================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 22, 1998
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.
(AS DEPOSITOR UNDER THE POOLING AND SERVICING
AGREEMENT, DATED AS OF DECEMBER 1, 1998, PROVIDING
FOR THE ISSUANCE OF CALLABLE FLOATING RATE MORTGAGE
PASS-THROUGH CERTIFICATES,
SERIES 1998-NC5)
Salomon Brothers Mortgage Securities VII, Inc.
----------------------------------------------
(Exact name of registrant as specified in its charter)
- --------------------------------------------------------------------------------
Delaware 333-62737 13-3439681
-------- --------- ----------
(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification Number)
Seven World Trade Center
New York, New York 10048
------------------ -----
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (212) 783-5659
================================================================================
<PAGE>
-2-
Item 2. Acquisition or Disposition of Assets
------------------------------------
Description of the Certificates and the Mortgage Pools
On December 22, 1998, a single series of certificates,
entitled Salomon Brothers Mortgage Securities VII, Inc., Callable Floating Rate
Mortgage Pass-Through Certificates, Series 1998-NC5 (the "Certificates"), were
issued pursuant to a pooling and servicing agreement, dated as of December 1,
1998 (the "Agreement"), attached hereto as Exhibit 4.1, among Salomon Brothers
Mortgage Securities VII, Inc. as depositor (the "Depositor"), New Century
Mortgage Corporation ("New Century") as master servicer (in such capacity, the
"Master Servicer"), Firstar Bank Milwaukee, N.A. as trustee (the "Trustee") and
U.S. Bank National Association as trust administrator (the "Trust
Administrator"). The Certificates consist of seven classes of certificates
(collectively, the "Certificates"), designated as the "Class A Certificates" the
"Class CE Certificates", the "Class P Certificates", the "Class S Certificates",
the "Class R-I Certificates", the "Class R-II Certificates" and the "Class R-III
Certificates." The Certificates evidence in the aggregate the entire beneficial
ownership interest in a trust fund (the "Trust Fund"), consisting primarily of a
segregated pool (the "Mortgage Pool") of conventional, one- to four- family,
adjustable rate, first lien mortgage loans having original terms to maturity up
to 30 years (the "Mortgage Loans"). The Mortgage Pool consists of Mortgage Loans
having an aggregate principal balance of $915,734,430 as of December 1, 1998
(the "Cut-off Date"). The Mortgage Loans were purchased pursuant to the Mortgage
Loan Purchase Agreement, dated December 18, 1998 (the "Mortgage Loan Purchase
Agreement") between NC Residual II Corporation and NC Capital Corporation. The
Class A Certificates were sold by the Depositor to Salomon Smith Barney Inc.
(the "Underwriter"), an affiliate of the Depositor, pursuant to an Underwriting
Agreement, dated December 18, 1998 between the Depositor and the Underwriter.
The Certificates have the following initial Certificate
Balances and Pass-Through Rates:
================================================================================
Initial Certificate
Class Principal Balance Pass-through Rate
----- ----------------- -----------------
A $875,442,000.00 Variable
CE $40,292,330.54 Variable
P $100.00 Variable
S $915,734,429.54(1) Variable
R-I $100.00 Variable
R-II $100.00 Variable
R-III $100.00 Variable
================================================================================
<PAGE>
-3-
- ---------------
(1) Initial Notional Amount
The Certificates, other than the Class CE Certificates, Class
P Certificates, the Class R-1 Certificates, the Class R-II Certificates and the
R-III Certificates and the Mortgage Loans are more particularly described in the
Prospectus, dated November 13, 1998, and the Prospectus Supplement, dated
December 18, 1998, as previously filed with the Securities and Exchange
Commission pursuant to Rule 424(b). The Class CE Certificates, the Class P
Certificates, the Class R-I Certificates, Class R-II Certificates and Class
R-III have not been and will not be publicly offered by the Depositor.
Capitalized terms used but not otherwise defined herein shall have the meanings
assigned to them in the Prospectus Supplement.
<PAGE>
-4-
Item 7. Financial Statements and Exhibits
----------------------------
(a) Not applicable
(b) Not applicable
(c) Exhibits
Exhibit No. Description
----------- -----------
4.1 Pooling and Servicing Agreement,
dated as of December 1, 1998, by and
among Salomon Brothers Mortgage
Securities VII, Inc. as Depositor,
New Century Mortgage Corporation as
Master Servicer, Firstar Bank
Milwaukee, N.A. as Trustee and U.S.
Bank National Association as Trust
Administrator, relating to the
Series 1998-NC5 Certificates.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
Dated: December 22, 1998
SALOMON BROTHERS MORTGAGE
SECURITIES VII, INC.
By: /s/ Vincent J. Varca
----------------------------
Name: Vincent J. Varca
Title: Assistant Vice President
<PAGE>
Index To Exhibits
-----------------
Sequentially
Exhibit No. Description Numbered Page
- ----------- ----------- -------------
4.1 Pooling and Servicing Agreement, dated as of 7
December 1, 1998, by and among Salomon
Brothers Mortgage Securities VII, Inc. as
Depositor, New Century Mortgage Corporation
as Master Servicer, Firstar Bank Milwaukee,
N.A. as Trustee and U.S. Bank National
Association as Trust Administrator, relating to
the Series 1998-NC5 Certificates.
Exhibit 4.1
<PAGE>
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.
Depositor
NEW CENTURY MORTGAGE CORPORATION
Master Servicer
FIRSTAR BANK MILWAUKEE, N.A.
Trustee
and
U.S. BANK NATIONAL ASSOCIATION
Trust Administrator
-----------------------------------------
POOLING AND SERVICING AGREEMENT
Dated as of December 1, 1998
-----------------------------------------
Callable Floating Rate Mortgage Pass-Through Certificates
Series 1998-NC5
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
SECTION PAGE
------- ----
ARTICLE I
DEFINITIONS
<S> <C> <C>
1.01. Defined Terms...................................................................................4
Accepted Servicing Practices....................................................................4
Accrued Certificate Interest....................................................................4
Additional Price................................................................................4
Adjustment Date.................................................................................5
Administration Fee..............................................................................5
Administration Fee Rate.........................................................................5
Affiliate.......................................................................................5
Agreement.......................................................................................5
Annual Loss Percentage..........................................................................5
Assignment......................................................................................5
Available Distribution Amount...................................................................5
Bankruptcy Code.................................................................................6
Bankruptcy Loss.................................................................................6
Book-Entry Certificate..........................................................................6
Book-Entry Custodian............................................................................6
Business Day....................................................................................6
Call Class......................................................................................6
Cash-Out Refinancing............................................................................7
Certificate.....................................................................................7
Certificate Factor..............................................................................7
Certificate Insurer.............................................................................7
Certificate Insurer Default.....................................................................7
Certificate Insurer Premium.....................................................................8
Certificate Insurer Premium Rate................................................................8
Certificateholder" or "Holder...................................................................8
Certificate Owner...............................................................................8
Certificate Principal Balance...................................................................8
Certificate Register............................................................................8
Class .......................................................................................9
Class A Certificate.............................................................................9
Class CE Certificate............................................................................9
Class P Certificate.............................................................................9
Class R-I Certificate...........................................................................9
Class R-II Certificate..........................................................................9
Class R-III Certificates........................................................................9
Class S Certificate.............................................................................9
-i-
<PAGE>
SECTION PAGE
------- ----
Closing Date....................................................................................9
Code .......................................................................................9
Collection Account..............................................................................9
Commission.....................................................................................10
Corporate Trust Office.........................................................................10
Corresponding Certificate......................................................................10
Cumulative Insurance Payments..................................................................10
Cumulative Loss Percentage.....................................................................10
Cut-off Date...................................................................................10
Debt Service Reduction.........................................................................10
Deficiency Amount..............................................................................10
Deficiency Event...............................................................................11
Deficient Valuation............................................................................11
Definitive Certificates........................................................................11
Deleted Mortgage Loan..........................................................................11
Delinquency Percentage.........................................................................11
Depositor......................................................................................11
Depository.....................................................................................11
Depository Institution.........................................................................11
Depository Participant.........................................................................12
Determination Date.............................................................................12
Directly Operate...............................................................................12
Disqualified Organization......................................................................12
Distribution Account...........................................................................12
Distribution Date..............................................................................13
Due Date ......................................................................................13
Due Period.....................................................................................13
Eligible Account...............................................................................13
ERISA ......................................................................................13
Estate in Real Property........................................................................13
Excess Overcollateralized Amount...............................................................13
Expense Account................................................................................13
Expense Adjusted Mortgage Rate.................................................................13
Fannie Mae.....................................................................................13
FDIC ......................................................................................13
Final Recovery Determination...................................................................14
Freddie Mac....................................................................................14
Gross Margin...................................................................................14
Guaranteed Distribution........................................................................14
Independent....................................................................................14
Independent Contractor.........................................................................14
Index ......................................................................................15
Initial Deposit................................................................................15
-ii-
<PAGE>
SECTION PAGE
------- ----
Insurance Agreement............................................................................15
Insurance Payment..............................................................................15
Insurance Proceeds.............................................................................15
Interest Accrual Period........................................................................15
Interest Determination Date....................................................................15
Interest Distribution Amount...................................................................16
Late Collections...............................................................................16
Liquidation Event..............................................................................16
Liquidation Proceeds...........................................................................16
Loan-to-Value Ratio............................................................................16
London Business Day............................................................................16
Majority Class CE Certificateholder............................................................16
Master Servicer................................................................................16
Master Servicer Event of Default...............................................................17
Master Servicer Prepayment Charge Payment Amount...............................................17
Master Servicer Remittance Date................................................................17
Maximum I-LT3 Uncertificated Interest Deferral Amount..........................................17
Maximum Mortgage Rate..........................................................................17
Minimum Mortgage Rate..........................................................................17
Minimum Spread.................................................................................17
Monthly Payment................................................................................17
Moody's ......................................................................................17
Mortgage ......................................................................................17
Mortgage File..................................................................................17
Mortgage Loan..................................................................................18
Mortgage Loan Purchase Agreement...............................................................18
Mortgage Loan Schedule.........................................................................18
Mortgage Note..................................................................................20
Mortgage Pool..................................................................................20
Mortgage Rate..................................................................................20
Mortgaged Property.............................................................................21
Mortgagor......................................................................................21
Net Monthly Excess Cashflow....................................................................21
Net Monthly Excess Spread......................................................................21
Net Mortgage Rate..............................................................................21
Net WAC Pass-Through Rate......................................................................21
New Lease......................................................................................21
Nonrecoverable P&I Advance.....................................................................21
Nonrecoverable Servicing Advance...............................................................22
Non-United States Person.......................................................................22
Notional Amount................................................................................22
Officers' Certificate..........................................................................22
One-Month LIBOR................................................................................22
-iii-
<PAGE>
SECTION PAGE
------- ----
One-Month LIBOR Pass-Through Rate..............................................................23
Opinion of Counsel.............................................................................23
Mortgage Loan..................................................................................23
Overcollateralized Amount......................................................................23
Overcollateralization Deficiency Amount........................................................23
Overcollateralization Increase Amount..........................................................23
Overcollateralization Reduction Amount.........................................................23
Percentage"....................................................................................24
Ownership Interest.............................................................................24
Pass-Through Rate..............................................................................24
Percentage Interest............................................................................24
Periodic Rate Cap..............................................................................25
Permitted Investments..........................................................................25
Permitted Transferee...........................................................................26
Person ......................................................................................26
P&I Advance....................................................................................26
Plan ......................................................................................26
Policy ......................................................................................26
Policy Payments Account........................................................................27
Premium Supplement.............................................................................27
Prepayment Assumption..........................................................................27
Prepayment Charge..............................................................................27
Prepayment Charge Schedule.....................................................................27
Prepayment Interest Shortfall..................................................................27
Prepayment Period..............................................................................28
Principal Distribution Amount..................................................................28
Principal Prepayment...........................................................................29
Purchase Price.................................................................................29
Qualified Substitute Mortgage Loan.............................................................29
Rate/Term Refinancing..........................................................................30
Rating Agency or Rating Agencies...............................................................30
Realized Loss..................................................................................30
Record Date....................................................................................31
Reference Banks................................................................................31
Refinanced Mortgage Loan.......................................................................32
Regular Certificate............................................................................32
Regular Interest...............................................................................32
Relief Act.....................................................................................32
Relief Act Interest Shortfall..................................................................32
REMIC ......................................................................................32
REMIC I ......................................................................................32
REMIC I Interest Loss Allocation Amount........................................................32
REMIC I Overcollateralized Amount..............................................................33
-iv-
<PAGE>
SECTION PAGE
------- ----
REMIC I Principal Loss Allocation Amount.......................................................33
REMIC I Regular Interest.......................................................................33
REMIC I Regular Interest I-LT1.................................................................33
REMIC I Regular Interest I-LT2.................................................................33
REMIC I Regular Interest I-LT3.................................................................33
REMIC I Regular Interest I-LTP.................................................................34
REMIC I Remittance Rate........................................................................34
REMIC I Required Overcollateralized Amount.....................................................34
REMIC II ......................................................................................34
REMIC II Regular Interest......................................................................34
REMIC II Regular Interest II-LT1...............................................................34
REMIC II Regular Interest II-LT2...............................................................34
REMIC II Regular Interest II-LT3...............................................................35
REMIC II Regular Interest II-LTP...............................................................35
REMIC II Regular Interest II-LT2S..............................................................35
REMIC II Remittance Rate.......................................................................35
REMIC III......................................................................................35
REMIC III Certificate..........................................................................35
REMIC III Certificateholder....................................................................35
Remittance Report..............................................................................36
Rents from Real Property.......................................................................36
REO Account....................................................................................36
REO Disposition................................................................................36
REO Imputed Interest...........................................................................36
REO Principal Amortization.....................................................................36
REO Property...................................................................................36
Request for Release............................................................................36
Required Overcollateralized Amount.............................................................36
Reserve Interest Rate..........................................................................37
Residential Dwelling...........................................................................37
Residual Certificate...........................................................................37
Residual Interest..............................................................................37
Responsible Officer............................................................................37
Rolling Delinquency Percentage.................................................................38
Rolling Termination Fee Percentage.............................................................38
Scheduled Principal Balance....................................................................38
Servicing Account..............................................................................38
Servicing Advances.............................................................................38
Servicing Fee..................................................................................39
Servicing Fee Rate.............................................................................39
Servicing Officer..............................................................................39
Single Certificate.............................................................................39
Spread Squeeze Condition.......................................................................39
-v-
<PAGE>
SECTION PAGE
------- ----
Spread Squeeze Overcollateralization Increase Amount...........................................39
Spread Squeeze Percentage......................................................................40
S&P ......................................................................................40
Startup Day....................................................................................40
Stated Principal Balance.......................................................................40
Stayed Funds...................................................................................41
Step Down Cumulative Loss Test.................................................................41
Step Down Rolling Delinquency Test.............................................................41
Step Down Rolling Loss Test....................................................................41
Step Down Trigger".............................................................................41
Stepped Down Required Overcollateralized Percentage............................................41
Step Up Cumulative Loss Test"..................................................................42
Step Up Rolling Delinquency Test...............................................................42
Step Up Rolling Loss Test".....................................................................42
Step Up Spread Squeeze Test"...................................................................42
Step Up Trigger................................................................................42
Sub-Servicer...................................................................................42
Sub-Servicing Account..........................................................................42
Sub-Servicing Agreement........................................................................42
Substitution Shortfall Amount".................................................................42
Tax Returns....................................................................................42
Telerate Page 3750.............................................................................43
Termination Price..............................................................................43
Terminator.....................................................................................43
Transfer ......................................................................................43
Transferee.....................................................................................43
Transferor.....................................................................................43
Trust Administrator............................................................................43
Trust Fund.....................................................................................43
Trustee ......................................................................................43
Uncertificated Balance.........................................................................43
Uncertificated Corresponding Component.........................................................44
Uncertificated Interest........................................................................44
Uncertificated Notional Amount.................................................................44
Uninsured Cause................................................................................45
United States Person...........................................................................45
Value ......................................................................................45
Voting Rights..................................................................................45
1.02. Allocation of Certain Interest Shortfalls......................................................46
-vi-
<PAGE>
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS;
ORIGINAL ISSUANCE OF CERTIFICATES
2.01. Conveyance of the Mortgage Loans...............................................................47
2.02. Acceptance of REMIC I by Trustee...............................................................49
2.03. Repurchase or Substitution of Mortgage Loans by the Originator, the Seller
or the Depositor...............................................................................50
2.04. Representations and Warranties of the Depositor................................................54
2.05. Representations, Warranties and Covenants of the Master Servicer...............................56
2.06. Issuance of the Class R-I Certificates.........................................................59
2.07. Conveyance of the REMIC I Regular Interests; Acceptance of REMIC II by
the Trustee....................................................................................59
2.08. Issuance of Class R-II Certificates............................................................59
2.09. Conveyance of REMIC II Regular Interests; Acceptance of REMIC III by
the Trustee....................................................................................60
2.10. Issuance of REMIC III Certificates.............................................................60
ARTICLE III
ADMINISTRATION AND SERVICING
OF THE MORTGAGE LOANS
3.01. Master Servicer to Act as Master Servicer......................................................61
3.02. Sub-Servicing Agreements Between Master Servicer and Sub-Servicers.............................63
3.03. Successor Sub-Servicers........................................................................64
3.04. Liability of the Master Servicer...............................................................65
3.05. No Contractual Relationship Between Sub-Servicers and the Trust
Administrator, the Trustee or Certificateholders...............................................65
3.06. Assumption or Termination of Sub-Servicing Agreements by Trust
Administrator..................................................................................65
3.07. Collection of Certain Mortgage Loan Payments...................................................66
3.08. Sub-Servicing Accounts.........................................................................66
3.09. Collection of Taxes, Assessments and Similar Items; Servicing Accounts.........................67
3.10. Collection Account and Distribution Account....................................................68
3.11. Withdrawals from the Collection Account and Distribution Account...............................70
3.12. Investment of Funds in the Collection Account, the Expense Account and
the Distribution Account.......................................................................72
3.13. [intentionally omitted]........................................................................74
3.14. Maintenance of Hazard Insurance and Errors and Omissions and Fidelity
Coverage.......................................................................................74
3.15. Enforcement of Due-On-Sale Clauses; Assumption Agreements......................................75
3.16. Realization Upon Defaulted Mortgage Loans......................................................76
-vii-
<PAGE>
SECTION PAGE
------- ----
3.17. Trustee and Trust Administrator to Cooperate; Release of Mortgage Files
Compensation...................................................................................78
3.18. Servicing Compensation.........................................................................80
3.19. Reports to the Trust Administrator and the Trustee; Collection Account
Statements.....................................................................................80
3.20. Statement as to Compliance.....................................................................80
3.21. Independent Public Accountants' Servicing Report...............................................81
3.22. Access to Certain Documentation................................................................81
3.23. Title, Management and Disposition of REO Property..............................................82
3.24. Obligations of the Master Servicer in Respect of Prepayment Interest
Shortfall......................................................................................85
3.25. Expense Account................................................................................85
3.26. Obligations of the Master Servicer in Respect of Mortgage Rates and
Monthly Payments...............................................................................86
ARTICLE IV
PAYMENTS TO CERTIFICATEHOLDERS
4.01. Distributions..................................................................................87
4.02. Statements to Certificateholders...............................................................92
4.03. Remittance Reports; P&I Advances...............................................................95
4.04. Allocation of Realized Losses..................................................................97
4.05. Compliance with Withholding Requirements.......................................................99
4.06. Exchange Commission; Additional Information....................................................99
ARTICLE V
THE CERTIFICATES
5.01. The Certificates..............................................................................100
5.02. Registration of Transfer and Exchange of Certificates.........................................102
5.03. Mutilated, Destroyed, Lost or Stolen Certificates.............................................106
5.04. Persons Deemed Owners.........................................................................107
5.05. Certain Available Information.................................................................107
ARTICLE VI
THE DEPOSITOR AND THE MASTER SERVICER
6.01. Liability of the Depositor and the Master Servicer............................................109
6.02. Merger or Consolidation of the Depositor or the Master Servicer...............................109
6.03. Limitation on Liability of the Depositor, the Master Servicer and Others......................109
-viii-
<PAGE>
SECTION PAGE
------- ----
6.04. Limitation on Resignation of the Master Servicer..............................................110
6.05. Rights of the Depositor in Respect of the Master Servicer.....................................111
ARTICLE VII
DEFAULT
7.01. Master Servicer Events of Default.............................................................112
7.02. Trust Administrator or Trustee to Act; Appointment of Successor...............................115
7.03. Notification to Certificateholders............................................................116
7.04. Waiver of Master Servicer Events of Default...................................................117
ARTICLE VIII
CONCERNING THE TRUSTEE AND THE TRUST ADMINISTRATOR
8.01. Duties of Trustee and Trust Administrator.....................................................118
8.02. Certain Matters Affecting the Trustee and the Trust Administrator.............................119
8.03. Neither Trustee nor Trust Administrator Liable for Certificates or Mortgage
Loans.........................................................................................120
8.04. Trustee and Trust Administrator May Own Certificates..........................................121
8.05. Trustee's and Trust Administrator's Fees and Expenses.........................................121
8.06. Eligibility Requirements for Trustee and Trust Administrator..................................122
8.07. Resignation and Removal of the Trustee and the Trust Administrator............................122
8.08. Successor Trustee or Trust Administrator......................................................123
8.09. Merger or Consolidation of Trustee or Trust Administrator.....................................124
8.10. Appointment of Co-Trustee or Separate Trustee.................................................125
8.11. Appointment of Office or Agency...............................................................125
8.12. Representations and Warranties................................................................126
ARTICLE IX
CERTAIN MATTERS REGARDING THE CERTIFICATE INSURER
9.01. Rights of the Certificate Insurer To Exercise Rights of Class A
Certificateholders............................................................................127
9.02. Trustee and the Trust Administrator To Act Solely with Consent of the
Certificate Insurer...........................................................................127
9.03. Trust Fund and Accounts Held for Benefit of the Certificate Insurer...........................128
9.04. Claims Upon the Policy; Policy Payments Account...............................................128
9.05 Effect of Payments by the Certificate Insurer; Subrogation....................................130
9.06. Notices to the Certificate Insurer............................................................130
9.07. Third-Party Beneficiary.......................................................................130
-ix-
<PAGE>
SECTION PAGE
------- ----
9.08. Trust Administrator to Hold the Policy........................................................131
ARTICLE X
TERMINATION
10.01 Termination Upon Repurchase or Liquidation of All Mortgage Loans..............................132
10.02 Termination by the Call Class.................................................................134
10.03 Additional Termination Requirements...........................................................136
ARTICLE XI
REMIC PROVISIONS
11.01. REMIC Administration..........................................................................138
11.02. Prohibited Transactions and Activities........................................................141
11.03. Master Servicer, Trustee and Trust Administrator Indemnification..............................141
ARTICLE XII
MISCELLANEOUS PROVISIONS
12.01. Amendment.....................................................................................142
12.02. Recordation of Agreement; Counterparts........................................................143
12.03. Limitation on Rights of Certificateholders....................................................143
12.04. Governing Law.................................................................................144
12.05. Notices.......................................................................................144
12.06. Severability of Provisions....................................................................145
12.07. Notice to Rating Agencies and the Certificate Insurer.........................................145
12.08. Article and Section References................................................................146
12.09. Grant of Security Interest....................................................................147
</TABLE>
-x-
<PAGE>
Exhibits
--------
Exhibit A-1 Form of Class A Certificate
Exhibit A-2 Form of Class CE Certificate
Exhibit A-3 Form of Class P Certificate
Exhibit A-4 Form of Class S Certificate
Exhibit A-5 Form of Class R-I Certificate
Exhibit A-6 Form of Class R-II Certificate
Exhibit A-7 Form of Class R-III Certificate
Exhibit B Form of Financial Guaranty Insurance Policy
Exhibit C-1 Form of Trust Administrator's Initial Certification
Exhibit C-2 Form of Trust Administrator's Final Certification
Exhibit D-1 Form of Mortgage Loan Purchase Agreement
Exhibit D-2 Form of Transfer Agreement
Exhibit E-1 Request for Release
Exhibit E-2 Request for Release Mortgage Loans paid in full
Exhibit F-1 Form of Transferor Representation Letter and Form of
Transferee Representation Letter in Connection with
Transfer of the Class CE Certificates, Class P
Certificates or Class S Certificates Pursuant to Rule
144A Under the 1933 Act
Exhibit F-2 Form of Transfer Affidavit and Agreement and Form of
Transferor Affidavit in Connection with Transfer of
Residual Certificates
Exhibit G Form of Certification with respect to ERISA and the
Code
Exhibit H Form of Report Pursuant to Section 4.06
Exhibit I Form of Lost Note Affidavit
Schedule 1 Mortgage Loan Schedule
Schedule 2 Prepayment Charge Schedule
-xi-
<PAGE>
This Pooling and Servicing Agreement, is dated and effective
as of December 1, 1998, among SALOMON BROTHERS MORTGAGE SECURITIES VII, INC. as
Depositor, NEW CENTURY MORTGAGE CORPORATION as Master Servicer, FIRSTAR BANK
MILWAUKEE, N.A. as Trustee and U.S. BANK NATIONAL ASSOCIATION as Trust
Administrator.
PRELIMINARY STATEMENT:
The Depositor intends to sell pass-through certificates to be
issued hereunder in multiple classes, which in the aggregate will evidence the
entire beneficial ownership interest in each REMIC (as defined herein) created
hereunder. The Trust Fund will consist of a segregated pool of assets comprising
of the Mortgage Loans and certain other related assets subject to this
Agreement.
As provided herein, the Trustee will elect to treat the
segregated pool of assets consisting of the Mortgage Loans and certain other
related assets subject (other than the Master Servicer Prepayment Charge Payment
Amount) to this Agreement as a REMIC for federal income tax purposes, and such
segregated pool of assets will be designated as "REMIC I." The Class R-I
Certificates will be the sole class of "residual interests" in REMIC I for
purposes of the REMIC Provisions (as defined herein). The following table
irrevocably sets forth the designation, the REMIC I Remittance Rate (or in the
case of the Class S Certificates, the Pass-Through Rate), the initial
Uncertificated Balance (or in the case of the Class S Certificates, the initial
Notional Amount) and, solely for purposes of satisfying Treasury regulation
Section 1.860G-1(a)(4)(iii), the "latest possible maturity date" for each of the
REMIC I Regular Interests (as defined herein). None of the REMIC I Regular
Interests (other than the Class S Certificates) will be certificated.
<TABLE>
<CAPTION>
REMIC I Initial Latest Possible
Designation Remittance Rate Uncertificated Balance Maturity Date(1)
----------- --------------- ---------------------- ----------------
<S> <C> <C> <C>
I-LT1 Variable(2) $897,419,642.95 December 25, 2028
I-LT2 Variable(2) $8,754,420.00 December 25, 2028
I-LT3 Variable(2) $9,560,266.59 December 25, 2028
I-LTP (3) $100.00 December 25, 2028
Class S 0.01% per annum $915,734,429.54(4) December 25, 2028
</TABLE>
- ------------------
(1) Solely for purposes of Section 1.860G-1(a)(4)(iii) of the Treasury
regulations, the Distribution Date immediately following the maturity date
for the Mortgage Loan with the latest maturity date has been designated as
the "latest possible maturity date" for each REMIC I Regular Interest.
(2) Calculated in accordance with the definition of "REMIC I Remittance Rate"
herein.
(3) The REMIC I Regular Interest I-LTP will not accrue interest.
(4) Initial Notional Amount. The Class S Certificates will accrue interest at
their Pass-Through Rate on the Notional Amount of the Class S Certificates
outstanding from time to time which shall equal the aggregate Stated
Principal Balance of the Mortgage Loans and REO Properties.
-1-
<PAGE>
As provided herein, the Trustee will elect to treat the
segregated pool of assets consisting of the REMIC I Regular Interests (other
than the Class S Certificates) as a REMIC for federal income tax purposes, and
such segregated pool of assets will be designated as "REMIC II." The Class R-II
Certificates will evidence the sole class of "residual interests" in REMIC II
for purposes of the REMIC Provisions. The following table irrevocably sets forth
the designation, the REMIC II Remittance Rate, the initial Uncertificated
Balance and, solely for purposes of satisfying Treasury regulation Section
1.860G-1(a)(4)(iii), the "latest possible maturity date" for each of the REMIC
II Regular Interests. None of the REMIC II Regular Interests will be
certificated.
<TABLE>
<CAPTION>
Remic Ii Initial Latest Possible
Designation Remittance Rate Uncertificated Balance Maturity Date(1)
----------- --------------- ---------------------- ----------------
<S> <C> <C> <C>
II-LT1 Variable(2) $897,419,642.95 December 25, 2028
II-LT2 Variable(2) $8,754,420.00 December 25, 2028
II-LT3 Variable(2) $9,560,266.59 December 25, 2028
II-LTP (3) $100.00 December 25, 2028
II-LT2S Variable(2) (4) December 25, 2028
</TABLE>
(1) Solely for purposes of Section 1.860G-1(a)(4)(iii) of the Treasury
regulations, the Distribution Date immediately following the maturity
date for the Mortgage Loan with the latest maturity date has been
designated as the "latest possible maturity date" for each REMIC II
Regular Interest.
(2) Calculated in accordance with the definition of "REMIC II Remittance
Rate" herein.
(3) The REMIC II Regular Interest II-LTP will not accrue interest.
(4) This REMIC II Regular Interest has no Uncertificated Principal Balance
but will accrue interest at the related REMIC II Remittance Rate on the
related Uncertificated Notional Amount, which is equal to the
Uncertificated Balance of the Uncertificated Corresponding Component.
-2-
<PAGE>
As provided herein, the Trustee will elect to treat the
segregated pool of assets consisting of the REMIC II Regular Interests as a
REMIC for federal income tax purposes, and such segregated pool of assets will
be designated as "REMIC III." The Class R-III Certificates will evidence the
sole class of "residual interests" in REMIC III for purposes of the REMIC
Provisions. "The following table irrevocably sets forth the designation, the
Pass-Through Rate, the initial aggregate Certificate Principal Balance and,
solely for purposes of satisfying Treasury regulation Section
1.860G-1(a)(4)(iii), the "latest possible maturity date" for the indicated
Classes of Certificates.
<TABLE>
<CAPTION>
Initial Aggregate Latest Possible
Designation Pass-through Rate Certificate Principal Balance Maturity Date(1)
----------- ----------------- ----------------------------- ----------------
<S> <C> <C> <C>
Class A Variable(2) $875,442,000.00 December 25, 2028
Class CE Variable(2) $ 40,292,329.54(3) December 25, 2028
Class P (4) $ 100.00 December 25, 2028
</TABLE>
(1) Solely for purposes of Section 1.860G-1(a)(4)(iii) of the Treasury
regulations, the Distribution Date immediately following the maturity
date for the Mortgage Loans with the latest maturity date has been
designated as the "latest possible maturity date" for each Class of
Certificates.
(2) Calculated in accordance with the definition of "Pass-Through Rate"
herein.
(3) The Class CE Certificates will accrue interest at their variable
Pass-Through Rate on the Notional Amount of the Class CE Certificates
outstanding from time to time which shall equal the Uncertificated
Balance of the REMIC II Regular Interests (other than the Uncertificated
Balance of REMIC II Regular Interest II-LTP). The Class CE Certificates
will not accrue interest on their Certificate Principal Balance.
(4) The Class P Certificates will not accrue interest.
As of the Cut-off Date, the Original Mortgage Loans had an
aggregate Scheduled Principal Balance equal to $915,734,429.54.
In consideration of the mutual agreements herein contained,
the Depositor, the Master Servicer, the Trustee and the Trust Administrator
agree as follows:
-3-
<PAGE>
ARTICLE I
DEFINITIONS
SECTION 1.01. Defined Terms.
Whenever used in this Agreement, including, without
limitation, in the Preliminary Statement hereto, the following words and
phrases, unless the context otherwise requires, shall have the meanings
specified in this Article. Unless otherwise specified, all calculations
described herein shall be made on the basis of a 360-day year consisting of
twelve 30-day months.
"Accepted Servicing Practices": The servicing standards set
forth in Section 3.01.
"Accrued Certificate Interest": With respect to any Class A
Certificate, Class S Certificate or Class CE Certificate and each Distribution
Date, interest accrued during the related Interest Accrual Period at the
Pass-Through Rate for such Certificate for such Distribution Date on the
Certificate Principal Balance, in the case of the Class A Certificates, or on
the related Notional Amount, in the case of the Class S Certificates or the
Class CE Certificates, of such Certificate immediately prior to such
Distribution Date. The Class P Certificates are not entitled to distributions in
respect of interest and, accordingly, will not accrue interest. All
distributions of interest on the Class A Certificates will be calculated on the
basis of a 360-day year and the actual number of days in the applicable Interest
Accrual Period and all distributions of interest on the Class S Certificates
will be calculated on the basis of a 360-day year consisting of twelve 30- day
months. Accrued Certificate Interest with respect to each Distribution Date, as
to any Class A Certificate, shall be reduced by an amount equal to the portion
allocable to such Certificate pursuant to Section 1.02 hereof of the aggregate
amount of any Relief Act Interest Shortfall, if any, for such Distribution Date.
Accrued Certificate Interest with respect to each Distribution Date, as to any
Class CE Certificate, shall be reduced by an amount equal to the portion
allocable to such Certificate pursuant to Section 1.02 hereof of the sum of (a)
the aggregate Prepayment Interest Shortfall, if any, for such Distribution Date
to the extent not covered by payments pursuant to Section 3.24 and (b) the
aggregate amount of any Relief Act Interest Shortfall, if any, for such
Distribution Date. In addition, Accrued Certificate Interest with respect to
each Distribution Date, as to any Class CE Certificate, shall be reduced by an
amount equal to the portion allocable to such Class CE Certificate of Realized
Losses, if any, pursuant to Section 4.04 hereof.
"Additional Price": The Additional Price shall be an amount
equal to the sum of the following: (a) the aggregate fair market value (as
determined by the Holder of Call Class in its reasonable discretion) of the
Class CE Certificates, the Class P Certificates and the Residual Certificates,
but in no event less than the amount of any financing in respect of such
Certificates, (b) any amounts due to the Certificate Insurer under the terms of
the Insurance Agreement and (c) any amounts which the Master Servicer would be
permitted to withdraw and retain from the Collection Account pursuant to Section
3.11 and any other amounts otherwise payable by the Trust Administrator to the
Master Servicer from amounts on deposit in the Distribution Account pursuant to
the terms of this Agreement.
-4-
<PAGE>
"Adjustment Date": With respect to each Mortgage Loan, the
first day of the month in which the Mortgage Rate of a Mortgage Loan changes
pursuant to the related Mortgage Note. The first Adjustment Date following the
Cut-off Date as to each Mortgage Loan is set forth in the Mortgage Loan
Schedule.
"Administration Fee": The amount payable to the Trustee on
each Distribution Date pursuant to Section 8.05 as compensation for all services
rendered by it in the execution of the trust hereby created and in the exercise
and performance of any of the powers and duties of the Trustee hereunder, which
amount shall equal one twelfth of the product of (i) the Administration Fee
Rate, multiplied by (ii) the aggregate Scheduled Principal Balance of the
Mortgage Loans and any REO Properties as of the second preceding Due Date (or,
in the case of the initial Distribution Date, as of the Cut-off Date). The fee
payable to the Trust Administrator for all services rendered by it in the
exercise and performance of any of the powers and duties of the Trust
Administrator hereunder will be paid by the Trustee out of the Administration
Fee.
"Administration Fee Rate": 0.0035% per annum.
"Affiliate": With respect to any specified Person, any other
Person controlling or controlled by or under common control with such specified
Person. For the purposes of this definition, "control" when used with respect to
any specified Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise, and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Agreement": This Pooling and Servicing Agreement and all
amendments hereof and supplements hereto.
"Annual Loss Percentage": With respect to any Distribution
Date, a fraction, expressed as a percentage, the numerator of which is the
aggregate of all Realized Losses for the twelve months ending on the last day of
the preceding month and the denominator of which is the aggregate Stated
Principal Balance of the Mortgage Loans and REO Properties as of the first day
of the twelfth preceding calendar month.
"Assignment": An assignment of Mortgage, notice of transfer or
equivalent instrument, in recordable form, which is sufficient under the laws of
the jurisdiction wherein the related Mortgaged Property is located to reflect of
record the sale of the Mortgage, which assignment, notice of transfer or
equivalent instrument may be in the form of one or more blanket assignments
covering Mortgages secured by Mortgaged Properties located in the same county,
if permitted by law.
"Available Distribution Amount": With respect to any
Distribution Date, an amount equal to (1) the sum of (a) the aggregate of the
amounts on deposit in the Collection Account and Distribution Account as of the
close of business on the related Determination Date, (b) the aggregate of any
amounts received in respect of an REO Property withdrawn from any REO Account
and deposited in the Distribution Account for such Distribution Date pursuant to
Section
-5-
<PAGE>
3.23, (c) the aggregate of any amounts deposited in the Distribution Account by
the Master Servicer in respect of Prepayment Interest Shortfalls for such
Distribution Date pursuant to Section 3.24, (d) the aggregate of any P&I
Advances made by the Master Servicer for such Distribution Date pursuant to
Section 4.03, (e) the aggregate of any advances made by the Trust Administrator
or the Trustee, as applicable, for such Distribution Date pursuant to Section
7.02(b) and (f) with respect to the initial Distribution Date, the Initial
Deposit, reduced (to not less than zero), by (2) the sum of (x) the portion of
the amount described in clause (1)(a) above that represents (i) Monthly Payments
on the Mortgage Loans received from a Mortgagor on or prior to the Determination
Date but due during any Due Period subsequent to the related Due Period, (ii)
Principal Prepayments on the Mortgage Loans received after the related
Prepayment Period (together with any interest payments received with such
Principal Prepayments to the extent they represent the payment of interest
accrued on the Mortgage Loans during a period subsequent to the related
Prepayment Period), (iii) Liquidation Proceeds and Insurance Proceeds received
in respect of the Mortgage Loans after the related Prepayment Period, (iv)
amounts reimbursable or payable to the Depositor, the Master Servicer, the
Trustee, the Originator, the Trust Administrator, the Seller or any Sub-Servicer
pursuant to Section 3.11 or Section 3.12 or otherwise payable in respect of
extraordinary Trust Fund expenses, (v) Stayed Funds, (vi) the amount of the
Certificate Insurer Premium payable from the Distribution Account to the Expense
Account pursuant to Section 3.25(b) for payment to the Certificate Insurer, the
Administration Fee payable from the Distribution Account pursuant to Section
8.05 and the Interest Distribution Amount with respect to the Class S
Certificates, (vii) amounts deposited in the Collection Account or the
Distribution Account in error and (viii) the amount of any Prepayment Charges
collected by the Master Servicer in connection with the Principal Prepayment of
any of the Mortgage Loans or any Master Servicer Prepayment Charge Payment
Amount, and (y) amounts reimbursable to the Trustee or the Trust Administrator,
as applicable, for an advance made pursuant to Section 7.02(b) which advance the
Trustee or Trust Administrator, 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.
"Book-Entry Certificate": The Class A Certificates for so long
as the Certificates of such Class shall be registered in the name of the
Depository or its nominee.
"Book-Entry Custodian": The custodian appointed pursuant to
Section 5.01.
"Business Day": Any day other than a Saturday, a Sunday or a
day on which banking or savings and loan institutions in the State of
California, the State of New York or in the city in which the Corporate Trust
Office of the Trust Administrator or the Corporate Trust Office of the Trustee
is located, are authorized or obligated by law or executive order to be closed.
"Call Class": The Class S Certificateholder.
-6-
<PAGE>
"Call Price": A price equal to 100% of the Certificate
Principal Balance of the Class A Certificates as of the day of such purchase
plus accrued interest thereon at the applicable Pass- Through Rate during the
related Interest Accrual Period.
"Cash-Out Refinancing": A Refinanced Mortgage Loan the
proceeds of which are more than a nominal amount in excess of the principal
balance of any existing first mortgage or subordinate mortgage on the related
Mortgaged Property and related closing costs.
"Certificate": Any one of the Depositor's Callable Floating
Rate Mortgage Pass- Through Certificates, Series 1998-NC5, Class A, Class CE,
Class P, Class R-I, Class R-II or Class R-III, issued under this Agreement.
"Certificate Factor": With respect to any Class of Regular
Certificates as of any Distribution Date, a fraction, expressed as a decimal
carried to six places, the numerator of which is the aggregate Certificate
Principal Balance (or the related Notional Amount, in the case of the Class CE
Certificates or the Class S Certificates) of such Class of Certificates on such
Distribution Date (after giving effect to any distributions of principal and
allocations of Realized Losses in reduction of the Certificate Principal Balance
(or the related Notional Amount, in the case of the Class CE Certificates or the
Class S Certificates) of such Class of Certificates to be made on such
Distribution Date), and the denominator of which is the initial aggregate
Certificate Principal Balance (or the related Notional Amount, in the case of
the Class CE Certificates or Class S Certificates) of such Class of Certificates
as of the Closing Date.
"Certificate Insurer": Financial Security Assurance Inc., a
stock insurance company organized and created under the laws of the State of New
York, and any successors thereto.
"Certificate Insurer Default": The existence and continuance
of any of the following:
(a) The Certificate Insurer fails to make a payment
required under the Policy in accordance with its terms; or
(b)(i) the Certificate Insurer (A) files any petition
or commences any case or proceeding under any provision or
chapter of the Bankruptcy Code or any other similar federal or
state law relating to insolvency, bankruptcy, rehabilitation,
liquidation or reorganization, (B) makes a general assignment
for the benefit of its creditors, or (C) has an order for
relief entered against it under the Bankruptcy Code or any
other similar federal or state law relating to insolvency,
bankruptcy, rehabilitation, liquidation or reorganization
which is final and nonappealable; or
(ii) a court of competent jurisdiction, the New York
Department of Insurance or other competent regulatory
authority enters a final and nonappealable order, judgment or
decree (A) appointing a custodian, trustee, agent or receiver
for the Certificate Insurer or for all or any material portion
of its property or (B)
-7-
<PAGE>
authorizing the taking of possession by a custodian, trustee,
agent or receiver of the Certificate Insurer (or the taking of
possession of all or any material portion of the property of
the Certificate Insurer).
"Certificate Insurer Premium": The Policy premium payable
pursuant to Section 3.25(b) hereof.
"Certificate Insurer Premium Rate": 0.19% per annum.
"Certificateholder" or "Holder": The Person in whose name a
Certificate is registered in the Certificate Register and the Certificate
Insurer to the extent of Cumulative Insurance Payments, except that a
Disqualified Organization or a Non-United States Person shall not be a Holder of
a Residual Certificate for any purposes hereof and, solely for the purposes of
giving any consent pursuant to this Agreement, any Certificate registered in the
name of the Depositor or the Master Servicer or any Affiliate thereof shall be
deemed not to be outstanding and the Voting Rights to which it is entitled shall
not be taken into account in determining whether the requisite percentage of
Voting Rights necessary to effect any such consent has been obtained, except as
otherwise provided in Section 12.01. The Trustee and the Trust Administrator may
conclusively rely upon a certificate of the Depositor or the Master Servicer in
determining whether a Certificate is held by an Affiliate thereof. All
references herein to "Holders" or "Certificateholders" shall reflect the rights
of Certificate Owners as they may indirectly exercise such rights through the
Depository and participating members thereof, except as otherwise specified
herein; provided, however, that the Trustee and the Trust Administrator shall be
required to recognize as a "Holder" or "Certificateholder" only the Person in
whose name a Certificate is registered in the Certificate Register.
"Certificate Owner": With respect to a Book-Entry Certificate,
the Person who is the beneficial owner of such Certificate as reflected on the
books of the Depository or on the books of a Depository Participant or on the
books of an indirect participating brokerage firm for which a Depository
Participant acts as agent.
"Certificate Principal Balance": With respect to each Class A
Certificate or Class P Certificate as of any date of determination, the
Certificate Principal Balance of such Certificate on the Distribution Date
immediately prior to such date of determination, minus all distributions
allocable to principal made thereon and Realized Losses allocated thereto on
such immediately prior Distribution Date (or, in the case of any date of
determination up to and including the first Distribution Date, the initial
Certificate Principal Balance of such Certificate, as stated on the face
thereof). With respect to each Class CE Certificate as of any date of
determination, an amount equal to the Percentage Interest evidenced by such
Certificate times the excess, if any, of (A) the then aggregate Uncertificated
Balances of the REMIC II Regular Interests over (B) the then aggregate
Certificate Principal Balances of the Class A Certificates and the Class P
Certificates then outstanding.
"Certificate Register": The register maintained pursuant to
Section 5.02.
-8-
<PAGE>
"Class": Collectively, all of the Certificates bearing the
same class designation.
"Class A Certificate": Any one of the Class A Certificates
executed, authenticated and delivered by the Trustee or the Trust Administrator,
substantially in the form annexed hereto as Exhibit A-1 and evidencing a Regular
Interest in REMIC III for purposes of the REMIC Provisions.
"Class CE Certificate": Any one of the Class CE Certificates
executed, authenticated and delivered by the Trustee or the Trust Administrator,
substantially in the form annexed hereto as Exhibit A-2 and evidencing a Regular
Interest in REMIC III for purposes of the REMIC Provisions.
"Class P Certificate": Any one of the Class P Certificates
executed, authenticated and delivered by the Trustee or the Trust Administrator,
substantially in the form annexed hereto as Exhibit A-3 and evidencing a Regular
Interest in REMIC III for purposes of the REMIC Provisions.
"Class R-I Certificate": Any one of the Class R-I Certificates
executed, authenticated and delivered by the Trustee or the Trust Administrator,
substantially in the form annexed hereto as Exhibit A-5 and evidencing the
Residual Interest in REMIC I for purposes of the REMIC Provisions.
"Class R-II Certificate": Any one of the Class R-II
Certificates executed, authenticated and delivered by the Trustee or the Trust
Administrator, substantially in the form annexed hereto as Exhibit A-6 and
evidencing the Residual Interest in REMIC II for purposes of the REMIC
Provisions.
"Class R-III Certificates": Any one of the Class R-III
Certificates executed, authenticated and delivered by the Trustee or the Trust
Administrator, substantially in the form annexed hereto as Exhibit A-7 and
evidencing the Residual Interest in REMIC III for purposes of the REMIC
Provisions.
"Class S Certificate": Any one of the Class S Certificates
executed, authenticated and delivered by the Trustee or the Trust Administrator,
substantially in the form annexed hereto as Exhibit A-4 and evidencing a Regular
Interest in REMIC I for purposes of the REMIC Provisions.
"Closing Date": December 22, 1998.
"Code": The Internal Revenue Code of 1986.
"Collection Account": The account or accounts created and
maintained, or caused to be created and maintained, by the Master Servicer
pursuant to Section 3.10(a), which shall be entitled "New Century Mortgage
Corporation, as Master Servicer for Firstar Bank Milwaukee, N.A., as Trustee, in
trust for (A) the registered holders of Salomon Brothers Mortgage Securities
-9-
<PAGE>
VII, Inc., Callable Floating Rate Mortgage Pass-Through Certificates, Series
1998-NC5 and (B) Financial Security Assurance Inc." The Collection Account must
be an Eligible Account.
"Commission": The Securities and Exchange Commission.
"Corporate Trust Office": The principal corporate trust office
of the Trust Administrator or the Trustee, as the case may be, at which at any
particular time its corporate trust business in connection with this Agreement
shall be administered, which office, with respect to the Trust Administrator, at
the date of the execution of this instrument is located at 180 East Fifth
Street, St. Paul, Minnesota 55101, or at such other address as the Trust
Administrator may designate from time to time by notice to the
Certificateholders, the Depositor, the Master Servicer, the Trustee and the
Certificate Insurer and, with respect to the Trustee, at the date of the
execution of this instrument is located at 1555 N. Rivercenter Drive, Milwaukee,
Wisconsin 53212, or such other address as the Trustee may designate from time to
time by notice to the Certificateholders, the Depositor, the Master Servicer,
the Trust Administrator and the Certificate Insurer.
"Corresponding Certificate": With respect to REMIC I Regular
Interest I-LT2 and REMIC I Regular Interest I-LTP, the Class A Certificates and
Class P Certificates, respectively. With respect to REMIC II Regular Interest
II-LT2 and REMIC II Regular Interest II-LTP, the Class A Certificates and Class
P Certificates, respectively.
"Cumulative Insurance Payments": As of any time of
determination, the aggregate of all Insurance Payments previously made by the
Certificate Insurer under the Policy plus interest thereon from the date such
amount became due until paid in full, at a rate of interest calculated as
provided in the Insurance Agreement minus all payments previously made to the
Certificate Insurer pursuant to Section 4.01 hereof as reimbursement for such
amounts.
"Cumulative Loss Percentage": With respect to any Distribution
Date, the percentage equivalent of a fraction, the numerator of which is the
aggregate amount of Realized Losses incurred from the Cut-off Date to the last
day of the preceding calendar month and the denominator of which is the
aggregate Stated Principal Balance of the Mortgage Loans as of the Cut-off Date.
"Cut-off Date": With respect to each Original Mortgage Loan,
December 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.
"Debt Service Reduction": With respect to any Mortgage Loan, a
reduction in the scheduled Monthly Payment for such Mortgage Loan by a court of
competent jurisdiction in a proceeding under the Bankruptcy Code, except such a
reduction resulting from a Deficient Valuation.
"Deficiency Amount": With respect to the Class A Certificates
as of any Distribution Date, the sum of (i) any shortfall in the amounts
available in the Distribution Account
-10-
<PAGE>
to pay the Interest Distribution Amount on such Certificates for the related
Interest Accrual Period, (ii) the excess, if any, of (a) the aggregate
Certificate Principal Balance of the Class A Certificates then outstanding over
(b) the aggregate Stated Principal Balances of the Mortgage Loans and REO
Properties then outstanding, and (iii) without duplication of the amount
specified in clause (ii), the aggregate Certificate Principal Balance of the
Class A Certificates to the extent unpaid on the final Distribution Date or
earlier termination of the Trust Fund pursuant to the terms of this Agreement.
"Deficiency Event": The inability of the Trust Administrator
to make the Guaranteed Distribution on any Distribution Date due to a shortage
of funds for such purpose then held in the Distribution Account and the failure
of the Certificate Insurer to pay in full a claim made in accordance with the
Policy with respect to such Distribution Date.
"Deficient Valuation": With respect to any Mortgage Loan, a
valuation of the related Mortgaged Property by a court of competent jurisdiction
in an amount less than the then outstanding principal balance of the Mortgage
Loan, which valuation results from a proceeding
initiated under the Bankruptcy Code.
"Definitive Certificates": As defined in Section 5.01(b).
"Deleted Mortgage Loan": A Mortgage Loan replaced or to be
replaced by a Qualified Substitute Mortgage Loan.
"Delinquency Percentage": As of the last day of the related
Due Period, the percentage equivalent of a fraction, the numerator of which is
the aggregate Stated Principal Balance of all Mortgage Loans that, as of the
last day of the previous calendar month, are 60 or more days delinquent, are in
foreclosure, have been converted to REO Properties or have been discharged by
reason of bankruptcy, and the denominator of which is the aggregate Stated
Principal Balance of the Mortgage Loans and REO Properties as of the last day of
the previous calendar month; provided, however, that any Mortgage Loan purchased
by the Master Servicer pursuant to Section 3.16(c) shall not be included in
either the numerator or the denominator for purposes of calculating the
Delinquency Percentage.
"Depositor": Salomon Brothers Mortgage Securities VII, Inc., a
Delaware corporation, or its successor in interest.
"Depository": The Depository Trust Company, or any successor
Depository hereafter named. The nominee of the initial Depository, for purposes
of registering those Certificates that are to be Book-Entry Certificates, is
CEDE & Co. The Depository shall at all times be a "clearing corporation" as
defined in Section 8-102(3) of the Uniform Commercial Code of the State of New
York and a "clearing agency" registered pursuant to the provisions of Section
17A of the Securities Exchange Act of 1934, as amended.
"Depository Institution": Any depository institution or trust
company, including the Trustee and the Trust Administrator, that (a) is
incorporated under the laws of the United
-11-
<PAGE>
States of America or any State thereof, (b) is subject to supervision and
examination by federal or state banking authorities and (c) has outstanding
unsecured commercial paper or other short-term unsecured debt obligations (or,
in the case of a depository institution that is the principal subsidiary of a
holding company, such holding company has unsecured commercial paper or other
short-term unsecured debt obligations) that are rated P-1 by Moody's and A-1 by
S&P (or comparable ratings if Moody's and S&P are not the Rating Agencies).
"Depository Participant": A broker, dealer, bank or other
financial institution or other Person for whom from time to time a Depository
effects book-entry transfers and pledges of securities deposited with the
Depository.
"Determination Date": With respect to each Distribution Date,
the 15th day of the calendar month in which such Distribution Date occurs or, if
such 15th day is not a Business Day, the Business Day immediately preceding such
15th day.
"Directly Operate": With respect to any REO Property, the
furnishing or rendering of services to the tenants thereof, the management or
operation of such REO Property, the holding of such REO Property primarily for
sale to customers, the performance of any construction work thereon or any use
of such REO Property in a trade or business conducted by REMIC I other than
through an Independent Contractor; provided, however, that the Trustee (or the
Master Servicer on behalf of the Trustee) shall not be considered to Directly
Operate an REO Property solely because the Trustee (or the Master Servicer on
behalf of the Trustee) establishes rental terms, chooses tenants, enters into or
renews leases, deals with taxes and insurance, or makes decisions as to repairs
or capital expenditures with respect to such REO Property.
"Disqualified Organization": Any of the following: (i) the
United States, any State or political subdivision thereof, any possession of the
United States, or any agency or instrumentality of any of the foregoing (other
than an instrumentality which is a corporation if all of its activities are
subject to tax and, except for Freddie Mac, a majority of its board of directors
is not selected by such governmental unit), (ii) any foreign government, any
international organization, or any agency or instrumentality of any of the
foregoing, (iii) any organization (other than certain farmers' cooperatives
described in Section 521 of the Code) which is exempt from the tax imposed by
Chapter 1 of the Code (including the tax imposed by Section 511 of the Code on
unrelated business taxable income), (iv) rural electric and telephone
cooperatives described in Section 1381(a)(2)(C) of the Code, (v) an "electing
large partnership" and (vi) any other Person so designated by the Trustee or the
Trust Administrator based upon an Opinion of Counsel that the holding of an
Ownership Interest in a Residual Certificate by such Person may cause any of
REMIC I, REMIC II or REMIC III or any Person having an Ownership Interest in any
Class of Certificates (other than such Person) to incur a liability for any
federal tax imposed under the Code that would not otherwise be imposed but for
the Transfer of an Ownership Interest in a Residual Certificate to such Person.
The terms "United States," "State" and "international organization" shall have
the meanings set forth in Section 7701 of the Code or successor provisions.
"Distribution Account": The trust account or accounts created
and maintained by the Trust Administrator pursuant to Section 3.10(b), which
shall be entitled "U.S. Bank National
-12-
<PAGE>
Association, as Trust Administrator for Firstar Bank Milwaukee, N.A., as
Trustee, in trust for (A) the registered holders of Salomon Brothers Mortgage
Securities VII, Inc., Callable Floating Rate Mortgage Pass-Through Certificates,
Series 1998-NC5 and (B) Financial Security Assurance Inc." The Distribution
Account must be an Eligible Account.
"Distribution Date": The 25th day of any month, or if such
25th day is not a Business Day, the Business Day immediately following such 25th
day, commencing in January 1999.
"Due Date": With respect to each Distribution Date, the first
day of the calendar month in which such Distribution Date occurs, which is
generally the day of the month on which the Monthly Payment is due on a Mortgage
Loan, exclusive of any days of grace.
"Due Period": With respect to any Distribution Date, the
period commencing on the second day of the month immediately preceding the month
in which such Distribution Date occurs and ending on the related Due Date.
"Eligible Account": Any of (i) an account or accounts
maintained with a Depository Institution, (ii) an account or accounts the
deposits in which are fully insured by the FDIC or (iii) a trust account or
accounts maintained with the corporate trust department of a federal or state
chartered depository institution or trust company acting in its fiduciary
capacity. Eligible Accounts may bear interest.
"ERISA": The Employee Retirement Income Security Act of 1974,
as amended.
"Estate in Real Property": A fee simple estate in a parcel of
land.
"Excess Overcollateralized Amount": With respect to the Class
A Certificates and any Distribution Date, the excess, if any, of (i) the
Overcollateralized Amount for such Distribution Date over (ii) the Required
Overcollateralized Amount for such Distribution Date.
"Expense Account": The account established and maintained
pursuant to Section 3.25.
"Expense Adjusted Mortgage Rate": With respect to any Mortgage
Loan or REO Property, the then applicable Mortgage Rate thereon minus the sum of
(i) the Minimum Spread, (ii) the Administration Fee Rate, (iii) the Servicing
Fee Rate and (iv) the Pass-Through Rate on the Class S Certificates.
"Fannie Mae": Fannie Mae, formally known as the Federal
National Mortgage Association ("FNMA"), or any successor thereto.
"FDIC": Federal Deposit Insurance Corporation or any successor
thereto.
-13-
<PAGE>
"Final Recovery Determination": With respect to any defaulted
Mortgage Loan or any REO Property (other than a Mortgage Loan or REO Property
purchased by the Originator, the Seller, the Depositor, the Majority Class CE
Certificateholder, the Call Class, the Master Servicer or the Certificate
Insurer pursuant to or as contemplated by Section 2.03, Section 3.16(c) or
Section 10.01), a determination made by the Master Servicer that all Insurance
Proceeds, Liquidation Proceeds and other payments or recoveries which the Master
Servicer, in its reasonable good faith judgment, expects to be finally
recoverable in respect thereof have been so recovered. The Master Servicer shall
maintain records, prepared by a Servicing Officer, of each Final Recovery
Determination made thereby.
"Freddie Mac": Freddie Mac, formally known as the Federal Home
Loan Mortgage Corporation ("FHLMC"), or any successor thereto.
"Gross Margin": With respect to each Mortgage Loan, the fixed
percentage set forth in the related Mortgage Note that is added to the Index on
each Adjustment Date in accordance with the terms of the related Mortgage Note
used to determine the Mortgage Rate for
such Mortgage Loan.
"Guaranteed Distribution": As defined in the Policy.
"Independent": When used with respect to any specified Person,
any such Person who (a) is in fact independent of the Depositor, the Master
Servicer, the Originator and their respective Affiliates, (b) does not have any
direct financial interest in or any material indirect financial interest in the
Depositor, the Originator, the Master Servicer or any Affiliate thereof, and (c)
is not connected with the Depositor, the Originator, the Master Servicer or any
Affiliate thereof as an officer, employee, promoter, underwriter, trustee, trust
administrator, partner, director or Person performing similar functions;
provided, however, that a Person shall not fail to be Independent of the
Depositor, the Originator, the Master Servicer or any Affiliate thereof merely
because such Person is the beneficial owner of 1% or less of any class of
securities issued by the Depositor, the Originator, the Master Servicer or any
Affiliate thereof, as the case may be.
"Independent Contractor": Either (i) any Person (other than
the Master Servicer) that would be an "independent contractor" with respect to
REMIC I within the meaning of Section 856(d)(3) of the Code if REMIC I were a
real estate investment trust (except that the ownership tests set forth in that
section shall be considered to be met by any Person that owns, directly or
indirectly, 35% or more of any Class of Certificates), so long as REMIC I does
not receive or derive any income from such Person and provided that the
relationship between such Person and REMIC I is at arm's length, all within the
meaning of Treasury Regulation Section 1.856-4(b)(5), or (ii) any other Person
(including the Master Servicer) if the Trustee and the Trust Administrator have
received an Opinion of Counsel to the effect that the taking of any action in
respect of any REO Property by such Person, subject to any conditions therein
specified, that is otherwise herein contemplated to be taken by an Independent
Contractor will not cause such REO Property to cease to qualify as "foreclosure
property" within the meaning of Section 860G(a)(8) of the Code (determined
without regard to the exception applicable for purposes of Section 860D(a) of
the
-14-
<PAGE>
Code), or cause any income realized in respect of such REO Property to fail to
qualify as Rents from Real Property.
"Index": With respect to each Mortgage Loan and each related
Adjustment Date, the average of the interbank offered rates for six-month United
States dollar deposits in the London market as published in THE WALL STREET
JOURNAL and as most recently available either (i) as of the first business day
45 days prior to such Adjustment Date or (ii) as of the first business day of
the month preceding the month of such Adjustment Date, as specified in the
related Mortgage Note.
"Initial Deposit": $34,056.87 in cash to be deposited by the
Depositor with the Trust Administrator on or before the Closing Date, which
represents with respect to each Mortgage Loan having a first payment date due in
February 1999, interest accrued at the Net Mortgage Rate for each such Mortgage
Loan for the initial Interest Accrual Period.
"Insurance Agreement": The Insurance and Indemnity Agreement,
dated as of December 22, 1998, among the Depositor, the Seller, the Mortgage
Loan Transferor, the Master Servicer and the Certificate Insurer, as amended or
supplemented in accordance with the provisions thereof.
"Insurance Payment": Any payment made by the Certificate
Insurer under the Policy with respect to the Class A Certificates.
"Insurance Proceeds": Proceeds of any title policy, hazard
policy or other insurance policy covering a Mortgage Loan, to the extent such
proceeds are not to be applied to the restoration of the related Mortgaged
Property or released to the Mortgagor in accordance with the procedures that the
Master Servicer would follow in servicing mortgage loans held for its own
account, subject to the terms and conditions of the related Mortgage Note and
Mortgage.
"Interest Accrual Period": With respect to any Distribution
Date and the Class A Certificates, the Class S Certificates, REMIC II Regular
Interest II-LT2 and REMIC II Regular Interest II-LT2S, the period commencing on
the Distribution Date of the month immediately preceding the month in which such
Distribution Date occurs (or, in the case of the first Distribution Date,
commencing on the Closing Date) and ending on the day preceding such
Distribution Date. With respect to any Distribution Date and REMIC II Regular
Interest II-LT1, REMIC II Regular Interest II-LT3 and the REMIC I Regular
Interests, the one-month period ending on the last day of the calendar month
preceding the month in which such Distribution Date occurs.
"Interest Determination Date": With respect to the Class A
Certificates, REMIC II Regular Interest II-LT2 and REMIC II Regular Interest
II-LT2S and any Interest Accrual Period therefor, the second London Business Day
preceding the commencement of such Interest Accrual Period.
-15-
<PAGE>
"Interest Distribution Amount": With respect to any
Distribution Date and any Class A Certificates, any Class S Certificates and any
Class CE Certificates, the aggregate Accrued Certificate Interest on the
Certificates of such Class for such Distribution Date, plus with respect to the
Class A Certificates any undistributed Interest Distribution Amount from any
previous Distribution Date for which no Insurance Payment has been previously
paid to Holders of the Class A Certificates and with respect to the Class S
Certificates any undistributed Interest Distribution Amount from any previous
Distribution Dates.
"Late Collections": With respect to any Mortgage Loan and any
Due Period, all amounts received subsequent to the Determination Date
immediately following such Due Period, whether as late payments of Monthly
Payments or as Insurance Proceeds, Liquidation Proceeds or otherwise, which
represent late payments or collections of principal and/or interest due (without
regard to any acceleration of payments under the related Mortgage and Mortgage
Note) but delinquent for such Due Period and not previously recovered.
"Liquidation Event": With respect to any Mortgage Loan, any of
the following events: (i) such Mortgage Loan is paid in full; (ii) a Final
Recovery Determination is made as to such Mortgage Loan; or (iii) such Mortgage
Loan is removed from REMIC I by reason of its being purchased, sold or replaced
pursuant to or as contemplated by Section 2.03, Section 3.16(c) or Section
10.01. With respect to any REO Property, either of the following events: (i) a
Final Recovery Determination is made as to such REO Property; or (ii) such REO
Property is removed from REMIC I by reason of its being purchased pursuant to
Section 10.01.
"Liquidation Proceeds": The amount (other than Insurance
Proceeds or amounts received in respect of the rental of any REO Property prior
to REO Disposition) received by the Master Servicer in connection with (i) the
taking of all or a part of a Mortgaged Property by exercise of the power of
eminent domain or condemnation, (ii) the liquidation of a defaulted Mortgage
Loan through a trustee's sale, foreclosure sale or otherwise, or (iii) the
repurchase, substitution or sale of a Mortgage Loan or an REO Property pursuant
to or as contemplated by Section 2.03, Section 3.16(c), Section 3.23 or Section
10.01.
"Loan-to-Value Ratio": As of any date of determination, the
fraction, expressed as a percentage, the numerator of which is the principal
balance of the related Mortgage Loan at such date and the denominator of which
is the Value of the related Mortgaged Property.
"London Business Day": Any day on which banks in the City of
London are open and conducting transactions in United States dollars.
"Majority Class CE Certificateholder": Any single Holder or
group of Holders of Class CE Certificates representing a greater than 50%
Percentage Interest in such Class.
"Master Servicer": New Century Mortgage Corporation or any
successor master servicer appointed as herein provided, in its capacity as
Master Servicer hereunder.
-16-
<PAGE>
"Master Servicer Event of Default": One or more of the events
described in Section 7.01.
"Master Servicer Prepayment Charge Payment Amount": The
amounts payable by the Master Servicer in respect of any waived Prepayment
Charges pursuant to Section 2.05 or Section 3.01.
"Master Servicer Remittance Date": With respect to any
Distribution Date, 3:00 p.m. New York time on the 18th day of the calendar month
in which such Distribution Date occurs or, if such 18th day is not a Business
Day, the Business Day immediately succeeding such
18th day.
"Maximum I-LT3 Uncertificated Interest Deferral Amount": With
respect to any Distribution Date, the excess of (i) accrued interest at the
REMIC I Remittance Rate applicable to REMIC I Regular Interest I-LT3 for such
Distribution Date on a balance equal to the Uncertificated Balance of REMIC I
Regular Interest I-LT3 minus the REMIC I Overcollateralized Amount, in each case
for such Distribution Date, over (ii) Uncertificated Interest on REMIC II
Regular Interest II-LT2 for such Distribution Date.
"Maximum Mortgage Rate": With respect to each Mortgage Loan,
the percentage set forth in the related Mortgage Note as the maximum Mortgage
Rate thereunder.
"Minimum Mortgage Rate": With respect to each Mortgage Loan,
the percentage set forth in the related Mortgage Note as the minimum Mortgage
Rate thereunder.
"Minimum Spread": 0.50% per annum.
"Monthly Payment": With respect to any Mortgage Loan, the
scheduled monthly payment of principal and interest on such Mortgage Loan which
is payable by the related Mortgagor from time to time under the related Mortgage
Note, determined: (a) after giving effect to (i) any Deficient Valuation and/or
Debt Service Reduction with respect to such Mortgage Loan and (ii) any reduction
in the amount of interest collectible from the related Mortgagor pursuant to the
Relief Act; (b) without giving effect to any extension granted or agreed to by
the Master Servicer pursuant to Section 3.07; and (c) on the assumption that all
other amounts, if any, due under such Mortgage Loan are paid when due.
"Moody's": Moody's Investors Service, Inc. or its successor in
interest.
"Mortgage": The mortgage, deed of trust or other instrument
creating a first lien on, or first priority security interest in, a Mortgaged
Property securing a Mortgage Note.
"Mortgage File": The mortgage documents listed in Section 2.01
pertaining to a particular Mortgage Loan and any additional documents required
to be added to the Mortgage File pursuant to this Agreement.
-17-
<PAGE>
"Mortgage Loan": Each mortgage loan transferred and assigned
to the Trustee and delivered to the Trust Administrator pursuant to Section 2.01
or Section 2.03(d) of this Agreement, as held from time to time as a part of the
Trust Fund, the Mortgage Loans so held being identified in the Mortgage Loan
Schedule.
"Mortgage Loan Purchase Agreement": The agreement among the
Seller, the Originator and the Mortgage Loan Transferor, regarding the transfer
of the Mortgage Loans by the Seller to the Mortgage Loan Transferor,
substantially in the form of Exhibit D-1 annexed
hereto.
