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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: September 30, 1998
(Date of earliest event reported)
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC. (as depositor under the Trust
Agreement, dated as of September 1, 1998, and pursuant to which an Indenture was
entered into, providing for, inter alia, the issuance of Salomon Brothers
Mortgage Securities VII, Inc. Asset- Backed Floating Rate Notes Series 1998-11)
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.
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(Exact name of registrant as specified in its charter)
Delaware 333-50153 13-3439681
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(State or Other Jurisdiction (Commission (I.R.S. Employer
diction of Incorporation) File Number) Identification No.)
Seven World Trade Center
New York, New York 10048
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(Address of Principal Executive Office) (Zip Code)
Registrant's telephone number, including area code:(212) 783-5659
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Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Not applicable
(b) Not applicable
(c) Exhibits:
4.1 Servicing Agreement, dated as of September 1, 1998,
among Wilshire Servicing Corporation, Ameriquest Mortgage Company, Norwest Bank
Minnesota, National Association, and Wilshire REIT Trust Series 1998-1;
4.2 Servicing Agreement, dated as of September 1, 1998,
among Wilshire Servicing Corporation, Long Beach Mortgage Company, Norwest Bank
Minnesota, National Association, and Wilshire REIT Trust Series 1998-1;
4.3 Servicing Agreement, dated as of September 1, 1998,
among Wilshire Servicing Corporation, National Mortgage Corporation, Norwest
Bank Minnesota, National Association, and Wilshire REIT Trust Series 1998-1;
4.4 Amended and Restated Trust Agreement, dated as of
September 1, 1998, between Salomon Brothers Mortgage Securities VII, Inc., as
depositor, and Wilmington Trust Company, as owner trustee;
4.5 Indenture, dated as of September 1, 1998 between Wilshire
REIT Trust Series 1998-1, as the issuer, and Norwest National Bank Minnesota,
National Association, as indenture trustee; and
10.1 Ownership Transfer Agreement dated as of September 1,
1998 between Wilshire REIT 1998-1 Inc. and Salomon Brothers Mortgage Securities
VII, Inc.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly
authorized.
SALOMON BROTHERS
MORTGAGE SECURITIES VII,
INC.
By: /s/ Susan Mills
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Name: Susan Mills
Title: Assistant Vice President
Dated: September 30, 1998
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INDEX TO EXHIBITS
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EXHIBIT NO. DESCRIPTION
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4.1 Servicing Agreement, dated as of September 1,
1998, among Wilshire Servicing Corporation,
Ameriquest Mortgage Company, Norwest Bank Minnesota,
National Association, and Wilshire REIT Trust Series
1998-1.
4.2 Servicing Agreement, dated as of September 1,
1998, among Wilshire Servicing Corporation,
Long Beach Mortgage Company, Norwest Bank
Minnesota, National Association, and Wilshire
REIT Trust Series 1998-1.
4.3 Servicing Agreement, dated as of September 1,
1998, among Wilshire Servicing Corporation,
National Mortgage Corporation, Norwest Bank
Minnesota, National Association, and Wilshire
REIT Trust Series 1998-1.
4.4 Amended and Restated Trust Agreement, dated
as of September 1, 1998, between Salomon
Brothers Mortgage Securities VII, Inc., as
depositor, and Wilmington Trust Company, as
owner trustee.
4.5 Indenture, dated as of September 1, 1998
between Wilshire REIT Trust Series 1998-1, as
the issuer, and Norwest National Bank
Minnesota, National Association, as indenture
trustee.
10.1 Ownership Transfer Agreement dated as of
September 1, 1998 between Wilshire REIT
1998-1 Inc. and Salomon Brothers Mortgage
Securities VII, Inc.
EXHIBIT 4.1
WILSHIRE SERVICING CORPORATION
Master Servicer
AMERIQUEST MORTGAGE COMPANY
Servicer
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
Indenture Trustee
and
WILSHIRE REIT TRUST SERIES 1998-1
Issuer
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SERVICING AGREEMENT
Dated as of September 1, 1998
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Asset-Backed Floating Rate Notes
Series 1998-11
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TABLE OF CONTENTS
SECTION PAGE
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ARTICLE I
DEFINITIONS
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1.01. Defined Terms..................................................................................1
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.01. Enforcement of Representations and Warranties.................................................23
2.02. Existence.....................................................................................25
2.03. Representations, Warranties and Covenants of the Servicer and the Master
Servicer......................................................................................25
ARTICLE III
ADMINISTRATION AND SERVICING
OF THE MORTGAGE LOANS
3.01. Servicer to Act as Servicer...................................................................29
3.02. Sub-Servicing Agreements Between the Servicer and Sub-Servicers...............................30
3.03. Successor Sub-Servicers.......................................................................31
3.04. Liability of the Servicer.....................................................................32
3.05. No Contractual Relationship Between Sub-Servicers and Indenture Trustee,
Issuer or Noteholders.........................................................................32
3.06. Assumption or Termination of Sub-Servicing Agreements by
Indenture Trustee.............................................................................32
3.07. Collection of Certain Mortgage Loan Payments..................................................33
3.08. Sub-Servicing Accounts........................................................................33
3.09. Collection of Taxes, Assessments and Similar Items; Servicing Accounts........................34
3.10. Collection Account............................................................................35
3.11. Withdrawals from the Collection Account.......................................................37
3.12. Investment of Funds in the Collection Account.................................................38
3.13. [intentionally omitted].......................................................................39
3.14. Maintenance of Hazard Insurance and Errors and Omissions and
Fidelity Coverage.............................................................................39
3.15. Enforcement of Due-On-Sale Clauses; Assumption Agreements.....................................41
3.16. Realization Upon Defaulted Mortgage Loans.....................................................42
3.17. Indenture Trustee to Cooperate; Release of Mortgage Files.....................................44
3.18. Servicing Compensation........................................................................45
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3.19. Reports to the Indenture Trustee; Collection Account Statements...............................45
3.20. Statement as to Compliance....................................................................46
3.21. Independent Public Accountants' Servicing Report..............................................46
3.22. Access to Certain Documentation...............................................................47
3.23. Title, Management and Disposition of REO Property.............................................47
3.24. Obligations of the Servicer in Respect of Prepayment Interest Shortfalls......................49
3.25. Obligations of the Servicer in Respect of Mortgage Rates and Monthly Payments
49
ARTICLE IV
REMITTANCE REPORTS; P&I ADVANCES
4.01. Remittance Reports; P&I Advances..............................................................50
4.02. Determination of Realized Losses..............................................................51
ARTICLE V
THE SERVICER
5.01. Liability of the Servicer.....................................................................52
5.02. Merger or Consolidation of the Servicer.......................................................52
5.03. Limitation on Liability of the Master Servicer, Servicer and Others...........................52
5.04. Limitation on Resignation of the Servicer.....................................................53
5.05. Rights of the Indenture Trustee and the Issuer in Respect of the Servicer.....................54
5.06. Indemnification of the Indenture Trustee......................................................54
ARTICLE VI
DEFAULT
6.01. Servicer Events of Default....................................................................56
6.02. Master Servicer or Indenture Trustee to Act; Appointment of Successor.........................58
6.03. Notification to Noteholders...................................................................60
6.04. Waiver of Servicer Events of Default..........................................................60
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ARTICLE VII
MISCELLANEOUS PROVISIONS
7.01. Amendment.....................................................................................61
7.02. Governing Law.................................................................................61
7.03. Notices.......................................................................................61
7.04. Severability of Provisions....................................................................62
7.05. Article and Section References................................................................62
7.06. Third-Party Beneficiaries.....................................................................62
7.07. Counterparts..................................................................................62
7.08 Termination...................................................................................62
7.09. Partial Optional Redemption of the Notes......................................................62
7.10. No Recourse...................................................................................63
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EXHIBITS
Exhibit A-1 Request for Release
Exhibit A-2 Request for Release Mortgage Loans paid in full
Schedule 1 Mortgage Loan Schedule
Schedule 2 Prepayment Charge Schedule
Schedule 3 Schedule of Mortgage Loans from Series 1996-LB3
Schedule 4 Schedule of Mortgage Loans from Series 1997-LB1 and
Series 1996-LB3
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This Servicing Agreement, is dated and effective as of
September 1, 1998, among WILSHIRE SERVICING CORPORATION as Master Servicer,
AMERIQUEST MORTGAGE COMPANY as Servicer, NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION as Indenture Trustee and Wilshire REIT Trust Series 1998-1 as
Issuer.
PRELIMINARY STATEMENT:
WHEREAS, the Master Servicer and Servicer are engaged in the
business of servicing sub-prime mortgage loans;
WHEREAS, the Issuer desires to pledge to the Indenture
Trustee certain mortgage loans, identified on Schedule 1 hereto (the "Mortgage
Loans") in connection with the issuance of the Asset-Backed Floating Rate Notes,
Series 1998-11 (the "Notes");
WHEREAS, the Issuer desires to contract with the Master
Servicer and the Servicer for the servicing responsibilities associated with
such Mortgage Loans; and
WHEREAS, the Issuer, the Master Servicer, the Servicer and
the Indenture Trustee desire to execute this Agreement to define each party's
rights, duties and obligations relating to the servicing of the Mortgage Loans;
NOW, THEREFORE, in consideration of the mutual agreements
herein contained, the parties hereto agree as follows:
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.
"Adjustable Rate Mortgage Loan": Each of the Mortgage Loans
identified in the Mortgage Loan Schedule as having a Mortgage Rate that is
subject to adjustment.
"Adjustment Date": With respect to each Adjustable Rate
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
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of voting securities, by contract or otherwise and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Agreement": This Servicing Agreement and all amendments
hereof and supplements hereto.
"Available Payment Amount": With respect to any Payment Date,
an amount equal to (1) the sum of (a) the aggregate of the amounts on deposit in
the Collection Account and Payment 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 Payment
Account for such Payment Date pursuant to Section 3.23, (c) the aggregate of any
amounts deposited in the Payment Account by the Servicer in respect of
Prepayment Interest Shortfalls for such Payment Date pursuant to Section 3.24,
(d) the aggregate of any P&I Advances made by the Servicer for such Payment Date
pursuant to Section 4.01 and (e) the aggregate of any advances made by the
Master Servicer or the Indenture Trustee for such Payment Date pursuant to
Section 6.02, reduced (to not less than zero) by (2) the sum of (x) the portion
of the amount described in clause (1)(a) above that represents (i) Monthly
Payments on the Mortgage Loans received from a Mortgagor on or prior to the
Determination Date but due during any Due Period subsequent to the related Due
Period, (ii) Principal Prepayments on the Mortgage Loans received after the
related Prepayment Period (together with any interest payments received with
such Principal Prepayments to the extent they represent the payment of interest
accrued on the Mortgage Loans during a period subsequent to the related
Prepayment Period), (iii) Liquidation Proceeds and Insurance Proceeds received
in respect of the Mortgage Loans after the related Prepayment Period, (iv)
amounts reimbursable or payable to the Master Servicer, the Servicer, the
Indenture Trustee, the Seller or any Sub-Servicer pursuant to Section 3.11 or
Section 3.12 or pursuant to Section 6.07 of the Indenture, (v) Stayed Funds,
(vi) the Indenture Trustee Fee, the Expense Fee and the Master Servicing Fee
payable from the Payment Account pursuant to the Indenture, (vii) amounts
deposited in the Collection Account or the Payment Account in error and (viii)
the amount of any Prepayment Charges collected by the Servicer in connection
with the voluntary Principal Prepayment in full of any of the Mortgage Loans and
(y) amounts reimbursable to the Master Servicer or the Indenture Trustee for an
advance made pursuant to Section 6.02(b), which advance the Master Servicer or
the Indenture Trustee, as applicable, 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.
"Basic Document": The Owner Trust Agreement, the Certificate
of Trust, the Indenture, the Mortgage Loan Purchase Agreement, the Ownership
Transfer Agreement, the Servicing Agreement and the other documents and
certificates delivered in connection with any of the above.
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"Book-Entry Notes": Any Note registered in the name of the
Depository or its nominee. Initially, the Book-Entry Notes will be the Class A
Notes and the Mezzanine Notes.
"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 Maryland or the State of New York, or in the city in
which the Corporate Trust Office of the Indenture Trustee is located, are
authorized or obligated by law or executive order to be closed.
"Business Trust Statute": Chapter 38 of Title 12 of the
Delaware Code, 12 Del. Code ss.ss.3801 ET SEQ., as the same may be amended from
time to time.
"Certificate of Trust": The Certificate of Trust filed for
the Issuer pursuant to Section 3810(a) of the Business Trust Statute.
"Certificateholder": The Person in whose name an Equity
Certificate is registered in the Certificate Register.
"Class": Collectively, all of the Notes bearing the same
class designation.
"Class A Note": Any one of the Class A Notes authorized by
the Indenture, substantially in the form annexed as Exhibit A-1 to the
Indenture.
"Class M-1 Note": Any one of the Class M-1 Notes authorized
by the Indenture, substantially in the form annexed as Exhibit A-2 to the
Indenture.
"Class M-2 Note": Any one of the Class M-2 Notes authorized
by the Indenture, substantially in the form annexed as Exhibit A-3 to the
Indenture.
"Class M-3 Note": Any one of the Class M-3 Notes authorized
by the Indenture, substantially in the form annexed as Exhibit A-4 to the
Indenture.
"Closing Date": September 30, 1998.
"Code": The Internal Revenue Code of 1986.
"Collection Account": The account or accounts created and
maintained by the Servicer pursuant to Section 3.10(a), which shall be entitled,
"Ameriquest Mortgage Company, as Servicer for Norwest Bank Minnesota, National
Association, as Indenture Trustee, in trust for the registered holders of ,
Salomon Brothers Mortgage Securities VII, Inc. Asset-Backed Floating Rate Notes,
Series 1998-11". The Collection Account must be an Eligible Account.
"Corporate Trust Office": With respect to the Indenture
Trustee, the principal corporate trust office of the Indenture Trustee at which
at any particular time its corporate trust business shall be administered, which
office at the date of the execution of this instrument is
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located at Sixth Street and Marquette Avenue, Minneapolis, Minnesota 55479,
Attention: Corporate Trust Services, or at such other address as the Indenture
Trustee may designate from time to time by notice to the Noteholders, the
Issuer, the Owner Trustee, the Master Servicer and the Servicer. With respect to
the Owner Trustee, the principal corporate trust office of the Owner Trustee at,
which at any particular time its corporate trust business shall be administered,
which office at the date of the execution of this instrument is located at
Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19801,
Attention: Wilshire REIT Trust Series 1998- 1, or at such other address as the
Indenture Trustee may designate from time to time by notice to the Noteholders,
the Certificateholders, the Issuer, the Indenture Trustee, the Master Servicer
and the Servicer.
"Cumulative Loss Percentage": With respect to any Payment
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.
"Custodial Agreement": An agreement that may be entered into
among the Issuer, the Master Servicer, the Servicers, the Indenture Trustee and
a Custodian in the form of Exhibit C annexed to the Indenture or a similar
agreement assigned to the Indenture Trustee with respect to the Mortgage Loans.
"Custodian": A Custodian, which shall not be the Issuer, the
Master Servicer, the Servicer, the Depositor, the Seller, the Transferor, the
Owner Trustee or any Affiliate of any of them, appointed pursuant to a Custodial
Agreement.
"Cut-off Date": With respect to each Original Mortgage Loan,
September 1, 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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"Deleted Mortgage Loan": A Mortgage Loan replaced or to be
replaced by a Qualified Substitute Mortgage Loan.
"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 Notes that are to be Book-Entry Notes, 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 Indenture 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 that are rated D-1+ by DCR (if rated by DCR) and A-1 by S&P (or
comparable ratings if DCR and S&P are not the Rating Agencies).
"Depository Participant": A broker, dealer, bank or other
financial institution or other Person for whom from time to time a Depository
effects book-entry transfers and pledges of securities deposited with the
Depository.
"Determination Date": With respect to each Payment Date, the
15th day of the calendar month in which such Payment Date occurs or, if such
15th day is not a Business Day, the Business Day immediately preceding such 15th
day.
"Due Date": With respect to each Payment Date, the first day
of the calendar month in which such Payment Date occurs, which is the day of the
month on which the Monthly Payment is due on a Mortgage Loan, exclusive of any
days of grace.
"Due Period": With respect to any Payment Date, the period
commencing on the second day of the calendar month preceding the calendar month
in which such Payment Date occurs and ending on the related Due Date.
"Eligible Account": Any of (i) an account or accounts
maintained with a federal or state chartered depository institution or trust
company the short-term unsecured debt obligations of which are rated "AAA" or
"D-1+", as applicable, by DCR (if rated by DCR) and A-1 by
S&P
(or comparable ratings if DCR and S&P are not the Rating Agencies) at the time
any amounts are held on deposit therein, (ii) an account or accounts the
deposits in which are fully insured by the FDIC or (iii) a trust account or
accounts maintained with the corporate trust department of a federal or state
chartered depository institution or trust company acting in its fiduciary
capacity. Eligible Accounts may bear interest.
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"Equity Certificates": The certificates evidencing the
beneficial ownership interest in the Issuer and executed by the Owner Trustee in
substantially the form set forth in Exhibit A to the Owner Trust Agreement.
"Estate in Real Property": A fee simple estate in a parcel
of land.
"Expense Fee": With respect to each Mortgage Loan on Schedule
3 attached hereto and for any calendar month, an amount equal to one month's
interest (or in the event of any payment of interest which accompanies a
Principal Prepayment in full made by the Mortgagor during such calendar month,
interest for the number of days covered by such payment of interest) at the
applicable Expense Fee Rate on the same principal amount on which interest on
such Mortgage Loan accrues for such calendar month.
"Expense Fee Rate": 0.21% per annum.
"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 Seller or the Servicer pursuant to or as contemplated by
Section 2.01 or Section 3.16(c)), a determination made by the Servicer that all
Insurance Proceeds, Liquidation Proceeds and other payments or recoveries which
the Servicer, in its reasonable good faith judgment, expects to be finally
recoverable in respect thereof have been so recovered. The 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 Adjustable Rate 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.
"Indenture Trustee": Norwest Bank Minnesota, National
Association, a national banking association, in its capacity as Indenture
Trustee, or its successor in interest, or any successor indenture trustee
appointed as provided in the Indenture.
"Indenture Trustee Fee": The amount payable to the Indenture
Trustee on each Payment Date pursuant to the Indenture as compensation for all
services rendered by it, which amount shall equal one twelfth of the product of
(i) the Indenture Trustee Fee Rate, multiplied by (ii) the aggregate Scheduled
Principal Balance of the Mortgage Loans and any REO Properties as
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of the second preceding Due Date (or, in the case of the initial Payment Date,
as of the Cut-off Date).
"Indenture Trustee Fee Rate": 0.0035% per annum.
"Index": With respect to each Adjustable Rate Mortgage Loan
and each related Adjustment Date, the average of the interbank offered rates for
six-month United States dollar deposits in the London market as published in THE
WALL STREET JOURNAL and as most recently available as of a 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
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.
"Issuer": Wilshire REIT Trust Series 1998-1, a Delaware
Business Trust, or its successor in interest.
"Late Collections": With respect to any Mortgage Loan, all
amounts received subsequent to the Determination Date immediately following any
Due Period, whether as late payments of Monthly Payments or as Insurance
Proceeds, Liquidation Proceeds or otherwise, which represent late payments or
collections of principal and/or interest due (without regard to any acceleration
of payments under the related Mortgage and Mortgage Note) but delinquent for
such Due Period and not previously recovered.
"Liquidation Event": With respect to any Mortgage Loan, any
of the following events: (i) such Mortgage Loan is paid in full; (ii) a Final
Recovery Determination is made as to such Mortgage Loan; or (iii) such Mortgage
Loan is removed from the Trust Estate by reason of its being purchased, sold or
replaced pursuant to or as contemplated by Section 2.01 or Section 3.16(c). With
respect to any REO Property, a Final Recovery Determination is made as to such
REO Property.
"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 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 2.01, Section 3.16(c) or Section 3.23.
"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.
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"Master Servicer": Wilshire Servicing Corporation or its
successor in interest, in its capacity as Master Servicer hereunder.
"Master Servicing Fee": With respect to each Mortgage Loan
and for any calendar month, an amount equal to one month's interest (or in the
event of any payment of interest which accompanies a Principal Prepayment in
full made by the Mortgagor during such calendar month, interest for the number
of days covered by such payment of interest) at the applicable Master Servicing
Fee Rate on the same principal amount on which interest on such Mortgage Loan
accrues for such calendar month.
"Master Servicing Fee Rate": 0.05% per annum.
"Maximum Mortgage Rate": With respect to each Adjustable Rate
Mortgage Loan, the percentage set forth in the related Mortgage Note as the
maximum Mortgage Rate thereunder.
"Minimum Mortgage Rate": With respect to each Adjustable Rate
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 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.
"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 file containing the Related Documents
pertaining to a particular Mortgage Loan and any additional documents required
to be added to the Mortgage File pursuant to the Mortgage Loan Purchase
Agreement or this Servicing Agreement.
"Mortgage Loan": Each mortgage loan identified in the
Mortgage Loan Schedule.
"Mortgage Loan Purchase Agreement": The agreement, dated as
of September 1, 1998, among the Seller, the Transferor and the Issuer.
"Mortgage Loan Remittance Rate": With respect to any Mortgage
Loan or REO Property, as of any date of determination, the then applicable Net
Mortgage Rate in respect thereof plus the Indenture Trustee Fee Rate, the Master
Servicing Fee Rate and the Expense Fee Rate.
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"Mortgage Loan Schedule": As of any date, the list of
Mortgage Loans attached hereto as Schedule 1. The Mortgage Loan Schedule shall
set forth the following information with respect to each Mortgage Loan:
(i) the Mortgage Loan identifying number;
(ii) the Mortgagor's name;
(iii) the street address of the Mortgaged Property including the
state and zip code;
(iv) a code indicating whether the Mortgaged Property is
owner-occupied;
(v) the type of Residential Dwelling constituting the Mortgaged
Property;
(vi) the original months to maturity;
(vii) the Loan-to-Value Ratio at origination;
(viii) the Mortgage Rate in effect immediately following the Cut-off
Date;
(ix) the date on which the first Monthly Payment was due on the
Mortgage Loan;
(x) the stated maturity date;
(xi) the amount of the Monthly Payment due on the first Due Date
after the Cut-off Date;
(xii) the last Due Date on which a Monthly Payment was actually
applied to the unpaid
Stated Principal Balance;
(xiii) the original principal amount of the Mortgage Loan;
(xiv) the Scheduled Principal Balance of the Mortgage Loan as of the
close of business
on the Cut-off Date;
(xv) with respect to each Adjustable Rate Mortgage Loan, the Gross
Margin;
(xvi) a code indicating the purpose of the Mortgage Loan (I.E.,
purchase financing, rate/term refinancing, cash-out
refinancing);
(xvii) with respect to each Adjustable Rate Mortgage Loan, the
Maximum Mortgage Rate;
(xviii) with respect to each Adjustable Rate Mortgage Loan, the
Minimum Mortgage Rate;
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(xix) the Mortgage Rate at origination;
(xx) with respect to each Adjustable Rate Mortgage Loan, the
Periodic Rate Cap and the maximum first Adjustment Date
Mortgage Rate adjustment;
(xxi) a code indicating the documentation program;
(xxii) with respect to each Adjustable Rate Mortgage Loan, the first
Adjustment Date immediately following the Cut-off Date;
(xxiii) the risk grade;
(xxiv) the Value of the Mortgaged Property; and
(xxv) the sale price of the Mortgaged Property, if applicable.
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 Servicer in
accordance with the provisions of this Agreement. With respect to any Qualified
Substitute Mortgage Loan, Cut-off Date shall refer to the related Cut-off Date
for such Mortgage Loan, determined in accordance with the definition of Cut-off
Date herein.
"Mortgage Note": The original executed note or other evidence
of the indebtedness of a Mortgagor under a Mortgage Loan.
"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, without regard to
any reduction thereof as a result of a Debt Service
Reduction or operation of the Relief Act.
"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.
"Most Senior Class": The Class A Notes, or after the Class A
Notes have been paid in full, the Class of Subordinate Notes then outstanding
with the lowest numerical designation.
"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
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Mortgage Rate for such Mortgage Loan minus the sum of the Servicing Fee Rate,
the Indenture Trustee Fee Rate, the Master Servicing Fee Rate and the Expense
Fee Rate.
"Nonrecoverable P&I Advance": Any P&I Advance previously made
(including any P&I Advance made with respect to such Mortgage Loan that was made
by the Servicer as master servicer under another securitization) or proposed to
be made in respect of a Mortgage Loan or REO Property that, in the good faith
business judgment of the Servicer, will not or, in the case of a proposed P&I
Advance, would not be ultimately recoverable from related late payments,
Insurance Proceeds or Liquidation Proceeds on such Mortgage Loan or REO Property
as provided herein.
"Note Balance": With respect to any Note, as of any date of
determination, the Note Balance of such Note on the Payment Date immediately
prior to such date of determination, minus all payments allocable to principal
made thereon and Realized Losses allocated thereto on such immediately prior
Payment Date (or, in the case of any date of determination up to and including
the initial Payment Date, the initial Note Balance of such Note, as stated on
the face thereof).
"Note Owner": With respect to a Book-Entry Note, the Person
who is the beneficial owner of such Note 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.
"Note Register": The register maintained by the Note Registrar
in which the Note Registrar shall provide for the registration of Notes and of
transfers and exchanges of Notes.
"Note Registrar": The Indenture Trustee, in its capacity as
Note Registrar or its successor in interest, or any successor Note Registrar
appointed as provided in the Indenture.
"Noteholder" or "Holder": The Person in whose name a Note is
registered in the Note Register, except that solely for the purposes of giving
any consent pursuant to the Indenture, the Owner Trust Agreement or the
Servicing Agreement, any Note registered in the name of the Seller, the
Depositor, the Issuer, the Master Servicer or the 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. The Indenture Trustee may conclusively rely upon a certificate of the
Seller, the Depositor, the Issuer, the Master Servicer or the Servicer in
determining whether a Note is held by an Affiliate thereof. All references
herein to "Holders" or "Noteholders" shall reflect the rights of Note Owners as
they may indirectly exercise such rights through the Depository and
participating members thereof, except as otherwise specified herein; provided,
however, that the Indenture Trustee shall be required to recognize as a "Holder"
or "Noteholder" only the Person in whose name a Note is registered in the Note
Register.
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"Notes": Asset-Backed Floating Rate Notes, Series 1998-11,
designated as the "Notes" in the Indenture.
"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 Seller; with respect to the
Servicer or Master Servicer, any officer who is authorized to act for the
Servicer in matters relating to this Agreement, and whose action is binding upon
the Servicer or Master Servicer, as applicable, initially including those
individuals whose names appear on the list of authorized officers delivered at
the closing.
"Opinion of Counsel": A written opinion of counsel, who may,
without limitation, be salaried counsel for the Issuer, the Master Servicer or
the Servicer acceptable to the Indenture Trustee.
"Original Mortgage Loan": Any of the Mortgage Loans included
in the Trust Estate as of the Closing Date.
"Owner Trust Agreement": The Trust Agreement, dated as of
September 1, 1998, as amended and restated by the Amended and Restated Trust
Agreement, dated as of September 1, 1998, between the Owner Trustee and the
Depositor.
"Owner Trustee": Wilmington Trust Company and its successors
and assigns or any successor owner trustee appointed pursuant to the terms of
the Owner Trust Agreement.
"Payment Account": The trust account or accounts created and
maintained by the Indenture Trustee pursuant to Section 3.01 of the Indenture
which shall be entitled "Norwest Bank Minnesota, National Association, as
Indenture Trustee, in trust for the registered holders of Salomon Brothers
Mortgage Securities VII, Inc. Asset-Backed Floating Rate Notes, Series 1998-11".
The Payment Account must be an Eligible Account.
"Payment 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.
"Percentage Interest": With respect to any Class of Notes, the
portion of the respective Class evidenced by such Note, expressed as a
percentage, the numerator of which is the initial Note Balance represented by
such Note, and the denominator of which is the initial aggregate Note Balance of
all of the Notes of such Class. The Notes are issuable only in Percentage
Interests corresponding to initial Note Balances of $10,000 and integral
multiples of $1.00 in excess thereof; provided, however that a single Note of
each Class may be issued having a Percentage Interest corresponding to the
remainder of the aggregate initial Note Balance of such Note or to an otherwise
authorized denomination for such Class plus such remainder.
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"Periodic Rate Cap": With respect to each Adjustable Rate
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 Issuer, the Servicer, the Indenture 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 (which shall each have an original
maturity of not more than 90 days and, in the case of bankers'
acceptances, shall in no event have an original maturity of more than
365 days or a remaining maturity of more than 30 days) denominated in
United States dollars and 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;
(vi) units of money market funds, including money
market funds advised by the Indenture Trustee or an Affiliate thereof,
that have been rated "AAA" by DCR (if
rated by DCR) and "AAA" by S&P; and
(viii) if previously confirmed in writing to the
Indenture 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 Notes;
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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.
"Person": Any individual, corporation, partnership, limited
liability company, 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 Servicer in respect of any Payment Date pursuant to Section
4.01.
"Prepayment Charge": With respect to any Prepayment Period,
any prepayment premium, penalty or charge collected by the Servicer from a
Mortgagor in connection with any voluntary Principal Prepayment in full pursuant
to the terms of the related Mortgage Note as from time to time held as a part of
the Trust Estate, the Prepayment Charges so held being identified
in the Prepayment Charge Schedule.
"Prepayment Charge Schedule": As of any date, the list of
Prepayment Charges included in the Trust Estate 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:
(i) the 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 expiration date of the Prepayment Charge;
(v) the original principal balance of the related Mortgage Loan;
(vi) 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 Servicer in accordance with the provisions of this Agreement.
"Prepayment Interest Shortfall": With respect to any Payment 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 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
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interest at the applicable Mortgage Loan Remittance 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 Servicer in respect of any Prepayment Interest
Shortfall are set forth in Section 3.24.
"Prepayment Period": With respect to any Payment Date, the
calendar month preceding the calendar month in which such Payment Date occurs.
"Principal Prepayment": Any payment of principal made by the
Mortgagor on a Mortgage Loan which is received in advance of its scheduled Due
Date and which is not accompanied by an amount of interest (without regard to
any prepayment charge that may have been collected by the Servicer in connection
with such payment of principal) representing the full amount of scheduled
interest due on any Due Date in any month or months subsequent to the month of
prepayment.
"Purchase Price": With respect to any Mortgage Loan or REO
Property to be purchased (i) pursuant to or as contemplated by Section 2.01 or
Section 3.16(c), and as confirmed by an Officers' Certificate from the Servicer
to the Indenture Trustee or (ii) in connection with a partial redemption as
described in Section 7.09, an amount equal to the sum of: (i) 100% of the Stated
Principal Balance thereof as of the date of purchase, (ii) in the case of (x) a
Mortgage Loan, accrued interest on such Stated Principal Balance at the
applicable Mortgage Loan Remittance 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 Servicer, which payment or advance had as of the date of
purchase been distributed pursuant to the Indenture, 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 Mortgage Loan Remittance 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 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, minus 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; (iii) any unreimbursed Servicing Advances and P&I Advances and any
unpaid Servicing Fees allocable to such Mortgage Loan or REO Property; (iv) any
amounts previously withdrawn from the Collection Account in respect of such
Mortgage Loan or REO Property pursuant to Sections 3.11(ix) and Section 3.16(b);
and (v) in the case of a Mortgage Loan required to be purchased pursuant to
Section 2.01, expenses reasonably incurred or to be incurred by the Servicer or
the Indenture 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
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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) with respect to each
Adjustable Rate Mortgage Loan, have a Maximum Mortgage Rate not less than the
Maximum Mortgage Rate on the Deleted Mortgage Loan, (iv) with respect to each
Adjustable Rate Mortgage Loan, have a Minimum Mortgage Rate not less than the
Minimum Mortgage Rate of the Deleted Mortgage Loan, (v) with respect to each
Adjustable Rate Mortgage Loan, have a Gross Margin equal to the Gross Margin of
the Deleted Mortgage Loan, (vi) with respect to each Adjustable Rate Mortgage
Loan, 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
Servicer at least equal to the risk grading assigned on the Deleted Mortgage
Loan and (xi) conform to each representation and warranty set forth in Exhibit 2
to the Mortgage Loan Purchase Agreement applicable to the Deleted Mortgage Loan.
In the event that one or more mortgage loans are substituted for one or more
Deleted Mortgage Loans, the amounts described in clause (i) hereof shall be
determined on the basis of aggregate principal balances, the Mortgage Rates
described in clause (ii) hereof shall be determined on the basis of weighted
average Mortgage Rates, the risk gradings described in clause (x) hereof shall
be satisfied as to each such mortgage loan, the terms described in clause (vii)
hereof shall be determined on the basis of weighted average remaining term to
maturity, the Loan-to-Value Ratios described in clause (ix) hereof shall be
satisfied as to each such mortgage loan and, except to the extent otherwise
provided in this sentence, the representations and warranties described in
clause (xi) hereof must be satisfied as to each Qualified Substitute Mortgage
Loan or in the aggregate, as the case may be.
"Rating Agency" or "Rating Agencies": DCR and S&P or their
successors. If such agencies or their successors are no longer in existence,
"Rating Agencies" shall be such nationally recognized statistical rating
agencies, or other comparable Persons, designated by the Issuer, notice of which
designation shall be given to the Indenture Trustee, the Master Servicer and the
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 Payment 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(ix) and Section 3.16(b), minus (iv) the proceeds, if any,
received
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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 Servicer with respect to such Mortgage Loan pursuant to Section 3.11(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 the Trust Estate, 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 Payment 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(ix) and Section 3.16(b), minus
(v) the aggregate of all P&I Advances made by the Servicer in respect of such
REO Property or the related Mortgage Loan for which the Servicer has been or, in
connection with such Final Recovery Determination, will be reimbursed pursuant
to Section 3.23 out of rental income, Insurance Proceeds and Liquidation
Proceeds received in respect of such REO Property, minus (vi) the total of all
net rental income, Insurance Proceeds and Liquidation Proceeds received in
respect of such REO Property that has been, or in connection with such Final
Recovery Determination, will be transferred to the Payment 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.
"Refinanced Mortgage Loan": A Mortgage Loan the proceeds of which
were not used to purchase the related Mortgaged Property.
"Related Documents": With respect to each Mortgage Loan, the
documents specified in Section 2.4(b) of the Mortgage Loan Purchase Agreement
and Section 2.03 of the Indenture and any documents required to be added to such
documents pursuant to the Mortgage Loan Purchase Agreement, the Owner Trust
Agreement, the Indenture or the Servicing Agreement.
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"Relief Act": The Soldiers' and Sailors' Civil Relief Act of
1940, as amended.
"Relief Act Interest Shortfall": With respect to any Payment 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.
"Remittance Report": A report in form and substance that would be
acceptable to Fannie Mae on a magnetic disk or tape prepared by the Servicer
pursuant to Section 4.01 with such additions, deletions and modifications as
agreed to by the Indenture Trustee and the Servicer.
"REO Account": The account or accounts maintained by the Servicer
in respect of an REO Property pursuant to Section 3.23.
"REO Disposition": The sale or other disposition of an REO
Property on behalf of the Trust Estate.
"REO Imputed Interest": As to any REO Property, for any calendar
month during which such REO Property was at any time part of the Trust Estate,
one month's interest at the applicable Mortgage Loan Remittance 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 Payment 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 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 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 Servicer on
behalf of the Trust Estate 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 A-1 or Exhibit A-2 attached hereto.
"Residential Dwelling": Any one of the following: (i) an attached
or detached one-family dwelling, (ii) a detached two- to four-family dwelling,
(iii) a one-family dwelling unit in a Fannie Mae eligible condominium project,
or (iv) a detached one-family dwelling in a planned unit development, none of
which is a co-operative, mobile or manufactured home (as defined in 42 United
States Code, Section 5402(6)).
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"Responsible Officer": When used with respect to the Indenture
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 Indenture
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 Cutoff 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
Estate up to and including the Due Date in the calendar month in which a
Liquidation Event occurs with respect to such REO Property, an amount (not less
than zero) equal to the Scheduled Principal Balance of the related Mortgage Loan
as of the Due Date in the calendar month in which such REO Property was
acquired, minus the aggregate amount of REO Principal Amortization, if any, in
respect of such REO Property for all previously ended calendar months; and (b)
as of any Due Date subsequent to the occurrence of a Liquidation Event with
respect to such REO Property, zero.
"Seller": Wilshire Real Estate Investment Trust Inc. or its
successor in interest, in its capacity as seller under the Mortgage Loan
Purchase Agreement.
"Servicer": Ameriquest Mortgage Company ("Ameriquest") or any
successor servicer appointed as herein provided, in its capacity as Servicer
hereunder.
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"Servicer Event of Default": One or more of the events described
in Section 6.01.
"Servicer Remittance Date": With respect to any Payment Date, 3:00
p.m. New York time on the 18th day of the calendar month in which such Payment
Date occurs or, if such 18th day is not a Business Day, the Business Day
immediately preceding such 18th day; provided, however, that if such immediately
preceding Business Day is the Determination Date, the Servicer Remittance Date
shall be the next succeeding Business Day.
"Servicer Termination Test": With respect to any Payment Date, the
Servicer Termination Test will be failed if the Cumulative Loss Percentage
exceeds 5.75%; provided, however that such Servicer Termination Test shall not
apply if the Master Servicer is the Servicer.
"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 Servicer in connection with a default, delinquency or
other unanticipated event by the 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 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 Servicer, would not be ultimately recoverable from related
Insurance Proceeds or Liquidation Proceeds on such Mortgage Loan or REO Property
as provided herein.
"Servicing Fee": With respect to each Mortgage Loan and for any
calendar month, an amount equal to one month's interest (or in the event of any
payment of interest which accompanies a Principal Prepayment in full made by the
Mortgagor during such calendar month, interest for the number of days covered by
such payment of interest) at the applicable Servicing Fee Rate on the same
principal amount on which interest on such Mortgage Loan accrues for such
calendar month. A portion of such Servicing Fee may be retained by any
Sub-Servicer as its servicing compensation.
"Servicing Fee Rate": 0.50% per annum.
"Servicing Officer": Any employee of the Master Servicer or
Servicer involved in, or responsible for, the administration and servicing of
the Mortgage Loans, whose name and specimen signature appear on a list of
Servicing Officers furnished by the Master Servicer or Servicer, as applicable,
to the Indenture Trustee and the Issuer on the Closing Date, as such list may
from time to time be amended.
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"S&P": Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc., or its successor in interest.
"Stated Principal Balance": With respect to any Mortgage Loan: (a)
as of any date of determination up to but not including the Payment 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 Servicer and distributed pursuant to the Indenture on or before such date of
determination, (ii) all Principal Prepayments received after the Cut-off Date,
to the extent distributed pursuant to the Indenture on or before such date of
determination, (iii) all Liquidation Proceeds and Insurance Proceeds applied by
the Servicer as recoveries of principal in accordance with the provisions of
Section 3.16, to the extent distributed pursuant to the Indenture 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 Payment Date coinciding with or preceding
such date of determination; and (b) as of any date of determination coinciding
with or subsequent to the Payment 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 Payment Date on which the proceeds, if any, of a Liquidation
Event with respect to such REO Property would be distributed, an amount (not
less than zero) equal to the Stated Principal Balance of the related Mortgage
Loan as of the date on which such REO Property was acquired on behalf of the
Trust Estate, minus the sum of (i) if such REO Property was acquired before the
Payment 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 Servicer and distributed pursuant to the Indenture 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 the Indenture on or before such date of
determination; and (b) as of any date of determination coinciding with or
subsequent to the Payment 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 Servicer is the subject of a proceeding
under the federal Bankruptcy Code and the making of a Remittance (as defined in
Section 6.02(b)) is prohibited by Section 362 of the federal Bankruptcy Code,
funds which are in the custody of the Servicer, a trustee in bankruptcy or a
federal bankruptcy court and should have been the subject of such
Remittance absent such prohibition.
"Subordinate Note": Any Class M-1 Note, Class M-2 Note or Class
M-3 Note.
"Sub-Servicer": Any Person with which the Servicer has entered
into a Sub-Servicing Agreement and which meets the qualifications of a
Sub-Servicer pursuant to Section 3.02.
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"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 Servicer.
"Sub-Servicing Agreement": The written contract between the
Servicer and a Sub- Servicer relating to servicing and administration of certain
Mortgage Loans as provided in Section 3.02.
"Transferor": Wilshire REIT 1998-1, Inc.
"Trust Estate": The meaning specified in the Granting Clause of
the Indenture.
"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.
"Value": With respect to any Mortgaged Property, the lesser of (i)
the value thereof as determined by an appraisal made for the originator of the
Mortgage Loan at the time of origination of the Mortgage Loan by an appraiser
who met the minimum requirements of Fannie Mae and Freddie Mac, and (ii) the
purchase price paid for the related Mortgaged Property by the Mortgagor with the
proceeds of the Mortgage Loan, provided, however, in the case of a Refinanced
Mortgage Loan, such value of the Mortgaged Property is based solely upon the
value determined by an appraisal made for the originator of such Refinanced
Mortgage Loan at the time of origination of such Refinanced Mortgage Loan by an
appraiser who met the minimum requirements of Fannie Mae and Freddie Mac.
"Voting Rights": The portion of the voting rights of all of the
Notes which is allocated to any Note. At all times during the term of this
Agreement, (i) 100% of all of the Voting Rights shall be allocated to the Most
Senior Class of Notes, in proportion to their then outstanding Note Balances.
All Voting Rights allocated to any Class of Notes shall be allocated among such
Notes PRO RATA in accordance with the respective Percentage Interests evidenced
thereby.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES
SECTION 2.01. Enforcement of Representations and Warranties.
(a) Upon discovery by the Master Servicer, the Servicer, the
Indenture Trustee or the Issuer of any materially defective document in, or that
a document is missing from, a Mortgage File or of a breach of any of the
representations and warranties made by 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 Noteholders in such Mortgage Loan (in
the case of any such representation or warranty made to the knowledge or the
best of knowledge of the Seller as to which the Seller has no knowledge, without
regard to the Seller's lack of knowledge with respect to the substance of such
representation or warranty being inaccurate at the time it was made), the party
discovering such breach shall give prompt written notice to the other parties.
The
Indenture Trustee shall promptly notify the Seller of such defect, missing
document or breach and request that the Seller deliver such missing document or
cure such defect or breach within 90 days from the date the Seller was notified
of such missing document, defect or breach, and if the Seller does not deliver
such missing document or cure such defect or breach in all material respects
during such period, the Master Servicer shall enforce the obligations of the
Seller under the Mortgage Loan Purchase Agreement to repurchase such Mortgage
Loan from the Trust Estate at the Purchase Price within 90 days after the date
on which the Seller was notified of such missing document, defect or breach, if
and to the extent that the Seller is obligated to do so under the Mortgage Loan
Purchase Agreement. The Purchase Price for the repurchased Mortgage Loan shall
be deposited in the Collection Account. In lieu of repurchasing any such
Mortgage Loan as provided above, if so provided in the Mortgage Loan Purchase
Agreement, the Seller may cause such Mortgage Loan to be removed from the Trust
Estate (in which case it shall become a Deleted Mortgage Loan) and substitute
one or more Qualified Substitute Mortgage Loans.
Monthly Payments due with respect to Qualified Substitute Mortgage
Loans in the month of substitution are not part of the Trust Estate and will be
retained by the Seller. For the month of substitution, distributions to
Noteholders will reflect the Monthly Payment due on such Deleted Mortgage Loan
on or before the Due Date in the month of substitution, and the Seller shall
thereafter be entitled to retain all amounts subsequently received in respect of
such Deleted Mortgage Loan. The Master Servicer shall give or cause to be given
written notice to the Noteholders 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 Indenture Trustee and the Owner Trustee. Upon such
substitution, such Qualified Substitute Mortgage Loan or Loans shall constitute
part of the Trust Estate and shall be subject in all respects to the terms of
this Agreement and the Mortgage Loan Purchase Agreement, including all
applicable representations and warranties thereof included in the Mortgage Loan
Purchase Agreement as of the date of substitution.
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For any month in which the Seller substitutes one or more
Qualified Substitute Mortgage Loans for one or more Deleted Mortgage Loans, the
Master Servicer will determine the amount (with respect to each Qualified
Substitute Mortgage Loan, the "Substitution Shortfall Amount"), if any, by which
the Purchase Price of each such Deleted Mortgage Loan exceeds, 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 Mortgage Loan Remittance Rate. On
the date of such substitution the Seller will deliver or cause to be delivered
to the Master Servicer for deposit in the Collection Account an amount equal to
the applicable Substitution Shortfall Amounts, if any.
It is understood and agreed that the obligation of the Seller 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 Issuer and the
Indenture Trustee, as pledgee of the Mortgage Loans, against the Seller. In
connection with the purchase of or substitution of any such Mortgage Loan by the
Seller, the Issuer shall assign to the Seller all of its right, title and
interest in respect of the Mortgage Loan Purchase Agreement applicable to such
Mortgage Loan. The Indenture Trustee or a Custodian on its behalf, upon receipt
of written certification from the Master Servicer of deposit of the Purchase
Price, in the case of a repurchased Mortgage Loan or upon receipt of the related
Qualified Substitute Mortgage Loan or Loans and certification from the Master
Servicer of deposit of the Substitution Shortfall Amount, shall release to the
Seller the related Mortgage File or Files and shall execute and deliver such
instruments of transfer or assignment, in each case without recourse, as the
Seller shall furnish to it and as shall be necessary to vest in the Seller any
Mortgage Loan released pursuant hereto, and the Indenture Trustee shall have no
further responsibility with regard to such Mortgage File.
(b)(i) Within 90 days of the earlier of discovery by the Servicer
or receipt of notice by the Servicer of the breach of any representation,
warranty or covenant of the Servicer set forth in Section 2.03(a) which
materially and adversely affects the interests of the Noteholders in any
Mortgage Loan, the Servicer shall cure such breach in all material respects.
(ii) Within 90 days of the earlier of discovery by the Servicer or
receipt of notice by the Servicer of the breach of any representation, warranty
or covenant of the Servicer set forth in Section 2.03(a) which materially and
adversely affects the interests of the Certificateholders to any Prepayment
Charge, the Servicer shall cure such breach in all material respects. If the
representation made by the Servicer in Section 2.03(a)(vii) is breached, the
Servicer must pay into the Collection Account the amount of the scheduled
Prepayment Charge, less any amount collected and paid by the Servicer into the
Collection Account; and if the covenant made by the Servicer in Section
2.03(a)(viii) is breached, the Servicer must pay into the Collection Account the
amount of the waived Prepayment Charge.
(iii) 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
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Master Servicer set forth in Section 2.03(b) which materially and adversely
affects the interests of the Noteholders in any Mortgage Loan, the Master
Servicer shall cure such breach in all material respects.
SECTION 2.02. Existence.
The Issuer will keep in full force and effect its existence,
rights and franchises as a business trust under the laws of the State of
Delaware and will obtain and preserve its qualification to do business in each
jurisdiction in which such qualification is or shall be necessary to protect
the validity and enforceability of this Agreement.
SECTION 2.03. Representations, Warranties and Covenants of
the Servicer and the Master Servicer.
(a) The Servicer hereby represents, warrants and covenants to the
Issuer, the Seller, the Indenture Trustee and the Noteholders that as of the
Closing Date or as of such date specifically provided herein:
(i) The Servicer is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Delaware and is duly authorized and qualified to transact any and
all business contemplated by this Agreement to be conducted by the
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 Servicer has the full corporate power and authority to
service each Mortgage Loan, and to execute, deliver and perform,
and to enter into and consummate the transactions contemplated by
this Agreement and has duly authorized by all necessary corporate
action on the part of the Servicer the execution, delivery and
performance of this Agreement; and this Agreement, assuming the
due authorization, execution and delivery thereof by the Issuer
and the Indenture Trustee, constitutes a legal, valid and binding
obligation of the Servicer, enforceable against the Servicer in
accordance with its terms, except to the extent that (a) the
enforceability thereof may be limited by bankruptcy, insolvency,
moratorium, receivership and other similar laws relating to
creditors' rights generally and (b) the remedy of specific
performance and injunctive and other forms of equitable relief may
be subject to the equitable defenses and to the discretion of the
court before which any proceeding therefor may be brought;
(iii) The execution and delivery of this Agreement by the
Servicer, the servicing of the Mortgage Loans by the Servicer
hereunder, the consummation of any other of the transactions
herein contemplated, and the fulfillment of or compliance with the
terms
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hereof are in the ordinary course of business of the Servicer and
will not (A) result in a breach of any term or provision of the
charter or by-laws of the 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 Servicer is a party or by which it may be bound, or any
statute, order or regulation applicable to the Servicer of any
court, regulatory body, administrative agency or governmental body
having jurisdiction over the Servicer; and the 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
Servicer's knowledge, would in the future materially and adversely
affect, (x) the ability of the Servicer to perform its obligations
under this Agreement or (y) the business, operations, financial
condition, properties or assets of the Servicer taken as a whole;
(iv) The Servicer is an approved seller/servicer for Fannie Mae
or Freddie Mac in good standing and is a HUD approved mortgagee
pursuant to Section 203 of the National Housing Act;
(v) No litigation is pending against the Servicer that would
materially and adversely affect the execution, delivery or
enforceability of this Agreement or the ability of the Servicer to
service the Mortgage Loans or to perform any of its other
obligations hereunder in accordance with the terms hereof;
(vi) No consent, approval, authorization or order of any court or
governmental agency or body is required for the execution,
delivery and performance by the Servicer of, or compliance by the
Servicer with, this Agreement or the consummation of the
transactions contemplated by this Agreement, except for such
consents, approvals, authorizations or orders, if any, that have
been obtained prior to the Closing Date;
(vii) 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 at the date or
dates respecting which such information is furnished and each
Prepayment Charge is permissible and enforceable in accordance
with its terms (except to the extent that the enforceability
thereof may be limited by bankruptcy, insolvency, moratorium,
receivership and other similar laws relating to creditors' rights
generally) under applicable state law; and
(viii) The Servicer will not waive any Prepayment Charge or part
of a Prepayment Charge unless such waiver would maximize recovery
of total proceeds taking into account the value of such Prepayment
Charge and related Mortgage Loan and doing so is standard and
customary in servicing similar Mortgage Loans (including any
waiver of a Prepayment Charge in connection with a refinancing of
a Mortgage Loan
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that is related to a default or a reasonably foreseeable default)
and in no event will it waive a Prepayment Charge in connection
with a refinancing of a Mortgage Loan that is not related to a
default or a reasonably foreseeable default.
(b) The Master Servicer hereby represents, warrants and covenants
to the Issuer, the Seller, the Indenture Trustee and the Noteholders that as of
the Closing Date or as of such date specifically provided herein:
(i) The Master Servicer is duly organized, validly existing and
in good standing as a Delaware corporation under the laws of the
State of Delaware and is and will remain in compliance with the
laws of each state in which any Mortgaged Property is located to
the extent necessary to ensure the enforceability of each Mortgage
Loan and the servicing of 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 each of the other parties hereto, constitutes a legal,
valid and binding obligation of the Master Servicer, enforceable
against it in accordance with its terms except as enforceability
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 and the performance of and compliance with the terms of
this Agreement will not (a) violate the Master Servicer's charter
or by-laws or any law, rule, regulation, order, judgment, award,
administrative interpretation, injunction, writ, decree or the
like affecting the Master Servicer or by which the Master Servicer
is bound or (b) result in a breach of or constitute a default
under any indenture or other material agreement to which the
Master Servicer is a party or by which the Master Servicer is
bound, which in the case of either clause (a) or (b) will have a
material adverse effect on the Master Servicer's ability to
perform its obligations under this Agreement.
(iv) The Master Servicer or one of its Affiliates is an approved
servicer for Fannie Mae in good standing. No event has occurred,
including but not limited to a change in insurance coverage, which
would make such party unable to comply with Freddie Mac or Fannie
Mae (as applicable) eligibility requirements or which would
require notification to Freddie Mac or Fannie Mae (as applicable).
(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 applicable to it contained in this Agreement.
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(vi) There are no actions or proceedings against or
investigations known to the Master Servicer before any court,
administrative or other tribunal that (A) might prohibit its
entering into this Agreement, (B) seek to prevent the consummation
of the transactions contemplated by this Agreement or (C) might
prohibit or materially and adversely affect the performance by the
Master Servicer of its obligations under, or the validity or
enforceability of, this Agreement.
(vii) 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 the
compliance by the Master Servicer with, this Agreement, except for
such consents, approvals, authorizations or orders, if any, that
have been obtained prior to the Closing Date;
(viii) No litigation is pending or, to the best of the Master
Servicer's knowledge, threatened against the Master Servicer which
would prohibit the Master Servicer from entering into this
Agreement or, in the Master Servicer's good faith reasonable
judgment, is likely to materially and adversely affect either the
ability of the Master Servicer to perform its obligations under
this Agreement or the financial condition of the Master Servicer.
It is understood and agreed that the representations, warranties
and covenants set forth in this Section 2.03 shall survive delivery of the
Mortgage Files to the Indenture Trustee or to a Custodian, as the case may be,
and shall inure to the benefit of the Indenture Trustee, the Seller, the Issuer
and the Noteholders. Upon discovery by any of the Issuer, the Master Servicer,
the Servicer or the Indenture Trustee of a breach of any of the foregoing
representations, warranties and covenants which materially and adversely affects
the value of any Mortgage Loan, Prepayment Charge or the interests therein of
the Noteholders or 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 Indenture Trustee. Subject to Section 6.01, the
obligations of the Master Servicer and the Servicer set forth in Section 2.01(b)
to cure breaches shall constitute the sole remedies against the Master Servicer
or the Servicer, as applicable, available to the Noteholders, the
Certificateholders, the Issuer or the Indenture Trustee on behalf of the
Noteholders respecting a breach of the representations, warranties and covenants
contained in this Section 2.03.
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ARTICLE III
ADMINISTRATION AND SERVICING
OF THE MORTGAGE LOANS
SECTION 3.01. Servicer to Act as Servicer.
The Servicer shall service and administer the Mortgage Loans on behalf
of the Indenture Trustee and in the best interests of and for the benefit of the
Noteholders (as determined by the Servicer in its reasonable judgment) in
accordance with the terms of this Agreement and the respective Mortgage Loans
and, to the extent consistent with such terms, in the same manner in which it
services and administers similar mortgage loans for its own portfolio, giving
due consideration to customary and usual standards of practice of prudent
mortgage lenders and loan servicers administering similar mortgage loans but
without regard to:
(i) any relationship that the Servicer, any Sub-Servicer or any
Affiliate of the Servicer or any Sub-Servicer may have with the
related Mortgagor;
(ii) the ownership of any Note by the Servicer or any Affiliate
of the Servicer;
(iii) the Servicer's obligation to make P&I Advances or Servicing
Advances; or
(iv) the 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 Servicer shall also seek to
maximize the timely and complete recovery of principal and interest on the
Mortgage Notes. Subject only to the above-described servicing standards and the
terms of this Agreement and of the respective Mortgage Loans, the 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 Servicer in its own name
or in the name of a Sub-Servicer is hereby authorized and empowered by the
Indenture Trustee when the 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 Noteholders and the Indenture Trustee, and upon notice
to the Indenture 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 Indenture Trustee
and Noteholders. The 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 Servicer
shall
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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 Indenture Trustee shall execute, at the written request of
the Servicer, and furnish to the Servicer and any Sub-Servicer such documents as
are necessary or appropriate to enable the Servicer or any Sub- Servicer to
carry out their servicing and administrative duties hereunder, and the Indenture
Trustee hereby grants to the Servicer a power of attorney to carry out such
duties. The Indenture Trustee shall not be liable for the actions of the
Servicer or any Sub-Servicers under such powers of attorney.
In accordance with the standards of the preceding paragraph, the
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
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 Noteholders, 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
Servicer may not make any future advances with respect to a Mortgage Loan
(except as provided in Section 4.01) and the Servicer shall not 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
Servicer, reasonably foreseeable).
The Servicer may delegate its responsibilities under this
Agreement; provided, however, that no such delegation shall release the Servicer
from the responsibilities or liabilities
arising under this Agreement.
SECTION 3.02. Sub-Servicing Agreements Between the Servicer and
Sub-Servicers.
(a) The Servicer may enter into Sub-Servicing Agreements (provided
that such agreements would not result in a withdrawal or a downgrading by any
Rating Agency of the rating on any Class of Notes) with Sub-Servicers, for the
servicing and administration of the Mortgage
Loans.
Each Sub-Servicer shall be (i) authorized to transact business in
the state or states in which the related Mortgaged Properties it is to service
are situated, if and to the extent required by applicable law to enable the
Sub-Servicer to perform its obligations hereunder and under the Sub-Servicing
Agreement, (ii) an institution approved as a mortgage loan originator by the
Federal Housing Administration or an institution the deposit accounts of which
are insured by the FDIC and (iii) a Freddie Mac or Fannie Mae approved mortgage
servicer. Each Sub-Servicing
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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 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 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 Noteholders, without the consent of the Holders of Notes
entitled to at least 66% of the Voting Rights. Any variation without the consent
of the Holders of Notes 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 Servicer, are conclusively deemed to be inconsistent with this Agreement
and therefore prohibited. The Servicer shall deliver to the Master Servicer, the
Indenture Trustee and the Owner Trustee copies of all Sub-Servicing Agreements,
and any amendments or modifications thereof, promptly upon the Servicer's
execution and delivery of such instruments.
(b) As part of its servicing activities hereunder, the Servicer
(except as otherwise provided in the last sentence of this paragraph), for the
benefit of the Indenture Trustee and the Noteholders, shall enforce the
obligations of each Sub-Servicer under the related Sub-Servicing Agreement,
including, without limitation, any obligation to make advances in respect of
delinquent payments as required by a Sub-Servicing Agreement. 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
Servicer, in its good faith business judgment, would require were it the owner
of the related Mortgage Loans. The 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.
SECTION 3.03. Successor Sub-Servicers.
The 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 Servicer without any act or deed on the part of such Sub-Servicer or the
Servicer, and the 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.
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Any Sub-Servicing Agreement shall include the provision that such
agreement may be immediately terminated by the Indenture Trustee without fee, in
accordance with the terms of this Agreement, in the event that the Servicer
shall, for any reason, no longer be the Servicer (including termination due to a
Servicer Event of Default).
SECTION 3.04. Liability of the Servicer.
Notwithstanding any Sub-Servicing Agreement, any of the provisions
of this Agreement relating to agreements or arrangements between the Servicer
and a Sub-Servicer or reference to actions taken through a Sub-Servicer or
otherwise, the Servicer shall remain obligated and primarily liable to the
Indenture Trustee and the Noteholders 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
Servicer alone were servicing and administering the Mortgage Loans. The Servicer
shall be entitled to enter into any agreement with a Sub-Servicer for
indemnification of the Servicer by such Sub-Servicer and nothing contained in
this Agreement shall be deemed to limit or modify such indemnification.
SECTION 3.05. No Contractual Relationship Between
Sub-Servicers and Indenture Trustee, Issuer
or Noteholders.
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
Servicer alone, and the Indenture Trustee, Issuer and Noteholders 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 Servicer shall be solely liable for all fees owed by it to any
Sub-Servicer, irrespective of whether the Servicer's compensation pursuant to
this Agreement is sufficient to pay such fees.
SECTION 3.06. Assumption or Termination of Sub-Servicing
Agreements by Indenture Trustee.
In the event the Servicer shall for any reason no longer be the
servicer (including by reason of the occurrence of a Servicer Event of Default),
the Master Servicer (or if the Master Servicer is the Servicer, the Indenture
Trustee or its designee) shall thereupon assume all of the rights and
obligations of the Servicer under each Sub-Servicing Agreement that the Servicer
may have entered into, unless the Master Servicer (or if the Master Servicer is
the Servicer, the Indenture Trustee or its designee) elects to terminate any
Sub-Servicing Agreement in accordance with its terms as provided in Section
3.03. Upon such assumption, the Master Servicer (or the Indenture Trustee, its
designee or the successor servicer for the Indenture Trustee appointed pursuant
to Section 6.02) shall be deemed, subject to Section 3.03, to have assumed all
of the Servicer's interest therein and to have replaced the Servicer as a party
to each Sub-Servicing Agreement to the same extent as if each Sub-Servicing
Agreement had been assigned to the
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assuming party, except that (i) the Servicer shall not thereby be relieved of
any liability or obligations under any Sub-Servicing Agreement and (ii) none of
the Master Servicer, the Indenture Trustee, its designee or any successor
Servicer, as applicable, shall be deemed to have assumed any liability or
obligation of the Servicer that arose before it ceased to be the Servicer.
The Servicer at its expense shall, upon request of the Master
Servicer (or if the Master Servicer is the Servicer, the Indenture 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 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
Servicer may in its discretion (i) waive any late payment charge or, if
applicable, penalty interest, or (ii) extend the due dates for Monthly Payments
due on a Mortgage Note for a period of not greater than 180 days; provided 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 Servicer shall make timely advances on such Mortgage Loan during such
extension pursuant to Section 4.01 and in accordance with the amortization
schedule of such Mortgage Loan without modification thereof by reason of such
arrangements. Notwithstanding the foregoing, in the event that any Mortgage Loan
is in default or, in the judgment of the Servicer, such default is reasonably
foreseeable, the 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 Payoff") 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 (which account
must be an Eligible 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
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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 deposit of such funds into the clearing
account. The Sub-Servicer shall thereafter deposit such proceeds in the
Collection Account or remit such proceeds to the 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
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 Servicer shall establish and maintain one or more accounts
(the "Servicing Accounts"), into which all collections from the Mortgagors (or
related advances from Sub- Servicers) for the payment of taxes, assessments,
hazard insurance premiums and comparable items for the account of the Mortgagors
("Escrow Payments") shall be deposited and retained. Servicing Accounts shall be
Eligible Accounts. The Servicer shall deposit in the clearing account (which
account must be an Eligible 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 Servicer's receipt 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 deposit of
such funds in the clearing account, for the purpose of effecting the 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; (ii)
reimburse the 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; (v) clear
and terminate the Servicing Account at the termination of the Servicer's
obligations and responsibilities in respect of the Mortgage Loans under this
Agreement in accordance with Article VII; or (vi) recover amounts deposited in
error. As part of its servicing duties, the Servicer or Sub-Servicers shall pay
to the Mortgagors interest on funds in Servicing Accounts, to the extent
required by law and, to the extent that interest earned on funds in the
Servicing Accounts is insufficient, to pay such interest from its or their own
funds, without any reimbursement therefor. To the extent that a Mortgage does
not provide for Escrow Payments, the Servicer shall determine whether any such
payments are made by the Mortgagor in a manner and at a time that avoids the
loss of the Mortgaged Property due to a tax sale or the foreclosure of a tax
lien. The Servicer assumes full responsibility for the payment of all such bills
and shall effect payments of all such bills irrespective of the Mortgagor's
faithful performance in the payment of same or the making of the Escrow Payments
and shall make advances from its own funds to effect such payments.
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SECTION 3.10. Collection Account.
(a) On behalf of the Trust Estate, the Servicer shall establish
and maintain one or more accounts (such account or accounts, the "Collection
Account"), held in trust for the benefit of the Indenture Trustee and the
Noteholders. On behalf of the Trust Estate, the Servicer shall deposit or cause
to be deposited in the clearing account (which account must be an Eligible
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 Servicer's receipt
thereof, and shall thereafter deposit in the Collection Account, in no event
more than two Business Days after the deposit of such funds into the clearing
account, 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), or payments (other than Principal
Prepayments) received by it on or prior to the Cut-off Date but allocable to a
Due Period subsequent thereto:
(i) all payments on account of principal, including Principal
Prepayments, on the Mortgage Loans;
(ii) all payments on account of interest (net of the related
Servicing Fee) on each Mortgage Loan;
(iii) all Insurance Proceeds and Liquidation Proceeds (other than
proceeds collected in respect of any particular REO Property);
(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 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 2.01;
(vii) all amounts required to be deposited in connection with
shortfalls in principal amount of Qualified Substitute Mortgage
Loans pursuant to Section 2.01; and
(viii) all Prepayment Charges collected by the Servicer in
connection with the voluntary Principal Prepayment in full 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
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the nature of late payment charges, "NSF" fees, administrative charges and/or
assumption fees need not be deposited by the Servicer in the Collection Account.
In the event the 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.
Notwithstanding the foregoing, the Servicer shall deposit in the Collection
Account all scheduled payments of principal and interest due on or before the
Cut-off Date and collected after the Cut-off Date with respect to any Mortgage
Loan listed on Schedule 4 attached hereto. Such payments shall be used by the
Servicer as repayment for any P&I Advances made with respect to such Mortgage
Loans that were made by the Servicer under prior securitizations.
(b) On behalf of the Trust Estate, the Servicer shall deliver to
the Indenture Trustee in immediately available funds for deposit in the Payment
Account on or before 3:00 p.m. New York time (i) on the Servicer Remittance
Date, that portion of the Available Payment Amount (calculated without regard to
the references in clause (2) of the definition thereof to amounts that may be
withdrawn from the Payment Account) for the related Payment Date then on deposit
in the Collection Account and the amount of all Prepayment Charges collected by
the Servicer in connection with the voluntary Principal Prepayment in full 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 Servicer shall, on or
before 3:00 p.m. New York time on such Business Day, withdraw from the
Collection Account any and all amounts payable or reimbursable to the Servicer,
the Indenture Trustee, 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 may be invested in Permitted
Investments in accordance with the provisions set forth in Section 3.12. The
Servicer shall give notice to the Master Servicer and the Indenture Trustee of
the location of the Collection Account maintained by it when established and
prior to any change thereof.
(d) Funds held in the Collection Account at any time may be
delivered by the Servicer to the Indenture Trustee for deposit in an account
(which may be the Payment Account and must satisfy the standards for the Payment
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 Indenture Trustee shall have the sole authority to withdraw
any funds held pursuant to this subsection (d). In the event the Servicer shall
deliver to the Indenture Trustee for deposit in the Payment Account any amount
not required to be deposited therein, it may at any time request that the
Indenture Trustee withdraw such amount from the Payment Account and remit to it
any such amount, any provision herein to the contrary notwithstanding. In
addition,
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the Servicer shall deliver to the Indenture Trustee from time to time for
deposit, and the Indenture Trustee shall so deposit, in the Payment Account:
(i) any P&I Advances, as required pursuant to Section 4.01;
(ii) any amounts required to be deposited pursuant to Section
3.23(d) or (f) in connection with any REO Property;
(iii) any amounts required to be deposited pursuant to Section
3.24 in connection with any Prepayment Interest Shortfalls; and
(iv) 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
Servicer, a trustee in bankruptcy, or federal bankruptcy court or other source,
the Indenture Trustee shall deposit such funds in the Payment Account, subject
to withdrawal thereof pursuant to Section 6.02(b) or
as otherwise permitted hereunder.
SECTION 3.11. Withdrawals from the Collection Account.
(a) The Servicer shall, from time to time, make withdrawals from
the Collection Account for any of the following purposes or as described in
Section 4.01:
(i) to remit to the Indenture Trustee for deposit in the Payment
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 Servicer or
Master Servicer, as the case may be, for P&I Advances (including
any P&I Advance made with respect to such Mortgage Loan that was
made by the Servicer as master servicer under another
securitization), but only to the extent of amounts received which
represent Late Collections (net of the related Servicing Fees) of
Monthly Payments on Mortgage Loans with respect to which such P&I
Advances were made in accordance with the provisions of Section
4.01;
(iii) subject to Section 3.16(d), to pay the Master Servicer, the
Servicer or any Sub- Servicer any unpaid Servicing Fees and
reimburse any unreimbursed Servicing Advances (including any
servicing fee incurred or any Servicing Advance made with respect
to such Mortgage Loan that was made by the Servicer as master
servicer under another securitization), with respect to each
Mortgage Loan, but only to the extent of any Liquidation Proceeds,
Insurance Proceeds or other amounts as may be collected by the
Servicer from a Mortgagor, or otherwise received with respect to
such Mortgage Loan;
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(iv) to pay to the Servicer as servicing compensation (in
addition to the Servicing Fee) on the Servicer Remittance Date any
interest or investment income earned on funds deposited in the
Collection Account;
(v) to pay to the Servicer or the Seller, as the case may be,
with respect to each Mortgage Loan that has previously been
purchased or replaced pursuant to Section 2.01 or Section 3.16(c)
all amounts received thereon subsequent to the date of purchase or
substitution, as the case may be;
(vi) to reimburse the Servicer for any P&I Advance (including any
P&I Advance made with respect to such Mortgage Loan that was made
by the Servicer as master servicer under another securitization)
previously made which the Servicer has determined to be a
Nonrecoverable P&I Advance in accordance with the provisions of
Section 4.01;
(vii) to reimburse the Servicer for expenses incurred by or
reimbursable to the Servicer pursuant to Section 5.03;
(viii) to reimburse the Servicer for expenses reasonably incurred
in respect of the breach or defect giving rise to the purchase
obligation under Section 2.01 of this Agreement that were included
in the Purchase Price of the Mortgage Loan, including any expenses
arising out of the enforcement of the purchase obligation;
(ix) to pay, or to reimburse the Servicer for advances in respect
of, expenses incurred in connection with any Mortgage Loan
pursuant to Section 3.16(b); and
(x) to clear and terminate the Collection Account upon a
termination pursuant to Section 7.08.
The 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 Servicer shall provide written notification to the Indenture Trustee, on or
prior to the next succeeding Servicer Remittance Date, upon making any
withdrawals from the Collection Account pursuant to subclause (vii) above.
SECTION 3.12. Investment of Funds in the Collection Account.
(a) The Servicer may direct any depository institution maintaining
the Collection Account (for purposes of this Section 3.12, 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
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Agreement, if a Person other than the Indenture 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 Indenture Trustee is the
obligor thereon. All such Permitted Investments shall
be held to maturity, unless payable on demand.
(b) All income and gain realized from the investment of funds
deposited in the Collection Account held by or on behalf of the Servicer, shall
be for the benefit of the Servicer and shall be subject to its withdrawal in
accordance with Section 3.11. The Servicer shall deposit in the Collection
Account the amount of any loss of principal incurred in respect of any such
Permitted Investment made with funds in such accounts immediately upon
realization of such loss.
SECTION 3.13. [intentionally omitted]
SECTION 3.14. Maintenance of Hazard Insurance and Errors
and Omissions and Fidelity Coverage.
(a) The Servicer shall cause to be maintained for each Mortgage
Loan fire insurance with extended coverage on the related Mortgaged Property in
an amount which is at least equal to the least of (i) the current principal
balance of such Mortgage Loan, (ii) the amount necessary to fully compensate for
any damage or loss to the improvements that are a part of such property on a
replacement cost basis and (iii) the maximum insurable value of the improvements
which are a part of such Mortgaged Property, in each case in an amount not less
than such amount as is necessary to avoid the application of any coinsurance
clause contained in the related hazard insurance policy. The Servicer shall also
cause to be maintained fire insurance with extended coverage on each REO
Property in an amount which is at least equal to the lesser of (i) the maximum
insurable value of the improvements which are a part of such property and (ii)
the outstanding principal balance of the related Mortgage Loan at the time it
became an REO Property, plus accrued interest at the Mortgage Rate and related
Servicing Advances. The 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 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 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 Servicer in maintaining any such insurance shall not, for the purpose of
calculating distributions to Noteholders, be added to the unpaid principal
balance of the related Mortgage Loan, notwithstanding that the terms of such
Mortgage Loan so permit. It is understood and agreed that no earthquake or other
additional insurance is to be required of any Mortgagor other than pursuant to
such applicable laws and regulations as shall at any time be in force and as
shall require such additional insurance. If the Mortgaged Property or REO
Property is at any time in an area identified in the Federal Register by the
Federal Emergency Management Agency as having special flood hazards, the
Servicer will
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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 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 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 Servicer agrees to prepare and present, on behalf of itself,
the Indenture Trustee and Noteholders, claims under any such blanket policy in a
timely fashion in accordance with the terms of such policy.
(b) The 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 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 Servicer has obtained a waiver of such requirements
from Fannie Mae or Freddie Mac. The 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 Servicer has obtained a waiver of such requirements from Fannie
Mae or Freddie Mac. The Servicer shall provide the Indenture Trustee (upon the
Indenture Trustee's reasonable request) with copies of any such insurance
policies and fidelity bond. The Servicer shall be deemed to have complied with
this provision if an Affiliate of the 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 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 Indenture Trustee. The 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 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 Servicer shall not exercise any such rights if prohibited by law from
doing so. If the 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 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 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 Servicer and has a credit risk
rating at least equal to that of the original Mortgagor. In connection with any
assumption or substitution, the 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 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, or a new policy meeting
the requirements of this Section is obtained. Any fee collected by the Servicer
in respect of an assumption or substitution of liability agreement will be
retained by the 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 Servicer shall notify the Indenture Trustee and any respective
Custodian that any such substitution or assumption agreement has been completed
by forwarding to the Indenture Trustee or to such Custodian, as the case may be,
the executed original of such substitution or assumption agreement, which
document shall be added to the related Mortgage File and shall, for all
purposes, be considered a part of such Mortgage File to the same extent as all
other documents and instruments constituting a part thereof.
Notwithstanding the foregoing paragraph or any other provision of
this Agreement, the 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 Servicer may be restricted by law from preventing, for any
reason whatever. For purposes of this Section 3.15, the term "assumption" is
deemed to also include a sale (of the Mortgaged Property) subject to the
Mortgage that is not accompanied by an assumption or substitution of liability
agreement.
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SECTION 3.16. Realization Upon Defaulted Mortgage Loans.
(a) The Servicer shall, consistent with the servicing standard set
forth in Section 3.01, foreclose upon or otherwise comparably convert the
ownership of properties securing such of the Mortgage Loans as come into and
continue in default and as to which no satisfactory arrangements can be made for
collection of delinquent payments pursuant to Section 3.07. The 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 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
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 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 Servicer shall not, on behalf of the Indenture 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 Indenture Trustee, the Trust Estate or the Noteholders 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 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 Estate to take such actions as are
necessary to bring the Mortgaged Property into compliance
therewith; and
(2) there are no circumstances present at such Mortgaged
Property relating to the use, management or disposal of any
hazardous substances, hazardous materials, hazardous wastes, or
petroleum-based materials for which investigation, testing,
monitoring, containment, clean-up or remediation could be required
under any federal, state or local law or regulation, or that if
any such materials are present for which such action could be
required, that it would be in the best economic interest of the
Trust Estate to take such actions with respect to the affected
Mortgaged Property.
The cost of the environmental audit report contemplated by this
Section 3.23 shall be advanced by the Servicer, subject to the Servicer's right
to be reimbursed therefor from the
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Collection Account as provided in Section 3.11(ix), such right of reimbursement
being prior to the rights of Noteholders to receive any amount in the Collection
Account received in respect of the affected Mortgage Loan or other Mortgage
Loans.
If the Servicer determines, as described above, that it is in the
best economic interest of the Trust Estate 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 Servicer shall take such action as it deems to be in the best economic
interest of the Trust Estate. The cost of any such compliance, containment,
cleanup or remediation shall be advanced by the Servicer, subject to the
Servicer's right to be reimbursed therefor from the Collection Account as
provided in Section 3.11(ix), such right of reimbursement being prior to the
rights of Noteholders to receive any amount in the Collection Account received
in respect of the affected Mortgage Loan or other Mortgage Loans.
(c) The Master Servicer, at its option, may purchase from the
Trust Estate 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 Indenture Trustee prior to purchase), at a price equal to the
Purchase Price. The Purchase Price for any Mortgage Loan purchased hereunder
shall be deposited in the Collection Account, and the Indenture Trustee or a
Custodian on its behalf, upon receipt of written certification from the 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. Notwithstanding the foregoing, the
Master Servicer may not purchase any Mortgage Loan pursuant to this Section
unless it pays to the Servicer (if the Servicer is Ameriquest) a fee in the
amount equal to the product of (i) 0.50% multiplied by (ii) the aggregate
Scheduled Principal Balance of the related Mortgage Loan, plus all accrued but
uncollected Servicing Fees, P&I Advances, Servicing Advances, Late Charges and
"NSF" fees assessed to the related Mortgage Loan, or such lower amount as may be
agreed to by Ameriquest and the Master Servicer.
(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
Servicer or any Sub-Servicer for any related unreimbursed Servicing Advances and
P&I Advances (including any P&I Advance, servicing fee incurred or Servicing
Advances made with respect to such Mortgage Loan that was made by the Servicer
as master servicer under another securitization), pursuant to Section 3.11(ii)
or (iii); SECOND, to accrued and unpaid interest on the Mortgage Loan, to the
date of the Final Recovery Determination, or to the Due Date prior to the
Payment 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
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amount of the recovery so allocated to interest is less than the full amount of
accrued and unpaid interest due on such Mortgage Loan, the amount of such
recovery will be allocated by the 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 Servicer or any Sub-Servicer pursuant to Section 3.11(iii).
SECTION 3.17. Indenture Trustee to Cooperate; Release of
Mortgage Files.
(a) Upon the payment in full of any Mortgage Loan, or the receipt
by the Servicer of a notification that payment in full shall be escrowed in a
manner customary for such purposes, the Servicer will immediately notify the
Indenture Trustee and any related Custodian by a certification in the form of
Exhibit A-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
Indenture Trustee or such Custodian, as the case may be, shall promptly release
the related Mortgage File to the Servicer. No expenses incurred in connection
with any instrument of satisfaction or deed of reconveyance shall be chargeable
to the Collection Account or the Payment 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 Indenture Trustee and
any related Custodian shall, upon request of the Servicer and delivery to the
Indenture Trustee or such Custodian, as the case may be, of a Request for
Release in the form of Exhibit A-l, release the related Mortgage File to the
Servicer, and the Indenture Trustee shall, at the direction of the Servicer,
execute such documents as shall be necessary to the prosecution of any such
proceedings. Such Request for Release shall obligate the Servicer to return each
and every document previously requested from the Mortgage File to the Indenture
Trustee or to such Custodian when the need therefor by the 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 Servicer
has delivered to the Indenture Trustee a certificate of a Servicing Officer
certifying as to the name and address of the Person to which such Mortgage File
or such document was delivered and the purpose or purposes of such delivery.
Upon receipt of a certificate of a Servicing Officer stating that such Mortgage
Loan was liquidated and that all amounts received or to be received in
connection with such liquidation that are required to be deposited into the
Collection Account have been so deposited, or that such Mortgage Loan has become
an REO Property, a copy of the Request for Release shall be released by the
Indenture Trustee or such Custodian to the Servicer.
(c) Upon written certification of a Servicing Officer, the
Indenture Trustee shall execute and deliver to the Servicer any court pleadings,
requests for trustee's sale or other
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documents reasonably necessary to the foreclosure or trustee's sale in respect
of a Mortgaged Property or to any legal action brought to obtain judgment
against any Mortgagor on the Mortgage Note or Mortgage or to obtain a deficiency
judgment, or to enforce any other remedies or rights provided by the Mortgage
Note or Mortgage or otherwise available at law or in equity. Each such
certification shall include a request that such pleadings or documents be
executed by the Indenture Trustee and a statement as to the reason such
documents or pleadings are required and that the execution and delivery thereof
by the Indenture 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 Servicer hereunder, the
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 Servicer shall be entitled to recover
unpaid Servicing Fees out of Insurance Proceeds or Liquidation Proceeds to the
extent permitted by Section 3.11(iii) and out of amounts derived from the
operation and sale of an REO Property to the extent permitted by Section 3.23.
The right to receive the Servicing Fee may not be transferred in whole or in
part except in connection with the transfer of all of the Servicer's
responsibilities and obligations under this Agreement.
Additional servicing compensation in the form of assumption fees,
late payment charges and other similar fees and charges (other than Prepayment
Charges) shall be retained by the Servicer (subject to Section 3.24) only to the
extent such fees or charges are received by the Servicer. The Servicer shall
also be entitled pursuant to Section 3.11(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 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 shall not be
entitled to reimbursement therefor except as specifically provided herein.
SECTION 3.19. Reports to the Indenture Trustee; Collection
Account Statements.
Not later than fifteen days after each Payment Date, the Servicer
shall forward to the Indenture Trustee, the Master Servicer and the Issuer a
statement prepared by the Servicer setting forth the status of the Collection
Account as of the close of business on such Payment Date and showing, for the
period covered by such statement, the aggregate amount of deposits into and
withdrawals from the Collection Account of each category of deposit specified in
Section 3.10(a) and each category of withdrawal specified in Section 3.11. Such
statement shall include information as to the aggregate of the outstanding
principal balances of all of the Mortgage Loans as of the last day of the
calendar month immediately preceding such Payment Date. Copies of such statement
shall be provided by the Indenture Trustee to any Noteholder and to any Person
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identified to the Indenture Trustee as a prospective transferee of a Note, upon
request at the expense of the requesting party, provided such statement is
delivered by the Servicer to the Indenture Trustee.
SECTION 3.20. Statement as to Compliance.
The Servicer will deliver to the Master Servicer, the Indenture
Trustee, the Issuer and each Rating Agency on or before April 15 of each
calendar year commencing in 1999, an Officers' Certificate stating, as to each
signatory thereof, that (i) a review of the activities of the 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 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 Indenture Trustee to any Noteholder and to any Person identified
to the Indenture Trustee as a prospective transferee of a Note, upon the request
and at the expense of the requesting party, provided that such statement is
delivered by the Servicer to the Indenture Trustee.
SECTION 3.21. Independent Public Accountants' Servicing
Report.
Not later than April 15 of each calendar year commencing in 1999,
the Servicer, at its expense, shall cause a nationally recognized firm of
independent certified public accountants to furnish to the Servicer a report
stating that (i) it has obtained a letter of representation regarding certain
matters from the management of the Servicer which includes an assertion that the
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 Servicer shall
furnish a copy of such report to the Master Servicer, the Indenture Trustee, the
Issuer and each Rating Agency. Copies of such statement shall be provided by the
Indenture Trustee to any Noteholder upon request at the Servicer's expense,
provided that such statement is delivered by the Servicer to the Indenture
Trustee. In the event such firm of independent certified public accountants
requires the Indenture Trustee to agree to the procedures performed by such
firm, the Servicer shall direct the Indenture Trustee in writing to so agree; it
being understood and agreed that the Indenture Trustee will deliver such letter
of agreement in conclusive reliance upon the direction of the Servicer, and the
Indenture Trustee has not made any independent inquiry or
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investigation as to, and shall have no obligation or liability in respect of,
the sufficiency, validity or correctness of such procedures.
SECTION 3.22. Access to Certain Documentation.
The 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 Noteholder, 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
Servicer designated by it. In addition, access to the documentation regarding
the Mortgage Loans will be provided to any Noteholder, the Indenture Trustee and
to any Person identified to the Servicer as a prospective transferee of a Note,
upon reasonable request during normal business hours at the offices of the
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 Indenture Trustee, or its nominee, in trust for the
benefit of the Noteholders.
(b) The Servicer shall segregate and hold all funds collected and
received in connection with the operation of any REO Property separate and apart
from its own funds and general assets and shall establish and maintain with
respect to REO Properties an account held in trust for the Indenture Trustee for
the benefit of the Noteholders (the "REO Account"), which shall be an Eligible
Account. The Servicer shall be permitted to allow the Collection Account to
serve as the REO Account, subject to separate ledgers for each REO Property. The
Servicer shall be entitled to retain or withdraw any interest income paid on
funds deposited in the REO Account.
(c) The Servicer shall have full power and authority, subject only
to the specific requirements and prohibitions of this Agreement, to do any and
all things in connection with any REO Property as are consistent with the manner
in which the Servicer manages and operates similar property owned by the
Servicer or any of its Affiliates, all on such terms and for such period as the
Servicer deems to be in the best interests of Noteholders. In connection
therewith, the Servicer shall deposit, or cause to be deposited in the clearing
account (which account must be an Eligible 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 Servicer's receipt thereof, and shall thereafter
deposit in the REO Account, in no event more than two Business Days after the
deposit of such funds into the clearing account, all revenues received by it
with respect to an REO Property and shall withdraw therefrom funds necessary for
the proper operation, management and maintenance of such REO Property including,
without limitation:
(i) all insurance premiums due and payable in respect of such
REO Property;
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(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 Servicer shall advance from
its own funds such amount as is necessary for such purposes if, but only if, the
Servicer would make such advances if the Servicer owned the REO Property and if
in the Servicer's judgment, the payment of such amounts will be recoverable from
the rental or sale of the REO Property.
(d) In addition to the withdrawals permitted under Section
3.23(c), the 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
(including any servicing fees incurred on, P&I Advance or Servicing Advance made
with respect to such Mortgage Loan that was made by the Servicer as master
servicer under another securitization) made in respect of such REO Property or
the related Mortgage Loan. On the Servicer Remittance Date, the Servicer shall
withdraw from each REO Account maintained by it and deposit into the Payment
Account in accordance with Section 3.10(d)(ii), for distribution on the related
Payment Date in accordance with the Indenture, 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) Each REO Disposition shall be carried out by the Servicer at
such price and upon such terms and conditions as the Servicer shall deem
necessary or advisable, as shall be normal and usual in its general servicing
activities for similar properties.
(f) The proceeds from the REO Disposition, net of any amount
required by law to be remitted to the Mortgagor under the related Mortgage Loan
and net of any payment or reimbursement to the Servicer or any Sub-Servicer as
provided above, shall be deposited in the Payment Account in accordance with
Section 3.10(d)(ii) on the Servicer Remittance Date in the month following the
receipt thereof for distribution on the related Payment Date in accordance with
the Indenture.
(g) The 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.
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SECTION 3.24. Obligations of the Servicer in Respect of
Prepayment Interest Shortfalls.
The Servicer shall deliver to the Indenture Trustee for deposit
into the Payment Account on or before 3:00 p.m. New York time on the 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 Payment Date
resulting solely from Principal Prepayments during the related Prepayment Period
and (ii) the amount of its aggregate Servicing Fee for the most recently ended
calendar month.
SECTION 3.25. Obligations of the 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 Servicer in a manner not consistent with the terms of the related
Mortgage Note and this Agreement, the Servicer, upon discovery or receipt of
notice thereof, immediately shall deliver to the Indenture Trustee for deposit
in the Payment Account from its own funds the amount of any such shortfall and
shall indemnify and hold harmless the Trust Estate, the Indenture Trustee, the
Issuer, the Owner Trustee and any successor servicer in respect of any such
liability. Such indemnities shall survive the termination or discharge of this
Agreement.
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ARTICLE IV
REMITTANCE REPORTS; P&I ADVANCES
SECTION 4.01. Remittance Reports; P&I Advances.
(a) On the Business Day following each Determination Date, the
Servicer shall deliver to the Indenture Trustee by telecopy (or by such other
means as the Servicer and the Indenture Trustee may agree from time to time) a
Remittance Report with respect to the related Payment Date. Such Remittance
Report will include (i) the amount of P&I Advances to be made by the Servicer in
respect of the related Payment 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 Payment Date and (ii) such
other information with respect to the Mortgage Loans as the Indenture Trustee
may reasonably require to perform the calculations necessary to make the
distributions contemplated by the Indenture and to prepare the statements to
Noteholders contemplated by the Indenture. The Indenture Trustee shall not be
responsible to recompute, recalculate or verify any information provided to it
by the Servicer. The Indenture Trustee hereby agrees to forward a copy of the
Remittance Report in electronic format to the Master Servicer by the Business
Day following its receipt thereof.
(b) The amount of P&I Advances to be made by the Servicer for any
Payment Date shall equal, subject to Section 4.01(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 such REO Property an REO Disposition did not
occur during the related Prepayment Period, an amount equal to the excess, if
any, of the Monthly Payments (with each interest portion thereof net of the
related Servicing Fee) that would have been due on the related Due Date in
respect of the related Mortgage Loans, over the net income from such REO
Property transferred to the Payment Account pursuant to Section 3.23 for
distribution on such Payment Date.
On or before 3:00 p.m. New York time on the Servicer Remittance
Date, the Servicer shall remit in immediately available funds to the Indenture
Trustee for deposit in the Payment 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 Payment 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 4.01, used by the 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 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 Servicer's
records and replaced by the Servicer by deposit in the Collection Account on or
before any future Servicer Remittance Date to the extent that the
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Available Payment Amount for the related Payment Date (determined without regard
to P&I Advances to be made on the Servicer Remittance Date) shall be less than
the total amount that would be distributed to the Classes of Noteholders
pursuant to the Indenture on such Payment Date if such amounts held for future
distributions had not been so used to make P&I Advances. The Indenture Trustee
will provide notice to the Servicer by telecopy by the close of business on any
Servicer Remittance Date in the event that the amount remitted by the Servicer
to the Indenture Trustee on such date is less than the P&I Advances required to
be made by the Servicer for the related Payment Date.
(c) The obligation of the 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 Estate pursuant to any applicable provision of
this Agreement, except as otherwise provided in this Section.
(d) Notwithstanding anything herein to the contrary, no P&I
Advance shall be required to be made hereunder by the Servicer if such P&I
Advance would, if made, constitute a Nonrecoverable P&I Advance. The
determination by the Servicer that it has made a Nonrecoverable P&I Advance or
that any proposed P&I Advance, if made, would constitute a Nonrecoverable P&I
Advance, shall be evidenced by an Officers' Certificate of the Servicer
delivered to the Indenture Trustee.
SECTION 4.02. Determination of Realized Losses.
Prior to each Determination Date, the 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 Servicer shall also determine as to each Mortgage Loan:
(A) the total amount of Realized Losses, if any, incurred in connection with any
Deficient Valuations made during the related Prepayment Period; and (B) 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 Servicer shall be evidenced by an Officers' Certificate
delivered to the Indenture Trustee by the Servicer prior to the Determination
Date immediately following the end of (x) in the case of Bankruptcy Losses
allocable to interest, the Due Period during which any such Realized Loss was
incurred, and (y) in the case of all other Realized Losses, the Prepayment
Period during which any such Realized Loss was incurred.
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ARTICLE V
THE SERVICER
SECTION 5.01. Liability of the Servicer.
The Servicer shall be liable in accordance herewith only to the
extent of the obligations specifically imposed by this Agreement and undertaken
hereunder by the Servicer herein.
SECTION 5.02. Merger or Consolidation of the Servicer.
Subject to the following paragraph, the Servicer will keep in full
effect its existence, rights and franchises as a corporation under the laws of
the jurisdiction of its incorporation and its qualification as an approved
conventional seller/servicer for Fannie Mae or Freddie Mac in good standing. The
Servicer 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
Notes or any of the Mortgage Loans and to perform its respective duties under
this Agreement.
The 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
Servicer shall be a party, or any Person succeeding to the business of the
Servicer, shall be the successor of the Servicer 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 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 Notes 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 5.03. Limitation on Liability of the Master
Servicer, Servicer and Others.
None of the Master Servicer, the Servicer nor any of the
directors, officers, employees or agents of the Master Servicer or Servicer
shall be under any liability to the Trust Estate or the Noteholders 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 Master Servicer, the Servicer or any such
person against any breach of warranties, representations or covenants made
herein, or against any specific liability imposed on the Master Servicer or
Servicer pursuant hereto, or against any liability which would otherwise be
imposed by reason of willful misfeasance, bad faith or negligence in the
performance of duties or by reason of reckless disregard of obligations and
duties hereunder. The Master Servicer, Servicer and any director, officer,
employee or agent of the Master Servicer or Servicer may rely in good faith on
any document of any kind which, PRIMA FACIE, is properly executed and submitted
by any Person
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respecting any matters arising hereunder. The Master Servicer, Servicer and any
director, officer, employee or agent of the Master Servicer or Servicer shall be
indemnified and held harmless by the Trust Estate against any loss, liability or
expense incurred in connection with any legal action relating to this Agreement
or the Notes, other than any loss, liability or expense to any specific Mortgage
Loan or Mortgage Loans (except as any such loss, liability or expense shall be
otherwise reimbursable pursuant to this Agreement) or any loss, liability or
expense incurred by reason of willful misfeasance, bad faith or negligence in
the performance of duties hereunder or by reason of reckless disregard of
obligations and duties hereunder. Neither the Master Servicer or 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 Master Servicer and the 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 Noteholders hereunder. In such event, unless the Master
Servicer or the Servicer acts without the consent of Holders of Notes entitled
to at least 51% of the Voting Rights (which consent shall not be necessary in
the case of litigation or other legal action by either to enforce their
respective rights or defend themselves hereunder), 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 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 Estate, and the Master Servicer or the Servicer, as the case may be,
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 Noteholders to receive any amount in the Collection
Account.
SECTION 5.04. Limitation on Resignation of the Servicer.
The Servicer shall not resign from the obligations and duties
hereby imposed on it except (i) upon determination that its duties hereunder are
no longer permissible under applicable law or (ii) with the written consent of
the Master Servicer, the Indenture Trustee and the Issuer and written
confirmation from each Rating Agency (which confirmation shall be furnished to
the Indenture Trustee and the Issuer) that such resignation will not cause such
Rating Agency to reduce the then current rating of the Notes. Any such
determination pursuant to clause (i) of the preceding sentence permitting the
resignation of the Servicer shall be evidenced by an Opinion of Counsel to such
effect obtained at the expense of the Servicer and delivered to the Master
Servicer, the Indenture Trustee and the Issuer. No resignation of the Servicer
shall become effective until the Master Servicer (or if the Master Servicer is
not the successor, the Indenture Trustee or a successor servicer) shall have
assumed the 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 Servicer shall not assign
nor transfer any of its rights, benefits or privileges hereunder to any other
Person, nor delegate to or subcontract with, nor authorize or appoint any other
Person to perform any of the duties, covenants or obligations
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to be performed by the Servicer hereunder. If, pursuant to any provision hereof,
the duties of the Servicer are transferred to a successor servicer, the entire
amount of the Servicing Fee and other compensation payable to the Servicer
pursuant hereto shall thereafter be payable to such successor servicer.
SECTION 5.05. Rights of the Indenture Trustee and the
Issuer in Respect of the Servicer.
The Servicer shall afford (and any Sub-Servicing Agreement shall
provide that each Sub-Servicer shall afford) the Master Servicer, the Issuer and
the Indenture Trustee, upon reasonable notice, during normal business hours,
access to all records maintained by the Servicer (and any such Sub-Servicer) in
respect of the Servicer's rights and obligations hereunder and access to
officers of the Servicer (and those of any such Sub-Servicer) responsible for
such obligations. Upon request, the Servicer shall furnish to the Master
Servicer, the Issuer and the Indenture Trustee its (and any such Sub-Servicer's)
most recent financial statements and such other information relating to the
Servicer's capacity to perform its obligations under this Agreement that it
possesses. To the extent such information is not otherwise available to the
public, the Master Servicer, the Issuer and the Indenture Trustee shall not
disseminate any information obtained pursuant to the preceding two sentences
without the 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,
rating agencies or reinsurers or (ii) pursuant to any law, rule, regulation,
order, judgment, writ, injunction or decree of any court or governmental
authority having jurisdiction over the Master Servicer, the Issuer, the
Indenture Trustee or the Trust Estate, and in each case, the Master Servicer,
the Issuer or the Indenture Trustee, as the case may be, shall use its best
efforts to assure the confidentiality of any such disseminated non-public
information. The Master Servicer, the Indenture Trustee or the Issuer may, but
is not obligated to, enforce the obligations of the Servicer under this
Agreement and may, but is not obligated to, perform, or cause a designee to
perform, any defaulted obligation of the Servicer under this Agreement or
exercise the rights of the Servicer under this Agreement; provided that the
Servicer shall not be relieved of any of its obligations under this Agreement by
virtue of such performance by the Master Servicer, the Issuer, the Indenture
Trustee or any of their designees. The Master Servicer, the Issuer and the
Indenture Trustee shall not have any responsibility or liability for any action
or failure to act by the Servicer and is not obligated to supervise the
performance of the Servicer under this Agreement or otherwise.
SECTION 5.06. Indemnification of the Indenture Trustee.
The Servicer agrees to indemnify the Indenture Trustee from, and
hold it harmless against, any loss, liability or expense resulting from a breach
of the Servicer's obligations and duties under this Agreement. Such indemnity
shall survive the termination or discharge of this Agreement. Any payment
hereunder made by the Servicer to the Indenture Trustee shall be from the
Servicer's own funds, without reimbursement from the Trust Estate therefore.
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ARTICLE VI
DEFAULT
SECTION 6.01. Servicer Events of Default.
"Servicer Event of Default," wherever used herein, means any one
of the following events:
(i) any failure by the Servicer to remit to the Indenture
Trustee for distribution to the Noteholders any payment (other
than a P&I Advance required to be made from its own funds on any
Servicer Remittance Date pursuant to Section 4.01) required to be
made under the terms of 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 Servicer by the Indenture Trustee (in which
case notice shall be provided by telecopy), or to the Servicer and
the Indenture Trustee by the Holders of Notes entitled to at least
25% of the Voting Rights; or
(ii) any failure on the part of the Servicer duly to observe or
perform in any material respect any of the covenants or agreements
on the part of the Servicer contained in this Agreement which
continues unremedied for a period of 45 days after the earlier of
(i) the date on which written notice of such failure, requiring
the same to be remedied, shall have been given to the Servicer by
either the Master Servicer or the Indenture Trustee, or to the
Servicer and the Indenture Trustee by the Holders of Notes
entitled to at least 25% of the Voting Rights and (ii) actual
knowledge of such failure by a Servicing Officer of the 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 Servicer and if such proceeding is being
contested by the Servicer in good faith such decree or order shall
have remained in force undischarged or unstayed for a period of 60
days or results in the entry of an order for relief or any such
adjudication or appointment; or
(iv) the 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 the Servicer or of or
relating to all or substantially all of its property; or
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(v) the Servicer shall admit in writing its inability to pay its
debts generally as they become due, file a petition to take
advantage of any applicable insolvency or reorganization statute,
make an assignment for the benefit of its creditors, or
voluntarily suspend payment of its obligations; or
(vi) any failure by the Servicer of the Servicer Termination
Test; provided, however that if the Master Servicer is the
Servicer such Servicer Termination Test shall not apply; or
(vii) any failure of the Servicer to make any P&I Advance on any
Servicer Remittance Date required to be made from its own funds
pursuant to Section 4.01 which continues unremedied until 3:00
p.m. New York time on the Business Day immediately following the
Servicer Remittance Date.
If a 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
Servicer Event of Default shall not have been remedied, the Indenture Trustee
may, and at the written direction of the Holders of Notes entitled to at least
51% of Voting Rights, the Indenture Trustee shall, by notice in writing to the
Servicer, terminate all of the rights and obligations of the Servicer in its
capacity as a Servicer under this Agreement, to the extent permitted by law, and
in and to the Mortgage Loans and the proceeds thereof. If a Servicer Event of
Default described in clause (vii) hereof shall occur, the Indenture Trustee
shall, by notice in writing to the Servicer, terminate all of the rights and
obligations of the Servicer in its capacity as a Servicer under this Agreement
and in and to the Mortgage Loans and the proceeds thereof. On or after the
receipt by the Servicer of such written notice, all authority and power of the
Servicer under this Agreement, whether with respect to the Notes (other than as
a Holder of any Note) or the Mortgage Loans or otherwise, shall pass to and be
vested in the Master Servicer (or if the Master Servicer is the Servicer, the
Indenture Trustee) pursuant to and under this Section and, without limitation,
the Master Servicer (or if the Master Servicer is the Servicer, the Indenture
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 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 Servicer agrees, at
its sole cost and expense, promptly (and in any event no later than ten Business
Days subsequent to such notice) to provide the Master Servicer (or if the Master
Servicer is the Servicer, the Indenture Trustee) with all documents and records
requested by it to enable it to assume the Servicer's functions under this
Agreement, and to cooperate with the Master Servicer (or if the Master Servicer
is the Servicer, the Indenture Trustee) in effecting the termination of the
Servicer's responsibilities and rights under this Agreement, including, without
limitation, the transfer within one Business Day to the Master Servicer (or if
the Master Servicer is the Servicer, the Indenture Trustee) for administration
by it of all cash amounts which at the time shall be or should have been
credited by the Servicer to the Collection Account held by or on behalf of the
Servicer, the Payment Account or any REO Account or Servicing Account held by or
on behalf of the Servicer or thereafter be received with respect to the Mortgage
Loans or any REO Property
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serviced by the Servicer (provided, however, that the 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 5.03,
notwithstanding any such termination, with respect to events occurring prior to
such termination). For purposes of this Section 6.01, the Indenture Trustee
shall not be deemed to have knowledge of a Servicer Event of Default unless a
Responsible Officer of the Indenture Trustee assigned to and working in the
Indenture Trustee's Corporate Trust Office has actual knowledge thereof or
unless written notice of any event which is in fact such a Servicer Event of
Default is received by the Indenture Trustee and such notice references the
Notes, the Trust Estate or this Agreement.
SECTION 6.02. Master Servicer or Indenture Trustee to Act;
Appointment of Successor.
(a) On and after the time the Servicer receives a notice of
termination, the Master Servicer or if the Master Servicer is the Servicer, the
Indenture Trustee shall be the successor in all respects to the Servicer in its
capacity as Servicer under this Agreement and the transactions set forth or
provided for herein and shall be subject to all the responsibilities, duties and
liabilities relating thereto and arising thereafter placed on the Servicer
(except if the Indenture Trustee is successor for any representations or
warranties of the Servicer under this Agreement, the responsibilities, duties
and liabilities contained in Section 2.01(b) and its obligation to deposit
amounts in respect of losses pursuant to Section 3.12) by the terms and
provisions hereof including, without limitation, the Servicer's obligations to
make P&I Advances pursuant to Section 4.01; provided, however, that if the
Indenture Trustee is prohibited by law or regulation from obligating itself to
make advances regarding delinquent mortgage loans, then the Indenture Trustee
shall not be obligated to make P&I Advances pursuant to Section 4.01; and
provided further, that any failure to perform such duties or responsibilities
caused by the Servicer's failure to provide information required by Section 6.01
shall not be considered a default by the Master Servicer or the Indenture
Trustee as successor to the Servicer hereunder. As compensation therefor, the
Master Servicer or the Indenture Trustee, as the case may be, shall be entitled
to the Servicing Fees and all funds relating to the Mortgage Loans to which the
Servicer would have been entitled if it had continued to act hereunder (other
than amounts which were due or would become due to the Servicer prior to its
termination or resignation). Notwithstanding the above and subject to the next
paragraph, the Master Servicer or the Indenture Trustee, as the case may be,
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 Notes entitled to at least 51% of the Voting Rights
so request in writing to the Master Servicer or the Indenture Trustee, as the
case may be, 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 Servicer under this Agreement in the assumption of all or any
part of the responsibilities, duties or liabilities of the Servicer under this
Agreement. No appointment of a successor to the Servicer under this Agreement
shall be effective until the assumption by the successor of all of the
Servicer's responsibilities, duties and liabilities hereunder. In connection
with such appointment and assumption described herein, the Master
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Servicer or the Indenture Trustee, as the case may be, 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 Servicer as such
hereunder. The Master Servicer or the Indenture Trustee, as the case may be, 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 Servicer under this Agreement, the Master Servicer or the
Indenture Trustee, as the case may be, shall act in such capacity as hereinabove
provided.
Upon removal or resignation of the Servicer, if the Master
Servicer (or if the Master Servicer is the Servicer, the Indenture Trustee) is
not going to serve as successor Servicer, the Master Servicer (or if the Master
Servicer is the Servicer, the Indenture Trustee) with the cooperation of the
Issuer, (x) shall solicit bids for a successor Servicer as described below and
(y) pending the appointment of a successor Servicer as a result of soliciting
such bids, shall serve as Servicer of the Mortgage Loans serviced by such
predecessor Servicer. The Master Servicer (or if the Master Servicer is the
Servicer, the Indenture Trustee) shall solicit, by public announcement, bids
from housing and home finance institutions, banks and mortgage servicing
institutions meeting the qualifications set forth above (including the Indenture
Trustee or any affiliate thereof). Such public announcement shall specify that
the successor Servicer shall be entitled to the servicing compensation agreed
upon between the Master Servicer (or if the Master Servicer is the Servicer, the
Indenture Trustee), the successor Servicer and the Issuer; provided, however,
that no such fee shall exceed the related Servicing Fee. Within thirty days
after any such public announcement, the Master Servicer (or if the Master
Servicer is the Servicer, the Indenture Trustee), with the cooperation of the
Issuer, shall negotiate in good faith and effect the sale, transfer and
assignment of the servicing rights and responsibilities hereunder to the
qualified party submitting the highest satisfactory bid as to the price they
will pay to obtain such servicing. The Master Servicer (or if the Master
Servicer is the Servicer, the Indenture Trustee) upon receipt of the purchase
price shall pay such purchase price to the Servicer being so removed, after
deducting from any sum received by the Master Servicer (or if the Master
Servicer is the Servicer, the Indenture Trustee) from the successor to the
Servicer in respect of such sale, transfer and assignment all costs and expenses
of any public announcement and of any sale, transfer and assignment of the
servicing rights and responsibilities reasonably incurred hereunder. After such
deductions, the remainder of such sum shall be paid by the Master Servicer (or
if the Master Servicer is the Servicer, the Indenture Trustee) to the Servicer
at the time of such sale.
(b) If the Servicer fails to remit to the Indenture Trustee for
distribution to the Noteholders any payment required to be made under the terms
of the Notes and the Indenture (for purposes of this Section 6.02(b), a
"Remittance") because the 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 Indenture Trustee shall upon
notice of such prohibition, regardless of whether it has received a notice of
termination under Section 6.01, advance the amount of such Remittance by
depositing such amount in the Payment Account on the related Payment Date. The
Indenture Trustee shall be obligated to make such advance only if (i) such
advance, in the good faith judgment of the Indenture Trustee, can reasonably be
expected to
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be ultimately recoverable from Stayed Funds and (ii) the Indenture Trustee is
not prohibited by law from making such advance or obligating itself to do so.
Upon remittance of the Stayed Funds to the Indenture Trustee or the deposit
thereof in the Payment Account by the Servicer, a trustee in bankruptcy or a
federal bankruptcy court, the Indenture Trustee may recover the amount so
advanced, without interest, by withdrawing such amount from the Payment Account;
however, nothing in this Agreement shall be deemed to affect the Indenture
Trustee's rights to recover from the Servicer's own funds interest on the amount
of any such advance. If the Indenture 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 Indenture Trustee shall be entitled to reimburse itself for such
advance, without interest, by withdrawing from the Payment Account, out of
amounts on deposit therein, an amount equal to the portion of such advance
attributable to the Stayed Funds.
SECTION 6.03. Notification to Noteholders.
(a) Upon any termination of the Servicer pursuant to Section 6.01
above or any appointment of a successor to the Servicer pursuant to Section 6.02
above, the Indenture Trustee shall give prompt written notice thereof to
Noteholders at their respective addresses appearing in the Note 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 Servicer Event of Default or five days after a Responsible
Officer of the Indenture Trustee becomes aware of the occurrence of such an
event, the Indenture Trustee shall transmit by mail to the Master Servicer and
to all Holders of Notes notice of each such occurrence, unless such default or
Servicer Event of Default shall have been cured or waived.
SECTION 6.04. Waiver of Servicer Events of Default.
The Holders representing at least 66% of the Voting Rights
evidenced by all Classes of Notes affected by any default or Servicer Event of
Default hereunder may waive such default or Servicer Event of Default; provided,
however, that a default or Servicer Event of Default under clause (i) or (vii)
of Section 6.01 may be waived only by all of the Holders of the Notes. Upon any
such waiver of a default or Servicer Event of Default, such default or Servicer
Event of Default shall cease to exist and shall be deemed to have been remedied
for every purpose hereunder. No such waiver shall extend to any subsequent or
other default or Servicer Event of Default or impair any right consequent
thereon except to the extent expressly so waived.
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ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 7.01. Amendment.
This Agreement may be amended from time to time by the parties
hereto, provided that any amendment be accompanied by a letter from the Rating
Agencies to the effect that the amendment will not result in the downgrading or
withdrawal of the ratings then assigned to the
Notes.
