days after the Master Servicer's receipt
thereof, 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;
(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;
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unless, in any such case, the Master Servicer has obtained an Opinion of
Counsel, provided to the Trustee, 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 REMIC
I, 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 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 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; provided, however, that to the extent that any payments made by such
Independent Contractor would constitute Servicing Advances if made by the Master
Servicer, such amounts shall be reimbursable as Servicing Advances made by the
Master Servicer.
(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
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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 Accepted Servicing Practices.
(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 5:00 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 from full or partial Principal Prepayments during the related
Prepayment Period and (ii) the aggregate Servicing Fee for the related
Prepayment Period. Any amounts paid by the Master Servicer pursuant to this
Section 3.24 shall not be reimbursed by REMIC I.
SECTION 3.25. 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
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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 Depositor
and any successor master servicer in respect of any such liability. Such
indemnities shall survive the termination or discharge of this Agreement.
Notwithstanding the foregoing, this Section 3.26 shall not limit the ability of
the Master Servicer to seek recovery of any such amounts from the related
Mortgagor under the terms of the related Mortgage Note, as permitted by law.
SECTION 3.26. Solicitations.
From and after the Closing Date, the Master Servicer agrees
that it will not take any action or permit or cause any action to be taken by
any of its agents and Affiliates, or by any independent contractors or
independent mortgage brokerage companies on the Master Servicer's behalf, to
personally, by telephone or mail, solicit the Mortgagor under any Mortgage Loan
for the purpose of refinancing such Mortgage Loan, nor will the Master Servicer
purchase any loan to a Mortgagor secured by a Mortgaged Property, in whole or in
part; provided, that the Master Servicer may solicit any Mortgagor for whom the
Master Servicer has received a request for verification of mortgage from an
originator of mortgage loan products similar to the Mortgage Loans that
indicates that such Mortgagor intends to refinance his or her Mortgage Loan;
provided further, it is understood and agreed that promotions undertaken by the
Master Servicer or any of its Affiliates which (i) concern optional insurance
products or other additional products or (ii) are directed to the general public
at large, including, without limitation, mass mailings based on comercially
acquired mailing lists, newspaper, radio and television advertisements shall not
constitute solicitation under this Section 3.26, nor is the Master Servicer
prohibited from responding to unsolicited requests or inquiries made by a
Mortgagor or an agent of a Mortgagor.
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ARTICLE IV
PAYMENTS TO CERTIFICATEHOLDERS
SECTION 4.01. Distributions.
(a)(1)(A) On each Distribution Date, the following amounts, in
the following order of priority, shall be distributed by REMIC I to REMIC II on
account of the REMIC I Regular Interests or withdrawn from the Distribution
Account and distributed to the holders of the
Class R-I Certificates, as the case may be:
(i) to the Holders of REMIC I Regular Interests (other
than REMIC I Regular Interest I-LTP), in an amount equal to
(A) the Uncertificated Interest for such Distribution Date,
plus (B) any amounts in respect thereof remaining unpaid from
previous Distribution Dates. On the first Distribution Date,
the Class R-I Certificates shall be entitled to interest
accrued on its Certificate Principal Balance at the related
Pass-Through Rate. Amounts payable as Uncertificated Interest
in respect of REMIC I Regular Interest I-LT6 shall be reduced
when the REMIC I Overcollateralized Amount is less than the
REMIC I Required Overcollateralized Amount, by the lesser of
(x) the amount of such difference and (y) the Maximum I-LT6
Uncertificated Interest Deferral Amount; and
(ii) (x) on the first Distribution Date, to the Holders
of the Class R-I Certificates, the Certificate Principal
Balance thereof and (y) on each Distribution Date, to the
Holders of REMIC I Regular Interests, in an amount equal to
the remainder of the Available Distribution Amount for such
Distribution Date after the distributions made pursuant to
clauses (i) and (ii)(x) above, allocated as follows (except as
provided below):
(a) to the Holders of the REMIC I Regular
Interest I-LT1, 98.00% of such remainder;
(b) to the Holders of the REMIC I Regular
Interest I-LT2, REMIC I Regular Interest I-LT3, REMIC
I Regular Interest I-LT4 and REMIC I Regular Interest
I-LT5, 1.00% of such remainder, in the same
proportion as principal payments are allocated to the
Corresponding Certificates;
(c) to the Holders of the REMIC I Regular
Interest I-LT6, 1.00% of such remainder; and
(d) to the Holders of the REMIC I Regular
Interest I-LTP, $100 on the Distribution Date
immediately following the expiration of the latest
Prepayment Charge term as identified on the Mortgage
Loan Schedule or any Distribution Date thereafter;
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provided, however, that 98.00% and 2.00% of any principal payments that are
attributable to a Overcollateralization Reduction Amount shall be allocated to
Holders of the REMIC I Regular Interest I-LT1 and REMIC I Regular Interest
I-LT6, respectively.
(B) On each Distribution Date, the following amounts shall be
distributed by REMIC II to REMIC III on account of the REMIC II Regular
Interests (other than REMIC II Regular Interest II-LTP) or withdrawn from the
Distribution Account and distributed to the holders of the Class R-II
Certificates, as the case may be:
(i) on the first Distribution Date, the Class R-II
Certificates shall be entitled to (x) interest accrued on its
Certificate Principal Balance at the related Pass-Through Rate
and (y) principal in an amount equal to the Certificate
Principal
Balance thereof;
(ii) any amounts paid as either Uncertificated Interest
paid or accrued to the REMIC I Regular Interests (other than
REMIC I Regular Interest I-LTP) shall be deemed to have been
paid to the related Uncertificated Corresponding Component in
REMIC II in accordance with the REMIC II Remittance Rates; and
(iii) any amounts paid as principal on the REMIC I
Regular Interests shall be deemed to have been paid to the
related Uncertificated Corresponding Component in REMIC II in
accordance with the same priorities and conditions.
(2) On each Distribution Date, the Trustee shall withdraw from
the Distribution Account an amount equal to the Interest Remittance Amount and
distribute to the Certificateholders the following amounts, in the following
order of priority:
(i) (x) on the first Distribution Date, to the Holders
of the Class R-III Certificates and (y) to the Holders of the
Class A Certificates, an amount equal to
the Senior Interest Distribution Amount;
(ii) to the extent of the Interest Remittance Amount
remaining after distribution of the Senior Interest
Distribution Amount, to the Holders of the Class M-1
Certificates, an amount equal to the Interest Distribution
Amount allocable to the Class M-1 Certificates;
(iii) to the extent of the Interest Remittance Amount
remaining after distribution of the Senior Interest
Distribution Amount and the Interest Distribution Amount
allocable to the Class M-1 Certificates, to the Holders of the
Class M-2 Certificates, an amount equal to the Interest
Distribution Amount allocable to the Class M-2 Certificates;
and
(iv) to the extent of the Interest Remittance Amount
remaining after distribution of the Senior Interest
Distribution Amount and the Interest Distribution Amounts
allocable to the Class M-1 Certificates and the Class M-2
Certificates, to
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the Holders of the Class M-3 Certificates, an amount equal to
the Interest Distribution Amount allocable to the Class M-3
Certificates.
(3) On each Distribution Date, the Trustee shall withdraw from
the Distribution Account an amount equal to the Principal Distribution Amount
and distribute to the Certificateholders the following amounts, in the following
order of priority:
(i) On each Distribution Date (a) prior to the Stepdown
Date or (b) on which a Trigger Event is in effect, the
Principal Distribution Amount shall be
distributed in the following order of priority;
FIRST, on the first Distribution Date, to the Holders
of the Class R-III Certificates, the Certificate
Principal Balance thereof;
SECOND, to the Holders of the Class A Certificates,
until the Certificate Principal Balance of such Class
has been reduced to zero;
THIRD, to the Holders of the Class M-1 Certificates,
until the Certificate Principal Balance of such Class
has been reduced to zero;
FOURTH, to the Holders of the Class M-2 Certificates,
until the Certificate Principal Balance of such Class
has been reduced to zero; and
FIFTH, to the Holders of the Class M-3 Certificates,
until the Certificate Principal Balance of such Class
has been reduced to zero.
(ii) On each Distribution Date (a) on or after the
Stepdown Date and (b) on which a Trigger Event is not in
effect, the Principal Distribution Amount shall
be distributed in the following order of priority;
FIRST, the lesser of (x) the Principal Distribution
Amount and (y) the Class A Principal Distribution
Amount shall be distributed to the Holders of the
Class A Certificates, until the Certificate Principal
Balance of such Class has been reduced to zero;
SECOND, the lesser of (x) the excess of (i) the
Principal Distribution Amount over (ii) the amount
distributed to the Holders of the Class A
Certificates pursuant to clause FIRST above and (y)
the Class M-1 Principal Distribution Amount shall be
distributed to the Holders of the Class M-1
Certificates, until the Certificate Principal Balance
of such Class has been reduced to zero;
THIRD, the lesser of (x) the excess of (i) the
Principal Distribution Amount over (ii) the sum of
the amounts distributed to the Holders of the Class A
Certificates pursuant to clause FIRST above and to
the Holders of the Class
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M-1 Certificates pursuant to clause SECOND above and
(y) the Class M-2 Principal Distribution Amount shall
be distributed to the Holders of the Class M-2
Certificates, until the Certificate Principal Balance
of such Class has been reduced to zero;
FOURTH, the lesser of (x) the excess of (i) the
Principal Distribution Amount over (ii) the sum of
the amounts distributed to the Holders of the Class A
Certificates pursuant to clause FIRST above, to the
Holders of the Class M-1 Certificates pursuant to
clause SECOND above and to the Holders of the Class
M-2 Certificates pursuant to clause THIRD above and
(y) the Class M-3 Principal Distribution Amount shall
be distributed to the Holders of the Class M-3
Certificates, until the Certificate Principal Balance
of such Class has been reduced to zero; and
FIFTH, any remaining Principal Distribution Amount,
concurrently on a PRO RATA basis to the holders of
the Class A Certificates and the Mezzanine
Certificates, until the Certificate Principal
Balances thereof have been
reduced to zero.
(4) On each Distribution Date, the Net Monthly Excess Cashflow
(or, in the case of clause (i) below, the Net Monthly Excess Cashflow exclusive
of any Overcollateralization Reduction Amount) shall be distributed as follows:
(i) to the Holders of the Class or Classes of
Certificates then entitled to receive distributions
in respect of principal, in an amount equal to the
principal portion of any Realized Losses incurred or
deemed to have been incurred on the Mortgage Loans,
applied to reduce the Certificate Principal Balance
of such Certificates until the aggregate Certificate
Principal Balance of such Certificates is reduced to
zero;
(ii) to the Holders of the Class or Classes of
Certificates then entitled to receive distributions
in respect of principal, in an amount equal to the
Overcollateralization Increase Amount, applied to
reduce the Certificate Principal Balance of such
Certificates until the aggregate Certificate
Principal Balance of such Certificates is reduced to
zero;
(iii) to the Holders of the Class M-1 Certificates,
in an amount equal to the Interest Carry Forward
Amount (plus accrued interest) allocable to such
Class of Certificates;
(iv) to the Holders of the Class M-2 Certificates, in
an amount equal to the Interest Carry Forward Amount
(plus accrued interest) allocable to such
Class of Certificates;
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(v) to the Holders of the Class M-3 Certificates, in
an amount equal to the Interest Carry Forward Amount
(plus accrued interest) allocable to such
Class of Certificates;
(vi) to the Holders of the Class A Certificates, in
an amount equal to the aggregate of any Prepayment
Interest Shortfalls (to the extent not covered by
payments pursuant to Section 3.24) and any Relief Act
Interest Shortfall allocated to such Certificates;
(vii) to the Holders of the Class M-1 Certificates,
in an amount equal to the aggregate of any Prepayment
Interest Shortfalls (to the extent not covered by
payments pursuant to Section 3.24) and any Relief Act
Interest Shortfall allocated to such Certificates;
(viii) to the Holders of the Class M-2 Certificates,
in an amount equal to the aggregate of any Prepayment
Interest Shortfalls (to the extent not covered by
payments pursuant to Section 3.24) and any Relief Act
Interest Shortfall allocated to such Certificates;
(ix) to the Holders of the Class M-3 Certificates, in
an amount equal to the aggregate of any Prepayment
Interest Shortfalls (to the extent not covered by
payments pursuant to Section 3.24) and any Relief Act
Interest Shortfall allocated to such Certificates;
(x) to the Holders of the Class CE Certificates the
Interest Distribution Amount and any
Overcollateralization Reduction Amount for such
Distribution Date; and
(xi) to the Holders of the Class R-III Certificates,
any remaining amounts; provided that if such
Distribution Date is the Distribution Date
immediately following the expiration of the latest
Prepayment Charge term as identified on the Mortgage
Loan Schedule or any Distribution Date thereafter,
then any such remaining amounts will be distributed
FIRST, to the Holders of the Class P Certificates,
until the Certificate Principal Balance thereof has
been reduced to zero; and SECOND, to the Holders of
the Class R-III Certificates.
(b) On each Distribution Date, the Trustee shall withdraw any
amounts then on deposit in the Distribution Account that represent Prepayment
Charges collected by the Master Servicer in connection with the Principal
Prepayment of any of the Mortgage Loans and shall distribute such amounts to the
Holders of the Class P Certificates. Such distributions shall not be applied to
reduce the Certificate Principal Balance of the Class P Certificates.
(c) 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
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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(e) or Section 9.01 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 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.
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 Depositor
or the Master Servicer shall have any responsibility therefor except as
otherwise provided by this Agreement or applicable law.
(d) 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
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.
(e) Except as otherwise provided in Section 9.01, 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 three (3) days before the related Distribution Date, mail to each
Holder on such date of such Class of Certificates 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
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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(e)
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, mail a final notice to the remaining non-tendering Certificateholders
concerning surrender of their Certificates but shall continue to hold any
remaining funds for the benefit of non-tendering Certificateholders. 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(e). Any such amounts held
in trust by the Trustee shall be held in an Eligible Account and the Trustee may
direct any depository institution maintaining such account to invest the funds
in one or more Permitted Investments. All income and gain realized from the
investment of funds deposited in such accounts held in trust by the Trustee
shall be for the benefit of the Trustee; provided, however, that the Trustee
shall deposit in such account the amount of any loss of principal incurred in
respect of any such Permitted Investment made with funds in such accounts
immediately upon the realization of such loss.
(f) Notwithstanding anything to the contrary herein, (i) in no
event shall the Certificate Principal Balance of a Class A Certificate or a
Mezzanine Certificate be reduced more than once in respect of any particular
amount both (a) allocated to such Certificate in respect of Realized Losses
pursuant to Section 4.04 and (b) distributed to the Holder of such Certificate
in reduction of the Certificate Principal Balance thereof pursuant to this
Section 4.01 from Net Monthly Excess Cashflow and (ii) in no event shall the
Uncertificated Balance of a REMIC I Regular Interest be reduced more than once
in respect of any particular amount both (a) allocated to such REMIC I Regular
Interest in respect of Realized Losses pursuant to Section 4.04 and (b)
distributed on such REMIC I Regular Interest in reduction of the Uncertificated
Balance thereof pursuant to this Section 4.01.
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:
(i) the amount of the distribution made on such
Distribution Date to the Holders of the Certificates of each
Class allocable to principal, and the amount of the
distribution made on such Distribution Date to the Holders of
the Class P Certificates allocable to Prepayment Charges;
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(ii) the amount of the distribution made on such
Distribution Date to the Holders of the Certificates of each
Class allocable to interest;
(iii) the aggregate Servicing Fee 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 aggregate amount of P&I Advances for such
Distribution Date;
(v) the aggregate Stated Principal Balance of the
Mortgage Loans and any REO Properties as of the close of
business on such Distribution Date;
(vi) 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;
(vii) the number and aggregate unpaid principal balance
of Mortgage Loans (a) delinquent 30 to 59 days, (b) delinquent
60 to 89 days, (c) delinquent 90 or more days, in each case,
as of the last day of the preceding calendar month, (d) as to
which foreclosure proceedings have been commenced and (e) with
respect to which the related Mortgagor has filed for
protection under applicable bankruptcy laws, with respect to
whom bankruptcy proceedings are pending or with respect to who
bankruptcy protection is in force;
(viii) 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;
(ix) 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;
(x) the aggregate amount of Principal Prepayments made
during the related Prepayment Period;
(xi) 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 Bankruptcy Losses;
(xii) the aggregate amount of extraordinary Trust Fund
expenses withdrawn from the Collection Account or the
Distribution Account for such Distribution Date;
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(xiii) the aggregate Certificate Principal Balance of each
Class of 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;
(xiv) the Certificate Factor for each such Class of
Certificates applicable to such Distribution Date;
(xv) the Interest Distribution Amount in respect of the
Class A Certificates, the Mezzanine Certificates and the
Class CE Certificates for such Distribution Date and the
Interest Carry Forward Amount, if any, with respect to the
Class A Certificates and the Mezzanine Certificates on such
Distribution Date, and in the case of the Class A
Certificates, the Mezzanine Certificates and the Class CE
Certificates, separately identifying any reduction thereof
due to allocations of Realized Losses, Prepayment Interest
Shortfalls and Relief Act Interest Shortfalls;
(xvi) the aggregate amount of any Prepayment Interest
Shortfall for such Distribution Date, to the extent not
covered by payments by the Master Servicer pursuant to Section
3.24;
(xvii) the aggregate amount of Relief Act Interest
Shortfalls for such Distribution Date;
(xviii) the Required Overcollateralized Amount and the
Credit Enhancement Percentage for such Distribution Date;
(xix) the Overcollateralization Increase Amount, if any,
for such Distribution Date;
(xx) the Overcollateralization Reduction Amount, if any,
for such Distribution Date; and
(xxi) the respective Pass-Through Rates applicable to the
Class A Certificates, the Mezzanine Certificates and the
Class CE Certificates for such Distribution Date and the
Pass-Through Rate applicable to the Class A Certificates and
the Mezzanine Certificates for 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
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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 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.
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 by telecopy (or by such other means
as the Master Servicer and the Trustee may agree from time to time) a Remittance
Report with respect to the related Distribution Date. On the same date, the
Master Servicer shall forward to the Trustee by overnight mail or internet mail
an electronic file containing the information set forth in such 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. The Trustee shall not be
responsible (except with regard to any information regarding the Prepayment
Charges to the extent set forth below) to recompute, recalculate or verify any
information provided to it by the Master Servicer. Notwithstanding the
foregoing, in connection with any Principal Prepayment on any Mortgage Loan
listed on Schedule 2 hereto, the
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Trustee shall verify that the related Prepayment Charge was delivered to the
Trustee for deposit in the Distribution Account in the amount set forth on such
Schedule 2 or that such Prepayment Charge was waived in accordance
with the terms hereof.
(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 REO Imputed Interest on such REO Property for the most recently
ended calendar month, 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 5:00 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
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 by telecopy by the close of business on
the Business Day immediately following the 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.
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(d) Notwithstanding anything herein to the contrary, no P&I
Advance or Servicing Advance shall be required to be made hereunder by the
Master Servicer if such P&I Advance or Servicing Advance would, if made,
constitute a Nonrecoverable P&I Advance or Nonrecoverable Servicing Advance,
respectively. The determination by the Master Servicer that it has made a
Nonrecoverable P&I Advance or a Nonrecoverable Servicing Advance or that any
proposed P&I Advance or Servicing Advance, if made, would constitute a
Nonrecoverable P&I Advance or Nonrecoverable Servicing Advance, respectively,
shall be evidenced by an Officers' Certificate of the Master Servicer delivered
to the Depositor and the Trustee.
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; and (ii) the
respective portions of such 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 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 allocated to
REMIC II Regular Interest LT1 pursuant to Section 4.04(c) 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 CE Certificates, until the
Certificate Principal Balance thereof has been reduced to zero; third, to the
Class M-3 Certificates, until the Certificate Principal Balance thereof has been
reduced to zero; fourth, to the Class M-2 Certificates, until the Certificate
Principal Balance thereof has been reduced to zero; and fifth, to the Class M-1
Certificates, until the Certificate Principal Balance thereof has been reduced
to zero. 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.
Any allocation of Realized Losses to a Mezzanine Certificate
on any Distribution Date shall be made by reducing the Certificate Principal
Balance thereof by the amount so allocated, or in the case of a Class CE
Certificate, by reducing the amount otherwise payable in respect thereof
pursuant to Section 4.01(a)(4)(x). No allocations of any Realized Losses shall
be made to the Certificate Principal Balances of the Class A Certificates or the
Class P Certificates.
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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.