"Mortgage Loan Schedule": As of any date, the list of Mortgage
Loans included in REMIC I on such date, attached hereto as Schedule 1. The
Mortgage Loan Schedule shall set forth the following information with respect to
each Mortgage Loan:
(i) the 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 stated remaining months to maturity from the Cut-off
Date based on the original amortization schedule;
(viii) the Loan-to-Value Ratio at origination;
(ix) the Mortgage Rate in effect immediately following the
Cut-off Date;
(x) (A) the date on which the first Monthly Payment was due on
the Mortgage Loan and, (B) if such date is not consistent
with the Due Date currently in effect, such Due Date;
(xi) the stated maturity date;
(xii) the amount of the Monthly Payment at origination;
(xiii) the amount of the Monthly Payment due on the first Due
Date after the Cut-off Date;
-18-
<PAGE>
(xiv) the last Due Date on which a Monthly Payment was actually
applied to the unpaid Stated Principal Balance;
(xv) the original principal amount of the Mortgage Loan;
(xvi) the Scheduled Principal Balance of the Mortgage Loan as of
the close of business on the Cut-off Date;
(xvii) the Adjustment Dates;
(xviii) the Gross Margin;
(xix) a code indicating the purpose of the Mortgage Loan (I.E.,
purchase financing, Rate/Term Refinancing, Cash-Out
Refinancing);
(xx) the Maximum Mortgage Rate;
(xxi) the Minimum Mortgage Rate;
(xxii) the Mortgage Rate at origination;
(xxiii) the Periodic Rate Cap and the maximum first Adjustment
Date Mortgage Rate adjustment;
(xxiv) a code indicating the documentation program (I.E., Full
Documentation, Limited Documentation, Stated Income
Documentation);
(xxv) [intentionally omitted];
(xxvi) the first Adjustment Date immediately following the
Cut-off Date;
(xxvii) the risk grade;
(xxviii) [intentionally omitted];
(xxix) [intentionally omitted];
(xxx) [intentionally omitted];
(xxxi) the Value of the Mortgaged Property;
(xxxii) the sale price of the Mortgaged Property, if applicable;
(xxxiii) the actual unpaid principal balance of the Mortgage Loan
as of the Cut-off Date;
-19-
<PAGE>
(xxxiv) the type and term of the related Prepayment Charge;
(xxxv) [intentionally omitted];
(xxxvi) [intentionally omitted];
(xxxvii) the rounding code (I.E., nearest 0.125%, next highest
0.125%);
(xxxviii) [intentionally omitted];
(xxxix) [intentionally omitted];
(xl) the program code.
The Mortgage Loan Schedule shall set forth the following
information with respect to the Mortgage Loans in the aggregate as of the
Cut-Off Date: (1) the number of Mortgage Loans; (2) the current principal
balance of the Mortgage Loans; (3) the weighted average Mortgage Rate of the
Mortgage Loans; and (4) the weighted average maturity of the Mortgage Loans. The
Mortgage Loan Schedule shall be amended from time to time by the Depositor in
accordance with the provisions of this Agreement. With respect to any Qualified
Substitute Mortgage Loan, the Cut-off Date shall refer to the related Cut-off
Date for such Mortgage Loan, determined in accordance with the definition of
Cut-off Date herein.
"Mortgage Loan Transferor": NC Residual II Corporation or its
successor in interest, in its capacity as mortgage loan transferor under the
Transfer Agreement.
"Mortgage Note": The original executed note or other evidence
of the indebtedness of a Mortgagor under a Mortgage Loan.
"Mortgage Pool": The pool of Mortgage Loans, identified on
Schedule 1 from time to time, and any REO Properties acquired in respect
thereof.
"Mortgage Rate": With respect to each Mortgage Loan, the
annual rate at which interest accrues on such Mortgage Loan from time to time in
accordance with the provisions of the related Mortgage Note, which rate (A) as
of any date of determination until the first Adjustment Date following the
Cut-off Date shall be the rate set forth in the Mortgage Loan Schedule as the
Mortgage Rate in effect immediately following the Cut-off Date and (B) as of any
date of determination thereafter shall be the rate as adjusted on the most
recent Adjustment Date equal to the sum, rounded to the nearest 0.125% as
provided in the Mortgage Note, of the Index, as most recently available as of a
date prior to the Adjustment Date as set forth in the related Mortgage Note,
plus the related Gross Margin; provided that the Mortgage Rate on such Mortgage
Loan on any Adjustment Date shall never be more than the lesser of (i) the sum
of the Mortgage Rate in effect immediately prior to the Adjustment Date plus the
related Periodic Rate Cap, if any, and (ii) the related Maximum Mortgage Rate,
and shall never be less than the greater of (i) the Mortgage Rate in effect
immediately prior to the Adjustment Date less the Periodic Rate Cap, if
-20-
<PAGE>
any, and (ii) the related Minimum Mortgage Rate. With respect to each Mortgage
Loan that becomes an REO Property, as of any date of determination, the annual
rate determined in accordance with the immediately preceding sentence as of the
date such Mortgage Loan became
an REO Property.
"Mortgaged Property": The underlying property securing a
Mortgage Loan, including any REO Property, consisting of an Estate in Real
Property improved by a Residential Dwelling.
"Mortgagor": The obligor on a Mortgage Note.
"Net Monthly Excess Cashflow": With respect to any
Distribution Date, the sum of (i) any Overcollateralization Reduction Amount for
such Distribution Date and (ii) the excess of (x) the Available Distribution
Amount for such Distribution Date over (y) the sum for such Distribution Date of
(A) the Interest Distribution Amount payable to the holders of the Class A
Certificates and (B) the sum of the amounts described in clauses (b)(i) through
(iii) of the definition of Principal Distribution Amount.
"Net Monthly Excess Spread": With respect to any Distribution
Date, the excess of (x) the Available Distribution Amount for such Distribution
Date over (y) the sum for such Distribution Date of (A) the Interest
Distribution Amount payable to the holders of the Class A Certificates and (B)
the sum of the amounts described in clauses (b)(i) through (iii) of the
definition of Principal Distribution Amount.
"Net Mortgage Rate": With respect to any Mortgage Loan (or the
related REO Property) as of any date of determination, a per annum rate of
interest equal to the then applicable Mortgage Rate for such Mortgage Loan minus
the Servicing Fee Rate.
"Net WAC Pass-Through Rate": With respect to REMIC II Regular
Interest II-LT2 and the Class A Certificates and any Distribution Date, a per
annum rate equal to the fraction, expressed as a percentage, the numerator of
which is (i) an amount equal to (A) 1/12 of the aggregate Scheduled Principal
Balance of the then outstanding Mortgage Loans and REO Properties multiplied by
the weighted average of the Expense Adjusted Mortgage Rates on such Mortgage
Loans and REO Properties minus (B) the amount of the Certificate Insurer Premium
payable to the Certificate Insurer with respect to the Policy for such
Distribution Date, and the denominator of which is (ii) an amount equal to (A)
the sum of the aggregate Scheduled Principal Balance of the then outstanding
Mortgage Loans and REO Properties multiplied by (B) the actual number of days
elapsed in the related Interest Accrual Period divided by 360.
"New Lease": Any lease of REO Property entered into on behalf
of REMIC I, including any lease renewed or extended on behalf of REMIC I, if
REMIC I has the right to renegotiate the terms of such lease.
"Nonrecoverable P&I Advance": Any P&I Advance previously made
or proposed to be made in respect of a Mortgage Loan or REO Property that, in
the good faith business
-21-
<PAGE>
judgment of the Master Servicer, will not or, in the case of a proposed P&I
Advance, would not be ultimately recoverable from related Late Collections,
Insurance Proceeds or Liquidation Proceeds on such Mortgage Loan or REO Property
as provided herein.
"Nonrecoverable Servicing Advance": Any Servicing Advance
previously made or proposed to be made in respect of a Mortgage Loan or REO
Property that, in the good faith business judgment of the Master Servicer, will
not or, in the case of a proposed Servicing Advance, would not be ultimately
recoverable from related Late Collections, Insurance Proceeds or Liquidation
Proceeds on such Mortgage Loan or REO Property as provided herein.
"Non-United States Person": Any Person other than a United
States Person.
"Notional Amount": With respect to the Class CE Certificates
and any Distribution Date, the Uncertificated Balance of the REMIC II Regular
Interests (other than the Uncertificated Balance of REMIC II Regular Interest
II-LTP) for such Distribution Date. With respect to the Class S Certificates and
any Distribution Date, the aggregate Stated Principal Balance of the Mortgage
Loans and REO Properties for such Distribution Date.
"Officers' Certificate": A certificate signed by the Chairman
of the Board, the Vice Chairman of the Board, the President or a vice president
(however denominated), and by the Treasurer, the Secretary, or one of the
assistant treasurers or assistant secretaries of the Master Servicer, the
Originator, the Seller, the Mortgage Loan Transferor or the Depositor, as
applicable.
"One-Month LIBOR": With respect to the Class A Certificates
and REMIC II Regular Interest II-LT2 and any Interest Accrual Period therefor,
the rate determined by the Trust Administrator 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 Trust Administrator 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) LIBOR as
determined on the previous Interest Determination Date and (ii) the Reserve
Interest Rate. Notwithstanding the foregoing, if, under the priorities described
above, LIBOR for an Interest Determination Date would be based on LIBOR for the
previous Interest Determination Date for the third consecutive Interest
Determination Date, the Trust Administrator shall select an alternative
comparable index (over which the Trust Administrator has no control), used for
determining one-month Eurodollar lending rates that is calculated and published
(or otherwise made available) by an independent party.
-22-
<PAGE>
"One-Month LIBOR Pass-Through Rate": With respect to the Class
A Certificates and REMIC II Regular Interest II-LT2, a per annum rate equal to
One-Month LIBOR plus 0.70%, in the case of each Distribution Date through and
including the Distribution Date on which the aggregate Stated Principal Balance
of the Mortgage Loans and REO Properties remaining in the Trust Fund is reduced
to less than 10% of the aggregate Stated Principal Balance of the Mortgage Loans
as of the Cut-off Date, or One-Month LIBOR plus 1.40%, in the case of any
Distribution Date thereafter.
"Opinion of Counsel": A written opinion of counsel, who may,
without limitation, be salaried counsel for the Depositor or the Master
Servicer, acceptable to the Trustee and the Certificate Insurer, if such opinion
is delivered to the Trustee, or acceptable to the Trust Administrator and the
Certificate Insurer, if such opinion is to be delivered to the Trust
Administrator, except that any opinion of counsel relating to (a) the
qualification of any of REMIC I, REMIC II or REMIC III as a REMIC or (b)
compliance with the REMIC Provisions must be an opinion of Independent counsel.
"Original Mortgage Loan": Any of the Mortgage Loans included
in REMIC I as of the Closing Date.
"Originator": New Century Mortgage Corporation, or its
successor in interest, in its capacity as originator under the Mortgage Loan
Purchase Agreement.
"Overcollateralized Amount": With respect to any Distribution
Date, the excess, if any, of (a) the aggregate Stated Principal Balances of the
Mortgage Loans and REO Properties immediately following such Distribution Date
over (b) the sum of the aggregate Certificate Principal Balances of the Class A
Certificates and the Class P Certificates as of such Distribution Date (after
taking into account the payment of the amounts described in clauses (b)(i)
through (iv) of the definition of Principal Distribution Amount on such
Distribution Date).
"Overcollateralization Deficiency Amount": With respect to any
Distribution Date, the excess, if any, of (a) the Required Overcollateralized
Amount applicable to such Distribution Date over (b) the Overcollateralized
Amount applicable to such Distribution Date prior to taking into account the
payment of any Overcollateralization Increase Amount on such Distribution Date.
"Overcollateralization Increase Amount": With respect to any
Distribution Date, the lesser of (a) the Overcollateralization Deficiency Amount
as of such Distribution Date (after taking into account the payment of the
Principal Distribution Amount on such Distribution Date, exclusive of the
payment of any Overcollateralization Increase Amount) and (b) the amount of
Accrued Certificate Interest payable on the Class CE Certificates on such
Distribution Date as reduced by any Cumulative Insurance Payments or Realized
Losses allocated thereto with respect to such Distribution Date pursuant to
Section 4.04.
"Overcollateralization Reduction Amount": With respect to any
Distribution Date, an amount equal to the lesser of (a) the Excess
Overcollateralized Amount and (b) the sum of the
-23-
<PAGE>
amounts available for distribution specified in clauses (b)(i) through (iii) of
the definition of Principal Distribution Amount.
"Overcollateralization Percentage": With respect to any
Distribution Date, the percentage equivalent of a fraction, the numerator of
which is the Overcollateralized Amount, and the denominator of which is the
aggregate Stated Principal Balance of the Mortgage Loans and REO Properties as
of the last day of the related Due Period.
"Ownership Interest": As to any Certificate, any ownership or
security interest in such Certificate, including any interest in such
Certificate as the Holder thereof and any other interest therein, whether direct
or indirect, legal or beneficial, as owner or as pledgee.
"Pass-Through Rate": With respect to the Class A Certificates
and any Distribution Date, a rate per annum equal to the lesser of (i) the
One-Month LIBOR Pass-Through Rate for such Distribution Date and (ii) the Net
WAC Pass-Through Rate for such Distribution Date. With respect to the Class S
Certificates and any Distribution Date, a fixed rate equal to 0.01% per annum.
With respect to the Class CE Certificates and any Distribution Date, a rate per
annum equal to the percentage equivalent of a fraction, the numerator of which
is the sum of the amounts calculated pursuant to clauses (i) through (iv) below,
and the denominator of which is the Uncertificated Balance of the REMIC II
Regular Interests (other than the Uncertificated Balance of REMIC II Regular
Interest II-LTP). For purposes of calculating the Pass-Through Rate for the
Class CE Certificates, the numerator is equal to the sum of the following
components:
(i) the REMIC II Remittance Rate for REMIC II Regular Interest
II-LT1 minus two (2) times the weighted average of the REMIC II
Remittance Rates for REMIC II Regular Interest II-LT2 and REMIC II
Regular Interest II-LT3, with the rate on REMIC II Regular Interest
II-LT3 equal to zero for the purpose of this calculation, applied to an
amount equal to the Uncertificated Balance of REMIC II Regular Interest
II-LT1;
(ii) the REMIC II Remittance Rate for REMIC II Regular
Interest II-LT2 minus two (2) times the weighted average of the REMIC
II Remittance Rates for REMIC II Regular Interest II-LT2 and REMIC II
Regular Interest II-LT3, with the rate on REMIC II Regular Interest
II-LT3 equal to zero for the purpose of this calculation, applied to an
amount equal to the Uncertificated Balance of REMIC II Regular Interest
II-LT2;
(iii) the REMIC II Remittance Rate for REMIC II Regular
Interest II-LT3 minus two (2) times the weighted average of the REMIC
II Remittance Rates for REMIC II Regular Interest II-LT2 and REMIC II
Regular Interest II-LT3, with the rate on REMIC II Regular Interest
II-LT3 equal to zero for the purpose of this calculation, applied to an
amount equal to the Uncertificated Balance of REMIC II Regular Interest
II-LT3; and
(iv) 100% of the interest on REMIC II Regular Interest
II-LT2S.
"Percentage Interest": With respect to any Class of
Certificates (other than the Residual Certificates), the undivided percentage
ownership in such Class evidenced by such
-24-
<PAGE>
Certificate, expressed as a percentage, the numerator of which is the initial
Certificate Principal Balance (or Notional Amount, in the case of the Class S
Certificates) represented by such Certificate and the denominator of which is
the aggregate initial Certificate Principal Balance (or Notional Amount, in the
case of the Class S Certificates) of all of the Certificates of such Class. The
Class A Certificates are issuable only in minimum Percentage Interests
corresponding to minimum initial Certificate Principal Balances of $10,000 and
integral multiples of $1.00 in excess thereof. The Class P Certificates are
issuable only in Percentage Interests corresponding to initial Certificate
Principal Balances of $20 and integral multiples thereof. The Class S
Certificates are issuable only in a 100% Percentage Interest. The Class CE
Certificates are issuable only in minimum Percentage Interests corresponding to
minimum initial Certificate Principal Balances of $10,000 and integral multiples
of $1.00 in excess thereof; provided, however, that a single Certificate of such
Class of Certificates may be issued having a Percentage Interest corresponding
to the remainder of the aggregate initial Certificate Principal Balance of such
Class or to an otherwise authorized denomination for such Class plus such
remainder. With respect to any Residual Certificate, the undivided percentage
ownership in such Class evidenced by such Certificate, as set forth on the face
of such Certificate. The Residual Certificates are issuable in Percentage
Interests of 20% and multiples thereof.
"Periodic Rate Cap": With respect to each Mortgage Loan and
any Adjustment Date therefor, the fixed percentage set forth in the related
Mortgage Note, which is the maximum amount by which the Mortgage Rate for such
Mortgage Loan may increase or decrease (without regard to the Maximum Mortgage
Rate or the Minimum Mortgage Rate) on such Adjustment Date from the Mortgage
Rate in effect immediately prior to such Adjustment Date.
"Permitted Investments": Any one or more of the following
obligations or securities acquired at a purchase price of not greater than par,
regardless of whether issued by the Depositor, the Master Servicer, the Trustee,
the Trust Administrator or any of their respective Affiliates:
(i) direct obligations of, or obligations fully
guaranteed as to timely payment of principal and interest by, the
United States or any agency or instrumentality thereof, provided such
obligations are backed by the full faith and credit of the United
States; provided, however, that any obligation of, or guaranteed by,
Freddie Mac or Fannie Mae, other than a senior debt or a mortgage
participation or pass-through certificate guaranteed by Freddie Mac or
Fannie Mae shall be a Permitted Investment only if, at the time of
investment, such investment is acceptable to the Certificate Insurer;
(ii) demand and time deposits in, certificates of
deposit of, or bankers' acceptances issued by, any Depository
Institution;
(iii) repurchase obligations with respect to any
security described in clause (i) above entered into with a Depository
Institution (acting as principal);
(iv) securities bearing interest or sold at a
discount that are issued by any corporation incorporated under the laws
of the United States of America or any state thereof and that are rated
by each Rating Agency that rates such securities in its highest
-25-
<PAGE>
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 that have been rated
"P-1" by Moody's and "AAAm" by S&P; and
(viii) if previously confirmed in writing to the
Trustee and the Trust Administrator, any other demand, money market or
time deposit, or any other obligation, security or investment, as may
be acceptable to the Rating Agencies and the Certificate Insurer as a
permitted investment of funds backing securities having ratings
equivalent to its highest initial rating of the Class A Certificates;
provided, however, that no instrument described hereunder shall evidence either
the right to receive (a) only interest with respect to the obligations
underlying such instrument or (b) both principal and interest payments derived
from obligations underlying such instrument and the interest and principal
payments with respect to such instrument provide a yield to maturity at par
greater than 120% of the yield to maturity at par of the underlying obligations.
"Permitted Transferee": Any Transferee of a Residual
Certificate other than a Disqualified Organization or Non-United States Person.
"Person": Any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"P&I Advance": As to any Mortgage Loan or REO Property, any
advance made by the Master Servicer in respect of any Distribution Date pursuant
to Section 4.03.
"Plan": Any employee benefit plan or certain other retirement
plans and arrangements, including individual retirement accounts and annuities,
Keogh plans and bank collective investment funds and insurance company general
or separate accounts in which such plans, accounts or arrangements are invested,
that are subject to ERISA and Section 4975 of the
Code.
"Policy": The Financial Guaranty Insurance Policy (No.50751-N)
issued by the Certificate Insurer relating to the Class A Certificates,
including any endorsements thereto, attached hereto as Exhibit B.
-26-
<PAGE>
"Policy Payments Account": The account established pursuant to
Section 9.04 hereof.
"Premium Supplement": As defined in the Insurance Agreement.
"Prepayment Assumption": A prepayment rate for the Mortgage
Loans of 28% CPR. The Prepayment Assumption is used solely for determining the
accrual of original issue discount on the Certificates for federal income tax
purposes. A CPR (or Constant Prepayment Rate) represents an annualized constant
assumed rate of prepayment each month of a pool of mortgage loans relative to
its outstanding principal balance for the life of such pool.
"Prepayment Charge": With respect to any Prepayment Period,
any prepayment premium, penalty or charge payable by a Mortgagor in connection
with any Principal Prepayment on a Mortgage Loan pursuant to the terms of the
related Mortgage Note (other than any Master Servicer Prepayment Charge Payment
Amount).
"Prepayment Charge Schedule": As of any date, the list of
Prepayment Charges on the Mortgage Loans included in REMIC I on such date,
attached hereto as Schedule 2 (including the Prepayment Charge Summary attached
thereto). The Prepayment Charge Schedule shall set forth the following
information with respect to each Prepayment Charge:
(i) the Mortgage Loan identifying number;
(ii) a code indicating the type of Prepayment Charge;
(iii) the state of origination of the related Mortgage Loan;
(iv) the date on which the first monthly payment was due on the
related Mortgage Loan;
(v) the term of the related Mortgage Loan; and
(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 Depositor in accordance with the provisions of this Agreement.
"Prepayment Interest Shortfall": With respect to any
Distribution Date, for each Mortgage Loan that was during the related Prepayment
Period the subject of a Principal Prepayment in full or in part that was applied
by the Master Servicer to reduce the outstanding principal balance of such loan
on a date preceding the Due Date in the succeeding Prepayment Period, an amount
equal to interest at the applicable Net Mortgage Rate on the amount of such
Principal Prepayment for the number of days commencing on the date on which the
prepayment is applied and ending on the last day of the related Prepayment
Period. The obligations of the Master Servicer in respect of any Prepayment
Interest Shortfall are set forth in Section 3.24.
-27-
<PAGE>
"Prepayment Period": With respect to any Distribution Date,
the calendar month preceding the calendar month in which such Distribution Date
occurs.
"Principal Distribution Amount": With respect to any
Distribution Date, the lesser of:
(a) the excess of the Available Distribution Amount over
the amount payable on the Class A Certificates
pursuant to Section 4.01(a)(2)(i); and
(b) the sum of:
(i) the principal portion of each Monthly Payment on
the Mortgage Loans due during the related Due Period,
whether or not received on or prior to the related
Determination Date;
(ii) the Stated Principal Balance of any Mortgage
Loan that was purchased during the related Prepayment
Period pursuant to or as contemplated by Section
2.03, Section 3.16(c) or Section 10.01 and the amount
of any shortfall deposited in the Collection Account
in connection with the substitution of a Deleted
Mortgage Loan pursuant to Section 2.03 during the
related Prepayment Period;
(iii) the principal portion of all other unscheduled
collections (including, without limitation, Principal
Prepayments, Insurance Proceeds, Liquidation Proceeds
and REO Principal Amortization) received during the
related Prepayment Period, net of any portion thereof
that represents a recovery of principal for which an
advance was made by the Master Servicer pursuant to
Section 4.03 in respect of a preceding Distribution
Date;
(iv) the principal portion of any Realized Losses
incurred or deemed to have been incurred on the
Mortgage Loans in the calendar month preceding such
Distribution Date and the principal portion of any
Realized Losses allocated to the Class A Certificates
on previous Distribution Dates but not paid under the
Policy due to a Certificate Insurer Default and not
previously paid pursuant to Section
4.01(a)(2)(iii)(b), in each case from Accrued
Certificate Interest on the Class CE Certificates for
such Distribution Date; and
(v) the amount of any Overcollateralization Increase
Amount for such Distribution Date;
minus:
(vi) the amount of any Overcollateralization
Reduction Amount for such Distribution Date.
-28-
<PAGE>
"Principal Prepayment": Any payment of principal made by the
Mortgagor on a Mortgage Loan which is received in advance of its scheduled Due
Date and which is not accompanied by an amount of interest representing the full
amount of scheduled interest due on any Due Date in any month or months
subsequent to the month of prepayment.
"Purchase Price": With respect to any Mortgage Loan or REO
Property to be purchased pursuant to or as contemplated by Section 2.03, Section
3.16(c) or Section 10.01, and as confirmed by an Officers' Certificate from the
Master Servicer to the Trustee and the Trust Administrator, an amount equal to
the sum of (i) 100% of the Stated Principal Balance thereof as of the date of
purchase (or such other price as provided in Section 10.01), (ii) in the case of
(x) a Mortgage Loan, accrued interest on such Stated Principal Balance at the
applicable Net Mortgage Rate in effect from time to time from the Due Date as to
which interest was last covered by a payment by the Mortgagor or an advance by
the Master Servicer, which payment or advance had as of the date of purchase
been distributed pursuant to Section 4.01, through the end of the calendar month
in which the purchase is to be effected and (y) an REO Property, the sum of (1)
accrued interest on such Stated Principal Balance at the applicable Net Mortgage
Rate in effect from time to time from the Due Date as to which interest was last
covered by a payment by the Mortgagor or an advance by the Master Servicer
through the end of the calendar month immediately preceding the calendar month
in which such REO Property was acquired, plus (2) REO Imputed Interest for such
REO Property for each calendar month commencing with the calendar month in which
such REO Property was acquired and ending with the calendar month in which such
purchase is to be effected, net of the total of all net rental income, Insurance
Proceeds, Liquidation Proceeds and P&I Advances that as of the date of purchase
had been distributed as or to cover REO Imputed Interest pursuant to Section
4.01, (iii) any unreimbursed Servicing Advances and P&I Advances (including
Nonrecoverable P&I Advances and Nonrecoverable Servicing Advances) and any
unpaid Servicing Fees allocable to such Mortgage Loan or REO Property, (iv) any
amounts previously withdrawn from the Collection Account in respect of such
Mortgage Loan or REO Property pursuant to Section 3.11(a)(ix) and Section
3.16(b), and (v) in the case of a Mortgage Loan required to be purchased
pursuant to Section 2.03, expenses reasonably incurred or to be incurred by the
Master Servicer, the Trustee or the Trust Administrator in respect of the breach
or defect giving rise to the purchase obligation.
"Qualified Substitute Mortgage Loan": A mortgage loan
substituted for a Deleted Mortgage Loan pursuant to the terms of this Agreement
which must, on the date of such substitution, (i) have an outstanding principal
balance, after application of all scheduled payments of principal and interest
due during or prior to the month of substitution, not in excess of the Scheduled
Principal Balance of the Deleted Mortgage Loan as of the Due Date in the
calendar month during which the substitution occurs, (ii) have a Mortgage Rate
not less than (and not more than one percentage point in excess of) the Mortgage
Rate of the Deleted Mortgage Loan, (iii) have a Maximum Mortgage Rate not less
than the Maximum Mortgage Rate on the Deleted Mortgage Loan, (iv) have a Minimum
Mortgage Rate not less than the Minimum Mortgage Rate of the Deleted Mortgage
Loan, (v) have a Gross Margin equal to the Gross Margin of the Deleted Mortgage
Loan, (vi) have a next Adjustment Date not more than two months later than the
next Adjustment Date on the Deleted Mortgage Loan, (vii) have a remaining term
to maturity not greater than (and not more than one year less than) that of the
Deleted Mortgage Loan, (viii) have
-29-
<PAGE>
the same Due Date as the Due Date on the Deleted Mortgage Loan, (ix) have a
Loan-to-Value Ratio as of the date of substitution equal to or lower than the
Loan-to-Value Ratio of the Deleted Mortgage Loan as of such date, (x) have a
risk grading determined by the Originator at least equal to the risk grading
assigned on the Deleted Mortgage Loan and (xi) conform to each representation
and warranty set forth in Section 6 of the Mortgage Loan Purchase Agreement
applicable to the Deleted Mortgage Loan. In the event that one or more mortgage
loans are substituted for one or more Deleted Mortgage Loans, the amounts
described in clause (i) hereof shall be determined on the basis of aggregate
principal balances, the Mortgage Rates described in clause (ii) hereof shall be
determined on the basis of weighted average Mortgage Rates, the terms described
in clause (vii) hereof shall be determined on the basis of weighted average
remaining term to maturity, the Loan- to-Value Ratios described in clause (ix)
hereof shall be satisfied as to each such mortgage loan, the risk gradings
described in clause (x) hereof shall be satisfied as to each such mortgage loan
and, except to the extent otherwise provided in this sentence, the
representations and warranties described in clause (xi) hereof must be satisfied
as to each Qualified Substitute Mortgage Loan or in the aggregate, as the case
may be.
"Rate/Term Refinancing": A Refinanced Mortgage Loan, the
proceeds of which are not more than a nominal amount in excess of the existing
first mortgage loan and any subordinate mortgage loan on the related Mortgaged
Property and related closing costs, and were used exclusively (except for such
nominal amount) to satisfy the then existing first mortgage loan and any
subordinate mortgage loan of the Mortgagor on the related Mortgaged Property and
to pay related closing costs.
"Rating Agency or Rating Agencies": Moody's and S&P or their
successors. If such agencies or their successors are no longer in existence,
"Rating Agencies" shall be such nationally recognized statistical rating
agencies, or other comparable Persons, designated by the Depositor and the
Certificate Insurer, notice of which designation shall be given to the Trustee,
the Trust Administrator and the Master Servicer.
"Realized Loss": With respect to each Mortgage Loan as to
which a Final Recovery Determination has been made, an amount (not less than
zero) equal to (i) the unpaid principal balance of such Mortgage Loan as of the
commencement of the calendar month in which the Final Recovery Determination was
made, plus (ii) accrued interest from the Due Date as to which interest was last
paid by the Mortgagor through the end of the calendar month in which such Final
Recovery Determination was made, calculated in the case of each calendar month
during such period (A) at an annual rate equal to the annual rate at which
interest was then accruing on such Mortgage Loan and (B) on a principal amount
equal to the Stated Principal Balance of such Mortgage Loan as of the close of
business on the Distribution Date during such calendar month, plus (iii) any
amounts previously withdrawn from the Collection Account in respect of such
Mortgage Loan pursuant to Section 3.11(a)(ix) and Section 3.16(b), minus (iv)
the proceeds, if any, received in respect of such Mortgage Loan during the
calendar month in which such Final Recovery Determination was made, net of
amounts that are payable therefrom to the Master Servicer with respect to such
Mortgage Loan pursuant to Section 3.11(a)(iii).
-30-
<PAGE>
With respect to any REO Property as to which a Final Recovery
Determination has been made, an amount (not less than zero) equal to (i) the
unpaid principal balance of the related Mortgage Loan as of the date of
acquisition of such REO Property on behalf of REMIC I, plus (ii) accrued
interest from the Due Date as to which interest was last paid by the Mortgagor
in respect of the related Mortgage Loan through the end of the calendar month
immediately preceding the calendar month in which such REO Property was
acquired, calculated in the case of each calendar month during such period (A)
at an annual rate equal to the annual rate at which interest was then accruing
on the related Mortgage Loan and (B) on a principal amount equal to the Stated
Principal Balance of the related Mortgage Loan as of the close of business on
the Distribution Date during such calendar month, plus (iii) REO Imputed
Interest for such REO Property for each calendar month commencing with the
calendar month in which such REO Property was acquired and ending with the
calendar month in which such Final Recovery Determination was made, plus (iv)
any amounts previously withdrawn from the Collection Account in respect of the
related Mortgage Loan pursuant to Section 3.11(a)(ix) and Section 3.16(b), minus
(v) the aggregate of all P&I Advances and Servicing Advances (in the case of
Servicing Advances, without duplication of amounts netted out of the rental
income, Insurance Proceeds and Liquidation Proceeds described in clause (vi)
below) made by the Master Servicer in respect of such REO Property or the
related Mortgage Loan for which the Master Servicer has been or, in connection
with such Final Recovery Determination, will be reimbursed pursuant to Section
3.23 out of rental income, Insurance Proceeds and Liquidation Proceeds received
in respect of such REO Property, minus (vi) the total of all net rental income,
Insurance Proceeds and Liquidation Proceeds received in respect of such REO
Property that has been, or in connection with such Final Recovery Determination,
will be transferred to the Distribution Account pursuant to Section 3.23.
With respect to each Mortgage Loan which has become the
subject of a Deficient Valuation, the difference between the principal balance
of the Mortgage Loan outstanding immediately prior to such Deficient Valuation
and the principal balance of the Mortgage Loan as reduced by the Deficient
Valuation.
With respect to each Mortgage Loan which has become the
subject of a Debt Service Reduction, the portion, if any, of the reduction in
each affected Monthly Payment attributable to a reduction in the Mortgage Rate
imposed by a court of competent jurisdiction. Each such Realized Loss shall be
deemed to have been incurred on the Due Date for each affected Monthly Payment.
"Record Date": With respect to each Distribution Date and any
Book-Entry Certificate, the Business Day immediately preceding such Distribution
Date. With respect to each Distribution Date and any other Certificates,
including any Definitive Certificates, the last Business Day of the month
immediately preceding the month in which such Distribution Date occurs.
"Reference Banks": Bankers Trust Company, Barclay's Bank PLC,
The Tokyo Mitsubishi Bank and National Westminster Bank PLC and their successors
in interest; provided, however, that if any of the foregoing banks are not
suitable to serve as a Reference Bank, then any leading banks selected by the
Trust Administrator which are engaged in transactions in Eurodollar
-31-
<PAGE>
deposits in the international Eurocurrency market (i) with an established place
of business in London, (ii) not controlling, under the control of or under
common control with the Depositor or any Affiliate thereof and (iii) which have
been designated as such by the Trust Administrator.
"Refinanced Mortgage Loan": A Mortgage Loan the proceeds of
which were not used to purchase the related Mortgaged Property.
"Regular Certificate": Any Class A Certificate, Class S
Certificate, Class CE Certificate or Class P Certificate.
"Regular Interest": A "regular interest" in a REMIC within the
meaning of Section 860G(a)(1) of the Code.
"Relief Act": The Soldiers' and Sailors' Civil Relief Act of
1940, as amended.
"Relief Act Interest Shortfall": With respect to any
Distribution Date and any Mortgage Loan, any reduction in the amount of interest
collectible on such Mortgage Loan for the most recently ended calendar month as
a result of the application of the Relief Act.
"REMIC": A "real estate mortgage investment conduit" within
the meaning of Section 860D of the Code.
"REMIC I": The segregated pool of assets subject hereto,
constituting the primary trust created hereby and to be administered hereunder,
with respect to which a REMIC election is to be made, consisting of: (i) such
Mortgage Loans and Prepayment Charges as from time to time are subject to this
Agreement, together with the Mortgage Files relating thereto, and together with
all collections thereon and proceeds thereof; (ii) any REO Property, together
with all collections thereon and proceeds thereof; (iii) the Trustee's rights
with respect to the Mortgage Loans under all insurance policies required to be
maintained pursuant to this Agreement and any proceeds thereof; (iv) the
Depositor's rights under the Mortgage Loan Purchase Agreement and the Transfer
Agreement (including any security interest created thereby); (v) the Collection
Account (other than any amounts representing any Master Servicer Prepayment
Charge Payment Amount), the Distribution Account (other than any amounts
representing any Master Servicer Prepayment Charge Payment Amount), the Expense
Account and any REO Account, and such assets that are deposited therein from
time to time and any investments thereof, together with any and all income,
proceeds and payments with respect thereto. Notwithstanding the foregoing,
however, REMIC I specifically excludes the Policy and all payments and other
collections of principal and interest due on the Mortgage Loans on or before the
Cut-off Date and all Prepayment Charges payable in connection with Principal
Prepayments made before the Cut-off Date.
"REMIC I Interest Loss Allocation Amount": With respect to any
Distribution Date, an amount equal to (a) the product of (i) the aggregate
Stated Principal Balance of the Mortgage Loans and REO Properties then
outstanding and (ii) the REMIC I Remittance Rate for REMIC I Regular Interest
I-LT1 minus two (2) times the weighted average of the REMIC II Remittance Rates
for REMIC II Regular Interest II-LT2 and REMIC II Regular Interest II-LT3,
-32-
<PAGE>
with the rate on REMIC II Regular Interest II-LT3 equal to zero for purposes of
this calculation, divided by (b) 12.
"REMIC I Overcollateralized Amount": With respect to any date
of determination, (i) 1% of the aggregate Uncertificated Balances of the REMIC I
Regular Interests (other than the Class S Certificates) minus (ii) the
Uncertificated Balance of REMIC I Regular Interest I-LT2, in each case as of
such date of determination.
"REMIC I Principal Loss Allocation Amount": With respect to
any Distribution Date, an amount equal to the product of (i) the aggregate
Stated Principal Balance of the Mortgage Loans and REO Properties then
outstanding and (ii) 1 minus a fraction, the numerator of which is two times the
Uncertificated Balance of REMIC I Regular Interest I-LT2 and the denominator of
which is the sum of the Uncertificated Balances of REMIC I Regular Interest
I-LT2 and REMIC I Regular Interest I-LT3.
"REMIC I Regular Interest": Any Class S Certificate and any of
the four separate non-certificated beneficial ownership interests in REMIC I
issued hereunder and designated as a "regular interest" in REMIC I. Each REMIC I
Regular Interest (other than the Class S Certificates and other than REMIC I
Regular Interest I-LTP, with respect to interest) shall accrue interest at the
related REMIC I Remittance Rate in effect from time to time, and shall be
entitled to distributions of principal, subject to the terms and conditions
hereof, in an aggregate amount equal to its initial Uncertificated Balance as
set forth in the Preliminary Statement hereto. The Class S Certificates shall
accrue interest at its Pass-Through Rate on its Notional Amount in effect from
time to time, subject to the terms and conditions hereof. The designations for
the respective REMIC I Regular Interests are set forth in the Preliminary
Statement hereto.
"REMIC I Regular Interest I-LT1": One of the separate
non-certificated beneficial ownership interests in REMIC I issued hereunder and
designated as a Regular Interest in REMIC I. REMIC I Regular Interest I-LT1
shall accrue interest at the related REMIC I Remittance Rate in effect from time
to time, and shall be entitled to distributions of principal, subject to the
terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto.
"REMIC I Regular Interest I-LT2": One of the separate
non-certificated beneficial ownership interests in REMIC I issued hereunder and
designated as a Regular Interest in REMIC I. REMIC I Regular Interest I-LT2
shall accrue interest at the related REMIC I Remittance Rate in effect from time
to time, and shall be entitled to distributions of principal, subject to the
terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto.
"REMIC I Regular Interest I-LT3": One of the separate
non-certificated beneficial ownership interests in REMIC I issued hereunder and
designated as a Regular Interest in REMIC I. REMIC I Regular Interest I-LT3
shall accrue interest at the related REMIC I Remittance Rate in effect from time
to time, and shall be entitled to distributions of principal, subject to the
terms
-33-
<PAGE>
and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto.
"REMIC I Regular Interest I-LTP": One of the separate
non-certificated beneficial ownership interests in REMIC I issued hereunder and
designated as a Regular Interest in REMIC I. REMIC I Regular Interest I-LTP
shall be entitled to any Prepayment Charges collected by the Master Servicer and
to a distribution of principal, subject to the terms and conditions hereof, in
an aggregate amount equal to its initial Uncertificated Balance as set forth in
the Preliminary Statement hereto.
"REMIC I Remittance Rate": With respect to each REMIC I
Regular Interest (other than the Class S Certificates), the weighted average of
the Expense Adjusted Mortgage Rates on the then outstanding Mortgage Loans and
REO Properties plus the Minimum Spread.
"REMIC I Required Overcollateralized Amount": 1% of the
Required Overcollateralization Amount.
"REMIC II": The segregated pool of assets consisting of all of
the REMIC I Regular Interests (other than the Class S Certificates) conveyed in
trust to the Trustee, for the benefit of REMIC III, as holder of the REMIC II
Regular Interests, and the Class R-II Certificateholders pursuant to Section
2.07, and all amounts deposited therein, with respect to which a separate REMIC
election is to be made.
"REMIC II Regular Interest": Any of the five separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a "regular interest" in REMIC II. Each REMIC II Regular Interest
(other than REMIC II Regular Interest II-LTP) shall accrue interest at the
related REMIC II Remittance Rate in effect from time to time, and shall be
entitled to distributions of principal, subject to the terms and conditions
hereof, in an aggregate amount equal to its initial Uncertificated Balance as
set forth in the Preliminary Statement hereto. The designations for the
respective REMIC II Regular Interests are set forth in the Preliminary Statement
hereto.
"REMIC II Regular Interest II-LT1": One of the separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a Regular Interest in REMIC II. REMIC II Regular Interest II-LT1
shall accrue interest at the related REMIC II Remittance Rate in effect from
time to time, and shall be entitled to distributions of principal, subject to
the terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto.
"REMIC II Regular Interest II-LT2": One of the separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a Regular Interest in REMIC II. REMIC II Regular Interest II-LT2
shall accrue interest at the related REMIC II Remittance Rate in effect from
time to time, and shall be entitled to distributions of principal, subject to
the terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto.
-34-
<PAGE>
"REMIC II Regular Interest II-LT3": One of the separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a Regular Interest in REMIC II. REMIC II Regular Interest II-LT3
shall accrue interest at the related REMIC II Remittance Rate in effect from
time to time, and shall be entitled to distributions of principal, subject to
the terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto.
"REMIC II Regular Interest II-LTP": One of the separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a Regular Interest in REMIC II. REMIC II Regular Interest II-LTP
shall be entitled to any Prepayment Charges collected by the Master Servicer and
to a distribution of principal, subject to the terms and conditions hereof, in
an aggregate amount equal to its initial Uncertificated Balance as set forth in
the Preliminary Statement hereto.
"REMIC II Regular Interest II-LT2S": One of the separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a Regular Interest in REMIC II. REMIC II Regular Interest II-LT2S
shall accrue interest at the related REMIC II Remittance Rate in effect from
time to time on its related Uncertificated Notional Amount.
"REMIC II Remittance Rate": With respect to REMIC II Regular
Interest II-LT1 and REMIC II Regular Interest II-LT3, the weighted average of
the Expense Adjusted Mortgage Rates on the then outstanding Mortgage Loans and
REO Properties plus the Minimum Spread. With respect to REMIC II Regular
Interest II-LT2, the lesser of (i) the related One-Month LIBOR Pass-Through Rate
(based on the actual number of days elapsed in the applicable Interest Accrual
Period and a 360-day year) and (ii) the Net WAC Pass-Through Rate, multiplied by
the actual number of days elapsed in the related Interest Accrual Period divided
by 360. With respect to REMIC II Regular Interest II-LT2S, a rate per annum
equal to excess of the REMIC I Remittance Rate for the related Uncertificated
Corresponding Component over the REMIC II Remittance Rate for REMIC II Regular
Interest II-LT2.
"REMIC III": The segregated pool of assets consisting of all
of the REMIC II Regular Interests conveyed in trust to the Trustee, for the
benefit of the REMIC III Certificateholders pursuant to Section 2.09, and all
amounts deposited therein, with respect to which a separate REMIC election is to
be made.
"REMIC III Certificate": Any Regular Certificate (other than
any Class S Certificate) or Class R-III Certificate.
"REMIC III Certificateholder": The Holder of any REMIC III
Certificate.
"REMIC Provisions": Provisions of the federal income tax law
relating to real estate mortgage investment conduits, which appear at Section
860A through 860G of the Code, and related provisions, and proposed, temporary
and final regulations and published rulings, notices and announcements
promulgated thereunder, as the foregoing may be in effect from time to time.
-35-
<PAGE>
"Remittance Report": A report in form and substance acceptable
to the Trust Administrator on a magnetic disk or tape prepared by the Master
Servicer pursuant to Section 4.03 with such additions, deletions and
modifications as agreed to by the Trust Administrator and the Master Servicer.
"Rents from Real Property": With respect to any REO Property,
gross income of the character described in Section 856(d) of the Code as being
included in the term "rents from real property."
"REO Account": The account or accounts maintained, or caused
to be maintained, by the Master Servicer in respect of an REO Property pursuant
to Section 3.23.
"REO Disposition": The sale or other disposition of an REO
Property on behalf of REMIC I.
"REO Imputed Interest": As to any REO Property, for any
calendar month during which such REO Property was at any time part of REMIC I,
one month's interest at the applicable Net Mortgage Rate on the Stated Principal
Balance of such REO Property (or, in the case of the first such calendar month,
of the related Mortgage Loan, if appropriate) as of the close of business on the
Distribution Date in such calendar month.
"REO Principal Amortization": With respect to any REO
Property, for any calendar month, the excess, if any, of (a) the aggregate of
all amounts received in respect of such REO Property during such calendar month,
whether in the form of rental income, sale proceeds (including, without
limitation, that portion of the Termination Price paid in connection with a
purchase of all of the Mortgage Loans and REO Properties pursuant to Section
10.01 that is allocable to such REO Property) or otherwise, net of any portion
of such amounts (i) payable pursuant to Section 3.23(c) in respect of the proper
operation, management and maintenance of such REO Property or (ii) payable or
reimbursable to the Master Servicer pursuant to Section 3.23(d) for unpaid
Servicing Fees in respect of the related Mortgage Loan and unreimbursed
Servicing Advances and P&I Advances in respect of such REO Property or the
related Mortgage Loan, over (b) the REO Imputed Interest in respect of such REO
Property for such calendar month.
"REO Property": A Mortgaged Property acquired by the Master
Servicer on behalf of REMIC I through foreclosure or deed-in-lieu of
foreclosure, as described in Section 3.23.
"Request for Release": A release signed by a Servicing
Officer, in the form of Exhibit E-1 or Exhibit E-2 attached hereto.
"Required Overcollateralized Amount": With respect to any
Distribution Date, an amount equal to $40,292,329.54 subject to the following:
(i) if the Step Up Trigger has occurred, the Required Overcollateralized Amount
for such Distribution Date will be an amount equal to the entire aggregate
Stated Principal Balance of the Mortgage Loans and REO Properties as of such
Distribution Date; (ii) if the Step Up Trigger has not occurred but the Step Up
Spread Squeeze
-36-
<PAGE>
Test is met, the Required Overcollateralized Amount for such Distribution Date
will be an amount equal to the sum of (A) the Required Overcollateralized Amount
for such Distribution Date determined as though the Step Up Spread Squeeze Test
were not met plus (B) the Spread Squeeze Overcollateralization Increase Amount;
or (iii) if neither the Step Up Trigger has occurred nor the Step Up Spread
Squeeze Test is met but the Step Down Trigger has occurred, the Required
Overcollateralized Amount for such Distribution Date will be an amount equal to
the greater of (A) 0.50% of the aggregate Stated Principal Balance of the
Mortgage Loans as of the Cut-off Date and (B) the lesser of (x) $40,292,329.54
and (y) the Stepped Down Required Overcollateralized Percentage of the aggregate
Stated Principal Balance of the Mortgage Loans and REO Properties as of such
Distribution Date.
"Reserve Interest Rate": With respect to any Interest
Determination Date, the rate per annum that the Trust Administrator 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 Trust Administrator 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 Trust
Administrator can determine no such arithmetic mean, the lowest one-month U.S.
dollar lending rate which New York City banks selected by the Trust
Administrator are quoting on such Interest Determination Date to leading
European banks.
"Residential Dwelling": Any one of the following: (i) an
attached, detached or semi-detached one-family dwelling, (ii) an attached,
detached or semi-detached two- to four-family dwelling, (iii) a one-family
dwelling unit in a Fannie Mae eligible condominium project, or (iv) an attached,
detached or semi-detached one-family dwelling in a planned unit development,
none of which is a co-operative, mobile or manufactured home (as defined in 42
United States Code, Section 5402(6)).
"Residual Certificate": Any one of the Class R-I Certificates,
Class R-II Certificates or Class R-III Certificates.
"Residual Interest": The sole class of "residual interests" in
a REMIC within the meaning of Section 860G(a)(2) of the Code.
"Responsible Officer": When used with respect to the Trustee
or the Trust Administrator, the Chairman or Vice Chairman of the Board of
Directors or Trustees, the Chairman or Vice Chairman of the Executive or
Standing Committee of the Board of Directors or Trustees, the President, the
Chairman of the Committee on Trust Matters, any vice president, any assistant
vice president, the Secretary, any assistant secretary, the Treasurer, any
assistant treasurer, the Cashier, any assistant cashier, any trust officer or
assistant trust officer, the Controller and any assistant controller or any
other officer of the Trustee or the Trust Administrator, as the case may be,
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.
-37-
<PAGE>
"Rolling Delinquency Percentage": With respect to any
Distribution Date, the average of the Delinquency Percentages as of the last day
of each of the three (or one or two, in the case of the first and second
Distribution Dates) preceding calendar months.
"Rolling Termination Fee Percentage": With respect to any
Distribution Date, the average of the actual CPRs for the Mortgage Loans as of
the last day of each of the twelve preceding calendar months.
"Scheduled Principal Balance": With respect to any Mortgage
Loan: (a) as of the Cut-off Date, the outstanding principal balance of such
Mortgage Loan as of such date, net of the principal portion of all unpaid
Monthly Payments, if any, due on or before such date; (b) as of any Due Date
subsequent to the Cut-off Date up to and including the Due Date in the calendar
month in which a Liquidation Event occurs with respect to such Mortgage Loan,
the Scheduled Principal Balance of such Mortgage Loan as of the Cut-off Date,
minus the sum of (i) the principal portion of each Monthly Payment due on or
before such Due Date but subsequent to the Cut-off Date, whether or not
received, (ii) all Principal Prepayments received before such Due Date but after
the Cut-off Date, (iii) the principal portion of all Liquidation Proceeds and
Insurance Proceeds received before such Due Date but after the Cut-off Date, net
of any portion thereof that represents principal due (without regard to any
acceleration of payments under the related Mortgage and Mortgage Note) on a Due
Date occurring on or before the date on which such proceeds were received and
(iv) any Realized Loss incurred with respect thereto as a result of a Deficient
Valuation occurring before such Due Date, but only to the extent such Realized
Loss represents a reduction in the portion of principal of such Mortgage Loan
not yet due (without regard to any acceleration of payments under the related
Mortgage and Mortgage Note) as of the date of such Deficient Valuation; and (c)
as of any Due Date subsequent to the occurrence of a Liquidation Event with
respect to such Mortgage Loan, zero. With respect to any REO Property: (a) as of
any Due Date subsequent to the date of its acquisition on behalf of the Trust
Fund up to and including the Due Date in the calendar month in which a
Liquidation Event occurs with respect to such REO Property, an amount (not less
than zero) equal to the Scheduled Principal Balance of the related Mortgage Loan
as of the Due Date in the calendar month in which such REO Property was
acquired, minus the aggregate amount of REO Principal Amortization, if any, in
respect of such REO Property for all previously ended calendar months; and (b)
as of any Due Date subsequent to the occurrence of a Liquidation Event with
respect to such REO Property, zero.
"Seller": NC Capital Corporation or its successor in interest,
in its capacity as seller under the Mortgage Loan Purchase Agreement.
"Servicing Account": The account or accounts created and
maintained pursuant to Section 3.09.
"Servicing Advances": The reasonable "out-of-pocket" costs and
expenses incurred by the Master Servicer in connection with a default,
delinquency or other unanticipated event by the Master Servicer in the
performance of its servicing obligations, including, but not limited to, the
cost of (i) the preservation, restoration and protection of a Mortgaged
Property, (ii) any
-38-
<PAGE>
enforcement or judicial proceedings, including foreclosures, in respect of a
particular Mortgage Loan, (iii) the management (including reasonable fees in
connection therewith) and liquidation of any REO Property, and (iv) the
performance of its obligations under Section 3.01, Section 3.09, Section 3.14,
Section 3.16 and Section 3.23. The Master Servicer shall not be required to make
any Servicing Advance in respect of a Mortgage Loan or REO Property that, in the
good faith business judgment of the Master Servicer, would not be ultimately
recoverable from related Insurance Proceeds or Liquidation Proceeds on such
Mortgage Loan or REO Property as provided herein.
"Servicing Fee": With respect to each Mortgage Loan and for
any calendar month, an amount equal to one month's interest (or in the event of
any payment of interest which accompanies a Principal Prepayment in full or in
part made by the Mortgagor during such calendar month, interest for the number
of days covered by such payment of interest) at the applicable Servicing Fee
Rate on the same principal amount on which interest on such Mortgage Loan
accrues for such calendar month. A portion of such Servicing Fee may be retained
by any Sub- Servicer as its servicing compensation.
"Servicing Fee Rate": 0.50% per annum.
"Servicing Officer": Any officer of the Master Servicer
involved in, or responsible for, the administration and servicing of Mortgage
Loans, whose name and specimen signature appear on a list of Servicing Officers
furnished by the Master Servicer to the Trust Administrator, the Trustee, the
Certificate Insurer and the Depositor on the Closing Date, as such list may from
time to time be amended.
"Single Certificate": With respect to any Class of
Certificates (other than the Class P Certificates and the Residual
Certificates), a hypothetical Certificate of such Class evidencing a Percentage
Interest for such Class corresponding to an initial Certificate Principal
Balance or Notional Amount of $1,000. With respect to the Class P Certificates
and the Residual Certificates, a hypothetical Certificate of such Class
evidencing a 100% Percentage Interest in such Class.
"Spread Squeeze Condition": The Spread Squeeze Condition will
be met with respect to a Distribution Date if the Spread Squeeze Percentage for
such Distribution Date is less than (a) 2.0% for any Distribution Date prior to
January 2000, (b) 2.5% for any Distribution Date after December 1999 and prior
to January 2001 and (c) 3.0% for any Distribution Date beginning in January 2001
and any Distribution Date thereafter.
"Spread Squeeze Overcollateralization Increase Amount": For
any Distribution Date on which the Step Up Spread Squeeze Test is met, an amount
determined as follows:
(a) if the Spread Squeeze Condition is met for such
Distribution Date, the Spread Squeeze Overcollateralization Increase
Amount for such Distribution Date shall be equal to the product
obtained by multiplying (i) three, (ii) the excess, if any, of the
percentage applicable to such Distribution Date set forth in the
definition of "Spread Squeeze Condition" over the Spread Squeeze
Percentage for such Distribution Date and
-39-
<PAGE>
(iii) the aggregate Stated Principal Balance of the Mortgage Loans as
of the Cut-off Date; or
(b) if the Spread Squeeze Condition is not met for such
Distribution Date, the Spread Squeeze Overcollateralization Increase
Amount for such Distribution Date shall be equal to (A) the Spread
Squeeze Overcollateralization Increase Amount for the most recent
Distribution Date for which the Spread Squeeze Condition was met minus
(B) the product obtained by multiplying (i) one sixth of the amount
determined under clause (A) above and (ii) the number of consecutive
Distribution Dates through and including the current Distribution Date
for which the Spread Squeeze Condition was not met.
"Spread Squeeze Percentage": With respect to any Distribution
Date, the percentage equivalent of a fraction, the numerator of which is the
product of 12 and the Net Monthly Excess Spread for such Distribution Date, and
the denominator of which is the aggregate Stated Principal Balance of the
Mortgage Loans and REO Properties as of such Distribution Date.
"S&P": Standard & Poor's Ratings Services, a division of the
McGraw-Hill Companies, Inc., or its successor in interest.
"Startup Day": With respect to any of REMIC I, REMIC II and
REMIC III, the day designated as such pursuant to Section 11.01(b) hereof.
"Stated Principal Balance": With respect to any Mortgage Loan:
(a) as of any date of determination up to but not including the Distribution
Date on which the proceeds, if any, of a Liquidation Event with respect to such
Mortgage Loan would be distributed, the Scheduled Principal Balance of such
Mortgage Loan as of the Cut-off Date, as shown in the Mortgage Loan Schedule,
minus the sum of (i) the principal portion of each Monthly Payment due on a Due
Date subsequent to the Cut-off Date, to the extent received from the Mortgagor
or advanced by the Master Servicer and distributed pursuant to Section 4.01 on
or before such date of determination, (ii) all Principal Prepayments received
after the Cut-off Date, to the extent distributed pursuant to Section 4.01 on or
before such date of determination, (iii) all Liquidation Proceeds and Insurance
Proceeds applied by the Master Servicer as recoveries of principal in accordance
with the provisions of Section 3.16, to the extent distributed pursuant to
Section 4.01 on or before such date of determination, and (iv) any Realized Loss
incurred with respect thereto as a result of a Deficient Valuation made during
or prior to the Prepayment Period for the most recent Distribution Date
coinciding with or preceding such date of determination; and (b) as of any date
of determination coinciding with or subsequent to the Distribution Date on which
the proceeds, if any, of a Liquidation Event with respect to such Mortgage Loan
would be distributed, zero. With respect to any REO Property: (a) as of any date
of determination up to but not including the Distribution Date on which the
proceeds, if any, of a Liquidation Event with respect to such REO Property would
be distributed, an amount (not less than zero) equal to the Stated Principal
Balance of the related Mortgage Loan as of the date on which such REO Property
was acquired on behalf of REMIC I, minus the sum of (i) if such REO Property was
acquired before the Distribution Date in any calendar month, the principal
portion of the Monthly Payment due on the Due Date in the calendar month of
acquisition, to the extent advanced by the Master Servicer and distributed
-40-
<PAGE>
pursuant to Section 4.01 on or before such date of determination, and (ii) the
aggregate amount of REO Principal Amortization in respect of such REO Property
for all previously ended calendar months, to the extent distributed pursuant to
Section 4.01 on or before such date of determination; and (b) as of any date of
determination coinciding with or subsequent to the Distribution Date on which
the proceeds, if any, of a Liquidation Event with respect to such REO Property
would be distributed, zero.
"Stayed Funds": If the Master Servicer is the subject of a
proceeding under the federal Bankruptcy Code and the making of a Remittance (as
defined in Section 7.02(b)) is prohibited by Section 362 of the federal
Bankruptcy Code, funds that are in the custody of the Master Servicer, a trustee
in bankruptcy or a federal bankruptcy court and should have been the
subject of such Remittance absent such prohibition.
"Step Down Cumulative Loss Test": The Step Down Cumulative
Loss Test will be met with respect to a Distribution Date as follows: (i) for
the 36th through the 47nd Distribution Dates, if the Cumulative Loss Percentage
for such Distribution Date is 1.50% or less; (ii) for the 48th through the 59th
Distribution Dates, if the Cumulative Loss Percentage for such Distribution Date
is 2.00% or less; (iii) for the 60th through the 71th Distribution Dates, if the
Cumulative Loss Percentage for such Distribution Date is 2.40% or less; (iv) for
any Distribution Date after the 71th Distribution Date, if the Cumulative Loss
Percentage for such Distribution Date is 2.75% or less.
"Step Down Rolling Delinquency Test": The Step Down Rolling
Delinquency Test will be met with respect to a Distribution Date if the Rolling
Delinquency Percentage for such Distribution Date is 10% or less.
"Step Down Rolling Loss Test": The Step Down Rolling Loss Test
will be met with respect to a Distribution Date if the Annual Loss Percentage is
less than 1.00%.
"Step Down Trigger": For any Distribution Date after the 36th
Distribution Date, the Step Down Trigger will have occurred if each of the Step
Down Cumulative Loss Test, the Step Down Rolling Delinquency Test and the Step
Down Rolling Loss Test is met. In no event will the Step Down Trigger be deemed
to have occurred for the 36th Distribution Date or any preceding Distribution
Date.
"Stepped Down Required Overcollateralized Percentage": For any
Distribution Date for which the Step Down Trigger has occurred, a percentage
equal to (i) the percentage equivalent of a fraction, the numerator of which is
$40,292,329.54 and the denominator of which is the aggregate Stated Principal
Balance of the Mortgage Loans and REO Properties as of such Distribution Date,
minus (ii) the percentage equivalent of a fraction, the numerator of which is
the product of (A) the percentage calculated under clause (i) above minus 8.80%,
multiplied by (B) the number of consecutive Distribution Dates through and
including the Distribution Date for which the Stepped Down Required
Overcollateralized Percentage is being calculated, up to a maximum of six, for
which the Step Down Trigger has occurred, and the denominator of which is six.
-41-
<PAGE>
"Step Up Cumulative Loss Test": The Step Up Cumulative Loss
Test will be met with respect to a Distribution Date as follows: (i) for the 1st
through the 12th Distribution Dates, if the Cumulative Loss Percentage for such
Distribution Date is more than 1.00%; (ii) for the 13th through the 24th
Distribution Dates, if the Cumulative Loss Percentage for such Distribution Date
is more than 1.50%; (iii) for the 25th through the 36th Distribution Dates, if
the Cumulative Loss Percentage for such Distribution Date is more than 2.00%;
(iv) for the 37th through the 48th Distribution Dates, if the Cumulative Loss
Percentage for such Distribution Date is more than 2.50%; and (v) for the 49th
Distribution Date and any Distribution Date thereafter, if the Cumulative Loss
Percentage for such Distribution Date is more than 3.25%.
"Step Up Rolling Delinquency Test": The Step Up Rolling
Delinquency Test will be met with respect to a Distribution Date if the Rolling
Delinquency Percentage for such Distribution Date is more than 12.50%; provided,
however, that the Step Up Rolling Delinquency Test shall not be considered met
if the Overcollateralization Percentage is greater than or equal to the Rolling
Delinquency Percentage.
"Step Up Rolling Loss Test": The Step Up Rolling Loss Test
will be met with respect to a Distribution Date, if the Annual Loss Percentage
is equal to or more than 1.40%.
"Step Up Spread Squeeze Test": The Step Up Spread Squeeze Test
will be met with respect to a Distribution Date if the Spread Squeeze Condition
is met for such Distribution Date or was met for any of the five preceding
Distribution Dates.
"Step Up Trigger": For any Distribution Date, the Step Up
Trigger will have occurred if any one of the Step Up Cumulative Loss Test, the
Step Up Rolling Delinquency Test or the Step Up Rolling Loss Test is met.
"Sub-Servicer": Any Person with which the Master Servicer has
entered into a Sub- Servicing Agreement and which meets the qualifications of a
Sub-Servicer pursuant to Section 3.02.
"Sub-Servicing Account": An account established by a
Sub-Servicer which meets the requirements set forth in Section 3.08 and is
otherwise acceptable to the Master Servicer.
"Sub-Servicing Agreement": The written contract between the
Master Servicer and a Sub-Servicer relating to servicing and administration of
certain Mortgage Loans as provided in Section 3.02.
"Substitution Shortfall Amount": As defined in Section
2.03(d).
"Tax Returns": The federal income tax return on Internal
Revenue Service Form 1066, U.S. Real Estate Mortgage Investment Conduit Income
Tax Return, including Schedule Q thereto, Quarterly Notice to Residual Interest
Holders of REMIC Taxable Income or Net Loss Allocation, or any successor forms,
to be filed on behalf of the Trust Fund due to its classification as REMICs
under the REMIC Provisions, together with any and all other information reports
or
-42-
<PAGE>
returns that may be required to be furnished to the Certificateholders or filed
with the Internal Revenue Service or any other governmental taxing authority
under any applicable provisions of federal, state or local tax laws.
"Telerate Page 3750": The display designated as page "3750" on
the Dow Jones Telerate Capital Markets Report (or such other page as may replace
page 3750 on that report for the purpose of displaying London interbank offered
rates of major banks).
"Termination Fee": An amount equal to the present value
(discounted at the then applicable Pass-Through Rate on the Class A Certificates
plus 2.00% per annum) of any Certificate Insurer Premium that would have been
due if the call pursuant to Section 10.02 did not occur until the Distribution
Date on which the Clean-up Call would first become exercisable by the Majority
Class CE Certificateholder based on a prepayment rate equal to the faster of (a)
the Prepayment Assumption and (ii) the Rolling Termination Fee Percentage.
"Termination Price": As defined in Section 10.01.
"Terminator": As defined in Section 10.01.
"Transfer": Any direct or indirect transfer, sale, pledge,
hypothecation, or other form of assignment of any Ownership Interest in a
Certificate.
"Transfer Agreement": The agreement between the Mortgage Loan
Transferor and the Depositor, regarding the transfer of the Mortgage Loans by
the Mortgage Loan Transferor to the Depositor, substantially in the form of
Exhibit D-2 annexed hereto.
"Transferee": Any Person who is acquiring by Transfer any
Ownership Interest in a Certificate.
"Transferor": Any Person who is disposing by Transfer of any
Ownership Interest in a Certificate.
"Trust Administrator": U.S. Bank National Association, a
national banking association, or its successor in interest, or any successor
trustee appointed as herein provided.
"Trust Fund": Collectively, all of the assets of REMIC I,
REMIC II and REMIC III.
"Trustee": Firstar Bank Milwaukee, N.A., a national banking
association, or its successor in interest, or any successor trustee appointed as
herein provided.
"Uncertificated Balance": The amount of any REMIC I Regular
Interest (other than the Class S Certificates) or REMIC II Regular Interest
outstanding as of any date of determination. As of the Closing Date, the
Uncertificated Balance of each REMIC I Regular Interest (other than the Class S
Certificates) and each REMIC II Regular Interest shall equal the amount set
forth in
-43-
<PAGE>
the Preliminary Statement hereto as its initial uncertificated balance. On each
Distribution Date, the Uncertificated Balance of each REMIC I Regular Interest
(other than the Class S Certificates) and each REMIC II Regular Interest shall
be reduced by all distributions of principal made on such REMIC I Regular
Interest (other than the Class S Certificates) or such REMIC II Regular
Interest, as applicable, on such Distribution Date pursuant to Section 4.01 and,
if and to the extent necessary and appropriate, shall be further reduced on such
Distribution Date by Realized Losses as provided in Section 4.04 and the
Uncertificated Balances of REMIC I Regular Interest I-LT3 and REMIC II Regular
Interest II-LT3 shall be increased by interest deferrals as provided in Section
4.01(a)(1)(A)(ii) and Section 4.01(a)(1)(B)(i), respectively. The Uncertificated
Balance of each REMIC I Regular Interest (other than the Class S Certificates)
and each REMIC II Regular Interest shall never be less than zero.
"Uncertificated Corresponding Component": With respect to:
REMIC II Regular Interest II-LT1, REMIC I Regular Interest I-LT1; REMIC II
Regular Interest II-LT2 and REMIC II Regular Interest II-LT2S, REMIC I Regular
Interest I-LT2; REMIC II Regular Interest II-LT3, REMIC I Regular Interest
I-LT3; and REMIC II Regular Interest II-LTP, REMIC I Regular Interest I-LTP.
"Uncertificated Interest": With respect to any REMIC I Regular
Interest (other than the Class S Certificates) for any Distribution Date, one
month's interest at the REMIC I Remittance Rate applicable to such REMIC I
Regular Interest for such Distribution Date, accrued on the Uncertificated
Balance thereof immediately prior to such Distribution Date. With respect to any
REMIC II Regular Interest for any Distribution Date, one month's interest at the
REMIC II Remittance Rate applicable to such REMIC II Regular Interest for such
Distribution Date, accrued on the Uncertificated Balance thereof immediately
prior to such Distribution Date. Uncertificated Interest in respect of any REMIC
I Regular Interest I-LT1, REMIC I Regular Interest I-LT2, REMIC I Regular
Interest I-LT3, REMIC II Regular Interest II-LT1 and REMIC II Regular Interest
II-LT3, shall accrue on the basis of a 360-day year consisting of twelve 30-day
months; Uncertificated Interest in respect of REMIC II Regular Interest II-LT2
and REMIC II Regular Interest II-LT2S, shall accrue on the basis of a 360-day
year and the actual number of days in the applicable Interest Accrual Period.
Uncertificated Interest with respect to each Distribution Date, as to any REMIC
I Regular Interest (other than the Class S Certificates) or REMIC II Regular
Interest, shall be reduced by an amount equal to the sum of (a) the aggregate
Prepayment Interest Shortfall, if any, for such Distribution Date to the extent
not covered by payments pursuant to Section 3.24 and (b) the aggregate amount of
any Relief Act Interest Shortfall, if any allocated, in each case, to such REMIC
I Regular Interest or REMIC II Regular Interest pursuant to Section 1.02. In
addition, Uncertificated Interest with respect to each Distribution Date, as to
any REMIC I Regular Interest (other than the Class S Certificates) or REMIC II
Regular Interest, shall be reduced by Realized Losses, if any, allocated to such
REMIC I Regular Interest or REMIC II Regular Interest pursuant to Section 1.02
and Section 4.04.
"Uncertificated Notional Amount": With respect to REMIC II
Regular Interest II-LT2S, the Uncertificated Balance of REMIC I Regular Interest
I-LT2.