SECTION 7.02. 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 7.03. 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 Master Servicer, Wilshire Servicing Corporation, 1776 South West
Madison Street, Portland, Oregon 97205, Attention: Mr. Robert Rosen (facsimile
number: (503) 233-8799), (b) in the case of the Servicer, Ameriquest Mortgage
Company, 1100 Town & Country Road, 11th Floor, Orange, California 92868,
Attention: General Counsel (telecopy number (714) 564-9639), (c) in the case of
DCR, Duff & Phelps Credit Rating Co., 17 State Street, New York, New York 10004,
(d) in the case of S&P, Standard & Poor's Ratings Services, 25 Broadway, New
York, New York 10004, (e) in the case of the Issuer (or the Owner Trustee on
behalf of the Issuer), c/o Wilmington Trust Company, Rodney Square North, 1100
North Market Street, Wilmington, Delaware 19890, Attention: Corporate Trust
Administration (telecopy number (302) 651-8882) (with copies to Wilshire Real
Estate Investment Trust Inc., 1776 South West Madison Street, Portland, Oregon
97205, Attention: 1776 South West Madison Street, Portland, Oregon 97205,
Attention: Mr. Robert Rosen (facsimile number: (503) 233-8799), (f) in the case
of the Indenture Trustee, Norwest Bank Minnesota, National Association, Sixth
Street & Marquette Avenue, Minneapolis, Minnesota 55479-0070, Attention;
Corporate Trust Services/Asset-Backed Administration (telecopy number (612)
667-3539) (with a copy to Norwest Bank Minnesota, National Association, 11000
Broken Land Parkway, Columbia, Maryland 21044, Attention: Securities
Administration (telecopy number (410) 884-2360)), (g) in the case of the Seller,
Wilshire Real Estate Investment Trust Inc., 1776 South West Madison Street,
Portland, Oregon 97205, Attention: 1776 South West Madison Street, Portland,
Oregon 97205, Attention: Mr. Robert Rosen (facsimile number: (503) 233-8799), or
as to each party, at such other address as shall be designated by such party in
written notice to each other party. Any notice required or
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permitted to be mailed to a Noteholder shall be given by first class mail,
postage prepaid, at the address of such Noteholder as shown in the Note
Register. Any notice so mailed within the time prescribed in the Agreement shall
be conclusively presumed to have been duly given, whether or not the Noteholder
receives such notice.
SECTION 7.04. 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 Notes or the rights of the Holders thereof.
SECTION 7.05. 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 7.06. Third-Party Beneficiaries.
This Agreement will inure to the benefit of and be binding upon
the parties hereto, the Noteholders, the Owner Trustee, the Seller and their
respective successors and permitted assigns. Except as otherwise provided in
this Agreement, no other Person will have any right or obligation hereunder.
SECTION 7.07. Counterparts.
This instrument may be executed in any number of counterparts,
each of which so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.
SECTION 7.08 Termination.
Except with respect to obligations of the Servicer relating to any
representations and warranties or indemnities made by it in this Agreement, the
respective obligations and responsibilities of the Servicer, the Indenture
Trustee and the Issuer created hereby shall terminate upon the satisfaction and
discharge of the Indenture pursuant to Section 4.10 thereof.
SECTION 7.09. Partial Optional Redemption of the Notes.
(a) At its option, the Majority Certificateholder may obtain the
release from the lien of the Indenture and the removal from the obligations of
the parties hereto, the Mortgage Loans and each REO Property on Schedule 3
attached hereto remaining in the Trust Estate and in
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connection therewith effect a partial redemption of the Notes on any Payment
Date following the Due Period in which the aggregate Stated Principal Balance of
such Mortgage Loans and such REO Properties listed on Schedule 3 attached hereto
remaining in the Trust Estate at the time of such election is less than
$19,989,567.32. The aggregate redemption price for such partial redemption of
the Notes shall be a price which is equal to the greater of (A) the aggregate
Purchase Price of all the Mortgage Loans included on such Schedule 3 remaining
in the Trust Estate, plus the appraised value of each REO Property, if any,
included on such Schedule 3 remaining in the Trust Estate, such appraisal to be
conducted by an appraiser mutually agreed upon by the Majority Certificateholder
and the Indenture Trustee in their reasonable discretion and (B) the aggregate
fair market value of all of the assets of the Trust Estate included on such
Schedule 3 (as determined by the Majority Certificateholder and the Indenture
Trustee), as of the close of business on the third Business Day next preceding
the date upon which purchase is to take place.
(b) In order to exercise the foregoing option, the Majority
Certificateholder shall, not less than 15 days prior to the proposed Payment
Date on which such partial redemption is to be made, deposit the aggregate
redemption price for the partial redemption with the Indenture Trustee (and the
Indenture Trustee shall deposit such funds in the Payment Account), and shall
provide written notice of its exercise of such option to the Indenture Trustee,
the Owner Trustee, the Master Servicer and the Servicer. Upon receipt of such
payment, the Indenture Trustee shall promptly release or cause to be released to
the Majority Certificateholder the related Mortgage Files and the Indenture
Trustee shall execute all assignments, endorsements and other instruments
necessary to effectuate such transfer. Upon release of the related Mortgage
Files to the Majority Certificateholder, such Mortgage Loans shall no longer be
serviced in accordance with the terms of this Agreement.
SECTION 7.10. No Recourse.
(a) The Master Servicer and the Servicer each acknowledge that no
recourse may be had against the Issuer, except as may be expressly set forth in
this Agreement.
(b) It is expressly understood and agreed by and between the
parties hereto (i) that this Agreement is executed and delivered by the Owner
Trustee, not in its individual capacity but solely as Owner Trustee under the
Owner Trust Agreement in the exercise of the power and authority conferred and
vested in it as such Owner Trustee, (ii) each of the representations,
undertakings and agreements made herein by the Issuer are not personal
representations, undertakings and agreements of the Owner Trustee but are
binding only on the Issuer created pursuant to the Owner Trust Agreement, (iii)
nothing contained herein shall be construed as creating any liability on the
Owner Trustee, individually or personally, to perform any covenant of the Issuer
either expressed or implied contained herein, all such liability, if any, being
expressly waived by the parties hereto and by any person claiming by, through or
under any such party and (iv) under no circumstances shall the Owner Trustee be
personally liable for the payment of any indebtedness or expense of the Issuer
or be liable for the breach or failure of any obligation, representation,
warranty or covenant make or undertaken by the Issuer under this Agreement.
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<PAGE>
IN WITNESS WHEREOF, the Master Servicer, the Servicer, the Issuer
and the Indenture 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.
WILSHIRE SERVICING CORPORATION
as Master Servicer
By: /s/ Lawrence Mendelsohn
-----------------------------------
Name: Lawrence Mendelsohn
Title: President
AMERIQUEST MORTGAGE COMPANY
as Servicer
By: /s/ Judith Hopkinson
-----------------------------------
Name: Judith Hopkinson
Title: Executive Vice President
WILSHIRE REIT TRUST SERIES 1998-1,
as Issuer
By: Wilmington Trust Company, not in
its individual capacity but
solely as Owner Trustee
By: /s/ Emmett Harmon
-----------------------------------
Name: Emmett Harmon
Title: Vice President
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
as Indenture Trustee
By: /s/ Randall Reider
-----------------------------------
Name: Randall Reider
Title: Assistant Vice President
-64-
<PAGE>
EXHIBIT A-1
REQUEST FOR RELEASE
(for Indenture Trustee/Custodian)
LOAN INFORMATION
Name of Mortgagor:
-----------------------------------
Servicer
Loan No.:
-----------------------------------
INDENTURE TRUSTEE/CUSTODIAN
Name:
-----------------------------------
Address:
-----------------------------------
-----------------------------------
Indenture Trustee/Custodian
Mortgage File No.:
-----------------------------------
DEPOSITOR
Name: SALOMON BROTHERS MORTGAGE
SECURITIES VII, INC.
Address:
-----------------------------------
-----------------------------------
Notes: Asset-Backed Floating Rate Notes, Series 1998-11.
A-1-1
<PAGE>
The undersigned Servicer hereby acknowledges that it has received
from _______________________, as Indenture Trustee (or a Custodian on its
behalf) for the Holders of Salomon Brothers Mortgage Securities VII, Inc.
Asset-Backed Floating Rate Notes, Series 1998-11, 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 Servicing
Agreement, dated as of September 1, 1998, among the Indenture Trustee, the
Issuer and the Servicer (the "Agreement").
( ) Promissory Note dated _______________, 19__, in the original principal
sum of $__________, made by _____________________, payable to, or
endorsed to the order of, the Indenture 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 Indenture 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 Servicer hereby acknowledges and agrees as
follows:
(1) The Servicer shall hold and retain possession of the Documents
in trust for the benefit of the Indenture Trustee, solely for the
purposes provided in the Agreement.
(2) The Servicer shall not cause or permit the Documents to become
subject to, or encumbered by, any claim, liens, security interest,
charges, writs of attachment or other
A-1-2
<PAGE>
impositions nor shall the Servicer assert or seek to assert any claims
or rights of setoff to or against the Documents or any proceeds
thereof.
(3) The Servicer shall return each and every Document previously
requested from the Mortgage File to the Indenture Trustee (or a
Custodian on its behalf) 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 Servicer
shall at all times be earmarked for the account of the Indenture
Trustee, and the Servicer shall keep the Documents and any proceeds
separate and distinct from all other property in the Servicer's
possession, custody
or control.
Dated:
[ Servicer]
By:
-----------------------------------
Name:
Title:
A-1-3
<PAGE>
EXHIBIT A-2
REQUEST FOR RELEASE
[Mortgage Loans Paid in Full]
OFFICERS' CERTIFICATE AND TRUST RECEIPT
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.
ASSET-BACKED FLOATING RATE NOTES, SERIES 1998-11
____________________________________________________ HEREBY CERTIFIES THAT
HE/SHE IS AN OFFICER OF THE 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 SERVICING
AGREEMENT DESCRIBED IN THE ATTACHED SCHEDULE:
ALL PAYMENTS OF PRINCIPAL, PREMIUM (IF ANY), AND INTEREST HAVE BEEN
MADE.
LOAN NUMBER: BORROWER'S NAME:
---------------- -------------------
COUNTY:
------------------
WE HEREBY CERTIFY THAT ALL AMOUNTS RECEIVED IN CONNECTION WITH
SUCH
PAYMENTS, WHICH ARE REQUIRED TO BE DEPOSITED IN THE COLLECTION
ACCOUNT PURSUANT TO SECTION 3.10 OF THE SERVICING AGREEMENT, HAVE
BEEN OR WILL BE CREDITED.
DATED:
- -------------------- ---------------
/ / VICE PRESIDENT
/ / ASSISTANT VICE PRESIDENT
A-2-1
<PAGE>
SCHEDULE 1
MORTGAGE LOAN SCHEDULE
[AVAILABLE UPON REQUEST]
<PAGE>
SCHEDULE 2
PREPAYMENT CHARGE SCHEDULE
[AVAILABLE UPON REQUEST]
<PAGE>
SCHEDULE 3
Schedule of Mortgage Loans from Series 1996-LB3
[AVAILABLE UPON REQUEST]
<PAGE>
SCHEDULE 4
Schedule of Mortgage Loans from Series 1997-LB1 and Series 1996-LB3
[AVAILABLE UPON REQUEST]
EXHIBIT 4.2
WILSHIRE SERVICING CORPORATION
Master Servicer
LONG BEACH MORTGAGE COMPANY
Servicer
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
Indenture Trustee
and
WILSHIRE REIT TRUST SERIES 1998-1
Issuer
-----------------------------------------
SERVICING AGREEMENT
Dated as of September 1, 1998
-----------------------------------------
Asset-Backed Floating Rate Notes
Series 1998-11
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
SECTION PAGE
------- ----
<S> <C> <C>
ARTICLE I
DEFINITIONS
1.01. Defined Terms..................................................................................1
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.01. Enforcement of Representations and Warranties.................................................23
2.02. Existence.....................................................................................25
2.03. Representations, Warranties and Covenants of the Servicer and the Master
Servicer......................................................................................25
ARTICLE III
ADMINISTRATION AND SERVICING
OF THE MORTGAGE LOANS
3.01. Servicer to Act as Servicer...................................................................29
3.02. Sub-Servicing Agreements Between the Servicer and Sub-Servicers...............................30
3.03. Successor Sub-Servicers.......................................................................31
3.04. Liability of the Servicer.....................................................................32
3.05. No Contractual Relationship Between Sub-Servicers and Indenture Trustee,
Issuer or Noteholders.........................................................................32
3.06. Assumption or Termination of Sub-Servicing Agreements by
Indenture Trustee.............................................................................32
3.07. Collection of Certain Mortgage Loan Payments..................................................33
3.08. Sub-Servicing Accounts........................................................................33
3.09. Collection of Taxes, Assessments and Similar Items; Servicing Accounts........................34
3.10. Collection Account............................................................................35
3.11. Withdrawals from the Collection Account.......................................................37
3.12. Investment of Funds in the Collection Account.................................................38
3.13. [intentionally omitted].......................................................................39
3.14. Maintenance of Hazard Insurance and Errors and Omissions and
Fidelity Coverage.............................................................................39
3.15. Enforcement of Due-On-Sale Clauses; Assumption Agreements.....................................40
3.16. Realization Upon Defaulted Mortgage Loans.....................................................41
3.17. Indenture Trustee to Cooperate; Release of Mortgage Files.....................................43
3.18. Servicing Compensation........................................................................44
A-2-i
<PAGE>
SECTION PAGE
------- ----
3.19. Reports to the Indenture Trustee; Collection Account Statements...............................45
3.20. Statement as to Compliance....................................................................45
3.21. Independent Public Accountants' Servicing Report..............................................46
3.22. Access to Certain Documentation...............................................................46
3.23. Title, Management and Disposition of REO Property.............................................47
3.24. Obligations of the Servicer in Respect of Prepayment Interest Shortfalls......................48
3.25. Obligations of the Servicer in Respect of Mortgage Rates and Monthly Payments.................49
ARTICLE IV
REMITTANCE REPORTS; P&I ADVANCES
4.01. Remittance Reports; P&I Advances..............................................................50
4.02. Determination of Realized Losses..............................................................51
ARTICLE V
THE SERVICER
5.01. Liability of the Servicer.....................................................................53
5.02. Merger or Consolidation of the Servicer.......................................................53
5.03. Limitation on Liability of the Master Servicer, Servicer and Others...........................53
5.04. Limitation on Resignation of the Servicer.....................................................54
5.05. Rights of the Indenture Trustee and the Issuer in Respect of the Servicer.....................55
5.06. Indemnification of the Indenture Trustee......................................................56
ARTICLE VI
DEFAULT
6.01. Servicer Events of Default....................................................................57
6.02. Master Servicer or Indenture Trustee to Act; Appointment of Successor.........................59
6.03. Notification to Noteholders...................................................................61
6.04. Waiver of Servicer Events of Default..........................................................61
A-2-ii
<PAGE>
SECTION PAGE
------- ----
ARTICLE VII
SPECIAL FORECLOSURE PROCEDURES
AT OPTION OF THE CERTIFICATEHOLDER OF THE MAJORITY
IN PERCENTAGE INTEREST IN THE EQUITY CERTIFICATES
7.01. General.......................................................................................62
7.02. Reports and Notices...........................................................................63
7.03. Election to Delay Foreclosure Proceedings.....................................................64
7.04. Election to Commence Foreclosure Proceedings..................................................66
7.05. Termination...................................................................................68
7.06. Collateral Account............................................................................68
7.07. Collateral Account Permitted Investments......................................................68
7.08. Grant of Security Interest....................................................................69
7.09. Collateral Shortfalls.........................................................................69
ARTICLE VIII
MISCELLANEOUS PROVISIONS
8.01. Amendment.....................................................................................70
8.02. Governing Law.................................................................................70
8.03. Notices.......................................................................................70
8.04. Severability of Provisions....................................................................71
8.05. Article and Section References................................................................71
8.06. Third-Party Beneficiaries.....................................................................71
8.07. Counterparts..................................................................................71
8.08 Termination...................................................................................71
8.09. No Recourse...................................................................................71
</TABLE>
A-2-ii
<PAGE>
EXHIBITS
Exhibit A-1 Request for Release
Exhibit A-2 Request for Release Mortgage Loans paid in full
Schedule 1 Mortgage Loan Schedule
A-2-iv
<PAGE>
This Servicing Agreement, is dated and effective as of
September 1, 1998, among WILSHIRE SERVICING CORPORATION as Master Servicer, LONG
BEACH MORTGAGE COMPANY as Servicer, NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
as Indenture Trustee and Wilshire REIT Trust Series 1998-1 as Issuer.
PRELIMINARY STATEMENT:
WHEREAS, the Master Servicer and Servicer are engaged in the
business of servicing sub-prime mortgage loans;
WHEREAS, the Issuer desires to pledge to the Indenture
Trustee certain mortgage loans, identified on Schedule 1 hereto (the "Mortgage
Loans") in connection with the issuance of the Asset-Backed Floating Rate Notes,
Series 1998-11 (the "Notes");
WHEREAS, the Issuer desires to contract with the Master
Servicer and the Servicer for the servicing responsibilities associated with
such Mortgage Loans; and
WHEREAS, the Issuer, the Master Servicer, the Servicer and
the Indenture Trustee desire to execute this Agreement to define each party's
rights, duties and obligations relating to the servicing of the Mortgage Loans;
NOW, THEREFORE, in consideration of the mutual agreements
herein contained, the parties hereto agree as follows:
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.
"Adjustable Rate Mortgage Loan": Each of the Mortgage Loans
identified in the Mortgage Loan Schedule as having a Mortgage Rate that is
subject to adjustment.
"Adjustment Date": With respect to each Adjustable Rate
Mortgage Loan, the day of the month on 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
<PAGE>
of voting securities, by contract or otherwise and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Agreement": This Servicing Agreement and all amendments
hereof and supplements hereto.
"Available Payment Amount": With respect to any Payment Date,
an amount equal to (1) the sum of (a) the aggregate of the amounts on deposit in
the Collection Account and Payment 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 Payment
Account for such Payment Date pursuant to Section 3.23, (c) the aggregate of any
amounts deposited in the Payment Account by the Servicer in respect of
Prepayment Interest Shortfalls for such Payment Date pursuant to Section 3.24,
(d) the aggregate of any P&I Advances made by the Servicer for such Payment Date
pursuant to Section 4.01 and (e) the aggregate of any advances made by the
Master Servicer or the Indenture Trustee for such Payment Date pursuant to
Section 6.02, reduced (to not less than zero) by (2) the sum of (x) the portion
of the amount described in clause (1)(a) above that represents (i) Monthly
Payments on the Mortgage Loans received from a Mortgagor on or prior to the
Determination Date but due during any Due Period subsequent to the related Due
Period, (ii) Principal Prepayments on the Mortgage Loans received after the
related Prepayment Period (together with any interest payments received with
such Principal Prepayments to the extent they represent the payment of interest
accrued on the Mortgage Loans during a period subsequent to the related
Prepayment Period), (iii) Liquidation Proceeds and Insurance Proceeds received
in respect of the Mortgage Loans after the related Prepayment Period, (iv)
amounts reimbursable or payable to the Master Servicer, the Servicer, the
Indenture Trustee, the Seller or any Sub-Servicer pursuant to Section 3.11 or
Section 3.12 or pursuant to Section 6.07 of the Indenture, (v) Stayed Funds,
(vi) the Indenture Trustee Fee and the Master Servicing Fee payable from the
Payment Account pursuant to the Indenture, (vii) amounts deposited in the
Collection Account or the Payment Account in error and (viii) the amount of any
Prepayment Charges collected by the Servicer in connection with the voluntary
Principal Prepayment in full of any of the Mortgage Loans and (y) amounts
reimbursable to the Master Servicer or the Indenture Trustee for an advance made
pursuant to Section 6.02(b), which advance the Master Servicer or the Indenture
Trustee, as applicable, has determined to be nonrecoverable from the Stayed
Funds in respect of which it was made.
"Balloon Loan": Any Mortgage Loan that provided on the date
of origination for an amortization schedule extending beyond its stated maturity
date.
"Balloon Payment": With respect to any Balloon Loan, as of
any date of determination, the Monthly Payment payable on the stated maturity
date of such Mortgage Loan.
"Bankruptcy Code": The Bankruptcy Reform Act of 1978 (Title
11 of the United States Code), as amended.
-2-
<PAGE>
"Bankruptcy Loss": With respect to any Mortgage Loan, a
Realized Loss resulting from a Deficient Valuation or Debt Service Reduction.
"Basic Document": The Owner Trust Agreement, the Certificate
of Trust, the Indenture, the Mortgage Loan Purchase Agreement, the Ownership
Transfer Agreement, the Servicing Agreement and the other documents and
certificates delivered in connection with any of the above.
"Book-Entry Notes": Any Note registered in the name of the
Depository or its nominee. Initially, the Book-Entry Notes will be the Class A
Notes and the Mezzanine Notes.
"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 Maryland or the State of New York, or in the city in
which the Corporate Trust Office of the Indenture Trustee is located, are
authorized or obligated by law or executive order to be closed.
"Business Trust Statute": Chapter 38 of Title 12 of the
Delaware Code, 12 Del. Code ss.ss.3801 ET SEQ., as the same may be amended from
time to time.
"Certificate of Trust": The Certificate of Trust filed for
the Issuer pursuant to Section 3810(a) of the Business Trust Statute.
"Certificateholder": The Person in whose name an Equity
Certificate is registered in the Certificate Register.
"Class": Collectively, all of the Notes bearing the same
class designation.
"Class A Note": Any one of the Class A Notes authorized by
the Indenture, substantially in the form annexed as Exhibit A-1 to the
Indenture.
"Class M-1 Note": Any one of the Class M-1 Notes authorized
by the Indenture, substantially in the form annexed as Exhibit A-2 to the
Indenture.
"Class M-2 Note": Any one of the Class M-2 Notes authorized
by the Indenture, substantially in the form annexed as Exhibit A-3 to the
Indenture.
"Class M-3 Note": Any one of the Class M-3 Notes authorized
by the Indenture, substantially in the form annexed as Exhibit A-4 to the
Indenture.
"Closing Date": September 30, 1998.
"Code": The Internal Revenue Code of 1986.
-3-
<PAGE>
"Collection Account": The account or accounts created and
maintained by the Servicer pursuant to Section 3.10(a), which shall be entitled,
"Long Beach Mortgage Company, as Servicer for Norwest Bank Minnesota, National
Association, as Indenture Trustee, in trust for the registered holders of ,
Salomon Brothers Mortgage Securities VII, Inc. Asset-Backed Floating Rate Notes,
Series 1998-11". The Collection Account must be an Eligible Account.
"Corporate Trust Office": With respect to the Indenture
Trustee, the principal corporate trust office of the Indenture Trustee at which
at any particular time its corporate trust business shall be administered, which
office at the date of the execution of this instrument is located at Sixth
Street and Marquette Avenue, Minneapolis, Minnesota 55479, Attention: Corporate
Trust Services, or at such other address as the Indenture Trustee may designate
from time to time by notice to the Noteholders, the Issuer, the Owner Trustee,
the Master Servicer and the Servicer. With respect to the Owner Trustee, the
principal corporate trust office of the Owner Trustee at, which at any
particular time its corporate trust business shall be administered, which office
at the date of the execution of this instrument is located at Rodney Square
North, 1100 North Market Street, Wilmington, Delaware 19801, Attention: Wilshire
REIT Trust Series 1998- 1, or at such other address as the Indenture Trustee may
designate from time to time by notice to the Noteholders, the
Certificateholders, the Issuer, the Indenture Trustee, the Master Servicer and
the Servicer.
"Cumulative Loss Percentage": With respect to any Payment
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.
"Custodial Agreement": An agreement that may be entered into
among the Issuer, the Master Servicer, the Servicer, Ameriquest Mortgage
Company, National Mortgage Corporation and the Indenture Trustee and a Custodian
in the form of Exhibit C annexed to the Indenture or a similar agreement
assigned to the Indenture Trustee with respect to the Mortgage Loans.
"Custodian": A Custodian, which shall not be the Issuer, the
Master Servicer, the Servicer, the Depositor, the Seller, the Transferor, the
Owner Trustee or any Affiliate of any of them, appointed pursuant to a Custodial
Agreement.
"Cut-off Date": With respect to each Original Mortgage Loan,
September 1, 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.
-4-
<PAGE>
"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.
"Deleted Mortgage Loan": A Mortgage Loan replaced or to be
replaced by a Qualified Substitute Mortgage Loan.
"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 Notes that are to be Book-Entry Notes, 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 Indenture 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 that are rated D-1+ by DCR (if rated by DCR) and A-1 by S&P (or
comparable ratings if DCR and S&P are not the Rating Agencies).
"Depository Participant": A broker, dealer, bank or other
financial institution or other Person for whom from time to time a Depository
effects book-entry transfers and pledges of securities deposited with the
Depository.
"Determination Date": With respect to each Payment Date, the
15th day of the calendar month in which such Payment Date occurs or, if such
15th day is not a Business Day, the Business Day immediately preceding such 15th
day.
"Due Date": With respect to each Payment Date, the first day
of the calendar month in which such Payment Date occurs, which is the day of the
month on which the Monthly Payment is due on a Mortgage Loan, exclusive of any
days of grace.
-5-
<PAGE>
"Due Period": With respect to any Payment Date, the period
commencing on the second day of the calendar month preceding the calendar month
in which such Payment Date occurs and ending on the related Due Date.
"Eligible Account": Any of (i) an account or accounts
maintained with a federal or state chartered depository institution or trust
company the short-term unsecured debt obligations of which are rated "AAA" or
"D-1+", as applicable, by DCR (if rated by DCR) and A-1 by S&P (or comparable
ratings if DCR and S&P are not the Rating Agencies) at the time any amounts are
held on deposit therein, (ii) an account or accounts the deposits in which are
fully insured by the FDIC or (iii) a trust account or accounts maintained with
the corporate trust department of a federal or state chartered depository
institution or trust company acting in its fiduciary capacity. Eligible Accounts
may bear interest.
"Equity Certificates": The certificates evidencing the
beneficial ownership interest in the Issuer and executed by the Owner Trustee in
substantially the form set forth in Exhibit A to the Owner Trust Agreement.
"Estate in Real Property": A fee simple estate in a parcel
of land.
"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 Seller or the Servicer pursuant to or as contemplated by
Section 2.01 or Section 3.16(c)), a determination made by the Servicer that all
Insurance Proceeds, Liquidation Proceeds and other payments or recoveries which
the Servicer, in its reasonable good faith judgment, expects to be finally
recoverable in respect thereof have been so recovered. The 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 Adjustable Rate 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.
"Indenture Trustee": Norwest Bank Minnesota, National
Association, a national banking association, in its capacity as Indenture
Trustee, or its successor in interest, or any successor indenture trustee
appointed as provided in the Indenture.
-6-
<PAGE>
"Indenture Trustee Fee": The amount payable to the Indenture
Trustee on each Payment Date pursuant to the Indenture as compensation for all
services rendered by it, which amount shall equal one twelfth of the product of
(i) the Indenture Trustee Fee Rate, multiplied by (ii) the aggregate Scheduled
Principal Balance of the Mortgage Loans and any REO Properties as of the second
preceding Due Date (or, in the case of the initial Payment Date, as of the
Cut-off Date).
"Indenture Trustee Fee Rate": 0.0035% per annum.
"Index": With respect to each Adjustable Rate Mortgage Loan
and each related Adjustment Date, the average of the interbank offered rates for
six-month United States dollar deposits in the London market as published in THE
WALL STREET JOURNAL and as most recently available as of a 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
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.
"Issuer": Wilshire REIT Trust Series 1998-1, a Delaware
Business Trust, or its successor in interest.
"Late Collections": With respect to any Mortgage Loan, all
amounts received subsequent to the Determination Date immediately following any
Due Period, whether as late payments of Monthly Payments or as Insurance
Proceeds, Liquidation Proceeds or otherwise, which represent late payments or
collections of principal and/or interest due (without regard to any acceleration
of payments under the related Mortgage and Mortgage Note) but delinquent for
such Due Period and not previously recovered.
"Liquidation Event": With respect to any Mortgage Loan, any
of the following events: (i) such Mortgage Loan is paid in full; (ii) a Final
Recovery Determination is made as to such Mortgage Loan; or (iii) such Mortgage
Loan is removed from the Trust Estate by reason of its being purchased, sold or
replaced pursuant to or as contemplated by Section 2.01 or Section 3.16(c). With
respect to any REO Property, a Final Recovery Determination is made as to such
REO Property.
"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 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 2.01, Section 3.16(c) or Section 3.23.
-7-
<PAGE>
"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.
"Master Servicer": Wilshire Servicing Corporation or its
successor in interest, in its capacity as Master Servicer hereunder.
"Master Servicing Fee": With respect to each Mortgage Loan
and for any calendar month, an amount equal to one month's interest (or in the
event of any payment of interest which accompanies a Principal Prepayment in
full made by the Mortgagor during such calendar month, interest for the number
of days covered by such payment of interest) at the applicable Master Servicing
Fee Rate on the same principal amount on which interest on such Mortgage Loan
accrues for such calendar month.
"Master Servicing Fee Rate": 0.05% per annum.
"Maximum Mortgage Rate": With respect to each Adjustable Rate
Mortgage Loan, the percentage set forth in the related Mortgage Note as the
maximum Mortgage Rate thereunder.
"Minimum Mortgage Rate": With respect to each Adjustable Rate
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 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.
"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 file containing the Related Documents
pertaining to a particular Mortgage Loan and any additional documents required
to be added to the Mortgage File pursuant to the Mortgage Loan Purchase
Agreement or this Servicing Agreement.
"Mortgage Loan": Each mortgage loan identified in the
Mortgage Loan Schedule.
"Mortgage Loan Purchase Agreement": The agreement, dated as
of September 1, 1998, among the Seller, the Transferor and the Issuer.
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"Mortgage Loan Remittance Rate": With respect to any Mortgage
Loan or REO Property, as of any date of determination, the then applicable Net
Mortgage Rate in respect thereof plus the Indenture Trustee Fee Rate and the
Master Servicing Fee Rate.
"Mortgage Loan Schedule": As of any date, the list of
Mortgage Loans attached hereto as Schedule 1 (including the Prepayment Charge
summary attached thereto). The Mortgage Loan Schedule shall set forth the
following information with respect to each Mortgage Loan:
(vii) the Mortgage Loan identifying number;
(viii) the Mortgagor's name;
(ix) the street address of the Mortgaged Property including the
state and zip code;
(x) a code indicating whether the Mortgaged Property is
owner-occupied;
(xi) the type of Residential Dwelling constituting the Mortgaged
Property;
(xii) the original months to maturity;
(xiii) the Loan-to-Value Ratio at origination;
(xiv) the Mortgage Rate in effect immediately following the Cut-off
Date;
(xv) the date on which the first Monthly Payment was due on the
Mortgage Loan;
(xvi) the stated maturity date;
(xvii) the amount of the Monthly Payment due on the first Due Date
after the Cut-off Date;
(xviii) the last Due Date on which a Monthly Payment was actually
applied to the unpaid
Stated Principal Balance;
(xix) the original principal amount of the Mortgage Loan;
(xx) the Scheduled Principal Balance of the Mortgage Loan as of the
close of business on the Cut-off Date;
(xxi) with respect to each Adjustable Rate Mortgage Loan, the Gross
Margin;
(xxii) a code indicating the purpose of the Mortgage Loan (I.E.,
purchase financing, rate/term refinancing, cash-out
refinancing);
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(xxiii) with respect to each Adjustable Rate Mortgage Loan, the
Maximum Mortgage Rate;
(xxiv) with respect to each Adjustable Rate Mortgage Loan, the
Minimum ortgage Rate;
(xxv) the Mortgage Rate at origination;
(xxvi) with respect to each Adjustable Rate Mortgage Loan, the
Periodic Rate Cap;
(xxvii) a code indicating the documentation program;
(xxviii) with respect to each Adjustable Rate Mortgage Loan, the first
Adjustment Date immediately following the Cut-off Date;
(xxix) the risk grade;
(xxx) the Value of the Mortgaged Property;
(xxxi) the sale price of the Mortgaged Property, if applicable;
(xxxii) a code indicating the type of Prepayment Charge; and
(xxxiii) the expiration date of the Prepayment Charge.
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 Servicer in
accordance with the provisions of this Agreement. With respect to any Qualified
Substitute Mortgage Loan, Cut-off Date shall refer to the related Cut-off Date
for such Mortgage Loan, determined in accordance with the definition of Cut-off
Date herein.
"Mortgage Note": The original executed note or other evidence
of the indebtedness of a Mortgagor under a Mortgage Loan.
"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, without regard to
any reduction thereof as a result of a Debt Service
Reduction or operation of the Relief Act.
"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.
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"Mortgagor": The obligor on a Mortgage Note.
"Most Senior Class": The Class A Notes, or after the Class A
Notes have been paid in full, the Class of Subordinate Notes then outstanding
with the lowest numerical designation.
"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 sum of the Servicing Fee Rate, the Indenture
Trustee Fee Rate and the Master Servicing Fee Rate.
"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 Servicer, will not or, in the case of a
proposed P&I Advance, would not be ultimately recoverable from related late
payments, Insurance Proceeds or Liquidation Proceeds on such Mortgage Loan or
REO Property as provided herein.
"Note Balance": With respect to any Note, as of any date of
determination, the Note Balance of such Note on the Payment Date immediately
prior to such date of determination, minus all payments allocable to principal
made thereon and Realized Losses allocated thereto on such immediately prior
Payment Date (or, in the case of any date of determination up to and including
the initial Payment Date, the initial Note Balance of such Note, as stated on
the face thereof).
"Note Owner": With respect to a Book-Entry Note, the Person
who is the beneficial owner of such Note 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.
"Note Register": The register maintained by the Note Registrar
in which the Note Registrar shall provide for the registration of Notes and of
transfers and exchanges of Notes.
"Note Registrar": The Indenture Trustee, in its capacity as
Note Registrar or its successor in interest, or any successor Note Registrar
appointed as provided in the Indenture.
"Noteholder" or "Holder": The Person in whose name a Note is
registered in the Note Register, except that solely for the purposes of giving
any consent pursuant to the Indenture, the Owner Trust Agreement or this
Agreement, any Note registered in the name of the Seller, the Depositor, the
Issuer, the Master Servicer or the 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. The
Indenture Trustee may conclusively rely upon a certificate of the Seller, the
Depositor, the Issuer, the Master Servicer or the Servicer in determining
whether a Note is held by an Affiliate thereof. All references herein to
"Holders" or "Noteholders" shall reflect the rights of Note Owners as they may
indirectly exercise such rights through the
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Depository and participating members thereof, except as otherwise specified
herein; provided, however, that the Indenture Trustee shall be required to
recognize as a "Holder" or "Noteholder" only the Person in whose name a Note is
registered in the Note Register.
"Notes": Asset-Backed Floating Rate Notes, Series 1998-11,
designated as the "Notes" in the Indenture.
"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 Seller; with respect to the
Servicer or Master Servicer, any officer who is authorized to act for the
Servicer in matters relating to this Agreement, and whose action is binding upon
the Servicer or Master Servicer, as applicable, initially including those
individuals whose names appear on the list of authorized officers delivered at
the closing.
"Opinion of Counsel": A written opinion of counsel, who may,
without limitation, be salaried counsel for the Issuer, the Master Servicer or
the Servicer acceptable to the Indenture Trustee.
"Original Mortgage Loan": Any of the Mortgage Loans included
in the Trust Estate as of the Closing Date.
"Owner Trust Agreement": The Trust Agreement, dated as of
September 1, 1998, as amended and restated by the Amended and Restated Trust
Agreement, dated as of September 1, 1998, between the Owner Trustee and the
Depositor.
"Owner Trustee": Wilmington Trust Company and its successors
and assigns or any successor owner trustee appointed pursuant to the terms of
the Owner Trust Agreement.
"Payment Account": The trust account or accounts created and
maintained by the Indenture Trustee pursuant to Section 3.01 of the Indenture
which shall be entitled "Norwest Bank Minnesota, National Association, as
Indenture Trustee, in trust for the registered holders of Salomon Brothers
Mortgage Securities VII, Inc. Asset-Backed Floating Rate Notes, Series 1998-11".
The Payment Account must be an Eligible Account.
"Payment 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.
"Percentage Interest": With respect to any Class of Notes, the
portion of the respective Class evidenced by such Note, expressed as a
percentage, the numerator of which is the initial Note Balance represented by
such Note, and the denominator of which is the initial aggregate Note Balance of
all of the Notes of such Class. The Notes are issuable only in Percentage
Interests corresponding to initial Note Balances of $10,000 and integral
multiples of $1.00 in excess thereof; provided, however that a single Note of
each Class may be issued having
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a Percentage Interest corresponding to the remainder of the aggregate initial
Note Balance of such Note or to an otherwise authorized denomination for such
Class plus such remainder.
"Periodic Rate Cap": With respect to each Adjustable Rate
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 Issuer, the Servicer, the Indenture 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 (which shall each have an original
maturity of not more than 90 days and, in the case of bankers'
acceptances, shall in no event have an original maturity of more than
365 days or a remaining maturity of more than 30 days) denominated in
United States dollars and 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;
(vi) units of money market funds, including money
market funds advised by the Indenture Trustee or an Affiliate thereof,
that have been rated "AAA" by DCR (if rated by DCR) and "AAA" by S&P;
and
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(viii) if previously confirmed in writing to the
Indenture 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 Notes;
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.
"Person": Any individual, corporation, partnership, limited
liability company, 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 Servicer in respect of any Payment Date pursuant to Section
4.01.
"Prepayment Charge": With respect to any Prepayment Period,
any prepayment premium, penalty or charge collected by the Servicer from a
Mortgagor in connection with any voluntary Principal Prepayment in full pursuant
to the terms of the related Mortgage Note as from time to time held as a part of
the Trust Estate, the Prepayment Charges so held being identified
in the Mortgage Loan Schedule.
"Prepayment Interest Shortfall": With respect to any Payment
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
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 Mortgage Loan Remittance 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 Servicer in respect of any Prepayment Interest
Shortfall are set forth in Section 3.24.
"Prepayment Period": With respect to any Payment Date, the
calendar month preceding the calendar month in which such Payment Date occurs.
"Principal Prepayment": Any payment of principal made by the
Mortgagor on a Mortgage Loan which is received in advance of its scheduled Due
Date and which is not accompanied by an amount of interest (without regard to
any prepayment charge that may have been collected by the Servicer in connection
with such payment of principal) representing the full amount of scheduled
interest due on any Due Date in any month or months subsequent to the month of
prepayment.
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"Purchase Price": With respect to any Mortgage Loan or REO
Property to be purchased pursuant to or as contemplated by Section 2.01 or
Section 3.16(c), and as confirmed by an Officers' Certificate from the Servicer
to the Indenture Trustee, an amount equal to the sum of: (i) 100% of the Stated
Principal Balance thereof as of the date of purchase, (ii) in the case of (x) a
Mortgage Loan, accrued interest on such Stated Principal Balance at the
applicable Mortgage Loan Remittance 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 Servicer, which payment or advance had as of the date of
purchase been distributed pursuant to the Indenture, 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 Mortgage Loan Remittance 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 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, minus 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; (iii) any unreimbursed Servicing Advances and P&I Advances and any
unpaid Servicing Fees allocable to such Mortgage Loan or REO Property; (iv) any
amounts previously withdrawn from the Collection Account in respect of such
Mortgage Loan or REO Property pursuant to Sections 3.11(ix) and Section 3.16(b);
and (v) in the case of a Mortgage Loan required to be purchased pursuant to
Section 2.01, expenses reasonably incurred or to be incurred by the Servicer or
the Indenture 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) with respect to each Adjustable Rate
Mortgage Loan, have a Maximum Mortgage Rate not less than the Maximum Mortgage
Rate on the Deleted Mortgage Loan, (iv) with respect to each Adjustable Rate
Mortgage Loan, have a Minimum Mortgage Rate not less than the Minimum Mortgage
Rate of the Deleted Mortgage Loan, (v) with respect to each Adjustable Rate
Mortgage Loan, have a Gross Margin equal to the Gross Margin of the Deleted
Mortgage Loan, (vi) with respect to each Adjustable Rate Mortgage Loan, 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 Servicer at least equal to the
risk grading assigned on the Deleted Mortgage Loan and (xi) conform to each
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representation and warranty set forth in Exhibit 2 to the Mortgage Loan Purchase
Agreement applicable to the Deleted Mortgage Loan. In the event that one or more
mortgage loans are substituted for one or more Deleted Mortgage Loans, the
amounts described in clause (i) hereof shall be determined on the basis of
aggregate principal balances, the Mortgage Rates described in clause (ii) hereof
shall be determined on the basis of weighted average Mortgage Rates, the risk
gradings described in clause (x) hereof shall be satisfied as to each such
mortgage loan, the terms described in clause (vii) hereof shall be determined on
the basis of weighted average remaining term to maturity, the Loan-to-Value
Ratios described in clause (ix) hereof shall be satisfied as to each such
mortgage loan and, except to the extent otherwise provided in this sentence, the
representations and warranties described in clause (xi) hereof must be satisfied
as to each Qualified Substitute Mortgage Loan or in the aggregate, as the case
may be.
"Rating Agency" or "Rating Agencies": DCR and S&P or their
successors. If such agencies or their successors are no longer in existence,
"Rating Agencies" shall be such nationally recognized statistical rating
agencies, or other comparable Persons, designated by the Issuer, notice of which
designation shall be given to the Indenture Trustee, the Master Servicer and the
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 Payment 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(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 Servicer with respect to such Mortgage Loan pursuant to
Section 3.11(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 the Trust Estate, 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 Payment 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
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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(ix) and Section 3.16(b), minus (v) the aggregate of all P&I Advances made
by the Servicer in respect of such REO Property or the related Mortgage Loan for
which the Servicer has been or, in connection with such Final Recovery
Determination, will be reimbursed pursuant to Section 3.23 out of rental income,
Insurance Proceeds and Liquidation Proceeds received in respect of such REO
Property, minus (vi) the total of all net rental income, Insurance Proceeds and
Liquidation Proceeds received in respect of such REO Property that has been, or
in connection with such Final Recovery Determination, will be transferred to the
Payment 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.
"Refinanced Mortgage Loan": A Mortgage Loan the proceeds of
which were not used to purchase the related Mortgaged Property.
"Related Documents": With respect to each Mortgage Loan, the
documents specified in Section 2.4(b) of the Mortgage Loan Purchase Agreement
and Section 2.03 of the Indenture and any documents required to be added to such
documents pursuant to the Mortgage Loan Purchase Agreement, the Owner Trust
Agreement, the Indenture or this Agreement.
"Relief Act": The Soldiers' and Sailors' Civil Relief Act of
1940, as amended.
"Relief Act Interest Shortfall": With respect to any Payment
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.
"Remittance Report": A report in form and substance that would
be acceptable to Fannie Mae on a magnetic disk or tape prepared by the Servicer
pursuant to Section 4.01 with such additions, deletions and modifications as
agreed to by the Indenture Trustee and the
Servicer.
"REO Account": The account or accounts maintained by the
Servicer in respect of an REO Property pursuant to Section 3.23.
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"REO Disposition": The sale or other disposition of an REO
Property on behalf of the Trust Estate.
"REO Imputed Interest": As to any REO Property, for any
calendar month during which such REO Property was at any time part of the Trust
Estate, one month's interest at the applicable Mortgage Loan Remittance 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 Payment 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 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 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 Servicer
on behalf of the Trust Estate 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 A-1 or Exhibit A-2 attached hereto.
"Residential Dwelling": Any one of the following: (i) an
attached or detached one-family dwelling, (ii) a detached two- to four-family
dwelling, (iii) a one-family dwelling unit in a Fannie Mae eligible condominium
project, or (iv) a detached one-family dwelling in a planned unit development,
none of which is a co-operative, mobile or manufactured home (as defined in 42
United States Code, Section 5402(6)).
"Responsible Officer": When used with respect to the Indenture
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 Indenture
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
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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 Estate up to and including the Due Date in
the calendar month in which a Liquidation Event occurs with respect to such REO
Property, an amount (not less than zero) equal to the Scheduled Principal
Balance of the related Mortgage Loan as of the Due Date in the calendar month in
which such REO Property was acquired, minus the aggregate amount of REO
Principal Amortization, if any, in respect of such REO Property for all
previously ended calendar months; and (b) as of any Due Date subsequent to the
occurrence of a Liquidation Event with respect to such REO Property, zero.
"Seller": Wilshire Real Estate Investment Trust Inc. or its
successor in interest, in its capacity as seller under the Mortgage Loan
Purchase Agreement.
"Servicer": Long Beach Mortgage Company ("Long Beach") or any
successor servicer appointed as herein provided, in its capacity as Servicer
hereunder.
"Servicer Event of Default": One or more of the events
described in Section 6.01.
"Servicer Remittance Date": With respect to any Payment Date,
3:00 p.m. New York time on the 18th day of the calendar month in which such
Payment Date occurs or, if such 18th day is not a Business Day, the Business Day
immediately preceding such 18th day; provided, however, that if such immediately
preceding Business Day is the Determination Date, the Servicer Remittance Date
shall be the next succeeding Business Day.
"Servicer Termination Test": With respect to any Payment Date,
the Servicer Termination Test will be failed if the Cumulative Loss Percentage
exceeds 5.75%; provided, however that such Servicer Termination Test shall not
apply if the Master Servicer is the Servicer.
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"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 Servicer in connection with a default, delinquency or
other unanticipated event by the 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 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 Servicer, would not be ultimately recoverable from related
Insurance Proceeds or Liquidation Proceeds on such Mortgage Loan or REO Property
as provided herein.
"Servicing Fee": With respect to each Mortgage Loan and for
any calendar month, an amount equal to one month's interest (or in the event of
any payment of interest which accompanies a Principal Prepayment in full made by
the Mortgagor during such calendar month, interest for the number of days
covered by such payment of interest) at the applicable Servicing Fee Rate on the
same principal amount on which interest on such Mortgage Loan accrues for such
calendar month. A portion of such Servicing Fee may be retained by any
Sub-Servicer as its servicing compensation.
"Servicing Fee Rate": 0.50% per annum.
"Servicing Officer": Any employee of the Master Servicer or
Servicer involved in, or responsible for, the administration and servicing of
the Mortgage Loans, whose name and specimen signature appear on a list of
Servicing Officers furnished by the Master Servicer or Servicer, as applicable,
to the Indenture Trustee and the Issuer on the Closing Date, as such list may
from time to time be amended.
"S&P": Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc., or its successor in interest.
"Stated Principal Balance": With respect to any Mortgage Loan:
(a) as of any date of determination up to but not including the Payment 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 Servicer and distributed pursuant to the Indenture on or before such date of
determination, (ii) all Principal Prepayments received after the Cut-off Date,
to the extent distributed pursuant to the Indenture on or before such date of
determination, (iii) all Liquidation Proceeds and Insurance Proceeds applied by
the Servicer as recoveries of principal in accordance with the provisions of
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Section 3.16, to the extent distributed pursuant to the Indenture 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 Payment Date coinciding with or preceding
such date of determination; and (b) as of any date of determination coinciding
with or subsequent to the Payment 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 Payment Date on which the proceeds, if any, of a Liquidation
Event with respect to such REO Property would be distributed, an amount (not
less than zero) equal to the Stated Principal Balance of the related Mortgage
Loan as of the date on which such REO Property was acquired on behalf of the
Trust Estate, minus the sum of (i) if such REO Property was acquired before the
Payment 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 Servicer and distributed pursuant to the Indenture 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 the Indenture on or before such date of
determination; and (b) as of any date of determination coinciding with or
subsequent to the Payment 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 Servicer is the subject of a proceeding
under the federal Bankruptcy Code and the making of a Remittance (as defined in
Section 6.02(b)) is prohibited by Section 362 of the federal Bankruptcy Code,
funds which are in the custody of the Servicer, a trustee in bankruptcy or a
federal bankruptcy court and should have been the subject of such
Remittance absent such prohibition.
"Subordinate Note": Any Class M-1 Note, Class M-2 Note or
Class M-3 Note.
"Sub-Servicer": Any Person with which the 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 Servicer.
"Sub-Servicing Agreement": The written contract between the
Servicer and a Sub- Servicer relating to servicing and administration of certain
Mortgage Loans as provided in Section 3.02.
"Transferor": Wilshire REIT 1998-1, Inc.
"Trust Estate": The meaning specified in the Granting Clause
of the Indenture.
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"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.
"Value": With respect to any Mortgaged Property, the lesser of
(i) the value thereof as determined by an appraisal made for the originator of
the Mortgage Loan at the time of origination of the Mortgage Loan by an
appraiser who met the minimum requirements of Fannie Mae and Freddie Mac, and
(ii) the purchase price paid for the related Mortgaged Property by the Mortgagor
with the proceeds of the Mortgage Loan, provided, however, in the case of a
Refinanced Mortgage Loan, such value of the Mortgaged Property is based solely
upon the value determined by an appraisal made for the originator of such
Refinanced Mortgage Loan at the time of origination of such Refinanced Mortgage
Loan by an appraiser who met the minimum requirements of Fannie Mae and Freddie
Mac.
"Voting Rights": The portion of the voting rights of all of
the Notes which is allocated to any Note. At all times during the term of this
Agreement, (i) 100% of all of the Voting Rights shall be allocated to the Most
Senior Class of Notes, in proportion to their then outstanding Note Balances.
All Voting Rights allocated to any Class of Notes shall be allocated among such
Notes PRO RATA in accordance with the respective Percentage Interests evidenced
thereby.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES
SECTION 2.01. Enforcement of Representations and Warranties.
(a) Upon discovery by the Master Servicer, the Servicer, the
Indenture Trustee or the Issuer of any materially defective document in, or that
a document is missing from, a Mortgage File or of a breach of any of the
representations and warranties made by 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 Noteholders in such Mortgage Loan (in
the case of any such representation or warranty made to the knowledge or the
best of knowledge of the Seller as to which the Seller has no knowledge, without
regard to the Seller's lack of knowledge with respect to the substance of such
representation or warranty being inaccurate at the time it was made), the party
discovering such breach shall give prompt written notice to the other parties.
The Indenture Trustee shall promptly notify the Seller of such defect, missing
document or breach and request that the Seller deliver such missing document or
cure such defect or breach within 90 days from the date the Seller was notified
of such missing document, defect or breach, and if the Seller does not deliver
such missing document or cure such defect or breach in all material respects
during such period, the Master Servicer shall enforce the obligations of the
Seller under the Mortgage Loan Purchase Agreement to repurchase such Mortgage
Loan from the Trust Estate at the Purchase Price within 90 days after the date
on which the Seller was notified of such missing document, defect or breach, if
and to the extent that the Seller is obligated to do so under the Mortgage Loan
Purchase Agreement. The Purchase Price for the repurchased Mortgage Loan shall
be deposited in the Collection Account. In lieu of repurchasing any such
Mortgage Loan as provided above, if so provided in the Mortgage Loan Purchase
Agreement, the Seller may cause such Mortgage Loan to be removed from the Trust
Estate (in which case it shall become a Deleted Mortgage Loan) and substitute
one or more Qualified Substitute Mortgage Loans.
Monthly Payments due with respect to Qualified Substitute
Mortgage Loans in the month of substitution are not part of the Trust Estate and
will be retained by the Seller. For the month of substitution, distributions to
Noteholders will reflect the Monthly Payment due on such Deleted Mortgage Loan
on or before the Due Date in the month of substitution, and the Seller shall
thereafter be entitled to retain all amounts subsequently received in respect of
such Deleted Mortgage Loan. The Master Servicer shall give or cause to be given
written notice to the Noteholders 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 Indenture Trustee and the Owner Trustee. Upon such
substitution, such Qualified Substitute Mortgage Loan or Loans shall constitute
part of the Trust Estate and shall be subject in all respects to the terms of
this Agreement and the Mortgage Loan
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Purchase Agreement, including all applicable representations and warranties
thereof included in the Mortgage Loan Purchase Agreement as of the date of
substitution.
For any month in which the Seller substitutes one or more
Qualified Substitute Mortgage Loans for one or more Deleted Mortgage Loans, the
Master Servicer will determine the amount (with respect to each Qualified
Substitute Mortgage Loan, the "Substitution Shortfall Amount"), if any, by which
the Purchase Price of each such Deleted Mortgage Loan exceeds, 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 Mortgage Loan Remittance Rate. On
the date of such substitution the Seller will deliver or cause to be delivered
to the Master Servicer for deposit in the Collection Account an amount equal to
the applicable Substitution Shortfall Amounts, if any.
It is understood and agreed that the obligation of the Seller 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 Issuer and the
Indenture Trustee, as pledgee of the Mortgage Loans, against the Seller. In
connection with the purchase of or substitution of any such Mortgage Loan by the
Seller, the Issuer shall assign to the Seller all of its right, title and
interest in respect of the Mortgage Loan Purchase Agreement applicable to such
Mortgage Loan. The Indenture Trustee or a Custodian on its behalf, upon receipt
of written certification from the Master Servicer of deposit of the Purchase
Price, in the case of a repurchased Mortgage Loan or upon receipt of the related
Qualified Substitute Mortgage Loan or Loans and certification from the Master
Servicer of deposit of the Substitution Shortfall Amount, shall release to the
Seller the related Mortgage File or Files and shall execute and deliver such
instruments of transfer or assignment, in each case without recourse, as the
Seller shall furnish to it and as shall be necessary to vest in the Seller any
Mortgage Loan released pursuant hereto, and the Indenture Trustee shall have no
further responsibility with regard to such Mortgage File.
(b)(i) Within 90 days of the earlier of discovery by the
Servicer or receipt of notice by the Servicer of the breach of any
representation, warranty or covenant of the Servicer set forth in Section
2.03(a) which materially and adversely affects the interests of the Noteholders
in any Mortgage Loan, the Servicer shall cure such breach in all material
respects.
(ii) Within 90 days of the earlier of discovery by the
Servicer or receipt of notice by the Servicer of the breach of any
representation, warranty or covenant of the Servicer set forth in Section
2.03(a) which materially and adversely affects the interests of the
Certificateholders to any Prepayment Charge, the Servicer shall cure such breach
in all material respects. If the representation made by the Servicer in Section
2.03(a)(vii) is breached, the Servicer must pay into the Collection Account the
amount of the scheduled Prepayment Charge, less any amount collected and paid by
the Servicer into the Collection Account; and if the covenant made by the
Servicer in Section 2.03(a)(viii) is breached, the Servicer must pay into the
Collection Account the amount of the waived Prepayment Charge.
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(iii) 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
2.03(b) which materially and adversely affects the interests of the Noteholders
in any Mortgage Loan, the Master Servicer shall cure such breach in all material
respects.
SECTION 2.02. Existence.
The Issuer will keep in full force and effect its existence,
rights and franchises as a business trust under the laws of the State of
Delaware and will obtain and preserve its qualification to do business in each
jurisdiction in which such qualification is or shall be necessary
to protect the validity and enforceability of this Agreement.
SECTION 2.03. Representations, Warranties and Covenants of the
Servicer and the Master Servicer.
(a) The Servicer hereby represents, warrants and covenants to
the Issuer, the Seller, the Indenture Trustee and the Noteholders that as of the
Closing Date or as of such date specifically provided herein:
(i) The Servicer is a corporation duly organized,
validly existing and in good standing under the laws of the
State of Delaware and is duly authorized and qualified to
transact any and all business contemplated by this Agreement
to be conducted by the 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 Servicer has the full corporate power and
authority to service each Mortgage Loan, and to execute,
deliver and perform, and to enter into and consummate the
transactions contemplated by this Agreement and has duly
authorized by all necessary corporate action on the part of
the Servicer the execution, delivery and performance of this
Agreement; and this Agreement, assuming the due authorization,
execution and delivery thereof by the Issuer and the Indenture
Trustee, constitutes a legal, valid and binding obligation of
the Servicer, enforceable against the Servicer in accordance
with its terms, except to the extent that (a) the
enforceability thereof may be limited by bankruptcy,
insolvency, moratorium, receivership and other similar laws
relating to creditors' rights generally and (b) the remedy of
specific performance and injunctive and other forms of
equitable relief may be subject to the equitable defenses and
to the discretion of the court before which any proceeding
therefor may be brought;
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(iii) The execution and delivery of this Agreement by the
Servicer, the servicing of the Mortgage Loans by the Servicer
hereunder, the consummation of any other of the transactions
herein contemplated, and the fulfillment of or compliance with
the terms hereof are in the ordinary course of business of the
Servicer and will not (A) result in a breach of any term or
provision of the charter or by-laws of the 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 Servicer is a
party or by which it may be bound, or any statute, order or
regulation applicable to the Servicer of any court, regulatory
body, administrative agency or governmental body having
jurisdiction over the Servicer; and the 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 Servicer's knowledge, would in the future
materially and adversely affect, (x) the ability of the
Servicer to perform its obligations under this Agreement or
(y) the business, operations, financial condition, properties
or assets of the Servicer taken as a whole;
(iv) The Servicer is an approved seller/servicer for
Fannie Mae or Freddie Mac in good standing and is a HUD
approved mortgagee pursuant to Section 203 of the National
Housing Act;
(v) No litigation is pending against the Servicer that
would materially and adversely affect the execution, delivery
or enforceability of this Agreement or the ability of the
Servicer to service the Mortgage Loans or to perform any of
its other obligations hereunder in accordance with the terms
hereof;
(vi) No consent, approval, authorization or order of any
court or governmental agency or body is required for the
execution, delivery and performance by the Servicer of, or
compliance by the Servicer with, this Agreement or the
consummation of the transactions contemplated by this
Agreement, except for such consents, approvals, authorizations
or orders, if any, that have been obtained prior to the
Closing Date;
(vii) The information set forth in the Mortgage Loan
Schedule relating to the Prepayment Charges (including the
Prepayment Charge summary attached thereto) is complete, true
and correct in all material respects at the date or dates
respecting which such information is furnished and each
Prepayment Charge is permissible and enforceable in accordance
with its terms (except to the extent that the enforceability
thereof may be limited by bankruptcy, insolvency, moratorium,
receivership and other similar laws relating to creditors'
rights generally) under applicable state law; and
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(viii) The Servicer will not waive any Prepayment Charge
or part of a Prepayment Charge unless such waiver would
maximize recovery of total proceeds taking into account the
value of such Prepayment Charge and related Mortgage Loan and
doing so is standard and customary in servicing similar
Mortgage Loans (including any waiver of a Prepayment Charge in
connection with a refinancing of a Mortgage Loan that is
related to a default or a reasonably foreseeable default) and
in no event will it waive a Prepayment Charge in connection
with a refinancing of a Mortgage Loan that is not related to a
default or a reasonably foreseeable default.
(b) The Master Servicer hereby represents, warrants and
covenants to the Issuer, the Seller, the Indenture Trustee and the Noteholders
that as of the Closing Date or as of such date specifically provided herein:
(i) The Master Servicer is duly organized, validly
existing and in good standing as a Delaware corporation under
the laws of the State of Delaware and is and will remain in
compliance with the laws of each state in which any Mortgaged
Property is located to the extent necessary to ensure the
enforceability of each Mortgage Loan and the servicing of 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 each of the other
parties hereto, constitutes a legal, valid and binding
obligation of the Master Servicer, enforceable against it in
accordance with its terms except as enforceability 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 and the performance of and compliance with the
terms of this Agreement will not (a) violate the Master
Servicer's charter or by-laws or any law, rule, regulation,
order, judgment, award, administrative interpretation,
injunction, writ, decree or the like affecting the Master
Servicer or by which the Master Servicer is bound or (b)
result in a breach of or constitute a default under any
indenture or other material agreement to which the Master
Servicer is a party or by which the Master Servicer is bound,
which in the case of either clause (a) or (b) will have a
material adverse effect on the Master Servicer's ability to
perform its obligations under this Agreement.
(iv) The Master Servicer or one of its Affiliates is an
approved servicer for Fannie Mae in good standing. No event
has occurred, including but not limited
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to a change in insurance coverage, which would make such party
unable to comply with Freddie Mac or Fannie Mae (as
applicable) eligibility requirements or which would require
notification to Freddie Mac or Fannie Mae (as applicable).
(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 applicable to it contained in this
Agreement.
(vi) There are no actions or proceedings against or
investigations known to the Master Servicer before any court,
administrative or other tribunal that (A) might prohibit its
entering into this Agreement, (B) seek to prevent the
consummation of the transactions contemplated by this
Agreement or (C) might prohibit or materially and adversely
affect the performance by the Master Servicer of its
obligations under, or the validity or enforceability of, this
Agreement.
(vii) 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 the compliance by the Master Servicer with, this Agreement,
except for such consents, approvals, authorizations or orders,
if any, that have been obtained prior to the Closing Date;
(viii) No litigation is pending or, to the best of the
Master Servicer's knowledge, threatened against the Master
Servicer which would prohibit the Master Servicer from
entering into this Agreement or, in the Master Servicer's good
faith reasonable judgment, is likely to materially and
adversely affect either the ability of the Master Servicer to
perform its obligations under this Agreement or the financial
condition of the Master Servicer.
It is understood and agreed that the representations,
warranties and covenants set forth in this Section 2.03 shall survive delivery
of the Mortgage Files to the Indenture Trustee or to a Custodian, as the case
may be, and shall inure to the benefit of the Indenture Trustee, the Seller, the
Issuer and the Noteholders. Upon discovery by any of the Issuer, the Master
Servicer, the Servicer or the Indenture Trustee of a breach of any of the
foregoing representations, warranties and covenants which materially and
adversely affects the value of any Mortgage Loan, Prepayment Charge or the
interests therein of the Noteholders or 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 Indenture Trustee.
Subject to Section 6.01, the obligations of the Master Servicer and the Servicer
set forth in Section 2.01(b) to cure breaches shall constitute the sole remedies
against the Master Servicer or the Servicer, as applicable, available to the
Noteholders, the Certificateholders, the Issuer or the Indenture Trustee on
behalf of the Noteholders respecting a breach of the representations, warranties
and covenants contained in this Section 2.03.
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ARTICLE III
ADMINISTRATION AND SERVICING
OF THE MORTGAGE LOANS
SECTION 3.01. Servicer to Act as Servicer.
The Servicer shall service and administer the Mortgage Loans on behalf
of the Indenture Trustee and in the best interests of and for the benefit of the
Noteholders (as determined by the Servicer in its reasonable judgment) in
accordance with the terms of this Agreement and the respective Mortgage Loans
and, to the extent consistent with such terms, in the same manner in which it
services and administers similar mortgage loans for its own portfolio, giving
due consideration to customary and usual standards of practice of prudent
mortgage lenders and loan servicers administering similar mortgage loans but
without regard to:
(i) any relationship that the Servicer, any
Sub-Servicer or any Affiliate of the Servicer or any
Sub-Servicer may have with the related Mortgagor;
(ii) the ownership of any Note by the Servicer or any
Affiliate of the Servicer;
(iii) the Servicer's obligation to make P&I Advances or
Servicing Advances; or
(iv) the 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 Servicer shall also seek to
maximize the timely and complete recovery of principal and interest on the
Mortgage Notes. Subject only to the above-described servicing standards and the
terms of this Agreement and of the respective Mortgage Loans, the 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 Servicer in its own name
or in the name of a Sub-Servicer is hereby authorized and empowered by the
Indenture Trustee when the 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 Noteholders and the Indenture Trustee, and upon notice
to the Indenture 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 Indenture Trustee
and Noteholders. The Servicer shall service
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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 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 Indenture
Trustee shall execute, at the written request of the Servicer, and furnish to
the Servicer and any Sub-Servicer such documents as are necessary or appropriate
to enable the Servicer or any Sub- Servicer to carry out their servicing and
administrative duties hereunder, and the Indenture Trustee hereby grants to the
Servicer a power of attorney to carry out such duties. The Indenture Trustee
shall not be liable for the actions of the Servicer or any Sub-Servicers under
such powers of attorney.
In accordance with the standards of the preceding paragraph,
the 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
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 Noteholders, 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 Servicer may not make any future advances with respect to a Mortgage Loan
(except as provided in Section 4.01) and the Servicer shall not 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
Servicer, reasonably foreseeable).
The Servicer may delegate its responsibilities under this
Agreement; provided, however, that no such delegation shall release the Servicer
from the responsibilities or liabilities
arising under this Agreement.
SECTION 3.02. Sub-Servicing Agreements Between the Servicer
and Sub- Servicers.
(a) The Servicer may enter into Sub-Servicing Agreements
(provided that such agreements would not result in a withdrawal or a downgrading
by any Rating Agency of the rating on any Class of Notes) with Sub-Servicers,
for the servicing and administration of the Mortgage Loans.
Each Sub-Servicer shall be (i) authorized to transact business
in the state or states in which 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
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Sub-Servicing Agreement, (ii) an institution approved as a mortgage loan
originator by the Federal Housing Administration or an institution the deposit
accounts of which are insured by the FDIC and (iii) 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 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
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
Noteholders, without the consent of the Holders of Notes entitled to at least
66% of the Voting Rights. Any variation without the consent of the Holders of
Notes 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 Servicer, are
conclusively deemed to be inconsistent with this Agreement and therefore
prohibited. The Servicer shall deliver to the Master Servicer, the Indenture
Trustee and the Owner Trustee copies of all Sub-Servicing Agreements, and any
amendments or modifications thereof, promptly upon the Servicer's execution and
delivery of such instruments.
(b) As part of its servicing activities hereunder, the
Servicer (except as otherwise provided in the last sentence of this paragraph),
for the benefit of the Indenture Trustee and the Noteholders, shall enforce the
obligations of each Sub-Servicer under the related Sub- Servicing Agreement and
of the Seller under the Mortgage Loan Purchase Agreement, including, without
limitation, any obligation to make advances in respect of delinquent payments as
required by a Sub-Servicing Agreement, or to purchase a Mortgage Loan on account
of missing or defective documentation or on account of a breach of a
representation, warranty or covenant, as described in Section 2.01(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 Servicer, in its good faith business judgment, would require were it
the owner of the related Mortgage Loans. The 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.
SECTION 3.03. Successor Sub-Servicers.
The 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
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any Sub-Servicer, all servicing obligations of such Sub-Servicer shall be
assumed simultaneously by the Servicer without any act or deed on the part of
such Sub-Servicer or the Servicer, and the 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 Indenture Trustee without
fee, in accordance with the terms of this Agreement, in the event that the
Servicer shall, for any reason, no longer be the Servicer
(including termination due to a Servicer Event of Default).
SECTION 3.04. Liability of the Servicer.
Notwithstanding any Sub-Servicing Agreement, any of the
provisions of this Agreement relating to agreements or arrangements between the
Servicer and a Sub-Servicer or reference to actions taken through a Sub-Servicer
or otherwise, the Servicer shall remain obligated and primarily liable to the
Indenture Trustee and the Noteholders 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
Servicer alone were servicing and administering the Mortgage Loans. The Servicer
shall be entitled to enter into any agreement with a Sub-Servicer for
indemnification of the Servicer by such Sub-Servicer and nothing contained in
this Agreement shall be deemed to limit or modify such indemnification.
SECTION 3.05. No Contractual Relationship Between
Sub-Servicers and Indenture Trustee, Issuer or
Noteholders.
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
Servicer alone, and the Indenture Trustee, Issuer and Noteholders 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 Servicer shall be solely liable for all fees owed by it to any
Sub-Servicer, irrespective of whether the Servicer's compensation pursuant to
this Agreement is sufficient to pay such fees.
SECTION 3.06. Assumption or Termination of Sub-Servicing
Agreements by Indenture Trustee.
In the event the Servicer shall for any reason no longer be
the servicer (including by reason of the occurrence of a Servicer Event of
Default), the Master Servicer (or if the Master Servicer is the Servicer, the
Indenture Trustee or its designee) shall thereupon assume all of the rights and
obligations of the Servicer under each Sub-Servicing Agreement that the Servicer
may have entered into, unless the Master Servicer (or if the Master Servicer is
the Servicer, the Indenture Trustee or its designee) elects to terminate any
Sub-Servicing Agreement in accordance
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with its terms as provided in Section 3.03. Upon such assumption, the Master
Servicer (or the Indenture Trustee, its designee or the successor servicer for
the Indenture Trustee appointed pursuant to Section 6.02) shall be deemed,
subject to Section 3.03, to have assumed all of the Servicer's interest therein
and to have replaced the 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 Servicer shall not thereby be relieved of
any liability or obligations under any Sub-Servicing Agreement and (ii) none of
the Master Servicer, the Indenture Trustee, its designee or any successor
Servicer, as applicable, shall be deemed to have assumed any liability or
obligation of the Servicer that arose before it ceased to be the Servicer.
The Servicer at its expense shall, upon request of the Master
Servicer (or if the Master Servicer is the Servicer, the Indenture 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 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 Servicer may in its discretion (i) waive any late payment
charge or, if applicable, penalty interest, or (ii) extend the due dates for
Monthly Payments due on a Mortgage Note for a period of not greater than 180
days; provided 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 Servicer shall make timely advances on such
Mortgage Loan during such extension pursuant to Section 4.01 and in accordance
with the amortization schedule of such Mortgage Loan without modification
thereof by reason of such arrangements. Notwithstanding the foregoing, in the
event that any Mortgage Loan is in default or, in the judgment of the Servicer,
such default is reasonably foreseeable, the 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 Payoff") 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.
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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 (which account
must be an Eligible 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 deposit
of such funds into the clearing account. The Sub-Servicer shall thereafter
deposit such proceeds in the Collection Account or remit such proceeds to the
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 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 Servicer shall establish and maintain one or more accounts
(the "Servicing Accounts"), into which all collections from the Mortgagors (or
related advances from Sub- Servicers) for the payment of taxes, assessments,
hazard insurance premiums and comparable items for the account of the Mortgagors
("Escrow Payments") shall be deposited and retained. Servicing Accounts shall be
Eligible Accounts. The Servicer shall deposit in the clearing account (which
account must be an Eligible 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 Servicer's receipt 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 deposit of
such funds in the clearing account, for the purpose of effecting the 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; (ii)
reimburse the 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; (v) clear
and terminate the Servicing Account at the termination of the Servicer's
obligations and responsibilities in respect of the Mortgage Loans under this
Agreement in accordance with Article VII; or (vi) recover amounts deposited in
error. As part of its servicing duties, the Servicer or Sub-Servicers shall pay
to the Mortgagors interest on funds in Servicing Accounts, to the extent
required by law and, to the extent that interest earned on funds in the
Servicing Accounts is insufficient, to pay such interest from its or their own
funds, without any reimbursement therefor.
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To the extent that a Mortgage does not provide for Escrow Payments, the Servicer
shall determine whether any such payments are made by the Mortgagor in a manner
and at a time that avoids the loss of the Mortgaged Property due to a tax sale
or the foreclosure of a tax lien. The Servicer assumes full responsibility for
the payment of all such bills and shall effect payments of all such bills
irrespective of the Mortgagor's faithful performance in the payment of same or
the making of the Escrow Payments and shall make advances from its own funds to
effect such payments.
SECTION 3.10. Collection Account.
(a) On behalf of the Trust Estate, the Servicer shall
establish and maintain one or more accounts (such account or accounts, the
"Collection Account"), held in trust for the benefit of the Indenture Trustee
and the Noteholders. On behalf of the Trust Estate, the Servicer shall deposit
or cause to be deposited in the clearing account (which account must be an
Eligible 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 Servicer's
receipt thereof, and shall thereafter deposit in the Collection Account, in no
event more than two Business Days after the deposit of such funds into the
clearing account, 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), or payments (other than
Principal Prepayments) received by it on or prior to the Cut-off Date but
allocable to a Due Period subsequent thereto:
(i) all payments on account of principal, including
Principal Prepayments, on the Mortgage Loans;
(ii) all payments on account of interest (net of the
related Servicing Fee) on each Mortgage Loan;
(iii) all Insurance Proceeds and Liquidation Proceeds
(other than proceeds collected in respect of any particular
REO Property);
(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
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 2.01, Section 7.03(g),
Section 7.04(d) or Section 3.16(c);
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(vii) all amounts required to be deposited in
connection with shortfalls in principal amount of Qualified
Substitute Mortgage Loans pursuant to Section 2.01; and
(viii) all Prepayment Charges collected by the Servicer
in connection with the voluntary Principal Prepayment in full
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 or assumption fees need not be deposited by the Servicer in the
Collection Account. In the event the 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 Estate, the Servicer shall deliver
to the Indenture Trustee in immediately available funds for deposit in the
Payment Account on or before 3:00 p.m. New York time (i) on the Servicer
Remittance Date, that portion of the Available Payment Amount (calculated
without regard to the references in clause (2) of the definition thereof to
amounts that may be withdrawn from the Payment Account) for the related Payment
Date then on deposit in the Collection Account and the amount of all Prepayment
Charges collected by the Servicer in connection with the voluntary Principal
Prepayment in full 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 Servicer shall, on or before 3:00 p.m. New York time
on such Business Day, withdraw from the Collection Account any and all amounts
payable or reimbursable to the Servicer, the Indenture Trustee, 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 may be invested in
Permitted Investments in accordance with the provisions set forth in Section
3.12. The Servicer shall give notice to the Master Servicer and the Indenture
Trustee of the location of the Collection Account maintained
by it when established and prior to any change thereof.
(d) Funds held in the Collection Account at any time may be
delivered by the Servicer to the Indenture Trustee for deposit in an account
(which may be the Payment Account and must satisfy the standards for the Payment
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 Indenture Trustee shall have the sole authority to withdraw
any funds
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held pursuant to this subsection (d). In the event the Servicer shall deliver to
the Indenture Trustee for deposit in the Payment Account any amount not required
to be deposited therein, it may at any time request that the Indenture Trustee
withdraw such amount from the Payment Account and remit to it any such amount,
any provision herein to the contrary notwithstanding. In addition, the Servicer
shall deliver to the Indenture Trustee from time to time for deposit, and the
Indenture Trustee shall so deposit, in the Payment Account:
(i) any P&I Advances, as required pursuant to Section
4.01;
(ii) any amounts required to be deposited pursuant to
Section 3.23(d) or (f) in connection with any REO Property;
(iii) any amounts required to be deposited pursuant to
Section 3.24 in connection with any Prepayment Interest
Shortfalls; and
(iv) 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 Servicer, a trustee in bankruptcy, or federal bankruptcy court or other
source, the Indenture Trustee shall deposit such funds in the Payment Account,
subject to withdrawal thereof pursuant to Section
6.02(b) or as otherwise permitted hereunder.
SECTION 3.11. Withdrawals from the Collection Account.
The Servicer shall, from time to time, make
withdrawals from the Collection Account for any of the following purposes or as
described in Section 4.01:
(i) to remit to the Indenture Trustee for deposit in
the Payment 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
Servicer or Master Servicer, as the case may be, for P&I
Advances, but only to the extent of amounts received which
represent Late Collections (net of the related Servicing Fees)
of Monthly Payments on Mortgage Loans with respect to which
such P&I Advances were made in accordance with the provisions
of Section 4.01;
(iii) subject to Section 3.16(d), to pay the Master
Servicer, the Servicer or any Sub-Servicer any unpaid
Servicing Fees and reimburse any unreimbursed Servicing
Advances with respect to each Mortgage Loan, but only to the
extent of any Liquidation Proceeds, Insurance Proceeds or
other amounts as may be collected by the Servicer from a
Mortgagor, or otherwise received with respect to such Mortgage
Loan;
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(iv) to pay to the Servicer as servicing compensation
(in addition to the Servicing Fee) on the Servicer Remittance
Date any interest or investment income earned on funds
deposited in the Collection Account;
(v) to pay to the Servicer or the Seller, as the case
may be, with respect to each Mortgage Loan that has previously
been purchased or replaced pursuant to Section 2.01 or Section
3.16(c) all amounts received thereon subsequent to the date of
purchase or substitution, as the case may be;
(vi) to reimburse the Servicer for any P&I Advance
previously made which the Servicer has determined to be a
Nonrecoverable P&I Advance in accordance with the provisions
of Section 4.01;
(vii) to reimburse the Servicer for expenses incurred by
or reimbursable to the Servicer pursuant to Section 5.03;
(viii) to reimburse the Servicer for expenses reasonably
incurred in respect of the breach or defect giving rise to the
purchase obligation under Section 2.01 of this Agreement that
were included in the Purchase Price of the Mortgage Loan,
including any expenses arising out of the enforcement of the
purchase obligation;
(ix) to pay, or to reimburse the Servicer for advances
in respect of, expenses incurred in connection with any
Mortgage Loan pursuant to Section 3.16(b); and
(x) to clear and terminate the Collection Account upon a
termination pursuant to Section 8.08.
The 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 Servicer shall provide written notification to the Indenture Trustee, on or
prior to the next succeeding Servicer Remittance Date, upon making any
withdrawals from the Collection Account pursuant to subclause (vii) above.
SECTION 3.12. Investment of Funds in the Collection Account.
(a) The Servicer may direct any depository institution
maintaining the Collection Account (for purposes of this Section 3.12, 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 Indenture Trustee
is the obligor thereon, and (ii) no later
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than the date on which such funds are required to be withdrawn from such account
pursuant to this Agreement, if the Indenture Trustee is the obligor thereon. All
such Permitted Investments shall be held to maturity, unless payable on demand.
(b) All income and gain realized from the investment of funds
deposited in the Collection Account held by or on behalf of the Servicer, shall
be for the benefit of the Servicer and shall be subject to its withdrawal in
accordance with Section 3.11. The Servicer shall deposit in the Collection
Account the amount of any loss of principal incurred in respect of any such
Permitted Investment made with funds in such accounts immediately upon
realization of such loss.
SECTION 3.13. [intentionally omitted]
SECTION 3.14. Maintenance of Hazard Insurance and Errors and
Omissions and Fidelity Coverage.
(a) The Servicer shall cause to be maintained for each
Mortgage Loan fire insurance with extended coverage on the related Mortgaged
Property in an amount which is at least equal to the least of (i) the current
principal balance of such Mortgage Loan, (ii) the amount necessary to fully
compensate for any damage or loss to the improvements that are a part of such
property on a replacement cost basis and (iii) the maximum insurable value of
the improvements which are a part of such Mortgaged Property, in each case in an
amount not less than such amount as is necessary to avoid the application of any
coinsurance clause contained in the related hazard insurance policy. The
Servicer shall also cause to be maintained fire insurance with extended coverage
on each REO Property in an amount which is at least equal to the lesser of (i)
the maximum insurable value of the improvements which are a part of such
property and (ii) the outstanding principal balance of the related Mortgage Loan
at the time it became an REO Property, plus accrued interest at the Mortgage
Rate and related Servicing Advances. The 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 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 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 Servicer in maintaining any such insurance shall not, for the
purpose of calculating distributions to Noteholders, be added to the unpaid
principal balance of the related Mortgage Loan, notwithstanding that the terms
of such Mortgage Loan so permit. It is understood and agreed that no earthquake
or other additional insurance is to be required of any Mortgagor other than
pursuant to such applicable laws and regulations as shall at any time be in
force and as shall require such additional insurance. If the Mortgaged Property
or REO Property is at any time in an area identified in the Federal Register by
the Federal Emergency Management Agency as having special flood hazards, the
Servicer will cause to be maintained a flood insurance policy in respect
thereof. Such flood insurance shall be
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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 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 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 Servicer agrees to prepare and present, on behalf of itself,
the Indenture Trustee and Noteholders, claims under any such blanket policy in a
timely fashion in accordance with the terms of such policy.
(b) The 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 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 Servicer has obtained a waiver of such requirements
from Fannie Mae or Freddie Mac. The 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 Servicer has obtained a waiver of such requirements from Fannie
Mae or Freddie Mac. The Servicer shall provide the Indenture Trustee (upon the
Indenture Trustee's reasonable request) with copies of any such insurance
policies and fidelity bond. The Servicer shall be deemed to have complied with
this provision if an Affiliate of the 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 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 Indenture Trustee. The Servicer
shall also cause each Sub-Servicer to maintain a policy of insurance covering
errors and omissions and a fidelity bond which would meet such requirements.
SECTION 3.15. Enforcement of Due-On-Sale Clauses; Assumption
Agreements.
The 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
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the Servicer shall not exercise any such rights if prohibited by law from doing
so. If the 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 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 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 Servicer and has a credit risk rating
at least equal to that of the original Mortgagor. In connection with any
assumption or substitution, the 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 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, or a new policy meeting
the requirements of this Section is obtained. Any fee collected by the Servicer
in respect of an assumption or substitution of liability agreement will be
retained by the 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 Servicer shall notify the Indenture Trustee and any respective
Custodian that any such substitution or assumption agreement has been completed
by forwarding to the Indenture Trustee or to such Custodian, as the case may be,
the executed original of such substitution or assumption agreement, which
document shall be added to the related Mortgage File and shall, for all
purposes, be considered a part of such Mortgage File to the same extent as all
other documents and instruments constituting a part thereof.
Notwithstanding the foregoing paragraph or any other provision
of this Agreement, the 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 Servicer may be restricted by law from preventing, for any
reason whatever. For purposes of this Section 3.15, the term "assumption" is
deemed to also include a sale (of the Mortgaged Property) subject to the
Mortgage that is not accompanied by an assumption or substitution of liability
agreement.
SECTION 3.16. Realization Upon Defaulted Mortgage Loans.
(a) The Servicer shall, consistent with the servicing standard
set forth in Section 3.01, foreclose upon or otherwise comparably convert the
ownership of properties securing such of the Mortgage Loans as come into and
continue in default and as to which no satisfactory arrangements can be made for
collection of delinquent payments pursuant to Section 3.07. The Servicer shall
be responsible for all costs and expenses incurred by it in any such
proceedings;
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provided, however, that such costs and expenses will be recoverable as Servicing
Advances by the 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 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 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 Servicer shall not, on behalf of the Indenture 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 Indenture Trustee, the Trust Estate or the Noteholders 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 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 Estate to take such
actions as are necessary to bring the Mortgaged Property into
compliance therewith; and
(2) there are no circumstances present at such
Mortgaged Property relating to the use, management or disposal
of any hazardous substances, hazardous materials, hazardous
wastes, or petroleum-based materials for which investigation,
testing, monitoring, containment, clean-up or remediation
could be required under any federal, state or local law or
regulation, or that if any such materials are present for
which such action could be required, that it would be in the
best economic interest of the Trust Estate to take such
actions with respect to the affected Mortgaged Property.
The cost of the environmental audit report contemplated by
this Section 3.23 shall be advanced by the Servicer, subject to the Servicer's
right to be reimbursed therefor from the Collection Account as provided in
Section 3.11(ix), such right of reimbursement being prior to the rights of
Noteholders to receive any amount in the Collection Account received in respect
of the affected Mortgage Loan or other Mortgage Loans.
If the Servicer determines, as described above, that it is in
the best economic interest of the Trust Estate to take such actions as are
necessary to bring any such Mortgaged
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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 Servicer shall take such action
as it deems to be in the best economic interest of the Trust Estate. The cost of
any such compliance, containment, cleanup or remediation shall be advanced by
the Servicer, subject to the Servicer's right to be reimbursed therefor from the
Collection Account as provided in Section 3.11(ix), such right of reimbursement
being prior to the rights of Noteholders to receive any amount in the Collection
Account received in respect of the affected Mortgage Loan or other Mortgage
Loans.
(c) The Master Servicer, at its option, may purchase from the
Trust Estate 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 Indenture Trustee prior to purchase), at a price equal to the
Purchase Price. The Purchase Price for any Mortgage Loan purchased hereunder
shall be deposited in the Collection Account, and the Indenture Trustee or a
Custodian on its behalf, upon receipt of written certification from the 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
Servicer or any Sub-Servicer for any related unreimbursed Servicing Advances and
P&I Advances, pursuant to Section 3.11(ii) or (iii); SECOND, to accrued and
unpaid interest on the Mortgage Loan, to the date of the Final Recovery
Determination, or to the Due Date prior to the Payment Date on which such
amounts are to be distributed if not in connection with a Final Recovery
Determination; and THIRD, as a recovery of principal of the Mortgage Loan. If
the amount of the recovery so allocated to interest is less than the full amount
of accrued and unpaid interest due on such Mortgage Loan, the amount of such
recovery will be allocated by the 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 Servicer or any Sub-Servicer pursuant to Section 3.11(iii).
SECTION 3.17. Indenture Trustee to Cooperate; Release of
Mortgage Files.
(a) Upon the payment in full of any Mortgage Loan, or the
receipt by the Servicer of a notification that payment in full shall be escrowed
in a manner customary for such purposes, the Servicer will immediately notify
the Indenture Trustee and any related Custodian by a certification in the form
of Exhibit A-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
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so deposited) of a Servicing Officer and shall request delivery to it of the
Mortgage File. Upon receipt of such certification and request, the Indenture
Trustee or such Custodian, as the case may be, shall promptly release the
related Mortgage File to the Servicer. No expenses incurred in connection with
any instrument of satisfaction or deed of reconveyance shall be chargeable to
the Collection Account or the Payment 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 Indenture Trustee and
any related Custodian shall, upon request of the Servicer and delivery to the
Indenture Trustee or such Custodian, as the case may be, of a Request for
Release in the form of Exhibit A-l, release the related Mortgage File to the
Servicer, and the Indenture Trustee shall, at the direction of the Servicer,
execute such documents as shall be necessary to the prosecution of any such
proceedings. Such Request for Release shall obligate the Servicer to return each
and every document previously requested from the Mortgage File to the Indenture
Trustee or to such Custodian when the need therefor by the 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 Servicer
has delivered to the Indenture Trustee a certificate of a Servicing Officer
certifying as to the name and address of the Person to which such Mortgage File
or such document was delivered and the purpose or purposes of such delivery.
Upon receipt of a certificate of a Servicing Officer stating that such Mortgage
Loan was liquidated and that all amounts received or to be received in
connection with such liquidation that are required to be deposited into the
Collection Account have been so deposited, or that such Mortgage Loan has become
an REO Property, a copy of the Request for Release shall be released by the
Indenture Trustee or such Custodian to the Servicer.
(c) Upon written certification of a Servicing Officer, the
Indenture Trustee shall execute and deliver to the Servicer any court pleadings,
requests for trustee's sale or other documents reasonably necessary to the
foreclosure or trustee's sale in respect of a Mortgaged Property or to any legal
action brought to obtain judgment against any Mortgagor on the Mortgage Note or
Mortgage or to obtain a deficiency judgment, or to enforce any other remedies or
rights provided by the Mortgage Note or Mortgage or otherwise available at law
or in equity. Each such certification shall include a request that such
pleadings or documents be executed by the Indenture Trustee and a statement as
to the reason such documents or pleadings are required and that the execution
and delivery thereof by the Indenture 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 Servicer hereunder,
the Servicer shall be entitled to the Servicing Fee with respect to each
Mortgage Loan payable solely from payments
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of interest in respect of such Mortgage Loan, subject to Section 3.24. In
addition, the Servicer shall be entitled to recover unpaid Servicing Fees out of
Insurance Proceeds or Liquidation Proceeds to the extent permitted by Section
3.11(iii) and out of amounts derived from the operation and sale of an REO
Property to the extent permitted by Section 3.23. The right to receive the
Servicing Fee may not be transferred in whole or in part except in connection
with the transfer of all of the Servicer's responsibilities and obligations
under this Agreement.
Additional servicing compensation in the form of assumption
fees, late payment charges and other similar fees and charges (other than
Prepayment Charges) shall be retained by the Servicer (subject to Section 3.24)
only to the extent such fees or charges are received by the Servicer. The
Servicer shall also be entitled pursuant to Section 3.11(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 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 shall not
be entitled to reimbursement therefor except as specifically provided herein.
SECTION 3.19. Reports to the Indenture Trustee; Collection
Account Statements.
Not later than fifteen days after each Payment Date, the
Servicer shall forward to the Indenture Trustee, the Master Servicer and the
Issuer a statement prepared by the Servicer setting forth the status of the
Collection Account as of the close of business on such Payment Date and showing,
for the period covered by such statement, the aggregate amount of deposits into
and withdrawals from the Collection Account of each category of deposit
specified in Section 3.10(a) and each category of withdrawal specified in
Section 3.11. Such statement shall include information as to the aggregate of
the outstanding principal balances of all of the Mortgage Loans as of the last
day of the calendar month immediately preceding such Payment Date. Copies of
such statement shall be provided by the Indenture Trustee to any Noteholder and
to any Person identified to the Indenture Trustee as a prospective transferee of
a Note, upon request at the expense of the requesting party, provided such
statement is delivered by the Servicer to the Indenture Trustee.
SECTION 3.20. Statement as to Compliance.
The Servicer will deliver to the Master Servicer, the
Indenture Trustee, the Issuer and each Rating Agency on or before April 15 of
each calendar year commencing in 1999, an Officers' Certificate stating, as to
each signatory thereof, that (i) a review of the activities of the 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 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
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known to such officer and the nature and status thereof. Copies of any such
statement shall be provided by the Indenture Trustee to any Noteholder and to
any Person identified to the Indenture Trustee as a prospective transferee of a
Note, upon the request and at the expense of the requesting party, provided that
such statement is delivered by the Servicer to the Indenture Trustee.
SECTION 3.21. Independent Public Accountants' Servicing
Report.
Not later than April 15 of each calendar year commencing in
1999, the Servicer, at its expense, shall cause a nationally recognized firm of
independent certified public accountants to furnish to the Servicer a report
stating that (i) it has obtained a letter of representation regarding certain
matters from the management of the Servicer which includes an assertion that the
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 Servicer shall
furnish a copy of such report to the Master Servicer, the Indenture Trustee, the
Issuer and each Rating Agency. Copies of such statement shall be provided by the
Indenture Trustee to any Noteholder upon request at the Servicer's expense,
provided that such statement is delivered by the Servicer to the Indenture
Trustee. In the event such firm of independent certified public accountants
requires the Indenture Trustee to agree to the procedures performed by such
firm, the Servicer shall direct the Indenture Trustee in writing to so agree; it
being understood and agreed that the Indenture Trustee will deliver such letter
of agreement in conclusive reliance upon the direction of the Servicer, and the
Indenture Trustee has not made any independent inquiry or investigation as to,
and shall have no obligation or liability in respect of, the sufficiency,
validity or correctness of such procedures.
SECTION 3.22. Access to Certain Documentation.
The 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 Noteholder, 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
Servicer designated by it. In addition, access to the documentation regarding
the Mortgage Loans will be provided to any Noteholder, the Indenture Trustee and
to any Person identified to the Servicer as a prospective transferee of a Note,
upon reasonable request during normal business hours at the offices of the
Servicer designated by it at the expense of the Person requesting such access.
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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 Indenture Trustee, or its nominee, in trust for the
benefit of the Noteholders.
(b) The Servicer shall segregate and hold all funds collected
and received in connection with the operation of any REO Property separate and
apart from its own funds and general assets and shall establish and maintain
with respect to REO Properties an account held in trust for the Indenture
Trustee for the benefit of the Noteholders (the "REO Account"), which shall be
an Eligible Account. The Servicer shall be permitted to allow the Collection
Account to serve as the REO Account, subject to separate ledgers for each REO
Property. The Servicer shall be entitled to retain or withdraw any interest
income paid on funds deposited in the REO Account.
(c) The Servicer shall have full power and authority, subject
only to the specific requirements and prohibitions of this Agreement, to do any
and all things in connection with any REO Property as are consistent with the
manner in which the Servicer manages and operates similar property owned by the
Servicer or any of its Affiliates, all on such terms and for such period as the
Servicer deems to be in the best interests of Noteholders. In connection
therewith, the Servicer shall deposit, or cause to be deposited in the clearing
account (which account must be an Eligible 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 Servicer's receipt thereof, and shall thereafter
deposit in the REO Account, in no event more than two Business Days after the
deposit of such funds into the clearing account, all revenues received by it
with respect to an REO Property and shall withdraw therefrom funds necessary for
the proper operation, management and maintenance of such REO Property including,
without limitation:
(i) all insurance premiums due and payable in respect
of such REO Property;
(ii) all real estate taxes and assessments in respect
of such REO Property that may result in the imposition of a
lien thereon; and
(iii) all costs and expenses necessary to maintain such
REO Property.
To the extent that amounts on deposit in the REO Account with respect to an REO
Property are insufficient for the purposes set forth in clauses (i) through
(iii) above with respect to such REO Property, the Servicer shall advance from
its own funds such amount as is necessary for such purposes if, but only if, the
Servicer would make such advances if the Servicer owned the REO Property and if
in the Servicer's judgment, the payment of such amounts will be recoverable from
the rental or sale of the REO Property.
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(d) In addition to the withdrawals permitted under Section
3.23(c), the 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
Servicer Remittance Date, the Servicer shall withdraw from each REO Account
maintained by it and deposit into the Payment Account in accordance with Section
3.10(d)(ii), for distribution on the related Payment Date in accordance with the
Indenture, 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) Each REO Disposition shall be carried out by the Servicer
at such price and upon such terms and conditions as the Servicer shall deem
necessary or advisable, as shall be normal and usual in its general servicing
activities for similar properties.
(f) The proceeds from the REO Disposition, net of any amount
required by law to be remitted to the Mortgagor under the related Mortgage Loan
and net of any payment or reimbursement to the Servicer or any Sub-Servicer as
provided above, shall be deposited in the Payment Account in accordance with
Section 3.10(d)(ii) on the Servicer Remittance Date in the month following the
receipt thereof for distribution on the related Payment Date in accordance with
the Indenture.
(g) The 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 Servicer in Respect of
Prepayment Interest Shortfalls.
The Servicer shall deliver to the Indenture Trustee for
deposit into the Payment Account on or before 3:00 p.m. New York time on the
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 Payment Date
resulting solely from Principal Prepayments during the related Prepayment Period
and (ii) the amount of its aggregate Servicing Fee for the most recently ended
calendar month.
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SECTION 3.25. Obligations of the 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 Servicer in a manner not consistent with the terms of the
related Mortgage Note and this Agreement, the Servicer, upon discovery or
receipt of notice thereof, immediately shall deliver to the Indenture Trustee
for deposit in the Payment Account from its own funds the amount of any such
shortfall and shall indemnify and hold harmless the Trust Estate, the Indenture
Trustee, the Issuer, the Owner Trustee and any successor servicer in respect of
any such liability. Such indemnities shall survive the termination or discharge
of this Agreement.
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ARTICLE IV
REMITTANCE REPORTS; P&I ADVANCES
SECTION 4.01. Remittance Reports; P&I Advances.
(a) On the Business Day following each Determination Date, the
Servicer shall deliver to the Master Servicer in electronic format and the
Indenture Trustee by telecopy (or by such other means as the Servicer, the
Indenture Trustee and the Master Servicer may agree from time to time) a
Remittance Report with respect to the related Payment Date. Such Remittance
Report will include (i) the amount of P&I Advances to be made by the Servicer in
respect of the related Payment 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 Payment Date and (ii) such
other information with respect to the Mortgage Loans as the Indenture Trustee
may reasonably require to perform the calculations necessary to make the
distributions contemplated by the Indenture and to prepare the statements to
Noteholders contemplated by the Indenture. Neither the Master Servicer nor the
Indenture Trustee shall not be responsible to recompute, recalculate or verify
any information provided to it by the Servicer.
(b) The amount of P&I Advances to be made by the Servicer for
any Payment Date shall equal, subject to Section 4.01(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 (other than with respect to any Balloon Loan with a delinquent
Balloon Payment as described in clause (iii) below), which Monthly Payments were
delinquent as of the close of business on the related Determination Date, plus
(ii) with respect to each REO Property (other than with respect to any REO
Property relating to a Balloon Loan with a delinquent Balloon Payment as
described in clause (iv) below), which REO Property was acquired during or prior
to the related Prepayment Period and as to which such REO Property an REO
Disposition did not occur during the related Prepayment Period, an amount equal
to the excess, if any, of the Monthly Payments (with each interest portion
thereof net of the related Servicing Fee) that would have been due on the
related Due Date in respect of the related Mortgage Loans, over the net income
from such REO Property transferred to the Payment Account pursuant to Section
3.23 for distribution on such Payment Date, plus (iii) with respect to each
Balloon Loan with a delinquent Balloon Payment, an amount equal to the assumed
monthly principal and interest payment (with each interest portion thereof net
of the Servicing Fee) that would have been due on the related Due Date based on
the original principal amortization schedule for such Balloon Loan assuming such
Mortgage Loan was not a Balloon Loan, plus (iv) with respect to each REO
Property relating to a Balloon Loan with a delinquent Balloon Payment, 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 assumed monthly
principal and interest payment (with each interest portion thereof net of the
Servicing Fee) that would have been due on the related Due Date based on the
original principal amortization schedule for the related Balloon Loan assuming
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such Mortgage Loan was not a Balloon Loan, over the net income from such REO
Property transferred to the Payment Account pursuant to Section 3.23 for payment
on such Payment Date.
On or before 3:00 p.m. New York time on the Servicer
Remittance Date, the Servicer shall remit in immediately available funds to the
Indenture Trustee for deposit in the Payment 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 Payment 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 4.01, used by the 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
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
Servicer's records and replaced by the Servicer by deposit in the Collection
Account on or before any future Servicer Remittance Date to the extent that the
Available Payment Amount for the related Payment Date (determined without regard
to P&I Advances to be made on the Servicer Remittance Date) shall be less than
the total amount that would be distributed to the Classes of Noteholders
pursuant to the Indenture on such Payment Date if such amounts held for future
distributions had not been so used to make P&I Advances. The Indenture Trustee
will provide notice to the Servicer by telecopy by the close of business on any
Servicer Remittance Date in the event that the amount remitted by the Servicer
to the Indenture Trustee on such date is less than the P&I Advances required to
be made by the Servicer for the related Payment Date.
(c) The obligation of the 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 Estate pursuant to any applicable provision of
this Agreement, except as otherwise provided in this Section.
(d) Notwithstanding anything herein to the contrary, no P&I
Advance shall be required to be made hereunder by the Servicer if such P&I
Advance would, if made, constitute a Nonrecoverable P&I Advance. The
determination by the Servicer that it has made a Nonrecoverable P&I Advance or
that any proposed P&I Advance, if made, would constitute a Nonrecoverable P&I
Advance, shall be evidenced by an Officers' Certificate of the Servicer
delivered to the Indenture Trustee.
SECTION 4.02. Determination of Realized Losses.
Prior to each Determination Date, the 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 Servicer shall also determine as to each Mortgage
Loan: (A) the
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total amount of Realized Losses, if any, incurred in connection with any
Deficient Valuations made during the related Prepayment Period; and (B) 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 Servicer shall be evidenced by an Officers' Certificate
delivered to the Indenture Trustee by the Servicer prior to the Determination
Date immediately following the end of (x) in the case of Bankruptcy Losses
allocable to interest, the Due Period during which any such Realized Loss was
incurred, and (y) in the case of all other Realized Losses, the Prepayment
Period during which any such Realized Loss was incurred.
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ARTICLE V
THE SERVICER
SECTION 5.01. Liability of the Servicer.
The Servicer shall be liable in accordance herewith only to
the extent of the obligations specifically imposed by this Agreement and
undertaken hereunder by the Servicer herein.
SECTION 5.02. Merger or Consolidation of the Servicer.
Subject to the following paragraph, the Servicer will keep in
full effect its existence, rights and franchises as a corporation under the laws
of the jurisdiction of its incorporation and its qualification as an approved
conventional seller/servicer for Fannie Mae or Freddie Mac in good standing. The
Servicer 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
Notes or any of the Mortgage Loans and to perform its respective duties under
this Agreement.
The 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
Servicer shall be a party, or any Person succeeding to the business of the
Servicer, shall be the successor of the Servicer 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 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 Notes 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 5.03. Limitation on Liability of the Master Servicer,
Servicer and Others.
None of the Master Servicer, the Servicer nor any of the
directors, officers, employees or agents of the Master Servicer or Servicer
shall be under any liability to the Trust Estate or the Noteholders 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 Master Servicer, the Servicer or any such
person against any breach of warranties, representations or covenants made
herein, or against any specific liability imposed on the Master Servicer or
Servicer pursuant hereto, or against any liability which would otherwise be
imposed by reason of willful misfeasance, bad faith or negligence in the
performance of duties or by reason of reckless disregard of obligations and
duties hereunder. The Master Servicer,
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Servicer and any director, officer, employee or agent of the Master Servicer or
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 Master Servicer, Servicer and any director, officer, employee or
agent of the Master Servicer or Servicer shall be indemnified and held harmless
by the Trust Estate against any loss, liability or expense incurred in
connection with any legal action relating to this Agreement or the Notes, other
than any loss, liability or expense to any specific Mortgage Loan or Mortgage
Loans (except as any such loss, liability or expense shall be otherwise
reimbursable pursuant to this Agreement) or any loss, liability or expense
incurred by reason of willful misfeasance, bad faith or negligence in the
performance of duties hereunder or by reason of reckless disregard of
obligations and duties hereunder. Neither the Master Servicer or 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 Master Servicer and the 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 Noteholders hereunder. In such event, unless the Master
Servicer or the Servicer acts without the consent of Holders of Notes entitled
to at least 51% of the Voting Rights (which consent shall not be necessary in
the case of litigation or other legal action by either to enforce their
respective rights or defend themselves hereunder), 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 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 Estate, and the Master Servicer or the Servicer, as the case may be,
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 Noteholders to receive any amount in the Collection
Account.
SECTION 5.04. Limitation on Resignation of the Servicer.
The Servicer shall not resign from the obligations and duties
hereby imposed on it except (i) upon determination that its duties hereunder are
no longer permissible under applicable law or (ii) with the written consent of
the Master Servicer, the Indenture Trustee and the Issuer and written
confirmation from each Rating Agency (which confirmation shall be furnished to
the Indenture Trustee and the Issuer) that such resignation will not cause such
Rating Agency to reduce the then current rating of the Notes. Any such
determination pursuant to clause (i) of the preceding sentence permitting the
resignation of the Servicer shall be evidenced by an Opinion of Counsel to such
effect obtained at the expense of the Servicer and delivered to the Master
Servicer, the Indenture Trustee and the Issuer. No resignation of the Servicer
shall become effective until the Master Servicer (or if the Master Servicer is
not the successor, the Indenture Trustee or a successor servicer) shall have
assumed the Servicer's responsibilities, duties, liabilities (other than those
liabilities arising prior to the appointment of such successor) and obligations
under this Agreement.
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Except as expressly provided herein, the Servicer shall not
assign nor transfer any of its rights, benefits or privileges hereunder to any
other Person, nor delegate to or subcontract with, nor authorize or appoint any
other Person to perform any of the duties, covenants or obligations to be
performed by the Servicer hereunder. If, pursuant to any provision hereof, the
duties of the Servicer are transferred to a successor servicer, the entire
amount of the Servicing Fee and other compensation payable to the Servicer
pursuant hereto shall thereafter be payable to such successor servicer.
SECTION 5.05. Rights of the Indenture Trustee and the Issuer
in Respect of the Servicer.
The Servicer shall afford (and any Sub-Servicing Agreement
shall provide that each Sub-Servicer shall afford) the Master Servicer, the
Issuer and the Indenture Trustee, upon reasonable notice, during normal business
hours, access to all records maintained by the Servicer (and any such
Sub-Servicer) in respect of the Servicer's rights and obligations hereunder and
access to officers of the Servicer (and those of any such Sub-Servicer)
responsible for such obligations. Upon request, the Servicer shall furnish to
the Master Servicer, the Issuer and the Indenture Trustee its (and any such
Sub-Servicer's) most recent financial statements and such other information
relating to the Servicer's capacity to perform its obligations under this
Agreement that it possesses. To the extent such information is not otherwise
available to the public, the Master Servicer, the Issuer and the Indenture
Trustee shall not disseminate any information obtained pursuant to the preceding
two sentences without the 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, rating agencies or reinsurers or (ii) pursuant to any
law, rule, regulation, order, judgment, writ, injunction or decree of any court
or governmental authority having jurisdiction over the Master Servicer, the
Issuer, the Indenture Trustee or the Trust Estate, and in each case, the Master
Servicer, the Issuer or the Indenture Trustee, as the case may be, shall use its
best efforts to assure the confidentiality of any such disseminated non-public
information. The Master Servicer, the Indenture Trustee or the Issuer may, but
is not obligated to, enforce the obligations of the Servicer under this
Agreement and may, but is not obligated to, perform, or cause a designee to
perform, any defaulted obligation of the Servicer under this Agreement or
exercise the rights of the Servicer under this Agreement; provided that the
Servicer shall not be relieved of any of its obligations under this Agreement by
virtue of such performance by the Master Servicer, the Issuer, the Indenture
Trustee or any of their designees. The Master Servicer, the Issuer and the
Indenture Trustee shall not have any responsibility or liability for any action
or failure to act by the Servicer and is not obligated to supervise the
performance of the Servicer under this Agreement or otherwise.
SECTION 5.06. Indemnification of the Indenture Trustee.
The Servicer agrees to indemnify the Indenture Trustee from,
and hold it harmless against, any loss, liability or expense resulting from a
breach of the Servicer's obligations and duties under this Agreement. Such
indemnity shall survive the termination or discharge of this
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Agreement. Any payment hereunder made by the Servicer to the Indenture Trustee
shall be from the Servicer's own funds, without reimbursement from the Trust
Estate therefore.
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ARTICLE VI
DEFAULT
SECTION 6.01. Servicer Events of Default.
"Servicer Event of Default," wherever used herein, means any
one of the following events:
(i) any failure by the Servicer to remit to the
Indenture Trustee for distribution to the Noteholders any
payment (other than a P&I Advance required to be made from its
own funds on any Servicer Remittance Date pursuant to Section
4.01) required to be made under the terms of 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 Servicer by either the Master Servicer or the Indenture
Trustee (in which case notice shall be provided by telecopy),
or to the Servicer and the Indenture Trustee by the Holders of
Notes entitled to at least 25% of the Voting Rights; or
(ii) any failure on the part of the Servicer duly to
observe or perform in any material respect any of the
covenants or agreements on the part of the Servicer contained
in this Agreement which continues unremedied for a period of
45 days after the earlier of (i) the date on which written
notice of such failure, requiring the same to be remedied,
shall have been given to the Servicer by either the Master
Servicer or the Indenture Trustee, or to the Servicer and the
Indenture Trustee by the Holders of Notes entitled to at least
25% of the Voting Rights and (ii) actual knowledge of such
failure by a Servicing Officer of the 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 Servicer and
if such proceeding is being contested by the Servicer in good
faith such decree or order shall have remained in force
undischarged or unstayed for a period of 60 days or results in
the entry of an order for relief or any such adjudication or
appointment; or
(iv) the 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 the Servicer or of or
relating to all or substantially all of its property; or
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(v) the Servicer shall admit in writing its inability
to pay its debts generally as they become due, file a petition
to take advantage of any applicable insolvency or
reorganization statute, make an assignment for the benefit of
its creditors, or voluntarily suspend payment of its
obligations; or
(vi) any failure by the Servicer of the Servicer
Termination Test; provided, however, that if the Master
Servicer is the Servicer such Servicer Termination Test shall
not apply; or
(vii) any failure of the Servicer to make any P&I Advance
on any Servicer Remittance Date required to be made from its
own funds pursuant to Section 4.01 which continues unremedied
until 3:00 p.m. New York time on the Business Day immediately
following the Servicer Remittance Date.
If a 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
Servicer Event of Default shall not have been remedied, the Master Servicer may,
but solely with the written consent of the Indenture Trustee (or if the Master
Servicer is the Servicer, the Indenture Trustee may), and at the written
direction of the Holders of Notes entitled to at least 51% of Voting Rights, the
Master Servicer (or if the Master Servicer is the Servicer, the Indenture
Trustee) shall, by notice in writing to the Servicer, terminate all of the
rights and obligations of the Servicer in its capacity as a Servicer under this
Agreement, to the extent permitted by law, and in and to the Mortgage Loans and
the proceeds thereof. If a Servicer Event of Default described in clause (vii)
hereof shall occur, the Master Servicer (or if the Master Servicer is the
Servicer, the Indenture Trustee) shall, by notice in writing to the Servicer,
terminate all of the rights and obligations of the Servicer in its capacity as a
Servicer under this Agreement and in and to the Mortgage Loans and the proceeds
thereof. On or after the receipt by the Servicer of such written notice, all
authority and power of the Servicer under this Agreement, whether with respect
to the Notes (other than as a Holder of any Note) or the Mortgage Loans or
otherwise, shall pass to and be vested in the Master Servicer (or if the Master
Servicer is the Servicer, the Indenture Trustee) pursuant to and under this
Section and, without limitation, the Master Servicer (or if the Master Servicer
is the Servicer, the Indenture 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 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 Servicer agrees, at its sole cost and expense, promptly (and in
any event no later than ten Business Days subsequent to such notice) to provide
the Master Servicer (or if the Master Servicer is the Servicer, the Indenture
Trustee) with all documents and records requested by it to enable it to assume
the Servicer's functions under this Agreement, and to cooperate with the Master
Servicer (or if the Master Servicer is the Servicer, the Indenture Trustee) in
effecting the termination of the Servicer's responsibilities and rights under
this Agreement, including, without limitation, the transfer within one Business
Day to the Master Servicer (or if the Master Servicer is the Servicer, the
Indenture Trustee) for administration by it of all cash amounts which at the
time shall be or
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should have been credited by the Servicer to the Collection Account held by or
on behalf of the Servicer, the Payment Account or any REO Account or Servicing
Account held by or on behalf of the Servicer or thereafter be received with
respect to the Mortgage Loans or any REO Property serviced by the Servicer
(provided, however, that the 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 5.03, notwithstanding any
such termination, with respect to events occurring prior to such termination).
For purposes of this Section 6.01, the Indenture Trustee shall not be deemed to
have knowledge of a Servicer Event of Default unless a Responsible Officer of
the Indenture Trustee assigned to and working in the Indenture Trustee's
Corporate Trust Office has actual knowledge thereof or unless written notice of
any event which is in fact such a Servicer Event of Default is received by the
Indenture Trustee and such notice references the Notes, the Trust Estate or this
Agreement.
SECTION 6.02. Master Servicer or Indenture Trustee to Act;
Appointment of Successor.