(c) All Realized Losses on the Mortgage Loans shall be
allocated by the Trustee on each Distribution Date to the following REMIC I
Regular Interests in the specified percentages, as follows: first, to
Uncertificated Interest payable to the REMIC I Regular Interest I-LT1 and REMIC
I Regular Interest I-LT6 up to an aggregate amount equal to the REMIC I Interest
Loss Allocation Amount, 98% and 2%, respectively; second, to the Uncertificated
Balances of the REMIC I Regular Interest I-LT1 and REMIC I Regular Interest
I-LT6 up to an aggregate amount equal to the REMIC I Principal Loss Allocation
Amount, 98% and 2%, respectively; third, to the Uncertificated Balances of REMIC
I Regular Interest I-LT1, REMIC I Regular Interest I-LT5 and REMIC I Regular
Interest I-LT6, 98%, 1% and 1%, respectively, until the Uncertificated Balance
of REMIC I Regular Interest I-LT5 has been reduced to zero; fourth, to the
Uncertificated Balances of REMIC I Regular Interest I-LT1, REMIC I Regular
Interest I-LT4 and REMIC I Regular Interest I-LT6, 98%, 1% and 1%, respectively,
until the Uncertificated Balance of REMIC I Regular Interest I-LT4 has been
reduced to zero; and fifth, to the Uncertificated Balances of REMIC I Regular
Interest I-LT1, REMIC I Regular Interest I-LT3 and REMIC I Regular Interest
I-LT6, 98%, 1% and 1%, respectively, until the Uncertificated Balance of REMIC I
Regular Interest I-LT3 has been reduced to zero.
(d) All Realized Losses on the REMIC II Regular Interests
shall be allocated by the Trustee on each Distribution Date among the REMIC II
Regular Interests in the proportion that Realized Losses are allocated to the
related Uncertificated Corresponding Component.
As used herein, an allocation of a Realized Loss on a "PRO
RATA basis" among the REMIC I Regular Interests means an allocation on a PRO
RATA basis among the REMIC I Regular Interests on the basis of their then
outstanding Uncertificated Balances, in each case prior to giving effect to
distributions to be made on such Distribution Date.
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. 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.
SECTION 4.06. Exchange Commission; Additional Information.
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Within 15 days after each Distribution Date, the Trustee shall
file with the Commission via the Electronic Data Gathering and Retrieval System,
a Form 8-K with a copy of the statement to Certificateholders for such
Distribution Date as an exhibit thereto. Prior to January 30, 1999, the Trustee
shall file a Form 15 Suspension Notification with respect to the Trust Fund, if
applicable. Prior to March 30, 1999, the Trustee shall file a Form 10-K,
substantially in the form attached hereto as Exhibit H, with respect to the
Trust Fund. The Depositor hereby grants to the Trustee a limited power of
attorney to execute and file each such document on behalf of the Depositor. Such
power of attorney shall continue until the earlier of (i) receipt by the Trustee
from the Depositor of written termination of such power of attorney and (ii) the
termination of the Trust Fund. Upon request, the Trustee shall deliver to the
Depositor a copy of any Form 8-K or Form 10-K filed pursuant to this Section
4.06.
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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 REMIC I.
The Certificates will be substantially in the forms annexed
hereto as Exhibits A-1 through A-9. 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,
authenticated and delivered by the Trustee to or upon the order of the
Depositor. The Certificates shall be executed 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 Trustee 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 and the Mezzanine Certificates
shall initially be issued as one or more Certificates held by the Book-Entry
Custodian or, if appointed to hold such Certificates as provided below, the
Depository and 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 brokerage firms for which it acts as agent in
accordance with the Depository's normal procedures. The Trustee is hereby
initially appointed as the Book-Entry Custodian and hereby agrees to act as such
in accordance herewith and in accordance with the agreement that it has with the
Depository authorizing it to act as such. The Book-Entry Custodian may, and, if
it is no longer qualified to act as such, the Book-Entry Custodian shall,
appoint, by a written instrument delivered
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to the Depositor, the Master Servicer and, if the Trustee is not the Book-Entry
Custodian, the Trustee, any other transfer agent (including the Depository or
any successor Depository) to act as Book-Entry Custodian under such conditions
as the predecessor Book-Entry Custodian and the Depository or any successor
Depository may prescribe, provided that the predecessor Book-Entry Custodian
shall not be relieved of any of its duties or responsibilities by reason of any
such appointment of other than the Depository. If the Trustee resigns or is
removed in accordance with the terms hereof, the successor trustee or, if it so
elects, the Depository shall immediately succeed to its predecessor's duties as
Book-Entry Custodian. The Depositor shall have the right to inspect, and to
obtain copies of, any Certificates held as Book-Entry Certificates by the
Book-Entry Custodian.
The Trustee, the Master Servicer and the Depositor 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 Book-Entry Custodian or the Depository, as
applicable, 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 $10,000,
except that any beneficial ownership that was represented by a Book-Entry
Certificate in an amount less than $10,000 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
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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 Trustee shall provide for
the registration of Certificates and of transfers and exchanges of
Certificates as herein provided.
(b) No transfer of any Class CE Certificate or Class P
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 Class CE
Certificate or Class P Certificate is to be made without registration or
qualification (other than in connection with the initial transfer of any such
Class CE Certificate or Class P Certificate by the Depositor to an affiliate of
the Depositor), the Trustee shall 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, the Master Servicer in its
capacity as such or any Sub-Servicer), 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. Neither the Depositor nor the Trustee is obligated to
register or qualify the Class CE Certificates or the Class P 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 Class CE Certificate or a Class P Certificate shall, and does
hereby agree to, indemnify the Trustee, the Depositor and the Master Servicer
against any liability that may result if the transfer is not so exempt or is not
made in accordance with such federal and state laws.
(c) No transfer of a Mezzanine Certificate, Class CE
Certificate, Class P Certificate or Residual Certificate or any interest therein
shall be made to any Plan subject to ERISA or Section 4975 of the Code, any
Person acting, directly or indirectly, on behalf of any such Plan or any Person
acquiring such Certificates with "Plan Assets" of a Plan within the meaning of
the Department of Labor regulation promulgated at 29 C.F.R. ss. 2510.3-101
("Plan Assets") unless the Depositor, the Trustee and the Master Servicer are
provided with an Opinion of Counsel which establishes to the satisfaction of the
Depositor, the Trustee and the Master Servicer that the purchase of such
Certificates is permissible under applicable law, will not constitute or result
in any prohibited transaction under ERISA or Section 4975 of the Code and will
not subject the Depositor, the Master Servicer, the Trustee or the Trust Fund to
any obligation
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or liability (including obligations or liabilities under ERISA or Section 4975
of the Code) in addition to those undertaken in this Agreement, which Opinion of
Counsel shall not be an expense of the Depositor, the Master Servicer, the
Trustee or the Trust Fund. In lieu of such Opinion of Counsel, any prospective
Transferee of such Certificates may provide a certification (which in the case
of the Mezzanine Certificates, the Transferee will be deemed to have represented
such certification) in the form of Exhibit G to this Agreement (or other form
acceptable to the Depositor, the Trustee and the Master Servicer), which the
Trustee may rely upon without further inquiry or investigation. An Opinion of
Counsel, any certification or a deemed representation will not be required in
connection with the initial transfer of any such Certificate by the Depositor to
an affiliate of the Depositor (in which case, the Depositor or any affiliate
thereof shall have deemed to have represented that such affiliate is not a Plan
or a Person investing Plan Assets) and the Trustee shall be entitled to
conclusively rely upon a representation (which, upon the request of the Trustee,
shall be a written representation) from the Depositor of the status of such
transferee as an affiliate of the Depositor.
(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," in the form
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
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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 transferor affidavit (a
"Transferor Affidavit," 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
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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 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 any of REMIC I,
REMIC II or REMIC III to cease to qualify as a REMIC
and will not cause any of REMIC I, REMIC II or REMIC
III, as the case may be, 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 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.
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(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, 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.
(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, 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 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 Trustee in accordance with its customary
procedures.
SECTION 5.03. Mutilated, Destroyed, Lost or Stolen
Certificates.
If (i) any mutilated Certificate is surrendered to the
Trustee, or the Trustee receives evidence to its satisfaction of the
destruction, loss or theft of any Certificate, and (ii) there is delivered to
the Trustee such security or indemnity as may be required by it to save it
harmless, then, in the absence of actual knowledge by the Trustee that such
Certificate has been acquired by a bona fide purchaser, the Trustee shall
execute, authenticate and deliver, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Certificate, a new Certificate of 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
Trustee) 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.
The Depositor, the Master Servicer, the Trustee 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
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whatsoever, and none of the Depositor, the Master Servicer, the Trustee 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 Class CE
Certificate or Class P Certificate to an Independent third party, the Depositor
shall provide to the Trustee ten copies of any private placement memorandum or
other disclosure document used by the Depositor in connection with the offer and
sale of the Class CE Certificates or Class P 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 ten 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 Class CE Certificate or Class P Certificate, the
related private placement memorandum or other disclosure document relating to
such Class of 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 11.01, (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 10.01(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 or Servicing Advance was,
or if made, would be a Nonrecoverable P&I Advance or Nonrecoverable Servicing
Advance, respectively, 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 upon them in their respective capacities as Depositor and
Master Servicer 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. 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
Fannie Mae or Freddie Mac; and provided further that the Rating Agencies'
ratings of the Class A Certificates and the Mezzanine 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 any breach of warranties, representations or covenants made
herein, or against any specific
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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 relating 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
Holders of Certificates entitled to at least 51% of the Voting Rights, 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 upon determination that its duties hereunder
are no longer permissible under applicable law. Any such determination pursuant
to 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 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. The foregoing prohibition on
assignment shall not prohibit the Master Servicer from designating a Subservicer
as payee of any
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indemnification amount payable to the Master Servicer hereunder; provided,
however, that as provided in Section 3.06 hereof, no Subservicer shall be a
third-party beneficiary hereunder and the parties hereto shall not be required
to recognize any Subservicer as an indemnitee under this Agreement. 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 and
the Trustee, 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 and the Trustee 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 (and that any such Sub-Servicer possesses). To the
extent such information is not otherwise available to the public, the Depositor
and the Trustee 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 or the Trust Fund, and in
either case, the Depositor 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.
(a) "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
or the Trustee (in which case notice shall be provided by
telecopy), or to the Master Servicer, the Depositor 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 this Agreement, or the breach by the Master
Servicer of any representation and warranty contained in
Section 2.05, which continues unremedied for a period of 30
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 or the
Trustee, or to the Master Servicer, the Depositor 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; 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 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
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(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) any failure by the Master Servicer of the Master
Servicer Termination Test; 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 5:00 p.m. New York time on the
second Business Day immediately following the Master Servicer
Remittance Date.
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 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 if given by the Trustee or
to the Trustee if given by the Depositor), 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 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 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 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,
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notwithstanding any such termination, with respect to events occurring prior to
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.
SECTION 7.02. Trustee to Act; Appointment of Successor.
(a) (1) On and after the time the Master Servicer receives a
notice of termination, the Trustee shall be the successor in all respects to the
Master Servicer in its capacity as Master Servicer under this Agreement and the
transactions set forth or provided for herein, and all the responsibilities,
duties and liabilities relating thereto and arising thereafter shall be assumed
by the Trustee (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 the 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 Fee and
all funds relating to the Mortgage Loans to which the Master Servicer would have
been entitled if it had continued to act hereunder. Notwithstanding the above
and subject to Section 7.02(a)(2) below, 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
Holders of Certificates entitled to at least 51% of the Voting Rights so request
in writing to the Trustee, promptly appoint or petition a court of competent
jurisdiction to appoint, an established mortgage loan servicing institution
acceptable to each Rating Agency 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.
(2) 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.
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(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 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 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 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 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. 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
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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.
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
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 document,
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unless requested in writing to do so by the 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 Trustee 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 Trustee on the Certificates) or of any Mortgage Loan
or related document. The Trustee shall not be accountable for the use or
application by the 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 Master
Servicer 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 any
breach by the Master Servicer of its obligations in connection with this
Agreement, (ii) that constitutes a specific liability of the Trustee pursuant to
Section 10.01(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 X hereof.
The Master Servicer agrees to indemnify the Trustee from, and hold it harmless
against, any loss, liability or expense arising in respect of any breach by the
Master Servicer of its obligations in connection with 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 REMIC I therefor.
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 Seller, the Originator, 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 (or a member of a bank holding company whose capital and
surplus is 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.
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
Master Servicer and to the Certificateholders. Upon receiving such notice of
resignation, the Depositor shall promptly
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appoint a successor trustee by written instrument, in duplicate, which
instrument shall be delivered to the resigning Trustee and to the successor
trustee. A copy of such instrument shall be delivered to the Certificateholders
and 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 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, and the Master Servicer by the Depositor.
The Holders of Certificates entitled to at least 51% of the
Voting Rights may at any time remove the Trustee and appoint a successor trustee
by written instrument or instruments, in triplicate, signed by such Holders or
their attorneys-in-fact duly authorized, one complete set of which instruments
shall be delivered to the Depositor, one complete set to the Trustee so removed
and one complete set to the successor so appointed. A copy of such instrument
shall be delivered to the Certificateholders 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 and to its predecessor
trustee an instrument accepting such appointment hereunder, and thereupon the
resignation or removal of the predecessor trustee shall become effective and
such successor trustee, without any further act, deed or conveyance, shall
become fully vested with all the rights, powers, duties and obligations of its
predecessor hereunder, with the like effect as if originally named as trustee
herein. The predecessor trustee shall deliver to the successor trustee all
Mortgage Files and related documents and statements, as well as all moneys, held
by it hereunder, and the Depositor and the predecessor trustee shall execute and
deliver such instruments and do such other things as may reasonably be required
for more fully and certainly vesting and confirming in the successor trustee all
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
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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 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.
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 REMIC I or property securing the same may at the time be located, the
Trustee 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 REMIC I, and to vest in such Person or Persons, in such
capacity, such title to REMIC I, or any part thereof, and, subject to the other
provisions of this Section 8.10, such powers, duties, obligations, rights and
trusts as the Trustee may consider necessary or desirable. No co-trustee or
separate trustee hereunder shall be required to meet the terms of eligibility as
a successor trustee under Section 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 REMIC I 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
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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.
SECTION 8.11. Appointment of Office or Agency.
The Trustee will maintain an office or agency in St. Paul,
Minnesota 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 8.12. Representations and Warranties of the Trustee.
The Trustee hereby represents and warrants to the Master
Servicer and the Depositor, 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
governing its creation and existence.
(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 articles of
association 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, 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)
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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
TERMINATION
SECTION 9.01 Termination Upon Repurchase or Liquidation of All
Mortgage Loans.
(a) Subject to Section 9.02, 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 in respect of the REMIC I Regular Interests, the REMIC
II Regular Interests or the Classes of Certificates as hereinafter 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 REMIC I and (ii) the final
payment or other liquidation (or any advance with respect thereto) of the last
Mortgage Loan or REO Property remaining in REMIC I; 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. Subject to Section 3.11 hereof, the purchase by the
Terminator of all Mortgage Loans and each REO Property remaining in REMIC I
shall be at a price (the "Termination Price") equal to the greater of (A) the
aggregate Purchase Price of all the Mortgage Loans included in REMIC I, plus the
appraised value of each REO Property, if any, included in REMIC I, such
appraisal to be conducted by an appraiser mutually agreed upon by the Terminator
and the Trustee in their reasonable discretion and (B) the aggregate fair market
value of all of the assets of REMIC I (as determined by 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 9.01);
provided, however, that in the event the Majority Class CE Certificateholder is
the Terminator, and subject to Section 3.11 hereof, the purchase by the Majority
Class CE Certificateholder of all Mortgage Loans and each REO Property remaining
in REMIC I shall be at the price designated in clause (A) above.
(b) The Majority Class CE Certificateholder shall have the
right and, to the extent the Majority Class CE Certificateholder fails to
exercise 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 REMIC I 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 REMIC I 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
reduced to less than 5% of the aggregate Stated Principal Balance of the
Mortgage Loans as of the Cut-off Date.
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(c) Notice of the liquidation of the REMIC I Regular Interests
shall be given promptly by the Trustee by letter to Certificateholders mailed
(a) in the event such notice is given in 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 the final payment in respect of the REMIC I Regular Interests, the
REMIC II Regular Interests and the Certificates will be made upon presentation
and surrender of the related 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 REMIC I Regular Interests, the REMIC II Regular
Interests or 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. In the event such notice is given in connection with the purchase
of all of the Mortgage Loans and each REO Property remaining in REMIC I 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. The
Trustee shall remit to the Master Servicer from such funds deposited in the
Distribution Account (i) any amounts which the Master Servicer would be
permitted to withdraw and retain from the Collection Account pursuant to Section
3.11 and (ii) any other amounts otherwise payable by the Trustee to the Master
Servicer from amounts on deposit in the Distribution Account pursuant to the
terms of this Agreement, in each case prior to making any final distributions
pursuant to Section 10.01(d) below. Upon certification to the Trustee by a
Servicing Officer of the making of such final deposit, the Trustee shall
promptly release 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
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
9.01 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 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, mail a final notice to the 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
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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 9.01. Any such amounts held in trust by
the Trustee shall be held in an Eligible Account and the Trustee may direct any
depository institution maintaining such account to invest the funds in one or
more Permitted Investments. All income and gain realized from the investment of
funds deposited in such accounts held in trust by the Trustee shall be for the
benefit of the Trustee; provided, however, that the Trustee shall deposit in
such account the amount of any loss of principal incurred in respect of any such
Permitted Investment made with funds in such accounts immediately upon the
realization of such loss.
Immediately following the deposit of funds in trust hereunder
in respect of the Certificates, the Trust Fund shall terminate.
SECTION 9.02 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 REMIC I
pursuant to Section 9.01, 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 REMIC
I's, REMIC II's and REMIC III'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 REMIC I 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 requesting Terminator (or, if the
Trust Fund is being terminated as a result of the occurrence of the event
described in clause (ii) of the first paragraph of Section 9.01, at the expense
of the Trustee without the right of reimbursement from the Trust Fund), the
Trustee shall prepare or cause to be prepared the documentation required in
connection with the adoption of a plan of liquidation of each of REMIC I , REMIC
II and REMIC III pursuant to this Section 9.02.
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(c) By their acceptance of Certificates, the Holders thereof
hereby agree to authorize the Trustee to specify the 90-day liquidation period
for each of REMIC I, REMIC II and REMIC III, which authorization shall be
binding upon all successor Certificateholders.
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ARTICLE X
REMIC PROVISIONS
SECTION 10.01. REMIC Administration.
(a) The Trustee shall elect to treat each of REMIC I, REMIC II
and REMIC III as a REMIC under the Code and, if necessary, under applicable
state law. Each such election will be made by the Master Servicer on behalf of
the Trustee 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 REMIC I, the REMIC I Regular Interests shall be
designated as the Regular Interests in REMIC I and the Class R-I Certificates
shall be designated as the Residual Interests in REMIC I. The REMIC II Regular
Interests shall be designated as the Regular Interests in REMIC II and the Class
R-II Certificates shall be designated as the Residual Interests in REMIC II. The
Class A Certificates, the Mezzanine Certificates, the Class CE Certificates and
the Class P Certificates shall be designated as the Regular Interests in REMIC
III and the Class R-III Certificates shall be designated as the Residual
Interests in REMIC III. The Trustee shall not permit the creation of any
"interests" in REMIC I, REMIC II or REMIC III (within the meaning of Section
860G of the Code) other than the REMIC I Regular Interests, the REMIC II Regular
Interests and the interests represented by the Certificates.
(b) The Closing Date is hereby designated as the "Startup Day"
of REMIC I, REMIC II and REMIC III within the meaning of Section 860G(a)(9) of
the Code.
(c) The Depositor 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 any REMIC I, REMIC II or
REMIC III 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 all of REMIC I's, REMIC II's and
REMIC III's tax matters person, shall (i) act on behalf of the Trust Fund in
relation to any tax matter or controversy involving any of REMIC I, REMIC II or
REMIC III 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 related REMIC
created hereunder. 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 each REMIC created hereunder. The expenses of preparing
and filing such returns shall be borne by the Trustee without any right of
reimbursement therefor.
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(e) The Trustee shall perform on behalf of each of REMIC I,
REMIC II and REMIC III all reporting and other tax compliance duties that are
the responsibility of such REMIC under the Code, the REMIC Provisions or other
compliance guidance issued by the Internal Revenue Service or any 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 REMIC I, REMIC II and REMIC
III. 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 Master Servicer and the Trustee shall take such action
and shall cause each 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. The Master Servicer and 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 REMIC I, REMIC II or REMIC III 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
(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 any of REMIC I, REMIC II or REMIC III, 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;
provided that the Master Servicer may conclusively rely on such Opinion of
Counsel and shall incur no liability for its action or failure to act in
accordance with such Opinion of Counsel. In addition, prior to taking any action
with respect to any of REMIC I, REMIC II or REMIC III or the respective assets
of each, or causing REMIC I, REMIC II or REMIC III 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 REMIC I,
REMIC II or REMIC III, and the Master Servicer shall not take any such action or
cause REMIC I, REMIC II or REMIC III to take any such action as to which the
Trustee has advised it in writing that an Adverse REMIC Event could occur;
provided that the Master Servicer may conclusively rely on such writing and
shall incur no liability for its action or failure to act in accordance with
such writing. 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
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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 or the Master Servicer will
ensure that substantially all of the assets of both REMIC I and REMIC II will
consist of "qualified mortgages" as defined in Section 860G(a)(3) of the Code
and "permitted investments" as defined in Section 860G(a)(5) of the Code, to the
extent such obligations are within such party's control and not otherwise
inconsistent with the terms of this Agreement.