-44-
<PAGE>
"Uninsured Cause": Any cause of damage to a Mortgaged Property
such that the complete restoration of such property is not fully reimbursable by
the hazard insurance policies required to be maintained pursuant to Section
3.14.
"United States Person": A citizen or resident of the United
States, a corporation, partnership or other entity created or organized in, or
under the laws of, the United States or any political subdivision thereof
(except, in the case of a partnership, to the extent provided in regulations) or
an estate whose income is subject to United States federal income tax regardless
of its source, or a trust if a court within the United States is able to
exercise primary supervision over the administration of the trust and one or
more United States persons have the authority to control all substantial
decisions of the trust. To the extent prescribed in regulations by the Secretary
of the Treasury, which have not yet been issued, a trust which was in existence
on August 20, 1996 (other than a trust treated as owned by the grantor under
subpart E of part I of subchapter J of chapter 1 of the Code), and which was
treated as a United States person on August 20, 1996 may elect to continue to be
treated as a United States person notwithstanding the previous sentence. The
term "United States" shall have the meaning set forth in Section 7701 of the
Code.
"Value": With respect to any Mortgaged Property, the lesser of
(i) the lesser of (a) the value thereof as determined by an appraisal made for
the Originator of the Mortgage Loan at the time of origination of the Mortgage
Loan by an appraiser who met the minimum requirements of Fannie Mae and Freddie
Mac and (b) the value thereof as determined by a review appraisal conducted by
the Master Servicer (in its capacity as Originator) in accordance with the
Master Servicer's underwriting guidelines, and (ii) the purchase price paid for
the related Mortgaged Property by the Mortgagor with the proceeds of the
Mortgage Loan; provided, however, (A) in the case of a Refinanced Mortgage Loan,
such value of the Mortgaged Property is based solely upon the lesser of (1) the
value determined by an appraisal made for the Originator of such Refinanced
Mortgage Loan at the time of origination of such Refinanced Mortgage Loan by an
appraiser who met the minimum requirements of Fannie Mae and Freddie Mac and (2)
the value thereof as determined by a review appraisal conducted by the Master
Servicer (in its capacity as Originator) in accordance with the Master
Servicer's underwriting guidelines, and (B) in the case of a Mortgage Loan
originated in connection with a "lease-option purchase," such value of the
Mortgaged Property is based on the lower of the value determined by an appraisal
made for the Originator of such Mortgage Loan at the time of origination or the
sale price of such Mortgaged Property if the "lease option purchase price" was
set less than 12 months prior to origination, and is based on the value
determined by an appraisal made for the Originator of such Mortgage Loan at the
time of origination if the "lease option purchase price" was set 12 months or
more prior to origination.
"Voting Rights": The portion of the voting rights of all of
the Certificates which is allocated to any Certificate. With respect to any date
of determination, 97% of all Voting Rights will be allocated among the holders
of the Class A Certificates and the Class CE Certificates in proportion to the
then outstanding Certificate Principal Balances of their respective
Certificates, 1% of all Voting Rights will be allocated to the holders of the
Class P Certificates, 1% of all Voting Rights will be allocated to the holders
of the Class S Certificates and 1/3 of 1% of all Voting Rights will be allocated
among the holders of each Class of Residual Certificates.
-45-
<PAGE>
The Voting Rights allocated to each Class of Certificate shall be allocated
among Holders of each such Class in accordance with their respective Percentage
Interests as of the most recent Record Date.
SECTION 1.02. Allocation of Certain Interest Shortfalls.
For purposes of calculating the amount of Accrued Certificate
Interest and the amount of the Interest Distribution Amount for the Class A
Certificates and the Class CE Certificates for any Distribution Date, (1) the
aggregate amount of any Prepayment Interest Shortfalls (to the extent not
covered by payments by the Master Servicer pursuant to Section 3.24) incurred in
respect of the Mortgage Loans for any Distribution Date shall be allocated among
the Class CE Certificates on a PRO RATA basis based on, and to the extent of,
one month's interest at the then applicable respective Pass-Through Rate on the
respective Notional Amount of each such Certificate, (2) the aggregate amount of
any Relief Act Interest Shortfalls incurred in respect of the Mortgage Loans for
any Distribution Date shall be allocated first, among the Class CE Certificates
on a PRO RATA basis based on, and to the extent of, one month's interest at the
then applicable respective Pass-Through Rate on the respective Notional Amount
of each such Certificate and, thereafter, among the Class A Certificates on a
PRO RATA basis based on, and to the extent of, one month's interest at the then
applicable respective Pass-Through Rate on the respective Certificate Principal
Balance of each such Certificate and (3) the aggregate amount of any Realized
Losses incurred for any Distribution Date shall be allocated among the Class CE
Certificates on a PRO RATA basis based on, and to the extent of, one month's
interest at the then applicable respective Pass-Through Rate on the respective
Notional Amount of each such Certificate.
For purposes of calculating the amount of Uncertificated
Interest for the REMIC I Regular Interests (other than the Class S Certificates)
for any Distribution Date, (1) the aggregate amount of any Prepayment Interest
Shortfalls (to the extent not covered by payments by the Master Servicer
pursuant to Section 3.24) incurred in respect of the Mortgage Loans for any
Distribution Date shall be allocated first, to Uncertificated Interest payable
to REMIC I Regular Interest I-LT1 and REMIC I Regular Interest I-LT3 up to an
aggregate amount equal to the REMIC I Interest Loss Allocation Amount, 98% and
2%, respectively and (2) the aggregate amount of any Relief Act Interest
Shortfalls incurred in respect of the Mortgage Loans for any Distribution Date
shall be allocated first, to Uncertificated Interest payable to REMIC I Regular
Interest I-LT1 and REMIC I Regular Interest I-LT3 up to an aggregate amount
equal to the REMIC I Interest Loss Allocation Amount, 98% and 2%, respectively,
and thereafter among REMIC I Regular Interest I-LT1, REMIC I Regular Interest
I-LT2 and REMIC I Regular Interest I-LT3 PRO RATA based on, and to the extent
of, one month's interest at the then applicable respective Pass-Through Rate on
the respective Uncertificated Balance of each such REMIC I Regular Interest.
All Prepayment Interest Shortfalls and Relief Act Interest
Shortfalls on the REMIC II Regular Interests shall be allocated by the Trust
Administrator on each Distribution Date among the REMIC II Regular Interests in
the proportion that Prepayment Interest Shortfalls and Relief Act Interest
Shortfalls are allocated to the related Uncertificated Corresponding Component.
-46-
<PAGE>
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS;
ORIGINAL ISSUANCE OF CERTIFICATES
SECTION 2.01. Conveyance of the Mortgage Loans.
The Depositor, concurrently with the execution and delivery
hereof, does hereby transfer, assign, set over and otherwise convey to the
Trustee without recourse, for the benefit of the Certificateholders and the
Certificate Insurer, all the right, title and interest of the
Depositor,
including any security interest therein for the benefit of the Depositor, in and
to the Mortgage Loans identified on the Mortgage Loan Schedule, the rights of
the Depositor under the Mortgage Loan Purchase Agreement, and all other assets
included or to be included in REMIC I. Such assignment includes all interest and
principal received by the Depositor or the Master Servicer on or with respect to
the Mortgage Loans (other than payments of principal and interest due on such
Mortgage Loans on or before the Cut-off Date).
In connection with such transfer and assignment, the Depositor
does hereby deliver to, and deposit with, the Trust Administrator, as custodian
for the Trustee (in which capacity the Trust Administrator will, unless
otherwise specified, be acting under this Article II), the following documents
or instruments with respect to each Mortgage Loan so transferred and assigned (a
"Mortgage File"):
(i) the original Mortgage Note, endorsed in the
following form: "Pay to the order of Firstar Bank Milwaukee,
N.A., as Trustee 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 Trustee;
(ii) the original Mortgage with evidence of recording
thereon, and the original recorded power of attorney, if the
Mortgage was executed pursuant to a power of attorney, with
evidence of recording thereon;
(iii) an original Assignment of the Mortgage executed in
the following form: "Firstar Bank Milwaukee, N.A., as Trustee
under the applicable agreement";
(iv) the original recorded Assignment or Assignments of
the Mortgage showing a complete chain of assignment from the
originator to the Person assigning the Mortgage to the Trustee
as contemplated by the immediately preceding clause (iii);
(v) the original or copies of each assumption,
modification, written assurance or substitution agreement, if
any; and
-47-
<PAGE>
(vi) the original lender's title insurance policy,
together with all endorsements or riders that were issued with
or subsequent to the issuance of such policy, insuring the
priority of the Mortgage as a first lien on the Mortgaged
Property represented therein as a fee interest vested in the
Mortgagor, or in the event such original title policy is
unavailable, a written commitment or uniform binder or
preliminary report of title issued by the title insurance or
escrow company.
The Trust Administrator, at the expense of the Master
Servicer, shall promptly (within sixty Business Days following the later of the
Closing Date and the date of receipt by the Trust Administrator of the recording
information for a Mortgage, but in no event later than ninety days following the
Closing Date submit or cause to be submitted for recording, at no expense to the
Trust Fund, the Trustee, the Trust Administrator, the Certificate Insurer or the
Depositor, in the appropriate public office for real property records, each
Assignment referred to in Sections 2.01(iii) and (iv) above. In the event that
any such Assignment is lost or returned unrecorded because of a defect therein,
the Master Servicer shall promptly prepare or cause to be prepared a substitute
Assignment or cure or cause to be cured such defect, as the case may be, and
thereafter cause each such Assignment to be duly recorded.
With respect to a maximum of approximately 1.0% of the
Original Mortgage Loans, by outstanding principal balance of the Original
Mortgage Loans as of the Cut-off Date, if any original Mortgage Note referred to
in Section 2.01(i) above cannot be located, the obligations of the Depositor to
deliver such documents shall be deemed to be satisfied upon delivery to the
Trust Administrator of a photocopy of such Mortgage Note, if available, with a
lost note affidavit substantially in the form of Exhibit I attached hereto. If
any of the original Mortgage Notes for which a lost note affidavit was delivered
to the Trust Administrator is subsequently located, such original Mortgage Note
shall be delivered to the Trust Administrator within three Business Days. If any
of the documents referred to in Sections 2.01(ii), (iii) or (iv) above has as of
the Closing Date been submitted for recording but either (x) has not been
returned from the applicable public recording office or (y) has been lost or
such public recording office has retained the original of such document, the
obligations of the Depositor to deliver such documents shall be deemed to be
satisfied upon (1) delivery to the Trust Administrator of a copy of each such
document certified by the Master Servicer (in its capacity as Originator) in the
case of (x) above or the applicable public recording office in the case of (y)
above to be a true and complete copy of the original that was submitted for
recording and (2) if such copy is certified by the Master Servicer (in its
capacity as Originator), delivery to the Trust Administrator promptly upon
receipt thereof of either the original or a copy of such document certified by
the applicable public recording office to be a true and complete copy of the
original. Notice shall be provided to the Trustee, the Trust Administrator, the
Certificate Insurer and the Rating Agencies by the Originator if delivery
pursuant to clause (2) above will be made more than 180 days after the Closing
Date. If the original lender's title insurance policy was not delivered pursuant
to Section 2.01(vi) above, the Depositor shall deliver or cause to be delivered
to the Trust Administrator, promptly after receipt thereof, the original
lender's title insurance policy. The Depositor shall deliver or cause to be
delivered to the Trust Administrator promptly upon receipt thereof any other
original documents constituting a part of a Mortgage File received with respect
to any Mortgage Loan,
-48-
<PAGE>
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 Trust Administrator are and shall be held by or on behalf
of the Originator, the Seller, the Mortgage Loan Transferor, the Depositor or
the Master Servicer, as the case may be, in trust for the benefit of the Trustee
on behalf of the Certificateholders and the Certificate Insurer. In the event
that any such original document is required pursuant to the terms of this
Section to be a part of a Mortgage File, such document shall be delivered
promptly to the Trust Administrator. Any such original document delivered to or
held by the Depositor that is not required pursuant to the terms of this Section
to be a part of a Mortgage File, shall be delivered promptly to the Master
Servicer.
The Depositor herewith delivers to the Trustee and the Trust
Administrator an executed copy of the Mortgage Loan Purchase Agreement and the
Transfer Agreement. In addition to the foregoing, the Depositor shall cause the
Certificate Insurer to deliver the Policy to
the Trust Administrator for the benefit of the Certificateholders.
SECTION 2.02. Acceptance of REMIC I by Trustee.
The Trust Administrator, on behalf of the Trustee,
acknowledges receipt of the Policy and, subject to the provisions of Section
2.01 and subject to any exceptions noted on the exception report described in
the next paragraph below, the documents referred to in Section 2.01 (other than
such documents described in Section 2.01(v)) above and all other assets included
in the definition of "REMIC I" under clauses (i), (iii), (iv) and (v) (to the
extent of amounts deposited into the Distribution Account) and declares that it
holds and will hold such documents and the other documents delivered to it
constituting a Mortgage File, and that it holds or will hold all such assets and
such other assets included in the definition of "REMIC I" in trust for the
exclusive use and benefit of all present and future Certificateholders and the
Certificate Insurer.
The Trust Administrator agrees, for the benefit of the
Certificateholders and the Certificate Insurer, to review each Mortgage File on
or before the Closing Date and to certify in substantially the form attached
hereto as Exhibit C-1 that, as to each Mortgage Loan listed in the Mortgage Loan
Schedule (other than any Mortgage Loan paid in full or any Mortgage Loan
specifically identified in the exception report annexed thereto as not being
covered by such certification), (i) all documents constituting part of such
Mortgage File (other than such documents described in Section 2.01(v)) required
to be delivered to it pursuant to this Agreement are in its possession, (ii)
such documents have been reviewed by it and appear regular on their face and
relate to such Mortgage Loan, (iii) based on its examination and only as to the
foregoing, the information set forth in the Mortgage Loan Schedule that
corresponds to items (i) through (iii), (vi), (x)(A), (xi), (xii), (xv), (xvii),
(xviii), (xx) through (xxiii) and (xxv) 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 Trust Administrator 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
-49-
<PAGE>
represented purpose or whether they have actually been recorded or that they are
other than what they purport to be on their face, or (ii) to determine whether
any Mortgage File should include any of the documents specified in clause (v) of
Section 2.01.
Prior to the first anniversary date of this Agreement the
Trust Administrator shall deliver to the Depositor, the Master Servicer, the
Trustee and the Certificate Insurer a final certification in the form annexed
hereto as Exhibit C-2 evidencing the completeness of the Mortgage Files, with
any applicable exceptions noted thereon, and the Master Servicer shall
forward a copy thereof to any Sub-Servicer.
If in the process of reviewing the Mortgage Files and making
or preparing, as the case may be, the certifications referred to above, the
Trust Administrator 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 Trust Administrator shall so notify the Depositor,
the Master Servicer, the Trustee and the Certificate Insurer. In addition, upon
the discovery by the Depositor, the Master Servicer, the Trust Administrator or
the Trustee of a breach of any of the representations and warranties made by the
Originator or the Seller in the Mortgage Loan Purchase Agreement in respect of
any Mortgage Loan which materially adversely affects such Mortgage Loan or the
interests of the related Certificateholders in such Mortgage Loan, the party
discovering such breach shall give prompt written notice to the other parties
and the Certificate Insurer.
The Trust Administrator shall, at the written request and
expense of any Certificateholder, provide a written report to such
Certificateholder of all Mortgage Files released
to the Master Servicer for servicing purposes.
SECTION 2.03. Repurchase or Substitution of Mortgage Loans by
the Originator, the Seller or the Depositor.
(a) Upon discovery or receipt of notice of any materially
defective document in, or that a document is missing from, a Mortgage File or of
the breach by the Originator or the Seller of any representation, warranty or
covenant under the Mortgage Loan Purchase Agreement in respect of any Mortgage
Loan that materially adversely affects the value of such Mortgage Loan or the
interest therein of the Certificateholders, the Trust Administrator shall
promptly notify the Originator, the Seller, the Master Servicer, the Trustee and
the Certificate Insurer of such defect, missing document or breach and request
that the Originator or the Seller, as the case may be, deliver such missing
document or cure such defect or breach within 60 days from the date the
Originator or the Seller, as the case may be, was notified of such missing
document, defect or breach, and if the Originator or the Seller, as the case may
be, does not deliver such missing document or cure such defect or breach in all
material respects during such period, the Trustee, in accordance with Section
3.02(b), shall enforce the obligations of the Originator or the Seller, as the
case may be, under the Mortgage Loan Purchase Agreement to repurchase such
Mortgage Loan from REMIC I at the Purchase Price within 90 days after the date
on which the Originator or the Seller, as the case may be, was notified (subject
to Section 2.03(e)) of such missing document, defect or breach, if and to the
extent that the Originator or the Seller, as the case may
-50-
<PAGE>
be, is obligated to do so under the Mortgage Loan Purchase Agreement. The
Purchase Price for the repurchased Mortgage Loan shall be deposited in the
Collection Account and the Trust Administrator, upon receipt of written
certification from the Master Servicer of such deposit, shall release to the
Originator or the Seller, as the case may be, the related Mortgage File and the
Trustee shall execute and deliver such instruments of transfer or assignment, in
each case without recourse, as the Originator or the Seller, as the case may be,
shall furnish to it and as shall be necessary to vest in the Originator or the
Seller, as the case may be, any Mortgage Loan released pursuant hereto neither
the Trustee nor the Trust Administrator shall have any further responsibility
with regard to such Mortgage File. In lieu of repurchasing any such Mortgage
Loan as provided above, if so provided in the Mortgage Loan Purchase Agreement,
the Originator or the Seller, as the case may be, may cause such Mortgage Loan
to be removed from REMIC I (in which case it shall become a Deleted Mortgage
Loan) and substitute one or more Qualified Substitute Mortgage Loans in the
manner and subject to the limitations set forth in Section 2.03(d). It is
understood and agreed that the obligation of the Originator or the Seller, as
the case may be, to cure or to repurchase (or to substitute for) any Mortgage
Loan as to which a document is missing, a material defect in a constituent
document exists or as to which such a breach has occurred and is continuing
shall constitute the sole remedy respecting such omission, defect or breach
available to the Trustee, the Certificateholders and the Certificate Insurer.
(b) Subject to Section 2.03(e), within 90 days of the earlier
of discovery by the Depositor or receipt of notice by the Depositor of the
breach of any representation or warranty of the Depositor set forth in Section
2.04 with respect to any Mortgage Loan, which materially adversely affects the
value of such Mortgage Loan or the interest therein of the Certificateholders,
the Depositor shall (i) cure such breach in all material respects, (ii)
repurchase the Mortgage Loan from REMIC I at the Purchase Price or (iii) remove
such Mortgage Loan from REMIC I (in which case it shall become a Deleted
Mortgage Loan) and substitute one or more Qualified Substitute Mortgage Loans in
the manner and subject to the limitations set forth in Section 2.03(d). If any
such breach is a breach of any of the representations and warranties included in
Section 2.04(a)(iv), and the Depositor is unable to cure such breach, the
Depositor shall repurchase or substitute the smallest number of Mortgage Loans
as shall be required to make such representation or warranty true and correct.
The Purchase Price for any repurchased Mortgage Loan shall be delivered to the
Master Servicer for deposit in the Collection Account, and the Trust
Administrator, upon receipt of written certification from the Master Servicer of
such deposit, shall at the Depositor's direction release to the Depositor the
related Mortgage File and the Trustee shall execute and deliver such instruments
of transfer or assignment furnished by the Depositor, in each case without
recourse, as the Depositor shall furnish to it and as shall be necessary to vest
in the Depositor any Mortgage Loan released pursuant hereto.
(c) Within 90 days of the earlier of discovery by the Master
Servicer or receipt of notice by the Master Servicer of the breach of any
representation, warranty or covenant of the Master Servicer set forth in Section
2.05 which materially and adversely affects the interests of the
Certificateholders in any Mortgage Loan or Prepayment Charge, the Master
Servicer shall cure such breach in all material respects.
-51-
<PAGE>
(d) Any substitution of Qualified Substitute Mortgage Loans
for Deleted Mortgage Loans made pursuant to Section 2.03(a), in the case of the
Originator or the Seller, or Section 2.03(b), in the case of the Depositor, must
be effected prior to the date which is two years after the Startup Day for REMIC
I.
As to any Deleted Mortgage Loan for which the Originator or
the Seller or the Depositor substitutes a Qualified Substitute Mortgage Loan or
Loans, such substitution shall be effected by the Originator, the Seller or the
Depositor, as the case may be, delivering to the Trust Administrator, on behalf
of the Trustee, for such Qualified Substitute Mortgage Loan or
Loans,
the Mortgage Note, the Mortgage, the Assignment to the Trustee, and such other
documents and agreements, with all necessary endorsements thereon, as are
required by Section 2.01, together with an Officers' Certificate providing that
each such Qualified Substitute Mortgage Loan satisfies the definition thereof
and specifying the Substitution Shortfall Amount (as described below), if any,
in connection with such substitution. The Trust Administrator shall acknowledge
receipt for such Qualified Substitute Mortgage Loan or Loans and, within ten
Business Days thereafter, review such documents as specified in Section 2.02 and
deliver to the Depositor, the Master Servicer, the Trustee and the Certificate
Insurer, with respect to such Qualified Substitute Mortgage Loan or Loans, a
certification substantially in the form attached hereto as Exhibit C-1, with any
applicable exceptions noted thereon. Within one year of the date of
substitution, the Trust Administrator shall deliver to the Depositor, the Master
Servicer, the Trustee and the Certificate Insurer a certification substantially
in the form of Exhibit C-2 hereto with respect to such Qualified Substitute
Mortgage Loan or Loans, with any applicable exceptions noted thereon. Monthly
Payments due with respect to Qualified Substitute Mortgage Loans in the month of
substitution are not part of REMIC I and will be retained by the Depositor, the
Originator or the Seller, as the case may be. For the month of substitution,
distributions to Certificateholders will reflect the Monthly Payment due on such
Deleted Mortgage Loan on or before the Due Date in the month of substitution,
and the Depositor, the Originator or the Seller, as the case may be, shall
thereafter be entitled to retain all amounts subsequently received in respect of
such Deleted Mortgage Loan. The Depositor shall give or cause to be given
written notice to the Certificateholders that such substitution has taken place,
shall amend the Mortgage Loan Schedule to reflect the removal of such Deleted
Mortgage Loan from the terms of this Agreement and the substitution of the
Qualified Substitute Mortgage Loan or Loans and shall deliver a copy of such
amended Mortgage Loan Schedule to the Trustee and the Trust Administrator. Upon
such substitution, such Qualified Substitute Mortgage Loan or Loans shall
constitute part of the Mortgage Pool and shall be subject in all respects to the
terms of this Agreement and, in the case of a substitution effected by the
Originator or the Seller, the Mortgage Loan Purchase Agreement, including, in
the case of a substitution effected by the Originator or the Seller, all
applicable representations and warranties thereof included in the Mortgage Loan
Purchase Agreement, and in the case of a substitution effected by the Depositor,
all applicable representations and warranties thereof set forth in Section 2.04,
in each case as of the date of substitution.
For any month in which the Depositor, the Originator or the
Seller substitutes one or more Qualified Substitute Mortgage Loans for one or
more Deleted Mortgage Loans, the Master Servicer will determine the amount (the
"Substitution Shortfall Amount"), if any, by which the aggregate Purchase Price
of all such Deleted Mortgage Loans exceeds the aggregate of, as to
-52-
<PAGE>
each such Qualified Substitute Mortgage Loan, the Scheduled Principal Balance
thereof as of the date of substitution, together with one month's interest on
such Scheduled Principal Balance at the applicable Net Mortgage Rate, plus all
outstanding P&I Advances and Servicing Advances (including Nonrecoverable P&I
Advances and Nonrecoverable Servicing Advances) related thereto. On the date of
such substitution, the Depositor, the Originator or the Seller, as the case may
be, will deliver or cause to be delivered to the Master Servicer for deposit in
the Collection Account an amount equal to the Substitution Shortfall Amount, if
any, and the Trust Administrator, upon receipt of the related Qualified
Substitute Mortgage Loan or Loans and certification by the Master Servicer of
such deposit, shall release to the Depositor, the Originator or the Seller, as
the case may be, the related Mortgage File or Files and the Trustee shall
execute and deliver such instruments of transfer or assignment, in each case
without recourse, as the Depositor, the Originator or the Seller, as the case
may be, shall deliver to it and as shall be necessary to vest therein any
Deleted Mortgage Loan released pursuant hereto.
In addition, the Depositor, the Originator or the Seller, as
the case may be, shall obtain at its own expense and deliver to the Trust
Administrator, the Trustee and the Certificate Insurer an Opinion of Counsel to
the effect that such substitution will not cause (a) any federal tax to be
imposed on any of REMIC I, REMIC II or REMIC III, including without limitation,
any federal tax imposed on "prohibited transactions" under Section 860F(a)(1) of
the Code or on "contributions after the startup date" under Section 860G(d)(1)
of the Code, or (b) any of REMIC I, REMIC II or REMIC III to fail to qualify as
a REMIC at any time that any Certificate is outstanding.
(e) Upon discovery by the Depositor, the Originator, the
Seller, the Master Servicer, the Trustee, the Trust Administrator or the
Certificate Insurer that any Mortgage Loan does not constitute a "qualified
mortgage" within the meaning of Section 860G(a)(3) of the Code, the party
discovering such fact shall within two Business Days give written notice thereof
to the other parties and the Certificate Insurer. In connection therewith, the
Originator, the Seller or the Depositor shall repurchase or, subject to the
limitations set forth in Section 2.03(d), substitute one or more Qualified
Substitute Mortgage Loans for the affected Mortgage Loan within 90 days of the
earlier of discovery or receipt of such notice with respect to such affected
Mortgage Loan. Such repurchase or substitution shall be made by (i) the
Originator or the Seller, as the case may be, if the affected Mortgage Loan's
status as a non-qualified mortgage is or results from a breach of any
representation, warranty or covenant made by the Originator or the Seller, as
the case may be, under the Mortgage Loan Purchase Agreement, or (ii) the
Depositor, if the affected Mortgage Loan's status as a non-qualified mortgage is
a breach of any representation or warranty of the Depositor set forth in Section
2.04, or if its status as a non-qualified mortgage is a breach of no
representation or warranty. Any such repurchase or substitution shall be made in
the same manner as set forth in Section 2.03(a), if made by the Originator or
the Seller, or Section 2.03(b), if made by the Depositor. The Trustee and the
Trust Administrator shall reconvey to the Depositor, the Originator or the
Seller, as the case may be, the Mortgage Loan to be released pursuant hereto in
the same manner, and on the same terms and conditions, as it would a Mortgage
Loan repurchased for breach of a representation or warranty.
-53-
<PAGE>
SECTION 2.04. Representations and Warranties of the Depositor.
(a) The Depositor hereby represents and warrants to the Trust
Administrator and the Trustee for the benefit of the Certificateholders and the
Certificate Insurer that as of the
Closing Date or as of such other date specifically provided herein:
(i) The information set forth in the Mortgage Loan
Schedule for the Original Mortgage Loans is complete, true and
correct in all material respects at the date or dates
respecting which such information is furnished;
(ii) Except with respect to approximately 1.46% of the
Original Mortgage Loans which were 30 days or more but less
than 60 days delinquent in their Monthly Payment as of
November 30, 1998 and with respect to approximately 0.07% of
the Original Mortgage Loans which were 60 days or more but
less than 90 days delinquent in their Monthly Payment as of
November 30, 1998, in each case by outstanding principal
balance of the Original Mortgage Loans as of the Cutoff Date,
as of November 30, 1998, the Monthly Payment due under each
Original Mortgage Loan is not 30 or more days delinquent in
payment and has not been 30 or more days delinquent in payment
more than once in the twelve month period prior to November
30, 1998 (assuming that a "rolling" 30 day delinquency is
considered to be delinquent only once);
(iii) Each Original Mortgage Loan had an original term to
maturity of not greater than 30 years; each Original Mortgage
Loan is an adjustable-rate mortgage loan with payments
generally due on the first day of each month and each such
Mortgage Loan is fully amortizing; effective with the first
payment due after each Adjustment Date, the monthly payment
amount for each Original Mortgage Loan will be adjusted to an
amount which would amortize fully the outstanding principal
balance of such Mortgage Loan over its remaining term and pay
interest at the Mortgage Rate so adjusted; on the first
Adjustment Date and on each Adjustment Date thereafter, the
Mortgage Rate on each Original Mortgage Loan will be adjusted
to equal the sum of the Index and the related Gross Margin,
rounded to the nearest multiple of 0.125%, subject to the
Periodic Rate Cap, the Maximum Mortgage Rate and the Minimum
Mortgage Rate applicable to such Mortgage Loan;
(iv) (A) No more than approximately 28.45%,
approximately 12.30%, approximately 5.84%, approximately
5.04%, approximately 3.77%, approximately 3.63%, approximately
3.52% and approximately 3.32% of the Original Mortgage Loans,
by outstanding principal balance of the Original Mortgage
Loans as of the Cut-off Date, will be secured by Mortgaged
Properties located in California, Illinois, Ohio, Minnesota,
Colorado, Washington, Michigan and Florida, respectively, and
no more than 3.00% of the Original Mortgage Loans, by
outstanding principal balance of the Original Mortgage Loans
as of the Cut-off Date, will be secured by Mortgaged
Properties located in any other state; (B) as of
-54-
<PAGE>
the Cut-off Date, no more than approximately 0.28% of the
Original Mortgage Loans, by outstanding principal balance of
the Original Mortgage Loans as of the Cut-off Date, are
secured by Mortgaged Properties located in any one California
zip code area, and no more than approximately 17.51% of the
Original Mortgage Loans, by outstanding principal balance of
the Original Mortgage Loans as of the Cut-off Date, are
secured by units in two- to four-family dwellings,
condominiums, town houses, planned unit developments or
manufactured housing and; (C) at least approximately 82.49% of
the Original Mortgage Loans, by outstanding principal balance
of the Original Mortgage Loans as of the Cut-off Date, are
secured by real property with a single family residence
erected thereon;
(v) If the Mortgaged Property securing an Original
Mortgage Loan is identified in the Federal Register by the
Federal Emergency Management Agency ("FEMA") as having special
flood hazards, as of the Closing Date, such Mortgaged Property
is covered by a flood insurance policy that met the
requirements of FEMA at the time such policy was issued;
(vi) With respect to each Original Mortgage Loan, the
Loan-to-Value Ratio was less than or equal to 95% (except with
respect to 10 Mortgage Loans, representing 0.11% of the
Original Mortgage Loans, by outstanding principal balance of
the Original Mortgage Loans as of the Cut-off Date) at the
origination of such Original Mortgage Loan; and
(vii) With respect to at least approximately 88.42% of
the Original Mortgage Loans by outstanding principal balance
as of the Cut-off Date, at the time that such Mortgage Loan
was made, the Mortgagor represented that the Mortgagor would
occupy the Mortgaged Property as the Mortgagor's primary
residence. With respect to approximately 11.58% of the
Original Mortgage Loans by outstanding principal balance as of
the Cut-off Date, at the time that such Mortgage Loan was
made, the Mortgagor represented that the Mortgagor would
occupy the Mortgaged Property as the Mortgagor's secondary
residence or that the Mortgaged Property would be an investor
property.
(b) It is understood and agreed that the representations and
warranties set forth in this Section 2.04 shall survive delivery of the Mortgage
Files to the Trust Administrator and shall inure to the benefit of the
Certificateholders and the Certificate Insurer notwithstanding any restrictive
or qualified endorsement or assignment. Upon discovery by any of the Depositor,
the Master Servicer, the Trustee or the Trust Administrator of a breach of any
of the foregoing representations and warranties which materially and adversely
affects the value of any Mortgage Loan, Prepayment Charge or the interests
therein of the Certificateholders and the Certificate Insurer, the party
discovering such breach shall give prompt written notice to the other parties,
and in no event later than two Business Days from the date of such discovery. It
is understood and agreed that the obligations of the Depositor set forth in
Section 2.03(b) to cure, substitute for or repurchase a Mortgage Loan constitute
the sole remedies available to the Certificateholders or
-55-
<PAGE>
to the Trust Administrator or the Trustee on their behalf respecting a breach of
the representations and warranties contained in this Section 2.04.
SECTION 2.05. Representations, Warranties and Covenants of the
Master Servicer.
The Master Servicer hereby represents, warrants and covenants
to the Trust Administrator and the Trustee, for the benefit of each of the
Trustee, the Trust Administrator, the Certificateholders, the Certificate
Insurer and to the Depositor that as of the Closing Date or as
of such date specifically provided herein:
(i) The Master Servicer is a corporation duly
organized, validly existing and in good standing under the
laws of the State of California and is duly authorized and
qualified to transact any and all business contemplated by
this Agreement to be conducted by the Master Servicer in any
state in which a Mortgaged Property is located or is otherwise
not required under applicable law to effect such qualification
and, in any event, is in compliance with the doing business
laws of any such State, to the extent necessary to ensure its
ability to enforce each Mortgage Loan and to service the
Mortgage Loans in accordance with the terms of this Agreement;
(ii) The Master Servicer has the full power and
authority to conduct its business as presently conducted by it
and to execute, deliver and perform, and to enter into and
consummate, all transactions contemplated by this Agreement.
The Master Servicer has duly authorized the execution,
delivery and performance of this Agreement, has duly executed
and delivered this Agreement, and this Agreement, assuming due
authorization, execution and delivery by the Depositor, the
Trust Administrator and the Trustee, constitutes a legal,
valid and binding obligation of the Master Servicer,
enforceable against it in accordance with its terms except as
the enforceability thereof may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting the
enforcement of creditors' rights generally and by general
principles of equity;
(iii) The execution and delivery of this Agreement by the
Master Servicer, the servicing of the Mortgage Loans by the
Master Servicer hereunder, the consummation by the Master
Servicer of any other of the transactions herein contemplated,
and the fulfillment of or compliance with the terms hereof are
in the ordinary course of business of the Master Servicer and
will not (A) result in a breach of any term or provision of
the charter or by-laws of the Master Servicer or (B) conflict
with, result in a breach, violation or acceleration of, or
result in a default under, the terms of any other material
agreement or instrument to which the Master Servicer is a
party or by which it may be bound, or any statute, order or
regulation applicable to the Master Servicer of any court,
regulatory body, administrative agency or governmental body
having jurisdiction over the Master Servicer; and the Master
Servicer is not a party to, bound by, or in breach or
-56-
<PAGE>
violation of any indenture or other agreement or instrument,
or subject to or in violation of any statute, order or
regulation of any court, regulatory body, administrative
agency or governmental body having jurisdiction over it, which
materially and adversely affects or, to the Master Servicer's
knowledge, would in the future materially and adversely
affect, (x) the ability of the Master Servicer to perform its
obligations under this Agreement or (y) the business,
operations, financial condition, properties or assets of the
Master Servicer taken as a whole;
(iv) The Master Servicer is a HUD approved mortgagee
pursuant to Section 203 of the National Housing Act. No event
has occurred, including but not limited to a change in
insurance coverage, that would make the Master Servicer unable
to comply with HUD eligibility requirements or that would
require notification to HUD;
(v) The Master Servicer does not believe, nor does it
have any reason or cause to believe, that it cannot perform
each and every covenant made by it and contained in this
Agreement;
(vi) With respect to each Mortgage Loan, the Master
Servicer, or Sub- Servicer, if any, is in possession of a
complete Mortgage File, except for such documents as have been
delivered to the Trust Administrator;
(vii) No litigation is pending against the Master
Servicer that would materially and adversely affect the
execution, delivery or enforceability of this Agreement or the
ability of the Master Servicer to service the Mortgage Loans
or to perform any of its other obligations hereunder in
accordance with the terms hereof;
(viii) There are no actions or proceedings against, or
investigations known to it of, the Master Servicer before any
court, administrative or other tribunal (A) that might
prohibit its entering into this Agreement, (B) seeking to
prevent the consummation of the transactions contemplated by
this Agreement or (C) that might prohibit or materially and
adversely affect the performance by the Master Servicer of its
obligations under, or validity or enforceability of, this
Agreement;
(ix) No consent, approval, authorization or order of any
court or governmental agency or body is required for the
execution, delivery and performance by the Master Servicer of,
or compliance by the Master Servicer with, this Agreement or
the consummation by it of the transactions contemplated by
this Agreement, except for such consents, approvals,
authorizations or orders, if any, that have been obtained
prior to the Closing Date;
(x) The information set forth in the Prepayment Charge
Schedule (including the prepayment charge summary attached
thereto) is complete, true and correct in all material
respects on the date or dates when such information is
-57-
<PAGE>
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 or the collectability
thereof may be limited due to acceleration in connection with
a foreclosure) under applicable state law;
(xi) The Master Servicer will not waive any Prepayment
Charge unless it is waived in accordance with the standard set
forth in Section 3.01; and
(xii) The Master Servicer's computer and other systems
used in servicing mortgage loans will be modified and
maintained to operate in a manner such that at all times,
including on and after January 1, 2000, (i) the Master
Servicer can service the Mortgage Loans in accordance with the
terms of this Agreement if necessary and (ii) the Master
Servicer can operate its business in the same manner as it is
operating on the date hereof; provided that the Master
Servicer's ability to meet the requirements of this
representation may be limited in circumstances where it relies
(after reasonable due diligence in inquiring into and
obtaining reasonable compliance representations) on third
party systems which are incompatible with those of the Master
Servicer on or after January 1, 2000.
It is understood and agreed that the representations,
warranties and covenants set forth in this Section 2.05 shall survive delivery
of the Mortgage Files to the Trust Administrator and shall inure to the benefit
of the Trust Administrator, the Trustee, the Depositor, the Certificateholders
and the Certificate Insurer. Upon discovery by any of the Depositor, the Master
Servicer, the Trust Administrator or the Trustee of a breach of any of the
foregoing representations, warranties and covenants which materially and
adversely affects the value of any Mortgage Loan, Prepayment Charge or the
interests therein of the Certificateholders and the Certificate Insurer, the
party discovering such breach shall give prompt written notice (but in no event
later than two Business Days following such discovery) to the Trust
Administrator, the Trustee and the Certificate Insurer. Subject to Section 7.01,
unless such breach shall not be susceptible of cure within 90 days, the
obligation of the Master Servicer set forth in Section 2.03(c) to cure breaches
shall constitute the sole remedy against the Master Servicer available to the
Certificateholders, the Depositor or the Trust Administrator and the Trustee on
behalf of the Certificateholders respecting a breach of the representations,
warranties and covenants contained in this Section 2.05. Notwithstanding the
foregoing, within 90 days of the earlier of discovery by the Master Servicer or
receipt of notice by the Master Servicer of the breach of the representation or
covenant of the Master Servicer set forth in Sections 2.05(x) or 2.05(xi) above
which materially and adversely affects the interests of the Holders of the Class
P Certificates in any Prepayment Charge, the Master Servicer shall remedy such
breach as follows: (a) if the representation made by the Master Servicer in
Section 2.05(x) above is breached and a Principal Prepayment has occurred in the
applicable Prepayment Period, the Master Servicer must pay the amount of the
scheduled Prepayment Charge, for the benefit of the holder of the Class P
Certificate, by depositing such amount into the Collection Account, net of any
amount previously collected by the Master Servicer or paid by the Master
Servicer, for the benefit of the Holders of the Class P
-58-
<PAGE>
Certificates, in respect of such Prepayment Charge; and (b) if any of the
covenants made by the Master Servicer in Section 2.05(xi) above is breached, the
Master Servicer must pay the amount of such waived Prepayment Charge, for the
benefit of the holders of the Class P Certificates, by depositing such amount
into the Collection Account. The foregoing shall not, however, limit any
remedies available to the Certificateholders, the Depositor, the Trust
Administrator or the Trustee on behalf of the Certificateholders, pursuant to
the Mortgage Loan Purchase Agreement signed by the Master Servicer in its
capacity as Originator, respecting a breach of the representations, warranties
and covenants of the Master Servicer in its capacity as Originator contained in
the Mortgage Loan Purchase Agreement.
SECTION 2.06. Issuance of the Class R-I Certificates.
The Trustee acknowledges the assignment to it of the Mortgage
Loans and the delivery to it (or the Trust Administrator on its behalf) of the
Mortgage Files, subject to the provisions of Section 2.01 and Section 2.02,
together with the assignment to it of all other assets included in REMIC I, the
receipt of which is hereby acknowledged. Concurrently with such assignment and
delivery and in exchange therefor, the Trust Administrator, pursuant to the
written request of the Depositor executed by an officer of the Depositor, has
executed, authenticated and delivered to or upon the order of the Depositor, the
Class R-I Certificates in authorized denominations. The interests evidenced by
the Class R-I Certificates, together with the REMIC I Regular Interests,
constitute the entire beneficial ownership interest in REMIC I. The rights of
the Class R-I Certificateholders and REMIC II (as holder of the REMIC I Regular
Interests (other than the Class S Certificates) to receive distributions from
the proceeds of REMIC I in respect of the Class R-I Certificates and the REMIC I
Regular Interests (other than the Class S Certificates), respectively, and all
ownership interests evidenced or constituted by the Class R-I Certificates and
the REMIC I Regular Interests, shall be as set forth in this Agreement.
SECTION 2.07. Conveyance of the REMIC I Regular Interests;
Acceptance of REMIC II by the Trustee.
The Depositor, concurrently with the execution and delivery
hereof, does hereby transfer, assign, set over and otherwise convey to the
Trustee, without recourse all the right, title and interest of the Depositor in
and to the REMIC I Regular Interests (other than the Class S Certificates) for
the benefit of the Class R-II and REMIC III Certificateholders. The Trustee
acknowledges receipt of the REMIC I Regular Interests and declares that it holds
and will hold the same (other than the Class S Certificates) in trust for the
exclusive use and benefit of all present and future Class R-II
Certificateholders and REMIC III Certificateholders. The rights of the Class
R-II Certificateholders and REMIC III (as holder of the REMIC II Regular
Interests) to receive distributions from the proceeds of REMIC II in respect of
the Class R-II Certificates and REMIC II Regular Interests, respectively, and
all ownership interests evidenced or constituted by the Class R-II Certificates
and the REMIC II Regular Interests, shall be as set forth in this Agreement.
SECTION 2.08. Issuance of Class R-II Certificates.
-59-
<PAGE>
The Trustee acknowledges the assignment to it of the REMIC I
Regular Interests and, concurrently therewith and in exchange therefor, pursuant
to the written request of the Depositor executed by an officer of the Depositor,
the Trust Administrator has executed, authenticated and delivered to or upon the
order of the Depositor, the Class R-II Certificates in authorized denominations.
The interests evidenced by the Class R-II Certificates, together with the REMIC
II Regular Interests, constitute the entire beneficial ownership interest in
REMIC II.
SECTION 2.09. Conveyance of REMIC II Regular Interests;
Acceptance of REMIC III by the Trustee.
The Depositor, concurrently with the execution and delivery
hereof, does hereby transfer, assign, set over and otherwise convey to the
Trustee, without recourse all the right, title and interest of the Depositor in
and to the REMIC II Regular Interests for the benefit of the REMIC III
Certificateholders and the Certificate Insurer. The Trustee acknowledges receipt
of the REMIC II Regular Interests and declares that it holds and will hold the
same in trust for the exclusive use and benefit of all present and future REMIC
III Certificateholders and the Certificate Insurer. The rights of the REMIC III
Certificateholders to receive distributions from the proceeds of REMIC III in
respect of the REMIC III Certificates, and all ownership interests evidenced or
constituted by the REMIC III Certificates, shall be as set forth in this
Agreement.
SECTION 2.10. Issuance of REMIC III Certificates.
The Trustee acknowledges the assignment to it of the REMIC II
Regular Interests and, concurrently therewith and in exchange therefor, pursuant
to the written request of the Depositor executed by an officer of the Depositor,
the Trust Administrator has executed, authenticated and delivered to or upon the
order of the Depositor, the REMIC III Certificates in authorized denominations
evidencing the entire beneficial ownership interest in REMIC III.
-60-
<PAGE>
ARTICLE III
ADMINISTRATION AND SERVICING
OF THE MORTGAGE LOANS
SECTION 3.01. Master Servicer to Act as Master Servicer.
The Master Servicer shall service and administer the Mortgage
Loans on behalf of the Trustee and in the best interests of and for the benefit
of the Certificateholders and the Certificate Insurer (as determined by the
Master Servicer in its reasonable judgment) in accordance with the terms of this
Agreement and the respective Mortgage Loans and, to the extent consistent with
such terms, in the same manner in which it services and administers similar
mortgage loans for its own portfolio, giving due consideration to customary and
usual standards of practice of mortgage lenders and loan servicers administering
similar mortgage loans but without regard to:
(i) any relationship that the Master Servicer, any
Sub-Servicer or any Affiliate of the Master Servicer or any
Sub-Servicer may have with the related Mortgagor;
(ii) the ownership or non-ownership of any Certificate
by the Master Servicer or any Affiliate of the Master
Servicer;
(iii) the Master Servicer's obligation to make P&I
Advances or Servicing Advances; or
(iv) the Master Servicer's or any Sub-Servicer's right
to receive compensation for its services hereunder or with
respect to any particular transaction.
To the extent consistent with the foregoing, the Master Servicer (a) shall seek
to maximize the timely and complete recovery of principal and interest on the
Mortgage Notes and (b) shall waive (or permit a subservicer to waive) a
Prepayment Charge only under the following circumstances: (i) such waiver is
standard and customary in servicing similar Mortgage Loans and (ii) either (A)
such waiver would, in the reasonable judgement of the Master Servicer, maximize
recovery of total proceeds taking into account the value of such Prepayment
Charge and the related Mortgage Loan and, if such waiver is made in connection
with a refinancing of the related Mortgage Loan, such refinancing is related to
a default or a reasonably foreseeable default or (B) such waiver is made in
connection with a refinancing of the related Mortgage Loan unrelated to a
default or a reasonably foreseeable default where (x) the related mortgagor has
stated to the Master Servicer or an applicable subservicer an intention to
refinance the related Mortgage Loan and (y) the Master Servicer has concluded in
its reasonable judgement that the waiver of such Prepayment Charge would induce
such mortgagor to refinance with the Master Servicer. If a Prepayment Charge is
waived as permitted by meeting the standards described in clauses (i) and
(ii)(B) above, then the Master Servicer is required to pay the amount of such
waived Prepayment Charge, for the benefit of the Holders of the Class P
Certificates, by depositing such amount into the Collection Account
-61-
<PAGE>
together with and at the time that the amount prepaid on the related Mortgage
Loan is required to be deposited into the Collection Account. Notwithstanding
any other provisions of this Agreement, any payments made by the Master Servicer
in respect of any waived Prepayment Charges pursuant to clauses (i) and (ii)(B)
shall be deemed to be paid outside of the Trust Fund. Subject only to the
above-described servicing standards and the terms of this Agreement and of the
respective Mortgage Loans, the Master Servicer shall have full power and
authority, acting alone or through Sub-Servicers as provided in Section 3.02, to
do or cause to be done any and all things in connection with such servicing and
administration which it may deem necessary or desirable. Without limiting the
generality of the foregoing, the Master Servicer in its own name or in the name
of a Sub-Servicer is hereby authorized and empowered by the Trustee when the
Master Servicer believes it appropriate in its best judgment in accordance with
the servicing standards set forth above, to execute and deliver, on behalf of
the Certificateholders and the Trustee, and upon notice to the Trustee and the
Trust Administrator, any and all instruments of satisfaction or cancellation, or
of partial or full release or discharge, and all other comparable instruments,
with respect to the Mortgage Loans and the Mortgaged Properties and to institute
foreclosure proceedings or obtain a deed-in-lieu of foreclosure so as to convert
the ownership of such properties, and to hold or cause to be held title to such
properties, on behalf of the Trustee and Certificateholders. The Master Servicer
shall service and administer the Mortgage Loans in accordance with applicable
state and federal law and shall provide to the Mortgagors any reports required
to be provided to them thereby. The Master Servicer shall also comply in the
performance of this Agreement with all reasonable rules and requirements of each
insurer under any standard hazard insurance policy. Subject to Section 3.17, the
Trustee shall execute, at the written request of the Master Servicer, and
furnish to the Master Servicer and any Sub-Servicer any special or limited
powers of attorney and other documents necessary or appropriate to enable the
Master Servicer or any Sub-Servicer to carry out their servicing and
administrative duties hereunder and the Trustee shall not be liable for the
actions of the Master Servicer or any Sub- Servicers under such powers of
attorney.
Subject to Section 3.09 hereof, in accordance with the
standards of the preceding paragraph, the Master Servicer shall advance or cause
to be advanced funds as necessary for the purpose of effecting the timely
payment of taxes and assessments on the Mortgaged Properties, which advances
shall be Servicing Advances reimbursable in the first instance from related
collections from the Mortgagors pursuant to Section 3.09, and further as
provided in Section 3.11. Any cost incurred by the Master Servicer or by
Sub-Servicers in effecting the timely payment of taxes and assessments on a
Mortgaged Property shall not, for the purpose of calculating distributions to
Certificateholders, be added to the unpaid principal balance of the related
Mortgage Loan, notwithstanding that the terms of such Mortgage Loan so permit.
Notwithstanding anything in this Agreement to the contrary,
the Master Servicer may not make any future advances with respect to a Mortgage
Loan (except as provided in Section 4.03) and the Master Servicer shall not (i)
permit any modification with respect to any Mortgage Loan that would change the
Mortgage Rate, reduce or increase the principal balance (except for reductions
resulting from actual payments of principal) or change the final maturity date
on such Mortgage Loan (unless, as provided in Section 3.07, the Mortgagor is in
default with respect to the Mortgage Loan or such default is, in the judgment of
the Master Servicer, reasonably
-62-
<PAGE>
foreseeable) or (ii) permit any modification, waiver or amendment of any term of
any Mortgage Loan that would both (A) effect an exchange or reissuance of such
Mortgage Loan under Section 1001 of the Code (or Treasury regulations
promulgated thereunder) and (B) cause any of REMIC I, REMIC II or REMIC III to
fail to qualify as a REMIC under the Code or the imposition of any tax on
"prohibited transactions" or "contributions after the startup date" under the
REMIC Provisions.
The Master Servicer may delegate its responsibilities under
this Agreement; provided, however, that no such delegation shall release the
Master Servicer from the responsibilities or liabilities arising under this
Agreement.
SECTION 3.02. Sub-Servicing Agreements Between Master Servicer
and Sub-Servicers.
(a) The Master Servicer may enter into Sub-Servicing
Agreements with Sub- Servicers for the servicing and administration of the
Mortgage Loans; provided, however, that any Sub-Servicer shall be acceptable to
the Certificate Insurer and provided such agreements would not result in a
withdrawal or a downgrading by any Rating Agency of the rating or any shadow
rating on any Class of Certificates. The Trust Administrator and the Trustee are
hereby authorized to acknowledge, at the request of the Master Servicer, any
Sub-Servicing Agreement that meets the requirements applicable to Sub-Servicing
Agreements set forth in this Agreement and that is otherwise permitted under
this Agreement.
Each Sub-Servicer shall be (i) authorized to transact business
in the state or states where the related Mortgaged Properties it is to service
are situated, if and to the extent required by applicable law to enable the
Sub-Servicer to perform its obligations hereunder and under the Sub-Servicing
Agreement and (ii) a Freddie Mac or Fannie Mae approved mortgage servicer. Each
Sub-Servicing Agreement must impose on the Sub-Servicer requirements conforming
to the provisions set forth in Section 3.08 and provide for servicing of the
Mortgage Loans consistent with the terms of this Agreement. The Master Servicer
will examine each Sub-Servicing Agreement and will be familiar with the terms
thereof. The terms of any Sub-Servicing Agreement will not be inconsistent with
any of the provisions of this Agreement. The Master Servicer and the
Sub-Servicers may enter into and make amendments to the Sub-Servicing Agreements
or enter into different forms of Sub-Servicing Agreements; provided, however,
that any such amendments or different forms shall be consistent with and not
violate the provisions of this Agreement, and that no such amendment or
different form shall be made or entered into which could be reasonably expected
to be materially adverse to the interests of the Certificateholders without the
consent of the Certificate Insurer and the Holders of Certificates entitled to
at least 66% of the Voting Rights; provided, further, that the consent of the
Holders of Certificates entitled to at least 66% of the Voting Rights shall not
be required (i) to cure any ambiguity or defect in a Sub-Servicing Agreement,
(ii) to correct, modify or supplement any provisions of a Sub-Servicing
Agreement, or (iii) to make any other provisions with respect to matters or
questions arising under a Sub-Servicing Agreement, which, in each case, shall
not be inconsistent with the provisions of this Agreement. Any variation without
the consent of the Certificate Insurer and the Holders of Certificates entitled
to at least 66% of the Voting Rights from the provisions
-63-
<PAGE>
set forth in Section 3.08 relating to insurance or priority requirements of
Sub-Servicing Accounts, or credits and charges to the Sub-Servicing Accounts or
the timing and amount of remittances by the Sub-Servicers to the Master
Servicer, are conclusively deemed to be inconsistent with this Agreement and
therefore prohibited. The Master Servicer shall deliver to the Trustee, the
Trust Administrator and the Certificate Insurer copies of all Sub-Servicing
Agreements, and any amendments or modifications thereof, promptly upon the
Master Servicer's execution and delivery of such instruments.
(b) As part of its servicing activities hereunder, the Master
Servicer, for the benefit of the Trustee, the Certificateholders and the
Certificate Insurer, shall enforce the obligations of each Sub-Servicer under
the related Sub-Servicing Agreement and of the Originator and the Seller under
the Mortgage Loan Purchase Agreement, including, without limitation, any
obligation to make advances in respect of delinquent payments as required by a
Sub-Servicing Agreement, or to purchase a Mortgage Loan on account of missing or
defective documentation or on account of a breach of a representation, warranty
or covenant, as described in Section 2.03(a). Such enforcement, including,
without limitation, the legal prosecution of claims, termination of
Sub-Servicing Agreements, and the pursuit of other appropriate remedies, shall
be in such form and carried out to such an extent and at such time as the Master
Servicer, in its good faith business judgment, would require were it the owner
of the related Mortgage Loans. The Master Servicer shall pay the costs of such
enforcement at its own expense, and shall be reimbursed therefor only (i) from a
general recovery resulting from such enforcement, to the extent, if any, that
such recovery exceeds all amounts due in respect of the related Mortgage Loans,
or (ii) from a specific recovery of costs, expenses or attorneys' fees against
the party against whom such enforcement is directed. Enforcement of the Mortgage
Loan Purchase Agreement against the Seller and the Originator shall be effected
by the Master Servicer to the extent it is not the Originator, the Seller or an
Affiliate of the Seller, and otherwise by the Trustee in accordance with the
foregoing provisions of this paragraph.
SECTION 3.03. Successor Sub-Servicers.
The Master Servicer or the Certificate Insurer shall be
entitled to terminate any Sub- Servicing Agreement and the rights and
obligations of any Sub-Servicer pursuant to any Sub- Servicing Agreement in
accordance with the terms and conditions of such Sub-Servicing Agreement. In the
event of termination of any Sub-Servicer, all servicing obligations of such Sub-
Servicer shall be assumed simultaneously by the Master Servicer without any act
or deed on the part of such Sub-Servicer or the Master Servicer, and the Master
Servicer either shall service directly the related Mortgage Loans or shall enter
into a Sub-Servicing Agreement with a successor Sub-Servicer which qualifies
under Section 3.02.
Any Sub-Servicing Agreement shall include the provision that
such agreement may be immediately terminated by the Trust Administrator, the
Trustee (if the Trust Administrator is acting as Master Servicer) or the
Certificate Insurer without fee, in accordance with the terms of this Agreement,
in the event that the Master Servicer (or the Trust Administrator, if it is then
acting as Master Servicer) shall, for any reason, no longer be the Master
Servicer (including termination due to a Master Servicer Event of Default).
-64-
<PAGE>
SECTION 3.04. Liability of the Master Servicer.
Notwithstanding any Sub-Servicing Agreement or the provisions
of this Agreement relating to agreements or arrangements between the Master
Servicer and a Sub-Servicer or reference to actions taken through a Sub-Servicer
or otherwise, the Master Servicer shall remain obligated and primarily liable to
the Trustee, the Certificateholders and the Certificate Insurer for the
servicing and administering of the Mortgage Loans in accordance with the
provisions of Section 3.01 without diminution of such obligation or liability by
virtue of such Sub-Servicing Agreements or arrangements or by virtue of
indemnification from the Sub-Servicer and to the same extent and under the same
terms and conditions as if the Master Servicer alone were servicing and
administering the Mortgage Loans. The Master Servicer shall be entitled to enter
into any agreement with a Sub-Servicer for indemnification of the Master
Servicer by such Sub-Servicer and nothing contained in this Agreement shall be
deemed to limit or modify such indemnification.
SECTION 3.05. No Contractual Relationship Between
Sub-Servicers and the Trust Administrator, the Trustee or Certificateholders.
Any Sub-Servicing Agreement that may be entered into and any
transactions or services relating to the Mortgage Loans involving a Sub-Servicer
in its capacity as such shall be deemed to be between the Sub-Servicer and the
Master Servicer alone, and the Trust Administrator, the Trustee,
Certificateholders or the Certificate Insurer shall not be deemed parties
thereto and shall have no claims, rights, obligations, duties or liabilities
with respect to the Sub- Servicer except as set forth in Section 3.06. The
Master Servicer shall be solely liable for all fees owed by it to any
Sub-Servicer, irrespective of whether the Master Servicer's compensation
pursuant to this Agreement is sufficient to pay such fees.
SECTION 3.06. Assumption or Termination of Sub-Servicing
Agreements by Trust Administrator.
In the event the Master Servicer shall for any reason no
longer be the master servicer (including by reason of the occurrence of a Master
Servicer Event of Default), the Trust Administrator or its designee shall
thereupon assume all of the rights and obligations of the Master Servicer under
each Sub-Servicing Agreement that the Master Servicer may have entered into,
unless the Trust Administrator, the Trustee or the Certificate Insurer elects to
terminate any Sub- Servicing Agreement in accordance with its terms as provided
in Section 3.03. Upon such assumption, the Trust Administrator, its designee or
the successor servicer for the Trust Administrator appointed pursuant to Section
7.02 shall be deemed, subject to Section 3.03, to have assumed all of the Master
Servicer's interest therein and to have replaced the Master Servicer as a party
to each Sub-Servicing Agreement to the same extent as if each Sub-Servicing
Agreement had been assigned to the assuming party, except that (i) the Master
Servicer shall not thereby be relieved of any liability or obligations under any
Sub-Servicing Agreement that arose before it ceased to be the Master Servicer
and (ii) none of the Trust Administrator, its designee or any successor Master
Servicer shall be deemed to have assumed any liability or obligation of the
Master Servicer that arose before it ceased to be the Master Servicer.
-65-
<PAGE>
The Master Servicer at its expense shall, upon request of the
Trust Administrator, deliver to the assuming party all documents and records
relating to each Sub-Servicing Agreement and the Mortgage Loans then being
serviced and an accounting of amounts collected and held by or on behalf of it,
and otherwise use its best efforts to effect the orderly and efficient transfer
of the Sub-Servicing Agreements to the assuming party.
SECTION 3.07. Collection of Certain Mortgage Loan Payments.
The Master Servicer shall make reasonable efforts to collect
all payments called for under the terms and provisions of the Mortgage Loans,
and shall, to the extent such procedures shall be consistent with this Agreement
and the terms and provisions of any applicable insurance policies, follow such
collection procedures as it would follow with respect to mortgage loans
comparable to the Mortgage Loans and held for its own account. Consistent with
the foregoing, the Master Servicer may in its discretion (i) waive any late
payment charge or, if applicable, any penalty interest, or (ii) extend the due
dates for the Monthly Payments due on a Mortgage Note for a period of not
greater than 180 days; provided, however, that any extension pursuant to clause
(ii) above shall not affect the amortization schedule of any Mortgage Loan for
purposes of any computation hereunder, except as provided below. In the event of
any such arrangement pursuant to clause (ii) above, the Master Servicer shall
make timely advances on such Mortgage Loan during such extension pursuant to
Section 4.03 and in accordance with the amortization schedule of such Mortgage
Loan without modification thereof by reason of such arrangement. Notwithstanding
the foregoing, in the event that any Mortgage Loan is in default or, in the
judgment of the Master Servicer, such default is reasonably foreseeable, the
Master Servicer, consistent with the standards set forth in Section 3.01, may
also waive, modify or vary any term of such Mortgage Loan (including
modifications that would change the Mortgage Rate, forgive the payment of
principal or interest or extend the final maturity date of such Mortgage Loan),
accept payment from the related Mortgagor of an amount less than the Stated
Principal Balance in final satisfaction of such Mortgage Loan (such payment, a
"Short Pay-off"), or consent to the postponement of strict compliance with any
such term or otherwise grant indulgence to any Mortgagor (any and all such
waivers, modifications, variances, forgiveness of principal or interest,
postponements, or indulgences collectively referred to herein as "forbearance"),
provided, however, that in no event shall the Master Servicer grant any such
forbearance (other than as permitted by the second sentence of this Section)
with respect to any one Mortgage Loan more than once in any 12 month period or
more than three times over the life of such Mortgage Loan. The Master Servicer's
analysis supporting any forbearance and the conclusion that any forebearance
meets the standards of Section 3.01 (including the standard that such
forebearance will maximize the timely and complete recovery of principal and
interest on the Mortgage Notes) shall be reflected in writing in the Mortgage
File and shall be provided to the Certificate Insurer upon request.
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
-66-
<PAGE>
Eligible Account and shall comply with all requirements of this Agreement
relating to the Collection Account. The Sub-Servicer shall deposit in the
clearing account in which it customarily deposits payments and collections on
mortgage loans in connection with its mortgage loan servicing activities on a
daily basis, and in no event more than one Business Day after the Sub-
Servicer's receipt thereof, all proceeds of Mortgage Loans received by the
Sub-Servicer less its servicing compensation to the extent permitted by the
Sub-Servicing Agreement, and shall thereafter deposit such amounts in the
Sub-Servicing Account, in no event more than two Business Days after the receipt
of such amounts. The Sub-Servicer shall thereafter deposit such proceeds in the
Collection Account or remit such proceeds to the Master Servicer for deposit in
the Collection Account not later than two Business Days after the deposit of
such amounts in the Sub- Servicing Account. For purposes of this Agreement, the
Master Servicer shall be deemed to have received payments on the Mortgage Loans
when the Sub-Servicer receives such payments.
SECTION 3.09. Collection of Taxes, Assessments and Similar
Items; Servicing Accounts.
The Master Servicer shall establish and maintain, or cause to
be established and maintained, one or more accounts (the "Servicing Accounts"),
into which all collections from the Mortgagors (or related advances from
Sub-Servicers) for the payment of taxes, assessments, hazard insurance premiums
and comparable items for the account of the Mortgagors ("Escrow Payments") shall
be deposited and retained. Servicing Accounts shall be Eligible Accounts. The
Master Servicer shall deposit in the clearing account in which it customarily
deposits payments and collections on mortgage loans in connection with its
mortgage loan servicing activities on a daily basis, and in no event more than
one Business Day after the Master Servicer's receipt thereof, all Escrow
Payments collected on account of the Mortgage Loans and shall thereafter deposit
such Escrow Payments in the Servicing Accounts, in no event more than two
Business Days after the receipt of such Escrow Payments, all Escrow Payments
collected on account of the Mortgage Loans for the purpose of effecting the
timely payment of any such items as required under the terms of this Agreement.
Withdrawals of amounts from a Servicing Account may be made only to (i) effect
timely payment of taxes, assessments, hazard insurance premiums, and comparable
items; (ii) reimburse the Master Servicer (or a Sub-Servicer to the extent
provided in the related Sub-Servicing Agreement) out of related collections for
any advances made pursuant to Section 3.01 (with respect to taxes and
assessments) and Section 3.14 (with respect to hazard insurance); (iii) refund
to Mortgagors any sums as may be determined to be overages; (iv) pay interest,
if required and as described below, to Mortgagors on balances in the Servicing
Account; or (v) clear and terminate the Servicing Account at the termination of
the Master Servicer's obligations and responsibilities in respect of the
Mortgage Loans under this Agreement in accordance with Article X. As part of its
servicing duties, the Master Servicer or Sub-Servicers shall pay to the
Mortgagors interest on funds in the Servicing Accounts, to the extent required
by law and, to the extent that interest earned on funds in the Servicing
Accounts is insufficient, to pay such interest from its or their own funds,
without any reimbursement therefor.
-67-
<PAGE>
SECTION 3.10. Collection Account and Distribution Account.
(a) On behalf of the Trust Fund, the Master Servicer shall
establish and maintain, or cause to be established and maintained, one or more
accounts (such account or accounts, the "Collection Account"), held in trust for
the benefit of the Trustee, the Certificateholders and the Certificate Insurer.
On behalf of the Trust Fund, the Master Servicer shall deposit or cause to be
deposited in the clearing account in which it customarily deposits payments and
collections on mortgage loans in connection with its mortgage loan servicing
activities on a daily basis, and in no event more than one Business Day after
the Master Servicer's receipt thereof, and shall thereafter deposit in the
Collection Account, in no event more than two Business Days after the Master
Servicer's receipt thereof, as and when received or as otherwise required
hereunder, the following payments and collections received or made by it
subsequent to the Cut-off Date (other than in respect of principal or interest
on the related Mortgage Loans due on or before the Cut-off Date), 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 and amounts paid in connection with a purchase of
Mortgage Loans and REO Properties pursuant to Section 10.01);
(iv) any amounts required to be deposited pursuant to
Section 3.12 in connection with any losses realized on
Permitted Investments with respect to funds held in the
Collection Account;
(v) any amounts required to be deposited by the Master
Servicer pursuant to the second paragraph of Section 3.14(a)
in respect of any blanket policy deductibles;
(vi) all proceeds of any Mortgage Loan repurchased or
purchased in accordance with Section 2.03 or Section 10.01;
(vii) all amounts required to be deposited in
connection with shortfalls in principal amount of Qualified
Substitute Mortgage Loans pursuant to Section 2.03; and
(viii) all Prepayment Charges collected by the Master
Servicer in connection with the Principal Prepayment of any of
the Mortgage Loans.
-68-
<PAGE>
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, modification or assumption fees, or insufficient funds charges need not
be deposited by the Master Servicer in the Collection Account and may be
retained by the Master Servicer as additional compensation. In the event the
Master Servicer shall deposit in the Collection Account any amount not required
to be deposited therein, it may at any time withdraw such amount from the
Collection Account, any provision herein to the contrary notwithstanding.
(b) On behalf of the Trust Fund, the Trust Administrator, as
agent for the Trustee, shall establish and maintain one or more accounts (such
account or accounts, the "Distribution Account"), held in trust for the benefit
of the Trustee, the Certificateholders and the Certificate Insurer. On behalf of
the Trust Fund, the Master Servicer shall deliver to the Trust Administrator in
immediately available funds for deposit in the Distribution Account on or before
3:00 p.m. New York time (i) on the Master Servicer Remittance Date, that portion
of the Available Distribution Amount (calculated without regard to the
references in clause (2) of the definition thereof to amounts that may be
withdrawn from the Distribution Account) for the related Distribution Date then
on deposit in the Collection Account and the amount of all Prepayment Charges
collected by the Master Servicer in connection with the Principal Prepayment of
any of the Mortgage Loans then on deposit in the Collection Account, and (ii) on
each Business Day as of the commencement of which the balance on deposit in the
Collection Account exceeds $75,000 following any withdrawals pursuant to the
next succeeding sentence, the amount of such excess, but only if the Collection
Account constitutes an Eligible Account solely pursuant to clause (ii) of the
definition of "Eligible Account." If the balance on deposit in the Collection
Account exceeds $75,000 as of the commencement of business on any Business Day
and the Collection Account constitutes an Eligible Account solely pursuant to
clause (ii) of the definition of "Eligible Account," the Master Servicer shall,
on or before 3:00 p.m. New York time on such Business Day, withdraw from the
Collection Account any and all amounts payable or reimbursable to the Depositor,
the Master Servicer, the Trustee, the Trust Administrator, the Originator, the
Seller or any Sub-Servicer pursuant to Section 3.11 and shall pay such amounts
to the Persons entitled thereto.