(a) On and after the time the Servicer receives a notice of
termination, the Master Servicer or if the Master Servicer is the Servicer, the
Indenture Trustee shall be the successor in all respects to the Servicer in its
capacity as Servicer under this Agreement and the transactions set forth or
provided for herein and shall be subject to all the responsibilities, duties and
liabilities relating thereto and arising thereafter placed on the Servicer
(except if the Indenture Trustee is successor for any representations or
warranties of the Servicer under this Agreement, the responsibilities, duties
and liabilities contained in Section 2.01(b) and its obligation to deposit
amounts in respect of losses pursuant to Section 3.12) by the terms and
provisions hereof including, without limitation, the Servicer's obligations to
make P&I Advances pursuant to Section 4.01; provided, however, that if the
Indenture Trustee is prohibited by law or regulation from obligating itself to
make advances regarding delinquent mortgage loans, then the Indenture Trustee
shall not be obligated to make P&I Advances pursuant to Section 4.01; and
provided further, that any failure to perform such duties or responsibilities
caused by the Servicer's failure to provide information required by Section 6.01
shall not be considered a default by the Master Servicer or the Indenture
Trustee as successor to the Servicer hereunder. As compensation therefor, the
Master Servicer or the Indenture Trustee, as the case may be, shall be entitled
to the Servicing Fees and all funds relating to the Mortgage Loans to which the
Servicer would have been entitled if it had continued to act hereunder (other
than amounts which were due or would become due to the Servicer prior to its
termination or resignation). Notwithstanding the above and subject to the next
paragraph, the Master Servicer or the Indenture Trustee, as the case may be,
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 Notes entitled to at least 51% of the Voting Rights
so request in writing to the Master Servicer or the Indenture Trustee, as the
case may be, 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 Servicer under this Agreement in the assumption of all or any
part of the responsibilities, duties or liabilities of the Servicer under this
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Agreement. No appointment of a successor to the Servicer under this Agreement
shall be effective until the assumption by the successor of all of the
Servicer's responsibilities, duties and liabilities hereunder. In connection
with such appointment and assumption described herein, the Master Servicer or
the Indenture Trustee, as the case may be, 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 Servicer as such hereunder. The Master Servicer or
the Indenture Trustee, as the case may be, 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 Servicer under this
Agreement, the Master Servicer or the Indenture Trustee, as the case may be,
shall act in such capacity as hereinabove provided.
Upon removal or resignation of the Servicer, if the Master
Servicer (or if the Master Servicer is the Servicer, the Indenture Trustee) is
not going to serve as successor Servicer, the Master Servicer (or if the Master
Servicer is the Servicer, the Indenture Trustee) with the cooperation of the
Issuer, (x) shall solicit bids for a successor Servicer as described below and
(y) pending the appointment of a successor Servicer as a result of soliciting
such bids, shall serve as Servicer of the Mortgage Loans serviced by such
predecessor Servicer. The Master Servicer (or if the Master Servicer is the
Servicer, the Indenture Trustee) shall solicit, by public announcement, bids
from housing and home finance institutions, banks and mortgage servicing
institutions meeting the qualifications set forth above (including the Indenture
Trustee or any affiliate thereof). Such public announcement shall specify that
the successor Servicer shall be entitled to the servicing compensation agreed
upon between the Master Servicer (or if the Master Servicer is the Servicer, the
Indenture Trustee), the successor Servicer and the Issuer; provided, however,
that no such fee shall exceed the related Servicing Fee. Within thirty days
after any such public announcement, the Master Servicer (or if the Master
Servicer is the Servicer, the Indenture Trustee), with the cooperation of the
Issuer, shall negotiate in good faith and effect the sale, transfer and
assignment of the servicing rights and responsibilities hereunder to the
qualified party submitting the highest satisfactory bid as to the price they
will pay to obtain such servicing. The Master Servicer (or if the Master
Servicer is the Servicer, the Indenture Trustee) upon receipt of the purchase
price shall pay such purchase price to the Servicer being so removed, after
deducting from any sum received by the Master Servicer (or if the Master
Servicer is the Servicer, the Indenture Trustee) from the successor to the
Servicer in respect of such sale, transfer and assignment all costs and expenses
of any public announcement and of any sale, transfer and assignment of the
servicing rights and responsibilities reasonably incurred hereunder. After such
deductions, the remainder of such sum shall be paid by the Master Servicer (or
if the Master Servicer is the Servicer, the Indenture Trustee) to the Servicer
at the time of such sale.
(b) If the Servicer fails to remit to the Indenture Trustee
for distribution to the Noteholders any payment required to be made under the
terms of the Notes and the Indenture (for purposes of this Section 6.02(b), a
"Remittance") because the 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 Indenture Trustee shall upon
notice of such prohibition, regardless of whether it has received a notice of
termination under Section 6.01,
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advance the amount of such Remittance by depositing such amount in the Payment
Account on the related Payment Date. The Indenture Trustee shall be obligated to
make such advance only if (i) such advance, in the good faith judgment of the
Indenture Trustee, can reasonably be expected to be ultimately recoverable from
Stayed Funds and (ii) the Indenture Trustee is not prohibited by law from making
such advance or obligating itself to do so. Upon remittance of the Stayed Funds
to the Indenture Trustee or the deposit thereof in the Payment Account by the
Servicer, a trustee in bankruptcy or a federal bankruptcy court, the Indenture
Trustee may recover the amount so advanced, without interest, by withdrawing
such amount from the Payment Account; however, nothing in this Agreement shall
be deemed to affect the Indenture Trustee's rights to recover from the
Servicer's own funds interest on the amount of any such advance. If the
Indenture 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 Indenture
Trustee shall be entitled to reimburse itself for such advance, without
interest, by withdrawing from the Payment Account, out of amounts on deposit
therein, an amount equal to the portion of such advance attributable to the
Stayed Funds.
SECTION 6.03. Notification to Noteholders.
(a) Upon any termination of the Servicer pursuant to Section
6.01 above or any appointment of a successor to the Servicer pursuant to Section
6.02 above, the Indenture Trustee shall give prompt written notice thereof to
Noteholders at their respective addresses appearing in the Note 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 Servicer Event of Default or five days after a Responsible
Officer of the Indenture Trustee becomes aware of the occurrence of such an
event, the Indenture Trustee shall transmit by mail to the Master Servicer and
to all Holders of Notes notice of each such occurrence, unless such default or
Servicer Event of Default shall have been cured or waived.
SECTION 6.04. Waiver of Servicer Events of Default.
The Holders representing at least 66% of the Voting Rights
evidenced by all Classes of Notes affected by any default or Servicer Event of
Default hereunder may waive such default or Servicer Event of Default; provided,
however, that a default or Servicer Event of Default under clause (i) or (vii)
of Section 6.01 may be waived only by all of the Holders of the Notes. Upon any
such waiver of a default or Servicer Event of Default, such default or Servicer
Event of Default shall cease to exist and shall be deemed to have been remedied
for every purpose hereunder. No such waiver shall extend to any subsequent or
other default or Servicer Event of Default or impair any right consequent
thereon except to the extent expressly so waived.
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ARTICLE VII
SPECIAL FORECLOSURE PROCEDURES
AT OPTION OF THE CERTIFICATEHOLDER OF THE MAJORITY
IN PERCENTAGE INTEREST IN THE EQUITY CERTIFICATES
SECTION 7.01. General.
(a) The Servicer hereby consents to the terms and provisions
of this Article VII so long as the Transferor is the Directing Holder. If at any
time any Person other than the Transferor is the Directing Holder, the terms and
provisions of this Article VII shall only become operative upon the express
written consent of the Servicer, with written notice of such consent delivered
to the Indenture Trustee, and then only for so long as the specific
Certificateholder to whom consent was granted remains the Certificateholder of a
majority in Percentage Interest in the Equity Certificates. In the event of any
conflict between the terms and conditions of this Article VII and the first
paragraph of Section 3.16(a), this Article VII shall control.
(b) Whenever used in this Article VII, the following words and
phrases, unless the context otherwise requires, shall have the following
meanings:
AFFIRMATION: A written statement signed by the
Certificateholder of a majority in Percentage Interest in the Equity
Certificates and sent to the Servicer certifying such Certificateholder's
Percentage Interest in the Equity Certificates, and affirming the terms of
Section 7.08.
COLLATERAL ACCOUNT: The fund established and maintained
pursuant to Section 7.06 hereof.
COMMENCEMENT OF FORECLOSURE: The first official action
required under local law in order to commence foreclosure proceedings or to
schedule a trustee's sale under a deed of trust, including (i) in the case of a
mortgage or deed to secure debt, any filing or service of process necessary to
commence an action to foreclose or (ii) in the case of a deed of trust, the
posting, publishing, filing or delivery of a notice of sale, but not including
in either case any notice of default, notice of intent to foreclose or sell or
any other action prerequisite to the actions specified in (i) or (ii) above.
CURRENT APPRAISAL: With respect to any Subject Mortgage Loan
as to which the Directing Holder has made an Election to Delay Foreclosure or an
Election to Foreclose, an appraisal of such Mortgage Loan, based on an appraisal
of the related Mortgaged Property obtained by the Directing Holder at its
expense from an appraiser acceptable to the Servicer as nearly contemporaneously
as practicable to the time of the Directing Holder's election, prepared based on
customary requirements for such appraisals, and which appraisal shall take into
account estimated liquidation expenses and carrying costs.
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DIRECTING HOLDER: The Certificateholder of a majority in
Percentage Interest of the Equity Certificates from the time that such
Certificateholder provides the Affirmation to the Servicer and until such time
as such Certificateholder is no longer a Certificateholder of a majority in
Percentage Interest in the Equity Certificates.
ELECTION TO DELAY FORECLOSURE: Any election by the Directing
Holder to delay the Commencement of Foreclosure, made in accordance with Section
7.03(b).
ELECTION TO FORECLOSE: Any election by the Directing Holder to
proceed with the Commencement of Foreclosure, made in accordance with Section
7.04(a).
FAIR MARKET VALUE: With respect to a Subject Mortgage Loan,
the fair market value of the related Mortgaged Property as determined pursuant
to the Current Appraisal.
REQUIRED COLLATERAL ACCOUNT BALANCE: As of any date of
determination, an amount equal to the aggregate of all amounts previously
required to be deposited in the Collateral Account pursuant to Section 7.03(d)
(after adjustment for all withdrawals and deposits pursuant to Section 7.03(e))
and Section 7.04(b) (after adjustment for all withdrawals and deposits pursuant
to Section 7.04(c)), reduced by all withdrawals therefrom pursuant to Section
7.03(g) and Section 7.04(d).
SUBJECT MORTGAGE LOAN: Any Mortgage Loan that comes into and
continues in default and as to which no satisfactory arrangements can be made
for collection of delinquent payments pursuant to Section 3.07.
UPDATED CURRENT APPRAISAL: With respect to any Subject
Mortgage Loan as to which the Directing Holder has made an Election to Delay
Foreclosure and as to which no amount has been realized on such Subject Mortgage
Loan within six months from the time the Subject Mortgage Loan becomes
delinquent, an appraisal of such Mortgage Loan, based on an appraisal of the
related Mortgaged Property obtained by the Directing Holder at its expense from
an appraiser acceptable to the Servicer as nearly contemporaneously as
practicable to the time which the Directing Holder is obligated to purchase such
Subject Mortgage Loan pursuant to Section 7.03(g), prepared based on customary
requirements for such appraisals, and which appraisal shall take into account
estimated liquidation expenses and carrying costs.
(c) All capitalized terms not otherwise defined in this
Article VII shall have the meanings assigned elsewhere in this Agreement.
SECTION 7.02. Reports and Notices.
(a) In connection with the performance of its duties under
this Agreement relating to the realization upon defaulted Mortgage Loans, the
Servicer shall provide to the Directing Holder the following notices and
reports:
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(i) Upon reasonable request of the Directing Holder, with
respect to any Mortgage Loan listed as at least 30 days delinquent in
the statement provided to Noteholders pursuant to Section 7.05 of the
Indenture, the Servicer shall provide such information as it may have
in its possession or may reasonably obtain, the reasonable out of
pocket expenses of the Servicer in providing such information to be
paid promptly by the Directing Holder, upon receipt of an invoice from
the Servicer.
(ii) Prior to the Commencement of Foreclosure in connection
with any Subject Mortgage Loan, the Servicer shall provide the
Directing Holder with a notice of such proposed and imminent
foreclosure, stating the loan number and the aggregate amount
owing under such Mortgage Loan.
(b) If requested by the Directing Holder, the Servicer shall
make its servicing personnel available (during its normal business hours) to
respond to reasonable inquiries by the Directing Holder in connection with any
Subject Mortgage Loan identified in a report or notice under subsection (a)(i)
or (a)(ii) above which has been given to the Directing Holder; provided, that
(1) the Servicer shall only be required to provide information that is readily
accessible to its servicing personnel and (2) the Servicer shall not be required
to provide any written information under this subsection.
SECTION 7.03. Election to Delay Foreclosure Proceedings.
(a) In the event that the Servicer does not receive written
notice of the Directing Holder's election pursuant to subsection (b) below
within 24 hours of transmission of the notice provided by the Servicer under
Section 7.02(a)(ii), the Servicer shall proceed with the Commencement of
Foreclosure in respect of such Subject Mortgage Loan in accordance with its
normal foreclosure policies without additional notice to the Directing Holder.
Any foreclosure that has been initiated may be discontinued if the Subject
Mortgage Loan has been brought current (including the payment to the Collateral
Account of all related P&I Advances and Servicing Advances) or if a refinancing
or prepayment occurs pursuant to which the Subject Mortgage Loan is brought
current (including the payment of all related P&I Advances and Servicing
Advances), without notice to the Directing Holder.
(b) In connection with any Subject Mortgage Loan with respect
to which a notice under Section 7.02(a)(ii) has been given to the Directing
Holder, the Directing Holder may elect, for reasonable cause as determined by
the Directing Holder, to instruct the Servicer to delay Commencement of
Foreclosure until such time as the Directing Holder determines that the Servicer
may proceed with Commencement of Foreclosure. Such election must be evidenced by
written notice received by the Servicer within 24 hours of transmission of the
notice provided by the Servicer under Section 7.02(a)(ii), except that such 24
hour period shall be extended for a reasonable period, not to exceed four
Business Days if the Directing Holder requests additional information related to
such foreclosure or such Subject Mortgage Loan, to permit the review of such
additional information.
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(c) With respect to any Subject Mortgage Loan as to which the
Directing Holder has made an Election to Delay Foreclosure, the Directing Holder
shall obtain a Current Appraisal as soon as practicable, and shall provide the
Servicer with a copy of such Current Appraisal. With respect to any Subject
Mortgage Loan as to which the Directing Holder has made an Election to Delay
Foreclosure and as to which no amount has been realized on such Subject Mortgage
Loan within six months from the time the Subject Mortgage Loan becomes
delinquent, the Directing Holder shall obtain an Updated Current Appraisal and
shall provide the Servicer with a copy of such Updated Current Appraisal.
(d) Within two Business Days of making any Election to Delay
Foreclosure, the Directing Holder shall remit to the Servicer, for deposit in
the Collateral Account, an amount, as calculated by the Servicer, equal to the
sum of (1) 125% of the Fair Market Value determined pursuant to the Current
Appraisal referred to in subsection (c) above (or, if such Current Appraisal has
not yet been obtained, the Servicer's estimate thereof, in which case the
required deposit under this subsection shall be adjusted upon obtaining such
Current Appraisal) and (2) three months' interest on the Subject Mortgage Loan
at the applicable Mortgage Rate. If the Directing Holder decides to extend any
Election to Delay Foreclosure for a period in excess of three months, which
extension shall in no event exceed three months (such excess period being
referred to herein as the "Excess Period"), the Directing Holder shall remit by
wire transfer in advance to the Servicer for deposit in the Collateral Account
the amount of each additional month's interest, as calculated by the Servicer,
equal to interest on the Mortgage Loan at the applicable Mortgage Rate for the
Excess Period designated by the Directing Holder. Nothing contained in this
Article VII shall alter the Servicer's obligation to make P&I Advances pursuant
to Section 4.01.
(e) With respect to any Subject Mortgage Loan as to which the
Directing Holder has made an Election to Delay Foreclosure, the Servicer may
withdraw from the Collateral Account from time to time amounts necessary to
reimburse the Servicer for all P&I Advances and Servicing Advances thereafter
made by the Servicer in accordance with this Agreement. To the extent that the
amount of any Servicing Advance is determined by the Servicer based on estimated
costs, and the actual costs are subsequently determined to be higher than the
estimate, the Servicer may withdraw the additional amount from the Collateral
Account and if the actual costs are determined to be lower than such estimate,
the Servicer shall deposit the amount of such difference into the Collateral
Account. In the event that the Subject Mortgage Loan is brought current by the
Mortgagor and the foreclosure action is discontinued, the amounts so withdrawn
from the Collateral Account by the Servicer as reimbursement for P&I Advances
and Servicing Advances shall be redeposited therein by the Servicer and the
Servicer shall be reimbursed as otherwise provided in this Agreement. Except as
provided in the two preceding sentences, amounts withdrawn from the Collateral
Account to cover P&I Advances and Servicing Advances shall not be redeposited
therein or otherwise reimbursed to the Directing Holder; however, to the extent
any such amounts are not redeposited by the Servicer, the Servicer waives any
right to reimbursement for such amounts under any other provision of this
Agreement. If and when any such Subject Mortgage Loan is brought current by the
Mortgagor (including the payment to the Collateral Account of all related P&I
Advances and Servicing Advances), all amounts remaining
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in the Collateral Account in respect of such Subject Mortgage Loan (after
adjustment for all withdrawals and deposits pursuant to this subsection) shall
be released to the Directing Holder.
(f) With respect to any Subject Mortgage Loan as to which the
Directing Holder has made an Election to Delay Foreclosure, the Servicer shall
continue to service the Subject Mortgage Loan in accordance with the terms of
this Agreement (other than the delay in Commencement of Foreclosure as provided
herein). If and when the Directing Holder shall notify the Servicer that it
believes that it is appropriate to do so, the Servicer shall proceed with the
Commencement of Foreclosure.
(g) Upon the occurrence of a liquidation of a defaulted
Mortgage Loan or the disposition of an REO Property with respect to any Subject
Mortgage Loan, in either case as to which the Directing Holder made an Election
to Delay Foreclosure, the Servicer shall calculate the amount, if any, by which
the Fair Market Value determined pursuant to the Current Appraisal obtained
under subsection (c) above exceeds the Liquidation Proceeds for the related
Mortgage Loan or REO Property, and the Servicer shall withdraw the amount of
such excess from the Collateral Account, shall remit the same to the Collection
Account and in its capacity as Servicer shall apply such amount as additional
Liquidation Proceeds pursuant to this Agreement. If the Liquidation Proceeds for
such Mortgage Loan or REO Property exceeds the Fair Market Value determined
pursuant to the Current Appraisal obtained under subsection (c) above, the
Servicer shall deposit immediately such excess into the Collection Account as
additional Liquidation Proceeds pursuant to this Agreement. After making any
such withdrawal as provided in this subsection (g), all amounts remaining in the
Collateral Account in respect of such Subject Mortgage Loan (after adjustment
for all withdrawals and deposits pursuant to subsection (e)) shall be released
to the Directing Holder. If within six months of the time the Subject Mortgage
Loan becomes delinquent, no amount has been realized on the Subject Mortgage
Loan, the Directing Holder shall purchase the Mortgage Loan from the Trust
Estate at a purchase price equal to the greater of (i) the Fair Market Value
shown on the Current Appraisal determined pursuant to subsection (c) above or
(ii) the Fair Market Value shown on the Updated Current Appraisal determined
pursuant to subsection (c) above. The Servicer shall first apply amounts on
deposit in the Collateral Account towards such purchase price (after adjustments
for all withdrawals and deposits pursuant to subsection (e) above. Any shortfall
shall be paid by the Directing Holder and any excess will be returned to it. The
Servicer shall remit the amount of such purchase price to the Collection
Account.
SECTION 7.04. Election to Commence Foreclosure Proceedings.
(a) In connection with any Subject Mortgage Loan identified
under Section 7.02(a)(i), the Directing Holder may elect, for reasonable cause
as determined by the Directing Holder, to instruct the Servicer to proceed with
Commencement of Foreclosure as soon as practicable.
(b) Within two Business Days of making any Election to
Foreclose, the Directing Holder shall remit to the Servicer, for deposit in the
Collateral Account, an amount, as
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calculated by the Servicer, equal to the sum of (1) 125% of the Stated Principal
Balance of the Subject Mortgage Loan and (2) three months' interest on the
Subject Mortgage Loan at the applicable Mortgage Rate.
(c) With respect to any Subject Mortgage Loan as to which the
Directing Holder has made an Election to Foreclose, the Servicer shall continue
to service such Subject Mortgage Loan in accordance with the terms of this
Agreement (other than to proceed with the Commencement of Foreclosure as
provided herein). In connection therewith, the Servicer shall have the same
rights to make withdrawals for related P&I Advances and Servicing Advances from
the Collateral Account as are provided under Section 7.03(e), and the Servicer
shall make reimbursements thereto to the limited extent provided under such
subsection. The Servicer shall not be required to proceed with the Commencement
of Foreclosure if (i) the same is stayed as a result of the Mortgagor's
bankruptcy or is otherwise barred by applicable law, or to the extent that all
legal conditions precedent thereto have not yet been complied with or (ii) the
Servicer reasonably determines that such foreclosure might result in liability
to the Servicer, unless the Directing Holder provides, at such time, a general
indemnity to the Servicer with respect to any such liability or (iii) the
Servicer believes there is a breach of representations or warranties which may
result in a repurchase or substitution of such Mortgage Loan or (iv) the
Servicer reasonably believes the Mortgaged Property may be contaminated with or
affected by hazardous wastes or hazardous substances. Any foreclosure that has
been initiated may be discontinued if the Subject Mortgage Loan has been brought
current (including the payment to the Collateral Account of all related P&I
Advances and Servicing Advances) or if a refinancing or prepayment occurs
pursuant to which the Subject Mortgage Loan is brought current (including the
payment to the Collateral Account of all related P&I Advances and Servicing
Advances), without notice to the Directing Holder. If and when any such Subject
Mortgage Loan is brought current by the Mortgagor (including the payment to the
Collateral Account of all related P&I Advances and Servicing Advances), all
amounts remaining in the Collateral Account in respect of such Subject Mortgage
Loan (after adjustment for all withdrawals and deposits pursuant to this
subsection) shall be released to the Directing Holder.
(d) Upon the occurrence of a liquidation of a defaulted
Mortgage Loan or the disposition of an REO Property, in either case with respect
to any Subject Mortgage Loan as to which the Directing Holder made an Election
to Foreclose and as to which the Servicer proceeded with the Commencement of
Foreclosure in accordance with subsection (c) above, the Servicer shall
calculate the amount, if any, by which the Stated Principal Balance of such
Subject Mortgage Loan exceeds the Liquidation Proceeds for the related Mortgage
Loan or REO Property, and the Servicer shall withdraw the amount of such excess
from the Collateral Account, shall remit the same to the Collection Account and
in its capacity as Servicer shall apply such amount as additional Liquidation
Proceeds pursuant to this Agreement. After making any such withdrawal or deposit
as provided in this subsection (d), all amounts remaining in the Collateral
Account in respect of such Subject Mortgage Loan shall be released to the
Directing Holder.
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<PAGE>
SECTION 7.05. Termination.
With respect to all Subject Mortgage Loans included in the
Trust Estate, the Directing Holder's rights to make any Election to Delay
Foreclosure or any Election to Foreclose and the Servicer's obligations under
Section 7.02 shall terminate upon the earlier of (i) the termination of this
Agreement or (ii) such time as the Directing Holder ceases to be a
Certificateholder of a majority in Percentage Interest of the Equity
Certificates. Except as set forth above, this Article VII of this Agreement and
the respective rights, obligations and responsibilities of the Directing Holder
and the Servicer hereunder shall terminate and be of no further force and effect
upon the final liquidation of the last Subject Mortgage Loan as to which the
Directing Holder made any Election to Delay Foreclosure or any Election to
Foreclose and the withdrawal of all remaining amounts in the Collateral Account
as provided herein.
SECTION 7.06. Collateral Account.
Upon receipt from the Directing Holder of the initial amount
required to be deposited in the Collateral Account pursuant to Section 7.03(d)
or Section 7.04(b), the Servicer shall establish and maintain as a separate
Eligible Account (the "Collateral Account"), entitled "Long Beach Mortgage
Company, as Servicer for Norwest Bank Minnesota, National Association, as
Indenture Trustee, in trust for the registered holders of Salomon Brothers
Mortgage Securities VII, Inc. Asset-Backed Floating Rate Notes, Series 1998-11".
Amounts in the Collateral Account shall continue to be the property of the
Directing Holder, subject to the first priority security interest granted
hereunder for the benefit of the Noteholders and the Certificateholders, until
withdrawn from the Collateral Account pursuant to Section 7.03 or Section 7.04
hereof.
Upon the termination of this Article VII of this Agreement
pursuant to Section 7.05 hereof, the Servicer shall distribute to the Directing
Holder all amounts remaining in the Collateral
Account together with any investment earnings thereon.
The Collateral Account shall not be an asset of the Trust
Estate and, for federal income tax purposes, shall be owned by the Directing
Holder.
For purposes of determining whether a P&I Advance constitutes
a Nonrecoverable P&I Advance, Liquidation Proceeds shall be deemed to include
any amounts ultimately recoverable from the Collateral Account or, to the extent
of any shortfall described in Section
7.09, from the Directing Holder.
SECTION 7.07. Collateral Account Permitted Investments.
The Servicer shall, at the written direction of the Directing
Holder, invest the funds in the Collateral Account in Permitted Investments.
Such direction shall not be changed more frequently than quarterly. In the
absence of any direction, the Servicer shall invest funds in the
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Collateral Account in accordance with the definition of Permitted Investments
herein in its discretion.
All income and gain realized from any investment as well as
any interest earned on deposits in the Collateral Account (net of any losses on
such investments) and any payments of principal made in respect of any Permitted
Investment shall be deposited in the Collateral Account upon receipt. All costs
associated with the purchase and sale of Collateral Account Permitted
Investments shall be borne by the Directing Holder. The Directing Holder shall
deposit in the Collateral Account the amount of any loss incurred in respect of
any such Permitted Investments made with funds in such Collateral Account
immediately upon realization of such loss. The Servicer shall periodically (but
not more frequently than monthly) distribute to the Directing Holder upon
request an amount of cash, to the extent cash is available therefor in the
Collateral Account, equal to the amount by which the balance of the Collateral
Account, after giving effect to all other distributions to be made from the
Collateral Account on such date, exceeds the Required Collateral Account
Balance. Any amounts so distributed shall be released from the lien and security
interest created pursuant to Section 7.08 of this Agreement.
SECTION 7.08. Grant of Security Interest.
The Directing Holder hereby grants to the Servicer for the
benefit of the Noteholders and other Certificateholders a security interest in
and lien on all of the Directing Holder's right, title and interest, whether now
owned or hereafter acquired, in and to: (1) the Collateral Account, (2) all
amounts deposited in the Collateral Account and Permitted Investments in which
such amounts are invested (and the distributions and proceeds of such
investments) and (3) all cash and non-cash proceeds of any of the foregoing,
including proceeds of the voluntary or involuntary conversion thereof (all of
the foregoing collectively, the "Collateral").
The Directing Holder hereby acknowledges the lien on and
security interest in the Collateral for the benefit of the Noteholders and other
Certificateholders. The Directing Holder shall take all actions requested by the
Master Servicer as may be reasonably necessary to perfect the security interest
created under this Section 7.08 of this Agreement in the Collateral and cause it
to be prior to all other security interests and liens, including the execution
and delivery to the Master Servicer for filing of appropriate financing
statements in accordance with applicable law. Upon receipt of duly filed
financing statements, the Master Servicer shall file appropriate continuation
statements, or appoint an agent on its behalf to file such statements, in
accordance with applicable law.
SECTION 7.09. Collateral Shortfalls.
In the event that amounts on deposit in the Collateral Account
at any time are insufficient to cover any withdrawals therefrom that the
Servicer is then entitled to make hereunder, the Directing Holder shall be
obligated to pay such amounts to the Servicer immediately upon demand. Such
obligation shall constitute a general obligation of the Directing Holder.
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ARTICLE VIII
MISCELLANEOUS PROVISIONS
SECTION 8.01. Amendment.
This Agreement may be amended from time to time by the
parties hereto, provided that any amendment be accompanied by a letter from the
Rating Agencies to the effect that the amendment will not result in the
downgrading or withdrawal of the ratings then assigned to the
Notes.
SECTION 8.02. 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 8.03. 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 Master Servicer, Wilshire Servicing Corporation, 1776 South West
Madison Street, Portland, Oregon 97205, Attention: Mr. Robert Rosen (facsimile
number: (503) 233-8799), (b) in the case of the Servicer, Long Beach Mortgage
Company, 1100 Town & Country Road, Suite 900, Orange, California 92868,
Attention: General Counsel (telecopy number: (714) 543-6847), (c) in the case of
DCR, Duff & Phelps Credit Rating Co., 17 State Street, New York, New York 10004,
(d) in the case of S&P, Standard & Poor's Ratings Services, 25 Broadway, New
York, New York 10004, (e) in the case of the Issuer (or the Owner Trustee on
behalf of the Issuer), c/o Wilmington Trust Company, Rodney Square North, 1100
North Market Street, Wilmington, Delaware 19890, Attention: Corporate Trust
Administration (telecopy number (302) 651-8882) (with copies to Wilshire Real
Estate Investment Trust Inc., 1776 South West Madison Street, Portland, Oregon
97205, Attention: Lawrence Mendelsohn (telecopy number (503) 223-8799), (f) in
the case of the Indenture Trustee, Norwest Bank Minnesota, National Association,
Sixth Street & Marquette Avenue, Minneapolis, Minnesota 55479-0070, Attention;
Corporate Trust Services/Asset-Backed Administration (telecopy number (612) 667-
3539) (with a copy to Norwest Bank Minnesota, National Association, 11000 Broken
Land Parkway, Columbia, Maryland 21044, Attention: Securities Administration
(telecopy number (410) 884-2360)), (g) in the case of the Seller, Wilshire Real
Estate Investment Trust Inc., 1776 South West Madison Street, Portland, Oregon
97205, Attention: Lawrence Mendelsohn (telecopy number (503) 223-8799), or as to
each party, at such other address as shall be designated by such party in
written notice to each other party. Any notice required or permitted to be
mailed to a Noteholder shall be given by first class mail, postage prepaid, at
the address of such Noteholder
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as shown in the Note Register. Any notice so mailed within the time prescribed
in the Agreement shall be conclusively presumed to have been duly given, whether
or not the Noteholder receives such notice.
SECTION 8.04. 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 Notes or the rights of the Holders thereof.
SECTION 8.05. 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 8.06. Third-Party Beneficiaries.
This Agreement will inure to the benefit of and be binding
upon the parties hereto, the Noteholders, the Owner Trustee, the Seller and
their respective successors and permitted assigns. Except as otherwise provided
in this Agreement, no other Person will have any right or
obligation hereunder.
SECTION 8.07. Counterparts.
This instrument may be executed in any number of counterparts,
each of which so executed shall be deemed to be an original, but all such
counterparts shall together constitute but
one and the same instrument.
SECTION 8.08 Termination.
The respective obligations and responsibilities of the
Servicer, the Indenture Trustee and the Issuer created hereby shall terminate
upon the satisfaction and discharge of the Indenture
pursuant to Section 4.10 thereof.
SECTION 8.09. No Recourse.
(a) The Master Servicer and the Servicer each acknowledge that
no recourse may be had against the Issuer, except as may be expressly set forth
in this Agreement.
(b) It is expressly understood and agreed by and between the
parties hereto (i) that this Agreement is executed and delivered by the Owner
Trustee, not in its individual capacity but
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solely as Owner Trustee under the Owner Trust Agreement in the exercise of the
power and authority conferred and vested in it as such Owner Trustee, (ii) each
of the representations, undertakings and agreements made herein by the Issuer
are not personal representations, undertakings and agreements of the Owner
Trustee but are binding only on the Issuer created pursuant to the Owner Trust
Agreement, (iii) nothing contained herein shall be construed as creating any
liability on the Owner Trustee, individually or personally, to perform any
covenant of the Issuer either expressed or implied contained herein, all such
liability, if any, being expressly waived by the parties hereto and by any
person claiming by, through or under any such party and (iv) under no
circumstances shall the Owner Trustee be personally liable for the payment of
any indebtedness or expense of the Issuer or be liable for the breach or failure
of any obligation, representation, warranty or covenant make or undertaken by
the Issuer under this Agreement.
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IN WITNESS WHEREOF, the Master Servicer, the Servicer, the
Issuer and the Indenture 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.
WILSHIRE SERVICING CORPORATION
as Master Servicer
By: /s/ Lawrence Mendolsohn
------------------------------
Name: Lawrence Mendelsohn
Title: President
LONG BEACH MORTGAGE COMPANY
as Servicer
By: /s/ Jeffrey A. Sorensen
------------------------------
Name: Jeffrey A. Sorensen
Title: Vice President
WILSHIRE REIT TRUST SERIES 1998-1,
as Issuer
By: Wilmington Trust Company, not
in its individual capacity but
solely as Owner Trustee
By: /s/ Emmett Harmon
------------------------------
Name: Emmett Harmon
Title: Vice President
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
as Indenture Trustee
By: /s/ Randall S. Reider
------------------------------
Name: Randall S. Reider
Title: Assistant Vice President
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EXHIBIT A-1
REQUEST FOR RELEASE
(for Indenture Trustee/Custodian)
LOAN INFORMATION
Name of Mortgagor:
Servicer
Loan No.:
INDENTURE TRUSTEE/CUSTODIAN
Name:
Address:
Indenture Trustee/Custodian
Mortgage File No.:
DEPOSITOR
Name: SALOMON BROTHERS MORTGAGE
SECURITIES VII, INC.
Address: __________________________________
______________________________________
Notes: Asset-Backed Floating Rate Notes, Series 1998-11.
A-1-1
<PAGE>
The undersigned Servicer hereby acknowledges that it has
received from _______________________, as Indenture Trustee (or a Custodian on
its behalf) for the Holders of Salomon Brothers Mortgage Securities VII, Inc.
Asset-Backed Floating Rate Notes, Series 1998-11, 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 Servicing
Agreement, dated as of September 1, 1998, among the Indenture Trustee, the
Issuer and the Servicer (the "Agreement").
( ) Promissory Note dated _______________, 19__, in the original principal
sum of $__________, made by _____________________, payable to, or
endorsed to the order of, the Indenture 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 Indenture 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 Servicer hereby acknowledges and agrees as
follows:
(1) The Servicer shall hold and retain possession of the
Documents in trust for the benefit of the Indenture Trustee, solely for
the purposes provided in the Agreement.
(2) The Servicer shall not cause or permit the Documents to
become subject to, or encumbered by, any claim, liens, security
interest, charges, writs of attachment or other
A-1-2
<PAGE>
impositions nor shall the Servicer assert or seek to assert any claims
or rights of setoff to or against the Documents or any proceeds
thereof.
(3) The Servicer shall return each and every Document
previously requested from the Mortgage File to the Indenture Trustee
(or a Custodian on its behalf) 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
Servicer shall at all times be ear marked for the account of the
Indenture Trustee, and the Servicer shall keep the Documents and any
proceeds separate and distinct from all other property in the
Servicer's possession, custody or control.
Dated:
[ Servicer]
By:____________________________
Name:
Title:
A-1-3
<PAGE>
EXHIBIT A-2
-----------
REQUEST FOR RELEASE
[Mortgage Loans Paid in Full]
OFFICERS' CERTIFICATE AND TRUST RECEIPT
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.
ASSET-BACKED FLOATING RATE NOTES, SERIES 1998-11
____________________________________________________ HEREBY CERTIFIES THAT
HE/SHE IS AN OFFICER OF THE 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 SERVICING
AGREEMENT DESCRIBED IN THE ATTACHED SCHEDULE:
ALL PAYMENTS OF PRINCIPAL, PREMIUM (IF ANY), AND INTEREST HAVE BEEN MADE.
LOAN NUMBER:_____________________ BORROWER'S NAME:_________________
COUNTY:__________________________
WE HEREBY CERTIFY THAT ALL AMOUNTS RECEIVED IN CONNECTION WITH SUCH PAYMENTS,
WHICH ARE REQUIRED TO BE DEPOSITED IN THE COLLECTION ACCOUNT PURSUANT TO SECTION
3.10 OF THE SERVICING AGREEMENT, HAVE BEEN OR WILL BE CREDITED.
__________________________ DATED:________________________
/ / VICE PRESIDENT
/ / ASSISTANT VICE PRESIDENT
A-2-1
<PAGE>
SCHEDULE 1
MORTGAGE LOAN SCHEDULE
[AVAILABLE UPON REQUEST]
EXHIBIT 4.3
WILSHIRE SERVICING CORPORATION
Master Servicer
NATIONAL MORTGAGE CORPORATION
Servicer
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
Indenture Trustee
and
WILSHIRE REIT TRUST SERIES 1998-1
Issuer
-----------------------------------------
SERVICING AGREEMENT
Dated as of September 1, 1998
-----------------------------------------
Asset-Backed Floating Rate Notes
Series 1998-11
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
-----------------
SECTION PAGE
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<S> <C> <C>
ARTICLE I
DEFINITIONS
1.01. Defined Terms..................................................................................1
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.01. Enforcement of Representations and Warranties.................................................23
2.02. Existence.....................................................................................25
2.03. Representations, Warranties and Covenants of the Servicer
and the Master Servicer.......................................................................25
ARTICLE III
ADMINISTRATION AND SERVICING
OF THE MORTGAGE LOANS
3.01. Servicer to Act as Servicer...................................................................29
3.02. Sub-Servicing Agreements Between the Servicer and Sub-Servicers...............................30
3.03. Successor Sub-Servicers.......................................................................32
3.04. Liability of the Servicer.....................................................................32
3.05. No Contractual Relationship Between Sub-Servicers and Indenture Trustee,
Issuer or Noteholders.........................................................................32
3.06. Assumption or Termination of Sub-Servicing Agreements by
Indenture Trustee.............................................................................33
3.07. Collection of Certain Mortgage Loan Payments..................................................33
3.08. Sub-Servicing Accounts........................................................................34
3.09. Collection of Taxes, Assessments and Similar Items; Servicing Accounts........................34
3.10. Collection Account............................................................................35
3.11. Withdrawals from the Collection Account.......................................................37
3.12. Investment of Funds in the Collection Account.................................................39
3.13. [intentionally omitted].......................................................................39
3.14. Maintenance of Hazard Insurance and Errors and Omissions and
Fidelity Coverage.............................................................................39
3.15. Enforcement of Due-On-Sale Clauses; Assumption Agreements.....................................41
3.16. Realization Upon Defaulted Mortgage Loans.....................................................42
3.17. Indenture Trustee to Cooperate; Release of Mortgage Files.....................................44
3.18. Servicing Compensation........................................................................45
A-2-i
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SECTION PAGE
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3.19. Reports to the Indenture Trustee; Collection Account Statements...............................45
3.20. Statement as to Compliance....................................................................46
3.21. Independent Public Accountants' Servicing Report..............................................46
3.22. Access to Certain Documentation...............................................................47
3.23. Title, Management and Disposition of REO Property.............................................47
3.24. Obligations of the Servicer in Respect of Prepayment Interest Shortfalls......................48
3.25. Obligations of the Servicer in Respect of Mortgage Rates and
Monthly Payments..............................................................................49
3.26. Transfer of Servicing.........................................................................49
ARTICLE IV
REMITTANCE REPORTS; P&I ADVANCES
4.01. Remittance Reports; P&I Advances..............................................................51
4.02. Determination of Realized Losses..............................................................52
ARTICLE V
THE SERVICER
5.01. Liability of the Servicer.....................................................................53
5.02. Merger or Consolidation of the Servicer.......................................................53
5.03. Limitation on Liability of the Master Servicer, Servicer and Others...........................53
5.04. Limitation on Resignation of the Servicer.....................................................54
5.05. Rights of the Indenture Trustee and the Issuer in Respect of the Servicer.....................55
5.06. Indemnification of the Master Servicer, the Indenture Trustee and the Owner
Trustee by the Servicer.......................................................................56
ARTICLE VI
DEFAULT
6.01. Servicer Events of Default....................................................................57
6.02. Master Servicer or Indenture Trustee to Act; Appointment of Successor.........................59
6.03. Notification to Noteholders...................................................................61
6.04. Waiver of Servicer Events of Default..........................................................61
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SECTION PAGE
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ARTICLE VII
SPECIAL FORECLOSURE PROCEDURES
AT OPTION OF THE CERTIFICATEHOLDER OF THE MAJORITY
IN PERCENTAGE INTEREST IN THE EQUITY CERTIFICATES
7.01. General.......................................................................................62
7.02. Reports and Notices...........................................................................63
7.03. Election to Delay Foreclosure Proceedings.....................................................64
7.04. Election to Commence Foreclosure Proceedings..................................................66
7.05. Termination...................................................................................68
7.06. Collateral Account............................................................................68
7.07. Collateral Account Permitted Investments......................................................68
7.08. Grant of Security Interest....................................................................69
7.09. Collateral Shortfalls.........................................................................69
ARTICLE VIII
MISCELLANEOUS PROVISIONS
8.01. Amendment.....................................................................................71
8.02. Governing Law.................................................................................71
8.03. Notices.......................................................................................71
8.04. Severability of Provisions....................................................................72
8.05. Article and Section References................................................................72
8.06. Third-Party Beneficiaries.....................................................................72
8.07. Counterparts..................................................................................72
8.08 Termination...................................................................................72
8.09. No Recourse...................................................................................72
</TABLE>
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<PAGE>
EXHIBITS
Exhibit A-1 Request for Release
Exhibit A-2 Request for Release Mortgage Loans paid in full
Schedule 1 Mortgage Loan Schedule
A-2-iv
<PAGE>
This Servicing Agreement, is dated and effective as of
September 1, 1998, among WILSHIRE SERVICING CORPORATION as Master Servicer,
NATIONAL MORTGAGE CORPORATION as Servicer, NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION as Indenture Trustee and Wilshire REIT Trust Series 1998-1 as
Issuer.
PRELIMINARY STATEMENT:
WHEREAS, the Master Servicer and Servicer are engaged in the
business of servicing sub-prime mortgage loans;
WHEREAS, the Issuer desires to pledge to the Indenture
Trustee certain mortgage loans, identified on Schedule 1 hereto (the "Mortgage
Loans") in connection with the issuance of the Asset-Backed Floating Rate Notes,
Series 1998-11 (the "Notes");
WHEREAS, the Issuer desires to contract with the Master
Servicer and the Servicer for the servicing responsibilities associated with
such Mortgage Loans; and
WHEREAS, the Issuer, the Master Servicer, the Servicer and
the Indenture Trustee desire to execute this Agreement to define each party's
rights, duties and obligations relating to the servicing of the Mortgage Loans;
NOW, THEREFORE, in consideration of the mutual agreements
herein contained, the parties hereto agree as follows:
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.
"Adjustable Rate Mortgage Loan": Each of the Mortgage Loans
identified in the Mortgage Loan Schedule as having a Mortgage Rate that is
subject to adjustment.
"Adjustment Date": With respect to each Adjustable Rate
Mortgage Loan, the day of the month on 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
<PAGE>
of voting securities, by contract or otherwise and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Agreement": This Servicing Agreement and all amendments
hereof and supplements hereto.
"Available Payment Amount": With respect to any Payment Date,
an amount equal to (1) the sum of (a) the aggregate of the amounts on deposit in
the Collection Account and Payment 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 Payment
Account for such Payment Date pursuant to Section 3.23, (c) the aggregate of any
amounts deposited in the Payment Account by the Servicer in respect of
Prepayment Interest Shortfalls for such Payment Date pursuant to Section 3.24,
(d) the aggregate of any P&I Advances made by the Servicer for such Payment Date
pursuant to Section 4.01 and (e) the aggregate of any advances made by the
Master Servicer or the Indenture Trustee for such Payment Date pursuant to
Section 6.02, reduced (to not less than zero) by (2) the sum of (x) the portion
of the amount described in clause (1)(a) above that represents (i) Monthly
Payments on the Mortgage Loans received from a Mortgagor on or prior to the
Determination Date but due during any Due Period subsequent to the related Due
Period, (ii) Principal Prepayments on the Mortgage Loans received after the
related Prepayment Period (together with any interest payments received with
such Principal Prepayments to the extent they represent the payment of interest
accrued on the Mortgage Loans during a period subsequent to the related
Prepayment Period), (iii) Liquidation Proceeds and Insurance Proceeds received
in respect of the Mortgage Loans after the related Prepayment Period, (iv)
amounts reimbursable or payable to the Master Servicer, the Servicer, the
Indenture Trustee, the Seller or any Sub-Servicer pursuant to Section 3.11 or
Section 3.12 or amounts payable from the Payment Account pursuant to Section
6.07 of the Indenture, (v) Stayed Funds, (vi) the Indenture Trustee Fee and the
Master Servicing Fee payable from the Payment Account pursuant to the Indenture
in the amounts calculated as described herein, (vii) amounts deposited in the
Collection Account or the Payment Account in error and (viii) the amount of any
Prepayment Charges collected by the Servicer in connection with the voluntary
Principal Prepayment in full of any of the Mortgage Loans and (y) amounts
reimbursable to the Master Servicer or the Indenture Trustee for an advance made
pursuant to Section 6.02(b), which advance the Master Servicer or the Indenture
Trustee, as applicable, 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 (i.e. "principal cramdown")
or Debt Service Reduction (i.e. "interest cramdown").
"Basic Document": The Owner Trust Agreement, the Certificate
of Trust, the Indenture, the Mortgage Loan Purchase Agreement, the Ownership
Transfer Agreement, the
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<PAGE>
Servicing Agreement and the other documents and certificates delivered in
connection with any of the above.
"Book-Entry Notes": Any Note registered in the name of the
Depository or its nominee. Initially, the Book-Entry Notes will be the Class A
Notes and the Mezzanine Notes.
"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 Maryland or the State of New York, or in the city in
which the Corporate Trust Office of the Indenture Trustee is located, are
authorized or obligated by law or executive order to be closed.
"Business Trust Statute": Chapter 38 of Title 12 of the
Delaware Code, 12 Del. Code ss.ss.3801 ET SEQ., as the same may be amended from
time to time.
"Certificate of Trust": The Certificate of Trust filed for
the Issuer pursuant to Section 3810(a) of the Business Trust Statute.
"Certificateholder": The Person in whose name an Equity
Certificate is registered in the Certificate Register.
"Class": Collectively, all of the Notes bearing the same
class designation.
"Class A Note": Any one of the Class A Notes authorized by
the Indenture, substantially in the form annexed as Exhibit A-1 to the
Indenture.
"Class M-1 Note": Any one of the Class M-1 Notes authorized
by the Indenture, substantially in the form annexed as Exhibit A-2 to the
Indenture.
"Class M-2 Note": Any one of the Class M-2 Notes authorized
by the Indenture, substantially in the form annexed as Exhibit A-3 to the
Indenture.
"Class M-3 Note": Any one of the Class M-3 Notes authorized
by the Indenture, substantially in the form annexed as Exhibit A-4 to the
Indenture.
"Closing Date": September 30, 1998.
"Code": The Internal Revenue Code of 1986.
"Collection Account": The account or accounts created and
maintained by the Servicer pursuant to Section 3.10(a), which shall be entitled,
"National Mortgage Corporation, as Servicer for Norwest Bank Minnesota, National
Association, as Indenture Trustee, in trust for the registered holders of ,
Salomon Brothers Mortgage Securities VII, Inc. Asset-Backed Floating Rate Notes,
Series 1998-11". The Collection Account must be an Eligible Account.
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<PAGE>
"Corporate Trust Office": With respect to the Indenture
Trustee, the principal corporate trust office of the Indenture Trustee at which
at any particular time its corporate trust business shall be administered, which
office at the date of the execution of this instrument is located at Sixth
Street and Marquette Avenue, Minneapolis, Minnesota 55479, Attention: Corporate
Trust Services, or at such other address as the Indenture Trustee may designate
from time to time by notice to the Noteholders, the Issuer, the Owner Trustee,
the Master Servicer and the Servicer. With respect to the Owner Trustee, the
principal corporate trust office of the Owner Trustee at, which at any
particular time its corporate trust business shall be administered, which office
at the date of the execution of this instrument is located at Rodney Square
North, 1100 North Market Street, Wilmington, Delaware 19801, Attention: Wilshire
REIT Trust Series 1998- 1, or at such other address as the Indenture Trustee may
designate from time to time by notice to the Noteholders, the
Certificateholders, the Issuer, the Indenture Trustee, the Master Servicer and
the Servicer.
"Cumulative Loss Percentage": With respect to any Payment
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.
"Custodial Agreement": An agreement that may be entered into
among the Issuer, the Master Servicer, the Servicers, the Indenture Trustee and
a Custodian in the form of Exhibit C annexed to the Indenture or a similar
agreement assigned to the Indenture Trustee with respect to the Mortgage Loans.
"Custodian": A Custodian, which shall not be the Issuer, the
Master Servicer, the Servicer, the Depositor, the Seller, the Transferor, the
Owner Trustee or any Affiliate of any of them, appointed pursuant to a Custodial
Agreement.
"Cut-off Date": With respect to each Original Mortgage Loan,
September 1, 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
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<PAGE>
outstanding principal balance of the Mortgage Loan, which valuation results from
a proceeding initiated under the Bankruptcy Code.
"Deleted Mortgage Loan": A Mortgage Loan replaced or to be
replaced by a Qualified Substitute Mortgage Loan.
"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 Notes that are to be Book-Entry Notes, 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 Indenture 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 that are rated D-1+ by DCR (if rated by DCR) and A-1 by S&P (or
comparable ratings if DCR and S&P are not the Rating Agencies).
"Depository Participant": A broker, dealer, bank or other
financial institution or other Person for whom from time to time a Depository
effects book-entry transfers and pledges of securities deposited with the
Depository.
"Determination Date": With respect to each Payment Date, the
15th day of the calendar month in which such Payment Date occurs or, if such
15th day is not a Business Day, the Business Day immediately preceding such 15th
day.
"Due Date": With respect to each Payment Date, the first day
of the calendar month in which such Payment Date occurs, which is the day of the
month on which the Monthly Payment is due on a Mortgage Loan, exclusive of any
days of grace.
"Due Period": With respect to any Payment Date, the period
commencing on the second day of the calendar month preceding the calendar month
in which such Payment Date occurs and ending on the related Due Date.
"Eligible Account": Any of (i) an account or accounts
maintained with a federal or state chartered depository institution or trust
company the short-term unsecured debt obligations of which are rated "AAA" or
"D-1+", as applicable, by DCR (if rated by DCR) and A-1 by S&P (or comparable
ratings if DCR and S&P are not the Rating Agencies) at the time any amounts are
held on deposit therein, (ii) an account or accounts the deposits in which are
fully insured by the
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<PAGE>
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.
"Equity Certificates": The certificates evidencing the
beneficial ownership interest in the Issuer and executed by the Owner Trustee in
substantially the form set forth in Exhibit A to the Owner Trust Agreement.
"Estate in Real Property": A fee simple estate in a parcel of
land.
"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 Seller or the Servicer pursuant to or as contemplated by
Section 2.01 or Section 3.16(c)), a determination made by the Servicer that all
Insurance Proceeds, Liquidation Proceeds and other payments or recoveries which
the Servicer, in its reasonable good faith judgment, expects to be finally
recoverable in respect thereof have been so recovered. The 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 Adjustable Rate 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.
"Indenture Trustee": Norwest Bank Minnesota, National
Association, a national banking association, in its capacity as Indenture
Trustee, or its successor in interest, or any successor indenture trustee
appointed as provided in the Indenture.
"Indenture Trustee Fee": The amount payable to the Indenture
Trustee on each Payment Date pursuant to the Indenture as compensation for all
services rendered by it, which amount shall equal one twelfth of the product of
(i) the Indenture Trustee Fee Rate, multiplied by (ii) the aggregate Scheduled
Principal Balance of the Mortgage Loans and any REO Properties as of the second
preceding Due Date (or, in the case of the initial Payment Date, as of the
Cut-off Date).
"Indenture Trustee Fee Rate": 0.0035% per annum.
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<PAGE>
"Index": With respect to each Adjustable Rate Mortgage Loan
and each related Adjustment Date, the average of the interbank offered rates for
six-month United States dollar deposits in the London market as published in THE
WALL STREET JOURNAL and as most recently available as of a 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
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.
"Issuer": Wilshire REIT Trust Series 1998-1, a Delaware
Business Trust, or its successor in interest.
"Late Collections": With respect to any Mortgage Loan, all
amounts received subsequent to the Determination Date immediately following any
Due Period, whether as late payments of Monthly Payments or as Insurance
Proceeds, Liquidation Proceeds or otherwise, which represent late payments or
collections of principal and/or interest due (without regard to any acceleration
of payments under the related Mortgage and Mortgage Note) but delinquent for
such Due Period and not previously recovered.
"Liquidation Event": With respect to any Mortgage Loan, any
of the following events: (i) such Mortgage Loan is paid in full; (ii) a Final
Recovery Determination is made as to such Mortgage Loan; or (iii) such Mortgage
Loan is removed from the Trust Estate by reason of its being purchased, sold or
replaced pursuant to or as contemplated by Section 2.01 or Section 3.16(c). With
respect to any REO Property, a Final Recovery Determination is made as to such
REO Property.
"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 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 2.01, Section 3.16(c) or Section 3.23.
"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.
"Master Servicer": Wilshire Servicing Corporation or its
successor in interest, in its capacity as Master Servicer hereunder.
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<PAGE>
"Master Servicing Fee": With respect to each Mortgage Loan
and for any calendar month, an amount equal to one month's interest (or in the
event of any payment of interest which accompanies a Principal Prepayment in
full made by the Mortgagor during such calendar month, interest for the number
of days covered by such payment of interest) at the applicable Master Servicing
Fee Rate on the same principal amount on which interest on such Mortgage Loan
accrues for such calendar month.
"Master Servicing Fee Rate": 0.05% per annum.
"Maximum Mortgage Rate": With respect to each Adjustable Rate
Mortgage Loan, the percentage set forth in the related Mortgage Note as the
maximum Mortgage Rate thereunder.
"Minimum Mortgage Rate": With respect to each Adjustable Rate
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 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.
"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 file containing the Related Documents
pertaining to a particular Mortgage Loan and any additional documents required
to be added to the Mortgage File pursuant to the Mortgage Loan Purchase
Agreement or this Servicing Agreement.
"Mortgage Loan": Each mortgage loan identified in the
Mortgage Loan Schedule.
"Mortgage Loan Purchase Agreement": The agreement, dated as
of September 1, 1998, among the Seller, the Transferor and the Issuer.
"Mortgage Loan Remittance Rate": With respect to any Mortgage
Loan or REO Property, as of any date of determination, the then applicable Net
Mortgage Rate in respect thereof plus the Indenture Trustee Fee Rate and the
Master Servicing Fee Rate.
"Mortgage Loan Schedule": As of any date, the list of
Mortgage Loans attached hereto as Schedule 1. The Mortgage Loan Schedule shall
set forth the following information with respect to each Mortgage Loan:
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<PAGE>
(xxxiv) the Mortgage Loan identifying number;
(xxxv) the Mortgagor's name;
(xxxvi) the street address of the Mortgaged Property including the
state and zip code;
(xxxvii) a code indicating whether the Mortgaged Property is
owner-occupied;
(xxxviii) the type of Residential Dwelling constituting the Mortgaged
Property;
(xxxix) the original months to maturity;
(xl) the Loan-to-Value Ratio at origination;
(xli) the Mortgage Rate in effect immediately following the Cut-off
Date;
(xlii) the date on which the first Monthly Payment was due on the
Mortgage Loan;
(xliii) the stated maturity date;
(xliv) the amount of the Monthly Payment due on the first Due Date
after the Cut-off Date;
(xlv) the last Due Date on which a Monthly Payment was actually applied
to the unpaid Stated Principal Balance;
(xlvi) the original principal amount of the Mortgage Loan;
(xlvii) the Scheduled Principal Balance of the Mortgage Loan as of the
close of business on the Cut-off Date;
(xlviii) with respect to each Adjustable Rate Mortgage Loan, the Gross
Margin;
(xlix) a code indicating the purpose of the Mortgage Loan (I.E.,
purchase financing, rate/term refinancing, cash-out refinancing);
(l) with respect to each Adjustable Rate Mortgage Loan, the Maximum
Mortgage Rate;
(li) with respect to each Adjustable Rate Mortgage Loan, the Minimum
Mortgage Rate;
(lii) the Mortgage Rate at origination;
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<PAGE>
(liii) with respect to each Adjustable Rate Mortgage Loan, the
Periodic Rate Cap and the maximum first Adjustment Date
Mortgage Rate adjustment;
(liv) a code indicating the documentation program;
(lv) with respect to each Adjustable Rate Mortgage Loan, the first
Adjustment Date immediately following the Cut-off Date;
(lvi) the risk grade;
(lvii) the Value of the Mortgaged Property;
(lviii) the sale price of the Mortgaged Property, if applicable; and
(lix) a code indicating whether there is a Prepayment Charge.
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 Servicer in
accordance with the provisions of this Agreement. With respect to any Qualified
Substitute Mortgage Loan, Cut-off Date shall refer to the related Cut-off Date
for such Mortgage Loan, determined in accordance with the definition of Cut-off
Date herein.
"Mortgage Note": The original executed note or other evidence
of the indebtedness of a Mortgagor under a Mortgage Loan.
"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, without regard to
any reduction thereof as a result of a Debt Service
Reduction or operation of the Relief Act.
"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.
"Most Senior Class": The Class A Notes, or after the Class A
Notes have been paid in full, the Class of Subordinate Notes then outstanding
with the lowest numerical designation.
"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
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<PAGE>
Mortgage Rate for such Mortgage Loan minus the sum of the Servicing Fee Rate,
the Indenture Trustee Fee Rate and the Master Servicing Fee Rate.
"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 Servicer, will not or, in the case of a
proposed P&I Advance, would not be ultimately recoverable from related late
payments, Insurance Proceeds or Liquidation Proceeds on such Mortgage Loan or
REO Property as provided herein.
"Note Balance": With respect to any Note, as of any date of
determination, the Note Balance of such Note on the Payment Date immediately
prior to such date of determination, minus all payments allocable to principal
made thereon and Realized Losses allocated thereto on such immediately prior
Payment Date (or, in the case of any date of determination up to and including
the initial Payment Date, the initial Note Balance of such Note, as stated on
the face thereof).
"Note Owner": With respect to a Book-Entry Note, the Person
who is the beneficial owner of such Note 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.
"Note Register": The register maintained by the Note Registrar
in which the Note Registrar shall provide for the registration of Notes and of
transfers and exchanges of Notes.
"Note Registrar": The Indenture Trustee, in its capacity as
Note Registrar or its successor in interest, or any successor Note Registrar
appointed as provided in the Indenture.
"Noteholder" or "Holder": The Person in whose name a Note is
registered in the Note Register, except that solely for the purposes of giving
any consent pursuant to the Indenture, the Owner Trust Agreement or the
Servicing Agreement, any Note registered in the name of the Seller, the
Depositor, the Issuer, the Master Servicer or the 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. The Indenture Trustee may conclusively rely upon a certificate of the
Seller, the Depositor, the Issuer, the Master Servicer or the Servicer in
determining whether a Note is held by an Affiliate thereof. All references
herein to "Holders" or "Noteholders" shall reflect the rights of Note Owners as
they may indirectly exercise such rights through the Depository and
participating members thereof, except as otherwise specified herein; provided,
however, that the Indenture Trustee shall be required to recognize as a "Holder"
or "Noteholder" only the Person in whose name a Note is registered in the Note
Register.
"Notes": Asset-Backed Floating Rate Notes, Series 1998-11,
designated as the "Notes" in the Indenture.
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"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 Seller; with respect to the
Servicer or Master Servicer, any officer who is authorized to act for the
Servicer in matters relating to this Agreement, and whose action is binding upon
the Servicer or Master Servicer, as applicable, initially including those
individuals whose names appear on the list of authorized officers delivered at
the closing.
"Opinion of Counsel": A written opinion of counsel, who may,
without limitation, be salaried counsel for the Issuer, the Master Servicer or
the Servicer acceptable to the Indenture Trustee, which acceptance shall not be
unreasonably withheld.
"Original Mortgage Loan": Any of the Mortgage Loans included
in the Trust Estate as of the Closing Date.
"Owner Trust Agreement": The Trust Agreement, dated as of
September 1, 1998, as amended and restated by the Amended and Restated Trust
Agreement, dated as of September 1, 1998, between the Owner Trustee and the
Depositor.
"Owner Trustee": Wilmington Trust Company and its successors
and assigns or any successor owner trustee appointed pursuant to the terms of
the Owner Trust Agreement.
"Payment Account": The trust account or accounts created and
maintained by the Indenture Trustee pursuant to Section 3.01 of the Indenture
which shall be entitled "Norwest Bank Minnesota, National Association, as
Indenture Trustee, in trust for the registered holders of Salomon Brothers
Mortgage Securities VII, Inc. Asset-Backed Floating Rate Notes, Series 1998-11".
The Payment Account must be an Eligible Account.
"Payment 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.
"Percentage Interest": With respect to any Class of Notes, the
portion of the respective Class evidenced by such Note, expressed as a
percentage, the numerator of which is the initial Note Balance represented by
such Note, and the denominator of which is the initial aggregate Note Balance of
all of the Notes of such Class. The Notes are issuable only in Percentage
Interests corresponding to initial Note Balances of $10,000 and integral
multiples of $1.00 in excess thereof; provided, however that a single Note of
each Class may be issued having a Percentage Interest corresponding to the
remainder of the aggregate initial Note Balance of such Note or to an otherwise
authorized denomination for such Class plus such remainder.
"Periodic Rate Cap": With respect to each Adjustable Rate
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
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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 Issuer, the Servicer, the Indenture 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 (which shall each have an original
maturity of not more than 90 days and, in the case of bankers'
acceptances, shall in no event have an original maturity of more than
365 days or a remaining maturity of more than 30 days) denominated in
United States dollars and 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;
(vi) units of money market funds, including money
market funds advised by the Indenture Trustee or an Affiliate thereof,
that have been rated "AAA" by DCR (if rated by DCR) and "AAA" by S&P;
and
(viii) if previously confirmed in writing to the
Indenture 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 Notes;
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
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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.
"Person": Any individual, corporation, partnership, limited
liability company, 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 Servicer in respect of any Payment Date pursuant to Section
4.01.
"Prepayment Charge": With respect to any Prepayment Period,
any prepayment premium, penalty or charge collected by the Servicer from a
Mortgagor in connection with any Principal Prepayment pursuant to the terms of
the related Mortgage Note as from time to time held as a part of the Trust
Estate, the Prepayment Charges so held being identified in the Mortgage
Loan Schedule.
"Prepayment Interest Shortfall": With respect to any Payment
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
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 Mortgage Loan Remittance 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 Servicer in respect of any Prepayment Interest
Shortfall are set forth in Section 3.24.
"Prepayment Period": With respect to any Payment Date, the
calendar month preceding the calendar month in which such Payment Date occurs.
"Principal Prepayment": Any payment of principal made by the
Mortgagor on a Mortgage Loan which is received in advance of its scheduled Due
Date and which is not accompanied by an amount of interest (without regard to
any prepayment charge that may have been collected by the Servicer in connection
with such payment of principal) representing the full amount of scheduled
interest due on any Due Date in any month or months subsequent to the month of
prepayment.
"Purchase Price": With respect to any Mortgage Loan or REO
Property to be purchased pursuant to or as contemplated by Section 2.01 or
Section 3.16(c), and as confirmed by an Officers' Certificate from the Master
Servicer to the Indenture Trustee, an amount equal to the sum of: (i) 100% of
the Stated Principal Balance thereof as of the date of purchase, (ii) in the
case of (x) a Mortgage Loan, accrued interest on such Stated Principal Balance
at the applicable Mortgage Loan Remittance 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 Servicer, which payment or advance had as of the date of
purchase been distributed pursuant to the Indenture, through the
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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 Mortgage Loan Remittance 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 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, minus 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; (iii) any unreimbursed Servicing Advances and P&I Advances and any
unpaid Servicing Fees allocable to such Mortgage Loan or REO Property; (iv) any
amounts previously withdrawn from the Collection Account in respect of such
Mortgage Loan or REO Property pursuant to Sections 3.11(ix) and Section 3.16(b);
and (v) in the case of a Mortgage Loan required to be purchased pursuant to
Section 2.01, expenses reasonably incurred or to be incurred by the Servicer or
the Indenture 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) with respect to each Adjustable Rate
Mortgage Loan, have a Maximum Mortgage Rate not less than the Maximum Mortgage
Rate on the Deleted Mortgage Loan, (iv) with respect to each Adjustable Rate
Mortgage Loan, have a Minimum Mortgage Rate not less than the Minimum Mortgage
Rate of the Deleted Mortgage Loan, (v) with respect to each Adjustable Rate
Mortgage Loan, have a Gross Margin equal to the Gross Margin of the Deleted
Mortgage Loan, (vi) with respect to each Adjustable Rate Mortgage Loan, 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 Servicer at least equal to the
risk grading assigned on the Deleted Mortgage Loan and (xi) conform to each
representation and warranty set forth in Exhibit 2 to the Mortgage Loan Purchase
Agreement applicable to the Deleted Mortgage Loan. In the event that one or more
mortgage loans are substituted for one or more Deleted Mortgage Loans, the
amounts described in clause (i) hereof shall be determined on the basis of
aggregate principal balances, the Mortgage Rates described in clause (ii) hereof
shall be determined on the basis of weighted average Mortgage Rates, the risk
gradings described in clause (x) hereof shall be satisfied as to each such
mortgage loan, the terms described in clause (vii) hereof shall be determined on
the basis of weighted average remaining term to maturity, the Loan-to-Value
Ratios described in clause (ix) hereof shall be satisfied as to
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each such mortgage loan and, except to the extent otherwise provided in this
sentence, the representations and warranties described in clause (xi) hereof
must be satisfied as to each Qualified Substitute Mortgage Loan or in the
aggregate, as the case may be.
"Rating Agency" or "Rating Agencies": DCR and S&P or their
successors. If such agencies or their successors are no longer in existence,
"Rating Agencies" shall be such nationally recognized statistical rating
agencies, or other comparable Persons, designated by the Issuer, notice of which
designation shall be given to the Indenture Trustee, the Master Servicer and the
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 Payment 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(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 Servicer with respect to such Mortgage Loan pursuant to
Section 3.11(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 the Trust Estate, 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 Payment 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(ix) and Section 3.16(b), minus
(v) the aggregate of all P&I Advances made by the Servicer in respect of such
REO Property or the related Mortgage Loan for which the 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 Payment 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.
"Refinanced Mortgage Loan": A Mortgage Loan the proceeds of
which were not used to purchase the related Mortgaged Property.
"Related Documents": With respect to each Mortgage Loan, the
documents specified in Section 2.4(b) of the Mortgage Loan Purchase Agreement
and Section 2.03 of the Indenture and any documents required to be added to such
documents pursuant to the Mortgage Loan Purchase Agreement, the Owner Trust
Agreement, the Indenture or the Servicing Agreement.
"Relief Act": The Soldiers' and Sailors' Civil Relief Act of
1940, as amended.
"Relief Act Interest Shortfall": With respect to any Payment
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.
"Remittance Report": A report in form and substance that would
be acceptable to Fannie Mae on a magnetic disk or tape prepared by the Servicer
pursuant to Section 4.01 with such additions, deletions and modifications as
agreed to by the Indenture Trustee and the
Servicer.
"REO Account": The account or accounts maintained by the
Servicer in respect of an REO Property pursuant to Section 3.23.
"REO Disposition": The sale or other disposition of an REO
Property on behalf of the Trust Estate.
"REO Imputed Interest": As to any REO Property, for any
calendar month during which such REO Property was at any time part of the Trust
Estate, one month's interest at the applicable Mortgage Loan Remittance 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 Payment Date in such calendar month.
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"REO Principal Amortization": With respect to any REO
Property, for any calendar month, the excess, if any, of (a) the aggregate of
all amounts received in respect of such REO Property during such calendar month,
whether in the form of rental income, sale proceeds 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 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 Servicer
on behalf of the Trust Estate 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 A-1 or Exhibit A-2 attached hereto.
"Residential Dwelling": Any one of the following: (i) an
attached or detached one-family dwelling, (ii) a detached two- to four-family
dwelling, (iii) a one-family dwelling unit in a Fannie Mae eligible condominium
project, or (iv) a detached one-family dwelling in a planned unit development,
none of which is a co-operative, mobile or manufactured home (as defined in 42
United States Code, Section 5402(6)).
"Responsible Officer": When used with respect to the Indenture
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 Indenture
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
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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 Estate up to and including the Due Date in
the calendar month in which a Liquidation Event occurs with respect to such REO
Property, an amount (not less than zero) equal to the Scheduled Principal
Balance of the related Mortgage Loan as of the Due Date in the calendar month in
which such REO Property was acquired, minus the aggregate amount of REO
Principal Amortization, if any, in respect of such REO Property for all
previously ended calendar months; and (b) as of any Due Date subsequent to the
occurrence of a Liquidation Event with respect to such REO Property, zero.
"Seller": Wilshire Real Estate Investment Trust Inc. or its
successor in interest, in its capacity as seller under the Mortgage Loan
Purchase Agreement.
"Servicer": National Mortgage Corporation ("National") or any
successor servicer appointed as herein provided, in its capacity as Servicer
hereunder; provided, however, that with respect to the Mortgage Loans identified
on Part B of Schedule 1, the servicing will be transferred to the Master
Servicer on October 30, 1998.
"Servicer Event of Default": One or more of the events
described in Section 6.01.
"Servicer Remittance Date": With respect to any Payment Date,
3:00 p.m. New York time on the 18th day of the calendar month in which such
Payment Date occurs or, if such 18th day is not a Business Day, the Business Day
immediately preceding such 18th day; provided, however, that if such immediately
preceding Business Day is the Determination Date, the Servicer Remittance Date
shall be the next succeeding Business Day.
"Servicer Termination Test": With respect to any Payment Date,
the Servicer Termination Test will be failed if the Cumulative Loss Percentage
exceeds 5.75%; provided, however that such Servicer Termination Test shall not
apply if the Master Servicer becomes the Servicer in connection with the default
by National with regard to any Mortgage Loan listed on
Part A of Schedule 1 attached hereto.
"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 Servicer in connection with a default, delinquency or
other unanticipated event by the Servicer in the performance of its servicing
obligations, including, but not limited to, the cost of
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(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 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 Servicer, would not be ultimately
recoverable from related Insurance Proceeds or Liquidation Proceeds on such
Mortgage Loan or REO Property as provided herein.
"Servicing Fee": With respect to each Mortgage Loan and for
any calendar month, an amount equal to one month's interest (or in the event of
any payment of interest which accompanies a Principal Prepayment in full made by
the Mortgagor during such calendar month, interest for the number of days
covered by such payment of interest) at the applicable Servicing Fee Rate on the
same principal amount on which interest on such Mortgage Loan accrues for such
calendar month. A portion of such Servicing Fee may be retained by any
Sub-Servicer as its servicing compensation.
"Servicing Fee Rate": 0.50% per annum.
"Servicing Officer": Any employee of the Master Servicer or
Servicer involved in, or responsible for, the administration and servicing of
the Mortgage Loans, whose name and specimen signature appear on a list of
Servicing Officers furnished by the Master Servicer or Servicer, as applicable,
to the Indenture Trustee and the Issuer on the Closing Date, as such list may
from time to time be amended.
"S&P": Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc., or its successor in interest.
"Stated Principal Balance": With respect to any Mortgage Loan:
(a) as of any date of determination up to but not including the Payment 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 Servicer and distributed pursuant to the Indenture on or before such date of
determination, (ii) all Principal Prepayments received after the Cut-off Date,
to the extent distributed pursuant to the Indenture on or before such date of
determination, (iii) all Liquidation Proceeds and Insurance Proceeds applied by
the Servicer as recoveries of principal in accordance with the provisions of
Section 3.16, to the extent distributed pursuant to the Indenture 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 Payment Date coinciding with or preceding
such date of determination; and (b) as of any date of determination coinciding
with or subsequent to the Payment 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
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Property: (a) as of any date of determination up to but not including the
Payment Date on which the proceeds, if any, of a Liquidation Event with respect
to such REO Property would be distributed, an amount (not less than zero) equal
to the Stated Principal Balance of the related Mortgage Loan as of the date on
which such REO Property was acquired on behalf of the Trust Estate, minus the
sum of (i) if such REO Property was acquired before the Payment 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 Servicer and
distributed pursuant to the Indenture 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 the Indenture on or before such date of determination; and (b) as of
any date of determination coinciding with or subsequent to the Payment 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 Servicer is the subject of a proceeding
under the federal Bankruptcy Code and the making of a Remittance (as defined in
Section 6.02(b)) is prohibited by Section 362 of the federal Bankruptcy Code,
funds which are in the custody of the Servicer, a trustee in bankruptcy or a
federal bankruptcy court and should have been the subject of such
Remittance absent such prohibition.
"Subordinate Note": Any Class M-1 Note, Class M-2 Note or
Class M-3 Note.
"Sub-Servicer": Any Person with which the 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 Servicer.
"Sub-Servicing Agreement": The written contract between the
Servicer and a Sub- Servicer relating to servicing and administration of certain
Mortgage Loans as provided in Section 3.02.
"Transfer Date": October 30, 1998.
"Transferor": Wilshire REIT 1998-1, Inc.
"Trust Estate": The meaning specified in the Granting Clause
of the Indenture.
"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.
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"Value": With respect to any Mortgaged Property, the lesser of
(i) the value thereof as determined by an appraisal made for the originator of
the Mortgage Loan at the time of origination of the Mortgage Loan by an
appraiser who met the minimum requirements of Fannie Mae and Freddie Mac, and
(ii) the purchase price paid for the related Mortgaged Property by the Mortgagor
with the proceeds of the Mortgage Loan, provided, however, in the case of a
Refinanced Mortgage Loan, such value of the Mortgaged Property is based solely
upon the value determined by an appraisal made for the originator of such
Refinanced Mortgage Loan at the time of origination of such Refinanced Mortgage
Loan by an appraiser who met the minimum requirements of Fannie Mae and Freddie
Mac.
"Voting Rights": The portion of the voting rights of all of
the Notes which is allocated to any Note. At all times during the term of this
Agreement, (i) 100% of all of the Voting Rights shall be allocated to the Most
Senior Class of Notes, in proportion to their then outstanding Note Balances.
All Voting Rights allocated to any Class of Notes shall be allocated among such
Notes PRO RATA in accordance with the respective Percentage Interests evidenced
thereby.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES
SECTION 2.01. Enforcement of Representations and Warranties.
(a) Upon discovery by the Master Servicer, the Servicer, the
Indenture Trustee or the Issuer of any materially defective document in, or that
a document is missing from, a Mortgage File or of a breach of any of the
representations and warranties made by 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 Noteholders in such Mortgage Loan (in
the case of any such representation or warranty made to the knowledge or the
best of knowledge of the Seller as to which the Seller has no knowledge, without
regard to the Seller's lack of knowledge with respect to the substance of such
representation or warranty being inaccurate at the time it was made), the party
discovering such breach shall give prompt written notice to the other parties.
The Indenture Trustee shall promptly notify the Seller of such defect, missing
document or breach and request that the Seller deliver such missing document or
cure such defect or breach within 90 days from the date the Seller was notified
of such missing document, defect or breach, and if the Seller does not deliver
such missing document or cure such defect or breach in all material respects
during such period, the Master Servicer shall enforce the obligations of the
Seller under the Mortgage Loan Purchase Agreement to repurchase such Mortgage
Loan from the Trust Estate at the Purchase Price within 90 days after the date
on which the Seller was notified of such missing document, defect or breach, if
and to the extent that the Seller is obligated to do so under the Mortgage Loan
Purchase Agreement. The Purchase Price for the repurchased Mortgage Loan shall
be deposited in the Collection Account. In lieu of repurchasing any such
Mortgage Loan as provided above, if so provided in the Mortgage Loan Purchase
Agreement, the Seller may cause such Mortgage Loan to be removed from the Trust
Estate (in which case it shall become a Deleted Mortgage Loan) and substitute
one or more Qualified Substitute Mortgage Loans.
Monthly Payments due with respect to Qualified Substitute
Mortgage Loans in the month of substitution are not part of the Trust Estate and
will be retained by the Seller. For the month of substitution, distributions to
Noteholders will reflect the Monthly Payment due on such Deleted Mortgage Loan
on or before the Due Date in the month of substitution, and the Seller shall
thereafter be entitled to retain all amounts subsequently received in respect of
such Deleted Mortgage Loan. The Master Servicer shall give or cause to be given
written notice to the Noteholders 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 Indenture Trustee and the Owner Trustee. Upon such
substitution, such Qualified Substitute Mortgage Loan or Loans shall constitute
part of the Trust Estate and shall be subject in all respects to the terms of
this Agreement and the Mortgage Loan
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Purchase Agreement, including all applicable representations and warranties
thereof included in the Mortgage Loan Purchase Agreement as of the date of
substitution.
For any month in which the Seller substitutes one or more
Qualified Substitute Mortgage Loans for one or more Deleted Mortgage Loans, the
Master Servicer will determine the amount (with respect to each Qualified
Substitute Mortgage Loan, the "Substitution Shortfall Amount"), if any, by which
the Purchase Price of each such Deleted Mortgage Loan exceeds, 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 Mortgage Loan Remittance Rate. On
the date of such substitution the Seller will deliver or cause to be delivered
to the Master Servicer for deposit in the Collection Account an amount equal to
the applicable Substitution Shortfall Amounts, if any.
It is understood and agreed that the obligation of the Seller 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 Issuer and the
Indenture Trustee, as pledgee of the Mortgage Loans, against the Seller. In
connection with the purchase of or substitution of any such Mortgage Loan by the
Seller, the Issuer shall assign to the Seller all of its right, title and
interest in respect of the Mortgage Loan Purchase Agreement applicable to such
Mortgage Loan. The Indenture Trustee or a Custodian on its behalf, upon receipt
of written certification from the Master Servicer of deposit of the Purchase
Price, in the case of a repurchased Mortgage Loan or upon receipt of the related
Qualified Substitute Mortgage Loan or Loans and certification from the Master
Servicer of deposit of the Substitution Shortfall Amount, shall release to the
Seller the related Mortgage File or Files and shall execute and deliver such
instruments of transfer or assignment, in each case without recourse, as the
Seller shall furnish to it and as shall be necessary to vest in the Seller any
Mortgage Loan released pursuant hereto, and the Indenture Trustee shall have no
further responsibility with regard to such Mortgage File.
(b)(i) Within 90 days of the earlier of discovery by the
Servicer or receipt of notice by the Servicer of the breach of any
representation, warranty or covenant of the Servicer set forth in Section
2.03(a) which materially and adversely affects the interests of the Noteholders
in any Mortgage Loan, the Servicer shall cure such breach in all material
respects.
(ii) Within 90 days of the earlier of discovery by the
Servicer or receipt of notice by the Servicer of the breach of any
representation, warranty or covenant of the Servicer set forth in Section
2.03(a) which materially and adversely affects the interests of the
Certificateholders to any Prepayment Charge, the Servicer shall cure such breach
in all material respects. If the representation made by the Servicer in Section
2.03(a)(vii) is breached, the Servicer must pay into the Collection Account the
amount of the scheduled Prepayment Charge, less any amount collected and paid by
the Servicer into the Collection Account; and if the covenant made by the
Servicer in Section 2.03(a)(viii) is breached, the Servicer must pay into the
Collection Account the amount of the waived Prepayment Charge.
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(iii) 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
2.03(b) which materially and adversely affects the interests of the Noteholders
in any Mortgage Loan, the Master Servicer shall cure such breach in all material
respects.
SECTION 2.02. Existence.
The Issuer will keep in full force and effect its existence,
rights and franchises as a business trust under the laws of the State of
Delaware and will obtain and preserve its qualification to do business in each
jurisdiction in which such qualification is or shall be necessary
to protect the validity and enforceability of this Agreement.
SECTION 2.03. Representations, Warranties and Covenants of the
Servicer and the Master Servicer.
(a) The Servicer hereby represents, warrants and covenants to
the Issuer, the Seller, the Indenture Trustee and the Noteholders that as of the
Closing Date or as of such date specifically provided herein:
(i) The Servicer is a corporation duly organized,
validly existing and in good standing under the laws of the
State of Colorado and is duly authorized and qualified to
transact any and all business contemplated by this Agreement
to be conducted by the 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 Servicer has the full corporate power and
authority to service each Mortgage Loan, and to execute,
deliver and perform, and to enter into and consummate the
transactions contemplated by this Agreement and has duly
authorized by all necessary corporate action on the part of
the Servicer the execution, delivery and performance of this
Agreement; and this Agreement, assuming the due authorization,
execution and delivery thereof by the Issuer and the Indenture
Trustee, constitutes a legal, valid and binding obligation of
the Servicer, enforceable against the Servicer in accordance
with its terms, except to the extent that (a) the
enforceability thereof may be limited by bankruptcy,
insolvency, moratorium, receivership and other similar laws
relating to creditors' rights generally and (b) the remedy of
specific performance and injunctive and other forms of
equitable relief may be subject to the equitable defenses and
to the discretion of the court before which any proceeding
therefor may be brought;
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(iii) The execution and delivery of this Agreement by the
Servicer, the servicing of the Mortgage Loans by the Servicer
hereunder, the consummation of any other of the transactions
herein contemplated, and the fulfillment of or compliance with
the terms hereof are in the ordinary course of business of the
Servicer and will not (A) result in a breach of any term or
provision of the charter or by-laws of the 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 Servicer is a
party or by which it may be bound, or any statute, order or
regulation applicable to the Servicer of any court, regulatory
body, administrative agency or governmental body having
jurisdiction over the Servicer; and the 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 Servicer's knowledge, would in the future
materially and adversely affect, (x) the ability of the
Servicer to perform its obligations under this Agreement or
(y) the business, operations, financial condition, properties
or assets of the Servicer taken as a whole;
(iv) The Servicer is an approved seller/servicer for
Fannie Mae or Freddie Mac in good standing and is a HUD
approved mortgagee pursuant to Section 203 of the National
Housing Act;
(v) No litigation is pending against the Servicer that
would materially and adversely affect the execution, delivery
or enforceability of this Agreement or the ability of the
Servicer to service the Mortgage Loans or to perform any of
its other obligations hereunder in accordance with the terms
hereof;
(vi) No consent, approval, authorization or order of any
court or governmental agency or body is required for the
execution, delivery and performance by the Servicer of, or
compliance by the Servicer with, this Agreement or the
consummation of the transactions contemplated by this
Agreement, except for such consents, approvals, authorizations
or orders, if any, that have been obtained prior to the
Closing Date;
(vii) The amount of each Prepayment Charge is as set
forth in the related Mortgage Note and each Prepayment Charge
is permissible and enforceable in accordance with its terms
(except to the extent that the enforceability thereof may be
limited by bankruptcy, insolvency, moratorium, receivership
and other similar laws relating to creditors' rights
generally) under applicable state law; and
(viii) The Servicer will not waive any Prepayment Charge
or part of a Prepayment Charge unless such waiver would
maximize recovery of total proceeds taking into account the
value of such Prepayment Charge and related Mortgage
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Loan and doing so is standard and customary in servicing
similar Mortgage Loans (including any waiver of a Prepayment
Charge in connection with a refinancing of a Mortgage Loan
that is related to a default or a reasonably foreseeable
default) and in no event will it waive a Prepayment Charge in
connection with a refinancing of a Mortgage Loan that is not
related to a default or a reasonably foreseeable default.
(b) The Master Servicer hereby represents, warrants and
covenants to the Issuer, the Seller, the Indenture Trustee and the Noteholders
that as of the Closing Date or as of such date
specifically provided herein:
(i) The Master Servicer is duly organized, validly
existing and in good standing as a Delaware corporation under
the laws of the State of Delaware and is and will remain in
compliance with the laws of each state in which any Mortgaged
Property is located to the extent necessary to ensure the
enforceability of each Mortgage Loan and the servicing of 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 each of the other
parties hereto, constitutes a legal, valid and binding
obligation of the Master Servicer, enforceable against it in
accordance with its terms except as enforceability 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 and the performance of and compliance with the
terms of this Agreement will not (a) violate the Master
Servicer's charter or by-laws or any law, rule, regulation,
order, judgment, award, administrative interpretation,
injunction, writ, decree or the like affecting the Master
Servicer or by which the Master Servicer is bound or (b)
result in a breach of or constitute a default under any
indenture or other material agreement to which the Master
Servicer is a party or by which the Master Servicer is bound,
which in the case of either clause (a) or (b) will have a
material adverse effect on the Master Servicer's ability to
perform its obligations under this Agreement.
(iv) The Master Servicer or one of its Affiliates is an
approved servicer for Fannie Mae in good standing. No event
has occurred, including but not limited to a change in
insurance coverage, which would make such party unable to
comply with Freddie Mac or Fannie Mae (as applicable)
eligibility requirements or which would require notification
to Freddie Mac or Fannie Mae (as applicable).
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(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 applicable to it contained in this
Agreement.
(vi) There are no actions or proceedings against or
investigations known to the Master Servicer before any court,
administrative or other tribunal that (A) might prohibit its
entering into this Agreement, (B) seek to prevent the
consummation of the transactions contemplated by this
Agreement or (C) might prohibit or materially and adversely
affect the performance by the Master Servicer of its
obligations under, or the validity or enforceability of, this
Agreement.
(vii) 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 the compliance by the Master Servicer with, this Agreement,
except for such consents, approvals, authorizations or orders,
if any, that have been obtained prior to the Closing Date;
(viii) No litigation is pending or, to the best of the
Master Servicer's knowledge, threatened against the Master
Servicer which would prohibit the Master Servicer from
entering into this Agreement or, in the Master Servicer's good
faith reasonable judgment, is likely to materially and
adversely affect either the ability of the Master Servicer to
perform its obligations under this Agreement or the financial
condition of the Master Servicer.
It is understood and agreed that the representations,
warranties and covenants set forth in this Section 2.03 shall survive delivery
of the Mortgage Files to the Indenture Trustee or to a Custodian, as the case
may be, and shall inure to the benefit of the Indenture Trustee, the Seller, the
Issuer and the Noteholders. Upon discovery by any of the Issuer, the Master
Servicer, the Servicer or the Indenture Trustee of a breach of any of the
foregoing representations, warranties and covenants which materially and
adversely affects the value of any Mortgage Loan, Prepayment Charge or the
interests therein of the Noteholders or 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 Indenture Trustee.
Subject to Section 6.01, the obligations of the Master Servicer and the Servicer
set forth in Section 2.01(b) to cure breaches shall constitute the sole remedies
against the Master Servicer or the Servicer, as applicable, available to the
Noteholders, the Certificateholders, the Issuer or the Indenture Trustee on
behalf of the Noteholders respecting a breach of the representations, warranties
and covenants contained in this Section 2.03.
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ARTICLE III
ADMINISTRATION AND SERVICING
OF THE MORTGAGE LOANS
SECTION 3.01. Servicer to Act as Servicer.
The Servicer shall service and administer the Mortgage Loans on behalf
of the Indenture Trustee and in the best interests of and for the benefit of the
Noteholders (as determined by the Servicer in its reasonable judgment) in
accordance with the terms of this Agreement and the respective Mortgage Loans
and, to the extent consistent with such terms, in the same manner in which it
services and administers similar mortgage loans for its own portfolio, giving
due consideration to customary and usual standards of practice of prudent
mortgage lenders and loan servicers administering similar mortgage loans but
without regard to:
(i) any relationship that the Servicer, any
Sub-Servicer or any Affiliate of the Servicer or any
Sub-Servicer may have with the related Mortgagor;
(ii) the ownership of any Note by the Servicer or any
Affiliate of the Servicer;
(iii) the Servicer's obligation to make P&I Advances or
Servicing Advances; or
(iv) the 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 Servicer shall also seek to
maximize the timely and complete recovery of principal and interest on the
Mortgage Notes. Subject only to the above-described servicing standards and the
terms of this Agreement and of the respective Mortgage Loans, the 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 Servicer in its own name
or in the name of a Sub-Servicer is hereby authorized and empowered by the
Indenture Trustee when the 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 Noteholders and the Indenture Trustee, and upon notice
to the Indenture 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 Indenture Trustee
and Noteholders. The Servicer shall service
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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 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 Indenture
Trustee shall execute, at the written request of the Servicer, and furnish to
the Servicer and any Sub-Servicer such documents as are necessary or appropriate
to enable the Servicer or any Sub- Servicer to carry out their servicing and
administrative duties hereunder, and the Indenture Trustee hereby grants to the
Servicer a power of attorney to carry out such duties including a power of
attorney to take title to Mortgaged Properties after foreclosure on behalf of
the Indenture Trustee and the Noteholders. The Indenture Trustee shall execute a
separate power of attorney in favor of the Servicer for the purposes described
herein to the extent necessary or desirable to enable the Servicer to perform
its duties hereunder. The Indenture Trustee shall not be liable for the actions
of the Servicer or any Sub-Servicers under such powers of attorney.
In accordance with the standards of the preceding paragraph,
the 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
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 Noteholders, 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 Servicer may not make any future advances with respect to a Mortgage Loan
(except as provided in Section 4.01) and the Servicer shall not 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
Servicer, reasonably foreseeable).
The Servicer may delegate its responsibilities under this
Agreement; provided, however, that no such delegation shall release the Servicer
from the responsibilities or liabilities
arising under this Agreement.
SECTION 3.02. Sub-Servicing Agreements Between the Servicer
and Sub- Servicers.
(a) The Servicer may enter into Sub-Servicing Agreements
(provided that such agreements would not result in a withdrawal or a downgrading
by any Rating Agency of the rating on any Class of Notes) with Sub-Servicers,
for the servicing and administration of the Mortgage Loans. Notwithstanding the
foregoing, in connection with the transfer of servicing to the Master
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Servicer on the Transfer Date, the Master Servicer as successor Servicer can
appoint Wilshire Credit Corporation ("WCC") as a Sub-Servicer without any
approval.
Each Sub-Servicer shall be (i) authorized to transact business
in the state or states in which the related Mortgaged Properties it is to
service are situated, if and to the extent required by applicable law to enable
the Sub-Servicer to perform its obligations hereunder and under the
Sub-Servicing Agreement, (ii) an institution approved as a mortgage loan
originator by the Federal Housing Administration or an institution the deposit
accounts of which are insured by the FDIC and (iii) 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 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
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
Noteholders, without the consent of the Holders of Notes entitled to at least
66% of the Voting Rights. Any variation without the consent of the Holders of
Notes 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 Servicer, are
conclusively deemed to be inconsistent with this Agreement and therefore
prohibited. The Servicer shall deliver to the Master Servicer, the Indenture
Trustee and the Owner Trustee copies of all Sub-Servicing Agreements, and any
amendments or modifications thereof, promptly upon the Servicer's execution and
delivery of such instruments (other than any Sub-Servicing Agreement between the
Master Servicer and WCC).
(b) As part of its servicing activities hereunder, the
Servicer (except as otherwise provided in the last sentence of this paragraph),
for the benefit of the Indenture Trustee and the Noteholders, shall enforce the
obligations of each Sub-Servicer under the related Sub- Servicing Agreement and
of the Seller under the Mortgage Loan Purchase Agreement, including, without
limitation, any obligation to make advances in respect of delinquent payments as
required by a Sub-Servicing Agreement, or to purchase a Mortgage Loan on account
of missing or defective documentation or on account of a breach of a
representation, warranty or covenant, as described in Section 2.01(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 Servicer, in its good faith business judgment, would require were it
the owner of the related Mortgage Loans. The 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
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a specific recovery of costs, expenses or attorneys' fees against the party
against whom such enforcement is directed.
SECTION 3.03. Successor Sub-Servicers.
The 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 Servicer without any act or deed on the part of such Sub-Servicer or the
Servicer, and the 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 Indenture Trustee without
fee, in accordance with the terms of this Agreement, in the event that the
Servicer shall, for any reason, no longer be the Servicer
(including termination due to a Servicer Event of Default).
SECTION 3.04. Liability of the Servicer.
Notwithstanding any Sub-Servicing Agreement, any of the
provisions of this Agreement relating to agreements or arrangements between the
Servicer and a Sub-Servicer or reference to actions taken through a Sub-Servicer
or otherwise, the Servicer shall remain obligated and primarily liable to the
Indenture Trustee and the Noteholders 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
Servicer alone were servicing and administering the Mortgage Loans. The Servicer
shall be entitled to enter into any agreement with a Sub-Servicer for
indemnification of the Servicer by such Sub-Servicer and nothing contained in
this Agreement shall be deemed to limit or modify such indemnification.
SECTION 3.05. No Contractual Relationship Between
Sub-Servicers and Indenture Trustee, Issuer or
Noteholders.
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
Servicer alone, and the Indenture Trustee, Issuer and Noteholders 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 Servicer shall be solely liable for all fees owed by it to any
Sub-Servicer, irrespective of whether the Servicer's compensation pursuant to
this Agreement is sufficient to pay such fees.
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SECTION 3.06. Assumption or Termination of Sub-Servicing
Agreements by Indenture Trustee.
In the event the Servicer shall for any reason no longer be
the servicer (including by reason of the occurrence of a Servicer Event of
Default), the Master Servicer (or if the Master Servicer is the Servicer, the
Indenture Trustee or its designee) shall thereupon assume all of the rights and
obligations of the Servicer under each Sub-Servicing Agreement that the Servicer
may have entered into, unless the Master Servicer (or if the Master Servicer is
the Servicer, the Indenture Trustee or its designee) elects to terminate any
Sub-Servicing Agreement in accordance with its terms as provided in Section
3.03. Upon such assumption, the Master Servicer (or the Indenture Trustee, its
designee or the successor servicer for the Indenture Trustee appointed pursuant
to Section 6.02) shall be deemed, subject to Section 3.03, to have assumed all
of the Servicer's interest therein and to have replaced the 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 Servicer
shall not thereby be relieved of any liability or obligations under any
Sub-Servicing Agreement and (ii) none of the Master Servicer, the Indenture
Trustee, its designee or any successor Servicer, as applicable, shall be deemed
to have assumed any liability or obligation of the Servicer that arose before it
ceased to be the Servicer.
The Servicer at its expense shall, upon request of the Master
Servicer (or if the Master Servicer is the Servicer, the Indenture 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 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 Servicer may in its discretion (i) waive any late payment
charge or, if applicable, penalty interest, or (ii) extend the due dates for
Monthly Payments due on a Mortgage Note for a period of not greater than 180
days; provided 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 Servicer shall make timely advances on such
Mortgage Loan during such extension pursuant to Section 4.01 and in accordance
with the amortization schedule of such Mortgage Loan without modification
thereof by reason of such arrangements. Notwithstanding the foregoing, in the
event that any Mortgage Loan is in default or, in the judgment of the Servicer,
such default is reasonably foreseeable, the 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
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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 Payoff") 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 (which account
must be an Eligible 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 deposit
of such funds into the clearing account. The Sub-Servicer shall thereafter
deposit such proceeds in the Collection Account or remit such proceeds to the
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 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 Servicer shall establish and maintain one or more accounts
(the "Servicing Accounts"), into which all collections from the Mortgagors (or
related advances from Sub- Servicers) for the payment of taxes, assessments,
hazard insurance premiums and comparable items for the account of the Mortgagors
("Escrow Payments") shall be deposited and retained. Servicing Accounts shall be
Eligible Accounts. The Servicer shall deposit in the clearing account (which
account must be an Eligible 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 Servicer's receipt 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 deposit of
such funds in the clearing account, for the purpose of effecting the 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; (ii)
reimburse the 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
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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; (v) clear and terminate the Servicing
Account at the termination of the Servicer's obligations and responsibilities in
respect of the Mortgage Loans under this Agreement in accordance with Article
VII; or (vi) recover amounts deposited in error. As part of its servicing
duties, the Servicer or Sub-Servicers shall pay to the Mortgagors interest on
funds in Servicing Accounts, to the extent required by law and, to the extent
that interest earned on funds in the Servicing Accounts is insufficient, to pay
such interest from its or their own funds, without any reimbursement therefor.
To the extent that a Mortgage does not provide for Escrow Payments, the Servicer
shall determine whether any such payments are made by the Mortgagor in a manner
and at a time that avoids the loss of the Mortgaged Property due to a tax sale
or the foreclosure of a tax lien. The Servicer assumes full responsibility for
the payment of all such bills and shall effect payments of all such bills
irrespective of the Mortgagor's faithful performance in the payment of same or
the making of the Escrow Payments and shall make advances from its own funds to
effect such payments.
SECTION 3.10. Collection Account.
(a) On behalf of the Trust Estate, the Servicer shall
establish and maintain one or more accounts (such account or accounts, the
"Collection Account"), held in trust for the benefit of the Indenture Trustee
and the Noteholders. On behalf of the Trust Estate, the Servicer shall deposit
or cause to be deposited in the clearing account (which account must be an
Eligible 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 Servicer's
receipt thereof, and shall thereafter deposit in the Collection Account, in no
event more than two Business Days after the deposit of such funds into the
clearing account, 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), or payments (other than
Principal Prepayments) received by it on or prior to the Cut-off Date but
allocable to a Due Period subsequent thereto:
(i) all payments on account of principal, including
Principal Prepayments, on the Mortgage Loans;
(ii) all payments on account of interest (net of the
related Servicing Fee) on each Mortgage Loan;
(iii) all Insurance Proceeds and Liquidation Proceeds
(other than proceeds collected in respect of any particular
REO Property);
(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;
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(v) any amounts required to be deposited by the
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 2.01;
(vii) all amounts remitted by the Seller in connection
with shortfalls in principal amount of Qualified Substitute
Mortgage Loans pursuant to Section 2.01; and
(viii) all Prepayment Charges collected by the Servicer in
connection with the Principal Prepayments 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 or assumption fees need not be deposited by the Servicer in the
Collection Account but may be retained by the Servicer as additional
compensation. In the event the 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 Estate, the Servicer shall deliver
to the Indenture Trustee in immediately available funds for deposit in the
Payment Account on or before 3:00 p.m. New York time (i) on the Servicer
Remittance Date, that portion of the Available Payment Amount (calculated
without regard to the references in clause (2) of the definition thereof to
amounts that may be withdrawn from the Payment Account) for the related Payment
Date then on deposit in the Collection Account and the amount of all Prepayment
Charges collected by the Servicer in connection with Principal Prepayments 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 Servicer shall, on or
before 3:00 p.m. New York time on such Business Day, withdraw from the
Collection Account any and all amounts payable or reimbursable to the Servicer,
the Indenture Trustee, 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 may be invested in
Permitted Investments in accordance with the provisions set forth in Section
3.12. The Servicer shall give notice to the
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Master Servicer and the Indenture Trustee of the location of the Collection
Account maintained by it when established and prior to any change thereof.
(d) Funds held in the Collection Account at any time may be
delivered by the Servicer to the Indenture Trustee for deposit in an account
(which may be the Payment Account and must satisfy the standards for the Payment
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 Indenture Trustee shall have the sole authority to withdraw
any funds held pursuant to this subsection (d). In the event the Servicer shall
deliver to the Indenture Trustee for deposit in the Payment Account any amount
not required to be deposited therein, it may at any time request that the
Indenture Trustee withdraw such amount from the Payment Account and remit to it
any such amount, any provision herein to the contrary notwithstanding. In
addition, the Servicer shall deliver to the Indenture Trustee from time to time
for deposit, and the Indenture Trustee shall so deposit, in the Payment Account:
(i) any P&I Advances, as required pursuant to Section
4.01;
(ii) any amounts required to be deposited pursuant to
Section 3.23(d) or (f) in connection with any REO Property;
(iii) any amounts required to be deposited pursuant to
Section 3.24 in connection with any Prepayment Interest
Shortfalls; and
(iv) 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 Servicer, a trustee in bankruptcy, or federal bankruptcy court or other
source, the Indenture Trustee shall deposit such funds in the Payment Account,
subject to withdrawal thereof pursuant to Section
6.02(b) or as otherwise permitted hereunder.
SECTION 3.11. Withdrawals from the Collection Account.
(a) The Servicer shall, from time to time, make withdrawals
from the Collection Account for any of the following purposes or as described in
Section 4.01:
(i) to remit to the Indenture Trustee for deposit in
the Payment 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
Servicer or Master Servicer, as the case may be, for P&I
Advances, but only to the extent of amounts received which
represent Late Collections (net of the related Servicing Fees)
of
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Monthly Payments on Mortgage Loans with respect to which such
P&I Advances were made in accordance with the provisions of
Section 4.01;
(iii) subject to Section 3.16(d), to pay the Master
Servicer, the Servicer or any Sub-Servicer any unpaid
Servicing Fees and reimburse any unreimbursed Servicing
Advances with respect to each Mortgage Loan, but only to the
extent of any Liquidation Proceeds, Insurance Proceeds or
other amounts as may be collected by the Servicer from a
Mortgagor, or otherwise received with respect to such Mortgage
Loan;
(iv) to pay to the Servicer as servicing compensation
(in addition to the Servicing Fee) on the Servicer Remittance
Date any interest or investment income earned on funds
deposited in the Collection Account;
(v) to pay to the Servicer or the Seller, as the case
may be, with respect to each Mortgage Loan that has previously
been purchased or replaced pursuant to Section 2.01 or Section
3.16(c) all amounts received thereon subsequent to the date of
purchase or substitution, as the case may be;
(vi) to reimburse the Servicer for any P&I Advance
previously made which the Servicer has determined to be a
Nonrecoverable P&I Advance in accordance with the provisions
of Section 4.01;
(vii) to reimburse the Servicer for expenses incurred
by or reimbursable to the Servicer pursuant to Section 5.03;
(viii) to reimburse the Servicer for expenses
reasonably incurred in respect of the breach or defect giving
rise to the purchase obligation under Section 2.01 of this
Agreement that were included in the Purchase Price of the
Mortgage Loan, including any expenses arising out of the
enforcement of the purchase obligation;
(ix) to pay, or to reimburse the Servicer for advances
in respect of, expenses incurred in connection with any
Mortgage Loan pursuant to Section 3.16(b); and
(x) to clear and terminate the Collection Account upon
a termination pursuant to Section 8.08.
The 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 Servicer shall provide written notification to the Indenture Trustee, on or
prior to the next succeeding Servicer Remittance Date, upon making any
withdrawals from the Collection Account pursuant to subclause (vii) above.
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SECTION 3.12. Investment of Funds in the Collection Account.
(a) The Servicer may direct any depository institution
maintaining the Collection Account (for purposes of this Section 3.12, 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 Indenture 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
Indenture Trustee is the obligor thereon. All such Permitted Investments shall
be held to maturity, unless payable on demand.
(b) All income and gain realized from the investment of funds
deposited in the Collection Account held by or on behalf of the Servicer, shall
be for the benefit of the Servicer and shall be subject to its withdrawal in
accordance with Section 3.11. The Servicer shall deposit in the Collection
Account the amount of any loss of principal incurred in respect of any such
Permitted Investment made with funds in such accounts immediately upon
realization of such loss.
SECTION 3.13. [intentionally omitted]
SECTION 3.14. Maintenance of Hazard Insurance and Errors and
Omissions and Fidelity Coverage.
(a) The Servicer shall cause to be maintained for each
Mortgage Loan fire insurance with extended coverage on the related Mortgaged
Property in an amount which is at least equal to the least of (i) the current
principal balance of such Mortgage Loan, (ii) the amount necessary to fully
compensate for any damage or loss to the improvements that are a part of such
property on a replacement cost basis and (iii) the maximum insurable value of
the improvements which are a part of such Mortgaged Property, in each case in an
amount not less than such amount as is necessary to avoid the application of any
coinsurance clause contained in the related hazard insurance policy. The
Servicer shall also cause to be maintained fire insurance with extended coverage
on each REO Property in an amount which is at least equal to the lesser of (i)
the maximum insurable value of the improvements which are a part of such
property and (ii) the outstanding principal balance of the related Mortgage Loan
at the time it became an REO Property, plus accrued interest at the Mortgage
Rate and related Servicing Advances. The 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 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 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
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3.23, if received in respect of an REO Property. Any cost incurred by the
Servicer in maintaining any such insurance shall not, for the purpose of
calculating distributions to Noteholders, be added to the unpaid principal
balance of the related Mortgage Loan, notwithstanding that the terms of such
Mortgage Loan so permit. It is understood and agreed that no earthquake or other
additional insurance is to be required of any Mortgagor other than pursuant to
such applicable laws and regulations as shall at any time be in force and as
shall require such additional insurance. If the Mortgaged Property or REO
Property is at any time in an area identified in the Federal Register by the
Federal Emergency Management Agency as having special flood hazards, the
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 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 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 Servicer agrees to prepare and present, on behalf of itself,
the Indenture Trustee and Noteholders, claims under any such blanket policy in a
timely fashion in accordance with the terms of such policy.
(b) The 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 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 Servicer has obtained a waiver of such requirements
from Fannie Mae or Freddie Mac. The 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 Servicer has obtained a waiver of such requirements from Fannie
Mae or Freddie Mac. The Servicer shall provide the Indenture Trustee (upon the
Indenture Trustee's reasonable request) with copies of any such insurance
policies and fidelity bond. The Servicer shall be deemed to have complied with
this provision if an Affiliate of the 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 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 Indenture Trustee. The 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 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 Servicer shall not exercise any such rights if prohibited by law from
doing so. If the 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 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 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 Servicer and has a credit risk
rating at least equal to that of the original Mortgagor. In connection with any
assumption or substitution, the 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 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, or a new policy meeting
the requirements of this Section is obtained. Any fee collected by the Servicer
in respect of an assumption or substitution of liability agreement will be
retained by the 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 Servicer shall notify the Indenture Trustee and any respective
Custodian that any such substitution or assumption agreement has been completed
by forwarding to the Indenture Trustee or to such Custodian, as the case may be,
the executed original of such substitution or assumption agreement, which
document shall be added to the related Mortgage File and shall, for all
purposes, be considered a part of such Mortgage File to the same extent as all
other documents and instruments constituting a part thereof.
Notwithstanding the foregoing paragraph or any other provision
of this Agreement, the 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 Servicer may be restricted by law from preventing, for any
reason whatever. For purposes of this Section 3.15, the term "assumption" is
deemed to also include a sale (of the Mortgaged Property) subject to the
Mortgage that is not accompanied by an assumption or substitution of liability
agreement.
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SECTION 3.16. Realization Upon Defaulted Mortgage Loans.
(a) The Servicer shall, consistent with the servicing standard
set forth in Section 3.01, foreclose upon or otherwise comparably convert the
ownership of properties securing such of the Mortgage Loans as come into and
continue in default and as to which no satisfactory arrangements can be made for
collection of delinquent payments pursuant to Section 3.07. The 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 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
Servicer shall not be required to expend its own funds toward the restoration of
such property unless it shall determine in its sole and absolute 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 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 Servicer shall not, on behalf of the Indenture 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 Indenture Trustee, the Trust Estate or the Noteholders 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 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 Estate to take such
actions as are necessary to bring the Mortgaged Property into
compliance therewith; and
(2) there are no circumstances present at such
Mortgaged Property relating to the use, management or disposal
of any hazardous substances, hazardous materials, hazardous
wastes, or petroleum-based materials for which investigation,
testing, monitoring, containment, clean-up or remediation
could be required under any federal, state or local law or
regulation, or that if any such materials are present for
which such action could be required, that it would be in the
best economic interest of the Trust Estate to take such
actions with respect to the affected Mortgaged Property.
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The cost of the environmental audit report contemplated by
this Section 3.23 shall be advanced by the Servicer, subject to the Servicer's
right to be reimbursed therefor from the Collection Account as provided in
Section 3.11(ix), such right of reimbursement being prior to the rights of
Noteholders to receive any amount in the Collection Account received in respect
of the affected Mortgage Loan or other Mortgage Loans. It is understood by the
parties hereto that any such advance will be deemed a Servicing Advance.
If the Servicer determines, as described above, that it is in
the best economic interest of the Trust Estate 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 Servicer shall take such action as it deems to be in the best economic
interest of the Trust Estate. The cost of any such compliance, containment,
cleanup or remediation shall be advanced by the Servicer, subject to the
Servicer's right to be reimbursed therefor from the Collection Account as
provided in Section 3.11(ix), such right of reimbursement being prior to the
rights of Noteholders to receive any amount in the Collection Account received
in respect of the affected Mortgage Loan or other Mortgage Loans. It is
understood by the parties hereto that any such advance will be deemed to be a
Servicing Advance.