(g) In the event that any tax is imposed on "prohibited
transactions" of any REMIC created hereunder as defined in Section 860F(a)(2) of
the Code, on the "net income from foreclosure property" of such REMIC as defined
in Section 860G(c) of the Code, on any contributions to any such 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 10.03 hereof,
if such tax arises out of or results from a breach by the Trustee of any of its
obligations under this Article X, (ii) to the Master Servicer pursuant to
Section 10.03 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 X,
or (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, 1999, the Trustee shall deliver to each Rating Agency an Officer's
Certificate of the Trustee stating the Trustee's compliance with this Article X.
(i) The Trustee shall, for federal income tax purposes,
maintain books and records with respect to each of REMIC I, REMIC II and REMIC
III on a calendar year and on an accrual basis.
(j) Following the Startup Day, the Master Servicer and the
Trustee shall not accept any contributions of assets to any of REMIC I, REMIC II
or REMIC III 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 Trust
Fund will not cause the related REMIC to fail to qualify as a REMIC at any time
that any Certificates are outstanding or subject such 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 REMIC I, REMIC II or REMIC III will receive a fee
or other compensation for services nor permit either 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.
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SECTION 10.02. 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 REMIC I, (iii) the termination of
REMIC I pursuant to Article IX 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 any of REMIC I,
REMIC II or REMIC III (other than REO Property 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 any of REMIC I, REMIC II or REMIC III 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
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 any of REMIC I, REMIC II or REMIC
III as a REMIC or (b) cause any of REMIC I, REMIC II or REMIC III to be subject
to a tax on "prohibited transactions" or "contributions" pursuant to the REMIC
Provisions.
SECTION 10.03. Master Servicer and Trustee Indemnification.
(a) The Trustee agrees to indemnify the Trust Fund, the
Depositor 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 or the Master Servicer, as a result of a
breach of the Trustee's covenants set forth in this Article X.
(b) The Master Servicer agrees to indemnify the Trust Fund,
the Depositor, 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 or the Trustee, as a result of a breach of the Master
Servicer's covenants set forth in Article III or this Article X.
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ARTICLE XI
MISCELLANEOUS PROVISIONS
SECTION 11.01. Amendment.
This Agreement may be amended from time to time by the
Depositor, the Master Servicer and the Trustee without the consent of any of the
Certificateholders, (i) to cure any ambiguity or defect, (ii) to correct, modify
or supplement any provisions herein (including to give effect to the
expectations of Certificateholders), or (iii) to make any other provisions with
respect to matters or questions arising under this Agreement which shall not be
inconsistent with the provisions of this Agreement, provided that such action
shall not, as evidenced by an Opinion of Counsel delivered to the Trustee,
adversely affect in any material respect the interests of any Certificateholder.
No amendment shall be deemed to adversely affect in any material respect the
interests of any Certificateholder who shall have consented thereto, and no
Opinion of Counsel shall be required to address the effect of any such amendment
on any such consenting Certificateholder.
This Agreement may also be amended from time to time by the
Depositor, the Master Servicer and the Trustee with the consent of 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 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 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 11.01, 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 any of REMIC I, REMIC II or REMIC III
pursuant to the REMIC Provisions or cause any of REMIC I, REMIC II or REMIC III
to fail to qualify as a REMIC at any time that any Certificates are outstanding.
Promptly after the execution of any such amendment the Trustee
shall furnish a copy of such amendment to each Certificateholder.
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It shall not be necessary for the consent of
Certificateholders under this Section 11.01 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 11.01 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 11.02. 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 11.03. 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 liability to any third person by reason of any
action taken by the parties to this Agreement pursuant to any provision hereof.
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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 11.04. 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 11.05. 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 and the Trustee in writing by the Depositor, (b) in the case of the
Master Servicer, 2020 East First Street, Suite 120, Santa Ana, California 92705,
Attention: Ms. Fabiola Camperi (telecopy number: (949) 558- 3822), or such other
address or telecopy number as may hereafter be furnished to the Trustee and the
Depositor in writing by the Master Servicer and (c) in the case of the Trustee,
180 East Fifth Street, St. Paul, Minnesota, 55101, Attention: Structured
Finance/Option One 1998-OPT2 (telecopy number (612) 244-0089), or such other
address or telecopy number as may hereafter be furnished to the Master Servicer
and the Depositor in writing by the Trustee. 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
-132-
<PAGE>
required to be telecopied hereunder also shall be mailed to the appropriate
party in the manner set forth above.
SECTION 11.06. 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 11.07. Notice to Rating Agencies.
The Trustee shall use its best efforts promptly to provide
notice to the Rating Agencies 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;
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. The filing of any claim under any Master Servicer's
blanket bond and errors and omissions insurance
policy required by Section 3.14 or the cancellation
or material modification of coverage under any such
instrument.
In addition, the Trustee shall promptly furnish to each Rating
Agency copies of each report to Certificateholders described in Section 4.02 and
the Master Servicer shall promptly
furnish to each Rating Agency copies of the following:
1. Each annual statement as to compliance described in
Section 3.20; and
-133-
<PAGE>
2. Each annual independent public accountants' servicing
report described in Section 3.21.
Any such notice pursuant to this Section 11.07 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 Duff & Phelps Credit Rating Co., 17 State Street, 12th Floor, New York, New
York, 10004, and to Moody's Investors Service, Inc., 99 Church
Street, New York, New York 10007, or such other addresses as the Rating Agencies
may designate in writing to the parties hereto.
SECTION 11.08. Article and Section References.
All article and section references used in this Agreement,
unless otherwise provided, are to articles and sections in this Agreement.
SECTION 11.09. Grant of Security Interest.
It is the express intent of the parties hereto that the
conveyance of the Mortgage Loans by the Depositor to the Trustee be, and be
construed as, a sale of the Mortgage Loans by the Depositor and not a pledge of
the Mortgage Loans by the Depositor to secure a debt or other obligation of the
Depositor. However, in the event that, notwithstanding the aforementioned intent
of the parties, the Mortgage Loans are held to be property of the Depositor,
then, (a) it is the express intent of the parties that such conveyance be deemed
a pledge of the Mortgage Loans by the Depositor to the Trustee to secure a debt
or other obligation of the Depositor and (b)(1) this Agreement shall also be
deemed to be a security agreement within the meaning of Articles 8 and 9 of the
Uniform Commercial Code as in effect from time to time in the State of New York;
(2) the conveyance provided for in Section 2.01 hereof shall be deemed to be a
grant by the Depositor to the Trustee of a security interest in all of the
Depositor'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 and the Distribution Account,
whether in the form of cash, instruments, securities or other property; (3) the
obligations secured by such security agreement shall be deemed to be all of the
Depositor's obligations under this Agreement, including the obligation to
provide to the Certificateholders the benefits of this Agreement relating to the
Mortgage Loans and the Trust Fund; 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 Trustee for the purpose of perfecting such security interest under
applicable law. Accordingly, the Depositor hereby grants to the Trustee a
security interest in the Mortgage Loans and all other property described in
clause (2) of the preceding sentence, for the purpose of securing to the Trustee
the performance by the Depositor of the obligations described in clause (3) of
the preceding sentence. Notwithstanding the foregoing, the parties hereto intend
the conveyance
-134-
<PAGE>
pursuant to Section 2.01 to be a true, absolute and unconditional sale of the
Mortgage Loans and assets constituting the Trust Fund by the Depositor to the
Trustee.
-135-
<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/ Matthew R. Bollo
-----------------------------------------
Name: Matthew R. Bollo
Title: Assistant Vice President
OPTION ONE MORTGAGE CORPORATION
as Master Servicer
By: /s/ William L. O'Neill
-----------------------------------------
Name: William L. O'Neill
Title: Senior Vice President
U. S. BANK NATIONAL ASSOCIATION
as Trustee
By: /s/ Lynn Steiner
-----------------------------------------
Name: Lynn Steiner
Title: Vice President
-136-
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the __th day of September 1998, before me, a notary public
in and for said State, personally appeared Matthew R. Bollo, 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]
-137-
<PAGE>
STATE OF CALIFORNIA )
) ss.:
COUNTY OF _________ )
On the __th day of September 1998, before me, a notary public
in and for said State, personally appeared ________________, known to me to be
_________________ of Option One Mortgage Corporation, 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]
-138-
<PAGE>
STATE OF _____________ )
) ss.:
COUNTY OF ____________ )
On the __th day of September 1998, before me, a notary public
in and for said State, personally appeared ____________________, known to me to
be an _____________________ of U. S. 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]
-139-
<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").
<TABLE>
<CAPTION>
<S> <C>
Series 1998-OPT2, Class A Aggregate Certificate Principal Balance of
the Class A Certificates as of the Issue Date:
Variable Pass-Through Rate $274,239,000.00
Date of Pooling and Servicing Agreement Denomination: $_____________
and Cut-off Date: September 1, 1998
Master Servicer:
First Distribution Date: Option One Mortgage Corporation
October 26, 1998
Trustee: U.S. Bank National Association
No. ___
Issue Date: September 25, 1998
CUSIP: 79548K E3 8
</TABLE>
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 ABOVE AS THE DENOMINATION OF THIS
CERTIFICATE.
<PAGE>
-1-
ASSET-BACKED FLOATING RATE CERTIFICATE
evidencing a beneficial ownership interest in a Trust Fund (the "Trust Fund")
consisting primarily of a pool of conventional one- to four-family first
mortgage loans (the "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 RESPECTIVE AFFILIATES. NEITHER THIS
CERTIFICATE NOR THE UNDERLYING MORTGAGE LOANS ARE GUARANTEED BY ANY
AGENCY OR INSTRUMENTALITY OF THE UNITED STATES.
This certifies that Cede & Co. 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 as of
the Issue Date) in that certain beneficial ownership interest evidenced by all
the Class A Certificates in REMIC III 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"), 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 the
lesser of (i) $5,000,000 or (ii) two-thirds of the aggregate initial Certificate
Principal Balance of the Class A Certificates, or otherwise 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. 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>
-3-
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
0.180%, 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 less than 5% of the aggregate principal balance of the Mortgage
Loans as of the Cut-off Date, or One-Month LIBOR plus 0.360% per annum, in the
case of any Distribution Date thereafter, and (ii) the Net WAC 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 of 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 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 Account 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 and the Trustee with the consent of the Holders of Certificates
entitled to at least 66% of the Voting Rights. 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.
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 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.
<PAGE>
-4-
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 and the Trustee and any
agent of the Depositor, the Master Servicer or the Trustee 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 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 REMIC I, and (ii) the purchase by the party designated in the
Agreement at a price determined as provided in the Agreement from REMIC I of all
the 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 REMIC I all the 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 less than
10%, in the event the majority holder of the Class CE Certificates exercises
such option, or less than 5%, in the event the Master Servicer exercises such
option, of the aggregate principal balance of the Mortgage Loans as of 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 Trustee, 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.
Dated: September 25, 1998
U.S. BANK NATIONAL ASSOCIATION
as Trustee
By:_______________________________
Authorized Officer
CERTIFICATE OF AUTHENTICATION
-----------------------------
This is one of the Class A Certificates referred to in the
within-mentioned Agreement.
U.S. BANK NATIONAL ASSOCIATION
as Trustee
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 Trustee 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
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 M-1 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").
THIS CERTIFICATE IS SUBORDINATE TO THE CLASS A
CERTIFICATES AND THE RESIDUAL CERTIFICATES TO THE
EXTENT DESCRIBED IN THE POOLING AND SERVICING
AGREEMENT REFERRED TO HEREIN.
NO TRANSFER OF THIS CERTIFICATE TO AN EMPLOYEE BENEFIT PLAN OR OTHER
RETIREMENT ARRANGEMENT (EACH A "PLAN") SUBJECT TO THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), SHALL BE
MADE EXCEPT IN COMPLIANCE WITH THE PROCEDURES DESCRIBED HEREIN.
<TABLE>
<CAPTION>
<S> <C>
Series 1998-OPT2, Class M-1 Aggregate Certificate Principal Balance of
the Class M-1 Certificates as of the Issue
Variable Pass-Through Rate Date: $25,710,000.00
Date of Pooling and Servicing Agreement Denomination: $_____________
and Cut-off Date: September 1, 1998
Master Servicer:
First Distribution Date: Option One Mortgage Corporation
October 26, 1998
Trustee: U.S. Bank National Association
No. ___
Issue Date: September 25, 1998
CUSIP: 79548K E4 6
</TABLE>
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 ABOVE AS THE DENOMINATION OF THIS
CERTIFICATE.
<PAGE>
-1-
ASSET-BACKED FLOATING RATE CERTIFICATE
evidencing a beneficial ownership interest in a Trust Fund (the "Trust Fund")
consisting primarily of a pool of conventional one- to four-family first
mortgage loans (the "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 RESPECTIVE AFFILIATES. NEITHER THIS
CERTIFICATE NOR THE UNDERLYING MORTGAGE LOANS ARE GUARANTEED BY ANY
AGENCY OR INSTRUMENTALITY OF THE UNITED STATES.
This certifies that Cede & Co. 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 M-1 Certificates as
of the Issue Date) in that certain beneficial ownership interest evidenced by
all the Class M-1 Certificates in REMIC III 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"), 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 M-1 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 M-1 Certificates the
aggregate initial Certificate Principal Balance of which is in excess of the
lesser of (i) $5,000,000 or (ii) two-thirds of the aggregate initial Certificate
Principal Balance of the Class
<PAGE>
-3-
M-1 Certificates, or otherwise 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. Notwithstanding the above, the final distribution on
this Certificate will be made after due notice by the Trustee of the pendency of
such distribution and only upon presentation and surrender of this Certificate
at the 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
0.370%, 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 less than 5% of the aggregate principal balance of the Mortgage
Loans as of the Cut-off Date, or One-Month LIBOR plus 0.555% per annum, in the
case of any Distribution Date thereafter, and (ii) the Net WAC 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 of 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 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 Account 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 and the Trustee with the consent of the Holders of Certificates
entitled to at least 66% of the Voting Rights. 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.
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
<PAGE>
-4-
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 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 to a Plan subject to ERISA or
Section 4975 of the Code, any Person acting, directly or indirectly, on behalf
of any such Plan or any person using Plan Assets to acquire this Certificate
shall be made except in accordance with Section 5.02(c) of the Agreement.
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 and the Trustee and any
agent of the Depositor, the Master Servicer or the Trustee 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 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 REMIC I, and (ii) the purchase by the party designated in the
Agreement at a price determined as provided in the Agreement from REMIC I of all
the 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 REMIC I all the 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 less than
10%, in the event the majority holder of the Class CE Certificates exercises
such option, or less than 5%, in the event the Master Servicer exercises such
option, of the aggregate principal balance of the Mortgage Loans as of the
Cut-off Date.
<PAGE>
-5-
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 Trustee, 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.
Dated: September 25, 1998
U.S. BANK NATIONAL ASSOCIATION
as Trustee
By:_______________________________
Authorized Officer
CERTIFICATE OF AUTHENTICATION
-----------------------------
This is one of the Class M-1 Certificates referred to in the
within-mentioned Agreement.
U.S. BANK NATIONAL ASSOCIATION
as Trustee
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 Trustee 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
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-3
FORM OF CLASS M-2 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").
THIS CERTIFICATE IS SUBORDINATE TO THE CLASS A CERTIFICATES, THE CLASS
M-1 CERTIFICATES AND THE RESIDUAL CERTIFICATES TO THE EXTENT DESCRIBED
IN THE POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN.
NO TRANSFER OF THIS CERTIFICATE TO AN EMPLOYEE BENEFIT PLAN OR OTHER
RETIREMENT ARRANGEMENT (EACH A "PLAN") SUBJECT TO THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR THE
CODE SHALL BE MADE EXCEPT IN COMPLIANCE WITH THE PROCEDURES DESCRIBED
HEREIN.
<TABLE>
<CAPTION>
<S> <C>
Series 1998-OPT2, Class M-2 Aggregate Certificate Principal Balance of
the Class M-2 Certificates as of the Issue
Variable Pass-Through Rate Date: $18,854,000.00
Date of Pooling and Servicing Agreement Denomination: $_____________
and Cut-off Date: September 1, 1998
Master Servicer:
First Distribution Date: Option One Mortgage Corporation
October 26, 1998
Trustee: U.S. Bank National Association
No. ___
Issue Date: September 25, 1998
CUSIP: 79548K E5 3
</TABLE>
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 ABOVE AS THE DENOMINATION OF THIS
CERTIFICATE.
<PAGE>
-1-
ASSET-BACKED FLOATING RATE CERTIFICATE
evidencing a beneficial ownership interest in a Trust Fund (the "Trust Fund")
consisting primarily of a pool of conventional one- to four-family first
mortgage loans (the "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 RESPECTIVE AFFILIATES. NEITHER THIS
CERTIFICATE NOR THE UNDERLYING MORTGAGE LOANS ARE GUARANTEED BY ANY
AGENCY OR INSTRUMENTALITY OF THE UNITED STATES.
This certifies that Cede & Co. 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 M-2 Certificates as
of the Issue Date) in that certain beneficial ownership interest evidenced by
all the Class M-2 Certificates in REMIC III 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"), 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 M-2 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 M-2 Certificates the
aggregate initial Certificate Principal Balance of which is in excess of the
lesser of (i) $5,000,000 or (ii) two-thirds of the aggregate initial Certificate
Principal Balance of the Class M-2 Certificates, or otherwise by check mailed by
first class mail to the address of the Person
<PAGE>
-3-
entitled thereto, as such name and address shall appear on the Certificate
Register. Notwithstanding the above, the final distribution on this Certificate
will be made after due notice by the Trustee of the pendency of such
distribution and only upon presentation and surrender of this Certificate at the
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
0.630%, 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 less than 5% of the aggregate principal balance of the Mortgage
Loans as of the Cut-off Date, or One-Month LIBOR plus 0.945% per annum, in the
case of any Distribution Date thereafter, and (ii) the Net WAC 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 of 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 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 Account 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 and the Trustee with the consent of the Holders of Certificates
entitled to at least 66% of the Voting Rights. 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.
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 duly executed
<PAGE>
-4-
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 to a Plan subject to ERISA or
Section 4975 of the Code, any Person acting, directly or indirectly, on behalf
of any such Plan or any person using Plan Assets to acquire this Certificate
shall be made except in accordance with Section 5.02(c) of the Agreement.
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 and the Trustee and any
agent of the Depositor, the Master Servicer or the Trustee 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 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 REMIC I, and (ii) the purchase by the party designated in the
Agreement at a price determined as provided in the Agreement from REMIC I of all
the 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 REMIC I all the 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 less than
10%, in the event the majority holder of the Class CE Certificates exercises
such option, or less than 5%, in the event the Master Servicer exercises such
option, of the aggregate principal balance of the Mortgage Loans as of 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.
<PAGE>
-5-
Unless the certificate of authentication hereon has been
executed by the Trustee, 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.
Dated: September 25, 1998
U.S. BANK NATIONAL ASSOCIATION
as Trustee
By:_______________________________
Authorized Officer
CERTIFICATE OF AUTHENTICATION
-----------------------------
This is one of the Class M-2 Certificates referred to in the
within-mentioned Agreement.
U.S. BANK NATIONAL ASSOCIATION
as Trustee
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 Trustee 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
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-4
FORM OF CLASS M-3 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").
THIS CERTIFICATE IS SUBORDINATE TO THE CLASS A CERTIFICATES, THE CLASS
M-1 CERTIFICATES, THE CLASS M-2 CERTIFICATES AND THE RESIDUAL
CERTIFICATES TO THE EXTENT DESCRIBED IN THE POOLING AND SERVICING
AGREEMENT REFERRED TO HEREIN.
NO TRANSFER OF THIS CERTIFICATE TO AN EMPLOYEE BENEFIT PLAN OR OTHER
RETIREMENT ARRANGEMENT (EACH A "PLAN") SUBJECT TO THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR THE
CODE SHALL BE MADE EXCEPT IN COMPLIANCE WITH THE PROCEDURES DESCRIBED
HEREIN.