(c) Funds in the Collection Account and the Distribution
Account may be invested in Permitted Investments in accordance with the
provisions set forth in Section 3.12. The Master Servicer shall give notice to
the Trustee, the Trust Administrator and the Certificate Insurer of the location
of the Collection Account maintained by it when established and prior to any
change thereof. The Trust Administrator shall give notice to the Master
Servicer, the Depositor, the Trustee and the Certificate Insurer of the location
of the Distribution Account when established and prior to any change thereof.
(d) Funds held in the Collection Account at any time may be
delivered by the Master Servicer to the Trust Administrator for deposit in an
account (which may be the Distribution Account and must satisfy the standards
for the Distribution Account as set forth in the definition thereof) and for all
purposes of this Agreement shall be deemed to be a part of the Collection
Account; provided, however, that the Trustee and the Trust Administrator shall
have
-69-
<PAGE>
the sole authority to withdraw any funds held pursuant to this subsection (d).
In the event the Master Servicer shall deliver to the Trust Administrator for
deposit in the Distribution Account any amount not required to be deposited
therein, it may at any time request that the Trust Administrator withdraw such
amount from the Distribution Account and remit to it any such amount, any
provision herein to the contrary notwithstanding. In addition, the Master
Servicer, with respect to items (i) through (v) below, shall deliver to the
Trust Administrator from time to time for deposit, and the Trust Administrator,
with respect to items (i) through (vi) below, shall so deposit, in the
Distribution Account:
(i) any P&I Advances, as required pursuant to Section
4.03;
(ii) any amounts required to be deposited pursuant to
Section 3.23(d) or (f) in connection with any REO Property;
(iii) any amounts to be paid in connection with a
purchase of Mortgage Loans and REO Properties pursuant to
Section 10.01;
(iv) any amounts required to be deposited pursuant to
Section 3.24 in connection with any Prepayment Interest
Shortfall;
(v) any Stayed Funds, as soon as permitted by the
federal bankruptcy court having jurisdiction in such matters;
and
(vi) any amounts required to be transferred from the
Policy Payments Account pursuant to Section 9.04(b) on any
Distribution Date.
(e) Promptly upon receipt of any Stayed Funds, whether from
the Master Servicer, a trustee in bankruptcy, federal bankruptcy court or other
source, the Trust Administrator shall deposit such funds in the Distribution
Account, subject to withdrawal thereof pursuant to Section 7.02(b) or as
otherwise permitted hereunder.
(f) The Master Servicer shall deposit in the Collection
Account or Distribution Account, as the case may be, any amounts required to be
deposited pursuant to Section 3.12(b) in connection with losses realized on
Permitted Investments with respect to funds held in the Collection Account or
Distribution Account, respectively.
SECTION 3.11. Withdrawals from the Collection Account and
Distribution Account.
(a) The Master Servicer shall, from time to time, make
withdrawals from the Collection Account for any of the following purposes or as
described in Section 4.03:
(i) to remit to the Trust Administrator for deposit in
the Distribution Account the amounts required to be so
remitted pursuant to Section 3.10(b) or permitted to be so
remitted pursuant to the first sentence of Section 3.10(d);
-70-
<PAGE>
(ii) subject to Section 3.16(d), to reimburse the Master
Servicer for P&I Advances, but only to the extent of amounts
received which represent Late Collections (net of the related
Servicing Fees) of Monthly Payments on Mortgage Loans with
respect to which such P&I Advances were made in accordance
with the provisions of Section 4.03;
(iii) subject to Section 3.16(d), to pay the Master
Servicer or any Sub- Servicer (a) any unpaid Servicing Fees,
(b) any unreimbursed Servicing Advances with respect to each
Mortgage Loan, but only to the extent of any Late Collections,
Liquidation Proceeds and Insurance Proceeds received with
respect to such Mortgage Loan, and (c) any Nonrecoverable
Servicing Advances with respect to the final liquidation of a
Mortgage Loan, but only to the extent that Late Collections,
Liquidation Proceeds and Insurance Proceeds received with
respect to such Mortgage Loan are insufficient to reimburse
the Master Servicer or any Sub- Servicer for Servicing
Advances;
(iv) to pay to the Master Servicer as servicing
compensation (in addition to the Servicing Fee) on the Master
Servicer Remittance Date any interest or investment income
earned on funds deposited in the Collection Account;
(v) to pay to the Master Servicer, the Depositor, the
Originator or the Seller, as the case may be, with respect to
each Mortgage Loan that has previously been purchased or
replaced pursuant to Section 2.03 or Section 3.16(c) all
amounts received thereon subsequent to the date of purchase or
substitution, as the case may be;
(vi) to reimburse the Master Servicer for any P&I
Advance previously made which the Master Servicer has
determined to be a Nonrecoverable P&I Advance in accordance
with the provisions of Section 4.03;
(vii) to reimburse the Master Servicer or the Depositor
for expenses incurred by or reimbursable to the Master
Servicer or the Depositor, as the case may be, pursuant to
Section 6.03;
(viii) to reimburse the Master Servicer, the Trustee or
the Trust Administrator, as the case may be, for expenses
reasonably incurred in connection with any breach or defect
giving rise to the purchase obligation under Section 2.03 or
Section 2.04 of this Agreement, including any expenses arising
out of the enforcement of the purchase obligation;
(ix) to pay, or to reimburse the Master Servicer for
Servicing Advances in respect of, expenses incurred in
connection with any Mortgage Loan pursuant to Section 3.16(b);
and
-71-
<PAGE>
(x) to clear and terminate the Collection Account
pursuant to Section 10.01.
The Master Servicer shall keep and maintain separate accounting, on a
Mortgage Loan by Mortgage Loan basis, for the purpose of justifying any
withdrawal from the Collection Account, to the extent held by or on behalf of
it, pursuant to subclauses (ii), (iii), (iv), (v), (vi), (viii) and (ix) above.
The Master Servicer shall provide written notification to the Trust
Administrator, on or prior to the next succeeding Master Servicer Remittance
Date, upon making any withdrawals from the Collection Account pursuant to
subclauses (vi) and (vii) above; provided that an Officer's Certificate in the
form described under Section 4.03(d) shall suffice for such written notification
to the Trust Administrator in respect hereof.
(b) The Trust Administrator shall, from time to time, make
withdrawals from the Distribution Account, for any of the following purposes,
without priority:
(i) to make distributions to Certificateholders and the
Certificate Insurer in accordance with Section 4.01;
(ii) to pay to itself and the Trustee amounts to which
each is entitled pursuant to Section 8.05;
(iii) to pay to the Master Servicer on each
Distribution Date as servicing compensation any interest or
investment income earned on funds deposited in the
Distribution Account pursuant to Section 3.12(b);
(iv) to reimburse itself pursuant to Section 7.02;
(v) to pay any amounts in respect of taxes pursuant to
Section 11.01(g)(iii); and
(vi) to clear and terminate the Distribution Account
pursuant to Section 10.01.
Notwithstanding the foregoing, the Trust Administrator shall be
entitled to withdraw amounts from the Distribution Account to transfer funds to
the Expense Account on the Business Day immediately preceding each Distribution
Date pursuant to Section 3.25(b) prior to any payments to Certificateholders and
the Certificate Insurer pursuant to Section 4.01.
SECTION 3.12. Investment of Funds in the Collection Account,
the Expense Account and the Distribution
Account.
(a) The Master Servicer may direct any depository institution
maintaining the Collection Account, the Distribution Account and the Expense
Account (each, for purposes of this Section 3.12, an "Investment Account") to
invest the funds (other than the Initial Deposit) in such Investment Account in
one or more Permitted Investments bearing interest or sold at a discount,
-72-
<PAGE>
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 Trust
Administrator 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 Trust Administrator is the obligor thereon. All such Permitted
Investments shall be held to maturity, unless payable on demand. Any investment
of funds in an Investment Account shall be made in the name of the Trust
Administrator (in its capacity as such), as agent for the Trustee, or in the
name of a nominee of the Trust Administrator. The Trust Administrator shall be
entitled to sole possession (except with respect to investment direction of
funds held in the Collection Account, the Distribution Account and the Expense
Account and any income and gain realized thereon) over each such investment, and
any certificate or other instrument evidencing any such investment shall be
delivered directly to the Trust Administrator or its agent, together with any
document of transfer necessary to transfer title to such investment to the Trust
Administrator or its nominee. In the event amounts on deposit in an Investment
Account are at any time invested in a Permitted Investment payable on demand,
the Trust Administrator shall:
(x) consistent with any notice required to be given
thereunder, demand that payment thereon be made on
the last day such Permitted Investment may otherwise
mature hereunder in an amount equal to the lesser of
(1) all amounts then payable thereunder and (2) the
amount required to be withdrawn on such date; and
(y) demand payment of all amounts due thereunder promptly
upon determination by a Responsible Officer of the
Trust Administrator that such Permitted Investment
would not constitute a Permitted Investment in
respect of funds thereafter on deposit in the
Investment Account.
(b) All income and gain realized from the investment of funds
deposited in the Collection Account, the Distribution Account, the Expense
Account and any REO Account held by or on behalf of the Master Servicer shall be
for the benefit of the Master Servicer and shall be subject to its withdrawal in
accordance with Section 3.11 or Section 3.23, as applicable, or withdrawal by
the Trustee or the Trust Administrator in accordance with Section 3.11 or
Section 3.25, as applicable. The Master Servicer shall deposit in the Collection
Account, the Distribution Account, the Expense Account or any REO Account, as
applicable, the amount of any loss of principal incurred in respect of any such
Permitted Investment made with funds in such accounts immediately upon
realization of such loss.
(c) Except as otherwise expressly provided in this Agreement,
if any default occurs in the making of a payment due under any Permitted
Investment, or if a default occurs in any other performance required under any
Permitted Investment, the Trustee may and, subject to Section 8.01 and Section
8.02(v), upon the request of the Certificate Insurer or the Holders of
Certificates representing more than 50% of the Voting Rights allocated to any
Class of Certificates, shall take such action as may be appropriate to enforce
such payment or performance, including the institution and prosecution of
appropriate proceedings.
-73-
<PAGE>
SECTION 3.13. [intentionally omitted]
SECTION 3.14. Maintenance of Hazard Insurance and Errors and
Omissions and Fidelity Coverage.
(a) The Master Servicer shall cause to be maintained for each
Mortgage Loan fire insurance with extended coverage on the related Mortgaged
Property in an amount which is at least equal to the lesser of the current
principal balance of such Mortgage Loan and the amount necessary to fully
compensate for any damage or loss to the improvements that are a part of such
property on a replacement cost basis, in each case in an amount not less than
such amount as is necessary to avoid the application of any coinsurance clause
contained in the related hazard insurance policy. The Master Servicer shall also
cause to be maintained fire insurance with extended coverage on each REO
Property in an amount which is at least equal to the lesser of (i) the maximum
insurable value of the improvements which are a part of such property and (ii)
the outstanding principal balance of the related Mortgage Loan at the time it
became an REO Property, plus accrued interest at the Mortgage Rate and related
Servicing Advances. The Master Servicer will comply in the performance of this
Agreement with all reasonable rules and requirements of each insurer under any
such hazard policies. Any amounts to be collected by the Master Servicer under
any such policies (other than amounts to be applied to the restoration or repair
of the property subject to the related Mortgage or amounts to be released to the
Mortgagor in accordance with the procedures that the Master Servicer would
follow in servicing loans held for its own account, subject to the terms and
conditions of the related Mortgage and Mortgage Note) shall be deposited in the
Collection Account, subject to withdrawal pursuant to Section 3.11, if received
in respect of a Mortgage Loan, or in the REO Account, subject to withdrawal
pursuant to Section 3.23, if received in respect of an REO Property. Any cost
incurred by the Master Servicer in maintaining any such insurance shall not, for
the purpose of calculating distributions to Certificateholders and the
Certificate Insurer, be added to the unpaid principal balance of the related
Mortgage Loan, notwithstanding that the terms of such Mortgage Loan so permit.
It is understood and agreed that no earthquake or other additional insurance is
to be required of any Mortgagor other than pursuant to such applicable laws and
regulations as shall at any time be in force and as shall require such
additional insurance. If the Mortgaged Property or REO Property is at any time
in an area identified in the Federal Register by the Federal Emergency
Management Agency as having special flood hazards and flood insurance has been
made available, the Master Servicer will cause to be maintained a flood
insurance policy in respect thereof. Such flood insurance shall be in an amount
equal to the lesser of (i) the unpaid principal balance of the related Mortgage
Loan and (ii) the maximum amount of such insurance available for the related
Mortgaged Property under the national flood insurance program (assuming that the
area in which such Mortgaged Property is located is participating in such
program).
In the event that the Master Servicer shall obtain and
maintain a blanket policy with an insurer having a General Policy Rating of A:X
or better in Best's Key Rating Guide (or such other rating that is comparable to
such rating) insuring against hazard losses on all of the Mortgage Loans, it
shall conclusively be deemed to have satisfied its obligations as set forth in
the first two sentences of this Section 3.14, it being understood and agreed
that such policy may contain a deductible clause, in which case the Master
Servicer shall, in the event that there shall not have
-74-
<PAGE>
been maintained on the related Mortgaged Property or REO Property a policy
complying with the first two sentences of this Section 3.14, and there shall
have been one or more losses which would have been covered by such policy,
deposit to the Collection Account from its own funds the amount not otherwise
payable under the blanket policy because of such deductible clause. In
connection with its activities as administrator and servicer of the Mortgage
Loans, the Master Servicer agrees to prepare and present, on behalf of itself,
the Trustee, Certificateholders and the Certificate Insurer, claims under any
such blanket policy in a timely fashion in accordance with the terms of such
policy.
(b) The Master Servicer shall keep in force during the term of
this Agreement a policy or policies of insurance covering errors and omissions
for failure in the performance of the Master Servicer's obligations under this
Agreement, which policy or policies shall be in such form and amount that would
meet the requirements of Fannie Mae or Freddie Mac if it were the purchaser of
the Mortgage Loans, unless the Master Servicer has obtained a waiver of such
requirements from Fannie Mae or Freddie Mac. The Master Servicer shall also
maintain a fidelity bond in the form and amount that would meet the requirements
of Fannie Mae or Freddie Mac, unless the Master Servicer has obtained a waiver
of such requirements from Fannie Mae or Freddie Mac. The Master Servicer shall
be deemed to have complied with this provision if an Affiliate of the Master
Servicer has such errors and omissions and fidelity bond coverage and, by the
terms of such insurance policy or fidelity bond, the coverage afforded
thereunder extends to the Master Servicer. Any such errors and omissions policy
and fidelity bond shall by its terms not be cancelable without thirty days'
prior written notice to the Trustee and the Trust Administrator. The Master
Servicer shall also cause each Sub-Servicer to maintain a policy of insurance
covering errors and omissions and a fidelity bond which would meet such
requirements.
SECTION 3.15. Enforcement of Due-On-Sale Clauses; Assumption
Agreements.
The Master Servicer will, to the extent it has knowledge of
any conveyance or prospective conveyance of any Mortgaged Property by any
Mortgagor (whether by absolute conveyance or by contract of sale, and whether or
not the Mortgagor remains or is to remain liable under the Mortgage Note and/or
the Mortgage), exercise its rights to accelerate the maturity of such Mortgage
Loan under the "due-on-sale" clause, if any, applicable thereto; provided,
however, that the Master Servicer shall not be required to take such action if
in its sole business judgment the Master Servicer believes it is not in the best
interests of the Trust Fund and shall not exercise any such rights if prohibited
by law from doing so. If the Master Servicer reasonably believes it is unable
under applicable law to enforce such "due-on-sale" clause, or if any of the
other conditions set forth in the proviso to the preceding sentence apply, the
Master Servicer will enter into an assumption and modification agreement from or
with the person to whom such property has been conveyed or is proposed to be
conveyed, pursuant to which such person becomes liable under the Mortgage Note
and, to the extent permitted by applicable state law, the Mortgagor remains
liable thereon. The Master Servicer is also authorized to enter into a
substitution of liability agreement with such person, pursuant to which the
original Mortgagor is released from liability and such person is substituted as
the Mortgagor and becomes liable under the Mortgage Note, provided that no such
substitution shall be effective unless such person satisfies the
-75-
<PAGE>
underwriting criteria of the Master Servicer and has a credit risk rating at
least equal to that of the original Mortgagor. In connection with any assumption
or substitution, the Master Servicer shall apply such underwriting standards and
follow such practices and procedures as shall be normal and usual in its general
mortgage servicing activities and as it applies to other mortgage loans owned
solely by it. The Master Servicer shall not take or enter into any assumption
and modification agreement, however, unless (to the extent practicable in the
circumstances) it shall have received confirmation, in writing, of the continued
effectiveness of any applicable hazard insurance policy. Any fee collected by
the Master Servicer in respect of an assumption, modification or substitution of
liability agreement shall be retained by the Master Servicer as additional
servicing compensation. In connection with any such assumption, no material term
of the Mortgage Note (including but not limited to the related Mortgage Rate and
the amount of the Monthly Payment) may be amended or modified, except as
otherwise required pursuant to the terms thereof. The Master Servicer shall
notify the Trustee and the Trust Administrator that any such substitution,
modification or assumption agreement has been completed by forwarding to the
Trust Administrator (with a copy to the Trustee) the executed original of such
substitution, modification or assumption agreement, which document shall be
added to the related Mortgage File and shall, for all purposes, be considered a
part of such Mortgage File to the same extent as all other documents and
instruments constituting a part thereof.
Notwithstanding the foregoing paragraph or any other provision
of this Agreement, the Master Servicer shall not be deemed to be in default,
breach or any other violation of its obligations hereunder by reason of any
assumption of a Mortgage Loan by operation of law or by the terms of the
Mortgage Note or any assumption which the Master Servicer may be restricted by
law from preventing, for any reason whatever. For purposes of this Section 3.15,
the term "assumption" is deemed to also include a sale (of the Mortgaged
Property) subject to the Mortgage that is not accompanied by an assumption or
substitution of liability agreement.
SECTION 3.16. Realization Upon Defaulted Mortgage Loans.
(a) The Master Servicer shall use its best efforts, consistent
with Accepted Servicing Practices, to foreclose upon or otherwise comparably
convert the ownership of properties securing such of the Mortgage Loans as come
into and continue in default and as to which no satisfactory arrangements can be
made for collection of delinquent payments pursuant to Section 3.07. The Master
Servicer shall be responsible for all costs and expenses incurred by it in any
such proceedings; provided, however, that such costs and expenses will be
recoverable as Servicing Advances by the Master Servicer as contemplated in
Section 3.11 and Section 3.23. The foregoing is subject to the provision that,
in any case in which Mortgaged Property shall have suffered damage from an
Uninsured Cause, the Master Servicer shall not be required to expend its own
funds toward the restoration of such property unless it shall determine in its
discretion that such restoration will increase the proceeds of liquidation of
the related Mortgage Loan after reimbursement to itself for such expenses.
(b) Notwithstanding the foregoing provisions of this Section
3.16 or any other provision of this Agreement, with respect to any Mortgage Loan
as to which the Master Servicer has received actual notice of, or has actual
knowledge of, the presence of any toxic or hazardous
-76-
<PAGE>
substance on the related Mortgaged Property, the Master Servicer shall not, on
behalf of the Trustee, either (i) obtain title to such Mortgaged Property as a
result of or in lieu of foreclosure or otherwise, or (ii) otherwise acquire
possession of, or take any other action with respect to, such Mortgaged
Property, if, as a result of any such action, the Trustee, the Trust
Administrator, the Trust Fund, the Certificateholders or the Certificate Insurer
would be considered to hold title to, to be a "mortgagee-in-possession" of, or
to be an "owner" or "operator" of such Mortgaged Property within the meaning of
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended from time to time, or any comparable law, unless the Master
Servicer has also previously determined, based on its reasonable judgment and a
report prepared by a Person who regularly conducts environmental audits using
customary industry standards, that:
(1) such Mortgaged Property is in compliance with
applicable environmental laws or, if not, that it would be in
the best economic interest of the Trust Fund to take such
actions as are necessary to bring the Mortgaged Property into
compliance therewith; and
(2) there are no circumstances present at such
Mortgaged Property relating to the use, management or disposal
of any hazardous substances, hazardous materials, hazardous
wastes, or petroleum-based materials for which investigation,
testing, monitoring, containment, clean-up or remediation
could be required under any federal, state or local law or
regulation, or that if any such materials are present for
which such action could be required, that it would be in the
best economic interest of the Trust Fund to take such actions
with respect to the affected Mortgaged Property.
The cost of the environmental audit report contemplated by
this Section 3.16 shall be advanced by the Master Servicer, subject to the
Master Servicer's right to be reimbursed therefor from the Collection Account as
provided in Section 3.11(a)(ix), such right of reimbursement being prior to the
rights of Certificateholders to receive any amount in the Collection Account
received in respect of the affected Mortgage Loan or other Mortgage Loans.
If the Master Servicer determines, as described above, that it
is in the best economic interest of the Trust Fund to take such actions as are
necessary to bring any such Mortgaged Property into compliance with applicable
environmental laws, or to take such action with respect to the containment,
clean-up or remediation of hazardous substances, hazardous materials, hazardous
wastes or petroleum-based materials affecting any such Mortgaged Property, then
the Master Servicer shall take such action as it deems to be in the best
economic interest of the Trust Fund; provided that any amounts disbursed by the
Master Servicer pursuant to this Section 3.16(b) shall constitute Servicing
Advances, subject to Section 4.03(d). The cost of any such compliance,
containment, cleanup or remediation shall be advanced by the Master Servicer,
subject to the Master Servicer's right to be reimbursed therefor from the
Collection Account as provided in Section 3.11(a)(iii) and (a)(ix), such right
of reimbursement being prior to the rights of Certificateholders to receive any
amount in the Collection Account received in respect of the affected Mortgage
Loan or other Mortgage Loans.
-77-
<PAGE>
(c) The Master Servicer may at its option purchase from REMIC
I any Mortgage Loan or related REO Property 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 Trust Administrator, the Trustee and the Certificate Insurer
prior to purchase), at a price equal to the Purchase Price; provided, however,
that (i) the Master Servicer shall purchase any such Mortgage Loans or related
REO Properties on the basis of delinquency, purchasing the most delinquent
Mortgage Loans or related REO Properties first and (ii) after it has purchased
5% of the Mortgage Loans or related REO Properties, by aggregate Stated
Principal Balance of the Mortgage Loans as of the Cut-off Date, pursuant to
clause (i) above, the Master Servicer must also obtain the consent of the
Certificate Insurer prior to any further purchases, provided that failure of the
Certificate Insurer to respond within five Business Days following actual
receipt of any such request for consent by the Master Servicer shall be deemed
to constitute consent to the additional purchases identified in such request for
consent. The Purchase Price for any Mortgage Loan or related REO Property
purchased hereunder shall be deposited in the Collection Account, and the Trust
Administrator, upon receipt of written certification from the Master Servicer of
such deposit, shall release or cause to be released to the Master Servicer the
related Mortgage File and the Trustee 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 or related REO Property released pursuant hereto.
(d) Proceeds received in connection with any Final Recovery
Determination, as well as any recovery resulting from a partial collection of
Insurance Proceeds or Liquidation Proceeds, in respect of any Mortgage Loan,
will be applied in the following order of priority: FIRST, to reimburse the
Master Servicer or any Sub-Servicer for any related unreimbursed Servicing
Advances and P&I Advances, pursuant to Section 3.11(a)(ii) or (a)(iii); SECOND,
to accrued and unpaid interest on the Mortgage Loan, to the date of the Final
Recovery Determination, or to the Due Date prior to the Distribution Date on
which such amounts are to be distributed if not in connection with a Final
Recovery Determination; and THIRD, as a recovery of principal of the Mortgage
Loan. If the amount of the recovery so allocated to interest is less than the
full amount of accrued and unpaid interest due on such Mortgage Loan, the amount
of such recovery will be allocated by the Master Servicer as follows: FIRST, to
unpaid Servicing Fees; and SECOND, to the balance of the interest then due and
owing. The portion of the recovery so allocated to unpaid Servicing Fees shall
be reimbursed to the Master Servicer or any Sub-Servicer pursuant to Section
3.11(a)(iii).
SECTION 3.17. Trustee and Trust Administrator to Cooperate;
Release of Mortgage Files.
(a) Upon the payment in full of any Mortgage Loan, or the
receipt by the Master Servicer of a notification that payment in full shall be
escrowed in a manner customary for such purposes, the Master Servicer will
immediately notify or cause to be notified the Trust Administrator, the Trustee
and the Certificate Insurer by a certification in the form of Exhibit E-2 (which
certification shall include a statement to the effect that all amounts received
or to be received in connection with such payment which are required to be
deposited in the Collection
-78-
<PAGE>
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 Trust Administrator shall
promptly release the related Mortgage File to the Master Servicer. No expenses
incurred in connection with any instrument of satisfaction or deed of
reconveyance shall be chargeable to the Collection Account or the Distribution
Account.
(b) From time to time and as appropriate for the servicing or
foreclosure of any Mortgage Loan, including, for this purpose, collection under
any insurance policy relating to the Mortgage Loans, the Trust Administrator
shall, upon any request made by or on behalf of the Master Servicer and delivery
to the Trust Administrator of a Request for Release in the form of Exhibit E-l,
release the related Mortgage File to the Master Servicer, and the Trustee shall,
at the direction of the Master Servicer, execute such documents as shall be
necessary to the prosecution of any such proceedings. Such Request for Release
shall obligate the Master Servicer to return each and every document previously
requested from the Mortgage File to the Trust Administrator when the need
therefor by the Master Servicer no longer exists, unless the Mortgage Loan has
been liquidated and the Liquidation Proceeds relating to the Mortgage Loan have
been deposited in the Collection Account or the Mortgage File or such document
has been delivered to an attorney, or to a public trustee or other public
official as required by law, for purposes of initiating or pursuing legal action
or other proceedings for the foreclosure of the Mortgaged Property either
judicially or non-judicially, and the Master Servicer has delivered, or caused
to be delivered, to the Trust Administrator an additional Request for Release
certifying as to such liquidation or action or proceedings. Upon the request of
the Trust Administrator, the Trustee or the Certificate Insurer, the Master
Servicer shall provide notice to the Trust Administrator, the Trustee and the
Certificate Insurer of the name and address of the Person to which such Mortgage
File or such document was delivered and the purpose or purposes of such
delivery. Upon receipt of a certificate of a Servicing Officer stating that such
Mortgage Loan was liquidated and that all amounts received or to be received in
connection with such liquidation that are required to be deposited into the
Collection Account have been so deposited, or that such Mortgage Loan has become
an REO Property, any outstanding Requests for Release with respect to such
Mortgage Loan shall be released by the Trust Administrator to the Master
Servicer or its designee.
(c) Upon written certification of a Servicing Officer, the
Trustee shall execute and deliver to the Master Servicer or the Sub-Servicer, as
the case may be, and upon the request of the Certificate Insurer the Master
Servicer shall deliver or cause to be delivered to the Certificate Insurer
copies of, any court pleadings, requests for trustee's sale or other documents
necessary to the foreclosure or trustee's sale in respect of a Mortgaged
Property or to any legal action brought to obtain judgment against any Mortgagor
on the Mortgage Note or Mortgage or to obtain a deficiency judgment, or to
enforce any other remedies or rights provided by the Mortgage Note or Mortgage
or otherwise available at law or in equity. Each such certification shall
include a request that such pleadings or documents be executed by the Trustee
and a statement as to the reason such documents or pleadings are required and
that the execution and delivery thereof by the Trustee will not invalidate or
otherwise affect the lien of the Mortgage, except for the termination of such a
lien upon completion of the foreclosure or trustee's sale.
-79-
<PAGE>
SECTION 3.18. Servicing Compensation.
As compensation for the activities of the Master Servicer
hereunder, the Master Servicer shall be entitled to the Servicing Fee with
respect to each Mortgage Loan payable solely from payments of interest in
respect of such Mortgage Loan, subject to Section 3.24. In addition, the Master
Servicer shall be entitled to recover unpaid Servicing Fees out of Insurance
Proceeds or Liquidation Proceeds to the extent permitted by Section 3.11(a)(iii)
and out of amounts derived from the operation and sale of an REO Property to the
extent permitted by Section 3.23. The right to receive the Servicing Fee may not
be transferred in whole or in part except in connection with the transfer of all
of the Master Servicer's responsibilities and obligations under this Agreement;
provided, however, that the Master Servicer may pay from the Servicing Fee any
amounts due to a Sub-Servicer pursuant to a Sub-Servicing Agreement entered into
under Section 3.02.
Additional servicing compensation in the form of assumption or
modification fees, late payment charges, insufficient funds charges or otherwise
(subject to Section 3.24 and other than Prepayment Charges) shall be retained by
the Master Servicer only to the extent such fees or charges are received by the
Master Servicer. The Master Servicer shall also be entitled pursuant to Section
3.11(a)(iv) to withdraw from the Collection Account, pursuant to Section 3.11 to
be paid by the Trust Administrator from the Distribution Account, pursuant to
Section 3.25 to be paid by the Trust Administrator from the Expense Account and
pursuant to Section 3.23(b) to withdraw from any REO Account, as additional
servicing compensation, interest or other income earned on deposits therein,
subject to Section 3.12 and Section 3.24. The Master Servicer shall be required
to pay all expenses incurred by it in connection with its servicing activities
hereunder (including premiums for the insurance required by Section 3.14, to the
extent such premiums are not paid by the related Mortgagors or by a
Sub-Servicer, servicing compensation of each Sub-Servicer, and to the extent
provided herein in Section 8.05, the fees and expenses of the Trustee and the
Trust Administrator) and shall not be entitled to reimbursement therefor except
as specifically provided herein.
SECTION 3.19. Reports to the Trust Administrator and the
Trustee; Collection Account Statements.
Not later than twenty days after each Distribution Date, the
Master Servicer shall forward to the Trust Administrator, the Trustee, the
Certificate Insurer and the Depositor the most current available bank statement
for the Collection Account. Copies of such statement shall be provided by the
Trust Administrator to any Certificateholder and to any Person identified to the
Trust Administrator as a prospective transferee of a Certificate, upon request
at the expense of the requesting party, provided such statement is delivered by
the Master Servicer to the Trust Administrator.
SECTION 3.20. Statement as to Compliance.
The Master Servicer will deliver to the Trust Administrator,
the Trustee, the Certificate Insurer and the Depositor not later than 90 days
following the end of the fiscal year of the Master Servicer, which as of the
Closing Date ends on the last day in December, an Officers'
-80-
<PAGE>
Certificate stating, as to each signatory thereof, that (i) a review of the
activities of the Master Servicer during the preceding year and of performance
under this Agreement has been made under such officers' supervision and (ii) to
the best of such officers' knowledge, based on such review, the Master Servicer
has fulfilled all of its obligations under this Agreement throughout such year,
or, if there has been a default in the fulfillment of any such obligation,
specifying each such default known to such officer and the nature and status
thereof. Copies of any such statement shall be provided by the Trust
Administrator to any Certificateholder and to any Person identified to the Trust
Administrator as a prospective transferee of a Certificate, upon request at the
expense of the requesting party, provided such statement is delivered by the
Master Servicer to the Trust Administrator.
SECTION 3.21. Independent Public Accountants' Servicing
Report.
Not later than 90 days following the end of each fiscal year
of the Master Servicer, the Master Servicer, at its expense, shall cause a
nationally recognized firm of independent certified public accountants to
furnish to the Master Servicer a report stating that (i) it has obtained a
letter of representation regarding certain matters from the management of the
Master Servicer which includes an assertion that the Master Servicer has
complied with certain minimum residential mortgage loan servicing standards,
identified in the Uniform Single Attestation Program for Mortgage Bankers
established by the Mortgage Bankers Association of America, with respect to the
servicing of residential mortgage loans during the most recently completed
fiscal year and (ii) on the basis of an examination conducted by such firm in
accordance with standards established by the American Institute of Certified
Public Accountants, such representation is fairly stated in all material
respects, subject to such exceptions and other qualifications that may be
appropriate. In rendering its report such firm may rely, as to matters relating
to the direct servicing of residential mortgage loans by Sub-Servicers, upon
comparable reports of firms of independent certified public accountants rendered
on the basis of examinations conducted in accordance with the same standards
(rendered within one year of such report) with respect to those Sub-Servicers.
Immediately upon receipt of such report, the Master Servicer shall furnish a
copy of such report to the Trust Administrator, the Trustee, the Certificate
Insurer and each Rating Agency. Copies of such statement shall be provided by
the Trust Administrator to any Certificateholder upon request at the Master
Servicer's expense, provided that such statement is delivered by the Master
Servicer to the Trust Administrator.
SECTION 3.22. Access to Certain Documentation.
The Master Servicer shall provide to the Office of Thrift
Supervision, the FDIC, and any other federal or state banking or insurance
regulatory authority that may exercise authority over any Certificateholder,
access to the documentation regarding the Mortgage Loans required by applicable
laws and regulations. Such access shall be afforded without charge, but only
upon reasonable request and during normal business hours at the offices of the
Master Servicer designated by it. In addition, access to the documentation
regarding the Mortgage Loans will be provided to any Certificateholder, the
Certificate Insurer, the Trustee, the Trust Administrator and to any Person
identified to the Master Servicer as a prospective transferee of a Certificate,
upon
-81-
<PAGE>
reasonable request during normal business hours at the offices of the Master
Servicer designated by it at the expense of the Person requesting such access.
SECTION 3.23. Title, Management and Disposition of REO
Property.
(a) The deed or certificate of sale of any REO Property shall
be taken in the name of the Trustee, or its nominee, in trust for the benefit of
the Certificateholders and the Certificate Insurer. The Master Servicer, on
behalf of REMIC I, shall either sell any REO Property within three years after
REMIC I acquires ownership of such REO Property for purposes of Section
860G(a)(8) of the Code or request from the Internal Revenue Service, no later
than 60 days before the day on which the three-year grace period would otherwise
expire, an extension of the three-year grace period, unless the Master Servicer
shall have delivered to the Trust Administrator and the Trustee an Opinion of
Counsel, addressed to the Trust Administrator, the Trustee, the Certificate
Insurer and the Depositor, to the effect that the holding by REMIC I of such REO
Property subsequent to three years after its acquisition will not result in the
imposition on REMIC I, REMIC II or REMIC III of taxes on "prohibited
transactions" thereof, as defined in Section 860F of the Code, or cause any of
REMIC I, REMIC II or REMIC III to fail to qualify as a REMIC under Federal law
at any time that any Certificates are outstanding. The Master Servicer shall
manage, conserve, protect and operate each REO Property for the
Certificateholders solely for the purpose of its prompt disposition and sale in
a manner which does not cause such REO Property to fail to qualify as
"foreclosure property" within the meaning of Section 860G(a)(8) of the Code or
result in the receipt by REMIC I, REMIC II or REMIC III of any "income from
non-permitted assets" within the meaning of Section 860F(a)(2)(B) of the Code,
or any "net income from foreclosure property" which is subject to taxation under
the REMIC Provisions.
(b) The Master Servicer shall 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, or cause to be established and maintained, with respect to REO
Properties an account held in trust for the Trustee for the benefit of the
Certificateholders and the Certificate Insurer (the "REO Account"), which shall
be an Eligible Account. The Master Servicer shall be permitted to allow the
Collection Account to serve as the REO Account, subject to separate ledgers for
each REO Property. The Master Servicer shall be entitled to retain or withdraw
any interest income paid on funds deposited in the REO Account.
(c) The Master Servicer shall have full power and authority,
subject only to the specific requirements and prohibitions of this Agreement, to
do any and all things in connection with any REO Property as are consistent with
the manner in which the Master Servicer manages and operates similar property
owned by the Master Servicer or any of its Affiliates, all on such terms and for
such period as the Master Servicer deems to be in the best interests of
Certificateholders. In connection therewith, the Master Servicer shall deposit,
or cause to be deposited in the clearing account in which it customarily
deposits payments and collections on mortgage loans in connection with its
mortgage loan servicing activities on a daily basis, and in no event more than
one Business Day after the Master Servicer's receipt thereof, and shall
-82-
<PAGE>
thereafter deposit in the REO Account, in no event more than two Business Days
after the Master Servicer's receipt thereof, all revenues received by it with
respect to an REO Property and shall withdraw therefrom funds necessary for the
proper operation, management and maintenance of such REO Property including,
without limitation:
(i) all insurance premiums due and payable in respect
of such REO Property;
(ii) all real estate taxes and assessments in respect of
such REO Property that may result in the imposition of a lien
thereon; and
(iii) all costs and expenses necessary to maintain such
REO Property.
To the extent that amounts on deposit in the REO Account with respect to an REO
Property are insufficient for the purposes set forth in clauses (i) through
(iii) above with respect to such REO Property, the Master Servicer shall advance
from its own funds such amount as is necessary for such purposes if, but only
if, the Master Servicer would make such advances if the Master Servicer owned
the REO Property and if in the Master Servicer's judgment, the payment of such
amounts will be recoverable from the rental or sale of the REO Property.
Notwithstanding the foregoing, none of the Master Servicer,
the Trust Administrator or the Trustee shall:
(i) authorize the Trust Fund to enter into, renew or
extend any New Lease with respect to any REO Property, if the
New Lease by its terms will give rise to any income that does
not constitute Rents from Real Property;
(ii) authorize any amount to be received or accrued
under any New Lease other than amounts that will constitute
Rents from Real Property;
(iii) authorize any construction on any REO Property,
other than the completion of a building or other improvement
thereon, and then only if more than ten percent of the
construction of such building or other improvement was
completed before default on the related Mortgage Loan became
imminent, all within the meaning of Section 856(e)(4)(B) of
the Code; or
(iv) authorize any Person to Directly Operate any REO
Property on any date more than 90 days after its date of
acquisition by the Trust Fund;
unless, in any such case, the Master Servicer has obtained an Opinion of
Counsel, provided to the Trust Administrator, the Trustee and the Certificate
Insurer, to the effect that such action will not cause such REO Property to fail
to qualify as "foreclosure property" within the meaning of Section 860G(a)(8) of
the Code at any time that it is held by REMIC I, in which case the Master
Servicer may take such actions as are specified in such Opinion of Counsel.
-83-
<PAGE>
The Master Servicer may contract with any Independent
Contractor for the operation and management of any REO Property, provided that:
(i) the terms and conditions of any such contract shall
not be inconsistent herewith;
(ii) any such contract shall require, or shall be
administered to require, that the Independent Contractor pay
all costs and expenses incurred in connection with the
operation and management of such REO Property, including those
listed above and remit all related revenues (net of such costs
and expenses) to the Master Servicer as soon as practicable,
but in no event later than thirty days following the receipt
thereof by such Independent Contractor;
(iii) none of the provisions of this Section 3.23(c)
relating to any such contract or to actions taken through any
such Independent Contractor shall be deemed to relieve the
Master Servicer of any of its duties and obligations to the
Trustee on behalf of the Certificateholders and the
Certificate Insurer with respect to the operation and
management of any such REO Property; and
(iv) the Master Servicer shall be obligated with respect
thereto to the same extent as if it alone were performing all
duties and obligations in connection with the operation and
management of such REO Property.
The Master Servicer shall be entitled to enter into any agreement with any
Independent Contractor performing services for it related to its duties and
obligations hereunder for indemnification of the Master Servicer by such
Independent Contractor, and nothing in this Agreement shall be deemed to limit
or modify such indemnification. The Master Servicer shall be solely liable for
all fees owed by it to any such Independent Contractor, irrespective of whether
the Master Servicer's compensation pursuant to Section 3.18 is sufficient to pay
such fees; provided, however, that to the extent that any payments made by such
Independent Contractor would constitute Servicing Advances if made by the Master
Servicer, such amounts shall be reimbursable as Servicing Advances made by the
Master Servicer.
(d) In addition to the withdrawals permitted under Section
3.23(c), the Master Servicer may from time to time make withdrawals from the REO
Account for any REO Property: (i) to pay itself or any Sub-Servicer unpaid
Servicing Fees in respect of the related Mortgage Loan; and (ii) to reimburse
itself or any Sub-Servicer for unreimbursed Servicing Advances and P&I Advances
made in respect of such REO Property or the related Mortgage Loan. On the Master
Servicer Remittance Date, the Master Servicer shall withdraw from each REO
Account maintained by it and deposit into the Distribution Account in accordance
with Section 3.10(d)(ii), for distribution on the related Distribution Date in
accordance with Section 4.01, the income from the related REO Property received
during the prior calendar month, net of any withdrawals made pursuant to Section
3.23(c) or this Section 3.23(d).
-84-
<PAGE>
(e) Subject to the time constraints set forth in Section
3.23(a), each REO Disposition shall be carried out by the Master Servicer at
such price and upon such terms and conditions as the Master Servicer shall deem
necessary or advisable, as shall be normal and usual in its Accepted Servicing
Practices.
(f) The proceeds from the REO Disposition, net of any amount
required by law to be remitted to the Mortgagor under the related Mortgage Loan
and net of any payment or reimbursement to the Master Servicer or any
Sub-Servicer as provided above, shall be deposited in the Distribution Account
in accordance with Section 3.10(d)(ii) on the Master Servicer Remittance Date in
the month following the receipt thereof for distribution on the related
Distribution Date in accordance with Section 4.01. Any REO Disposition shall be
for cash only (unless changes in the REMIC Provisions made subsequent to the
Startup Day allow a sale for other consideration).
(g) The Master Servicer shall file information returns with
respect to the receipt of mortgage interest received in a trade or business,
reports of foreclosures and abandonments of any Mortgaged Property and
cancellation of indebtedness income with respect to any Mortgaged Property as
required by Sections 6050H, 6050J and 6050P of the Code, respectively. Such
reports shall be in form and substance sufficient to meet the reporting
requirements imposed by such Sections 6050H, 6050J and 6050P of the Code.
SECTION 3.24. Obligations of the Master Servicer in Respect of
Prepayment Interest Shortfalls.
The Master Servicer shall deliver to the Trust Administrator
for deposit into the Distribution Account on or before 3:00 p.m. New York time
on the Master Servicer Remittance Date from its own funds an amount equal to the
lesser of (i) the aggregate of the Prepayment Interest Shortfalls for the
related Distribution Date resulting from full or partial Principal Prepayments
during the related Prepayment Period and (ii) the aggregate Servicing Fee for
the related Prepayment Period. Any amounts paid by the Master Servicer pursuant
to this Section 3.24 shall not be reimbursed by REMIC I.
SECTION 3.25. Expense Account.
(a) On behalf of the Trust Fund, the Trust Administrator, as
agent for the Trustee, shall establish and maintain in trust, for the benefit of
the Trustee, the Certificateholders and the Certificate Insurer, the Expense
Account. The Expense Account shall be an Eligible Account, and funds on deposit
therein shall be held separate and apart from, and shall not be commingled with,
any other moneys, including, without limitation, other moneys of the Trust
Administrator held pursuant to this Agreement.
(b) On the Business Day immediately preceding each
Distribution Date, the Trust Administrator shall withdraw from the Distribution
Account and deposit into the Expense Account an amount equal to 1/12 of the
Certificate Insurer Premium Rate on the Certificate Principal Balance of the
Class A Certificates for such Distribution Date.
-85-
<PAGE>
(c) The Trust Administrator shall make withdrawals from the
Expense Account to pay the Certificate Insurer Premium on each Distribution
Date.
(d) Funds in the Expense Account may be invested in Permitted
Investments in accordance with the provisions set forth in Section 3.12. Any
earnings on such amounts shall be payable to the Master Servicer on each
Distribution Date as additional servicing compensation. The Trust Administrator
shall give notice to the Depositor, the Trustee and the Certificate Insurer of
the location of the Expense Account on the Closing Date and prior to any change
thereof.
(e) Upon termination of the Trust Fund in accordance with
Section 10.01, any amounts remaining in the Expense Account following the
payment of all unpaid Certificate Insurer Premiums shall be released to the
Master Servicer as additional servicing compensation.
SECTION 3.26. Obligations of the Master Servicer in Respect of
Mortgage Rates and Monthly Payments.
In the event that a shortfall in any collection on or
liability with respect to any Mortgage Loan results from or is attributable to
adjustments to Mortgage Rates, Monthly Payments or Stated Principal Balances
that were made by the Master Servicer in a manner not consistent with the terms
of the related Mortgage Note and this Agreement, the Master Servicer, upon
discovery or receipt of notice thereof, immediately shall deliver to the Trust
Administrator for deposit in the Distribution Account from its own funds the
amount of any such shortfall and shall indemnify and hold harmless the Trust
Fund, the Trust Administrator, the Trustee, the Certificate Insurer, the
Depositor and any successor master servicer in respect of any such liability.
Such indemnities shall survive the termination or discharge of this Agreement.
Notwithstanding the foregoing, this Section 3.26 shall not limit the ability of
the Master Servicer to seek recovery of any such amounts from the related
Mortgagor under the terms of the related Mortgage Note, as permitted by law.
-86-
<PAGE>
ARTICLE IV
PAYMENTS TO CERTIFICATEHOLDERS
SECTION 4.01. Distributions.
(a)(1)(A) On each Distribution Date, the following amounts, in
the following order of priority, shall be distributed by REMIC I to REMIC II on
account of the REMIC I Regular Interests (other than the Class S Certificates)
or withdrawn from the Distribution Account and distributed to the holders of the
Class S Certificates, as the case may be:
(i) to the Holders of the Class S Certificates, in an
amount equal to its Interest Distribution Amount for such
Distribution Date;
(ii) to the Holders of REMIC I Regular Interests (other
than REMIC I Regular Interest I-LTP and the Class S
Certificates), in an amount equal to (A) the Uncertificated
Interest for such Distribution Date, plus (B) any amounts in
respect thereof remaining unpaid from previous Distribution
Dates. Amounts payable as Uncertificated Interest in respect
of REMIC I Regular Interest I-LT3 shall be reduced when the
REMIC I Overcollateralized Amount is less than the REMIC I
Required Overcollateralized Amount, by the lesser of (x) the
amount of such difference and (y) the Maximum I-LT3
Uncertificated Interest Deferral Amount; and
(iii) on each Distribution Date, to the Holders of REMIC
I Regular Interests (other than the Class S Certificates), in
an amount equal to the remainder of the Available Distribution
Amount for such Distribution Date after the distributions made
pursuant to clause (i) above, allocated as follows (except as
provided below):
(a) to the Holders of the REMIC I Regular
Interest I-LTP, on the Distribution Date immediately
following the expiration of the latest Prepayment
Charge term as identified on the Mortgage Loan
Schedule or any Distribution Date thereafter until
$100 has been distributed pursuant to this clause;
(b) to the Holders of the REMIC I Regular
Interest I-LT1, 98.00% of the amount remaining after
application of clause (a), until the Uncertificated
Balance of such REMIC I Regular Interest is reduced
to zero and any remaining amount to the Holders of
the Class R-I Certificates;
(c) to the Holders of the REMIC I Regular
Interest I-LT2, 1.00% of the amount remaining after
application of clause (a), until the Uncertificated
Balance of such REMIC I Regular Interest is reduced
to zero and any remaining amount to the Holders of
the Class R-I Certificates; and
-87-
<PAGE>
(d) to the Holders of the REMIC I Regular
Interest I-LT3, 1.00% of the amount remaining after
application of clause (a), until the Uncertificated
Balance of such REMIC I Regular Interest is reduced
to zero and any remaining amount to the Holders of
the Class R-I Certificates;
provided, however, that 98.00% and 2.00% of any principal payments that are
attributable to a Overcollateralization Reduction Amount shall be allocated to
Holders of the REMIC I Regular Interest I-LT1 and REMIC I Regular Interest
I-LT3, respectively.
(B) On each Distribution Date, the following amounts shall be
distributed by REMIC II to REMIC III on account of the REMIC II Regular
Interests:
(i) any amounts paid as either Uncertificated Interest
paid or accrued to the REMIC I Regular Interests (other than
REMIC I Regular Interest I-LTP and the Class S Certificates)
shall be deemed to have been paid to the related
Uncertificated Corresponding Component in REMIC II in
accordance with the REMIC II Remittance Rates and any amounts
deferred on REMIC I Regular Interest I-LT3 pursuant to Section
4.01(a)(1)(A) shall be deemed to have been deferred with
respect to REMIC II Regular Interest II-LT3; and
(ii) any amounts paid as principal on the REMIC I
Regular Interests (other than the Class S Certificates) shall
be deemed to have been paid to the related Uncertificated
Corresponding Component in REMIC II in accordance with
the same priorities and conditions.
(2) On each Distribution Date, the Trust Administrator shall
withdraw from the Distribution Account an amount equal to the Available
Distribution Amount (other than any amount in the Distribution Account that was
transferred from the Policy Payments Account to the Distribution Account
pursuant to Section 9.04) and distribute to the Certificateholders the following
amounts, in the following order of priority:
(i) (a) to the Holders of the Class A Certificates, in
an amount equal to the Interest Distribution Amount for such
Distribution Date;
(ii) to the Holders of the Class A Certificates, in an
amount equal to the Principal Distribution Amount (except for
any portion thereof consisting of any Overcollateralization
Increase Amount and any amount payable pursuant to clause
(iii) below), applied to reduce the Certificate Principal
Balance of the Class A Certificates, until the aggregate
Certificate Principal Balance of the Class A Certificates is
reduced to zero;
(iii) to the Holders of the Class A Certificates, payable
from Net Monthly Excess Cashflow (exclusive of any
Overcollateralization Reduction Amount), in an amount equal to
(a) the principal portion of any Realized Losses incurred or
deemed to have been incurred on the Mortgage Loans, applied to
-88-
<PAGE>
reduce the Certificate Principal Balance of the Class A
Certificates, until the aggregate Certificate Principal
Balance of the Class A Certificates is reduced to zero, plus
(b) the principal portion of any Realized Losses allocated to
the Class A Certificates on previous Distribution Dates but
not paid under the Policy due to a Certificate Insurer Default
and not previously paid pursuant to this clause (iii)(b);
(iv) to the Certificate Insurer, payable from Net
Monthly Excess Cashflow, to reimburse the Certificate Insurer
for claims under the Policy, to the
extent of Cumulative Insurance Payments;
(v) to the Holders of the Class A Certificates, payable
from Net Monthly Excess Cashflow, in an amount equal to the
portion of the Principal Distribution Amount consisting of any
Overcollateralization Increase Amount, applied to reduce the
Certificate Principal Balance of the Class A Certificates,
until the aggregate Certificate Principal Balance of the Class
A Certificates is reduced to zero;
(vi) to the Holders of the Class A Certificates, payable
from Net Monthly Excess Cashflow, in an amount equal to any
Relief Act Shortfalls that were allocated pursuant to Section
1.02;
(vii) to the Certificate Insurer, payable from Net
Monthly Excess Cashflow, any amounts remaining due to the
Insurer under the terms of the Insurance Agreement (including
any Premium Supplement);
(viii) to the Holders of the Class CE Certificates,
payable from Net Monthly Excess Cashflow, the Interest
Distribution Amount and any Overcollateralization Reduction
Amount for such Distribution Date; and
(ix) to the Holders of the Class R-III Certificates, any
remaining amounts; provided that if such Distribution Date is
the Distribution Date immediately following the expiration of
the latest Prepayment Charge term as identified on the
Mortgage Loan Schedule or any Distribution Date thereafter,
then any such remaining amounts will be distributed FIRST, to
the Holders of the Class P Certificates, until the Certificate
Principal Balance thereof has been reduced to zero; and
SECOND, to the Holders of the Class R-III Certificates.
(b) On each Distribution Date, the Trust Administrator shall
withdraw any amounts then on deposit in the Distribution Account that represent
Prepayment Charges collected by the Master Servicer in connection with the
Principal Prepayment of any of the Mortgage Loans or any Master Servicer
Prepayment Charge Payment Amount and shall distribute such amounts to the
Holders of the Class P Certificates. Such distributions shall not be applied to
reduce the Certificate Principal Balance of the Class P Certificates.
-89-
<PAGE>
(c) In addition to making the distributions required pursuant
to Section 4.01(a)(2), on each Distribution Date for which there exists a
Deficiency Amount, the Trust Administrator shall withdraw from the Distribution
Account any amount therein that was transferred from the Policy Payments Account
to the Distribution Account pursuant to Section 9.04 and distribute to the
Holders of the Class A Certificates (i) an amount equal to any amount required
to be paid to such Class pursuant to Section 4.01(a)(2)(i) for such Distribution
Date remaining unpaid after giving effect to all distributions made pursuant to
Section 4.01(a)(2) for such Distribution Date, (ii) an amount equal to the
principal portion of any Realized Losses allocated to such Class on such
Distribution Date after giving effect to all distributions made pursuant to
Section 4.01(a)(2) for such Distribution Date and (iii) without duplication, any
other amount constituting a Deficiency Amount.
(c) Each Holder of a Class A Certificate, by its acceptance of
such Certificate, hereby agrees that, in the event any distribution is made to
any Holder of a Class A Certificate from amounts paid under the Policy, (i) the
Certificate Insurer shall be subrogated in the manner herein provided to the
rights of the Holder of such Class A Certificate to receive from amounts on
deposit in the Distribution Account the distributions allocable to principal and
interest that would have been distributable to such Holder if no such
distribution to such Holder had been made from amounts paid under the Policy;
and (ii) in addition to the rights of the Holders of the Class A Certificates
that the Certificate Insurer may exercise in accordance with the provisions of
Section 9.01, the Certificate Insurer may exercise any option, vote, right,
power or the like with respect to each Class A Certificate for which Cumulative
Insurance Payments are outstanding.
(d) All distributions made with respect to each Class of
Certificates on each Distribution Date shall be allocated PRO RATA among the
outstanding Certificates in such Class based on their respective Percentage
Interests. Payments in respect of each Class of Certificates on each
Distribution Date will be made to the Holders of the respective Class of record
on the related Record Date (except as otherwise provided in Section 4.01(f) or
Section 10.01 respecting the final distribution on such Class), based on the
aggregate Percentage Interest represented by their respective Certificates, and
shall be made by wire transfer of immediately available funds to the account of
any such Holder at a bank or other entity having appropriate facilities
therefor, if such Holder shall have so notified the Trust Administrator in
writing at least five Business Days prior to the Record Date immediately prior
to such Distribution Date and is the registered owner of Certificates having an
initial aggregate Certificate Principal Balance (or Notional Amount, with
respect to the Class S Certificates) that is in excess of the lesser of (i)
$5,000,000 or (ii) two-thirds of the initial Certificate Principal Balance (or
Notional Amount, with respect to the Class S Certificates) of such Class of
Certificates, or otherwise by check mailed by first class mail to the address of
such Holder appearing in the Certificate Register. The final distribution on
each Certificate will be made in like manner, but only upon presentment and
surrender of such Certificate at the Corporate Trust Office or such other
location specified in the notice to Certificateholders of such final
distribution. Payments to the Certificate Insurer on any Distribution Date will
be made by wire transfer of immediately available funds to the account
designated by the Certificate Insurer under the Premium Letter (as defined in
the Insurance Agreement).
-90-
<PAGE>
Each distribution with respect to a Book-Entry Certificate
shall be paid to the Depository, as Holder thereof, and the Depository shall be
responsible for crediting the amount of such distribution to the accounts of its
Depository Participants in accordance with its normal procedures. Each
Depository Participant shall be responsible for disbursing such distribution to
the Certificate Owners that it represents and to each indirect participating
brokerage firm (a "brokerage firm" or "indirect participating firm") for which
it acts as agent. Each brokerage firm shall be responsible for disbursing funds
to the Certificate Owners that it represents. None of the Trust Administrator,
the Trustee, the Depositor or the Master Servicer shall have any responsibility
therefor except as otherwise provided by this Agreement or applicable law.
(e) The rights of the Certificateholders to receive
distributions in respect of the Certificates, and all interests of the
Certificateholders in such distributions, shall be as set forth in this
Agreement. None of the Holders of any Class of Certificates, the Trust
Administrator, the Trustee or the Master Servicer shall in any way be
responsible or liable to the Holders of any other Class of Certificates in
respect of amounts properly previously distributed on the Certificates.
(f) Except as otherwise provided in Section 10.01, whenever
the Trust Administrator expects that the final distribution with respect to any
Class of Certificates will be made on the next Distribution Date, the Trust
Administrator shall, no later than three (3) days before the related
Distribution Date, mail to each Holder on such date of such Class of
Certificates and the Certificate Insurer a notice to the effect that:
(i) the Trust Administrator expects that the final distribution
with respect to such Class of Certificates will be made on such
Distribution Date but only upon presentation and surrender of such
Certificates at the office of the Trust Administrator therein
specified, and
(ii) no interest shall accrue on such Certificates from and after
the end of the related Interest Accrual Period.
Any funds not distributed to any Holder or Holders of Certificates of such Class
on such Distribution Date because of the failure of such Holder or Holders to
tender their Certificates shall, on such date, be set aside and held in trust by
the Trust Administrator and credited to the account of the appropriate
non-tendering Holder or Holders. If any Certificates as to which notice has been
given pursuant to this Section 4.01(f) shall not have been surrendered for
cancellation within six months after the time specified in such notice, the
Trust Administrator shall mail a second notice to the remaining non-tendering
Certificateholders to surrender their Certificates for cancellation in order to
receive the final distribution with respect thereto. If within one year after
the second notice all such Certificates shall not have been surrendered for
cancellation, the Trust Administrator shall, directly or through an agent, (i)
mail a final notice to the remaining non- tendering Certificateholders
concerning surrender of their Certificates and (ii) pay to the Certificate
Insurer any amount of such funds which were paid by the Certificate Insurer
under the Policy but shall continue to hold any remaining funds for the benefit
of non-tendering Certificateholders, and all liability of the Certificate
Insurer with respect to such funds shall thereupon cease. The costs and expenses
of maintaining the funds in trust and of contacting such
-91-
<PAGE>
Certificateholders shall be paid out of the assets remaining in such trust fund.
If within one year after the final notice any such Certificates shall not have
been surrendered for cancellation, the Trust Administrator shall pay to Salomon
Smith Barney Inc. all such amounts, and all rights of non-tendering
Certificateholders in or to such amounts shall thereupon cease. No interest
shall accrue or be payable to any Certificateholder on any amount held in trust
by the Trust Administrator as a result of such Certificateholder's failure to
surrender its Certificate(s) for final payment thereof in accordance with this
Section 4.01(f). Any such amounts held in trust by the Trust Administrator shall
be held in an Eligible Account and the Trust Administrator may direct any
depository institution maintaining such account to invest the funds in one or
more Permitted Investments. All income and gain realized from the investment of
funds deposited in such accounts held in trust by the Trust Administrator shall
be for the benefit of the Trust Administrator; provided, however, that the Trust
Administrator shall deposit in such account the amount of any loss of principal
incurred in respect of any such Permitted Investment made with funds in such
accounts immediately upon the realization of such loss.
(g) Notwithstanding anything to the contrary herein, (i) in no
event shall the Certificate Principal Balance of a Class A Certificate be
reduced more than once in respect of any particular amount both (a) allocated to
such Certificate in respect of Realized Losses pursuant to Section 4.04 and (b)
distributed to the Holder of such Certificate in reduction of the Certificate
Principal Balance thereof pursuant to this Section 4.01 from Net Monthly Excess
Cashflow or from amounts paid under the Policy and (ii) in no event shall the
Uncertificated Balance of a REMIC I Regular Interest be reduced more than once
in respect of any particular amount both (a) allocated to such REMIC I Regular
Interest in respect of Realized Losses pursuant to Section 4.04 and (b)
distributed on such REMIC I Regular Interest in reduction of the Uncertificated
Balance thereof pursuant to this Section 4.01.
SECTION 4.02. Statements to Certificateholders.
On each Distribution Date, the Trust Administrator shall
prepare and forward by mail to each Holder of the Regular Certificates, a
statement as to the distributions made on such
Distribution Date setting forth:
(i) the amount of the distribution made on such
Distribution Date to the Holders of the Certificates of each
Class allocable to principal, and the amount of the
distribution made on such Distribution Date to the Holders of
the Class P Certificates allocable to Prepayment Charges;
(ii) the amount of the distribution made on such
Distribution Date to the Holders of the Certificates of each
Class allocable to interest;
(iii) the aggregate Servicing Fee received by the
Master Servicer during the related Due Period and such other
customary information as the Trust Administrator deems
necessary or desirable, or which a Certificateholder
reasonably requests, to enable Certificateholders to prepare
their tax returns;
-92-
<PAGE>
(iv) the Guaranteed Distribution for such Distribution
Date and the respective portions thereof allocable to
principal and interest;
(v) the amount of any Insurance Payment made to the
Class A Certificates on such Distribution Date, the amount of
any reimbursement payment made to the Certificate Insurer on
such Distribution Date pursuant to Section 4.01(a)(2)(iv) and
the amount of Cumulative Insurance Payments after giving
effect to any such Insurance Payment to the Class A
Certificateholders or any such reimbursement payment to the
Certificate Insurer;
(vi) the aggregate amount of P&I Advances for such
Distribution Date;
(vii) the aggregate Stated Principal Balance of the
Mortgage Loans and any REO Properties as of the close of
business on such Distribution Date;
(viii) the number, aggregate principal balance,
weighted average remaining term to maturity and weighted
average Mortgage Rate of the Mortgage Loans as of the related
Due Date;
(ix) the number and aggregate unpaid principal balance
of Mortgage Loans (a) delinquent 30 to 59 days, (b) delinquent
60 to 89 days, (c) delinquent 90 or more days, in each case,
as of the last day of the preceding calendar month, (d) as to
which foreclosure proceedings have been commenced and (e) with
respect to which the related Mortgagor has filed for
protection under applicable bankruptcy laws, with respect to
whom bankruptcy proceedings are pending or with respect to
whom bankruptcy protection is in force;
(x) with respect to any Mortgage Loan that became an
REO Property during the preceding calendar month, the loan
number of such Mortgage Loan, the unpaid principal balance and
the Stated Principal Balance of such Mortgage Loan as of the
date it became an REO Property;
(xi) the book value of any REO Property as of the close
of business on the last Business Day of the calendar month
preceding the Distribution Date;
(xii) the aggregate amount of Principal Prepayments
made during the related Prepayment Period;
(xiii) the aggregate amount of Realized Losses incurred
during the related Prepayment Period (or, in the case of
Bankruptcy Losses allocable to interest, during the related
Due Period), separately identifying whether such Realized
Losses constituted Bankruptcy Losses and the aggregate amount
of Realized Losses incurred since the Closing Date;
-93-
<PAGE>
(xiv) the aggregate amount of extraordinary Trust Fund
expenses withdrawn from the Collection Account or the
Distribution Account for such Distribution Date;
(xv) the aggregate Certificate Principal Balance of each
Class of Certificates, after giving effect to the
distributions, and allocations of Realized Losses, made on
such Distribution Date, separately identifying any reduction
thereof due to allocations of Realized Losses;
(xvi) the Certificate Factor for each such Class of
Certificates applicable to such Distribution Date;
(xvii) the Interest Distribution Amount in respect of the
Class A Certificates, the Class S Certificates and the Class
CE Certificates for such Distribution Date and, in the case of
the Class A Certificates, the portion thereof, if any, paid
under the Policy or (in the event of a Deficiency Event)
remaining unpaid following the distributions made in respect
of the Class A Certificates on such Distribution Date and, in
the case of the Class A Certificates or the Class CE
Certificates, separately identifying any reduction thereof due
to allocations of Realized Losses, Prepayment Interest
Shortfalls and Relief Act Interest Shortfalls;
(xviii) the aggregate amount of any Prepayment Interest
Shortfall for such Distribution Date, to the extent not
covered by payments by the Master Servicer pursuant to Section
3.24;
(xix) the aggregate amount of Relief Act Interest
Shortfalls for such Distribution Date;
(xx) the Required Overcollateralized Amount for such
Distribution Date;
(xxi) the Overcollateralization Increase Amount, if any,
for such Distribution Date;
(xxii) the Overcollateralization Reduction Amount, if
any, for such Distribution Date; and
(xxiii) the respective Pass-Through Rates applicable to
the Class A Certificates, the Class S Certificates and the
Class CE Certificates for such Distribution Date and the
Pass-Through Rate applicable to the Class A Certificates for
the immediately succeeding Distribution Date.
In the case of information furnished pursuant to subclauses
(i) through (iii) above, the amounts shall be expressed as a dollar amount per
Single Certificate of the relevant Class.
-94-
<PAGE>
Within a reasonable period of time after the end of each
calendar year, the Trust Administrator shall furnish to each Person who at any
time during the calendar year was a Holder of a Regular Certificate a statement
containing the information set forth in subclauses (i) through (iii) above,
aggregated for such calendar year or applicable portion thereof during which
such person was a Certificateholder. Such obligation of the Trust Administrator
shall be deemed to have been satisfied to the extent that substantially
comparable information shall be provided by the Trust Administrator pursuant to
any requirements of the Code as from time to time are in force.
On each Distribution Date, the Trust Administrator shall
forward to the Depositor, the Trustee, to each Holder of a Residual Certificate,
the Certificate Insurer and to the Master Servicer, a copy of the reports
forwarded to the Regular Certificateholders on such Distribution Date and a
statement setting forth the amounts, if any, actually distributed with respect
to the Residual Certificates, respectively, on such Distribution Date.
Within a reasonable period of time after the end of each
calendar year, the Trust Administrator shall furnish to each Person who at any
time during the calendar year was a Holder of a Residual Certificate a statement
setting forth the amount, if any, actually distributed with respect to the
Residual Certificates, as appropriate, aggregated for such calendar year or
applicable portion thereof during which such Person was a Certificateholder.
The Trust Administrator shall, upon request, furnish to each
Certificateholder, during the term of this Agreement, such periodic, special, or
other reports or information, whether or not provided for herein, as shall be
reasonable with respect to the Certificateholder, or otherwise with respect to
the purposes of this Agreement, all such reports or information to be provided
at the expense of the Certificateholder in accordance with such reasonable and
explicit instructions and directions as the Certificateholder may provide. For
purposes of this Section 4.02, the Trust Administrator's duties are limited to
the extent that the Trust Administrator receives timely reports as required from
the Master Servicer.
On each Distribution Date the Trust Administrator shall
provide Bloomberg Financial Markets, L.P. ("Bloomberg") CUSIP level factors for
each class of Certificates as of such Distribution Date, using a format and
media mutually acceptable to the Trust Administrator and Bloomberg.
SECTION 4.03. Remittance Reports; P&I Advances.
(a) On the Business Day following each Determination Date, the
Master Servicer shall deliver to the Trust Administrator, the Trustee and the
Certificate Insurer by telecopy (or by such other means as the Master Servicer,
the Trust Administrator, the Trustee or the Certificate Insurer, as the case may
be, may agree from time to time) a Remittance Report with respect to the related
Distribution Date. On the same date, the Master Servicer shall forward to the
Trust Administrator by overnight mail a computer readable magnetic tape
containing the information set forth in such Remittance Report with respect to
the related Distribution Date. Such Remittance Report will include (i) the
amount of P&I Advances to be made by the Master Servicer in respect of the
related Distribution Date, the aggregate amount of P&I Advances
-95-
<PAGE>
outstanding after giving effect to such P&I Advances, and the aggregate amount
of Nonrecoverable P&I Advances in respect of such Distribution Date and (ii)
such other information with respect to the Mortgage Loans as the Trust
Administrator may reasonably require to perform the calculations necessary to
make the distributions contemplated by Section 4.01 and to prepare the
statements to Certificateholders contemplated by Section 4.02. Not later than
the close of business on the third Business Day prior to the Distribution Date,
the Trust Administrator shall deliver or cause to be delivered to the
Certificate Insurer, in addition to the information provided on the Remittance
Report, a report setting forth (i) the Guaranteed Distribution for such
Distribution Date, separately identifying the portions thereof allocable to
principal and interest; (ii) the Available Distribution Amount for such
Distribution Date; (iii) whether the Available Distribution Amount expected to
be on deposit in the Distribution Account on such Distribution Date will be
sufficient to cover the Guaranteed Distribution and, if not, the amount of the
shortfall; (iv) with respect to any reimbursement to be made to the Certificate
Insurer on such Distribution Date pursuant to Section 4.01(a)(2)(iv), the
amount, if any, allocable to principal and the amount allocable to interest; and
(v) Cumulative Insurance Payments after giving effect to the distributions to be
made on such Distribution Date. The Trust Administrator shall not be responsible
(except with regard to any information regarding the Prepayment Charges to the
extent set forth below) to recompute, recalculate or verify any information
provided to it by the Master Servicer. Notwithstanding the foregoing, in
connection with any Principal Prepayment on any Mortgage Loan listed on Schedule
2 hereto, the Trust Administrator shall verify that the related Prepayment
Charge was delivered to the Trust Administrator for deposit in the Distribution
Account in the amount set forth on such Schedule 2 or that such Prepayment
Charge was waived in accordance with the terms hereof.