(c) The Master Servicer, at its option, may purchase from the
Trust Estate 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 Indenture Trustee prior to purchase), at a price equal to the
Purchase Price. The Purchase Price for any Mortgage Loan purchased hereunder
shall be deposited in the Collection Account, and the Indenture Trustee or a
Custodian on its behalf, upon receipt of written certification from the 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
Servicer or any Sub-Servicer for any related unreimbursed Servicing Advances and
P&I Advances, pursuant to Section 3.11(ii) or (iii); SECOND, to accrued and
unpaid interest on the Mortgage Loan, to the date of the Final Recovery
Determination, or to the Due Date prior to the Payment Date on which such
amounts are to be distributed if not in connection with a Final Recovery
Determination; and THIRD, as a recovery of principal of the Mortgage Loan. If
the amount of the recovery so allocated to interest is less than the full amount
of accrued and unpaid interest due on such Mortgage Loan, the amount of such
recovery will be allocated by the Servicer as follows: FIRST, to unpaid
Servicing Fees; and SECOND, to the balance of the interest then
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due and owing. The portion of the recovery so allocated to unpaid Servicing Fees
shall be reimbursed to the Servicer or any Sub-Servicer pursuant to Section
3.11(iii).
SECTION 3.17. Indenture Trustee to Cooperate; Release of
Mortgage Files.
(a) Upon the payment in full of any Mortgage Loan, or the
receipt by the Servicer of a notification that payment in full shall be escrowed
in a manner customary for such purposes, the Servicer will immediately notify
the Indenture Trustee and any related Custodian by a certification in the form
of Exhibit A-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
Indenture Trustee or such Custodian, as the case may be, shall promptly release
the related Mortgage File to the Servicer. No expenses incurred in connection
with any instrument of satisfaction or deed of reconveyance shall be chargeable
to the Collection Account or the Payment 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 Indenture Trustee and
any related Custodian shall, upon request of the Servicer and delivery to the
Indenture Trustee or such Custodian, as the case may be, of a Request for
Release in the form of Exhibit A-l, release the related Mortgage File to the
Servicer, and the Indenture Trustee shall, at the direction of the Servicer,
execute such documents as shall be necessary to the prosecution of any such
proceedings. Such Request for Release shall obligate the Servicer to return each
and every document previously requested from the Mortgage File to the Indenture
Trustee or to such Custodian when the need therefor by the 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 Servicer
has delivered to the Indenture Trustee a certificate of a Servicing Officer
certifying as to the name and address of the Person to which such Mortgage File
or such document was delivered and the purpose or purposes of such delivery.
Upon receipt of a certificate of a Servicing Officer stating that such Mortgage
Loan was liquidated and that all amounts received or to be received in
connection with such liquidation that are required to be deposited into the
Collection Account have been so deposited, or that such Mortgage Loan has become
an REO Property, a copy of the Request for Release shall be released by the
Indenture Trustee or such Custodian to the Servicer.
(c) Upon written certification of a Servicing Officer, the
Indenture Trustee shall execute and deliver to the Servicer any court pleadings,
requests for trustee's sale or other documents reasonably necessary to the
foreclosure or trustee's sale in respect of a Mortgaged Property or to any legal
action brought to obtain judgment against any Mortgagor on the Mortgage Note or
Mortgage or to obtain a deficiency judgment, or to enforce any other remedies or
rights
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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 Indenture Trustee and a statement as to the reason
such documents or pleadings are required and that the execution and delivery
thereof by the Indenture 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 Servicer hereunder,
the 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 Servicer shall be
entitled to recover unpaid Servicing Fees out of Insurance Proceeds or
Liquidation Proceeds to the extent permitted by Section 3.11(iii) and out of
amounts derived from the operation and sale of an REO Property to the extent
permitted by Section 3.23. The right to receive the Servicing Fee may not be
transferred in whole or in part except in connection with the transfer of all of
the Servicer's responsibilities and obligations under this Agreement.
Additional servicing compensation in the form of assumption
fees, late payment charges and other similar fees and charges (other than
Prepayment Charges) shall be retained by the Servicer (subject to Section 3.24)
only to the extent such fees or charges are received by the Servicer. The
Servicer shall also be entitled pursuant to Section 3.11(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 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, it being understood however, that payment of such premiums
by the Servicer shall constitute Servicing Advances and servicing compensation
of each Sub-Servicer) and shall not be entitled to reimbursement therefor except
as specifically provided herein.
SECTION 3.19. Reports to the Indenture Trustee; Collection
Account Statements.
Not later than fifteen days after each Payment Date, the
Servicer shall forward to the Indenture Trustee, the Master Servicer and the
Issuer a statement prepared by the Servicer setting forth the status of the
Collection Account as of the close of business on such Payment Date and showing,
for the period covered by such statement, the aggregate amount of deposits into
and withdrawals from the Collection Account of each category of deposit
specified in Section 3.10(a) and each category of withdrawal specified in
Section 3.11. Such statement shall include information as to the aggregate of
the outstanding principal balances of all of the Mortgage Loans as of the last
day of the calendar month immediately preceding such Payment Date. Copies of
such statement shall be provided by the Indenture Trustee to any Noteholder and
to any Person identified to the Indenture Trustee as a prospective transferee of
a Note, upon request at the
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expense of the requesting party, provided such statement is delivered by the
Servicer to the Indenture Trustee.
SECTION 3.20. Statement as to Compliance.
The Servicer will deliver to the Master Servicer, the
Indenture Trustee, the Issuer and each Rating Agency on or before April 15 of
each calendar year commencing in 1999, an Officers' Certificate stating, as to
each signatory thereof, that (i) a review of the activities of the 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 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 Indenture Trustee to any Noteholder and to
any Person identified to the Indenture Trustee as a prospective transferee of a
Note, upon the request and at the expense of the requesting party, provided that
such statement is delivered by the Servicer to the Indenture Trustee.
SECTION 3.21. Independent Public Accountants' Servicing
Report.
Not later than April 15 of each calendar year commencing in
1999, the Servicer, at its expense, shall cause a nationally recognized firm of
independent certified public accountants to furnish to the Servicer a report
stating that (i) it has obtained a letter of representation regarding certain
matters from the management of the Servicer which includes an assertion that the
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 Servicer shall
furnish a copy of such report to the Master Servicer, the Indenture Trustee, the
Issuer and each Rating Agency. Copies of such statement shall be provided by the
Indenture Trustee to any Noteholder upon request at the Servicer's expense,
provided that such statement is delivered by the Servicer to the Indenture
Trustee. In the event such firm of independent certified public accountants
requires the Indenture Trustee to agree to the procedures performed by such
firm, the Servicer shall direct the Indenture Trustee in writing to so agree; it
being understood and agreed that the Indenture Trustee will deliver such letter
of agreement in conclusive reliance upon the direction of the Servicer, and the
Indenture Trustee has not made any independent inquiry or investigation as to,
and shall have no obligation or liability in respect of, the sufficiency,
validity or correctness of such procedures.
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SECTION 3.22. Access to Certain Documentation.
The 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 Noteholder, 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
Servicer designated by it. In addition, access to the documentation regarding
the Mortgage Loans will be provided to any Noteholder, the Indenture Trustee and
to any Person identified to the Servicer as a prospective transferee of a Note,
upon reasonable request during normal business hours at the offices of the
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 Indenture Trustee, or its nominee, in trust for the
benefit of the Noteholders.
(b) The Servicer shall segregate and hold all funds collected
and received in connection with the operation of any REO Property separate and
apart from its own funds and general assets and shall establish and maintain
with respect to REO Properties an account held in trust for the Indenture
Trustee for the benefit of the Noteholders (the "REO Account"), which shall be
an Eligible Account. The Servicer shall be permitted to allow the Collection
Account to serve as the REO Account, subject to separate ledgers for each REO
Property. The Servicer shall be entitled to retain or withdraw any interest
income paid on funds deposited in the REO Account.
(c) The Servicer shall have full power and authority, subject
only to the specific requirements and prohibitions of this Agreement, to do any
and all things in connection with any REO Property as are consistent with the
manner in which the Servicer manages and operates similar property owned by the
Servicer or any of its Affiliates, all on such terms and for such period as the
Servicer deems to be in the best interests of Noteholders. In connection
therewith, the Servicer shall deposit, or cause to be deposited in the clearing
account (which account must be an Eligible 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 Servicer's receipt thereof, and shall thereafter
deposit in the REO Account, in no event more than two Business Days after the
deposit of such funds into the clearing account, all revenues received by it
with respect to an REO Property and shall withdraw therefrom funds necessary for
the proper operation, management and maintenance of such REO Property including,
without limitation:
(i) all insurance premiums due and payable in respect
of such REO Property;
(ii) all real estate taxes and assessments in respect
of such REO Property that may result in the imposition of a
lien thereon; and
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(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 Servicer shall advance from
its own funds as Servicing Advances such amount as is necessary for such
purposes if, but only if, the Servicer would make such advances if the Servicer
owned the REO Property and if in the Servicer's judgment, the payment of such
amounts will be recoverable from the rental or sale of the REO Property.
(d) In addition to the withdrawals permitted under Section
3.23(c), the 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
Servicer Remittance Date, the Servicer shall withdraw from each REO Account
maintained by it and deposit into the Payment Account in accordance with Section
3.10(d)(ii), for distribution on the related Payment Date in accordance with the
Indenture, 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) Each REO Disposition shall be carried out by the Servicer
at such price and upon such terms and conditions as the Servicer shall deem
necessary or advisable, as shall be normal and usual in its general servicing
activities for similar properties.
(f) The proceeds from the REO Disposition, net of any amount
required by law to be remitted to the Mortgagor under the related Mortgage Loan
and net of any payment or reimbursement to the Servicer or any Sub-Servicer as
provided above, shall be deposited in the Payment Account in accordance with
Section 3.10(d)(ii) on the Servicer Remittance Date in the month following the
receipt thereof for distribution on the related Payment Date in accordance with
the Indenture.
(g) The 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 Servicer in Respect of
Prepayment Interest Shortfalls.
The Servicer shall deliver to the Indenture Trustee for
deposit into the Payment Account on or before 3:00 p.m. New York time on the
Servicer Remittance Date from its own funds an amount equal to the lesser of (i)
the aggregate of the Prepayment Interest Shortfalls for
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the related Payment Date resulting solely from Principal Prepayments during the
related Prepayment Period and (ii) the amount of its aggregate Servicing Fee for
the most recently ended
calendar month.
SECTION 3.25. Obligations of the 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 Servicer in a manner not consistent with the terms of the
related Mortgage Note and this Agreement, the Servicer, upon discovery or
receipt of notice thereof, immediately shall deliver to the Indenture Trustee
for deposit in the Payment Account from its own funds the amount of any such
shortfall and shall indemnify and hold harmless the Trust Estate, the Indenture
Trustee, the Issuer, the Owner Trustee and any successor servicer in respect of
any such liability. Such indemnities shall survive the termination or discharge
of this Agreement.
SECTION 3.26. Transfer of Servicing.
(a) On the Transfer Date, National shall resign as Servicer
with respect to the Mortgage Loans listed on Part B of Schedule 1 attached
hereto (the "related Mortgage Loans") and such servicing rights and obligations
shall be transferred to the Master Servicer. In connection with such transfer,
the Master Servicer will set up any accounts necessary in order to comply with
the provisions hereof in its capacity as Servicer on or prior to the Transfer
Date. On and after the Transfer Date, the Master Servicer will be entitled to
the Servicing Fee with respect to the related Mortgage Loans and will have all
rights and be subject to all obligations of the predecessor Servicer. On and
after the Transfer Date, National will still be entitled to reimbursement for
any P&I Advances or Servicing Advances that it made while acting as Servicer
with respect to the related Mortgage Loans. National hereby agrees to fully
cooperate with the Master Servicer in the transfer of the servicing hereunder in
connection with the related Mortgage Loans. Upon the transfer of servicing to
the Master Servicer, National shall no longer be liable or responsible for any
liabilities or obligations with respect to or arising out of the servicing of
the related Mortgage Loans after such transfer of the servicing thereof to the
Master Servicer.
(b) On and after the Transfer Date, unless otherwise specified, all
references to actions to be taken or previously taken by "the Servicer" under
this Agreement with respect to a Mortgage Loan or Mortgage Loans or with respect
to an REO Property or REO Properties shall be to actions to be taken or
previously taken by each Servicer with respect to a Mortgage Loan or Mortgage
Loans serviced thereby or with respect to an REO Property or REO Properties
administered thereby. Furthermore, unless otherwise specified, all references to
actions to be taken or previously taken by "the Servicer" under this Agreement
with respect to "the Collection Account" or "the Servicing Account" shall be to
actions to be taken or previously taken by each Servicer with respect to the
Collection Account or the Servicing Account to be established and maintained
thereby. Consistent with the foregoing, but only insofar as the context so
permits, this Agreement
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is to be read with respect to each Servicer as if such Servicer alone was
servicing and administering its respective Mortgage Loans hereunder.
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ARTICLE IV
REMITTANCE REPORTS; P&I ADVANCES
SECTION 4.01. Remittance Reports; P&I Advances.
(a) On the Business Day following each Determination Date, the
Servicer shall deliver to the Master Servicer in electronic format and the
Indenture Trustee by telecopy (or by such other means as the Servicer, the
Indenture Trustee and the Master Servicer may agree from time to time) a
Remittance Report with respect to the related Payment Date. Such Remittance
Report will include (i) the amount of P&I Advances to be made by the Servicer in
respect of the related Payment 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 Payment Date and (ii) such
other information with respect to the Mortgage Loans as the Indenture Trustee
may reasonably require to perform the calculations necessary to make the
distributions contemplated by the Indenture and to prepare the statements to
Noteholders contemplated by the Indenture. Neither the Master Servicer nor the
Indenture Trustee shall not be responsible to recompute, recalculate or verify
any information provided to it by the Servicer.
(b) The amount of P&I Advances to be made by the Servicer for
any Payment Date shall equal, subject to Section 4.01(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 such REO Property an REO Disposition did not
occur during the related Prepayment Period, an amount equal to the excess, if
any, of the Monthly Payments (with each interest portion thereof net of the
related Servicing Fee) that would have been due on the related Due Date in
respect of the related Mortgage Loans, over the net income from such REO
Property transferred to the Payment Account pursuant to Section 3.23 for
distribution on such Payment Date.
On or before 3:00 p.m. New York time on the Servicer
Remittance Date, the Servicer shall remit in immediately available funds to the
Indenture Trustee for deposit in the Payment 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 Payment 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 4.01, used by the 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
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
Servicer's records and replaced by the Servicer by deposit in the Collection
Account on or before any future Servicer Remittance Date to the extent that the
Available Payment Amount for the related Payment Date (determined without
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regard to P&I Advances to be made on the Servicer Remittance Date) shall be less
than the total amount that would be distributed to the Classes of Noteholders
pursuant to the Indenture on such Payment Date if such amounts held for future
distributions had not been so used to make P&I Advances. The Indenture Trustee
will provide notice to the Servicer by telecopy by the close of business on any
Servicer Remittance Date in the event that the amount remitted by the Servicer
to the Indenture Trustee on such date is less than the P&I Advances required to
be made by the Servicer for the related Payment Date.
(c) The obligation of the 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 Estate pursuant to any applicable provision of
this Agreement, except as otherwise provided in this Section.
(d) Notwithstanding anything herein to the contrary, no P&I
Advance shall be required to be made hereunder by the Servicer if such P&I
Advance would, if made, constitute a Nonrecoverable P&I Advance. The
determination by the Servicer that it has made a Nonrecoverable P&I Advance or
that any proposed P&I Advance, if made, would constitute a Nonrecoverable P&I
Advance, shall be evidenced by an Officers' Certificate of the Servicer
delivered to the Indenture Trustee.
SECTION 4.02. Determination of Realized Losses.
Prior to each Determination Date, the 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 Servicer shall also determine as to each Mortgage
Loan: (A) the total amount of Realized Losses, if any, incurred in connection
with any Deficient Valuations made during the related Prepayment Period; and (B)
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 Servicer shall be evidenced by an Officers' Certificate
delivered to the Indenture Trustee by the Servicer prior to the Determination
Date immediately following the end of (x) in the case of Bankruptcy Losses
allocable to interest, the Due Period during which any such Realized Loss was
incurred, and (y) in the case of all other Realized Losses, the Prepayment
Period during which any such Realized Loss was incurred.
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ARTICLE V
THE SERVICER
SECTION 5.01. Liability of the Servicer.
The Servicer shall be liable in accordance herewith only to
the extent of the obligations specifically imposed by this Agreement and
undertaken hereunder by the Servicer herein.
SECTION 5.02. Merger or Consolidation of the Servicer.
Subject to the following paragraph, the Servicer will keep in
full effect its existence, rights and franchises as a corporation under the laws
of the jurisdiction of its incorporation and its qualification as an approved
conventional seller/servicer for Fannie Mae or Freddie Mac in good standing. The
Servicer 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
Notes or any of the Mortgage Loans and to perform its respective duties under
this Agreement.
The 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
Servicer shall be a party, or any Person succeeding to the business of the
Servicer, shall be the successor of the Servicer 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 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 Notes 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 5.03. Limitation on Liability of the Master Servicer,
Servicer and Others.
None of the Master Servicer, the Servicer nor any of the
directors, officers, employees or agents of the Master Servicer or Servicer
shall be under any liability to the Trust Estate or the Noteholders 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 Master Servicer, the Servicer or any such
person against any breach of warranties, representations or covenants made
herein, or against any specific liability imposed on the Master Servicer or
Servicer pursuant hereto, or against any liability which would otherwise be
imposed by reason of willful misfeasance, bad faith or negligence in the
performance of duties or by reason of reckless disregard of obligations and
duties hereunder. The Master Servicer,
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Servicer and any director, officer, employee or agent of the Master Servicer or
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 Master Servicer, Servicer and any director, officer, employee or
agent of the Master Servicer or Servicer shall be indemnified and held harmless
by the Trust Estate against any loss, liability or expense incurred in
connection with any legal action relating to this Agreement or the Notes, other
than any loss, liability or expense to any specific Mortgage Loan or Mortgage
Loans (except as any such loss, liability or expense shall be otherwise
reimbursable pursuant to this Agreement) or any loss, liability or expense
incurred by reason of willful misfeasance, bad faith or negligence in the
performance of duties hereunder or by reason of reckless disregard of
obligations and duties hereunder. Neither the Master Servicer or 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 Master Servicer and the Servicer may in its
discretion, but without any obligation to do so, 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 Noteholders hereunder.
In such event, unless the Master Servicer or the Servicer acts without the
consent of Holders of Notes entitled to at least 51% of the Voting Rights (which
consent shall not be necessary in the case of litigation or other legal action
by either to enforce their respective rights or defend themselves hereunder),
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 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 Estate, and the Master Servicer or
the Servicer, as the case may be, 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 Noteholders to
receive any amount in the Collection Account.
SECTION 5.04. Limitation on Resignation of the Servicer.
The Servicer shall not resign from the obligations and duties
hereby imposed on it except (i) upon determination that its duties hereunder are
no longer permissible under applicable law or (ii) with the written consent of
the Master Servicer, the Indenture Trustee and the Issuer and written
confirmation from each Rating Agency (which confirmation shall be furnished to
the Indenture Trustee and the Issuer) that such resignation will not cause such
Rating Agency to reduce the then current rating of the Notes; provided, however
such written consent and written confirmation shall not be necessary in
connection with the transfer of servicing to the Master Servicer on the Transfer
Date. Any such determination pursuant to clause (i) of the preceding sentence
permitting the resignation of the Servicer (other than in connection with the
transfer of servicing to the Master Servicer on the Transfer Date) shall be
evidenced by an Opinion of Counsel to such effect obtained at the expense of the
Servicer and delivered to the Master Servicer, the Indenture Trustee and the
Issuer. No resignation of the Servicer shall become effective until the Master
Servicer (or if the Master Servicer is not the successor, the Indenture Trustee
or a successor servicer) shall have assumed the Servicer's responsibilities,
duties, liabilities (other than those liabilities arising prior to the
appointment of such successor) and obligations under this
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Agreement. The provisions of this paragraph shall not apply in connection with
the transfer of servicing with respect to the Mortgage Loans listed on Part B of
Schedule 1 attached hereto on the Transfer Date from National to the Master
Servicer.
Except as expressly provided herein, the Servicer shall not
assign nor transfer any of its rights, benefits or privileges hereunder to any
other Person, nor delegate to or subcontract with, nor authorize or appoint any
other Person to perform any of the duties, covenants or obligations to be
performed by the Servicer hereunder. If, pursuant to any provision hereof, the
duties of the Servicer are transferred to a successor servicer, the entire
amount of the Servicing Fee and other compensation payable to the Servicer
pursuant hereto shall thereafter be payable to such successor servicer.
SECTION 5.05. Rights of the Indenture Trustee and the Issuer
in Respect of the Servicer.
The Servicer shall afford (and any Sub-Servicing Agreement
shall provide that each Sub-Servicer shall afford) the Master Servicer, the
Issuer and the Indenture Trustee, upon reasonable notice, during normal business
hours, access to all records maintained by the Servicer (and any such
Sub-Servicer) in respect of the Servicer's rights and obligations hereunder and
access to officers of the Servicer (and those of any such Sub-Servicer)
responsible for such obligations. Upon request, the Servicer shall furnish to
the Master Servicer, the Issuer and the Indenture Trustee its (and any such
Sub-Servicer's) most recent financial statements and such other information
relating to the Servicer's capacity to perform its obligations under this
Agreement that it possesses. To the extent such information is not otherwise
available to the public, the Master Servicer, the Issuer and the Indenture
Trustee shall not disseminate any information obtained pursuant to the preceding
two sentences without the 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, rating agencies or reinsurers or (ii) pursuant to any
law, rule, regulation, order, judgment, writ, injunction or decree of any court
or governmental authority having jurisdiction over the Master Servicer, the
Issuer, the Indenture Trustee or the Trust Estate, and in each case, the Master
Servicer, the Issuer or the Indenture Trustee, as the case may be, shall use its
best efforts to assure the confidentiality of any such disseminated non-public
information. The Master Servicer, the Indenture Trustee or the Issuer may, but
is not obligated to, enforce the obligations of the Servicer under this
Agreement and may, but is not obligated to, perform, or cause a designee to
perform, any defaulted obligation of the Servicer under this Agreement or
exercise the rights of the Servicer under this Agreement; provided that the
Servicer shall not be relieved of any of its obligations under this Agreement by
virtue of such performance by the Master Servicer, the Issuer, the Indenture
Trustee or any of their designees. The Master Servicer, the Issuer and the
Indenture Trustee shall not have any responsibility or liability for any action
or failure to act by the Servicer and is not obligated to supervise the
performance of the Servicer under this Agreement or otherwise.
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SECTION 5.06. Indemnification of the Master Servicer, the
Indenture Trustee and the Owner Trustee by the
Servicer.
The Servicer agrees to indemnify the Master Servicer, the
Indenture Trustee and the Owner Trustee for, and to hold the Master Servicer,
the Indenture Trustee and the Owner Trustee, as the case may be, harmless
against, any claim, tax, penalty, loss, liability or expense of any kind
whatsoever, incurred without negligence or willful misconduct on the part of the
Master Servicer, the Indenture Trustee or the Owner Trustee, arising out of, or
in connection with, the failure by the Servicer to perform its duties in
compliance with this Servicing Agreement, including the reasonable costs and
expenses (including reasonable legal fees and expenses) of defending itself
against any claim in connection with the exercise or performance of any of its
powers or duties under any Basic Document, provided that:
(i) with respect to any such claim, the Master
Servicer, the Indenture Trustee or the Owner Trustee, as the
case may be, shall have given the Servicer written notice
thereof promptly after the Master Servicer, the Indenture
Trustee or the Owner Trustee, as the case may be, shall have
actual knowledge thereof;
(ii) the Servicer shall have the right to assume
control of the defense of such claim, using counsel approved
by the Indenture Trustee and the Owner Trustee, which approval
shall not be unreasonably withheld, whereupon the Servicer
shall not be liable for any separate attorneys' fees or
disbursements or other costs incurred by the Indenture Trustee
or the Owner Trustee in connection with such claim; and
(iii) notwithstanding anything in this Servicing
Agreement to the contrary, the Servicer shall not be liable
for settlement of any claim by the Master Servicer, the
Indenture Trustee or the Owner Trustee, as the case may be,
entered into without the prior consent of the Servicer, which
consent shall not be unreasonably withheld.
Notwithstanding the foregoing, with respect to the Mortgage Loans on
Part B of Schedule 1 attached hereto, the indemnification provided for in this
Section 5.06 is provided by National only until the date on which servicing is
transferred with respect to such Mortgage Loans and such indemnification will be
provided by the Master Servicer thereafter. However, after the transfer of
servicing with respect to such Mortgage Loans, National will still be
responsible for any claim, tax, penalty, loss, liability or expense arising out
of, or in connection with, the failure by National to perform its duties during
the time it was acting as Servicer for such Mortgage Loans.
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ARTICLE VI
DEFAULT
SECTION 6.01. Servicer Events of Default.
"Servicer Event of Default," wherever used herein, means any
one of the following events:
(i) any failure by the Servicer to remit to the
Indenture Trustee for distribution to the Noteholders any
payment (other than a P&I Advance required to be made from its
own funds on any Servicer Remittance Date pursuant to Section
4.01) required to be made under the terms of 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 Servicer by either the Master Servicer or the Indenture
Trustee (in which case notice shall be provided by telecopy),
or to the Servicer and the Indenture Trustee by the Holders of
Notes entitled to at least 25% of the Voting Rights; or
(ii) any failure on the part of the Servicer duly to
observe or perform in any material respect any of the
covenants or agreements on the part of the Servicer contained
in this Agreement which continues unremedied for a period of
45 days after the earlier of (i) the date on which written
notice of such failure, requiring the same to be remedied,
shall have been given to the Servicer by either the Master
Servicer or the Indenture Trustee, or to the Servicer and the
Indenture Trustee by the Holders of Notes entitled to at least
25% of the Voting Rights and (ii) actual knowledge of such
failure by a Servicing Officer of the 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 Servicer and
if such proceeding is being contested by the Servicer in good
faith such decree or order shall have remained in force
undischarged or unstayed for a period of 60 days or results in
the entry of an order for relief or any such adjudication or
appointment; or
(iv) the 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 the Servicer or of or
relating to all or substantially all of its property; or
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(v) the Servicer shall admit in writing its inability
to pay its debts generally as they become due, file a petition
to take advantage of any applicable insolvency or
reorganization statute, make an assignment for the benefit of
its creditors, or voluntarily suspend payment of its
obligations; or
(vi) any failure by the Servicer of the Servicer
Termination Test; provided, however that if the Master
Servicer becomes the Servicer in connection with the default
by National with regard to any Mortgage Loan listed on Part A
of Schedule 1 attached hereto such Servicer Termination Test
shall not apply; or
(vii) any failure of the Servicer to make any P&I Advance
on any Servicer Remittance Date required to be made from its
own funds pursuant to Section 4.01 which continues unremedied
until 3:00 p.m. New York time on the Business Day immediately
following the Servicer Remittance Date.
If a 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
Servicer Event of Default shall not have been remedied, the Master Servicer may,
but solely with the written consent of the Indenture Trustee (or if the Master
Servicer is the Servicer, the Indenture Trustee may), and at the written
direction of the Holders of Notes entitled to at least 51% of Voting Rights, the
Master Servicer (or if the Master Servicer is the Servicer, the Indenture
Trustee) shall, by notice in writing to the Servicer, terminate all of the
rights and obligations of the Servicer in its capacity as a Servicer under this
Agreement, to the extent permitted by law, and in and to the Mortgage Loans and
the proceeds thereof. If a Servicer Event of Default described in clause (vii)
hereof shall occur, the Master Servicer (or if the Master Servicer is the
Servicer, the Indenture Trustee) shall, by notice in writing to the Servicer,
terminate all of the rights and obligations of the Servicer in its capacity as a
Servicer under this Agreement and in and to the Mortgage Loans and the proceeds
thereof. On or after the receipt by the Servicer of such written notice, all
authority and power of the Servicer under this Agreement, whether with respect
to the Notes (other than as a Holder of any Note) or the Mortgage Loans or
otherwise, shall pass to and be vested in the Master Servicer (or if the Master
Servicer is the Servicer, the Indenture Trustee) pursuant to and under this
Section and, without limitation, the Master Servicer (or if the Master Servicer
is the Servicer, the Indenture 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 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 Servicer agrees, at its sole cost and expense, promptly (and in
any event no later than ten Business Days subsequent to such notice) to provide
the Master Servicer (or if the Master Servicer is the Servicer, the Indenture
Trustee) with all documents and records requested by it to enable it to assume
the Servicer's functions under this Agreement, and to cooperate with the Master
Servicer (or if the Master Servicer is the Servicer, the Indenture Trustee) in
effecting the termination of the Servicer's responsibilities and rights under
this Agreement, including, without limitation, the transfer within one Business
Day to the Master Servicer (or if the Master Servicer is the Servicer,
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the Indenture Trustee) for administration by it of all cash amounts which at the
time shall be or should have been credited by the Servicer to the Collection
Account held by or on behalf of the Servicer, the Payment Account or any REO
Account or Servicing Account held by or on behalf of the Servicer or thereafter
be received with respect to the Mortgage Loans or any REO Property serviced by
the Servicer (provided, however, that the 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 5.03,
notwithstanding any such termination, with respect to events occurring prior to
such termination). For purposes of this Section 6.01, the Indenture Trustee
shall not be deemed to have knowledge of a Servicer Event of Default unless a
Responsible Officer of the Indenture Trustee assigned to and working in the
Indenture Trustee's Corporate Trust Office has actual knowledge thereof or
unless written notice of any event which is in fact such a Servicer Event of
Default is received by the Indenture Trustee and such notice references the
Notes, the Trust Estate or this Agreement.
SECTION 6.02. Master Servicer or Indenture Trustee to Act;
Appointment of Successor.
(a) On and after the time the Servicer receives a notice of
termination, the Master Servicer or if the Master Servicer is the Servicer, the
Indenture Trustee shall be the successor in all respects to the Servicer in its
capacity as Servicer under this Agreement and the transactions set forth or
provided for herein and shall be subject to all the responsibilities, duties and
liabilities relating thereto and arising thereafter placed on the Servicer
(except if the Indenture Trustee is successor for any representations or
warranties of the Servicer under this Agreement, the responsibilities, duties
and liabilities contained in Section 2.01(b) and its obligation to deposit
amounts in respect of losses pursuant to Section 3.12) by the terms and
provisions hereof including, without limitation, the Servicer's obligations to
make P&I Advances pursuant to Section 4.01; provided, however, that if the
Indenture Trustee is prohibited by law or regulation from obligating itself to
make advances regarding delinquent mortgage loans, then the Indenture Trustee
shall not be obligated to make P&I Advances pursuant to Section 4.01; and
provided further, that any failure to perform such duties or responsibilities
caused by the Servicer's failure to provide information required by Section 6.01
shall not be considered a default by the Master Servicer or the Indenture
Trustee as successor to the Servicer hereunder. As compensation therefor, the
Master Servicer or the Indenture Trustee, as the case may be, shall be entitled
to the Servicing Fees and all funds relating to the Mortgage Loans to which the
Servicer would have been entitled if it had continued to act hereunder (other
than amounts which were due or would become due to the Servicer prior to its
termination or resignation). Notwithstanding the above and subject to the next
paragraph, the Master Servicer or the Indenture Trustee, as the case may be,
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 Notes entitled to at least 51% of the Voting Rights
so request in writing to the Master Servicer or the Indenture Trustee, as the
case may be, 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 Servicer under this Agreement in the
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assumption of all or any part of the responsibilities, duties or liabilities of
the Servicer under this Agreement. No appointment of a successor to the Servicer
under this Agreement shall be effective until the assumption by the successor of
all of the Servicer's responsibilities, duties and liabilities hereunder. In
connection with such appointment and assumption described herein, the Master
Servicer or the Indenture Trustee, as the case may be, 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 Servicer as such
hereunder. The Master Servicer or the Indenture Trustee, as the case may be, 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 Servicer under this Agreement, the Master Servicer or the
Indenture Trustee, as the case may be, shall act in such capacity as hereinabove
provided.
Upon removal or resignation of the Servicer, if the Master
Servicer (or if the Master Servicer is the Servicer, the Indenture Trustee) is
not going to serve as successor Servicer, the Master Servicer (or if the Master
Servicer is the Servicer, the Indenture Trustee) with the cooperation of the
Issuer, (x) shall solicit bids for a successor Servicer as described below and
(y) pending the appointment of a successor Servicer as a result of soliciting
such bids, shall serve as Servicer of the Mortgage Loans serviced by such
predecessor Servicer. The Master Servicer (or if the Master Servicer is the
Servicer, the Indenture Trustee) shall solicit, by public announcement, bids
from housing and home finance institutions, banks and mortgage servicing
institutions meeting the qualifications set forth above (including the Indenture
Trustee or any affiliate thereof). Such public announcement shall specify that
the successor Servicer shall be entitled to the servicing compensation agreed
upon between the Master Servicer (or if the Master Servicer is the Servicer, the
Indenture Trustee), the successor Servicer and the Issuer; provided, however,
that no such fee shall exceed the related Servicing Fee. Within thirty days
after any such public announcement, the Master Servicer (or if the Master
Servicer is the Servicer, the Indenture Trustee), with the cooperation of the
Issuer, shall negotiate in good faith and effect the sale, transfer and
assignment of the servicing rights and responsibilities hereunder to the
qualified party submitting the highest satisfactory bid as to the price they
will pay to obtain such servicing. The Master Servicer (or if the Master
Servicer is the Servicer, the Indenture Trustee) upon receipt of the purchase
price shall pay such purchase price to the Servicer being so removed, after
deducting from any sum received by the Master Servicer (or if the Master
Servicer is the Servicer, the Indenture Trustee) from the successor to the
Servicer in respect of such sale, transfer and assignment all costs and expenses
of any public announcement and of any sale, transfer and assignment of the
servicing rights and responsibilities reasonably incurred hereunder. After such
deductions, the remainder of such sum shall be paid by the Master Servicer (or
if the Master Servicer is the Servicer, the Indenture Trustee) to the Servicer
at the time of such sale.
(b) If the Servicer fails to remit to the Indenture Trustee
for distribution to the Noteholders any payment required to be made under the
terms of the Notes and the Indenture (for purposes of this Section 6.02(b), a
"Remittance") because the 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 Indenture Trustee shall upon
notice of such
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prohibition, regardless of whether it has received a notice of termination under
Section 6.01, advance the amount of such Remittance by depositing such amount in
the Payment Account on the related Payment Date. The Indenture Trustee shall be
obligated to make such advance only if (i) such advance, in the good faith
judgment of the Indenture Trustee, can reasonably be expected to be ultimately
recoverable from Stayed Funds and (ii) the Indenture Trustee is not prohibited
by law from making such advance or obligating itself to do so. Upon remittance
of the Stayed Funds to the Indenture Trustee or the deposit thereof in the
Payment Account by the Servicer, a trustee in bankruptcy or a federal bankruptcy
court, the Indenture Trustee may recover the amount so advanced, without
interest, by withdrawing such amount from the Payment Account; however, nothing
in this Agreement shall be deemed to affect the Indenture Trustee's rights to
recover from the Servicer's own funds interest on the amount of any such
advance. If the Indenture 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 Indenture Trustee shall be entitled to reimburse itself for such
advance, without interest, by withdrawing from the Payment Account, out of
amounts on deposit therein, an amount equal to the portion of such advance
attributable to the Stayed Funds.
SECTION 6.03. Notification to Noteholders.
(a) Upon any termination of the Servicer pursuant to Section
6.01 above or any appointment of a successor to the Servicer pursuant to Section
6.02 above, the Indenture Trustee shall give prompt written notice thereof to
Noteholders at their respective addresses appearing in the Note 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 Servicer Event of Default or five days after a Responsible
Officer of the Indenture Trustee becomes aware of the occurrence of such an
event, the Indenture Trustee shall transmit by mail to the Master Servicer and
to all Holders of Notes notice of each such occurrence, unless such default or
Servicer Event of Default shall have been cured or waived.
SECTION 6.04. Waiver of Servicer Events of Default.
The Holders representing at least 66% of the Voting Rights
evidenced by all Classes of Notes affected by any default or Servicer Event of
Default hereunder may waive such default or Servicer Event of Default; provided,
however, that a default or Servicer Event of Default under clause (i) or (vii)
of Section 6.01 may be waived only by all of the Holders of the Notes. Upon any
such waiver of a default or Servicer Event of Default, such default or Servicer
Event of Default shall cease to exist and shall be deemed to have been remedied
for every purpose hereunder. No such waiver shall extend to any subsequent or
other default or Servicer Event of Default or impair any right consequent
thereon except to the extent expressly so waived.
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ARTICLE VII
SPECIAL FORECLOSURE PROCEDURES
AT OPTION OF THE CERTIFICATEHOLDER OF THE MAJORITY
IN PERCENTAGE INTEREST IN THE EQUITY CERTIFICATES
SECTION 7.01. General.
(a) The Servicer hereby consents to the terms and provisions
of this Article VII so long as the Transferor is the Directing Holder. If at any
time any Person other than the Transferor is the Directing Holder, the terms and
provisions of this Article VII shall only become operative upon the express
written consent of the Servicer, with written notice of such consent delivered
to the Indenture Trustee, and then only for so long as the specific
Certificateholder to whom consent was granted remains the Certificateholder of a
majority in Percentage Interest in the Equity Certificates. In the event of any
conflict between the terms and conditions of this Article VII and the first
paragraph of Section 3.16(a), this Article VII shall control.
(b) Whenever used in this Article VII, the following words and
phrases, unless the context otherwise requires, shall have the following
meanings:
AFFIRMATION: A written statement signed by the
Certificateholder of a majority in Percentage Interest in the Equity
Certificates and sent to the Servicer certifying such Certificateholder's
Percentage Interest in the Equity Certificates, and affirming the terms of
Section 7.08.
COLLATERAL ACCOUNT: The fund established and maintained
pursuant to Section 7.06 hereof.
COMMENCEMENT OF FORECLOSURE: The first official action
required under local law in order to commence foreclosure proceedings or to
schedule a trustee's sale under a deed of trust, including (i) in the case of a
mortgage or deed to secure debt, any filing or service of process necessary to
commence an action to foreclose or (ii) in the case of a deed of trust, the
posting, publishing, filing or delivery of a notice of sale, but not including
in either case any notice of default, notice of intent to foreclose or sell or
any other action prerequisite to the actions specified in (i) or (ii) above.
CURRENT APPRAISAL: With respect to any Subject Mortgage Loan
as to which the Directing Holder has made an Election to Delay Foreclosure or an
Election to Foreclose, an appraisal of such Mortgage Loan, based on an appraisal
of the related Mortgaged Property obtained by the Directing Holder at its
expense from an appraiser acceptable to the Servicer as nearly contemporaneously
as practicable to the time of the Directing Holder's election, prepared based on
customary requirements for such appraisals, and which appraisal shall take into
account estimated liquidation expenses and carrying costs.
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DIRECTING HOLDER: The Certificateholder of a majority in
Percentage Interest of the Equity Certificates from the time that such
Certificateholder provides the Affirmation to the Servicer and until such time
as such Certificateholder is no longer a Certificateholder of a majority in
Percentage Interest in the Equity Certificates.
ELECTION TO DELAY FORECLOSURE: Any election by the Directing
Holder to delay the Commencement of Foreclosure, made in accordance with Section
7.03(b).
ELECTION TO FORECLOSE: Any election by the Directing Holder to
proceed with the Commencement of Foreclosure, made in accordance with Section
7.04(a).
FAIR MARKET VALUE: With respect to a Subject Mortgage Loan,
the fair market value of the related Mortgaged Property as determined pursuant
to the Current Appraisal.
REQUIRED COLLATERAL ACCOUNT BALANCE: As of any date of
determination, an amount equal to the aggregate of all amounts previously
required to be deposited in the Collateral Account pursuant to Section 7.03(d)
(after adjustment for all withdrawals and deposits pursuant to Section 7.03(e))
and Section 7.04(b) (after adjustment for all withdrawals and deposits pursuant
to Section 7.04(c)), reduced by all withdrawals therefrom pursuant to Section
7.03(g) and Section 7.04(d).
SUBJECT MORTGAGE LOAN: Any Mortgage Loan that comes into and
continues in default and as to which no satisfactory arrangements can be made
for collection of delinquent payments pursuant to Section 3.07.
UPDATED CURRENT APPRAISAL: With respect to any Subject
Mortgage Loan as to which the Directing Holder has made an Election to Delay
Foreclosure and as to which no amount has been realized on such Subject Mortgage
Loan within six months from the time the Subject Mortgage Loan becomes
delinquent, an appraisal of such Mortgage Loan, based on an appraisal of the
related Mortgaged Property obtained by the Directing Holder at its expense from
an appraiser acceptable to the Servicer as nearly contemporaneously as
practicable to the time which the Directing Holder is obligated to purchase such
Subject Mortgage Loan pursuant to Section 7.03(g), prepared based on customary
requirements for such appraisals, and which appraisal shall take into account
estimated liquidation expenses and carrying costs.
(c) All capitalized terms not otherwise defined in this
Article VII shall have the meanings assigned elsewhere in this Agreement.
SECTION 7.02. Reports and Notices.
(a) In connection with the performance of its duties under
this Agreement relating to the realization upon defaulted Mortgage Loans, the
Servicer shall provide to the Directing Holder the following notices and
reports:
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(i) Upon reasonable request of the Directing Holder, with
respect to any Mortgage Loan listed as at least 30 days delinquent in
the statement provided to Noteholders pursuant to Section 7.05 of the
Indenture, the Servicer shall provide such information as it may have
in its possession or may reasonably obtain, the reasonable out of
pocket expenses of the Servicer in providing such information to be
paid promptly by the Directing Holder, upon receipt of an invoice from
the Servicer.
(ii) Prior to the Commencement of Foreclosure in connection
with any Subject Mortgage Loan, the Servicer shall provide the
Directing Holder with a notice of such proposed and imminent
foreclosure, stating the loan number and the aggregate amount
owing under such Mortgage Loan.
(b) If requested by the Directing Holder, the Servicer shall
make its servicing personnel available (during its normal business hours) to
respond to reasonable inquiries by the Directing Holder in connection with any
Subject Mortgage Loan identified in a report or notice under subsection (a)(i)
or (a)(ii) above which has been given to the Directing Holder; provided, that
(1) the Servicer shall only be required to provide information that is readily
accessible to its servicing personnel and (2) the Servicer shall not be required
to provide any written information under this subsection.
(c) The Remittance Reports prepared by the Servicer pursuant
to Section 4.01, and the statements to Noteholders prepared by the Indenture
Trustee pursuant to Section 7.05 of the Indenture, shall each include the
following additional information: (i) the number and aggregate unpaid principal
balance of Mortgage Loans as to which an Election to Delay Foreclosure has been
made and (ii) the number and aggregate unpaid principal balance of Mortgage
Loans as to which an Election to Foreclose has been made.
SECTION 7.03. Election to Delay Foreclosure Proceedings.
(a) In the event that the Servicer does not receive written
notice of the Directing Holder's election pursuant to subsection (b) below
within 24 hours of transmission of the notice provided by the Servicer under
Section 7.02(a)(ii), the Servicer shall proceed with the Commencement of
Foreclosure in respect of such Subject Mortgage Loan in accordance with its
normal foreclosure policies without additional notice to the Directing Holder.
Any foreclosure that has been initiated may be discontinued if the Subject
Mortgage Loan has been brought current (including the payment to the Collateral
Account of all related P&I Advances and Servicing Advances) or if a refinancing
or prepayment occurs pursuant to which the Subject Mortgage Loan is brought
current (including the payment of all related P&I Advances and Servicing
Advances), without notice to the Directing Holder.
(b) In connection with any Subject Mortgage Loan with respect
to which a notice under Section 7.02(a)(ii) has been given to the Directing
Holder, the Directing Holder may elect, for reasonable cause as determined by
the Directing Holder, to instruct the Servicer to delay Commencement of
Foreclosure until such time as the Directing Holder determines that the
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Servicer may proceed with Commencement of Foreclosure. Such election must be
evidenced by written notice received by the Servicer within 24 hours of
transmission of the notice provided by the Servicer under Section 7.02(a)(ii),
except that such 24 hour period shall be extended for a reasonable period, not
to exceed four Business Days if the Directing Holder requests additional
information related to such foreclosure or such Subject Mortgage Loan, to permit
the review of such additional information.
(c) With respect to any Subject Mortgage Loan as to which the
Directing Holder has made an Election to Delay Foreclosure, the Directing Holder
shall obtain a Current Appraisal as soon as practicable, and shall provide the
Servicer with a copy of such Current Appraisal. With respect to any Subject
Mortgage Loan as to which the Directing Holder has made an Election to Delay
Foreclosure and as to which no amount has been realized on such Subject Mortgage
Loan within six months from the time the Subject Mortgage Loan becomes
delinquent, the Directing Holder shall obtain an Updated Current Appraisal and
shall provide the Servicer with a copy of such Updated Current Appraisal.
(d) Within two Business Days of making any Election to Delay
Foreclosure, the Directing Holder shall remit to the Servicer, for deposit in
the Collateral Account, an amount, as calculated by the Servicer, equal to the
sum of (1) 125% of the Fair Market Value determined pursuant to the Current
Appraisal referred to in subsection (c) above (or, if such Current Appraisal has
not yet been obtained, the Servicer's estimate thereof, in which case the
required deposit under this subsection shall be adjusted upon obtaining such
Current Appraisal) and (2) three months' interest on the Subject Mortgage Loan
at the applicable Mortgage Rate. If any Election to Delay Foreclosure extends
for a period in excess of three months (such excess period being referred to
herein as the "Excess Period"), the Directing Holder shall remit by wire
transfer in advance to the Servicer for deposit in the Collateral Account the
amount of each additional month's interest, as calculated by the Servicer, equal
to interest on the Mortgage Loan at the applicable Mortgage Rate for the Excess
Period. Nothing contained in this Article VII shall alter the Servicer's
obligation to make P&I Advances pursuant to Section 4.01.
(e) With respect to any Subject Mortgage Loan as to which the
Directing Holder has made an Election to Delay Foreclosure, the Servicer may
withdraw from the Collateral Account from time to time amounts necessary to
reimburse the Servicer for all P&I Advances and Servicing Advances thereafter
made by the Servicer in accordance with this Agreement. To the extent that the
amount of any Servicing Advance is determined by the Servicer based on estimated
costs, and the actual costs are subsequently determined to be higher than the
estimate, the Servicer may withdraw the additional amount from the Collateral
Account and if the actual costs are determined to be lower than such estimate,
the Servicer shall deposit the amount of such difference into the Collateral
Account. In the event that the Subject Mortgage Loan is brought current by the
Mortgagor and the foreclosure action is discontinued, the amounts so withdrawn
from the Collateral Account by the Servicer as reimbursement for P&I Advances
and Servicing Advances shall be redeposited therein by the Servicer and the
Servicer shall be reimbursed as otherwise provided in this Agreement. Except as
provided in the two preceding sentences, amounts withdrawn from the Collateral
Account to cover P&I Advances and Servicing Advances shall not
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<PAGE>
be redeposited therein or otherwise reimbursed to the Directing Holder; however,
the Servicer waives any right to reimbursement for such amounts under any other
provision of this Agreement. If and when any such Subject Mortgage Loan is
brought current by the Mortgagor (including the payment to the Collateral
Account of all related P&I Advances and Servicing Advances), all amounts
remaining in the Collateral Account in respect of such Subject Mortgage Loan
(after adjustment for all withdrawals and deposits pursuant to this subsection)
shall be released to the Directing Holder.
(f) With respect to any Subject Mortgage Loan as to which the
Directing Holder has made an Election to Delay Foreclosure, the Servicer shall
continue to service the Subject Mortgage Loan in accordance with the terms of
this Agreement (other than the delay in Commencement of Foreclosure as provided
herein). If and when the Directing Holder shall notify the Servicer that it
believes that it is appropriate to do so, the Servicer shall proceed with the
Commencement of Foreclosure.
(g) Upon the occurrence of a liquidation of a defaulted
Mortgage Loan or the disposition of a REO Property with respect to any Subject
Mortgage Loan, in either case as to which the Directing Holder made an Election
to Delay Foreclosure, the Servicer shall calculate the amount, if any, by which
the Fair Market Value determined pursuant to the Current Appraisal obtained
under subsection (c) above exceeds the Liquidation Proceeds for the related
Mortgage Loan or REO Property, and the Servicer shall withdraw the amount of
such excess from the Collateral Account, shall remit the same to the Collection
Account and in its capacity as Servicer shall apply such amount as additional
Liquidation Proceeds pursuant to this Agreement. If the Liquidation Proceeds for
such Mortgage Loan or REO Property exceeds the Fair Market Value determined
pursuant to the Current Appraisal obtained under subsection (c) above, the
Servicer shall deposit immediately such excess into the Collection Account as
additional Liquidation Proceeds pursuant to this Agreement. After making any
such withdrawal as provided in this subsection (g), all amounts remaining in the
Collateral Account in respect of such Subject Mortgage Loan (after adjustment
for all withdrawals and deposits pursuant to subsection (e)) shall be released
to the Directing Holder. If within six months of the time the Subject Mortgage
Loan becomes delinquent, no amount has been realized on the Subject Mortgage
Loan, the Directing Holder shall purchase the Mortgage Loan from the Trust
Estate at a purchase price equal to the greater of (i) the Fair Market Value
shown on the Current Appraisal determined pursuant to subsection (c) above or
(ii) the Fair Market Value shown on the Updated Current Appraisal determined
pursuant to subsection (c) above. The Servicer shall first apply amounts on
deposit in the Collateral Account towards such purchase price. Any shortfall
shall be paid by the Directing Holder and any excess will be returned to it. The
Servicer shall remit the amount of such purchase price to the Collection
Account.
SECTION 7.04. Election to Commence Foreclosure Proceedings.
(a) In connection with any Subject Mortgage Loan identified
under Section 7.02(a)(i), the Directing Holder may elect, for reasonable cause
as determined by the Directing
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<PAGE>
Holder, to instruct the Servicer to proceed with Commencement of Foreclosure as
soon as practicable.
(b) Within two Business Days of making any Election to
Foreclose, the Directing Holder shall remit to the Servicer, for deposit in the
Collateral Account, an amount, as calculated by the Servicer, equal to the sum
of (1) 125% of the Stated Principal Balance of the Subject Mortgage Loan and (2)
three months' interest on the Subject Mortgage Loan at the applicable Mortgage
Rate. If and when any such Subject Mortgage Loan is brought current (including
the payment to the Collateral Account of all related P&I Advances and Servicing
Advances) by the Mortgagor, all amounts in the Collateral Account in respect of
such Subject Mortgage Loan shall be released to the Directing Holder.
(c) With respect to any Subject Mortgage Loan as to which the
Directing Holder has made an Election to Foreclose, the Servicer shall continue
to service such Subject Mortgage Loan in accordance with the terms of this
Agreement (other than to proceed with the Commencement of Foreclosure as
provided herein). In connection therewith, the Servicer shall have the same
rights to make withdrawals for related P&I Advances and Servicing Advances from
the Collateral Account as are provided under Section 7.03(e), and the Servicer
shall make reimbursements thereto to the limited extent provided under such
subsection. The Servicer shall not be required to proceed with the Commencement
of Foreclosure if (i) the same is stayed as a result of the Mortgagor's
bankruptcy or is otherwise barred by applicable law, or to the extent that all
legal conditions precedent thereto have not yet been complied with or (ii) the
Servicer reasonably determines that such foreclosure might result in liability
to the Servicer, unless the Directing Holder provides, at such time, a general
indemnity to the Servicer with respect to any such liability or (iii) the
Servicer believes there is a breach of representations or warranties which may
result in a repurchase or substitution of such Mortgage Loan or (iv) the
Servicer reasonably believes the Mortgaged Property may be contaminated with or
affected by hazardous wastes or hazardous substances. Any foreclosure that has
been initiated may be discontinued if the Subject Mortgage Loan has been brought
current (including the payment to the Collateral Account of all related P&I
Advances and Servicing Advances) or if a refinancing or prepayment occurs
pursuant to which the Subject Mortgage Loan is brought current (including the
payment to the Collateral Account of all related P&I Advances and Servicing
Advances), without notice to the Directing Holder. If and when any such Subject
Mortgage Loan is brought current by the Mortgagor (including the payment to the
Collateral Account of all related P&I Advances and Servicing Advances), all
amounts remaining in the Collateral Account in respect of such Subject Mortgage
Loan (after adjustment for all withdrawals and deposits pursuant to this
subsection) shall be released to the Directing Holder.
(d) Upon the occurrence of a liquidation of a defaulted
Mortgage Loan or the disposition of a REO Property, in either case with respect
to any Subject Mortgage Loan as to which the Directing Holder made an Election
to Foreclose and as to which the Servicer proceeded with the Commencement of
Foreclosure in accordance with subsection (c) above, the Servicer shall
calculate the amount, if any, by which the Stated Principal Balance of such
Subject Mortgage Loan exceeds the Liquidation Proceeds for the related Mortgage
Loan or REO Property, and the
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<PAGE>
Servicer shall withdraw the amount of such excess from the Collateral Account,
shall remit the same to the Collection Account and in its capacity as Servicer
shall apply such amount as additional Liquidation Proceeds pursuant to this
Agreement. After making any such withdrawal or deposit as provided in this
subsection (d), all amounts remaining in the Collateral Account in respect of
such Subject Mortgage Loan shall be released to the Directing Holder.
SECTION 7.05. Termination.
With respect to all Subject Mortgage Loans included in the
Trust Estate, the Directing Holder's rights to make any Election to Delay
Foreclosure or any Election to Foreclose and the Servicer's obligations under
Section 7.02 shall terminate upon the earlier of (i) the termination of this
Agreement or (ii) such time as the Directing Holder ceases to be a
Certificateholder of a majority in Percentage Interest of the Equity
Certificates. Except as set forth above, this Article VII of this Agreement and
the respective rights, obligations and responsibilities of the Directing Holder
and the Servicer hereunder shall terminate and be of no further force and effect
upon the final liquidation of the last Subject Mortgage Loan as to which the
Directing Holder made any Election to Delay Foreclosure or any Election to
Foreclose and the withdrawal of all remaining amounts in the Collateral Account
as provided herein.
SECTION 7.06. Collateral Account.
Upon receipt from the Directing Holder of the initial amount
required to be deposited in the Collateral Account pursuant to Section 7.03(d)
or Section 7.04(b), the Servicer shall establish and maintain as a separate
Eligible Account (the "Collateral Account"), entitled "National Mortgage
Corporation, as Servicer for Norwest Bank Minnesota, National Association, as
Indenture Trustee, in trust for the registered holders of , Salomon Brothers
Mortgage Securities VII, Inc. Asset-Backed Floating Rate Notes, Series 1998-11".
Amounts in the Collateral Account shall continue to be the property of the
Directing Holder, subject to the first priority security interest granted
hereunder for the benefit of the Noteholders and the Certificateholders, until
withdrawn from the Collateral Account pursuant to Section 7.03 or Section 7.04
hereof.
Upon the termination of this Article VII of this Agreement
pursuant to Section 7.05 hereof, the Servicer shall distribute to the Directing
Holder all amounts remaining in the Collateral
Account together with any investment earnings thereon.
The Collateral Account shall not be an asset of the Trust
Estate and, for federal income tax purposes, shall be owned by the Directing
Holder.
For purposes of determining whether a P&I Advance constitutes
a Nonrecoverable P&I Advance, Liquidation Proceeds shall be deemed to include
any amounts ultimately recoverable from the Collateral Account or, to the extent
of any shortfall described in Section
7.09, from the Directing Holder.
SECTION 7.07. Collateral Account Permitted Investments.
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<PAGE>
The Servicer shall, at the written direction of the Directing
Holder, invest the funds in the Collateral Account in Permitted Investments.
Such direction shall not be changed more frequently than quarterly. In the
absence of any direction, the Servicer shall invest funds in the Collateral
Account in accordance with the definition of Permitted Investments herein in its
discretion.
All income and gain realized from any investment as well as
any interest earned on deposits in the Collateral Account (net of any losses on
such investments) and any payments of principal made in respect of any Permitted
Investment shall be deposited in the Collateral Account upon receipt. All costs
associated with the purchase and sale of Collateral Account Permitted
Investments shall be borne by the Directing Holder. The Directing Holder shall
deposit in the Collateral Account the amount of any loss incurred in respect of
any such Permitted Investments made with funds in such Collateral Account
immediately upon realization of such loss. The Servicer shall periodically (but
not more frequently than monthly) distribute to the Directing Holder upon
request an amount of cash, to the extent cash is available therefor in the
Collateral Account, equal to the amount by which the balance of the Collateral
Account, after giving effect to all other distributions to be made from the
Collateral Account on such date, exceeds the Required Collateral Account
Balance. Any amounts so distributed shall be released from the lien and security
interest created pursuant of Section 7.08 of this Agreement.
SECTION 7.08. Grant of Security Interest.
The Directing Holder hereby grants to the Servicer for the
benefit of the Noteholders and Certificateholders a security interest in and
lien on all of the Directing Holder's right, title and interest, whether now
owned or hereafter acquired, in and to: (1) the Collateral Account, (2) all
amounts deposited in the Collateral Account and Permitted Investments in which
such amounts are invested (and the distributions and proceeds of such
investments) and (3) all cash and non-cash proceeds of any of the foregoing,
including proceeds of the voluntary or involuntary conversion thereof (all of
the foregoing collectively, the "Collateral").
The Directing Holder hereby acknowledges the lien on and
security interest in the Collateral for the benefit of the Noteholders and
Certificateholders. The Directing Holder shall take all actions requested by the
Servicer as may be reasonably necessary to perfect the security interest created
under this Section 7.08 of this Agreement in the Collateral and cause it to be
prior to all other security interests and liens, including the execution and
delivery to the Servicer for filing of appropriate financing statements in
accordance with applicable law. Upon receipt of duly filed financing statements,
the Servicer shall file appropriate continuation statements, or appoint an agent
on its behalf to file such statements, in accordance with applicable law.
SECTION 7.09. Collateral Shortfalls.
In the event that amounts on deposit in the Collateral Account
at any time are insufficient to cover any withdrawals therefrom that the
Servicer is then entitled to make hereunder, the Directing Holder shall be
obligated to pay such amounts to the Servicer
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<PAGE>
immediately upon demand. Such obligation shall constitute a general obligation
of the Directing Holder.
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<PAGE>
ARTICLE VIII
MISCELLANEOUS PROVISIONS
SECTION 8.01. Amendment.
This Agreement may be amended from time to time by the
parties hereto, provided that any amendment be accompanied by a letter from the
Rating Agencies to the effect that the amendment will not result in the
downgrading or withdrawal of the ratings then assigned to the
Notes.
SECTION 8.02. 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 8.03. 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 Master Servicer, Wilshire Servicing Corporation, 1776 South West
Madison Street, Portland, Oregon 97205, Attention: Mr. Robert Rosen (facsimile
number: (503) 233-8799), (b) in the case of the Servicer, National Mortgage
Corporation, 7600 East Orchard Road, Suite 330S, Englewood, Colorado 80111-4943,
Attention: President (facsimile number: (303) 224-7290), (c) in the case of DCR,
Duff & Phelps Credit Rating Co., 17 State Street, New York, New York 10004, (d)
in the case of S&P, Standard & Poor's Ratings Services, 25 Broadway, New York,
New York 10004, (e) in the case of the Issuer (or the Owner Trustee on behalf of
the Issuer), c/o Wilmington Trust Company, Rodney Square North, 1100 North
Market Street, Wilmington, Delaware 19890, Attention: Corporate Trust
Administration (telecopy number (302) 651-8882) (with copies to Wilshire Real
Estate Investment Trust Inc., 1776 South West Madison Street, Portland, Oregon
97205, Attention: Lawrence Mendelsohn (telecopy number (503) 223-8799), (f) in
the case of the Indenture Trustee, Norwest Bank Minnesota, National Association,
Sixth Street & Marquette Avenue, Minneapolis, Minnesota 55479-0070, Attention;
Corporate Trust Services/Asset-Backed Administration (telecopy number (612)
667-3539) (with a copy to Norwest Bank Minnesota, National Association, 11000
Broken Land Parkway, Columbia, Maryland 21044, Attention: Securities
Administration (telecopy number (410) 884- 2360)), (g) in the case of the
Seller, Wilshire Real Estate Investment Trust Inc., 1776 South West Madison
Street, Portland, Oregon 97205, Attention: Attention: Lawrence Mendelsohn
(telecopy number (503) 223-8799), or as to each party, at such other address as
shall be designated by such party in written notice to each other party. Any
notice required or permitted to be mailed to a Noteholder shall be given by
first class mail, postage prepaid, at the address of such Noteholder
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<PAGE>
as shown in the Note Register. Any notice so mailed within the time prescribed
in the Agreement shall be conclusively presumed to have been duly given, whether
or not the Noteholder receives such notice.
SECTION 8.04. 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 Notes or the rights of the Holders thereof.
SECTION 8.05. 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 8.06. Third-Party Beneficiaries.
This Agreement will inure to the benefit of and be binding
upon the parties hereto, the Noteholders, the Owner Trustee, the Seller and
their respective successors and permitted assigns. Except as otherwise provided
in this Agreement, no other Person will have any right or
obligation hereunder.
SECTION 8.07. Counterparts.
This instrument may be executed in any number of counterparts,
each of which so executed shall be deemed to be an original, but all such
counterparts shall together constitute but
one and the same instrument.
SECTION 8.08 Termination.
Except with respect to obligations of the Servicer relating to
any representations and warranties or indemnities made by it in this Agreement,
the respective obligations and responsibilities of the Servicer, the Indenture
Trustee and the Issuer created hereby shall terminate upon the satisfaction and
discharge of the Indenture pursuant to Section 4.10 thereof.
SECTION 8.09. No Recourse.
(a) The Master Servicer and the Servicer each acknowledge that
no recourse may be had against the Issuer, except as may be expressly set forth
in this Agreement.
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<PAGE>
(b) It is expressly understood and agreed by and between the
parties hereto (i) that this Agreement is executed and delivered by the Owner
Trustee, not in its individual capacity but solely as Owner Trustee under the
Owner Trust Agreement in the exercise of the power and authority conferred and
vested in it as such Owner Trustee, (ii) each of the representations,
undertakings and agreements made herein by the Issuer are not personal
representations, undertakings and agreements of the Owner Trustee but are
binding only on the Issuer created pursuant to the Owner Trust Agreement, (iii)
nothing contained herein shall be construed as creating any liability on the
Owner Trustee, individually or personally, to perform any covenant of the Issuer
either expressed or implied contained herein, all such liability, if any, being
expressly waived by the parties hereto and by any person claiming by, through or
under any such party and (iv) under no circumstances shall the Owner Trustee be
personally liable for the payment of any indebtedness or expense of the Issuer
or be liable for the breach or failure of any obligation, representation,
warranty or covenant make or undertaken by the Issuer under this Agreement.
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<PAGE>
IN WITNESS WHEREOF, the Master Servicer, the Servicer, the
Issuer and the Indenture 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.
WILSHIRE SERVICING CORPORATION
as Master Servicer
By: /s/ Lawrence Mendelsohn
---------------------------------
Name: Lawrence Mendelsohn
Title: President
NATIONAL MORTGAGE COMPANY
as Servicer
By: /s/ Scott Colclough
---------------------------------
Name: Scott Colclough
Title: Vice President
WILSHIRE REIT TRUST SERIES 1998-1,
as Issuer
By: Wilmington Trust
Company, not in
its individual capacity but
solely as Owner Trustee
By: /s/ Emmett Harmon
---------------------------------
Name: Emmett Harmon
Title: Vice President
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
as Indenture Trustee
By: /s/ Randall S. Reider
---------------------------------
Name: Randall S. Reider
Title: Assistant Vice President
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<PAGE>
EXHIBIT A-1
REQUEST FOR RELEASE
(for Indenture Trustee/Custodian)
Loan Information
- ----------------
Name of Mortgagor:
-------------------------------
Servicer
Loan No.:
-------------------------------
Indenture Trustee/Custodian
- ---------------------------
Name:
-------------------------------
Address:
-------------------------------
-------------------------------
Indenture Trustee/Custodian
Mortgage File No.:
-------------------------------
Depositor
- ---------
Name: SALOMON BROTHERS MORTGAGE
SECURITIES VII, INC.
Address:
-------------------------------
-------------------------------
Notes: Asset-Backed Floating Rate Notes, Series 1998-11.
A-1-1
<PAGE>
The undersigned Servicer hereby acknowledges that it has
received from _______________________, as Indenture Trustee (or a Custodian on
its behalf) for the Holders of Salomon Brothers Mortgage Securities VII, Inc.
Asset-Backed Floating Rate Notes, Series 1998-11, 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 Servicing
Agreement, dated as of September 1, 1998, among the Indenture Trustee, the
Issuer and the Servicer (the "Agreement").
<TABLE>
<CAPTION>
<S> <C>
( ) Promissory Note dated _______________, 19__, in the original principal sum of
$__________, made by _____________________, payable to, or endorsed to the order
of, the Indenture 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 Indenture 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.
</TABLE>
( ) ---------------------------------------------
( ) ---------------------------------------------
( ) ---------------------------------------------
( ) ---------------------------------------------
The undersigned Servicer hereby acknowledges and agrees as
follows:
(1) The Servicer shall hold and retain possession of the
Documents in trust for the benefit of the Indenture Trustee, solely for
the purposes provided in the Agreement.
(2) The Servicer shall not cause or permit the Documents to
become subject to, or encumbered by, any claim, liens, security
interest, charges, writs of attachment or other
A-1-2
<PAGE>
impositions nor shall the Servicer assert or seek to assert any claims
or rights of setoff to or against the Documents or any proceeds
thereof.
(3) The Servicer shall return each and every Document
previously requested from the Mortgage File to the Indenture Trustee
(or a Custodian on its behalf) 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
Servicer shall at all times be ear marked for the account of the
Indenture Trustee, and the Servicer shall keep the Documents and any
proceeds separate and distinct from all other property in the
Servicer's possession, custody or control.
Dated:
[ Servicer]
By:
----------------------------
Name:
Title:
A-1-3
<PAGE>
EXHIBIT A-2
REQUEST FOR RELEASE
[Mortgage Loans Paid in Full]
OFFICERS' CERTIFICATE AND TRUST RECEIPT
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.
ASSET-BACKED FLOATING RATE NOTES, SERIES 1998-11
____________________________________________________ HEREBY CERTIFIES THAT
HE/SHE IS AN OFFICER OF THE 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 SERVICING
AGREEMENT DESCRIBED IN THE ATTACHED SCHEDULE:
ALL PAYMENTS OF PRINCIPAL, PREMIUM (IF ANY), AND INTEREST HAVE BEEN
MADE.
LOAN NUMBER: _____________________ BORROWER'S NAME: _________________
COUNTY:___________________________
WE HEREBY CERTIFY THAT ALL AMOUNTS RECEIVED IN CONNECTION WITH SUCH PAYMENTS,
WHICH ARE REQUIRED TO BE DEPOSITED IN THE COLLECTION ACCOUNT PURSUANT TO SECTION
3.10 OF THE SERVICING AGREEMENT, HAVE BEEN OR WILL BE CREDITED.
______________________________ DATED:__________________________________
/ / VICE PRESIDENT
/ / ASSISTANT VICE PRESIDENT
A-2-1
<PAGE>
SCHEDULE 1
MORTGAGE LOAN SCHEDULE
[AVAILABLE UPON REQUEST]
EXHIBIT 4.4
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.,
as Depositor
and
WILMINGTON TRUST COMPANY,
as Owner Trustee
-----------------------------------------
AMENDED AND RESTATED
TRUST AGREEMENT
Dated as of September 1, 1998
------------------------------------------
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.
ASSET-BACKED CERTIFICATES
SERIES 1998-11
<PAGE>
<TABLE>
<CAPTION>
Table of Contents
Section Page
ARTICLE I
<S> <C>
DEFINITIONS..............................................................................................1
1.01. DEFINITIONS................................................................................1
1.02. OTHER DEFINITIONAL PROVISIONS..............................................................1
ARTICLE II
ORGANIZATION.............................................................................................2
2.01. NAME.......................................................................................2
2.02. OFFICE.....................................................................................2
2.03. PURPOSES AND POWERS........................................................................2
2.04. APPOINTMENT OF OWNER TRUSTEE...............................................................3
2.05. INITIAL CAPITAL CONTRIBUTION OF TRUST ESTATE...............................................3
2.06. DECLARATION OF TRUST.......................................................................3
2.07. LIABILITY OF THE CERTIFICATEHOLDERS........................................................4
2.08. TITLE TO TRUST PROPERTY....................................................................4
2.09. SITUS OF TRUST.............................................................................4
2.10. REPRESENTATIONS AND WARRANTIES OF THE DEPOSITOR............................................4
2.11. PAYMENT OF TRUST EXPENSES..................................................................5
2.12. INVESTMENT COMPANY.........................................................................6
2.13. COMMISSION FILINGS.........................................................................6
ARTICLE III
CONVEYANCE OF THE MORTGAGE LOANS; EQUITY CERTIFICATES....................................................6
3.01. CONVEYANCE OF THE MORTGAGE LOANS...........................................................6
3.02. INITIAL OWNERSHIP..........................................................................6
3.03. THE EQUITY CERTIFICATES....................................................................7
3.04. AUTHENTICATION OF EQUITY CERTIFICATES......................................................7
3.05. REGISTRATION OF AND LIMITATIONS ON TRANSFER AND EXCHANGE OF EQUITY
CERTIFICATES...............................................................................7
3.06. MUTILATED, DESTROYED, LOST OR STOLEN EQUITY CERTIFICATES..................................10
3.07. PERSONS DEEMED CERTIFICATEHOLDERS.........................................................11
3.08. ACCESS TO LIST OF CERTIFICATEHOLDERS' NAMES AND ADDRESSES.................................11
3.09. MAINTENANCE OF OFFICE OR AGENCY...........................................................11
3.10. CERTIFICATE PAYING AGENT..................................................................11
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ARTICLE IV
<S> <C>
AUTHORITY AND DUTIES OF OWNER TRUSTEE...................................................................13
4.01. GENERAL AUTHORITY.........................................................................13
4.02. GENERAL DUTIES............................................................................13
4.03. ACTION UPON INSTRUCTION...................................................................13
4.04. NO DUTIES EXCEPT AS SPECIFIED UNDER SPECIFIED DOCUMENTS OR
IN INSTRUCTIONS...........................................................................14
4.05. RESTRICTIONS..............................................................................15
4.06. PRIOR NOTICE TO CERTIFICATEHOLDERS WITH RESPECT TO CERTAIN MATTERS........................15
4.07. ACTION BY CERTIFICATEHOLDERS WITH RESPECT TO CERTAIN MATTERS..............................16
4.08. ACTION BY CERTIFICATEHOLDERS WITH RESPECT TO BANKRUPTCY...................................17
4.09. RESTRICTIONS ON CERTIFICATEHOLDERS' POWER.................................................17
4.10. MAJORITY CONTROL..........................................................................17
4.11. OPTIONAL REDEMPTION.......................................................................17
4.12. RESTRICTIONS..............................................................................17
ARTICLE V
APPLICATION OF TRUST FUNDS..............................................................................18
5.01. DISTRIBUTIONS.............................................................................18
5.02. METHOD OF PAYMENT.........................................................................18
5.03. TAX TREATMENT OF THE ISSUER...............................................................18
ARTICLE VI
CONCERNING THE OWNER TRUSTEE............................................................................19
6.01. ACCEPTANCE OF TRUSTS AND DUTIES...........................................................19
6.02. FURNISHING OF DOCUMENTS...................................................................20
6.03. REPRESENTATIONS AND WARRANTIES............................................................20
6.04. RELIANCE; ADVICE OF COUNSEL...............................................................21
6.05. NOT ACTING IN INDIVIDUAL CAPACITY.........................................................22
6.06. OWNER TRUSTEE NOT LIABLE FOR EQUITY CERTIFICATES OR RELATED DOCUMENTS.....................22
6.07. OWNER TRUSTEE MAY OWN EQUITY CERTIFICATES AND NOTES.......................................22
6.08. PAYMENTS FROM TRUST ESTATE................................................................22
6.09. DOING BUSINESS IN OTHER JURISDICTIONS.....................................................22
6.10. LIABILITY OF CERTIFICATE REGISTRAR AND CERTIFICATE PAYING AGENT...........................23
ARTICLE VII
COMPENSATION OF OWNER TRUSTEE...........................................................................23
7.01. OWNER TRUSTEE'S FEES AND EXPENSES.........................................................23
7.02. INDEMNIFICATION...........................................................................23
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ARTICLE VIII
<S> <C>
TERMINATION OF OWNER TRUST AGREEMENT....................................................................24
8.01. TERMINATION OF OWNER TRUST AGREEMENT......................................................24
ARTICLE IX
SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES..................................................25
9.01. ELIGIBILITY REQUIREMENTS FOR OWNER TRUSTEE................................................26
9.02. REPLACEMENT OF OWNER TRUSTEE..............................................................26
9.03. SUCCESSOR OWNER TRUSTEE...................................................................26
9.04. MERGER OR CONSOLIDATION OF OWNER TRUSTEE..................................................27
9.05. APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE.............................................27
ARTICLE X
MISCELLANEOUS...........................................................................................28
10.01. AMENDMENTS................................................................................29
10.02. NO LEGAL TITLE TO TRUST ESTATE............................................................30
10.03. LIMITATIONS ON RIGHTS OF OTHERS...........................................................30
10.04. NOTICES...................................................................................30
10.05. SEVERABILITY..............................................................................31
10.06. SEPARATE COUNTERPARTS.....................................................................31
10.07. SUCCESSORS AND ASSIGNS....................................................................31
10.08. NO PETITION...............................................................................31
10.09. NO RECOURSE...............................................................................32
10.10. HEADINGS..................................................................................32
10.11. GOVERNING LAW.............................................................................32
10.12. INTEGRATION...............................................................................32
</TABLE>
<PAGE>
EXHIBIT
Exhibit A - Form of Equity Certificate.....................................A-1
Exhibit B - Certificate of Trust of Wilshire REIT Trust Series 1998-1 .....B-1
Exhibit C - Form of Rule 144A Investment Representation....................C-1
Exhibit D - Form of Investor Representation Letter.........................D-1
Exhibit E - Form of Transferor Representation Letter.......................E-1
Exhibit F - Form of Certificate of Non-Foreign Status......................F-1
Exhibit G - Form of ERISA Representation Letter............................G-1
Exhibit H - Form of Representation Letter..................................H-1
Exhibit I - Initial Trust Agreement........................................I-1
<PAGE>
This Amended and Restated Trust Agreement (which amends and restates the
Trust Agreement, dated September 1, 1998, between Salomon Brothers Mortgage
Securities VII, Inc. as Depositor and Wilmington Trust Company, a Delaware
banking corporation, not in its individual capacity, but solely as, as Owner
Trustee, which is attached hereto as Exhibit I), dated as of September 1, 1998
(as amended from time to time, this "Owner Trust Agreement"), between the
Depositor and the Owner Trustee,
WITNESSETH THAT:
In consideration of the mutual agreements herein contained, the Depositor
and the Owner Trustee agree as follows:
ARTICLE I
Definitions
-----------
Section 1.01. DEFINITIONS. For all purposes of this Owner Trust Agreement,
except as otherwise expressly provided herein or unless the context otherwise
requires, capitalized terms not otherwise defined herein shall have the meanings
assigned to such terms in Appendix A to the Indenture, dated September 1, 1998,
between Wilshire REIT Trust Series 1998-1 as Issuer and Norwest Bank Minnesota,
National Association as Indenture Trustee, which is incorporated by referenced
herein. All other capitalized terms used herein shall have the meanings
specified herein.
Section 1.02. OTHER DEFINITIONAL PROVISIONS.
(a) All terms defined in this Owner Trust Agreement shall have the defined
meanings when used in any certificate or other document made or delivered
pursuant hereto unless otherwise defined therein.
(b) As used in this Owner Trust Agreement and in any certificate or other
document made or delivered pursuant hereto or thereto, accounting terms not
defined in this Owner Trust Agreement or in any such certificate or other
document, and accounting terms partly defined in this Owner Trust Agreement or
in any such certificate or other document to the extent not defined, shall have
the respective meanings given to them under generally accepted accounting
principles. To the extent that the definitions of accounting terms in this Owner
Trust Agreement or in any such certificate or other document are inconsistent
with the meanings of such terms under generally accepted accounting principles,
the definitions contained in this Owner Trust Agreement or in any such
certificate or other document shall control.
(c) The words "hereof," "herein," "hereunder" and words of similar import
when used in this Owner Trust Agreement shall refer to this Owner Trust
Agreement as a whole and not to any particular provision of this Owner Trust
Agreement; Article, Section and Exhibit references contained in this Owner Trust
Agreement are references to Articles, Sections and Exhibits in or
<PAGE>
-2-
to this Owner Trust Agreement unless otherwise specified; and the term
"including" shall mean "including without limitation".
(d) The definitions contained in this Owner Trust Agreement are applicable
to the singular as well as the plural forms of such terms and to the masculine
as well as to the feminine and neuter genders of such terms.
(e) Any agreement, instrument or statute defined or referred to herein or
in any instrument or certificate delivered in connection herewith means such
agreement, instrument or statute as from time to time amended, modified or
supplemented and includes (in the case of agreements or instruments) references
to all attachments thereto and instruments incorporated therein; references to a
Person are also to its permitted successors and assigns.
ARTICLE II
Organization
------------
Section 2.01. NAME. The trust created hereby (the "Trust") shall be known
as "Wilshire REIT Trust Series 1998-1", in which name the Owner Trustee may
conduct the business of the Trust, make and execute contracts and other
instruments on behalf of the Trust and sue and be sued.
Section 2.02. OFFICE. The office of the Trust shall be in care of the
Owner Trustee at the Corporate Trust Office or at such other address in Delaware
as the Owner Trustee may designate by written notice to the Certificateholders
and the Depositor.
Section 2.03. PURPOSES AND POWERS. The purpose of the Trust is to engage
in the following activities:
(i) to issue the Notes pursuant to the Indenture and the Equity
Certificates pursuant to this Owner Trust Agreement and to sell the Notes
and the Equity Certificates;
(ii) to pay the organizational, start-up and transactional expenses
of the Trust;
(iii) to hold, assign, grant, transfer, pledge and convey all the
Mortgage Loans pursuant to the Indenture and to hold, manage and
distribute to the Certificateholders pursuant to Section 5.01 any portion
of the Mortgage Loans released from the Lien of, and remitted to the Trust
pursuant to the Indenture;
(iv) to purchase and hold the Mortgage Loans pursuant to this Owner
Trust Agreement;
<PAGE>
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(v) to enter into and perform its obligations under the Basic
Documents to which it is to be a party;
(vi) if directed by the Majority Certificateholder subsequent to the
discharge of the Indenture, sell the Trust Estate, for the benefit of the
holders of the Equity Certificates;
(vii) to engage in those activities, including entering into
agreements, that are necessary, suitable or convenient to accomplish the
foregoing or are incidental thereto or connected therewith; and
(viii) subject to compliance with the Basic Documents, to engage in
such other activities as may be required in connection with conservation
of the Trust Estate and the making of distributions to the
Certificateholder and the Noteholders.
The Trust is hereby authorized to engage in the foregoing activities. The Trust
shall not engage in any activity other than in connection with the foregoing or
other than as required or authorized by the terms of this Owner Trust Agreement
or the Basic Documents.
Section 2.04. APPOINTMENT OF OWNER TRUSTEE. The Depositor hereby appoints
the Wilmington Trust Company as trustee of the Trust effective as of the date
hereof, to have all the rights, powers and duties set forth herein.
Section 2.05. INITIAL CAPITAL CONTRIBUTION OF TRUST ESTATE. The Depositor
hereby sells, assigns, transfers, conveys and sets over to the Trust, as of the
date hereof, the sum of $1. The Owner Trustee hereby acknowledges receipt in
trust from the Depositor, as of the date hereof, of the foregoing contribution,
which shall constitute the initial corpus of the Trust and shall be deposited in
the Certificate Distribution Account.
Section 2.06. DECLARATION OF TRUST. The Owner Trustee hereby declares that
it shall hold the Trust Estate in trust upon and subject to the conditions set
forth herein for the use and benefit of the Certificateholders, subject to the
obligations of the Trust under the Basic Documents. It is the intention of the
parties hereto that the Trust constitute a "business trust" under the Business
Trust Statute and that this Owner Trust Agreement constitute the governing
instrument of such business trust. It is the intention of the parties hereto
that, for federal and state income and state and local franchise tax purposes,
the Trust shall not be treated as (i) an association (other than as a "qualified
REIT subsidiary" under Section 856(i) of the Code) subject separately to
taxation as a corporation or (ii) a "publicly traded partnership" as defined in
Treasury Regulation Section 1.7704-1 and that the Notes shall be characterized
as indebtedness, and the provisions of this Owner Trust Agreement shall be
interpreted to further this intention. Except as otherwise provided in this
Owner Trust Agreement, the rights of the Certificateholders will be those of
equity owners of the Trust. Effective as of the date hereof, the Owner Trustee
shall have all rights, powers and duties set forth herein and in the Business
Trust Statute with respect to accomplishing the purposes of the Trust.
<PAGE>
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Section 2.07. LIABILITY OF THE CERTIFICATEHOLDERS. The Certificateholders
(other than any Pledgees as set forth in the definition thereof) shall be
jointly and severally liable directly to and shall indemnify the Trust and the
Owner Trustee for all losses, claims, damages, liabilities and expenses of the
Trust and the Owner Trustee (including Expenses, to the extent not paid by the
Indenture Trustee pursuant to Section 2.11 or out of the Trust Estate);
provided, however, that the Certificateholders shall not be liable for payments
required to be made on the Notes or the Equity Certificates, or for any losses
incurred by a Certificateholder in the capacity of an investor in the Equity
Certificates or a Noteholder in the capacity of an investor in the Notes. The
Certificateholders shall be liable for and shall promptly pay any entity level
taxes imposed on the Trust. In addition, any third party creditors of the Trust
(other than in connection with the obligations described in the second preceding
sentence for which the Certificateholders shall not be liable) shall be deemed
third party beneficiaries of this paragraph. The obligations of the
Certificateholders under this paragraph shall be evidenced by the Equity
Certificates.
Section 2.08. TITLE TO TRUST PROPERTY. Except with respect to the Mortgage
Loans, which will be assigned of record to the Indenture Trustee pursuant to the
Indenture, legal title to the Trust Estate shall be vested at all times in the
Trust as a separate legal entity except where applicable law in any jurisdiction
requires title to any part of the Trust Estate to be vested in a trustee or
trustees, in which case title shall be deemed to be vested in the Owner Trustee,
a co-trustee and/or a separate trustee, as the case may be.
Section 2.09. SITUS OF TRUST. The Trust will be located and administered
in the State of Delaware. All bank accounts maintained by the Owner Trustee on
behalf of the Trust shall be located in the State of Delaware. The Trust shall
not have any employees in any state other than Delaware; provided, however, that
nothing herein shall restrict or prohibit the Owner Trustee from having
employees within or without the State of Delaware or taking actions outside the
State of Delaware in order to comply with Section 2.03. Payments will be
received by the Trust only in Minnesota, Delaware or New York, and payments will
be made by the Trust only from Delaware or New York. The only office of the
Trust will be at the Corporate Trust Office in Delaware.
Section 2.10. REPRESENTATIONS AND WARRANTIES OF THE DEPOSITOR. The
Depositor hereby represents and warrants to the Owner Trustee that as of the
Closing Date:
(i) The Depositor is duly organized and validly existing as a
corporation in good standing under the laws of the State of Delaware, with
power and authority to own its properties and to conduct its business as
such properties are currently owned and such business is presently
conducted.
(ii) The Depositor is duly qualified to do business as a foreign
corporation in all jurisdictions it is required to be qualified to do
business as a foreign corporation under law and is in good standing and
has obtained all necessary licenses and approvals in all jurisdictions in
which the ownership or lease of its property or the conduct of its
business shall require such qualifications and in which the failure to so
qualify would have a
<PAGE>
-5-
material adverse effect on the business, properties, assets or condition
(financial or other) of the Depositor.
(iii) The Depositor has the power and authority to execute and
deliver this Owner Trust Agreement and to carry out its terms; the
Depositor has full power and authority to convey and assign the property
to be conveyed and assigned to and deposited with the Trust as part of the
Trust Estate and the Depositor has duly authorized such conveyance and
assignment and deposit to the Trust by all necessary corporate action; and
the execution, delivery and performance of this Owner Trust Agreement have
been duly authorized by the Depositor by all necessary corporate action.
(iv) The consummation of the transactions contemplated by this Owner
Trust Agreement and the fulfillment of the terms hereof do not conflict
with, result in any breach of any of the terms and provisions of, or
constitute (with or without notice or lapse of time) a default under, the
articles of incorporation or bylaws of the Depositor, or any indenture,
agreement or other instrument to which the Depositor is a party or by
which it is bound; nor result in the creation or imposition of any Lien
upon any of its properties pursuant to the terms of any such indenture,
agreement or other instrument (other than pursuant to the Basic
Documents); nor violate any law or, to the best of the Depositor's
knowledge, any order, rule or regulation applicable to the Depositor of
any court or of any federal or state regulatory body, administrative
agency or other governmental instrumentality having jurisdiction over the
Depositor or its properties.
(v) The Trust is not required to register as an investment company
under the Investment Company Act and is not under the control of a Person
required to so register.
(vi) The transfer of the Mortgage Loans to the Trust as contemplated
herein requires no regulatory approval, other than any such approvals as
have been obtained, and is not subject to any bulk transfer or similar law
in effect in any applicable jurisdiction.
(vii) No litigation is pending or, to the best of the Depositor's
knowledge, threatened against the Depositor that, if determined adversely
to the Depositor, would prohibit the Depositor from entering into this
Owner Trust Agreement or, in the Depositor's good faith and reasonable
judgment, is likely to materially and adversely affect either the ability
of the Depositor to perform its obligations under this Owner Trust
Agreement or the financial condition of the Depositor.
(viii) The Depositor is transferring the Mortgage Loans to the Trust
free and clear of any liens, pledges, charges and security interests.
Section 2.11. PAYMENT OF TRUST EXPENSES. The Indenture Trustee shall pay
the Trust's expenses (including expenses of the Owner Trustee and the Indenture
Trustee) incurred with respect to the performance of the Trust's duties under
the Indenture and the Owner Trust
<PAGE>
-6-
Agreement pursuant to Section 6.07 of the Indenture, or, if such amounts are
unpaid, the Owner Trustee shall be paid pursuant to Section 5.01 hereof.
Section 2.12. INVESTMENT COMPANY. Neither the Depositor nor any holder of
an Equity Certificate shall take any action which would cause the Trust to
become an "investment company" which would be required to register under the
Investment Company Act.
Section 2.13. COMMISSION FILINGS. The Depositor hereby agrees to furnish
such information and otherwise cooperate with the Indenture Trustee as necessary
for the Indenture Trustee to perform its duties as provided in Section 7.03 of
the Indenture.
ARTICLE III
Conveyance of the Mortgage Loans; Equity Certificates
-----------------------------------------------------
Section 3.01. CONVEYANCE OF THE MORTGAGE LOANS. The Depositor,
concurrently with the execution and delivery hereof, does hereby Grant to the
Trust, without recourse, all its right, title and interest in and to the
Mortgage Loans, including all interest and principal received on or with respect
to the Mortgage Loans after the Cut-off Date (other than payments of principal
and interest due on the Mortgage Loans on or before the Cut-off Date) the
proceeds thereof and all rights under the Related Documents (including the
related Mortgage Files). In addition, the Depositor hereby Grants to the Trust
all of its right, title, and interest in, to, and under the Mortgage Loan
Purchase Agreement and the Ownership Transfer Agreement. Notwithstanding the
above, the Trust shall be entitled to all scheduled payments of principal and
interest due on or before the Cutoff Date and collected after the Cut-off Date
with respect to any Mortgage Loan listed on Exhibit 3 to the Indenture.
The conveyance of the Mortgage Loans by the Depositor to the Trust
hereunder is intended to facilitate the simultaneous issuance of the Notes under
the Indenture and issuance of the Equity Certificates hereunder. The parties
hereto intend that the conveyance of the Mortgage Loans by the Depositor to the
Trust hereunder constitute a contribution by the Depositor to the Trust of all
of the Depositor's right, title and interest in and to the Mortgage Loans.
However, if the transactions contemplated by this Owner Trust Agreement are
determined to constitute a financing, the Depositor hereby Grants to the Trust a
security interest in the Trust Estate and all distributions thereon and proceeds
thereof, and this Owner Trust Agreement shall constitute a security agreement
under applicable law, and in such event, the parties hereto acknowledge that the
Indenture Trustee, in addition to holding the Mortgage Loans for the benefit of
the Noteholders, holds the Mortgage Loans as designee of the Trust.
Section 3.02. INITIAL OWNERSHIP. Upon the formation of the Trust by the
contribution by the Depositor pursuant to Section 2.05 and until the issuance of
the Equity Certificates the Depositor shall be the sole beneficial owner of the
Trust, and thereafter except as otherwise
<PAGE>
-7-
permitted hereunder, Wilshire Real Estate Investment Trust Inc. shall be the
sole Certificateholder.
Section 3.03. THE EQUITY CERTIFICATES. The Equity Certificates shall be
issued in the form of one or more Equity Certificates each representing not less
than a 10% Certificate Percentage Interest. The Equity Certificates shall
initially be registered in the name of Wilshire Real Estate Investment Trust
Inc. The Equity Certificates shall be executed on behalf of the Trust by manual
or facsimile signature of an authorized officer of the Owner Trustee and
authenticated in the manner provided in Section 3.04. Equity Certificates
bearing the manual or facsimile signatures of individuals who were, at the time
when such signatures shall have been affixed, authorized to sign on behalf of
the Trust, shall be validly issued and entitled to the benefit of this Owner
Trust Agreement, notwithstanding that such individuals or any of them shall have
ceased to be so authorized prior to the authentication and delivery of such
Equity Certificates or did not hold such offices at the date of authentication
and delivery of such Equity Certificates. Without any further act, a Person
(including a transferee of an Equity Certificate) shall become a
Certificateholder and shall be entitled to the rights and subject to the
obligations of a Certificateholder hereunder upon such Person's acceptance of a
Equity Certificate duly registered in such Person's name, pursuant to Section
3.05.
Section 3.04. AUTHENTICATION OF EQUITY CERTIFICATES. The Owner Trustee
shall cause all Equity Certificates issued hereunder to be executed and
authenticated on behalf of the Trust, authenticated and delivered upon the
written order of the Depositor, signed by the Depositor's chairman of the board,
its president or any vice president, without further corporate action by the
Depositor, in authorized denominations. No Equity Certificate shall entitle its
holder to any benefit under this Owner Trust Agreement or be valid for any
purpose unless there shall appear on such Equity Certificate a certificate of
authentication substantially in the form set forth in Exhibit A, executed by the
Owner Trustee or the Certificate Registrar by manual signature; such
authentication shall constitute conclusive evidence that such Equity Certificate
shall have been duly authenticated and delivered hereunder. All Equity
Certificates shall be dated the date of their authentication.
Section 3.05. REGISTRATION OF AND LIMITATIONS ON TRANSFER AND EXCHANGE OF
EQUITY CERTIFICATES. The Certificate Registrar shall keep or cause to be kept, a
Certificate Register in which, subject to such reasonable regulations as it may
prescribe, the Certificate Registrar shall provide for the registration of
Equity Certificates and of transfers and exchanges of Equity Certificates as
herein provided. Norwest Bank Minnesota, National Association shall be the
initial Certificate Registrar. If the Certificate Registrar resigns or is
removed, the Owner Trustee shall appoint a successor Certificate Registrar.
Subject to satisfaction of the conditions set forth below with respect to
the Equity Certificate, upon surrender for registration of transfer of any
Equity Certificate at the office or agency maintained pursuant to Section 3.09,
the Owner Trustee or the Certificate Registrar shall execute, authenticate and
deliver in the name of the designated transferee or transferees, one or more new
Equity Certificates in authorized denominations of a like aggregate amount dated
<PAGE>
-8-
the date of authentication by the Owner Trustee or the Certificate Registrar. At
the option of a Certificateholder, Equity Certificates may be exchanged for
other Equity Certificates of authorized denominations of a like aggregate amount
upon surrender of the Equity Certificates to be exchanged at the office or
agency maintained pursuant to Section 3.09.
Every Equity Certificate presented or surrendered for registration of
transfer or exchange shall be accompanied by a written instrument of transfer in
form satisfactory to the Certificate Registrar duly executed by the
Certificateholder or such Certificateholder's attorney duly authorized in
writing. Each Equity Certificate surrendered for registration of transfer or
exchange shall be canceled and subsequently disposed of by the Certificate
Registrar in accordance with its customary practice.
No service charge shall be made for any registration of transfer or
exchange of Equity Certificates, but the Owner Trustee or the Certificate
Registrar may require payment of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any transfer or
exchange of Equity Certificates.
No Person shall become a Certificateholder until it shall establish its
non-foreign status by submitting to the Certificate Paying Agent an IRS Form W-9
and the Certificate of Non-Foreign Status set forth in Exhibit F hereto.
No transfer, sale, pledge or other disposition of a Equity Certificate
shall be made unless such transfer, sale, pledge or other disposition is exempt
from the registration requirements of the Securities Act and any applicable
state securities laws or is made in accordance with said Act, the Owner Trust
Agreement and applicable laws. In the event of any such transfer, the
Certificate Registrar or the Depositor shall prior to such transfer require the
transferee to execute (a) either (i) an investment letter in substantially the
form attached hereto as Exhibit C (or in such form and substance reasonably
satisfactory to the Certificate Registrar and the Depositor) which investment
letter shall not be an expense of the Trust, the Owner Trustee, the Certificate
Registrar, the Master Servicers or the Depositor and which investment letter
states that, among other things, such transferee (A) is a "qualified
institutional buyer" as defined under Rule 144A, acting for its own account or
the accounts of other "qualified institutional buyers" as defined under Rule
144A and (B) is aware that the proposed transferor intends to rely on the
exemption from registration requirements under the Securities Act of 1933, as
amended, provided by Rule 144A or (ii) (A) a written Opinion of Counsel
acceptable to and in form and substance satisfactory to the Certificate
Registrar and the Depositor that such transfer may be made pursuant to an
exemption, describing the applicable exemption and the basis therefor, from said
Act and laws or is being made pursuant to said Act and laws, which Opinion of
Counsel shall not be an expense of the Trust, the Owner Trustee, the Certificate
Registrar, the Master Servicers or the Depositor and (B) the transferee executes
a representation letter, substantially in the form of Exhibit D hereto, and the
transferor executes a representation letter, substantially in the form of
Exhibit E hereto, each acceptable to and in form and substance satisfactory to
the Certificate Registrar and the Depositor certifying the facts surrounding
such transfer, which representation letters shall not be an expense of the
Trust, the Owner Trustee, the Certificate Registrar, the Master Servicers or the
Depositor and (b) the
<PAGE>
-9-
Certificate of Non-Foreign Status (in substantially the form attached hereto as
Exhibit F) acceptable to and in form and substance reasonably satisfactory to
the Certificate Registrar and the Depositor, which certificate shall not be an
expense of the Trust, the Owner Trustee, the Certificate Registrar, the Master
Servicers or the Depositor. If the proposed transferee is unable to provide a
Certificate of Non-Foreign Status, such proposed transferee must provide an
Opinion of Counsel as described above in this paragraph. The Certificateholder
desiring to effect such transfer shall, and does hereby agree to, indemnify the
Trust, the Owner Trustee, the Certificate Registrar, the Master Servicers and
the Depositor 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. Neither an
Opinion of Counsel nor a certification set forth in clause (a) of this paragraph
will be required in connection with (i) the initial transfer of any such Equity
Certificate by the Depositor to the Transferor pursuant to the Ownership
Transfer Agreement, (ii) the transfer of any such Equity Certificate by the
Transferor to the Seller pursuant to the Mortgage Loan Purchase Agreement or
(iii) the pledge of any such Equity Certificate by the Seller to Salomon Smith
Barney Inc. and the certification set forth in clause (b) of this paragraph will
not be required in connection with the pledge of any such Equity Certificate by
the Seller to Salomon Smith Barney Inc.
No transfer of a Equity Certificate or any interest therein shall be made
to 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, or Section 4975 of the Code (collectively, "Plan"), any Person acting,
directly or indirectly, on behalf of any such Plan or any Person acquiring such
Equity 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 Owner Trustee, the Certificate Registrar and
the Master Servicers are provided with an Opinion of Counsel which establishes
to the satisfaction of the Depositor, the Owner Trustee, the Certificate
Registrar and the Master Servicers that the purchase of Equity 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 Owner Trustee, the Certificate Registrar or the
Master Servicers to any obligation or liability (including obligations or
liabilities under ERISA or Section 4975 of the Code) in addition to those
undertaken in this Owner Trust Agreement, which Opinion of Counsel shall not be
an expense of the Depositor, the Owner Trustee, the Certificate Registrar or the
Master Servicers. In lieu of such Opinion of Counsel, a Plan, any Person acting,
directly or indirectly, on behalf of any such Plan or any Person acquiring such
Equity Certificates with Plan Assets of a Plan may provide a certification in
the form of Exhibit G to this Owner Trust Agreement, which the Depositor, the
Owner Trustee, the Certificate Registrar and the Master Servicers may rely upon
without further inquiry or investigation. Neither an Opinion of Counsel nor a
certification will be required in connection with (i) the initial transfer of
any such Equity Certificate by the Depositor to the Transferor pursuant to the
Ownership Transfer Agreement, (ii) the transfer of any such Equity Certificate
by the Transferor to the Seller pursuant to the Mortgage Loan Purchase Agreement
or (iii) the pledge of any such Equity Certificate by the Seller to Salomon
Smith Barney Inc. (in each case, each such party is deemed to have represented
that it
<PAGE>
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is not a Plan or a Person investing Plan Assets of any Plan) and the Owner
Trustee shall be entitled to conclusively rely upon such deemed representation.
In addition, no transfer, sale, assignment, pledge or other disposition of
a Equity Certificate shall be made unless the proposed transferee executes a
representation letter substantially in the form of Exhibit D, or substantially
in the form of Exhibit H hereto, that (1) the transferee is acquiring the Equity
Certificate for its own behalf and is not acting as agent or custodian for any
other person or entity in connection with such acquisition and (2) if the
transferee is a partnership, grantor trust or S corporation for federal income
tax purposes, the Equity Certificates are not more than 50% of the assets of the
partnership, grantor trust or S corporation.
No offer, sale, transfer, pledge, hypothecation or other disposition
(including any pledge, sale or transfer under a repurchase transaction or
securities loan) of any Equity Certificate shall be made to any transferee
unless, prior to such disposition, the proposed transferee delivers to the Owner
Trustee an Opinion of Counsel, rendered by a law firm generally recognized to be
qualified to opine concerning the tax aspects of asset securitization, to the
effect that such transfer (including any disposition permitted following any
default under any pledge or repurchase transaction) will not cause the Trust to
be (i) treated as an association taxable as a corporation for federal income tax
purposes, (ii) taxable as a taxable mortgage pool as defined in Section 7701(i)
of the Code or (iii) taxable as a "publicly traded partnership" as defined in
Treasury Regulation section 1.7704-1. Notwithstanding the foregoing, the
provisions of this paragraph shall not apply to (i) the initial transfer of the
Equity Certificates by the Depositor to the Transferor pursuant to the Ownership
Transfer Agreement, (ii) the transfer of the Equity Certificates by the
Transferor to the Seller pursuant to the Mortgage Loan Purchase Agreement, (iii)
the pledge of the Equity Certificates by the Seller to Salomon Smith Barney Inc.
and (iv) in the case of any default by the Seller in its obligations to Salomon
Smith Barney Inc., the transfer to Salomon Smith Barney Inc. as registered
owner. In addition, in the event Salomon Smith Barney Inc. becomes
Certificateholder, the provisions of this paragraph shall no longer apply to any
transfer.
Notwithstanding any other provisions of this Section 3.05 to the contrary,
(i) on the Closing Date, the Depositor may transfer the Equity Certificates to
the Transferor pursuant to the Ownership Transfer Agreement, (ii) the Transferor
may transfer the Equity Certificates to the Seller pursuant to the Ownership
Transfer Agreement, (iii) on or after the Closing Date, the Seller may pledge
the Equity Certificates to secure its obligations to Salomon Smith Barney Inc.
and (iv) in the case of any default by the Seller in its obligations to Salomon
Smith Barney Inc., Salomon Smith Barney Inc. may become the registered owner of
the Equity Certificates, in each case, without complying with the foregoing
provisions of this Section 3.05.
Section 3.06. MUTILATED, DESTROYED, LOST OR STOLEN EQUITY CERTIFICATES. If
(a) any mutilated Equity Certificate shall be surrendered to the Certificate
Registrar, or if the Certificate Registrar shall receive evidence to its
satisfaction of the destruction, loss or theft of any Equity Certificate and (b)
there shall be delivered to the Certificate Registrar and the Owner Trustee such
security or indemnity as may be required by them to save each of them harmless,
then in the
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absence of notice to the Certificate Registrar or the Owner Trustee that such
Equity Certificate has been acquired by a bona fide purchaser, the Owner Trustee
shall execute on behalf of the Trust and the Owner Trustee or the Certificate
Registrar, shall authenticate and deliver, in exchange for or in lieu of any
such mutilated, destroyed, lost or stolen Equity Certificate, a new Equity
Certificate of like tenor and denomination. In connection with the issuance of
any new Equity Certificate under this Section 3.06, the Owner Trustee or the
Certificate Registrar may require the payment of a sum sufficient to cover any
expenses of the Owner Trustee or the Certificate Registrar (including fees and
expenses of counsel) and any tax or other governmental charge that may be
imposed in connection therewith. Any duplicate Equity Certificate issued
pursuant to this Section 3.06 shall constitute conclusive evidence of ownership
in the Trust, as if originally issued, whether or not the lost, stolen or
destroyed Equity Certificate shall be found at any time.
Section 3.07. PERSONS DEEMED CERTIFICATEHOLDERS. Prior to due presentation
of a Equity Certificate for registration of transfer, the Owner Trustee, the
Certificate Registrar or any Certificate Paying Agent may treat the Person in
whose name any Equity Certificate is registered in the Certificate Register as
the owner of such Equity Certificate for the purpose of receiving distributions
pursuant to Section 5.02 and for all other purposes whatsoever, and none of the
Trust, the Owner Trustee, the Certificate Registrar or any Paying Agent shall be
bound by any notice to the contrary.
Section 3.08. ACCESS TO LIST OF CERTIFICATEHOLDERS' NAMES AND ADDRESSES.
The Certificate Registrar shall furnish or cause to be furnished to the
Depositor or the Owner Trustee, within 15 days after receipt by the Certificate
Registrar of a written request therefor from the Depositor or the Owner Trustee,
a list, in such form as the Depositor or the Owner Trustee, as the case may be,
may reasonably require, of the names and addresses of the Certificateholders as
of the most recent Record Date. Each Certificateholder, by receiving and holding
a Equity Certificate, shall be deemed to have agreed not to hold any of the
Trust, the Depositor, the Certificate Registrar or the Owner Trustee accountable
by reason of the disclosure of its name and address, regardless of the source
from which such information was derived.
Section 3.09. MAINTENANCE OF OFFICE OR AGENCY. The Certificate Registrar
on behalf of the Trust, shall maintain in an office or offices or agency or
agencies where Equity Certificates may be surrendered for registration of
transfer or exchange and where notices and demands to or upon the Certificate
Registrar in respect of the Equity Certificates and the Basic Documents may be
served. The Certificate Registrar initially designates its Corporate Trust
Office as its office for such purposes. The Certificate Registrar shall give
prompt written notice to the Depositor, the Owner Trustee and the
Certificateholders of any change in the location of the Certificate Register or
any such office or agency.
Section 3.10. CERTIFICATE PAYING AGENT. (a) The Certificate Paying Agent
shall make distributions to Certificateholders from the Certificate Distribution
Account on behalf of the Trust in accordance with the provisions of the Equity
Certificates and Section 5.01 hereof from payments remitted to the Certificate
Paying Agent by the Indenture Trustee pursuant to Section 3.05 of the Indenture.
The Trust hereby appoints Norwest Bank Minnesota, National Association as
Certificate Paying Agent and Norwest Bank Minnesota, National Association hereby
accepts such appointment and further agrees that it will be bound by the
provisions of this Owner Trust Agreement relating to the Certificate Paying
Agent and shall:
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(i) hold all sums held by it for the payment of amounts due with
respect to the Equity Certificates in trust for the benefit of the Persons
entitled thereto until such sums shall be paid to such Persons or
otherwise disposed of as herein provided;
(ii) give the Owner Trustee notice of any default by the Trust of
which it has actual knowledge in the making of any payment required to be
made with respect to the Equity Certificates;
(iii) at any time during the continuance of any such default, upon
the written request of the Owner Trustee forthwith pay to the Owner
Trustee on behalf of the Trust all sums so held in Trust by such
Certificate Paying Agent;
(iv) immediately resign as Certificate Paying Agent and forthwith pay
to the Owner Trustee on behalf of the Trust all sums held by it in trust
for the payment of Equity Certificates if at any time it ceases to meet the
standards under this Section 3.10 required to be met by the Certificate
Paying Agent at the time of its appointment;
(v) comply with all requirements of the Code with respect to the
withholding from any payments made by it on any Equity Certificates of any
applicable withholding taxes imposed thereon and with respect to any
applicable reporting requirements in connection therewith;
(vi) deliver to the Owner Trustee a copy of the report to
Certificateholders prepared with respect to each Payment Date by the
Indenture Trustee pursuant to Section 7.05 of the Indenture; and
(vii) not institute bankruptcy proceedings against the Issuer in
connection with this Owner Trust Agreement.
(b) The Trust may revoke such power and remove the Certificate Paying
Agent if it determines in its sole discretion that the Certificate Paying Agent
shall have failed to perform its obligations under this Owner Trust Agreement in
any material respect. Norwest Bank Minnesota, National Association shall be
permitted to resign as Certificate Paying Agent upon 30 days written notice to
the Owner Trustee; provided Norwest Bank Minnesota, National Association is also
resigning as Paying Agent under the Indenture at such time. In the event that
Norwest Bank Minnesota, National Association shall no longer be the Certificate
Paying Agent under this Owner Trust Agreement and Paying Agent under the
Indenture, the Owner Trustee shall appoint a successor to act as Certificate
Paying Agent (which shall be a bank or trust company) and which shall also be
the successor Paying Agent under the Indenture. The Owner Trustee shall cause
such successor Certificate Paying Agent or any additional Certificate Paying
Agent appointed by the
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Owner Trustee to execute and deliver to the Owner Trustee an instrument
accepting the terms of this Section 3.10 as it relates to the Certificate Paying
Agent. The Certificate Paying Agent shall return all unclaimed funds to the
Trust and upon removal of a Certificate Paying Agent such Certificate Paying
Agent shall also return all funds in its possession to the Trust. The provisions
of Sections 6.01, 6.03, 6.04 and 7.01 shall apply to the Certificate Paying
Agent to the extent applicable. Any reference in this Owner Trust Agreement to
the Certificate Paying Agent shall include any co-paying agent unless the
context requires otherwise.
(c) The Certificate Paying Agent shall establish and maintain with itself
a trust account (the "Certificate Distribution Account") in which the
Certificate Paying Agent shall deposit, on the same day as it is received from
the Indenture Trustee, each remittance received by the Certificate Paying Agent
with respect to payments made pursuant to the Indenture. The Certificate Paying
Agent shall make all distributions to Equity Certificates, from moneys on
deposit in the Certificate Distribution Account.
(d) The Certificate Paying Agent shall be paid by the Indenture Trustee
from sources other than the Trust Estate.
ARTICLE IV
Authority and Duties of Owner Trustee
-------------------------------------
Section 4.01. GENERAL AUTHORITY. The Owner Trustee is authorized and
directed to execute and deliver on behalf of the Trust the Basic Documents to
which the Trust is to be a party and each certificate or other document attached
as an exhibit to or contemplated by the Basic Documents to which the Trust is to
be a party and any amendment or other agreement or instrument described herein,
as evidenced conclusively by the Owner Trustee's execution thereof. In addition
to the foregoing, the Owner Trustee is authorized, but shall not be obligated,
except as otherwise provided in this Owner Trust Agreement, to take all actions
required of the Trust pursuant to the Basic Documents.
Section 4.02. GENERAL DUTIES. It shall be the duty of the Owner Trustee to
discharge (or cause to be discharged) all of its responsibilities pursuant to
the terms of this Owner Trust Agreement and the Basic Documents to which the
Trust is a party and to administer the Trust in the interest of the
Certificateholders, subject to the Basic Documents and in accordance with the
provisions of this Owner Trust Agreement.