<TABLE>
<CAPTION>
<S> <C>
Series 1998-OPT2, Class M-3 Aggregate Certificate Principal Balance of
the Class M-3 Certificates as of the Issue
Variable Pass-Through Rate Date: $14,569,000.00
Date of Pooling and Servicing Agreement Denomination: $_____________
and Cut-off Date: September 1, 1998
Master Servicer:
First Distribution Date: Option One Mortgage Corporation
October 26, 1998
Trustee: U.S. Bank National Association
No. ___
Issue Date: September 25, 1998
CUSIP: 79548K E8 1
</TABLE>
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 ABOVE AS THE DENOMINATION OF THIS
CERTIFICATE.
<PAGE>
-1-
ASSET-BACKED FLOATING RATE CERTIFICATE
evidencing a beneficial ownership interest in a Trust Fund (the "Trust Fund")
consisting primarily of a pool of conventional one- to four-family first
mortgage loans (the "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 RESPECTIVE AFFILIATES. NEITHER THIS
CERTIFICATE NOR THE UNDERLYING MORTGAGE LOANS ARE GUARANTEED BY ANY
AGENCY OR INSTRUMENTALITY OF THE UNITED STATES.
This certifies that Cede & Co. 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 M-3 Certificates as
of the Issue Date) in that certain beneficial ownership interest evidenced by
all the Class M-3 Certificates in REMIC III 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"), 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 M-3 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 M-3 Certificates the
aggregate initial Certificate Principal Balance of which is in excess of the
lesser of (i) $5,000,000 or (ii) two-thirds of the aggregate initial Certificate
Principal Balance of the Class M-3 Certificates, or otherwise by check mailed by
first class mail to the address of the Person
<PAGE>
-3-
entitled thereto, as such name and address shall appear on the Certificate
Register. Notwithstanding the above, the final distribution on this Certificate
will be made after due notice by the Trustee of the pendency of such
distribution and only upon presentation and surrender of this Certificate at the
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
1.200%, 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 less than 5% of the aggregate principal balance of the Mortgage
Loans as of the Cut-off Date, or One-Month LIBOR plus 1.800% per annum, in the
case of any Distribution Date thereafter, and (ii) the Net WAC 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 of 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 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 Account 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 and the Trustee with the consent of the Holders of Certificates
entitled to at least 66% of the Voting Rights. 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.
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
<PAGE>
-4-
below or other written instrument of transfer in form satisfactory to the
Trustee 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 to a Plan subject to ERISA or
Section 4975 of the Code, any Person acting, directly or indirectly, on behalf
of any such Plan or any person using Plan Assets to acquire this Certificate
shall be made except in accordance with Section 5.02(c) of the Agreement.
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 and the Trustee and any
agent of the Depositor, the Master Servicer or the Trustee 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 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 REMIC I, and (ii) the purchase by the party designated in the
Agreement at a price determined as provided in the Agreement from REMIC I of all
the 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 REMIC I all the 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 less than
10%, in the event the majority holder of the Class CE Certificates exercises
such option, or less than 5%, in the event the Master Servicer exercises such
option, of the aggregate principal balance of the Mortgage Loans as of 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.
<PAGE>
-5-
Unless the certificate of authentication hereon has been
executed by the Trustee, 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.
Dated: September 25, 1998
U.S. BANK NATIONAL ASSOCIATION
as Trustee
By:_______________________________
Authorized Officer
CERTIFICATE OF AUTHENTICATION
-----------------------------
This is one of the Class M-3 Certificates referred to in the
within-mentioned Agreement.
U.S. BANK NATIONAL ASSOCIATION
as Trustee
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 Trustee 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
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-5
FORM OF CLASS CE 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").
THE FOLLOWING INFORMATION IS PROVIDED SOLELY FOR THE PURPOSES OF
APPLYING THE U.S. FEDERAL INCOME TAX ORIGINAL ISSUE DISCOUNT ("OID")
RULES TO THIS CERTIFICATE. THE ISSUE DATE OF THIS CERTIFICATE IS
SEPTEMBER 25, 1998. BASED ON THE OID REGULATIONS AND ASSUMING THAT THE
MORTGAGE LOANS PREPAY AT __% CONSTANT PREPAYMENT RATE, USED SOLELY FOR
THE PURPOSES OF APPLYING THE OID RULES TO THE CERTIFICATES (THE
"PREPAYMENT ASSUMPTION"), THIS CERTIFICATE HAS BEEN ISSUED WITH NO MORE
THAN $_____ OF OID PER $100,000 OF INITIAL NOTIONAL AMOUNT, THE YIELD
TO MATURITY IS _____% AND THE AMOUNT OF OID ATTRIBUTABLE TO THE INITIAL
ACCRUAL PERIOD IS NO MORE THAN $______ PER $100,000 OF INITIAL NOTIONAL
AMOUNT, COMPUTED UNDER THE EXACT METHOD. NO REPRESENTATION IS MADE THAT
THE MORTGAGE LOANS WILL PREPAY AT A RATE BASED ON THE PREPAYMENT
ASSUMPTION OR AT ANY OTHER RATE.
THIS CERTIFICATE IS SUBORDINATE TO THE CLASS A CERTIFICATES, THE
MEZZANINE CERTIFICATES AND THE RESIDUAL CERTIFICATES TO THE EXTENT
DESCRIBED IN THE POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN.
THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE
AND MAY NOT BE RESOLD OR TRANSFERRED UNLESS IT IS REGISTERED PURSUANT
TO SUCH ACT AND LAWS OR IS SOLD OR TRANSFERRED IN TRANSACTIONS THAT ARE
EXEMPT FROM REGISTRATION UNDER SUCH ACT AND UNDER APPLICABLE STATE LAW
AND IS TRANSFERRED IN ACCORDANCE WITH THE PROVISIONS OF SECTION 5.02 OF
THE AGREEMENT.
NO TRANSFER OF THIS CERTIFICATE TO AN EMPLOYEE BENEFIT
PLAN OR OTHER RETIREMENT ARRANGEMENT (EACH A "PLAN")
SUBJECT TO THE EMPLOYEE RETIREMENT INCOME SECURITY
<PAGE>
ACT OF 1974, AS AMENDED ("ERISA"), OR THE CODE WILL BE
REGISTERED EXCEPT IN COMPLIANCE WITH THE PROCEDURES
DESCRIBED HEREIN.
<TABLE>
<CAPTION>
<S> <C>
Series 1998-OPT2, Class CE Aggregate Certificate Principal Balance of
the Class CE Certificates as of the Issue
Variable Pass-Through Rate Date: $9,427,363.98
Date of Pooling and Servicing Agreement Denomination: $_____________
and Cut-off Date: September 1, 1998
Master Servicer:
First Distribution Date: Option One Mortgage Corporation
October 26, 1998
Trustee: U.S. Bank National Association
No. ___
Issue Date: September 25, 1998
Aggregate Notional Amount of the Class
CE Certificates as of the Issue Date:
$342,799,463.28
Notional Amount: $______________
</TABLE>
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 ABOVE AS THE DENOMINATION OF THIS
CERTIFICATE.
<PAGE>
-4-
ASSET-BACKED FLOATING RATE CERTIFICATE
evidencing a beneficial ownership interest in a Trust Fund (the "Trust Fund")
consisting primarily of a pool of conventional one- to four-family first
mortgage loans (the "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 RESPECTIVE AFFILIATES. NEITHER THIS
CERTIFICATE NOR THE UNDERLYING MORTGAGE LOANS ARE GUARANTEED BY ANY
AGENCY OR INSTRUMENTALITY OF THE UNITED STATES.
This certifies that Salomon Smith Barney Inc. 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
CE Certificates as of the Issue Date) in that certain beneficial ownership
interest evidenced by all the Class CE Certificates in REMIC III 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"), 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 CE 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 CE Certificates the
aggregate initial Certificate Principal Balance of which is in excess of the
lesser of (i)
<PAGE>
-5-
$5,000,000 or (ii) two-thirds of the aggregate initial Certificate Principal
Balance of the Class CE Certificates, or otherwise 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. Notwithstanding the above, the
final distribution on this Certificate will be made after due notice by the
Trustee of the pendency of such distribution and only upon presentation and
surrender of this Certificate at the 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
a Percentage Interest in the Class of 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 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 Account 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 and the Trustee with the consent of the Holders of Certificates
entitled to at least 66% of the Voting Rights. 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.
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 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
<PAGE>
-6-
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 the
transfer is made pursuant to an effective registration statement under the
Securities Act of 1933, as amended (the "1933 Act"), and an 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 this Certificate is to be made without
registration or qualification, the Trustee shall require receipt of (i) if such
transfer is purportedly being made in reliance upon Rule 144A under the 1933
Act, written certifications from the Holder of the Certificate desiring to
effect the transfer, and from such Holder's prospective transferee,
substantially in the forms attached to the Agreement 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 their respective capacities as such), together with
copies of the written certification(s) of the Holder of the Certificate desiring
to effect the transfer and/or such Holder's prospective transferee upon which
such Opinion of Counsel is based. Neither the Depositor 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 Holder desiring to
effect a transfer of this Certificate shall be required to indemnify the
Trustee, the Depositor and the Master Servicer against any liability that may
result if the transfer is not so exempt or is not made in accordance with such
federal and state laws.
No transfer of this Certificate to a Plan subject to ERISA or
Section 4975 of the Code, any Person acting, directly or indirectly, on behalf
of any such Plan or any Person using "Plan Assets" to acquire this Certificate
shall be made except in accordance with Section 5.02(c) of the Agreement.
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 and the Trustee and any
agent of the Depositor, the Master Servicer or the Trustee 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 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
<PAGE>
-7-
Mortgage Loan remaining in REMIC I, and (ii) the purchase by the party
designated in the Agreement at a price determined as provided in the Agreement
from REMIC I of all the 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 REMIC I all the 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 less than 10%, in the event the majority holder of the Class CE
Certificates exercises such option, or less than 5%, in the event the Master
Servicer exercises such option, of the aggregate principal balance of the
Mortgage Loans as of 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 Trustee, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
<PAGE>
-8-
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.
Dated: September 25, 1998
U.S. BANK NATIONAL ASSOCIATION
as Trustee
By:_______________________________
Authorized Officer
CERTIFICATE OF AUTHENTICATION
-----------------------------
This is one of the Class CE Certificates referred to in the
within-mentioned Agreement.
U.S. BANK NATIONAL ASSOCIATION
as Trustee
By:_______________________________
Authorized Signatory
<PAGE>
-9-
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 Trustee 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>
-10-
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for purposes of
distribution:
Distributions shall be made, by wire transfer or otherwise, in
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>
-1-
EXHIBIT A-5
FORM OF CLASS P 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").
THE FOLLOWING INFORMATION IS PROVIDED SOLELY FOR THE PURPOSES OF
APPLYING THE U.S. FEDERAL INCOME TAX ORIGINAL ISSUE DISCOUNT ("OID")
RULES TO THIS CERTIFICATE. THE ISSUE DATE OF THIS CERTIFICATE IS
SEPTEMBER 25, 1998. BASED ON THE OID REGULATIONS AND ASSUMING THAT THE
MORTGAGE LOANS PREPAY AT __% CONSTANT PREPAYMENT RATE, USED SOLELY FOR
THE PURPOSES OF APPLYING THE OID RULES TO THE CERTIFICATES (THE
"PREPAYMENT ASSUMPTION"), THIS CERTIFICATE HAS BEEN ISSUED WITH NO MORE
THAN $______ OF OID PER $100,000 OF INITIAL NOTIONAL AMOUNT, THE YIELD
TO MATURITY IS _____% AND THE AMOUNT OF OID ATTRIBUTABLE TO THE INITIAL
ACCRUAL PERIOD IS NO MORE THAN $_____ PER $100,000 OF INITIAL NOTIONAL
AMOUNT, COMPUTED UNDER THE EXACT METHOD. NO REPRESENTATION IS MADE THAT
THE MORTGAGE LOANS WILL PREPAY AT A RATE BASED ON THE PREPAYMENT
ASSUMPTION OR AT ANY OTHER RATE.
THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE
AND MAY NOT BE RESOLD OR TRANSFERRED UNLESS IT IS REGISTERED PURSUANT
TO SUCH ACT AND LAWS OR IS SOLD OR TRANSFERRED IN TRANSACTIONS THAT ARE
EXEMPT FROM REGISTRATION UNDER SUCH ACT AND UNDER APPLICABLE STATE LAW
AND IS TRANSFERRED IN ACCORDANCE WITH THE PROVISIONS OF SECTION 5.02 OF
THE AGREEMENT.
NO TRANSFER OF THIS CERTIFICATE TO AN EMPLOYEE BENEFIT PLAN OR OTHER
RETIREMENT ARRANGEMENT (EACH A "PLAN") SUBJECT TO THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR THE
CODE WILL BE REGISTERED EXCEPT IN COMPLIANCE WITH THE PROCEDURES
DESCRIBED HEREIN.
<PAGE>
-2-
<TABLE>
<CAPTION>
<S> <C>
Series 1998-OPT2, Class P Aggregate Certificate Principal Balance of
the Class P Certificates as of the Issue
Variable Pass-Through Rate Date: $100.00
Date of Pooling and Servicing Agreement Denomination: $_____________
and Cut-off Date: September 1, 1998
Master Servicer:
First Distribution Date: Option One Mortgage Corporation
October 26, 1998
Trustee: U.S. Bank National Association
No. ___
Issue Date: September 25, 1998
</TABLE>
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 ABOVE AS THE DENOMINATION OF THIS
CERTIFICATE.
<PAGE>
-3-
ASSET-BACKED FLOATING RATE CERTIFICATE
evidencing a beneficial ownership interest in a Trust Fund (the "Trust Fund")
consisting primarily of a pool of conventional one- to four-family first
mortgage loans (the "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 RESPECTIVE AFFILIATES. NEITHER THIS
CERTIFICATE NOR THE UNDERLYING MORTGAGE LOANS ARE GUARANTEED BY ANY
AGENCY OR INSTRUMENTALITY OF THE UNITED STATES.
This certifies that Salomon Smith Barney Inc. 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
P Certificates as of the Issue Date) in that certain beneficial ownership
interest evidenced by all the Class P Certificates in REMIC III 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"), 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 P 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 P Certificates the
aggregate initial Certificate Principal Balance of which is in excess of the
lesser of (i) $5,000,000 or (ii) two-thirds of the aggregate initial Certificate
Principal Balance of the Class P Certificates, or otherwise by check mailed by
first class mail to the address of the Person
<PAGE>
-4-
entitled thereto, as such name and address shall appear on the Certificate
Register. Notwithstanding the above, the final distribution on this Certificate
will be made after due notice by the Trustee of the pendency of such
distribution and only upon presentation and surrender of this Certificate at the
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
a Percentage Interest in the Class of 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 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 Account 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 and the Trustee with the consent of the Holders of Certificates
entitled to at least 66% of the Voting Rights. 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.
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 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.
<PAGE>
-5-
No transfer of this Certificate shall be made unless the
transfer is made pursuant to an effective registration statement under the
Securities Act of 1933, as amended (the "1933 Act"), and an 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 this Certificate is to be made without
registration or qualification, the Trustee shall require receipt of (i) if such
transfer is purportedly being made in reliance upon Rule 144A under the 1933
Act, written certifications from the Holder of the Certificate desiring to
effect the transfer, and from such Holder's prospective transferee,
substantially in the forms attached to the Agreement 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 their respective capacities as such), together with
copies of the written certification(s) of the Holder of the Certificate desiring
to effect the transfer and/or such Holder's prospective transferee upon which
such Opinion of Counsel is based. Neither the Depositor 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 Holder desiring to
effect a transfer of this Certificate shall be required to indemnify the
Trustee, the Depositor and the Master Servicer against any liability that may
result if the transfer is not so exempt or is not made in accordance with such
federal and state laws.
No transfer of this Certificate to a Plan subject to ERISA or
Section 4975 of the Code, any Person acting, directly or indirectly, on behalf
of any such Plan or any Person using "Plan Assets" to acquire this Certificate
shall be made except in accordance with Section 5.02(c) of the Agreement.
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 and the Trustee and any
agent of the Depositor, the Master Servicer or the Trustee 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 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 REMIC I, and (ii) the purchase by the party designated in the
Agreement at a price determined as provided in the Agreement from REMIC I of all
the Mortgage Loans and all property acquired in respect of such Mortgage Loans.
The Agreement
<PAGE>
-6-
permits, but does not require, the party designated in the Agreement to purchase
from REMIC I all the 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 less than 10%, in the event the
majority holder of the Class P Certificates exercises such option, or less than
5%, in the event the Master Servicer exercises such option, of the aggregate
principal balance of the Mortgage Loans as of 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 Trustee, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
<PAGE>
-7-
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.
Dated: September 25, 1998
U.S. BANK NATIONAL ASSOCIATION
as Trustee
By:_______________________________
Authorized Officer
CERTIFICATE OF AUTHENTICATION
-----------------------------
This is one of the Class P Certificates referred to in the
within-mentioned Agreement.
U.S. BANK NATIONAL ASSOCIATION
as Trustee
By:_______________________________
Authorized Signatory
<PAGE>
-8-
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 Trustee 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>
-9-
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for purposes of
distribution:
Distributions shall be made, by wire transfer or otherwise, in
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>
-10-
EXHIBIT A-6
FORM OF CLASS R-I 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").
ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS
CERTIFICATE MAY BE MADE ONLY 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 (EACH A "PLAN") SUBJECT TO THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR THE
CODE WILL BE REGISTERED EXCEPT IN COMPLIANCE WITH THE PROCEDURES
DESCRIBED HEREIN.
ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS
CERTIFICATE MAY BE MADE ONLY IF THE PROPOSED
TRANSFEREE PROVIDES (I) AN AFFIDAVIT TO THE TRUSTEE
THAT (A) SUCH TRANSFEREE IS NOT (1) THE UNITED STATES OR
ANY POSSESSION THEREOF, ANY STATE OR POLITICAL
SUBDIVISION THEREOF, ANY FOREIGN GOVERNMENT, ANY
INTERNATIONAL ORGANIZATION, OR ANY AGENCY OR
INSTRUMENTALITY OF ANY OF THE FOREGOING, (2) ANY
ORGANIZATION (OTHER THAN A COOPERATIVE DESCRIBED IN
SECTION 521 OF THE CODE) THAT 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, (3) ANY ORGANIZATION DESCRIBED IN
SECTION 1381(A)(2)(C) OF THE CODE (ANY SUCH PERSON
DESCRIBED IN THE FOREGOING CLAUSES (1), (2) OR (3) SHALL
HEREINAFTER BE REFERRED TO AS A "DISQUALIFIED
ORGANIZATION") OR (4) AN AGENT OF A DISQUALIFIED
ORGANIZATION AND (B) NO PURPOSE OF SUCH TRANSFER IS TO
IMPEDE THE ASSESSMENT OR COLLECTION OF TAX, AND (II)
SUCH TRANSFEREE SATISFIES CERTAIN ADDITIONAL
CONDITIONS RELATING TO THE FINANCIAL CONDITION OF THE
PROPOSED TRANSFEREE. NOTWITHSTANDING THE
<PAGE>
-11-
REGISTRATION IN THE CERTIFICATE REGISTER OF ANY TRANSFER, SALE OR OTHER
DISPOSITION OF THIS 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 THIS CERTIFICATE BY ACCEPTANCE HEREOF 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 CERTIFICATE.
<TABLE>
<CAPTION>
<S> <C>
Series 1998-OPT2, Class R-I Aggregate Certificate Principal Balance of
the Class R-I Certificates as of the Issue
Variable Pass-Through Rate Date: $100.00
Date of Pooling and Servicing Agreement Denomination: $100.00
and Cut-off Date: September 1, 1998
Master Servicer:
First Distribution Date: Option One Mortgage Corporation
October 26, 1998
Trustee: U.S. Bank National Association
No. ___
Issue Date: September 25, 1998
CUSIP: 79548K E7 9
</TABLE>
<PAGE>
-3-
ASSET-BACKED FLOATING RATE CERTIFICATE
evidencing a beneficial ownership interest in a Trust Fund (the "Trust Fund")
consisting primarily of a pool of conventional one- to four-family first
mortgage loans (the "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 RESPECTIVE AFFILIATES. NEITHER THIS
CERTIFICATE NOR THE UNDERLYING MORTGAGE LOANS ARE GUARANTEED BY ANY
AGENCY OR INSTRUMENTALITY OF THE UNITED STATES.
This certifies that Salomon Smith Barney Inc. 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-I Certificates as of the Issue Date) in that certain beneficial ownership
interest evidenced by all the Class R-I Certificates in REMIC I 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"), 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-I 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-I Certificates the
aggregate initial Certificate Principal Balance of which is in excess of the
lesser of (i) $5,000,000 or (ii) two-thirds of the aggregate initial Certificate
Principal Balance of the Class R-I Certificates, or otherwise by check mailed by
first class mail to the address of the Person
<PAGE>
-4-
entitled thereto, as such name and address shall appear on the Certificate
Register. Notwithstanding the above, the final distribution on this Certificate
will be made after due notice by the Trustee of the pendency of such
distribution and only upon presentation and surrender of this Certificate at the
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
a Percentage Interest in the Class of 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 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 Account 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 and the Trustee with the consent of the Holders of Certificates
entitled to at least 66% of the Voting Rights. 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.