(b) The amount of P&I Advances to be made by the Master
Servicer for any Distribution Date shall equal, subject to Section 4.03(d), the
sum of (i) the aggregate amount of Monthly Payments (with each interest portion
thereof net of the related Servicing Fee), due on the related Due Date in
respect of the Mortgage Loans, which Monthly Payments were delinquent as of the
close of business on the related Determination Date and (ii) with respect to
each REO Property, which REO Property was acquired during or prior to the
related Prepayment Period and as to which REO Property an REO Disposition did
not occur during the related Prepayment Period, an amount equal to the excess,
if any, of the REO Imputed Interest on such REO Property for the most recently
ended calendar month, over the net income from such REO Property transferred to
the Distribution Account pursuant to Section 3.23 for distribution on such
Distribution Date.
On or before 3:00 p.m. New York time on the Master Servicer
Remittance Date, the Master Servicer shall remit in immediately available funds
to the Trust Administrator for deposit in the Distribution Account an amount
equal to the aggregate amount of P&I Advances, if any, to be made in respect of
the Mortgage Loans and REO Properties for the related Distribution Date either
(i) from its own funds or (ii) from the Collection Account, to the extent of
funds held therein for future distribution (in which case it will cause to be
made an appropriate entry in the records of Collection Account that amounts held
for future distribution have been, as permitted by this Section 4.03, used by
the Master Servicer in discharge of any such P&I Advance) or (iii) in the form
of any combination of (i) and (ii) aggregating the total amount of P&I
-96-
<PAGE>
Advances to be made by the Master Servicer with respect to the Mortgage Loans
and REO Properties. Any amounts held for future distribution and so used shall
be appropriately reflected in the Master Servicer's records and replaced by the
Master Servicer by deposit in the Collection Account on or before any future
Master Servicer Remittance Date to the extent that the Available Distribution
Amount for the related Distribution Date (determined without regard to P&I
Advances to be made on the Master Servicer Remittance Date) shall be less than
the total amount that would be distributed to the Classes of Certificateholders
pursuant to Section 4.01 on such Distribution Date if such amounts held for
future distributions had not been so used to make P&I Advances. The Trust
Administrator will provide notice to the Trustee, the Master Servicer and the
Certificate Insurer by telecopy by the close of business on the third Business
Day prior to the Distribution Date in the event that the amount remitted by the
Master Servicer to the Trust Administrator on such date is less than the P&I
Advances required to be made by the Master Servicer for the related Distribution
Date.
(c) The obligation of the Master Servicer to make such P&I
Advances is mandatory, notwithstanding any other provision of this Agreement but
subject to (d) below, and, with respect to any Mortgage Loan or REO Property,
shall continue until a Final Recovery Determination in connection therewith or
the removal thereof from the Trust Fund pursuant to any applicable provision of
this Agreement, except as otherwise provided in this Section.
(d) Notwithstanding anything herein to the contrary, no P&I
Advance or Servicing Advance shall be required to be made hereunder by the
Master Servicer if such P&I Advance or Servicing Advance would, if made,
constitute a Nonrecoverable P&I Advance or Nonrecoverable Servicing Advance,
respectively. The determination by the Master Servicer that it has made a
Nonrecoverable P&I Advance or a Nonrecoverable Servicing Advance or that any
proposed P&I Advance or Servicing Advance, if made, would constitute a
Nonrecoverable P&I Advance or Nonrecoverable Servicing Advance, respectively,
shall be evidenced by an Officers' Certificate of the Master Servicer delivered
to the Depositor, the Trust Administrator, the Trustee and the Certificate
Insurer.
(e) If, at the close of business on the third Business Day
prior to any Distribution Date, the funds on deposit in the Distribution Account
are less than the Guaranteed Distribution for such Distribution Date, the Trust
Administrator shall give notice by telephone or telecopy of the amount of such
deficiency, confirmed in writing in the form set forth as Exhibit A to the
Endorsement of the Policy, to the Certificate Insurer and the Fiscal Agent (as
defined in the Policy), if any, at or before 10:00 a.m., New York time, on the
second Business Day prior to such Distribution Date.
SECTION 4.04. Allocation of Realized Losses.
(a) Prior to each Determination Date, the Master Servicer
shall determine as to each Mortgage Loan and REO Property: (i) the total amount
of Realized Losses, if any, incurred in connection with any Final Recovery
Determinations made during the related Prepayment Period; (ii) whether and the
extent to which such Realized Losses constituted Bankruptcy Losses; and (iii)
the respective portions of such Realized Losses allocable to interest
-97-
<PAGE>
and allocable to principal. Prior to each Determination Date, the Master
Servicer shall also determine as to each Mortgage Loan: (i) the total amount of
Realized Losses, if any, incurred in connection with any Deficient Valuations
made during the related Prepayment Period; and (ii) the total amount of Realized
Losses, if any, incurred in connection with Debt Service Reductions in respect
of Monthly Payments due during the related Due Period. The information described
in the two preceding sentences that is to be supplied by the Master Servicer
shall be evidenced by an Officers' Certificate delivered to the Trust
Administrator, the Trustee and the Certificate Insurer by the Master Servicer
prior to the Determination Date immediately following the end of (i) in the case
of Bankruptcy Losses allocable to interest, the Due Period during which any such
Realized Loss was incurred, and (ii) in the case of all other Realized Losses,
the Prepayment Period during which any such Realized Loss was incurred.
(b) All Realized Losses on the Mortgage Loans allocated to any
REMIC II Regular Interest pursuant to Section 4.04(c) on the Mortgage Loans
shall be allocated by the Trust Administrator on each Distribution Date as
follows: first, to Net Monthly Excess Cashflow; second, to the Class CE
Certificates, until the Certificate Principal Balance thereof has been reduced
to zero; and third, to the Class A Certificates. All Realized Losses to be
allocated to the Certificate Principal Balances of all Classes on any
Distribution Date shall be so allocated after the actual distributions to be
made on such date as provided above. All references above to the Certificate
Principal Balance of any Class of Certificates shall be to the Certificate
Principal Balance of such Class immediately prior to the relevant Distribution
Date, before reduction thereof by any Realized Losses, in each case to be
allocated to such Class of Certificates, on such Distribution Date. No
allocations of Realized Losses pursuant to this Section 4.04 shall affect any
liability of the Certificate Insurer with respect to such amounts under the
Policy.
Any allocation of Realized Losses to a Class A Certificate on
any Distribution Date shall be made by reducing the Certificate Principal
Balance thereof by the amount so allocated; any allocation of Realized Losses to
a Class CE Certificate shall be made by reducing the amount otherwise payable in
respect thereof pursuant to Section 4.01(a)(2)(viii). No allocations of any
Realized Losses shall be made to the Certificate Principal Balance of the Class
P Certificates.
As used herein, an allocation of a Realized Loss on a "PRO
RATA basis" among two or more specified Classes of Certificates means an
allocation on a PRO RATA basis, among the various Classes so specified, to each
such Class of Certificates on the basis of their then outstanding Certificate
Principal Balances prior to giving effect to distributions to be made on such
Distribution Date. All Realized Losses and all other losses allocated to a Class
of Certificates hereunder will be allocated among the Certificates of such Class
in proportion to the Percentage Interests evidenced thereby.
(c) All Realized Losses on the Mortgage Loans shall be
allocated by the Trust Administrator on each Distribution Date to the following
REMIC I Regular Interests in the specified percentages, as follows: first, to
Uncertificated Interest payable to the REMIC I Regular Interest I-LT1 and REMIC
I Regular Interest I-LT3 up to an aggregate amount equal to the REMIC I Interest
Loss Allocation Amount, 98% and 2%, respectively; second, to the Uncertificated
Balances of the REMIC I Regular Interest I-LT1 and REMIC I Regular Interest I-
-98-
<PAGE>
LT3 up to an aggregate amount equal to the REMIC I Principal Loss Allocation
Amount, 98% and 2%, respectively; third, to the Uncertificated Balances of REMIC
I Regular Interest I-LT1, REMIC I Regular Interest I-LT2 and REMIC I Regular
Interest I-LT3, 98%, 1% and 1%, respectively.
(d) All Realized Losses on the REMIC II Regular Interests
shall be allocated by the Trust Administrator on each Distribution Date among
the REMIC II Regular Interests in the proportion that Realized Losses are
allocated to the related Uncertificated Corresponding Component; Realized Losses
allocated to principal on REMIC I Regular Interest I-LT2 shall be allocated to
REMIC II Regular Interest II-LT2.
As used herein, an allocation of a Realized Loss on a "PRO
RATA basis" among the REMIC I Regular Interests (other than REMIC I Regular
Interest I-LTP and the Class S Certificates) means an allocation on a PRO RATA
basis among the REMIC I Regular Interests (other than REMIC I Regular Interest
I-LTP and the Class S Certificates) on the basis of their then outstanding
Uncertificated Balances, in each case prior to giving effect to distributions to
be made on such Distribution Date.
SECTION 4.05. Compliance with Withholding Requirements .
Notwithstanding any other provision of this Agreement, the
Trust Administrator shall comply with all federal withholding requirements
respecting payments to Certificateholders of interest or original issue discount
that the Trust Administrator reasonably believes are applicable under the Code.
The consent of Certificateholders shall not be required for such withholding. In
the event the Trust Administrator does withhold any amount from interest or
original issue discount payments or advances thereof to any Certificateholder
pursuant to federal withholding requirements, the Trust Administrator shall
indicate the amount withheld to such Certificateholders.
SECTION 4.06. Exchange Commission; Additional Information.
Within 15 days after each Distribution Date, the Trust
Administrator shall file with the Commission via the Electronic Data Gathering
and Retrieval System, a Form 8-K with a copy of the statement to
Certificateholders for such Distribution Date as an exhibit thereto. Prior to
January 30, 1999, the Trust Administrator shall file a Form 15 Suspension
Notification with respect to the Trust Fund, if applicable. Prior to March 30,
1999, the Trust Administrator shall file a Form 10-K, substantially in the form
attached hereto as Exhibit H, with respect to the Trust Fund. The Depositor
hereby grants to the Trust Administrator a limited power of attorney to execute
and file each such document on behalf of the Depositor. Such power of attorney
shall continue until the earlier of (i) receipt by the Trust Administrator from
the Depositor of written termination of such power of attorney and (ii) the
termination of the Trust Fund. Upon request, the Trust Administrator shall
deliver to the Depositor a copy of any Form 8-K or Form 10-K filed pursuant to
this Section 4.06.
-99-
<PAGE>
ARTICLE V
THE CERTIFICATES
SECTION 5.01. The Certificates.
(a) The Certificates in the aggregate will represent the
entire beneficial ownership interest in the Mortgage Loans and all other assets
included in REMIC I.
The Certificates will be substantially in the forms annexed
hereto as Exhibits A-1 through A-7. The Certificates of each Class will be
issuable in registered form only, in denominations of authorized Percentage
Interests as described in the definition thereof. Each Certificate will share
ratably in all rights of the related Class.
Upon original issue, the Certificates shall be executed by the
Trustee, or by the Trust Administrator on behalf of the Trustee, and
authenticated and delivered by the Trustee or the Trust Administrator to or upon
the order of the Depositor. The Certificates shall be executed by manual or
facsimile signature on behalf of the Trustee or the Trust Administrator by an
authorized signatory. Certificates bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the Trustee or the Trust
Administrator shall bind the Trustee or the Trust Administrator, as applicable,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Certificates or did not
hold such offices at the date of such Certificates. No Certificate shall be
entitled to any benefit under this Agreement or be valid for any purpose, unless
there appears on such Certificate a certificate of authentication substantially
in the form provided herein executed by the Trustee or the Trust Administrator
by manual signature, and such certificate of authentication shall be conclusive
evidence, and the only evidence, that such Certificate has been duly
authenticated and delivered hereunder. All Certificates shall be dated the date
of their authentication.
(b) The Class A Certificates shall initially be issued as one
or more Certificates held by the Book-Entry Custodian or, if appointed to hold
such Certificates as provided below, the Depository and registered in the name
of the Depository or its nominee and, except as provided below, registration of
such Certificates may not be transferred by the Trust Administrator except to
another Depository that agrees to hold such Certificates for the respective
Certificate Owners with Ownership Interests therein. The Certificate Owners
shall hold their respective Ownership Interests in and to such Certificates
through the book-entry facilities of the Depository and, except as provided
below, shall not be entitled to definitive, fully registered Certificates
("Definitive Certificates") in respect of such Ownership Interests. All
transfers by Certificate Owners of their respective Ownership Interests in the
Book-Entry Certificates shall be made in accordance with the procedures
established by the Depository Participant or brokerage firm representing such
Certificate Owner. Each Depository Participant shall only transfer the Ownership
Interests in the Book-Entry Certificates of Certificate Owners it represents or
of brokerage firms for which it acts as agent in accordance with the
Depository's normal procedures. The Trust Administrator 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
-100-
<PAGE>
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 Depositor, the Master
Servicer, the Certificate Insurer, the Trustee and, if the Trust Administrator
is not the Book-Entry Custodian, the Trust Administrator, 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 Trust Administrator resigns or is removed in accordance with
the terms hereof, the Trustee, the successor trust administrator or, if it so
elects, the Depository shall immediately succeed to its predecessor's duties as
Book-Entry Custodian. The Depositor shall have the right to inspect, and to
obtain copies of, any Certificates held as Book-Entry Certificates by the
Book-Entry Custodian.
The Trust Administrator, the Trustee, the Master Servicer, the
Certificate Insurer and the Depositor may for all purposes (including the making
of payments due on the Book-Entry Certificates) deal with the Depository as the
authorized representative of the Certificate Owners with respect to the
Book-Entry Certificates for the purposes of exercising the rights of
Certificateholders hereunder. The rights of Certificate Owners with respect to
the Book-Entry Certificates shall be limited to those established by law and
agreements between such Certificate Owners and the Depository Participants and
brokerage firms representing such Certificate Owners. Multiple requests and
directions from, and votes of, the Depository as Holder of the Book-Entry
Certificates with respect to any particular matter shall not be deemed
inconsistent if they are made with respect to different Certificate Owners. The
Trust Administrator may establish a reasonable record date in connection with
solicitations of consents from or voting by Certificateholders and shall give
notice to the Depository of such record date.
If (i)(A) the Depositor advises the Trust Administrator in
writing that the Depository is no longer willing or able to properly discharge
its responsibilities as Depository, and (B) the Depositor is unable to locate a
qualified successor, (ii) the Depositor at its option advises the Trust
Administrator in writing that it elects to terminate the book-entry system
through the Depository or (iii) after the occurrence of a Master Servicer Event
of Default, Certificate Owners representing in the aggregate not less than 51%
of the Ownership Interests of the Book-Entry Certificates advise the Trust
Administrator through the Depository, in writing, that the continuation of a
book-entry system through the Depository is no longer in the best interests of
the Certificate Owners, the Trust Administrator shall notify all Certificate
Owners, through the Depository, of the occurrence of any such event and of the
availability of Definitive Certificates to Certificate Owners requesting the
same. Upon surrender to the Trust Administrator of the Book-Entry Certificates
by the Book-Entry Custodian or the Depository, as applicable, accompanied by
registration instructions from the Depository for registration of transfer, the
Trust Administrator shall issue the Definitive Certificates. Such Definitive
Certificates will be issued in minimum denominations of $10,000, except that any
beneficial ownership that was represented by a Book-Entry Certificate in an
amount less than $10,000 immediately prior to the issuance of a Definitive
Certificate shall be issued in a minimum denomination equal to the amount
represented by such Book-Entry Certificate. None of the Depositor, the Master
Servicer, the
-101-
<PAGE>
Trust Administrator or the Trustee shall be liable for any delay in the delivery
of such instructions and may conclusively rely on, and shall be protected in
relying on, such instructions. Upon the issuance of Definitive Certificates all
references herein to obligations imposed upon or to be performed by the
Depository shall be deemed to be imposed upon and performed by the Trust
Administrator, to the extent applicable with respect to such Definitive
Certificates, and the Trust Administrator shall recognize the Holders of the
Definitive Certificates as Certificateholders hereunder.
SECTION 5.02. Registration of Transfer and Exchange of
Certificates.
(a) The Trust Administrator shall cause to be kept at one of
the offices or agencies to be appointed by the Trust Administrator in accordance
with the provisions of Section 8.11 a Certificate Register for the Certificates
in which, subject to such reasonable regulations as it may prescribe, the Trust
Administrator shall provide for the registration of Certificates and of
transfers and exchanges of Certificates as herein provided.
(b) No transfer of any Class CE Certificate, Class P
Certificate, Class S Certificate or Residual Certificate shall be made unless
that transfer is made pursuant to an effective registration statement under the
Securities Act of 1933, as amended (the "1933 Act"), and effective registration
or qualification under applicable state securities laws, or is made in a
transaction that does not require such registration or qualification. In the
event that such a transfer of a Class CE Certificate, Class P Certificate, Class
S Certificate or Residual Certificate is to be made without registration or
qualification (other than in connection with the initial transfer of any such
Certificate by the Depositor to an affiliate of the Depositor), the Trust
Administrator shall require receipt of: (i) if such transfer is purportedly
being made in reliance upon Rule 144A under the 1933 Act, written certifications
from the Certificateholder desiring to effect the transfer and from such
Certificateholder's prospective transferee, substantially in the forms attached
hereto as Exhibit F-1; and (ii) in all other cases, an Opinion of Counsel
satisfactory to it that such transfer may be made without such registration or
qualification (which Opinion of Counsel shall not be an expense of the Trust
Fund or of the Depositor, the Trust Administrator, the Trustee, the Master
Servicer in its capacity as such, any Sub-Servicer or the Certificate Insurer),
together with copies of the written certification(s) of the Certificateholder
desiring to effect the transfer and/or such Certificateholder's prospective
transferee upon which such Opinion of Counsel is based, if any. None of the
Depositor, the Trust Administrator or the Trustee is obligated to register or
qualify any such Certificates under the 1933 Act or any other securities laws or
to take any action not otherwise required under this Agreement to permit the
transfer of such Certificates without registration or qualification. Any
Certificateholder desiring to effect the transfer of any such Certificate shall,
and does hereby agree to, indemnify the Trust Administrator, the Trustee, the
Depositor, the Master Servicer and the Certificate Insurer against any liability
that may result if the transfer is not so exempt or is not made in accordance
with such federal and state laws.
(c) No transfer of a Class CE Certificate, Class P
Certificate, Class S Certificate or Residual Certificate or any interest therein
shall be made to any Plan subject to ERISA or Section 4975 of the Code, any
Person acting, directly or indirectly, on behalf of any such Plan or any Person
acquiring such Certificates with "Plan Assets" of a Plan within the meaning of
the
-102-
<PAGE>
Department of Labor regulation promulgated at 29 C.F.R. ss. 2510.3-101 ("Plan
Assets") unless the Depositor, the Trust Administrator, the Trustee, the
Certificate Insurer and the Master Servicer are provided with an Opinion of
Counsel which establishes to the satisfaction of the Depositor, the Trust
Administrator, the Trustee, the Certificate Insurer and the Master Servicer that
the purchase of such Certificates is permissible under applicable law, will not
constitute or result in any prohibited transaction under ERISA or Section 4975
of the Code and will not subject the Depositor, the Master Servicer, the Trust
Administrator, the Trustee, the Certificate Insurer or the Trust Fund to any
obligation or liability (including obligations or liabilities under ERISA or
Section 4975 of the Code) in addition to those undertaken in this Agreement,
which Opinion of Counsel shall not be an expense of the Depositor, the Master
Servicer, the Trust Administrator, the Trustee, the Certificate Insurer or the
Trust Fund. In lieu of such Opinion of Counsel, any prospective Transferee of
such Certificates may provide a certification in the form of Exhibit G to this
Agreement (or other form acceptable to the Depositor, the Trust Administrator,
the Trustee, the Certificate Insurer and the Master Servicer), which the Trust
Administrator may rely upon without further inquiry or investigation. Neither an
Opinion of Counsel nor any certification will be required in connection with the
initial transfer of any such Certificate by the Depositor to an affiliate of the
Depositor (in which case, the Depositor or any affiliate thereof shall have
deemed to have represented that such affiliate is not a Plan or a Person
investing Plan Assets) and the Trust Administrator shall be entitled to
conclusively rely upon a representation (which, upon the request of the Trust
Administrator, shall be a written representation) from the Depositor of the
status of such transferee as an affiliate of the Depositor.
(d) (i) Each Person who has or who acquires any Ownership
Interest in a Residual Certificate shall be deemed by the acceptance or
acquisition of such Ownership Interest to have agreed to be bound by the
following provisions and to have irrevocably authorized the Trust Administrator
or its designee under clause (iii)(A) below to deliver payments to a Person
other than such Person and to negotiate the terms of any mandatory sale under
clause (iii)(B) below and to execute all instruments of Transfer and to do all
other things necessary in connection with any such sale. The rights of each
Person acquiring any Ownership Interest in a Residual Certificate are expressly
subject to the following provisions:
(A) Each Person holding or acquiring any
Ownership Interest in a Residual Certificate shall be
a Permitted Transferee and shall promptly notify the
Trust Administrator of any change or impending change
in its status as a Permitted Transferee.
(B) In connection with any proposed Transfer
of any Ownership Interest in a Residual Certificate,
the Trust Administrator shall require delivery to it,
and shall not register the Transfer of any Residual
Certificate until its receipt of, an affidavit and
agreement (a "Transfer Affidavit and Agreement," in
the form attached hereto as Exhibit F-2) from the
proposed Transferee, in form and substance
satisfactory to the Trust Administrator, representing
and warranting, among other things, that such
Transferee is a Permitted Transferee, that it is not
acquiring its Ownership Interest in the Residual
Certificate that is the subject of the proposed
Transfer as a
-103-
<PAGE>
nominee, trustee or agent for any Person that is not
a Permitted Transferee, that for so long as it
retains its Ownership Interest in a Residual
Certificate, it will endeavor to remain a Permitted
Transferee, and that it has reviewed the provisions
of this Section 5.02(d) and agrees to be bound by
them.
(C) Notwithstanding the delivery of a
Transfer Affidavit and Agreement by a proposed
Transferee under clause (B) above, if a Responsible
Officer of the Trust Administrator who is assigned to
this transaction has actual knowledge that the
proposed Transferee is not a Permitted Transferee, no
Transfer of an Ownership Interest in a Residual
Certificate to such proposed Transferee shall be
effected.
(D) Each Person holding or acquiring any
Ownership Interest in a Residual Certificate shall
agree (x) to require a transferor affidavit (a
"Transferor Affidavit," in the form attached hereto
as Exhibit F-2) from any other Person to whom such
Person attempts to transfer its Ownership Interest in
a Residual Certificate and (y) not to transfer its
Ownership Interest unless it provides a Transferor
Affidavit (in the form attached hereto as Exhibit
F-2) to the Trust Administrator stating that, among
other things, it has no actual knowledge that such
other Person is not a Permitted Transferee.
(E) Each Person holding or acquiring an
Ownership Interest in a Residual Certificate, by
purchasing an Ownership Interest in such Certificate,
agrees to give the Trust Administrator written notice
that it is a "pass-through interest holder" within
the meaning of temporary Treasury regulation Section
1.67-3T(a)(2)(i)(A) immediately upon acquiring an
Ownership Interest in a Residual Certificate, if it
is, or is holding an Ownership Interest in a Residual
Certificate on behalf of, a "pass-through interest
holder."
(ii) The Trust Administrator will register the Transfer
of any Residual Certificate only if it shall have received the
Transfer Affidavit and Agreement and all of such other
documents as shall have been reasonably required by the Trust
Administrator as a condition to such registration. In
addition, no Transfer of a Residual Certificate shall be made
unless the Trust Administrator shall have received a
representation letter from the Transferee of such Certificate
to the effect that such Transferee is a Permitted Transferee.
(iii) (A) If any purported Transferee shall become a
Holder of a Residual Certificate in violation of the
provisions of this Section 5.02(d), then the last preceding
Permitted Transferee shall be restored, to the extent
permitted by law, to all rights as holder thereof retroactive
to the date of registration of such Transfer of such Residual
Certificate. The Trust Administrator shall be under no
liability to any Person for any registration of Transfer of a
Residual Certificate that
-104-
<PAGE>
is in fact not permitted by this Section 5.02(d) or for making
any payments due on such Certificate to the holder thereof or
for taking any other action with respect to such holder under
the provisions of this Agreement.
(B) If any purported Transferee shall become
a holder of a Residual Certificate in violation of the
restrictions in this Section 5.02(d) and to the extent that
the retroactive restoration of the rights of the holder of
such Residual Certificate as described in clause (iii)(A)
above shall be invalid, illegal or unenforceable, then the
Trust Administrator shall have the right, without notice to
the holder or any prior holder of such Residual Certificate,
to sell such Residual Certificate to a purchaser selected by
the Trust Administrator on such terms as the Trust
Administrator may choose. Such purported Transferee shall
promptly endorse and deliver each Residual Certificate in
accordance with the instructions of the Trust Administrator.
Such purchaser may be the Trust Administrator itself or any
Affiliate of the Trust Administrator. The proceeds of such
sale, net of the commissions (which may include commissions
payable to the Trust Administrator or its Affiliates),
expenses and taxes due, if any, will be remitted by the Trust
Administrator to such purported Transferee. The terms and
conditions of any sale under this clause (iii)(B) shall be
determined in the sole discretion of the Trust Administrator,
and the Trust Administrator shall not be liable to any Person
having an Ownership Interest in a Residual Certificate as a
result of its exercise of such discretion.
(iv) The Trust Administrator shall make available to the
Internal Revenue Service and those Persons specified by the
REMIC Provisions all information necessary to compute any tax
imposed (A) as a result of the Transfer of an Ownership
Interest in a Residual Certificate to any Person who is a
Disqualified Organization, including the information described
in Treasury regulations sections 1.860D-1(b)(5) and
1.860E-2(a)(5) with respect to the "excess inclusions" of such
Residual Certificate and (B) as a result of any regulated
investment company, real estate investment trust, common trust
fund, partnership, trust, estate or organization described in
Section 1381 of the Code that holds an Ownership Interest in a
Residual Certificate having as among its record holders at any
time any Person which is a Disqualified Organization.
Reasonable compensation for providing such information may be
accepted by the Trust Administrator.
(v) The provisions of this Section 5.02(d) set forth
prior to this subsection (v) may be modified, added to or
eliminated, provided that there shall have been delivered to
the Trust Administrator at the expense of the party seeking to
modify, add to or eliminate any such provision the following:
(A) written notification from each Rating
Agency to the effect that the modification, addition
to or elimination of such provisions will not
-105-
<PAGE>
cause such Rating Agency to downgrade its
then-current ratings of any Class of Certificates;
and
(B) an Opinion of Counsel, in form and
substance satisfactory to the Trust Administrator, to
the effect that such modification of, addition to or
elimination of such provisions will not cause any of
REMIC I, REMIC II or REMIC III to cease to qualify as
a REMIC and will not cause any of REMIC I, REMIC II
or REMIC III, as the case may be, to be subject to an
entity-level tax caused by the Transfer of any
Residual Certificate to a Person that is not a
Permitted Transferee or a Person other than the
prospective transferee to be subject to a REMIC-tax
caused by the Transfer of a Residual Certificate to a
Person that is not a Permitted Transferee.
(e) Subject to the preceding subsections, upon surrender for
registration of transfer of any Certificate at any office or agency of the Trust
Administrator maintained for such purpose pursuant to Section 8.11, the Trust
Administrator shall execute, authenticate and deliver, in the name of the
designated Transferee or Transferees, one or more new Certificates of the same
Class of a like aggregate Percentage Interest.
(f) At the option of the Holder thereof, any Certificate may
be exchanged for other Certificates of the same Class with authorized
denominations and a like aggregate Percentage Interest, upon surrender of such
Certificate to be exchanged at any office or agency of the Trust Administrator
maintained for such purpose pursuant to Section 8.11. Whenever any Certificates
are so surrendered for exchange the Trust Administrator shall execute,
authenticate and deliver the Certificates which the Certificateholder making the
exchange is entitled to receive. Every Certificate presented or surrendered for
transfer or exchange shall (if so required by the Trust Administrator) be duly
endorsed by, or be accompanied by a written instrument of transfer in the form
satisfactory to the Trust Administrator duly executed by, the Holder thereof or
his attorney duly authorized in writing.
(g) No service charge to the Certificateholders shall be made
for any transfer or exchange of Certificates, but the Trust Administrator may
require payment of a sum sufficient to cover any tax or governmental charge that
may be imposed in connection with any transfer or exchange of Certificates.
(h) All Certificates surrendered for transfer and exchange
shall be canceled and destroyed by the Trust Administrator in accordance with
its customary procedures.
SECTION 5.03. Mutilated, Destroyed, Lost or Stolen
Certificates.
If (i) any mutilated Certificate is surrendered to the Trust
Administrator, or the Trust Administrator receives evidence to its satisfaction
of the destruction, loss or theft of any Certificate, and (ii) there is
delivered to each of the Trustee and the Trust Administrator such security or
indemnity as may be required by it to save it harmless, then, in the absence of
actual knowledge by the Trust Administrator or the Trustee that such Certificate
has been acquired by
-106-
<PAGE>
a bona fide purchaser, the Trustee, or the Trust Administrator on behalf of the
Trustee shall execute, and the Trustee or the Trust Administrator shall
authenticate and deliver, in exchange for or in lieu of any such mutilated,
destroyed, lost or stolen Certificate, a new Certificate of the same Class and
of like denomination and Percentage Interest. Upon the issuance of any new
Certificate under this Section, the Trust Administrator may require the payment
of a sum sufficient to cover any tax or other governmental charge that may be
imposed in relation thereto and any other expenses (including the fees and
expenses of the Trustee and the Trust Administrator) connected therewith. Any
replacement Certificate issued pursuant to this Section shall constitute
complete and indefeasible evidence of ownership in the applicable REMIC created
hereunder, as if originally issued, whether or not the lost, stolen or destroyed
Certificate shall be found at any time.
SECTION 5.04. Persons Deemed Owners.
The Depositor, the Master Servicer, the Trust Administrator,
the Trustee, the Certificate Insurer and any agent of any of them may treat the
Person in whose name any Certificate is registered as the owner of such
Certificate for the purpose of receiving distributions pursuant to Section 4.01
and for all other purposes whatsoever, and none of the Depositor, the Master
Servicer, the Trust Administrator, the Trustee or any agent of any of them shall
be affected by notice to the contrary.
SECTION 5.05. Certain Available Information.
On or prior to the date of the first sale of any Class CE
Certificate, Class P Certificate, Class S Certificate or Residual Certificate to
an Independent third party, the Depositor shall provide to the Trust
Administrator ten copies of any private placement memorandum or other disclosure
document used by the Depositor in connection with the offer and sale of such
Certificate. In addition, if any such private placement memorandum or disclosure
document is revised, amended or supplemented at any time following the delivery
thereof to the Trust Administrator, the Depositor promptly shall inform the
Trust Administrator of such event and shall deliver to the Trust Administrator
ten copies of the private placement memorandum or disclosure document, as
revised, amended or supplemented. The Trust Administrator shall maintain at its
Corporate Trust Office and shall make available free of charge during normal
business hours for review by any Holder of a Certificate or any Person
identified to the Trust Administrator as a prospective transferee of a
Certificate, originals or copies of the following items: (i) in the case of a
Holder or prospective transferee of a Class CE Certificate, Class P Certificate,
Class S Certificate or Residual Certificate, the related private placement
memorandum or other disclosure document relating to such Class of Certificates,
in the form most recently provided to the Trust Administrator; and (ii) in all
cases, (A) this Agreement and any amendments hereof entered into pursuant to
Section 12.01, (B) all monthly statements required to be delivered to
Certificateholders of the relevant Class pursuant to Section 4.02 since the
Closing Date, and all other notices, reports, statements and written
communications delivered to the Certificateholders of the relevant Class
pursuant to this Agreement since the Closing Date, (C) all certifications
delivered by a Responsible Officer of the Trust Administrator since the Closing
Date pursuant to Section 11.01(h), (D) any and all Officers' Certificates
delivered to the Trust Administrator by
-107-
<PAGE>
the Master Servicer since the Closing Date to evidence the Master Servicer's
determination that any P&I Advance or Servicing Advance was, or if made, would
be a Nonrecoverable P&I Advance or Nonrecoverable Servicing Advance,
respectively, and (E) any and all Officers' Certificates delivered to the Trust
Administrator by the Master Servicer since the Closing Date pursuant to Section
4.04(a). Copies and mailing of any and all of the foregoing items will be
available from the Trust Administrator upon request at the expense of the Person
requesting the same.
-108-
<PAGE>
ARTICLE VI
THE DEPOSITOR AND THE MASTER SERVICER
SECTION 6.01. Liability of the Depositor and the Master
Servicer.
The Depositor and the Master Servicer each shall be liable in
accordance herewith only to the extent of the obligations specifically imposed
by this Agreement upon them in their respective capacities as Depositor and
Master Servicer and undertaken hereunder by the Depositor
and the Master Servicer herein.
SECTION 6.02. Merger or Consolidation of the Depositor or the
Master Servicer.
Subject to the following paragraph, the Depositor will keep in
full effect its existence, rights and franchises as a corporation under the laws
of the jurisdiction of its incorporation. Subject to the following paragraph,
the Master Servicer will keep in full effect its existence, rights and
franchises as a corporation under the laws of the jurisdiction of its
incorporation. The Depositor and the Master Servicer each will obtain and
preserve its qualification to do business as a foreign corporation in each
jurisdiction in which such qualification is or shall be necessary to protect the
validity and enforceability of this Agreement, the Certificates or any of the
Mortgage Loans and to perform its respective duties under this Agreement.
The Depositor or the Master Servicer may be merged or
consolidated with or into any Person, or transfer all or substantially all of
its assets to any Person, in which case any Person resulting from any merger or
consolidation to which the Depositor or the Master Servicer shall be a party, or
any Person succeeding to the business of the Depositor or the Master Servicer,
shall be the successor of the Depositor or the Master Servicer, as the case may
be, hereunder, without the execution or filing of any paper or any further act
on the part of any of the parties hereto, anything herein to the contrary
notwithstanding; provided, however, that the successor or surviving Person to
the Master Servicer shall be qualified to service mortgage loans on behalf of
Fannie Mae or Freddie Mac; and provided further that the Rating Agencies'
ratings and shadow ratings of the Class A Certificates in effect immediately
prior to such merger or consolidation will not be qualified, reduced or
withdrawn as a result thereof (as evidenced by a letter to such effect from the
Rating Agencies).
SECTION 6.03. Limitation on Liability of the Depositor, the
Master Servicer and Others.
None of the Depositor, the Master Servicer or any of the
directors, officers, employees or agents of the Depositor or the Master Servicer
shall be under any liability to the Trust Fund or the Certificateholders for any
action taken or for refraining from the taking of any action in good faith
pursuant to this Agreement, or for errors in judgment; provided, however, that
this provision shall not protect the Depositor, the Master Servicer or any such
person against any breach of warranties, representations or covenants made
herein, or against any specific
-109-
<PAGE>
liability imposed on the Master Servicer pursuant hereto, or against any
liability which would otherwise be imposed by reason of willful misfeasance, bad
faith or gross negligence in the performance of duties or by reason of reckless
disregard of obligations and duties hereunder. The Depositor, the Master
Servicer and any director, officer, employee or agent of the Depositor or the
Master Servicer may rely in good faith on any document of any kind which, PRIMA
FACIE, is properly executed and submitted by any Person respecting any matters
arising hereunder. The Depositor, the Master Servicer and any director, officer,
employee or agent of the Depositor or the Master Servicer shall be indemnified
and held harmless by the Trust Fund against any loss, liability or expense
incurred in connection with any legal action relating to this Agreement or the
Certificates, other than any loss, liability or expense relating to any specific
Mortgage Loan or Mortgage Loans (except as any such loss, liability or expense
shall be otherwise reimbursable pursuant to this Agreement) or any loss,
liability or expense incurred by reason of willful misfeasance, bad faith or
gross negligence in the performance of duties hereunder or by reason of reckless
disregard of obligations and duties hereunder. Neither the Depositor nor the
Master Servicer shall be under any obligation to appear in, prosecute or defend
any legal action unless such action is related to its respective duties under
this Agreement and, in its opinion, does not involve it in any expense or
liability; provided, however, that each of the Depositor and the Master Servicer
may in its discretion undertake any such action which it may deem necessary or
desirable with respect to this Agreement and the rights and duties of the
parties hereto and the interests of the Certificateholders hereunder. In such
event, unless the Depositor or the Master Servicer acts without the consent of
the Certificate Insurer prior to a Certificate Insurer Default or without the
consent of Holders of Certificates entitled to at least 51% of the Voting Rights
after a Certificate Insurer Default, the legal expenses and costs of such action
and any liability resulting therefrom (except any loss, liability or expense
incurred by reason of willful misfeasance, bad faith or gross negligence in the
performance of duties hereunder or by reason of reckless disregard of
obligations and duties hereunder) shall be expenses, costs and liabilities of
the Trust Fund, and the Depositor and the Master Servicer shall be entitled to
be reimbursed therefor from the Collection Account as and to the extent provided
in Section 3.11, any such right of reimbursement being prior to the rights of
the Certificateholders to receive any amount in the Collection Account.
SECTION 6.04. Limitation on Resignation of the Master
Servicer.
The Master Servicer shall not resign from the obligations and
duties hereby imposed on it except upon determination that its duties hereunder
are no longer permissible under applicable law. Any such determination pursuant
to the preceding sentence permitting the resignation of the Master Servicer
shall be evidenced by an Opinion of Counsel to such effect obtained at the
expense of the Master Servicer and delivered to the Trustee and the Trust
Administrator. No resignation of the Master Servicer shall become effective
until the Trustee, the Trust Administrator or a successor servicer shall have
assumed the Master Servicer's responsibilities, duties, liabilities (other than
those liabilities arising prior to the appointment of such successor) and
obligations under this Agreement.
Except as expressly provided herein, the Master Servicer shall
not assign or transfer any of its rights, benefits or privileges hereunder to
any other Person, or delegate to or subcontract with, or authorize or appoint
any other Person to perform any of the duties, covenants or
-110-
<PAGE>
obligations to be performed by the Master Servicer hereunder. The foregoing
prohibition on assignment shall not prohibit the Master Servicer from
designating a Subservicer as payee of any indemnification amount payable to the
Master Servicer hereunder; provided, however, that as provided in Section 3.06
hereof, no Subservicer shall be a third-party beneficiary hereunder and the
parties hereto shall not be required to recognize any Subservicer as an
indemnitee under this Agreement. If, pursuant to any provision hereof, the
duties of the Master Servicer are transferred to a successor master servicer,
the entire amount of the Servicing Fee and other compensation payable to the
Master Servicer pursuant hereto shall thereafter be payable to such successor
master servicer.
SECTION 6.05. Rights of the Depositor in Respect of the Master
Servicer.
The Master Servicer shall afford (and any Sub-Servicing
Agreement shall provide that each Sub-Servicer shall afford) the Depositor, the
Trustee, the Trust Administrator and the Certificate Insurer, upon reasonable
notice, during normal business hours, access to all records maintained by the
Master Servicer (and any such Sub-Servicer) in respect of the Master Servicer's
rights and obligations hereunder and access to officers of the Master Servicer
(and those of any such Sub-Servicer) responsible for such obligations. Upon
request, the Master Servicer shall furnish to the Depositor, the Trustee, the
Trust Administrator and the Certificate Insurer its (and any such
Sub-Servicer's) most recent financial statements and such other information
relating to the Master Servicer's capacity to perform its obligations under this
Agreement as it possesses (and that any such Sub-Servicer possesses). To the
extent such information is not otherwise available to the public, the Depositor,
the Trustee, the Trust Administrator and the Certificate Insurer shall not
disseminate any information obtained pursuant to the preceding two sentences
without the Master Servicer's written consent, except as required pursuant to
this Agreement or to the extent that it is appropriate to do so (i) in working
with legal counsel, auditors, taxing authorities or other governmental agencies
or (ii) pursuant to any law, rule, regulation, order, judgment, writ, injunction
or decree of any court or governmental authority having jurisdiction over the
Depositor, the Trustee, the Trust Administrator, the Certificate Insurer or the
Trust Fund, and in any case, the Depositor, the Trustee, the Trust Administrator
or the Certificate Insurer, as the case may be, shall use its best efforts to
assure the confidentiality of any such disseminated non-public information. The
Depositor may, but is not obligated to, enforce the obligations of the Master
Servicer under this Agreement and may, but is not obligated to, perform, or
cause a designee to perform, any defaulted obligation of the Master Servicer
under this Agreement or exercise the rights of the Master Servicer under this
Agreement; provided that the Master Servicer shall not be relieved of any of its
obligations under this Agreement by virtue of such performance by the Depositor
or its designee. The Depositor shall not have any responsibility or liability
for any action or failure to act by the Master Servicer and is not obligated to
supervise the performance of the Master Servicer under this Agreement or
otherwise.
-111-
<PAGE>
ARTICLE VII
DEFAULT
SECTION 7.01. Master Servicer Events of Default.
(a) "Master Servicer Event of Default," wherever used herein,
means any one of the following events:
(i) any failure by the Master Servicer to remit to the
Trust Administrator for distribution to the Certificateholders
any payment (other than a P&I Advance required to be made from
its own funds on any Master Servicer Remittance Date pursuant
to Section 4.03) required to be made under the terms of the
Certificates and this Agreement which continues unremedied for
a period of one Business Day after the date upon which written
notice of such failure, requiring the same to be remedied,
shall have been given to the Master Servicer by the Depositor,
the Certificate Insurer, the Trustee or the Trust
Administrator (in which case notice shall be provided by
telecopy), or to the Master Servicer, the Depositor, the
Certificate Insurer, the Trustee and the Trust Administrator
by the Holders of Certificates entitled to at least 25% of the
Voting Rights; or
(ii) any failure on the part of the Master Servicer duly
to observe or perform in any material respect any other of the
covenants or agreements on the part of the Master Servicer
contained in this Agreement, or the breach by the Master
Servicer of any representation and warranty contained in
Section 2.05, which continues unremedied for a period of 30
days after the earlier of (i) the date on which written notice
of such failure, requiring the same to be remedied, shall have
been given to the Master Servicer by the Depositor, the
Certificate Insurer, the Trustee, the Trust Administrator or
to the Master Servicer, the Depositor, the Certificate
Insurer, the Trustee and the Trust Administrator by the
Holders of Certificates entitled to at least 25% of the Voting
Rights and (ii) actual knowledge of such failure by a
Servicing Officer of the Master Servicer; or
(iii) a decree or order of a court or agency or
supervisory authority having jurisdiction in the premises in
an involuntary case under any present or future federal or
state bankruptcy, insolvency or similar law or the appointment
of a conservator or receiver or liquidator in any insolvency,
readjustment of debt, marshalling of assets and liabilities or
similar proceeding, or for the winding-up or liquidation of
its affairs, shall have been entered against the Master
Servicer and such decree or order shall have remained in force
undischarged or unstayed for a period of 90 days; or
(iv) the Master Servicer shall consent to the
appointment of a conservator or receiver or liquidator in any
insolvency, readjustment of debt, marshalling of
-112-
<PAGE>
assets and liabilities or similar proceedings of or relating
to it or of or relating to all or substantially all of its
property; or
(v) the Master Servicer shall admit in writing its
inability to pay its debts generally as they become due, file
a petition to take advantage of any applicable insolvency or
reorganization statute, make an assignment for the benefit of
its creditors, or voluntarily suspend payment of its
obligations; or
(vi) there shall have occurred, and the Certificate
Insurer shall have notified the Master Servicer, the Trustee
and the Trust Administrator of, an event of default by the
Master Servicer under the Insurance Agreement, provided
(except in the case of a default by the Master Servicer under
Section 5.01(f) of the Insurance Agreement) that no
Certificate Insurer Default exists; or
(vii) any failure of the Master Servicer to make any P&I
Advance on any Master Servicer Remittance Date required to be
made from its own funds pursuant to Section 4.03 which
continues unremedied until 3:00 p.m. New York time on the
second Business Day immediately following the Master Servicer
Remittance Date.
Subject to Article IX, if a Master Servicer Event of Default described in
clauses (i) through (vi) of this Section shall occur, then, and in each and
every such case, so long as such Master Servicer Event of Default shall not have
been remedied, the Depositor, the Certificate Insurer or the Trustee may (with
the consent of the Certificate Insurer), and at the written direction of the
Holders of Certificates entitled to at least 51% of Voting Rights (with the
consent of the Certificate Insurer), the Trustee shall, by notice in writing to
the Master Servicer (and to the Depositor, the Trust Administrator and the
Certificate Insurer if given by the Trustee or to the Trustee and the Trust
Administrator if given by the Depositor or the Certificate Insurer), terminate
all of the rights and obligations of the Master Servicer in its capacity as
Master Servicer under this Agreement, to the extent permitted by law, and in and
to the Mortgage Loans and the proceeds thereof. Subject to Article IX, if a
Master Servicer Event of Default described in clause (vii) hereof shall occur,
the Trustee shall, by notice in writing to the Master Servicer, the Certificate
Insurer, the Trust Administrator and the Depositor, terminate all of the rights
and obligations of the Master Servicer in its capacity as Master Servicer under
this Agreement and in and to the Mortgage Loans and the proceeds thereof. On or
after the receipt by the Master Servicer of such written notice, all authority
and power of the Master Servicer under this Agreement, whether with respect to
the Certificates (other than as a Holder of any Certificate) or the Mortgage
Loans or the Policy or otherwise, shall pass to and be vested in the Trust
Administrator pursuant to and under this Section, and, without limitation, the
Trust Administrator is hereby authorized and empowered, as attorney-in-fact or
otherwise, to execute and deliver, on behalf of and at the expense of the Master
Servicer, any and all documents and other instruments and to do or accomplish
all other acts or things necessary or appropriate to effect the purposes of such
notice of termination, whether to complete the transfer and endorsement or
assignment of the Mortgage Loans and related documents, or otherwise. The Master
Servicer agrees promptly (and in any event no later than ten Business Days
subsequent to such notice) to provide the Trust Administrator with all documents
and records requested by it to enable it to assume the Master Servicer's
functions under
-113-
<PAGE>
this Agreement, and to cooperate with the Trust Administrator and the Trustee in
effecting the termination of the Master Servicer's responsibilities and rights
under this Agreement, including, without limitation, the transfer within one
Business Day to the Trust Administrator for administration by it of all cash
amounts which at the time shall be or should have been credited by the Master
Servicer to the Collection Account held by or on behalf of the Master Servicer,
the Distribution Account, the Expense Account, the Policy Payments Account or
any REO Account or Servicing Account held by or on behalf of the Master Servicer
or thereafter be received with respect to the Mortgage Loans or any REO Property
serviced by the Master Servicer (provided, however, that the Master Servicer
shall continue to be entitled to receive all amounts accrued or owing to it
under this Agreement on or prior to the date of such termination, whether in
respect of P&I Advances or otherwise, and shall continue to be entitled to the
benefits of Section 6.03, notwithstanding any such termination, with respect to
events occurring prior to such termination). For purposes of this Section 7.01,
each of the Trustee and the Trust Administrator shall not be deemed to have
knowledge of a Master Servicer Event of Default unless a Responsible Officer of
the Trustee or the Trust Administrator, as applicable, assigned to and working
in the Trustee's or the Trust Administrator's, as the case may be, Corporate
Trust Office has actual knowledge thereof or unless written notice of any event
which is in fact such a Master Servicer Event of Default is received by the
Trustee or the Trust Administrator, as applicable, and such notice references
the Certificates, the Trust Fund or this Agreement.
The Master Servicer hereby covenants and agrees to act as the
Master Servicer under this Agreement for an initial term, commencing on the
Closing Date and ending on March 31, 1999, which term shall be extendable by the
Certificate Insurer for successive terms of three calendar months thereafter,
until the termination of the Trust Fund pursuant to Article X. Each such notice
of extension (a "Master Servicer Extension Notice") shall be delivered by the
Certificate Insurer to the Trustee, the Trust Administrator and the Master
Servicer. The Master Servicer hereby agrees that, upon its receipt of any such
Master Servicer Extension Notice, the Master Servicer shall become bound for the
duration of the term covered by such Master Servicer Extension Notice to
continue as the Master Servicer subject to and in accordance with the other
provisions of this Agreement. The Trust Administrator agrees that if as of the
fifteenth (15th) day prior to the last day of any term of the Master Servicer
the Trust Administrator shall not have received any Master Servicer Extension
Notice from the Certificate Insurer, the Trust Administrator will within five
(5) days thereafter, give written notice of such non-receipt to the Certificate
Insurer, the Trustee and the Master Servicer. The failure of the Certificate
Insurer to deliver a Master Servicer Extension Notice by the end of a calendar
term shall result in the termination of the Master Servicer. If the term of the
Master Servicer shall expire without the Certificate Insurer having delivered to
the Master Servicer a Master Servicer Extension Notice, but the Master Servicer
shall continue without objection from the Trust Administrator, the Trustee or
the Certificate Insurer to perform the functions of servicer hereunder (and in
the absence of ground for termination under any agreement referred to in Section
7.04), the Master Servicer shall be entitled to receive a prorated portion of
the Servicing Fee specified hereunder for the time during which it shall so act;
PROVIDED, that it is understood and agreed that the foregoing provision for
payment of the prorated Servicing Fee is intended solely to avoid unjust
enrichment of the Trust Fund and does not contemplate or give rise to any
implicit renewal of the Master Servicer's term. The foregoing provisions of this
paragraph shall not apply to the Trust Administrator or the
-114-
<PAGE>
Trustee in the event the Trust Administrator or the Trustee, as applicable,
succeeds to the rights and obligations of the Master Servicer and the Trust
Administrator or the Trustee, as applicable, shall continue in such capacity
until the earlier of the termination of this Agreement pursuant to Article X or
the appointment of a successor master servicer.
SECTION 7.02. Trust Administrator or Trustee to Act;
Appointment of Successor.
(a) (1) On and after the time the Master Servicer receives a
notice of termination, the Trust Administrator (and in the event the Trust
Administrator fails in its obligation, the Trustee) shall be the successor in
all respects to the Master Servicer in its capacity as Master Servicer under
this Agreement and the transactions set forth or provided for herein, and all
the responsibilities, duties and liabilities relating thereto and arising
thereafter shall be assumed by the Trust Administrator or the Trustee, as
applicable, (except for any representations or warranties of the Master Servicer
under this Agreement, the responsibilities, duties and liabilities contained in
Section 2.03(c) and the obligation to deposit amounts in respect of losses
pursuant to Section 3.12) by the terms and provisions hereof including, without
limitation, the Master Servicer's obligations to make P&I Advances pursuant to
Section 4.03; provided, however, that if the Trust Administrator or the Trustee,
as applicable, is prohibited by law or regulation from obligating itself to make
advances regarding delinquent mortgage loans, then the Trust Administrator or
the Trustee, as applicable, shall not be obligated to make P&I Advances pursuant
to Section 4.03; and provided further, that any failure to perform such duties
or responsibilities caused by the Master Servicer's failure to provide
information required by Section 7.01 shall not be considered a default by the
Trust Administrator or the Trustee, as applicable, as successor to the Master
Servicer hereunder. As compensation therefor, the Trust Administrator or the
Trustee, as applicable, shall be entitled to the Servicing Fee and all funds
relating to the Mortgage Loans to which the Master Servicer would have been
entitled if it had continued to act hereunder. Notwithstanding the above and
subject to Section 7.02(a)(2) below, the Trust Administrator or the Trustee, as
applicable, may, if it shall be unwilling to so act, or shall, if it is unable
to so act or if it is prohibited by law from making advances regarding
delinquent mortgage loans or if the Certificate Insurer or if the Holders of
Certificates entitled to at least 51% of the Voting Rights so request in writing
to the Trust Administrator or Trustee, as applicable, promptly appoint or
petition a court of competent jurisdiction to appoint, an established mortgage
loan servicing institution selected by the Certificate Insurer and acceptable to
each Rating Agency and having a net worth of not less than $15,000,000, as the
successor to the Master Servicer under this Agreement in the assumption of all
or any part of the responsibilities, duties or liabilities of the Master
Servicer under this Agreement.
(2) No appointment of a successor to the Master
Servicer under this Agreement shall be effective until the assumption by the
successor of all of the Master Servicer's responsibilities, duties and
liabilities hereunder. In connection with such appointment and assumption
described herein, the Trust Administrator or the Trustee, as applicable, may
make such arrangements for the compensation of such successor out of payments on
Mortgage Loans as it and such successor shall agree; provided, however, that no
such compensation shall be in excess of that permitted the Master Servicer as
such hereunder. The Depositor, the Trustee, the
-115-
<PAGE>
Trust Administrator and such successor shall take such action, consistent with
this Agreement, as shall be necessary to effectuate any such succession. Pending
appointment of a successor to the Master Servicer under this Agreement, the
Trust Administrator or the Trustee, as applicable, shall act in such capacity as
hereinabove provided.
(b) If the Master Servicer fails to remit to the Trust
Administrator for distribution to the Certificateholders any payment required to
be made under the terms of this Agreement (for purposes of this Section 7.02(b),
a "Remittance") because the Master Servicer is the subject of a proceeding under
the federal Bankruptcy Code and the making of such Remittance is prohibited by
Section 362 of the federal Bankruptcy Code, the Trust Administrator shall (and
in the event the Trust Administrator fails in its obligation, the Trustee) upon
notice of such prohibition, regardless of whether it has received a notice of
termination under Section 7.01, advance the amount of such Remittance by
depositing such amount in the Distribution Account on the related Distribution
Date. The Trust Administrator or the Trustee, as applicable, shall be obligated
to make such advance only if (i) such advance, in the good faith judgment of the
Trust Administrator or the Trustee, as applicable, can reasonably be expected to
be ultimately recoverable from Stayed Funds and (ii) the Trust Administrator or
the Trustee, as applicable, is not prohibited by law from making such advance or
obligating itself to do so. Upon remittance of the Stayed Funds to the Trust
Administrator or the deposit thereof in the Distribution Account by the Master
Servicer, a trustee in bankruptcy or a federal bankruptcy court, the Trust
Administrator or the Trustee, as applicable, may recover the amount so advanced,
without interest, by withdrawing such amount from the Distribution Account;
however, nothing in this Agreement shall be deemed to affect the Trust
Administrator's or Trustee's, as applicable, rights to recover from the Master
Servicer's own funds interest on the amount of any such advance. If the Trust
Administrator or the Trustee, as the case may be, 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 Trust Administrator or the Trustee, as applicable, shall
be entitled to reimburse itself for such advance, without interest, by
withdrawing from the Distribution Account, out of amounts on deposit therein, an
amount equal to the portion of such advance attributable to the Stayed Funds.
SECTION 7.03. Notification to Certificateholders.
(a) Upon any termination of the Master Servicer pursuant to
Section 7.01 above or any appointment of a successor to the Master Servicer
pursuant to Section 7.02 above, the Trust Administrator shall give prompt
written notice thereof to Certificateholders at their respective
addresses appearing in the Certificate Register.
(b) Not later than the later of 60 days after the occurrence
of any event, which constitutes or which, with notice or lapse of time or both,
would constitute a Master Servicer Event of Default or five days after a
Responsible Officer of the Trustee or the Trust Administrator becomes aware of
the occurrence of such an event, the Trustee or the Trust Administrator shall
transmit (or, in the case of the Trustee, the Trustee shall cause the Trust
Administrator to transmit) by mail to all Holders of Certificates notice of each
such occurrence, unless such default or Master Servicer Event of Default shall
have been cured or waived.
-116-
<PAGE>
SECTION 7.04. Waiver of Master Servicer Events of Default.
Subject to Article IX, the Holders representing at least 66%
of the Voting Rights evidenced by all Classes of Certificates affected by any
default or Master Servicer Event of Default hereunder, with the written consent
of the Certificate Insurer, may waive such default or Master Servicer Event of
Default; PROVIDED, HOWEVER, that a default or Master Servicer Event of Default
under clause (i) or (vi) of Section 7.01 may be waived only by all of the
Holders of the Regular Certificates with the written consent of the Certificate
Insurer. Upon any such waiver of a default or Master Servicer Event of Default,
such default or Master Servicer Event of Default shall cease to exist and shall
be deemed to have been remedied for every purpose hereunder. No such waiver
shall extend to any subsequent or other default or Master Servicer Event of
Default or impair any right consequent thereon except to the extent expressly so
waived.
-117-
<PAGE>
ARTICLE VIII
CONCERNING THE TRUSTEE AND THE TRUST ADMINISTRATOR
SECTION 8.01. Duties of Trustee and Trust Administrator.
Each of the Trustee and the Trust Administrator, prior to the
occurrence of a Master Servicer Event of Default and after the curing of all
Master Servicer Events of Default which may have occurred, undertakes to perform
such duties and only such duties as are specifically set forth in this
Agreement. During a Master Servicer Event of Default, each of the Trustee and
the Trust Administrator shall exercise such of the rights and powers vested in
it by this Agreement, and use the same degree of care and skill in their
exercise as a prudent person would exercise or use under the circumstances in
the conduct of such person's own affairs. Any permissive right of the Trustee or
the Trust Administrator enumerated in this Agreement shall not be construed as a
duty.
Each of the Trustee and the Trust Administrator, upon receipt
of all resolutions, certificates, statements, opinions, reports, documents,
orders or other instruments furnished to it, which are specifically required to
be furnished pursuant to any provision of this Agreement, shall examine them to
determine whether they conform to the requirements of this Agreement. If any
such instrument is found not to conform to the requirements of this Agreement in
a material manner, it shall take such action as it deems appropriate to have the
instrument corrected, and if the instrument is not corrected to its
satisfaction, it will provide notice thereof to the Certificateholders and the
Certificate Insurer.
No provision of this Agreement shall be construed to relieve
the Trustee or the Trust Administrator from liability for its own negligent
action, its own negligent failure to act or
its own misconduct; provided, however, that:
(i) Prior to the occurrence of a Master Servicer Event
of Default, and after the curing of all such Master Servicer
Events of Default which may have occurred, the duties and
obligations of each of the Trustee and the Trust Administrator
shall be determined solely by the express provisions of this
Agreement, neither the Trustee nor the Trust Administrator
shall be liable except for the performance of such duties and
obligations as are specifically set forth in this Agreement,
no implied covenants or obligations shall be read into this
Agreement against the Trustee or the Trust Administrator and,
in the absence of bad faith on the part of the Trustee or the
Trust Administrator, as applicable, the Trustee or the Trust
Administrator, as the case may be, may conclusively rely, as
to the truth of the statements and the correctness of the
opinions expressed therein, upon any certificates or opinions
furnished to the Trustee or the Trust Administrator, as the
case may be, that conform to the requirements of this
Agreement;
-118-
<PAGE>
(ii) Neither the Trustee nor the Trust Administrator
shall be personally liable for an error of judgment made in
good faith by a Responsible Officer or Responsible Officers of
it unless it shall be proved that it was negligent in
ascertaining the pertinent facts; and
(iii) Neither the Trustee nor the Trust Administrator
shall be personally liable with respect to any action taken,
suffered or omitted to be taken by it in good faith in
accordance with the direction of the Certificate Insurer or
Holders of Certificates entitled to at least 25% of the Voting
Rights relating to the time, method and place of conducting
any proceeding for any remedy available to it or exercising
any trust or power conferred upon it under this Agreement.
SECTION 8.02. Certain Matters Affecting the Trustee and the
Trust Administrator.
(a) Except as otherwise provided in Section 8.01:
(i) Each of the Trustee and the Trust Administrator may
request and rely upon and shall be protected in acting or
refraining from acting upon any resolution, Officers'
Certificate, certificate of auditors or any other certificate,
statement, instrument, opinion, report, notice, request,
consent, order, appraisal, bond or other paper or document
reasonably believed by it to be genuine and to have been
signed or presented by the proper party or parties;
(ii) Each of the Trustee and the Trust Administrator may
consult with counsel and any Opinion of Counsel shall be full
and complete authorization and protection in respect of any
action taken or suffered or omitted by it hereunder in good
faith and in accordance with such Opinion of Counsel;
(iii) Neither the Trustee nor the Trust Administrator
shall be under any obligation to exercise any of the trusts or
powers vested in it by this Agreement or to institute, conduct
or defend any litigation hereunder or in relation hereto at
the request, order or direction of any of the
Certificateholders, pursuant to the provisions of this
Agreement, unless such Certificateholders shall have offered
to the Trustee or the Trust Administrator, as applicable,
reasonable security or indemnity against the costs, expenses
and liabilities which may be incurred therein or thereby;
nothing contained herein shall, however, relieve the Trustee
or the Trust Administrator of the obligation, upon the
occurrence of a Master Servicer Event of Default (which has
not been cured or waived), to exercise such of the rights and
powers vested in it by this Agreement, and to use the same
degree of care and skill in their exercise as a prudent person
would exercise or use under the circumstances in the conduct
of such person's own affairs;
(iv) Neither the Trustee nor the Trust Administrator
shall be personally liable for any action taken, suffered or
omitted by it in good faith and believed by
-119-
<PAGE>
it to be authorized or within the discretion or rights or
powers conferred upon it by this Agreement;
(v) Prior to the occurrence of a Master Servicer Event
of Default hereunder and after the curing of all Master
Servicer Events of Default which may have occurred, neither
the Trustee nor the Trust Administrator shall be bound to make
any investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion,
report, notice, request, consent, order, approval, bond or
other paper or document, unless requested in writing to do so
by the Certificate Insurer or by Holders of Certificates
entitled to at least 25% of the Voting Rights; provided,
however, that if the payment within a reasonable time to the
Trustee or the Trust Administrator, as applicable, of the
costs, expenses or liabilities likely to be incurred by it in
the making of such investigation is, in the opinion of the
Trustee or the Trust Administrator, as applicable, not
reasonably assured to the Trustee or the Trust Administrator,
as applicable, by such Certificateholders or the Certificate
Insurer, the Trustee or the Trust Administrator, as
applicable, may require reasonable indemnity against such
expense, or liability from such Certificateholders or the
Certificate Insurer as a condition to taking any such action;
(vi) Each of the Trustee and the Trust Administrator may
execute any of the trusts or powers hereunder or perform any
duties hereunder either directly or by or through agents or
attorneys; and
(vii) Neither the Trustee nor the Trust Administrator
shall be personally liable for any loss resulting from the
investment of funds held in the Collection Account or the
Expense Account at the direction of the Master Servicer
pursuant to Section 3.12.
(b) All rights of action under this Agreement or under any of
the Certificates, enforceable by the Trustee or the Trust Administrator, may be
enforced by it without the possession of any of the Certificates, or the
production thereof at the trial or other proceeding relating thereto, and any
such suit, action or proceeding instituted by the Trustee or the Trust
Administrator shall be brought in its name for the benefit of all the Holders of
such Certificates, subject to the provisions of this Agreement.
SECTION 8.03. Neither Trustee nor Trust Administrator Liable
for Certificates or Mortgage Loans.
The recitals contained herein and in the Certificates (other
than the signature of the Trustee or the Trust Administrator, on behalf of the
Trustee, the authentication of the Trustee or the Trust Administrator on the
Certificates, the acknowledgments of the Trustee and the Trust Administrator
contained in Article II and the representations and warranties of the Trustee
and the Trust Administrator in Section 8.12) shall be taken as the statements of
the Depositor and neither the Trustee nor the Trust Administrator assumes any
responsibility for their correctness. Neither
-120-
<PAGE>
the Trustee nor the Trust Administrator makes any representations or warranties
as to the validity or sufficiency of this Agreement (other than as specifically
set forth in Section 8.12) or of the Certificates (other than the signature of
the Trustee, or the Trust Administrator on behalf of the Trustee, and
authentication of the Trustee or the Trust Administrator on the Certificates) or
of any Mortgage Loan or related document. Neither the Trustee nor the Trust
Administrator shall be accountable for the use or application by the Depositor
of any of the Certificates or of the proceeds of such Certificates, or for the
use or application of any funds paid to the Depositor or the Master Servicer in
respect of the Mortgage Loans or deposited in or withdrawn from the Collection
Account by the Master Servicer, other than any funds held by or on behalf of the
Trustee or the Trust Administrator in accordance with Section 3.10.
SECTION 8.04. Trustee and Trust Administrator May Own
Certificates.
Each of the Trustee and the Trust Administrator in its
individual capacity or any other capacity may become the owner or pledgee of
Certificates with the same rights it would have
if it were not Trustee or Trust Administrator, as applicable.
SECTION 8.05. Trustee's and Trust Administrator's Fees and
Expenses.
The Trust Administrator shall withdraw from the Distribution
Account on each Distribution Date and pay to itself the related portion of the
Administration Fee and pay to the Trustee the related portion of the
Administration Fee and, to the extent that the funds therein are at anytime
insufficient for such purpose, the Master Servicer shall pay such fees. Each of
the Trustee and the Trust Administrator and any director, officer, employee or
agent of the Trustee or the Trust Administrator, as applicable, shall be
indemnified by the Trust Fund and held harmless against any loss, liability or
expense (not including expenses, disbursements and advances incurred or made by
the Trustee or the Trust Administrator, as applicable, including the
compensation and the expenses and disbursements of its agents and counsel, in
the ordinary course of the Trustee's or Trust Administrator's, as the case may
be, performance in accordance with the provisions of this Agreement) incurred by
the Trustee or the Trust Administrator, as applicable, in connection with any
claim or legal action or any pending or threatened claim or legal action arising
out of or in connection with the acceptance or administration of its obligations
and duties under this Agreement, other than any loss, liability or expense (i)
resulting from any breach of the Master Servicer's (and in the case of the
Trustee, the Trust Administrator's or in the case of the Trust Administrator,
the Trustee's) obligations in connection with this Agreement, (ii) that
constitutes a specific liability of the Trustee or the Trust Administrator, as
applicable, pursuant to Section 11.01(g) or (iii) any loss, liability or expense
incurred by reason of willful misfeasance, bad faith or negligence in the
performance of duties hereunder or by reason of reckless disregard of
obligations and duties hereunder or in the case of the Trust Administrator, as a
result of a breach of the Trust Administrator's obligations under Article XI
hereof. The Master Servicer agrees to indemnify the Trustee and the Trust
Administrator, from, and hold each harmless against, any loss, liability or
expense arising in respect of any breach by the Master Servicer of its
obligations in connection with this Agreement. Such indemnity shall survive the
termination or discharge of this Agreement and the resignation or removal of the
Trustee or the Trust Administrator, as the case may be. Any payment hereunder
made by the Master Servicer to the
-121-
<PAGE>
Trustee or the Trust Administrator shall be from the Master Servicer's own
funds, without reimbursement from REMIC I therefor.
SECTION 8.06. Eligibility Requirements for Trustee and Trust
Administrator.
Each of the Trustee and the Trust Administrator hereunder
shall at all times be a corporation or an association (other than the Depositor,
the Originator, the Seller, the Mortgage Loan Transferor, the Master Servicer or
any Affiliate of the foregoing) organized and doing business under the laws of
any state or the United States of America, authorized under such laws to
exercise corporate trust powers, having a combined capital and surplus of at
least $50,000,000 (or a member of a bank holding company whose capital and
surplus is at least $50,000,000) and subject to supervision or examination by
federal or state authority. If such corporation or association publishes reports
of conditions at least annually, pursuant to law or to the requirements of the
aforesaid supervising or examining authority, then for the purposes of this
Section the combined capital and surplus of such corporation or association
shall be deemed to be its combined capital and surplus as set forth in its most
recent report of conditions so published. In case at any time the Trustee or the
Trust Administrator shall cease to be eligible in accordance with the provisions
of this Section, the Trustee or the Trust Administrator, as the case may be,
shall resign immediately in the manner and with the effect specified in Section
8.07.