Section 4.03. ACTION UPON INSTRUCTION. (a) Subject to this Article IV and
in accordance with the terms of the Basic Documents, the Certificateholders may
by written instruction direct the Owner Trustee in the management of the Trust.
Such direction may be exercised at any time by written instruction of the
Certificateholders pursuant to this Article IV.
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(b) Notwithstanding the foregoing, the Owner Trustee shall not be required
to take any action hereunder or under any Basic Document if the Owner Trustee
shall have reasonably determined, or shall have been advised by counsel, that
such action is likely to result in liability on the part of the Owner Trustee or
is contrary to the terms hereof or of any Basic Document or is otherwise
contrary to law.
(c) Whenever the Owner Trustee is required to decide between alternative
courses of action permitted or required by the terms of this Owner Trust
Agreement or under any Basic Document, or in the event that the Owner Trustee is
unsure as to the application of any provision of this Owner Trust Agreement or
any Basic Document or any such provision is ambiguous as to its application, or
is, or appears to be, in conflict with any other applicable provision, or in the
event that this Owner Trust Agreement permits any determination by the Owner
Trustee or is silent or is incomplete as to the course of action that the Owner
Trustee is required to take with respect to a particular set of facts, the Owner
Trustee shall promptly give notice (in such form as shall be appropriate under
the circumstances) to the Certificateholders requesting instruction as to the
course of action to be adopted, and to the extent the Owner Trustee acts in good
faith in accordance with any written instruction of the Certificateholders, the
Owner Trustee shall not be liable on account of such action to any Person. If
the Owner Trustee shall not have received appropriate instruction within 10 days
of such notice (or within such shorter period of time as reasonably may be
specified in such notice or may be necessary under the circumstances) it may,
but shall be under no duty to, take or refrain from taking such action not
inconsistent with this Owner Trust Agreement or the Basic Documents, as it shall
deem to be in the best interests of the Certificateholders and the Noteholders,
and the Owner Trustee shall have no liability to any Person for such action or
inaction.
Section 4.04. NO DUTIES EXCEPT AS SPECIFIED UNDER SPECIFIED DOCUMENTS OR
IN INSTRUCTIONS. The Owner Trustee shall not have any duty or obligation to
manage, make any payment with respect to, register, record, sell, dispose of, or
otherwise deal with the Trust Estate, or to otherwise take or refrain from
taking any action under, or in connection with, any document contemplated hereby
to which the Owner Trustee is a party, except as expressly provided (a) in
accordance with the powers granted to and the authority conferred upon the Owner
Trustee pursuant to this Owner Trust Agreement, (b) in accordance with the Basic
Documents and (c) in accordance with any document or instruction delivered to
the Owner Trustee pursuant to Section 4.03; and no implied duties or obligations
shall be read into this Owner Trust Agreement or any Basic Document against the
Owner Trustee. The Owner Trustee shall have no responsibility (i) to file any
financing or continuation statement in any public office at any time, (ii) to
otherwise perfect or maintain the perfection of any security interest or lien
granted to it hereunder, (iii) to record this Owner Trust Agreement or any Basic
Document or (iv) to prepare or file any Securities and Exchange Commission
filing for the Trust. The Owner Trustee nevertheless agrees that it will, at its
own cost and expense, promptly take all action as may be necessary to discharge
any liens on any part of the Trust Estate that result from actions by, or claims
against, the Owner Trustee that are not related to the ownership or the
administration of the Trust Estate.
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Section 4.05. RESTRICTIONS. (a) The Owner Trustee and the Depositor (or an
Affiliate thereof) shall not take any action (i) that is inconsistent with the
purposes of the Trust set forth in Section 2.03 or (ii) that, to the actual
knowledge of the Owner Trustee based on an Opinion of Counsel rendered by a law
firm generally recognized to be qualified to opine concerning the tax aspects of
asset securitization, would result in the Trust becoming taxable as a
corporation for federal income tax purposes. The Certificateholders shall not
direct the Owner Trustee to take action that would violate the provisions of
this Section 4.05.
(b) The Owner Trustee shall not convey or transfer any of the Trust's
properties or assets (other than as contemplated in the Indenture), including
those included in the Trust Estate, to any person unless (i) it shall have
received an Opinion of Counsel rendered by a law firm generally recognized to be
qualified to opine concerning the tax aspects of asset securitization to the
effect that such transaction will not have any material adverse tax consequence
to the Trust or any Certificateholder and (ii) such conveyance or transfer shall
not violate the provisions of Section 3.16(b) of the Indenture.
(c) The Trust shall not commingle its assets with those of any other
entity. The Trust shall maintain its financial and accounting books and records
separate from those of any other entity. Except as expressly set forth herein,
the Trust shall pay its indebtedness, operating expenses and liabilities from
its own funds, and the Trust shall not pay the indebtedness, operating expenses
and liabilities of any other entity. The Trust shall maintain appropriate
minutes or other records of all appropriate actions and shall maintain its
office separate from the offices of the Depositor.
Section 4.06. PRIOR NOTICE TO CERTIFICATEHOLDERS WITH RESPECT TO CERTAIN
MATTERS. With respect to the following matters, the Owner Trustee shall not take
action unless at least 30 days before the taking of such action, the Owner
Trustee shall have notified the Certificateholders in writing of the proposed
action and the Certificateholders shall not have notified the Owner Trustee in
writing prior to the 30th day after such notice is given that such
Certificateholders have withheld consent or provided alternative direction:
(a) the initiation of any claim or lawsuit by the Trust (except claims or
lawsuits brought in connection with the collection of cash distributions due and
owing under the Mortgage Loans) and the compromise of any action, claim or
lawsuit brought by or against the Trust (except with respect to the
aforementioned claims or lawsuits for collection of cash distributions due and
owing under the Mortgage Loans);
(b) the election by the Trust to file an amendment to the Certificate of
Trust (unless such amendment is required to be filed under the Business Trust
Statute);
(c) the amendment or other change to this Owner Trust Agreement or any
Basic Document in circumstances where the consent of any Noteholder is required;
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(d) the amendment or other change to this Owner Trust Agreement or any
Basic Document in circumstances where the consent of any Noteholder is not
required and such amendment materially adversely affects the interest of the
Certificateholders;
(e) the appointment pursuant to the Indenture of a successor Note
Registrar, Paying Agent or Indenture Trustee or, pursuant to this Owner Trust
Agreement, of a successor Certificate Registrar or Certificate Paying Agent or
the consent to the assignment by the Note Registrar, Paying Agent, Indenture
Trustee, Certificate Registrar or Certificate Paying Agent of its obligations
under the Indenture or this Owner Trust Agreement, as applicable;
(f) the consent to the calling or waiver of any default under any Basic
Document;
(g) the consent to the assignment by the Indenture Trustee or Master
Servicers of their respective obligations under any Basic Document;
(h) except as provided in Article VIII hereof, the dissolution,
termination or liquidation of the Trust in whole or in part;
(i) merge or consolidate the Trust with or into any other entity, or
convey or transfer all or substantially all of the Trust's assets to any other
entity;
(j) cause the Trust to incur, assume or guaranty any indebtedness other
than as set forth in this Owner Trust Agreement and the Basic Documents;
(k) perform any act that conflicts with any other Basic Document;
(l) perform any act which would make it impossible to carry on the
purposes and powers of the Trust as described in Section 2.03 hereof;
(m) confess a judgment against the Trust;
(n) possess Trust assets or assign the Trust's right to property for other
than a Trust purpose as described in Section 2.03 hereof;
(o) cause the Trust to lend any funds to any entity; or
(p) change the Trust's purpose and powers from those enumerated in this
Owner Trust Agreement.
Section 4.07. ACTION BY CERTIFICATEHOLDERS WITH RESPECT TO CERTAIN
MATTERS. The Owner Trustee shall not have the power, except upon the direction
of the Certificateholders to (a) remove or replace the Indenture Trustee under
the Indenture pursuant to Section 6.08 thereof, (b) except as expressly provided
in the Basic Documents, sell the Mortgage Loans after the termination of the
Indenture, (c) institute proceedings to have the Trust declared or adjudicated
to be bankrupt
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or insolvent, (d) consent to the institution of bankruptcy or insolvency
proceedings against the Trust, (e) file a petition or consent to a petition
seeking reorganization or relief on behalf of the Trust under any applicable
federal or state law relating to bankruptcy, (f) consent to the appointment of a
receiver, liquidator, assignee, trustee, sequestrator (or any similar official)
of the Trust or a substantial portion of the property of the Trust, (g) make any
assignment for the benefit of the Trust's creditors, (h) cause the Trust to
admit in writing its inability to pay its debts generally as they become due,
(i) take any action or cause the Trust to take any action, in furtherance of any
of the foregoing clauses (c) through (i) (any of such clauses, a "Bankruptcy
Action"). So long as the Indenture remains in effect, no Certificateholder shall
have the power to take, and shall not take, any Bankruptcy Action with respect
to the Trust or the Depositor or direct the Owner Trustee to take any Bankruptcy
Action with respect to the Trust or the Depositor. The Owner Trustee shall take
the actions referred to in the preceding sentence only upon written instructions
signed by the Certificateholders.
Section 4.08. ACTION BY CERTIFICATEHOLDERS WITH RESPECT TO BANKRUPTCY. The
Owner Trustee shall not have the power to commence a voluntary proceeding in
bankruptcy relating to the Trust without the unanimous prior approval of all
Certificateholders, the Noteholders and the Owner Trustee and the delivery to
the Owner Trustee by each such Certificateholder of a certificate certifying
that such Certificateholder reasonably believes that the Trust is insolvent.
This paragraph shall survive for one year and one day following termination of
this Owner Trust Agreement.
Section 4.09. RESTRICTIONS ON CERTIFICATEHOLDERS' POWER. The
Certificateholders shall not direct the Owner Trustee to take or to refrain from
taking any action if such action or inaction would be contrary to or
inconsistent with any obligation of the Trust or the Owner Trustee under this
Owner Trust Agreement or any of the Basic Documents or would be contrary to
Section 2.03, nor shall the Owner Trustee be obligated to follow any such
direction, if given.
Section 4.10. MAJORITY CONTROL. Except as expressly provided herein, any
action that may be taken by the Certificateholders under this Owner Trust
Agreement may be taken by the Majority Certificateholder. Except as expressly
provided herein, any written notice of the Certificateholders delivered pursuant
to this Owner Trust Agreement shall be effective if signed by the Majority
Certificateholder at the time of the delivery of such notice.
Section 4.11. OPTIONAL REDEMPTION. The Notes may be redeemed in accordance
with Section 8.07 of the Indenture by the Majority Certificateholder.
Section 4.12. RESTRICTIONS. The Owner Trustee shall take no action if the
Owner Trustee has been notified by the Indenture Trustee that such action would
cause or threaten to cause any Rating Agency to downgrade the ratings on the
Notes.
ARTICLE V
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Application Of Trust Funds
--------------------------
Section 5.01. DISTRIBUTIONS. (a) On each Payment Date, the Certificate
Paying Agent shall distribute to the Certificateholders, on a pro rata basis
based on the Certificate Percentage Interests thereof, all funds on deposit in
the Certificate Distribution Account and available therefor (as provided in
Section 3.05 of the Indenture) for such Payment Date as reduced first, by any
amount owing to the Owner Trustee hereunder and second, any Expenses of the
Trust remaining unpaid.
(b) In the event that any withholding tax is imposed on the distributions
(or allocations of income) to a Certificateholder, such tax shall reduce the
amount otherwise distributable to such Certificateholder in accordance with this
Section 5.01. The Certificate Paying Agent is hereby authorized and directed to
retain or cause to be retained from amounts otherwise distributable to the
Certificateholders sufficient funds for the payment of any tax that is legally
owed by the Trust (but such authorization shall not prevent the Owner Trustee
from contesting any such tax in appropriate proceedings, and withholding payment
of such tax, if permitted by law, pending the outcome of such proceedings). The
amount of any withholding tax imposed with respect to a Certificateholder shall
be treated as cash distributed to such Certificateholder at the time it is
withheld by the Certificate Paying Agent and remitted to the appropriate taxing
authority. If there is a possibility that withholding tax is payable with
respect to a distribution (such as a distribution to a non-U.S.
Certificateholder), the Certificate Paying Agent may in its sole discretion
withhold such amounts in accordance with this paragraph (b).
(c) Distributions to Certificateholders shall be subordinated to the
creditors of the Trust, including the Noteholders.
Section 5.02. METHOD OF PAYMENT. Subject to Section 8.01(c), distributions
required to be made to Certificateholders on any Payment Date as provided in
Section 5.01 shall be made to each Certificateholder of record on the preceding
Record Date either by, in the case of any Certificateholder owning Equity
Certificates having a Certificate Percentage Interest of 100%, wire transfer, in
immediately available funds, to the account of such Certificateholder at a bank
or other entity having appropriate facilities therefor, if such
Certificateholder shall have provided to the Certificate Registrar appropriate
written instructions at least five Business Days prior to such Record Date or,
if not, by check mailed to such Certificateholder at the address of such
Certificateholder appearing in the Certificate Register.
Section 5.03. TAX TREATMENT OF THE ISSUER. It is the intention of the
parties hereto that, for federal and state income and state and local franchise
tax purposes, the Trust shall not be treated as (i) an association (other than
as a "qualified REIT subsidiary" as defined in Section 856(i) of the Code)
subject separately to taxation as a corporation or (ii) a publicly traded
partnership as defined in Treasury Regulation Section 1.7704-1, and that the
Notes shall be characterized as indebtedness, and the provisions of this
Agreement shall be interpreted to further this intention. It is also the
intention of the parties hereto that, as of the Closing Date, the Trust will be
disregarded for federal income tax purposes. As an entity disregarded for
federal income
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tax purposes, the Indenture Trustee, in its capacity as Administrator shall not
be required to prepare and file partnership tax returns on behalf of the Trust
unless it receives an Opinion of Counsel (which shall not be at the Indenture
Trustee's expense, but shall be the expense of the Seller or other party
furnishing such opinion) as to the necessity of such filings.
ARTICLE VI
Concerning The Owner Trustee
----------------------------
Section 6.01. ACCEPTANCE OF TRUSTS AND DUTIES. The Owner Trustee accepts
the trusts hereby created and agrees to perform its duties hereunder with
respect to such trusts but only upon the terms of this Owner Trust Agreement.
Each of the Owner Trustee and the Certificate Paying Agent also agrees to
disburse all moneys actually received by it constituting part of the Trust
Estate upon the terms of the Basic Documents and this Owner Trust Agreement. The
Owner Trustee shall not be answerable or accountable hereunder or under any
Basic Document under any circumstances, except (i) for its own willful
misconduct, gross negligence or bad faith or grossly negligent failure to act or
(ii) in the case of the inaccuracy of any representation or warranty contained
in Section 6.03 expressly made by the Owner Trustee. In particular, but not by
way of limitation (and subject to the exceptions set forth in the preceding
sentence):
(a) The Owner Trustee shall not be liable with respect to any action taken
or omitted to be taken by it in accordance with the instructions of the
Certificateholders permitted under this Owner Trust Agreement;
(b) No provision of this Owner Trust Agreement or any Basic Document shall
require the Owner Trustee to expend or risk funds or otherwise incur any
financial liability in the performance of any of its rights, duties or powers
hereunder or under any Basic Document if the Owner Trustee shall have reasonable
grounds for believing that repayment of such funds or adequate indemnity against
such risk or liability is not reasonably assured or provided to it;
(c) Under no circumstances shall the Owner Trustee be liable for
indebtedness evidenced by or arising under any of the Basic Documents, including
the principal of and interest on the Notes;
(d) The Owner Trustee shall not be responsible for or in respect of the
validity or sufficiency of this Owner Trust Agreement or for the due execution
hereof by the Depositor or for the form, character, genuineness, sufficiency,
value or validity of any of the Trust Estate, or for or in respect of the
validity or sufficiency of the Basic Documents, the Notes, the Equity
Certificates, other than the certificate of authentication on the Equity
Certificates, if executed by the Owner Trustee and the Owner Trustee shall in no
event assume or incur any liability, duty, or obligation to any Noteholder or to
any Certificateholder, other than as expressly provided for herein or expressly
agreed to in the Basic Documents;
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(e) The Owner Trustee shall not be liable for the default or misconduct of
the Depositor, Indenture Trustee, Certificate Registrar or the Master Servicers
under any of the Basic Documents or otherwise and the Owner Trustee shall have
no obligation or liability to perform the obligations of the Trust under this
Owner Trust Agreement or the Basic Documents that are required to be performed
by the Indenture Trustee under the Indenture or the Seller under the Mortgage
Loan Purchase Agreement; and
(f) The Owner Trustee shall be under no obligation to exercise any of the
rights or powers vested in it or duties imposed by this Owner Trust Agreement,
or to institute, conduct or defend any litigation under this Owner Trust
Agreement or otherwise or in relation to this Owner Trust Agreement or any Basic
Document, at the request, order or direction of any of the Certificateholders,
unless such Certificateholders have offered to the Owner Trustee security or
indemnity satisfactory to it against the costs, expenses and liabilities that
may be incurred by the Owner Trustee therein or thereby. The right of the Owner
Trustee to perform any discretionary act enumerated in this Owner Trust
Agreement or in any Basic Document shall not be construed as a duty.
Section 6.02. FURNISHING OF DOCUMENTS. The Owner Trustee shall furnish to
the Certificateholders promptly upon receipt of a written reasonable request
therefor, duplicates or copies of all reports, notices, requests, demands,
certificates, financial statements and any other instruments furnished to the
Trust under the Basic Documents.
Section 6.03. REPRESENTATIONS AND WARRANTIES. Wilmington Trust Company
hereby represents and warrants to the Depositor, for the benefit of the
Certificateholders that:
(a) It is a banking corporation duly organized and validly existing in
good standing under the laws of the State of Delaware. It has all requisite
corporate power and authority to execute, deliver and perform its obligations
under this Owner Trust Agreement or consummation of the transactions
contemplated thereby;
(b) It has taken all corporate action necessary to authorize the execution
and delivery by it of this Owner Trust Agreement, and this Owner Trust Agreement
will be executed and delivered by one of its officers who is duly authorized to
execute and deliver this Owner Trust Agreement on its behalf;
(c) The execution, delivery, authentication and performance by it of this
Owner Trust Agreement will not require the authorization, consent or approval
of, the giving of notice to, the filing or registration with, or the taking of
any other action with respect to, any governmental authority or agency;
(d) Neither the execution nor the delivery by it of this Owner Trust
Agreement, nor the consummation by it of the transactions contemplated hereby
nor compliance by it with any of the terms or provisions hereof will contravene
any federal or Delaware law, governmental rule or regulation governing the
banking or trust powers of the Owner Trustee or any judgment or
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order binding on it, or constitute any default under its charter documents or
bylaws or any indenture, mortgage, contract, agreement or instrument to which it
is a party or by which any of its properties may be bound;
(e) This Owner Trust Agreement, assuming due authorization, execution and
delivery by the Depositor, constitutes a valid, legal and binding obligation of
the Owner Trustee, enforceable against it in accordance with the terms hereof
subject to applicable bankruptcy, insolvency, reorganization, moratorium and
other laws affecting the enforcement of creditors' rights generally and to
general principles of equity, regardless of whether such enforcement is
considered in a proceeding in equity or at law;
(f) The Owner Trustee is not in default with respect to any order or
decree of any court or any order, regulation or demand of any Federal, state,
municipal or governmental agency, which default might have consequences that
would materially and adversely affect the condition (financial or other) or
operations of the Owner Trustee or its properties or might have consequences
that would materially adversely affect its performance hereunder; and
(g) No litigation is pending or, to the best of the Owner Trustee's
knowledge, threatened against the Owner Trustee which would prohibit its
entering into this Owner Trust Agreement or performing its obligations under
this Owner Trust Agreement.
Section 6.04. RELIANCE; ADVICE OF COUNSEL. (a) The Owner Trustee shall
incur no liability to anyone in acting upon any signature, instrument, notice,
resolution, request, consent, order, certificate, report, opinion, Note, or
other document or paper believed by it to be genuine and believed by it to be
signed by the proper party or parties. The Owner Trustee may accept a certified
copy of a resolution of the board of directors or other governing body of any
corporate party as conclusive evidence that such resolution has been duly
adopted by such body and that the same is in full force and effect. As to any
fact or matter the method of determination of which is not specifically
prescribed herein, the Owner Trustee may for all purposes hereof rely on a
certificate, signed by the president or any vice president or by the treasurer
or other authorized officers of the relevant party, as to such fact or matter
and such certificate shall constitute full protection to the Owner Trustee for
any action taken or omitted to be taken by it in good faith in reliance thereon.
(b) In the exercise or administration of the Trust hereunder and in the
performance of its duties and obligations under this Owner Trust Agreement or
the Basic Documents, the Owner Trustee (i) may act directly or through its
agents, attorneys, custodians or nominees (including persons acting under a
power of attorney) pursuant to agreements entered into with any of them, and the
Owner Trustee shall not be liable for the conduct or misconduct of such agents,
attorneys, custodians or nominees (including persons acting under a power of
attorney) if such persons have been selected by the Owner Trustee with
reasonable care and (ii) may consult with counsel, accountants and other skilled
persons to be selected with reasonable care and employed by it. The Owner
Trustee shall not be liable for anything done, suffered or omitted in good faith
by it in
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accordance with the written opinion or advice of any such counsel, accountants
or other such Persons and not contrary to this Owner Trust Agreement or any
Basic Document.
Section 6.05. NOT ACTING IN INDIVIDUAL CAPACITY. Except as provided in
this Article VI, in accepting the trusts hereby created Wilmington Trust Company
acts solely as Owner Trustee hereunder and not in its individual capacity, and
all Persons having any claim against the Owner Trustee by reason of the
transactions contemplated by this Owner Trust Agreement or any Basic Document
shall look only to the Trust Estate for payment or satisfaction thereof; except
nothing contained herein shall protect the Owner Trustee (i) for its own willful
misconduct, gross negligence or bad faith or grossly negligent failure to act or
(ii) in the case of the inaccuracy of any representation or warranty contained
in Section 6.03 expressly made by the Owner Trustee.
Section 6.06. OWNER TRUSTEE NOT LIABLE FOR EQUITY CERTIFICATES OR RELATED
DOCUMENTS. The recitals contained herein and in the Equity Certificates (other
than the signatures of the Owner Trustee on the Equity Certificates) shall be
taken as the statements of the Depositor, and the Owner Trustee assumes no
responsibility for the correctness thereof. The Owner Trustee makes no
representations as to the validity or sufficiency of this Owner Trust Agreement,
of any Basic Document or of the Equity Certificates (other than the signatures
of the Owner Trustee on the Equity Certificates) or the Notes, or of any Related
Documents. The Owner Trustee shall at no time have any responsibility or
liability with respect to the sufficiency of the Trust Estate or its ability to
generate the payments to be distributed to Certificateholders under this Owner
Trust Agreement or the Noteholders under the Indenture, including compliance by
the Depositor or the Seller with any warranty or representation made under any
Basic Document or in any related document or the accuracy of any such warranty
or representation, or any action of the Certificate Paying Agent, the
Certificate Registrar or the Indenture Trustee taken in the name of the Owner
Trustee.
Section 6.07. OWNER TRUSTEE MAY OWN EQUITY CERTIFICATES AND NOTES. The
Owner Trustee in its individual or any other capacity may, subject to Section
3.05, become the owner or pledgee of Equity Certificates or Notes and may deal
with the Depositor, the Seller, the Certificate Paying Agent, the Certificate
Registrar and the Indenture Trustee in transactions with the same rights as it
would have if it were not Owner Trustee.
Section 6.08. PAYMENTS FROM TRUST ESTATE. All payments to be made by the
Owner Trustee under this Owner Trust Agreement or any of the Basic Documents to
which the Owner Trustee is a party shall be made only from the income and
proceeds of the Trust Estate or from other amounts required to be provided by
the Certificateholders and only to the extent that the Owner Trust shall have
received income or proceeds from the Trust Estate or the Certificateholders to
make such payments in accordance with the terms hereof. Wilmington Trust
Company, in its individual capacity, shall not be liable for any amounts payable
under this Owner Trust Agreement or any of the Basic Documents to which the
Owner Trustee is a party.
Section 6.09. DOING BUSINESS IN OTHER JURISDICTIONS. Notwithstanding
anything contained herein to the contrary, neither Wilmington Trust Company nor
the Owner Trustee shall be
<PAGE>
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required to take any action in any jurisdiction other than in the State of
Delaware if the taking of such action will, even after the appointment of a
co-trustee or separate trustee in accordance with Section 9.05 hereof, (i)
require the consent or approval or authorization or order of or the giving of
notice to, or the registration with or the taking of any other action in respect
of, any state or other governmental authority or agency of any jurisdiction
other than the State of Delaware; (ii) result in any fee, tax or other
governmental charge under the laws of the State of Delaware becoming payable by
Wilmington Trust Company; or (iii) subject Wilmington Trust Company to personal
jurisdiction in any jurisdiction other than the State of Delaware for causes of
action arising from acts unrelated to the consummation of the transactions by
Wilmington Trust Company or the Owner Trustee, as the case may be, contemplated
hereby.
Section 6.10. LIABILITY OF CERTIFICATE REGISTRAR AND CERTIFICATE PAYING
AGENT. All provisions affording protection to or limiting the liability of the
Owner Trustee shall inure as well to the Certificate Registrar and Certificate
Paying Agent.
ARTICLE VII
Compensation of Owner Trustee
-----------------------------
Section 7.01. OWNER TRUSTEE'S FEES AND EXPENSES. The Owner Trustee shall
receive as compensation for its services hereunder such fees as have been
separately agreed upon before the date hereof and as set forth in Appendix A to
the Indenture, and the Owner Trustee shall be reimbursed by the Indenture
Trustee from the Payment Account for its reasonable expenses hereunder and under
the Basic Documents, including the reasonable compensation, expenses and
disbursements of such agents, representatives, experts and counsel as the Owner
Trustee may reasonably employ in connection with the exercise and performance of
its rights and its duties hereunder and under the Basic Documents. The amount of
the Owner Trustee Fee shall be an up- front fee in an amount equal to $15,000
and shall be paid on the Closing Date by the Majority Certificateholder.
Section 7.02. INDEMNIFICATION. The Depositor shall indemnify, defend and
hold harmless the Owner Trustee and its successors, assigns, agents and servants
(collectively, the "Indemnified Parties") from and against, any and all
liabilities, obligations, losses, damages, taxes, claims, actions and suits, and
any and all reasonable costs, expenses and disbursements (including reason able
legal fees and expenses) of any kind and nature whatsoever (collectively,
"Expenses") which may at any time be imposed on, incurred by, or asserted
against the Owner Trustee or any Indemnified Party in any way relating to or
arising out of this Owner Trust Agreement, the Basic Documents, the Trust
Estate, the administration of the Trust Estate or the action or inaction of the
Owner Trustee hereunder, provided, that:
(i) the Depositor shall not be liable for or required to indemnify
an Indemnified Party from and against Expenses arising or resulting from
the Owner Trustee's willful misconduct, gross negligence or bad faith or
as a result of any inaccuracy
<PAGE>
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of a representation or warranty contained in Section 6.03 expressly made
by the Owner Trustee;
(ii) with respect to any such claim, the Indemnified Party shall
have given the Depositor written notice thereof promptly after the
Indemnified Party shall have actual knowledge thereof;
(iii) while maintaining control over its own defense, the Depositor
shall consult with the Indemnified Party in preparing such defense; and
(iv) notwithstanding anything in this Owner Trust Agreement to the
contrary, the Depositor shall not be liable for settlement of any claim by
an Indemnified Party entered into without the prior consent of the
Depositor which consent shall not be unreasonably withheld.
The indemnities contained in this Section shall survive the resignation or
termination of the Owner Trustee or the termination of this Owner Trust
Agreement. In the event of any claim, action or proceeding for which indemnity
will be sought pursuant to this Section 7.02, the Owner Trustee's choice of
legal counsel, if other than the legal counsel retained by the Owner Trustee in
connection with the execution and delivery of this Owner Trust Agreement, shall
be subject to the approval of the Depositor, which approval shall not be
unreasonably withheld. In addition, upon written notice to the Owner Trustee and
with the consent of the Owner Trustee which consent shall not be unreasonably
withheld, the Depositor has the right to assume the defense of any claim, action
or proceeding against the Owner Trustee.
ARTICLE VIII
Termination of Owner Trust Agreement
------------------------------------
Section 8.01. TERMINATION OF OWNER TRUST AGREEMENT. (a) This Owner Trust
Agreement (other than Article VII) and the Trust shall terminate and be of no
further force or effect upon the earliest of (i) the final distribution of all
moneys or other property or proceeds of the Trust Estate in accordance with the
terms of the Indenture and this Owner Trust Agreement, (ii) the Final Maturity
Date, or (iii) the distribution of all of the assets of the Trust Estate, in
accordance with written instructions provided to the Owner Trustee by the
Majority Certificateholder, following the optional redemption of the Notes by
the Issuer pursuant to Section 8.07 of the Indenture; provided in each case that
all amounts owing to the Noteholders to the extent payable from the Trust Estate
or proceeds thereof have been paid in full and that all obligations under the
Indenture have been discharged. The bankruptcy, liquidation, dissolution, death
or incapacity of any Certificateholder shall not (x) operate to terminate this
Owner Trust Agreement or the Trust or (y) 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 all or any part of the
Trust
<PAGE>
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or the Trust Estate or (z) otherwise affect the rights, obligations and
liabilities of the parties hereto.
(b) Except as provided in Section 8.01(a), neither the Depositor nor any
Certificateholder shall be entitled to revoke or terminate the Trust.
(c) Notice of any termination of the Trust, specifying the Payment Date
upon which Certificateholders shall surrender their Equity Certificates to the
Certificate Paying Agent for payment of the final distribution and cancellation,
shall be given by the Certificate Paying Agent by letter to Certificateholders
mailed within five Business Days of receipt of notice of the final payment on
the Notes from the Indenture Trustee, stating (i) the Payment Date upon or with
respect to which final payment of the Equity Certificates shall be made upon
presentation and surrender of the Equity Certificates at the office of the
Certificate Paying Agent therein designated, (ii) the amount of any such final
payment and (iii) that the Record Date otherwise applicable to such Payment Date
is not applicable, payments being made only upon presentation and surrender of
the Equity Certificates at the office of the Certificate Payment Agent therein
specified. The Certificate Paying Agent shall give such notice to the Owner
Trustee and the Certificate Registrar at the time such notice is given to
Certificateholders. Upon presentation and surrender of the Equity Certificates,
the Certificate Paying Agent shall cause to be distributed to Certificateholders
amounts distributable on such Payment Date pursuant to Section 5.01.
In the event that all of the Certificateholders shall not surrender their
Equity Certificates for cancellation within six months after the date specified
in the above mentioned written notice, the Certificate Paying Agent shall give a
second written notice to the remaining Certificateholders to surrender their
Equity Certificates for cancellation and receive the final distribution with
respect thereto. Subject to applicable laws with respect to escheat of funds, if
within one year following the Payment Date on which final payment of the Equity
Certificates was to have been made pursuant to Section 3.05 of the Indenture,
all the Equity Certificates shall not have been surrendered for cancellation,
the Certificate Paying Agent may take appropriate steps, or may appoint an agent
to take appropriate steps, to contact the remaining Certificateholders
concerning surrender of their Equity Certificates, and the cost thereof shall be
paid out of the funds and other assets that shall remain subject to this Owner
Trust Agreement. Any funds remaining in the Certificate Distribution Account
after exhaustion of such remedies shall be distributed by the Certificate Paying
Agent to the Certificateholder.
(d) Upon the winding up of the Trust and its termination, the Owner
Trustee shall cause the Certificate of Trust to be canceled by filing a
certificate of cancellation with the Secretary of State in accordance with the
provisions of Section 3810(d) of the Business Trust Statute.
ARTICLE IX
Successor Owner Trustees and Additional Owner Trustees
------------------------------------------------------
<PAGE>
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Section 9.01. ELIGIBILITY REQUIREMENTS FOR OWNER TRUSTEE. The Owner
Trustee shall at all times be a corporation satisfying the provisions of Section
3807(a) of the Business Trust Statute; authorized to exercise corporate trust
powers; having a combined capital and surplus of at least $50,000,000 and
subject to supervision or examination by federal or state authorities; and
having (or having a parent that has) a rating of at least BBB or is otherwise
acceptable to DCR and S&P. If such corporation shall publish reports of
condition at least annually pursuant to law or to the requirements of the
aforesaid supervising or examining authority, then for the purpose of this
Section, the combined capital and surplus of such corporation shall be deemed to
be its combined capital and surplus as set forth in its most recent report of
condition so published. In case at any time the Owner Trustee shall cease to be
eligible in accordance with the provisions of this Section 9.01, the Owner
Trustee shall resign immediately in the manner and with the effect specified in
Section 9.02.
Section 9.02. REPLACEMENT OF OWNER TRUSTEE. The Owner Trustee may at any
time resign and be discharged from the trusts hereby created by giving 30 days
prior written notice thereof to the Certificateholders and the Depositor. In the
event of such resignation (or removal as provided below), the Owner Trustee must
reimburse to the Majority Certificateholder the Owner Trustee Fee, less the sum
of $7,000 plus $167 multiplied by the number of months that have elapsed since
the Closing Date. Upon receiving such notice of resignation, the Majority
Certificateholder shall promptly appoint a successor Owner Trustee, by written
instrument, in duplicate, one copy of which instrument shall be delivered to the
resigning Owner Trustee and to the successor Owner Trustee. If no successor
Owner Trustee shall have been so appointed and have accepted appointment within
30 days after the giving of such notice of resignation, the resigning Owner
Trustee or the Majority Certificateholder may petition any court of competent
jurisdiction for the appointment of a successor Owner Trustee reasonably
acceptable to all Certificateholders.
If at any time the Owner Trustee shall cease to be eligible in accordance
with the provisions of Section 9.01 and shall fail to resign after written
request therefor by the Majority Certificateholder, or if at any time the Owner
Trustee shall be legally unable to act, or shall be adjudged bankrupt or
insolvent, or a receiver of the Owner Trustee or of its property shall be
appointed, or any public officer shall take charge or control of the Owner
Trustee or of its property or affairs for the purpose of rehabilitation,
conservation or liquidation, then the Majority Certificateholder may remove the
Owner Trustee.
Any resignation or removal of the Owner Trustee and appointment of a
successor Owner Trustee pursuant to any of the provisions of this Section shall
not become effective until acceptance of appointment by the successor Owner
Trustee pursuant to Section 9.03 and payment of all fees and expenses owed to
the outgoing Owner Trustee. The Majority Certificateholder shall provide notice
of such resignation or removal of the Owner Trustee to the Depositor and to each
of the Rating Agencies.
Section 9.03. SUCCESSOR OWNER TRUSTEE. Any successor Owner Trustee
appointed pursuant to Section 9.02 shall execute, acknowledge and deliver to the
Indenture Trustee and to
<PAGE>
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its predecessor Owner Trustee an instrument accepting such appointment under
this Owner Trust Agreement, and thereupon the resignation or removal of the
predecessor Owner Trustee shall become effective, and such successor Owner
Trustee, without any further act, deed or conveyance, shall become fully vested
with all the rights, powers, duties and obligations of its predecessor under
this Owner Trust Agreement, with like effect as if originally named as Owner
Trustee. The predecessor Owner Trustee shall upon payment of its fees and
expenses deliver to the successor Owner Trustee all documents and statements and
monies held by it under this Owner Trust Agreement; and the predecessor Owner
Trustee shall execute and deliver such instruments and do such other things as
may reasonably be required for fully and certainly vesting and confirming in the
successor Owner Trustee all such rights, powers, duties and obligations.
No successor Owner Trustee shall accept appointment as provided in this
Section 9.03 unless at the time of such acceptance such successor Owner Trustee
shall be eligible pursuant to Section 9.01.
Upon acceptance of appointment by a successor Owner Trustee pursuant to
this Section 9.03, the Owner Trustee shall mail notice thereof to all
Certificateholders, the Indenture Trustee, the Noteholders and the Rating
Agencies.
Section 9.04. MERGER OR CONSOLIDATION OF OWNER TRUSTEE. Any Person into
which the Owner Trustee may be merged or converted or with which it may be
consolidated, or any Person resulting from any merger, conversion or
consolidation to which the Owner Trustee shall be a party, or any Person
succeeding to all or substantially all of the corporate trust business of the
Owner Trustee, shall be the successor of the Owner Trustee hereunder, without
the execution or filing of any instrument or any further act on the part of any
of the parties hereto, anything herein to the contrary notwithstanding;
provided, that such Person shall be eligible pursuant to Section 9.01 and,
provided, further, that the Owner Trustee shall mail notice of such merger or
consolidation to the Rating Agencies.
Section 9.05. APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE.
Notwithstanding any other provisions of this Owner Trust Agreement, at any time,
for the purpose of meeting any legal requirements of any jurisdiction in which
any part of the Trust Estate may at the time be located, the Owner Trustee shall
have the power and shall execute and deliver all instruments to appoint one or
more Persons to act as co-trustee, jointly with the Owner Trustee, or as
separate trustee or trustees, of all or any part of the Trust Estate, and to
vest in such Person, in such capacity, such title to the Trust or any part
thereof and, subject to the other provisions of this Section, such powers,
duties, obligations, rights and trusts as the Owner Trustee may consider
necessary or desirable. No co-trustee or separate trustee under this Owner Trust
Agreement shall be required to meet the terms of eligibility as a successor
Owner Trustee pursuant to Section 9.01 and no notice of the appointment of any
co-trustee or separate trustee shall be required pursuant to Section 9.03.
<PAGE>
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Each separate trustee and co-trustee shall, to the extent permitted by
law, be appointed and act subject to the following provisions and conditions:
(a) All rights, powers, duties and obligations conferred or imposed upon
the Owner Trustee shall be conferred upon and exercised or performed by the
Owner Trustee and such separate trustee or co-trustee jointly (it being
understood that such separate trustee or co-trustee is not authorized to act
separately without the Owner Trustee joining in such act), except to the extent
that under any law of any jurisdiction in which any particular act or acts are
to be performed, the Owner Trustee shall be incompetent or unqualified to
perform such act or acts, in which event such rights, powers, duties and
obligations (including the holding of title to the Trust Estate or any portion
thereof in any such jurisdiction) shall be exercised and performed singly by
such separate trustee or co-trustee, but solely at the direction of the Owner
Trustee;
(b) No trustee under this Owner Trust Agreement shall be personally liable
by reason of any act or omission of any other trustee under this Owner Trust
Agreement; and
(c) The Owner Trustee may at any time accept the resignation of or remove
any separate trustee or co-trustee.
Any notice, request or other writing given to the Owner Trustee shall be
deemed to have been given to each of the then separate trustees and co-trustees,
as effectively as if given to each of them. Every instrument appointing any
separate trustee or co-trustee shall refer to this Owner Trust Agreement and the
conditions of this Article IX. Each separate trustee and co-trustee, upon its
acceptance of the trusts conferred, shall be vested with the estates or property
specified in its instrument of appointment, either jointly with the Owner
Trustee or separately, as may be provided therein, subject to all the provisions
of this Owner Trust Agreement, specifically including every provision of this
Owner Trust Agreement relating to the conduct of, affecting the liability of, or
affording protection to, the Owner Trustee. Each such instrument shall be filed
with the Owner Trustee.
Any separate trustee or co-trustee may at any time appoint the Owner
Trustee as 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
Owner Trust 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 Owner Trustee, to the extent permitted by law, without the
appointment of a new or successor co-trustee or separate trustee.
ARTICLE X
Miscellaneous
-------------
<PAGE>
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Section 10.01. AMENDMENTS. (a) This Owner Trust Agreement may be amended
from time to time by the parties hereto (with the prior notice to the Rating
Agencies) as specified in this Section, provided that any amendment, except as
provided in subparagraph (e) below, shall be accompanied by an Opinion of
Counsel addressed to the Owner Trustee and obtained by the Issuer to the effect
that such amendment (i) complies with the provisions of this Section and (ii)
would not cause the Trust (if the Transferor or the Seller was not the
Certificateholder of 100% of the Equity Certificates) to be subject to an entity
level tax for federal income tax purposes.
(b) If the purpose of the amendment (as detailed therein) is to correct
any mistake, eliminate any inconsistency, cure any ambiguity or deal with any
matter not covered (i.e. to give effect to the intent of the parties and, if
applicable, to the expectations of the Certificateholders), it shall not be
necessary to obtain the consent of any Certificateholders, but the Owner Trustee
shall be furnished with (i) a letter from each of the Rating Agencies that the
amendment will not result in the downgrading or withdrawal of the rating then
assigned to any Note or the rating then assigned to any Note or (ii) an Opinion
of Counsel obtained by the Depositor to the effect that such action will not
adversely affect in any material respect the interests of any
Certificateholders.
(c) If the purpose of the amendment is to prevent the imposition of any
federal or state taxes at any time that any Equity Certificate is outstanding,
it shall not be necessary to obtain the consent of any Certificateholder, but
the Owner Trustee shall be furnished with an Opinion of Counsel obtained by the
Depositor that such amendment is necessary or helpful to prevent the imposition
of such taxes and is not materially adverse to any Certificateholder.
(d) If the purpose of the amendment is to add or eliminate or change any
provision of the Owner Trust Agreement other than as contemplated in (b) and (c)
above, the amendment shall require (i) an Opinion of Counsel obtained by the
Depositor to the effect that such action will not adversely affect in any
material respect the interests of any Certificateholders and (ii) either (A) a
letter from each of the Rating Agencies that the amendment will not result in
the downgrading or withdrawal of the rating then assigned to any Note or (B) the
consent of the Indenture Trustee and the Majority Certificateholder; provided,
however, that no such amendment shall (1) reduce in any manner the amount of, or
delay the timing of, payments received that are required to be distributed on
any Equity Certificate without the consent of the related Certificateholder, or
(2) reduce the aforesaid percentage of Equity Certificates the
Certificateholders of which are required to consent to any such amendment,
without the consent of the Certificateholders then outstanding.
(e) If the purpose of the amendment is to provide for the holding of any
of the Equity Certificates in book-entry form, it shall require the consent of
Certificateholders of all such Equity Certificates then outstanding; provided,
that the Opinion of Counsel specified in subparagraph (a) above shall not be
required.
(f) If the purpose of the amendment is to provide for the issuance of
additional certificates representing an interest in the Trust, it shall not be
necessary to obtain the consent of any Certificateholder, but the Owner Trustee
shall be furnished with (i) an Opinion of Counsel obtained by the Depositor to
the effect that such action will not adversely affect in any material
<PAGE>
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respect the interests of any Certificateholders and (ii) a letter from the each
of the Rating Agencies that the amendment will not result in the downgrading or
withdrawal of the rating then assigned to any Notes.
(g) Promptly after the execution of any such amendment or consent, the
Depositor shall furnish written notification of the substance of such amendment
or consent to each Certificateholder, the Indenture Trustee and each of the
Rating Agencies. It shall not be necessary for the consent of Certificateholders
or the Indenture Trustee pursuant to this Section 10.01 to approve the
particular form of any proposed amendment or consent, but it shall be sufficient
if such consent shall approve the substance thereof. The manner of obtaining
such consents (and any other consents of Certificateholders provided for in this
Owner Trust Agreement or in any other Basic Document) and of evidencing the
authorization of the execution thereof by Certificateholders shall be subject to
such reasonable requirements as the Owner Trustee may prescribe.
(h) In connection with the execution of any amendment to any agreement to
which the Trust is a party, other than this Owner Trust Agreement, the Owner
Trustee shall be entitled to receive and conclusively rely upon an Opinion of
Counsel to the effect that such amendment is authorized or permitted by the
documents subject to such amendment and that all conditions precedent in the
Basic Documents for the execution and delivery thereof by the Trust or the Owner
Trustee, as the case may be, have been satisfied.
(i) Promptly after the execution of any amendment to the Certificate of
Trust, the Owner Trustee shall cause the filing of such amendment with the
Secretary of State of the State of Delaware.
Section 10.02. NO LEGAL TITLE TO TRUST ESTATE. The Certificateholders
shall not have legal title to any part of the Trust Estate solely by virtue of
their status as Certificateholders. The Certificateholders shall be entitled to
receive distributions with respect to their undivided beneficial interests
therein only in accordance with Articles V and VIII. No transfer, by operation
of law or otherwise, of any right, title or interest of the Certificateholders
to and in their ownership interest in the Trust Estate shall operate to
terminate this Owner Trust Agreement or the trusts hereunder or entitle any
transferee to an accounting or to the transfer to it of legal title to any part
of the Trust Estate.
Section 10.03. LIMITATIONS ON RIGHTS OF OTHERS. Except for Section 2.07, the
provisions of this Owner Trust Agreement are solely for the benefit of the Owner
Trustee, the Depositor, the Certificateholders and, to the extent expressly
provided herein, the Indenture Trustee and the Noteholders, and nothing in this
Owner Trust Agreement (other than Section 2.07), whether express or implied,
shall be construed to give to any other Person any legal or equitable right,
remedy or claim in the Trust Estate or under or in respect of this Owner Trust
Agreement or any covenants, conditions or provisions contained herein.
Section 10.04. NOTICES. (a) Unless otherwise expressly specified or
permitted by the terms hereof, all notices shall be in writing and shall be
deemed given upon receipt, to the Owner
<PAGE>
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Trustee at: Wilmington Trust Company, Rodney Square North, 1100 North Market
Street, Wilmington, Delaware 19890; Attention: Corporate Trust Administration;
to the Depositor at: Salomon Brothers Mortgage Securities VII, Inc., Seven World
Trade Center, New York, New York 10048, Attention: Mortgage Finance Group; to
the Indenture Trustee, at Sixth Street & Marquette Avenue, Minneapolis,
Minnesota 55479-0070, Attention: Corporate Trust Services, with a copy to the
Indenture Trustee at 11000 Broken Land Parkway, Columbia, Maryland 21044,
Attention: Securities Administration Services; to DCR at: 17 State Street, 12th
Floor, New York, New York 10004; to S&P at 25 Broadway, New York, New York 10004
or, as to each party, at such other address as shall be designated by such party
in a written notice to each other party.
(b) 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
Certificateholder as shown in the Certificate Register. Any notice so mailed
within the time prescribed in this Owner Trust Agreement shall be conclusively
presumed to have been duly given, whether or not the Certificateholder receives
such notice.
(c) A copy of any notice delivered to the Owner Trustee or the Trust shall
also be delivered to the Depositor.
Section 10.05. SEVERABILITY. Any provision of this Owner Trust Agreement
that is prohibited 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 shall not invalidate or
render unenforceable such provision in any other jurisdiction.
Section 10.06. SEPARATE COUNTERPARTS. This Owner Trust Agreement may be
executed by the parties hereto in separate counterparts, each of which when so
executed and delivered shall be an original, but all such counterparts shall
together constitute but one and the same instrument.
Section 10.07. SUCCESSORS AND ASSIGNS. All representations, warranties,
covenants and agreements contained herein shall be binding upon, and inure to
the benefit of, each of the Depositor, the Owner Trustee and its successors and
each Certificateholder and its successors and permitted assigns, all as herein
provided. Any request, notice, direction, consent, waiver or other instrument or
action by a Certificateholder shall bind the successors and assigns of such
Certificateholder.
Section 10.08. NO PETITION. The Owner Trustee, by entering into this
Owner Trust Agreement and each Certificateholder, by accepting a Equity
Certificate, hereby covenant and agree that they will not at any time institute
against the Transferor, the Depositor or the Trust, or join in any institution
against the Transferor, the Depositor or the Trust of, any bankruptcy
proceedings under any United States federal or state bankruptcy or similar law
in connection with any obligations to the Equity Certificates, the Notes, this
Owner Trust Agreement or any of the Basic Documents. This Section shall survive
for one year following the termination of this Owner Trust Agreement.
<PAGE>
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Section 10.09. NO RECOURSE. Each Certificateholder by accepting a Equity
Certificate acknowledges that such Certificateholder's Equity Certificates
represent beneficial interests in the Trust only and do not represent interests
in or obligations of the Depositor, the Seller, the Owner Trustee, the Indenture
Trustee or any Affiliate thereof and no recourse may be had against such parties
or their assets, except as may be expressly set forth or contemplated in this
Owner Trust Agreement, the Equity Certificates or the Basic Documents.
Section 10.10. HEADINGS. The headings of the various Articles and Sections
herein are for convenience of reference only and shall not define or limit any
of the terms or provisions hereof.
Section 10.11. GOVERNING LAW. THIS OWNER TRUST AGREEMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT
REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND
REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH
LAWS.
Section 10.12. INTEGRATION. This Owner Trust Agreement constitutes the
entire agreement among the parties hereto pertaining to the subject matter
hereof and supersedes all prior agreements and understanding pertaining thereto.
<PAGE>
IN WITNESS WHEREOF, the Depositor and the Owner Trustee have caused their
names to be signed hereto by their respective officers thereunto duly
authorized, all as of the day and year first above written.
SALOMON BROTHERS MORTGAGE
SECURITIES VII, INC., as Depositor,
By: /s/Susan Mills
---------------------------------
Name: Susan Mills
Title: Assistant Vice President
WILMINGTON TRUST COMPANY, as
Owner Trustee,
By: /s/Emmett Harman
---------------------------------
Name: Emmett Harman
Title: Vice President
Acknowledged and Agreed:
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
as Certificate Registrar
and Certificate Paying Agent
By: /s/Randall S. Reider
---------------------------------
Name: Randall S. Reider
Title: Assistant Vice President
<PAGE>
EXHIBIT A
FORM OF EQUITY CERTIFICATE
WILSHIRE REIT TRUST SERIES 1998-1
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.
ASSET-BACKED CERTIFICATES, SERIES 1998-11
THIS EQUITY 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 WHICH ARE EXEMPT FROM
REGISTRATION UNDER SUCH ACT AND UNDER APPLICABLE STATE LAW AND IS TRANSFERRED IN
ACCORDANCE WITH THE PROVISIONS OF SECTION 3.05 OF THE OWNER TRUST AGREEMENT
REFERRED TO HEREIN.
NO TRANSFER OF THIS EQUITY CERTIFICATE SHALL BE MADE (A) TO ANY EMPLOYEE BENEFIT
PLAN OR OTHER RETIREMENT ARRANGEMENT ("PLAN") THAT IS SUBJECT TO THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR THE INTERNAL
REVENUE CODE OF 1986 AS AMENDED (THE "CODE) OR (B) TO ANY PERSON WHO IS DIRECTLY
OR INDIRECTLY PURCHASING THIS NOTE ON BEHALF OF, AS NAMED FIDUCIARY OF, AS
TRUSTEE OF, OR WITH ASSETS OF ANY SUCH PLAN, UNLESS SUCH PLAN OR PERSON PROVIDES
EITHER THE OPINION OF COUNSEL OR CERTIFICATION DESCRIBED IN SECTION 3.05 OF THE
OWNER TRUST AGREEMENT REFERRED TO HEREIN.
NO TRANSFER OF THIS CERTIFICATE SHALL BE MADE UNLESS THE CERTIFICATE REGISTRAR
SHALL HAVE RECEIVED A CERTIFICATE OF NON- FOREIGN STATUS CERTIFYING AS TO THE
TRANSFEREE'S STATUS AS A U.S. PERSON OR CORPORATION UNDER U.S. LAW.
THIS CERTIFICATE DOES NOT REPRESENT AN INTEREST IN OR OBLIGATION OF THE SELLER,
THE DEPOSITOR, THE MASTER SERVICER, THE SUB-SERVICERS, THE INDENTURE TRUSTEE, OR
THE OWNER TRUSTEE OR ANY OF THEIR RESPECTIVE AFFILIATES, EXCEPT AS EXPRESSLY
PROVIDED IN THE OWNER TRUST AGREEMENT OR THE BASIC DOCUMENTS.
<PAGE>
A-2
Date of Owner Trust Agreement:
September ___, 1998
Cut-off Date: September 1, 1998
First Payment Date: October 26, 1998
Depositor: Salomon Brothers Mortgage
Securities VII, Inc.
Owner Trust Certificate No. ___
Certificate Percentage Interest
of this Certificate: ____%
Closing Date: September ___, 1998
Owner Trustee: Wilmington Trust Company
Evidencing a fractional undivided equity interest in the Trust Estate, the
property of which consists primarily of the Mortgage Loans in Wilshire REIT
Trust Series 1998-1 (the "Trust"), a Delaware business trust formed by
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC. as depositor (the "Depositor"),
pursuant to the Owner Trust Agreement referred to below.
This certifies that ________________ is the registered owner of the
Certificate Percentage Interest represented hereby.
The Trust was created pursuant to a Owner Trust Agreement, dated as of
September ___, 1998, as amended and restated by the Amended and Restated Trust
Agreement, dated as of September 1, 1998 (as amended and supplemented from time
to time, the "Owner Trust Agreement"), between the Depositor and Wilmington
Trust Company as owner trustee (as amended and supplemented from time to time,
the "Owner Trustee", which term includes any successor entity under the Owner
Trust Agreement), a summary of certain of the pertinent provisions of which is
set forth hereinafter. This Equity Certificate is issued under and is subject to
the terms, provisions and conditions of the Owner Trust Agreement, to which
Owner Trust Agreement the Certificateholder by virtue of the acceptance hereof
assents and by which such Certificateholder is bound.
This Equity Certificate is one of a duly authorized issue of Equity
Certificates (herein called the "Equity Certificates") issued under the Owner
Trust Agreement to which reference is
<PAGE>
A-3
hereby made for a statement of the respective rights thereunder of the
Depositor, the Owner Trustee and the Certificateholders and the terms upon which
the Equity Certificates are executed and delivered. All terms used in this
Equity Certificate which are defined in the Owner Trust Agreement shall have the
meanings assigned to them in the Owner Trust Agreement. The Trust Estate
consists of the Mortgage Loans in the Trust. The rights of the
Certificateholders are subordinated to the rights of the Holders of the Notes,
as set forth in the Indenture.
There will be distributed on the 25th day of each month or, if such
25th day is not a Business Day, the next Business Day (each, a "Payment Date"),
commencing in October 1998, to the Person in whose name this Certificate is
registered (i) with respect to the first Payment Date, on the Closing Date and
(ii) with respect to every other Payment Date, at the close of business on the
last Business Day of the month preceding the month of such Payment Date (the
"Record Date"), such Certificateholder's Certificate Percentage Interest in the
amount to be distributed to Certificateholders on such Payment Date.
The Certificateholder, by its acceptance of this Equity Certificate,
agrees that it will look solely to the funds on deposit in the Payment Account
that have been released from the Lien of the Indenture for payment hereunder and
that neither the Owner Trustee in its individual capacity nor the Depositor is
personally liable to the Certificateholders for any amount payable under this
Equity Certificate or the Owner Trust Agreement or, except as expressly provided
in the Owner Trust Agreement, subject to any liability under the Owner Trust
Agreement.
The Certificateholder acknowledges and agrees that its rights to
receive distributions in respect of this Equity Certificate are subordinated to
the rights of the Noteholders as described in the Indenture, dated as of
September 1, 1998, between the Trust and Norwest Bank Minnesota,
National Association as Indenture Trustee (the "Indenture").
The Depositor and this Certificateholder, by acceptance of this
Certificate, agree to treat, and to take no action inconsistent with the
treatment of, the Equity Certificates for federal, state and local income tax
purposes as an equity interest in the Trust.
This Certificateholder, by its acceptance of this Certificate,
covenants and agrees that such Certificateholder will not at any time institute
against the Depositor, or join in any institution against the Depositor or the
Trust of, any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings, or other proceedings under any United States federal or state
bankruptcy or similar law in connection with any obligations relating to the
Equity Certificates, the Notes, the Owner Trust Agreement or any of the Basic
Documents.
Distributions on this Equity Certificate will be made as provided in
the Owner Trust Agreement by the Certificate Paying Agent by wire transfer or
check mailed to the Certificateholder of record in the Certificate Register
without the presentation or surrender of this Equity Certificate or the making
of any notation hereon. Except as otherwise provided in the Owner Trust
Agreement and notwithstanding the above, the final distribution on this Equity
Certificate will be made after due notice by the Certificate Paying Agent of the
pendency of such
<PAGE>
A-4
distribution and only upon presentation and surrender of this Equity Certificate
at the office or agency maintained by the Certificate Registrar for that purpose
by the Trust.
Reference is hereby made to the further provisions of this Equity
Certificate set forth on the reverse hereof, which further provisions shall for
all purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon shall have been executed
by an authorized officer of the Owner Trustee, or an authenticating agent by
manual signature, this Equity Certificate shall not entitle the
Certificateholder hereof to any benefit under the Owner Trust Agreement or be
valid for any purpose.
THIS CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF DELAWARE, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
<PAGE>
IN WITNESS WHEREOF, the Owner Trustee, on behalf of the Trust and not in
its individual capacity, has caused this Equity Certificate to be duly executed.
WILSHIRE REIT TRUST SERIES 1998-1
By: WILMINGTON TRUST COMPANY, not in its individual capacity
but solely as Owner Trustee
Dated: September ___, 1998 By:____________________________
Authorized Signatory
CERTIFICATE OF AUTHENTICATION
This is one of the Equity Certificates referred to in the within-mentioned
Owner Trust Agreement.
WILMINGTON TRUST COMPANY, not in its individual capacity but
solely as Owner Trustee
By:_________________________________
Authorized Signatory
or__________________________________
As Authenticating Agent of the Owner Trustee
By:_________________________________
Authorized Signatory
<PAGE>
[REVERSE OF CERTIFICATE]
The Equity Certificates do not represent an obligation of, or an interest
in, the Depositor, the Seller, the Master Servicer, the Sub-Servicers, the
Indenture Trustee, the Owner Trustee or any Affiliates of any of them and no
recourse may be had against such parties or their assets, except as expressly
set forth or contemplated herein or in the Owner Trust Agreement or the Basic
Documents. In addition, this Equity Certificate is not guaranteed by any
governmental agency or instrumentality and is limited in right of payment to
certain collections and recoveries with respect to the Mortgage Loans, all as
more specifically set forth herein and in the Owner Trust Agreement. A copy of
the Owner Trust Agreement may be examined by this Certificateholder upon written
request during normal business hours at the principal office of the Depositor
and at such other places, if any, designated by the Depositor.
The Owner Trust Agreement permits the amendment thereof as specified
below, provided that any amendment be accompanied by an Opinion of Counsel to
the Owner Trustee to the effect that such amendment complies with the provisions
of the Owner Trust Agreement and, if either Wilshire REIT 1998-1 Inc. or
Wilshire Real Estate Investment Trust Inc. was not the Holder of 100% of the
Equity Certificates, would not cause the Trust to be subject to an entity level
tax. If the purpose of the amendment is to correct any mistake, eliminate any
inconsistency, cure any ambiguity or deal with any matter not covered, it shall
not be necessary to obtain the consent of any Certificateholder, but the Owner
Trustee shall be furnished with (A) a letter from each of the Rating Agencies
that the amendment will not result in the downgrading or withdrawal of the
rating then assigned to any Note or (B) an Opinion of Counsel to the effect that
such action will not adversely affect in any material respect the interests of
any Certificateholders. If the purpose of the amendment is to prevent the
imposition of any federal or state taxes at any time that any Equity Certificate
is outstanding, it shall not be necessary to obtain the consent of the any
Certificateholder, but the Owner Trustee shall be furnished with an Opinion of
Counsel that such amendment is necessary or helpful to prevent the imposition of
such taxes and is not materially adverse to any Certificateholder. If the
purpose of the amendment is to add or eliminate or change any provision of the
Owner Trust Agreement, other than as specified in the preceding two sentences,
the amendment shall require (A) an Opinion of Counsel to the effect that such
action will not adversely affect in any material respect the interests of any
Certificateholders, and (B) either (i) a letter from each of the Rating Agencies
that the amendment will not result in the downgrading or withdrawal of the
rating then assigned to any Note or (b) the consent of the Indenture Trustee and
the Majority Certificateholder; PROVIDED, HOWEVER, that no such amendment shall
(i) reduce in any manner the amount of, or delay the timing of, payments
received that are required to be distributed on any Equity Certificate without
the consent of the related Certificateholder or (ii) reduce the aforesaid
percentage of Equity Certificates the Holders of which are required to consent
to any such amendment without the consent of the Certificateholders of all such
Equity Certificates then outstanding.
As provided in the Owner Trust Agreement and subject to certain
limitations therein set forth, the transfer of this Equity Certificate is
registerable in the Certificate Register upon surrender of this Equity
Certificate for registration of transfer at the offices or agencies of the
Certificate Registrar maintained by the Trust, accompanied by a written
instrument of transfer in
<PAGE>
A-7
form satisfactory to the Certificate Registrar duly executed by the
Certificateholder hereof or such Certificateholder's attorney duly authorized in
writing, and thereupon one or more new Equity Certificates of authorized
denominations evidencing the same aggregate interest in the Trust will be issued
to the designated transferee. The initial Certificate Registrar appointed under
the Owner Trust Agreement is Norwest Bank Minnesota, National Association.
Except as provided in the Owner Trust Agreement, the Equity Certificates
are issuable only in a minimum Certificate Percentage Interest of 10%. As
provided in the Owner Trust Agreement and subject to certain limitations therein
set forth, Equity Certificates are exchangeable for new Equity Certificates of
authorized denominations evidencing the same aggregate denomination, as
requested by the Certificateholder surrendering the same. No service charge will
be made for any such registration of transfer or exchange, but the Owner Trustee
or the Certificate Registrar may require payment of a sum sufficient to cover
any tax or governmental charge payable in connection therewith.
The Owner Trustee, the Certificate Paying Agent, the Certificate Registrar
and any agent of the Owner Trustee, the Certificate Paying Agent, or the
Certificate Registrar may treat the Person in whose name this Equity Certificate
is registered as the owner hereof for all purposes, and none of the Owner
Trustee, the Certificate Paying Agent, the Certificate Registrar or any such
agent shall be affected by any notice to the contrary.
The obligations and responsibilities created by the Owner Trust Agreement
and the Trust created thereby shall terminate as and when provided in accordance
with the terms of the Owner Trust Agreement.
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers
unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
_______________________________________________________________________________
(Please print or type name and address, including postal zip code, of assignee)
_______________________________________________________________________________
the within Equity Certificate, and all rights thereunder, hereby irrevocably
constituting and appointing
_______________________________________________________________________________
to transfer said Equity Certificate on the books of the Certificate Registrar,
with full power of substitution in the premises.
Dated:
_______________________________________*/
Signature Guaranteed: -
____________________________*/
-
________________
*/ NOTICE: The signature to this assignment must correspond with the name as it
appears upon the face of the within Equity Certificate in every particular,
without alteration, enlargement or any change whatever. Such signature must be
guaranteed by a member firm of the New York Stock Exchange or a commercial bank
or trust company.
<PAGE>
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for the information of the
Certificate Paying Agent:
Distribution shall be made by wire transfer in immediately available funds
to ________________________________________
______________________________________________________
for the account of ________________________________________, account number
______________, or, if mailed by check, to ______________.
Applicable statements should be mailed to__________________.
__________________________________
Signature of assignee or agent
(for authorization of wire
transfer only)
<PAGE>
EXHIBIT B
CERTIFICATE OF TRUST OF
WILSHIRE REIT TRUST SERIES 1998-1
---------------------------------
THIS Certificate of Trust of Wilshire REIT Trust Series 1998-1 (the
"Trust"), dated September ___, 1998, is being duly executed and filed by
______________________, a Delaware banking corporation, as trustee, to form a
business trust under the Delaware Business Trust Act (12 DEL. CODE, ss. 3801 ET
SEQ.).
1. NAME. The name of the business trust formed hereby is Wilshire REIT
Trust Series 1998-1.
2. DELAWARE TRUSTEE. The name and business address of the trustee of the
Trust in the State of Delaware is ______________________, __________________,
______________, ______________, Attention: ______________________________.
IN WITNESS WHEREOF, the undersigned, being the sole trustee of the Trust,
has executed this Certificate of Trust as of the date first above written.
___________________________________,
not in its individual capacity but solely as owner
trustee under a Owner Trust Agreement dated as of
September ___, 1998.
By:
________________________________
Name:
Title:
<PAGE>
EXHIBIT C
[FORM OF RULE 144A INVESTMENT REPRESENTATION]
Description of Rule 144A Securities, including numbers:
_______________________________________________________
_______________________________________________________
_______________________________________________________
_______________________________________________________
The undersigned seller, as registered holder (the "Seller"), intends
to transfer the Rule 144A Securities described above to the undersigned buyer
(the "Buyer").
1. In connection with such transfer and in accordance with the
agreements pursuant to which the Rule 144A Securities were issued, the Seller
hereby certifies the following facts: Neither the Seller nor anyone acting on
its behalf has offered, transferred, pledged, sold or otherwise disposed of the
Rule 144A Securities, any interest in the Rule 144A Securities or any other
similar security to, or solicited any offer to buy or accept a transfer, pledge
or other disposition of the Rule 144A Securities, any interest in the Rule 144A
Securities or any other similar security from, or otherwise approached or
negotiated with respect to the Rule 144A Securities, any interest in the Rule
144A Securities or any other similar security with, any person in any manner, or
made any general solicitation by means of general advertising or in any other
manner, or taken any other action, that would constitute a distribution of the
Rule 144A Securities under the Securities Act of 1933, as amended (the "1933
Act"), or that would render the disposition of the Rule 144A Securities a
violation of Section 5 of the 1933 Act or require registration pursuant thereto,
and that the Seller has not offered the Rule 144A Securities to any person other
than the Buyer or another "qualified institutional buyer" as defined in Rule
144A under the 1933 Act.
2. The Buyer warrants and represents to, and covenants with, the Owner
Trustee and the Depositor (each as defined in the Amended and Restated Trust
Agreement (the "Agreement"), dated as of September 1, 1998, between Salomon
Brothers Mortgage Securities VII, Inc. as Depositor and Wilmington Trust Company
as Owner Trustee, pursuant to Section 3.05 of the Agreement and Norwest Bank
Minnesota, National Association as indenture trustee, as follows:
a. The Buyer understands that the Rule 144A Securities have not been
registered under the 1933 Act or the securities laws of any state.
b. The Buyer considers itself a substantial, sophisticated
institutional investor having such knowledge and experience in financial
and business matters that it is capable of evaluating the merits and risks
of investment in the Rule 144A Securities.
<PAGE>
C-2
c. The Buyer has been furnished with all information regarding the
Rule 144A Securities that it has requested from the Seller, the Indenture
Trustee, the Owner Trustee, the Master Servicer or any Sub-Servicer.
d. Neither the Buyer nor anyone acting on its behalf has offered,
transferred, pledged, sold or otherwise disposed of the Rule 144A
Securities, any interest in the Rule 144A Securities or any other similar
security to, or solicited any offer to buy or accept a transfer, pledge or
other disposition of the Rule 144A Securities, any interest in the Rule
144A Securities or any other similar security from, or otherwise approached
or negotiated with respect to the Rule 144A Securities, any interest in the
Rule 144A Securities or any other similar security with, any person in any
manner, or made any general solicitation by means of general advertising or
in any other manner, or taken any other action, that would constitute a
distribution of the Rule 144A Securities under the 1933 Act or that would
render the disposition of the Rule 144A Securities a violation of Section 5
of the 1933 Act or require registration pursuant thereto, nor will it act,
nor has it authorized or will it authorize any person to act, in such
manner with respect to the Rule 144A Securities.
e. The Buyer is a "qualified institutional buyer" as that term is
defined in Rule 144A under the 1933 Act and has completed either of the
forms of certification to that effect attached hereto as Annex 1 or Annex
2. The Buyer is aware that the sale to it is being made in reliance on Rule
144A. The Buyer is acquiring the Rule 144A Securities for its own account
or the accounts of other qualified institutional buyers, understands that
such Rule 144A Securities may be resold, pledged or transferred only (i) to
a person reasonably believed to be a qualified institutional buyer that
purchases for its own account or for the account of a qualified
institutional buyer to whom notice is given that the resale, pledge or
transfer is being made in reliance on Rule 144A, or (ii) pursuant to
another exemption from registration under the 1933 Act.
[3. The Buyer warrants and represents to, and covenants with, the
Seller, the Indenture Trustee, Owner Trustee, Master Servicer and the Depositor
that either (1) the Buyer is (A) not an employee benefit plan (within the
meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")), or a plan (within the meaning of Section 4975(e)(1) of
the Internal Revenue Code of 1986 ("Code")), which (in either case) is subject
to ERISA or Section 4975 of the Code (both a "Plan"), and (B) is not directly or
indirectly purchasing the Rule 144A Securities on behalf of, as investment
manager of, as named fiduciary of, as trustee of, or with "plan assets" of a
Plan, or (2) the Buyer understands that registration of transfer of any Rule
144A Securities to any Plan, or to any Person acting on behalf of any Plan, will
not be made unless such Plan delivers an opinion of its counsel, addressed and
satisfactory to the Certificate Registrar and the Depositor, to the effect that
the purchase and holding of the Rule 144A Securities by, on behalf of or with
"plan assets" of any Plan would not constitute or result in a prohibited
transaction under Section 406 of ERISA or Section 4975 of the Code, and would
not subject the Depositor, the Master Servicer, the Indenture Trustee or the
Trust to any obligation or liability (including liabilities under ERISA or
Section 4975 of the Code) in addition
<PAGE>
C-3
to those undertaken in the Agreement or any other liability. In lieu of such
opinion of counsel the Buyer may provide a certification in the form of Exhibit
G to the Agreement.]
4. This document may be executed in one or more counterparts and by
the different parties hereto on separate counterparts, each of which, when so
executed, shall be deemed to be an original; such counterparts, together, shall
constitute one and the same document.
Capitalized terms used herein and not otherwise defined herein have
the meanings assigned to them in the Agreement.
IN WITNESS WHEREOF, each of the parties has executed this document as
of the date set forth below.
___________________________________ __________________________________
______
Print Name of Seller Print Name of Buyer
By:___________________________ By:________________________
Name: Name:
Title: Title:
Taxpayer Identification: Taxpayer Identification:
No.___________________________ No.________________________
Date:_________________________ Date:______________________
<PAGE>
C-4
ANNEX 1 TO EXHIBIT C
--------------------
QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
--------------------------------------------------------
[For Buyers Other Than Registered Investment Companies]
The undersigned hereby certifies as follows in connection with the Rule
144A Investment Representation to which this Certification is attached:
1. As indicated below, the undersigned is the President, Chief
Financial Officer, Senior Vice President or other executive officer of the
Buyer.
2. In connection with purchases by the Buyer, the Buyer is a
"qualified institutional buyer" as that term is defined in Rule 144A under the
Securities Act of 1933 ("Rule 144A") because (i) the Buyer owned and/or invested
on a discretionary basis $______________________1 in securities (except for the
excluded securities referred to below) as of the end of the Buyer's most recent
fiscal year (such amount being calculated in accordance with Rule 144A) and (ii)
the Buyer satisfies the criteria in the category marked below.
___ CORPORATION, ETC. The Buyer is a corporation (other than a bank,
savings and loan association or similar institution), Massachusetts or
similar business trust, partnership, or charitable organization
described in Section 501(c)(3) of the Internal Revenue Code.
___ BANK. The Buyer (a) is a national bank or banking institution
organized under the laws of any State, territory or the District of
Columbia, the business of which is substantially confined to banking
and is supervised by the State or territorial banking commission or
similar official or is a foreign bank or equivalent institution, and
(b) has an audited net worth of at least $25,000,000 as demonstrated
in its latest annual financial statements, A COPY OF WHICH IS ATTACHED
HERETO.
________________
1 Buyer must own and/or invest on a discretionary basis at least $100,000,000 in
securities unless Buyer is a dealer, and, in that case, Buyer must own and/or
invest on a discretionary basis at least $10,000,000 in securities.
<PAGE>
C-5
___ SAVINGS AND LOAN. The Buyer (a) is a savings and loan association,
building and loan association, cooperative bank, homestead association
or similar institution, which is supervised and examined by a State or
Federal authority having supervision over any such institutions or is
a foreign savings and loan association or equivalent institution and
(b) has an audited net worth of at least $25,000,000 as demonstrated
in its latest annual financial statements.
___ BROKER-DEALER. The Buyer is a dealer registered pursuant to Section 15
of the Securities Exchange Act of 1934.
___ INSURANCE COMPANY. The Buyer is an insurance company whose primary and
predominant business activity is the writing of insurance or the
reinsuring of risks underwritten by insurance companies and which is
subject to supervision by the insurance commissioner or a similar
official or agency of a State or territory or the District of
Columbia.
___ STATE OR LOCAL PLAN. The Buyer is a plan established and maintained by
a State, its political subdivisions, or any agency or instrumentality
of the State or its political subdivisions, for the benefit of its
employees.
___ ERISA PLAN. The Buyer is an employee benefit plan within the meaning
of Title I of the Employee Retirement Income Security Act of 1974.
___ INVESTMENT ADVISER. The Buyer is an investment adviser registered
under the Investment Advisers Act of 1940.
___ SBIC. The Buyer is a Small Business Investment Company licensed by the
U.S. Small Business Administration under Section 301(c) or (d) of the
Small Business Investment Act of 1958.
___ BUSINESS DEVELOPMENT COMPANY. The Buyer is a business development
company as defined in Section 202(a)(22) of the Investment Advisers
Act of 1940.
___ TRUST FUND. The Buyer is a trust fund whose trustee is a bank or trust
company and whose participants are exclusively (a) plans established
and maintained by a State, its political subdivisions, or any agency
or instrumentality of the State or its political subdivisions, for the
benefit of its employees, or (b) employee benefit plans within the
meaning of Title I of the Employee Retirement Income Security Act of
1974, but is not a trust fund that includes as participants individual
retirement accounts or H.R. 10 plans.
3. The term "SECURITIES" as used herein DOES NOT INCLUDE (i)
securities of issuers that are affiliated with the Buyer, (ii) securities that
are part of an unsold allotment to or subscription by the Buyer, if the Buyer is
a dealer, (iii) bank deposit notes and certificates of deposit, (iv) loan
<PAGE>
C-6
participations, (v) repurchase agreements, (vi) securities owned but subject to
a repurchase agreement and (vii) currency, interest rate and commodity swaps.
4. For purposes of determining the aggregate amount of securities
owned and/or invested on a discretionary basis by the Buyer, the Buyer used the
cost of such securities to the Buyer and did not include any of the securities
referred to in the preceding paragraph. Further, in determining such aggregate
amount, the Buyer may have included securities owned by subsidiaries of the
Buyer, but only if such subsidiaries are consolidated with the Buyer in its
financial statements prepared in accordance with generally accepted accounting
principles and if the investments of such subsidiaries are managed under the
Buyer's direction. However, such securities were not included if the Buyer is a
majority-owned, consolidated subsidiary of another enterprise and the Buyer is
not itself a reporting company under the Securities Exchange Act of 1934.
5. The Buyer acknowledges that it is familiar with Rule 144A and
understands that the seller to it and other parties related to the Certificates
are relying and will continue to rely on the statements made herein because one
or more sales to the Buyer may be in reliance on Rule 144A.
___ ___ Will the Buyer be purchasing the Rule 144A
Yes No Securities only for the Buyer's own account?
6. If the answer to the foregoing question is "no", the Buyer agrees
that, in connection with any purchase of securities sold to the Buyer for the
account of a third party (including any separate account) in reliance on Rule
144A, the Buyer will only purchase for the account of a third party that at the
time is a "qualified institutional buyer" within the meaning of Rule 144A. In
addition, the Buyer agrees that the Buyer will not purchase securities for a
third party unless the Buyer has obtained a current representation letter from
such third party or taken other appropriate steps contemplated by Rule 144A to
conclude that such third party independently meets the definition of "qualified
institutional buyer" set forth in Rule 144A.
7. The Buyer will notify each of the parties to which this
certification is made of any changes in the information and conclusions herein.
Until such notice is given, the Buyer's purchase of Rule 144A Securities will
constitute a reaffirmation of this certification as of the date of such
purchase.
________________________________
Print Name of Buyer
By:_____________________________
Name:
Title:
Date:___________________________
<PAGE>
C-7
ANNEX 2 TO EXHIBIT C
--------------------
QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
--------------------------------------------------------
[For Buyers That Are Registered Investment Companies]
The undersigned hereby certifies as follows in connection with the
Rule 144A Investment Representation to which this Certification is attached:
1. As indicated below, the undersigned is the President, Chief
Financial Officer or Senior Vice President of the Buyer or, if the Buyer is a
"qualified institutional buyer" as that term is defined in Rule 144A under the
Securities Act of 1933 ("Rule 144A") because Buyer is part of a Family of
Investment Companies (as defined below), is such an officer of the Adviser.
2. In connection with purchases by Buyer, the Buyer is a "qualified
institutional buyer" as defined in SEC Rule 144A because (i) the Buyer is an
investment company registered under the Investment Company Act of 1940, and (ii)
as marked below, the Buyer alone, or the Buyer's Family of Investment Companies,
owned at least $100,000,000 in securities (other than the excluded securities
referred to below) as of the end of the Buyer's most recent fiscal year. For
purposes of determining the amount of securities owned by the Buyer or the
Buyer's Family of Investment Companies, the cost of such securities was used.
____ The Buyer owned $___________________ in securities (other than the
excluded securities referred to below) as of the end of the Buyer's
most recent fiscal year (such amount being calculated in accordance
with Rule 144A).
____ The Buyer is part of a Family of Investment Companies which owned in
the aggregate $______________ in securities (other than the excluded
securities referred to below) as of the end of the Buyer's most recent
fiscal year (such amount being calculated in accordance with Rule
144A).
3. The term "FAMILY OF INVESTMENT COMPANIES" as used herein means two
or more registered investment companies (or series thereof) that have the same
investment adviser or investment advisers that are affiliated (by virtue of
being majority owned subsidiaries of the same parent or because one investment
adviser is a majority owned subsidiary of the other).
4. The term "SECURITIES" as used herein does not include (i)
securities of issuers that are affiliated with the Buyer or are part of the
Buyer's Family of Investment Companies, (ii) bank deposit notes and certificates
of deposit, (iii) loan participations, (iv) repurchase agreements, (v)
securities owned but subject to a repurchase agreement and (vi) currency,
interest rate and commodity swaps.
<PAGE>
C-8
5. The Buyer is familiar with Rule 144A and understands that each of
the parties to which this certification is made are relying and will continue to
rely on the statements made herein because one or more sales to the Buyer will
be in reliance on Rule 144A. In addition, the Buyer will only purchase for the
Buyer's own account.
6. The undersigned will notify each of the parties to which this
certification is made of any changes in the information and conclusions herein.
Until such notice, the Buyer's purchase of Rule 144A Securities will constitute
a reaffirmation of this certification by the undersigned as of the date of such
purchase.
______________________________
Print Name of Buyer
By:___________________________
Name:____________________
Title:____________________
IF AN ADVISER:
______________________________
Print Name of Buyer
Date:_________________________
<PAGE>
EXHIBIT D
FORM OF INVESTOR REPRESENTATION LETTER
, 19
Salomon Brothers Mortgage Securities VII, Inc.
Seven World Trade Center
New York, New York 10048
Norwest Bank Minnesota, National Association
11000 Broken Land Parkway
Columbia, Maryland 21044-3562
Attention: Corporate Trust Administration
Re: Wilshire REIT Trust Series 1998-1
Salomon Brothers Mortgage Securities VII, Inc.
Asset-Backed Certificates, Series 1998-11 (the "Certificates")
--------------------------------------------------------------
Ladies and Gentlemen:
_____________ (the "Purchaser") intends to purchase from ____________
(the "Seller") $_____________ of the above -captioned Certificates, issued
pursuant to the Amended and Restated Trust Agreement (the "Trust Agreement"),
dated as of September 1, 1998, between Salomon Brothers Mortgage Securities VII,
Inc. as depositor (the "Depositor") and Wilmington Trust Company as owner
trustee (the "Owner Trustee"), as acknowledged and agreed by Norwest Bank
Minnesota, National Association as Certificate Registrar. All terms used herein
and not otherwise defined shall have the meanings set forth in the Trust
Agreement. The Purchaser hereby certifies, represents and warrants to, and
covenants with, the Depositor and the Certificate Registrar that:
1. The Purchaser understands that (a) the Certificates have not
been and will not be registered or qualified under the Securities Act
of 1933, as amended (the "Act") or any state securities law, (b) the
Company is not required to so register or qualify the Certificates,
(c) the Certificates may be resold only if registered and qualified
pursuant to the provisions of the Act or any state securities law, or
if an exemption from such registration and qualification is available,
(d) the Trust Agreement contains restrictions regarding the transfer
of the Certificates and (e) the Certificates will bear a legend to the
foregoing effect.
<PAGE>
D-2
2. The Purchaser is acquiring the Certificates for its own
account for investment only and not with a view to or for sale in
connection with any distribution thereof in any manner that would
violate the Act or any applicable state securities laws.
3. The Purchaser is (a) a substantial, sophisticated
institutional investor having such knowledge and experience in
financial and business matters, and, in particular, in such matters
related to securities similar to the Certificates, such that it is
capable of evaluating the merits and risks of investment in the
Certificates, (b) able to bear the economic risks of such an
investment and (c) an "accredited investor" within the meaning of Rule
501(a) promulgated pursuant to the Act.
4. The Purchaser has been furnished with, and has had an
opportunity to review (a) a copy of the Trust Agreement and (b) such
other information concerning the Certificates, the Mortgage Loans and
the Depositor as has been requested by the Purchaser from the
Depositor or the Seller and is relevant to the Purchaser's decision to
purchase the Certificates. The Purchaser has had any questions arising
from such review answered by the Depositor or the Seller to the
satisfaction of the Purchaser.
5. The Purchaser has not and will not nor has it authorized or
will it authorize any person to (a) offer, pledge, sell, dispose of or
otherwise transfer any Certificate, any interest in any Certificate or
any other similar security to any person in any manner, (b) solicit
any offer to buy or to accept a pledge, disposition of other transfer
of any Certificate, any interest in any Certificate or any other
similar security from any person in any manner, (c) otherwise approach
or negotiate with respect to any Certificate, any interest in any
Certificate or any other similar security with any person in any
manner, (d) make any general solicitation by means of general
advertising or in any other manner or (e) take any other action, that
(as to any of (a) through (e) above) would constitute a distribution
of any Certificate under the Act, that would render the disposition of
any Certificate a violation of Section 5 of the Act or any state
securities law, or that would require registration or qualification
pursuant thereto. The Purchaser will not sell or otherwise transfer
any of the Certificates, except in compliance with the provisions of
the Trust Agreement.
6. The Purchaser represents:
(i) that either (a) or (b) is satisfied, as marked below:
____ a. The Purchaser is not any employee benefit plan subject to
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or
the Internal Revenue Code of 1986 (the "Code"), a Person acting, directly or
indirectly, on behalf of any such plan or any Person acquiring such Certificates
with "plan assets" of a Plan within
<PAGE>
D-3
the meaning of the Department of Labor regulation promulgated at 29 C.F.R.
ss.2510.3- 101; or
____ b. The Purchaser will provide the Depositor, the Owner
Trustee, the Certificate Registrar and the Master Servicer with either: (x) an
opinion of counsel, satisfactory to the Depositor, the Owner Trustee, the
Certificate Registrar and the Master Servicer, to the effect that the purchase
and holding of a Certificate by or on behalf of the Purchaser is permissible
under applicable law, will not constitute or result in a prohibited transaction
under Section 406 of ERISA or Section 4975 of the Code (or comparable provisions
of any subsequent enactments) and will not subject the Depositor, the Owner
Trustee, the Trust, the Certificate Registrar, the Master Servicer or any Sub-
Servicer to any obligation or liability (including liabilities under ERISA or
Section 4975 of the Code) in addition to those undertaken in the Trust
Agreement, which opinion of counsel shall not be an expense of the Depositor,
the Owner Trustee, the Trust, the Certificate Registrar, the Master Servicer or
the Sub-Servicers; or (y) in lieu of such opinion of counsel, a certification in
the form of Exhibit G to the Trust Agreement; and
(ii) the Purchaser is familiar with the prohibited transaction restrictions and
fiduciary responsibility requirements of Sections 406 and 407 of ERISA and
Section 4975 of the Code and understands that each of the parties to which this
certification is made is relying and will continue to rely on the statements
made in this paragraph 6.
7. The Purchaser is not a non-United States person.
Very truly yours,
By:___________________
Name:
Title:
<PAGE>
EXHIBIT E
FORM OF TRANSFEROR REPRESENTATION LETTER
, 19
Salomon Brothers Mortgage Securities VII, Inc.
Seven World Trade Center
New York, New York 10048
Norwest Bank Minnesota, National Association
11000 Broken Land Parkway
Columbia, Maryland 21044-3562
Attention: Corporate Trust Administration
Re: Wilshire REIT Trust Series 1998-1
Salomon Brothers Mortgage Securities VII, Inc.
Asset-Backed Certificates, Series 1998-11 (the "Certificates")
--------------------------------------------------------------
Ladies and Gentlemen:
_______________ (the "Purchaser") intends to purchase from
____________ (the "Seller") $_____________ of the above -captioned Certificates,
issued pursuant to the Amended and Restated Trust Agreement (the "Trust
Agreement"), dated as of September 1, 1998, between Salomon Brothers Mortgage
Securities VII, Inc. as depositor (the "Depositor") and Wilmington Trust Company
as owner trustee (the "Owner Trustee"), as acknowledged and agreed by Norwest
Bank Minnesota, National Association as Certificate Registrar. All terms used
herein and not otherwise defined shall have the meanings set forth in the Trust
Agreement. The Purchaser hereby certifies, represents and warrants to, and
covenants with, the Depositor and the Certificate Registrar that:
Neither the Seller 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, or (e) has taken any other action, that (as to any of (a) through
(e) above) would constitute a distribution of the Certificates under the
Securities Act of 1933 (the "Act"), that would render the disposition of any
Certificate a violation of Section 5 of the Act or any state securities law, or
that would require registration or qualification pursuant thereto. The Seller
will not act, in any manner set forth in the foregoing sentence with respect to
any Certificate. The
<PAGE>
E-2
Seller has not and will not sell or otherwise transfer any of the Certificates,
except in compliance with the provisions of the Trust Agreement.
Very truly yours,
(Seller)
By:_________________________
Name:
Title:
<PAGE>
EXHIBIT F
CERTIFICATE OF NON-FOREIGN STATUS
This Certificate of Non-Foreign Status ("certificate") is delivered
pursuant to Section 3.05 of the Amended and Restated Trust Agreement, dated as
of September 1, 1998 (the "Trust Agreement"), between Salomon Brothers Mortgage
Securities VII, Inc. as depositor (the "Depositor") and Wilmington Trust Company
as Owner Trustee (the "Owner Trustee"), in connection with the acquisition of,
transfer to or possession by the undersigned, whether as beneficial owner (the
"Beneficial Owner"), or nominee on behalf of the Beneficial Owner of the Salomon
Brothers Mortgage Securities VII, Inc., Asset-Backed Certificates, Series
1998-11 (the "Certificate"). Capitalized terms used but not defined in this
certificate have the respective meanings given them in the Trust Agreement.
Each holder must complete Part I, Part II (if the holder is a nominee), and in
all cases sign and otherwise complete Part III.
In addition, each holder shall submit with the Certificate an IRS Form W-9
relating to such holder.
To confirm to the Trust that the provisions of Sections 871, 881 or 1446 of the
Internal Revenue Code (relating to withholding tax on foreign partners) do not
apply in respect of the Certificate held by the undersigned, the undersigned
hereby certifies:
Part I - Complete Either A or B
A. Individual as Beneficial Owner
1. I am (The Beneficial Owner is ) not a non-resident alien for
purposes of U.S. income taxation;
2. My (The Beneficial Owner's) name and home address are:
; and
3. My (The Beneficial Owner's) U.S. taxpayer identification
number (Social Security Number) is .
B. Corporate, Partnership or Other Entity as Beneficial Owner
1. (Name of the Beneficial Owner) is not a
foreign corporation, foreign partnership, foreign trust or
foreign estate (as those terms are defined in the Code and
Treasury Regulations;
<PAGE>
F-2
2. The Beneficial Owner's office address and place of
incorporation (if applicable) is
; and
3. The Beneficial Owner's U.S. employer identification number is
.
Part II - Nominees
If the undersigned is the nominee for the Beneficial Owner, the undersigned
certifies that this certificate has been made in reliance upon information
contained in:
an IRS Form W-9
a form such as this or substantially similar
provided to the undersigned by an appropriate person and (i) the undersigned
agrees to notify the Trust at least thirty (30) days prior to the date that the
form relied upon becomes obsolete, and (ii) in connection with change in
Beneficial Owners, the undersigned agrees to submit a new Certificate of
Non-Foreign Status to the Trust promptly after such change.
Part III - Declaration
The undersigned, as the Beneficial Owner or a nominee thereof, agrees to
notify the Trust within sixty (60) days of the date that the Beneficial Owner
becomes a foreign person. The undersigned understands that this certificate may
be disclosed to the Internal Revenue Service by the Trust and any false
statement contained therein could be punishable by fines, imprisonment or both.
<PAGE>
F-3
Under penalties of perjury, I declare that I have examined this certificate
and to the best of my knowledge and belief it is true, correct and complete and
will further declare that I will inform the Trust of any change in the
information provided above, and, if applicable, I further declare that I have
the authority* to sign this document.
Name
Title (if applicable)
Signature and Date
*NOTE: If signed pursuant to a power of attorney, the power of attorney must
accompany this certificate.
<PAGE>
EXHIBIT G
FORM OF ERISA REPRESENTATION LETTER
_____________, 199__
Salomon Brothers Mortgage Securities VII, Inc.
Seven World Trade Center
New York, New York 10048
Wilmington Trust Company, as Owner Trustee
11 North Market Street
Rodney Square North
Wilmington, Delaware 19890
Norwest Bank Minnesota, National Association
11000 Broken Land Parkway
Columbia, Maryland 21044-3562
Attention: Corporate Trust Administration
Re: Wilshire REIT Trust Series 1998-1
Salomon Brothers Mortgage Securities VII, Inc.
Asset-Backed Certificates, Series 1998-11 (the "Certificates")
--------------------------------------------------------------
Ladies and Gentlemen:
__________________________________ (the "Transferee") intends to
acquire from _____________________ (the "Transferor") a ____% Certificate
Percentage Interest of Salomon Brothers Mortgage Securities VII, Inc.
Asset-Backed Certificates, Series 1998-11 (the "Certificates"), issued pursuant
to an Amended and Restated Trust Agreement (the "Trust Agreement"), dated as of
September 1, 1998, between Salomon Brothers Mortgage Securities VII, Inc. as
depositor (the "Depositor") and Wilmington Trust Company as trustee (the "Owner
Trustee"). Capitalized terms used herein and not otherwise defined shall have
the meanings assigned thereto in the Trust Agreement.
The Transferee hereby certifies, represents and warrants to, and covenants
with, the Company, the Owner Trustee, the Certificate Registrar, the Master
Servicer and the Sub-Servicers that either:
(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 of
ERISA
<PAGE>
G-2
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, 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 Owner Trustee
or the Certificate Registrar to any obligation in addition to those
undertaken in the Trust 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>
G-3
(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.
(3) The Transferee is familiar with the prohibited transaction
restrictions and fiduciary responsibility requirements of Sections 406 and
407 of ERISA and Section 4975 of the Code and understands that each of the
parties to which this certification is made is relying and will continue to
rely on the statements made herein.
Very truly yours,
By:_____________________
Name:
Title:
<PAGE>
EXHIBIT H
FORM OF REPRESENTATION LETTER
_____________, 199__
Salomon Brothers Mortgage Securities VII, Inc.
Seven World Trade Center
New York, New York 10048
Wilmington Trust Company, as Owner Trustee
11 North Market Street
Rodney Square North
Wilmington, Delaware 19890
Norwest Bank Minnesota, National Association
11000 Broken Land Parkway
Columbia, Maryland 21044-3562
Attention: Corporate Trust Administration
Re: Wilshire REIT Trust Series 1998-1
Salomon Brothers Mortgage Securities VII, Inc.
Asset-Backed Certificates, Series 1998-11 (the "Certificates")
--------------------------------------------------------------
Ladies and Gentlemen:
__________________________________ (the "Transferee") intends to
acquire from _____________________ (the "Transferor") a ___% Certificate
Percentage Interest of Salomon Brothers Mortgage Securities VII, Inc.
Asset-Backed Certificates, Series 1998-11 (the "Certificates"), issued pursuant
to an Amended and Restated Trust Agreement (the "Trust Agreement"), dated as of
September 1, 1998 between Salomon Brothers Mortgage Securities VII, Inc. as
depositor (the "Depositor") and Wilmington Trust Company, as trustee (the "Owner
Trustee"). Capitalized terms used herein and not otherwise defined shall have
the meanings assigned thereto in the Trust Agreement.
The Transferee hereby certifies, represents and warrants to, and
covenants with, the Depositor, the Owner Trustee, the Certificate Registrar and
the Master Servicer that:
(1) the Transferee is acquiring the Certificate for its own behalf and
is not acting as agent or custodian for any other person or entity in
connection with such acquisition; and
(2) the Transferee is not a partnership, grantor trust or S
corporation for federal income tax purposes, or, if the Transferee is a
partnership, grantor trust or S corporation for federal income tax
purposes, the Certificates are not more than 50% of the assets of the
partnership, grantor trust or S corporation.
<PAGE>
H-2
Very truly yours,
By:______________________
Name:
Title:
<PAGE>
EXHIBIT I
INITIAL TRUST AGREEMENT
EXHIBIT 4.5
________________________________________________________________________________
________________________________________________________________________________
================================================================================
WILSHIRE REIT TRUST SERIES 1998-1
Issuer
and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
Indenture Trustee
___________________________________
INDENTURE
Dated as of September 1, 1998
___________________________________
ASSET-BACKED FLOATING RATE NOTES
SERIES 1998-11
___________________
________________________________________________________________________________
________________________________________________________________________________
================================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
Section Page
- ------- ----
ARTICLE I
Definitions
1.01 Definitions...........................................................3
1.02 Incorporation by Reference of Trust Indenture Act.....................3
1.03 Rules of Construction.................................................3
ARTICLE II
Original Issuance of Notes
2.01. Form...................................................................5
2.02. Execution, Authentication and Delivery.................................5
2.03. Acceptance of Mortgage Loans by Indenture Trustee......................6
ARTICLE III
Covenants
3.01. Collection of Payments With Respect to the Mortgage Loans.............11
3.02. Maintenance of Office or Agency.......................................11
3.03. Money For Payments to be Held in Trust; Paying Agent..................11
3.04. Existence.............................................................12
3.05. Payment of Interest And Principal.....................................13
3.06. Allocation of Realized Losses.........................................17
3.07. Protection of Trust Estate............................................17
3.08. Opinions As to Trust Estate...........................................18
3.09. Performance of Obligations............................................18
3.10. Negative Covenants....................................................19
3.11. Annual Statement as to Compliance.....................................19
3.12. [Reserved]............................................................19
3.13. Representations and Warranties Concerning the Mortgage Loans..........19
3.14. Amendments to Servicing Agreements....................................20
3.15. Servicers as Agent and Bailee of the Indenture Trustee................20
3.16. Investment Company Act................................................20
3.17. Issuer May Consolidate, Etc...........................................20
3.18. Successor or Transferee...............................................22
3.19. No Other Business.....................................................22
3.20. No Borrowing..........................................................22
3.21. Guarantees, Loans, Advances and Other Liabilities.....................22
3.22. Capital Expenditures..................................................23
-ii-
<PAGE>
3.23. [Reserved]............................................................23
3.24. Restricted Payments...................................................23
3.25. Notice of Events of Default...........................................23
3.26. Further Instruments and Acts..........................................23
3.27. Statements to Noteholders.............................................23
ARTICLE IV
The Notes; Satisfaction and Discharge of Indenture
4.01 The Notes.............................................................24
4.02 Registration of And Limitations on Transfer and Exchange of Notes;
Appointment of Certificate Registrar..................................24
4.03 Mutilated, Destroyed, Lost or Stolen Notes............................25
4.04 Persons Deemed Owners.................................................26
4.05 Cancellation..........................................................26
4.06 Book-Entry Notes......................................................26
4.07 Notices to Depository.................................................27
4.08 Definitive Notes......................................................27
4.09 Tax Treatment.........................................................27
4.10 Satisfaction and Discharge Of Indenture...............................28
4.11 Application of Trust Money............................................29
4.12 Repayment of Monies Held by Paying Agent..............................29
4.13 Temporary Notes.......................................................29
ARTICLE V
Default and Remedies
5.01 Events of Default.....................................................30
5.02 Acceleration of Maturity; Rescission and Annulment....................30
5.03 Collection of Indebtedness And Suits for Enforcement By
Indenture Trustee.....................................................31
5.04 Remedies; Priorities..................................................33
5.05 Optional Preservation of the Trust Estate.............................35
5.06 Limitation of Suits...................................................36
5.07 Unconditional Rights of Noteholders to Receive Principal and Interest.36
5.08 Restoration of Rights and Remedies....................................36
5.09 Rights and Remedies Cumulative........................................37
5.10 Delay or Omission Not a Waiver........................................37
5.11 Control by Noteholders................................................37
5.12 Waiver of Past Defaults...............................................38
5.13 Undertaking for Costs.................................................38
5.14 Waiver of Stay or Extension Laws......................................38
5.15 Sale of Trust Estate..................................................38
5.16 Action on Notes.......................................................40
-iii-
<PAGE>
ARTICLE VI
The Indenture Trustee
6.01 Duties of Indenture Trustee...........................................42
6.02 Rights of Indenture Trustee...........................................43
6.03 Individual Rights of Indenture Trustee................................44
6.04 Indenture Trustee's Disclaimer........................................44
6.05 Notice of Event of Default............................................44
6.06 Tax Administration of the Issuer......................................44
6.07 Payment of Fees, Compensation and Indemnity...........................44
6.08 Replacement of Indenture Trustee......................................45
6.09 Successor Indenture Trustee by Merger.................................46
6.10 Appointment of Co-indenture Trustee or Separate Indenture Trustee.....46
6.11 Eligibility; Disqualification.........................................47
6.12 Preferential Collection of Claims Against Issuer......................48
6.13 Representations and Warranties........................................48
6.14 Directions to Indenture Trustee.......................................48
6.15 The Agents............................................................49
6.16 Appointment Of Custodians.............................................49
ARTICLE VII
Noteholders' Lists and Reports
7.01. Issuer to Furnish Indenture Trustee Names and Addresses of
Noteholders...........................................................49
7.02. Preservation of Information; Communications to Noteholders............49
7.03. Reports by the Indenture Trustee; Issuer Fiscal Year..................50
7.04. Reports by Indenture Trustee..........................................51
7.05. Statements to Noteholders.............................................52
7.06. Books and Records.....................................................54
ARTICLE VIII
Accounts, Disbursements and Releases
8.01 Collection of Money...................................................55
8.02 Trust Accounts........................................................55
8.03 Officer's Certificate.................................................55
8.04 Termination Upon Payment to Noteholders...............................56
8.05 Release of Trust Estate...............................................56
8.06 Surrender of Notes Upon Final Payment.................................56
8.07 Optional Redemption of the Notes......................................56
-iv-
<PAGE>
ARTICLE IX
Supplemental Indentures
9.01 Supplemental Indentures Without Consent of Noteholders................58
9.02 Supplemental Indentures With Consent of Noteholders...................59
9.03 Execution of Supplemental Indentures..................................60
9.04 Effect of Supplemental Indenture......................................61
9.05 Conformity with Trust Indenture Act...................................61
9.06 Reference in Notes to Supplemental Indentures.........................61
ARTICLE X
Miscellaneous
10.01 Compliance Certificates and Opinions, etc.............................62
10.02 Form of Documents Delivered to Indenture Trustee......................63
10.03 Acts of Noteholders...................................................64
10.04 Notices, Etc., to Indenture Trustee, Issuer and Rating Agencies.......64
10.05 Notices to Noteholders; Waiver........................................65
10.06 Conflict with Trust Indenture Act.....................................66
10.07 Effect of Headings....................................................66
10.08 Successors and Assigns................................................66
10.09 Separability..........................................................66
10.10 Legal Holidays........................................................67
10.11 Governing Law.........................................................67
10.12 Counterparts..........................................................67
10.13 Recording of Indenture................................................67
10.14 Issuer Obligation.....................................................67
10.15 No Petition...........................................................67
10.16 Inspection............................................................68
10.17 Limited Third-Party Beneficiary.......................................68
-v-
<PAGE>
EXHIBITS
Appendix A Definitions
Exhibit A-1 Form of Class A Note
Exhibit A-2 Form of Class M-1 Note
Exhibit A-3 Form of Class M-2 Note
Exhibit A-4 Form of Class M-3 Note
Exhibit B-1 Form of Trustee's Initial Certification
Exhibit B-2 Form of Trustee's Final Certification
Exhibit C Form of Custodial Agreement
Schedule 1 Mortgage Loan Schedule
Schedule 2 Schedule of Mortgage Loans from Series 1996-LB3
-vi-
<PAGE>
This Indenture, dated as of September 1, 1998, between Wilshire REIT
Trust Series 1998-1, a Delaware business trust as Issuer (the "Issuer") and
Norwest Bank Minnesota, National Association, a national banking association as
Indenture Trustee (the "Indenture Trustee"),
WITNESSETH THAT:
Each party hereto agrees as follows for the benefit of the other party
and for the benefit of the Holders of the Salomon Brothers Mortgage Securities
VII, Inc. Asset-Backed Floating Rate Notes, Series 1998-11 (the "Notes").
GRANTING CLAUSE
The Issuer hereby Grants to the Indenture Trustee at the Closing Date,
as trustee for the benefit of the Holders of the Notes and Financial Security
Assurance Inc., all of the Issuer's right, title and interest in and to whether
now existing or hereafter created by (a) the Original Mortgage Loans, the
Qualified Substitute Mortgage Loans and the proceeds thereof and all rights
under the Related Documents (including the related Mortgage Files); (b) all
funds on deposit from time to time in the Collection Accounts allocable to the
Mortgage Loans excluding any investment income from such funds; (c) all funds on
deposit from time to time in the Payment Account and in all proceeds thereof,
including any income on funds deposited in, or investments made with funds
deposited in, the Payment Account, which income shall belong to, and be for the
account of, the Indenture Trustee; (d) all rights under the (i) Mortgage Loan
Purchase Agreement as assigned to the Issuer, (ii) the Ownership Transfer
Agreement as assigned to the Issuer, (iii) the Servicing Agreements and (iv) any
title and hazard insurance policies with respect to the Mortgaged Properties;
and (e) all present and future claims, demands, causes and choses in action in
respect of any or all of the foregoing and all payments on or under, and all
proceeds of every kind and nature whatsoever in respect of, any or all of the
foregoing and all payments on or under, and all proceeds of every kind and
nature whatsoever in the conversion thereof, voluntary or involuntary, into cash
or other liquid property, all cash proceeds, accounts, accounts receivable,
notes, drafts, acceptances, checks, deposit accounts, rights to payment of any
and every kind, and other forms of obligations and receivables, instruments and
other property which at any time constitute all or part of or are included in
the proceeds of any of the foregoing (collectively, the "Trust Estate" or the
"Collateral").
The foregoing Grant is made in trust to secure (i) the payment of
principal of and interest on, and any other amounts owing in respect of, the
Notes, (ii) the payment of the Expense Fee to Financial Security Assurance Inc.,
(iii) the payment of all other amounts payable under this Indenture and (iv)
compliance with the provisions of this Indenture, all as provided in this
Indenture.
The Indenture Trustee, as trustee on behalf of the Holders of the
Notes, acknowledges such Grant, accepts the trust under this Indenture in
accordance with the provisions hereof and agrees to perform its duties as
Indenture Trustee as required herein.
The Indenture Trustee further acknowledges that in the event (i) the transfer of
the Mortgage Loans from the Seller to the Transferor pursuant to the Mortgage
Loan Purchase
<PAGE>
Agreement is determined to be a financing; (ii) the transfer of the Mortgage
Loans from the Transferor to the Depositor pursuant to the Ownership Transfer
Agreement is determined to be a financing; and/or (iii) the transfer of the
Mortgage Loans from the Depositor to the Issuer pursuant to the Owner Trust
Agreement is determined to be a financing, then in each case the Indenture
Trustee holds the Mortgage Loans as the designee and bailee of the Transferor,
the Depositor and the Issuer, respectively, subject however, in each case, to a
prior lien in favor of the Noteholders pursuant to the terms of this Indenture
(and a prior lien in favor of Financial Security Assurance Inc, to the extent of
the Expense Fee).
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ARTICLE I
Definitions
Section 1.01. DEFINITIONS. For all purposes of this Indenture, except as
otherwise expressly provided herein or unless the context otherwise requires,
capitalized terms not otherwise defined herein shall have the meanings assigned
to such terms in the definitions attached hereto as Appendix A, which is
incorporated by reference herein. All other capitalized terms used herein shall
have the meanings specified herein.
Section 1.02. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT. Whenever
this Indenture refers to a provision of the Trust Indenture Act (the "TIA"), the
provision is incorporated by reference in and made a part of this Indenture. The
following TIA terms used in this Indenture have the following meanings:
"Commission" means the Securities and Exchange Commission.
"indenture securities" means the Notes.
"indenture security holder" means a Noteholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the
Indenture Trustee.
"obligor" on the indenture securities means the Issuer and any
other obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA by reference to another statute or defined by Commission rules,
have the meanings assigned to them by such definitions.
Section 1.03. RULES OF CONSTRUCTION. Unless the context otherwise
requires:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the meaning
assigned to it in accordance with generally accepted accounting principles
as in effect from time to time;
(iii) "or" is not exclusive;
(iv) "including" means including without limitation;
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(v) words in the singular include the plural and words in the
plural include the singular; and
(vi) any agreement, instrument or statute defined or referred to
herein or in any instrument or certificate delivered in connection herewith
means such agreement, instrument or statute as from time to time amended,
modified or supplemented and includes (in the case of agreements or
instruments) references to all attachments thereto and instruments
incorporated therein; references to a Person are also to its permitted
successors and assigns.
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ARTICLE II
Original Issuance of Notes
Section 2.01. FORM. The Notes, together with the Indenture Trustee's
certificate of authentication, shall be in substantially the forms set forth in
Exhibits A-1 through A-4, with such appropriate insertions, omissions,
substitutions and other variations as are required or permitted by this
Indenture.
The Notes shall be typewritten, printed, lithographed or engraved or
produced by any combination of these methods (with or without steel engraved
borders).
The terms of the Notes set forth in Exhibits A-1 through A-4 are part of
the terms of this Indenture.
Section 2.02. EXECUTION, AUTHENTICATION AND DELIVERY. The Notes shall be
executed on behalf of the Issuer by any of its Authorized Officers. The
signature of any such Authorized Officer on the Notes may be manual or
facsimile.
Notes bearing the manual or facsimile signature of individuals who were at
any time Authorized Officers of the Issuer shall bind the Issuer,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Notes or did not hold
such offices at the date of such Notes.
The Indenture Trustee shall upon Issuer Request authenticate and deliver
Notes for original issue in an aggregate initial Note Balance of $374,189,000.
The Notes shall be divided among four classes, having designations, initial Note
Balances, Note Interest Rates and Final Maturity Dates as follows:
Designation Note Interest Rate Initial Note Balance Final Maturity Date
----------- ------------------ -------------------- -------------------
Class A Variable(1) $309,824,000 October 2028
Class M-1 Variable(1) $26,280,000 October 2028
Class M-2 Variable(1) $16,186,000 October 2028
Class M-3 Variable(1) $21,899,000 October 2028
_________________
(1) Calculated in accordance with the definition of "Note Interest Rate" herein.
Each Note shall be dated the date of its authentication. The Notes shall be
issuable as registered Notes and the Notes shall be issuable in the minimum
initial Note Balances of $10,000 and in integral multiples of $1.00 in excess
thereof.
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No Note shall be entitled to any benefit under this Indenture or be valid
or obligatory for any purpose, unless there appears on such Note a certificate
of authentication substantially in the form provided for herein executed by the
Indenture Trustee by the manual signature of one of its authorized signatories,
and such certificate upon any Note shall be conclusive evidence, and the only
evidence, that such Note has been duly authenticated and delivered hereunder.