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 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.
<PAGE>
-5-
No transfer of this Certificate to a Plan subject to ERISA or
Section 4975 of the Code, any Person acting, directly or indirectly, on behalf
of any such Plan or any Person using "Plan Assets" to acquire this Certificate
shall be made except in accordance with Section 5.02(c) of the Agreement.
Prior to registration of any transfer, sale or other
disposition of this Certificate, the proposed transferee shall provide to the
Trustee (i) an affidavit to the effect that such transferee is any Person other
than a Disqualified Organization or the agent (including a broker, nominee or
middleman) of a Disqualified Organization, and (ii) a certificate that
acknowledges that (A) the Class R-I Certificates have been designated as a
residual interest in a REMIC, (B) it will include in its income a PRO RATA share
of the net income of the Trust Fund and that such income may be an "excess
inclusion," as defined in the Code, that, with certain exceptions, cannot be
offset by other losses or benefits from any tax exemption, and (C) it expects to
have the financial means to satisfy all of its tax obligations including those
relating to holding the Class R-I Certificates. Notwithstanding the registration
in the Certificate Register of any transfer, sale or other disposition of this
Certificate to a Disqualified Organization or an agent (including a broker,
nominee or middleman) 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, including, but not limited to,
the receipt of distributions in respect of this Certificate.
The Holder of this Certificate, by its acceptance hereof, shall be
deemed 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.
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 and the Trustee and any
agent of the Depositor, the Master Servicer or the Trustee 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 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 REMIC I, and (ii) the purchase by the party designated in the
Agreement at a price determined as provided in the Agreement from REMIC I of all
the
<PAGE>
-6-
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 REMIC I all the 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 less than 10%, in
the event the majority holder of the Class CE Certificates exercises such
option, or less than 5%, in the event the Master Servicer exercises such option,
of the aggregate principal balance of the Mortgage Loans as of 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 Trustee, 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.
Dated: September 25, 1998
U.S. BANK NATIONAL ASSOCIATION
as Trustee
By:_______________________________
Authorized Officer
CERTIFICATE OF AUTHENTICATION
-----------------------------
This is one of the Class R-1 Certificates referred to in the
within-mentioned Agreement.
U.S. BANK NATIONAL ASSOCIATION
as Trustee
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 Trustee 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
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-7
FORM OF CLASS R-II 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").
ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS
CERTIFICATE MAY BE MADE ONLY 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 (EACH A "PLAN") SUBJECT TO THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR THE
CODE WILL BE REGISTERED EXCEPT IN COMPLIANCE WITH THE PROCEDURES
DESCRIBED HEREIN.
ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS
CERTIFICATE MAY BE MADE ONLY IF THE PROPOSED
TRANSFEREE PROVIDES (I) AN AFFIDAVIT TO THE TRUSTEE
THAT (A) SUCH TRANSFEREE IS NOT (1) THE UNITED STATES OR
ANY POSSESSION THEREOF, ANY STATE OR POLITICAL
SUBDIVISION THEREOF, ANY FOREIGN GOVERNMENT, ANY
INTERNATIONAL ORGANIZATION, OR ANY AGENCY OR
INSTRUMENTALITY OF ANY OF THE FOREGOING, (2) ANY
ORGANIZATION (OTHER THAN A COOPERATIVE DESCRIBED IN
SECTION 521 OF THE CODE) THAT 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, (3) ANY ORGANIZATION DESCRIBED IN
SECTION 1381(A)(2)(C) OF THE CODE (ANY SUCH PERSON
DESCRIBED IN THE FOREGOING CLAUSES (1), (2) OR (3) SHALL
HEREINAFTER BE REFERRED TO AS A "DISQUALIFIED
ORGANIZATION") OR (4) AN AGENT OF A DISQUALIFIED
ORGANIZATION AND (B) NO PURPOSE OF SUCH TRANSFER IS TO
IMPEDE THE ASSESSMENT OR COLLECTION OF TAX, AND (II)
SUCH TRANSFEREE SATISFIES CERTAIN ADDITIONAL
CONDITIONS RELATING TO THE FINANCIAL CONDITION OF THE
PROPOSED TRANSFEREE. NOTWITHSTANDING THE
<PAGE>
REGISTRATION IN THE CERTIFICATE REGISTER OF ANY TRANSFER, SALE OR OTHER
DISPOSITION OF THIS 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 THIS CERTIFICATE BY ACCEPTANCE HEREOF 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 CERTIFICATE.
<TABLE>
<CAPTION>
<S> <C>
Series 1998-OPT2, Class R-II Aggregate Certificate Principal Balance of
the Class R-II Certificates as of the Issue
Variable Pass-Through Rate Date: $100.00
Date of Pooling and Servicing Agreement Denomination: $100.00
and Cut-off Date: September 1, 1998
Master Servicer:
First Distribution Date: Option One Mortgage Corporation
October 26, 1998
Trustee: U.S. Bank National Association
No. ___
Issue Date: September 25, 1998
CUSIP: 79548K E8 7
</TABLE>
<PAGE>
-3-
ASSET-BACKED FLOATING RATE CERTIFICATE
evidencing a beneficial ownership interest in a Trust Fund (the "Trust Fund")
consisting primarily of a pool of conventional one- to four-family first
mortgage loans (the "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 RESPECTIVE AFFILIATES. NEITHER THIS
CERTIFICATE NOR THE UNDERLYING MORTGAGE LOANS ARE GUARANTEED BY ANY
AGENCY OR INSTRUMENTALITY OF THE UNITED STATES.
This certifies that Salomon Smith Barney Inc. 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-II Certificates as of the Issue Date) in that certain beneficial ownership
interest evidenced by all the Class R-II Certificates in REMIC II 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"), 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-II 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-II Certificates the
aggregate initial Certificate Principal Balance of which is in excess of the
lesser of (i) $5,000,000 or (ii) two-thirds of the aggregate initial Certificate
Principal Balance of the Class R-II Certificates, or otherwise by check mailed
by first class mail to the address of the Person
<PAGE>
-4-
entitled thereto, as such name and address shall appear on the Certificate
Register. Notwithstanding the above, the final distribution on this Certificate
will be made after due notice by the Trustee of the pendency of such
distribution and only upon presentation and surrender of this Certificate at the
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
a Percentage Interest in the Class of 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 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 Account 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 and the Trustee with the consent of the Holders of Certificates
entitled to at least 66% of the Voting Rights. 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.
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 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
<PAGE>
-5-
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 to a Plan subject to ERISA or
Section 4975 of the Code, any Person acting, directly or indirectly, on behalf
of any such Plan or any Person using "Plan Assets" to acquire this Certificate
shall be made except in accordance with Section 5.02(c) of the Agreement.
Prior to registration of any transfer, sale or other
disposition of this Certificate, the proposed transferee shall provide to the
Trustee (i) an affidavit to the effect that such transferee is any Person other
than a Disqualified Organization or the agent (including a broker, nominee or
middleman) of a Disqualified Organization, and (ii) a certificate that
acknowledges that (A) the Class R-II Certificates have been designated as a
residual interest in a REMIC, (B) it will include in its income a PRO RATA share
of the net income of the Trust Fund and that such income may be an "excess
inclusion," as defined in the Code, that, with certain exceptions, cannot be
offset by other losses or benefits from any tax exemption, and (C) it expects to
have the financial means to satisfy all of its tax obligations including those
relating to holding the Class R-II Certificates. Notwithstanding the
registration in the Certificate Register of any transfer, sale or other
disposition of this Certificate to a Disqualified Organization or an agent
(including a broker, nominee or middleman) 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,
including, but not limited to, the receipt of distributions in respect of this
Certificate.
The Holder of this Certificate, by its acceptance hereof, shall be
deemed 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.
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 and the Trustee and any
agent of the Depositor, the Master Servicer or the Trustee 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 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
<PAGE>
-6-
(i) the final payment or other liquidation (or any advance with respect thereto)
of the last Mortgage Loan remaining in REMIC I, and (ii) the purchase by the
party designated in the Agreement at a price determined as provided in the
Agreement from REMIC I of all the 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 REMIC I all the 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 less than 10%, in the event the majority holder of the Class CE
Certificates exercises such option, or less than 5%, in the event the Master
Servicer exercises such option, of the aggregate principal balance of the
Mortgage Loans as of 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 Trustee, 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.
Dated: September 25, 1998
U.S. BANK NATIONAL ASSOCIATION
as Trustee
By:_______________________________
Authorized Officer
CERTIFICATE OF AUTHENTICATION
-----------------------------
This is one of the Class R-II Certificates referred to in the
within-mentioned Agreement.
U.S. BANK NATIONAL ASSOCIATION
as Trustee
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 Trustee 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
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-8
FORM OF CLASS R-III 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").
ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS
CERTIFICATE MAY BE MADE ONLY 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 (EACH A "PLAN") SUBJECT TO THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR THE
CODE WILL BE REGISTERED EXCEPT IN COMPLIANCE WITH THE PROCEDURES
DESCRIBED HEREIN.
ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS
CERTIFICATE MAY BE MADE ONLY IF THE PROPOSED
TRANSFEREE PROVIDES (I) AN AFFIDAVIT TO THE TRUSTEE
THAT (A) SUCH TRANSFEREE IS NOT (1) THE UNITED STATES OR
ANY POSSESSION THEREOF, ANY STATE OR POLITICAL
SUBDIVISION THEREOF, ANY FOREIGN GOVERNMENT, ANY
INTERNATIONAL ORGANIZATION, OR ANY AGENCY OR
INSTRUMENTALITY OF ANY OF THE FOREGOING, (2) ANY
ORGANIZATION (OTHER THAN A COOPERATIVE DESCRIBED IN
SECTION 521 OF THE CODE) THAT 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, (3) ANY ORGANIZATION DESCRIBED IN
SECTION 1381(A)(2)(C) OF THE CODE (ANY SUCH PERSON
DESCRIBED IN THE FOREGOING CLAUSES (1), (2) OR (3) SHALL
HEREINAFTER BE REFERRED TO AS A "DISQUALIFIED
ORGANIZATION") OR (4) AN AGENT OF A DISQUALIFIED
ORGANIZATION AND (B) NO PURPOSE OF SUCH TRANSFER IS TO
IMPEDE THE ASSESSMENT OR COLLECTION OF TAX, AND (II)
SUCH TRANSFEREE SATISFIES CERTAIN ADDITIONAL
CONDITIONS RELATING TO THE FINANCIAL CONDITION OF THE
PROPOSED TRANSFEREE. NOTWITHSTANDING THE
<PAGE>
REGISTRATION IN THE CERTIFICATE REGISTER OF ANY TRANSFER, SALE OR OTHER
DISPOSITION OF THIS 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 THIS CERTIFICATE BY ACCEPTANCE HEREOF 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 CERTIFICATE.
<TABLE>
<CAPTION>
<S> <C>
Series 1998-OPT2, Class R-III Aggregate Certificate Principal Balance of
the Class R-III Certificates as of the Issue
Variable Pass-Through Rate Date: $100.00
Date of Pooling and Servicing Agreement Denomination: $100.00
and Cut-off Date: September 1, 1998
Master Servicer:
First Distribution Date: Option One Mortgage Corporation
October 26, 1998
Trustee: U.S. Bank National Association
No. ___
Issue Date: September 25, 1998
CUSIP: 79548K E9 5
</TABLE>
<PAGE>
-3-
ASSET-BACKED FLOATING RATE CERTIFICATE
evidencing a beneficial ownership interest in a Trust Fund (the "Trust Fund")
consisting primarily of a pool of conventional one- to four-family first
mortgage loans (the "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 RESPECTIVE AFFILIATES. NEITHER THIS
CERTIFICATE NOR THE UNDERLYING MORTGAGE LOANS ARE GUARANTEED BY ANY
AGENCY OR INSTRUMENTALITY OF THE UNITED STATES.
This certifies that Salomon Smith Barney Inc. 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-III Certificates as of the Issue Date) in that certain beneficial ownership
interest evidenced by all the Class R-III Certificates in REMIC III 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"), 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-III 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-III Certificates the
aggregate initial Certificate Principal Balance of which is in excess of the
lesser of (i) $5,000,000 or (ii) two-thirds of the aggregate initial Certificate
Principal Balance of the Class R-III Certificates, or otherwise by check mailed
by first class mail to the address of the Person
<PAGE>
-4-
entitled thereto, as such name and address shall appear on the Certificate
Register. Notwithstanding the above, the final distribution on this Certificate
will be made after due notice by the Trustee of the pendency of such
distribution and only upon presentation and surrender of this Certificate at the
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
a Percentage Interest in the Class of 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 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 Account 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 and the Trustee with the consent of the Holders of Certificates
entitled to at least 66% of the Voting Rights. 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.
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 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
<PAGE>
-5-
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 to a Plan subject to ERISA or
Section 4975 of the Code, any Person acting, directly or indirectly, on behalf
of any such Plan or any Person using "Plan Assets" to acquire this Certificate
shall be made except in accordance with Section 5.02(c) of the Agreement.
Prior to registration of any transfer, sale or other
disposition of this Certificate, the proposed transferee shall provide to the
Trustee (i) an affidavit to the effect that such transferee is any Person other
than a Disqualified Organization or the agent (including a broker, nominee or
middleman) of a Disqualified Organization, and (ii) a certificate that
acknowledges that (A) the Class R-III Certificates have been designated as a
residual interest in a REMIC, (B) it will include in its income a PRO RATA share
of the net income of the Trust Fund and that such income may be an "excess
inclusion," as defined in the Code, that, with certain exceptions, cannot be
offset by other losses or benefits from any tax exemption, and (C) it expects to
have the financial means to satisfy all of its tax obligations including those
relating to holding the Class R-III Certificates. Notwithstanding the
registration in the Certificate Register of any transfer, sale or other
disposition of this Certificate to a Disqualified Organization or an agent
(including a broker, nominee or middleman) 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,
including, but not limited to, the receipt of distributions in respect of this
Certificate.
The Holder of this Certificate, by its acceptance hereof, shall be
deemed 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.
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 and the Trustee and any
agent of the Depositor, the Master Servicer or the Trustee 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 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
<PAGE>
-6-
(i) the final payment or other liquidation (or any advance with respect thereto)
of the last Mortgage Loan remaining in REMIC I, and (ii) the purchase by the
party designated in the Agreement at a price determined as provided in the
Agreement from REMIC I of all the 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 REMIC I all the 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 less than 10%, in the event the majority holder of the Class CE
Certificates exercises such option, or less than 5%, in the event the Master
Servicer exercises such option, of the aggregate principal balance of the
Mortgage Loans as of 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 Trustee, 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.
Dated: September 25, 1998
U.S. BANK NATIONAL ASSOCIATION
as Trustee
By:_______________________________
Authorized Officer
CERTIFICATE OF AUTHENTICATION
-----------------------------
This is one of the Class R-III Certificates referred to in the
within-mentioned Agreement.
U.S. BANK NATIONAL ASSOCIATION
as Trustee
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 Trustee 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
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
[RESERVED]
<PAGE>
EXHIBIT C
FORM OF TRUSTEE'S INITIAL CERTIFICATION
[Date]
Salomon Brothers Mortgage
Securities VII, Inc.
Seven World Trade Center
New York, New York 10048
[Master Servicer]
___________________________
___________________________
Re: Pooling and Servicing Agreement, dated as of September 1, 1998,
among Salomon Brothers Mortgage Securities VII, Inc.,
Option One Mortgage Corporation and U.S. Bank National Association
Asset-Backed Floating Rate Certificates, Series 1998-OPT2
------------------------------------------------------------------
Ladies and Gentlemen:
Attached is the Trustee's preliminary exceptions in accordance with
Section 2.02 of the referenced Pooling and Servicing Agreement (the "Pooling and
Servicing Agreement"). Capitalized terms used but not otherwise defined herein
shall have the meanings ascribed to them in the Pooling and Servicing Agreement.
The Trustee has made no independent examination of any documents
contained in each Mortgage File beyond the review specifically required in the
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 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 clauses (iv) and (v) of
Section 2.01 of the Pooling and Servicing Agreement.
U.S. BANK NATIONAL ASSOCIATION
By:________________________________
Name:
Title:
<PAGE>
EXHIBIT C-1
FORM OF TRUSTEE'S INTERIM CERTIFICATION
[Date]
Salomon Brothers Mortgage
Securities VII, Inc.
Seven World Trade Center
New York, New York 10048
[Master Servicer]
___________________________
___________________________
Re: Pooling and Servicing Agreement, dated as of September 1, 1998,
among Salomon Brothers Mortgage Securities VII, Inc.,
Option One Mortgage Corporation and U.S. Bank National Association
Asset-backed Floating Rate Certificates, Series 1998-OPT2
------------------------------------------------------------------
Ladies and Gentlemen:
Attached is the Trustee's preliminary exceptions in accordance with
Section 2.02 of the referenced Pooling and Servicing Agreement (the "Pooling and
Servicing Agreement"). Capitalized terms used but not otherwise defined herein
shall have the meanings ascribed to them in the Pooling and Servicing Agreement.
The Trustee has made no independent examination of any documents
contained in each Mortgage File beyond the review specifically required in the
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 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 (v) of Section
2.01 of the Pooling and Servicing Agreement.
U.S. BANK NATIONAL ASSOCIATION
By:________________________________
Name:
Title:
<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
[Master Servicer]
___________________________
___________________________
Re: Pooling and Servicing Agreement, dated as of September 1, 1998,
among Salomon Brothers Mortgage Securities VII, Inc.,
Option One Mortgage Corporation and U.S. Bank National Association
Asset-backed Floating Rate Certificates, Series 1998-OPT2
------------------------------------------------------------------
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;
(iii) the original lender's title insurance policy; and
<PAGE>
(iv) the original Primary Insurance Policy for each Mortgage Loan
indicated on the Mortgage Loan Schedule as having a Loan-to-Value Ratio
at origination in excess of __%.
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 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.
U.S. BANK NATIONAL ASSOCIATION
By:__________________________________
Name:
Title:
<PAGE>
EXHIBIT D
---------
FORM OF MORTGAGE LOAN PURCHASE AGREEMENT
<PAGE>
MORTGAGE LOAN PURCHASE AGREEMENT
This is a Mortgage Loan Purchase Agreement (this "Agreement"),
dated September 22, 1998, among Salomon Brothers Mortgage Securities VII, Inc.,
a Delaware corporation (the "Purchaser"), Option One Mortgage Corporation, a
California 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
identified) 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 Mortgage Loan Purchase and Servicing
Agreement, dated as of March 1, 1998 (the "Purchase and Servicing Agreement"),
between 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 of the Trust Fund. The Trust Fund will be evidenced by a single
series of asset-backed floating rate certificates designated as Series 1998-OPT2
(the "Certificates"). The Certificates will consist of nine classes of
certificates. The Certificates will be issued pursuant to a Pooling and
Servicing Agreement, dated as of September 1, 1998 (the "Pooling and Servicing
Agreement"), among the Purchaser as depositor, the Originator as master servicer
(in such capacity, the "Master Servicer") and U.S. Bank National Association as
trustee (the "Trustee"). 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, 1998 (the
"Closing Date"), certain conventional, one- to four-family, adjustable-rate
residential mortgage loans (the "Mortgage Loans"), having an aggregate principal
balance as of the close of business on September 1, 1998 (the "Cut-off Date") of
approximately $342,799,764 (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, including the right to any Prepayment Charges payable by the related
Mortgagors in connection with any Principal Prepayments on the Mortgage Loans.
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 shall describe such Mortgage Loans and set forth
all of the Mortgage Loans to be purchased under this Agreement, including the
related Prepayment Charges. 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.