SECTION 8.07. Resignation and Removal of the Trustee and the
Trust Administrator.
Either of the Trustee or the Trust Administrator may at any
time resign and be discharged from the trust hereby created by giving written
notice thereof to the Depositor, the Certificate Insurer, the Master Servicer,
to the Certificateholders and, if the Trustee is resigning, to the Trust
Administrator, or, if the Trust Administrator is resigning, to the Trustee. Upon
receiving such notice of resignation, the Depositor shall, with the written
consent of the Certificate Insurer, promptly appoint a successor trustee or
trust administrator (which may be the same Person in the event both the Trustee
and the Trust Administrator resign or are removed) by written instrument, in
duplicate, which instrument shall be delivered to the resigning Trustee or Trust
Administrator and to the successor trustee or trust administrator, as
applicable. A copy of such instrument shall be delivered to the
Certificateholders, the Certificate Insurer, the Trustee or Trust Administrator,
as applicable, and the Master Servicer by the Depositor. If no successor trustee
or trust administrator shall have been so appointed and have accepted
appointment within 30 days after the giving of such notice of resignation, the
resigning Trustee or Trust Administrator, as applicable, may petition any court
of competent jurisdiction for the appointment of a successor trustee or trust
administrator, as applicable.
If at any time the Trustee or the Trust Administrator shall
cease to be eligible in accordance with the provisions of Section 8.06 and shall
fail to resign after written request therefor by the Depositor or the
Certificate Insurer (or in the case of the Trust Administrator, the Trustee), or
if at any time the Trustee or the Trust Administrator shall become incapable of
acting, or shall be adjudged bankrupt or insolvent, or a receiver of the Trustee
or the Trust Administrator or of
-122-
<PAGE>
its property shall be appointed, or any public officer shall take charge or
control of the Trustee or the Trust Administrator or of its property or affairs
for the purpose of rehabilitation, conservation or liquidation, then the
Depositor (or in the case of the Trust Administrator, the Trustee) may remove
the Trustee or the Trust Administrator, as applicable, and appoint a successor
trustee or trust administrator (which may be the same Person in the event both
the Trustee and the Trust Administrator resign or are removed) by written
instrument, in duplicate, which instrument shall be delivered to the Trustee or
Trust Administrator, as the case may be, so removed and to the successor trustee
or trust administrator. A copy of such instrument shall be delivered to the
Certificateholders, the Certificate Insurer, the Trustee or the Trust
Administrator, as applicable, and the Master Servicer by the Depositor.
The Certificate Insurer or the Holders of Certificates
entitled to at least 51% of the Voting Rights, with the written consent of the
Certificate Insurer, may at any time remove the Trustee or the Trust
Administrator and appoint a successor trustee or trust administrator by written
instrument or instruments, in triplicate, signed by the Certificate Insurer or
such Holders or their attorneys-in-fact duly authorized, one complete set of
which instruments shall be delivered to the Depositor, one complete set to the
Trustee or the Trust Administrator, as the case may be, so removed and one
complete set to the successor so appointed. A copy of such instrument shall be
delivered to the Certificateholders, the Certificate Insurer and the Master
Servicer by the Depositor. In addition, if the Trustee has knowledge that the
Trust Administrator has breached any of its duties under this Agreement, the
Trustee, with the consent of the Certificate Insurer, may remove the Trust
Administrator in the same manner as provided in the prior sentence. For purposes
of this Section, the Trustee shall not be deemed to have knowledge of a breach
by the Trust Administrator of any of its duties hereunder, unless a Responsible
Officer of the Trustee, assigned to and working in the Trustee's Corporate Trust
Office has actual knowledge thereof or unless written notice of any event which
is in fact such a breach is received by the Trustee, and such notice references
the Certificates, the Trust Fund or this Agreement.
Any resignation or removal of the Trustee or the Trust
Administrator and appointment of a successor trustee or trust administrator, as
the case may be, pursuant to any of the provisions of this Section shall not
become effective until acceptance of appointment by the successor trustee or
trust administrator as provided in Section 8.08. Notwithstanding the foregoing,
in the event the Trust Administrator advises the Trustee that it is unable to
continue to perform its obligations pursuant to the terms of this Agreement
prior to the appointment of a successor, the Trustee shall be obligated to
perform such obligations until a new trust administrator is appointed. Such
performance shall be without prejudice to any claim by a party hereto or
beneficiary hereof resulting from the Trust Administrator's breach of its
obligations hereunder.
SECTION 8.08. Successor Trustee or Trust Administrator.
Any successor trustee or trust administrator appointed as
provided in Section 8.07 shall execute, acknowledge and deliver to the
Depositor, the Certificate Insurer, the Trustee or the Trust Administrator, as
applicable, and its predecessor trustee or trust administrator an instrument
accepting such appointment hereunder, and thereupon the resignation or removal
of the
-123-
<PAGE>
predecessor trustee or trust administrator shall become effective and such
successor trustee or trust administrator, without any further act, deed or
conveyance, shall become fully vested with all the rights, powers, duties and
obligations of its predecessor hereunder, with the like effect as if originally
named as trustee or trust administrator herein. The predecessor trustee or trust
administrator shall deliver to the successor trustee or trust administrator all
Mortgage Files and related documents and statements to the extent held by it
hereunder, as well as all moneys, held by it hereunder, and the Depositor and
the predecessor trustee or trust administrator shall execute and deliver such
instruments and do such other things as may reasonably be required for more
fully and certainly vesting and confirming in the successor trustee or trust
administrator all such rights, powers, duties and obligations.
No successor trustee or trust administrator shall accept
appointment as provided in this Section unless at the time of such acceptance
such successor trustee or trust administrator shall be eligible under the
provisions of Section 8.06 and the appointment of such successor trustee or
trust administrator shall not result in a downgrading of any Class of
Certificates by either Rating Agency, as evidenced by a letter from each Rating
Agency.
Upon acceptance of appointment by a successor trustee or trust
administrator as provided in this Section, the Depositor shall mail notice of
the succession of such trustee or trust administrator hereunder to the
Certificate Insurer and to all Holders of Certificates at their addresses as
shown in the Certificate Register. If the Depositor fails to mail such notice
within 10 days after acceptance of appointment by the successor trustee or trust
administrator, the successor trustee or trust administrator shall cause such
notice to be mailed at the expense of the Depositor.
Notwithstanding anything to the contrary contained herein, so
long as no Certificate Insurer Default has occurred and is continuing, the
appointment of any successor trustee or trust administrator pursuant to any
provision of this Agreement will be subject to the prior written
consent of the Certificate Insurer.
SECTION 8.09. Merger or Consolidation of Trustee or Trust
Administrator.
Any corporation or association into which either the Trustee
or the Trust Administrator may be merged or converted or with which it may be
consolidated or any corporation or association resulting from any merger,
conversion or consolidation to which the Trustee or the Trust Administrator, as
the case may be, shall be a party, or any corporation or association succeeding
to the business of the Trustee or the Trust Administrator, as applicable, shall
be the successor of the Trustee or the Trust Administrator, as the case may be,
hereunder, provided such corporation or association shall be eligible under the
provisions of Section 8.06, without the execution or filing of any paper or any
further act on the part of any of the parties hereto, anything herein to the
contrary notwithstanding.
-124-
<PAGE>
SECTION 8.10. Appointment of Co-Trustee or Separate Trustee.
Notwithstanding any other provisions hereof, at any time, for
the purpose of meeting any legal requirements of any jurisdiction in which any
part of REMIC I or property securing the same may at the time be located, the
Trustee shall have the power and shall execute and deliver all instruments to
appoint one or more Persons approved by the Trustee to act as co-trustee or
co-trustees, jointly with the Trustee, or separate trustee or separate trustees,
of all or any part of REMIC I, and to vest in such Person or Persons, in such
capacity, such title to REMIC I, or any part thereof, and, subject to the other
provisions of this Section 8.10, such powers, duties, obligations, rights and
trusts as the Trustee may consider necessary or desirable. No co-trustee or
separate trustee hereunder shall be required to meet the terms of eligibility as
a successor trustee under Section 8.06 hereunder and no notice to Holders of
Certificates of the appointment of co-trustee(s) or separate trustee(s) shall be
required under Section 8.08 hereof.
In the case of any appointment of a co-trustee or separate
trustee pursuant to this Section 8.10 all rights, powers, duties and obligations
conferred or imposed upon the Trustee shall be conferred or imposed upon and
exercised or performed by the Trustee and such separate trustee or co-trustee
jointly, except to the extent that under any law of any jurisdiction in which
any particular act or acts are to be performed by the Trustee (whether as
Trustee hereunder or as successor to a defaulting Master Servicer hereunder),
the Trustee shall be incompetent or unqualified to perform such act or acts, in
which event such rights, powers, duties and obligations (including the holding
of title to REMIC I or any portion thereof in any such jurisdiction) shall be
exercised and performed by such separate trustee or co-trustee at the direction
of the Trustee.
Any notice, request or other writing given to the Trustee
shall be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement and
the conditions of this Article VIII. Each separate trustee and co-trustee, upon
its acceptance of the trust conferred, shall be vested with the estates or
property specified in its instrument of appointment, either jointly with the
Trustee, or separately, as may be provided therein, subject to all the
provisions of this Agreement, specifically including every provision of this
Agreement relating to the conduct of, affecting the liability of, or affording
protection to, the Trustee. Every such instrument shall be filed with the
Trustee.
Any separate trustee or co-trustee may, at any time,
constitute the Trustee, its agent or attorney-in-fact, with full power and
authority, to the extent not prohibited by law, to do any lawful act under or in
respect of this Agreement on its behalf and in its name. If any separate trustee
or co-trustee shall die, become incapable of acting, resign or be removed, all
of its estates, properties, rights, remedies and trusts shall vest in and be
exercised by the Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee or co-trustee.
SECTION 8.11. Appointment of Office or Agency.
The Trust Administrator will appoint an office or agency in
the City of St. Paul, Minnesota where the Certificates may be surrendered for
registration of transfer or exchange, and
-125-
<PAGE>
presented for final distribution, and where notices and demands to or upon the
Trust Administrator in respect of the Certificates and this Agreement may be
served.
SECTION 8.12. Representations and Warranties.
Each of the Trustee and the Trust Administrator hereby
represents and warrants to the Master Servicer, the Depositor, the Trustee or
the Trust Administrator, as applicable, and the Certificate Insurer, as of the
Closing Date, that:
(i) it is a national banking association duly organized,
validly existing and in good standing under the laws of the United
States of America.
(ii) The execution and delivery of this Agreement by it, and
the performance and compliance with the terms of this Agreement by it,
will not violate its articles of association or bylaws or constitute a
default (or an event which, with notice or lapse of time, or both,
would constitute a default) under, or result in the breach of, any
material agreement or other instrument to which it is a party or which
is applicable to it or any of its assets.
(iii) It has the full power and authority to enter into and
consummate all transactions contemplated by this Agreement, has duly
authorized the execution, delivery and performance of this Agreement,
and has duly executed and delivered this Agreement.
(iv) This Agreement, assuming due authorization, execution and
delivery by the other parties hereto, constitutes a valid, legal and
binding obligation of it, enforceable against it in accordance with the
terms hereof, subject to (A) applicable bankruptcy, insolvency,
receivership, reorganization, moratorium and other laws affecting the
enforcement of creditors' rights generally, and (B) general principles
of equity, regardless of whether such enforcement is considered in a
proceeding in equity or at law.
(v) It is not in violation of, and its execution and delivery
of this Agreement and its performance and compliance with the terms of
this Agreement will not constitute a violation of, any law, any order
or decree of any court or arbiter, or any order, regulation or demand
of any federal, state or local governmental or regulatory authority,
which violation, in its good faith and reasonable judgment, is likely
to affect materially and adversely either the ability of it to perform
its obligations under this Agreement or its financial condition.
(vi) No litigation is pending or, to the best of its
knowledge, threatened against it, which would prohibit it from entering
into this Agreement or, in its good faith reasonable judgment, is
likely to materially and adversely affect either the ability of it to
perform its obligations under this Agreement or its financial
condition.
-126-
<PAGE>
ARTICLE IX
CERTAIN MATTERS REGARDING THE CERTIFICATE INSURER
SECTION 9.01. Rights of the Certificate Insurer To Exercise
Rights of Class A Certificateholders.
Each of the Depositor, the Master Servicer, the Trust
Administrator and the Trustee, and, by accepting its Certificate, each Class A
Certificateholder, agrees that unless a Certificate Insurer Default has occurred
and is continuing, the Certificate Insurer shall have the right to exercise all
rights of the Class A Certificateholders under this Agreement (except as
provided in clause (i) of the second paragraph of Section 12.01) without any
further consent of the Class A Certificateholders, including, without
limitation:
(a) the right to direct foreclosures upon Mortgage Loans upon
failure of the Master Servicer to do so;
(b) the right to require the Seller or the Depositor to
repurchase or substitute for Mortgage Loans pursuant to Section 2.03;
(c) the right to give notices of breach or to terminate the
rights and obligations of the Master Servicer as Master Servicer
pursuant to Section 7.01;
(d) the right to direct the actions of the Trustee and the
Trust Administrator during the continuance of a Master Servicer Event
of Default pursuant to Sections 7.01 and 7.02;
(e) the right to consent to or direct any waivers of Master
Servicer Events of Default pursuant to Section 7.04;
(f) the right to direct the Trustee and the Trust
Administrator to investigate certain matters pursuant to Section
8.02(a)(v); and
(g) the right to remove the Trustee or the Trust Administrator
pursuant to Section 8.07 hereof.
In addition, each Class A Certificateholder agrees that,
unless a Certificate Insurer Default has occurred and is continuing, the rights
specifically set forth above may be exercised by the Class A Certificateholders
only with the prior written consent of the Certificate Insurer.
SECTION 9.02. Trustee and the Trust Administrator To Act
Solely with Consent of the Certificate Insurer.
Unless a Certificate Insurer Default has occurred and is
continuing, neither the Trustee nor the Trust Administrator shall:
-127-
<PAGE>
(a) agree to any amendment pursuant to Section 12.01; or
(b) undertake any litigation pursuant to Section 8.02(a)(iii);
without the prior written consent of the Certificate Insurer which consent shall
not be unreasonably withheld.
SECTION 9.03. Trust Fund and Accounts Held for Benefit of the
Certificate Insurer.
The Trustee and the Trust Administrator shall hold the Trust
Fund and the Mortgage Files for the benefit of the Certificateholders and the
Certificate Insurer and all references in this Agreement (including, without
limitation, in Sections 2.01 and 2.02) and in the Certificates to the benefit of
Holders of the Certificates shall be deemed to include the Certificate Insurer.
Each of the Trustee and the Trust Administrator shall cooperate in all
reasonable respects with any reasonable request by the Certificate Insurer for
action to preserve or enforce the Certificate Insurer's rights or interests
under this Agreement and the Certificates.
The Master Servicer hereby acknowledges and agrees that it
shall service and administer the Mortgage Loans and any REO Properties, and
shall maintain the Collection Account and any REO Account, for the benefit of
the Certificateholders and for the benefit of the Certificate Insurer, and all
references in this Agreement (including, without limitation, in Sections 3.01
and 3.10) to the benefit of or actions on behalf of the Certificateholders shall
be deemed to include the Certificate Insurer. Unless a Certificate Insurer
Default has occurred and is continuing, the Master Servicer shall not terminate
any Sub-Servicing Agreements without cause without the prior consent of the
Certificate Insurer. Unless a Certificate Insurer Default has occurred and is
continuing, neither the Master Servicer nor the Depositor shall undertake any
litigation pursuant to Section 6.03 (other than litigation to enforce their
respective rights hereunder) without the prior consent of the Certificate
Insurer.
SECTION 9.04. Claims Upon the Policy; Policy Payments Account.
(a) If, by the close of business on the third Business Day
prior to a Distribution Date, the Trust Administrator determines that a
Deficiency Amount for any Distribution Date is greater than zero, then the Trust
Administrator shall give notice to the Certificate Insurer by telephone or
telecopy of the amount of such Deficiency Amount. Such notice of such Deficiency
Amount shall be confirmed in writing in the form set forth as Exhibit A to the
Endorsement of the Policy, to the Certificate Insurer and the Fiscal Agent (as
defined in the Policy), if any, at or before 10:00 a.m. New York time on the
second Business Day prior to such Distribution Date. Following Receipt (as
defined in the Policy) by the Certificate Insurer of such notice in such form,
the Certificate Insurer or the Fiscal Agent will pay any amount payable under
the Policy on the later to occur of (i) 12:00 noon New York time on the second
Business Day following such receipt and (ii) 12:00 noon New York time on the
Distribution Date to which such deficiency relates, as provided in the
Endorsement to the Policy.
-128-
<PAGE>
(b) The Trust Administrator shall establish a separate special
purpose trust account for the benefit of Holders of the Class A Certificates and
the Certificate Insurer referred to herein as the "Policy Payments Account" over
which the Trust Administrator shall have exclusive control and sole right of
withdrawal. The Trust Administrator shall deposit any amount paid under the
Policy in the Policy Payments Account and distribute such amount only for
purposes of payment to Holders of Class A Certificates of the Guaranteed
Distribution for which a claim was made, and such amount may not be applied to
satisfy any costs, expenses or liabilities of the Master Servicer, the Trustee,
the Trust Administrator or the Trust Fund. Amounts paid under the Policy shall
be transferred to the Distribution Account in accordance with the next
succeeding paragraph and disbursed by the Trust Administrator to Holders of
Class A Certificates in accordance with Section 4.01(c) or Section 10.01, as
applicable. It shall not be necessary for such payments to be made by checks or
wire transfers separate from the checks or wire transfers used to pay the
Guaranteed Distribution with other funds available to make such payment.
However, the amount of any payment of principal of or interest on the Class A
Certificates to be paid from funds transferred from the Policy Payments Account
shall be noted as provided in paragraph (c) below in the Certificate Register
and in the statement to be furnished to Holders of the Class A Certificates
pursuant to Section 4.02. Funds held in the Policy Payments Account shall not be
invested.
On any Distribution Date with respect to which a claim has
been made under the Policy, the amount of any funds received by the Trust
Administrator as a result of any claim under the Policy, to the extent required
to make the Guaranteed Distribution on such Distribution Date, shall be
withdrawn from the Policy Payments Account and deposited in the Distribution
Account and applied by the Trust Administrator, together with the other funds to
be withdrawn from the Distribution Account pursuant to Section 4.01(c) or
Section 10.01, as applicable, directly to the payment in full of the Guaranteed
Distribution due on the Class A Certificates. Funds received by the Trust
Administrator as a result of any claim under the Policy shall be deposited by
the Trust Administrator in the Policy Payments Account and used solely for
payment to the Holders of the Class A Certificates and may not be applied to
satisfy any costs, expenses or liabilities of the Master Servicer, the Trustee,
the Trust Administrator or the Trust Fund. Any funds remaining in the Policy
Payments Account on the first Business Day following a Distribution Date shall
be remitted to the Certificate Insurer, pursuant to the instructions of the
Certificate Insurer, by the end of such Business Day.
(c) The Trust Administrator shall keep a complete and accurate
record of the amount of interest and principal paid in respect of any Class A
Certificate from moneys received under the Policy. The Certificate Insurer shall
have the right to inspect such records at reasonable times during normal
business hours upon one Business Day's prior notice to the Trust Administrator.
(d) The Trustee and the Trust Administrator shall promptly
notify the Certificate Insurer and Fiscal Agent of any proceeding or the
institution of any action, of which a Responsible Officer of the Trustee or
Trust Administrator, as applicable, has actual knowledge, seeking the avoidance
as a preferential transfer under applicable bankruptcy, insolvency, receivership
or similar law (a "Preference Claim") of any Guaranteed Distribution made with
respect to the Class
-129-
<PAGE>
A Certificates. Each Holder of the Class A Certificates, by its purchase of such
Certificates, the Master Servicer, the Trust Administrator and the Trustee
hereby agree that the Certificate Insurer (so long as no Certificate Insurer
Default has occurred and is continuing) may at any time during the continuation
of any proceeding relating to a Preference Claim direct all matters relating to
such Preference Claim, including, without limitation, (i) the direction of any
appeal of any order relating to such Preference Claim and (ii) the posting of
any surety, supersedeas or performance bond pending any such appeal. In addition
and without limitation of the foregoing, the Certificate Insurer shall be
subrogated to the rights of the Master Servicer, the Trustee, the Trust
Administrator and each Holder of the Class A Certificates in the conduct of any
such Preference Claim, including, without limitation, all rights of any party to
an adversary proceeding action with respect to any court order issued in
connection with any such Preference Claim.
SECTION 9.05 Effect of Payments by the Certificate Insurer;
Subrogation.
Anything herein to the contrary notwithstanding, any payment
with respect to principal of or interest on any of the Class A Certificates
which is made with moneys received pursuant to the terms of the Policy shall not
be considered payment of such Class A Certificates from the Trust Fund and shall
not result in the payment of or the provision for the payment of the principal
of or interest on such Certificates within the meaning of Section 4.01. The
Depositor, the Master Servicer, the Trustee and the Trust Administrator
acknowledge, and each Holder by its acceptance of a Class A Certificate agrees,
that without the need for any further action on the part of the Certificate
Insurer, the Depositor, the Master Servicer, the Trustee or the Trust
Administrator (a) to the extent the Certificate Insurer makes payments, directly
or indirectly, on account of principal of or interest on any Class A
Certificates to the Holders of such Certificates, the Certificate Insurer will
be fully subrogated to the rights of such Holders to receive such principal and
interest from the Trust Fund and (b) the Certificate Insurer shall be paid such
principal and interest but only from the sources and in the manner provided
herein for the payment of such principal and interest.
The Trustee, the Trust Administrator and the Master Servicer
shall cooperate in all respects with any reasonable request by the Certificate
Insurer for action to preserve or enforce the Certificate Insurer's rights or
interests under this Agreement without limiting the rights or affecting the
interests of the Holders as otherwise set forth herein.
SECTION 9.06. Notices to the Certificate Insurer.
All notices, statements, reports, certificates or opinions
required by this Agreement to be sent to any other party hereto or to any of the
Certificateholders shall also be sent to the Certificate Insurer.
SECTION 9.07. Third-Party Beneficiary.
The Certificate Insurer shall be a third-party beneficiary of
this Agreement, entitled to enforce the provisions hereof as if a party hereto.
-130-
<PAGE>
SECTION 9.08. Trust Administrator to Hold the Policy.
The Trust Administrator, on behalf of the Trustee, will hold
the Policy in trust as agent for the Holders of the Class A Certificates for the
purpose of making claims thereon and distributing the proceeds thereof. Upon the
later of (i) the date upon which the Certificate Principal Balance of the Class
A Certificates has been reduced to zero and all Guaranteed Distributions have
been made and (ii) the date the Term of the Policy (as defined in the Policy)
ends, the Trust Administrator, on behalf of the Trustee, shall surrender the
Policy to the Certificate Insurer for cancellation. Neither the Policy nor the
amounts paid on the Policy will constitute part of the Trust Fund or assets of
any REMIC created by this Agreement. Each Holder of Class A Certificates, by
accepting its Certificates, appoints the Trustee and the Trust Administrator as
attorneys-in-fact for the purpose of making claims on the Policy.
-131-
<PAGE>
ARTICLE X
TERMINATION
SECTION 10.01 Termination Upon Repurchase or Liquidation of
All Mortgage Loans.
(a) Subject to Section 10.03, the respective obligations and
responsibilities under this Agreement of the Depositor, the Master Servicer, the
Trustee and the Trust Administrator (other than the obligations of the Master
Servicer to the Trustee and the Trust Administrator pursuant to Section 8.05 and
of the Master Servicer to provide for and the Trust Administrator to make
payments in respect of the REMIC I Regular Interests, the REMIC II Regular
Interests or the Classes of Certificates as hereinafter set forth) shall
terminate upon payment to the Certificateholders and the deposit of all amounts
held by or on behalf of the Trustee and required hereunder to be so paid or
deposited on the Distribution Date coinciding with or following the earlier to
occur of (i) the purchase by the Terminator (as defined below) of all Mortgage
Loans and each REO Property remaining in REMIC I (the "Clean-up Call") and (ii)
the final payment or other liquidation (or any advance with respect thereto) of
the last Mortgage Loan or REO Property remaining in REMIC I; provided, however,
that in no event shall the trust created hereby continue beyond the expiration
of 21 years from the death of the last survivor of the descendants of Joseph P.
Kennedy, the late ambassador of the United States to the Court of St. James,
living on the date hereof. Subject to Section 3.11 hereof, the purchase by the
Terminator of all Mortgage Loans and each REO Property remaining in REMIC I
shall be at a price (the "Termination Price") equal to the greater of (A) the
aggregate Purchase Price of all the Mortgage Loans included in REMIC I, plus the
appraised value of each REO Property, if any, included in REMIC I, such
appraisal to be conducted by an appraiser mutually agreed upon by the Terminator
and the Trustee in their reasonable discretion (and approved by the Certificate
Insurer in its reasonable discretion) and (B) the aggregate fair market value of
all of the assets of REMIC I (as determined by the Terminator, the Certificate
Insurer (to the extent the Certificate Insurer is not the Terminator) and the
Trustee, as of the close of business on the third Business Day next preceding
the date upon which notice of any such termination is furnished to
Certificateholders pursuant to the third paragraph of this Section 10.01);
provided, however, that in the event the Majority Class CE Certificateholder is
the Terminator, and subject to Section 3.11 hereof, the purchase by the Majority
Class CE Certificateholder of all Mortgage Loans and each REO Property remaining
in REMIC I shall be at a price equal to the greater of: (i) the amount
designated in clause (A) above or (ii) the lesser of (x) the sum of the amount
designated in clause (A) above and any amounts due under the Insurance Agreement
and (y) the amount designated in clause (B) above.
(b) The Majority Class CE Certificateholder shall have the
right and, to the extent the Majority Class CE Certificateholder fails to
exercise such right, the Certificate Insurer shall have the right and, to the
extent neither the Majority Class CE Certificateholder nor the Certificate
Insurer exercises such right, the Master Servicer shall have the right (the
party exercising such right, the "Terminator"), to purchase all of the Mortgage
Loans and each REO
-132-
<PAGE>
Property remaining in REMIC I pursuant to clause (i) of the preceding paragraph
no later than the Determination Date in the month immediately preceding the
Distribution Date on which the Certificates will be retired; provided, however,
that the Terminator may elect to purchase all of the Mortgage Loans and each REO
Property remaining in REMIC I pursuant to clause (i) above only if the aggregate
Stated Principal Balance of the Mortgage Loans and each REO Property remaining
in the Trust Fund at the time of such election is reduced to less than 10%, in
the event the Majority Class CE Certificateholder is the Terminator, or 5%, in
the event the Master Servicer or the Certificate Insurer is the Terminator, in
each case of the aggregate Stated Principal Balance of the Mortgage Loans as of
the Cut-off Date. By acceptance of the Class R-I Certificates, the Holder of the
Class R-I Certificates agrees, in connection with any termination hereunder, to
assign and transfer any amounts in excess of par, and to the extent received in
respect of such termination, to pay any such amounts to the Holders of the Class
CE Certificates.
(c) Notice of the liquidation of the REMIC I Regular Interests
shall be given promptly by the Trust Administrator by letter to
Certificateholders and the Certificate Insurer mailed (a) in the event such
notice is given in connection with the purchase of the Mortgage Loans and each
REO Property by the Terminator, not earlier than the 15th day and not later than
the 25th day of the month next preceding the month of the final distribution on
the Certificates or (b) otherwise during the month of such final distribution on
or before the Determination Date in such month, in each case specifying (i) the
Distribution Date upon which the Trust Fund will terminate and the final payment
in respect of the REMIC I Regular Interests, the REMIC II Regular Interests and
the Certificates will be made upon presentation and surrender of the related
Certificates at the office of the Trust Administrator therein designated, (ii)
the amount of any such final payment, (iii) that no interest shall accrue in
respect of the REMIC I Regular Interests, the REMIC II Regular Interests or the
Certificates from and after the Interest Accrual Period relating to the final
Distribution Date therefor and (iv) that the Record Date otherwise applicable to
such Distribution Date is not applicable, payments being made only upon
presentation and surrender of the Certificates at the office of the Trust
Administrator. In the event such notice is given in connection with the purchase
of all of the Mortgage Loans and each REO Property remaining in REMIC I by the
Terminator, the Terminator shall deliver to the Trust Administrator for deposit
in the Distribution Account not later than the last Business Day of the month
next preceding the month of the final distribution on the Certificates an amount
in immediately available funds equal to the above-described purchase price. The
Trust Administrator shall remit to the Master Servicer from such funds deposited
in the Distribution Account (i) any amounts which the Master Servicer would be
permitted to withdraw and retain from the Collection Account pursuant to Section
3.11 and (ii) any other amounts otherwise payable by the Trust Administrator to
the Master Servicer from amounts on deposit in the Distribution Account pursuant
to the terms of this Agreement, in each case prior to making any final
distributions pursuant to Section 10.01(d) below. Upon certification to the
Trust Administrator by a Servicing Officer (a copy of which certification shall
be delivered to the Certificate Insurer) of the making of such final deposit,
the Trust Administrator shall promptly release to the Terminator the Mortgage
Files for the remaining Mortgage Loans, and the Trustee shall execute all
assignments, endorsements and other instruments necessary to effectuate such
transfer.
-133-
<PAGE>
(d) Upon presentation of the Certificates by the
Certificateholders on the final Distribution Date, the Trust Administrator shall
distribute to each Certificateholder so presenting and surrendering its
Certificates the amount otherwise distributable on such Distribution Date in
accordance with Section 4.01 in respect of the Certificates so presented and
surrendered. Any funds not distributed to any Holder or Holders of Certificates
being retired on such Distribution Date because of the failure of such Holder or
Holders to tender their Certificates shall, on such date, be set aside and held
in trust and credited to the account of the appropriate non-tendering Holder or
Holders. If any Certificates as to which notice has been given pursuant to this
Section 10.01 shall not have been surrendered for cancellation within six months
after the time specified in such notice, the Trust Administrator shall mail a
second notice to the remaining non-tendering Certificateholders to surrender
their Certificates for cancellation in order to receive the final distribution
with respect thereto. If within one year after the second notice all such
Certificates shall not have been surrendered for cancellation, the Trust
Administrator shall, directly or through an agent, (i) mail a final notice to
the remaining non-tendering Certificateholders concerning surrender of their
Certificates and (ii) pay to the Certificate Insurer any amount of such funds
which were paid by the Certificate Insurer under the Policy but shall continue
to hold any remaining funds for the benefit of non-tendering Certificateholders,
and all liability of the Certificate Insurer with respect to such funds shall
thereupon cease. The costs and expenses of maintaining the funds in trust and of
contacting such Certificateholders shall be paid out of the assets remaining in
the trust funds. If within one year after the final notice any such Certificates
shall not have been surrendered for cancellation, the Trust Administrator shall
pay to Salomon Smith Barney Inc. all such amounts, and all rights of
non-tendering Certificateholders in or to such amounts shall thereupon cease. No
interest shall accrue or be payable to any Certificateholder on any amount held
in trust by the Trust Administrator as a result of such Certificateholder's
failure to surrender its Certificate(s) for final payment thereof in accordance
with this Section 10.01. Any such amounts held in trust by the Trust
Administrator shall be held in an Eligible Account and the Trust Administrator
may direct any depository institution maintaining such account to invest the
funds in one or more Permitted Investments. All income and gain realized from
the investment of funds deposited in such accounts held in trust by the Trust
Administrator shall be for the benefit of the Trust Administrator; provided,
however, that the Trust Administrator shall deposit in such account the amount
of any loss of principal incurred in respect of any such Permitted Investment
made with funds in such accounts immediately upon the realization of such loss.
Immediately following the deposit of funds in trust hereunder
in respect of the Certificates, the Trust Fund shall terminate.
SECTION 10.02 Termination by the Call Class.
(a) Subject to Section 10.03, the respective obligations and
responsibilities under this Agreement of the Depositor, the Master Servicer, the
Trustee and the Trust Administrator (other than the obligations of the Master
Servicer to the Trustee and the Trust Administrator pursuant to Section 8.05 and
of the Master Servicer to provide for and the Trust Administrator to make
payments in respect of the REMIC I Regular Interests, the REMIC II Regular
Interests or the Classes of Certificates as hereinafter set forth) shall
terminate upon the call by the Holder of the Call Class. The Call Class will
have the right, solely at its discretion,
-134-
<PAGE>
to terminate the Trust Fund on the Distribution Date in January 2000 and on any
third Distribution Date thereafter until the Clean-up Call becomes exercisable
as described in Section 10.01, and thereby effect early retirement of the
Certificates. In the event the Call Class exercises such option, the Holder of
the Call Class shall pay the following amounts to the Trust Administrator and
the Trust Administrator shall immediately distribute: (i) the Call Price to the
Holders of the Class A Certificates, (ii) the Termination Fee to the Certificate
Insurer and (iii) the related portion of the Additional Price to the each of the
Holders of the Class CE Certificates, Class P Certificates, Residual
Certificates, the Certificate Insurer and the Master Servicer. The Termination
Fee will be distributed to the Certificate Insurer and the Call Price and the
Additional Price will be paid in accordance with the priorities described in
this Agreement. In no event will the Holders of the Class CE Certificates
receive any amounts in excess of the then outstanding principal balance of such
Certificates and interest due for the related Interest Accrual Period. If the
Call Price, the Termination Fee and the Additional Price are not deposited with
the Trust Administrator, the Certificates will remain outstanding.
Simultaneously with the making of such payment, the Trust Administrator shall
release to the Call Class the Mortgage Files for the remaining Mortgage Loans,
and the Trustee shall execute all assignments, endorsements and other
instruments necessary to effectuate such transfer.
(b) Notice of the liquidation of the REMIC I Regular Interests
pursuant to this Section 10.02 shall be given promptly by the Trust
Administrator by letter to Certificateholders and the Certificate Insurer mailed
not earlier than the 15th day and not later than the 25th day of the month next
preceding the month of the final distribution on the Certificates specifying (i)
the Distribution Date upon which the Trust Fund will terminate and the final
payment in respect of the REMIC I Regular Interests, the REMIC II Regular
Interests and the Certificates will be made upon presentation and surrender of
the related Certificates at the office of the Trust Administrator therein
designated, (ii) the amount of any such final payment, (iii) that no interest
shall accrue in respect of the REMIC I Regular Interests, the REMIC II Regular
Interests or the Certificates from and after the Interest Accrual Period
relating to the final Distribution Date therefor and (iv) that the Record Date
otherwise applicable to such Distribution Date is not applicable, payments being
made only upon presentation and surrender of the Certificates at the office of
the Trust Administrator.
(c) Upon presentation of the Certificates by the
Certificateholders on the final Distribution Date, the Trust Administrator shall
distribute to each Certificateholder so presenting and surrendering its
Certificates the amount to which such Certificateholder is entitled to pursuant
to Section 10.02(a) in respect of the Certificates so presented and surrendered.
Any funds not distributed to any Holder or Holders of Certificates being retired
on such Distribution Date because of the failure of such Holder or Holders to
tender their Certificates shall, on such date, be set aside and held in trust
and credited to the account of the appropriate non-tendering Holder or Holders.
If any Certificates as to which notice has been given pursuant to this Section
10.02 shall not have been surrendered for cancellation within six months after
the time specified in such notice, the Trust Administrator shall mail a second
notice to the remaining non-tendering Certificateholders to surrender their
Certificates for cancellation in order to receive the final distribution with
respect thereto. If within one year after the second notice all such
Certificates shall not have been surrendered for cancellation, the Trust
Administrator shall, directly or through
-135-
<PAGE>
an agent, (i) mail a final notice to the remaining non-tendering
Certificateholders concerning surrender of their Certificates and (ii) pay to
the Certificate Insurer any amount of such funds which were paid by the
Certificate Insurer under the Policy but shall continue to hold any remaining
funds for the benefit of non-tendering Certificateholders, and all liability of
the Certificate Insurer with respect to such funds shall thereupon cease. The
costs and expenses of maintaining the funds in trust and of contacting such
Certificateholders shall be paid out of the assets remaining in the trust funds.
If within one year after the final notice any such Certificates shall not have
been surrendered for cancellation, the Trust Administrator shall pay to Salomon
Smith Barney Inc. all such amounts, and all rights of non-tendering
Certificateholders in or to such amounts shall thereupon cease. No interest
shall accrue or be payable to any Certificateholder on any amount held in trust
by the Trust Administrator as a result of such Certificateholder's failure to
surrender its Certificate(s) for final payment thereof in accordance with this
Section 10.02. Any such amounts held in trust by the Trust Administrator shall
be held in an Eligible Account and the Trust Administrator may direct any
depository institution maintaining such account to invest the funds in one or
more Permitted Investments. All income and gain realized from the investment of
funds deposited in such accounts held in trust by the Trust Administrator shall
be for the benefit of the Trust Administrator; provided, however, that the Trust
Administrator shall deposit in such account the amount of any loss of principal
incurred in respect of any such Permitted Investment made with funds in such
accounts immediately upon the realization of such loss.
Immediately following the deposit of funds in trust hereunder
in respect of the Certificates, the Trust Fund shall terminate.
SECTION 10.03 Additional Termination Requirements.
(a) In the event that the Terminator or the Call Class
purchases all the Mortgage Loans and each REO Property or the final payment on
or other liquidation of the last Mortgage Loan or REO Property remaining in
REMIC I pursuant to Section 10.01 or Section 10.02, the Trust Fund shall be
terminated in accordance with the following additional requirements:
(i) The Trustee shall specify the first day in the
90-day liquidation period in a statement attached to REMIC
I's, REMIC II's and REMIC III's final Tax Return pursuant to
Treasury regulation Section 1.860F-1 and shall satisfy all
requirements of a qualified liquidation under Section 860F of
the Code and any regulations thereunder, as evidenced by an
Opinion of Counsel obtained at the expense of the Terminator;
(ii) During such 90-day liquidation period and, at or
prior to the time of making of the final payment on the
Certificates, the Trustee shall sell all of the assets of
REMIC I to the Terminator or the Call Class, as applicable,
for cash; and
(iii) At the time of the making of the final payment on
the Certificates, the Trust Administrator shall distribute or
credit, or cause to be distributed or credited, to the Holders
of the Residual Certificates all cash on hand in the Trust
-136-
<PAGE>
Fund (other than cash retained to meet claims), and the Trust
Fund shall terminate at that time.
(b) At the expense of the requesting Terminator or Call Class
(or, if the Trust Fund is being terminated as a result of the occurrence of the
event described in clause (ii) of the first paragraph of Section 10.01, at the
expense of the Trust Administrator without the right of reimbursement from the
Trust Fund), the Trust Administrator shall prepare or cause to be prepared the
documentation required in connection with the adoption of a plan of liquidation
of each of REMIC I , REMIC II and REMIC III pursuant to this Section 10.03.
(c) By their acceptance of Certificates, the Holders thereof
hereby agree to authorize the Trustee to specify the 90-day liquidation period
for each of REMIC I, REMIC II and REMIC III, which authorization shall be
binding upon all successor Certificateholders.
-137-
<PAGE>
ARTICLE XI
REMIC PROVISIONS
SECTION 11.01. REMIC Administration.
(a) The Trustee shall elect to treat each of REMIC I, REMIC II
and REMIC III as a REMIC under the Code and, if necessary, under applicable
state law. Each such election will be made by the Master Servicer on behalf of
the Trustee on Form 1066 or other appropriate federal tax or information return
or any appropriate state return for the taxable year ending on the last day of
the calendar year in which the Certificates are issued. For the purposes of the
REMIC election in respect of REMIC I, the REMIC I Regular Interests and the
Class S Certificates shall be designated as the Regular Interests in REMIC I and
the Class R-I Certificates shall be designated as the Residual Interests in
REMIC I. The REMIC II Regular Interests shall be designated as the Regular
Interests in REMIC II and the Class R-II Certificates shall be designated as the
Residual Interests in REMIC II. The Class A Certificates, the Class CE
Certificates and the Class P Certificates shall be designated as the Regular
Interests in REMIC III and the Class R-III Certificates shall be designated as
the Residual Interests in REMIC III. Neither the Trustee nor the Trust
Administrator shall permit the creation of any "interests" in REMIC I, REMIC II
or REMIC III (within the meaning of Section 860G of the Code) other than the
REMIC I Regular Interests, the REMIC II Regular Interests and the interests
represented by the Certificates.
(b) The Closing Date is hereby designated as the "Startup Day"
of REMIC I, REMIC II and REMIC III within the meaning of Section 860G(a)(9) of
the Code.
(c) The Master Servicer shall pay out of its own funds,
without any right of reimbursement, any and all expenses relating to any tax
audit of the Trust Fund (including, but not limited to, any professional fees or
any administrative or judicial proceedings with respect to any REMIC I, REMIC II
or REMIC III that involve the Internal Revenue Service or state tax
authorities), other than the expense of obtaining any tax related Opinion of
Counsel except as specified herein. The Master Servicer, as agent for all of
REMIC I's, REMIC II's and REMIC III's tax matters person shall (i) act on behalf
of the Trust Fund in relation to any tax matter or controversy involving any of
REMIC I, REMIC II or REMIC III and (ii) represent the Trust Fund in any
administrative or judicial proceeding relating to an examination or audit by any
governmental taxing authority with respect thereto. The holder of the largest
Percentage Interest of each Class of Residual Certificates shall be designated,
in the manner provided under Treasury regulations section 1.860F-4(d) and
Treasury regulations section 301.6231(a)(7)-1, as the tax matters person of the
related REMIC created hereunder. By their acceptance thereof, the holder of the
largest Percentage Interest of the Residual Certificates hereby agrees to
irrevocably appoint the Master Servicer or an Affiliate as its agent to perform
all of the duties of the tax matters person for the Trust Fund.
(d) The Master Servicer shall prepare and the Trustee shall
sign and the Trust Administrator shall file all of the Tax Returns in respect of
each REMIC created hereunder. The
-138-
<PAGE>
expenses of preparing and filing such returns shall be borne by the Master
Servicer without any right of reimbursement therefor.
(e) The Master Servicer shall perform on behalf of each of
REMIC I, REMIC II and REMIC III all reporting and other tax compliance duties
that are the responsibility of such REMIC under the Code, the REMIC Provisions
or other compliance guidance issued by the Internal Revenue Service or any state
or local taxing authority. Among its other duties, as required by the Code, the
REMIC Provisions or other such compliance guidance, the Master Servicer shall
provide (i) to any Transferor of a Residual Certificate such information as is
necessary for the application of any tax relating to the transfer of a Residual
Certificate to any Person who is not a Permitted Transferee, (ii) to the
Certificateholders such information or reports as are required by the Code or
the REMIC Provisions including reports relating to interest, original issue
discount and market discount or premium (using the Prepayment Assumption as
required) and (iii) to the Internal Revenue Service the name, title, address and
telephone number of the person who will serve as the representative of REMIC I,
REMIC II and REMIC III. The Depositor shall provide or cause to be provided to
the Master Servicer, within ten (10) days after the Closing Date, all
information or data that the Master Servicer reasonably determines to be
relevant for tax purposes as to the valuations and issue prices of the
Certificates, including, without limitation, the price, yield, prepayment
assumption and projected cash flow of the Certificates.
(f) The Master Servicer, the Trustee and the Trust
Administrator shall take such action and shall cause each REMIC created
hereunder to take such action as shall be necessary to create or maintain the
status thereof as a REMIC under the REMIC Provisions. The Master Servicer, the
Trustee and the Trust Administrator shall not take any action, cause the Trust
Fund to take any action or fail to take (or fail to cause to be taken) any
action that, under the REMIC Provisions, if taken or not taken, as the case may
be, could (i) endanger the status of REMIC I, REMIC II or REMIC III as a REMIC
or (ii) result in the imposition of a tax upon the Trust Fund (including but not
limited to the tax on prohibited transactions as defined in Section 860F(a)(2)
of the Code and the tax on contributions to a REMIC set forth in Section 860G(d)
of the Code) (either such event, an "Adverse REMIC Event") unless the Trustee
and the Trust Administrator have received an Opinion of Counsel, addressed to
the Trustee, the Trust Administrator and the Certificate Insurer (at the expense
of the party seeking to take such action but in no event at the expense of the
Trust Administrator or the Trustee) to the effect that the contemplated action
will not, with respect to any of REMIC I, REMIC II or REMIC III, endanger such
status or result in the imposition of such a tax, nor shall the Master Servicer
take or fail to take any action (whether or not authorized hereunder) as to
which the Trustee or the Trust Administrator has advised it in writing that it
has received an Opinion of Counsel to the effect that an Adverse REMIC Event
could occur with respect to such action; provided that the Master Servicer may
conclusively rely on such Opinion of Counsel and shall incur no liability for
its action or failure to act in accordance with such Opinion of Counsel. In
addition, prior to taking any action with respect to any of REMIC I, REMIC II or
REMIC III or the respective assets of each, or causing REMIC I, REMIC II or
REMIC III to take any action, which is not contemplated under the terms of this
Agreement, the Master Servicer will consult with the Trustee and the Trust
Administrator or its designee, in writing, with respect to whether such action
could cause an Adverse REMIC Event to occur with
-139-
<PAGE>
respect to REMIC I, REMIC II or REMIC III, and the Master Servicer shall not
take any such action or cause REMIC I, REMIC II or REMIC III to take any such
action as to which the Trustee or the Trust Administrator has advised it in
writing that an Adverse REMIC Event could occur; provided that the Master
Servicer may conclusively rely on such writing and shall incur no liability for
its action or failure to act in accordance with such writing. The Trust
Administrator and the Trustee may consult with counsel to make such written
advice, and the cost of same shall be borne by the party seeking to take the
action not permitted by this Agreement, but in no event shall such cost be an
expense of the Trustee or the Trust Administrator, as applicable. At all times
as may be required by the Code, the Trust Administrator, the Trustee or the
Master Servicer will ensure that substantially all of the assets of both REMIC I
and REMIC II will consist of "qualified mortgages" as defined in Section
860G(a)(3) of the Code and "permitted investments" as defined in Section
860G(a)(5) of the Code, to the extent such obligations are within such party's
control and not otherwise inconsistent with the terms of this Agreement.
(g) In the event that any tax is imposed on "prohibited
transactions" of any REMIC created hereunder as defined in Section 860F(a)(2) of
the Code, on the "net income from foreclosure property" of such REMIC as defined
in Section 860G(c) of the Code, on any contributions to any such REMIC after the
Startup Day therefor pursuant to Section 860G(d) of the Code, or any other tax
is imposed by the Code or any applicable provisions of state or local tax laws,
such tax shall be charged (i) to the Trust Administrator pursuant to Section
11.03 hereof, if such tax arises out of or results from a breach by the Trust
Administrator of any of its obligations under this Article XI, (ii) to the
Trustee pursuant to Section 11.03 hereof, if such tax arises out of or results
from a breach by the Trustee of any of its obligations under this Article XI,
(iii) to the Master Servicer pursuant to Section 11.03 hereof, if such tax
arises out of or results from a breach by the Master Servicer of any of its
obligations under Article III or this Article XI, or (iv) against amounts on
deposit in the Distribution Account and shall be paid by withdrawal therefrom.
(h) On or before April 15 of each calendar year, commencing
April 15, 1999, the Master Servicer shall deliver to each Rating Agency an
Officer's Certificate of the Master Servicer stating the Master Servicer's
compliance with this Article XI.
(i) The Master Servicer shall, for federal income tax
purposes, maintain books and records with respect to each of REMIC I, REMIC II
and REMIC III on a calendar year and on an accrual basis.
(j) Following the Startup Day, the Master Servicer, the
Trustee and the Trust Administrator shall not accept any contributions of assets
to any of REMIC I, REMIC II or REMIC III other than in connection with any
Qualified Substitute Mortgage Loan delivered in accordance with Section 2.03
unless it shall have received an Opinion of Counsel to the effect that the
inclusion of such assets in the Trust Fund will not cause the related REMIC to
fail to qualify as a REMIC at any time that any Certificates are outstanding or
subject such REMIC to any tax under the REMIC Provisions or other applicable
provisions of federal, state and local law or ordinances.
-140-
<PAGE>
(k) None of the Trustee, the Trust Administrator or the Master
Servicer shall enter into any arrangement by which REMIC I, REMIC II or REMIC
III will receive a fee or other compensation for services nor permit either
REMIC to receive any income from assets other than "qualified mortgages" as
defined in Section 860G(a)(3) of the Code or "permitted investments" as defined
in Section 860G(a)(5) of the Code.
SECTION 11.02. Prohibited Transactions and Activities.
None of the Depositor, the Master Servicer, the Trust
Administrator or the Trustee shall sell, dispose of or substitute for any of the
Mortgage Loans (except in connection with (i) the foreclosure of a Mortgage
Loan, including but not limited to, the acquisition or sale of a Mortgaged
Property acquired by deed in lieu of foreclosure, (ii) the bankruptcy of REMIC
I, (iii) the termination of REMIC I pursuant to Article X of this Agreement,
(iv) a substitution pursuant to Article II of this Agreement or (v) a purchase
of Mortgage Loans pursuant to Article II or III of this Agreement), nor acquire
any assets for any of REMIC I, REMIC II or REMIC III (other than REO Property
acquired in respect of a defaulted Mortgage Loan), nor sell or dispose of any
investments in the Collection Account or the Distribution Account for gain, nor
accept any contributions to any of REMIC I, REMIC II or REMIC III after the
Closing Date (other than a Qualified Substitute Mortgage Loan delivered in
accordance with Section 2.03), unless it has received an Opinion of Counsel,
addressed to the Trustee, the Trust Administrator and the Certificate Insurer
(at the expense of the party seeking to cause such sale, disposition,
substitution, acquisition or contribution but in no event at the expense of the
Trustee or the Trust Administrator) that such sale, disposition, substitution,
acquisition or contribution will not (a) affect adversely the status of any of
REMIC I, REMIC II or REMIC III as a REMIC or (b) cause any of REMIC I, REMIC II
or REMIC III to be subject to a tax on "prohibited transactions" or
"contributions" pursuant to the REMIC Provisions.
SECTION 11.03. Master Servicer, Trustee and Trust
Administrator Indemnification.
(a) The Trustee agrees to indemnify the Trust Fund, the
Depositor, the Certificate Insurer, the Master Servicer and the Trust
Administrator for any taxes and costs including, without limitation, any
reasonable attorneys fees imposed on or incurred by the Trust Fund, the
Depositor, the Certificate Insurer, the Master Servicer or the Trust
Administrator, as a result of a breach of the Trustee's covenants set forth in
this Article XI.
(b) The Trust Administrator agrees to indemnify the Trust
Fund, the Depositor, the Certificate Insurer, the Master Servicer and the
Trustee for any taxes and costs including, without limitation, any reasonable
attorneys fees imposed on or incurred by the Trust Fund, the Depositor, the
Certificate Insurer, the Master Servicer or the Trustee, as a result of a breach
of the Trust Administrator's covenants set forth in this Article XI.
(b) The Master Servicer agrees to indemnify the Trust Fund,
the Depositor, the Certificate Insurer, the Trustee and the Trust Administrator
for any taxes and costs including, without limitation, any reasonable attorneys'
fees imposed on or incurred by the Trust Fund, the Depositor, the Certificate
Insurer, the Trustee or the Trust Administrator, as a result of a breach of the
Master Servicer's covenants set forth in Article III or this Article XI.
-141-
<PAGE>
ARTICLE XII
MISCELLANEOUS PROVISIONS
SECTION 12.01. Amendment.
This Agreement may be amended with the consent of the
Certificate Insurer from time to time by the Depositor, the Master Servicer, the
Trustee and the Trust Administrator without the consent of any of the
Certificateholders, (i) to cure any ambiguity or defect, (ii) to correct, modify
or supplement any provisions herein (including to give effect to the
expectations of Certificateholders), or (iii) to make any other provisions with
respect to matters or questions arising under this Agreement which shall not be
inconsistent with the provisions of this Agreement, provided that such action
shall not, as evidenced by an Opinion of Counsel delivered to the Trustee, the
Trust Administrator and the Certificate Insurer, adversely affect in any
material respect the interests of any Certificateholder or the Certificate
Insurer, and provided further that such Opinion of Counsel shall not be
necessary if the party seeking such amendment delivers to the Trustee and the
Trust Administrator a letter from each Rating Agency stating that such amendment
would not cause a downgrade or withdrawal of the then current ratings of the
Certificates without regard to the Policy. No amendment shall be deemed to
adversely affect in any material respect the interests of any Certificateholder
who shall have consented thereto, and no Opinion of Counsel shall be required to
address the effect of any such amendment on any such consenting
Certificateholder.
This Agreement may also be amended from time to time by the
Depositor, the Master Servicer, the Trustee and the Trust Administrator with the
consent of the Certificate Insurer and the Holders of Certificates entitled to
at least 66% of the Voting Rights for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Agreement or
of modifying in any manner the rights of the Holders of Certificates; provided,
however, that no such amendment shall (i) reduce in any manner the amount of, or
delay the timing of, payments received on Mortgage Loans which are required to
be distributed on any Certificate without the consent of the Holder of such
Certificate, (ii) adversely affect in any material respect the interests of the
Holders of any Class of Certificates in a manner, other than as described in
(i), without the consent of the Holders of Certificates of such Class evidencing
at least 66% of the Voting Rights allocated to such Class, or (iii) modify the
consents required by the immediately preceding clauses (i) and (ii) without the
consent of the Certificate Insurer and the Holders of all Certificates then
outstanding. Notwithstanding any other provision of this Agreement, for purposes
of the giving or withholding of consents pursuant to this Section 12.01,
Certificates registered in the name of the Depositor or the Master Servicer or
any Affiliate thereof shall be entitled to Voting Rights with respect to matters
affecting such Certificates.
Notwithstanding any contrary provision of this Agreement,
neither the Trustee nor the Trust Administrator shall consent to any amendment
to this Agreement unless it shall have first received an Opinion of Counsel to
the effect that such amendment will not result in the imposition of any tax on
any of REMIC I, REMIC II or REMIC III pursuant to the REMIC Provisions or cause
any of REMIC I, REMIC II or REMIC III to fail to qualify as a REMIC at any time
that any
-142-
<PAGE>
Certificates are outstanding. Any such amendment pursuant to the first paragraph
of this Section 12.01 shall not be deemed to adversely affect in any material
respect the interests of any Certificateholder if such change is required by the
Certificate Insurer, so long as no Certificate Insurer Default has occurred and
is continuing, and the Trustee and the Trust Administrator receive written
confirmation from each Rating Agency that such amendment will not cause such
Rating Agency to reduce the then current rating or any shadow rating of the
affected Certificates.
Promptly after the execution of any such amendment the Trust
Administrator shall furnish a copy of such amendment to each Certificateholder
and the Certificate Insurer.
It shall not be necessary for the consent of
Certificateholders under this Section 12.01 to approve the particular form of
any proposed amendment, but it shall be sufficient if such consent shall approve
the substance thereof. The manner of obtaining such consents and of evidencing
the authorization of the execution thereof by Certificateholders shall be
subject to such reasonable regulations as the Trustee or the Trust Administrator
may prescribe.
The cost of any Opinion of Counsel to be delivered pursuant to
this Section 12.01 shall be borne by the Person seeking the related amendment,
but in no event shall such Opinion of Counsel be an expense of the Trustee or
Trust Administrator.
Each of the Trustee and the Trust Administrator may, but shall
not be obligated to enter into any amendment pursuant to this Section that
affects its rights, duties and immunities under this Agreement or otherwise.
SECTION 12.02. Recordation of Agreement; Counterparts.
To the extent permitted by applicable law, this Agreement is
subject to recordation in all appropriate public offices for real property
records in all the counties or other comparable jurisdictions in which any or
all of the properties subject to the Mortgages are situated, and in any other
appropriate public recording office or elsewhere, such recordation to be
effected by the Master Servicer at the expense of the Certificateholders, but
only upon direction of the Trustee or the Trust Administrator accompanied by an
Opinion of Counsel to the effect that such recordation materially and
beneficially affects the interests of the Certificateholders.
For the purpose of facilitating the recordation of this
Agreement as herein provided and for other purposes, this Agreement may be
executed simultaneously in any number of counterparts, each of which
counterparts shall be deemed to be an original, and such counterparts
shall constitute but one and the same instrument.
SECTION 12.03. Limitation on Rights of Certificateholders.
The death or incapacity of any Certificateholder shall not
operate to terminate this Agreement or the Trust Fund, nor entitle such
Certificateholder's legal representatives or heirs to claim an accounting or to
take any action or proceeding in any court for a partition or winding
-143-
<PAGE>
up of the Trust Fund, nor otherwise affect the rights, obligations and
liabilities of the parties hereto or any of them.
No Certificateholder shall have any right to vote (except as
expressly provided for herein) or in any manner otherwise control the operation
and management of the Trust Fund, or the obligations of the parties hereto, nor
shall anything herein set forth, or contained in the terms of any of the
Certificates, be construed so as to constitute the Certificateholders from time
to time as partners or members of an association; nor shall any
Certificateholder be under any liability to any third person by reason of any
action taken by the parties to this Agreement pursuant to any provision hereof.
No Certificateholder shall have any right by virtue of any
provision of this Agreement to institute any suit, action or proceeding in
equity or at law upon or under or with respect to this Agreement, unless such
Holder previously shall have given to the Trustee a written notice of default
and of the continuance thereof, as hereinbefore provided, and unless also the
Holders of Certificates entitled to at least 25% of the Voting Rights shall have
made written request upon the Trustee to institute such action, suit or
proceeding in its own name as Trustee hereunder and shall have offered to the
Trustee such reasonable indemnity as it may require against the costs, expenses
and liabilities to be incurred therein or thereby, and the Trustee, for 15 days
after its receipt of such notice, request and offer of indemnity, shall have
neglected or refused to institute any such action, suit or proceeding. It is
understood and intended, and expressly covenanted by each Certificateholder with
every other Certificateholder and the Trustee, that no one or more Holders of
Certificates shall have any right in any manner whatsoever by virtue of any
provision of this Agreement to affect, disturb or prejudice the rights of the
Holders of any other of such Certificates, or to obtain or seek to obtain
priority over or preference to any other such Holder, or to enforce any right
under this Agreement, except in the manner herein provided and for the equal,
ratable and common benefit of all Certificateholders. For the protection and
enforcement of the provisions of this Section, each and every Certificateholder
and the Trustee shall be entitled to such relief as can be given either at law
or in equity.
SECTION 12.04. Governing Law.
This Agreement shall be construed in accordance with the laws
of the State of New York and the obligations, rights and remedies of the parties
hereunder shall be determined in accordance with such laws.
SECTION 12.05. Notices.
All directions, demands and notices hereunder shall be in
writing and shall be deemed to have been duly given when received if personally
delivered at or mailed by first class mail, postage prepaid, or by express
delivery service or delivered in any other manner specified herein, to (a) in
the case of the Depositor, Seven World Trade Center, New York, New York 10048,
Attention: Mortgage Finance Group (telecopy number (212) 783-3895), or such
other address or telecopy number as may hereafter be furnished to the Master
Servicer, the Trustee, the Trust Administrator and the Certificate Insurer in
writing by the Depositor, (b) in the case of the
-144-
<PAGE>
Master Servicer, 18400 Von Karman, Suite 1000, Irvine, California 92612
(telecopy number: (949) 225-7878), or such other address or telecopy number as
may hereafter be furnished to the Trustee, the Trust Administrator, the
Certificate Insurer and the Depositor in writing by the Master Servicer, (c) in
the case of the Trust Administrator, 180 East Fifth Street, St. Paul, Minnesota,
55101, Attention: Structured Finance/New Century 1998-NC5 (telecopy number (612)
244-0089), or such other address or telecopy number as may hereafter be
furnished to the Master Servicer, the Certificate Insurer, the Depositor and the
Trustee in writing by the Trust Administrator, (d) in the case of the Trustee,
1555 North RiverCenter Drive, Suite 301, Milwaukee, Wisconsin 53212, Attention:
Charles Pedersen (telecopy number (414) 905-5049), or such other address or
telecopy number as may hereafter be furnished to the Master Servicer, the
Certificate Insurer, the Trust Administrator and the Depositor in writing by the
Trustee and (e) in the case of the Certificate Insurer, 350 Park Avenue, New
York, New York 10022, Attention: Surveillance Department (telecopy number (212)
339-3518 or (212) 339-3529) or such other address or telecopy number as may
hereafter be furnished to the Trustee, the Trust Administrator, the Depositor
and the Master Servicer in writing by the Certificate Insurer. In each case in
which a notice or other communication to the Certificate Insurer refers to a
Master Servicer Event of Default or a claim under the Policy or with respect to
which failure on the part of the Certificate Insurer to respond shall be deemed
to constitute consent or acceptance, then a copy of such notice or other
communication should also be sent to the attention of the General Counsel and
the Head-Financial Guaranty Group and shall be marked to indicate "URGENT
MATERIAL ENCLOSED." Any notice required or permitted to be given to a
Certificateholder shall be given by first class mail, postage prepaid, at the
address of such Holder as shown in the Certificate Register. Any notice so
mailed within the time prescribed in this Agreement shall be conclusively
presumed to have been duly given when mailed, whether or not the
Certificateholder receives such notice. A copy of any notice required to be
telecopied hereunder also shall be mailed to the appropriate party in the manner
set forth above.
SECTION 12.06. Severability of Provisions.
If any one or more of the covenants, agreements, provisions or
terms of this Agreement shall be for any reason whatsoever held invalid, then
such covenants, agreements, provisions or terms shall be deemed severable from
the remaining covenants, agreements, provisions or terms of this Agreement and
shall in no way affect the validity or enforceability of the other provisions of
this Agreement or of the Certificates or the rights of the Holders thereof.
SECTION 12.07. Notice to Rating Agencies and the Certificate
Insurer.
The Trust Administrator shall use its best efforts promptly to
provide notice to the Rating Agencies and the Certificate Insurer with respect
to each of the following of which it has actual knowledge:
1. Any material change or amendment to this Agreement;
2. The occurrence of any Master Servicer Event of
Default that has not been cured or waived;
-145-
<PAGE>
3. The resignation or termination of the Master
Servicer, the Trustee or the Trust Administrator;
4. The repurchase or substitution of Mortgage Loans
pursuant to or as contemplated by Section 2.03;
5. The final payment to the Holders of any Class of
Certificates;
6. Any change in the location of the Collection Account
or the Distribution Account;
7. Any event that would result in the inability of the
Trust Administrator or the Trustee, as applicable, to
make advances regarding delinquent Mortgage Loans;
8. Any Certificate Insurer Default that has not been
cured; and
9. The filing of any claim under any Master Servicer's
blanket bond and errors and omissions insurance
policy required by Section 3.14 or the cancellation
or material modification of coverage under any such
instrument.
In addition, the Trust Administrator shall promptly furnish to
each Rating Agency and the Certificate Insurer copies of each report to
Certificateholders described in Section 4.02 and the Master Servicer shall
promptly furnish to each Rating Agency copies of the following:
1. Each annual statement as to compliance described in
Section 3.20; and
2. Each annual independent public accountants' servicing
report described in Section 3.21.
Any such notice pursuant to this Section 12.07 shall be in
writing and shall be deemed to have been duly given if personally delivered at
or mailed by first class mail, postage prepaid, or by express delivery service
to Moody's Investors Service, Inc., 99 Church Street, New York, New York 10007,
and to Standard & Poor's Ratings Services, 25 Broadway, New York, New York
10004, or such other addresses as the Rating Agencies may designate in writing
to the parties hereto.
SECTION 12.08. Article and Section References.
All article and section references used in this Agreement,
unless otherwise provided, are to articles and sections in this Agreement.
-146-
<PAGE>
SECTION 12.09. Grant of Security Interest.
It is the express intent of the parties hereto that the
conveyance of the Mortgage Loans to the Trust Administrator, on behalf of the
Trustee, be, and be construed as, a sale of the Mortgage Loans and not a pledge
of the Mortgage Loans to secure a debt or other obligation of the Depositor or
Mortgage Loan Transferor. However, in the event that, notwithstanding the
aforementioned intent of the parties, the Mortgage Loans are held to be property
of the Depositor or the Mortgage Loan Transferor, then, (a) it is the express
intent of the parties that such conveyance be deemed a pledge of the Mortgage
Loans to the Trustee to secure a debt or other obligation of the Depositor or
the Mortgage Loan Transferor and (b)(1) this Agreement shall also be deemed to
be a security agreement within the meaning of Articles 8 and 9 of the Uniform
Commercial Code as in effect from time to time in the State of New York; (2) the
conveyance provided for in Section 2.01 hereof shall be deemed to be a grant by
the Mortgage Loan Transferor and the Depositor to the Trustee of a security
interest in all of the Mortgage Loan Transferor's and the Depositor's right,
title and interest in and to the Mortgage Loans and all amounts payable to the
holders of the Mortgage Loans in accordance with the terms thereof and all
proceeds of the conversion, voluntary or involuntary, of the foregoing into
cash, instruments, securities or other property, including without limitation
all amounts, other than investment earnings, from time to time held or invested
in the Collection Account and the Distribution Account, whether in the form of
cash, instruments, securities or other property; (3) the obligations secured by
such security agreement shall be deemed to be all of the Depositor's obligations
under this Agreement, including the obligation to provide to the
Certificateholders the benefits of this Agreement relating to the Mortgage Loans
and the Trust Fund; and (4) notifications to persons holding such property, and
acknowledgments, receipts or confirmations from persons holding such property,
shall be deemed notifications to, or acknowledgments, receipts or confirmations
from, financial intermediaries, bailees or agents (as applicable) of the Trustee
for the purpose of perfecting such security interest under applicable law.
Accordingly, the Depositor hereby grants to the Trustee a security interest in
the Mortgage Loans and all other property described in clause (2) of the
preceding sentence, for the purpose of securing to the Trustee the performance
by the Depositor of the obligations described in clause (3) of the preceding
sentence. Notwithstanding the foregoing, the parties hereto intend the
conveyance pursuant to Section 2.01 and the transfer pursuant to the Transfer
Agreement to be a true, absolute and unconditional sale of the Mortgage Loans
and assets constituting the Trust Fund by the Mortgage Loan Transferor to the
Trustee.
-147-
<PAGE>
IN WITNESS WHEREOF, the Depositor, the Master Servicer, the
Trust Administrator and the Trustee have caused their names to be signed hereto
by their respective officers thereunto duly authorized, in each case as of the
day and year first above written.