Section 2.03. ACCEPTANCE OF MORTGAGE LOANS BY INDENTURE TRUSTEE. (a) The
Indenture Trustee acknowledges receipt of (or, with respect to Mortgage Loans
subject to a Custodial Agreement, receipt by the respective Custodian as the
duly appointed agent of the Indenture Trustee), the following documents or
instruments with respect to each Mortgage Loan transferred to the Indenture
Trustee pursuant to the Granting Clause:
(i) the original Mortgage Note, endorsed in one of the following
forms: (i) "Pay to the order of Norwest Bank Minnesota, National
Association, as Trustee, without recourse," (ii) "Pay to the order of
Norwest Bank Minnesota, National Association, as Trustee for the
registered holders of Salomon Brothers Mortgage Securities VII, Inc.,
Series 1996-LB3, without recourse" or (iii) "Pay to the order of
Norwest Bank Minnesota, National Association, as Trustee for the
registered holders of Salomon Brothers Mortgage Securities VII, Inc.,
Series 1997-LB1, without recourse, in each case with all prior and
intervening endorsements showing a complete chain of endorsement from
the originator to the Person so endorsing in the form as provided
above;
(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 one of
the following forms: (i) "Norwest Bank Minnesota, National
Association, as Trustee", (ii) "Norwest Bank Minnesota, National
Association, as Trustee for the registered holders of Salomon Brothers
Mortgage Securities VII, Inc., Series 1996-LB3" or (iii) "Norwest Bank
Minnesota, National Association, as Trustee for the registered holders
of Salomon Brothers Mortgage Securities VII, Inc., Series 1997-LB1";
(iv) the original recorded Assignment or Assignments of the
Mortgage showing a complete chain of assignment from the originator to
the Person assigning the Mortgage to the Indenture Trustee as
contemplated by the immediately preceding clause (iii);
(v) the original or copies of each assumption, modification,
written assurance or substitution agreement, if any; and
(vi) the original lender's title insurance policy, together with
all endorsements or riders which were issued with or subsequent to the
issuance of such policy, insuring the priority of the Mortgage as a
first lien on the Mortgaged
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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 Issuer, at the expense of the Seller, shall promptly (and in no
event later than five Business Days following the later of the Closing Date and
the date of receipt by the Issuer of the recording information for a Mortgage)
submit or cause to be submitted for recording, at no expense to the Trust
Estate, the Indenture Trustee or the Owner Trustee, in the appropriate public
office for real property records, each Assignment referred to in Sections
2.03(a)(iii) and (a)(iv) above. In the event that any such Assignment is lost or
returned unrecorded because of a defect therein, the Issuer, at the expense of
the Seller, shall promptly prepare or cause to be prepared a substitute
Assignment or cure or cause to be cured such defect, as the case may be, and
thereafter cause each such Assignment to be duly recorded.
If any of the documents referred to in Sections 2.03(a)(ii), (a)(iii)
or (a)(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 Issuer to deliver such documents shall be
deemed to be satisfied upon (1) delivery to the Indenture Trustee, or to the
appropriate Custodian on behalf of the Indenture Trustee, of a copy of each such
document certified by the Seller 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 Seller, delivery to the Indenture Trustee, or to the
appropriate Custodian on behalf of the Indenture Trustee, promptly upon receipt
thereof of either the original or a copy of such document certified by the
applicable public recording office to be a true and complete copy of the
original. If the original lender's title insurance policy was not delivered
pursuant to Section 2.03(a)(vi) above, the Issuer shall deliver or cause to be
delivered to the Indenture Trustee, or to the appropriate Custodian on behalf of
the Indenture Trustee, promptly after receipt thereof, the original lender's
title insurance policy. The Issuer shall deliver or cause to be delivered to the
Indenture Trustee, or to the appropriate Custodian on behalf of the Indenture
Trustee, promptly upon receipt thereof any other original documents constituting
a part of a Mortgage File received with respect to any Mortgage Loan, including,
but not limited to, any original documents evidencing an assumption or
modification of any Mortgage Loan.
All original documents relating to the Mortgage Loans that are not
delivered to the Indenture Trustee, or to the appropriate Custodian on behalf of
the Indenture Trustee, are and shall be held by or on behalf of the Seller, the
Transferor, the Depositor or the Issuer, as the case may be, in trust for the
benefit of the Indenture Trustee on behalf of the Noteholders. 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
Indenture Trustee, or to the appropriate Custodian on behalf of the Indenture
Trustee. Any such original document delivered to or held by the Issuer 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 Seller.
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(b) Subject to the provisions of Section 2.03(a) and subject to any
exceptions noted on the exception report described in the next paragraph below,
the Indenture Trustee acknowledges receipt (or, with respect to Mortgage Loans
subject to a Custodial Agreement, receipt by the respective Custodian as the
duly appointed agent of the Indenture Trustee) of the documents referred to in
Section 2.03(a) (other than such documents described in Section 2.03(a)(v))
above and all other assets included in the definition of the "Trust Estate" as
set forth in the Granting Clause of this Indenture (to the extent of amounts
deposited into the Payment Account) and declares that it, or such Custodian as
its agent, holds and will hold such documents and the other documents delivered
to it constituting the Mortgage File, and that it holds or will hold all such
assets and such other assets included in the definition of the "Trust Estate" in
trust for the exclusive use and benefit of all present and future Noteholders.
(c) The Indenture Trustee agrees, for the benefit of the Noteholders,
to review (or cause a Custodian on its behalf to review) each Mortgage File on
or before the Closing Date and to certify in substantially the form attached
hereto as Exhibit B-1 (or cause the Custodian to certify in the form of the
Initial Certification attached to the Custodial Agreement) that, as to each
Mortgage Loan listed in the Mortgage Loan Schedule (other than any Mortgage Loan
paid in full or any Mortgage Loan specifically identified in the exception
report annexed thereto as not being covered by such certification), (i) all
documents constituting part of such Mortgage File (other than such documents
described in Section 2.03(a)(v)) required to be delivered to it pursuant to this
Indenture are in its possession, (ii) such documents have been reviewed by it or
such Custodian and appear regular on their face and relate to such Mortgage
Loan, (iii) based on its or the Custodian's examination and only as to the
foregoing, the information set forth in the Mortgage Loan Schedule that
corresponds to items (i) through (iii), (vi), (ix), (x), (xiii), (xvi) and
(xvii) through (xx) 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 Indenture Trustee or such Custodian was
under no duty or obligation (i) to inspect, review or examine any such
documents, instruments, certificates or other papers to determine whether they
are genuine, enforceable, or appropriate for the represented purpose or whether
they have actually been recorded or that they are other than what they purport
to be on their face, or (ii) to determine whether any Mortgage File should
include any of the documents specified in Section 2.03(a)(v).
Prior to the first anniversary date of this Indenture, the Indenture
Trustee shall deliver to the Seller, the Depositor and the Issuer a final
certification in the form annexed hereto as Exhibit B-2 (or shall cause the
Custodian to deliver to the Indenture Trustee, the Seller, the Depositor and the
Issuer a final certification in the form attached to the Custodial Agreement)
evidencing the completeness of the Mortgage Files, with any applicable
exceptions noted thereon.
If in the process of reviewing the Mortgage Files and making or
preparing, as the case may be, the certifications referred to above, the
Indenture Trustee or any Custodian finds any document or documents constituting
a part of a Mortgage File to be missing or defective in any material respect, at
the conclusion of its review the Indenture Trustee (or a Custodian on behalf of
the Indenture Trustee) shall so notify the Seller, the Issuer and the Depositor.
In addition, upon the discovery by the Issuer or the Indenture Trustee of a
breach of any of the representations and warranties made by the Seller in the
Mortgage Loan Purchase Agreement in respect of any
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Mortgage Loan which materially adversely affects such Mortgage Loan or the
interests of the related Noteholders in such Mortgage Loan, the party
discovering such breach shall give prompt written notice to the other parties.
The Indenture Trustee (or a Custodian on behalf of the Indenture
Trustee) shall, at the written request and expense of any Noteholder, provide a
written report to such Noteholder of all Mortgage Files released to the related
Servicer for servicing purposes.
(d) As to any Deleted Mortgage Loan for which the Seller substitutes a
Qualified Substitute Mortgage Loan or Loans in accordance with the requirements
of the Mortgage Loan Purchase Agreement and the related Servicing Agreement,
such substitution shall be effected by the Issuer delivering or causing to be
delivered to the Indenture Trustee (or a Custodian on behalf of the Indenture
Trustee), for such Qualified Substitute Mortgage Loan or Loans, the Mortgage
Note, the Mortgage, the Assignment to the Indenture Trustee, and such other
documents and agreements, with all necessary endorsements thereon, as are
required by Section 2.03(a), together with an Officers' Certificate from the
Seller 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 each such substitution. The
Indenture Trustee (or a Custodian on behalf of the Indenture 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 2.03(c) and deliver to the Seller, the Depositor and the Issuer, with
respect to such Qualified Substitute Mortgage Loan or Loans, a certification
substantially in the form attached hereto as Exhibit B-1 (or cause the Custodian
to certify in the form of the Initial Certification attached to the Custodial
Agreement), with any applicable exceptions noted thereon. Within one year of the
date of substitution, the Indenture Trustee shall deliver to the Seller, the
Issuer and the Depositor a certification substantially in the form of Exhibit
B-2 hereto with respect to such Qualified Substitute Mortgage Loan or Loans (or
shall cause the Custodian to deliver to the Indenture Trustee, the Seller, the
Depositor and the Issuer a final certification in the form attached to the
Custodial Agreement), with any applicable exceptions noted thereon. Monthly
Payments due with respect to Qualified Substitute Mortgage Loans in the month of
substitution are not part of the Trust Estate and will be retained by the
Seller. For the month of substitution, payments to Noteholders will reflect the
Monthly Payment due on such Deleted Mortgage Loan on the Due Date in the month
of substitution, and the Seller shall thereafter be entitled to retain all
amounts subsequently received in respect of such Deleted Mortgage Loan. The
Indenture Trustee shall give or cause to be given written notice to the
Noteholders 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 Indenture and the substitution of the Qualified Substitute
Mortgage Loan or Loans. Upon such substitution, such Qualified Substitute
Mortgage Loan or Loans shall constitute part of the Trust Estate and shall be
subject in all respects to the terms of this Indenture, the related Servicing
Agreement and the Mortgage Loan Purchase Agreement, including all applicable
representations and warranties thereof included in the Mortgage Loan Purchase
Agreement as of the date of substitution.
For any month in which the Seller substitutes one or more Qualified
Substitute Mortgage Loans for one or more Deleted Mortgage Loans, the related
Servicer or Master Servicer
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(as provided in the related Servicing Agreement) will determine the amount (with
respect to each Qualified Substitute Mortgage Loan, the "Substitution Shortfall
Amount"), if any, by which the Purchase Price of each such Deleted Mortgage Loan
exceeds, 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 Mortgage
Loan Remittance Rate. On the date of such substitution the Seller will deliver
or cause to be delivered to the related Servicer or Master Servicer (as provided
in the related Servicing Agreement) for deposit in the related Collection
Account an amount equal to the applicable Substitution Shortfall Amounts, if
any.
(e) The Indenture Trustee or a Custodian on its behalf, upon receipt of
written certification from the related Servicer or Master Servicer (as provided
in the related Servicing Agreement) of deposit of the Purchase Price, in the
case of a repurchased Mortgage Loan or upon receipt of the related Qualified
Substitute Mortgage Loan or Loans and certification from the related Servicer or
Master Servicer (as provided in the related Servicing Agreement) of deposit of
the applicable Substitution Shortfall Amounts, shall release to the Seller the
related Mortgage File or Files and shall execute and deliver such instruments of
transfer or assignment, in each case without recourse, as the Seller shall
furnish to it and as shall be necessary to vest in the Seller any Mortgage Loan
released pursuant hereto, and the Indenture Trustee shall have no further
responsibility with regard to such Mortgage File.
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ARTICLE III
Covenants
Section 3.01. COLLECTION OF PAYMENTS WITH RESPECT TO THE MORTGAGE LOANS.
The Indenture Trustee shall establish and maintain an Eligible Account (the
"Payment Account"), held in trust for the benefit of the Noteholders. The
Indenture Trustee shall, subject to the terms of this paragraph, deposit in the
Payment Account, on the date of receipt (if received prior to 3:00 p.m. Eastern
Time, and if not, then on the Business Day following receipt) from the related
Servicer, each remittance received by the Indenture Trustee with respect to the
Mortgage Loans. The Indenture Trustee shall make all payments of principal of
and interest on the Notes, subject to Section 3.03, as provided in Section 3.05
from monies on deposit in the Payment Account.
Section 3.02. MAINTENANCE OF OFFICE OR AGENCY. The Issuer will maintain
within the United States of America, an office or agency where, subject to
satisfaction of conditions set forth herein, Notes may be surrendered for
registration of transfer or exchange, and where notices and demands to or upon
the Issuer in respect of the Notes and this Indenture may be served. The Issuer
hereby initially appoints the Indenture Trustee to serve as its agent for the
foregoing purposes. If at any time the Issuer shall fail to maintain any such
office or agency or shall fail to furnish the Indenture Trustee with the address
thereof, such surrenders, notices and demands may be made or served at the
Corporate Trust Office of the Indenture Trustee, and the Issuer hereby appoints
the Indenture Trustee as its agent to receive all such surrenders, notices and
demands.
Section 3.03. MONEY FOR PAYMENTS TO BE HELD IN TRUST; PAYING AGENT. (a) As
provided in Section 3.01, all payments of amounts due and payable with respect
to any Notes that are to be made from amounts withdrawn from the Payment Account
pursuant to Section 3.01 shall be made on behalf of the Issuer by the Indenture
Trustee or by the Paying Agent, and no amounts so withdrawn from the Payment
Account for payments of Notes shall be paid over to the Issuer except as
provided in this Section 3.03.
The Issuer will cause each Paying Agent other than the Indenture Trustee to
execute and deliver to the Indenture Trustee an instrument in which such Paying
Agent shall agree with the Indenture Trustee (and if the Indenture Trustee acts
as Paying Agent it hereby so agrees), subject to the provisions of this Section
3.03, that such Paying Agent will:
(i) hold all sums held by it for the payment of amounts due with
respect to the Notes in trust for the benefit of the Persons entitled
thereto until such sums shall be paid to such Persons or otherwise disposed
of as herein provided and pay such sums to such Persons as herein provided;
(ii) give the Indenture Trustee notice of any default by the
Issuer of which it has actual knowledge in the making of any payment
required to be made with respect to the Notes;
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(iii) at any time during the continuance of any such default,
upon the written request of the Indenture Trustee, forthwith pay to the
Indenture Trustee all sums so held in trust by such Paying Agent;
(iv) immediately resign as Paying Agent and forthwith pay to the
Indenture Trustee all sums held by it in trust for the payment of Notes if
at any time it ceases to meet the standards required to be met by a Paying
Agent at the time of its appointment;
(v) comply with all requirements of the Code with respect to the
withholding from any payments made by it on any Notes of any applicable
withholding taxes imposed thereon and with respect to any applicable
reporting requirements in connection therewith; and
(vi) not commence a bankruptcy proceeding against the Issuer in
connection with this Indenture.
The Issuer may at any time, for the purpose of obtaining the satisfaction
and discharge of this Indenture or for any other purpose, by Issuer Request
direct any Paying Agent to pay to the Indenture Trustee all sums held in trust
by such Paying Agent, such sums to be held by the Indenture Trustee upon the
same trusts as those upon which the sums were held by such Paying Agent; and
upon such payment by any Paying Agent to the Indenture Trustee, such Paying
Agent shall be released from all further liability with respect to such money.
Subject to applicable laws with respect to escheat of funds, any money held
by the Indenture Trustee or any Paying Agent in trust for the payment of any
amount due with respect to any Note and remaining unclaimed for one year after
such amount has become due and payable shall be discharged from such trust and
be paid to the Issuer upon receipt of an Issuer Request; and the Holder of such
Note shall thereafter, as an unsecured general creditor, look only to the Issuer
for payment thereof (but only to the extent of the amounts so paid to the
Issuer), and all liability of the Indenture Trustee or such Paying Agent with
respect to such trust money shall thereupon cease; provided, however, that the
Indenture Trustee or such Paying Agent, before being required to make any such
repayment, shall at the expense and direction of the Issuer cause to be
published once, in an Authorized Newspaper, notice that such money remains
unclaimed and that, after a date specified therein, which shall not be less than
30 days from the date of such publication, any unclaimed balance of such money
then remaining will be repaid to the Issuer. The Indenture Trustee may also
adopt and employ, at the expense and direction of the Issuer, any other
reasonable means of notification of such repayment (including, but not limited
to, mailing notice of such repayment to Holders whose Notes have been called but
have not been surrendered for redemption or whose right to or interest in monies
due and payable but not claimed is determinable from the records of the
Indenture Trustee or of any Paying Agent, at the last address of record for each
such Holder).
Section 3.04. EXISTENCE. The Issuer will keep in full effect its existence,
rights and franchises as a business trust under the laws of the State of
Delaware (unless it becomes, or any
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successor Issuer hereunder is or becomes, organized under the laws of any other
state or of the United States of America, in which case the Issuer will keep in
full effect its existence, rights and franchises under the laws of such other
jurisdiction) and will obtain and preserve its qualification to do business in
each jurisdiction in which such qualification is or shall be necessary to
protect the validity and enforceability of this Indenture, the Notes, the
Mortgage Loans and each other instrument or agreement included in the Trust
Estate.
Section 3.05. PAYMENT OF INTEREST AND PRINCIPAL. (a)(1) On each Payment
Date, the Indenture Trustee shall withdraw from the Payment Account an amount
equal to the Current Interest Payment Amount and pay to the Noteholders the
following amounts, in the following order of priority:
(i) to the Holders of the Class A Notes, an amount equal to the
Interest Payment Amount allocable to the Class A Notes;
(ii) to the extent of the Current Interest Payment Amount
remaining after payment of the Interest Payment Amount allocable to the
Class A Notes, to the Holders of the Class M-1 Notes, an amount equal to
the Interest Payment Amount allocable to the Class M-1 Notes;
(iii) to the extent of the Current Interest Payment Amount
remaining after payment of the Interest Payment Amounts allocable to the
Class A Notes and the Class M-1 Notes, to the Holders of the Class M-2
Notes, an amount equal to the Interest Payment Amount allocable to the
Class M-2 Notes;
(iv) to the extent of the Current Interest Payment Amount
remaining after payment of the Interest Payment Amounts allocable to the
Class A Notes, the Class M-1 Notes and the Class M-2 Notes, to the Holders
of the Class M-3 Notes, an amount equal to the Interest Payment Amount
allocable to the Class M-3 Notes.
(2) On each Payment Date, the Indenture Trustee shall withdraw from
the Payment Account an amount equal to the Principal Payment Amount and pay to
the Noteholders the following amounts, in the following order of priority:
(i) On each Payment Date (a) prior to the Stepdown Date, (b) on
which a Trigger Event is in effect or (c) on the Final Maturity Date,
the Principal Payment Amount shall be distributed in the following
order of priority:
FIRST, to the Holders of the Class A Notes, until the Note
Balance of such Class has been reduced to zero;
SECOND, to the Holders of the Class M-1 Notes, until the Note
Balance of such Class has been reduced to zero;
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THIRD, to the Holders of the Class M-2 Notes, until the Note
Balance of such Class has been reduced to zero; and
FOURTH, to the Holders of the Class M-3 Notes, until the Note
Balance of such Class has been reduced to zero.
(ii) On each Payment Date (other than the Final Maturity Date)
(a) on or after the Stepdown Date and (b) on which a Trigger Event is
not in effect, the Principal Payment Amount shall be distributed in
the following order of priority:
FIRST, the lesser of (x) the Principal Payment Amount and (y) the
Class A Principal Payment Amount shall be distributed to the
Holders of the Class A Notes, until the Note Balance of such
Class has been reduced to zero;
SECOND, the lesser of (x) the excess of (i) the Principal Payment
Amount over (ii) the amount distributed to the Holders of the
Class A Notes pursuant to clause FIRST above and (y) the Class
M-1 Principal Payment Amount shall be distributed to the Holders
of the Class M-1 Notes, until the Note Balance of such Class has
been reduced to zero;
THIRD, the lesser of (x) the excess of (i) the Principal Payment
Amount over (ii) the sum of the amounts distributed to the
Holders of the Class A Notes pursuant to clause FIRST above and
to the Holders of the Class M-1 Notes pursuant to clause SECOND
above and (y) the Class M-2 Principal Payment Amount shall be
distributed to the Holders of the Class M-2 Notes, until the Note
Balance of such Class has been reduced to zero;
FOURTH, the lesser of (x) the excess of (i) the Principal Payment
Amount over (ii) the sum of the amounts distributed to the
Holders of the Class A Notes pursuant to clause FIRST above, to
the Holders of the Class M-1 Notes pursuant to clause SECOND
above and to the Holders of the Class M-2 Notes pursuant to
clause THIRD above and (y) the Class M-3 Principal Payment Amount
shall be distributed to the Holders of the Class M-3 Notes, until
the Note Balance of such Class has been reduced to zero.
(3) On each Payment 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 paid as follows:
(i) to the Holders of the Class or Classes of Notes 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 Note Balance of such Notes until the aggregate Note
Balance of such Notes is reduced to zero;
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(ii) to the Holders of the Class or Classes of Notes then
entitled to receive payments in respect of principal, in an
amount equal to the Overcollateralization Increase Amount,
applied to reduce the Note Balance of such Notes until the
aggregate Note Balance of such Notes is reduced to zero;
(iii) to the Holders of the Class A Notes, in an amount equal to
the Interest Carry Forward Amount allocable to such Class of
Notes;
(iv) to the Holders of the Class M-1 Notes, in an amount equal to
the Interest Carry Forward Amount allocable to such Class of
Notes;
(v) to the Holders of the Class M-1 Notes, in an amount equal to
the Allocated Realized Loss Amount allocable to such Class of
Notes;
(vi) to the Holders of the Class M-2 Notes, in an amount equal to
the Interest Carry Forward Amount allocable to such Class of
Notes;
(vii) to the Holders of the Class M-2 Notes, in an amount equal
to the Allocated Realized Loss Amount allocable to such Class of
Notes;
(viii) to the Holders of the Class M-3 Notes, in an amount equal
to the Interest Carry Forward Amount allocable to such Class of
Notes;
(ix) to the Holders of the Class M-3 Notes, in an amount equal to
the Allocated Realized Loss Amount allocable to such Class of
Notes; and
(x) any remaining amount, to the Issuer or the Certificate Paying
Agent as its designee, on behalf of the Certificateholders.
(b) On each Payment Date, the Indenture Trustee shall withdraw any
amounts then on deposit in the Payment Account that represent Prepayment Charges
collected by the Servicers in connection with voluntary Principal Prepayments in
full of any of the Mortgage Loans and shall distribute such amounts to the
Issuer or the Certificate Paying Agent as its designee, on behalf of the
Certificateholders. On each Payment Date, the Certificate Paying Agent shall
deposit in the Certificate Distribution Account all amounts it received pursuant
to this Section 3.05(b) and Section 3.05(a)(ix) above for the purpose of
distributing such funds to the Certificateholders after payment of trust
expenses to the Owner Trustee or the Indenture Trustee pursuant to the Owner
Trust Agreement.
(c) All payments made with respect to each Class of Notes on each
Payment Date shall be allocated PRO RATA among the Outstanding Notes in such
Class based on their respective Percentage Interests. Payments in respect of
each Class of Notes on each Payment Date will be made to the Holders of the
respective Class of record on the related Record Date (except as otherwise
provided in Section 3.05(e) or Section 8.07 respecting the final payment on such
Class),
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based on the aggregate Percentage Interest represented by their respective
Notes, 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 Indenture Trustee
in writing at least five Business Days prior to the Record Date immediately
prior to such Payment Date and is the registered owner of Notes having an
initial aggregate Note Balance that is in excess of the lesser of (i) $5,000,000
or (ii) two-thirds of the initial Note Balance of such Class of Notes, or
otherwise by check mailed by first class mail to the address of such Holder
appearing in the Note Register. The final distribution on each Note will be made
in like manner, but only upon presentment and surrender of such Note at the
Corporate Trust Office or such other location specified in the notice to
Noteholders of such final distribution.
Each payment with respect to a Book-Entry Note shall be paid to the
Depository, as Holder thereof, and the Depository shall be responsible for
crediting the amount of such payment 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 Note
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 Note Owners
that it represents. None of the Indenture Trustee, the Issuer, the Depositor,
the Owner Trustee, the Master Servicer or the Servicers shall have any
responsibility therefor except as otherwise provided by this Indenture or
applicable law.
(d) The rights of the Noteholders to receive payments in respect of
the Notes, and all interests of the Noteholders in such payments, shall be as
set forth in this Indenture. None of the Holders of any Class of Notes nor the
Indenture Trustee, the Issuer, the Depositor, the Owner Trustee, the Master
Servicer nor the Servicers shall in any way be responsible or liable to the
Holders of any other Class of Notes in respect of amounts properly previously
distributed on the Notes.
(e) The principal of each Note shall be due and payable in full on the
Final Maturity Date for such Note. All principal payments on the Notes shall be
made to the Noteholders entitled thereto in accordance with the Percentage
Interests represented by such Notes. Upon notice to the Indenture Trustee by the
Issuer, the Indenture Trustee shall notify the Person in whose name a Note is
registered at the close of business on the Record Date preceding the Final
Maturity Date or other final Payment Date (including any final Payment Date
resulting from any redemption pursuant to Section 8.07 hereof). Such notice
shall to the extent practicable be mailed no later than three Business Days
prior to such Final Maturity Date or other final Payment Date and shall specify
that payment of the principal amount and any interest due with respect to such
Note at the Final Maturity Date or other final Payment Date will be payable only
upon presentation and surrender of such Note and shall specify the place where
such Note may be presented and surrendered for such final payment. No interest
shall accrue on the Notes on or after the Final Maturity Date or any such other
final Payment Date.
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(f) Notwithstanding anything to the contrary herein, in no event shall
the Note Balance of any Class of Notes be reduced more than once in respect of
any particular amount both (a) allocated to such Note in respect of Realized
Losses pursuant to Section 3.06 and (b) paid to the Holder of such Note in
reduction of the Note Balance thereof pursuant to this Section 3.05 from Net
Monthly Excess Cashflow.
Section 3.06. ALLOCATION OF REALIZED LOSSES. (a) All Realized Losses on the
Mortgage Loans shall be allocated by the Indenture Trustee on each Payment Date
as follows: first, to Net Monthly Excess Cashflow; second, to the
Overcollateralized Amount, until such amount has been reduced to zero; third, to
the Class M-3 Notes, until the Note Balance thereof has been reduced to zero;
fourth, to the Class M-2 Notes, until the Note Balance thereof has been reduced
to zero; and fifth, to the Class M-1 Notes, until the Note Balance thereof has
been reduced to zero. All Realized Losses to be allocated to the Note Balances
of all Classes on any Payment Date shall be so allocated after the actual
payments to be made on such date as provided above. All references above to the
Note Balance of any Class of Notes shall be to the Note Balance of such Class
immediately prior to the relevant Payment Date, before reduction thereof by any
Realized Losses, in each case to be allocated to such Class of Notes, on such
Payment Date.
Any allocation of Realized Losses to a Subordinate Note on any Payment
Date shall be made by reducing the Note Balance thereof by the amount so
allocated. No allocations of any Realized Losses shall be made to the Note
Balances of the Class A Notes. Notwithstanding anything to the contrary
described herein, in no event will the Note Balance of any Note be reduced more
than once in respect of any particular amount (i) both allocable to such Notes
in respect of Realized Losses and (ii) payable as principal to the Holder of
such Notes from Net Monthly Excess Cashflow.
Section 3.07. PROTECTION OF TRUST ESTATE. (a) The Issuer will from time to
time prepare, execute and deliver all such supplements and amendments hereto and
all such financing statements, continuation statements, instruments of further
assurance and other instruments, and will take such other action necessary or
advisable to:
(i) maintain or preserve the lien and security interest (and the
priority thereof) of this Indenture or carry out more effectively the
purposes hereof;
(ii) perfect, publish notice of or protect the validity of any
Grant made or to be made by this Indenture;
(iii) cause the Issuer or the Servicers to enforce any of their
rights with respect to the Mortgage Loans; and
(iv) preserve and defend title to the Trust Estate and the rights
of the Indenture Trustee and the Noteholders in such Trust Estate against
the claims of all persons and parties.
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(b) Except as otherwise provided in this Indenture, the Indenture Trustee
shall not remove any portion of the Trust Estate that consists of money or is
evidenced by an instrument, certificate or other writing from the jurisdiction
in which it was held at the date of the most recent Opinion of Counsel delivered
pursuant to Section 3.08 hereof, unless the Indenture Trustee shall have first
received an Opinion of Counsel to the effect that the lien and security interest
created by this Indenture with respect to such property will continue to be
maintained after giving effect to such action or actions.
The Issuer hereby designates the Indenture Trustee its agent and
attorney-in-fact to sign any financing statement, continuation statement or
other instrument required to be signed pursuant to this Section 3.07 upon the
Issuer's preparation thereof and delivery to the Indenture Trustee.
Section 3.08. OPINIONS AS TO TRUST ESTATE. (a) On the Closing Date, the
Issuer shall furnish to the Indenture Trustee and the Owner Trustee an Opinion
of Counsel either stating that, in the opinion of such counsel, such action has
been taken with respect to the recording and filing of this Indenture, any
indentures supplemental hereto, and any other requisite documents, and with
respect to the execution and filing of any financing statements and continuation
statements, as are necessary to perfect and make effective the lien and first
priority security interest in the Collateral and reciting the details of such
action, or stating that, in the opinion of such counsel, no such action is
necessary to make such lien and first priority security interest effective.
(b) On or before September 1 in each calendar year, beginning in 1999, the
Issuer shall furnish to the Indenture Trustee an Opinion of Counsel at the
expense of the Issuer either stating that, in the opinion of such counsel, such
action has been taken with respect to the recording, filing, re-recording and
refiling of this Indenture, any indentures supplemental hereto and any other
requisite documents and with respect to the execution and filing of any
financing statements and continuation statements as is necessary to maintain the
lien and first priority security interest in the Collateral and reciting the
details of such action or stating that in the opinion of such counsel no such
action is necessary to maintain such lien and security interest. Such Opinion of
Counsel shall also describe the recording, filing, re-recording and refiling of
this Indenture, any indentures supplemental hereto and any other requisite
documents and the execution and filing of any financing statements and
continuation statements that will, in the opinion of such counsel, be required
to maintain the lien and security interest in the Collateral until December 31
in the following calendar year.
Section 3.09. PERFORMANCE OF OBLIGATIONS. (a) The Issuer will punctually
perform and observe all of its obligations and agreements contained in this
Indenture, the Basic Documents and in the instruments and agreements included in
the Trust Estate.
(b) The Issuer may contract with other Persons to assist it in performing
its duties under this Indenture, and any performance of such duties by a Person
identified to the Indenture Trustee in an Officer's Certificate of the Issuer
shall be deemed to be action taken by the Issuer.
(c) The Issuer will not take any action or permit any action to be taken by
others which would release any Person from any of such Person's covenants or
obligations under any of the
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documents relating to the Mortgage Loans or under any instrument included in the
Trust Estate, or which would result in the amendment, hypothecation,
subordination, termination or discharge of, or impair the validity or
effectiveness of, any of the documents relating to the Mortgage Loans or any
such instrument, except such actions as any Servicer is expressly permitted to
take in the related Servicing Agreement. The Indenture Trustee, as pledgee of
the Mortgage Loans, shall be able to exercise the rights of the Issuer to direct
the actions of any Servicer pursuant to the Servicing Agreements.
Section 3.10. NEGATIVE COVENANTS. So long as any Notes are Outstanding, the
Issuer shall not:
(i) except as expressly permitted by this Indenture, sell,
transfer, exchange or otherwise dispose of the Trust Estate, unless
directed to do so by the Indenture Trustee;
(ii) claim any credit on, or make any deduction from the
principal or interest payable in respect of, the Notes (other than amounts
properly withheld from such payments under the Code) or assert any claim
against any present or former Noteholder by reason of the payment of the
taxes levied or assessed upon any part of the Trust Estate;
(iii) (1) permit the validity or effectiveness of this Indenture
to be impaired, or permit the lien of this Indenture to be amended,
hypothecated, subordinated, terminated or discharged, or permit any Person
to be released from any covenants or obligations with respect to the Notes
under this Indenture except as may be expressly permitted hereby, (2)
permit any lien, charge, excise, claim, security interest, mortgage or
other encumbrance (other than the lien of this Indenture) to be created on
or extend to or otherwise arise upon or burden the Trust Estate or any part
thereof or any interest therein or the proceeds thereof or (3) permit the
lien of this Indenture not to constitute a valid first priority security
interest in the Trust Estate; or
(iv) waive or impair, or fail to assert rights under, the
Mortgage Loans, or impair or cause to be impaired the Issuer's interest in
the Mortgage Loans, the Mortgage Loan Purchase Agreement or any other Basic
Document, if any such action would materially and adversely affect the
interests of the Noteholders.
Section 3.11. ANNUAL STATEMENT AS TO COMPLIANCE. The Issuer will deliver
to the Indenture Trustee, within 120 days after the end of each fiscal year of
the Issuer (commencing with the fiscal year 1999), an Officer's Certificate
stating, as to the Authorized Officer signing such Officer's
Certificate, that:
(i) a review of the activities of the Issuer during such year and
of its performance under this Indenture has been made under such Authorized
Officer's supervision; and
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(ii) to the best of such Authorized Officer's knowledge, based on
such review, the Issuer has complied with all conditions and covenants
under this Indenture throughout such year, or, if there has been a default
in its compliance with any such condition or covenant, specifying each such
default known to such Authorized Officer and the nature and status thereof.
Section 3.12. [Reserved].
Section 3.13. REPRESENTATIONS AND WARRANTIES CONCERNING THE MORTGAGE LOANS.
The Indenture Trustee, as pledgee of the Mortgage Loans, has the benefit of the
representations and warranties made by the Seller in the Mortgage Loan Purchase
Agreement concerning the Seller and the Mortgage Loans and the right to enforce
the remedies against the Seller provided in such Mortgage Loan Purchase
Agreement to the same extent as though such representations and warranties were
made directly to the Indenture Trustee. If the Indenture Trustee has actual
knowledge of any breach of any representation or warranty made by the Seller in
the Mortgage Loan Purchase Agreement, the Indenture Trustee shall promptly
notify the Seller of such finding and the Seller's obligation to cure such
breach or repurchase or substitute for the related Mortgage Loan.
Section 3.14. AMENDMENTS TO SERVICING AGREEMENTS. The Issuer covenants with
the Indenture Trustee that it will not enter into any amendment or supplement to
the Servicing Agreements without the prior written consent of the Indenture
Trustee. The Indenture Trustee, as pledgee of the Mortgage Loans, may decline to
enter into or consent to any such supplement or amendment if the Noteholders'
rights, duties or immunities would be materially and adversely affected thereby.
The Indenture Trustee may, but shall not be obligated to, enter into any
amendment or supplement to the Servicing Agreements that affects the Indenture
Trustee's own rights, duties, liabilities or immunities under this Indenture or
otherwise.
Section 3.15. SERVICERS AS AGENT AND BAILEE OF THE INDENTURE TRUSTEE.
Solely for purposes of perfection under Section 9-305 of the Uniform Commercial
Code or other similar applicable law, rule or regulation of the state in which
such property is held by any Servicer, the Issuer and the Indenture Trustee
hereby acknowledge that such Servicer is acting as agent and bailee of the
Indenture Trustee in holding amounts on deposit in the related Collection
Account, as well as its agent and bailee in holding any Related Documents
released to such Servicer, and any other items constituting a part of the Trust
Estate which from time to time come into the possession of such Servicer. It is
intended that, by each Servicer's acceptance of such agency, the Indenture
Trustee, as a secured party of the Mortgage Loans, will be deemed to have
possession of such Related Documents, such monies and such other items for
purposes of Section 9-305 of the Uniform Commercial Code of the state in which
such property is held by the related Servicer.
Section 3.16. INVESTMENT COMPANY ACT. The Issuer shall not become an
"investment company" or under the "control" of an "investment company" as such
terms are defined in the Investment Company Act of 1940, as amended (or any
successor or amendatory statute), and the rules and regulations thereunder
(taking into account not only the general definition of the term "investment
company" but also any available exceptions to such general definition);
provided,
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however, that the Issuer shall be in compliance with this Section 3.16 if it
shall have obtained an order exempting it from regulation as an "investment
company" so long as it is in compliance with
the conditions imposed in such order.
Section 3.17. ISSUER MAY CONSOLIDATE, ETC. (a) The Issuer shall not
consolidate or merge with or into any other Person, unless:
(i) the Person (if other than the Issuer) formed by or surviving
such consolidation or merger shall be a Person organized and existing under
the laws of the United States of America or any state or the District of
Columbia and shall expressly assume, by an indenture supplemental hereto,
executed and delivered to the Indenture Trustee, in form reasonably
satisfactory to the Indenture Trustee, the due and punctual payment of the
principal of and interest on all Notes and to the Certificate Paying Agent,
on behalf of the Certificateholders and the performance or observance of
every agreement and covenant of this Indenture on the part of the Issuer to
be performed or observed, all as provided herein;
(ii) immediately after giving effect to such transaction, no
Event of Default shall have occurred and be continuing;
(iii) the Rating Agencies shall have notified the Issuer that
such transaction shall not cause the rating of the Notes to be reduced,
suspended or withdrawn;
(iv) the Issuer shall have received an Opinion of Counsel (and
shall have delivered a copy thereof to the Indenture Trustee) to the effect
that such transaction will not (A) adversely affect the status of the Notes
as indebtedness for federal income tax purposes, or (B) cause the Issuer to
be subject to an entity level tax for federal income tax purposes;
(v) any action that is necessary to maintain the lien and
security interest created by this Indenture shall have been taken; and
(vi) the Issuer shall have delivered to the Indenture Trustee an
Officer's Certificate and an Opinion of Counsel each stating that such
consolidation or merger and such supplemental indenture comply with this
Article III and that all conditions precedent herein provided for relating
to such transaction have been complied with (including any filing required
by the Exchange Act).
(b) The Issuer shall not convey or transfer any of its properties or
assets, including those included in the Trust Estate, to any Person, unless:
(i) the Person that acquires by conveyance or transfer the
properties and assets of the Issuer the conveyance or transfer of which is
hereby restricted shall (A) be a United States citizen or a Person
organized and existing under the laws of the United States of America or
any state, (B) expressly assume, by an indenture supplemental hereto,
executed and delivered to the Indenture Trustee, in form satisfactory to
the Indenture
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Trustee, the due and punctual payment of the principal of and interest on
all Notes and to the Certificate Paying Agent, on behalf of the
Certificateholders and the performance or observance of every agreement and
covenant of this Indenture on the part of the Issuer to be performed or
observed, all as provided herein, (C) expressly agree by means of such
supplemental indenture that all right, title and interest so conveyed or
transferred shall be subject and subordinate to the rights of the Holders
of the Notes, (D) unless otherwise provided in such supplemental indenture,
expressly agree to indemnify, defend and hold harmless the Issuer and the
Indenture Trustee against and from any loss, liability or expense arising
under or related to this Indenture and the Notes and (E) expressly agree by
means of such supplemental indenture that such Person (or if a group of
Persons, then one specified Person) shall make all filings with the
Commission (and any other appropriate Person) required by the Exchange Act
in connection with the Notes;
;
(ii) immediately after giving effect to such transaction, no
Default or Event of Default shall have occurred and be continuing;
(iii) the Rating Agencies shall have notified the Issuer that
such transaction shall not cause the rating of the Notes to be reduced,
suspended or withdrawn;
(iv) the Issuer shall have received an Opinion of Counsel (and
shall have delivered a copy thereof to the Indenture Trustee) to the effect
that such transaction will not (A) adversely affect the status of the Notes
as indebtedness for federal income tax purposes, or (B) cause the Issuer to
be subject to an entity level tax for federal income tax purposes;
(v) any action that is necessary to maintain the lien and
security interest created by this Indenture shall have been taken; and
(vi) the Issuer shall have delivered to the Indenture Trustee an
Officer's Certificate and an Opinion of Counsel each stating that such
conveyance or transfer and such supplemental indenture comply with this
Article III and that all conditions precedent herein provided for relating
to such transaction have been complied with (including any filing required
by the Exchange Act).
Section 3.18. SUCCESSOR OR TRANSFEREE. (a) Upon any consolidation or merger
of the Issuer in accordance with Section 3.17(a), the Person formed by or
surviving such consolidation or merger (if other than the Issuer) shall succeed
to, and be substituted for, and may exercise every right and power of, the
Issuer under this Indenture with the same effect as if such Person had been
named as the Issuer herein.
(b) Upon a conveyance or transfer of all the assets and properties of the
Issuer pursuant to Section 3.17(b), the Issuer will be released from every
covenant and agreement of this Indenture to be observed or performed on the part
of the Issuer with respect to the Notes immediately upon the delivery of written
notice to the Indenture Trustee of such conveyance or transfer.
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Section 3.19. NO OTHER BUSINESS. The Issuer shall not engage in any
business other than financing, purchasing, owning, selling and managing the
Mortgage Loans and the issuance of the Notes and Equity Certificates in the
manner contemplated by this Indenture and the Basic Documents and all activities
incidental thereto.
Section 3.20. NO BORROWING. The Issuer shall not issue, incur, assume,
guarantee or otherwise become liable, directly or indirectly, for any
indebtedness except for the Notes.
Section 3.21. GUARANTEES, LOANS, ADVANCES AND OTHER LIABILITIES. Except as
contemplated by this Indenture or the Basic Documents, the Issuer shall not make
any loan or advance or credit to, or guarantee (directly or indirectly or by an
instrument having the effect of assuring another's payment or performance on any
obligation or capability of so doing or otherwise), endorse or otherwise become
contingently liable, directly or indirectly, in connection with the obligations,
stocks or dividends of, or own, purchase, repurchase or acquire (or agree
contingently to do so) any stock, obligations, assets or securities of, or any
other interest in, or make any capital contribution to, any other Person.
Section 3.22. CAPITAL EXPENDITURES. The Issuer shall not make any
expenditure (by long- term or operating lease or otherwise) for capital assets
(either realty or personalty).
Section 3.23. [Reserved]
Section 3.24. RESTRICTED PAYMENTS. The Issuer shall not, directly or
indirectly, (i) pay any dividend or make any distribution (by reduction of
capital or otherwise), whether in cash, property, securities or a combination
thereof, to the Owner Trustee or any owner of a beneficial interest in the
Issuer or otherwise with respect to any ownership or equity interest or security
in or of the Issuer, (ii) redeem, purchase, retire or otherwise acquire for
value any such ownership or equity interest or security or (iii) set aside or
otherwise segregate any amounts for any such purpose; PROVIDED, HOWEVER, that
the Issuer may make, or cause to be made, (x) distributions to the Owner Trustee
and the Certificateholders as contemplated by, and to the extent funds are
available for such purpose under this Indenture and the Owner Trust Agreement
and (y) payments to the Servicers pursuant to the terms of the Servicing
Agreements. The Issuer will not, directly or indirectly, make payments to or
distributions from the Collection Account except in accordance with this
Indenture and the Basic Documents.
Section 3.25. NOTICE OF EVENTS OF DEFAULT. The Issuer shall give the
Indenture Trustee and the Rating Agencies prompt written notice of each Event of
Default hereunder and under the Owner Trust Agreement.
Section 3.26. FURTHER INSTRUMENTS AND ACTS. Upon request of the Indenture
Trustee, the Issuer will execute and deliver such further instruments and do
such further acts as may be reasonably necessary or proper to carry out more
effectively the purpose of this Indenture.
Section 3.27. STATEMENTS TO NOTEHOLDERS. On each Payment Date, the
Indenture Trustee and the Certificate Registrar shall forward by mail to each
Noteholder and Certificateholder,
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respectively, the statement prepared pursuant to Section 7.05 of this Indenture.
The Indenture Trustee shall have no responsibility to (i) verify information
provided by any Servicer to be included in such statement or (ii) include any
information required to be included in such statement if such Servicer has
failed to timely produce such information to the Indenture Trustee as required
pursuant to the related Servicing Agreement. In addition, or or prior to the
Expense Fee Termination Date, the Indenture Trustee shall forward by mail to
Financial Security Assurance Inc. the statement prepared pursuant to Section
7.05 of this Indenture.
ARTICLE IV
The Notes; Satisfaction and Discharge of Indenture
Section 4.01. THE NOTES. The Notes will be substantially in the forms
annexed hereto as Exhibits A-1 through A-4. The Notes of each Class will be
issuable in registered form only, in denominations of authorized Percentage
Interests as described in the definition thereof. Each Note will share ratably
in all rights of the related Class.
The Notes shall, on original issue, be executed on behalf of the Issuer by
the Owner Trustee, not in its individual capacity but solely as Owner Trustee,
authenticated by the Indenture Trustee and delivered by the Indenture Trustee to
or upon the order of the Issuer.
The Indenture Trustee may for all purposes (including the making of
payments due on the Notes) deal with the Depository as the authorized
representative of the Note Owners with respect to the Notes for the purposes of
exercising the rights of Noteholders hereunder. The rights of Note Owners with
respect to the Notes shall be limited to those established by law and agreements
between such Note Owners and the Depository Participants and brokerage firms
representing such Note Owners. Multiple requests and directions from, and votes
of, the Depository as Holder of the Notes with respect to any particular matter
shall not be deemed inconsistent if they are made with respect to different Note
Owners. The Indenture Trustee may establish a reasonable record date in
connection with solicitations of consents from or voting by Noteholders and
shall give notice to the Depository of such record date.
In the event The Depository Trust Company resigns or is removed as
Depository, the Indenture Trustee with the approval of the Issuer may appoint a
successor Depository. If no successor Depository has been appointed within 30
days of the effective date of the Depository's resignation or removal, each Note
Owner shall be entitled to notes representing the Notes it beneficially owns in
the manner prescribed in Section 4.08.
Section 4.02. REGISTRATION OF AND LIMITATIONS ON TRANSFER AND EXCHANGE OF
NOTES; APPOINTMENT OF CERTIFICATE REGISTRAR. The Issuer shall cause the
Indenture Trustee, as Note Registrar, to keep at the Corporate Trust Office a
Note Register in which, subject to such reasonable regulations as it may
prescribe, the Note Registrar shall provide for the registration of Notes and of
transfers and exchanges of Notes as herein provided.
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Subject to the restrictions and limitations set forth below, upon surrender
for registration of transfer of any Note at the Corporate Trust Office, the
Issuer shall execute and the Indenture Trustee shall authenticate and deliver,
in the name of the designated transferee or transferees, one or more new Notes
in authorized initial Note Balances evidencing the same aggregate Percentage
Interests.
Subject to the foregoing, at the option of the Noteholders, Notes may be
exchanged for other Notes of like tenor and in authorized initial Note Balances
evidencing the same aggregate Percentage Interests upon surrender of the Notes
to be exchanged at the Corporate Trust Office of the Note Registrar. Whenever
any Notes are so surrendered for exchange, the Issuer shall execute and the
Indenture Trustee shall authenticate and deliver the Notes which the Noteholder
making the exchange is entitled to receive. Each Note presented or surrendered
for registration of transfer or exchange shall (if so required by the Note
Registrar) be duly endorsed by, or be accompanied by a written instrument of
transfer in form reasonably satisfactory to the Note Registrar duly executed by
the Holder thereof or his attorney duly authorized in writing with such
signature guaranteed by a commercial bank or trust company located or having a
correspondent located in the City of New York or the city in which any Corporate
Trust Office is located. Notes delivered upon any such transfer or exchange will
evidence the same obligations, and will be entitled to the same rights and
privileges, as the Notes surrendered.
No service charge shall be made for any registration of transfer or
exchange of Notes, but the Note Registrar shall require payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any registration of transfer or exchange of Notes.
The Issuer hereby appoints the Indenture Trustee as Certificate Registrar
to keep at its Corporate Trust Office a Certificate Register pursuant to Section
3.09 of the Owner Trust Agreement in which, subject to such reasonable
regulations as it may prescribe, the Certificate Registrar shall provide for the
registration of Equity Certificates and of transfers and exchanges thereof
pursuant to Section 3.05 of the Owner Trust Agreement. The Indenture Trustee
hereby accepts such appointment.
Section 4.03. MUTILATED, DESTROYED, LOST OR STOLEN NOTES. If (a) any
mutilated Note is surrendered to the Indenture Trustee, or the Indenture Trustee
receives evidence to its satis faction of the destruction, loss or theft of any
Note, and (ii) there is delivered to the Indenture Trustee such security or
indemnity as may be required by it to hold the Issuer and the Indenture Trustee
harmless, then, in the absence of notice to the Issuer, the Note Registrar or
the Indenture Trustee that such Note has been acquired by a bona fide purchaser,
and provided that the requirements of Section 8-405 of the UCC are met, the
Issuer shall execute, and upon its request the Indenture Trustee shall
authenticate and deliver, in exchange for or in lieu of any such mutilated,
destroyed, lost or stolen Note, a replacement Note; provided, however, that if
any such destroyed, lost or stolen Note, but not a mutilated Note, shall have
become or within seven days shall be due and payable, instead of issuing a
replacement Note, the Issuer may pay such destroyed, lost or stolen Note when so
due or payable without surrender thereof. If, after the delivery of such
replacement Note or payment of a destroyed, lost or stolen Note pursuant to the
proviso to the preceding sentence, a bona fide purchaser of the original Note in
lieu of which such
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replacement Note was issued presents for payment such original Note, the Issuer
and the Indenture Trustee shall be entitled to recover such replacement Note (or
such payment) from the Person to whom it was delivered or any Person taking such
replacement Note from such Person to whom such replacement Note was delivered or
any assignee of such Person, except a bona fide purchaser, and shall be entitled
to recover upon the security or indemnity provided therefor to the extent of any
loss, damage, cost or expense incurred by the Issuer or the Indenture Trustee in
connection therewith.
Upon the issuance of any replacement Note under this Section 4.03, the
Issuer may require the payment by the Holder of such Note of a sum sufficient to
cover any tax or other governmental charge that may be imposed in relation
thereto and any other reasonable expenses (including the fees and expenses of
the Indenture Trustee) connected therewith.
Every replacement Note issued pursuant to this Section 4.03 in replacement
of any mutilated, destroyed, lost or stolen Note shall constitute an original
additional contractual obligation of the Issuer, whether or not the mutilated,
destroyed, lost or stolen Note shall be at any time enforceable by anyone, and
shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Notes duly issued hereunder.
The provisions of this Section 4.03 are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Notes.
Section 4.04. PERSONS DEEMED OWNERS. Prior to due presentment for
registration of transfer of any Note, the Issuer, the Indenture Trustee and any
agent of the Issuer or the Inden ture Trustee may treat the Person in whose name
any Note is registered (as of the day of determination) as the owner of such
Note for the purpose of receiving payments of principal of and interest, if any,
on such Note and for all other purposes whatsoever, whether or not such Note be
overdue, and none of the Issuer, the Indenture Trustee nor any agent of the
Issuer or the Indenture Trustee shall be affected by notice to the contrary.
Section 4.05. CANCELLATION. All Notes surrendered for payment, registration
of transfer, exchange or redemption shall, if surrendered to any Person other
than the Indenture Trustee, be delivered to the Indenture Trustee and shall be
promptly canceled by the Indenture Trustee. The Issuer may at any time deliver
to the Indenture Trustee for cancellation any Notes previously authenticated and
delivered hereunder which the Issuer may have acquired in any manner whatsoever,
and all Notes so delivered shall be promptly canceled by the Indenture Trustee.
No Notes shall be authenticated in lieu of or in exchange for any Notes canceled
as provided in this Section 4.05, except as expressly permitted by this
Indenture. All canceled Notes may be held or disposed of by the Indenture
Trustee in accordance with its standard retention or disposal policy as in
effect at the time unless the Issuer shall direct by an Issuer Request that they
be destroyed or returned to it; provided, however, that such Issuer Request is
timely and the Notes have not been previously disposed of by the Indenture
Trustee.
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Section 4.06. BOOK-ENTRY NOTES. The Notes, upon original issue, will be
issued as one or more Book-Entry Notes held by the Book-Entry Custodian or, if
appointed to hold such Notes as provided below, the Depository and registered in
the name of the Depository or its nominee and, except as provided below,
registration of such Notes may not be transferred by the Indenture Trustee
except to another Depository that agrees to hold such Notes for the respective
Note Owners with Ownership Interests therein. The Note Owners shall hold their
respective Ownership Interests in and to such Notes through the book-entry
facilities of the Depository and, except as provided in Section 4.08, shall not
be entitled to definitive, fully registered Notes ("Definitive Notes") in
respect of such Ownership Interests. All transfers by Note Owners of their
respective Ownership Interests in the Notes shall be made in accordance with the
procedures established by the Depository Participant or brokerage firm
representing such Note Owner. Each Depository Participant shall only transfer
the Ownership Interests in the Notes of Note Owners it represents or of
brokerage firms for which it acts as agent in accordance with the Depository's
normal procedures. The Indenture 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 to the Issuer, the Depositor, the Indenture Trustee (if the Indenture
Trustee is not the Book-Entry Custodian) and 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 Indenture
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 Issuer shall have the right to
inspect, and to obtain copies of, any Notes held by the Book-Entry Custodian.
Section 4.07. NOTICES TO DEPOSITORY. Whenever a notice or other
communication to the Noteholders is required under this Indenture, unless and
until Definitive Notes shall have been issued to Note Owners pursuant to Section
4.08, the Indenture Trustee shall give all such notices and communications
specified herein to be given to Holders of the Notes to the Depository, and
shall have no obligation to the Note Owners.
Section 4.08. DEFINITIVE NOTES. If (i) the Indenture Trustee determines
that the Depository is no longer willing or able to properly discharge its
responsibilities with respect to the Notes and the Indenture Trustee is unable
to locate a qualified successor, (ii) the Indenture Trustee elects to terminate
the book-entry system through the Depository or (iii) after the occurrence of an
Event of Default, Note Owners of Notes representing beneficial interests
aggregating at least a majority of the Note Balances of the Notes advise the
Depository in writing that the continuation of a book-entry system through the
Depository is no longer in the best interests of the Note Owners, the Indenture
Trustee shall notify all Note Owners, through the Depository of the occurrence
of any such event and of the availability of Definitive Notes to Note Owners
requesting the same. Upon surrender to the Indenture Trustee of the Notes in
book-entry form by the Book-Entry Custodian or the Depository, as applicable,
accompanied by registration
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instructions, the Issuer shall execute and the Indenture Trustee shall
authenticate the Definitive Notes in accordance with the instructions of the
Depository. None of the Issuer, the Note Registrar or the Indenture Trustee
shall be liable for any delay in delivery of such instructions and may
conclusively rely on, and shall be protected in relying on, such instructions.
Upon the issuance of Definitive Notes, the Indenture Trustee shall recognize the
Holders of the Definitive Notes as Noteholders.
Section 4.09. TAX TREATMENT. The Issuer has entered into this Indenture,
and the Notes will be issued, with the intention that, for federal, state and
local income, single business and franchise tax purposes, the Notes will qualify
as indebtedness. The Issuer, by entering into this Indenture, and each
Noteholder, by its acceptance of its Note (and each Note Owner by its acceptance
of an interest in the applicable Book-Entry Note), agree to treat the Notes for
federal, state and local income, single business and franchise tax purposes as
indebtedness.
Section 4.10. SATISFACTION AND DISCHARGE OF INDENTURE. This Indenture shall
cease to be of further effect with respect to the Notes, except as to (i) rights
of registration of transfer and exchange, (ii) substitution of mutilated,
destroyed, lost or stolen Notes, (iii) rights of Noteholders to receive payments
of principal thereof and interest thereon, (iv) Sections 3.03, 3.04, 3.07, 3.10,
3.17, 3.19 and 3.20, (v) the rights, obligations and immunities of the Indenture
Trustee hereunder (including the rights of the Indenture Trustee under Section
6.07 and the obligations of the Indenture Trustee under Section 4.11) and (vi)
the rights of Noteholders as beneficiaries hereof with respect to the property
so deposited with the Indenture Trustee payable to all or any of them, and the
Indenture Trustee, on demand of and at the expense of the Issuer, shall execute
proper instruments acknowledging satisfaction and discharge of this Indenture
with respect to the Notes and shall release and deliver the Collateral to or
upon the order of the Issuer, when
(A) either
(1) all Notes theretofore authenticated and delivered (other than (i)
Notes that have been destroyed, lost or stolen and that have been replaced
or paid as provided in Section 4.03 hereof and (ii) Notes for whose payment
money has theretofore been deposited in trust or segregated and held in
trust by the Issuer and thereafter repaid to the Issuer or discharged from
such trust, as provided in Section 3.03) have been delivered to the
Indenture Trustee for cancellation; or
(2) all Notes not theretofore delivered to the Indenture Trustee for
cancellation
a. have become due and payable,
b. will become due and payable at the Final Maturity Date within
one year, or
c. have been called for early redemption pursuant to Section 8.07
hereof,
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and the Issuer, in the case of a. or b. above, has irrevocably
deposited or caused to be irrevocably deposited with the Indenture
Trustee cash or direct obligations of or obligations guaranteed by the
United States of America (which will mature prior to the date such
amounts are payable), in trust for such purpose, in an amount
sufficient to pay and discharge the entire indebtedness on such Notes
then Outstanding not theretofore delivered to the Indenture Trustee
for cancellation when due on the Final Maturity Date or other final
Payment Date and has delivered to the Indenture Trustee a verification
report from a nationally recognized accounting firm certifying that
the amounts deposited with the Indenture Trustee are sufficient to pay
and discharge the entire indebtedness of such Notes, or, in the case
of c. above, the Issuer shall have complied with all requirements of
Section 8.07 hereof;
(B) the Issuer has paid or caused to be paid all other sums
payable hereunder by the Issuer; and
(C) the Issuer has delivered to the Indenture Trustee an
Officer's Certificate and an Opinion of Counsel, each meeting the
applicable requirements of Section 10.01 hereof, each stating that all
conditions precedent herein provided for relating to the satisfaction
and discharge of this Indenture have been complied with and, if the
Opinion of Counsel relates to a deposit made in connection with
Section 4.10(A)(2)b. above, such opinion shall further be to the
effect that such deposit will constitute an "in-substance defeasance"
within the meaning of Revenue Ruling 85-42, 1985-1 C.B. 36, and in
accordance therewith, the Issuer will be the owner of the assets
deposited in trust for federal income tax purposes.
Section 4.11. APPLICATION OF TRUST MONEY. All monies deposited with the
Indenture Trustee pursuant to Section 4.10 hereof shall be held in trust and
applied by it, in accordance with the provisions of the Notes and this
Indenture, to the payment, either directly or through any Paying Agent or the
Issuer or Certificate Paying Agent as designee of the Issuer, as applicable, as
the Indenture Trustee may determine, to the Holders of Notes, of all sums due
and to become due thereon for principal and interest or otherwise; but such
monies need not be segregated from other funds except to the extent required
herein or required by law.
Section 4.12. REPAYMENT OF MONIES HELD BY PAYING AGENT. In connection with
the satisfaction and discharge of this Indenture with respect to the Notes, all
monies then held by any Person other than the Indenture Trustee under the
provisions of this Indenture with respect to such Notes shall, upon demand of
the Issuer, be paid to the Indenture Trustee to be held and applied according to
Section 3.05 and thereupon such Person shall be released from all further
liability with respect to such monies.
Section 4.13. TEMPORARY NOTES. Pending the preparation of any Definitive
Notes, the Issuer may execute and upon its written direction, the Indenture
Trustee may authenticate and make available for delivery, temporary Notes that
are printed, lithographed, typewritten, photocopied or otherwise produced, in
any denomination, substantially of the tenor of the Definitive Notes in lieu of
which they are issued and with such appropriate insertions, omissions,
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substitutions and other variations as the officers executing such Notes may
reasonably determine, as evidenced by their execution of such Notes.
If temporary Notes are issued, the Issuer will cause Definitive Notes to be
prepared without unreasonable delay. After the preparation of the Definitive
Notes, the temporary Notes shall be exchangeable for Definitive Notes upon
surrender of the temporary Notes at the office or agency of the Indenture
Trustee, without charge to the Holder. Upon surrender for cancellation of any
one or more temporary Notes, the Issuer shall execute and the Indenture Trustee
shall authenticate and make available for delivery, in exchange therefor,
Definitive Notes of authorized denominations and of like tenor and aggregate
principal amount. Until so exchanged, such temporary Notes shall in all respects
be entitled to the same benefits under this Indenture as Definitive Notes.
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ARTICLE V
DEFAULT AND REMEDIES
Section 5.01. EVENTS OF DEFAULT. The Issuer shall deliver to the Indenture
Trustee, within five days after learning of the occurrence of a Default or an
Event of Default, written notice in the form of an Officer's Certificate of the
occurrence of such Default or Event of Default, its status and what action the
Issuer is taking or proposes to take with respect thereto.
Section 5.02. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT. If an
Event of Default should occur and be continuing, then and in every such case the
Indenture Trustee may, and, at the written direction of the Holders of Notes of
the Most Senior Class representing not less than a majority of the Note Balance
of such Class, shall, declare the Notes to be immediately due and payable, by a
notice in writing to the Issuer (and to the Indenture Trustee if given by
Noteholders), and upon any such declaration (a) 100% of the aggregate Note
Balance then outstanding, (b) the aggregate of any Allocated Realized Loss
Amount (plus accrued interest through the date of acceleration) on the Notes
remaining unpaid immediately prior to such date of acceleration, (c) accrued and
unpaid interest thereon through the date of acceleration and (d) the aggregate
of any Interest Carry Forward Amounts (plus accrued interest through the date of
acceleration) remaining unpaid immediately prior to such date of acceleration.
At any time after such declaration of acceleration of maturity with respect
to an Event of Default has been made and before a judgment or decree for payment
of the money due has been obtained by the Indenture Trustee as hereinafter in
this Article V provided, the Holders of Notes of the Most Senior Class
representing a majority of the Note Balance of such Class, by written notice to
the Issuer and the Indenture Trustee, may waive the related Event of Default and
rescind and annul such declaration and its consequences if:
(i) the Issuer has paid or deposited with the Indenture Trustee a
sum sufficient to pay:
(A) all payments of principal of and interest on the Notes
and all other amounts that would then be due hereunder or upon
the Notes if the Event of Default giving rise to such
acceleration had not occurred; and
(B) all sums reasonably paid or advanced by the Indenture
Trustee hereunder and the reasonable compensation, expenses,
disbursements and advances of the Indenture Trustee and its
agents and counsel; and
(ii) all Events of Default, other than the nonpayment of the
principal of the Notes that has become due solely by such acceleration,
have been cured or waived as provided in Section 5.12.
No such rescission shall affect any subsequent default or impair any right
consequent thereto.
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Section 5.03. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY
INDENTURE TRUSTEE.
(a) The Issuer covenants that if (i) default is made in the payment of any
interest (including the Interest Payment Amount) on any Note when the same
becomes due and payable, and such default continues for a period of five days,
or (ii) default is made in the payment of the principal (including the Principal
Payment Amount and the Overcollateralization Increase Amount) of or any
installment of the principal of any Note when the same becomes due and payable,
the Issuer shall, upon demand of the Indenture Trustee pay to the Indenture
Trustee, for the benefit of the Holders of Notes, the whole amount then due and
payable on the Notes for principal and interest, with interest at the Note
Accrual Rate upon the overdue principal, and in addition thereto such further
amount as shall be sufficient to cover the reasonable costs and expenses of
collection, including the reasonable compensation, expenses, disbursements and
advances of the Indenture Trustee and its agents and counsel.
(b) In case the Issuer shall fail forthwith to pay such amounts upon such
demand, the Indenture Trustee, in its own name and as trustee of an express
trust, subject to the provisions of Section 10.15 hereof, may institute a
Proceeding for the collection of the sums so due and unpaid, and may prosecute
such Proceeding to judgment or final decree, and may enforce the same against
the Issuer or other obligor upon the Notes and collect in the manner provided by
law out of the property of the Issuer or other obligor the Notes, wherever
situated, the monies adjudged or decreed to be payable.
(c) If an Event of Default occurs and is continuing, the Indenture Trustee,
subject to the provisions of Section 10.15 hereof may, as more particularly
provided in Section 5.04 hereof, in its discretion, proceed to protect and
enforce its rights and the rights of the Noteholders, by such appropriate
Proceedings as the Indenture Trustee shall deem most effective to protect and
enforce any such rights, whether for the specific enforcement of any covenant or
agreement in this Indenture or in aid of the exercise of any power granted
herein, or to enforce any other proper remedy or legal or equitable right vested
in the Indenture Trustee by this Indenture or by law.
(d) In case there shall be pending, relative to the Issuer or any other
obligor upon the Notes or any Person having or claiming an ownership interest in
the Trust Estate, Proceedings under Title 11 of the United States Code or any
other applicable federal or state bankruptcy, insolvency or other similar law,
or in case a receiver, assignee or trustee in bankruptcy or reorganization,
liquidator, sequestrator or similar official shall have been appointed for or
taken possession of the Issuer or its property or such other obligor or Person,
or in case of any other comparable judicial Proceedings relative to the Issuer
or other obligor upon the Notes, or to the creditors or property of the Issuer
or such other obligor, the Indenture Trustee, irrespective of whether the
principal of any Notes shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the Indenture Trustee shall
have made any demand pursuant to the provisions of this Section, shall be
entitled and empowered, by intervention in such Proceedings or otherwise:
(i) to file and prove a claim or claims for the whole amount of
principal and interest owing and unpaid in respect of the Notes and to file
such other papers or
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documents as may be necessary or advisable in order to have the claims of
the Indenture Trustee (including any claim for reasonable compensation to
the Indenture Trustee and each predecessor Indenture Trustee, and their
respective agents, attorneys and counsel, and for reimbursement of all
reasonable expenses and liabilities incurred, and all advances made, by the
Indenture Trustee and each predecessor Indenture Trustee, except as a
result of negligence or bad faith) and of the Noteholders allowed in such
Proceedings;
(ii) unless prohibited by applicable law and regulations, to vote
on behalf of the Holders of Notes in any election of a trustee, a standby
trustee or Person performing similar functions in any such Proceedings;
(iii) to collect and receive any monies or other property payable
or deliverable on any such claims and to distribute all amounts received
with respect to the claims of the Noteholders and of the Indenture Trustee
on their behalf; and
(iv) to file such proofs of claim and other papers or documents
as may be necessary or advisable in order to have the claims of the
Indenture Trustee or the Holders of Notes allowed in any judicial
proceedings relative to the Issuer, its creditors and its property;
and any trustee, receiver, liquidator, custodian or other similar official in
any such Proceeding is hereby authorized by each of such Noteholders to make
payments to the Indenture Trustee, and, in the event that the Indenture Trustee
shall consent to the making of payments directly to such Noteholders, to pay to
the Indenture Trustee such amounts as shall be sufficient to cover reasonable
compensation to the Indenture Trustee, each predecessor Indenture Trustee and
their respective agents, attorneys and counsel, all other reasonable expenses
and liabilities incurred, all advances made, by the Indenture Trustee and each
predecessor Indenture Trustee, except as a result of negligence or bad faith.
(e) Nothing herein contained shall be deemed to authorize the Indenture
Trustee to authorize or consent to or vote for or accept or adopt on behalf of
any Noteholder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder thereof or to
authorize the Indenture Trustee to vote in respect of the claim of any
Noteholder in any such proceeding except, as aforesaid, to vote for the election
of a trustee in bankruptcy or similar Person.
(f) All rights of action and of asserting claims under this Indenture, or
under any of the Notes, may be enforced by the Indenture Trustee without the
possession of any of the Notes or the production thereof in any trial or other
Proceedings relative thereto, and any such action or proceedings instituted by
the Indenture Trustee shall be brought in its own name as trustee of an express
trust, and any recovery of judgment, subject to the payment of the reasonable
expenses, disbursements and compensation of the Indenture Trustee, each
predecessor Indenture Trustee and their respective agents and attorneys, shall
be for the benefit of the Holders of the Notes, subject to Section 5.05 hereof.
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(g) In any Proceedings brought by the Indenture Trustee (and also any
Proceedings involving the interpretation of any provision of this Indenture to
which the Indenture Trustee shall be a party), the Indenture Trustee shall be
held to represent all the Holders of the Notes, and it shall not be necessary to
make any Noteholder a party to any such Proceedings.
Section 5.04. REMEDIES; PRIORITIES. (a) If an Event of Default shall have
occurred and be continuing and if an acceleration has been declared and not
rescinded pursuant to Section 5.02 hereof, the Indenture Trustee, subject to the
provisions of Section 10.15 hereof, may do one or more of the following (subject
to Section 5.05 hereof):
(i) institute Proceedings in its own name and as trustee of an
express trust for the collection of all amounts then payable on the Notes
or under this Indenture with respect thereto, whether by declaration or
otherwise, enforce any judgment obtained, and collect from the Issuer and
any other obligor upon such Notes monies adjudged due;
(ii) institute Proceedings from time to time for the complete or
partial foreclosure of this Indenture with respect to the Trust Estate;
(iii) exercise any remedies of a secured party under the UCC and
take any other appropriate action to protect and enforce the rights and
remedies of the Indenture Trustee and the Holders of the Notes; and
(iv) sell the Trust Estate or any portion thereof or rights or
interest therein, at one or more public or private sales called and
conducted in any manner permitted by law;
provided, however, the Indenture Trustee may not sell or otherwise liquidate the
Trust Estate following an Event of Default, unless (1) the Indenture Trustee
obtains the consent of the Holders of 100% of the aggregate Note Balance of the
Most Senior Class then Outstanding, (2) the proceeds of such sale or liquidation
distributable to the Holders of the Notes are sufficient to discharge in full
all amounts then due and unpaid upon the Notes for principal and interest or (3)
the Indenture Trustee determines that the Mortgage Loans will not continue to
provide sufficient funds for the payment of principal of and interest on the
Notes as they would have become due if the Notes had not been declared due and
payable, and the Indenture Trustee obtains the consent of the Holders of 66 2/3%
of the aggregate Note Balance of the Most Senior Class then Outstanding. In
determining such sufficiency or insufficiency with respect to clause (B) and
(C), the Indenture Trustee may, but need not, obtain and rely upon an opinion of
an Independent investment banking or accounting firm of national reputation as
to the feasibility of such proposed action and as to the sufficiency of the
Trust Estate for such purpose.
(b) If the Indenture Trustee collects any money or property pursuant to
this Article V, it shall pay out the money or property in the following order:
FIRST: to the Indenture Trustee, the Owner Trustee, the Master
Servicer and Financial Security Assurance Inc. for amounts due under
Section 6.07 hereof;
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SECOND: to the Servicers, any amounts required to pay the Servicing
Fees then due and to reimburse the Servicers of P&I Advances
previously made by, and not previously reimbursed or retained, the
Servicers and, upon the final liquidation of the related Mortgage Loan
or the final liquidation of the Trust Estate, Servicing Advances
previously made by, and not previously reimbursed or retained by, the
related Servicer and to the Indenture Trustee reimbursement for any
advances relating to Stayed Funds;
THIRD: to the Holders of the Class A Notes, for payment of the
Interest Payment Amount allocable to such Notes, if any, then due and
unpaid through the day preceding the date on which such payment was
made;
FOURTH: to the Holders of the Class M-1 Notes, for payment of the
Interest Payment Amount allocable to such Notes, if any due and unpaid
through the day preceding the date on which such payment was made;
FIFTH: to the Holders of the Class M-2 Notes, for payment of the
Interest Payment Amount allocable to such Notes, if any due and unpaid
through the day preceding the date on which such payment was made;
SIXTH: to the Holders of the Class M-3 Notes, for payment of the
Interest Payment Amount allocable to such Notes, if any due and unpaid
through the day preceding the date on which such payment was made;
SEVENTH: to the Holders of the Class A Notes, until the Note Balance
of such Class has been reduced to zero;
EIGHTH: to the Holders of the Class M-1 Notes, until the Note Balance
of such Class has been reduced to zero;
NINTH: to the Holders of the Class M-2 Notes, until the Note Balance
of such Class has been reduced to zero;
TENTH: to the Holders of the Class M-3 Notes, until the Note Balance
of such Class has been reduced to zero;
ELEVENTH: to the Holders of the Class A Notes, an amount equal to the
Interest Carry Forward Amount (plus accrued interest through the date
of acceleration) allocable to such Class of Notes;
TWELFTH: to the Holders of the Class M-1 Notes, an amount equal to the
Interest Carry Forward Amount (plus accrued interest through the date
of acceleration) allocable to such Class of Notes;
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THIRTEENTH: to the Holders of the Class M-1 Notes, an amount equal to
the Allocated Realized Loss Amount (plus accrued interest through the
date of acceleration) allocable to such Class of Notes;
FOURTEENTH: to the Holders of the Class M-2 Notes, an amount equal to
the Interest Carry Forward Amount (plus accrued interest through the
date of acceleration) allocable to such Class of Notes;
FIFTEENTH: to the Holders of the Class M-2 Notes, an amount equal to
the Allocated Realized Loss Amount (plus accrued interest through the
date of acceleration) allocable to such Class of Notes;
SIXTEENTH: to the Holders of the Class M-3 Notes, an amount equal to
the Interest Carry Forward Amount (plus accrued interest through the
date of acceleration) allocable to such Class of Notes;
SEVENTEENTH: to the Holders of the Class M-3 Notes, an amount equal to
the Allocated Realized Loss Amount (plus accrued interest through the
date of acceleration) allocable to such Class of Notes; and
EIGHTEENTH: any remaining amount, to the Issuer or the Certificate
Paying Agent as its designee, on behalf of the Certificateholders.
The Indenture Trustee may fix a record date and payment date for any
payment to Noteholders pursuant to this Section 5.04. At least 15 days before
such record date, the Indenture Trustee shall mail to each Noteholder a notice
that states the record date, the payment date and the amount to be paid.
Section 5.05. OPTIONAL PRESERVATION OF THE TRUST ESTATE. If the Notes have
been declared to be due and payable under Section 5.02 following an Event of
Default and such declaration and its consequences have not been rescinded and
annulled, the Indenture Trustee may elect to take and maintain possession of the
Trust Estate. It is the desire of the parties hereto and the Noteholders that
there be at all times sufficient funds for the payment of principal of and
interest on the Notes and other obligations of the Issuer, and the Indenture
Trustee shall take such desire into account when determining whether or not to
take and maintain possession of the Trust Estate. In determining whether to take
and maintain possession of the Trust Estate, the Indenture Trustee may, but need
not, obtain and rely upon an opinion of an Independent investment banking or
accounting firm of national reputation as to the feasibility of such proposed
action and as to the sufficiency of the Trust Estate for such purpose.
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Section 5.06. LIMITATION OF SUITS. No Holder of any Note shall have any
right to institute any Proceeding, judicial or otherwise, with respect to this
Indenture, or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless subject to the provisions of Section 10.15 hereof:
(i) such Holder has previously given written notice to the
Indenture Trustee of a continuing Event of Default;
(ii) the Holders of not less than 25% of the Note Balance of the
Notes in any affected Class have made a written request to the Indenture
Trustee to institute such Proceeding in respect of such Event of Default in
its own name as Indenture Trustee hereunder;
(iii) such Holder or Holders have offered to the Indenture
Trustee reasonable indemnity against the costs, expenses and liabilities to
be incurred in complying with such request;
(iv) the Indenture Trustee for 60 days after its receipt of such
notice of request and offer of indemnity has failed to institute such
Proceedings; and
(v) no direction inconsistent with such written request has been
given to the Indenture Trustee during such 60-day period by the Holders of
a majority of the Note Balances of the Notes in any affected Class.
It is understood and intended that no one or more Holders of Notes shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other
Holders of Notes or to obtain or to seek to obtain priority or preference over
any other Holders or to enforce any right under this Indenture, except in the
manner herein provided.
In the event the Indenture Trustee shall receive conflicting or
inconsistent requests and indemnity from two or more groups of Holders of Notes,
each representing less than a majority of the Note Balances of the Notes in such
affected Class, the Indenture Trustee in its sole discretion may determine what
action, if any, shall be taken, notwithstanding any other provisions of this
Indenture.
Section 5.07. UNCONDITIONAL RIGHTS OF NOTEHOLDERS TO RECEIVE PRINCIPAL AND
INTEREST. Notwithstanding any other provisions in this Indenture, the Holder of
any Note shall have the right, which is absolute and unconditional, to receive
payment of the principal of and interest, if any, on such Note on or after the
respective due dates thereof expressed in such Note or in this Indenture and to
institute suit for the enforcement of any such payment, and such right shall not
be impaired without the consent of such Holder.
Section 5.08. RESTORATION OF RIGHTS AND REMEDIES. If the Indenture Trustee
or any Noteholder has instituted any Proceeding to enforce any right or remedy
under this Indenture and
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such Proceeding has been discontinued or abandoned for any reason or has been
determined adversely to the Indenture Trustee or to such Noteholder, then and in
every such case the Issuer, the Indenture Trustee and the Noteholders shall,
subject to any determination in such Proceeding, be restored severally and
respectively to their former positions hereunder, and thereafter all rights and
remedies of the Indenture Trustee and the Noteholders shall continue as though
no such Proceeding had been instituted.
Section 5.09. RIGHTS AND REMEDIES CUMULATIVE. No right or remedy herein
conferred upon or reserved to the Indenture Trustee or to the Noteholders is
intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at law
or in equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
Section 5.10. DELAY OR OMISSION NOT A WAIVER. No delay or omission of the
Indenture Trustee or any Holder of any Note to exercise any right or remedy
accruing upon any Event of Default shall impair any such right or remedy or
constitute a waiver of any such Event of Default or an acquiescence therein.
Every right and remedy given by this Article V or by law to the Indenture
Trustee or to the Noteholders may be exercised from time to time, and as often
as may be deemed expedient, by the Indenture Trustee or by the Noteholders, as
the case may be.
Section 5.11. CONTROL BY NOTEHOLDERS. The Holders of a majority of the Note
Balance of the Most Senior Class of Notes shall have the right (subject to the
provisions of Section 5.06) to direct the time, method and place of conducting
any Proceeding for any remedy available to the Indenture Trustee with respect to
the Notes or exercising any trust or power conferred on the Indenture Trustee;
provided that:
(i) such direction shall not be in conflict with any rule of law
or with this Indenture;
(ii) any direction to the Indenture Trustee to sell or liquidate
the Trust Estate shall be by Holders of Notes representing the Percentage
Interest of the Note Balance of the Most Senior Class of Notes as provided
in Section 5.15;
(iii) if the conditions set forth in Section 5.05 hereof have
been satisfied and the Indenture Trustee elects to retain the Trust Estate
pursuant to such Section, then any direction to the Indenture Trustee by
Holders of Notes of the Most Senior Class to sell or liquidate the Trust
Estate shall be of no force and effect.
Notwithstanding the rights of Noteholders set forth in this Section, subject to
Section 6.01, the Indenture Trustee need not take any action that it determines
might involve it in liability or, might materially adversely affect the rights
of any Noteholders not consenting to such action.
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Section 5.12. WAIVER OF PAST DEFAULTS. Prior to the declaration of the
acceleration of the maturity of the Notes as provided in Section 5.02 hereof,
the Holders of Notes of not less than a majority of the Note Balance of the Most
Senior Class of Notes, may waive any past Event of Default and its consequences
except an Event of Default 1. with respect to payment of principal of or
interest on any of the Notes or 2. in respect of a covenant or provision hereof
which cannot be modified or amended without the consent of the Holder of each
Note affected. In the case of any such waiver, the Issuer, the Indenture Trustee
and the Holders of the Notes shall be restored to their former positions and
rights hereunder, respectively; but no such waiver shall extend to any
subsequent or other Event of Default or impair any right consequent thereto.
Upon any such waiver, any Event of Default arising therefrom shall be
deemed to have been cured and not to have occurred, for every purpose of this
Indenture; but no such waiver shall extend to any subsequent or other Event of
Default or impair any right consequent thereto.
Section 5.13. UNDERTAKING FOR COSTS. All parties to this Indenture agree,
and each Holder of any Note by such Holder's acceptance thereof shall be deemed
to have agreed, that any court may in its discretion require, in any suit for
the enforcement of any right or remedy under this Indenture, or in any suit
against the Indenture Trustee for any action taken, suffered or omitted by it as
Indenture Trustee, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section 5.13 shall not apply to (a) any suit instituted by
the Indenture Trustee, (b) any suit instituted by any Noteholder, or group of
Noteholders, in each case holding in the aggregate more than 10% of the Note
Balance of the Most Senior Class of Notes or (c) any suit instituted by any
Noteholder for the enforcement of the payment of principal of or interest on any
Note on or after the respective due dates expressed in such Note and in this
Indenture.
Section 5.14. WAIVER OF STAY OR EXTENSION LAWS. The Issuer covenants (to
the extent that it may lawfully do so) that it will not at any time insist upon,
or plead or in any manner whatsoever, claim or take the benefit or advantage of,
any stay or extension law wherever enacted, now or at any time hereafter in
force, that may affect the covenants or the performance of this Indenture; and
the Issuer (to the extent that it may lawfully do so) hereby expressly waives
all benefit or advantage of any such law, and covenants that it shall not
hinder, delay or impede the execution of any power herein granted to the
Indenture Trustee, but will suffer and permit the execution of every such power
as though no such law had been enacted.
Section 5.15. SALE OF TRUST ESTATE. (a) The power to effect any sale or
other disposition (a "Sale") of any portion of the Trust Estate pursuant to
Section 5.04 hereof is expressly subject to the provisions of Section 5.05
hereof and this Section 5.15. The power to effect any such Sale shall not be
exhausted by any one or more Sales as to any portion of the Trust Estate
remaining unsold, but shall continue unimpaired until the entire Trust Estate
shall have been sold or all amounts payable on the Notes and under this
Indenture shall have been paid. The Indenture Trustee may from time to time
postpone any public Sale by public announcement made
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at the time and place of such Sale. The Indenture Trustee hereby expressly
waives its right to any amount fixed by law as compensation for any Sale.
(b) The Indenture Trustee shall not in any private Sale sell the Trust
Estate, or any portion thereof, unless
(i) the Holders of all Notes in the Most Senior Class, consent to or
direct the Indenture Trustee to make, such Sale, or
(ii) the proceeds of such Sale would be not less than the entire
amount which would be payable to the Noteholders under the Notes, in full
payment thereof in accordance with Section 5.02 hereof, on the Payment Date next
succeeding the date of such Sale, or
(iii) The Indenture Trustee determines that the conditions for
retention of the Trust Estate set forth in Section 5.05 hereof cannot be
satisfied (in making any such determination, the Indenture Trustee may rely upon
an opinion of an Independent investment banking firm obtained and delivered as
provided in Section 5.05 hereof), and the Holders of Notes representing at least
66-2/3% of the Note Balance of the Most Senior Class of Notes consent to such
Sale.
The purchase by the Indenture Trustee of all or any portion of the Trust Estate
at a private Sale shall not be deemed a Sale or other disposition thereof for
purposes of this Section 5.15(b).
(c) Unless the Holders of Notes representing at least 66-2/3% of the Note
Balance of the Most Senior Class of Notes have otherwise consented or directed
the Indenture Trustee, at any public Sale of all or any portion of the Trust
Estate at which a minimum bid equal to or greater than the amount described in
paragraph (2) of subsection (b) of this Section 5.15 has not been established by
the Indenture Trustee and no Person bids an amount equal to or greater than such
amount, the Indenture Trustee shall bid an amount at least $1.00 more than the
highest other bid.
(d) In connection with a Sale of all or any portion of the Trust Estate,
(i) any Holder or Holders of Notes may bid for and purchase the
property offered for Sale, and upon compliance with the terms of sale may hold,
retain and possess and dispose of such property, without further accountability,
and may, in paying the purchase money therefor, deliver any Notes or claims for
interest thereon in lieu of cash up to the amount which shall, upon distribution
of the net proceeds of such sale, be payable thereon, and such Notes, in case
the amounts so payable thereon shall be less than the amount due thereon, shall
be returned to the Holders thereof after being appropriately stamped to show
such partial payment;
(ii the Indenture Trustee may bid for and acquire the property offered
for Sale in connection with any Sale thereof, and, subject to any requirements
of, and to the extent permitted by, applicable law in connection therewith, may
purchase all or any portion of the Trust Estate in a private sale, and, in lieu
of paying cash therefor, may make settlement for the purchase price by crediting
the gross Sale price against the sum of (A) the amount which would be
distributable to the Holders of the Notes and Holders of Equity Certificates and
(B) the reasonable
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expenses of the Sale and of any Proceedings in connection therewith which are
reimbursable to it, without being required to produce the Notes in order to
complete any such Sale or in order for the net Sale price to be credited against
such Notes, and any property so acquired by the Indenture Trustee shall be held
and dealt with by it in accordance with the provisions of this Indenture;
(iii) the Indenture Trustee shall execute and deliver an appropriate
instrument of conveyance transferring its interest in any portion of the Trust
Estate in connection with a Sale thereof;
(iv) the Indenture Trustee is hereby irrevocably appointed the agent
and attorney-in-fact of the Issuer to transfer and convey its interest in any
portion of the Trust Estate in connection with a Sale thereof, and to take all
action necessary to effect such Sale; and
(v) no purchaser or transferee at such a Sale shall be bound to
ascertain the Indenture Trustee's authority, inquire into the satisfaction of
any conditions precedent or see to the application of any monies.
Section 5.16. ACTION ON NOTES. The Indenture Trustee's right to seek and
recover judgment on the Notes or under this Indenture shall not be affected by
the seeking, obtaining or application of any other relief under or with respect
to this Indenture. Neither the lien of this Indenture nor any rights or remedies
of the Indenture Trustee or the Noteholders shall be impaired by the recovery of
any judgment by the Indenture Trustee against the Issuer or by the levy of any
execution under such judgment upon any portion of the Trust Estate or upon any
of the assets of the Issuer. Any money or property collected by the Indenture
Trustee shall be applied in accordance with Section 5.04(b) hereof.
Section 5.17. PERFORMANCE AND ENFORCEMENT OF CERTAIN OBLIGATIONS. (a)
Promptly following a request from the Indenture Trustee to do so, the Issuer, in
its capacity as holder of the Mortgage Loans, shall take all such lawful action
as the Indenture Trustee may request to cause the Issuer to compel or secure the
performance and observance by the Seller and the Servicers, as applicable, of
each of their obligations to the Issuer under or in connection with the Mortgage
Loan Purchase Agreement and the Servicing Agreements, and to exercise any and
all rights, remedies, powers and privileges lawfully available to the Issuer
under or in connection with the Mortgage Loan Purchase Agreement and the
Servicing Agreements to the extent and in the manner directed by the Indenture
Trustee, as pledgee of the Mortgage Loans, including the transmission of notices
of default on the part of the Seller or the Servicers thereunder and the
institution of legal or administrative actions or proceedings to compel or
secure performance by the Seller or the Servicers of each of their obligations
under the Mortgage Loan Purchase Agreement and the Servicing Agreements.
(b) The Indenture Trustee, as pledgee of the Mortgage Loans may, and at the
direction (which direction shall be in writing or by telephone (confirmed in
writing promptly thereafter)) of the Holders of 66-2/3% of the Note Balance of
the Most Senior Class of Notes, shall exercise all rights, remedies, powers,
privileges and claims of the Issuer against the Seller or the Servicers under or
in connection with the Mortgage Loan Purchase Agreement and the Servicing
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Agreements, including the right or power to take any action to compel or secure
performance or observance by the Seller or the related Servicer, as the case may
be, of each of their obligations to the Issuer thereunder and to give any
consent, request, notice, direction, approval, extension or waiver under the
Mortgage Loan Purchase Agreement and the Servicing Agreements, as the case may
be, and any right of the Issuer to take such action shall not be suspended.
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ARTICLE VI
THE INDENTURE TRUSTEE
Section 6.01. DUTIES OF INDENTURE TRUSTEE. (a) If an Event of Default has
occurred and is continuing, the Indenture Trustee shall exercise the rights and
powers vested in it by this Indenture 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.
(b) Except during the continuance of an Event of Default:
(i) the Indenture Trustee undertakes to perform such duties and
only such duties as are specifically set forth in this Indenture and no
implied covenants or obligations shall be read into this Indenture against
the Indenture Trustee; and
(ii) in the absence of bad faith on its part, the Indenture
Trustee may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Indenture Trustee and conforming to the
requirements of this Indenture; however, the Indenture Trustee shall
examine the certificates and opinions to determine whether or not they
conform to the requirements of this Indenture.
(c) The Indenture Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own willful
misconduct, except that:
(i)this paragraph does not limit the effect of paragraph (b) of
this Section 6.01;
(ii) the Indenture Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer unless it is proved
that the Indenture Trustee was negligent in ascertaining the pertinent
facts; and
(iii) the Indenture Trustee shall not be liable with respect to
any action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Sections 5.11 or 5.15.
(d) The Indenture Trustee shall not be liable for interest on any money
received by it except as the Indenture Trustee may agree in writing with the
Issuer.
(e) Money held in trust by the Indenture Trustee need not be segregated
from other trust funds except to the extent required by law or the terms of this
Indenture or the Owner Trust Agreement.
(f) No provision of this Indenture shall require the Indenture Trustee to
expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder
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or in the exercise of any of its rights or powers, if it shall have reasonable
grounds to believe that repayment of such funds or adequate indemnity against
such risk or liability is not reasonably
assured to it.
(g) Every provision of this Indenture relating to the conduct or affecting
the liability of or affording protection to the Indenture Trustee shall be
subject to the provisions of this Section and to the provisions of the TIA.
(h) The Indenture Trustee shall act in accordance with Sections 6.03 and
6.04 of the Servicing Agreements and shall act as successor to any of the
Servicer in accordance with Section 6.02 of the related Servicing Agreement.
(i) For all purposes under this Indenture, the Indenture Trustee shall not
be deemed to have notice or knowledge of any Default or Event of Default unless
a Responsible Officer assigned to and working in the Indenture Trustee's
corporate trust department has actual knowledge thereof or unless written notice
of any event which is in fact such an Event of Default or Default is received by
the Indenture Trustee at the Corporate Trust Office, and such notice references
the Notes generally, the Issuer, the Trust Estate or this Indenture.
The Indenture Trustee is hereby authorized to execute and shall execute the
Servicing Agreements and shall perform its duties and satisfy its obligations
thereunder. Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Indenture Trustee
shall apply to the Indenture Trustee's execution of the Servicing Agreements and
the performance of its duties and satisfaction of its obligations thereunder.
Section 6.02. RIGHTS OF INDENTURE TRUSTEE. (a) The Indenture Trustee may
rely on any document believed by it to be genuine and to have been signed or
presented by the proper person. The Indenture Trustee need not investigate any
fact or matter stated in the document.
(b) Before the Indenture Trustee acts or refrains from acting, it may
require an Officer's Certificate or an Opinion of Counsel reasonably
satisfactory in form and substance to the Indenture Trustee, which Officer's
Certificate or Opinion of Counsel shall not be at the expense of the Indenture
Trustee or the Trust Estate. The Indenture Trustee shall not be liable for any
action it takes or omits to take in good faith in reliance on an Officer's
Certificate or Opinion of Counsel.
(c) The Indenture Trustee may execute any of the trusts or powers hereunder
or perform any duties hereunder either directly or by or through agents or
attorneys or a custodian or nominee.
(d) The Indenture Trustee shall not be liable for any action it takes or
omits to take in good faith which it believes to be authorized or within its
rights or powers; provided, however, that the Indenture Trustee's conduct does
not constitute willful misconduct, negligence or bad faith.
(e) The Indenture Trustee may consult with counsel chosen by it with due
care, and the advice or opinion of counsel with respect to legal matters
relating to this Indenture and the Notes shall be full and complete
authorization and protection from liability in respect to any action taken,
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omitted or suffered by it hereunder in good faith and in accordance with the
advice or opinion of such counsel.
Section 6.03. INDIVIDUAL RIGHTS OF INDENTURE TRUSTEE. The Indenture Trustee
in its individual or any other capacity may become the owner or pledgee of Notes
and may otherwise deal with the Issuer or its Affiliates with the same rights it
would have if it were not Indenture Trustee. Any Note Registrar, co-registrar or
co-paying agent may do the same with like rights. However, the Indenture Trustee
must comply with Section 6.11 hereof.
Section 6.04. INDENTURE TRUSTEE'S DISCLAIMER. The Indenture Trustee shall
not be responsible for and makes no representation as to the validity or
adequacy of this Indenture or the Notes, it shall not be accountable for the
Issuer's use of the proceeds from the Notes, and it shall not be responsible for
any statement of the Issuer in the Indenture or in any document issued in
connection with the sale of the Notes or in the Notes other than the Indenture
Trustee's certificate of authentication.
Section 6.05. NOTICE OF EVENT OF DEFAULT. If an Event of Default occurs and
is continuing and if it is known to a Responsible Officer of the Indenture
Trustee, the Indenture Trustee shall give notice thereof to the Noteholders. The
Indenture Trustee shall mail to each Noteholder notice of the Event of Default
within 10 days after a Responsible Officer has actual knowledge thereof unless
such Event of Default shall have been waived or cured. Except in the case of an
Event of Default in payment of principal of or interest on any Note, the
Indenture Trustee may withhold the notice if and so long as a committee of its
Responsible Officers in good faith determines that withholding the notice is in
the interests of Noteholders.
Section 6.06. TAX ADMINISTRATION OF THE ISSUER. The Indenture Trustee,
based solely on information timely provided by the Administrators, shall prepare
and file (or cause to be prepared and filed), on behalf of the Owner Trustee,
all tax returns and information reports, tax elections and such annual or other
reports of the Issuer as are necessary for preparation of tax returns and
information reports as provided in Section 5.03 of the Owner Trust Agreement,
including without limitation Form 1099. All tax returns and information reports
shall be signed by the Owner Trustee as provided in Section 5.03 of the Owner
Trust Agreement.
Section 6.07. PAYMENT OF FEES, COMPENSATION AND INDEMNITY. The Indenture
Trustee shall withdraw from the Payment Account and pay the following amounts
without priority: (i) on each Payment Date, the Indenture Trustee Fee to itself;
(ii) on each Payment Date on or prior to the Expense Fee Termination Date, the
Expense Fee to Financial Security Assurance Inc. and (iii) on each Payment Date,
the Master Servicing Fee to the Master Servicer. The Indenture Trustee's
compensation shall not be limited by any law on compensation of a trustee of an
express trust. In addition, the Indenture Trustee shall withdraw from the
Payment Account to reimburse the Owner Trustee for all reasonable out-of pocket
expenses incurred or made by it for all services rendered by it in its execution
of the trust created under the Owner Trust Agreement and in the exercise and
performance of any of its powers and duties under the Owner Trust Agreement and
shall reimburse itself for all reasonable out-of-pocket expenses incurred or
made by it, including costs of collection. Such expenses shall include
reasonable compensation and expenses,
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disbursements and advances of the Indenture Trustee's agents, counsel,
accountants and experts. The Issuer shall indemnify the Indenture Trustee
against any and all loss, liability or expense (including reasonable attorneys'
fees) incurred by it in connection with the administration of this Trust Estate
and the performance of its duties hereunder. The Indenture Trustee shall notify
the Issuer promptly of any claim for which it may seek indemnity. Failure by the
Indenture Trustee to so notify the Issuer shall not relieve the Issuer of its
obligations hereunder. The Issuer shall defend any such claim, and the Indenture
Trustee may have separate counsel and the Issuer shall pay the reasonable fees
and expenses of such counsel. The Issuer is not obligated to reimburse any
expense or indemnify against any loss, liability or expense incurred by the
Indenture Trustee through the Indenture Trustee's own willful misconduct,
negligence or bad faith. It is understood by the parties hereto that a "claim"
as used in this paragraph includes any claim for indemnification made by the
Custodian under Section 3.2 of the Custodial Agreement.
The Issuer's payment obligations to the Indenture Trustee pursuant to this
Section 6.07 shall survive the discharge of this Indenture. When the Indenture
Trustee incurs expenses after the occurrence of an Event of Default with respect
to the Issuer, the expenses are intended to constitute expenses of
administration under Title 11 of the United States Code or any other applicable
federal or state bankruptcy, insolvency or similar law.
Section 6.08. REPLACEMENT OF INDENTURE TRUSTEE. No resignation or removal
of the Indenture Trustee and no appointment of a successor Indenture Trustee
shall become effective until the acceptance of appointment by the successor
Indenture Trustee pursuant to this Section 6.08. The Indenture Trustee may
resign at any time by so notifying the Issuer. The Holders of a majority of Note
Balance of the Most Senior Class of Notes may remove the Indenture Trustee by so
notifying the Issuer and the Indenture Trustee and may appoint a successor
Indenture Trustee. The Issuer shall remove the Indenture Trustee if:
(i) the Indenture Trustee fails to comply with Section 6.11
hereof;
(ii) the Indenture Trustee is adjudged a bankrupt or insolvent;
(iii) a receiver or other public officer takes charge of the
Indenture Trustee or its property; or
(iv) the Indenture Trustee otherwise becomes incapable of acting.
If the Indenture Trustee resigns or is removed or if a vacancy exists in
the office of the Indenture Trustee for any reason (the Indenture Trustee in
such event being referred to herein as the retiring Indenture Trustee), the
Issuer shall promptly appoint a successor Indenture Trustee.
A successor Indenture Trustee shall deliver a written acceptance of its
appointment to the retiring Indenture Trustee and to the Issuer. Thereupon, the
resignation or removal of the retiring Indenture Trustee shall become effective,
and the successor Indenture Trustee shall have all the rights, powers and duties
of the Indenture Trustee under this Indenture. The successor Indenture Trustee
shall mail a notice of its succession to the Noteholders. The retiring Indenture
Trustee
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shall promptly transfer all property held by it as Indenture Trustee to the
successor Indenture Trustee (other than any Mortgage Files at the time held by a
Custodian, which Custodian shall become the agent of any successor indenture
trustee hereunder).
If a successor Indenture Trustee does not take office within 60 days after
the retiring Indenture Trustee resigns or is removed, the retiring Indenture
Trustee, the Issuer or the Holders of a majority of Note Balance of the Most
Senior Class of Notes may petition any court of competent jurisdiction for the
appointment of a successor Indenture Trustee.
Notwithstanding the replacement of the Indenture Trustee pursuant to this
Section, the Issuer's obligations under Section 6.07 shall continue for the
benefit of the retiring Indenture Trustee.
Section 6.09. SUCCESSOR INDENTURE TRUSTEE BY MERGER. If the Indenture
Trustee consolidates with, merges or converts into, or transfers all or
substantially all of its corporate trust business or assets to, another
corporation or banking association, the resulting, surviving or transferee
corporation or banking association, without any further act, shall be the
successor Indenture Trustee; provided, that such corporation or banking
association shall be otherwise qualified and eligible under Section 6.11 hereof.
The Indenture Trustee shall provide the Issuer and the Rating Agencies with
prior written notice of any such transaction.
If at the time such successor or successors by merger, conversion or
consolidation to the Indenture Trustee shall succeed to the trusts created by
this Indenture and any of the Notes shall have been authenticated but not
delivered, any such successor to the Indenture Trustee may adopt the certificate
of authentication of any predecessor trustee and deliver such Notes so
authenticated; and if at that time any of the Notes shall not have been
authenticated, any successor to the Indenture Trustee may authenticate such
Notes either in the name of any predecessor hereunder or in the name of the
successor to the Indenture Trustee; and in all such cases such certificates
shall have the full force which it is in the Notes or in this Indenture provided
that the certificate of the Indenture Trustee shall have.
Section 6.10. APPOINTMENT OF CO-INDENTURE TRUSTEE OR SEPARATE INDENTURE
TRUSTEE. (a) Notwithstanding any other provisions of this Indenture, at any
time, for the purpose of meeting any legal requirement of any jurisdiction in
which any part of the Trust Estate may at the time be located, the Indenture
Trustee shall have the power and may execute and deliver all instruments to
appoint one or more Persons to act as a co-trustee or co-trustees, or separate
trustee or separate trustees, of all or any part of the Trust Estate, and to
vest in such Person or Persons, in such capacity and for the benefit of the
Noteholders, such title to the Trust Estate, or any part hereof, and, subject to
the other provisions of this Section, such powers, duties, obligations, rights
and trusts as the Indenture 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 6.11 hereof.
(b) Every separate trustee and co-trustee shall, to the extent permitted by
law, be appointed and act subject to the following provisions and conditions:
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(i) all rights, powers, duties and obligations conferred or
imposed upon the Indenture Trustee shall be conferred or imposed upon and
exercised or performed by the Indenture Trustee and such separate trustee
or co-trustee jointly (it being understood that such separate trustee or
co-trustee is not authorized to act separately without the Indenture
Trustee joining in such act), except to the extent that under any law of
any jurisdiction in which any particular act or acts are to be performed
the Indenture Trustee shall be incompetent or unqualified to perform such
act or acts, in which event such rights, powers, duties and obligations
(including the holding of title to the Trust Estate or any portion thereof
in any such jurisdiction) shall be exercised and performed singly by such
separate trustee or co-trustee, but solely at the direction of the
Indenture Trustee;
(ii) no trustee hereunder shall be personally liable by reason of
any act or omission of any other trustee hereunder; and
(iii) the Indenture Trustee may at any time accept the
resignation of or remove any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the Indenture Trustee
shall be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Indenture and
the conditions of this Article VI. Each separate trustee and co-trustee, upon
its acceptance of the trusts conferred, shall be vested with the estates or
property specified in its instrument of appointment, either jointly with the
Indenture Trustee or separately, as may be provided therein, subject to all the
provisions of this Indenture, specifically including every provision of this
Indenture relating to the conduct of, affecting the liability of, or affording
protection to, the Indenture Trustee. Every such instrument shall be filed with
the Indenture Trustee.
(d) Any separate trustee or co-trustee may at any time constitute the
Indenture 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 Indenture 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 Indenture Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.
Section 6.11. ELIGIBILITY; DISQUALIFICATION. The Indenture Trustee
shall at all times be authorized to exercise corporate trust powers. The
Indenture Trustee shall also satisfy the requirements of TIA ss.310(a) and have
a combined capital and surplus of at least $50,000,000 as set forth in its most
recent published annual report of condition and it or its parent shall have a
long-term debt rating of BBB or better by DCR and BBB or better by S&P. The
Indenture Trustee shall comply with TIA ss. 310(b), including the optional
provision permitted by the second sentence of TIA ss. 310(b)(9); provided,
however, that there shall be excluded from the operation of TIA ss. 310(b)(1)
any indenture or indentures under which other securities of the Issuer are
Outstanding if the requirements for such exclusion set forth in TIA ss.
310(b)(1) are met. If at any time the
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Indenture Trustee shall cease to be eligible in accordance with the provisions
of this Section, it shall resign immediately in the manner and with the effect
specified in Section 6.08 hereof.
Section 6.12. PREFERENTIAL COLLECTION OF CLAIMS AGAINST ISSUER. The
Indenture Trustee shall comply with TIA ss. 311(a), excluding any creditor
relationship listed in TIA ss. 311(b). An Indenture Trustee who has resigned or
been removed shall be subject to TIA ss. 311(a) to the extent indicated.
Section 6.13. REPRESENTATIONS AND WARRANTIES. The Indenture Trustee
hereby represents that:
(i) The Indenture Trustee is duly organized and validly existing
as a national banking association in good standing under the laws of the
United States with power and authority to own its properties and to conduct
its business as such properties are currently owned and such business is
presently conducted;
(ii) The Indenture Trustee has the power and authority to execute
and deliver this Indenture and to carry out its terms; and the execution,
delivery and performance of this Indenture have been duly authorized by the
Indenture Trustee by all necessary corporate action;
(iii) The consummation of the transactions contemplated by this
Indenture and the fulfillment of the terms hereof do not conflict with,
result in any breach of any of the terms and provisions of, or constitute
(with or without notice or lapse of time) a default under, the articles of
organization or bylaws of the Indenture Trustee or any agreement or other
instrument to which the Indenture Trustee is a party or by which it is
bound; and
(iv) To the Indenture Trustee's best knowledge, there are no
proceedings or investigations pending or threatened before any court,
regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Indenture Trustee or its
properties: (A) asserting the invalidity of this Indenture, (B) seeking to
prevent the consummation of any of the transactions contemplated by this
Indenture or (C) seeking any determination or ruling that might materially
and adversely affect the performance by the Indenture Trustee of its
obligations under, or the validity or enforceability of, this Indenture.
Section 6.14. DIRECTIONS TO INDENTURE TRUSTEE. The Indenture Trustee is
hereby directed:
(a) to accept the pledge of the Mortgage Loans and hold the assets of the
Trust Estate in trust for the Noteholders;
(b) to authenticate and deliver the Notes substantially in the form
prescribed by Exhibits A-1 through A-4 in accordance with the terms of this
Indenture; and
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(c) to take all other actions as shall be required to be taken by the terms
of this Indenture.
Section 6.15. THE AGENTS. The provisions of this Indenture relating to the
limitations of the Indenture Trustee's liability and to its indemnity shall
inure also to the Paying Agent, the Note Registrar, the Certificate Paying Agent
and the Certificate Registrar.
Section 6.16. APPOINTMENT OF CUSTODIANS. The Indenture Trustee may, with
the consent of the Issuer, appoint one or more Custodians to hold all or a
portion of the Mortgage Files as agent for the Indenture Trustee, by entering
into a Custodial Agreement. The appointment of any Custodian may at any time be
terminated and a substitute Custodian appointed therefor upon the reasonable
request of the related Servicer to the Indenture Trustee, the consent to which
shall not be unreasonably withheld. The Indenture Trustee shall pay any and all
fees and expenses of any Custodian in accordance with each Custodial Agreement.
The Trustee initially appoints Chase Bank of Texas National Association as
Custodian, and the Issuer consents to such appointment. Subject to Article VI
hereof, the Indenture Trustee agrees to comply with the terms of each Custodial
Agreement and to enforce the terms and provisions thereof against the Custodian
for the benefit of the Noteholders having an interest in any Mortgage File held
by such Custodian. Each Custodian shall be a depository institution or trust
company subject to supervision by federal or state authority, shall have
combined capital and surplus of at least $10,000,000 and shall be qualified to
do business in the jurisdiction in which it holds any Mortgage File. Each
Custodial Agreement may be amended only as provided in such Custodial Agreement.
In no event shall the appointment of any Custodian pursuant to a Custodial
Agreement diminish the obligations of the Trustee hereunder.
ARTICLE VII
NOTEHOLDERS' LISTS AND REPORTS
Section 7.01. ISSUER TO FURNISH INDENTURE TRUSTEE NAMES AND ADDRESSES OF
Noteholders. The Issuer will furnish or cause to be furnished to the Indenture
Trustee (a) not more than five days after each Record Date, a list, in such form
as the Indenture Trustee may reasonably require, of the names and addresses of
the Holders of Notes as of such Record Date, (b) at such other times as the
Indenture Trustee may request in writing, within 30 days after receipt by the
Issuer of any such request, a list of similar form and content as of a date not
more than 10 days prior to the time such list is furnished; provided, however,
that so long as the Indenture Trustee is the Note Registrar, no such list shall
be required to be furnished.
Section 7.02. PRESERVATION OF INFORMATION; COMMUNICATIONS TO NOTEHOLDERS.
(a) The Indenture Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of the Holders of Notes contained in the
most recent list furnished to the Indenture Trustee as provided in Section 7.01
hereof and the names and addresses of Holders of Notes received by the Indenture
Trustee in its capacity as Note Registrar. The Indenture Trustee may
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destroy any list furnished to it as provided in such Section 7.01 upon receipt
of a new list so furnished.
(b) Noteholders may communicate pursuant to TIA ss.312(b) with other
Noteholders with respect to their rights under this Indenture or under the
Notes.
(c) The Issuer, the Indenture Trustee and the Note Registrar shall have the
protection of TIA ss. 312(c).
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Section 7.03. REPORTS BY THE INDENTURE TRUSTEE; ISSUER FISCAL YEAR. (a) The
Indenture Trustee shall:
(i) Within 15 days after each Payment Date, the Indenture 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 Noteholders
for such Payment Date as an exhibit thereto. Prior to January 30, 1999, the
Indenture Trustee shall file a Form 15 Suspension Notification with respect
to the Trust Estate, if applicable. Prior to March 30, 1999, the Indenture
Trustee shall file a Form 10-K, in substance conforming to industry
standards, with respect to the Trust Estate. The Issuer hereby grants to
the Indenture Trustee a limited power of attorney to execute and file each
such document on behalf of the Issuer. Such power of attorney shall
continue until the earlier of (i) receipt by the Indenture Trustee from the
Issuer of written termination of such power of attorney and (ii) the
termination of the Trust Estate. At least three Business Days prior to
filing any Form 8-K or Form 10-K pursuant to this Section 7.03, the
Indenture Trustee shall deliver a copy of such Form 8-K or Form 10-K, as
the case may be, to the Issuer and the Depositor. The Depositor agrees to
promptly furnish to the Indenture Trustee, from time to time upon request,
such further information, reports and financial statements within its
control related to this Indenture and the Mortgage Loans as the Indenture
Trustee reasonably deems appropriate to prepare and file all necessary
reports with the Commission.
(ii) to use its best efforts to file with the Depositor and the
Commission in accordance with rules and regulations prescribed from time to
time by the Commission such additional information, documents and reports
with respect to compliance by the Issuer with the conditions and covenants
of this Indenture as may be required from time to time by such rules and
regulations; and
(iii) supply to the Depositor (and the Indenture Trustee shall
transmit by mail to all Noteholders described in TIA ss. 313(c)) such
summaries of any information, documents and reports required to be filed by
the Issuer pursuant to clauses (i) and (ii) of this Section 7.03(a) and by
rules and regulations prescribed from time to time by the Commission.