<PAGE>
-2-
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 ______% 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 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, including the related Prepayment Charges. 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 [MUST UPDATE WHAT IS BEING CERTIFIED IF THERE
IS A CUSTODIAN]:
[(i) the original Mortgage Note, endorsed in the
following form: "Pay to the order of U.S. Bank National Association, as
Trustee for the registered holders of Salomon Brothers Mortgage
Securities VII, Inc., under the applicable pooling and servicing
agreement, without recourse," with all prior and intervening
endorsements
<PAGE>
-3-
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 Mortgage executed in
the following form: "U.S. Bank National Association, as Trustee for the
registered holders of Salomon Brothers Mortgage Securities VII, Inc.,
under the applicable pooling and servicing agreement";
(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 that 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 Seller, at the expense of the Originator, promptly shall
(within sixty Business Days following the later of the Closing Date and the date
of receipt by the Seller of the recording information for a Mortgage, but in no
event later than ninety days following the Closing Date) submit or cause to be
submitted for recording, at no expense to the Seller or the Purchaser (or the
Trust Fund or the Trustee under the Pooling and Servicing Agreement), in the
appropriate public office for real property records, each Assignment referred to
in clauses (b)(iii) and (b)(iv) of this Section 4. In the event that any such
Assignment is lost or returned unrecorded because of a defect therein, the
Originator on behalf of the Seller, at the expense of the 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 4, with respect to a maximum of approximately 1.0% of the Mortgage
Loans, by aggregate principal balance of the Mortgage Loans as of the Cut-off
Date, if any original Mortgage Note referred to in Section 4(b)(i) above cannot
be located, the obligations of the Seller to deliver such documents shall be
deemed to be satisfied upon delivery to the Purchaser or any assignee,
transferee or designee of the Purchaser of a photocopy of such Mortgage Note, if
available, with a lost note affidavit substantially in the form of Exhibit 6
attached hereto. If any of the original Mortgage Notes for
<PAGE>
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which a lost note affidavit was delivered to the Purchaser or any assignee,
transferee or designee of the Purchaser is subsequently located, such original
Mortgage Note shall be delivered to the Purchaser or any assignee, transferee or
designee of the Purchaser within three Business Days; and 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 delivery to the Purchaser or any
assignee, transferee or designee of the Purchaser promptly upon receipt thereof
by or on behalf of the Seller 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.
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.
Each original document relating to a Mortgage Loan which is
not delivered to the Purchaser or its assignee, transferee or designee, if held
by the Seller or the Originator, shall be so held for the benefit of the
Purchaser or its assignee, transferee or designee.
(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.
(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
<PAGE>
-5-
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 duly organized, validly
existing and in good standing as a corporation under the laws of the State of
California 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 Originator had the full corporate power
and authority to own the Mortgage Loans and to transfer and convey the Mortgage
Loans to the Seller pursuant to the Purchase and Servicing Agreement, and the
Originator 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) The Originator has duly authorized the
execution, delivery and performance of this Agreement, has duly executed and
delivered this Agreement, and this Agreement, assuming due authorization,
execution and delivery by the Purchaser and the Seller, constitutes a legal,
valid and binding obligation of the Originator, enforceable against it in
accordance with its terms except as the enforceability thereof may be limited by
bankruptcy, insolvency or reorganization or by general principles of equity;
(iii) The execution, delivery and performance of this
Agreement by the Originator (x) does not conflict and will not conflict with,
does not breach and will not result in a breach of and does not constitute and
will not 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
articles of incorporation or by-laws of the Originator, (B) any term or
provision of any material agreement, contract, instrument or indenture, to which
the Originator is a party or by which the Originator 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
Originator or any of its property and (y) does not create or impose and will not
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;
<PAGE>
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(iv) No consent, approval, authorization or order of,
registration or filing with, or notice on behalf of the Originator to any
governmental authority or court is required, under federal laws or the laws of
the State of California, for the execution, delivery and performance by the
Originator of, or compliance by the Originator with, this Agreement or the
consummation by the Originator of any other transaction contemplated hereby and
by the Pooling and Servicing Agreement; provided, however, that the Originator
makes no representation or warranty regarding federal or state securities laws
in connection with the sale or distribution of the Certificates;
(v) With respect to any statement regarding the
intentions of the Originator, this Agreement does not contain any untrue
statement of material fact or omit to state a material fact necessary to make
the statements contained herein not misleading. The written statements, reports
and other documents prepared and furnished or to be prepared and furnished by
the Originator pursuant to this Agreement or in connection with the transactions
contemplated hereby taken in the aggregate do not contain any untrue statement
of material fact or omit to state a material fact necessary to make the
statements contained therein not misleading;
(vi) The Originator is not in violation of, and the
execution and delivery of this Agreement by the Originator and its performance
and compliance with the terms of this Agreement will not constitute a violation
with respect to, any order or decree of any court or any order or regulation of
any federal, state, municipal or governmental agency having jurisdiction over
the Originator or its assets, which violation might have consequences that would
materially and adversely affect the condition (financial or otherwise) or the
operation of the Originator or its assets or might have consequences that would
materially and adversely affect the performance of its obligations and duties
hereunder;
(vii) The Originator is a HUD approved mortgagee
pursuant to Section 203 of the National Housing Act. No event has occurred,
including but not limited to a change in insurance coverage, that would make the
Originator unable to comply with HUD eligibility requirements or that would
require notification to HUD;
(viii) The Originator does not believe, nor does it
have any reason or cause to believe, that it cannot perform each and every
covenant contained in this Agreement;
(ix) Immediately prior to the payment to the
Originator of the purchase price for each Mortgage Loan pursuant to the Purchase
and Servicing Agreement, the Originator was the owner of the related Mortgage
and the indebtedness evidenced by the related Mortgage Note, and, upon the
payment to the Originator of such purchase price, in the event that the
Originator retains or has retained record title, the Originator shall retain
such record title to each Mortgage, each related Mortgage Note and the related
Mortgage Files with respect thereto in trust for the Purchaser as the owner
thereof from and after the date hereof;
(x) There are no actions or proceedings against, or
investigations known to it of, the Originator before any court, administrative
or other tribunal (A) that might prohibit
<PAGE>
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its entering into this Agreement, (B) seeking to prevent the sale of the
Mortgage Loans by the Originator which occurred pursuant to the Purchase and
Servicing Agreement or the consummation of the transactions contemplated by this
Agreement or (C) that might prohibit or materially and adversely affect the
performance by the Originator of its obligations under, or validity or
enforceability of, this Agreement;
(xi) The consummation of the transactions
contemplated by this Agreement and the Purchase and Servicing Agreement are in
the ordinary course of business of the Originator, and the transfer, assignment
and conveyance of the Mortgage Notes and the Mortgages by the Originator
pursuant to the Purchase and Servicing Agreement were not subject to the bulk
transfer or any similar statutory provisions;
(xii) The information delivered by the Originator to
the Seller with respect to the Originator's loan loss, foreclosure and
delinquency experience on mortgage loans underwritten to the same standards as
the Mortgage Loans and covering mortgaged properties similar to the Mortgaged
Properties, is true and correct in all material respects;
(xiii) The Originator 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 pursuant to the Purchase and Servicing
Agreement; and
(xiv) There is no litigation currently pending or, to
the best of the Originator's knowledge without independent investigation,
threatened against the Originator that would reasonably be expected to adversely
affect the transfer of the Mortgage Loans, the issuance of the Certificates or
the execution, delivery, performance or enforceability of this Agreement, or
that would result in a material adverse change in the financial condition of the
Originator.
(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 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
<PAGE>
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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 compli ance 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) No certificate of an officer, statement or other
information furnished in writing or report delivered by the Seller to the
Purchaser, any affiliate of the Purchaser or the Trustee for use in connection
with the purchase of the Mortgage Loans and the transactions contemplated
hereunder and under the Pooling and Servicing Agreement will contain any untrue
statement of a material fact, or omit a material fact necessary to make the
information, certificate, statement or report not misleading in any material
respect;
(v) 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 docu ments or instruments
evidencing or securing the Mortgage Loans;
(vi) 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;
(vii) 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 execution, delivery, performance or
enforceability of this Agreement or that would result in a material adverse
change in the financial condition of the Seller;
<PAGE>
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(viii) 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;
(ix) 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;
(x) 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;
(xi) 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;
(xii) 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;
(xiii) 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; and
(xiv) With respect to the Mortgage Loans, the Seller
hereby represents and warrants, as of the date hereof and as of the Closing
Date, that each Mortgage Loan constitutes a "qualified mortgage" within the
meaning of Section 860(G)(a)(3) of the Code.
<PAGE>
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SECTION 6. REPRESENTATIONS AND WARRANTIES OF THE ORIGINATOR
AND THE SELLER RELATING TO THE MORTGAGE LOANS.
(a) PRINCIPLES OF CONSTRUCTION. The Originator, Seller and the
Purchaser understand, acknowledge and agree that, notwithstanding that the
representations and warranties set forth in Section 6(b) are made as of the
Closing Date, each such representation and warranty made with respect to any
Mortgage Loan that was purchased by the Seller from the Originator under the
Purchase and Servicing Agreement more than 90 days prior to the Closing Date
(with respect to each such Mortgage Loan, the related "Seller Purchase Date") is
made and shall be deemed to have been made to the Purchaser and the Seller by
the Originator solely as of the date which is 90 days following the related
Seller Purchase Date and not as of any later date, and each such representation
and warranty with respect to any such Mortgage Loan is made and shall be deemed
to have been made to the Purchaser solely by the Seller as of the Closing Date.
(b) REPRESENTATIONS AND WARRANTIES AS TO INDIVIDUAL MORTGAGE
LOANS. Subject to Section 6(a), the Originator hereby represents and warrants to
the Seller and the Purchaser, or the Seller hereby represents and warrants to
the Purchaser, as the case may be, that as to each Mortgage Loan as of the
Closing Date:
(i) The information set forth in the Mortgage Loan Schedule,
as transmitted electronically to the Seller by the Originator (as such
transmitted information may have been amended in writing by the Originator with
the written consent of the Seller subsequent to such transmission) is complete,
true and correct as of the Cut-off Date; provided, however, that no
representation or warranty is made as to the Closing Schedule to the extent that
information in such Closing Schedule is inconsistent with the Mortgage Loan
Schedule transmitted by the Originator as described above (as the same may have
been amended as described above);
(ii) Except with respect to the Mortgage Loans listed on
Exhibit 7 attached hereto, all payments required to be made prior to the first
day of the month in which the Closing Date occurs for such Mortgage Loan under
the terms of the Mortgage Note have been made; the Originator has not advanced
funds, or induced, solicited or knowingly received any advance of funds from a
party other than the owner of the related Mortgaged Property, directly or
indirectly, for the payment of any amount required by the Mortgage Note or
Mortgage; and as of the Closing Date, no payment required under any Mortgage
Loan has been 30 days delinquent more than once during the last twelve months
and except with respect to 0.19% of the Mortgage Loans by aggregate principal
balance as of the Cut-off Date, which were sixty days or more but less than
ninety days delinquent, no Mortgage Loan has ever been 60 or more days
delinquent;
(iii) At the origination of such Mortgage Loan, there were no
delinquent taxes, ground rents, water charges, sewer rents, assessments,
insurance premiums, leasehold payments, including assessments payable in future
installments or other outstanding charges affecting the related Mortgaged
Property, and, to the knowledge of the Originator, as of the Closing Date, there
are no delinquent taxes, ground rents, water charges, sewer rents, assessments,
insurance
<PAGE>
-11-
premiums, leasehold payments, including assessments payable in future
installments or other outstanding charges affecting the related Mortgaged
Property;
(iv) The terms of the Mortgage Note and the Mortgage have not
been impaired, waived, altered or modified in any respect, except by written
instruments, recorded in the applicable public recording office if necessary to
maintain the lien priority of the Mortgage, and which have been delivered to the
Trustee; the substance of any such waiver, alteration or modification has been
approved by the title insurer, to the extent required by the related policy, and
is reflected on the Mortgage Loan Schedule. No instrument of waiver, alteration
or modification has been executed, and no Mortgagor has been released, in whole
or in part, except in connection with an assumption agreement approved by the
title insurer, to the extent required by the policy, and which assumption
agreement has been delivered to the Trustee and the terms of which are reflected
in the Mortgage Loan Schedule;
(v) The Mortgage Note and the Mortgage are not subject to any
right of rescission, set-off, counterclaim or defense, including the defense of
usury, nor will the operation of any of the terms of 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;
(vi) All buildings upon the Mortgaged Property are insured by
a generally acceptable insurer against loss by fire, hazards of extended
coverage and such other hazards as are customary in the area where the Mortgaged
Property is located, pursuant to insurance policies conforming to the
requirements of the Pooling and Servicing Agreement. All such insurance policies
contain a standard mortgagee clause naming the Originator, its successors and
assigns as mortgagee and all premiums thereon have been paid. If upon
origination of the Mortgage Loan, the Mortgaged Property was in an area
identified on a Flood Hazard Map or Flood Insurance Rate Map issued by the
Federal Emergency Management Agency as having special flood hazards (and such
flood insurance has been made available), a flood insurance policy meeting the
requirements of the current guidelines of the Federal Insurance Administration
is in effect which policy conforms to the requirements of Fannie Mae. The
Mortgage obligates the Mortgagor thereunder to maintain all such insurance at
the Mortgagor's cost and expense, and on the Mortgagor's failure to do so,
authorizes the holder of the Mortgage to maintain such insurance at Mortgagor's
cost and expense and to seek reimbursement therefor from the Mortgagor;
(vii) Any and all requirements of any federal, state or local
law including, without limitation, usury, truth in lending, real estate
settlement procedures, consumer credit protection, equal credit opportunity or
disclosure laws applicable to the origination and servicing
of Mortgage Loan have been complied with;
(viii) The Mortgage has not been satisfied, canceled,
subordinated or rescinded, in whole or in part, and the Mortgaged Property has
not been released from the lien of the
<PAGE>
-12-
Mortgage, in whole or in part, nor has any instrument been executed that would
effect any such satisfaction, cancellation, subordination, rescission or
release;
(ix) The Mortgage is a valid, existing and enforceable first
lien on the Mortgaged Property, including all improvements on the Mortgaged
Property subject only to (a) the lien of current real property taxes and
assessments not yet due and payable, (b) covenants, conditions and restrictions,
rights of way, easements and other matters of the public record as of the date
of recording being acceptable to mortgage lending institutions generally and
specifically referred to in the lender's title insurance policy delivered to the
originator of the Mortgage Loan and which do not adversely affect the Appraised
Value of the Mortgaged Property, 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 the Mortgage or the use, enjoyment, value or
marketability of the related Mortgaged Property. Any security agreement, chattel
mortgage or equivalent document related to and delivered in connection with the
Mortgage Loan establishes and creates a valid, existing and enforceable first
lien and first priority security interest on the property described therein and
the Originator had full right to sell and assign the same to the Seller pursuant
to the Purchase and Servicing Agreement and the Seller has full right to sell
and assign the same to the Purchaser. Unless otherwise disclosed to the Seller
and Purchaser in writing, the Mortgaged Property was not, as of the date of
origination of the Mortgage Loan, subject to a mortgage, deed of trust, deed to
secured debt or other security instrument creating a lien subordinate to the
lien of the Mortgage;
(x) 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;
(xi) All parties to the Mortgage Note and the Mortgage had
legal capacity to enter into the Mortgage Loan and to execute and deliver the
Mortgage Note and the Mortgage, and the Mortgage Note and the Mortgage have been
duly and properly executed by such parties;
(xii) The proceeds of the Mortgage Loan have been fully
disbursed to or for the account of the Mortgagor and there is no obligation for
the Mortgagee to advance additional funds thereunder and any and all
requirements as to completion of any on-site or off-site improvement and as to
disbursements of any escrow funds therefor have been complied with. All costs,
fees and expenses incurred in making or closing the Mortgage Loan and the
recording of the Mortgage have been paid, and the Mortgagor is not entitled to
any refund of any amounts paid or due to the Mortgagee pursuant to the Mortgage
Note or Mortgage;
(xiii) As of the Closing Date and prior to the sale of the
Mortgage Loan hereunder to the Purchaser, the Seller was the sole legal,
beneficial and equitable owner of the Mortgage Note and the Mortgage and had
full right to transfer and sell the Mortgage Loan to the Purchaser free and
clear of any encumbrance, equity, lien, pledge, charge, claim or security
interest (this portion of this representation is made by the Seller only); as of
the closing date as defined in the Purchase and Servicing Agreement and prior to
the sale of the Mortgage Loan to the Seller pursuant to the Purchase and
Servicing Agreement, the Originator was the sole legal, beneficial
<PAGE>
-13-
and equitable owner of the Mortgage Note and the Mortgage and had full right to
transfer and sell the Mortgage Loan to the Seller free and clear of any
encumbrance, equity, lien, pledge, charge, claim or security interest (this
portion of this representation is made by the Originator only);
(xiv) To the best of the Originator's knowledge, all parties
which have had any interest in the Mortgage Loan, 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
"doing business" and licensing requirements of the laws of the state wherein the
Mortgaged Property is located;
(xv) The Mortgage Loan is covered by an ALTA lender's title
insurance policy or other title insurance acceptable to Fannie Mae, issued by a
title insurer acceptable to Fannie Mae and qualified to do business in the
jurisdiction where the Mortgaged Property is located (or, in the case of
Mortgaged Properties located in areas in which such policies are not generally
available, an attorney's certificate or opinion of title acceptable to Fannie
Mae), insuring (subject to the exceptions contained in (ix)(a), (b) and (c)
above) the Originator, its successors and assigns as to the first priority lien
of the Mortgage in the original principal amount of the Mortgage Loan and
against any loss by reason of the invalidity or unenforceability of the lien
resulting from the provisions of the Mortgage providing for adjustment in the
Mortgage Interest Rate and Monthly Payment. Additionally, such lender's title
insurance policy affirmatively insures ingress and egress to and from the
Mortgaged Property, and against encroachments by or upon the Mortgaged Property
or any interest therein. The Originator is the sole insured of such lender's
title insurance policy, and such lender's title insurance policy is in full
force and effect and will be in full force and effect upon the consummation of
the transactions contemplated by this Agreement. No claims have been made under
such lender's 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 lender's title insurance policy;
(xvi) Except with respect to the permitted delinquencies on
certain Mortgage Loans as described in Section 6(b)(ii) above and listed on
Exhibit 7 attached hereto, there is no default, breach, violation or event of
acceleration existing under the Mortgage or the Mortgage Note and no event
which, with the passage of time or with notice and the expiration of any grace
or cure period, would constitute a default, breach, violation or event of
acceleration, and the Originator has not waived any default, breach, violation
or event of acceleration;
(xvii) There are no mechanics' or similar liens or claims
which have been filed for work, labor or material (and no rights are outstanding
that under law could give rise to such lien) affecting the related Mortgaged
Property which are or may be liens prior to, or equal or coordinate with, the
lien of the related Mortgage;
(xviii) All improvements that were considered in determining
the Appraised Value of the related Mortgaged Property lay wholly within the
boundaries and building restriction lines of the Mortgaged Property, and no
improvements on adjoining properties encroach upon the Mortgaged Property;
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(xix) The Mortgage Loan was (i) originated (as the term is
used for the purposes of the Secondary Mortgage Market Enhancement Act) by the
Originator or by a savings and loan association, a savings bank, a commercial
bank or similar banking institution which is supervised and examined by a
federal or state authority, or by a mortgagee approved as such by the Secretary
of HUD or (ii) acquired by the Originator directly through loan brokers or
correspondents such that (a) the Mortgage Loan was originated in conformity with
the Originator's underwriting guidelines, (b) the Originator approved the
Mortgage Loan prior to funding thereof and (c) the Originator provided the funds
used to originate the Mortgage Loan and acquired the Mortgage Loan on the date
of origination thereof;
(xx) Principal payments on the Mortgage Loan commenced no more
than two (2) months after the proceeds of the Mortgage Loan were disbursed. The
Mortgage Loan bears interest at the Mortgage Interest Rate. Except as disclosed
in the Mortgage Loan Schedule, the Mortgage Note is payable on the first day of
each month. The Mortgage Note is payable in Monthly Payments which are changed
on each Adjustment Date to an amount which will amortize the Stated Principal
Balance of the Mortgage Loan over its remaining term at the Mortgage Interest
Rate. Interest on the Mortgage Loan is calculated on the basis of a 360 day year
consisting of twelve 30 day months. The Mortgage Note does not permit negative
amortization. The Mortgage Loan does not permit the Mortgagor to convert the
Mortgage Loan to a fixed rate Mortgage Loan;
(xxi) The origination and collection practices used by the
Originator with respect to each Mortgage Note and Mortgage have been in all
respects legal, proper, prudent and customary in the mortgage origination and
servicing industry. The Mortgage Loan has been serviced by the Originator and
any predecessor servicer in accordance with the terms of the Mortgage Note. With
respect to escrow deposits and Escrow Payments, if any, all such payments are in
the possession of, or under the control of, the Originator and there exist no
deficiencies in connection therewith for which customary arrangements for
repayment thereof have not been made. No escrow deposits or Escrow Payments or
other charges or payments due the Originator have been capitalized under any
Mortgage or the related Mortgage Note;
(xxii) The Mortgaged Property is free of damage and waste to
the best of the Originator's knowledge and there is no proceeding pending for
the total or partial condemnation thereof;
(xxiii) The Mortgage and related Mortgage Note contain