SALOMON BROTHERS MORTGAGE
SECURITIES VII, INC.,
as Depositor
By: /s/ Vincent J. Varca
----------------------------
Name: Vincent J. Varca
Title: Assistant Vice President
NEW CENTURY MORTGAGE CORPORATION
as Master Servicer
By: /s/ John Kontoulis
-----------------------------
Name: John Kontoulis
Title: Vice President
U.S. BANK NATIONAL ASSOCIATION
as Trust Administrator
By: /s/ Eve D. Kaplan
----------------------------
Name: Eve D. Kaplan
Title: Vice President
FIRSTAR BANK MILWAUKEE, N.A.
as Trustee
By: /s/ Charles F. Pederson
----------------------------
Name: Charles F. Pederson
Title: Assistant Vice President
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 22nd day of December 1998, before me, a notary public
in and for said State, personally appeared Vincent J. Varca, known to me to be
an Assistant Vice President of Salomon Brothers Mortgage Securities VII, Inc.,
one of the corporations that executed the within instrument, and also known to
me to be the person who executed it on behalf of said corporation, and
acknowledged to me that such corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
-----------------------------------
Notary Public
[Notarial Seal]
<PAGE>
STATE OF CALIFORNIA )
) ss.:
COUNTY OF ORANGE )
On the 22nd day of December 1998, before me, a notary public
in and for said State, personally appeared John Kontoulis, known to me to be
Vice President of New Century Mortgage Corporation, one of the corporations that
executed the within instrument, and also known to me to be the person who
executed it on behalf of said corporation, and acknowledged
to me that such corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
-----------------------------------
Notary Public
[Notarial Seal]
<PAGE>
STATE OF MINNESOTA )
) ss.:
COUNTY OF RAMSEY )
On the 22nd day of December 1998, before me, a notary public
in and for said State, personally appeared Eve D. Kaplan, known to me to be a
Vice President of U.S. Bank National Association, one of the corporations that
executed the within instrument, and also known to me to be the person who
executed it on behalf of said corporation, and acknowledged to me that such
corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
-----------------------------------
Notary Public
[Notarial Seal]
<PAGE>
STATE OF WISCONSIN )
) ss.:
COUNTY OF __________ )
On the 22nd day of December 1998, before me, a notary public
in and for said State, personally appeared ____________, known to me to be a
________________ of Firstar Bank Milwaukee, N.A., one of the corporations that
executed the within instrument, and also known to me to be the person who
executed it on behalf of said corporation, and acknowledged to me that such
corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
-----------------------------------
Notary Public
[Notarial Seal]
<PAGE>
EXHIBIT A-1
-----------
FORM OF CLASS A CERTIFICATE
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS
A "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT
CONDUIT," AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS
860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986 (THE "CODE").
<TABLE>
<CAPTION>
<S> <C>
Series 1998-NC5, Class A Aggregate Certificate Principal Balance of
the Class A Certificates as of the Issue Date:
Variable Pass-Through Rate $875,442,000.00
Date of Pooling and Servicing Agreement Denomination: $_____________
and Cut-off Date: December 1, 1998
Master Servicer: New Century Mortgage
First Distribution Date: Corporation
January 25, 1999
Trustee: Firstar Bank Milwaukee, N.A.
No. ___
Trust Administrator: U.S. Bank National
Association
Issue Date: December 22, 1998
CUSIP: 79548K ____
</TABLE>
DISTRIBUTIONS IN REDUCTION OF THE CERTIFICATE PRINCIPAL BALANCE
OF THIS CERTIFICATE MAY BE MADE MONTHLY AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING CERTIFICATE PRINCIPAL BALANCE
HEREOF AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ABOVE AS
THE DENOMINATION OF THIS CERTIFICATE.
<PAGE>
CALLABLE FLOATING RATE MORTGAGE PASS-THROUGH CERTIFICATE
evidencing a beneficial ownership interest in a Trust Fund (the "Trust Fund")
consisting primarily of a pool of conventional one- to four-family first
mortgage loans (the "Mortgage Loans") formed and sold by
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST
IN SALOMON BROTHERS MORTGAGE SECURITIES VII, INC., THE MASTER
SERVICER, THE TRUSTEE, THE TRUST ADMINISTRATOR OR ANY OF THEIR
RESPECTIVE AFFILIATES. NEITHER THIS CERTIFICATE NOR THE
UNDERLYING MORTGAGE LOANS ARE GUARANTEED BY ANY AGENCY OR
INSTRUMENTALITY OF THE UNITED STATES.
This certifies that Cede & Co. is the registered owner of a
Percentage Interest (obtained by dividing the denomination of this Certificate
by the aggregate Certificate Principal Balance of the Class A Certificates as of
the Issue Date) in that certain beneficial ownership interest evidenced by all
the Class A Certificates in REMIC III created pursuant to a Pooling and
Servicing Agreement, dated as specified above (the "Agreement"), among Salomon
Brothers Mortgage Securities VII, Inc. (hereinafter called the "Depositor,"
which term includes any successor entity under the Agreement), the Master
Servicer, the Trustee and the Trust Administrator, a summary of certain of the
pertinent provisions of which is set forth hereafter. To the extent not defined
herein, the capitalized terms used herein have the meanings assigned in the
Agreement. This Certificate is issued under and is subject to the terms,
provisions and conditions of the Agreement, to which Agreement the Holder of
this Certificate by virtue of the acceptance hereof assents and by which such
Holder is bound.
Pursuant to the terms of the Agreement, distributions will be made
on the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (a "Distribution Date"), commencing on the
First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the last Business Day of the month immediately
preceding the month of such distribution (the "Record Date"), in an amount equal
to the product of the Percentage Interest evidenced by this Certificate and the
amount required to be distributed to the Holders of Class A Certificates on such
Distribution Date pursuant to the Agreement.
All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by the Trust Administrator on behalf
of the Trustee by wire transfer in immediately available funds to the account of
the Person entitled thereto if such Person shall have so notified the Trust
Administrator in writing at least five Business Days prior to the Record Date
immediately prior to such Distribution Date and is the registered owner of Class
A Certificates the aggregate initial Certificate Principal Balance of which is
in excess of the lesser of (i) $5,000,000 or (ii) two-thirds of the aggregate
initial Certificate Principal Balance of the Class A Certificates, or otherwise
by check mailed by first class mail to the address of the Person entitled
thereto, as such name and address shall appear on the Certificate Register.
Notwithstanding the
<PAGE>
-3-
above, the final distribution on this Certificate will be made after due notice
by the Trust Administrator of the pendency of such distribution and only upon
presentation and surrender of this Certificate at the office or agency appointed
by the Trustee for that purpose as provided in the Agreement.
The Pass-Through Rate applicable to the calculation of interest
payable with respect to this Certificate on any Distribution Date shall equal a
rate per annum equal to the lesser of (i) One-Month LIBOR plus 0.70%, in the
case of each Distribution Date through and including the Distribution Date on
which the aggregate principal balance of the Mortgage Loans (and properties
acquired in respect thereof) remaining in the Trust Fund is reduced to less than
10% of the aggregate principal balance of the Mortgage Loans as of the Cut-off
Date, or One-Month LIBOR plus 1.40% per annum, in the case of any Distribution
Date thereafter and (ii) the Net WAC Pass-Through Rate for such Distribution
Date.
This Certificate is one of a duly authorized issue of Certificates
designated as Callable Floating Rate Mortgage Pass-Through Certificates of the
Series specified on the face hereof (herein called the "Certificates") and
representing a Percentage Interest in the Class of Certificates specified on the
face hereof equal to the denomination specified on the face hereof divided by
the aggregate Certificate Principal Balance of the Class of Certificates
specified on the face hereof.
The Certificates are limited in right of payment to certain
collections and recoveries respecting the Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Account and the Distribution Account
may be made from time to time for purposes other than distributions to
Certificateholders, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Mortgage Loans.
The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Depositor, the Master Servicer, the Trustee, the Trust Administrator and the
rights of the Certificateholders under the Agreement at any time by the
Depositor, the Master Servicer, the Trustee, the Trust Administrator and the
Certificate Insurer with the consent of the Holders of Certificates entitled to
at least 66% of the Voting Rights and the Certificate Insurer. Any such consent
by the Holder of this Certificate shall be conclusive and binding on such Holder
and upon all future Holders of this Certificate and of any Certificate issued
upon the transfer hereof or in exchange herefor or in lieu hereof whether or not
notation of such consent is made upon this Certificate. The Agreement also
permits the amendment thereof, in certain limited circumstances, without the
consent of the Holders of any of the Certificates but with the consent of the
Certificate Insurer.
As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies appointed by the Trust
<PAGE>
-4-
Administrator as provided in the Agreement, duly endorsed by, or accompanied by
an assignment in the form below or other written instrument of transfer in form
satisfactory to the Trust Administrator duly executed by, the Holder hereof or
such Holder's attorney duly authorized in writing, and thereupon one or more new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest will be issued to the designated transferee or
transferees.
The Certificates are issuable in fully registered form only without
coupons in Classes and denominations representing Percentage Interests specified
in the Agreement. As provided in the Agreement and subject to certain
limitations therein set forth, the Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.
No service charge will be made for any such registration of transfer
or exchange of Certificates, but the Trust Administrator may require payment of
a sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any transfer or exchange of Certificates.
The Depositor, the Master Servicer, the Trustee, the Trust
Administrator and the Certificate Insurer and any agent of the Depositor, any
Master Servicer, the Trustee, the Trust Administrator or the Certificate Insurer
may treat the Person in whose name this Certificate is registered as the owner
hereof for all purposes, and none of the Depositor, the Master Servicer, the
Trustee, the Trust Administrator, the Certificate Insurer nor any such agent
shall be affected by notice to the contrary.
The obligations created by the Agreement and the Trust Fund created
thereby shall terminate upon payment to the Certificateholders of all amounts
held by the Trust Administrator on behalf of the Trustee and required to be paid
to them pursuant to the Agreement following the earlier of (i) the final payment
or other liquidation (or any advance with respect thereto) of the last Mortgage
Loan remaining in REMIC I and (ii) the purchase by the party designated in the
Agreement at a price determined as provided in the Agreement from REMIC I of all
the Mortgage Loans and all property acquired in respect of such Mortgage Loans.
The Agreement permits, but does not require, the party designated in the
Agreement to purchase from REMIC I all the Mortgage Loans and all property
acquired in respect of any Mortgage Loan at a price determined as provided in
the Agreement. The exercise of such right will effect early retirement of the
Certificates; however, such right to purchase is subject to the aggregate
principal balance of the Mortgage Loans at the time of purchase is reduced to
less than 10%,in the event the Majority Class CE Certificateholder is the
Terminator, or 5%, in the event the Master Servicer or the Certificate Insurer
is the Terminator. Furthermore, the holder of the Call Class can effect early
retirement of the Certificates in accordance with the terms set forth in the
Agreement.
<PAGE>
-5-
The recitals contained herein shall be taken as statements of the
Depositor and neither the Trustee nor the Trust Administrator assumes
responsibility for their correctness.
Unless the certificate of authentication hereon has been executed by
the Trust Administrator, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
<PAGE>
IN WITNESS WHEREOF, the Trust Administrator has caused this
Certificate to be duly executed.
Dated: December 22, 1998
U.S. BANK NATIONAL ASSOCIATION
as Trust Administrator
By:_______________________________
Authorized Officer
CERTIFICATE OF AUTHENTICATION
-----------------------------
This is one of the Class A Certificates referred to in the
within-mentioned Agreement.
U.S. BANK NATIONAL ASSOCIATION
as Trust Administrator
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 Callable Floating
Rate Mortgage Pass-Through Certificate and hereby authorize(s) the registration
of transfer of such interest to assignee on the Certificate Register of the
Trust Fund.
I (we) further direct the Trustee to issue a new Certificate of a
like Percentage Interest and Class to the above named assignee and deliver such
Certificate to the following address: _________________________________________
______________________________________________________________________________.
Dated:
_____________________________________
Signature by or on behalf of assignor
_____________________________________
Signature Guaranteed
<PAGE>
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for purposes of
distribution:
Distributions shall be made, by wire transfer or otherwise, in
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 CE CERTIFICATE
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS
A "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT
CONDUIT", AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS
860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986 (THE "CODE").
THE FOLLOWING INFORMATION IS PROVIDED SOLELY FOR THE PURPOSES OF
APPLYING THE U.S. FEDERAL INCOME TAX ORIGINAL ISSUE DISCOUNT
("OID") RULES TO THIS CERTIFICATE. THE ISSUE DATE OF THIS
CERTIFICATE IS DECEMBER 22, 1998. BASED ON THE OID REGULATIONS
AND ASSUMING THAT THE MORTGAGE LOANS PREPAY AT __% CONSTANT
PREPAYMENT RATE, USED SOLELY FOR THE PURPOSES OF APPLYING THE
OID RULES TO THE CERTIFICATES (THE "PREPAYMENT ASSUMPTION"),
THIS CERTIFICATE HAS BEEN ISSUED WITH NO MORE THAN $_______ OF
OID PER $100,000 OF INITIAL NOTIONAL AMOUNT, THE YIELD TO
MATURITY IS ____% AND THE AMOUNT OF OID ATTRIBUTABLE TO THE
INITIAL ACCRUAL PERIOD IS NO MORE THAN $____ PER $100,000 OF
INITIAL NOTIONAL AMOUNT, COMPUTED UNDER THE EXACT METHOD. NO
REPRESENTATION IS MADE THAT THE MORTGAGE LOANS WILL PREPAY AT A
RATE BASED ON THE PREPAYMENT ASSUMPTION OR AT ANY OTHER RATE.
THIS CERTIFICATE IS SUBORDINATE TO THE CLASS A CERTIFICATES AND
THE RESIDUAL CERTIFICATES TO THE EXTENT DESCRIBED IN THE POOLING
AND SERVICING AGREEMENT REFERRED TO HEREIN.
THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS
OF ANY STATE AND MAY NOT BE RESOLD OR TRANSFERRED UNLESS IT IS
REGISTERED PURSUANT TO SUCH ACT AND LAWS OR IS SOLD OR
TRANSFERRED IN TRANSACTIONS THAT ARE EXEMPT FROM REGISTRATION
UNDER SUCH ACT AND UNDER APPLICABLE STATE LAW AND IS TRANSFERRED
IN ACCORDANCE WITH THE PROVISIONS OF SECTION 5.02 OF THE
AGREEMENT.
NO TRANSFER OF THIS CERTIFICATE TO AN EMPLOYEE BENEFIT PLAN OR
OTHER RETIREMENT ARRANGEMENT SUBJECT TO THE EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974, AS
<PAGE>
AMENDED, OR THE CODE WILL BE REGISTERED EXCEPT IN COMPLIANCE
WITH THE PROCEDURES DESCRIBED HEREIN.
<TABLE>
<CAPTION>
<S> <C>
Series 1998-NC5, Class CE Notional Amount: $_________________
Variable Pass-Through Rate Aggregate Certificate Principal Balance of
the Class CE Certificates as of the Issue
Date of Pooling and Servicing Agreement Date: $40,292,330.54
and Cut-off Date: December 1, 1998
Denomination: $_____________
First Distribution Date:
January 25, 1999 Master Servicer: New Century Mortgage
Corporation
No. ___
Trustee: Firstar Bank Milwaukee, N.A.
Aggregate Notional Amount of the Class
CE Certificates as of the Issue Date: Trust Administrator: U.S. Bank National
$------------------ Association
Issue Date: December 22, 1998
</TABLE>
DISTRIBUTIONS IN REDUCTION OF THE CERTIFICATE PRINCIPAL BALANCE
OF THIS CERTIFICATE MAY BE MADE MONTHLY AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING CERTIFICATE PRINCIPAL BALANCE
HEREOF AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ABOVE AS
THE DENOMINATION OF THIS CERTIFICATE.
<PAGE>
CALLABLE FLOATING RATE MORTGAGE PASS-THROUGH CERTIFICATE
evidencing a beneficial ownership interest in a Trust Fund (the "Trust Fund")
consisting primarily of a pool of conventional one- to four-family first
mortgage loans (the "Mortgage Loans") formed and sold by
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST
IN SALOMON BROTHERS MORTGAGE SECURITIES VII, INC., THE MASTER
SERVICER, THE TRUSTEE, THE TRUST ADMINISTRATOR OR ANY OF THEIR
RESPECTIVE AFFILIATES. NEITHER THIS CERTIFICATE NOR THE
UNDERLYING MORTGAGE LOANS ARE GUARANTEED BY ANY AGENCY OR
INSTRUMENTALITY OF THE UNITED STATES.
This certifies that _________________ is the registered owner of a
Percentage Interest (obtained by dividing the denomination of this Certificate
by the aggregate Certificate Principal Balance of the Class CE Certificates as
of the Issue Date) in that certain beneficial ownership interest evidenced by
all the Class CE Certificates in REMIC III created pursuant to a Pooling and
Servicing Agreement, dated as specified above (the "Agreement"), among Salomon
Brothers Mortgage Securities VII, Inc. (hereinafter called the "Depositor,"
which term includes any successor entity under the Agreement), the Master
Servicer, the Trustee and the Trust Administrator, a summary of certain of the
pertinent provisions of which is set forth hereafter. To the extent not defined
herein, the capitalized terms used herein have the meanings assigned in the
Agreement. This Certificate is issued under and is subject to the terms,
provisions and conditions of the Agreement, to which Agreement the Holder of
this Certificate by virtue of the acceptance hereof assents and by which such
Holder is bound.
Pursuant to the terms of the Agreement, distributions will be made
on the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (a "Distribution Date"), commencing on the
First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the last Business Day of the month immediately
preceding the month of such distribution (the "Record Date"), in an amount equal
to the product of the Percentage Interest evidenced by this Certificate and the
amount required to be distributed to the Holders of Class CE Certificates on
such Distribution Date pursuant to the Agreement.
All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by the Trust Administrator on behalf
of the Trustee by wire transfer in immediately available funds to the account of
the Person entitled thereto if such Person shall have so notified the Trust
Administrator in writing at least five Business Days prior to the Record Date
immediately prior to such Distribution Date and is the registered owner of Class
CE Certificates the aggregate initial Certificate Principal Balance of which is
in excess of the lesser of (i) $5,000,000 or (ii) two-thirds of the aggregate
initial Certificate Principal Balance of the Class CE Certificates, or otherwise
by check mailed by first class mail
<PAGE>
-4-
to the address of the Person entitled thereto, as such name and address shall
appear on the Certificate Register. Notwithstanding the above, the final
distribution on this Certificate will be made after due notice by the Trust
Administrator of the pendency of such distribution and only upon presentation
and surrender of this Certificate at the office or agency appointed by the Trust
Administrator for that purpose as provided in the Agreement.
This Certificate is one of a duly authorized issue of Certificates
designated as Callable Floating Rate Mortgage Pass-Through Certificates of the
Series specified on the face hereof (herein called the "Certificates") and
representing a Percentage Interest in the Class of Certificates specified on the
face hereof equal to the denomination specified on the face hereof divided by
the aggregate Certificate Principal Balance of the Class of Certificates
specified on the face hereof.
The Certificates are limited in right of payment to certain
collections and recoveries respecting the Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Account and the Distribution Account
may be made from time to time for purposes other than distributions to
Certificateholders, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Mortgage Loans.
The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Depositor, the Master Servicer, the Trustee, the Trust Administrator and the
rights of the Certificateholders under the Agreement at any time by the
Depositor, the Master Servicer, the Trustee, the Trust Administrator and the
Certificate Insurer with the consent of the Holders of Certificates entitled to
at least 66% of the Voting Rights and the Certificate Insurer. Any such consent
by the Holder of this Certificate shall be conclusive and binding on such Holder
and upon all future Holders of this Certificate and of any Certificate issued
upon the transfer hereof or in exchange herefor or in lieu hereof whether or not
notation of such consent is made upon this Certificate. The Agreement also
permits the amendment thereof, in certain limited circumstances, without the
consent of the Holders of any of the Certificates but with the consent of the
Certificate Insurer.
As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies appointed by the Trustee as provided in the
Agreement, duly endorsed by, or accompanied by an assignment in the form below
or other written instrument of transfer in form satisfactory to the Trust
Administrator duly executed by, the Holder hereof or such Holder's attorney duly
authorized in writing, and thereupon one or more new Certificates of the same
Class in authorized denominations evidencing the same aggregate Percentage
Interest will be issued to the designated transferee or transferees.
<PAGE>
-5-
The Certificates are issuable in fully registered form only without
coupons in Classes and denominations representing Percentage Interests specified
in the Agreement. As provided in the Agreement and subject to certain
limitations therein set forth, Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.
No transfer of this Certificate shall be made unless the transfer is
made pursuant to an effective registration statement under the Securities Act of
1933, as amended (the "1933 Act"), and an effective registration or
qualification under applicable state securities laws, or is made in a
transaction that does not require such registration or qualification. In the
event that such a transfer of this Certificate is to be made without
registration or qualification, the Trust Administrator shall require receipt of
(i) if such transfer is purportedly being made in reliance upon Rule 144A under
the 1933 Act, written certifications from the Holder of the Certificate desiring
to effect the transfer, and from such Holder's prospective transferee,
substantially in the forms attached to the Agreement as Exhibit F-1, and (ii) in
all other cases, an Opinion of Counsel satisfactory to it that such transfer may
be made without such registration or qualification (which Opinion of Counsel
shall not be an expense of the Trust Fund or of the Depositor, the Trustee, the
Trust Administrator or the Master Servicer in their respective capacities as
such), together with copies of the written certification(s) of the Holder of the
Certificate desiring to effect the transfer and/or such Holder's prospective
transferee upon which such Opinion of Counsel is based. None of the Depositor,
the Trustee or the Trust Administrator is obligated to register or qualify the
Class of Certificates specified on the face hereof under the 1933 Act or any
other securities law or to take any action not otherwise required under the
Agreement to permit the transfer of such Certificates without registration or
qualification. Any Holder desiring to effect a transfer of this Certificate
shall be required to indemnify the Trustee, the Trust Administrator, the
Depositor and the Master Servicer against any liability that may result if the
transfer is not so exempt or is not made in accordance with such federal and
state laws.
No transfer of this Certificate to a Plan subject to ERISA or
Section 4975 of the Code, any Person acting, directly or indirectly, on behalf
of any such Plan or any Person using "Plan Assets" to acquire this Certificate
shall be made except in accordance with Section 5.02(c) of the Agreement.
No service charge will be made for any such registration of transfer
or exchange of Certificates, but the Trust Administrator may require payment of
a sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any transfer or exchange of Certificates.
The Depositor, the Master Servicer, the Trustee or the Trust
Administrator and any agent of the Depositor, the Master Servicer, the Trustee
or the Trust Administrator may treat the Person in whose name this Certificate
is registered as the owner hereof for all purposes, and none of the Depositor,
the Master Servicer, the Trustee, the Trust Administrator nor any such agent
shall be affected by notice to the contrary.
<PAGE>
-6-
The obligations created by the Agreement and the Trust Fund created
thereby shall terminate upon payment to the Certificateholders of all amounts
held by the Trust Administrator on behalf of the Trustee and required to be paid
to them pursuant to the Agreement following the earlier of (i) the final payment
or other liquidation (or any advance with respect thereto) of the last Mortgage
Loan remaining in REMIC I and (ii) the purchase by the party designated in the
Agreement at a price determined as provided in the Agreement from REMIC I of all
the Mortgage Loans and all property acquired in respect of such Mortgage Loans.
The Agreement permits, but does not require, the party designated in the
Agreement to purchase from REMIC I all the Mortgage Loans and all property
acquired in respect of any Mortgage Loan at a price determined as provided in
the Agreement. The exercise of such right will effect early retirement of the
Certificates; however, such right to purchase is subject to the aggregate
principal balance of the Mortgage Loans at the time of purchase is reduced to
less than 10%,in the event the Majority Class CE Certificateholder is the
Terminator, or 5%, in the event the Master Servicer or the Certificate Insurer
is the Terminator. Furthermore, the holder of the Call Class can effect early
retirement of the Certificates in accordance with the terms set forth in the
Agreement.
The recitals contained herein shall be taken as statements of the
Depositor and neither the Trustee nor the Trust Administrator assumes
responsibility for their correctness.
Unless the certificate of authentication hereon has been executed by
the Trust Administrator, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
<PAGE>
IN WITNESS WHEREOF, the Trust Administrator has caused this
Certificate to be duly executed.
Dated: December 22, 1998
U.S. BANK NATIONAL ASSOCIATION
as Trust Administrator
By:_______________________________
Authorized Officer
CERTIFICATE OF AUTHENTICATION
-----------------------------
This is one of the Class CE Certificates referred to in the
within-mentioned Agreement.
U.S. BANK NATIONAL ASSOCIATION
as Trust Administrator
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 Callable Floating
Rate Mortgage Pass-Through Certificate and hereby authorize(s) the registration
of transfer of such interest to assignee on the Certificate Register of the
Trust Fund.
I (we) further direct the Trustee to issue a new Certificate of a
like Percentage Interest and Class to the above named assignee and deliver such
Certificate to the following address: _________________________________________
______________________________________________________________________________.
Dated:
_____________________________________
Signature by or on behalf of assignor
_____________________________________
Signature Guaranteed
<PAGE>
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for purposes of
distribution:
Distributions shall be made, by wire transfer or otherwise, in
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 P CERTIFICATE
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS
A "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT
CONDUIT", AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS
860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986 (THE "CODE").
THE FOLLOWING INFORMATION IS PROVIDED SOLELY FOR THE PURPOSES OF
APPLYING THE U.S. FEDERAL INCOME TAX ORIGINAL ISSUE DISCOUNT
("OID") RULES TO THIS CERTIFICATE. THE ISSUE DATE OF THIS
CERTIFICATE IS DECEMBER 22, 1998. BASED ON THE OID REGULATIONS
AND ASSUMING THAT THE MORTGAGE LOANS PREPAY AT __% OF THE
CONSTANT PREPAYMENT RATE, USED SOLELY FOR THE PURPOSES OF
APPLYING THE OID RULES TO THE CERTIFICATES (THE "PREPAYMENT
ASSUMPTION"), THIS CERTIFICATE HAS BEEN ISSUED WITH NO MORE THAN
$______ OF OID PER $1,000 OF INITIAL CERTIFICATE PRINCIPAL
BALANCE, THE YIELD TO MATURITY IS _____% AND THE AMOUNT OF OID
ATTRIBUTABLE TO THE INITIAL ACCRUAL PERIOD IS NO MORE THAN $____
PER $1,000 OF INITIAL CERTIFICATE PRINCIPAL BALANCE, COMPUTED
UNDER THE EXACT METHOD. NO REPRESENTATION IS MADE THAT THE
MORTGAGE LOANS WILL PREPAY AT A RATE BASED ON THE PREPAYMENT
ASSUMPTION OR AT ANY OTHER RATE.
THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS
OF ANY STATE AND MAY NOT BE RESOLD OR TRANSFERRED UNLESS IT IS
REGISTERED PURSUANT TO SUCH ACT AND LAWS OR IS SOLD OR
TRANSFERRED IN TRANSACTIONS THAT ARE EXEMPT FROM REGISTRATION
UNDER SUCH ACT AND UNDER APPLICABLE STATE LAW AND IS TRANSFERRED
IN ACCORDANCE WITH THE PROVISIONS OF SECTION 5.02 OF THE
AGREEMENT.
NO TRANSFER OF THIS CERTIFICATE TO AN EMPLOYEE BENEFIT PLAN OR
OTHER RETIREMENT ARRANGEMENT (EACH A "PLAN") SUBJECT TO THE
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED
("ERISA"), OR THE CODE WILL BE REGISTERED EXCEPT IN COMPLIANCE
WITH THE PROCEDURES DESCRIBED HEREIN.
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Series 1998-NC5, Class P Aggregate Certificate Principal Balance of
the Class P Certificates as of the Issue
Date of Pooling and Servicing Agreement Date: $100.00
and Cut-off Date: December 1, 1998
Denomination: $100.00
First Distribution Date:
January 25, 1998 Master Servicer:
New Century Mortgage Corporation
No. ___
Trustee: Firstar Bank Milwaukee, N.A.
Trust Administrator: U.S. Bank National
Association
Issue Date: December 22, 1998
</TABLE>
DISTRIBUTIONS IN REDUCTION OF THE CERTIFICATE PRINCIPAL BALANCE
OF THIS CERTIFICATE MAY BE MADE MONTHLY AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING CERTIFICATE PRINCIPAL BALANCE
HEREOF AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ABOVE AS
THE DENOMINATION OF THIS CERTIFICATE.
<PAGE>
CALLABLE FLOATING RATE MORTGAGE PASS-THROUGH CERTIFICATE
evidencing a beneficial ownership interest in a Trust Fund (the "Trust Fund")
consisting primarily of a pool of conventional one- to four-family
adjustable-rate first lien mortgage loans (the "Mortgage Loans") formed and sold
by
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST
IN SALOMON BROTHERS MORTGAGE SECURITIES VII, INC., THE MASTER
SERVICER, THE TRUSTEE, THE TRUST ADMINISTRATOR OR ANY OF THEIR
RESPECTIVE AFFILIATES. NEITHER THIS CERTIFICATE NOR THE
UNDERLYING MORTGAGE LOANS ARE GUARANTEED BY ANY AGENCY OR
INSTRUMENTALITY OF THE UNITED STATES.
This certifies that ___________________ is the registered owner of a
Percentage Interest (obtained by dividing the denomination of this Certificate
by the aggregate Certificate Principal Balance of the Class P Certificates as of
the Issue Date) in that certain beneficial ownership interest evidenced by all
the Class P Certificates in REMIC III created pursuant to a Pooling and
Servicing Agreement, dated as specified above (the "Agreement"), among Salomon
Brothers Mortgage Securities VII, Inc. (hereinafter called the "Depositor,"
which term includes any successor entity under the Agreement), the Master
Servicer, the Trustee and the Trust Administrator, a summary of certain of the
pertinent provisions of which is set forth hereafter. To the extent not defined
herein, the capitalized terms used herein have the meanings assigned in the
Agreement. This Certificate is issued under and is subject to the terms,
provisions and conditions of the Agreement, to which Agreement the Holder of
this Certificate by virtue of the acceptance hereof assents and by which such
Holder is bound.
Pursuant to the terms of the Agreement, distributions will be made
on the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (a "Distribution Date"), commencing on the
First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the last Business Day of the month immediately
preceding the month of such distribution (the "Record Date"), in an amount equal
to the product of the Percentage Interest evidenced by this Certificate and the
amount required to be distributed to the Holders of Class P Certificates on such
Distribution Date pursuant to the Agreement.
All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by the Trust Administrator on behalf
of the Trustee by wire transfer in immediately available funds to the account of
the Person entitled thereto if such Person shall have so notified the Trust
Administrator in writing at least five Business Days prior to the Record Date
immediately prior to such Distribution Date and is the registered owner of Class
P Certificates the aggregate initial Certificate Principal Balance of which is
in excess of the lesser of (i) $5,000,000 or (ii) two-thirds of the aggregate
initial Certificate Principal Balance of the Class P Certificates, or otherwise
by check mailed by first class mail
<PAGE>
-4-
to the address of the Person entitled thereto, as such name and address shall
appear on the Certificate Register. Notwithstanding the above, the final
distribution on this Certificate will be made after due notice by the Trustee of
the pendency of such distribution and only upon presentation and surrender of
this Certificate at the office or agency appointed by the Trust Administrator
for that purpose as provided in the Agreement.
This Certificate is one of a duly authorized issue of Certificates
designated as Callable Floating Rate Mortgage Pass-Through Certificates of the
Series specified on the face hereof (herein called the "Certificates") and
representing a Percentage Interest in the Class of Certificates specified on the
face hereof equal to the denomination specified on the face hereof divided by
the aggregate Certificate Principal Balance of the Class of Certificates
specified on the face hereof.
The Certificates are limited in right of payment to certain
collections and recoveries respecting the Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Account and the Distribution Account
may be made from time to time for purposes other than distributions to
Certificateholders, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Mortgage Loans.
The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Depositor, the Master Servicer, the Trustee, the Trust Administrator and the
rights of the Certificateholders under the Agreement at any time by the
Depositor, the Master Servicer, the Trustee, the Trust Administrator and the
Certificate Insurer with the consent of the Holders of Certificates entitled to
at least 66% of the Voting Rights and the Certificate Insurer. Any such consent
by the Holder of this Certificate shall be conclusive and binding on such Holder
and upon all future Holders of this Certificate and of any Certificate issued
upon the transfer hereof or in exchange herefor or in lieu hereof whether or not
notation of such consent is made upon this Certificate. The Agreement also
permits the amendment thereof, in certain limited circumstances, without the
consent of the Holders of any of the Certificates but with the consent of the
Certificate Insurer.
As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies appointed by the Trust Administrator as
provided in the Agreement, duly endorsed by, or accompanied by an assignment in
the form below or other written instrument of transfer in form satisfactory to
the Trustee duly executed by, the Holder hereof or such Holder's attorney duly
authorized in writing, and thereupon one or more new Certificates of the same
Class in authorized denominations evidencing the same aggregate Percentage
Interest will be issued to the designated transferee or transferees.
<PAGE>
-5-
The Certificates are issuable in fully registered form only without
coupons in Classes and denominations representing Percentage Interests specified
in the Agreement. As provided in the Agreement and subject to certain
limitations therein set forth, Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.
No transfer of this Certificate shall be made unless the transfer is
made pursuant to an effective registration statement under the Securities Act of
1933, as amended (the "1933 Act"), and an effective registration or
qualification under applicable state securities laws, or is made in a
transaction that does not require such registration or qualification. In the
event that such a transfer of this Certificate is to be made without
registration or qualification, the Trust Administrator shall require receipt of
(i) if such transfer is purportedly being made in reliance upon Rule 144A under
the 1933 Act, written certifications from the Holder of the Certificate desiring
to effect the transfer, and from such Holder's prospective transferee,
substantially in the forms attached to the Agreement as Exhibit F-1, and (ii) in
all other cases, an Opinion of Counsel satisfactory to it that such transfer may
be made without such registration or qualification (which Opinion of Counsel
shall not be an expense of the Trust Fund or of the Depositor, the Trustee, the
Trust Administrator or the Master Servicer in their respective capacities as
such), together with copies of the written certification(s) of the Holder of the
Certificate desiring to effect the transfer and/or such Holder's prospective
transferee upon which such Opinion of Counsel is based. None of the Depositor,
the Trustee or the Trust Administrator is obligated to register or qualify the
Class of Certificates specified on the face hereof under the 1933 Act or any
other securities law or to take any action not otherwise required under the
Agreement to permit the transfer of such Certificates without registration or
qualification. Any Holder desiring to effect a transfer of this Certificate
shall be required to indemnify the Trustee, the Trust Administrator, the
Depositor and the Master Servicer against any liability that may result if the
transfer is not so exempt or is not made in accordance with such federal and
state laws.
No transfer of this Certificate to a Plan subject to ERISA or
Section 4975 of the Code, any Person acting, directly or indirectly, on behalf
of any such Plan or any Person using "Plan Assets" to acquire this Certificate
shall be made except in accordance with Section 5.02(c) of the Agreement.
No service charge will be made for any such registration of transfer
or exchange of Certificates, but the Trust Administrator may require payment of
a sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any transfer or exchange of Certificates.
The Depositor, the Master Servicer, the Trustee, the Trust
Administrator or the Certificate Insurer and any agent of the Depositor, the
Master Servicer, the Trustee, the Trust Administrator or the Certificate Insurer
may treat the Person in whose name this Certificate is registered as the owner
hereof for all purposes, and none of the Depositor, the Master
<PAGE>
-6-
Servicer, the Trustee, the Trust Administrator, the Certificate Insurer nor any
such agent shall be affected by notice to the contrary.
The obligations created by the Agreement and the Trust Fund created
thereby shall terminate upon payment to the Certificateholders of all amounts
held by the Trust Administrator on behalf of the Trustee and required to be paid
to them pursuant to the Agreement following the earlier of (i) the final payment
or other liquidation (or any advance with respect thereto) of the last Mortgage
Loan remaining in REMIC I and (ii) the purchase by the party designated in the
Agreement at a price determined as provided in the Agreement from REMIC I of all
the Mortgage Loans and all property acquired in respect of such Mortgage Loans.
The Agreement permits, but does not require, the party designated in the
Agreement to purchase from REMIC I all the Mortgage Loans and all property
acquired in respect of any Mortgage Loan at a price determined as provided in
the Agreement. The exercise of such right will effect early retirement of the
Certificates; however, such right to purchase is subject to the aggregate
principal balance of the Mortgage Loans at the time of purchase is reduced to
less than 10%,in the event the Majority Class CE Certificateholder is the
Terminator, or 5%, in the event the Master Servicer or the Certificate Insurer
is the Terminator. Furthermore, the holder of the Call Class can effect early
retirement of the Certificates in accordance with the terms set forth in the
Agreement.
The recitals contained herein shall be taken as statements of the
Depositor and neither the Trustee nor the Trust Administrator assumes
responsibility for their correctness.
Unless the certificate of authentication hereon has been executed by
the Trust Administrator, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
<PAGE>
-7-
IN WITNESS WHEREOF, the Trust Administrator has caused this
Certificate to be duly executed.
Dated: December 22, 1998
U.S. BANK NATIONAL ASSOCIATION
as Trust Administrator
By:_______________________________
Authorized Officer
CERTIFICATE OF AUTHENTICATION
-----------------------------
This is one of the Class P Certificates referred to in the
within-mentioned Agreement.
U.S. BANK NATIONAL ASSOCIATION
as Trust Administrator
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 Callable Floating
Rate Mortgage Pass-Through Certificate and hereby authorize(s) the registration
of transfer of such interest to assignee on the Certificate Register of the
Trust Fund.
I (we) further direct the Trustee to issue a new Certificate of a
like Percentage Interest and Class to the above named assignee and deliver such
Certificate to the following address: _________________________________________
______________________________________________________________________________.
Dated:
_____________________________________
Signature by or on behalf of assignor
_____________________________________
Signature Guaranteed
<PAGE>
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for purposes of
distribution:
Distributions shall be made, by wire transfer or otherwise, in
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 S CERTIFICATE
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE
REPRESENTS A "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE
INVESTMENT CONDUIT", AS THOSE TERMS ARE DEFINED, RESPECTIVELY,
IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986
(THE "CODE").
THE FOLLOWING INFORMATION IS PROVIDED SOLELY FOR THE PURPOSES OF
APPLYING THE U.S. FEDERAL INCOME TAX ORIGINAL ISSUE DISCOUNT
("OID") RULES TO THIS CERTIFICATE. THE ISSUE DATE OF THIS
CERTIFICATE IS DECEMBER 22, 1998. BASED ON THE OID REGULATIONS
AND ASSUMING THAT THE MORTGAGE LOANS PREPAY AT __% OF THE
CONSTANT PREPAYMENT RATE (AS DEFINED IN THE PROSPECTUS
SUPPLEMENT UNDER WHICH THIS CERTIFICATE WAS ISSUED), USED SOLELY
FOR THE PURPOSES OF APPLYING THE OID RULES TO THE CERTIFICATES
(THE "PREPAYMENT ASSUMPTION"), THIS CERTIFICATE HAS BEEN ISSUED
WITH NO MORE THAN $________ OF OID PER $100,000 OF INITIAL
NOTIONAL AMOUNT, THE YIELD TO MATURITY IS ____% AND THE AMOUNT
OF OID ATTRIBUTABLE TO THE INITIAL ACCRUAL PERIOD IS NO MORE
THAN $_____ PER $100,000 OF INITIAL NOTIONAL AMOUNT, COMPUTED
UNDER THE EXACT METHOD. NO REPRESENTATION IS MADE THAT THE
MORTGAGE LOANS WILL PREPAY AT A RATE BASED ON THE PREPAYMENT
ASSUMPTION OR AT ANY OTHER RATE.
<TABLE>
<CAPTION>
<S> <C>
Series 1998-NC5, Class S Master Servicer: New Century Mortgage
Corporation
Variable Pass-Through Rate Trustee: Firstar Bank Milwaukee, N.A.
Date of Pooling and Servicing Agreement and Trust Administrator: U.S. Bank National
Cut-off Date: December 1, 1998 Association
First Distribution Date: January 25, 1998 Issue Date: December 22, 1998
No. ____
Aggregate Notional Amount of Class S
Certificates as of the Issue Date:
$_______________
Notional Amount: $_____________________
</TABLE>
<PAGE>
-2-
CALLABLE FLOATING RATE MORTGAGE PASS-THROUGH CERTIFICATE
evidencing a beneficial ownership interest in a Trust Fund (the "Trust Fund")
consisting primarily of a pool of conventional, one- to four-family, first lien
mortgage loans (the "Mortgage Loans") formed and sold by
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST
IN THE DEPOSITOR, THE MASTER SERVICER, THE TRUSTEE, THE TRUST
ADMINISTRATOR OR ANY OF THEIR RESPECTIVE AFFILIATES. NEITHER
THIS CERTIFICATE NOR THE UNDERLYING MORTGAGE LOANS ARE
GUARANTEED BY ANY AGENCY OR INSTRUMENTALITY OF THE UNITED
STATES.
This certifies that ____________________ is the registered owner of
a Percentage Interest (obtained by dividing the Notional Amount of this
Certificate by the aggregate Notional Amount of the Class S Certificates as of
the Issue Date) in that certain beneficial ownership interest evidenced by all
the Class S Certificates in REMIC III created pursuant to a Pooling and
Servicing Agreement, dated as specified above (the "Agreement"), among Salomon
Brothers Mortgage Securities VII, Inc. (hereinafter called the "Depositor,"
which term includes any successor entity under the Agreement), the Master
Servicer, the Trustee and the Trust Administrator, a summary of certain of the
pertinent provisions of which is set forth hereafter. To the extent not defined
herein, the capitalized terms used herein have the meanings assigned in the
Agreement. This Certificate is issued under and is subject to the terms,
provisions and conditions of the Agreement, to which Agreement the Holder of
this Certificate by virtue of the acceptance hereof assents and by which such
Holder is bound.
Pursuant to the terms of the Agreement, distributions will be made
on the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (a "Distribution Date"), commencing on the
First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the last Business Day of the month immediately
preceding the month of such distribution (the "Record Date"), in an amount equal
to the product of the Percentage Interest evidenced by this Certificate and the
amount required to be distributed to the Holders of Class S Certificates on such
Distribution Date pursuant to the Agreement.
All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by the Trust Administrator on behalf
of the Trustee by wire transfer in immediately available funds to the account of
the Person entitled thereto if such Person shall have so notified the Trust
Administrator in writing at least five Business Days prior to the Record Date
immediately prior to such Distribution Date and is the registered owner of Class
S Certificates, the aggregate initial Notional Amount of which is in excess of
the lesser of (i) $5,000,000 or (ii) two-thirds of the aggregate initial
Notional Amount of the
<PAGE>
-3-
Class S Certificates, or otherwise by check mailed by first class mail to the
address of the Person entitled thereto, as such name and address shall appear on
the Certificate Register. Notwithstanding the above, the final distribution on
this Certificate will be made after due notice by the Trust Administrator of the
pendency of such distribution and only upon the presentation and surrender of
this Certificate at the office or agency appointed by the Trust Administrator
for that purpose as provided in the Agreement.
This Certificate is one of a duly authorized issue of Certificates
designated as Callable Floating Rate Mortgage Pass-Through Certificates of the
Series specified on the face hereof (hereinafter called the "Certificates") and
representing a Percentage Interest in the Class of Certificates specified on the
face hereof equal to the denomination specified on the face hereof divided by
the aggregate Notional Amount of the Class of Certificates specified on the face
hereof.
The Certificates are limited in right of payment to certain
collections and recoveries respecting the Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Account and the Distribution Account
may be made from time to time for purposes other than distributions to Holders
of the Certificates, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Mortgage Loans.
The Agreement permits, with certain exceptions and conditions
provided therein, the amendment thereof and the modification of the rights and
obligations of the Depositor, the Master Servicer, the Trustee, the Trust
Administrator and the rights of the Certificateholders under the Agreement at
any time by the Depositor, the Master Servicer, the Trustee and the Trust
Administrator, with the consent of the Holders of Certificates entitled to at
least 66% of the Voting Rights and the Certificate Insurer. Any such consent by
the Holder of this Certificate shall be conclusive and binding on such Holder
and upon all future Holders of this Certificate and of any Certificate issued
upon the transfer hereof or in exchange herefor or in lieu hereof whether or not
notation of such consent is made upon this Certificate. The Agreement also
permits the amendment thereof, in certain limited circumstances, without the
consent of the Holders of any of the Certificates but with the consent of the
Certificate Insurer.
As provided in the Agreement and subject to certain limitations set
forth therein, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies appointed by the Trust Administrator as
provided in the Agreement, duly endorsed by, or accompanied by an assignment in
the form below or other written instrument of transfer in form satisfactory to
the Trust Administrator and the Certificate Registrar duly executed by, the
Holder hereof or such Holder's attorney duly authorized in writing, and
thereupon one or more new Certificates of the same Class in authorized
denominations evidencing the same aggregate Percentage Interest will be issued
to the designated transferee or transferees.
<PAGE>
-4-
The Certificates are issuable in fully registered form only without
coupons in Classes and denominations representing Percentage Interests specified
in the Agreement. As provided in the Agreement and subject to certain
limitations set forth therein, Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.
No transfer of this Certificate shall be made unless the transfer is
made pursuant to an effective registration statement under the Securities Act of
1933, as amended (the "1933 Act"), and an effective registration or
qualification under applicable state securities laws, or is made in a
transaction that does not require such registration or qualification. In the
event that such a transfer of this Certificate is to be made without
registration or qualification, the Trust Administrator shall require receipt of
(i) if such transfer is purportedly being made in reliance upon Rule 144A under
the 1933 Act, written certifications from the Holder of the Certificate desiring
to effect the transfer, and from such Holder's prospective transferee,
substantially in the forms attached to the Agreement as Exhibit F-1, and (ii) in
all other cases, an Opinion of Counsel satisfactory to it that such transfer may
be made without such registration or qualification (which Opinion of Counsel
shall not be an expense of the Trust Fund or of the Depositor, the Trustee, the
Trust Administrator or the Master Servicer in their respective capacities as
such), together with copies of the written certification(s) of the Holder of the
Certificate desiring to effect the transfer and/or such Holder's prospective
transferee upon which such Opinion of Counsel is based. None of the Depositor,
the Trustee or the Trust Administrator is obligated to register or qualify the
Class of Certificates specified on the face hereof under the 1933 Act or any
other securities law or to take any action not otherwise required under the
Agreement to permit the transfer of such Certificates without registration or
qualification. Any Holder desiring to effect a transfer of this Certificate
shall be required to indemnify the Trustee, the Trust Administrator, the
Depositor and the Master Servicer against any liability that may result if the
transfer is not so exempt or is not made in accordance with such federal and
state laws.
No transfer of this Certificate to a Plan subject to ERISA or
Section 4975 of the Code, any Person acting, directly or indirectly, on behalf
of any such Plan or any Person using "Plan Assets" to acquire this Certificate
shall be made except in accordance with Section 5.02(c) of the Agreement.
No service charge will be made for any such registration of transfer
or exchange of Certificates, but the Certificate Registrar may require payment
of a sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any transfer or exchange of Certificates.
The Depositor, the Master Servicer, the Trustee, the Trust
Administrator and any agent of the Depositor, the Master Servicer, the Trustee,
the Trust Administrator may treat the Person in whose name this Certificate is
registered as the owner hereof for all purposes, and none of the Depositor, the
Master Servicer, the Trustee, the Trust Administrator nor any such agent shall
be affected by notice to the contrary.
<PAGE>
-5-
The obligations created by the Agreement and the Trust Fund created
thereby shall terminate upon payment to the Certificateholders of all amounts
held by the Trust Administrator on behalf of the Trustee and required to be paid
to them pursuant to the Agreement following the earlier of (i) the final payment
or other liquidation (or any advance with respect thereto) of the last Mortgage
Loan remaining in REMIC I and (ii) the purchase by the party designated in the
Agreement at a price determined as provided in the Agreement from REMIC I of all
the Mortgage Loans and all property acquired in respect of such Mortgage Loans.
The Agreement permits, but does not require, the party designated in the
Agreement to purchase from REMIC I all the Mortgage Loans and all property
acquired in respect of any Mortgage Loan at a price determined as provided in
the Agreement. The exercise of such right will effect early retirement of the
Certificates; however, such right to purchase is subject to the aggregate
principal balance of the Mortgage Loans at the time of purchase is reduced to
less than 10%,in the event the Majority Class CE Certificateholder is the
Terminator, or 5%, in the event the Master Servicer or the Certificate Insurer
is the Terminator. Furthermore, the holder of the Call Class can effect early
retirement of the Certificates in accordance with the terms set forth in the
Agreement.
The recitals contained herein shall be taken as statements of the
Depositor and neither the Trustee nor the Trust Administrator assumes
responsibility for their correctness.
Unless the certificate of authentication hereon has been executed by
the Trust Administrator, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
<PAGE>
IN WITNESS WHEREOF, the Trust Administrator has caused this
Certificate to be duly executed.
Dated: December 22, 1998
U.S. BANK NATIONAL ASSOCIATION
as Trust Administrator
By:_______________________________
Authorized Officer
CERTIFICATE OF AUTHENTICATION
-----------------------------
This is one of the Class S Certificates referred to in the
within-mentioned Agreement.
U.S. BANK NATIONAL ASSOCIATION
as Trust Administrator
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)
the Percentage Interest evidenced by the within Callable Floating Rate Mortgage
Pass Through Certificate and hereby authorize(s) the registration of transfer of
such interest to assignee on the Certificate Register of the Trust Fund.
I (we) further direct the Trustee to issue a new Certificate of a
like Percentage Interest and Class to the above named assignee and deliver such
Certificate to the following address: _________________________________________
______________________________________________________________________________.
Dated:
_____________________________________
Signature by or on behalf of assignor
_____________________________________
Signature Guaranteed
<PAGE>
DISTRIBUTION INSTRUCTIONS
-------------------------
The assignee should include the following for purposes of
distribution:
Distributions shall be made, by wire transfer or otherwise, in
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-5
-----------
FORM OF CLASS R-I CERTIFICATE
THIS CERTIFICATE MAY NOT BE TRANSFERRED TO A NON-UNITED STATES
PERSON.
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS
A "RESIDUAL INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT
CONDUIT" ("REMIC"), AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN
SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986 (THE
"CODE").
ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CERTIFICATE
MAY BE MADE ONLY IN ACCORDANCE WITH THE PROVISIONS OF SECTION
5.02 OF THE POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN.
NO TRANSFER OF THIS CERTIFICATE TO AN EMPLOYEE BENEFIT PLAN OR
OTHER RETIREMENT ARRANGEMENT SUBJECT TO THE EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974, AS AMENDED, OR THE CODE WILL BE
REGISTERED EXCEPT IN COMPLIANCE WITH THE PROCEDURES DESCRIBED
HEREIN.
ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CERTIFICATE
MAY BE MADE ONLY IF THE PROPOSED TRANSFEREE PROVIDES (I) AN
AFFIDAVIT TO THE TRUSTEE THAT (A) SUCH TRANSFEREE IS NOT (1) THE
UNITED STATES OR ANY POSSESSION THEREOF, ANY STATE OR POLITICAL
SUBDIVISION THEREOF, ANY FOREIGN GOVERNMENT, ANY INTERNATIONAL
ORGANIZATION, OR ANY AGENCY OR INSTRUMENTALITY OF ANY OF THE
FOREGOING, (2) ANY ORGANIZATION (OTHER THAN A COOPERATIVE
DESCRIBED IN SECTION 521 OF THE CODE) THAT IS EXEMPT FROM THE
TAX IMPOSED BY CHAPTER 1 OF THE CODE UNLESS SUCH ORGANIZATION IS
SUBJECT TO THE TAX IMPOSED BY SECTION 511 OF THE CODE, (3) ANY
ORGANIZATION DESCRIBED IN SECTION 1381(A)(2)(C) OF THE CODE (ANY
SUCH PERSON DESCRIBED IN THE FOREGOING CLAUSES (1), (2) OR (3)
SHALL HEREINAFTER BE REFERRED TO AS A "DISQUALIFIED
ORGANIZATION") OR (4) AN AGENT OF A DISQUALIFIED ORGANIZATION
AND (B) NO PURPOSE OF SUCH TRANSFER IS TO IMPEDE THE ASSESSMENT
OR COLLECTION OF TAX, AND (II) SUCH TRANSFEREE SATISFIES CERTAIN
ADDITIONAL CONDITIONS RELATING TO THE FINANCIAL CONDITION OF THE
PROPOSED TRANSFEREE. NOTWITHSTANDING THE REGISTRATION IN THE
CERTIFICATE REGISTER OF ANY
<PAGE>
TRANSFER, SALE OR OTHER DISPOSITION OF THIS CERTIFICATE TO A
DISQUALIFIED ORGANIZATION OR AN AGENT OF A DISQUALIFIED
ORGANIZATION, SUCH REGISTRATION SHALL BE DEEMED TO BE OF NO
LEGAL FORCE OR EFFECT WHATSOEVER AND SUCH PERSON SHALL NOT BE
DEEMED TO BE A CERTIFICATEHOLDER FOR ANY PURPOSE HEREUNDER,
INCLUDING, BUT NOT LIMITED TO, THE RECEIPT OF DISTRIBUTIONS ON
THIS CERTIFICATE. EACH HOLDER OF THIS CERTIFICATE BY ACCEPTANCE
HEREOF SHALL BE DEEMED TO HAVE CONSENTED TO THE PROVISIONS OF
THIS PARAGRAPH AND THE PROVISIONS OF SECTION 5.02(D) OF THE
POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN. ANY PERSON
THAT IS A DISQUALIFIED ORGANIZATION IS PROHIBITED FROM ACQUIRING
BENEFICIAL OWNERSHIP OF THIS CERTIFICATE.
<TABLE>
<CAPTION>
<S> <C>
Series 1998-NC5, Class R-I Aggregate Percentage Interest of the Class
R-I Certificates as of the Issue Date:
Variable Pass-Through Rate 100.00%
Date of Pooling and Servicing Agreement Master Servicer: New Century Mortgage
and Cut-off Date: December 1, 1998 Corporation
First Distribution Date: Trustee: Firstar Bank Milwaukee, N.A.
January 25, 1999
Trust Administrator: U.S. Bank
No. ___ Milwaukee, N.A.
Issue Date: December 22, 1998
</TABLE>
<PAGE>
CALLABLE FLOATING RATE MORTGAGE PASS-THROUGH CERTIFICATE
evidencing a beneficial ownership interest in a Trust Fund (the "Trust Fund")
consisting primarily of a pool of conventional one- to four-family first
mortgage loans (the "Mortgage Loans") formed and sold by
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST
IN SALOMON BROTHERS MORTGAGE SECURITIES VII, INC., THE MASTER
SERVICER, THE TRUSTEE, THE TRUST ADMINISTRATOR OR ANY OF THEIR
RESPECTIVE AFFILIATES. NEITHER THIS CERTIFICATE NOR THE
UNDERLYING MORTGAGE LOANS ARE GUARANTEED BY ANY AGENCY OR
INSTRUMENTALITY OF THE UNITED STATES.
This certifies that _____________ is the registered owner of a
Percentage Interest (obtained by dividing the denomination of this Certificate
by the aggregate Certificate Principal Balance of the Class R-I Certificates as
of the Issue Date) in that certain beneficial ownership interest evidenced by
all the Class R-I Certificates in REMIC I created pursuant to a Pooling and
Servicing Agreement, dated as specified above (the "Agreement"), among Salomon
Brothers Mortgage Securities VII, Inc. (hereinafter called the "Depositor,"
which term includes any successor entity under the Agreement), the Master
Servicer, the Trustee and the Trust Administrator, a summary of certain of the
pertinent provisions of which is set forth hereafter. To the extent not defined
herein, the capitalized terms used herein have the meanings assigned in the
Agreement. This Certificate is issued under and is subject to the terms,
provisions and conditions of the Agreement, to which Agreement the Holder of
this Certificate by virtue of the acceptance hereof assents and by which such
Holder is bound.
Pursuant to the terms of the Agreement, distributions will be made
on the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (a "Distribution Date"), commencing on the
First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the last Business Day of the month immediately
preceding the month of such distribution (the "Record Date"), in an amount equal
to the product of the Percentage Interest evidenced by this Certificate and the
amount required to be distributed to the Holders of Class R-I Certificates on
such Distribution Date pursuant to the Agreement.
All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by the Trust Administrator on behalf
of the Trustee by wire transfer in immediately available funds to the account of
the Person entitled thereto if such Person shall have so notified the Trust
Administrator in writing at least five Business Days prior to the Record Date
immediately prior to such Distribution Date and is the registered owner of Class
R-I Certificates the aggregate initial Certificate Principal Balance of which is
in excess of the lesser of (i) $5,000,000 or (ii) two-thirds of the aggregate
initial Certificate Principal Balance of the Class R-I Certificates, or
otherwise by check mailed by first class mail
<PAGE>
-4-
to the address of the Person entitled thereto, as such name and address shall
appear on the Certificate Register. Notwithstanding the above, the final
distribution on this Certificate will be made after due notice by the Trust
Administrator of the pendency of such distribution and only upon presentation
and surrender of this Certificate at the office or agency appointed by the Trust
Administrator for that purpose as provided in the Agreement.
This Certificate is one of a duly authorized issue of Certificates
designated as Callable Floating Rate Mortgage Pass-Through Certificates of the
Series specified on the face hereof (herein called the "Certificates") and
representing a Percentage Interest in the Class of Certificates specified on the
face hereof equal to the denomination specified on the face hereof divided by
the aggregate Certificate Principal Balance of the Class of Certificates
specified on the face hereof.
The Certificates are limited in right of payment to certain
collections and recoveries respecting the Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Account and the Distribution Account
may be made from time to time for purposes other than distributions to
Certificateholders, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Mortgage Loans.
The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Depositor, the Master Servicer, the Trustee, the Trust Administrator and the
rights of the Certificateholders under the Agreement at any time by the
Depositor, the Master Servicer, the Trustee, the Trust Administrator and the
Certificate Insurer with the consent of the Holders of Certificates entitled to
at least 66% of the Voting Rights and the Certificate Insurer. Any such consent
by the Holder of this Certificate shall be conclusive and binding on such Holder
and upon all future Holders of this Certificate and of any Certificate issued
upon the transfer hereof or in exchange herefor or in lieu hereof whether or not
notation of such consent is made upon this Certificate. The Agreement also
permits the amendment thereof, in certain limited circumstances, without the
consent of the Holders of any of the Certificates but with the consent of the
Certificate Insurer.
As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies appointed by the Trust Administrator as
provided in the Agreement, duly endorsed by, or accompanied by an assignment in
the form below or other written instrument of transfer in form satisfactory to
the Trust Administrator duly executed by, the Holder hereof or such Holder's
attorney duly authorized in writing, and thereupon one or more new Certificates
of the same Class in authorized denominations evidencing the same aggregate
Percentage Interest will be issued to the designated transferee or transferees.
The Certificates are issuable in fully registered form only without
coupons in Classes and denominations representing Percentage Interests specified
in the Agreement. As provided in the Agreement and subject to certain
limitations therein set forth, Certificates are
<PAGE>
-5-
exchangeable for new Certificates of the same Class in authorized denominations
evidencing the same aggregate Percentage Interest, as requested by the Holder
surrendering the same.
No transfer of this Certificate shall be made unless the transfer is
made pursuant to an effective registration statement under the Securities Act of
1933, as amended (the "1933 Act"), and an effective registration or
qualification under applicable state securities laws, or is made in a
transaction that does not require such registration or qualification. In the
event that such a transfer of this Certificate is to be made without
registration or qualification, the Trust Administrator shall require receipt of
(i) if such transfer is purportedly being made in reliance upon Rule 144A under
the 1933 Act, written certifications from the Holder of the Certificate desiring
to effect the transfer, and from such Holder's prospective transferee,
substantially in the forms attached to the Agreement as Exhibit F-1, and (ii) in
all other cases, an Opinion of Counsel satisfactory to it that such transfer may
be made without such registration or qualification (which Opinion of Counsel
shall not be an expense of the Trust Fund or of the Depositor, the Trustee, the
Trust Administrator or the Master Servicer in their respective capacities as
such), together with copies of the written certification(s) of the Holder of the
Certificate desiring to effect the transfer and/or such Holder's prospective
transferee upon which such Opinion of Counsel is based. None of the Depositor,
the Trustee or the Trust Administrator is obligated to register or qualify the
Class of Certificates specified on the face hereof under the 1933 Act or any
other securities law or to take any action not otherwise required under the
Agreement to permit the transfer of such Certificates without registration or
qualification. Any Holder desiring to effect a transfer of this Certificate
shall be required to indemnify the Trustee, the Trust Administrator, the
Depositor and the Master Servicer against any liability that may result if the
transfer is not so exempt or is not made in accordance with such federal and
state laws.
No transfer of this Certificate to a Plan subject to ERISA or
Section 4975 of the Code, any Person acting, directly or indirectly, on behalf
of any such Plan or any Person using "Plan Assets" to acquire this Certificate
shall be made except in accordance with Section 5.02(c) of the Agreement.
Prior to registration of any transfer, sale or other disposition of
this Certificate, the proposed transferee shall provide to the Trustee (i) an
affidavit to the effect that such transferee is any Person other than a
Disqualified Organization or the agent (including a broker, nominee or
middleman) of a Disqualified Organization, and (ii) a certificate that
acknowledges that (A) the Class R-I Certificates have been designated as a
residual interest in a REMIC, (B) it will include in its income a PRO RATA share
of the net income of the Trust Fund and that such income may be an "excess
inclusion," as defined in the Code, that, with certain exceptions, cannot be
offset by other losses or benefits from any tax exemption, and (C) it expects to
have the financial means to satisfy all of its tax obligations including those
relating to holding the Class R-I Certificates. Notwithstanding the registration
in the Certificate
<PAGE>
-6-
Register of any transfer, sale or other disposition of this Certificate to a
Disqualified Organization or an agent (including a broker, nominee or middleman)
of a Disqualified Organization, such registration shall be deemed to be of no
legal force or effect whatsoever and such Person shall not be deemed to be a
Certificateholder for any purpose, including, but not limited to, the receipt of
distributions in respect of this Certificate.
The Holder of this Certificate, by its acceptance hereof, shall be
deemed to have consented to the provisions of Section 5.02 of the Agreement and
to any amendment of the Agreement deemed necessary by counsel of the Depositor
to ensure that the transfer of this Certificate to any Person other than a
Permitted Transferee or any other Person will not cause the Trust Fund to cease
to qualify as a REMIC or cause the imposition of a tax upon the REMIC.
No service charge will be made for any such registration of transfer
or exchange of Certificates, but the Trust Administrator may require payment of
a sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any transfer or exchange of Certificates.
The Depositor, the Master Servicer, the Trustee, the Trust
Administrator and the Certificate Insurer and any agent of the Depositor, any
Master Servicer, the Trustee, the Trust Administrator or the Certificate Insurer
may treat the Person in whose name this Certificate is registered as the owner
hereof for all purposes, and none of the Depositor, the Master Servicer, the
Trustee, the Trust Administrator, the Certificate Insurer nor any such agent
shall be affected by notice to the contrary.
The obligations created by the Agreement and the Trust Fund created
thereby shall terminate upon payment to the Certificateholders of all amounts
held by the Trust Administrator on behalf of the Trustee and required to be paid
to them pursuant to the Agreement following the earlier of (i) the final payment
or other liquidation (or any advance with respect thereto) of the last Mortgage
Loan remaining in REMIC I and (ii) the purchase by the party designated in the
Agreement at a price determined as provided in the Agreement from REMIC I of all
the Mortgage Loans and all property acquired in respect of such Mortgage Loans.
The Agreement permits, but does not require, the party designated in the
Agreement to purchase from REMIC I all the Mortgage Loans and all property
acquired in respect of any Mortgage Loan at a price determined as provided in
the Agreement. The exercise of such right will effect early retirement of the
Certificates; however, such right to purchase is subject to the aggregate
principal balance of the Mortgage Loans at the time of purchase is reduced to
less than 10%,in the event the Majority Class CE Certificateholder is the
Terminator, or 5%, in the event the Master Servicer or the Certificate Insurer
is the Terminator. Furthermore, the holder of the Call Class can effect early
retirement of the Certificates in accordance with the terms set forth in the
Agreement.
The recitals contained herein shall be taken as statements of the
Depositor and neither the Trustee nor the Trust Administrator assumes
responsibility for their correctness.
<PAGE>
-7-
Unless the certificate of authentication hereon has been executed by
the Trust Administrator, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
<PAGE>
IN WITNESS WHEREOF, the Trust Administrator has caused this
Certificate to be duly executed.
Dated: December 22, 1998
U.S. BANK NATIONAL ASSOCIATION
as Trust Administrator
By:_______________________________
Authorized Officer
CERTIFICATE OF AUTHENTICATION
-----------------------------
This is one of the Class R-I Certificates referred to in the
within-mentioned Agreement.
U.S. BANK NATIONAL ASSOCIATION
as Trust Administrator
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 Callable Floating
Rate Mortgage Pass-Through Certificate and hereby authorize(s) the registration
of transfer of such interest to assignee on the Certificate Register of the
Trust Fund.
I (we) further direct the Trustee to issue a new Certificate of a
like Percentage Interest and Class to the above named assignee and deliver such
Certificate to the following address: _________________________________________
______________________________________________________________________________.
Dated:
_____________________________________
Signature by or on behalf of assignor
_____________________________________
Signature Guaranteed
<PAGE>
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for purposes of
distribution:
Distributions shall be made, by wire transfer or otherwise, in
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-6
-----------
FORM OF CLASS R-II CERTIFICATE
THIS CERTIFICATE MAY NOT BE TRANSFERRED TO A NON-UNITED STATES
PERSON.
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS
A "RESIDUAL INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT
CONDUIT" ("REMIC"), AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN
SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986 (THE
"CODE").
ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CERTIFICATE
MAY BE MADE ONLY IN ACCORDANCE WITH THE PROVISIONS OF SECTION
5.02 OF THE POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN.
NO TRANSFER OF THIS CERTIFICATE TO AN EMPLOYEE BENEFIT PLAN OR
OTHER RETIREMENT ARRANGEMENT SUBJECT TO THE EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974, AS AMENDED, OR THE CODE WILL BE
REGISTERED EXCEPT IN COMPLIANCE WITH THE PROCEDURES DESCRIBED
HEREIN.
ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CERTIFICATE
MAY BE MADE ONLY IF THE PROPOSED TRANSFEREE PROVIDES (I) AN
AFFIDAVIT TO THE TRUSTEE THAT (A) SUCH TRANSFEREE IS NOT (1) THE
UNITED STATES OR ANY POSSESSION THEREOF, ANY STATE OR POLITICAL
SUBDIVISION THEREOF, ANY FOREIGN GOVERNMENT, ANY INTERNATIONAL
ORGANIZATION, OR ANY AGENCY OR INSTRUMENTALITY OF ANY OF THE
FOREGOING, (2) ANY ORGANIZATION (OTHER THAN A COOPERATIVE
DESCRIBED IN SECTION 521 OF THE CODE) THAT IS EXEMPT FROM THE
TAX IMPOSED BY CHAPTER 1 OF THE CODE UNLESS SUCH ORGANIZATION IS
SUBJECT TO THE TAX IMPOSED BY SECTION 511 OF THE CODE, (3) ANY
ORGANIZATION DESCRIBED IN SECTION 1381(A)(2)(C) OF THE CODE (ANY
SUCH PERSON DESCRIBED IN THE FOREGOING CLAUSES (1), (2) OR (3)
SHALL HEREINAFTER BE REFERRED TO AS A "DISQUALIFIED
ORGANIZATION") OR (4) AN AGENT OF A DISQUALIFIED ORGANIZATION
AND (B) NO PURPOSE OF SUCH TRANSFER IS TO IMPEDE THE ASSESSMENT
OR COLLECTION OF TAX, AND (II) SUCH TRANSFEREE SATISFIES CERTAIN
ADDITIONAL CONDITIONS RELATING TO THE FINANCIAL CONDITION OF THE
PROPOSED TRANSFEREE. NOTWITHSTANDING THE REGISTRATION IN THE
CERTIFICATE REGISTER OF ANY
<PAGE>
TRANSFER, SALE OR OTHER DISPOSITION OF THIS CERTIFICATE TO A
DISQUALIFIED ORGANIZATION OR AN AGENT OF A DISQUALIFIED
ORGANIZATION, SUCH REGISTRATION SHALL BE DEEMED TO BE OF NO
LEGAL FORCE OR EFFECT WHATSOEVER AND SUCH PERSON SHALL NOT BE
DEEMED TO BE A CERTIFICATEHOLDER FOR ANY PURPOSE HEREUNDER,
INCLUDING, BUT NOT LIMITED TO, THE RECEIPT OF DISTRIBUTIONS ON
THIS CERTIFICATE. EACH HOLDER OF THIS CERTIFICATE BY ACCEPTANCE
HEREOF SHALL BE DEEMED TO HAVE CONSENTED TO THE PROVISIONS OF
THIS PARAGRAPH AND THE PROVISIONS OF SECTION 5.02(D) OF THE
POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN. ANY PERSON
THAT IS A DISQUALIFIED ORGANIZATION IS PROHIBITED FROM ACQUIRING
BENEFICIAL OWNERSHIP OF THIS CERTIFICATE.