(b) Unless the Issuer otherwise determines, the fiscal year of the Issuer
shall end on December 31 of each year.
(c) The Issuer hereby agrees to furnish such information and otherwise
cooperate with the Indenture Trustee as necessary for the Indenture Trustee to
perform its duties as provided in this Section 7.03.
(d) The Indenture Trustee may conclusively rely upon any information
provided by the Servicers or the Depositor in its preparation of the foregoing
reports pursuant to this Section 7.03.
Section 7.04. REPORTS BY INDENTURE TRUSTEE. If required by TIA ss. 313(a),
within 60 days after each January 1 beginning with January 1, 1999, the
Indenture Trustee shall mail to each
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Noteholder as required by TIA ss. 313(c) a brief report dated as of such date
that complies with TIA ss. 313(a). The Indenture Trustee also shall comply with
TIA ss. 313(b).
A copy of each report at the time of its mailing to Noteholders shall be
filed by the Indenture Trustee with the Commission and each stock exchange, if
any, on which the Notes are listed. The Issuer shall notify the Indenture
Trustee if and when the Notes are listed on any stock exchange.
Section 7.05. STATEMENTS TO NOTEHOLDERS. (a) Subject to Section 3.27 of
this Indenture, with respect to each Payment Date, the Indenture Trustee shall
deliver to each Certificateholder and Noteholder, the Depositor, the Owner
Trustee, the Certificate Paying Agent, each Rating Agency and on or prior to the
Expense Fee Termination Date, to Financial Security Assurance Inc., a statement
setting forth the following information as to the Notes, to the extent
applicable:
(a) the amount of the payment made on such Payment Date to the
Holders of Notes of each such Class allocable to principal, and the
amount of the payment made on such Payment Date to the
Certificateholders allocable to Prepayment Charges;
(b) the amount of the payment made on such Payment Date to the
Holders of Notes of each such Class allocable to interest;
(c) the Interest Carry Forward Amount and Allocated Realized Loss
Amount with respect to each Class of Notes for such Payment Date and
the aggregate unpaid Interest Carry Forward Amount and Allocated
Realized Loss Amount for all prior Payment Dates;
(d) the aggregate amount of servicing compensation received by
the each Servicer during the related Due Period;
(e) the aggregate amount of P&I Advances for such Payment Date;
(f) the aggregate Stated Principal Balance of the Mortgage Loans
and any REO Properties at the close of business on such Payment Date;
(g) 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;
(h) the number and aggregate unpaid principal balance of Mortgage
Loans (a) delinquent 30-59 days, (b) delinquent 60-89 days, (c)
delinquent 90 or more days in each case, as of the last day of the
preceding calendar month, and (d) as to which foreclosure proceedings
have been commenced;
(i) with respect to any Mortgage Loan that became an REO Property
during the preceding calendar month, the loan number of such Mortgage
Loan, the
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unpaid principal balance and the Stated Principal Balance of such
Mortgage Loan as of the date it became an REO Property;
(j) the book value and the Stated Principal Balance of any REO
Property as of the close of business on the last Business Day of the
calendar month preceding the Payment Date;
(k) the aggregate amount of Principal Prepayments made during the
related Prepayment Period;
(l) 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;
(m) the aggregate amount of expenses withdrawn from the
Collection Accounts or the Payment Account for such Payment Date;
(n) the aggregate Note Balance of each Class of Notes, after
giving effect to the payments, and allocations of Realized Losses,
made on such Payment Date, separately identifying any reduction
thereof due to allocations of Realized Losses ;
(o) the Interest Payment Amount in respect of each Class of Notes
for such Payment Date;
(p) with respect to any Mortgage Loan as to which foreclosure
proceedings have been concluded, the loan number and unpaid principal
balance of such Mortgage Loan as of the date of such conclusion of
foreclosure proceedings;
(q) with respect to Mortgage Loans as to which a Final
Liquidation has occurred, the number of Mortgage Loans, the unpaid
principal balance of such Mortgage Loans as of the date of such Final
Liquidation and the amount of proceeds (including Liquidation Proceeds
and Insurance Proceeds) collected in respect of such Mortgage Loans;
(r) on or prior to the Expense Fee Termination Date, with respect
to each Mortgage Loan on Schedule 2 attached hereto the aggregate
Expense Fee payable for such Payment Date and the aggregate principal
balance upon which such Expense Fee was calculated, which is the same
principal amount on which interest on such Mortgage Loan accrues for
the preceding calendar month.
In the case of information furnished pursuant to subclauses (a)
through (c) above, the amounts shall be expressed as a dollar amount per Single
Certificate of the relevant Class. In the case of the information furnished
pursuant to subclause (l) above, the amounts shall be set forth on a Servicer by
Servicer basis as well as in the aggregate.
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The Indenture Trustee may conclusively rely upon the Remittance Reports
provided by the Servicers pursuant to Section 4.01 of the Servicing Agreements
in its preparation of its Statement to the Noteholders pursuant to this Section
7.04.
Section 7.06. BOOKS AND RECORDS.
The Issuer hereby covenants with the Indenture Trustee that, so long
as any of the Notes remain Outstanding, it shall:
(a) at all times cause to be kept proper books of account and allow
the Indenture Trustee and any person appointed by it, to whom the Issuer shall
have no reasonable objection, access to the books of account of the Issuer at
all reasonable times, on reasonable prior notice and during normal business
hours;
(b) at all times conduct and continue to conduct business in its own
corporate name;
(c) at all times act and continue to act through its duly authorized
officers and agents; and
(d) so far as permitted by law, at all times cause to be given to the
Indenture Trustee such information as it shall reasonably require for the
purpose of the discharge of the duties, powers, trusts, authorities and
discretions vested in it by this Indenture or by operation of law.
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ARTICLE VIII
Accounts, Disbursements and Releases
------------------------------------
Section 8.01. COLLECTION OF MONEY. Except as otherwise expressly provided
herein, the Indenture Trustee may demand payment or delivery of, and shall
receive and collect, directly and without intervention or assistance of any
fiscal agent or other intermediary, all money and other property payable to or
receivable by the Indenture Trustee pursuant to this Indenture. The Indenture
Trustee shall apply all such money received by it as provided in this Indenture.
Except as otherwise expressly provided in this Indenture, if any default occurs
in the making of any payment or performance under any agreement or instrument
that is part of the Trust Estate, the Indenture Trustee may take such action as
may be appropriate to enforce such payment or performance, including the
institution and prosecution of appropriate Proceedings. Any such action shall be
without prejudice to any right to claim a Default or Event of Default under this
Indenture and any right to proceed thereafter as provided in Article V.
Section 8.02. TRUST ACCOUNTS. (a) On or prior to the Closing Date, the
Issuer shall cause the Indenture Trustee to establish and maintain, in the name
of the Indenture Trustee, for the benefit of the Noteholders, the Payment
Account as provided in Section 3.01 hereof.
(b) All monies deposited from time to time in the Payment Account (other
than investments made with such monies including all income or other gain from
such investments pursuant to this Indenture and other than Prepayment Charges),
including assumption fees, and all deposits therein pursuant to this Indenture
are for the benefit of the Noteholders. Any Prepayment Charges deposited from
time to time in the Payment Account are for the benefit of the
Certificateholders and are not available to the Noteholders.
On each Payment Date, the Indenture Trustee shall distribute all amounts on
deposit in the Payment Account to Noteholders in respect of the Notes and to
such other persons in the order of priority set forth in Section 3.05 hereof
(except as otherwise provided in Section 5.04(b) hereof).
The Indenture Trustee may invest any funds in the Payment Account in
Permitted Investments, in its discretion, maturing no later than the Business
Day preceding each Payment Date (provided, however, that with respect to
Permitted Investments that consist of obligations of the Indenture Trustee or
its Affiliates, such Permitted Investments may mature on the related Payment
Date) and such Permitted Investments shall not be sold or disposed of prior to
their maturity. All income or other gain from such investments may be released
from the Payment Account and paid to the Indenture Trustee from time to time as
part of its compensation for acting as Indenture Trustee.
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Section 8.03. OFFICER'S CERTIFICATE. The Indenture Trustee shall receive at
least seven days' notice when requested by the Issuer to take any action
pursuant to Section 8.05(a) hereof, accompanied by copies of any instruments to
be executed, and the Indenture Trustee shall also require, as a condition to
such action, an Officer's Certificate, in form and substance reasonably
satisfactory to the Indenture Trustee, stating the legal effect of any such
action, outlining the steps required to complete such action, and concluding
that all conditions precedent to the taking of such action have been complied
with.
Section 8.04. TERMINATION UPON PAYMENT TO NOTEHOLDERS. This Indenture and
the respective obligations and responsibilities of the Issuer and the Indenture
Trustee created hereby shall terminate upon the payment to Noteholders, the
Certificate Paying Agent on behalf of the Certificateholders and the Indenture
Trustee of all amounts required to paid pursuant to Article III; provided,
however, that in no event shall the trust created hereby continue beyond the
expiration of 21 years from the death of the 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.
Section 8.05. RELEASE OF TRUST ESTATE. (a) Subject to the payment of its
reasonable fees and expenses, the Indenture Trustee may, and when required by
the provisions of this Indenture shall, execute instruments to release property
from the lien of this Indenture, or convey the Indenture Trustee's interest in
the same, in a manner and under circumstances that are not inconsistent with the
provisions of this Indenture.
(b) The Indenture Trustee shall, at such time as (i) there are no Notes
Outstanding and (ii) all sums due to the Indenture Trustee pursuant to this
Indenture have been paid, release any remaining portion of the Trust Estate that
secured the Notes from the lien of this Indenture.
(c) The Indenture Trustee shall release property from the lien of this
Indenture pursuant to this Section 8.05 only upon receipt of a request from the
Issuer accompanied by an Officers' Certificate and an Opinion of Counsel stating
that all applicable requirements have been satisfied.
Section 8.06. SURRENDER OF NOTES UPON FINAL PAYMENT. By acceptance of any
Note, the Holder thereof agrees to surrender such Note to the Indenture Trustee
promptly, prior to such Noteholder's receipt of the final payment thereon.
Section 8.07. OPTIONAL REDEMPTION OF THE NOTES. (a) At its option, the
Majority Certificateholder may redeem the Notes in whole, but not in part, on
any Payment Date on or after the Payment Date which the aggregate Note Balance
is reduced to less than 20% of the aggregate initial Note Balance as of the
Cut-Off Date. The aggregate redemption price for the Notes will be equal to the
sum of (a) 100% of the aggregate Note Balance then outstanding, (b) the
aggregate of any Allocated Realized Loss Amount on the Notes remaining unpaid
immediately prior to such Payment Date,
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(c) the aggregate of the Interest Payment Amounts on the Notes for such Payment
Date and (d) the aggregate of any Interest Carry Forward Amounts for such
Payment Date.
(b) At its option, the Majority Certificateholder may obtain the release
from the lien of the Indenture the Mortgage Loans and each REO Property listed
on Schedule 2 attached hereto remaining in the Trust Estate and in connection
therewith effect a partial redemption of the Notes on any Payment Date following
the Due Period in which the aggregate Stated Principal Balance of such Mortgage
Loans and such REO Properties listed on Schedule 2 attached hereto remaining in
the Trust Estate at the time of such election is less than $19,989,567.32. The
aggregate redemption price for such partial redemption of the Notes shall be a
price which is equal to the greater of (A) the aggregate Purchase Price of all
the Mortgage Loans included on Schedule 2 remaining in the Trust Estate, plus
the appraised value of each REO Property, if any, included on Schedule 2
remaining in the Trust Estate, such appraisal to be conducted by an appraiser
mutually agreed upon by the Majority Certificateholder and the Indenture Trustee
in their reasonable discretion and (B) the aggregate fair market value of all of
the assets of the Trust Estate included on such Schedule 2 (as determined by the
Majority Certificateholder and the Indenture Trustee), as of the close of
business on the third Business Day next preceding the date upon which partial
redemption is to take place.
(c) In order to exercise either of the foregoing options, the Majority
Certificateholder shall, not less than 15 days prior to the proposed Payment
Date on which such redemption is to be made, deposit the aggregate redemption
price specified in (a) above or the aggregate redemption price for the partial
redemption specified in (b) above with the Indenture Trustee (and the Indenture
Trustee shall deposit such funds in the Payment Account), and shall provide
written notice of its exercise of such option to the Indenture Trustee, the
Owner Trustee, the Master Servicer and the Servicers.
(d) Following receipt of the notice and the aggregate redemption price,
calculated as specified in Section 8.07(a) hereof, pursuant to the foregoing,
the Indenture Trustee shall provide notice to the Noteholders of the final
payment on the Notes and shall apply such funds to make final payments of
principal and interest on the Notes in accordance with Section 3.05(a) hereof,
and this Indenture shall be discharged, subject to the provisions of Section
4.10 hereof. Following receipt of the notice and the aggregate partial
redemption price, calculated as specified in Section 8.07(b) hereof, the
Indenture Trustee shall promptly release or cause to be released to the Majority
Certificateholder the related Mortgage Files and the Indenture Trustee shall
execute all assignments, endorsements and other instruments necessary to
effectuate such transfer. If for any reason the amount deposited by the Majority
Certificateholder is not sufficient to make either of the above-described
redemptions or such redemptions cannot be completed for any reason, the amount
so deposited by the Majority Certificateholder with the Indenture Trustee shall
be immediately returned to the Majority Certificateholder in full and shall not
be used for any other purpose or be deemed to be part of the Trust Estate.
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ARTICLE IX
Supplemental Indentures
-----------------------
Section 9.01. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF NOTEHOLDERS. (a)
Without the consent of the Holders of any Notes but with prior notice to the
Rating Agencies, the Issuer and the Indenture Trustee, when authorized by an
Issuer Request, at any time and from time to time, may enter into one or more
indentures supplemental hereto (which shall conform to the provisions of the TIA
as in force at the date of the execution thereof), in form reasonably
satisfactory to the Indenture Trustee, for any of the following purposes:
(i) to correct or amplify the description of any property at any
time subject to the lien of this Indenture, or better to assure, convey and
confirm unto the Indenture Trustee any property subject or required to be
subjected to the lien of this Indenture, or to subject to the lien of this
Indenture additional property;
(ii) to evidence the succession, in compliance with the
applicable provisions hereof, of another person to the Issuer, and the
assumption by any such successor of the covenants of the Issuer herein and
in the Notes contained;
(iii) to add to the covenants of the Issuer, for the benefit of
the Holders of the Notes, or to surrender any right or power herein
conferred upon the Issuer;
(iv) to convey, transfer, assign, mortgage or pledge any property
to or with the Indenture Trustee;
(v) to cure any ambiguity or to correct or supplement any
provision herein or in any supplemental indenture that may be inconsistent
with any other provision herein or in any supplemental indenture;
(vi) to make any other provisions with respect to matters or
questions arising under this Indenture or in any supplemental indenture;
provided, that such action shall not materially and adversely affect the
interests of the Holders of the Notes;
(vii) to evidence and provide for the acceptance of the
appointment hereunder by a successor Indenture Trustee with respect to the
Notes and to add to or change any of the provisions of this Indenture as
shall be necessary to facilitate the administration of the trusts hereunder
by more than one trustee, pursuant to the requirements of Article VI
hereof; or
(viii) to modify, eliminate or add to the provisions of this
Indenture to such extent as shall be necessary to effect the qualification
of this Indenture under the TIA or under any similar federal statute
hereafter enacted and to add to this Indenture such other provisions as may
be expressly required by the TIA;
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provided, however, that no such supplemental indenture shall be entered into
unless the Indenture Trustee shall have received an Opinion of Counsel that
entering into such supplemental indenture will not (A) result in a "substantial
modification" of the Notes under Treasury Regulation Section 1.1001.3 or
adversely affect the status of the Notes as indebtedness for federal income tax
purposes or (B) cause the Issuer to be subject to an entity level tax.
The Indenture Trustee is hereby authorized to join in the execution of any
such supplemental indenture and to make any further appropriate agreements and
stipulations that may be therein contained.
(b) The Issuer and the Indenture Trustee, when authorized by an Issuer
Request, may, also without the consent of any of the Holders of the Notes but
with prior notice to the Rating Agencies, enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to, or changing in
any manner or eliminating any of the provisions of, this Indenture or of
modifying in any manner the rights of the Holders of the Notes under this
Indenture; provided, however, that such action shall not, as evidenced by an
Opinion of Counsel (or, in the alternative, with respect to clause (i), as
evidenced by a rating letter confirming the existing ratings on the Notes) (i)
adversely affect in any material respect the interests of any Noteholder or (ii)
if 100% of the Equity Certificates are not owned by the Transferor or the Seller
is outstanding, cause the Issuer to be subject to an entity level tax for
federal income tax purposes.
Section 9.02. SUPPLEMENTAL INDENTURES WITH CONSENT OF NOTEHOLDERS. The
Issuer and the Indenture Trustee, when authorized by an Issuer Request, also
may, with prior notice to the Rating Agencies and with the prior consent of the
Holders of not less than a majority of the Note Balance of the Notes affected
thereby, by Act (as defined in Section 10.03 hereof) of such Holders delivered
to the Issuer and the Indenture Trustee, enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to, or changing in
any manner or eliminating any of the provisions of, this Indenture or of
modifying in any manner the rights of the Holders of the Notes under this
Indenture; provided, however, that no such supplemental indenture shall, without
the consent of the Holder of each Note affected thereby:
(i) change the date of payment of any installment of principal of
or interest on any Note, or reduce the principal amount thereof or the
interest rate thereon, change the provisions of this Indenture relating to
the application of collections on, or the proceeds of the sale of, the
Trust Estate to payment of principal of or interest on the Notes, or change
any place of payment where, or the coin or currency in which, any Note or
the interest thereon is payable, or impair the right to institute suit for
the enforcement of the provisions of this Indenture requiring the
application of funds available therefor, as provided in Article V, to the
payment of any such amount due on the Notes on or after the respective due
dates thereof;
(ii) reduce the percentage of the Note Balances of the Notes, the
consent of the Holders of which is required for any such supplemental
indenture, or the consent of the Holders of which is required for any
waiver of compliance with certain provisions
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of this Indenture or certain defaults hereunder and their consequences
provided for in this Indenture;
(iii) modify or alter the provisions of the proviso to the
definition of the term "Outstanding" or modify or alter the exception in
the definition of the term "Noteholder";
(iv) reduce the percentage of the Note Balances of the Notes
required to direct the Indenture Trustee to direct the Issuer to sell or
liquidate the Trust Estate pursuant to Section 5.04 hereof;
(v) modify any provision of this Section 9.02 except to increase
any percentage specified herein or to provide that certain additional
provisions of this Indenture or the Basic Documents cannot be modified or
waived without the consent of the Holder of each Note affected thereby;
(vi) modify any of the provisions of this Indenture in such
manner as to affect the calculation of the amount of any payment of
interest or principal due on any Note on any Payment Date; or
(vii) permit the creation of any lien ranking prior to or on a
parity with the lien of this Indenture with respect to any part of the
Trust Estate or, except as otherwise permitted or contemplated herein,
terminate the lien of this Indenture on any property at any time subject
hereto or deprive the Holder of any Note of the security provided by the
lien of this Indenture; and provided, further, that such action shall not,
as evidenced by an Opinion of Counsel, cause the Issuer to be subject to an
entity level tax.
The Indenture Trustee may in its discretion determine whether or not any
Notes would be affected by any supplemental indenture and any such determination
shall be conclusive upon the Holders of all Notes, whether theretofore or
thereafter authenticated and delivered hereunder. The Indenture Trustee shall
not be liable for any such determination made in good faith.
It shall not be necessary for any Act of Noteholders under this Section
9.02 to approve the particular form of any proposed supplemental indenture, but
it shall be sufficient if such Act shall approve the substance thereof.
Promptly after the execution by the Issuer and the Indenture Trustee of any
supplemental indenture pursuant to this Section 9.02, the Indenture Trustee
shall mail to the Holders of the Notes to which such amendment or supplemental
indenture relates a notice setting forth in general terms the substance of such
supplemental indenture. Any failure of the Indenture Trustee to mail such
notice, or any defect therein, shall not, however, in any way impair or affect
the validity of any such supplemental indenture.
Section 9.03. EXECUTION OF SUPPLEMENTAL INDENTURES. In executing, or
permitting the additional trusts created by, any supplemental indenture
permitted by this Article IX or the modification thereby of the trusts created
by this Indenture, the Indenture Trustee shall be entitled
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to receive, and subject to Sections 6.01 and 6.02 hereof, shall be fully
protected in relying upon, an Opinion of Counsel stating that the execution of
such supplemental indenture is authorized or permitted by this Indenture. The
Indenture Trustee may, but shall not be obligated to, enter into any such
supplemental indenture that affects the Indenture Trustee's own rights, duties,
liabilities or immunities under this Indenture or otherwise.
Notwithstanding anything to the contrary in this Article IX, no amendment
that directly or indirectly changes the priority of payment, dates of payment or
amounts of the Expense Fee payable to Financial Security Assurance Inc. shall be
effective without the consent of Financial Security Assurance Inc.
Section 9.04. EFFECT OF SUPPLEMENTAL INDENTURE. Upon the execution of any
supplemental indenture pursuant to the provisions hereof, this Indenture shall
be and shall be deemed to be modified and amended in accordance therewith with
respect to the Notes affected thereby, and the respective rights, limitations of
rights, obligations, duties, liabilities and immunities under this Indenture of
the Indenture Trustee, the Issuer and the Holders of the Notes shall thereafter
be determined, exercised and enforced hereunder subject in all respects to such
modifications and amendments, and all the terms and conditions of any such
supplemental indenture shall be and be deemed to be part of the terms and
conditions of this Indenture for any and all purposes.
Section 9.05. CONFORMITY WITH TRUST INDENTURE ACT. Every amendment of this
Indenture and every supplemental indenture executed pursuant to this Article IX
shall conform to the requirements of the Trust Indenture Act as then in effect
so long as this Indenture shall then be qualified under the Trust Indenture Act.
Section 9.06. REFERENCE IN NOTES TO SUPPLEMENTAL INDENTURES. Notes
authenticated and delivered after the execution of any supplemental indenture
pursuant to this Article IX may, and if required by the Indenture Trustee shall,
bear a notation in form approved by the Indenture Trustee as to any matter
provided for in such supplemental indenture. If the Issuer or the Indenture
Trustee shall so determine, new Notes so modified as to conform, in the opinion
of the Indenture Trustee and the Issuer, to any such supplemental indenture may
be prepared and executed by the Issuer and authenticated and delivered by the
Indenture Trustee in exchange for Outstanding Notes.
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ARTICLE X
MISCELLANEOUS
Section 10.01. COMPLIANCE CERTIFICATES AND OPINIONS, ETC. (a) Upon any
application or request by the Issuer to the Indenture Trustee to take any action
under any provision of this Indenture, the Issuer shall furnish to the Indenture
Trustee a. an Officer's Certificate stating that all conditions precedent, if
any, provided for in this Indenture relating to the proposed action have been
complied with and b. an Opinion of Counsel stating that in the opinion of such
counsel all such conditions precedent, if any, have been complied with, except
that, in the case of any such application or request as to which the furnishing
of such documents is specifically required by any provision of this Indenture,
no additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture shall include:
(1) a statement that each signatory of such certificate or
opinion has read or has caused to be read such covenant or condition and
the definitions herein relating thereto;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of each such signatory, such
signatory has made such examination or investigation as is necessary to
enable such signatory to express an informed opinion as to whether or not
such covenant or condition has been complied with;
(4) a statement as to whether, in the opinion of each such
signatory, such condition or covenant has been complied with; and
(5) if the signatory of such certificate or opinion is required
to be Independent, the statement required by the definition of the term
"Independent".
(b) (i) Except with respect to the substitution of Mortgage Loans pursuant
to Section 3.2 of the Mortgage Loan Purchase Agreement, prior to the deposit of
any Collateral or other property or securities with the Indenture Trustee that
is to be made the basis for the release of any property or securities subject to
the lien of this Indenture, the Issuer shall, in addition to any obligation
imposed in Section 10.01(a) or elsewhere in this Indenture, furnish to the
Indenture Trustee an Officer's Certificate certifying or stating the opinion of
each person signing such certificate as to the fair value (within 90 days of
such deposit) to the Issuer of the Collateral or other property or securities to
be so deposited and a report from a nationally recognized accounting firm
verifying such value.
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(ii) Whenever the Issuer is required to furnish to the
Indenture Trustee an Officer's Certificate certifying or stating the opinion of
any signer thereof as to the matters described in clause (i) above, the Issuer
shall also deliver to the Indenture Trustee an Independent Certificate from a
nationally recognized accounting firm as to the same matters, if the fair value
to the Issuer of the securities to be so deposited and of all other such
securities made the basis of any such withdrawal or release since the
commencement of the then-current fiscal year of the Issuer, as set forth in the
certificates delivered pursuant to clause (i) above and this clause (ii), is 10%
or more of the Note Balances of the Notes, but such a certificate need not be
furnished with respect to any securities so deposited, if the fair value thereof
to the Issuer as set forth in the related Officer's Certificate is less than
$25,000 or less than one percent of the Note Balances of the Notes.
(iii) Except with respect to the substitution of Mortgage
Loans pursuant to Section 3.2 of the Mortgage Loan Purchase Agreement, whenever
any property or securities are to be released from the lien of this Indenture,
the Issuer shall also furnish to the Indenture Trustee an Officer's Certificate
certifying or stating the opinion of each person signing such certificate as to
the fair value (within 90 days of such release) of the property or securities
proposed to be released and stating that in the opinion of such person the
proposed release will not impair the security under this Indenture in
contravention of the provisions hereof.
(iv) Whenever the Issuer is required to furnish to the
Indenture Trustee an Officer's Certificate certifying or stating the opinion of
any signer thereof as to the matters described in clause (iii) above, the Issuer
shall also furnish to the Indenture Trustee an Independent Certificate as to the
same matters if the fair value of the property or securities and of all other
property, other than securities released from the lien of this Indenture since
the commencement of the then-current calendar year, as set forth in the
certificates required by clause (iii) above and this clause (iv), equals 10% or
more of the Note Balances of the Notes, but such certificate need not be
furnished in the case of any release of property or securities if the fair value
thereof as set forth in the related Officer's Certificate is less than $25,000
or less than one percent of the then Note Balances of the Notes.
Section 10.02. FORM OF DOCUMENTS DELIVERED TO INDENTURE TRUSTEE. In any
case where several matters are required to be certified by, or covered by an
opinion of, any specified Person, it is not necessary that all such matters be
certified by, or covered by the opinion of, only one such Person, or that they
be so certified or covered by only one document, but one such Person may certify
or give an opinion with respect to some matters and one or more other such
Persons as to other matters, and any such Person may certify or give an opinion
as to such matters in one or several documents.
Any certificate or opinion of an Authorized Officer of the Issuer may be
based, insofar as it relates to legal matters, upon a certificate or opinion of,
or representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate of an Authorized Officer or Opinion of Counsel
may be based, insofar as it relates to factual matters, upon a certificate or
opinion of, or representations
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by, an officer or officers of the Seller or the Issuer, stating that the
information with respect to such factual matters is in the possession of the
Seller or the Issuer, unless such counsel knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Whenever in this Indenture, in connection with any application or
certificate or report to the Indenture Trustee, it is provided that the Issuer
shall deliver any document as a condition of the granting of such application,
or as evidence of the Issuer's compliance with any term hereof, it is intended
that the truth and accuracy, at the time of the granting of such application or
at the effective date of such certificate or report (as the case may be), of the
facts and opinions stated in such document shall in such case be conditions
precedent to the right of the Issuer to have such application granted or to the
sufficiency of such certificate or report. The foregoing shall not, however, be
construed to affect the Indenture Trustee's right to rely upon the truth and
accuracy of any statement or opinion contained in any such document as provided
in Article VI.
Section 10.03. ACTS OF NOTEHOLDERS. (a) Any request, demand, authorization,
direction, notice, consent, waiver or other action provided by this Indenture to
be given or taken by Noteholders may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such Noteholders in person
or by agents duly appointed in writing; and except as herein otherwise expressly
provided, such action shall become effective when such instrument or instruments
are delivered to the Indenture Trustee, and, where it is hereby expressly
required, to the Issuer. Such instrument or instruments (and the action embodied
therein and evidenced thereby) are herein sometimes referred to as the "Act" of
the Noteholders signing such instrument or instruments. Proof of execution of
any such instrument or of a writing appointing any such agent shall be
sufficient for any purpose of this Indenture and (subject to Section 6.01
hereof) conclusive in favor of the Indenture Trustee and the Issuer, if made in
the manner provided in this Section 10.03.
(b) The fact and date of the execution by any person of any such instrument
or writing may be proved in any manner that the Indenture Trustee deems
sufficient.
(c) The ownership of Notes shall be proved by the Note Registrar.
(d) Any request, demand, authorization, direction, notice, consent, waiver
or other action by the Holder of any Notes shall bind the Holder of every Note
issued upon the registration thereof or in exchange therefor or in lieu thereof,
in respect of anything done, omitted or suffered to be done by the Indenture
Trustee or the Issuer in reliance thereon, whether or not notation of such
action is made upon such Note.
Section 10.04. NOTICES, ETC., TO INDENTURE TRUSTEE, ISSUER AND RATING
AGENCIES. Any request, demand, authorization, direction, notice, consent, waiver
or Act of Noteholders or other
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documents provided or permitted by this Indenture shall be in writing and if
such request, demand, authorization, direction, notice, consent, waiver or Act
of Noteholders is to be made upon, given or furnished to or filed with:
(i) the Indenture Trustee by any Noteholder or by the Issuer
shall be sufficient for every purpose hereunder if made, given, furnished
or filed in writing to or with the Indenture Trustee at the Corporate Trust
Office. The Indenture Trustee shall promptly transmit any notice received
by it from the Noteholders to the Issuer; or
(ii) the Issuer by the Indenture Trustee or by any Noteholder
shall be sufficient for every purpose hereunder if in writing and mailed
first-class, postage prepaid, to the Issuer addressed to: Salomon Brothers
Mortgage Securities VII, Inc. Asset-Backed Floating Rate Notes, Series
1998-11, in care of Wilmington Trust Company, Rodney Square North, 1100
North Market Street, Wilmington, Delaware 19890-0001, Attention: Corporate
Trust Administration (telecopy number (302) 651-1576), or at any other
address previously furnished in writing to the Indenture Trustee by the
Issuer. The Issuer shall promptly transmit any notice received by it from
the Noteholders to the Indenture Trustee; or
(iii) the Depositor by the Indenture Trustee or by any Noteholder
shall be sufficient for every purpose hereunder if in writing and mailed
first-class, postage prepaid, to the Depositor addressed to: Salomon
Brothers Mortgage Securities VII, Inc., Seven World Trade Center, New York,
New York 10048, Attention: Mortgage Finance Group (telecopy number (212)
783-3895), or at any other address previously furnished in writing to the
Indenture Trustee by the Depositor. The Depositor shall promptly transmit
any notice received by it from the Noteholders to the Indenture Trustee; or
(iv) the Seller by the Indenture Trustee or by any Noteholder
shall be sufficient for every purpose hereunder if in writing and mailed
first-class, postage prepaid, to the Issuer addressed to: Wilshire Real
Estate Investment Trust Inc., 1776 South West Madison Street, Portland,
Oregon 97205, Attention: Lawrence Mendelsohn (telecopy number (503)
223-8799), or at any other address previously furnished in writing to the
Indenture Trustee by the Seller. The Seller shall promptly transmit any
notice received by it from the Noteholders to the Indenture Trustee.
Notices required to be given to the Rating Agencies by the Issuer, the
Indenture Trustee or the Owner Trustee shall be in writing, personally delivered
or mailed first-class postage prepaid, to (i) in the case of DCR, at the
following address: Duff & Phelps Credit Rating Co., 17 State Street, 12th Floor,
New York, New York, 10004 and (ii) in the case of S&P, at the following address:
Standard & Poor's Ratings Services, 25 Broadway, New York, New York 10004; or as
to each of the foregoing, at such other address as shall be designated by
written notice to the other parties.
Section 10.05. NOTICES TO NOTEHOLDERS; WAIVER. Where this Indenture
provides for notice to Noteholders of any event, such notice shall be
sufficiently given (unless otherwise herein
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expressly provided) if in writing and mailed first-class, postage prepaid, to
each Noteholder affected by such event, at such Person's address as it appears
on the Note Register, not later than the latest date, and not earlier than the
earliest date, prescribed for the giving of such notice. In any case where
notice to Noteholders is given by mail, neither the failure to mail such notice
nor any defect in any notice so mailed to any particular Noteholder shall affect
the sufficiency of such notice with respect to other Noteholders, and any notice
that is mailed in the manner herein provided shall conclusively be presumed to
have been duly given regardless of whether such notice is in fact actually
received.
Where this Indenture provides for notice in any manner, such notice may be
waived in writing by any Person entitled to receive such notice, either before
or after the event, and such waiver shall be the equivalent of such notice.
Waivers of notice by Noteholders shall be filed with the Indenture Trustee but
such filing shall not be a condition precedent to the validity of any action
taken in reliance upon such a waiver.
In case, by reason of the suspension of regular mail service as a result of
a strike, work stoppage or similar activity, it shall be impractical to mail
notice of any event to Noteholders when such notice is required to be given
pursuant to any provision of this Indenture, then any manner of giving such
notice as shall be satisfactory to the Indenture Trustee shall be deemed to be a
sufficient giving of such notice.
Where this Indenture provides for notice to the Rating Agencies, failure to
give such notice shall not affect any other rights or obligations created
hereunder, and shall not under any circumstance constitute an Event of Default.
Section 10.06. CONFLICT WITH TRUST INDENTURE ACT. If any provision hereof
limits, qualifies or conflicts with another provision hereof that is required to
be included in this Indenture by any of the provisions of the Trust Indenture
Act, such required provision shall control.
The provisions of TIA ss.ss. 310 through 317 that impose duties on any
Person (including the provisions automatically deemed included herein unless
expressly excluded by this Indenture) are a part of and govern this Indenture,
whether or not physically contained herein.
Section 10.07. EFFECT OF HEADINGS. The Article and Section headings herein
are for convenience only and shall not affect the construction hereof.
Section 10.08. SUCCESSORS AND ASSIGNS. All covenants and agreements in this
Indenture and the Notes by the Issuer shall bind its successors and assigns,
whether so expressed or not. All agreements of the Indenture Trustee in this
Indenture shall bind its successors, co- trustees and agents.
Section 10.09. SEPARABILITY. In case any provision in this Indenture or in
the Notes shall be invalid, illegal or unenforceable, the validity, legality,
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
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Section 10.10. LEGAL HOLIDAYS. In any case where the date on which any
payment is due shall not be a Business Day, then (notwithstanding any other
provision of the Notes or this Indenture) payment need not be made on such date,
but may be made on the next succeeding Business Day with the same force and
effect as if made on the date on which nominally due, and no interest shall
accrue for the period from and after any such nominal date.
Section 10.11. GOVERNING LAW. THIS INDENTURE SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Section 10.12. COUNTERPARTS. This Indenture may be executed in any number
of counterparts, each of which so executed shall be deemed to be an original,
but all such counterparts shall together constitute but one and the same
instrument.
Section 10.13. RECORDING OF INDENTURE. If this Indenture is subject to
recording in any appropriate public recording offices, such recording is to be
effected by the Issuer and at its expense accompanied by an Opinion of Counsel
(which may be counsel to the Indenture Trustee or any other counsel reasonably
acceptable to the Indenture Trustee) to the effect that such recording is
necessary either for the protection of the Noteholders or any other Person
secured hereunder or for the enforcement of any right or remedy granted to the
Indenture Trustee under this Indenture.
Section 10.14. ISSUER OBLIGATION. No recourse may be taken, directly or
indirectly, with respect to the obligations of the Issuer, the Owner Trustee or
the Indenture Trustee on the Notes or under this Indenture or any certificate or
other writing delivered in connection herewith or therewith, against (i) the
Indenture Trustee or the Owner Trustee in its individual capacity, (ii) any
owner of a beneficial interest in the Issuer or (iii) any partner, owner,
beneficiary, agent, officer, director, employee or agent of the Indenture
Trustee or the Owner Trustee in its individual capacity, any holder of a
beneficial interest in the Issuer, the Owner Trustee or the Indenture Trustee or
of any successor or assign of the Indenture Trustee or the Owner Trustee in its
individual capacity, except as any such Person may have expressly agreed (it
being understood that the Indenture Trustee and the Owner Trustee have no such
obligations in their individual capacity) and except that any such partner,
owner or beneficiary shall be fully liable, to the extent provided by applicable
law, for any unpaid consideration for stock, unpaid capital contribution or
failure to pay any installment or call owing to such entity. For all purposes of
this Indenture, in the performance of any duties or obligations of the Issuer
hereunder, the Owner Trustee shall be subject to, and entitled to the benefits
of, the terms and provisions of Article VI, VII and VIII of the Owner Trust
Agreement.
Section 10.15. NO PETITION. The Indenture Trustee, by entering into this
Indenture, and each Noteholder, by accepting a Note, hereby covenant and agree
that they will not at any time institute against the Transferor, the Depositor
or the Issuer, or join in any institution against the Transferor, the Depositor
or the Issuer of, any bankruptcy, reorganization, arrangement,
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insolvency or liquidation proceedings, or other proceedings under any United
States federal or state bankruptcy or similar law in connection with any
obligations relating to the Notes, this Indenture or any of the Basic Documents.
This Section 10.15 will survive for one year and one day following the
termination of this Indenture.
Section 10.16. INSPECTION. The Issuer agrees that, on reasonable prior
notice, it shall permit any representative of the Indenture Trustee, during the
Issuer's normal business hours, to examine all the books of account, records,
reports and other papers of the Issuer, to make copies and extracts therefrom,
to cause such books to be audited by Independent certified public accountants,
and to discuss the Issuer's affairs, finances and accounts with the Issuer's
officers, employees, and Independent certified public accountants, all at such
reasonable times and as often as may be reasonably requested. The Indenture
Trustee shall cause their representatives to hold in confidence all such
information except to the extent disclosure may be required by law (and all
reasonable applications for confidential treatment are unavailing) and except to
the extent that the Indenture Trustee may reasonably determine that such
disclosure is necessary to perform its obligations hereunder.
Section 10.17. LIMITED THIRD-PARTY BENEFICIARY. Financial Security
Assurance Inc. shall be a limited third-party beneficiary of this Indenture,
entitled to enforce its right to the Expense Fee and any other rights it may
have as if a party hereto.
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IN WITNESS WHEREOF, the Issuer and the Indenture Trustee have caused their
names to be signed hereto by their respective officers thereunto duly
authorized, all as of the day and year first above written.
WILSHIRE REIT TRUST SERIES 1998-1,
as Issuer
By: WILMINGTON TRUST COMPANY, not in its
individual capacity but solely as
Owner Trustee
By: /s/ Emmett Harmon
---------------------------------------
Name: Emmett Harmon
Title: Vice President
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
not in its individual capacity but solely as
Indenture Trustee and as Note Registrar
By: /s/ Randall S. Reider
----------------------------------------
Name: Randall S. Reider
Title: Assistant Vice President
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
hereby accepts the appointment as
Certificate Paying Agent pursuant to
Section 3.10 of the Owner Trust
Agreement and as Certificate Registrar
pursuant to Section 4.02 hereof.
By: /s/ Randall S. Reider
-----------------------------------
Name: Randall S. Reider
Title: Assistant Vice President
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 30th day of September 1998, before me, a notary public in and for
said State, personally appeared Emmett R. Harmon, known to me to be a Vice
President of Wilmington Trust Company, one of the corporations that executed the
within instrument, and also known to me to be the person who executed it on
behalf of said corporation, and acknowledged to me that such corporation
executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
_______________
Notary Public
[Notarial Seal]
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 30th day of September 1998, before me, a notary public in and for
said State, personally appeared Randall S. Reider, known to me to be an
Assistant Vice President of Norwest Bank Minnesota, National Association, one of
the corporations that executed the within instrument, and also known to me to be
the person who executed it on behalf of said corporation, and acknowledged to me
that such corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
_______________
Notary Public
[Notarial Seal]
<PAGE>
APPENDIX A
DEFINITIONS
"Accrued Certificate Interest": With respect to any Class of Notes and
each Payment Date, interest accrued during the related Interest Accrual Period
at the Note Interest Rate for such Note for such Payment Date on the Note
Balance of such Note immediately prior to such Payment Date. All payments of
interest on the Notes will be calculated on the basis of a 360-day year and the
actual number of days in the applicable Interest Accrual Period.
"Adjustable Rate Mortgage Loan": Each of the Mortgage Loans identified
in the Mortgage Loan Schedule as having a Mortgage Rate that is subject to
adjustment.
"Adjustment Date": With respect to each Adjustable Rate 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.
"Administration Agreement": The administration agreement, dated as of
the date hereof, among the Issuer and the Administrators, pursuant to which the
Administrators shall perform various obligations of the Issuer hereunder.
"Administrators": Each person acting as an "Administrator" from time
to time under the Administration Agreement, which initially shall be Norwest
Bank Minnesota, National Association and Wilshire Servicing Corporation.
"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.
"Allocated Realized Loss Amount": With respect to any Payment Date and
any Class of Subordinate Notes, the sum of (i) any Realized Losses allocated to
such Class of Notes on any Payment Date and (ii) the amount of any Allocated
Realized Loss Amount for such Class of Notes remaining unpaid from previous
Payment Dates plus accrued interest on such amount calculated at the related
Note Accrual Rate for each Interest Accrual Period such amount remained
outstanding.
"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.
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"Authorized Newspaper": A newspaper of general circulation in the
Borough of Manhattan, The City of New York, printed in the English language and
customarily published on each Business Day, whether or not published on
Saturdays, Sundays or holidays.
"Authorized Officer": With respect to the Issuer, any officer of the
Owner Trustee who is authorized to act for the Owner Trustee in matters relating
to the Issuer and who is identi fied on the list of Authorized Officers
delivered by the Owner Trustee to the Indenture Trustee on the Closing Date (as
such list may be modified or supplemented from time to time thereafter).
"Available Interest Rate": With respect to any Payment Date, a rate
per annum equal to the fraction, expressed as a percentage, the numerator of
which is (i) the Current Interest Amount for such Payment Date, and the
denominator of which is (ii) an amount equal to (A) the aggregate Note Balance
of the Notes immediately prior to such Payment Date multiplied by (B) the actual
number of days elapsed in the related Interest Accrual Period and divided by
360.
"Available Payment Amount": With respect to any Payment Date, an
amount equal to (1) the sum of (a) the aggregate of the amounts on deposit in
the Collection Accounts and Payment 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 Payment
Account for such Payment Date pursuant to Section 3.23 of each Servicing
Agreement, (c) the aggregate of any amounts deposited in the Payment Account by
the Servicers in respect of Prepayment Interest Shortfalls for such Payment Date
pursuant to Section 3.24 of the Servicing Agreements, (d) the aggregate of any
P&I Advances made by the Servicers for such Payment Date pursuant to Section
4.01 of the Servicing Agreements and (e) the aggregate of any advances made by
the Master Servicer or the Indenture Trustee for such Payment Date pursuant to
Section 6.02 of the Servicing Agreements, 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 Master Servicer, the
Servicers, the Indenture Trustee, the Seller or any Sub-Servicer pursuant to
Section 3.11 of the Servicing Agreements, Section 3.12 of the Servicing
Agreements or pursuant to Section 6.07 of the Indenture, (v) Stayed Funds, (vi)
the Indenture Trustee Fee, the Expense Fee and the Master Servicing Fee payable
from the Payment Account pursuant to the Indenture, (vii) amounts deposited in
the Collection Accounts or the Payment Account in error and (viii) the amount of
any Prepayment Charges collected by the Servicers in connection with the
voluntary Principal Prepayment in full of any of the Mortgage Loans, and (y)
amounts reimbursable to the Master Servicer or the Indenture Trustee for an
advance made pursuant to Section 6.02(b) of the Servicing Agreements, which
advance the Master Servicer or the Indenture Trustee, as applicable, has
determined to be nonrecoverable from the Stayed Funds in respect of which it was
made.
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"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.
"Basic Documents": The Owner Trust Agreement, the Certificate of
Trust, the Indenture, the Mortgage Loan Purchase Agreement, the Ownership
Transfer Agreement, the Servicing Agreements and the other documents and
certificates delivered in connection with any of the above.
"Book-Entry Custodian": The Custodian appointed pursuant to Section
4.06.
"Book-Entry Notes": Any Note registered in the name of the Depository
or its nominee. Initially, all of the Notes will be Book-Entry Notes.
"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 Maryland or the State of New York, or in the city in which the
Corporate Trust Office of the Indenture Trustee is located, are authorized or
obligated by law or executive order to be closed.
"Business Trust Statute": Chapter 38 of Title 12 of the Delaware Code,
12 Del. Code ss.ss.3801 ET SEQ., as the same may be amended from time to time.
"Certificate Distribution Account": The account or accounts created
and maintained pursuant to Section 3.10(c) of the Owner Trust Agreement. The
Certificate Distribution Account shall be an Eligible Account.
"Certificate Paying Agent": The meaning specified in Section 3.10 of
the Owner Trust Agreement.
"Certificate Percentage Interest": With respect to each Equity
Certificate, the Certificate Percentage Interest on the face thereof.
"Certificate Register": The register maintained by the Certificate
Registrar in which the Certificate Registrar shall provide for the registration
of Equity Certificates and of transfers and exchanges of Equity Certificates.
"Certificate Registrar": Initially, the Indenture Trustee, in its
capacity as Certificate Registrar, or any successor to the Indenture Trustee in
such capacity.
"Certificate of Trust": The Certificate of Trust filed for the Issuer
pursuant to Section 3810(a) of the Business Trust Statute.
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"Certificateholder": The Person in whose name an Equity Certificate is
registered in the Certificate Register. Pledgees of Equity Certificates that
have been pledged in good faith may be regarded as Certificateholders if the
pledgee establishes to the satisfaction of the Indenture Trustee or the Owner
Trustee, as the case may be, the pledgee's right so to act with respect to such
Equity Certificates and that the pledgee is not the Issuer, any other obligor
upon the Equity Certificates or any Affiliate of the foregoing Persons.
"Class": Collectively, all of the Notes bearing the same class
designation.
"Class A Note": Any one of the Class A Notes authorized by this
Indenture, substantially in the form annexed hereto as Exhibit A-1.
"Class A Principal Payment Amount": With respect to any Payment Date
on or after the Stepdown Date and on which a Trigger Event is not in effect, the
excess of (x) the Note Balance of the Class A Notes immediately prior to such
Payment Date over (y) the lesser of (A) the product of (i) 62.70% 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 $2,856,405.
"Class M-1 Note": Any one of the Class M-1 Notes authorized by this
Indenture, substantially in the form annexed hereto as Exhibit A-2.
"Class M-1 Principal Payment Amount": With respect to any Payment 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 Note Balance of the Class A Notes (after taking
into account the payment of the Class A Principal Payment Amount on such Payment
Date) and (ii) the Note Balance of the Class M-1 Notes immediately prior to such
Payment Date over (y) the lesser of (A) the product of (i) 76.50% 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 $2,856,405.
"Class M-2 Note": Any one of the Class M-2 Notes authorized by this
Indenture, substantially in the form annexed hereto as Exhibit A-3.
"Class M-2 Principal Payment Amount": With respect to any Payment 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 Note Balance of the Class A Notes (after taking
into account the payment of the Class A Principal Payment Amount on such Payment
Date), (ii) the Note Balance of the Class M-1 Notes (after taking into account
the payment of the Class M-1 Principal Payment Amount on such Payment Date) and
(iii) the Note Balance of the Class M-2 Notes immediately prior to such Payment
Date over (y) the lesser of (A) the product of (i) 85.00% 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 $2,856,405.
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"Class M-3 Note": Any one of the Class M-3 Notes authorized by this
Indenture, substantially in the form annexed hereto Exhibit A-4.
"Class M-3 Principal Payment Amount": With respect to any Payment 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 Note Balance of the Class A Notes (after taking
into account the payment of the Class A Principal Payment Amount on such Payment
Date), (ii) the Note Balance of the Class M-1 Notes (after taking into account
the payment of the Class M-1 Principal Payment Amount on such Payment Date),
(iii) the Note Balance of the Class M-2 Notes (after taking into account the
payment of the Class M-2 Principal Payment Amount on such Payment Date) and (iv)
the Note Balance of the Class M-3 Notes immediately prior to such Payment Date
over (y) the lesser of (A) the product of (i) 96.50% 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 $2,856,405.
"Closing Date": September 30, 1998.
"Code": The Internal Revenue Code of 1986.
"Collateral": The meaning specified in the Granting Clause of the
Indenture.
"Collection Account": The account or accounts created and maintained
by each Servicer pursuant to Section 3.10(a) of the related Servicing Agreement.
The Collection Account must be an Eligible Account.
"Corporate Trust Office": With respect to the Indenture Trustee, the
principal corporate trust office of the Indenture Trustee at which at any
particular time its corporate trust business shall be administered, which office
at the date of the execution of this instrument is located at Sixth Street and
Marquette Avenue, Minneapolis, Minnesota 55479, Attention: Corporate Trust
Services, or at such other address as the Indenture Trustee may designate from
time to time by notice to the Noteholders, the Issuer, the Owner Trustee, the
Master Servicer and the Servicers. With respect to the Owner Trustee, the
principal corporate trust office of the Owner Trustee at, which at any
particular time its corporate trust business shall be administered, which office
at the date of the execution of this instrument is located at Rodney Square
North, 1100 North Market Street, Wilmington, Delaware 19801, Attention: Wilshire
REIT Trust Series 1998-1, or at such other address as the Indenture Trustee may
designate from time to time by notice to the Noteholders, the
Certificateholders, the Issuer, the Indenture Trustee, the Master Servicer and
the Servicers.
"Credit Enhancement Percentage": For any Payment Date, the percentage
equivalent of a fraction, the numerator of which is the sum of the aggregate
Note Balances of the Subordinate Certificates and the Overcollateralized Amount,
and the denominator of which is the aggregate Stated Principal Balance of the
Mortgage Loans, calculated after taking into account payments of principal on
the Mortgage Loans and payment of the Principal Payment Amount to the Notes then
entitled to payments of principal on such Payment Date.
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"Current Interest Payment Amount": With respect to any Payment Date,
an amount equal to interest collections or advances on the Mortgage Loans during
the related Due Period (net of the Master Servicing Fee, the Expense Fee, the
Servicing Fees and the Indenture Trustee Fee).
"Custodial Agreement": An agreement that may be entered into among the
Issuer, the Master Servicer, the Servicers, the Indenture Trustee and the
Custodian in the form of Exhibit C annexed hereto or a similar agreement
assigned to the Indenture Trustee with respect to the Mortgage Loans.
"Custodian": A custodian, which shall not be the Issuer, the Master
Servicer, the Servicers, the Depositor, the Seller, the Transferor, the Owner
Trustee or any Affiliate of any of them, appointed pursuant to a Custodial
Agreement.
"Cut-off Date": With respect to each Original Mortgage Loan, September
1, 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.
"Default": Any occurrence which is or with notice or the lapse of time
or both would become an Event of Default.
"Deficient Valuation": With respect to any Mortgage Loan, a valuation
of the related Mortgaged Property by a court of competent jurisdiction in an
amount less than the then outstanding principal balance of the Mortgage Loan,
which valuation results from a proceeding initiated under the Bankruptcy Code.
"Definitive Notes": As defined in Section 4.06.
"Deleted Mortgage Loan": A Mortgage Loan replaced or to be replaced by
a Qualified Substitute Mortgage Loan.
"Delinquency Percentage": With respect to any Payment Date, 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.
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"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 Notes that are to be Book-Entry Notes, 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 Indenture 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 that
are rated D-1+ by DCR (if rated by DCR) and A-1 by S&P (or comparable ratings if
DCR and S&P are not the Rating Agencies).
"Depository Participant": A broker, dealer, bank or other financial
institution or other Person for whom from time to time a Depository effects
book-entry transfers and pledges of securities deposited with the Depository.
"Determination Date": With respect to each Payment Date, the 15th day
of the calendar month in which such Payment Date occurs or, if such 15th day is
not a Business Day, the Business Day immediately preceding such 15th day.
"Due Date": With respect to each Payment Date, the first day of the
calendar month in which such Payment Date occurs, which is the day of the month
on which the Monthly Payment is due on a Mortgage Loan, exclusive of any days of
grace.
"Due Period": With respect to any Payment Date, the period commencing
on the second day of the calendar month preceding the calendar month in which
such Payment Date occurs and ending on the related Due Date.
"Eligible Account": Any of (i) an account or accounts maintained with
a federal or state chartered depository institution or trust company the
short-term unsecured debt obligations of which are rated "AAA" or "D-1+", as
applicable, by DCR (if rated by DCR) and A-1 by S&P (or comparable ratings if
DCR and S&P are not the Rating Agencies) at the time any amounts are held on
deposit therein, (ii) an account or accounts the deposits in which are fully
insured by the FDIC or (iii) a trust account or accounts maintained with the
corporate trust department of a federal or state chartered depository
institution or trust company acting in its fiduciary capacity. Eligible Accounts
may bear interest.
"Equity Certificates": The certificates evidencing the beneficial
ownership interest in the Issuer and executed by the Owner Trustee in
substantially the form set forth in Exhibit A to the Owner Trust Agreement.
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"ERISA": The Employee Retirement Income Security Act of 1974, as
amended.
"Estate in Real Property": A fee simple estate in a parcel of land.
"Event of Default": With respect to the Indenture, any one of the
following events (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or pursuant
to any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body):
(i) a default by the Issuer in the payment of (a) the Interest Payment
Amount, the Principal Payment Amount or any Overcollateralization Increase
Amount with respect to a Payment Date on such Payment Date, but only to the
extent funds are available to make such payment as provided in the
Indenture which remains unremedied for a period of five days; or
(ii) the failure by the Issuer on the Final Maturity Date to reduce
the Note Balance of any Notes outstanding to zero; or
(iii) there occurs a default in the observance or performance of any
covenant or agreement of the Issuer made in the Indenture, or any
representation or warranty of the Issuer made in the Indenture or in any
certificate or other writing delivered pursuant thereto or in connection
therewith proving to have been incorrect in any material respect as of the
time when the same shall have been made, and such default shall continue or
not be cured, or the circumstance or condition in respect of which such
representation or warranty was incorrect shall not have been eliminated or
otherwise cured, for a period of 30 days after there shall have been given,
by registered or certified mail, to the Issuer by the Indenture Trustee or
to the Issuer and the Indenture Trustee by the Holders of at least 25% of
the Voting Rights, a written notice specifying such default or incorrect
representation or warranty and requiring it to be remedied and stating that
such notice is a notice of default hereunder; or
(iv) there occurs the filing of a decree or order for relief by a
court having jurisdiction in the premises in respect of the Issuer or any
substantial part of the Trust Estate in an involuntary case under any
applicable federal or state bankruptcy, insolvency or other similar law now
or hereafter in effect, or appointing a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official of the Issuer or for
any substantial part of the Trust Estate, or ordering the winding-up or
liquidation of the Issuer's affairs, and such decree or order shall remain
unstayed and in effect for a period of 60 consecutive days; or
(v) there occurs the commencement by the Issuer of a voluntary case
under any applicable federal or state bankruptcy, insolvency or other
similar law now or hereafter in effect, or the consent by the Issuer to the
entry of an order for relief in an involuntary case under any such law, or
the consent by the Issuer to the appointment or taking possession by a
receiver, liquidator, assignee, custodian, trustee, sequestrator or similar
official of the
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Issuer or for any substantial part of the assets of the Trust Estate, or
the making by the Issuer of any general assignment for the benefit of
creditors, or the failure by the Issuer generally to pay its debts as such
debts become due, or the taking of any action by the Issuer in furtherance
of any of the foregoing.
"Excess Overcollateralized Amount": With respect to the Class A Notes
and the Subordinate Notes and any Payment Date, the excess, if any, of (i) the
Overcollateralized Amount for such Payment Date over (ii) the Required
Overcollateralized Amount for such Payment Date.
"Exchange Act": The Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
"Expense Fee": With respect to each Mortgage Loan on Schedule 2
attached hereto and for any calendar month, an amount equal to one month's
interest (or in the event of any payment of interest which accompanies a
Principal Prepayment in full made by the Mortgagor during such calendar month,
interest for the number of days covered by such payment of interest) at the
applicable Expense Fee Rate on the same principal amount on which interest on
such Mortgage Loan accrues for such calendar month. Notwithstanding the
forgoing, the Expense Fee shall not be payable after the Expense Fee Termination
Date.
"Expense Fee Rate": 0.21% per annum.
"Expense Fee Termination Date": The Expense Fee shall be paid to
Financial Security Assurance Inc. until and including the Payment Date following
the Due Period in which the aggregate Stated Principal Balance of the Mortgage
Loans and any REO Properties listed on Schedule 2 attached hereto remaining in
the Trust Estate is less than $19,989,567.32.
"Expenses": The meaning specified in Section 7.02 of the Owner Trust
Agreement.
"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 Maturity Date": The Payment Date occurring in October 2028.
"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 Seller or the related Servicer pursuant to or as contemplated by Section
2.01 or Section 3.16(c) of the related Servicing Agreement), a determination
made by the related Servicer that all Insurance Proceeds, Liquidation Proceeds
and other payments or recoveries which such Servicer, in its reasonable good
faith judgment, expects to be finally recoverable in respect thereof have been
so recovered. The related Servicer shall maintain records, prepared by a
Servicing Officer, of each Final Recovery Determination made thereby.
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"Freddie Mac": Freddie Mac, formerly known as the Federal Home Loan
Mortgage Corporation ("FHLMC") or any successor thereto.
"Grant": Pledge, bargain, sell, warrant, alienate, remise, release,
convey, assign, transfer, create, and grant a lien upon and a security interest
in and right of set-off against, deposit, set over and confirm pursuant to the
Indenture. A Grant of the Collateral or of any other agreement or instrument
shall include all rights, powers and options (but none of the obligations) of
the granting party thereunder, including the immediate and continuing right to
claim for, collect, receive and give receipt for principal and interest payments
in respect of such collateral or other agreement or instrument and all other
moneys payable thereunder, to give and receive notices and other communications,
to make waivers or other agreements, to exercise all rights and options, to
bring proceedings in the name of the granting party or otherwise, and generally
to do and receive anything that the granting party is or may be entitled to do
or receive thereunder or with respect thereto.
"Gross Margin": With respect to each Adjustable Rate 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.
"Indenture": The indenture, dated as of September 1, 1998 between the
Issuer, as debtor, and the Indenture Trustee, as Indenture Trustee.
"Indenture Trustee": Norwest Bank Minnesota, National Association, a
national banking association, in its capacity as Indenture Trustee, or its
successor in interest, or any successor indenture trustee appointed as provided
in this Indenture.
"Indenture Trustee Fee": The amount payable to the Indenture Trustee
on each Payment Date pursuant to the Indenture as compensation for all services
rendered by it, which amount shall equal one twelfth of the product of (i) the
Indenture Trustee Fee Rate, multiplied by (ii) the aggregate Scheduled Principal
Balance of the Mortgage Loans and any REO Properties as of the second preceding
Due Date (or, in the case of the initial Payment Date, as of the Cut-off Date).
"Indenture Trustee Fee Rate": 0.0035% per annum.
"Independent": When used with respect to any specified Person, the
Person (i) is in fact independent of the Issuer, any other obligor on the Notes,
the Seller, the Transferor, the Servicers, the Issuer, the Depositor and any
Affiliate of any of the foregoing Persons, (ii) does not have any direct
financial interest or any material indirect financial interest in the Issuer,
any such other obligor, the Seller, the Transferor, the Master Servicer, the
Servicers, the Issuer, the Depositor or any Affiliate of any of the foregoing
Persons and (iii) is not connected with the Issuer, any such other obligor, the
Seller, the Transferor, the Master Servicer, the Servicers, the Issuer, the
Depositor or any Affiliate of any of the foregoing Persons as an officer,
employee, promoter, underwriter, trustee, partner, director or person performing
similar functions.
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"Independent Certificate": A certificate or opinion to be delivered to
the Indenture Trustee under the circumstances described in, and otherwise
complying with, the applicable requirements of Section 10.01 of the Indenture,
made by an Independent appraiser or other expert appointed by the Issuer and
approved by the Indenture Trustee in the exercise of reasonable care, and such
opinion or certificate shall state that the signer has read the definition of
"Independent" in this Indenture and that the signer is Independent within the
meaning thereof.
"Index": With respect to each Mortgage Loan and each related
Adjustment Date, the average of the interbank offered rates for six-month United
States dollar deposits in the London market as published in THE WALL STREET
JOURNAL and as most recently available as of a 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 related
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 Payment Date, the
period commencing on the Payment Date of the month immediately preceding the
month in which such Payment Date occurs (or, in the case of the first Payment
Date, commencing on the Closing Date) and ending on the day preceding such
Payment Date.
"Interest Carry Forward Amount": With respect to any Payment Date and
any Class of Notes, the sum of (i) the amount, if any, by which (a) the Interest
Payment Amount that would be payable at the applicable Note Accrual Rate for
such Class of Notes as of the immediately preceding Payment Date exceeded (b)
the actual amount paid on such Class of Notes in respect of interest on such
immediately preceding Payment Date at the Available Interest Rate and (ii) the
amount of any Interest Carry Forward Amount for such Class of Notes remaining
unpaid from previous Payment Dates plus accrued interest on such amount
calculated at the related Note Accrual Rate for each Interest Accrual Period
such amount remained outstanding.
"Interest Determination Date": With respect to the Notes and any
Interest Accrual Period therefor, the second London Business Day preceding the
commencement of such Interest Accrual Period.
"Interest Payment Amount": With respect to any Payment Date and any
Class of Notes, the aggregate Accrued Certificate Interest on the Notes of such
Class for such Payment Date.
"Investment Company Act": The Investment Company Act of 1940, as
amended, and any amendments thereto.
"Issuer": Wilshire REIT Trust Series 1998-1, a Delaware Business
Trust, or its successor in interest.
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"Issuer Request": A written order or request signed in the name of the
Issuer by any one of its Authorized Officers and delivered to the Indenture
Trustee.
"Lien": Any mortgage, deed of trust, pledge, conveyance,
hypothecation, assignment, participation, deposit arrangement, encumbrance, lien
(statutory or other), preference, priority right or interest or other security
agreement or preferential arrangement of any kind or nature whatsoever,
including, without limitation, any conditional sale or other title retention
agree ment, any financing lease having substantially the same economic effect as
any of the foregoing and the filing of any financing statement under the UCC
(other than any such financing statement filed for informational purposes only)
or comparable law of any jurisdiction to evidence any of the foregoing.
"Liquidation Event": With respect to any Mortgage Loan, any of the
following events: (i) such Mortgage Loan is paid in full; (ii) a Final Recovery
Determination is made as to such Mortgage Loan; or (iii) such Mortgage Loan is
removed from the Trust Estate by reason of its being purchased, sold or replaced
pursuant to or as contemplated by Section 2.01 or Section 3.16(c) of the related
Servicing Agreement. With respect to any REO Property, a Final Recovery
Determination is made as to such REO Property.
"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 related 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 2.01, Section 3.16(c) or Section 3.23 of the
related Servicing Agreement.
"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 Certificateholder": Any single Certificateholder or group of
Certificateholders representing a greater than 50% Percentage Interest in the
Equity Certificates.
"Master Servicer": Wilshire Servicing Corporation or its successor in
interest, in its capacity as Master Servicer under the Servicing Agreements.
"Master Servicing Fee": With respect to each Mortgage Loan and for any
calendar month, an amount equal to one month's interest (or in the event of any
payment of interest which accompanies a Principal Prepayment in full made by the
Mortgagor during such calendar month, interest for the number of days covered by
such payment of interest) at the applicable Master
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Servicing Fee Rate on the same principal amount on which interest on such
Mortgage Loan accrues for such calendar month.
"Master Servicing Fee Rate": 0.05% per annum.
"Maximum Mortgage Rate": With respect to each Adjustable Rate Mortgage
Loan, the percentage set forth in the related Mortgage Note as the maximum
Mortgage Rate thereunder.
"Maximum Note Interest Rate": With respect to the Notes and any
Payment Date, a fixed rate equal to 13.75% per annum.
"Minimum Mortgage Rate": With respect to each Adjustable Rate 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 related Servicer pursuant to Section 3.07 of the related Servicing
Agreement; and (c) on the assumption that all other amounts, if any, due under
such Mortgage Loan are paid when due.
"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 file containing the Related Documents pertaining
to a particular Mortgage Loan and any additional documents required to be added
to the Mortgage File pursuant to the Mortgage Loan Purchase Agreement or the
related Servicing Agreement.
"Mortgage Loan": Each mortgage loan identified in the Mortgage Loan
Schedule.
"Mortgage Loan Purchase Agreement": The agreement, dated as of
September 1, 1998, among the Seller, the Transferor and the Issuer.
"Mortgage Loan Remittance Rate": With respect to any Mortgage Loan or
REO Property, as of any date of determination, the then applicable Net Mortgage
Rate in respect thereof plus the Indenture Trustee Fee Rate, the Master
Servicing Fee Rate and the Expense Fee Rate.
"Mortgage Loan Schedule": As of any date, the list of Mortgage Loans
attached hereto as Schedule 1. The Mortgage Loan Schedule shall set forth the
following information with respect to each Mortgage Loan:
(i) the Mortgage Loan identifying number;
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(ii) the Mortgagor's name;
(iii) the street address of the Mortgaged Property including the
state and zip code;
(iv) a code indicating whether the Mortgaged Property is
owner-occupied;
(v) the type of Residential Dwelling constituting the Mortgaged
Property;
(vi) the original months to maturity;
(vii) the Loan-to-Value Ratio at origination;
(viii) the Mortgage Rate in effect immediately following the Cut-off
Date;
(ix) the date on which the first Monthly Payment was due on the
Mortgage Loan;
(x) the stated maturity date;
(xi) the amount of the Monthly Payment due on the first Due Date
after the Cutoff Date;
(xii) the last Due Date on which a Monthly Payment was actually
applied to the unpaid Stated Principal Balance;
(xiii) the original principal amount of the Mortgage Loan;
(xiv) the Scheduled Principal Balance of the Mortgage Loan as of the
close of business on the Cut-off Date;
(xv) with respect to each Adjustable Rate Mortgage Loan, the Gross
Margin;
(xvi) a code indicating the purpose of the Mortgage Loan (I.E.,
purchase financing, rate/term refinancing, cash-out
refinancing);
(xvii) with respect to each Adjustable Rate Mortgage Loan, the Maximum
Mortgage Rate;
(xviii)with respect to each Adjustable Rate Mortgage Loan, the
Minimum Mortgage Rate;
(xix) the Mortgage Rate at origination;
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(xx) with respect to each Adjustable Rate Mortgage Loan, the
Periodic Rate Cap and the maximum first Adjustment Date
Mortgage Rate adjustment;
(xxi) a code indicating the documentation program;
(xxii) with respect to each Adjustable Rate Mortgage Loan, the first
Adjustment Date immediately following the Cut-off Date;
(xxiii)the risk grade;
(xxiv) the Value of the Mortgaged Property; and
(xxv) the sale price of the Mortgaged Property, if applicable.
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 Issuer in accordance with the
provisions of this Agreement. With respect to any Qualified Substitute Mortgage
Loan, Cut-off Date shall refer to the related Cut-off Date for such Mortgage
Loan, determined in accordance with the definition of Cut-off Date herein.
"Mortgage Note": The original executed note or other evidence of the
indebtedness of a Mortgagor under a Mortgage Loan.
"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, without regard to any
reduction thereof as a result of a Debt Service Reduction or operation of the
Relief Act.
"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.
"Most Senior Class": The Class A Notes, or after the Class A Notes
have been paid in full, the Class of Subordinate Notes then Outstanding with the
lowest numerical designation.
"Net Monthly Excess Cashflow": With respect to any Payment Date, the
sum of (i) any Overcollateralization Reduction Amount for such Payment Date and
(ii) the excess of (x) the Available Payment Amount for such Payment Date over
(y) the sum for such Payment Date of (A) the aggregate of the Interest Payment
Amounts payable to the Notes and (B) the sum of the amounts described in clauses
(b)(i) through (iii) of the definition of Principal Payment Amount.
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"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 sum
of the Servicing Fee Rates, the Indenture Trustee Fee Rate, the Master Servicing
Fee Rate and the Expense Fee Rate.
"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 related Servicer, will not or, in the case
of a proposed P&I Advance, would not be ultimately recoverable from related late
payments, Insurance Proceeds or Liquidation Proceeds on such Mortgage Loan or
REO Property as provided herein.
"Note Accrual Rate": With respect to the Notes and any Payment Date, a
rate per annum equal to the lesser of (i) the related One-Month LIBOR Note
Interest Rate for such Payment Date and (ii) the Maximum Note Interest Rate.
"Note Balance": With respect to any Note, as of any date of
determination, the Note Balance of such Note on the Payment Date immediately
prior to such date of determination, minus all payments allocable to principal
made thereon and Realized Losses allocated thereto on such immediately prior
Payment Date (or, in the case of any date of determination up to and including
the initial Payment Date, the initial Note Balance of such Note, as stated on
the face thereof).
"Note Interest Rate": With respect to the Notes and any Payment Date,
a rate per annum equal to the least of (i) the related One-Month LIBOR Note
Interest Rate for such Payment Date, (ii) the Available Interest Rate for such
Payment Date and (iii) the Maximum Note Interest Rate.
"Note Owner": With respect to a Book-Entry Note, the Person who is the
beneficial owner of such Note 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.
"Note Register": The register maintained by the Note Registrar in
which the Note Registrar shall provide for the registration of Notes and of
transfers and exchanges of Notes.
"Note Registrar": The Indenture Trustee, in its capacity as Note
Registrar or its successor in interest, or any successor Note Registrar
appointed as provided in this Indenture.
"Noteholder" or "Holder": The Person in whose name a Note is
registered in the Note Register, except that solely for the purposes of giving
any consent pursuant to the Indenture, the Owner Trust Agreement or the
Servicing Agreements, any Note registered in the name of the Seller, the
Transferor, the Depositor, the Issuer, the Master Servicer or the Servicers 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. The Indenture Trustee may conclusively
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rely upon a certificate of the Seller, the Transferor, the Depositor, the
Issuer, the Master Servicer or the Servicers in determining whether a Note is
held by an Affiliate thereof. All references herein to "Holders" or
"Noteholders" shall reflect the rights of Note Owners as they may indirectly
exercise such rights through the Depository and participating members thereof,
except as otherwise specified herein; provided, however, that the Indenture
Trustee shall be required to recognize as a "Holder" or "Noteholder" only the
Person in whose name a Note is registered in the Note Register.
"Notes": Asset-Backed Floating Rate Notes, Series 1998-11, designated
as the "Notes" in the Indenture.
"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 Seller; with respect to
each Servicer or the Master Servicer, any officer who is authorized to act for
such Servicer in matters relating to the related Servicing Agreement, and whose
action is binding upon such Servicer or the Master Servicer, as applicable,
initially including those individuals whose names appear on the list of
authorized officers delivered at the closing.
"One-Month LIBOR": With respect to the Notes and any Interest Accrual
Period therefor, the rate determined by the Indenture 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 Indenture 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 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) One-Month LIBOR as determined on the previous Interest
Determination Date and (ii) the Reserve Interest Rate. Notwithstanding the
foregoing, if, under the priorities described above, One-Month LIBOR for an
Interest Determination Date would be based on One-Month LIBOR for the previous
Interest Determination Date for the third consecutive Interest Determination
Date, the Indenture Trustee shall select an alternative comparable index (over
which the Indenture 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 Note Interest Rate": With respect to the Class A
Notes, a per annum rate equal to One-Month LIBOR plus 0.32%, in the case of each
Payment Date through and including the Payment Date on which the aggregate Note
Balance is reduced to less than 20% of the aggregate initial Note Balance, or
One-Month LIBOR plus 0.64%, in the case of any Payment Date thereafter.
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With respect to the Class M-1 Notes, a per annum rate equal to
One-Month LIBOR plus 0.60%, in the case of each Payment Date through and
including the Payment Date on which the aggregate Note Balance is reduced to
less than 20% of the aggregate initial Note Balance, or One-Month LIBOR plus
0.90%, in the case of any Payment Date thereafter.
With respect to the Class M-2 Notes, a per annum rate equal to
One-Month LIBOR plus 0.80%, in the case of each Payment Date through and
including the Payment Date on which the aggregate Note Balance is reduced to
less than 20% of the aggregate initial Note Balance, or One-Month LIBOR plus
1.20%, in the case of any Payment Date thereafter.
With respect to the Class M-3 Notes, a per annum rate equal to
One-Month LIBOR plus 1.85%, in the case of each Payment Date through and
including the Payment Date on which the aggregate Note Balance is reduced to
less than 20% of the aggregate initial Note Balance, or One-Month LIBOR plus
2.775%, in the case of any Payment Date thereafter.
"Opinion of Counsel": A written opinion of counsel, who may, without
limitation, be salaried counsel for the Issuer, the Master Servicer or any
Servicer acceptable to the Indenture Trustee.
"Original Mortgage Loan": Any of the Mortgage Loans included in the
Trust Estate as of the Closing Date.
"Outstanding": With respect to the Notes, as of the date of
determination, all Notes theretofore executed, authenticated and delivered under
this Indenture except:
(i) Notes theretofore canceled by the Note Registrar or delivered to
the Indenture Trustee for cancellation;
(ii) Notes or portions thereof for whose payment or redemption money
in the necessary amount has been theretofore deposited with the Indenture
Trustee or any Paying Agent (other than the Issuer) in trust for the
Holders of such Notes; provided, however, that if such Notes are to be
redeemed, notice of such redemption has been duly given pursuant to this
Indenture or provision therefor, satisfactory to the Indenture Trustee, has
been made; and
(iii) Notes in exchange for or in lieu of which other Notes have been
executed, authenticated and delivered pursuant to the Indenture unless
proof satisfactory to the Indenture Trustee is presented that any such Note
are held by a holder in due course.
"Overcollateralized Amount": With respect to any Payment Date, the
excess, if any, of (a) the aggregate Stated Principal Balances of the Mortgage
Loans immediately following such Payment Date over (b) the sum of the aggregate
Note Balances of the Notes as of such Payment Date (after taking into account
the payment of the amounts described in clauses (b)(i) through (iv) of the
definition of Principal Payment Amount on such Payment Date).
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"Overcollateralization Deficiency Amount": With respect to any Payment
Date, the excess, if any, of (a) the Required Overcollateralized Amount
applicable to such Payment Date over (b) the Overcollateralized Amount
applicable to such Payment Date prior to taking into account the payment of any
Overcollateralization Increase Amount on such Payment Date.
"Overcollateralization Increase Amount": With respect to any Payment
Date, the lesser of (a) the Overcollateralization Deficiency Amount as of such
Payment Date (after taking into account the payment of the Principal Payment
Amount on such Payment Date, exclusive of the payment of any
Overcollateralization Increase Amount) and (b) the amount of Net Monthly Excess
Cashflow on such Payment Date as reduced by Realized Losses allocated thereto
with respect to such Payment Date pursuant to Section 3.06.
"Overcollateralization Reduction Amount": With respect to any Payment
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 Payment Amount.
"Owner Trust Agreement": The trust agreement, dated as of September 1,
1998, as amended and restated by the amended and restated trust agreement, dated
as of September 1, 1998, between the Owner Trustee and the Depositor.
"Owner Trustee": Wilmington Trust Company, not in its individual
capacity, but solely as Owner Trustee of the Issuer, and its successors and
assigns or any successor owner trustee appointed pursuant to the terms of the
Owner Trust Agreement.
"Owner Trustee Fee": A one-time fee of $15,000.
"Ownership Interest": As to any Note, any ownership or security
interest in such Note, including any interest in such Note as the Holder thereof
and any other interest therein, whether direct or indirect, legal or beneficial,
as owner or pledgee.
"Ownership Transfer Agreement": The Ownership Transfer Agreement,
dated as of September 1, 1998 between the Transferor and the Depositor.
"Paying Agent": Any paying agent or co-paying agent appointed pursuant
to Section 3.03 of the Indenture, which initially shall be the Indenture
Trustee.
"Payment Account": The trust account or accounts created and
maintained by the Indenture Trustee pursuant to Section 3.01 of the Indenture
which shall be entitled "Norwest Bank Minnesota, National Association, as
Indenture Trustee, in trust for the registered holders of Salomon Brothers
Mortgage Securities VII, Inc. Asset-Backed Floating Rate Notes, Series 1998-11".
The Payment Account must be an Eligible Account.
"Payment 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.
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"Percentage Interest": With respect to any Class of Notes, the portion
of the respective Class evidenced by such Note, expressed as a percentage, the
numerator of which is the initial Note Balance represented by such Note, and the
denominator of which is the initial aggregate Note Balance of all of the Notes
of such Class. The Notes are issuable only in Percentage Interests corresponding
to minimum initial Note Balances of $10,000 and integral multiples of $1.00 in
excess thereof; provided, however, that a single Note of each Class may be
issued having a Percentage Interest corresponding to the remainder of the
aggregate initial Note Balance of such Note or to an otherwise authorized
denomination for such Class plus such remainder.
"Periodic Rate Cap": With respect to each Adjustable Rate 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 Issuer, the Servicers, the Master Servicer, the
Indenture 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 (which shall each have an original maturity of not
more than 90 days and, in the case of bankers' acceptances, shall in no
event have an original maturity of more than 365 days or a remaining
maturity of more than 30 days) denominated in United States dollars and
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
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that rates such securities in its highest short-term unsecured debt rating
available at the time of such investment;
(vi) units of money market funds, including money market funds
advised by the Indenture Trustee or an Affiliate thereof, that have been
rated "AAA" by DCR (if rated by DCR) and "AAA" by S&P; and
(viii) if previously confirmed in writing to the Indenture
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 Notes;
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 Investments may be purchased by or through Affiliates of the
Indenture Trustee.
"Person": Any individual, corporation, partnership, limited liability
company, 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 related Servicer in respect of any Payment Date pursuant to Section
4.01 of the related Servicing Agreement.
"Prepayment Charge": With respect to any Prepayment Period, any
prepayment premium, penalty or charge collected by the related Servicer from a
Mortgagor in connection with any voluntary Principal Prepayment in full pursuant
to the terms of the related Mortgage Note as from time to time held as a part of
the Trust Estate, the Prepayment Charges so held being identified in the related
prepayment charge schedule attached to the related Servicing Agreement.
"Prepayment Interest Shortfall": With respect to any Payment 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 related
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 Mortgage Loan Remittance 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 related Servicer in respect of any Prepayment
Interest Shortfall are set forth in Section 3.24 of the related Servicing
Agreement.
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"Prepayment Period": With respect to any Payment Date, the calendar
month preceding the calendar month in which such Payment Date occurs.
"Principal Payment Amount": With respect to any Payment Date, other
than the Final Maturity Date and the Payment Date immediately following the
acceleration of the Notes due to an Event of Default, the lesser of:
(a) the excess of the Available Payment Amount over the amount
payable on the Notes pursuant to Section 3.05(a)(1); 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 2.01 or Section 3.16(c) of any of the
Servicing Agreements and the amount of any shortfall deposited in
any of the Collection Accounts in connection with the
substitution of a Deleted Mortgage Loan pursuant to Section 2.01
of any of the Servicing Agreements during the related Prepayment
Period;
(iii) the principal portion of all other unscheduled collections
(including, without limitation, Principal Prepayments, Insurance
Proceeds, Liquidation Proceeds and REO Principal Amortization)
received during the related Prepayment Period, net of any portion
thereof that represents a recovery of principal for which an
advance was made by any of the Servicers pursuant to Section 4.01
of any of the Servicing Agreements in respect of a preceding
Payment 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 Payment Date; and
(v) the amount of any Overcollateralization Increase Amount for
such Payment Date;
minus:
(vi) the amount of any Overcollateralization Reduction Amount for
such Payment Date.
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On the Final Maturity Date or on the Payment Date immediately
following the acceleration of the Notes due to any Event of Default, the
"Principal Payment Amount" payable on each class of Notes will be an amount
equal to the Note Balance thereof immediately prior to such Final Maturity Date
or such Payment 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 (without regard to any
prepayment charge that may have been collected by the related Servicer in
connection with such payment of principal) representing the full amount of
scheduled interest due on any Due Date in any month or months subsequent to the
month of prepayment.
"Proceeding": Any suit in equity, action at law or other judicial or
administrative proceeding.
"Purchase Price": With respect to any Mortgage Loan or REO Property to
be purchased (i) pursuant to or as contemplated by Section 2.01 or Section
3.16(c) of the related Servicing Agreement, and as confirmed by an Officers'
Certificate from the related Servicer to the Indenture Trustee or (ii) in
connection with a partial redemption as described in Section 8.07(b) of the
Indenture, an amount equal to the sum of: (i) 100% of the Stated Principal
Balance thereof as of the date of purchase, (ii) in the case of (x) a Mortgage
Loan, accrued interest on such Stated Principal Balance at the applicable
Mortgage Loan Remittance 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 related Servicer, which payment or advance had as of the date of purchase
been distributed pursuant to the Indenture, 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
Mortgage Loan Remittance 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 related 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, minus 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; (iii) any unreimbursed Servicing Advances and P&I Advances and any
unpaid Servicing Fees allocable to such Mortgage Loan or REO Property; (iv) any
amounts previously withdrawn from the Collection Account in respect of such
Mortgage Loan or REO Property pursuant to Sections 3.11(ix) and Section 3.16(b)
of the related Servicing Agreement; and (v) in the case of a Mortgage Loan
required to be purchased pursuant to Section 2.01 of the related Servicing
Agreement, expenses reasonably incurred or to be incurred by the related
Servicer or the Indenture 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 the related Servicing Agreement
and the Mortgage Loan Purchase Agreement which must, on the date of such
substitution, (i) have an outstanding principal
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<PAGE>
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) with respect to each Adjustable Rate
Mortgage Loan, have a Maximum Mortgage Rate not less than the Maximum Mortgage
Rate on the Deleted Mortgage Loan, (iv) with respect to each Adjustable Rate
Mortgage Loan, have a Minimum Mortgage Rate not less than the Minimum Mortgage
Rate of the Deleted Mortgage Loan, (v) with respect to each Adjustable Rate
Mortgage Loan, have a Gross Margin equal to the Gross Margin of the Deleted
Mortgage Loan, (vi) with respect to each Adjustable Rate Mortgage Loan, 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 related Servicer at least equal to the
risk grading assigned on the Deleted Mortgage Loan and (xi) conform to each
representation and warranty set forth in Exhibit 2 to the Mortgage Loan Purchase
Agreement applicable to the Deleted Mortgage Loan. In the event that one or more
mortgage loans are substituted for one or more Deleted Mortgage Loans, the
amounts described in clause (i) hereof shall be determined on the basis of
aggregate principal balances, the Mortgage Rates described in clause (ii) hereof
shall be determined on the basis of weighted average Mortgage Rates, the risk
gradings described in clause (x) hereof shall be satisfied as to each such
mortgage loan, the terms described in clause (vii) hereof shall be determined on
the basis of weighted average remaining term to maturity, the Loan-to-Value
Ratios described in clause (ix) hereof shall be satisfied as to each such
mortgage loan and, except to the extent otherwise provided in this sentence, the
representations and warranties described in clause (xi) hereof must be satisfied
as to each Qualified Substitute Mortgage Loan or in the aggregate, as the case
may be.
"Rating Agency" or "Rating Agencies": DCR and S&P or their successors.
If such agencies or their successors are no longer in existence, "Rating
Agencies" shall be such nationally recognized statistical rating agencies, or
other comparable Persons, designated by the Issuer, notice of which designation
shall be given to the Indenture Trustee, the Master Servicer and the Servicers.
"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 Payment Date during such calendar month, plus (iii) any amounts previously
withdrawn from the related Collection Account in respect of such
A-24
<PAGE>
Mortgage Loan pursuant to Section 3.11(ix) and Section 3.16(b) of the related
Servicing Agreement, 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 related
Servicer with respect to such Mortgage Loan pursuant to Section 3.11(iii) of the
related Servicing Agreement.
With respect to any REO Property as to which a Final Recovery
Determination has been made an amount (not less than zero) equal to (i) the
unpaid principal balance of the related Mortgage Loan as of the date of
acquisition of such REO Property on behalf of the Trust Estate, 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 Payment 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 related Collection Account in respect
of the related Mortgage Loan pursuant to Section 3.11(ix) and Section 3.16(b) of
the related Servicing Agreement, minus (v) the aggregate of all P&I Advances
made by the related Servicer in respect of such REO Property or the related
Mortgage Loan for which such Servicer has been or, in connection with such Final
Recovery Determination, will be reimbursed pursuant to Section 3.23 of the
related Servicing Agreement out of rental income, Insurance Proceeds and
Liquidation Proceeds received in respect of such REO Property, minus (vi) the
total of all net rental income, Insurance Proceeds and Liquidation Proceeds
received in respect of such REO Property that has been, or in connection with
such Final Recovery Determination, will be transferred to the Payment Account
pursuant to Section 3.23 of the related Servicing Agreement.
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 Payment Date and any Note (other
than Definitive Notes), the Business Day immediately preceding such Payment
Date. With respect to each Payment Date and any Definitive Notes or the Equity
Certificates, the last Business Day of the month immediately preceding the month
in which such Payment Date occurs.
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<PAGE>
"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 Indenture
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, the Issuer or any Affiliate thereof and (iii) which have been
designated as such by the Indenture Trustee.
"Refinanced Mortgage Loan": A Mortgage Loan the proceeds of which were
not used to purchase the related Mortgaged Property.
"Related Documents": With respect to each Mortgage Loan, the documents
specified in Section 2.4(b) of the Mortgage Loan Purchase Agreement and Section
2.03 of the Indenture and any documents required to be added to such documents
pursuant to the Mortgage Loan Purchase Agreement, the Owner Trust Agreement, the
Indenture or the applicable Servicing Agreement.
"Relief Act": The Soldiers' and Sailors' Civil Relief Act of 1940, as
amended.
"Remittance Report": A report in form and substance that would be
acceptable to Fannie Mae on a magnetic disk or tape prepared by the related
Servicer pursuant to Section 4.01 of the related Servicing Agreement with such
additions, deletions and modifications as agreed to by the Indenture Trustee and
the related Servicer.
"REO Account": The account or accounts maintained by the related
Servicer in respect of an REO Property pursuant to Section 3.23 of the related
Servicing Agreement.
"REO Disposition": The sale or other disposition of an REO Property on
behalf of the Trust Estate.
"REO Imputed Interest": As to any REO Property, for any calendar month
during which such REO Property was at any time part of the Trust Estate, one
month's interest at the applicable Mortgage Loan Remittance 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 Payment 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 or otherwise, net of any portion of
such amounts (i) payable pursuant to Section 3.23(c) of the related Servicing
Agreement in respect of the proper operation, management and maintenance of such
REO Property or (ii) payable or reimbursable to the related Servicer pursuant to
Section 3.23(d) of the related Servicing Agreement for unpaid Servicing Fees in
respect of the related Mortgage Loan and unreimbursed Servicing Advances and P&I
Advances in respect of such REO
A-26
<PAGE>
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 related Servicer
on behalf of the Trust Estate through foreclosure or deed-in-lieu of
foreclosure, as described in Section 3.23 of the related Servicing Agreement.
"Residential Dwelling": Any one of the following: (i) an attached or
detached one-family dwelling, (ii) a detached two- to four-family dwelling,
(iii) a one-family dwelling unit in a Fannie Mae eligible condominium project,
or (iv) a detached one-family dwelling in a planned unit development, none of
which is a co-operative, mobile or manufactured home (as defined in 42 United
States Code, Section 5402(6)).
"Responsible Officer": When used with respect to the Indenture
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 Indenture
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.
"Required Overcollateralized Amount": With respect to any Payment Date
(i) prior to the Stepdown Date, $6,664,964.19, (ii) on or after the Stepdown
Date provided a Trigger Event is not in effect, the greater of (x) 3.50% of the
aggregate Stated Principal Balance of the Mortgage Loans as of the last day of
the related Due Period and (y) $2,856,405, and (iii) on or after the Stepdown
Date and a Trigger Event is in effect, the Required Overcollateralized Amount
for the immediately preceding Payment Date.
"Reserve Interest Rate": With respect to any Interest Determination
Date, the rate per annum that the Indenture 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 Indenture 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 Indenture Trustee can
determine no such arithmetic mean, the lowest one-month U.S. dollar lending rate
which New York City banks selected by the Indenture Trustee are quoting on such
Interest Determination Date to leading European banks.
"Sale": The meaning assigned in Section 5.15 of the Indenture.
"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
A-27
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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
Estate 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.
"Securities Act": The Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Seller": Wilshire Real Estate Investment Trust Inc. or its successor
in interest, in its capacity as seller under the Mortgage Loan Purchase
Agreement.
"Servicers": Ameriquest Mortgage Company ("Ameriquest") or any
successor servicer appointed as provided in the related Servicing Agreement, in
its capacity as Servicer under such Servicing Agreement with respect to the
Mortgage Loans identified on Part A of Schedule 1 hereto, Long Beach Mortgage
Company ("Long Beach") or any successor servicer appointed as provided in the
related Servicing Agreement, in its capacity as Servicer under such Servicing
Agreement with respect to the Mortgage Loans identified on Part B of Schedule 1
hereto and National Mortgage Corporation ("National Mortgage") or any successor
servicer appointed as provided in the related Servicing Agreement, in its
capacity as Servicer under such Servicing Agreement with respect to the Mortgage
Loans identified on Part C and Part D of Schedule 1 hereto; provided however
that with respect to the Mortgage Loans identified on Part D of Schedule 1, the
servicing will be transferred to the Master Servicer on October 29, 1998.
References to "related Servicer," "applicable Servicer" and similar terms shall
mean the Servicer only with respect to the Mortgage Loans serviced by it.
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<PAGE>
"Servicing Advances": The reasonable "out-of-pocket" costs and
expenses incurred by the related Servicer in connection with a default,
delinquency or other unanticipated event by such 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 of the related Servicing Agreement. The related
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 such
Servicer, would not be ultimately recoverable from related Insurance Proceeds or
Liquidation Proceeds on such Mortgage Loan or REO Property as provided herein.
"Servicing Agreement": Any of the Servicing Agreements, dated as of
September 1, 1998 among the related Servicer, the Indenture Trustee and the
Issuer.
"Servicing Fee": With respect to each Mortgage Loan and each Servicer
and for any calendar month, an amount equal to one month's interest (or in the
event of any payment of interest which accompanies a Principal Prepayment in
full made by the Mortgagor during such calendar month, interest for the number
of days covered by such payment of interest) at the applicable Servicing Fee
Rate on the same principal amount on which interest on such Mortgage Loan
accrues for such calendar month. A portion of such Servicing Fee may be retained
by any Sub-Servicer as its servicing compensation.
"Servicing Fee Rate": For each Servicer, 0.50% per annum.
"Servicing Officer": Any employee of the Master Servicer or the
related Servicer involved in, or responsible for, the administration and
servicing of the related Mortgage Loans, whose name and specimen signature
appear on a list of Servicing Officers furnished by the Master Servicer or such
Servicer, as applicable, to the Indenture Trustee and the Issuer on the Closing
Date, as such list may from time to time be amended.
"Single Note": With respect to any Class of Notes, a hypothetical Note
of such Class evidencing a Percentage Interest for such Class corresponding to
an initial Note Balance or $1,000. "S&P": Standard & Poor's Ratings Services, a
division of The McGraw-Hill Companies, Inc., or its successor in interest.
"Stated Principal Balance": With respect to any Mortgage Loan: (a) as
of any date of determination up to but not including the Payment 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 related Servicer and distributed pursuant to the Indenture on or before such
date of determination,
A-29
<PAGE>
(ii) all Principal Prepayments received after the Cut-off Date, to the extent
distributed pursuant to the Indenture on or before such date of determination,
(iii) all Liquidation Proceeds and Insurance Proceeds applied by the related
Servicer as recoveries of principal in accordance with the provisions of Section
3.16 of the related Servicing Agreement, to the extent distributed pursuant to
the Indenture 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 Payment Date
coinciding with or preceding such date of determination; and (b) as of any date
of determination coinciding with or subsequent to the Payment 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 Payment Date on which the proceeds,
if any, of a Liquidation Event with respect to such REO Property would be
distributed, an amount (not less than zero) equal to the Stated Principal
Balance of the related Mortgage Loan as of the date on which such REO Property
was acquired on behalf of the Trust Estate, minus the sum of (i) if such REO
Property was acquired before the Payment 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 Servicer and distributed
pursuant to the Indenture 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
the Indenture on or before such date of determination; and (b) as of any date of
determination coinciding with or subsequent to the Payment 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 related Servicer is the subject of a proceeding
under the federal Bankruptcy Code and the making of a Remittance (as defined in
Section 6.02(b) of the related Servicing Agreement) is prohibited by Section 362
of the federal Bankruptcy Code, funds which are in the custody of such 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 Payment Date occurring
in October 2001 and (ii) the first Payment Date on which the Credit Enhancement
Percentage (calculated for this purpose only after taking into account payments
of principal on the Mortgage Loans but prior to any payment of the Principal
Payment Amount to the Notes then entitled to payments of principal on such
Payment Date) is equal to or greater than 37.30%.
"Subordinate Note": Any Class M-1 Note, Class M-2 Note or Class M-3
Note.
"Sub-Servicer": Any Person with which any Servicer has entered into a
Sub-Servicing Agreement and which meets the qualifications of a Sub-Servicer
pursuant to Section 3.02 of the related Servicing Agreement.
"Sub-Servicing Agreement": The written contract between the related
Servicer and a Sub-Servicer relating to servicing and administration of certain
Mortgage Loans as provided in Section 3.02 of the related Servicing Agreement.
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<PAGE>
"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).
"Transferor": Wilshire REIT 1998-1, Inc.
"Treasury Regulations": Regulations, including proposed or temporary
Regulations, promulgated under the Code. References herein to specific
provisions of proposed or temporary regulations shall include analogous
provisions of final Treasury Regulations or other successor Treasury
Regulations.
"Trigger Event": A Trigger Event has occurred with respect to a
Payment Date if the Delinquency Percentage exceeds the lesser of (i) 35.00% of
the Credit Enhancement Percentage or (ii) 13.055%.
"Trust Estate": The meaning specified in the Granting Clause of the
Indenture.
"Trust Indenture Act or TIA": The Trust Indenture Act of 1939, as
amended from time to time, as in effect on any relevant date.
"UCC": The Uniform Commercial Code, as amended from time to time, as
in effect in any specified jurisdiction.
"Underwriter": Salomon Smith Barney Inc.
"Underwriting Agreement": means the Underwriting Agreement between the
Underwriter and the Depositor with respect to the offer and sale of the Notes,
as the same may be amended from time to time.
"Value": With respect to any Mortgaged Property, the lesser of (i) the
value thereof as determined by an appraisal made for the originator of the
Mortgage Loan at the time of origination of the Mortgage Loan by an appraiser
who met the minimum requirements of Fannie Mae and Freddie Mac, and (ii) the
purchase price paid for the related Mortgaged Property by the Mortgagor with the
proceeds of the Mortgage Loan, provided, however, in the case of a Refinanced
Mortgage Loan, such value of the Mortgaged Property is based solely upon the
value determined by an appraisal made for the originator of such Refinanced
Mortgage Loan at the time of origination of such Refinanced Mortgage Loan by an
appraiser who met the minimum requirements of Fannie Mae and Freddie Mac.
"Voting Rights": The portion of the voting rights of all of the Notes
which is allocated to any Note. At all times during the term of this Agreement,
(i) 100% of all of the Voting Rights shall be allocated to the Most Senior Class
of Notes, in proportion to their then outstanding Note Balances. All Voting
Rights allocated to any Class of Notes shall be allocated among such Notes PRO
RATA in accordance with the respective Percentage Interests evidenced thereby.
A-31
<PAGE>
A-1-1
EXHIBIT A-1
FORM OF CLASS A NOTE
WILSHIRE REIT TRUST SERIES 1998-1
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.
ASSET-BACKED FLOATING RATE NOTES, SERIES 1998-11
THIS NOTE REPRESENTS A NON-RECOURSE OBLIGATION OF THE ISSUER
AND WILL BE PAID SOLELY FROM THE COLLATERAL SECURING THE
NOTE. NEITHER THIS NOTE NOR THE COLLATERAL THEREFOR IS
INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY OR
INSTRUMENTALITY OR BY ANY OTHER PERSON.
PAYMENTS IN REDUCTION OF THE NOTE BALANCE OF THIS NOTE MAY
BE MADE MONTHLY AS SET FORTH IN THE INDENTURE REFERRED TO
HEREIN. ACCORDINGLY, THE OUTSTANDING NOTE BALANCE HEREOF AT
ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN BELOW.
Series 1998-11, Class A Aggregate Note Balance of the
Class A Notes as of the Issue
Note Interest Rate: Variable Date: $_________________
Date of Indenture and Cut-off Date: Initial Note Balance of this Note
September 1, 1998 as of the Issue Date: $_________
First Payment Date: Master Servicer: Wilshire
October 26, 1998 Servicing Corporation
Issuer: Wilshire REIT Trust Series 1998-1 Indenture Trustee: Norwest Bank
Minnesota, National Association
Owner Trustee: Wilmington Trust Company
Issue Date: September __, 1998
No. ___
Final Maturity Date: ___________
CUSIP: 971890 ___ ___
<PAGE>
A-1-2
This certifies that _____________ is the registered owner (the
"Holder") of a Percentage Interest (obtained by dividing the denomination of
this Note by the aggregate Note Balance of the Class A Notes as of the Issue
Date) of this Class A Note issued by the Issuer referred to above pursuant to
the Indenture, dated as of September 1, 1998 (the "Indenture"), between the
Issuer referred to above and the Indenture Trustee referred to above, a summary
of certain of the pertinent provisions of which is set forth hereafter. To the
extent not defined herein, capitalized terms used herein have the respective
meanings assigned in the Indenture. This Class A Note is issued under and is
subject to the terms, provisions and conditions of the Indenture, to which
Indenture the Holder of this Class A Note by virtue of the acceptance hereof
assents and by which such Holder is bound. This Class A Note is one of a duly
authorized issue of Notes designated as Asset-Backed Floating Rate Notes of the
Series specified on the face hereof (herein called the "Notes").
Pursuant to the terms of the Indenture, payments 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 "Payment Date"), commencing on the First Payment
Date specified above, to the Person in whose name this Note is registered on the
Business Day immediately preceding such Payment Date (the "Record Date"), in an
amount equal to the product of the Percentage Interest evidenced by this Note
and the amount required to be paid to the Holders of Class A Notes on such
Payment Date pursuant to the Indenture.
All payments to the Holder of this Note under the Indenture will be
made or caused to be made by or on behalf of the Indenture Trustee by wire
transfer in immediately available funds to the account of the Person entitled
thereto if such Person shall have so notified the Indenture Trustee in writing
at least five Business Days prior to the Record Date immediately prior to such
Payment Date and is the registered owner of Class A Notes the aggregate initial
Note Balance of which is in excess of the lesser of (i) $5,000,000 or (ii)
two-thirds of the aggregate initial Note Balance of the Class A Notes, 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 Note Register.
Notwithstanding the above, the final payment on this Note will be made after due
notice by the Indenture Trustee of the pendency of such payment and only upon
presentation and surrender of this Note at the office or agency appointed by the
Indenture Trustee for that purpose as provided in the Indenture.
The Note Interest Rate applicable to the calculation of interest
payable with respect to this Note on any Payment Date shall equal a rate per
annum equal to the lesser of (i) One-Month LIBOR plus _____%, in the case of
each Payment Date through and including the Payment Date on which the aggregate
Note Balance is reduced to less than 20% of the aggregate initial Note Balance,
or One-Month LIBOR plus _____% per annum, in the case of any Payment Date
thereafter, and (ii) the Maximum Note Interest Rate.
The Notes 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 Indenture. As provided in the Indenture and the other Basic
Documents, withdrawals from the Collection
<PAGE>
A-1-3
Accounts and the Payment Account may be made from time to time for purposes
other than payments to Noteholders, such purposes including reimbursement of
advances made, or certain expenses incurred, with respect to the Mortgage Loans.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Note is registrable in the Note Register
upon surrender of this Note for registration of transfer at the offices or
agencies appointed by the Indenture Trustee as provided in the Indenture, duly
endorsed by, or accompanied by an assignment in the form below or other written
instrument of transfer in form satisfactory to the Indenture Trustee duly
executed by, the Holder hereof or such Holder's attorney duly authorized in
writing, and thereupon one or more new Notes of the same Class in authorized
denominations evidencing the same aggregate Percentage Interest will be issued
to the designated transferee or transferees.
The Notes are issuable in fully registered form only without coupons
in Classes and denominations representing Percentage Interests specified in the
Indenture. As provided in the Indenture and subject to certain limitations
therein set forth, Notes are exchangeable for new Notes 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 Notes, but the Indenture 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 Notes.
Prior to the due presentment for registration of transfer of this
Note, the Issuer, the Indenture Trustee and any agent of the Issuer or the
Indenture Trustee may treat the Person in whose name this Note is registered as
the owner hereof for all purposes, and none of the Issuer, the Indenture Trustee
nor any such agent shall be affected by notice to the contrary.
All principal and interest on the Notes, if not previously paid, will
become finally due and payable on the Final Maturity Date.
The Notes are subject to redemption in whole, but not in part, by the
Majority Certificateholder on any Payment Date on which the aggregate Note
Balance is reduced to less than 20% of the aggregate initial Note Balance as of
the Cut-off Date.
The Issuer shall not be liable upon the indebtedness evidenced by the
Notes except to the extent of amounts available from the Trust Estate which
constitutes security for the payment of the Notes. The assets included in the
Trust Estate will be the sole source of payments on the Notes, and each Holder
hereof, by its acceptance of this Note, agrees that (i) such Note will be
limited in right of payment to amounts available from the Trust Estate as
provided in the Indenture and (ii) such Holder shall have no recourse to the
Issuer, the Owner Trustee, the Indenture Trustee, the Depositor, the Master
Servicer, the Servicers or any of
<PAGE>
A-1-4
their respective affiliates, or to the assets of any of the foregoing entities,
except the assets of the Issuer pledged to secure the Notes pursuant to the
Indenture.
If an Event of Default, as defined in the Indenture, shall occur and
be continuing with respect to the Notes, the Notes may become or be declared due
and payable in the manner and with the effect provided in the Indenture. If any
such acceleration of maturity occurs prior to the payment of the entire unpaid
Note Balance of the Notes, the amount payable to the Holder of this Note will be
equal to the sum of the unpaid Note Balance of this Note, together with accrued
and unpaid interest and described in the Indenture. The Indenture provides that
notwithstanding the acceleration of the maturity of the Notes, under certain
circumstances specified therein, all amounts collected as proceeds of the Trust
Estate securing the Notes or otherwise shall continue to be applied to payments
of principal of and interest on the Notes as if they had not been declared due
and payable.
The failure to pay any Interest Payment Amount, Principal Payment
Amount or any Overcollateralization Increase Amount at any time when funds are
not available to make such payment as provided in the Indenture shall not
constitute an Event of Default under the Indenture.
The Indenture permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Holders of a majority of the Notes
affected thereby. The Indenture also contains provisions permitting the Holders
of the Most Senior Class of Notes representing specified percentages of the
aggregate Note Balance of such Class of Notes on behalf of the Holders of all
the Notes, to waive any past Event of Default under the Indenture and its
consequences. Any such waiver by the Holder, at the time of the giving thereof,
of this Note (or any one or more predecessor Notes) shall bind the Holder of
every Note issued upon the registration of transfer hereof or in exchange hereof
or in lieu hereof, whether or not notation of such consent or waiver is made
upon such Note. The Indenture also permits the Issuer and the Indenture Trustee
to amend or waive certain terms and conditions set forth in the Indenture
without the consent of the Holders of the Notes issued thereunder.
The recitals contained herein shall be taken as statements of the
Issuer and the Indenture Trustee assumes no responsibility for their
correctness.
Unless the certificate of authentication hereon has been executed by
the Indenture Trustee, by manual signature, this Note shall not be entitled to
any benefit under the Indenture or be valid for any purpose.
<PAGE>
A-1-5
IN WITNESS WHEREOF, the Issuer has caused this Note to be duly
executed by Wilmington Trust Company, not in its individual capacity but solely
as Owner Trustee.
Dated: September __, 1998
WILSHIRE REIT TRUST SERIES 1998-1
By: WILMINGTON TRUST COMPANY, not in its
individual capacity but solely in its
capacity as Owner Trustee
By:______________________________
Authorized Signatory
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
-------------------------------------------------
This is one of the Class A Notes referred to in the within-mentioned
Indenture.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
as Indenture 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 Note and hereby authorize(s) the registration of transfer of such
interest to assignee on the Note Register of the Trust Estate.
I (we) further direct the Indenture Trustee to issue a new Note of a
like Percentage Interest and Class to the above named assignee and deliver such
Note to the following address: ________________________________________________
______________________________________________________________________________.
Dated:
_____________________________________
Signature by or on behalf of assignor
_____________________________________
Signature Guaranteed
<PAGE>
PAYMENT INSTRUCTIONS
The assignee should include the following for purposes of payment:
Payments shall be made, by wire transfer or otherwise, in immediately
available funds to ____________________________________________________________
_______________________________________________________________________________
for the account of ____________________________, account number ______________,
or, if mailed by check, to ____________________________________________________
______________________________________________________________________________.
Applicable statements should be mailed to _____________________________________
______________________________________________________________________________.
This information is provided by ______________________________________________,
the assignee named above, or _________________________________, as its agent.
<PAGE>
EXHIBIT A-2
-----------
FORM OF CLASS M-1 NOTE
WILSHIRE REIT TRUST SERIES 1998-1
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.
ASSET-BACKED FLOATING RATE NOTES, SERIES 1998-11
THIS NOTE REPRESENTS A NON-RECOURSE OBLIGATION OF THE ISSUER
AND WILL BE PAID SOLELY FROM THE COLLATERAL SECURING THE
NOTE. NEITHER THIS NOTE NOR THE COLLATERAL THEREFOR IS
INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY OR
INSTRUMENTALITY OR BY ANY OTHER PERSON.
PAYMENTS IN REDUCTION OF THE NOTE BALANCE OF THIS NOTE MAY
BE MADE MONTHLY AS SET FORTH IN THE INDENTURE REFERRED TO
HEREIN. ACCORDINGLY, THE OUTSTANDING NOTE BALANCE HEREOF AT
ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN BELOW.
Series 1998-11, Class M-1 Aggregate Note Balance of the
Class M-1 Notes as of the Issue
Note Interest Rate: Variable Date: $__________________
Date of Indenture and Cut-off Date: Initial Note Balance of this Note
September 1, 1998 as of the Issue Date: $__________
First Payment Date: Master Servicer: Wilshire
October 26, 1998 Servicing Corporation
Issuer: Wilshire REIT Trust Series 1998-1 Indenture Trustee: Norwest Bank
Minnesota, National Association
Owner Trustee: Wilmington Trust
Company Issue Date: September __, 1998
No. ___ Final Maturity Date: ___________
CUSIP: 971890 ___ ___
<PAGE>
A-2-2
This certifies that _____________ is the registered owner (the
"Holder") of a Percentage Interest (obtained by dividing the denomination of
this Note by the aggregate Note Balance of the Class M-1 Notes as of the Issue
Date) of this Class M-1 Note issued by the Issuer referred to above pursuant to
the Indenture, dated as of September 1, 1998 (the "Indenture"), between the
Issuer referred to above and the Indenture Trustee referred to above, a summary
of certain of the pertinent provisions of which is set forth hereafter. To the
extent not defined herein, capitalized terms used herein have the respective
meanings assigned in the Indenture. This Class M-1 Note is issued under and is
subject to the terms, provisions and conditions of the Indenture, to which
Indenture the Holder of this Class M-1 Note by virtue of the acceptance hereof
assents and by which such Holder is bound. This Class M-1 Note is one of a duly
authorized issue of Notes designated as Asset-Backed Floating Rate Notes of the
Series specified on the face hereof (herein called the "Notes").
Pursuant to the terms of the Indenture, payments 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 "Payment Date"), commencing on the First Payment
Date specified above, to the Person in whose name this Note is registered on the
Business Day immediately preceding such Payment Date (the "Record Date"), in an
amount equal to the product of the Percentage Interest evidenced by this Note
and the amount required to be paid to the Holders of Class M-1 Notes on such
Payment Date pursuant to the Indenture.
All payments to the Holder of this Note under the Indenture will be
made or caused to be made by or on behalf of the Indenture Trustee by wire
transfer in immediately available funds to the account of the Person entitled
thereto if such Person shall have so notified the Indenture Trustee in writing
at least five Business Days prior to the Record Date immediately prior to such
Payment Date and is the registered owner of Class M-1 Notes the aggregate
initial Note Balance of which is in excess of the lesser of (i) $5,000,000 or
(ii) two-thirds of the aggregate initial Note Balance of the Class M-1 Notes, 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 Note Register.