customary and enforceable provisions such as to render the rights and remedies
of the holder thereof adequate for the realization against the Mortgaged
Property of the benefits of the security provided thereby, including, (a) in the
case of a Mortgage designated as a deed of trust, by trustee's sale, and (b)
otherwise by judicial foreclosure. Since the date of origination of the Mortgage
Loan, the Mortgaged Property has not been subject to any bankruptcy proceeding
or foreclosure proceeding and the Mortgagor has not filed for protection under
applicable bankruptcy laws. 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. The
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Mortgagor has not notified the Originator and the Originator has no knowledge of
any relief requested or allowed to the Mortgagor under the Soldiers and Sailors
Civil Relief Act of 1940;
(xxiv) The Mortgage Note is not and has not been secured by
any collateral except the lien of the corresponding Mortgage on the Mortgaged
Property and the security interest of any applicable security agreement or
chattel mortgage referred to in (ix) above;
(xxv) The Mortgage File contains an appraisal of the related
Mortgaged Property made and signed, prior to the approval of the Mortgage Loan
application, by a qualified appraiser who met the requirements of the
Originator's appraisal policy and procedures and who had no interest, direct or
indirect in the Mortgaged Property or in any loan made on the security thereof,
whose compensation is not affected by the approval or disapproval of the
Mortgage Loan and who met the minimum qualifications of Fannie Mae or Freddie
Mac;
(xxvi) In the event the Mortgage constitutes 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 the 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;
(xxvii) No Mortgage Loan contains provisions pursuant to which
Monthly Payments are (a) paid or partially paid with funds deposited in any
separate account established by the Originator, the Mortgagor, or anyone on
behalf of the Mortgagor, (b) paid by any source other than the Mortgagor or (c)
contains any other similar provisions which may constitute a "buydown"
provision. The Mortgage Loan is not a graduated payment mortgage loan and the
Mortgage Loan does not have a shared appreciation or other contingent interest
feature;
(xxviii) The Mortgagor has executed a statement to the effect
that the Mortgagor has received all disclosure materials required by applicable
law with respect to the making of adjustable rate mortgage loans; and if the
Mortgage Loan is a Refinanced Mortgage Loan, the Mortgagor has received all
disclosure and rescission materials required by applicable law with respect to
the making of a Refinanced Mortgage Loan, and evidence of such receipt is and
will remain in the Mortgage File;
(xxix) No Mortgage Loan was made in connection with (a) the
construction or rehabilitation of a Mortgaged Property or (b) facilitating the
trade-in or exchange of a Mortgaged Property;
(xxx) The Mortgage Note, the Mortgage, the Assignment of
Mortgage and any other documents required to be delivered with respect to each
Mortgage Loan pursuant to the Pooling and Servicing Agreement, have been
delivered to the Trustee all in compliance with the specific requirements of the
Pooling and Servicing Agreement;
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(xxxi) The Mortgaged Property is lawfully occupied under
applicable law; to the best of the Originator's knowledge, 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;
(xxxii) To the best of the Originator's knowledge, no error,
omission, misrepresentation, negligence, fraud or similar occurrence with
respect to a Mortgage Loan has taken place on the part of any person, including,
without limitation, the Mortgagor, any appraiser, any builder or developer, or
any other party involved in the origination of the Mortgage Loan or in the
application of any insurance in relation to such Mortgage Loan;
(xxxiii) The Assignment of Mortgage, is in recordable form and
is acceptable for recording under the laws of the jurisdiction in which the
Mortgaged Property is located;
(xxxiv) Any principal advances made to the Mortgagor 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. The lien of the Mortgage
securing the consolidated principal amount is expressly insured as having first
lien priority by a title insurance policy, an endorsement to the policy insuring
the mortgagee's consolidated interest or by other title evidence acceptable to
Fannie Mae and Freddie Mac. The consolidated principal amount does not exceed
the original principal amount of the Mortgage Loan;
(xxxv) Except as disclosed on the Mortgage Loan Schedule, no
Mortgage Loan has a balloon payment feature;
(xxxvi) If the Residential Dwelling on the Mortgaged Property
is a condominium unit or a unit in a planned unit development (other than a de
minimis planned unit development), such condominium or planned unit development
project meets Fannie Mae's eligibility requirements;
(xxxvii) Except as previously disclosed to the Seller and the
Purchaser in writing, the Originator has made no mortgage on any Mortgaged
Property other than the Mortgage Loan;
(xxxviii) The Mortgage Loan was not intentionally selected by
the Seller in a manner intended to adversely affect the interest of the
Purchaser (this portion of this representation is made by the Seller only); the
Mortgage Loan was not intentionally selected by the Originator in a manner
intended to adversely affect the interest of the Seller (this portion of this
representation is made by the Originator only);
(xxxix) The Seller has not dealt with any broker or agent or
other Person who might be entitled to a fee, commission or compensation in
connection with the transaction contemplated by this Agreement other than the
Purchaser except as the Seller has previously disclosed to the
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Purchaser in writing (this portion of this representation is made by the Seller
only); the Originator did not deal with any broker or agent or other Person who
might be entitled to a fee, commission or compensation in connection with the
transaction contemplated by the Purchase and Servicing Agreement other than the
Seller except as the Originator previously disclosed to the Seller in writing
(this portion of this representation is made by the Originator only);
(xl) The Mortgaged Property consists of a parcel of real
property of not more than ten acres with a single family residence erected
thereon, or a two to four-family dwelling, or an individual condominium unit in
a low-rise or high-rise condominium project, or an individual unit in a planned
unit development. The Mortgaged Property is improved with a Residential
Dwelling. Without limiting the foregoing, the Mortgaged Property does NOT
consist of any of the following property types: (a) co-operative units, (b) log
homes, (c) earthen homes, (d) underground homes, (e) mobile homes and (f)
manufactured homes (as defined in the Fannie Mae Seller-Servicer's Guide),
except when the appraisal indicates that the home is of comparable construction
to a stick or beam construction home, is readily marketable, has been
permanently affixed to the site and is not in a mobile home "park." The
Mortgaged Property is either a fee simple estate or a long-term residential
lease. If the Mortgage Loan is secured by a long-term residential lease, unless
otherwise specifically disclosed in the Mortgage Loan Schedule, (A) the terms of
such lease expressly permit the mortgaging of the leasehold estate, the
assignment of the lease without the lessor's consent (or the lessor's consent
has been obtained and such consent is the Mortgage File) and the acquisition by
the holder of the Mortgage of the rights of the lessee upon foreclosure or
assignment in lieu of foreclosure or provide the holder of the Mortgage with
substantially similar protection; (B) the terms of such lease do not (x) allow
the termination thereof upon the lessee's default without the holder of the
Mortgage being entitled to receive written notice of, and opportunity to cure,
such default or (y) prohibit the holder of the Mortgage from being insured under
the hazard insurance policy relating to the Mortgaged Property; (C) the original
term of such lease is not less than 15 years; (D) the term of such lease does
not terminate earlier than five years after the maturity date of the Mortgage
Note; and (E) the Mortgaged Property is located in a jurisdiction in which the
use of leasehold estates for residential properties is a widely accepted
practice;
(xli) At the time of origination, the Loan-To-Value Ratio of
the Mortgage Loan was not greater than 95%;
(xlii) The Mortgage, and if required by applicable law the
related Mortgage Note, contains a 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, at the option of the Mortgagee;
(xliii) No Mortgage Loan has a Stated Principal Balance in
excess of $896,250; and
(xliv) The information set forth in the Prepayment Charge
Schedule is complete, true and correct in all material respects, and each
Prepayment Charge is permissible, enforceable
<PAGE>
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and collectible under applicable state law subject to bankruptcy and equitable
enforcement limitations.
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 the Certificates.
Except with respect to the representation and warranty contained in Section
6(b)(xxxii), with respect to the representations and warranties contained herein
as to which the Originator or 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 or 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 such breach shall give prompt written notice to the other
parties hereto. Within sixty (60) days of its discovery or its receipt of notice
of any such missing documentation that was not transferred by the Seller or not
transferred by the Originator to the Seller as described above, or of materially
defective documentation, or of any such breach of a representation and warranty,
the Originator or the Seller, as the case may be, promptly shall deliver such
missing document or cure such defect or breach in all material respects or, in
the event the Originator or the Seller, as the case may be, cannot deliver such
missing document or cannot cure such defect or breach, the Originator or the
Seller, as the case may be, shall, within ninety (90) days of its discovery or
receipt of notice, repurchase the affected Mortgage Loan at the Purchase Price
(as such term is defined in the Pooling and Servicing Agreement).
Notwithstanding the preceding sentences of this paragraph, to the extent that
the Originator would otherwise be required to repurchase such affected Mortgage
Loan and such obligation results from the breach of any of the representations
or warranties that are made or deemed to have been made by the Seller, then the
Seller (and not the Originator) shall be required to repurchase such affected
Mortgage Loan in the manner described above, and the Purchaser shall have no
remedy against the Originator therefor; provided, however, that to the extent
that the
<PAGE>
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Seller would otherwise be required to repurchase the affected Mortgage Loans and
such obligation results from the breach of any of the representations or
warranties that are made or deemed to have been made by the Originator, then the
Originator (and not the Seller) shall be required to repurchase the affected
Mortgage Loans in the manner described above, and the Purchaser shall have no
remedy against the Seller therefor. 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. 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 transfer to an account designated by
the Purchaser of the amount of the Purchase Price in accordance with Section
2.03 of the Pooling and Servicing Agreement. Any repurchase 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 set forth in this Section 7 to cure or repurchase 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 cure or
repurchase a defective Mortgage Loan constitute the sole remedies of the
Purchaser against the Seller respecting a missing document or a breach of the
representations and warranties contained in Section 6.
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 a.m. 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
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all signatories other than the Purchaser as required
pursuant to the respective terms thereof;
(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 and
the Pooling and Servicing 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 and Salomon Brothers Inc (the
"Underwriter") may rely, in the form of Exhibit 1
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 and the
Underwriter may rely, in the form of Exhibit 2
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 and the Underwriter, substantially in the
form attached hereto as Exhibit 3;
(d) An Officer's Certificate of the Originator, dated the
Closing Date, upon which the Seller, the Purchaser
and the Underwriter may rely, in the form of Exhibit
4 hereto, and attached thereto copies of the
certificate of incorporation, by- laws and
certificate of good standing of the Originator under
the laws of its state of incorporation;
(e) An opinion of Counsel of the Originator, dated the
Closing Date and addressed to the Seller, the
Purchaser and the Underwriter substantially in the
form attached hereto as Exhibit 5;
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(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, 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 22, 1998,
under the captions "Summary-- The Mortgage Pool,"
"Risk Factors-- Additional Risks Associated with the
Mortgage Loans" (except for the third and fourth
sentences in the first paragraph and the last
sentence in the last paragraph), "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 1998-OPT2, 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 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 22, 1998 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 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 attorneys, the costs and expenses incurred in
connection with producing the
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Originator's or any subservicer'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), 9(e) and 9(g). 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 and prospectus supplement, and any
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, 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 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 Originator has represented to the
Purchaser that the Mortgage Loans are being serviced by the Originator, in its
capacity as servicer under the Purchase and Servicing Agreement, and are not
subject to any other servicing agreements with third parties. It is understood
and agreed among the Originator, the Seller and the Purchaser that the Mortgage
Loans are to be delivered free and clear of any servicing agreements. The
Originator, without reimbursement from the Purchaser, shall pay any fees or
penalties required by any servicer for releasing the Mortgage Loans from any
such servicing agreement and shall arrange for the orderly transfer, as of the
Cut-off Date, of such servicing from any such servicer to the Master Servicer.
The Mortgage Loans shall be serviced by the Originator, in its capacity as
Master Servicer, in accordance with the terms of the Pooling and Servicing
Agreement. For so long as the Originator services the Mortgage Loans, the
Originator shall be entitled to the Servicing Fee and such other payments as
provided for under the terms of the Pooling and Servicing Agreement.
SECTION 12. INDEMNIFICATION. The Originator shall indemnify
and hold harmless each of (i) the Purchaser, (ii) the Seller, (iii) the
Underwriter, (iv) the Person, if any, to which the Purchaser assigns its rights
in and to a Mortgage Loan and each of their respective successors and assigns
and (v) each person, if any, who controls the Purchaser within the meaning of
Section 15 of the Securities Act of 1933, as amended (the "1933 Act") ((i)
through (v) collectively, the "Indemnified Party") against any and all losses,
claims, expenses, damages or liabilities to which the Indemnified Party may
become subject, under the 1933 Act or otherwise, insofar as such losses, claims,
expenses, damages or liabilities (or actions in respect thereof) arise out of or
are based upon (a) any untrue statement or alleged untrue statement of any
material fact contained in the Prospectus Supplement dated September 22, 1998
(the "Prospectus Supplement") or any private placement memorandum (the "Private
Placement Memorandum") relating to the offering by the Purchaser or an affiliate
thereof, of the Class CE Certificates and Class P Certificates, or the omission
or the alleged omission to state therein the material fact necessary in order to
make the statements therein not misleading, in each case to the extent, but only
to the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon and in conformity with
(i) information furnished in writing to the Purchaser
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or any of its affiliates by the Originator specifically for use therein, which
shall include, with respect to the Prospectus Supplement, the information set
forth under the captions "Summary -- The Mortgage Pool," "Risk Factors --
Additional Risks Associated with the Mortgage Loans" (except for the third and
fourth sentences in the first paragraph and the last sentence in the last
paragraph), "The Mortgage Pool" and "Pooling and Servicing Agreement -- The
Originator and Master Servicer" and, with respect to any private placement
memorandum, any information of a comparable nature, or (ii) the data files
containing information with respect to the Mortgage Loans as transmitted by
modem to the Purchaser by the Originator on September __, 1998 (as such
transmitted information may have been amended in writing by the Originator with
the written consent of the Purchaser subsequent to such transmission), (b) any
representation, warranty or covenant made by the Originator herein or in the
Pooling and Servicing Agreement, on which the Purchaser has relied, being, or
alleged to be, untrue or incorrect or (c) any updated collateral information
provided by the Underwriter to a purchaser of the Certificates derived from the
data contained in clause (ii) and the Remittance Report or a current collateral
tape obtained from the Originator or an affiliate of the Originator, including
the current loan balances of the Mortgage Loans; provided, however, that to the
extent that any such losses, claims, expenses, damages or liabilities to which
the Indemnified Party may become subject arise out of or are based upon both (1)
statements, omissions, representations, warranties or covenants of the
Originator described in clause (a), (b) or (c) above and (2) any other factual
basis, the Originator shall indemnify and hold harmless the Indemnified Party
only to the extent that the losses, claims, expenses, damages, or liabilities of
the person or persons asserting the claim are determined to rise from or be
based upon matters set forth in clause (1) above and do not result from the
gross negligence or willful misconduct of such Indemnified Party. This indemnity
shall be in addition to any liability that the Originator may otherwise have.
SECTION 13. 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.
<PAGE>
-24-
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 14. 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 fax and, receipt of which is confirmed by telephone, if to the
Purchaser, addressed to the Purchaser at Seven World Trade Center, New York, New
York 10048, Attention: Mortgage Finance Group, fax (212) 783-4581, 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; if to the Originator, addressed to the Originator at 2020 E.
First Street, Suite 100, Santa Ana, California 92706, Attention: Ms. Fabiola
Camperi, fax (714) 558-3822, or to such other address as the Originator may
designate in writing to the Purchaser and the Seller.
SECTION 15. SEVERABILITY OF PROVISIONS. Any part, provision,
representation or warranty of this Agreement that is prohibited or that 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 that
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 16. 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 17. 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
<PAGE>
-25-
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.
(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 of them, 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 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 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,
<PAGE>
-26-
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.
<PAGE>
-27-
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: Matthew R. Bollo
Title: Assistant Vice President
SALOMON BROTHERS REALTY CORP.
By:
------------------------------
Name: Matthew R. Bollo
Title: Authorized Agent
OPTION ONE MORTGAGE CORPORATION
By:
------------------------------
Name:
Title:
<PAGE>
EXHIBIT 1
[FORM OF OFFICER'S CERTIFICATE OF THE SELLER]
I, ________________, hereby certify that I am a duly
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 __, 1998, among the Seller,
Option One Mortgage Corporation 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 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.
<PAGE>
7. 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.
8. Capitalized terms used but not defined herein shall have
the meanings assigned in the Mortgage Loan Purchase Agreement.
<PAGE>
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:
<PAGE>
EXHIBIT 2
[FORM OF OFFICER'S CERTIFICATE OF THE SELLER WITH RESPECT TO CERTAIN
FACTS REGARDING THE SALE OF THE MORTGAGE LOANS]
Salomon Brothers Mortgage Securities VII, Inc.
Asset-Backed Floating Rate Certificates
Series 1998-OPT2
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 __, 1998, among SBRC, Option One Mortgage Corporation
and the Depositor (the "Purchase Agreement"), and the simultaneous issuance of
Asset-Backed Floating Rate Certificates, Series 1998-OPT2, Class A, Class M-1,
Class M-2, Class M-3, Class CE, Class P, Class R-I, Class R-II and Class R-III
(the "Certificates"), pursuant to a Pooling and Servicing Agreement, dated as of
September 1, 1998 (the "Pooling and Servicing Agreement") among the Depositor as
depositor, Option One Mortgage Corporation as master servicer (the "Master
Servicer") and U.S. Bank 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 __, 1998 (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 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 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.
<PAGE>
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 or mistake on
<PAGE>
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. 125 of the Financial Accounting Standards Board.
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this
Certificate as of September __, 1998.
SALOMON BROTHERS REALTY CORP.
By:
-------------------------------
Name:
Title: Authorized Agent
<PAGE>
EXHIBIT 3
[FORM OF OPINION OF COUNSEL FOR THE SELLER]
September __, 1998
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
Re: Salomon Brothers Mortgage Securities VII, Inc.
Asset-Backed Floating Rate Certificates, Series 1998-OPT2
---------------------------------------------------------
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 __,
1998, among the Seller, Option One Mortgage Corporation 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.
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
<PAGE>
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.
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.
<PAGE>
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
<PAGE>
EXHIBIT 4
[FORM OF OFFICER'S CERTIFICATE OF ORIGINATOR]
Option One Mortgage Corporation
Officer's Certificate
I, ____________________________, hereby certify that I am the
duly elected _____________________________________, of ________________________,
a California 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 California.
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 __, 1998 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, 1998 among SBMS VII, the Company
and U.S. Bank 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.
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.
<PAGE>
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 __, 1998
(Seal) OPTION ONE MORTGAGE CORPORATION
By:
---------------------------------
Name:
Title:
I, ________________________________, [Assistant] Secretary of
________________________, hereby certify that ______________________________ is
the duly elected, qualified and acting ____________________________________ of
_______________________________ and that the signature appearing above is his
genuine signature.
IN WITNESS WHEREOF, I have hereunto signed my name.
Dated: September __, 1998
OPTION ONE MORTGAGE CORPORATION
By:
------------------------------
Name:
Title:
<PAGE>
EXHIBIT 5
[FORM OF OPINION OF COUNSEL FOR ORIGINATOR]
September __, 1998
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
Re: Salomon Brothers Mortgage Securities VII, Inc.
Asset-Backed Floating Rate Certificates, Series 1998-OPT2
---------------------------------------------------------
Ladies and Gentlemen:
I have acted as counsel to Option One Mortgage Corporation, a
California corporation (the "Company"), in connection with the sale of certain
mortgage loans, previously sold by the Company to Salomon Brothers Realty Corp.
("Realty"), to Salomon Brothers Securities VII, Inc. ("SBMS VII") pursuant to a
Mortgage Loan Purchase Agreement, dated September __, 1998 (the "Purchase
Agreement"), among the Company, Realty and SBMS VII. Salomon Brothers Mortgage
Securities VII, Inc., Asset-Backed Floating Rate Certificates, Series 1998-OPT2
have or will be issued pursuant to the Pooling and Servicing Agreement, dated as
of September 1, 1998 (the "Pooling Agreement"), among SBMS VII, the Company and
U.S. Bank National Association. Capitalized terms not otherwise defined herein
have the meanings set forth in the Pooling Agreement.
In connection with rendering this opinion letter, I, or attorneys
working under my direction, have examined, among other things, originals,
certified copies or copies otherwise identified to my satisfaction as being true
copies of the following:
A. The Purchase Agreement;
B. The Pooling Agreement;
C. The Company's Certificate of Incorporation and Bylaws, as
amended to date; and
D. Resolutions adopted by the Board of Directors of the Company
with specific reference to actions relating to the
transactions covered by this opinion.
For the purpose of rendering this opinion, I have made such documentary, factual
and legal examinations as I deemed necessary under the circumstances. As to
factual matters, I have relied
<PAGE>
- 2 -
upon statements, certificates and other assurances of public officials and of
officers and other representatives of the Company, and upon such other
certificates as I deemed appropriate, which factual matters have not been
independently established or verified by me. I have also assumed, among other
things, the genuineness of all signatures, the legal capacity of all natural
persons, the authenticity of all documents submitted to me as originals, and the
conformity to original documents of all documents submitted to me as copies and
the authenticity of the originals of such copied documents.
On the basis of and subject to the foregoing examination, and in
reliance thereon, and subject to the assumptions, qualifications, exceptions and
limitations expressed herein, I am of the opinion that:
1. The Company has been duly incorporated and is validly existing and
in good standing under the laws of the State of California with corporate power
and authority to own its properties and conduct its business as presently
conducted by it. The Company has the corporate power and authority to execute,
deliver, and perform its obligations under the Purchase Agreement.
2. The Purchase Agreement has been duly and validly authorized,
executed and delivered by the Company.
3. The Purchase Agreement constitutes valid, legal and binding
obligations of the Company, enforceable against the Company in accordance with
its terms.
4. No consent, approval, authorization or order of any state or federal
court or government agency or body is required for the execution, delivery and
performance by the Company of the Purchase Agreement or the consummation of the
transactions contemplated by the Purchase Agreement, except for those consents,
approvals, authorizations or orders which previously have been obtained.
5. The fulfillment of the terms of or the consummation of the
transactions contemplated in the Purchase Agreement will not result in a breach
of any term or provision of the Certificate of Incorporation or By-laws of the
Company, or, to the best of my knowledge, will conflict with, result in a breach
or violation of, or constitute a default under, (i) the terms of any indenture
or other agreement or instrument known to me to which the Company is a party or
by which it is bound, (ii) any State of California or federal statute or
regulation applicable to the Company, or (iii) any order of any State of
California or federal court, regulatory body, administrative agency or
governmental body having jurisdiction over the Company, except in any such case
where the default, breach or violation would not have a material adverse effect
on the Company or its ability to perform its obligations under the Purchase
Agreement.
6. There is no action, suit, proceeding or investigation pending or, to
the best of my knowledge, threatened against the Company which, in my judgment,
either in any one instance or in the aggregate, would draw into question the
validity of the Purchase Agreement, which seeks
<PAGE>
- 3 -
to prevent the consummation of any of the transactions contemplated in the
Purchase Agreement or which would be likely to impair materially the ability of
the Company to perform under the terms of the Purchase Agreement.
7. No information has come to my attention that causes me to believe
that the information contained in SBMS VII's Prospectus Supplement, dated
September __, 1998, relating to the Company, its financial condition, its
underwriting standards and its loan portfolio, specifically the information in
the "Summary -- The Mortgage Pool," "Risk Factors -- Additional Risks Associated
with the Mortgage Loans," "The Mortgage Pool" and "Pooling and Servicing
Agreement -- The Originator and Master Servicer" contained an untrue statement
of material fact or omitted to state a material fact necessary in order to make
the statements made therein, in light of the circumstances under which they were
made, not misleading.
The opinions above are subject to the following additional assumptions,
exceptions, qualifications and limitations:
A. I have assumed that all parties to the Purchase Agreement
other than the Seller have all requisite power and authority
to execute, deliver and perform their respective obligations
under the Purchase Agreement, and that the Purchase Agreement
has been duly authorized by all necessary corporate actions on
the part of such parties, has been executed and delivered by
such parties and constitutes the legal, valid and binding
obligations of such parties.
B. My opinion expressed paragraphs 3 above is subject to the
qualifications that (i) the enforceability of the Purchase
Agreement may be limited by the effect of laws relating to (1)
bankruptcy, reorganization, insolvency, moratorium or other
similar laws now or hereafter in effect relating to creditors'
rights generally, including, without limitation, the effect of
statutory or other laws regarding fraudulent conveyances or
preferential transfers, and (2) general principles of equity
upon the specific enforceability of any of the remedies,
covenants or other provisions of the Purchase Agreement and
upon the availability of injunctive relief or other equitable
remedies and the application of principles of equity
(regardless of whether such enforceability is considered in a
proceeding in equity or at law) as such principles relate to
limit or affect the enforcement of creditors' rights generally
and the discretion of the court before which any proceeding
for such enforcement may be brought; and (ii) I express no
opinion herein with respect to the validity, legality, binding
effect or enforceability of provisions for indemnification in
the Purchase Agreement to the extent such provisions may be
held to be unenforceable as contrary to public policy.
C. I have assumed, without independent check or certification,
that there are no agreements or understandings among the
Company, Realty and any other party which would expand, modify
or otherwise affect the terms of the documents described
herein or the respective rights or obligations of the parties
thereunder.
<PAGE>
- 4 -
I express no opinion as to whether the courts of the United States
located in California or state courts of California would respect or enforce any
contractual provision regarding choice of
law, selection of forum or waiver of a jury trial.
This opinion is given to you for your sole benefit, and no other person
or entity is entitled to rely hereon.
I am admitted to practice in the State of California, and I render no
opinion herein as to matters involving the laws of any jurisdiction other than
the State of California and the Federal laws of the United States of America.
Very truly yours,
______________________________
<PAGE>
EXHIBIT 6
Loan #: ____________
Borrower: _____________
LOST NOTE AFFIDAVIT
-------------------
I, as ____________________ of ______________________, a
________________ corporation am authorized to make this Affidavit on behalf of
_____________________ (the "Seller"). In connection with the administration of
the Mortgage Loans held by ____________________, a _________________ corporation
as Seller on behalf of Salomon Brothers Mortgage Securities VII, Inc. (the
"Purchaser"), _____________________ (the "Deponent"), being duly sworn, deposes
and says that:
1. The Seller's address is : _____________________________
_____________________________
_____________________________
2. The Seller previously delivered to the Purchaser a signed
Initial Certification with respect to such Mortgage and/or
Assignment of Mortgage;
3. Such Mortgage Note and/or Assignment of Mortgage was
assigned or sold to the Purchaser by ________________________,
a ____________ corporation pursuant to the terms and
provisions of a Mortgage Loan Purchase Agreement dated as of
September __, 1998;
4. Such Mortgage Note and/or Assignment of Mortgage is not
outstanding pursuant to a request for release of Documents;
5. Aforesaid Mortgage Note and/or Assignment of Mortgage (the
"Original") has been lost;
6. Deponent has made or caused to be made a diligent search
for the Original and has been unable to find or recover same;
7. The Seller was the Seller of the Original at the time of
the loss; and
8. Deponent agrees that, if said Original should ever come
into Seller's possession, custody or power, Seller will
immediately and without consideration surrender the Original
to the Purchaser.
9. Attached hereto is a true and correct copy of (i) the Note,
endorsed in blank by the Mortgagee and (ii) the Mortgage or
Deed of Trust (strike one) which secures the Note, which
Mortgage or Deed of Trust is recorded in the county where the
property is located.
<PAGE>
10. Deponent hereby agrees that the Seller (a) shall indemnify
and hold harmless the Purchaser, its successors and assigns,
against any loss, liability or damage, including reasonable
attorney's fees, resulting from the unavailability of any
Notes, including but not limited to any loss, liability or
damage arising from (i) any false statement contained in this
Affidavit, (ii) any claim of any party that has already
purchased a mortgage loan evidenced by the Lost Note or any
interest in such mortgage loan, (iii) any claim of any
borrower with respect to the existence of terms of a mortgage
loan evidenced by the Lost Note on the related property to the
fact that the mortgage loan is not evidenced by an original
note and (iv) the issuance of a new instrument in lieu thereof
(items (i) through (iv) above hereinafter referred to as the
"Losses) and (b) if required by any Rating Agency in
connection with placing such Lost Note into a Pass-Through
Transfer, shall obtain a surety from an insurer acceptable to
the applicable Rating Agency to cover any Losses with respect
to such Lost Note.
11. This Affidavit is intended to be relied upon by the
Purchaser, its successors and assigns. _____________________,
a ______________ corporation represents and warrants that is
has the authority to perform its obligations under this
Affidavit of Lost Note.
Executed this ____ day, of ___________ 199_.
SELLER
By:______________________
Name:
Title:
On this _____ day of ________, 199_, before me appeared
_________________ to me personally known, who being duly sworn did say that he
is the _____________________ of ____________________ a ______________
corporation and that said Affidavit of Lost Note was signed and sealed on behalf
of such corporation and said acknowledged this instrument to be the free act and
deed of said corporation.
Signature:
[Seal]
<PAGE>
EXHIBIT 7
EXCEPTIONS TO THE REPRESENTATION AND WARRANTY CONTAINED IN SECTION 6(II)
<PAGE>
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 1998-OPT2
<PAGE>
The undersigned Master Servicer hereby acknowledges that it has
received from _______________________, as Trustee for the Holders of
Asset-Backed Floating Rate Cert ificates, Series 1998-OPT2, 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, 1998, 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>
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:
OPTION ONE MORTGAGE CORPORATION
By:________________________________
Name:
Title:
<PAGE>
EXHIBIT E-2
-----------
REQUEST FOR RELEASE
[Mortgage Loans Paid in Full]
OFFICERS' CERTIFICATE AND TRUST RECEIPT
ASSET-BACKED FLOATING RATE CERTIFICATES
SERIES 1998-OPT2
__________________________________________ 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 COLLEC TION 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>
EXHIBIT F-1
-----------
FORM OF TRANSFEROR REPRESENTATION LETTER
[Date]
[Trustee]
Re: Salomon Brothers Mortgage Securities VII, Inc.,
Asset-Backed Floating Rate Certificates, Series 1998-OPT2,
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
September 1, 1998, among Salomon Brothers Mortgage Securities VII, Inc. as
Depositor, Option One Mortgage Corporation as Master Servicer and U.S. Bank
National Association as Trustee (the "Pooling and Servicing Agreement"),
pursuant to which Pooling and Servicing Agreement the Certificates were issued.
<PAGE>
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>
FORM OF TRANSFEREE REPRESENTATION LETTER
[Date]
[Trustee]
______________________________
______________________________
Re: Salomon Brothers Mortgage Securities VII, Inc.,
Asset-Backed Floating Rate Certificates, Series 1998-OPT2,
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>
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, 1998, among Salomon Brothers Mortgage
Securities VII, Inc. as Depositor, Option One Mortgage Corporation as Master
Servicer and U.S. Bank National Association as Trustee, pursuant to which the
Certificates were issued.
[TRANSFEREE]
By:______________________________
Name:
Title:
<PAGE>
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 U.S. Bank National Association, as Trustee,
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
and loan association or equivalent institution and (b) has an
audited net worth of
- --------
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>
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 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
<PAGE>
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>
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 U.S. Bank National Association, as Trustee,
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).
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
<PAGE>
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>
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>
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:
1. 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
1998-OPT2, [Class R-I] [Class R-II] [Class R-III] (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.
2. 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.
3. 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" 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
<PAGE>
income on such residual interest, unless no significant purpose of the transfer
is to impede the assessment or collection of tax.
4. 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.)
5. 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.
6. 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.
7. The Owner's taxpayer identification number is
___________________.
8. 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.
9. The Owner is not acquiring and will not transfer the Class
R Certificates in order to impede the assessment or collection of any tax.
10. 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.
11. 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.
12. 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.
<PAGE>
13. 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.
14. 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.
15. 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".
16. 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.
[17. The Owner of the Class R-III Certificate, hereby agrees
that in the event that the Trust Fund created by the Pooling and Servicing
Agreement is terminated pursuant to Section 9.01 thereof, the undersigned shall
assign and transfer to the Holders of the Class CE Certificates any amounts in
excess of par received in connection with such termination. Accordingly, in the
event of such termination, the Trustee is hereby authorized to withhold any such
amounts in excess of par and to pay such amounts directly to the Holders of the
Class CE Certificates. This agreement shall bind and be enforceable against any
successor, transferee or assigned of the undersigned in the Class R-III
Certificate. In connection with any transfer of the Class R-III Certificate, the
Owner shall obtain an agreement substantially similar to this clause from any
subsequent owner.]
<PAGE>
[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>
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 [Class R-I] [Class R-II]
[Class R-III] (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 Residual Certificates: (i) has
insufficient assets to pay any taxes owed by such proposed transferee as holder
of the Residual Certificates; (ii) may become insolvent or subject to a
bankruptcy proceeding for so long as the Residual 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>
EXHIBIT G
---------
FORM OF CERTIFICATION WITH RESPECT TO ERISA AND THE CODE
_____________, 199__
Salomon Brothers Mortgage Securities VII, Inc.
Seven World Trade Center
New York, New York 10048
U.S. Bank National Association
180 East Fifth Street
St. Paul, Minnesota 55101
Option One Mortgage Corporation
2020 East First Street, Suite 100
Santa Ana, California 92705
Re: Salomon Brothers Mortgage Securities VII, Inc.
Asset-Backed Floating Rate Certificates,
Series 1998-OPT2, Class ___
----------------------------------------------
Dear Sirs:
__________________________________ (the "Transferee") intends
to acquire from _____________________ (the "Transferor") $____________ Initial
Certificate Principal Balance of Salomon Brothers Mortgage Securities VII, Inc.
Asset-Backed Floating Rate Certificates, Series 1998-OPT2, Class ___ (the
"Certificates"), issued pursuant to a Pooling and Servicing Agreement (the
"Pooling and Servicing Agreement") dated as of September 1, 1998 among Salomon
Brothers Mortgage Securities VII, Inc. as depositor (the "Depositor"), Option
One Mortgage Corporation as master servicer (the "Master Servicer") and U.S.
Bank National Association as trustee (the "Trustee"). Capitalized terms used
herein and not otherwise defined shall have the meanings assigned thereto in the
Pooling and Servicing Agreement. The Transferee hereby certifies, represents and
warrants to, and covenants with the Depositor, the Trustee and the Master
Servicer that the following statements in either (1) or (2) are accurate:
_____ (1) The Certificates (i) are not being acquired by, and will not
be transferred to, any employee benefit plan within the meaning of
section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), or other retirement arrangement, including
individual retirement accounts and annuities, Keogh plans and bank
collective investment funds and insurance company general or separate
accounts in which such plans, accounts or arrangements are invested,
that is subject to Section 406
<PAGE>
of ERISA or Section 4975 of the Internal Revenue Code of 1986 (the
"Code") (any of the foregoing, a "Plan"), (ii) are not being acquired
with "plan assets" of a Plan within the meaning of the Department of
Labor ("DOL") regulation, 29 C.F.R. ss. 2510.3-101, and (iii) will not
be transferred to any entity that is deemed to be investing in plan
assets within the meaning of the DOL regulation at 29 C.F.R. ss.
2510.3-101; or
_____ (2) The purchase of Certificates is permissible under applicable
law, will not constitute or result in any prohibited transaction under
ERISA or Section 4975 of the Code, will not subject the Depositor, the
Trustee or the Master Servicer to any obligation in addition to those
undertaken in the Pooling and Servicing Agreement and one of the
following conditions are met:
(i) the transferee is an insurance company and (A)
the source of funds used to purchase such Certificate is an
"insurance company general account" (as such term is defined
in PTCE 95-60), (B) the conditions set forth in PTCE 95-60
have been satisfied and (C) there is no Plan with respect to
which the amount of such general account's reserves and
liabilities for contracts held by or on behalf of such Plan
and all other Plans maintained by the same employer (or any
"affiliate" thereof, as defined in PTCE 95-60) or by the same
employee organization, exceeds 10% of the total of all
reserves and liabilities of such general account (as
determined under PTCE 95-60) as of the date of the acquisition
of such Certificates;
(ii) the transferee is an insurance company and (A)
the source of funds used to purchase such Certificates is an
insurance company general account, (B) the requirements of
Section 401(c) of ERISA and the regulations to be promulgated
thereunder ("401(c) Regulations") have been satisfied and will
continue to be satisfied and (C) the insurance company
represents that it understands that the operation of the
general account after December 31, 1998 may affect its ability
to continue to hold such Certificates after the date which is
18 months after the 401(c) Regulations become final and that
unless a Class Exemption or an exception under Section 401(c)
of ERISA is then available for the continued holding of such
Certificates, it will dispose of such Certificates prior to
the date which is 18 months after the 401(c) Regulations
become final;
(iii) the transferee is an insurance company and (A)
the source of funds used to purchase such Certificates is an
"insurance company pooled separate account" (as such term is
defined in PTCE 90-1), (B) the conditions set forth in PTCE
90-1 have been satisfied and (C) there is no Plan, together
with all other Plans maintained by the same employer (or any
"affiliate" thereof, as defined in PTCE 90-1) or by the same
employee organization, with assets which exceed 10% of the
total of all assets in such pooled separate account (as
determined under PTCE 90-1) as of the date of the acquisition
of such Certificates;
<PAGE>
(iv) the transferee is a bank and (A) the source of
funds used to purchase such Certificates is a "collective
investment fund" (as defined in PTCE 91-38), (B) the
conditions set forth in PTCE 91-38 have been satisfied and (C)
there is no Plan, the interests of which, together with the
interests of any other Plans maintained by the same employer
or employee organization, in the collective investment fund
exceed 10% of the total of all assets in the collective
investment fund (as determined under PTCE 91-38) as of the
date of acquisition of such Certificates;
(v) the transferee is a "qualified professional asset
manager" described in PTCE 84-14 and the conditions set forth
in PTCE 84-14 have been satisfied and will continue to be
satisfied; or
(vi) the transferee is an "in-house asset manager"
described in PTCE 96-23 and the conditions set forth in PTCE
96-23 have been satisfied and will continue to be satisfied.
Very truly yours,
By:________________________________
Name:
Title:
<PAGE>
EXHIBIT H
---------
FORM OF REPORT PURSUANT TO SECTION 4.06
<PAGE>
EXHIBIT I
FORM OF LOST NOTE AFFIDAVIT
Loan #: ____________
Borrower: _____________
LOST NOTE AFFIDAVIT
I, as ____________________ of ______________________, a
_______________ corporation am authorized to make this Affidavit on behalf of
_____________________ (the "Seller"). In connection with the administration of
the Mortgage Loans held by ____________________, a _________________ corporation
as Seller on behalf of Salomon Brothers Mortgage Securities VII, Inc. (the
"Purchaser"), _____________________ (the "Deponent"), being duly sworn, deposes
and says that:
1. The Seller's address is : ---------------------
---------------------
---------------------
2. The Seller previously delivered to the Purchaser a signed
Initial Certification with respect to such Mortgage and/or
Assignment of Mortgage;
3. Such Mortgage Note and/or Assignment of Mortgage was
assigned or sold to the Purchaser by ________________________,
a ____________ corporation pursuant to the terms and
provisions of a Mortgage Loan Purchase Agreement dated as of
September __, 1998;
4. Such Mortgage Note and/or Assignment of Mortgage is not
outstanding pursuant to a request for release of Documents;
5. Aforesaid Mortgage Note and/or Assignment of Mortgage (the
"Original") has been lost;
6. Deponent has made or caused to be made a diligent search
for the Original and has been unable to find or recover same;
7. The Seller was the Seller of the Original at the time of
the loss; and
8. Deponent agrees that, if said Original should ever come
into Seller's possession, custody or power, Seller will
immediately and without consideration surrender the Original
to the Purchaser.
9. Attached hereto is a true and correct copy of (i) the Note,
endorsed in blank by the Mortgagee and (ii) the Mortgage or
Deed of Trust (strike one)
<PAGE>
which secures the Note, which Mortgage or Deed of Trust is
recorded in the county where the property is located.
10. Deponent hereby agrees that the Seller (a) shall indemnify
and hold harmless the Purchaser, its successors and assigns,
against any loss, liability or damage, including reasonable
attorney's fees, resulting from the unavailability of any
Notes, including but not limited to any loss, liability or
damage arising from (i) any false statement contained in this
Affidavit, (ii) any claim of any party that has already
purchased a mortgage loan evidenced by the Lost Note or any
interest in such mortgage loan, (iii) any claim of any
borrower with respect to the existence of terms of a mortgage
loan evidenced by the Lost Note on the related property to the
fact that the mortgage loan is not evidenced by an original
note and (iv) the issuance of a new instrument in lieu thereof
(items (i) through (iv) above hereinafter referred to as the
"Losses) and (b) if required by any Rating Agency in
connection with placing such Lost Note into a Pass- Through
Transfer, shall obtain a surety from an insurer acceptable to
the applicable Rating Agency to cover any Losses with respect
to such Lost Note.
11. This Affidavit is intended to be relied upon by the
Purchaser, its successors and assigns. _____________________,
a ______________ corporation represents and warrants that is
has the authority to perform its obligations under this
Affidavit of Lost Note.
Executed this ____ day, of ___________ 199_.
SELLER
By:______________________
Name:
Title:
On this _____ day of ________, 199_, before me appeared
_________________ to me personally known, who being duly sworn did say that he
is the _____________________ of ____________________ a ______________
corporation and that said Affidavit of Lost Note was signed and sealed on behalf
of such corporation and said acknowledged this instrument to be the free act and
deed of said corporation.
Signature:
[Seal]
<PAGE>
SCHEDULE 1
----------
MORTGAGE LOAN SCHEDULE
TO BE PROVIDED UPON REQUEST
<PAGE>
SCHEDULE 2
----------
PREPAYMENT CHARGE SCHEDULE
TO BE PROVIDED UPON REQUEST