Notwithstanding the above, the final payment on this Note will be made after due
notice by the Indenture Trustee of the pendency of such payment and only upon
presentation and surrender of this Note at the office or agency appointed by the
Indenture Trustee for that purpose as provided in the Indenture.
The Note Interest Rate applicable to the calculation of interest
payable with respect to this Note on any Payment Date shall equal a rate per
annum equal to the lesser of (i) One-Month LIBOR plus _____%, in the case of
each Payment Date through and including the Payment Date on which the aggregate
Note Balance is reduced to less than 20% of the aggregate initial Note Balance,
or One-Month LIBOR plus _____% per annum, in the case of any Payment Date
thereafter, and (ii) the Maximum Note Interest Rate.
The Notes 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 Indenture. As provided in the Indenture and the other Basic
Documents, withdrawals from the Collection
<PAGE>
A-2-3
Accounts and the Payment Account may be made from time to time for purposes
other than payments to Noteholders, such purposes including reimbursement of
advances made, or certain expenses incurred, with respect to the Mortgage Loans.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Note is registrable in the Note Register
upon surrender of this Note for registration of transfer at the offices or
agencies appointed by the Indenture Trustee as provided in the Indenture, duly
endorsed by, or accompanied by an assignment in the form below or other written
instrument of transfer in form satisfactory to the Indenture Trustee duly
executed by, the Holder hereof or such Holder's attorney duly authorized in
writing, and thereupon one or more new Notes of the same Class in authorized
denominations evidencing the same aggregate Percentage Interest will be issued
to the designated transferee or transferees.
The Notes are issuable in fully registered form only without coupons
in Classes and denominations representing Percentage Interests specified in the
Indenture. As provided in the Indenture and subject to certain limitations
therein set forth, Notes are exchangeable for new Notes 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 Notes, but the Indenture 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 Notes.
Prior to the due presentment for registration of transfer of this
Note, the Issuer, the Indenture Trustee and any agent of the Issuer or the
Indenture Trustee may treat the Person in whose name this Note is registered as
the owner hereof for all purposes, and none of the Issuer, the Indenture Trustee
nor any such agent shall be affected by notice to the contrary.
All principal and interest on the Notes, if not previously paid, will
become finally due and payable on the Final Maturity Date.
The Notes are subject to redemption in whole, but not in part, by the
Majority Certificateholder on any Payment Date on which the aggregate Note
Balance is reduced to less than 20% of the aggregate initial Note Balance as of
the Cut-off Date.
The Issuer shall not be liable upon the indebtedness evidenced by the
Notes except to the extent of amounts available from the Trust Estate which
constitutes security for the payment of the Notes. The assets included in the
Trust Estate will be the sole source of payments on the Notes, and each Holder
hereof, by its acceptance of this Note, agrees that (i) such Note will be
limited in right of payment to amounts available from the Trust Estate as
provided in the Indenture and (ii) such Holder shall have no recourse to the
Issuer, the Owner Trustee, the Indenture Trustee, the Depositor, the Master
Servicer, the Servicers or any of
<PAGE>
A-2-4
their respective affiliates, or to the assets of any of the foregoing entities,
except the assets of the Issuer pledged to secure the Notes pursuant to the
Indenture.
If an Event of Default, as defined in the Indenture, shall occur and
be continuing with respect to the Notes, the Notes may become or be declared due
and payable in the manner and with the effect provided in the Indenture. If any
such acceleration of maturity occurs prior to the payment of the entire unpaid
Note Balance of the Notes, the amount payable to the Holder of this Note will be
equal to the sum of the unpaid Note Balance of this Note, together with accrued
and unpaid interest and described in the Indenture. The Indenture provides that
notwithstanding the acceleration of the maturity of the Notes, under certain
circumstances specified therein, all amounts collected as proceeds of the Trust
Estate securing the Notes or otherwise shall continue to be applied to payments
of principal of and interest on the Notes as if they had not been declared due
and payable.
The failure to pay any Interest Payment Amount, Principal Payment
Amount or any Overcollateralization Increase Amount at any time when funds are
not available to make such payment as provided in the Indenture shall not
constitute an Event of Default under the Indenture.
The Indenture permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Holders of a majority of the Notes
affected thereby. The Indenture also contains provisions permitting the Holders
of the Most Senior Class of Notes representing specified percentages of the
aggregate Note Balance of such Class of Notes on behalf of the Holders of all
the Notes, to waive any past Event of Default under the Indenture and its
consequences. Any such waiver by the Holder, at the time of the giving thereof,
of this Note (or any one or more predecessor Notes) shall bind the Holder of
every Note issued upon the registration of transfer hereof or in exchange hereof
or in lieu hereof, whether or not notation of such consent or waiver is made
upon such Note. The Indenture also permits the Issuer and the Indenture Trustee
to amend or waive certain terms and conditions set forth in the Indenture
without the consent of the Holders of the Notes issued thereunder.
The recitals contained herein shall be taken as statements of the
Issuer and the Indenture Trustee assumes no responsibility for their
correctness.
Unless the certificate of authentication hereon has been executed by
the Indenture Trustee, by manual signature, this Note shall not be entitled to
any benefit under the Indenture or be valid for any purpose.
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this Note to be duly
executed by Wilmington Trust Company, not in its individual capacity but solely
as Owner Trustee.
Dated: September __, 1998
WILSHIRE REIT TRUST SERIES 1998-1
By: WILMINGTON TRUST COMPANY, not in its
individual capacity but solely in its
capacity as Owner Trustee
By:______________________________
Authorized Signatory
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
-------------------------------------------------
This is one of the Class M-1 Notes referred to in the within-mentioned
Indenture.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
as Indenture 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 Note and hereby authorize(s) the registration of transfer of such
interest to assignee on the Note Register of the Trust Estate.
I (we) further direct the Indenture Trustee to issue a new Note of a
like Percentage Interest and Class to the above named assignee and deliver such
Note to the following address: ________________________________________________
______________________________________________________________________________.
Dated:
_____________________________________
Signature by or on behalf of assignor
_____________________________________
Signature Guaranteed
<PAGE>
PAYMENT INSTRUCTIONS
The assignee should include the following for purposes of payment:
Payments shall be made, by wire transfer or otherwise, in immediately
available funds to ____________________________________________________________
_______________________________________________________________________________
for the account of ____________________________, account number ______________,
or, if mailed by check, to ____________________________________________________
______________________________________________________________________________.
Applicable statements should be mailed to _____________________________________
______________________________________________________________________________.
This information is provided by ______________________________________________,
the assignee named above, or _________________________________, as its agent.
<PAGE>
EXHIBIT A-3
-----------
FORM OF CLASS M-2 NOTE
WILSHIRE REIT TRUST SERIES 1998-1
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.
ASSET-BACKED FLOATING RATE NOTES, SERIES 1998-11
THIS NOTE REPRESENTS A NON-RECOURSE OBLIGATION OF THE ISSUER
AND WILL BE PAID SOLELY FROM THE COLLATERAL SECURING THE
NOTE. NEITHER THIS NOTE NOR THE COLLATERAL THEREFOR IS
INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY OR
INSTRUMENTALITY OR BY ANY OTHER PERSON.
PAYMENTS IN REDUCTION OF THE NOTE BALANCE OF THIS NOTE MAY
BE MADE MONTHLY AS SET FORTH IN THE INDENTURE REFERRED TO
HEREIN. ACCORDINGLY, THE OUTSTANDING NOTE BALANCE HEREOF AT
ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN BELOW.
Series 1998-11, Class M-2 Aggregate Note Balance of the
Class M-2 Notes as of the Issue
Note Interest Rate: Variable Date: $___________________
Date of Indenture and Cut-off Date: Initial Note Balance of this Note
September 1, 1998 as of the Issue Date: $__________
First Payment Date: Master Servicer: Wilshire
October 26, 1998 Servicing Corporation
Issuer: Wilshire REIT Trust Series 1998-1 Indenture Trustee: Norwest Bank
Minnesota, National Association
Owner Trustee: Wilmington Trust
Company Issue Date: September __, 1998
No. ___ Final Maturity Date: ___________
CUSIP: 971890 ___ ___
<PAGE>
A-3-2
This certifies that _____________ is the registered owner (the
"Holder") of a Percentage Interest (obtained by dividing the denomination of
this Note by the aggregate Note Balance of the Class M-2 Notes as of the Issue
Date) of this Class M-2 Note issued by the Issuer referred to above pursuant to
the Indenture, dated as of September 1, 1998 (the "Indenture"), between the
Issuer referred to above and the Indenture Trustee referred to above, a summary
of certain of the pertinent provisions of which is set forth hereafter. To the
extent not defined herein, capitalized terms used herein have the respective
meanings assigned in the Indenture. This Class M-2 Note is issued under and is
subject to the terms, provisions and conditions of the Indenture, to which
Indenture the Holder of this Class M-2 Note by virtue of the acceptance hereof
assents and by which such Holder is bound. This Class M-2 Note is one of a duly
authorized issue of Notes designated as Asset-Backed Floating Rate Notes of the
Series specified on the face hereof (herein called the "Notes").
Pursuant to the terms of the Indenture, payments 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 "Payment Date"), commencing on the First Payment
Date specified above, to the Person in whose name this Note is registered on the
Business Day immediately preceding such Payment Date (the "Record Date"), in an
amount equal to the product of the Percentage Interest evidenced by this Note
and the amount required to be paid to the Holders of Class M-2 Notes on such
Payment Date pursuant to the Indenture.
All payments to the Holder of this Note under the Indenture will be
made or caused to be made by or on behalf of the Indenture Trustee by wire
transfer in immediately available funds to the account of the Person entitled
thereto if such Person shall have so notified the Indenture Trustee in writing
at least five Business Days prior to the Record Date immediately prior to such
Payment Date and is the registered owner of Class M-2 Notes the aggregate
initial Note Balance of which is in excess of the lesser of (i) $5,000,000 or
(ii) two-thirds of the aggregate initial Note Balance of the Class M-2 Notes, 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 Note Register.
Notwithstanding the above, the final payment on this Note will be made after due
notice by the Indenture Trustee of the pendency of such payment and only upon
presentation and surrender of this Note at the office or agency appointed by the
Indenture Trustee for that purpose as provided in the Indenture.
The Note Interest Rate applicable to the calculation of interest
payable with respect to this Note on any Payment Date shall equal a rate per
annum equal to the lesser of (i) One-Month LIBOR plus _____%, in the case of
each Payment Date through and including the Payment Date on which the aggregate
Note Balance is reduced to less than 20% of the aggregate initial Note Balance,
or One-Month LIBOR plus _____% per annum, in the case of any Payment Date
thereafter, and (ii) the Maximum Note Interest Rate.
The Notes 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 Indenture. As provided in the Indenture and the other Basic
Documents, withdrawals from the Collection
<PAGE>
A-3-3
Accounts and the Payment Account may be made from time to time for purposes
other than payments to Noteholders, such purposes including reimbursement of
advances made, or certain expenses incurred, with respect to the Mortgage Loans.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Note is registrable in the Note Register
upon surrender of this Note for registration of transfer at the offices or
agencies appointed by the Indenture Trustee as provided in the Indenture, duly
endorsed by, or accompanied by an assignment in the form below or other written
instrument of transfer in form satisfactory to the Indenture Trustee duly
executed by, the Holder hereof or such Holder's attorney duly authorized in
writing, and thereupon one or more new Notes of the same Class in authorized
denominations evidencing the same aggregate Percentage Interest will be issued
to the designated transferee or transferees.
The Notes are issuable in fully registered form only without coupons
in Classes and denominations representing Percentage Interests specified in the
Indenture. As provided in the Indenture and subject to certain limitations
therein set forth, Notes are exchangeable for new Notes 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 Notes, but the Indenture 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 Notes.
Prior to the due presentment for registration of transfer of this
Note, the Issuer, the Indenture Trustee and any agent of the Issuer or the
Indenture Trustee may treat the Person in whose name this Note is registered as
the owner hereof for all purposes, and none of the Issuer, the Indenture Trustee
nor any such agent shall be affected by notice to the contrary.
All principal and interest on the Notes, if not previously paid, will
become finally due and payable on the Final Maturity Date.
The Notes are subject to redemption in whole, but not in part, by the
Majority Certificateholder on any Payment Date on which the aggregate Note
Balance is reduced to less than 20% of the aggregate initial Note Balance as of
the Cut-off Date.
The Issuer shall not be liable upon the indebtedness evidenced by the
Notes except to the extent of amounts available from the Trust Estate which
constitutes security for the payment of the Notes. The assets included in the
Trust Estate will be the sole source of payments on the Notes, and each Holder
hereof, by its acceptance of this Note, agrees that (i) such Note will be
limited in right of payment to amounts available from the Trust Estate as
provided in the Indenture and (ii) such Holder shall have no recourse to the
Issuer, the Owner Trustee, the Indenture Trustee, the Depositor, the Master
Servicer, the Servicers or any of
<PAGE>
A-3-4
their respective affiliates, or to the assets of any of the foregoing entities,
except the assets of the Issuer pledged to secure the Notes pursuant to the
Indenture.
If an Event of Default, as defined in the Indenture, shall occur and
be continuing with respect to the Notes, the Notes may become or be declared due
and payable in the manner and with the effect provided in the Indenture. If any
such acceleration of maturity occurs prior to the payment of the entire unpaid
Note Balance of the Notes, the amount payable to the Holder of this Note will be
equal to the sum of the unpaid Note Balance of this Note, together with accrued
and unpaid interest and described in the Indenture. The Indenture provides that
notwithstanding the acceleration of the maturity of the Notes, under certain
circumstances specified therein, all amounts collected as proceeds of the Trust
Estate securing the Notes or otherwise shall continue to be applied to payments
of principal of and interest on the Notes as if they had not been declared due
and payable.
The failure to pay any Interest Payment Amount, Principal Payment
Amount or any Overcollateralization Increase Amount at any time when funds are
not available to make such payment as provided in the Indenture shall not
constitute an Event of Default under the Indenture.
The Indenture permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Holders of a majority of the Notes
affected thereby. The Indenture also contains provisions permitting the Holders
of the Most Senior Class of Notes representing specified percentages of the
aggregate Note Balance of such Class of Notes on behalf of the Holders of all
the Notes, to waive any past Event of Default under the Indenture and its
consequences. Any such waiver by the Holder, at the time of the giving thereof,
of this Note (or any one or more predecessor Notes) shall bind the Holder of
every Note issued upon the registration of transfer hereof or in exchange hereof
or in lieu hereof, whether or not notation of such consent or waiver is made
upon such Note. The Indenture also permits the Issuer and the Indenture Trustee
to amend or waive certain terms and conditions set forth in the Indenture
without the consent of the Holders of the Notes issued thereunder.
The recitals contained herein shall be taken as statements of the
Issuer and the Indenture Trustee assumes no responsibility for their
correctness.
Unless the certificate of authentication hereon has been executed by
the Indenture Trustee, by manual signature, this Note shall not be entitled to
any benefit under the Indenture or be valid for any purpose.
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this Note to be duly
executed by Wilmington Trust Company, not in its individual capacity but solely
as Owner Trustee.
Dated: September __, 1998
WILSHIRE REIT TRUST SERIES 1998-1
By: WILMINGTON TRUST COMPANY, not in its
individual capacity but solely in its
capacity as Owner Trustee
By:______________________________
Authorized Signatory
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
-------------------------------------------------
This is one of the Class M-2 Notes referred to in the within-mentioned
Indenture.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
as Indenture 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 Note and hereby authorize(s) the registration of transfer of such
interest to assignee on the Note Register of the Trust Estate.
I (we) further direct the Indenture Trustee to issue a new Note of a
like Percentage Interest and Class to the above named assignee and deliver such
Note to the following address: ________________________________________________
______________________________________________________________________________.
Dated:
_____________________________________
Signature by or on behalf of assignor
_____________________________________
Signature Guaranteed
<PAGE>
PAYMENT INSTRUCTIONS
The assignee should include the following for purposes of payment:
Payments shall be made, by wire transfer or otherwise, in immediately
available funds to ____________________________________________________________
_______________________________________________________________________________
for the account of ____________________________, account number ______________,
or, if mailed by check, to ____________________________________________________
______________________________________________________________________________.
Applicable statements should be mailed to _____________________________________
______________________________________________________________________________.
This information is provided by ______________________________________________,
the assignee named above, or _________________________________, as its agent.
<PAGE>
EXHIBIT A-4
-----------
FORM OF CLASS M-3 NOTE
WILSHIRE REIT TRUST SERIES 1998-1
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.
ASSET-BACKED FLOATING RATE NOTES, SERIES 1998-11
THIS NOTE REPRESENTS A NON-RECOURSE OBLIGATION OF THE ISSUER
AND WILL BE PAID SOLELY FROM THE COLLATERAL SECURING THE
NOTE. NEITHER THIS NOTE NOR THE COLLATERAL THEREFOR IS
INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY OR
INSTRUMENTALITY OR BY ANY OTHER PERSON.
PAYMENTS IN REDUCTION OF THE NOTE BALANCE OF THIS NOTE MAY
BE MADE MONTHLY AS SET FORTH IN THE INDENTURE REFERRED TO
HEREIN. ACCORDINGLY, THE OUTSTANDING NOTE BALANCE HEREOF AT
ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN BELOW.
Series 1998-11, Class M-3 Aggregate Note Balance of the
Class M-3 Notes as of the Issue
Note Interest Rate: Variable Date: $_________________
Date of Indenture and Cut-off Date: Initial Note Balance of this Note
September 1, 1998 as of the Issue Date: $_________
First Payment Date: Master Servicer:
October 26, 1998 Wilshire Servicing Corporation
Issuer: Wilshire REIT Trust Series 1998-1 Indenture Trustee: Norwest Bank
Minnesota, National Association
Owner Trustee: Wilmington Trust
Company Issue Date: September __, 1998
No. ___ Final Maturity Date: ___________
CUSIP: 971890 ___ ___
<PAGE>
A-4-2
This certifies that _____________ is the registered owner (the
"Holder") of a Percentage Interest (obtained by dividing the denomination of
this Note by the aggregate Note Balance of the Class M-3 Notes as of the Issue
Date) of this Class M-3 Note issued by the Issuer referred to above pursuant to
the Indenture, dated as of September 1, 1998 (the "Indenture"), between the
Issuer referred to above and the Indenture Trustee referred to above, a summary
of certain of the pertinent provisions of which is set forth hereafter. To the
extent not defined herein, capitalized terms used herein have the respective
meanings assigned in the Indenture. This Class M-3 Note is issued under and is
subject to the terms, provisions and conditions of the Indenture, to which
Indenture the Holder of this Class M-3 Note by virtue of the acceptance hereof
assents and by which such Holder is bound. This Class M-3 Note is one of a duly
authorized issue of Notes designated as Asset-Backed Floating Rate Notes of the
Series specified on the face hereof (herein called the "Notes").
Pursuant to the terms of the Indenture, payments 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 "Payment Date"), commencing on the First Payment
Date specified above, to the Person in whose name this Note is registered on the
Business Day immediately preceding such Payment Date (the "Record Date"), in an
amount equal to the product of the Percentage Interest evidenced by this Note
and the amount required to be paid to the Holders of Class M-3 Notes on such
Payment Date pursuant to the Indenture.
All payments to the Holder of this Note under the Indenture will be
made or caused to be made by or on behalf of the Indenture Trustee by wire
transfer in immediately available funds to the account of the Person entitled
thereto if such Person shall have so notified the Indenture Trustee in writing
at least five Business Days prior to the Record Date immediately prior to such
Payment Date and is the registered owner of Class M-3 Notes the aggregate
initial Note Balance of which is in excess of the lesser of (i) $5,000,000 or
(ii) two-thirds of the aggregate initial Note Balance of the Class M-3 Notes, 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 Note Register.
Notwithstanding the above, the final payment on this Note will be made after due
notice by the Indenture Trustee of the pendency of such payment and only upon
presentation and surrender of this Note at the office or agency appointed by the
Indenture Trustee for that purpose as provided in the Indenture.
The Note Interest Rate applicable to the calculation of interest
payable with respect to this Note on any Payment Date shall equal a rate per
annum equal to the lesser of (i) One-Month LIBOR plus _____%, in the case of
each Payment Date through and including the Payment Date on which the aggregate
Note Balance is reduced to less than 20% of the aggregate initial Note Balance,
or One-Month LIBOR plus _____% per annum, in the case of any Payment Date
thereafter, and (ii) the Maximum Note Interest Rate.
The Notes 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 Indenture. As provided in the Indenture and the other Basic
Documents, withdrawals from the Collection
<PAGE>
A-4-3
Accounts and the Payment Account may be made from time to time for purposes
other than payments to Noteholders, such purposes including reimbursement of
advances made, or certain expenses incurred, with respect to the Mortgage Loans.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Note is registrable in the Note Register
upon surrender of this Note for registration of transfer at the offices or
agencies appointed by the Indenture Trustee as provided in the Indenture, duly
endorsed by, or accompanied by an assignment in the form below or other written
instrument of transfer in form satisfactory to the Indenture Trustee duly
executed by, the Holder hereof or such Holder's attorney duly authorized in
writing, and thereupon one or more new Notes of the same Class in authorized
denominations evidencing the same aggregate Percentage Interest will be issued
to the designated transferee or transferees.
The Notes are issuable in fully registered form only without coupons
in Classes and denominations representing Percentage Interests specified in the
Indenture. As provided in the Indenture and subject to certain limitations
therein set forth, Notes are exchangeable for new Notes 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 Notes, but the Indenture 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 Notes.
Prior to the due presentment for registration of transfer of this
Note, the Issuer, the Indenture Trustee and any agent of the Issuer or the
Indenture Trustee may treat the Person in whose name this Note is registered as
the owner hereof for all purposes, and none of the Issuer, the Indenture Trustee
nor any such agent shall be affected by notice to the contrary.
All principal and interest on the Notes, if not previously paid, will
become finally due and payable on the Final Maturity Date.
The Notes are subject to redemption in whole, but not in part, by the
Majority Certificateholder on any Payment Date on which the aggregate Note
Balance is reduced to less than 20% of the aggregate initial Note Balance as of
the Cut-off Date.
The Issuer shall not be liable upon the indebtedness evidenced by the
Notes except to the extent of amounts available from the Trust Estate which
constitutes security for the payment of the Notes. The assets included in the
Trust Estate will be the sole source of payments on the Notes, and each Holder
hereof, by its acceptance of this Note, agrees that (i) such Note will be
limited in right of payment to amounts available from the Trust Estate as
provided in the Indenture and (ii) such Holder shall have no recourse to the
Issuer, the Owner Trustee, the Indenture Trustee, the Depositor, the Master
Servicer, the Servicers or any of
<PAGE>
A-4-4
their respective affiliates, or to the assets of any of the foregoing entities,
except the assets of the Issuer pledged to secure the Notes pursuant to the
Indenture.
If an Event of Default, as defined in the Indenture, shall occur and
be continuing with respect to the Notes, the Notes may become or be declared due
and payable in the manner and with the effect provided in the Indenture. If any
such acceleration of maturity occurs prior to the payment of the entire unpaid
Note Balance of the Notes, the amount payable to the Holder of this Note will be
equal to the sum of the unpaid Note Balance of this Note, together with accrued
and unpaid interest and described in the Indenture. The Indenture provides that
notwithstanding the acceleration of the maturity of the Notes, under certain
circumstances specified therein, all amounts collected as proceeds of the Trust
Estate securing the Notes or otherwise shall continue to be applied to payments
of principal of and interest on the Notes as if they had not been declared due
and payable.
The failure to pay any Interest Payment Amount, Principal Payment
Amount or any Overcollateralization Increase Amount at any time when funds are
not available to make such payment as provided in the Indenture shall not
constitute an Event of Default under the Indenture.
The Indenture permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Holders of a majority of the Notes
affected thereby. The Indenture also contains provisions permitting the Holders
of the Most Senior Class of Notes representing specified percentages of the
aggregate Note Balance of such Class of Notes on behalf of the Holders of all
the Notes, to waive any past Event of Default under the Indenture and its
consequences. Any such waiver by the Holder, at the time of the giving thereof,
of this Note (or any one or more predecessor Notes) shall bind the Holder of
every Note issued upon the registration of transfer hereof or in exchange hereof
or in lieu hereof, whether or not notation of such consent or waiver is made
upon such Note. The Indenture also permits the Issuer and the Indenture Trustee
to amend or waive certain terms and conditions set forth in the Indenture
without the consent of the Holders of the Notes issued thereunder.
The recitals contained herein shall be taken as statements of the
Issuer and the Indenture Trustee assumes no responsibility for their
correctness.
Unless the certificate of authentication hereon has been executed by
the Indenture Trustee, by manual signature, this Note shall not be entitled to
any benefit under the Indenture or be valid for any purpose.
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this Note to be duly
executed by Wilmington Trust Company, not in its individual capacity but solely
as Owner Trustee.
Dated: September __, 1998
WILSHIRE REIT TRUST SERIES 1998-1
By: WILMINGTON TRUST COMPANY, not in its
individual capacity but solely in its
capacity as Owner Trustee
By:______________________________
Authorized Signatory
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
-------------------------------------------------
This is one of the Class M-3 Notes referred to in the within-mentioned
Indenture.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
as Indenture 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 Note and hereby authorize(s) the registration of transfer of such
interest to assignee on the Note Register of the Trust Estate.
I (we) further direct the Indenture Trustee to issue a new Note of a
like Percentage Interest and Class to the above named assignee and deliver such
Note to the following address: ________________________________________________
______________________________________________________________________________.
Dated:
_____________________________________
Signature by or on behalf of assignor
_____________________________________
Signature Guaranteed
<PAGE>
PAYMENT INSTRUCTIONS
The assignee should include the following for purposes of payment:
Payments shall be made, by wire transfer or otherwise, in immediately
available funds to ____________________________________________________________
_______________________________________________________________________________
for the account of ____________________________, account number ______________,
or, if mailed by check, to ____________________________________________________
______________________________________________________________________________.
Applicable statements should be mailed to _____________________________________
______________________________________________________________________________.
This information is provided by ______________________________________________,
the assignee named above, or _________________________________, as its agent.
<PAGE>
EXHIBIT B-1
-----------
FORM OF INDENTURE TRUSTEE'S INITIAL CERTIFICATION
[Date]
[Seller]
[Depositor]
[Issuer]
Re: Indenture, dated as of September 1, 1998, between Wilshire REIT Trust
Series 1998-1 and Norwest Bank Minnesota, National Association Asset-
Backed Floating Rate Notes, Series 1998-11
---------------------------------------------------------------------
Ladies and Gentlemen:
Pursuant to Section 2.03(c) of the Indenture, attached hereto is the
Custodial Initial Certification delivered by Chase Bank of Texas, National
Association, as Custodian, pursuant to the Custodial Agreement dated as of
September 1, 1998, by and among Norwest Bank Minnesota, National Association,
Wilshire REIT Trust Series 1998-1, Wilshire Servicing Corporation, Ameriquest
Mortgage Company, Long Beach Mortgage Company, National Mortgage Company and
Chase Bank of Texas, National Association.
The Indenture Trustee (nor the Custodian on its behalf) has made no
independent examination of any documents contained in each Mortgage File beyond
the review specifically required in the above-referenced Indenture. The
Indenture Trustee makes no representations as to: (i) the validity, legality,
sufficiency, enforceability due authorization, recordability or genuineness of
any of the documents contained in the Mortgage File of any of the Mortgage Loans
identified on the Mortgage Loan Schedule, or (ii) the collectability,
insurability, effectiveness or suitability of any such Mortgage Loan.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
By:______________________________
Name:
Title:
<PAGE>
EXHIBIT B-2
-----------
FORM OF INDENTURE TRUSTEE FINAL CERTIFICATION
[Date]
[Seller]
[Depositor]
[Issuer]
Re: Indenture, dated as of September 1, 1998, between Wilshire REIT Trust
Series 1998-1 and Norwest Bank Minnesota, National Association Asset-
Backed Floating Rate Notes, Series 1998-11
--------------------------------------------------------
Ladies and Gentlemen:
In accordance with Section 2.03(C) of the above-captioned Indenture, the
undersigned, as Indenture 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 Indenture
Trustee together with the original recorded Assignment or Assignments of
the Mortgage showing a complete chain of assignment from the originator, or
a certified copy of such Assignments in those instances where the public
recording retains the original or where original has been lost; and
(iii) the original lender's title insurance policy.
The Indenture Trustee has made no independent examination of any documents
contained in each Mortgage File beyond the review specifically required in the
above-referenced Indenture. The Indenture 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.
<PAGE>
B-2-2
Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the above-captioned Indenture.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
By:____________________________
Name:
Title:
<PAGE>
EXHIBIT C
FORM OF CUSTODIAL AGREEMENT
THIS CUSTODIAL AGREEMENT (as amended and supplemented from time to
time, the "Agreement"), dated as of September 30, 1998, by and among NORWEST
BANK MINNESOTA, NATIONAL ASSOCIATION, not individually, but solely as Indenture
Trustee (including its successors under the Indenture defined below, the
"Indenture Trustee"), WILSHIRE SERVICING CORPORATION (together with any
successor in interest or successor under the Servicing Agreements referred to
below, the "Master Servicer"), AMERIQUEST MORTGAGE COMPANY (together with any
successor in interest or successor under the related Servicing Agreement
referred to below, "Ameriquest" or a "Servicer"), LONG BEACH MORTGAGE COMPANY
(together with any successor in interest or successor under the related
Servicing Agreement referred to below, "Long Beach" or a "Servicer"), NATIONAL
MORTGAGE CORPORATION (together with any successor in interest or successor under
the related Servicing Agreement referred to below, "National Mortgage" or a
"Servicer", and collectively with Ameriquest and Long Beach, the "Servicers"),
WILSHIRE REIT TRUST SERIES 1998-1 (the "Issuer") and CHASE BANK OF TEXAS,
NATIONAL ASSOCIATION, (together with any successor in interest or any successor
appointed hereunder, the "Custodian").
W I T N E S S E T H T H A T :
- - - - - - - - - - - - - -
WHEREAS, the Indenture Trustee and the Issuer have entered into an
Indenture, dated as of September 1, 1998, relating to the issuance of Salomon
Brothers Mortgage Securities VII, Inc., Asset-Backed Floating Rate Notes, Series
1998-11 (as in effect on the date of this Agreement, the "Original Indenture",
and as amended and supplemented from time to time, the "Indenture");
WHEREAS, the Indenture Trustee, the Issuer, the Master Servicer and
Ameriquest have entered into a Servicing Agreement, dated as of September 1,
1998, relating to the servicing of certain of the Mortgage Loans (as in effect
on the date of this Agreement, the "Original Ameriquest Servicing Agreement",
and as amended and supplemented from time to time, the "Ameriquest Servicing
Agreement");
WHEREAS, the Indenture Trustee, the Issuer, the Master Servicer and
Long Beach have entered into a Servicing Agreement, dated as of September 1,
1998, relating to the servicing of certain of the Mortgage Loans (as in effect
on the date of this Agreement, the "Original Long Beach Servicing Agreement",
and as amended and supplemented from time to time, the "Long Beach Servicing
Agreement");
WHEREAS, the Indenture Trustee, the Issuer, the Master Servicer and
National Mortgage have entered into a Servicing Agreement, dated as of September
1, 1998, relating to the servicing of certain of the Mortgage Loans (as in
effect on the date of this Agreement, the "Original National Mortgage Servicing
Agreement", and as amended and supplemented from
<PAGE>
C-2
time to time, the "National Mortgage Servicing Agreement", and collectively with
the Ameriquest Servicing Agreement and the Long Beach Servicing Agreement, the
"Servicing Agreements");
WHEREAS, the Custodian has agreed to act as agent for the Indenture
Trustee for the purposes of receiving and holding certain documents and other
instruments delivered by the Issuer under the Indenture, all upon the terms and
conditions and subject to the limitations hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements hereinafter set forth, the Indenture Trustee, the
Issuer, the Master Servicer, the Servicers and the Custodian hereby agree as
follows:
ARTICLE I
Definitions
Capitalized terms used in this Agreement and not defined herein shall
have the meanings assigned in the Original Indenture, unless otherwise required
by the context herein.
<PAGE>
C-3
ARTICLE II
Custody of Mortgage Documents
Section 2.1. CUSTODIAN TO ACT AS AGENT; ACCEPTANCE OF MORTGAGE FILES.
The Custodian, as the duly appointed agent and bailee of the Indenture Trustee
for these purposes, hereby accepts the agency contemplated hereunder and
acknowledges receipt as of the Closing Date of the documents listed in Section
2.1(a) and (b) and, as agent for the Indenture Trustee, agrees to verify receipt
of the following documents pertaining to each of the Mortgage Loans identified
on the Mortgage Loan Schedule attached to the Indenture listed in Section
2.1(c), (d), (e) and (f) in accordance with Section 2.2 hereof:
(a) the original Mortgage Note, endorsed in one of the following
forms: (i) "Pay to the order of Norwest Bank Minnesota, National
Association, as Trustee, without recourse", (ii) "Pay to the order of
Norwest Bank Minnesota, National Association, as Trustee for the registered
holders of Salomon Brothers Mortgage Securities VII, Inc., Series 1996-LB3,
without recourse" or (iii) "Pay to the order of Norwest Bank Minnesota,
National Association, as Trustee for the registered holders of Salomon
Brothers Mortgage Securities VII, Inc., Series 1997-LB1, without recourse",
in each case with all prior and intervening endorsements showing a complete
chain of endorsement from the originator to the Person so endorsing in the
form as provided above;
(b) the original Mortgage with evidence of recording thereon, and the
original recorded power of attorney, if the Mortgage was executed pursuant
to a power of attorney, with evidence of recording thereon;
(c) an original Assignment of the Mortgage executed in one of the
following forms: (i) "Norwest Bank Minnesota, National Association, as
Trustee", (ii) "Norwest Bank Minnesota, National Association, as Trustee
for the registered holders of Salomon Brothers Mortgage Securities VII,
Inc., Series 1996-LB3" or (iii) "Norwest Bank Minnesota, National
Association, as Trustee for the registered holders of Salomon Brothers
Mortgage Securities VII, Inc., Series 1997-LB1";
(d) the original recorded Assignment or Assignments of the Mortgage
showing a complete chain of assignment from the originator to the Person
assigning the Mortgage to the Indenture Trustee as contemplated by the
immediately preceding clause (c);
(e) the original or copies of each assumption, modification, written
assurance or substitution agreement, if any; and
(f) the original lender's title insurance policy, together with all
endorsements or riders which were issued with or subsequent to the issuance
of such
<PAGE>
C-4
policy, insuring the priority of the Mortgage as a first lien on the
Mortgaged Property represented therein as a fee interest vested in the
Mortgagor, or in the event such original title policy is unavailable, a
written commitment or uniform binder or preliminary report of title issued
by the title insurance or escrow company.
In furtherance of facilitating the acknowledgment of such receipt by
the Custodian, the Indenture Trustee hereby instructs the Custodian to cause the
endorsement or execution, as the case may be, of the documents listed in Section
2.1(a) and (c) to be completed by the Custodian in the forms prescribed by
Section 2.1(a) and (c).
The Issuer, at the expense of the Seller, shall promptly (and in no
event later than five Business Days following the later of the Closing Date and
the date of receipt by the Issuer of the recording information for a Mortgage)
submit or cause to be submitted for recording, at no expense to the Trust
Estate, the Issuer, the Indenture Trustee, the Owner Trustee, the Depositor or
the Custodian, in the appropriate public office for real property records, each
Assignment referred to in clauses (c) and (d) of this Section 2.1. In the event
that any such Assignment is lost or returned unrecorded because of a defect
therein, the Issuer shall promptly prepare or cause to be prepared a substitute
Assignment or cure or cause to be cured such defect, as the case may be, and
thereafter cause each such Assignment to be duly recorded.
If any of the documents referred to in Sections 2.1(b), (c) or (d)
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 Issuer to deliver such documents shall be deemed to be
satisfied upon (1) delivery by the Issuer or the Indenture Trustee to the
Custodian of a copy of each such document certified by the Seller in the case of
(x) above or the public recording office in the case of (y) above to be a true
and complete copy of the recorded original thereof and (2) if such copy is
certified by the Seller, delivery to the Custodian, promptly upon receipt
thereof of either the original or a copy of such document certified by the
public recording office to be a true and complete copy of the original. Upon
delivery to the Issuer or the Indenture Trustee (x) by the public recording
office of any recorded original Mortgage, power of attorney or Assignment or (y)
by a title insurance or escrow company of any lender's title insurance policy,
the Issuer or the Indenture Trustee, as the case may be, promptly shall (and in
no event later than five Business Days following such receipt) deliver such
document to the Custodian. The Issuer shall deliver or cause to be delivered to
the Custodian promptly upon receipt thereof any other original documents
constituting a part of a Mortgage File received with respect to any Mortgage
Loan, including, but not limited to, any original documents evidencing an
assumption or modification of any Mortgage Loan. All Mortgage Loan documents
held by the Custodian as to each Mortgage Loan shall hereinafter be referred to
as the "Mortgage File".
<PAGE>
C-5
In the event that any original document is required pursuant to the
terms of this Section to be a part of a Mortgage File, such document shall be
delivered promptly to the Custodian.
In the event of any failure of any party to deliver any document as
provided above, the Custodian shall give prompt written notice of such failure
to the other parties to this Agreement. Once the Custodian has given notice of
such failure it is to continue to hold the Mortgage Loan and Mortgage File
unless otherwise directed by the Indenture Trustee.
The parties hereto agree and acknowledge that prior to the transfer
and sale of the Mortgage Loans pursuant to the Mortgage Loan Purchase Agreement,
the Ownership Transfer Agreement, the Owner Trust Agreement and the Indenture,
all Mortgage Loan documents delivered to the Custodian for the benefit of the
Issuer and the possession by the Custodian of such Mortgage Loan Documents shall
be at the will of the Issuer and such possession by the Custodian shall be in a
custodial capacity only.
Section 2.2. REVIEW OF MORTGAGE FILES. The Custodian agrees, for the
benefit of the Indenture Trustee and the Noteholders, to review each Mortgage
File on or before the Closing Date and to certify in substantially the form
attached hereto as Exhibit One that, as to each Mortgage Loan listed in the
Mortgage Loan Schedule (other than any Mortgage Loan paid in full or any
Mortgage Loan specifically identified in the exception report annexed thereto as
not being covered by such certification), (i) all documents constituting part of
such Mortgage File (other than such documents described in Section 2.1(e))
required to be delivered to it pursuant to this Agreement are in its possession,
(ii) such documents have been reviewed by it and appear regular on their face
and relate to such Mortgage Loan, and (iii) based on its examination and only as
to the foregoing, the information set forth in the Mortgage Loan Schedule that
corresponds to items (i) through (iii), (vi), (ix), (x), (xiii), (xvi) and
(xvii) through (xx) of the definition of "Mortgage Loan Schedule" accurately
reflects information set forth in the Mortgage File. It is herein acknowledged
that, in conducting such review, the Custodian is under no duty or obligation
(i) to inspect, review or examine any such documents, instruments, certificates
or other papers to determine that they are genuine, enforceable, or appropriate
for the represented purpose or that they have actually been recorded or that
they are other than what they purport to be on their face, or (ii) to determine
whether any Mortgage File should include any of the documents specified in
Section 2.1(e).
The Mortgage Files will be delivered to the Custodian not less than 2
days prior to the Closing Date.
Prior to the first anniversary date of this Agreement, the Custodian
shall deliver to the Indenture Trustee, the Seller, the Depositor and the Issuer
a final certification in the form annexed hereto as Exhibit Two evidencing the
completeness of the Mortgage Files, with any applicable exceptions noted
thereon.
<PAGE>
C-6
If in the process of reviewing the Mortgage Files and making or
preparing, as the case may be, the certifications referred to above the
Custodian finds any document or documents constituting a part of a Mortgage File
to be missing or defective in any material respect, at the conclusion of its
review the Custodian shall so notify the Indenture Trustee, the Seller, the
Depositor, the Issuer, the Master Servicer and the related Servicer.
Section 2.3. NOTIFICATION OF DEFECTS. Upon discovery by the Custodian
of a defect with respect to a Mortgage File (including without limitation a
missing or defective document contained therein), the Custodian shall give
prompt written notice specifying such defect to the Indenture Trustee.
Section 2.4. RELEASE OF MORTGAGE FILES. Upon (i) the payment in full
of any Mortgage Loan, or (ii) the purchase or repurchase of any Mortgage Loan as
contemplated by Section 2.01 of the related Servicing Agreement or (iii)
substitution of a Qualified Substitute Mortgage Loan for a Deleted Mortgage
Loan, and upon receipt by the Custodian of a certificate signed by a Servicing
Officer stating that all amounts required by the related Servicing Agreement in
connection with such payment, repurchase or substitution have been deposited in
the related Collection Account pursuant to Section 3.10 of the related Servicing
Agreement, the Custodian shall promptly release the related Mortgage File to the
Seller.
From time to time as appropriate for the servicing or foreclosure of
any Mortgage Loan, the Custodian, shall, upon request of the Master Servicer or
the related Servicer and delivery to the Custodian of a Request for Release,
substantially in the form set forth in Exhibit Three hereto), release the
related Mortgage File to the Master Servicer or the related Servicer, as the
case may be. Such Request for Release shall obligate the Master Servicer or the
related Servicer to return each and every document previously requested from the
Mortgage File to the Custodian when the need therefor by the Master Servicer or
such Servicer no longer exists, unless: (i) the Mortgage Loan has been
liquidated and the Liquid ation Proceeds relating to the Mortgage Loan have been
deposited in the related Collection Account; or (ii) the Mortgage File or such
document has been delivered to an attorney, or to a public trustee or other
public official as required by law, for purposes of initiating or pursuing legal
action or other proceedings for the foreclosure of the Mortgaged Property either
judicially or non-judicially, and the Master Servicer such Servicer has
delivered to the Cus todian a certificate of a Servicing Officer certifying as
to the name and address of the Person to which such Mortgage File or such
document was delivered and the purpose or purposes of such delivery. Upon
receipt of a certificate of a Servicing Officer stating that such Mortgage Loan
was liquidated and that all amounts received or to be received in connection
with such liquidation which are required to be deposited into the related
Collection Account have been so deposited, or that such Mortgage Loan has become
an REO Property, the related Mortgage File shall be released by the Custodian to
the Master Servicer or related Servicer, as applicable.
<PAGE>
C-7
The Custodian shall, at the expense of any Noteholder and upon such
Noteholder's request, provide a written report to such Noteholder of all
Mortgage Files released to the Master Servicer or related Servicer for servicing
purposes.
Section 2.5. AUDIT AND EXAMINATION OF MORTGAGE FILES. Upon reasonable
notice
to the Custodian, the Indenture Trustee, the Master Servicer, the Servicers, the
Depositor, the Issuer or any agent of any of them will be permitted, during
normal business hours, to examine the Mortgage Files, documents, records and
other papers in possession of or under the control of Custodian relating to any
or all of the related Mortgage Loans.
Section 2.6. COPIES OF MORTGAGE FILES. Upon the reasonable request of
the Indenture Trustee, the Master Servicer, the related Servicer, the Issuer or
the Depositor, the Custodian shall provide to such requesting party, copies of
the documents which constitute the Mortgage Files. The Indenture Trustee shall
pay all reasonable costs and expenses incurred by the Custodian in preparing
such copies, which shall be in accordance with the Custodian's then-current fee
schedule.
Section 2.7. SAFEKEEPING. The Custodian shall segregate the Mortgage
Files from all other mortgages and mortgage notes and similar records in its
possession, and agrees to hold the Mortgage Files on behalf of the Indenture
Trustee for the use and benefit of all present and future Noteholders and to
maintain accurate records pertaining to each Mortgage Note and Mortgage in the
Mortgage Files as will enable the Indenture Trustee to comply with the terms and
conditions of the Indenture, and at all times to maintain a current inventory
thereof and to conduct periodic physical inspections of the Mortgage Files held
by it under this Agreement in such a manner as shall enable the Indenture
Trustee to verify the accuracy of such inventory and record keeping. The
Custodian will promptly report to the Indenture Trustee any failure on its part
to hold the Mortgage Files as herein provided and promptly take appropriate
action to remedy any such failure.
Section 2.8. ADMINISTRATION; REPORTS. In general, the Custodian shall
attend to all nondiscretionary details in connection with maintaining custody of
the Mortgage Files on behalf of the Indenture Trustee, and to provide the
Indenture Trustee with notification of any change in status of any Mortgage File
to which the Custodian has knowledge. In addition, the Custodian shall assist
the other parties hereto, who are preparing routine reports to Noteholders, at
the request of any such party, or to regulatory bodies, to the extent necessi
tated by the Custodian's custody of the Mortgage Files.
<PAGE>
C-8
ARTICLE III
Concerning the Custodian
Section 3.1. CUSTODIAN A BAILEE AND AGENT OF THE INDENTURE TRUSTEE.
With respect to each Mortgage Note, Mortgage and other documents constituting
each Mortgage File which are delivered to the Custodian, the Custodian hereby
agrees to act as the agent and bailee of the Indenture Trustee, and to hold such
documents, in trust, for the exclusive use and benefit of all present and future
Noteholders and undertakes to perform such duties and only such duties as are
specifically set forth in this Agreement. The Custodian may not delegate any of
its duties hereunder without the prior written consent of the Indenture Trustee.
The Custodian shall segregate and maintain all documents constituting the
Custodian's Mortgage File received by it for the benefit of the Noteholders in
secure facilities in accordance with cus tomary standards for such custody. The
Mortgage Note and Assignment of Mortgage shall be maintained in secure
fire-resistant facilities. Except upon compliance with the provisions of Section
2.4 of this Agreement, no Mortgage Note, Mortgage or other document constituting
a part of a Mortgage File shall be delivered by the Custodian to the Issuer, the
Depositor, the Master Servicer or any Servicer or otherwise released from the
possession of the Custodian.
Section 3.2. INDEMNIFICATION. The parties hereto acknowledge that the
Indenture Trustee, the Issuer, the Depositor, the Master Servicer and the
Servicers shall not be liable for the acts of the Custodian hereunder. The
Custodian agrees to indemnify the Indenture Trustee, the Issuer, the Depositor,
the Master Servicer and the Servicers and any director, officer, employee or
agent of the Indenture Trustee, the Issuer, the Depositor, the Master Servicer
and the Servicers for, and to hold them harmless against, any liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever, including reasonable
attorney's fees, incurred by them arising out of, or in connection with, any
suit, claim or other action relating to the Custodian's negligent conduct or
willful misconduct in its performance under this Agreement. Such indemnification
shall survive the termination or discharge of this Agreement, and the
resignation or removal of the Custodian hereunder.
The Indenture Trustee agrees to indemnify and hold the Custodian and
its directors, officers, agents and employees harmless against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever, including
reasonable attorney's fees, that may be imposed on, incurred by, or asserted
against it or them in any way relating to or arising out of this Agreement or
any action taken or not taken by it or them hereunder unless such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements were imposed on, incurred by or asserted against the
Custodian because of the breach by the Custodian of its obligations hereunder,
or because of the Custodian's negligence, lack of good faith or willful
misconduct on the part of the Custodian or any of its directors, officers,
agents or employees. The foregoing indemnification shall survive any termination
or assignment of this Agreement.
<PAGE>
C-9
Section 3.3. CUSTODIAN MAY OWN NOTES. The Custodian in its individual
or any other capacity may become the owner or pledgee of Notes with the same
rights it would have if it were not Custodian.
Section 3.4. INDENTURE TRUSTEE TO PAY CUSTODIAN'S FEES AND EXPENSES.
The Indenture Trustee covenants and agrees to pay to the Custodian monthly on
each Payment Date, and the Custodian shall be entitled to, a fee of 1/12 of
0.0035% per annum multiplied by the aggregate Scheduled Principal Balance of the
Mortgage Loans and any REO Properties as of the second preceding Due Date (or,
in the case of the first Payment Date, as of the Cut-off Date) as compensation
for all services rendered by it in the exercise and performance of any of the
powers and duties hereunder of the Custodian, and the Indenture Trustee will pay
or reim burse the Custodian upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Custodian in accordance with
any of the provisions of this Agreement (including the reasonable compensation
and the expenses and disbursements of its counsel and of all persons not
regularly in its employ), except any such expense, disbursement or advance as
may arise from its negligence or bad faith.
Section 3.5. CUSTODIAN MAY RESIGN; INDENTURE TRUSTEE MAY REMOVE
CUSTODIAN. The Custodian may resign from the obligations and duties hereby
imposed upon it as such obligations and duties relate to its acting as Custodian
of the Mortgage Loans by giving written notice thereof to the Issuer, the
Depositor, the Master Servicer, the Servicers and the Indenture Trustee. Upon
receiving such notice of resignation, the Indenture Trustee shall either: (1)
take custody of the Mortgage Files itself and give prompt notice thereof to the
Issuer, the Depositor, the Master Servicer, the Servicers and the Custodian or
(2) promptly appoint a successor Custodian by written instrument, in duplicate,
which instrument shall be delivered to the resigning Custodian and to the
successor Custodian. If the Indenture Trustee shall not have taken custody of
the Mortgage Files and no successor Custodian shall have been so appointed and
have accepted appointment within 30 days after the giving of such notice of
resignation, the resigning Custodian may petition any court of competent
jurisdiction for the appointment of a successor Custodian.
The Indenture Trustee may remove the Custodian at any time. In such
event, the Indenture Trustee shall appoint, or petition a court of competent
jurisdiction to appoint, a successor Custodian hereunder. Any successor
Custodian shall be a depository institution or a trust company subject to
supervision by federal or state authority and shall be able to satisfy the other
requirements contained in Section 3.7.
Any resignation or removal of the Custodian and appointment of a
successor Custodian pursuant to any of the provisions of this Section 3.5 shall
become effective upon acceptance of appointment by the successor Custodian. The
Indenture Trustee shall give prompt notice to the Issuer, the Depositor, the
Master Servicer and the Servicers of the appointment of any successor Custodian.
No successor Custodian shall be appointed by the Indenture Trustee without the
prior approval of the Issuer.
<PAGE>
C-10
In the event of the removal or resignation of the Custodian, the
Custodian shall transfer all files to the successor Custodian within 60 days
after receipt of tender of notice of removal or resignation.
Section 3.6. MERGER OR CONSOLIDATION OF CUSTODIAN. Any Person into
which the Custodian may be merged or converted or with which it may be
consolidated, or any Person resulting from any merger, conversion or
consolidation to which the Custodian shall be a party, or any Person succeeding
to the business of the Custodian, shall be the successor of the Custodian
hereunder, provided such Person shall be able to satisfy the requirements in
Section 3.7, without the execution or filing of any paper or any further act on
the part of any of the parties hereto, anything herein to the contrary
notwithstanding.
Section 3.7. REPRESENTATIONS OF THE CUSTODIAN. The Custodian hereby
represents that it is a depository institution or a trust company subject to
supervision by a federal or state authority, has a combined capital and surplus
of at least $10,000,000 and is qualified to do business in the jurisdiction in
which it will hold any Mortgage File.
Section 3.8. LIABILITY OF THE CUSTODIAN. In the absence of bad faith
on the part of the Custodian, the Custodian may conclusively rely, as to the
truth of the statements and the correctness of the opinions expressed therein,
upon any request, instructions, certificate, opinion or other document furnished
to the Custodian, reasonably believed by the Custodian to be genuine and to have
been signed or presented by the proper party or parties and conforming to the
requirements of this Agreement; but in the case of any loan document or other
request, instruction, document or certificate which by any provision hereof is
specifically required to be furnished to the Custodian, the Custodian shall be
under a duty to examine the same in accordance with the requirements of this
Agreement.
Neither the Custodian nor any of its directors, officers, agents or
employees, shall be liable for any action taken or omitted to be taken by it or
them hereunder or in connection herewith in good faith and believed by it or
them to be within the purview of this Agreement, except for its or their breach
of its or their obligations hereunder, or by its or their own negligence, lack
of good faith or willful misconduct. In no event shall the Custodian or its
directors, officers, agents and employees be held liable for any special,
indirect or consequential damages resulting from any action taken or omitted to
be taken by it or them hereunder or in connection herewith in good faith and
reasonably believed by it or them to be within the purview of this Agreement,
even if advised of the possibility of such damages.
Section 3.9. INSURANCE. The Custodian shall, at its own expense,
maintain in full force and effect at all times during the existence of this
Agreement the following:
(a) fidelity insurance;
(b) theft of documents insurance; and
(c) errors and omissions insurance.
<PAGE>
C-11
All such insurance shall be in amounts with standard coverage and subject to
deductibles as is customary for insurance typically maintained by depository
institutions or trust companies which act as custodians, which insurance may be
self-insurance. The minimum coverage under any such insurance shall be at least
equal to the corresponding amounts required by Fannie Mae in the Fannie Mae
Mortgage-Backed Securities Selling and Servicing Guide or by Freddie Mac in the
Freddie Mac Sellers' & Servicers' Guide. The Custodian shall, upon written
request, provide to the Issuer, the Depositor or the Indenture Trustee a copy of
any policy or certificate of insurance required to be maintained by the
Custodian pursuant to this Agreement.
ARTICLE IV
Miscellaneous Provisions
Section 4.1. NOTICES. All notices, requests, consents and demands and
other communications required under this Agreement or pursuant to any other
instrument or document delivered hereunder shall be in writing and, unless
otherwise specifically provided, may be delivered personally, by telegram or
telex, or by first class mail, postage prepaid, or by express delivery service,
at the addresses shown on the signature page hereto, or such other address as
may hereafter be furnished to the other parties by like notice. Any such demand,
notice or communication hereunder shall be deemed to have been received on the
date delivered to or received at the premises of the addressee.
Section 4.2. AMENDMENTS. This Agreement may be amended from time to
time by the parties hereto, provided that any amendment be accompanied by a
letter from the Rating Agencies to the effect that the amendment will not result
in a downgrading or withdrawal of the ratings then assigned to the Notes.
Section 4.3. GOVERNING LAW. This Agreement shall be deemed a contract
made under the laws of the State of New York and shall be construed and enforced
in accordance with and governed by the laws of the State of New York.
Section 4.4. COUNTERPARTS. For purpose of facilitating the recordation
of this Agreement as herein provided and for other purposes, this Agreement may
be executed simultaneously in any number of counterparts, each of which
counterparts shall be deemed to be an original, and such counterparts shall
constitute but one and the same instrument.
Section 4.5. SEVERABILITY OF PROVISIONS. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall be for any
reason whatsoever held invalid, then such covenants, agreements, provisions or
terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement or of the Notes or the
rights of the Holders thereof.
<PAGE>
C-12
Section 4.6. NO RECOURSE TO OWNER TRUSTEE. It is expressly understood
and agreed by and between the parties hereto (i) that this Agreement is executed
and delivered by the Owner Trustee, not in its individual capacity but solely as
Owner Trustee under the Owner Trust Agreement in the exercise of the power and
authority conferred and vested in it as such Owner Trustee, (ii) each of the
representations, undertakings and agreements made herein by the Issuer are not
personal representations, undertakings and agreements of the Owner Trustee but
are binding only on the Issuer created pursuant to the Owner Trust Agreement,
(iii) nothing contained herein shall be construed as creating any liability on
the Owner Trustee, individually or personally, to perform any covenant of the
Issuer either expressed or implied contained herein, all such liability, if any,
being expressly waived by the parties hereto and by any person claiming by,
through or under any such party and (iv) under no circumstances shall the Owner
Trustee be personally liable for the payment of any indebtedness or expense of
the Issuer or be liable for the breach or failure of any obligation,
representation, warranty or covenant make or undertaken by the Issuer under this
Agreement.
<PAGE>
IN WITNESS WHEREOF, this Agreement is executed as of the date first
above written.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
as Indenture Trustee
Address:
Norwest Center By:______________________________
Sixth & Marquette Name:
Minneapolis, Minnesota 55479 Title:
CHASE BANK OF TEXAS, NATIONAL
ASSOCIATION,
as Custodian
Address:
801 West Greens Road By:______________________________
Houston, Texas 77067 Name:
Title:
AMERIQUEST MORTGAGE COMPANY
Address: as Servicer
1100 Town & Country Road
Orange, California 92868 By:______________________________
Name:
Title:
LONG BEACH MORTGAGE
COMPANY,
as Servicer
Address:
1100 Town & Country Road By:______________________________
Orange, California 92868 Name:
Title:
NATIONAL MORTGAGE
CORPORATION,
as Servicer
Address:
7600 East Orchard Road By:______________________________
Englewood, Colorado 80111 Name:
Title:
<PAGE>
WILSHIRE REIT TRUST SERIES 1998-1,
as Issuer
By: WILMINGTON TRUST COMPANY,
not in its individual capacity but
solely as Owner Trustee
Address:
c/o Wilmington Trust Company By:______________________________
Rodney Square North Name:
1100 North Market Street Title:
Wilmington, Delaware 19890
WILSHIRE SERVICING
CORPORATION,
as Master Servicer
Address:
1776 South West Madison Street By:______________________________
Portland, Oregon 97205 Name:
Title:
<PAGE>
EXHIBIT ONE TO THE CUSTODIAL AGREEMENT
--------------------------------------
FORM OF CUSTODIAN INITIAL CERTIFICATION
September __, 1998
[Issuer]
[Indenture Trustee]
Re: Custodial Agreement, dated September __, 1998, among Wilshire REIT
Trust Series 1998-1, Long Beach Mortgage Company, Ameriquest
Mortgage Company, National Mortgage Corporation, Norwest Bank
Minnesota, National Association and Chase Bank of Texas, National
Association relating to Salomon Brothers Mortgage Securities VII, Inc.
Asset-Backed Floating Rate Notes, Series 1998-11
----------------------------------------------------------------------
Ladies and Gentlemen:
In accordance with Section 2.2 of the above-referenced Custodial
Agreement, the undersigned, as Custodian, hereby certifies, subject to the
exceptions noted on the attached report, that as to each Mortgage Loan listed in
the Mortgage Loan Schedule (other than any Mortgage Loan paid in full or any
Mortgage Loan specifically identified in the exception report as not being
covered by this certification), it has reviewed the Mortgage File and determined
that (i) all documents constituting part of such Mortgage File (other than such
documents described in Section 2.1(e)) required to be delivered to it pursuant
to the Custodial Agreement are in its possession, (ii) such documents have been
reviewed by it and appear regular on their face and relate to such Mortgage
Loan, (iii) based on its examination and only as to the foregoing, the
information set forth in the Mortgage Loan Schedule that corresponds to items
(i) through (iii), (vi), (ix), (x), (xiii), (xvi), and (xvii) through (xx) of
the definition of "Mortgage Loan Schedule" in the Indenture accurately reflects
information set forth in the Mortgage File.
The Custodian has made no independent examination of any documents
contained in each Mortgage File beyond the review specifically required in the
above-referenced Custodial Agreement. The Custodian makes no representations as
to: (i) the validity, legality, sufficiency, enforceability or genuineness of
any of the documents contained in the Mortgage File of any of the Mortgage Loans
identified on the Mortgage Loan Schedule,
<PAGE>
1-2
(ii) the collectability, insurability, effectiveness or suitability of any such
Mortgage Loan, or (iii) whether any Mortgage File included any of the documents
specified in clause (e) of Section 2.1 of the Custodial Agreement.
Capitalized words and phrases used herein shall have the meanings
assigned to them in the above-captioned Custodial Agreement.
CHASE BANK OF TEXAS,
NATIONAL ASSOCIATION
By:________________________
Name:
Title:
<PAGE>
EXHIBIT TWO TO THE CUSTODIAL AGREEMENT
--------------------------------------
FORM OF CUSTODIAN FINAL CERTIFICATION
[Date]
[Issuer]
[Indenture Trustee]
Re: Custodial Agreement, dated September __, 1998, among Wilshire REIT
Trust Series 1998-1, Long Beach Mortgage Company, Ameriquest
Mortgage Company, National Mortgage Corporation, Norwest Bank
Minnesota, National Association and Chase Bank of Texas, National
Association relating to Salomon Brothers Mortgage Securities VII, Inc.
Asset-Backed Floating Rate Notes, Series 1998-11
----------------------------------------------------------------------
Ladies and Gentlemen:
In accordance with Section 2.2 of the above-captioned Custodial
Agreement, the undersigned, as Custodian, hereby certifies that as to each
Mortgage Loan listed in the Mortgage Loan Schedule (other than any Mortgage Loan
paid in full or listed on the attachment hereto), it has received:
(i) the original Mortgage Note, endorsed in the following form:
"Pay to the order of Norwest Bank Minnesota, N.A., as Indenture Trustee for
the registered holders of the Notes, under the applicable 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 Indenture Trustee;
(ii) the original recorded Mortgage, and the original recorded
power of attorney, if the Mortgage was executed pursuant to a power of
attorney, or a certified copy thereof in those instances where the public
recording office retains the original or where the original has been lost;
and
(iii) an original recorded Assignment of the Mortgage to the
Indenture Trustee together with the original recorded Assignment or
Assignments of the Mortgage showing a complete chain of assignment from the
originator, or a certified copy of such Assignments in those instances
where the public recording retains the original or where original has been
lost; and
<PAGE>
2-2
(iv) the original lender's title insurance policy.
The Custodian has made no independent examination of any documents
contained in each Mortgage File beyond the review specifically required in the
above-referenced Indenture Agreement. The Custodian makes no representations as
to: (i) the validity, legality, sufficiency, enforceability or genuineness of
any of the documents contained in the Mortgage File of any of the Mortgage Loans
identified on the Mortgage Loan Schedule, or (ii) the collectability,
insurability, effectiveness or suitability of any such Mortgage Loan.
Capitalized words and phrases used herein shall have the meanings
assigned to them in the above-captioned Custodial Agreement.
CHASE BANK OF TEXAS, NATIONAL
ASSOCIATION
By:_____________________________
Name:
Title:
<PAGE>
EXHIBIT THREE TO THE CUSTODIAL AGREEMENT
----------------------------------------
REQUEST FOR RELEASE
(for Indenture Trustee/Custodian)
Loan Information
- ----------------
Name of Mortgagor: _____________________________
Servicer
Loan No.: _____________________________
Indenture Trustee/Custodian
- ---------------------------
Name: _____________________________
Address: _____________________________
_____________________________
Indenture Trustee/Custodian
Mortgage File No.: _____________________________
Depositor
- ---------
Name: SALOMON BROTHERS MORTGAGE
SECURITIES VII, INC.
Address: _____________________________
_____________________________
Notes: Asset-Backed Floating Rate Notes, Series 1998-11.
<PAGE>
3-2
The undersigned Servicer hereby acknowledges that it has received from
_______________________, as Indenture Trustee (or a Custodian on its behalf) for
the Holders of Salomon Brothers Mortgage Securities VII, Inc. Asset-Backed
Floating Rate Notes, Series 1998-11, 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 Servicing Agreement, dated as
of September 1, 1998, among the Indenture Trustee, the Issuer and the Servicer
(the "Agreement").
( ) Promissory Note dated _______________, 19__, in the original principal sum
of $__________, made by _____________________, payable to, or endorsed to
the order of, the Indenture 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 Indenture 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 Servicer hereby acknowledges and agrees as follows:
(1) The Servicer shall hold and retain possession of the Documents in
trust for the benefit of the Indenture Trustee, solely for the purposes
provided in the Agreement.
<PAGE>
3-3
(2) The Servicer shall not cause or permit the Documents to become
subject to, or encumbered by, any claim, liens, security interest, charges,
writs of attachment or other impositions nor shall the Servicer assert or
seek to assert any claims or rights of setoff to or against the Documents
or any proceeds thereof.
(3) The Servicer shall return each and every Document previously
requested from the Mortgage File to the Indenture Trustee (or a Custodian
on its behalf) 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 Servicer shall at
all times be ear marked for the account of the Indenture Trustee, and the
Servicer shall keep the Documents and any proceeds separate and distinct
from all other property in the Servicer's possession, custody or control.
Dated:
[Servicer]
By:_____________________________
Name:
Title:
<PAGE>
REQUEST FOR RELEASE
[Mortgage Loans Paid in Full]
OFFICERS' CERTIFICATE AND TRUST RECEIPT
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.
ASSET-BACKED FLOATING RATE NOTES, SERIES 1998-11
__________________________________________________ HEREBY CERTIFIES THAT HE/SHE
IS AN OFFICER OF THE 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 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 SERVICING AGREEMENT, HAVE BEEN OR WILL BE CREDITED.
_________________________ DATED:____________________
/ / VICE PRESIDENT
/ / ASSISTANT VICE PRESIDENT
<PAGE>
SCHEDULE 1
MORTGAGE LOAN SCHEDULE
[AVAILABLE UPON REQUEST]
<PAGE>
SCHEDULE 2
MORTGAGE LOAN SCHEDULE FOR MORTGAGE LOANS FROM SERIES 1996-LB3
[AVAILABLE UPON REQUEST]
EXHIBIT 10.1
OWNERSHIP TRANSFER AGREEMENT
----------------------------
This OWNERSHIP TRANSFER AGREEMENT (this "Agreement"), dated as of
September 29, 1998, is made between Wilshire REIT 1998-1, Inc. as transferor
(the "Transferor") and Salomon Brothers Mortgage Securities VII, Inc. as
transferee (the "Depositor").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, pursuant to the terms of the Mortgage Loan Purchase
Agreement, the Seller will transfer the Mortgage Loans to the Transferor on the
Closing Date;
WHEREAS, pursuant to the terms of this Ownership Transfer Agreement,
the Transferor will transfer the Mortgage Loans and all of its rights under the
Mortgage Loan Purchase Agreement to the Depositor, as agent of the Transferor,
on the Closing Date;
WHEREAS, the Depositor, as agent of the Transferor, will transfer the
Mortgage Loans and transfer all of its rights under this Ownership Transfer
Agreement and the Mortgage Loan Purchase Agreement to the Issuer on the Closing
Date;
WHEREAS, pursuant to the terms of the Owner Trust Agreement, the
Issuer will issue and transfer to or at the direction of the Transferor, the
Equity Certificates;
WHEREAS, pursuant to the terms of the Indenture, the Issuer will issue
and transfer to or at the direction of the Depositor, the Notes; and
WHEREAS, pursuant to the terms of the Servicing Agreements, the Master
Servicer and the Servicers will service the related Mortgage Loans directly or
through one or more Subservicers;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
1. DEFINITIONS
For all purposes of this Agreement, except as otherwise expressly provided
herein or unless the context otherwise requires, capitalized terms not otherwise
defined herein shall have the meanings assigned to such terms in the definitions
contained in Appendix A to the Indenture, dated as of September 1, 1998 (the
"Indenture"), between the Issuer and Norwest Bank Minnesota, National
Association, as indenture trustee (the "Indenture Trustee"), which Definitions
are incorporated by reference herein. All other capitalized terms used herein
shall have the meanings specified herein.
<PAGE>
2. AGENCY
The Transferor hereby appoints the Depositor, and the Depositor hereby
accepts the appointment, as agent of the Transferor for purposes of (i) taking
ownership of the Mortgage Loans pursuant to this Agreement solely for purposes
of transferring such Mortgage Loans to the Issuer; (ii) creating the Issuer and
transferring the Mortgage Loans to the Issuer pursuant to the Owner Trust
Agreement; (iii) receiving the Equity Certificates issued by the Issuer and
delivering such Equity Certificates to the Transferor; (iv) selling the Notes
under the Depositor's shelf registration statement and (v) otherwise
facilitating the transactions contemplated by this Agreement. As agent of the
Transferor, the Depositor shall not be entitled to the economic benefits
associated with the ownership of the Mortgage Loans or the Equity Certificates
and will not be subject to the economic burdens associated with such ownership.
3. WARRANTIES
The Transferor warrants and represents that attached hereto as Exhibit
2 is a true, accurate and complete copy of the Mortgage Loan Purchase Agreement
with respect to the Mortgage Loans, which Mortgage Loan Purchase Agreement is in
full force and effect as of the date hereof and will be in full force and effect
as of the Closing Date and has not been nor will be amended or modified in any
respect nor has any notice of termination been given or will be given thereunder
as of the date hereof and as of the Closing Date.
4. TRANSFER OF MORTGAGE LOANS TO DEPOSITOR FOR TRANSFER TO THE ISSUER
The Transferor, by the execution and delivery of this Agreement, for
purposes of transferring the Mortgage Loans to the Issuer, does hereby assign,
set over, and otherwise convey to the Depositor, as agent of the Transferor,
without recourse but subject to the terms of this Agreement, all of its legal
right, title and interest in, to and under the Mortgage Loans listed on the
Mortgage Loan Schedule attached hereto as Exhibit 1, whether now existing or
hereafter acquired and wherever located, on the Closing Date and as of the
Cut-off Date, the proceeds thereof and all rights under the Related Documents
(including the related Mortgage Files).
In addition, the Transferor hereby assigns to the Depositor, as agent
of the Transferor, all of its legal right, title, and interest in, to, and under
the Mortgage Loan Purchase Agreement to the extent of the Mortgage Loans, and
the Depositor hereby assumes all of the Transferor's obligations under the
Mortgage Loan Purchase Agreement with respect to the Mortgage Loans from and
after the date hereof, and the Transferor shall be relieved and released of all
of its obligations under the Mortgage Loan Purchase Agreement to the extent of
the Mortgage Loans from and after the date hereof.
The parties hereto intend that the transactions set forth herein
constitute a sale by the Transferor to the Depositor in an amount equal to the
net sale proceeds of the Notes and as a contribution of the balance of the
assets to the capital of the Depositor by the Transferor,
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<PAGE>
on the Closing Date of all the Transferor's legal right, title and interest in
and to the Mortgage Loans, and other property as and to the extent described
above. In addition, the Transferor hereby grants to the Depositor as of the
Closing Date a security interest in all of the Transferor's legal right, title
and interest in, to and under the Mortgage Loans, and such other property, to
secure all of the Transferor's obligations hereunder, and this Agreement shall
constitute a security agreement under applicable law, and in such event, the
parties hereto acknowledge that the Indenture Trustee, in addition to holding
the Mortgage Loans for the benefit of the Noteholders, holds the Mortgage Loans
as designee of the Depositor. The Transferor agrees to take or cause to be taken
such actions and to execute such documents, including without limitation the
filing of all necessary UCC-1 financing statements filed in the States of
Delaware, New York and Oregon (which shall be submitted for filing as of the
Closing Date), any continuation statements with respect thereto and any
amendments thereto required to reflect a change in the name or corporate
structure of the Transferor or the filing of any additional UCC-1 financing
statements due to the change in the principal office of the Transferor, as are
necessary to perfect and protect the interests of the Depositor and its
assignees in each Mortgage Loan and the proceeds thereof.
5. PURCHASE PRICE
The "Purchase Price" for the Mortgage Loans transferred to the
Depositor for transfer to the Issuer shall be (i) payment in immediately
available funds an amount equal to the net sale proceeds of the Notes and (ii)
the Equity Certificates representing a 100% Certificate Percentage Interest in
the Issuer.
6. SUCCESSORS AND ASSIGNS; ASSIGNMENT OF AGREEMENT
This Agreement shall bind and inure to the benefit of and be
enforceable by the Transferor, the Depositor, the Issuer and their respective
successors and assigns, the Indenture Trustee. The obligations of the Transferor
under this Agreement cannot be assigned or delegated to a third party without
the consent of the Depositor and the Issuer, which consent shall be at the
Depositor's and the Issuer's sole discretion. The parties hereto acknowledge
that the Depositor, as agent of the Transferor, is acquiring the Mortgage Loans
solely for the purpose of selling them and assigning all of its rights under
this Agreement and under the Mortgage Loan Purchase Agreement to the Issuer, who
will in turn pledge the Mortgage Loans and assign all of its rights under this
Agreement and the Mortgage Loan Purchase Agreement to the Indenture Trustee for
the benefit of the Noteholders. As an inducement to the Depositor to acquire the
Mortgage Loans, the Transferor acknowledges and consents to (i) the assignment
by the Depositor to the Issuer of such rights and to the enforcement or exercise
of any right or remedy against the Transferor pursuant to this Agreement and the
Mortgage Loan Purchase Agreement as assigned by the Depositor and (ii) the
assignment by the Issuer to the Indenture Trustee for the benefit of the
Noteholders of such rights and to the enforcement or exercise of any right or
remedy against the Transferor pursuant to this Agreement. Such enforcement of a
right or remedy by the Issuer, the Owner Trustee or the Indenture Trustee, as
applicable, shall have the same force and effect as if the right or remedy had
been enforced or exercised by the
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<PAGE>
Depositor directly. The Indenture Trustee is an express third-party beneficiary
to this Agreement.
7. GOVERNING LAW
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
day and year first above written.
WILSHIRE REIT 1998-1, INC.
By: /s/ Lawrence Mendelsohn
-----------------------------------
Name: Lawrence Mendelsohn
Title: President
SALOMON BROTHERS
MORTGAGE SECURITIES VII, INC.
By: /s/ Susan Mills
-----------------------------------
Name: Susan Mills
Title: Assistant Vice President
<PAGE>
EXHIBIT 1
---------
MORTGAGE LOAN SCHEDULE
[AVAILABLE UPON REQUEST]
<PAGE>
EXHIBIT 2
---------
================================================================================
WILSHIRE REIT 1998-1, INC.
as Purchaser,
WILSHIRE REAL ESTATE INVESTMENT TRUST INC.
as Seller,
and
WILSHIRE REIT TRUST SERIES 1998-1
as Issuer
______________________________
MORTGAGE LOAN PURCHASE AGREEMENT
Dated as of September 29, 1998
______________________________
Fixed and Adjustable Rate Mortgage Loans
================================================================================
<PAGE>
TABLE OF CONTENTS
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Page
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ARTICLE I
DEFINITIONS
Section 1.1. Definitions..................................................2
ARTICLE II
TRANSFER OF MORTGAGE LOANS AND RELATED PROVISIONS
Section 2.1. Agreement to Transfer........................................2
Section 2.2. Mortgage Loan Schedule.......................................3
Section 2.3. Consideration................................................3
Section 2.4. Transfer of the Mortgage Files...............................3
ARTICLE III
REPRESENTATIONS AND WARRANTIES;
REMEDIES FOR BREACH
Section 3.1. Seller Representations and Warranties........................7
Section 3.2. Repurchase Obligation for Defective Documentation and
for Breach of Representation and Warranty....................8
Section 3.3 Purchaser Representations and Warranties.....................9
ARTICLE IV
SELLER'S COVENANTS
Section 4.1. Covenants of the Seller.....................................10
Section 4.2. Payment of Expenses.........................................11
ARTICLE V
CONDITIONS TO MORTGAGE LOAN TRANSFER
Section 5.1. Conditions of Purchaser's Obligations.......................12
ARTICLE VI
LIMITATION ON LIABILITY OF THE SELLER
Section 6.1. Limitation on Liability of the Seller.......................12
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<PAGE>
Page
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ARTICLE VII
TERMINATION
Section 7.1. Termination.................................................13
ARTICLE VIII
MISCELLANEOUS PROVISIONS
Section 8.1. Amendment...................................................14
Section 8.2. Governing Law...............................................14
Section 8.3. Notices.....................................................15
Section 8.4. Severability of Provisions..................................15
Section 8.5. Relationship of Parties.....................................15
Section 8.6. Counterparts................................................16
Section 8.7. Further Agreements..........................................16
Section 8.8. Intention of the Parties....................................16
Section 8.9. Successors And Assigns; Assignment of Purchase Agreement....16
Section 8.10. Survival....................................................17
Section 8.11. No Recourse to Owner Trustee................................17
Exhibits
Exhibit 1 Mortgage Loan Schedule for Mortgage Loans
Exhibit 2 Representations and Warranties regarding the Mortgage Loans
Exhibit 3 Schedule of Mortgage Loans from Series 1997-LB1 and Series 1996-LB3
-ii-
<PAGE>
This MORTGAGE LOAN PURCHASE AGREEMENT (this "Agreement"), dated as of
September 29, 1998, is made among Wilshire Real Estate Investment Trust Inc.
(the "Seller"), Wilshire REIT 1998-1, Inc. (the "Purchaser") and Wilshire REIT
Trust Series 1998-1 (the "Issuer").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Seller owns the Mortgage Loans indicated on the Mortgage
Loan Schedule attached as Exhibit 1 hereto (the "Mortgage Loans"), including
rights to (a) any property acquired by foreclosure or deed in lieu of
foreclosure or otherwise, and (b) the proceeds of any insurance policies
covering the Mortgage Loans;
WHEREAS, pursuant to the terms of this Agreement the parties hereto
desire that the Seller transfer the Mortgage Loans to the Purchaser on the
Closing Date, and that the Seller make certain representations and warranties on
the Closing Date;
WHEREAS, pursuant to the terms of the Ownership Transfer Agreement,
the Purchaser will transfer the Mortgage Loans and transfer all of its rights
under this Mortgage Loan Purchase Agreement to the Depositor on the Closing
Date;
WHEREAS, the Depositor will transfer the Mortgage Loans and transfer
all of its rights under the Ownership Transfer Agreement and this Mortgage Loan
Purchase Agreement to the Issuer on the Closing Date;
WHEREAS, pursuant to the terms of the Owner Trust Agreement, the
Issuer will issue and transfer to or at the direction of the Depositor the
Equity Certificates;
WHEREAS, pursuant to the terms of the Indenture, the Issuer will issue
and transfer to or at the direction of the Depositor, the Notes; and
WHEREAS, pursuant to the terms of the Servicing Agreements, the Master
Servicer and the Servicers will service the related Mortgage Loans directly or
through one or more Sub-Servicers;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
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<PAGE>
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ARTICLE I
DEFINITIONS
Section 1.1. DEFINITIONS. For all purposes of this Mortgage Loan
Purchase Agreement, except as otherwise expressly provided herein or unless the
context otherwise requires, capitalized terms not otherwise defined herein shall
have the meanings assigned to such terms in the Definitions contained in
Appendix A to the Indenture dated as of September 1, 1998 between the Issuer and
the Indenture Trustee, which is incorporated by reference herein. All other
capitalized terms used herein shall have the meanings specified herein.
ARTICLE II
TRANSFER OF MORTGAGE LOANS AND RELATED PROVISIONS
Section 2.1. AGREEMENT TO TRANSFER.
The Seller agrees to transfer and the Purchaser agrees to accept the
transfer, on or before September 30, 1998 (the "Closing Date"), certain
fixed-rate and adjustable-rate conventional 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 $380,853,964
(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.
The parties hereto intend that the transactions set forth herein
constitute a sale by the Seller to the Purchaser in an amount equal to the net
sale proceeds of the Notes and as a contribution of the balance of the assets to
the capital of the Purchaser by the Seller. The Seller hereby conveys on the
Closing Date of all the Seller's right, title and interest in and to the
Mortgage Loans and other property as and to the extent described above. In the
event the transactions set forth herein be deemed a pledge of such Mortgage
Loans, the Seller hereby grants to the Purchaser as of the Closing Date a
security interest in all of the Seller's right, title and interest in, to and
under the Mortgage Loans and such other property, to secure all of the Seller's
obligations hereunder, and this Agreement shall constitute a security agreement
under applicable law and in such event, the parties hereto acknowledge that the
Indenture Trustee, in addition to holding the Mortgage Loans for the benefit of
the Noteholders, holds the Mortgage Loans as designee of the Purchaser. The
Seller agrees to take or cause to be taken such actions and to execute such
documents, including without limitation the filing of all necessary UCC-1
financing statements filed in the States of Delaware, New York and Oregon (which
shall have been submitted for filing as of the Closing Date, as applicable), any
continuation statements with respect thereto and any amendments thereto required
to reflect a change in the name or
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<PAGE>
-3-
corporate structure of the Seller or the filing of any additional UCC-1
financing statements due to the change in the principal office of the Seller, as
are necessary to perfect and protect the interests of the Purchaser and its
assignees in each Mortgage Loan and the proceeds thereof.
Section 2.2. MORTGAGE LOAN SCHEDULE.
The Purchaser and the Seller have agreed that the Mortgage Loans
listed on Exhibit 1 hereto (the "Mortgage Loan Schedule") are to be transferred
to the Purchaser pursuant to this Agreement.
Section 2.3. CONSIDERATION.
(a) In consideration for the Mortgage Loans to be transferred
hereunder, the Purchaser shall pay to or upon the order of the Seller: (i) in
immediately available funds an amount equal to the net sale proceeds of the
Notes and (ii) 100% of the shares of the stock of the Purchaser.
(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. Notwithstanding the above, the Purchaser or any
assignee, transferee or designee of the Purchaser shall be entitled to all
scheduled payments of principal and interest due on or before the Cut-off Date
and collected after the Cut-off Date with respect to any Mortgage Loan listed on
Exhibit 3 attached hereto.
Section 2.4. TRANSFER OF THE MORTGAGE FILES.
(a) POSSESSION OF MORTGAGE FILES. The Seller does hereby sell,
transfer, assign, set over and convey to the Purchaser, without recourse but
subject to the terms of this Agreement, all of its right, title and interest in,
to and under the Mortgage Loans. The contents of each Mortgage File not
delivered to the Purchaser or to any assignee, transferee or designee of the
Purchaser on or prior to the Closing Date are and shall be held in trust by the
Seller for the benefit of the Purchaser or any assignee, transferee or designee
of the Purchaser. Upon the transfer 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.
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<PAGE>
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(b) DELIVERY OF MORTGAGE LOAN DOCUMENTS. The Seller will, on or prior
to the Closing Date, deliver or cause to be delivered to the Purchaser or any
assignee, transferee or designee of the Purchaser each of the following
documents for each Mortgage Loan:
(i) the original Mortgage Note, endorsed in one of the following
forms: (i) "Pay to the order of Norwest Bank Minnesota, National
Association, as Trustee, without recourse," (ii) "Pay to the order of
Norwest Bank Minnesota, National Association, as Trustee for the registered
holders of Salomon Brothers Mortgage Securities VII, Inc., Series 1996-LB3,
without recourse" or (iii) "Pay to the order of Norwest Bank Minnesota,
National Association, as Trustee for the registered holders of Salomon
Brothers Mortgage Securities VII, Inc., Series 1997-LB1, without recourse,
in each case with all prior and intervening endorsements showing a complete
chain of endorsement from the originator to the Person so endorsing in the
form as provided above;
(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 one of the
following forms: (i) "Norwest Bank Minnesota, National Association, as
Trustee", (ii) "Norwest Bank Minnesota, National Association, as Trustee
for the registered holders of Salomon Brothers Mortgage Securities VII,
Inc., Series 1996-LB3" or (iii) "Norwest Bank Minnesota, National
Association, as Trustee for the registered holders of Salomon Brothers
Mortgage Securities VII, Inc., Series 1997-LB1";
(iv) the original recorded Assignment or Assignments of the Mortgage
showing a complete chain of assignment from the originator to the Person
assigning the Mortgage to the Trustee as contemplated by the immediately
preceding clause (iii);
(v) the original or copies of each assumption, modification, written
assurance or substitution agreement, if any; and
(vi) the original lender's title insurance policy, together with all
endorsements or riders which were issued with or subsequent to the issuance
of such policy, insuring the priority of the Mortgage as a first lien on
the Mortgaged Property represented therein as a fee interest vested in the
Mortgagor, 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 company or escrow company.
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<PAGE>
-5-
The Seller, at its own expense, shall promptly (and in no event later
than five Business Days following the later of the Closing Date and the date of
receipt by the Seller of the recording information for a Mortgage) submit or
cause to be submitted for recording, at no expense to the Trust Estate, the
Indenture Trustee or the Owner Trustee, in the appropriate public office for
real property records, each Assignment referred to in Sections 2.4(b)(iii) and
(b)(iv) above. In the event that such Assignment is lost or returned unrecorded
because of a defect therein, the Seller 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.
Notwithstanding anything to the contrary contained in this Section
2.4, if any document referred to in Section 2.4(b)(ii), 2.4(b)(iii) or
2.4(b)(iv) above has been submitted for recording but either (x) has not been
returned from the applicable public recording office or (y) has been lost or
such public recording office has retained the original of such document, the
obligations of the Seller hereunder shall be deemed to have been satisfied upon
(1) delivery by or on behalf of the Seller promptly upon receipt thereof to or
on behalf of the Purchaser or any assignee, transferee or designee of the
Purchaser of either the original or a copy of such document certified by the
Seller in the case of (x) above or the public recording office in the case of
(y) above to be a true and complete copy of the recorded original thereof and
(2) if such copy is certified by the Seller delivery promptly upon receipt
thereof of either the original or a copy of such document certified by the
public recording office to be a true and complete copy of the original.
In the event that the original lender's title insurance policy has not
been delivered pursuant to Section 4.2(b)(vi) above, the Seller shall deliver or
cause to be delivered to the Purchaser or any assignee, transferee or designee
of the Purchaser, promptly after receipt thereof, the original lender's title
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, 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 2.4(b) hereof shall be reviewed by the Purchaser or any assignee,
transferee or designee of the Purchaser at any time before or after the Closing
Date (and with respect to each document permitted to be delivered after the
Closing Date within seven days of its delivery) to ascertain that all required
documents have been executed and received and that such documents relate to the
Mortgage Loans identified on the Mortgage Loan Schedule.
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<PAGE>
-6-
(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 Depositor,
the Issuer and the Indenture Trustee, as may be required to effect the purposes
of the Ownership Transfer Agreement, the Owner Trust Agreement and the
Indenture, without the consent of the Seller, 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, the Depositor, the Issuer or the
Indenture Trustee in connection with enforcing any obligations of the Seller
under this Agreement will be promptly reimbursed by the Seller.
(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 Indenture
Trustee, and their respective designees, upon reasonable notice to the Seller
during normal business hours before the Closing Date and within 60 days after
the Closing Date. If any such person makes such examination prior to the Closing
Date and identifies any Mortgage Loans that do not conform to the requirements
of the Purchaser as described in this Agreement, such Mortgage Loans shall be
deleted from the Mortgage Loan 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 Indenture or related Servicing
Agreement.
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<PAGE>
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ARTICLE III
REPRESENTATIONS AND WARRANTIES;
REMEDIES FOR BREACH
Section 3.1. SELLER REPRESENTATIONS AND WARRANTIES. The Seller hereby
represents and warrants to the Purchaser and the Issuer as of the date hereof,
as of the Closing Date (or if otherwise specified below, as of the date so
specified):
(a) As to the Seller:
(i) The Seller (i) is a corporation duly organized, validly existing
and in good standing under the laws of the State of Maryland and (ii) is
qualified and in good standing as a foreign corporation to do business in
each jurisdiction where such qualification is necessary, except where the
failure so to qualify would not have a material adverse effect on the
Seller's ability to enter into this Agreement and to consummate the
transactions contemplated hereby and thereby;
(ii) The Seller has the power and authority to make, execute, deliver
and perform its obligations under this Agreement and all of the
transactions contemplated under this Agreement, and has taken all necessary
corporate action to authorize the execution, delivery and performance of
this Agreement;
(iii) The Seller is not required to obtain the consent of any other
Person or any consent, approval or authorization from, or registration or
declaration with, any governmental authority, bureau or agency in
connection with the execution, delivery, performance, validity or
enforceability of this Agreement, except for such consents, approvals or
authorization, or registration or declaration, as shall have been obtained
or filed, as the case may be;
(iv) The execution and delivery of this Agreement and the performance
of the transactions contemplated hereby by the Seller will not violate any
provision of any existing law or regulation or any order or decree of any
court applicable to the Seller or any provision of the certificate of
incorporation or bylaws of the Seller, or constitute a material breach of
any mortgage, indenture, contract or other agreement to which the Seller is
a party or by which the Seller may be bound;
(v) No litigation or administrative proceeding of or before any court,
tribunal or governmental body is currently pending, or to the knowledge of
the Seller threatened, against the Seller or any of its properties or with
respect to this Agreement, the Notes or the Equity Certificates which in
the opinion of the Seller has a reasonable
-7-
<PAGE>
-8-
likelihood of resulting in a material adverse effect on the transactions
contemplated by this Agreement;
(vi) This Agreement constitutes the legal, valid and binding
obligations of the Seller, enforceable against the Seller in accordance
with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
now or hereafter in effect affecting the enforcement of creditors' rights
in general and except as such enforceability may be limited by general
principles of equity (whether considered in a proceeding at law or in
equity);
(vii) This Agreement constitutes a valid transfer and assignment to
the Purchaser of all right, title and interest of the Seller in and to the
principal balance of the Mortgage Loans as of the Cut-off Date, all monies
due or to become due with respect thereto, and all proceeds of such
principal balance of the Mortgage Loans;
(viii) The Seller is not in default with respect to any order or
decree of any court or any order or regulation of any federal, state or
governmental agency, which default might have consequences that would
materially and adversely affect the condition (financial or other) or
operations of the Seller or its properties or might have consequences that
would materially adversely affect its performance hereunder; and
(ix) The Master Servicer, any Servicer or any Subservicer who will be
servicing any Mortgage Loan pursuant to the related Servicing Agreements or
Subservicing Agreements is qualified to do business in all jurisdictions in
which its activities as the Master Servicer, such Servicer or such
Subservicer of the Mortgage Loans serviced by it require such
qualifications except where failure to be so qualified will not have a
material adverse effect on such servicing activities.
(b) As to each Mortgage Loan as of the Closing Date, the information set
forth in Exhibit 2 is true and correct in all material respects as of the
Closing Date.
Section3.2. REPURCHASE OBLIGATION FOR DEFECTIVE DOCUMENTATION AND FOR
BREACH OF REPRESENTATION AND WARRANTY.
(a) The representations and warranties contained in Section 3.1 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
Purchaser to review or examine such documents and shall inure to the benefit of
any assignee, transferee or designee of the Purchaser, including the Indenture
Trustee for the benefit of Noteholders evidencing an interest in all or a
portion of the Mortgage Loans. With respect to the representations and
warranties contained herein which are made to the knowledge or the best of
knowledge of the
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Seller, or as to which the Seller 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 Seller
with respect to the substance of such representation and warranty being
inaccurate at the time the representation and warranty was made, the Seller
shall take such action described in the following paragraph in respect of such
Mortgage Loan.
Upon discovery by 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 (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 3.1
that materially and adversely affects the value of any Mortgage Loan, the
Purchaser or the Purchaser's assignee, transferee or designee, the party
discovering the breach shall give prompt written notice to the others. Within
ninety (90) days of its discovery or its receipt of notice of any such missing
documentation which was not transferred to the Seller as described above or
materially defective documentation or any such breach of a representation and
warranty the Seller promptly shall deliver such missing document or cure such
defect or breach in all material respects, or in the event the Seller cannot
deliver such missing document or such defect or breach cannot be cured, the
shall, within 90 days of its discovery or receipt of notice, either (i)
repurchase the affected Mortgage Loan at a price equal to the Purchase Price (as
such term is defined in the Indenture) or (ii) in accordance with the provisions
of the related Servicing Agreement, cause the removal of such Mortgage Loan from
the Trust Estate and substitute one or more Qualified Substitute Mortgage Loans.
The Seller shall amend the Mortgage Loan Schedule to reflect the withdrawal of
such Mortgage Loan from the terms of this Agreement and the related Servicing
Agreement and the Indenture and the addition, if any, of a Qualified Substitute
Mortgage Loan. The Seller shall deliver to the Purchaser such amended Mortgage
Loan Schedule and shall deliver such other documents as are required by this
Agreement or the related Servicing Agreement and Indenture within five (5) days
of any such amendment. Any repurchase pursuant to this Section 3.2(a) shall be
accomplished by deposit in the related Collection Account of the amount of the
Purchase Price in accordance with Section 2.01 of the related Servicing
Agreement. Any repurchase or substitution required by this Section shall be made
in a manner consistent with Section 2.01 of the related Servicing Agreement.
(b) It is understood and agreed that the obligations of the Seller set
forth in this Section 3.2 to cure, repurchase or substitute for a defective
Mortgage Loan constitute the sole remedies of the Purchaser against the Seller
respecting a missing or defective document or a breach of the representations
and warranties.
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Section 3.3 PURCHASER REPRESENTATIONS AND WARRANTIES. The Purchaser hereby
represents and warrants to the Seller as of the date hereof and as of the
Closing Date that:
(a) The Purchaser is duly organized and validly existing as a
corporation in good standing under the laws of the State of Delaware, with power
and authority to own its properties and to conduct its business as such
properties are currently owned and such business is presently conducted.
(b) The Purchaser is duly qualified to do business as a foreign
corporation in good standing and has obtained all necessary licenses and
approvals in all jurisdictions in which the ownership or lease of its property
or the conduct of its business shall require such qualifications and in which
the failure to so qualify would have a material adverse effect on the business,
properties, assets or condition (financial or other) of the Purchaser and the
ability of the Purchaser to perform under this Agreement.
(c) The Purchaser has the power and authority to execute and deliver
this Agreement and to carry out its terms; the Purchaser has full power and
authority to purchase the property to be purchased from the Seller and the
Purchaser has duly authorized such purchase by all necessary corporate action;
and the execution, delivery and performance of this Agreement have been duly
authorized by the Purchaser by all necessary corporate action.
(d) The consummation of the transactions contemplated by this
Agreement and the fulfillment of the terms hereof do not conflict with, result
in any breach of any of the terms and provisions of, or constitute (with or
without notice or lapse of time) a default under, the articles of incorporation
or bylaws of the Purchaser, or any indenture, agreement or other instrument to
which the Purchaser is a party or by which it is bound; nor result in the
creation or imposition of any Lien upon any of its properties pursuant to the
terms of any such indenture, agreement or other instrument (other than pursuant
to the Basic Documents); nor violate any law or, to the best of the Purchaser's
knowledge, any order, rule or regulation applicable to the Purchaser of any
court or of any federal or state regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over the Purchaser or its
properties.
ARTICLE IV
SELLER'S COVENANTS
Section 4.1. COVENANTS OF THE SELLER.
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(a) The Seller hereby covenants as of the date hereof and as of the
Closing Date that, except for the transfer hereunder, on and after the Closing
Date, the Seller will not sell, pledge, assign or transfer to any other Person,
or grant, create, incur or assume any Lien on, any Mortgage Loan, whether now
existing or hereafter created, or any interest therein; the Seller will notify
the Issuer, on its own behalf and as assignee of the Purchaser and the Indenture
Trustee of the existence of any such Lien on any Mortgage Loan immediately upon
discovery thereof; and the Seller will defend the right, title and interest of
the Issuer, on its own behalf and as assignee of the Purchaser, in, to and under
the Mortgage Loans, whether now existing or hereafter created, against all
claims of third parties claiming through or under the Seller.
In the event that the Indenture Trustee receives actual notice of any
transfer taxes arising out of the transfer, assignment and conveyance of the
Mortgage Loans, on written demand by the Indenture Trustee, or upon the Seller's
otherwise being given notice thereof by the Indenture Trustee, the Seller shall
pay any and all such transfer taxes (it being understood that the Holders of the
Notes, the Indenture Trustee shall have no obligation to pay such transfer
taxes).
(b) The Seller hereby covenants to qualify and remain qualified as a
real estate investment trust ("REIT") under Section 856 of the Code and to cause
any subsidiary owning interests in the Issuer to be a "qualified REIT
subsidiary" (as defined in Section 856(i) of the Code).
Section 4.2. PAYMENT OF EXPENSES.
(a) The Seller will pay on the Closing Date all expenses incident to
the performance of its obligations under this Agreement and the Underwriting
Agreement, including (i) the preparation, printing and any filing of the
preliminary prospectus, Prospectus Supplement and Prospectus (including any
schedules or exhibits and any document incorporated therein by reference)
originally filed and of each amendment or supplement thereto, (ii) the
preparation, printing and delivery to the Underwriter of this Agreement and the
Underwriting Agreement, the Indenture and such other documents as may be
required in connection with the offering, purchase, sale and delivery of the
Notes, (iii) the preparation, issuance and delivery of the certificates for the
Notes to the Underwriter, including any charges of DTC in connection therewith;
(iv) the fees and disbursements of the Depositor's accountants and other
advisors in connection with the filing of the preliminary prospectus, the
Prospectus Supplement and Prospectus, (v) the qualification of the Notes under
securities laws in accordance with the provisions of the Underwriting Agreement,
including filing fees and the reasonable fees and disbursements of counsel for
the Underwriter in connection therewith and in connection with the preparation
of the Blue Sky Survey and any supplement thereto for delivery to potential
investors, (vi) in addition to the initial printing and filing costs under (i)
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above, the printing and delivery to the Underwriter of copies of each
preliminary prospectus and of the Prospectus and any amendments or supplements
thereto for delivery to potential investors, (vi) the expenses of the Indenture
Trustee and Owner Trustee, including the fees and disbursements of counsel for
the Indenture Trustee and Owner Trustee in connection with the Indenture, the
Owner Trust Agreement and the Notes and (vii) any fees payable in connection
with the rating of the Notes.
(b) If the Underwriting Agreement is terminated by the Underwriter in
accordance with the provisions thereof, the Seller shall reimburse the
Underwriter for all of their out-of-pocket expenses, including the reasonable
fees and disbursements of counsel for the Underwriter.
ARTICLE V
CONDITIONS TO MORTGAGE LOAN TRANSFER
Section 5.1. CONDITIONS OF PURCHASER'S OBLIGATIONS. The Purchaser's
obligation to purchase the Mortgage Loans which it accepts for purchase
hereunder shall be subject to each of the following conditions:
(i) the Mortgage File for each Mortgage Loan shall have
been delivered in accordance with this Agreement and
the Owner Trust Agreement;
(ii) the representations and warranties set forth in Section
3.1(b) hereof with respect to each Mortgage Loan shall
be true as of the Closing Date;
(iii)The Underwriter or its affiliates shall have had an
opportunity to perform a due diligence review of each
Mortgage Loan; and
(iv) The Seller shall have provided to the Underwriter or
its affiliates such other documents which are then
required to have been delivered under this Agreement or
which are reasonably requested by the Underwriter or
its affiliates, which other documents may include UCC
financing statements, a favorable opinion or opinions
of counsel with respect to matters which are reasonably
requested by the Underwriter, and/or an Officers'
Certificate.
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ARTICLE VI
LIMITATION ON LIABILITY OF THE SELLER
Section 6.1. LIMITATION ON LIABILITY OF THE SELLER. None of the
directors, officers, employees or agents of the Seller shall be under any
liability to the Purchaser, it being expressly understood that all such
liability is expressly waived and released as a condition of, and as
consideration for, the execution of this Agreement. Except as and to the extent
expressly provided in the Basic Documents, the Seller shall not be under any
liability to the Issuer, the Owner Trust, the Owner Trustee, the Indenture
Trustee, the Noteholders or the Certificateholders. The Seller and any director,
officer, employee or agent of the Seller may rely in good faith on any document
of any kind PRIMA FACIE properly executed and submitted by any Person respecting
any matters arising hereunder.
ARTICLE VII
TERMINATION
Section 7.1. TERMINATION.
(a) Except as provided in Section 7.1(b) hereof, the respective
obligations and responsibilities of the Seller, the Purchaser and the Issuer
created hereby shall terminate, except for the Seller's indemnity obligations as
provided herein, upon the termination of the Issuer pursuant to the terms of the
Owner Trust Agreement.
(b) The Purchaser may terminate this Agreement, by notice to the
Seller, at any time at or prior to the Closing Date:
(i) if the Underwriting Agreement is terminated by the Underwriter
pursuant to the terms of the Underwriting Agreement or if there has been,
since the time of execution of this Agreement or since the respective dates
as of which information is given in the Prospectus, any material adverse
change in the financial condition, earnings, business affairs or business
prospects of the Seller, whether or not arising in the ordinary course of
business, or
(ii) if there has occurred any material adverse change in the
financial markets in the United States, any outbreak of hostilities or
escalation thereof or other calamity or crisis or any change or development
involving a prospective change in national or international political,
financial or economic conditions, in each case the effect of which is such
as to make it, in the judgment of the Underwriter, impracticable to market
the Notes or to enforce contracts for the sale of the Notes, or
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(iii) if trading in any securities of the Seller has been suspended or
limited by the Commission or the New York Stock Exchange, or if trading
generally on the American Stock Exchange or the New York Stock Exchange or
in the NASDAQ National Market System has been suspended or limited, or
minimum or maximum prices for trading have been fixed, or maximum ranges
for prices have been required, by any of said exchanges or by such system
or by order of the Commission, the National Association of Securities
Dealers, Inc. or any other governmental authority,
(iv) if a banking moratorium has been declared by either Federal or
New York authorities,
(v) either (A) a change in control of the Seller shall have occurred
other than in connection with and as a result of the issuance and sale by
the Seller or registered, publicly offered common stock; or (B) the
Underwriter determines in its sole discretion that any material adverse
change has occurred in the management of the Seller,
(vi) there is (A) a material breach by the Seller of any
representation and warranty contained in this Agreement or the Underwriting
Agreement other than a representation or warranty relating to particular
Mortgage Loans, and the Underwriter has reason to believe in good faith
either that such breach is not curable within two (2) days or that such
breach may not have been cured in all material respects at the expiration
of two (2) days following discovery thereof by the Seller OR (B) a failure
by the Seller to make any payment payable by it under this Agreement OR (C)
any other failure by the Seller to observe and perform in any material
respect its material covenants, agreements and obligations with the
Purchaser, including without limitation those contained in this Agreement,
and the Purchaser has reason to believe in good faith that such failure may
not have been cured in all material respects at the expiration of two (2)
days following discovery thereof by the Seller, or
(vii) the Seller fails to provide written notification to the
Underwriter of any change in its loan origination, acquisition or appraisal
guidelines or practices, or the Seller, without the prior consent of the
Underwriter (which shall not be unreasonably withheld), amends in any
material respect its loan origination, acquisition or appraisal guidelines
or practices.
If this Agreement is terminated pursuant to this Section 7.1(b), such
termination shall be without liability of any party to any other party except as
provided in Section 4.2 hereof.
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ARTICLE VIII
MISCELLANEOUS PROVISIONS
Section 8.1. AMENDMENT. This Agreement may be amended from time to
time by the Seller and the Purchaser by written agreement signed by the Seller
and the Purchaser.
Section 8.2. GOVERNING LAW. This Agreement shall be governed by and
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 8.3. NOTICES. All demands, notices and communications
hereunder shall be in writing and shall be deemed to have been duly given if
personally delivered at or mailed by registered mail, postage prepaid, addressed
as follows:
(i) if to the Seller:
Wilshire Real Estate Investment Trust Inc.
1776 South West Madison Street
Portland, Oregon 97205
Attention: Lawrence Mendelsohn
or, such other address as may hereafter be furnished to the Purchaser in writing
by the Seller.
(ii) if to the Purchaser:
Wilshire REIT 1998-1, Inc.
1776 South West Madison Street
Portland, Oregon 97205
Attention: Lawrence Mendelsohn
or such other address as may hereafter be furnished to the Seller in writing by
the Purchaser.
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(iii) if to the Issuer:
Wilshire REIT Trust Series 1998-1
c/o Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
Attention: Corporate Trust Administration
or such other address as may hereafter be furnished to the Seller in writing by
the Issuer.
Section 8.4. SEVERABILITY OF PROVISIONS. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall be held
invalid for any reason whatsoever, then such covenants, agreements, provisions
or terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement.
Section 8.5. RELATIONSHIP OF PARTIES. Nothing herein contained shall
be deemed or construed to create a partnership or joint venture between the
parties hereto, and the services of the Seller shall be rendered as an
independent contractor and not as agent for the Purchaser.
Section 8.6. COUNTERPARTS. This Agreement may be executed in two or
more counterparts and by the different parties hereto on separate counterparts,
each of which, when so executed, shall be deemed to be an original and such
counterparts together shall constitute one and the same agreement.
Section 8.7. FURTHER AGREEMENTS. The Purchaser and the Seller each
agree to execute and deliver to the other such additional documents, instruments
or agreements as may be necessary or appropriate to effectuate the purposes of
this Agreement. Each of the Purchaser and the Seller agrees to use its best
reasonable efforts to take all actions necessary to be taken by it to cause the
Notes to be issued and rated in the highest rating category by each of the
Rating Agencies, and each party will cooperate with the other in connection
therewith.
Section 8.8. INTENTION OF THE PARTIES. It is the intention of the
parties that the Purchaser is purchasing on the Closing Date, and the Seller is
selling on the Closing Date, the Mortgage Loans, rather than the Purchaser
providing to the Seller a loan secured by the Mortgage Loans on the Closing
Date. Accordingly, the parties hereto each intend to treat this transaction as a
sale by the Seller, and a purchase by the Purchaser, of the Mortgage Loans on
the Closing Date. The Purchaser and the Issuer will have the right to review the
Mortgage Loans and the Related Documents to determine the characteristics of the
Mortgage Loans
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which will affect the federal income tax consequences of owning the Mortgage
Loans and the Seller will cooperate with all reasonable requests made by the
Purchaser and/or the Issuer in the course of such review.
Section 8.9. SUCCESSORS AND ASSIGNS; ASSIGNMENT OF PURCHASE AGREEMENT.
This Agreement shall bind and inure to the benefit of and be enforceable by the
Seller, the Purchaser, the Issuer and their respective successors and assigns.
The obligations of the Seller under this Agreement cannot be assigned or
delegated to a third party without the consent of the Purchaser, which consent
shall be at the Purchaser's sole discretion. The parties hereto acknowledge that
the Purchaser is acquiring the Mortgage Loans for the purpose of selling them to
the Depositor, who will in turn sell them to the Issuer, who will in turn pledge
the Mortgage Loans to the Indenture Trustee for the benefit of the Noteholders.
As an inducement to the Purchaser and the Issuer to purchase the Mortgage Loans,
the Seller acknowledges and consents to (i) the assignment by the Purchaser to
the Depositor of all of the Purchaser's rights against the Seller pursuant to
this Agreement and to the enforcement or exercise of any right or remedy against
the Seller pursuant to this Agreement by the Purchaser, the Depositor and the
Issuer, (ii) the assignment by the Depositor to the Issuer of all of the
Depositor's rights against the Seller pursuant to this Agreement and the
Ownership Transfer Agreement and to the enforcement or exercise of any right or
remedy against the Seller pursuant to this Agreement and the Ownership Transfer
Agreement and (iii) the assignment by the Issuer to the Indenture Trustee of
such rights and to the enforcement or exercise of any right or remedy against
the Seller pursuant to this Agreement and the Ownership Transfer Agreement. Such
enforcement of a right or remedy by the Depositor, the Issuer, the Owner Trustee
or the Indenture Trustee, as applicable, shall have the same force and effect as
if the right or remedy had been enforced or exercised by the Purchaser or the
Issuer directly.
Section 8.10. SURVIVAL. The representations and warranties made herein
by the Seller and the provisions of Article V hereof shall survive the purchase
of the Mortgage Loans hereunder.
Section 8.11. NO RECOURSE TO OWNER TRUSTEE. It is expressly understood
and agreed by and between the parties hereto (i) that this Agreement is executed
and delivered by the Owner Trustee, not in its individual capacity but solely as
Owner Trustee under the Owner Trust Agreement in the exercise of the power and
authority conferred and vested in it as such Owner Trustee, (ii) each of the
representations, undertakings and agreements made herein by the Issuer are not
personal representations, undertakings and agreements of the Owner Trustee but
are binding only on the Issuer created pursuant to the Owner Trust Agreement,
(iii) nothing contained herein shall be construed as creating any liability on
the Owner Trustee, individually or personally, to perform any covenant of the
Issuer either expressed or implied contained herein, all such liability, if any,
being expressly waived by the parties hereto and by any person claiming by,
through or under any such party and (iv) under no circumstances shall
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the Owner Trustee be personally liable for the payment of any indebtedness or
expense of the Issuer or be liable for the breach or failure of any obligation,
representation, warranty or covenant make or undertaken by the Issuer under this
Agreement.
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IN WITNESS WHEREOF, the Seller, the Purchaser and the Issuer have
caused their names to be signed to this Mortgage Loan Purchase Agreement by
their respective officers thereunto duly authorized as of the day and year first
above written.
WILSHIRE REIT 1998-1, INC.
as Purchaser
By: /s/ Lawrence Mendelsohn
------------------------------------
Name: /s/ Lawrence Mendelsohn
Title: President
WILSHIRE REAL ESTATE INVESTMENT
TRUST INC.
as Seller
By: /s/ Lawrence Mendelsohn
------------------------------------
Name: Lawrence Mendelsohn
Title: President
WILSHIRE REIT TRUST SERIES 1998-1
as Issuer
By: WILMINGTON TRUST COMPANY, not in
its individual capacity but solely in its
capacity as Owner Trustee
By: /s/ Emmett Harman
------------------------------------
Authorized Signatory
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EXHIBIT 1
MORTGAGE LOAN SCHEDULE
[AVAILABLE UPON REQUEST]
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EXHIBIT 2
Representations and Warranties with respect to the Mortgage Loans
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EXHIBIT 3
SCHEDULE OF MORTGAGE LOANS FROM SERIES 1997-LB1 AND SERIES 1996-LB3
[AVAILABLE UPON REQUEST]
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