<TABLE>
<CAPTION>
<S> <C>
Series 1998-NC5, Class R-II Aggregate Percentage Interest of the Class
R-II Certificates as of the Issue Date
Variable Pass-Through Rate 100.00%
Date of Pooling and Servicing Agreement Master Servicer: New Century Mortgage
and Cut-off Date: December 1, 1998 Corporation
First Distribution Date: Trustee: Firstar Bank Milwaukee, N.A.
January 25, 1999
Trust Administrator: U.S. Bank
No. ___ Milwaukee, N.A.
Issue Date: December 22, 1998
</TABLE>
<PAGE>
CALLABLE FLOATING RATE MORTGAGE PASS-THROUGH CERTIFICATE
evidencing a beneficial ownership interest in a Trust Fund (the "Trust Fund")
consisting primarily of a pool of conventional one- to four-family first
mortgage loans (the "Mortgage Loans") formed and sold by
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST
IN SALOMON BROTHERS MORTGAGE SECURITIES VII, INC., THE MASTER
SERVICER, THE TRUSTEE, THE TRUST ADMINISTRATOR OR ANY OF THEIR
RESPECTIVE AFFILIATES. NEITHER THIS CERTIFICATE NOR THE
UNDERLYING MORTGAGE LOANS ARE GUARANTEED BY ANY AGENCY OR
INSTRUMENTALITY OF THE UNITED STATES.
This certifies that _____________ is the registered owner of a
Percentage Interest (obtained by dividing the denomination of this Certificate
by the aggregate Certificate Principal Balance of the Class R-II Certificates as
of the Issue Date) in that certain beneficial ownership interest evidenced by
all the Class R-II Certificates in REMIC I created pursuant to a Pooling and
Servicing Agreement, dated as specified above (the "Agreement"), among Salomon
Brothers Mortgage Securities VII, Inc. (hereinafter called the "Depositor,"
which term includes any successor entity under the Agreement), the Master
Servicer, the Trustee and the Trust Administrator, a summary of certain of the
pertinent provisions of which is set forth hereafter. To the extent not defined
herein, the capitalized terms used herein have the meanings assigned in the
Agreement. This Certificate is issued under and is subject to the terms,
provisions and conditions of the Agreement, to which Agreement the Holder of
this Certificate by virtue of the acceptance hereof assents and by which such
Holder is bound.
Pursuant to the terms of the Agreement, distributions will be made
on the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (a "Distribution Date"), commencing on the
First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the last Business Day of the month immediately
preceding the month of such distribution (the "Record Date"), in an amount equal
to the product of the Percentage Interest evidenced by this Certificate and the
amount required to be distributed to the Holders of Class R-II Certificates on
such Distribution Date pursuant to the Agreement.
All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by the Trust Administrator on behalf
of the Trustee by wire transfer in immediately available funds to the account of
the Person entitled thereto if such Person shall have so notified the Trust
Administrator in writing at least five Business Days prior to the Record Date
immediately prior to such Distribution Date and is the registered owner of Class
R-II Certificates the aggregate initial Certificate Principal Balance of which
is in excess of the lesser of (i) $5,000,000 or (ii) two-thirds of the aggregate
initial Certificate Principal Balance of the Class R-II Certificates, or
otherwise by check mailed by first class
<PAGE>
-4-
mail to the address of the Person entitled thereto, as such name and address
shall appear on the Certificate Register. Notwithstanding the above, the final
distribution on this Certificate will be made after due notice by the Trust
Administrator of the pendency of such distribution and only upon presentation
and surrender of this Certificate at the office or agency appointed by the Trust
Administrator for that purpose as provided in the Agreement.
This Certificate is one of a duly authorized issue of Certificates
designated as Callable Floating Rate Mortgage Pass-Through Certificates of the
Series specified on the face hereof (herein called the "Certificates") and
representing a Percentage Interest in the Class of Certificates specified on the
face hereof equal to the denomination specified on the face hereof divided by
the aggregate Certificate Principal Balance of the Class of Certificates
specified on the face hereof.
The Certificates are limited in right of payment to certain
collections and recoveries respecting the Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Account and the Distribution Account
may be made from time to time for purposes other than distributions to
Certificateholders, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Mortgage Loans.
The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Depositor, the Master Servicer, the Trustee, the Trust Administrator and the
rights of the Certificateholders under the Agreement at any time by the
Depositor, the Master Servicer, the Trustee, the Trust Administrator and the
Certificate Insurer with the consent of the Holders of Certificates entitled to
at least 66% of the Voting Rights and the Certificate Insurer. Any such consent
by the Holder of this Certificate shall be conclusive and binding on such Holder
and upon all future Holders of this Certificate and of any Certificate issued
upon the transfer hereof or in exchange herefor or in lieu hereof whether or not
notation of such consent is made upon this Certificate. The Agreement also
permits the amendment thereof, in certain limited circumstances, without the
consent of the Holders of any of the Certificates but with the consent of the
Certificate Insurer.
As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies appointed by the Trust Administrator as
provided in the Agreement, duly endorsed by, or accompanied by an assignment in
the form below or other written instrument of transfer in form satisfactory to
the Trust Administrator duly executed by, the Holder hereof or such Holder's
attorney duly authorized in writing, and thereupon one or more new Certificates
of the same Class in authorized denominations evidencing the same aggregate
Percentage Interest will be issued to the designated transferee or transferees.
<PAGE>
-5-
The Certificates are issuable in fully registered form only without
coupons in Classes and denominations representing Percentage Interests specified
in the Agreement. As provided in the Agreement and subject to certain
limitations therein set forth, Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.
No transfer of this Certificate shall be made unless the transfer is
made pursuant to an effective registration statement under the Securities Act of
1933, as amended (the "1933 Act"), and an effective registration or
qualification under applicable state securities laws, or is made in a
transaction that does not require such registration or qualification. In the
event that such a transfer of this Certificate is to be made without
registration or qualification, the Trust Administrator shall require receipt of
(i) if such transfer is purportedly being made in reliance upon Rule 144A under
the 1933 Act, written certifications from the Holder of the Certificate desiring
to effect the transfer, and from such Holder's prospective transferee,
substantially in the forms attached to the Agreement as Exhibit F-1, and (ii) in
all other cases, an Opinion of Counsel satisfactory to it that such transfer may
be made without such registration or qualification (which Opinion of Counsel
shall not be an expense of the Trust Fund or of the Depositor, the Trustee, the
Trust Administrator or the Master Servicer in their respective capacities as
such), together with copies of the written certification(s) of the Holder of the
Certificate desiring to effect the transfer and/or such Holder's prospective
transferee upon which such Opinion of Counsel is based. None of the Depositor,
the Trustee or the Trust Administrator is obligated to register or qualify the
Class of Certificates specified on the face hereof under the 1933 Act or any
other securities law or to take any action not otherwise required under the
Agreement to permit the transfer of such Certificates without registration or
qualification. Any Holder desiring to effect a transfer of this Certificate
shall be required to indemnify the Trustee, the Trust Administrator, the
Depositor and the Master Servicer against any liability that may result if the
transfer is not so exempt or is not made in accordance with such federal and
state laws.
No transfer of this Certificate to a Plan subject to ERISA or
Section 4975 of the Code, any Person acting, directly or indirectly, on behalf
of any such Plan or any Person using "Plan Assets" to acquire this Certificate
shall be made except in accordance with Section 5.02(c) of the Agreement.
Prior to registration of any transfer, sale or other disposition of
this Certificate, the proposed transferee shall provide to the Trustee (i) an
affidavit to the effect that such transferee is any Person other than a
Disqualified Organization or the agent (including a broker, nominee or
middleman) of a Disqualified Organization, and (ii) a certificate that
acknowledges that (A) the Class R-II Certificates have been designated as a
residual interest in a REMIC, (B) it will include in its income a PRO RATA share
of the net income of the Trust Fund and that such income may be an "excess
inclusion," as defined in the Code, that, with certain exceptions, cannot be
offset by other losses or benefits from any tax exemption, and (C) it expects to
have the financial means to satisfy all of its tax obligations including those
relating to holding the Class R-II Certificates. Notwithstanding the
registration in the Certificate
<PAGE>
-6-
Register of any transfer, sale or other disposition of this Certificate to a
Disqualified Organization or an agent (including a broker, nominee or middleman)
of a Disqualified Organization, such registration shall be deemed to be of no
legal force or effect whatsoever and such Person shall not be deemed to be a
Certificateholder for any purpose, including, but not limited to, the receipt of
distributions in respect of this Certificate.
The Holder of this Certificate, by its acceptance hereof, shall be
deemed to have consented to the provisions of Section 5.02 of the Agreement and
to any amendment of the Agreement deemed necessary by counsel of the Depositor
to ensure that the transfer of this Certificate to any Person other than a
Permitted Transferee or any other Person will not cause the Trust Fund to cease
to qualify as a REMIC or cause the imposition of a tax upon the REMIC.
No service charge will be made for any such registration of transfer
or exchange of Certificates, but the Trust Administrator may require payment of
a sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any transfer or exchange of Certificates.
The Depositor, the Master Servicer, the Trustee, the Trust
Administrator and the Certificate Insurer and any agent of the Depositor, any
Master Servicer, the Trustee, the Trust Administrator or the Certificate Insurer
may treat the Person in whose name this Certificate is registered as the owner
hereof for all purposes, and none of the Depositor, the Master Servicer, the
Trustee, the Trust Administrator, the Certificate Insurer nor any such agent
shall be affected by notice to the contrary.
The obligations created by the Agreement and the Trust Fund created
thereby shall terminate upon payment to the Certificateholders of all amounts
held by the Trust Administrator on behalf of the Trustee and required to be paid
to them pursuant to the Agreement following the earlier of (i) the final payment
or other liquidation (or any advance with respect thereto) of the last Mortgage
Loan remaining in REMIC I and (ii) the purchase by the party designated in the
Agreement at a price determined as provided in the Agreement from REMIC I of all
the Mortgage Loans and all property acquired in respect of such Mortgage Loans.
The Agreement permits, but does not require, the party designated in the
Agreement to purchase from REMIC I all the Mortgage Loans and all property
acquired in respect of any Mortgage Loan at a price determined as provided in
the Agreement. The exercise of such right will effect early retirement of the
Certificates; however, such right to purchase is subject to the aggregate
principal balance of the Mortgage Loans at the time of purchase is reduced to
less than 10%,in the event the Majority Class CE Certificateholder is the
Terminator, or 5%, in the event the Master Servicer or the Certificate Insurer
is the Terminator. Furthermore, the holder of the Call Class can effect early
retirement of the Certificates in accordance with the terms set forth in the
Agreement.
The recitals contained herein shall be taken as statements of the
Depositor and neither the Trustee nor the Trust Administrator assumes
responsibility for their correctness.
<PAGE>
-7-
Unless the certificate of authentication hereon has been executed by
the Trust Administrator, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
<PAGE>
IN WITNESS WHEREOF, the Trust Administrator has caused this
Certificate to be duly executed.
Dated: December 22, 1998
U.S. BANK NATIONAL ASSOCIATION
as Trust Administrator
By:_______________________________
Authorized Officer
CERTIFICATE OF AUTHENTICATION
-----------------------------
This is one of the Class R-II Certificates referred to in the
within-mentioned Agreement.
U.S. BANK NATIONAL ASSOCIATION
as Trust Administrator
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 Callable Floating
Rate Mortgage Pass-Through Certificate and hereby authorize(s) the registration
of transfer of such interest to assignee on the Certificate Register of the
Trust Fund.
I (we) further direct the Trustee to issue a new Certificate of a
like Percentage Interest and Class to the above named assignee and deliver such
Certificate to the following address: _________________________________________
______________________________________________________________________________.
Dated:
_____________________________________
Signature by or on behalf of assignor
_____________________________________
Signature Guaranteed
<PAGE>
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for purposes of
distribution:
Distributions shall be made, by wire transfer or otherwise, in
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-7
-----------
FORM OF CLASS R-III CERTIFICATE
THIS CERTIFICATE MAY NOT BE TRANSFERRED TO A NON-UNITED STATES
PERSON.
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS
A "RESIDUAL INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT
CONDUIT" ("REMIC"), AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN
SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986 (THE
"CODE").
ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CERTIFICATE
MAY BE MADE ONLY IN ACCORDANCE WITH THE PROVISIONS OF SECTION
5.02 OF THE POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN.
NO TRANSFER OF THIS CERTIFICATE TO AN EMPLOYEE BENEFIT PLAN OR
OTHER RETIREMENT ARRANGEMENT SUBJECT TO THE EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974, AS AMENDED, OR THE CODE WILL BE
REGISTERED EXCEPT IN COMPLIANCE WITH THE PROCEDURES DESCRIBED
HEREIN.
ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CERTIFICATE
MAY BE MADE ONLY IF THE PROPOSED TRANSFEREE PROVIDES (I) AN
AFFIDAVIT TO THE TRUSTEE THAT (A) SUCH TRANSFEREE IS NOT (1) THE
UNITED STATES OR ANY POSSESSION THEREOF, ANY STATE OR POLITICAL
SUBDIVISION THEREOF, ANY FOREIGN GOVERNMENT, ANY INTERNATIONAL
ORGANIZATION, OR ANY AGENCY OR INSTRUMENTALITY OF ANY OF THE
FOREGOING, (2) ANY ORGANIZATION (OTHER THAN A COOPERATIVE
DESCRIBED IN SECTION 521 OF THE CODE) THAT IS EXEMPT FROM THE
TAX IMPOSED BY CHAPTER 1 OF THE CODE UNLESS SUCH ORGANIZATION IS
SUBJECT TO THE TAX IMPOSED BY SECTION 511 OF THE CODE, (3) ANY
ORGANIZATION DESCRIBED IN SECTION 1381(A)(2)(C) OF THE CODE (ANY
SUCH PERSON DESCRIBED IN THE FOREGOING CLAUSES (1), (2) OR (3)
SHALL HEREINAFTER BE REFERRED TO AS A "DISQUALIFIED
ORGANIZATION") OR (4) AN AGENT OF A DISQUALIFIED ORGANIZATION
AND (B) NO PURPOSE OF SUCH TRANSFER IS TO IMPEDE THE ASSESSMENT
OR COLLECTION OF TAX, AND (II) SUCH TRANSFEREE SATISFIES CERTAIN
ADDITIONAL CONDITIONS RELATING TO THE FINANCIAL CONDITION OF THE
<PAGE>
PROPOSED TRANSFEREE. NOTWITHSTANDING THE REGISTRATION IN THE
CERTIFICATE REGISTER OF ANY TRANSFER, SALE OR OTHER DISPOSITION
OF THIS CERTIFICATE TO A DISQUALIFIED ORGANIZATION OR AN AGENT
OF A DISQUALIFIED ORGANIZATION, SUCH REGISTRATION SHALL BE
DEEMED TO BE OF NO LEGAL FORCE OR EFFECT WHATSOEVER AND SUCH
PERSON SHALL NOT BE DEEMED TO BE A CERTIFICATEHOLDER FOR ANY
PURPOSE HEREUNDER, INCLUDING, BUT NOT LIMITED TO, THE RECEIPT OF
DISTRIBUTIONS ON THIS CERTIFICATE. EACH HOLDER OF THIS
CERTIFICATE BY ACCEPTANCE HEREOF SHALL BE DEEMED TO HAVE
CONSENTED TO THE PROVISIONS OF THIS PARAGRAPH AND THE PROVISIONS
OF SECTION 5.02(D) OF THE POOLING AND SERVICING AGREEMENT
REFERRED TO HEREIN. ANY PERSON THAT IS A DISQUALIFIED
ORGANIZATION IS PROHIBITED FROM ACQUIRING BENEFICIAL OWNERSHIP
OF THIS CERTIFICATE.
<TABLE>
<CAPTION>
<S> <C>
Series 1998-NC5, Class R-III Aggregate Percentage Interest of the Class
R-III Certificates as of the Issue Date:
Variable Pass-Through Rate 100.00%
Date of Pooling and Servicing Agreement Master Servicer: New Century Mortgage
and Cut-off Date: December 1, 1998 Corporation
First Distribution Date: Trustee: Firstar Bank Milwaukee, N.A.
January 25, 1999
Trust Administrator: U.S. Bank
No. ___ Milwaukee, N.A.
Issue Date: December 22, 1998
</TABLE>
<PAGE>
CALLABLE FLOATING RATE MORTGAGE PASS-THROUGH CERTIFICATE
evidencing a beneficial ownership interest in a Trust Fund (the "Trust Fund")
consisting primarily of a pool of conventional one- to four-family first
mortgage loans (the "Mortgage Loans") formed and sold by
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST
IN SALOMON BROTHERS MORTGAGE SECURITIES VII, INC., THE MASTER
SERVICER, THE TRUSTEE, THE TRUST ADMINISTRATOR OR ANY OF THEIR
RESPECTIVE AFFILIATES. NEITHER THIS CERTIFICATE NOR THE
UNDERLYING MORTGAGE LOANS ARE GUARANTEED BY ANY AGENCY OR
INSTRUMENTALITY OF THE UNITED STATES.
This certifies that _____________ is the registered owner of a
Percentage Interest (obtained by dividing the denomination of this Certificate
by the aggregate Certificate Principal Balance of the Class R-III Certificates
as of the Issue Date) in that certain beneficial ownership interest evidenced by
all the Class R-III Certificates in REMIC I created pursuant to a Pooling and
Servicing Agreement, dated as specified above (the "Agreement"), among Salomon
Brothers Mortgage Securities VII, Inc. (hereinafter called the "Depositor,"
which term includes any successor entity under the Agreement), the Master
Servicer, the Trustee and the Trust Administrator, a summary of certain of the
pertinent provisions of which is set forth hereafter. To the extent not defined
herein, the capitalized terms used herein have the meanings assigned in the
Agreement. This Certificate is issued under and is subject to the terms,
provisions and conditions of the Agreement, to which Agreement the Holder of
this Certificate by virtue of the acceptance hereof assents and by which such
Holder is bound.
Pursuant to the terms of the Agreement, distributions will be made
on the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (a "Distribution Date"), commencing on the
First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the last Business Day of the month immediately
preceding the month of such distribution (the "Record Date"), in an amount equal
to the product of the Percentage Interest evidenced by this Certificate and the
amount required to be distributed to the Holders of Class R-III Certificates on
such Distribution Date pursuant to the Agreement.
All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by the Trust Administrator on behalf
of the Trustee by wire transfer in immediately available funds to the account of
the Person entitled thereto if such Person shall have so notified the Trust
Administrator in writing at least five Business Days prior to the Record Date
immediately prior to such Distribution Date and is the registered owner of Class
R-III Certificates the aggregate initial Certificate Principal Balance of which
is in excess of the lesser of (i) $5,000,000 or (ii) two-thirds of the aggregate
initial Certificate Principal Balance of the Class R-III Certificates, or
otherwise by check mailed by first class
<PAGE>
-4-
mail to the address of the Person entitled thereto, as such name and address
shall appear on the Certificate Register. Notwithstanding the above, the final
distribution on this Certificate will be made after due notice by the Trust
Administrator of the pendency of such distribution and only upon presentation
and surrender of this Certificate at the office or agency appointed by the Trust
Administrator for that purpose as provided in the Agreement.
This Certificate is one of a duly authorized issue of Certificates
designated as Callable Floating Rate Mortgage Pass-Through Certificates of the
Series specified on the face hereof (herein called the "Certificates") and
representing a Percentage Interest in the Class of Certificates specified on the
face hereof equal to the denomination specified on the face hereof divided by
the aggregate Certificate Principal Balance of the Class of Certificates
specified on the face hereof.
The Certificates are limited in right of payment to certain
collections and recoveries respecting the Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Account and the Distribution Account
may be made from time to time for purposes other than distributions to
Certificateholders, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Mortgage Loans.
The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Depositor, the Master Servicer, the Trustee, the Trust Administrator and the
rights of the Certificateholders under the Agreement at any time by the
Depositor, the Master Servicer, the Trustee, the Trust Administrator and the
Certificate Insurer with the consent of the Holders of Certificates entitled to
at least 66% of the Voting Rights and the Certificate Insurer. Any such consent
by the Holder of this Certificate shall be conclusive and binding on such Holder
and upon all future Holders of this Certificate and of any Certificate issued
upon the transfer hereof or in exchange herefor or in lieu hereof whether or not
notation of such consent is made upon this Certificate. The Agreement also
permits the amendment thereof, in certain limited circumstances, without the
consent of the Holders of any of the Certificates but with the consent of the
Certificate Insurer.
As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies appointed by the Trust Administrator as
provided in the Agreement, duly endorsed by, or accompanied by an assignment in
the form below or other written instrument of transfer in form satisfactory to
the Trust Administrator duly executed by, the Holder hereof or such Holder's
attorney duly authorized in writing, and thereupon one or more new Certificates
of the same Class in authorized denominations evidencing the same aggregate
Percentage Interest will be issued to the designated transferee or transferees.
<PAGE>
-5-
The Certificates are issuable in fully registered form only without
coupons in Classes and denominations representing Percentage Interests specified
in the Agreement. As provided in the Agreement and subject to certain
limitations therein set forth, Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.
No transfer of this Certificate shall be made unless the transfer is
made pursuant to an effective registration statement under the Securities Act of
1933, as amended (the "1933 Act"), and an effective registration or
qualification under applicable state securities laws, or is made in a
transaction that does not require such registration or qualification. In the
event that such a transfer of this Certificate is to be made without
registration or qualification, the Trust Administrator shall require receipt of
(i) if such transfer is purportedly being made in reliance upon Rule 144A under
the 1933 Act, written certifications from the Holder of the Certificate desiring
to effect the transfer, and from such Holder's prospective transferee,
substantially in the forms attached to the Agreement as Exhibit F-1, and (ii) in
all other cases, an Opinion of Counsel satisfactory to it that such transfer may
be made without such registration or qualification (which Opinion of Counsel
shall not be an expense of the Trust Fund or of the Depositor, the Trustee, the
Trust Administrator or the Master Servicer in their respective capacities as
such), together with copies of the written certification(s) of the Holder of the
Certificate desiring to effect the transfer and/or such Holder's prospective
transferee upon which such Opinion of Counsel is based. None of the Depositor,
the Trustee or the Trust Administrator is obligated to register or qualify the
Class of Certificates specified on the face hereof under the 1933 Act or any
other securities law or to take any action not otherwise required under the
Agreement to permit the transfer of such Certificates without registration or
qualification. Any Holder desiring to effect a transfer of this Certificate
shall be required to indemnify the Trustee, the Trust Administrator, the
Depositor and the Master Servicer against any liability that may result if the
transfer is not so exempt or is not made in accordance with such federal and
state laws.
No transfer of this Certificate to a Plan subject to ERISA or
Section 4975 of the Code, any Person acting, directly or indirectly, on behalf
of any such Plan or any Person using "Plan Assets" to acquire this Certificate
shall be made except in accordance with Section 5.02(c) of the Agreement.
Prior to registration of any transfer, sale or other disposition of
this Certificate, the proposed transferee shall provide to the Trustee (i) an
affidavit to the effect that such transferee is any Person other than a
Disqualified Organization or the agent (including a broker, nominee or
middleman) of a Disqualified Organization, and (ii) a certificate that
acknowledges that (A) the Class R-III Certificates have been designated as a
residual interest in a REMIC, (B) it will include in its income a PRO RATA share
of the net income of the Trust Fund and that such income may be an "excess
inclusion," as defined in the Code, that, with certain exceptions, cannot be
offset by other losses or benefits from any tax exemption, and (C) it expects to
have the financial means to satisfy all of its tax obligations including those
relating to holding the Class R-III Certificates. Notwithstanding the
registration in the Certificate
<PAGE>
-6-
Register of any transfer, sale or other disposition of this Certificate to a
Disqualified Organization or an agent (including a broker, nominee or middleman)
of a Disqualified Organization, such registration shall be deemed to be of no
legal force or effect whatsoever and such Person shall not be deemed to be a
Certificateholder for any purpose, including, but not limited to, the receipt of
distributions in respect of this Certificate.
The Holder of this Certificate, by its acceptance hereof, shall be
deemed to have consented to the provisions of Section 5.02 of the Agreement and
to any amendment of the Agreement deemed necessary by counsel of the Depositor
to ensure that the transfer of this Certificate to any Person other than a
Permitted Transferee or any other Person will not cause the Trust Fund to cease
to qualify as a REMIC or cause the imposition of a tax upon the REMIC.
No service charge will be made for any such registration of transfer
or exchange of Certificates, but the Trust Administrator may require payment of
a sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any transfer or exchange of Certificates.
The Depositor, the Master Servicer, the Trustee, the Trust
Administrator and the Certificate Insurer and any agent of the Depositor, any
Master Servicer, the Trustee, the Trust Administrator or the Certificate Insurer
may treat the Person in whose name this Certificate is registered as the owner
hereof for all purposes, and none of the Depositor, the Master Servicer, the
Trustee, the Trust Administrator, the Certificate Insurer nor any such agent
shall be affected by notice to the contrary.
The obligations created by the Agreement and the Trust Fund created
thereby shall terminate upon payment to the Certificateholders of all amounts
held by the Trust Administrator on behalf of the Trustee and required to be paid
to them pursuant to the Agreement following the earlier of (i) the final payment
or other liquidation (or any advance with respect thereto) of the last Mortgage
Loan remaining in REMIC I and (ii) the purchase by the party designated in the
Agreement at a price determined as provided in the Agreement from REMIC I of all
the Mortgage Loans and all property acquired in respect of such Mortgage Loans.
The Agreement permits, but does not require, the party designated in the
Agreement to purchase from REMIC I all the Mortgage Loans and all property
acquired in respect of any Mortgage Loan at a price determined as provided in
the Agreement. The exercise of such right will effect early retirement of the
Certificates; however, such right to purchase is subject to the aggregate
principal balance of the Mortgage Loans at the time of purchase is reduced to
less than 10%,in the event the Majority Class CE Certificateholder is the
Terminator, or 5%, in the event the Master Servicer or the Certificate Insurer
is the Terminator. Furthermore, the holder of the Call Class can effect early
retirement of the Certificates in accordance with the terms set forth in the
Agreement.
The recitals contained herein shall be taken as statements of the
Depositor and neither the Trustee nor the Trust Administrator assumes
responsibility for their correctness.
<PAGE>
-7-
Unless the certificate of authentication hereon has been
executed by the Trust Administrator, by manual signature, this Certificate shall
not be entitled to any benefit under the Agreement or be valid for any purpose.
<PAGE>
IN WITNESS WHEREOF, the Trust Administrator has caused this
Certificate to be duly executed.
Dated: December 22, 1998
U.S. BANK NATIONAL ASSOCIATION
as Trust Administrator
By:_______________________________
Authorized Officer
CERTIFICATE OF AUTHENTICATION
-----------------------------
This is one of the Class R-III Certificates referred to in the
within-mentioned Agreement.
U.S. BANK NATIONAL ASSOCIATION
as Trust Administrator
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 Callable Floating
Rate Mortgage Pass-Through Certificate and hereby authorize(s) the registration
of transfer of such interest to assignee on the Certificate Register of the
Trust Fund.
I (we) further direct the Trustee to issue a new Certificate of a
like Percentage Interest and Class to the above named assignee and deliver such
Certificate to the following address: _________________________________________
______________________________________________________________________________.
Dated:
_____________________________________
Signature by or on behalf of assignor
_____________________________________
Signature Guaranteed
<PAGE>
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for purposes of
distribution:
Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to ________________________________________________
_______________________________________________________________________________
for the account of _______________________________, account number ____________,
or, if mailed by check, to ____________________________________________________
_______________________________________________________________________________.
Applicable statements should be mailed to______________________________________
_______________________________________________________________________________.
This information is provided by _______________________________________________,
the assignee named above, or ___________________________________, as its agent.
<PAGE>
EXHIBIT B
---------
FORM OF FINANCIAL GUARANTY INSURANCE POLICY
FINANCIAL FINANCIAL GUARANTY
SECURITY INSURANCE POLICY
ASSURANCEsm
Trust: As described in Endorsement No. 1 Policy No.: 50751-N
Certificates: $875,442,000 Salomon Brothers Date of Issuance: 12/22/98
Mortgage Securities VII, Inc.,
Callable Floating Rate Mortgage
Pass-Through Certificates, Series
1998-NC5, Class A
FINANCIAL SECURITY ASSURANCE INC. ("Financial Security"), for
consideration received, hereby UNCONDITIONALLY AND IRREVOCABLY GUARANTEES to the
Trustee for the benefit of each Holder, subject only to the terms of this Policy
(which includes each endorsement hereto), the full and complete payment of
Guaranteed Distributions with respect to the Certificates of the Trust referred
to above.
For the further protection of each Holder, Financial Security
irrevocably and unconditionally guarantees payment of the amount of any
distribution of principal or interest with respect to the Certificates made
during the Term of this Policy to such Holder that is subsequently avoided in
whole or in part as a preference payment under applicable law.
Payment of any amount required to be paid under this Policy will be
made following receipt by Financial Security of notice as described in
Endorsement No. 1 hereto.
Financial Security shall be subrogated to the rights of each Holder to
receive distributions with respect to each Certificate held by such Holder to
the extent of any payment by Financial Security hereunder.
Except to the extent expressly modified by Endorsement No. 1 hereto,
the following terms shall have the meanings specified for all purposes of this
Policy. "Holder" means the registered owner of any Certificate as indicated on
the registration books maintained by or on behalf of the Trustee for such
purpose or, if the Certificate is in bearer form, the holder of the Certificate.
"Trustee", "Guaranteed Distributions" and "Term of this Policy" shall have the
meanings set forth in Endorsement No. 1 hereto.
This Policy sets forth in full the undertaking of Financial Security,
and shall not be modified, altered or affected by any other agreement or
instrument, including any modification or amendment thereto. Except to the
extent expressly modified by an endorsement hereto, the premiums paid in respect
of this Policy are nonrefundable for any reason whatsoever. This Policy may not
be canceled or revoked during the Term of this Policy. An acceleration payment
shall not be due under this Policy unless such acceleration is at the sole
option of Financial Security. THIS POLICY IS NOT COVERED BY THE
PROPERTY/CASUALTY INSURANCE SECURITY FUND SPECIFIED IN ARTICLE 76 OF THE NEW
YORK INSURANCE LAW.
In witness whereof, FINANCIAL SECURITY ASSURANCE INC. has caused this
Policy to be executed on its behalf by its Authorized Officer.
FINANCIAL SECURITY ASSURANCE INC.
By__________________________________
AUTHORIZED OFFICER
A subsidiary of Financial Security Assurance Holdings Ltd.
350 Park Avenue, New York, N.Y. 10022-6022 (212) 826-0100
Form 101NY (5/89)
<PAGE>
ENDORSEMENT NO. 1 TO FINANCIAL GUARANTY INSURANCE POLICY
FINANCIAL SECURITY ASSURANCE INC.
TRUST: Established pursuant to the Pooling and Servicing Agreement
dated as of December 1, 1998 among Salomon Brothers Mortgage
Securities VII, Inc., as Depositor, New Century Mortgage
Corporation, as Master Servicer, Firstar Bank Milwaukee,
National Association as Trustee and U.S. Bank National
Association as Trust Administrator
POLICY NO.: 50751-N
CERTIFICATES: $875,442,000 Salomon Brothers Mortgage Securities VII, Inc.,
Callable Floating Rate Mortgage Pass-Through Certificates,
Series 1998-NC5, Class A
DATE OF ISSUANCE: December 22, 1998
1. DEFINITIONS. For all purposes of this Policy, the terms specified
below shall have the meanings or constructions provided below. Capitalized terms
used herein and not otherwise defined herein shall have the meanings provided in
the Pooling and Servicing Agreement unless the context shall otherwise require.
"BUSINESS DAY" means any day other than (i) a Saturday or Sunday, or
(ii) a day on which banking institutions in the State of California, the State
of New York or in the city in which the Corporate Trust Office of the Trustee or
the Trust Administrator is located, are authorized or obligated by law or
executive order to be closed.
"FINAL DISTRIBUTION DATE" means the Distribution Date coinciding with
or following a purchase by the Terminator in accordance with the terms of clause
(i) of the first paragraph of Section 10.01 or by the Call Class in accordance
with the terms of Section 10.02 of the Pooling and Servicing Agreement.
"GUARANTEED DISTRIBUTIONS" means, with respect to each Distribution
Date, the distribution to be made to the Class A Certificates on such
Distribution Date, in an aggregate amount equal to the sum of (i) the Accrued
Certificate Interest on the Certificates, less the amount of any shortfalls
resulting from the application of the Relief Act, (ii) the excess, if any, of
(a) the aggregate Certificate Principal Balance of all of the Class A
Certificates then outstanding over (b) the aggregate principal balances of the
Mortgage Loans then outstanding and (iii) if (but only if) such Distribution
Date is the final Distribution Date or Maturity Date for the Class A
Certificates, the outstanding Certificate Principal Balance of the Class A
Certificates (without duplication of amounts included pursuant to clause (ii)),
in each case in accordance with the original terms of the Class A Certificates
when issued and without regard to any amendment or modification of the Class A
Certificates or the Pooling and Servicing Agreement which has not been consented
to by Financial Security. Guaranteed Distributions
<PAGE>
shall not include, nor shall coverage be provided under this Policy in respect
of any taxes, withholding or other charge imposed by any governmental authority.
"MATURITY DATE" means the Distribution Date coinciding with or
following the final payment or other liquidation of the last Mortgage Loan or
REO Property as described in clause (ii) of the first paragraph of Section 10.01
of the Pooling and Servicing Agreement, subject to the proviso set forth
therein.
"POLICY" means this Financial Guaranty Insurance Policy and includes
each endorsement thereto.
"POOLING AND SERVICING AGREEMENT" means the Pooling and Servicing
Agreement dated as of December 1, 1998 among Salomon Brothers Mortgage
Securities VII, Inc., New Century Mortgage Corporation, Firstar Bank Milwaukee
National Association and U.S. Bank National Association with respect to Salomon
Brothers Mortgage Securities VII, Inc., Callable Floating Rate Mortgage
Pass-Through Certificates, Series 1998-NC5, as amended from time to time with
the consent of Financial Security.
"RECEIPT" and "RECEIVED" mean actual delivery to Financial Security
and to the Fiscal Agent (as defined below), if any, at or prior to 12:00 noon,
New York City time, on a Business Day; delivery either on a day that is not a
Business Day, or after 12:00 noon, New York City time, shall be deemed to be
Received on succeeding Business Day. If any notice or certificate given
hereunder by the Trust Administrator is not in proper form or is not properly
completed, executed or delivered, it shall be deemed not to have been Received,
and Financial Security or its Fiscal Agent shall promptly so advise the Trust
Administrator and the Trust Administrator may submit an amended notice.
"TERM OF THIS POLICY" means the period from and including the Date of
Issuance to and including the date on which (i) the Certificate Principal
Balance of all of the Class A Certificates is zero, (ii) any period during which
any payment on the Class A Certificates could have been avoided in whole or in
part as a preference payment under applicable bankruptcy, insolvency,
receivership or similar law has expired, and (iii) if any proceedings requisite
to avoidance as a preference payment have been commenced prior to the occurrence
of (i) and (ii), a final and nonappealable order in resolution of each such
proceeding has been entered.
"TRUSTEE" means Firstar Bank Milwaukee National Association, in its
capacity as Trustee under the Pooling and Servicing Agreement and any successor
in such capacity.
"TRUST ADMINISTRATOR" means U.S. Bank National Association, in its
capacity as Trust Administrator under the Pooling and Servicing Agreement and
any successor in such capacity.
2. NOTICES AND CONDITIONS TO PAYMENT IN RESPECT OF GUARANTEED
DISTRIBUTIONS. Following Receipt by Financial Security of a notice and
certificate from the Trust Administrator in the form attached as Exhibit A to
this Endorsement, Financial Security will pay any amount payable hereunder in
respect of Guaranteed Distributions out of the funds of Financial Security on
the later to occur of (a) 12:00 noon, New York City time, on the second Business
Day following such Receipt; and (b) 12:00 noon, New York City time, on the
<PAGE>
Distribution Date to which such claim relates. Payments due hereunder in respect
of Guaranteed Distributions will be disbursed by wire transfer of immediately
available funds to the Policy Payments Account established pursuant to the
Pooling and Servicing Agreement or, if no such Policy Payments Account has been
established, to the Trust Administrator.
Financial Security shall be entitled to pay any amount hereunder in
respect of Guaranteed Distributions whether or not any notice and certificate
shall have been Received by Financial Security as provided above, provided
however, that by acceptance of this Policy the Trustee, and the Trust
Administrator on behalf of the Trustee, agree to provide upon request to
Financial Security a notice and certificate in respect of any such payments made
by Financial Security. Financial Security's obligations hereunder in respect of
Guaranteed Distributions shall be discharged to the extent funds are disbursed
by Financial Security as provided herein whether or not such funds are properly
applied by the Trust Administrator.
3. NOTICES AND CONDITIONS TO PAYMENT IN RESPECT OF GUARANTEED
DISTRIBUTIONS AVOIDED AS PREFERENCE PAYMENTS. If any Guaranteed Distribution is
avoided as a preference payment under applicable bankruptcy, insolvency,
receivership or similar law, Financial Security will pay such amount out of the
funds of Financial Security on the later of (a) the date when due to be paid
pursuant to the Order referred to below or (b) the first to occur of (i) the
fourth Business Day following Receipt by Financial Security from the Trustee of
(A) a certified copy of the order to the court or other governmental body which
exercised jurisdiction to the effect that the Holder is required to return
principal or interest distributed with respect to the Class A Certificates
during the Term of this Policy because such distributions were avoidable as
preference payments under applicable bankruptcy law (the "Order"), (B) a
certificate of the Holder that the Order has been entered and is not subject to
any stay and (C) an assignment duly executed and delivered by the Holder, in
such form as is reasonably required by Financial Security, and provided to the
Holder by Financial Security, irrevocably assigning to Financial Security all
rights and claims of the Holder relating to or arising under the Certificates
against the debtor which made such preference payment or otherwise with respect
to such preference payment or (ii) the date of Receipt by Financial Security
from the Trust Administrator of the items referred to in clauses (A), (B) and
(C) above if, at least four Business Days prior to such date of Receipt,
Financial Security shall have Received written notice from the Trust
Administrator that such items were to be delivered on such date and such date
was specified in such notice. Such payment shall be disbursed to the receiver,
conservator, debtor-in-possession or trustee in bankruptcy named in the Order
and not to the Trustee, the Trust Administrator or any Holder directly (unless a
Holder has previously paid such amount to the receiver, conservator,
debtor-in-possession or trustee in bankruptcy named in the Order, in which case
such payment shall be disbursed to the Trust Administrator for distribution to
such Holder upon proof of such payment reasonably satisfactory to Financial
Security). In connection with the foregoing, Financial Security shall have the
rights provided pursuant to Section 9.04(d) of the Pooling and Servicing
Agreement.
4. GOVERNING LAW. This Policy shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to the
conflict of laws principles thereof.
<PAGE>
5. FISCAL AGENT. At any time during the Term of this Policy, Financial
Security may appoint a fiscal agent (the "Fiscal Agent") for purposes of this
Policy by written notice to the Trust Administrator at the notice address
specified in the Pooling and Servicing Agreement specifying the name and notice
address of the Fiscal Agent. From and after the date of receipt of such notice
by the Trust Administrator, (i) copies of all notices and documents required to
be delivered to Financial Security pursuant to this Policy shall be
simultaneously delivered to the Fiscal Agent and to Financial Security and shall
not be deemed Received until Received by both and (ii) all payments required to
be made by Financial Security under this Policy may be made directly by
Financial Security or by the Fiscal Agent on behalf of Financial Security. The
Fiscal Agent is the agent of Financial Security only and the Fiscal Agent shall
in no event be liable to any Holder for any acts of the Fiscal Agent or any
failure of Financial Security to deposit, or cause to be deposited, sufficient
funds to make payments due under this Policy.
6. WAIVER OF DEFENSES. To the fullest extent permitted by applicable
law, Financial Security agrees not to assert, and hereby waives, for the benefit
of each Holder, all rights (whether by counterclaim, setoff or otherwise) and
defenses (including, without limitation, the defense of fraud), whether acquired
by subrogation, assignment or otherwise, to the extent that such rights and
defenses may be available to Financial Security to avoid payment of its
obligations under this Policy in accordance with the express provisions of this
Policy.
7. NOTICES. All notices to be given hereunder shall be in writing
(except as otherwise specifically provided herein) and shall be mailed by
registered mail or personally delivered or telecopied to Financial Security as
follows:
Financial Security Assurance Inc.
350 Park Avenue
New York, NY 10022
Attention: Senior Vice President - Surveillance
Re: Salomon Brothers Mortgage Securities VII, Inc.,
Callable Floating Rate Mortgage Pass-Through
Certificates, Series 1998-NC5
Telecopy No.: (212) 339-3518
Confirmation: (212) 826-0100
Financial Security may specify a different address or addresses by writing
mailed or delivered to the Trust Administrator.
8. PRIORITIES. In the event any term or provisions of the face of this
Policy is inconsistent with the provisions of this Endorsement, the provisions
of this Endorsement shall take precedence and shall be binding.
9. EXCLUSIONS FROM INSURANCE GUARANTY FUNDS. This Policy is not
covered by the Property/Casualty Insurance Security Fund specified in Article 76
of the New York Insurance Law. This Policy is not covered by the Florida
Insurance Guaranty Association created under Part II of Chapter 631 of the
Florida Insurance Code. In the event Financial Security were to become
insolvent, any claims arising under this Policy are excluded from coverage by
the
<PAGE>
California Insurance Guaranty Association, established pursuant to Article 14.2
of Chapter 1 of Part 2 of Division 1 of the California Insurance Code.
10. SURRENDER OF POLICY. The Trustee shall surrender this Policy to
Financial Security for cancellation upon expiration of the Term of this Policy.
IN WITNESS WHEREOF, FINANCIAL SECURITY ASSURANCE INC. has caused this
Endorsement No. 1 to be executed by its Authorized Officer.
FINANCIAL SECURITY ASSURANCE INC.
By:________________________________
Authorized Officer
<PAGE>
Exhibit A
To Endorsement 1
NOTICE OF CLAIM AND CERTIFICATE
-------------------------------
Financial Security Assurance Inc.
350 Park Avenue
New York, NY 10022
The undersigned, a duly authorized officer of U.S. Bank National
Association (the "Trust Administrator"), hereby certifies to Financial Security
Assurance Inc. ("Financial Security"), with reference to Financial Guaranty
Insurance Policy No. 50751-N dated December 22, 1998 (the "Policy") issued by
Financial Security in respect of the Salomon Brothers Mortgage Securities VII,
Inc., Callable Floating Rate Mortgage Pass-Through Certificates, Series
1998-NC5, Class A (the "Certificates), that:
(i) The Trust Administrator is the Trust Administrator under the
Pooling and Servicing Agreement for the Holders.
(ii) The sum of all amounts on deposit (or scheduled to be on
deposit) in the Distribution Account and available for distribution to
the Holders of the Guaranteed Distributions pursuant to the Pooling
and Servicing Agreement will be $____________ (the "Shortfall") less
than the Guaranteed Distributions with respect to the Distribution
Date occurring on ________________.
(iii) The Trust Administrator is making a claim under the Policy
for the Shortfall to be applied to distributions of principal or
interest or both with respect to the Certificates.
(iv) The Trust Administrator agrees that, following receipt of
funds from Financial Security, it shall (a) hold such amounts in trust
and apply the same directly to the payment of Guaranteed Distributions
on the Certificates when due; (b) not apply such funds for any other
purpose; (c) not commingle such funds with other funds held by the
Trust Administrator and (d) maintain an accurate record of such
payments with respect to each Certificate and the corresponding claim
on the Policy and proceeds thereof and, if the Certificate is required
to be surrendered for such payment, shall stamp on each such
Certificate the legend "$[INSERT APPLICABLE AMOUNT] paid by Financial
Security and the balance hereof has been canceled and reissued" and
then shall deliver such Certificate to Financial Security.
(v) The Trust Administrator, on behalf of the Holders, hereby
assigns to Financial Security the rights of the Holders with respect
to the Certificates to the extent of any payments under the Policy,
including, without limitation, any amounts due to the Holders in
respect of securities law violations arising from the offer and sale
of the Certificates. The foregoing assignment is in addition to, and
not in limitation of, rights
<PAGE>
of subrogation otherwise available to Financial Security in respect of
such payments. The Trust Administrator shall take such action and
deliver such instruments as may be reasonably requested or required by
Financial Security to effectuate the purpose or provisions of this
clause (v).
(vi) The Trust Administrator, on its behalf and on behalf of the
Holders, hereby appoints Financial Security as agent and
attorney-in-fact for the Trust Administrator, the Trustee and each
such Holder in any legal proceeding with respect to the Certificates.
The Trust Administrator hereby agrees that, so long as a Certificate
Insurer Default (as defined in the Pooling and Servicing Agreement)
shall not exist, Financial Security may at any time during the
continuation of any proceeding by or against the Mortgage Loan Seller,
the Transferor, the Master Servicer or the Depositor under the United
States Bankruptcy Code or any other applicable bankruptcy, insolvency,
receivership, rehabilitation or similar law (an "Insolvency
Proceeding") direct all matters relating to such Insolvency
Proceeding. In addition, the Trust Administrator, for itself and on
behalf of the Trustee, hereby agrees that Financial Security shall be
subrogated to, and the Trust Administrator on its behalf and on behalf
of the Trustee and each Holder, hereby delegates and assigns, to the
fullest extent permitted by law, the rights of the Trustee, the Trust
Administrator and each Holder in the conduct of any Insolvency
Proceeding, including, without limitation, all rights of any party to
an adversary proceeding or action with respect to any court order
issued in connection with any such Insolvency Proceeding.
(vii) Payment should be made by wire transfer directed to Policy
Payments Account.
Unless the context otherwise requires, capitalized terms used in this
Notice of Claim and Certificate and not defined herein shall have the meanings
provided in the Policy.
<PAGE>
IN WITNESS WHEREOF, the Trustee has executed and delivered this Notice
of Claim and Certificate as of the ______ day of _________________, _______.
__________________________________
By: ________________________
Title: ________________________
________________________________________________
For Financial Security or Fiscal Agent Use Only
Wire transfer sent on ___________________ by __________________________
Confirmation Number _________________________________
<PAGE>
EXHIBIT C-1
-----------
FORM OF TRUST ADMINISTRATOR'S INITIAL CERTIFICATION
[Date]
Salomon Brothers Mortgage
Securities VII, Inc.
Seven World Trade Center
New York, New York 10048
[Master Servicer]
________________________
________________________
Re: Pooling and Servicing Agreement, dated as of December 1, 1998,
among Salomon Brothers Mortgage Securities VII, Inc.,
New Century Mortgage Corporation, Firstar Bank Milwaukee, N.A.
and U.S. Bank National Association, Callable Floating Rate
Mortgage Pass-Through Certificates, Series 1998-NC5
----------------------------------------------------------------
Ladies and Gentlemen:
Attached is the Trust Administrator's preliminary exceptions in
accordance with Section 2.02 of the referenced Pooling and Servicing Agreement
(the "Pooling and Servicing Agreement"). Capitalized terms used but not
otherwise defined herein shall have the meanings ascribed to them in the Pooling
and Servicing Agreement.
The Trust Administrator has made no independent examination of any
documents contained in each Mortgage File beyond the review specifically
required in the Pooling and Servicing Agreement. The Trust Administrator makes
no representations as to: (i) the validity, legality, sufficiency,
enforceability or genuineness of any of the documents contained in the Mortgage
File of any of the Mortgage Loans identified on the Mortgage Loan Schedule, (ii)
the collectability, insurability, effectiveness or suitability of any such
Mortgage Loan, or (iii) whether any Mortgage File included any of the documents
specified in clause (v) of Section 2.01 of the Pooling and Servicing Agreement.
U.S. BANK NATIONAL ASSOCIATION
By:____________________________________
Name:
Title:
<PAGE>
EXHIBIT C-2
-----------
FORM OF TRUST ADMINISTRATOR'S FINAL CERTIFICATION
[Date]
Salomon Brothers Mortgage
Securities VII, Inc.
Seven World Trade Center
New York, New York 10048
[Master Servicer]
________________________
________________________
Re: Pooling and Servicing Agreement, dated as of December 1, 1998,
among Salomon Brothers Mortgage Securities VII, Inc.,
New Century Mortgage Corporation, Firstar Bank Milwaukee, N.A.
and U.S. Bank National Association, Callable Floating Rate
Mortgage Pass-Through Certificates, Series 1998-NC5
---------------------------------------------------------------
Ladies and Gentlemen:
In accordance with Section 2.02 of the above-captioned Pooling and
Servicing Agreement, the undersigned, as Trust Administrator, 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 Trust
Administrator together with the original recorded Assignment or
Assignments of the Mortgage showing a complete chain of assignment from
the originator, or a certified copy of such Assignments in those
instances where the public recording retains the original or where
original has been lost;
(iii) the original lender's title insurance policy; and
(iv) the original Primary Insurance Policy for each Mortgage Loan
indicated on the Mortgage Loan Schedule as having a Loan-to-Value Ratio
at origination in excess of 80%.
<PAGE>
The Trust Administrator has made no independent examination of any
documents contained in each Mortgage File beyond the review specifically
required in the above-referenced Pooling and Servicing Agreement. The Trust
Administrator makes no representations as to: (i) the validity, legality,
sufficiency, enforceability or genuineness of any of the documents contained in
the Mortgage File of any of the Mortgage Loans identified on the Mortgage Loan
Schedule, or (ii) the collectability, insurability, effectiveness or suitability
of any such Mortgage Loan.
Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the above-captioned Pooling and Servicing
Agreement.
U.S. BANK NATIONAL ASSOCIATION
By:_____________________________________
Name:
Title:
<PAGE>
EXHIBIT D-1
-----------
FORM OF MORTGAGE LOAN PURCHASE AGREEMENT
<PAGE>
MORTGAGE LOAN PURCHASE AGREEMENT
This is a Mortgage Loan Purchase Agreement (this "Agreement"), dated
December 18, 1998, among NC Capital Corporation, a California corporation (the
"Seller"), NC Residual II Corporation, a Delaware corporation (the "Purchaser")
and New Century Mortgage Corporation, a California corporation (the
"Originator").
Preliminary Statement
---------------------
The Seller intends to sell and contribute as a capital contribution
the Mortgage Loans (as hereinafter identified) to the Purchaser on the terms and
subject to the conditions set forth in this Agreement. The Purchaser intends to
transfer the Mortgage Loans to the Salomon Brothers Mortgage Securities VII,
Inc., a Delaware Corporation (the "Depositor") pursuant to a Transfer Agreement
dated December 18, 1998 (the "Transfer Agreement"), between the Depositor and
the Purchaser. The Depositor will deposit the Mortgage Loans into a mortgage
pool comprising the Trust Fund. The Trust Fund will be evidenced by a single
series of asset-backed floating rate certificates designated as Series 1998-NC5
(the "Certificates"). The Certificates will consist of seven classes of
certificates. The Class CE Certificates, the Class P Certificates, the Class R-I
Certificates, the Class R-II Certificates and the Class R-III Certificates
(collectively, the "NC Residual Certificates") will be delivered to the
Purchaser as partial consideration for the Mortgage Loans as further described
below. The Certificates will be issued pursuant to a Pooling and Servicing
Agreement for Series 1998-NC5, dated as of December 1, 1998 (the "Pooling and
Servicing Agreement"), among the Depositor as depositor, New Century Mortgage
Corporation as master servicer (the "Master Servicer"), Firstar Bank Milwaukee,
N.A. as trustee (the "Trustee") and U.S. Bank National Association as trust
administrator (the "Trust Administrator"). Capitalized terms used but not
defined herein shall have the meanings set forth in the Pooling and Servicing
Agreement.
The parties hereto agree as follows:
SECTION 1. AGREEMENT TO PURCHASE. The Seller agrees to sell, and the
Purchaser agrees to purchase, on or before December 22, 1998 (the "Closing
Date"), certain conventional, one- to four-family, adjustable-rate residential
mortgage loans (the "Mortgage Loans"), having an aggregate principal balance as
of the close of business on December 1, 1998, (the "Cut-off Date") of
approximately $915,734,429.54 (the "Closing Balance"), after giving effect to
all payments due on the Mortgage Loans on or before the Cut-off Date, whether or
not received including the right to any Prepayment Charges payable by the
related Mortgagors in connection with any Principal Prepayments on the Mortgage
Loans.
SECTION 2. MORTGAGE LOAN SCHEDULE. The Purchaser and the Seller have
agreed upon which of the mortgage loans owned by the Seller are to be purchased
by and contributed to the Purchaser pursuant to this Agreement and the Seller
will prepare or cause to be prepared on or prior to the Closing Date a final
schedule (the "Closing Schedule") that shall describe such Mortgage Loans and
set forth all of the Mortgage Loans to be purchased under this Agreement,
including the Prepayment Charges. The Closing Schedule will conform to the
requirements set
<PAGE>
-2-
forth in this Agreement and to the definition of "Mortgage Loan Schedule" under
the Pooling and Servicing Agreement. The Closing Schedule shall be used as the
Mortgage Loan Schedule under the Pooling and Servicing Agreement.
SECTION 3. CONSIDERATION.
(a) In consideration for the Mortgage Loans to be purchased
hereunder, the Purchaser shall, as described in Section 8, (i) pay to or upon
the order of the Seller in immediately available funds an amount equal to the
net sale proceeds of the Class A Certificates and (ii) will have delivered to or
upon the order of the Seller 100% of the shares of stock of the Purchaser (the
"Purchase Price").
(b) The Purchaser or any assignee, transferee or designee of the
Purchaser shall be entitled to all scheduled payments of principal due after the
Cut-off Date, all other payments of principal due and collected after the
Cut-off Date, and all payments of interest on the Mortgage Loans allocable to
the period after the Cut-off Date. All scheduled payments of principal and
interest due on or before the Cut-off Date and collected after the Cut-off Date
shall belong to the Seller.
(c) Pursuant to the Transfer Agreement, the Purchaser will assign
all of its right, title and interest in and to the Mortgage Loans, together with
its rights under this Agreement, to the Depositor and pursuant to the Pooling
and Servicing Agreement, the Depositor will assign all of its right, title and
interest in and to the Mortgage Loans, together with its rights under this
Agreement, to the Trustee for the benefit of the Certificateholders.
SECTION 4. TRANSFER OF THE MORTGAGE LOANS.
(a) POSSESSION OF MORTGAGE FILES. The Seller does hereby sell and
contribute, transfer, assign, set over and convey to the Purchaser, without
recourse but subject to the terms of this Agreement, all of its right, title and
interest in, to and under the Mortgage Loans, including the related Prepayment
Charges. The contents of each Mortgage File not delivered to the Purchaser or to
any assignee, transferee or designee of the Purchaser on or prior to the Closing
Date are and shall be held in trust by the Seller for the benefit of the
Purchaser or any assignee, transferee or designee of the Purchaser. Upon the
sale and contribution of the Mortgage Loans, the ownership of each Mortgage
Note, the related Mortgage and the other contents of the related Mortgage File
is vested in the Purchaser and the ownership of all records and documents with
respect to the related Mortgage Loan prepared by or that come into the
possession of the Seller on or after the Closing Date shall immediately vest in
the Purchaser and shall be delivered immediately to the Purchaser or as
otherwise directed by the Purchaser.
(b) DELIVERY OF MORTGAGE LOAN DOCUMENTS. The Seller will, on or
prior to the Closing Date, deliver or cause to be delivered to the Purchaser or
any assignee, transferee or designee of the Purchaser each of the following
documents for each Mortgage Loan:
<PAGE>
-3-
(i) the original Mortgage Note, endorsed in the following form:
"Pay to the order of Firstar Bank Milwaukee, N.A., as Trustee 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 Trustee;
(ii) the original Mortgage with evidence of recording thereon;
(iii) an original Assignment of Mortgage executed in the
following form: "Firstar Bank Milwaukee, N.A. as Trustee under the
applicable pooling and servicing agreement";
(iv) the original recorded Assignment or Assignments of the
Mortgage showing a complete chain of assignment from the originator to the
Person assigning the Mortgage to the Trustee as contemplated by the
immediately preceding clause (iii);
(v) the original or copies of each assumption, modification,
written assurance or substitution agreement, if any; and
(vi) the original lender's title insurance policy, together with
all endorsements or riders that were issued with or subsequent to the
issuance of such policy, insuring the priority of the Mortgage as a first
lien on the Mortgaged Property represented therein as a fee interest
vested in the Mortgagor.
The Seller promptly shall (within sixty Business Days following the
later of the Closing Date and the date of the receipt by the Seller of the
recording information for a Mortgage but in no event later than ninety days
following the Closing Date) submit or cause to be submitted for recording, at no
expense to the Purchaser (or the Trust Fund, the Certificate Insurer, the
Trustee or the Trust Administrator under the Pooling and Servicing Agreement),
in the appropriate public office for real property records, each Assignment
referred to in clauses (b)(iii) and (b)(iv) of this Section 4. In the event that
any such Assignment is lost or returned unrecorded because of a defect therein,
the Seller promptly shall prepare a substitute Assignment or cure such defect,
as the case may be, and thereafter cause each such Assignment to be duly
recorded.
Notwithstanding anything to the contrary contained in this Section
4, with respect to a maximum of approximately 1.0% of the Mortgage Loans, by
aggregate principal balance of the Mortgage Loans, if any original Mortgage Note
referred to in Section 4(b)(i) above cannot be located, the obligations of the
Seller to deliver such documents shall be deemed to be satisfied upon delivery
to the Purchaser or any assignee, transferee or designee of the Purchaser of a
photocopy of such Mortgage Note, if available, with a lost note affidavit
substantially in the form of Exhibit 5 attached hereto. If any of the original
Mortgage Notes for which a lost note affidavit was delivered to the Purchaser or
any assignee, transferee or designee of the Purchaser is subsequently located,
such original Mortgage Note shall be delivered to the Purchaser or any assignee,
transferee or designee of the Purchaser within three Business Days; and if any
document referred to in Section 4(b)(ii) or 4(b)(iv) above has been submitted
<PAGE>
-4-
for recording but either (x) has not been returned from the applicable public
recording office or (y) has been lost or such public recording office has
retained the original of such document, the obligations of the Seller hereunder
shall be deemed to have been satisfied upon delivery to the Purchaser or any
assignee, transferee or designee of the Purchaser promptly upon receipt thereof
by or on behalf of the Seller of either the original or a copy of such document
certified by the applicable public recording office to be a true and complete
copy of the original.
In the event that the original lender's title insurance policy has
not yet been issued, the Seller shall deliver to the Purchaser or any assignee,
transferee or designee of the Purchaser a written commitment or interim binder
or preliminary report of title issued by the title insurance or escrow company.
The Seller shall deliver to the Purchaser or any assignee, transferee or
designee of the Purchaser promptly upon receipt by the Seller of any such
original title insurance policy or original Primary Mortgage Insurance Policy.
Each original document relating to a Mortgage Loan which is not
delivered to the Purchaser or its assignee, transferee or designee, if held by
the Seller, shall be so held for the benefit of the Purchaser, its assignee,
transferee or designee.
(c) ACCEPTANCE OF MORTGAGE LOANS. The documents delivered pursuant
to Section 4(b) hereof shall be reviewed by the Purchaser or any assignee,
transferee or designee of the Purchaser at any time before or after the Closing
Date (and with respect to each document permitted to be delivered after the
Closing Date, within seven days of its delivery) to ascertain that all required
documents have been executed and received and that such documents relate to the
Mortgage Loans identified on the Mortgage Loan Schedule.
(d) TRANSFER OF INTEREST IN AGREEMENTS. The Purchaser has the right
to assign its interest under this Agreement, in whole or in part, to the
Trustee, as may be required to effect the purposes of the Pooling and Servicing
Agreement, without the consent of the Seller, and the assignee shall succeed to
the rights and obligations hereunder of the Purchaser. Any expense reasonably
incurred by or on behalf of the Purchaser or the Trustee in connection with
enforcing any obligations of the Seller 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, the Trustee or the
Trust Administrator, and their respective designees, upon reasonable notice to
the Seller during normal business hours before the Closing Date and within 60
days after the Closing Date. If any such person makes such examination prior to
the Closing Date and identifies any Mortgage Loans that do not conform to the
requirements of the Purchaser as described in this Agreement, such Mortgage
Loans shall be deleted from the Closing Schedule. The Purchaser may, at its
option and without notice to the Seller, purchase all or part of the Mortgage
Loans without conducting any partial or complete examination. The fact that the
Purchaser or any person has conducted or has
<PAGE>
-5-
failed to conduct any partial or complete examination of the Mortgage Files
shall not affect the rights of the Purchaser or any assignee, transferee or
designee of the Purchaser to demand repurchase or other relief as provided
herein or under the Pooling and Servicing Agreement.
SECTION 5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE SELLER.
(a) The Seller hereby represents and warrants to the Originator and
the Purchaser, as of the date hereof and as of the Closing Date, and covenants,
that:
(i) The Seller is duly organized, validly existing and in good
standing as a corporation under the laws of the State of California with full
corporate power and authority to conduct its business as presently conducted by
it to the extent material to the consummation of the transactions contemplated
herein. The Seller had the full corporate power and authority to own the
Mortgage Loans and to transfer and convey the Mortgage Loans to the Purchaser
and has the full corporate power and authority to execute and deliver, engage in
the transactions contemplated by, and perform and observe the terms and
conditions of this Agreement.
(ii) The Seller has duly authorized the execution, delivery and
performance of this Agreement, has duly executed and delivered this Agreement,
and this Agreement, assuming due authorization, execution and delivery by the
Originator and the Purchaser, constitutes a legal, valid and binding obligation
of the Seller, enforceable against it in accordance with its terms except as the
enforceability thereof may be limited by bankruptcy, insolvency or
reorganization or by general principles of equity.
(iii) The execution, delivery and performance of this Agreement
by the Seller (x) does not conflict and will not conflict with, does not breach
and will not result in a breach of and does not constitute and will not
constitute a default (or an event, which with notice or lapse of time or both,
would constitute a default) under (A) any terms or provisions of the articles of
incorporation or by-laws of the Seller, (B) any term or provision of any
material agreement, contract, instrument or indenture, to which the Seller is a
party or by which the Seller or any of its property is bound, or (C) any law,
rule, regulation, order, judgment, writ, injunction or decree of any court or
governmental authority having jurisdiction over the Seller or any of its
property and (y) does not create or impose and will not result in the creation
or imposition of any lien, charge or encumbrance which would have a material
adverse effect upon the Mortgage Loans or any documents or instruments
evidencing or securing the Mortgage Loans.
(iv) No consent, approval, authorization or order of,
registration or filing with, or notice on behalf of the Seller to any
governmental authority or court is required, under federal laws or the laws of
the State of California, for the execution, delivery and performance by the
Seller of, or compliance by the Seller with, this Agreement or the consummation
by the Seller of any other transaction contemplated hereby and by the Pooling
and Servicing Agreement; provided, however, that the Seller makes no
representation or warranty regarding federal or state securities laws in
connection with the sale or distribution of the Certificates.
<PAGE>
-6-
(v) This Agreement does not contain any untrue statement of
material fact or omit to state a material fact necessary to make the statements
contained herein not misleading. The written statements, reports and other
documents prepared and furnished or to be prepared and furnished by the Seller
pursuant to this Agreement or in connection with the transactions contemplated
hereby taken in the aggregate do not contain any untrue statement of material
fact or omit to state a material fact necessary to make the statements contained
therein not misleading.
(vi) The Seller is not in violation of, and the execution and
delivery of this Agreement by the Seller and its performance and compliance with
the terms of this Agreement will not constitute a violation with respect to, any
order or decree of any court or any order or regulation of any federal, state,
municipal or governmental agency having jurisdiction over the Seller or its
assets, which violation might have consequences that would materially and
adversely affect the condition (financial or otherwise) or the operation of the
Seller or its assets or might have consequences that would materially and
adversely affect the performance of its obligations and duties hereunder.
(vii) The Seller does not believe, nor does it have any reason
or cause to believe, that it cannot perform each and every covenant contained in
this Agreement.
(viii) Immediately prior to the sale of the Mortgage Loans to
the Purchaser as herein contemplated, the Seller was the owner of the related
Mortgage and the indebtedness evidenced by the related Mortgage Note, and, upon
the payment to the Seller of the Purchase Price, in the event that the Seller
retains or has retained record title, the Seller shall retain such record title
to each Mortgage, each related Mortgage Note and the related Mortgage Files with
respect thereto in trust for the Purchaser as the owner thereof from and after
the date hereof.
(ix) There are no actions or proceedings against, or
investigations known to it of, the Seller before any court, administrative or
other tribunal (A) that might prohibit its entering into this Agreement, (B)
seeking to prevent the sale of the Mortgage Loans by the Seller or the
consummation of the transactions contemplated by this Agreement or (C) that
might prohibit or materially and adversely affect the performance by the Seller
of its obligations under, or validity or enforceability of, this Agreement.
(x) The consummation of the transactions contemplated by this
Agreement are in the ordinary course of business of the Seller, and the
transfer, assignment and conveyance of the Mortgage Notes and the Mortgages by
the Seller are not subject to the bulk transfer or any similar statutory
provisions.
(xi) [intentionally omitted]
(xii) The Seller has not dealt with any broker, investment
banker, agent or other person, except for the Purchaser or any of its
affiliates, that may be entitled to any commission or compensation in connection
with the sale of the Mortgage Loans (except that an
<PAGE>
-7-
entity that previously financed the Seller's ownership of the Mortgage Loans may
be entitled to a fee to release its security interest in the Mortgage Loans,
which fee shall have been paid and which security interest shall have been
released on or prior to the Closing Date).
(xiii) There is no litigation currently pending or, to the best
of the Seller's knowledge without independent investigation, threatened against
the Seller that would reasonably be expected to adversely affect the transfer of
the Mortgage Loans, the issuance of the Certificates or the execution, delivery,
performance or enforceability of this Agreement, or that would result in a
material adverse change in the financial condition of the Seller.
(b) The Originator hereby represents and warrants to the Seller and
the Purchaser, as of the date hereof and as of the Closing Date, and covenants,
that:
(i) The Originator is duly organized, validly existing and in
good standing as a corporation under the laws of the State of California with
full corporate power and authority to conduct its business as presently
conducted by it to the extent material to the consummation of the transactions
contemplated herein. The Originator had the full corporate power and authority
to own the Mortgage Loans and to transfer and convey the Mortgage Loans to the
Seller and has the full corporate power and authority to execute and deliver,
engage in the transactions contemplated by, and perform and observe the terms
and conditions of this Agreement.
(ii) The Originator has duly authorized the execution, delivery
and performance of this Agreement, has duly executed and delivered this
Agreement, and this Agreement, assuming due authorization, execution and
delivery by the Seller and the Purchaser, constitutes a legal, valid and binding
obligation of the Originator, enforceable against it in accordance with its
terms except as the enforceability thereof may be limited by bankruptcy,
insolvency or reorganization or by general principles of equity.
(iii) The execution, delivery and performance of this Agreement
by the Originator (x) does not conflict and will not conflict with, does not
breach and will not result in a breach of and does not constitute and will not
constitute a default (or an event, which with notice or lapse of time or both,
would constitute a default) under (A) any terms or provisions of the articles of
incorporation or by-laws of the Originator, (B) any term or provision of any
material agreement, contract, instrument or indenture, to which the Originator
is a party or by which the Originator or any of its property is bound, or (C)
any law, rule, regulation, order, judgment, writ, injunction or decree of any
court or governmental authority having jurisdiction over the Originator or any
of its property and (y) does not create or impose and will not result in the
creation or imposition of any lien, charge or encumbrance which would have a
material adverse effect upon the Mortgage Loans or any documents or instruments
evidencing or securing the Mortgage Loans.
(iv) No consent, approval, authorization or order of,
registration or filing with, or notice on behalf of the Seller to any
governmental authority or court is required, under federal laws or the laws of
the State of California, for the execution, delivery and performance by
<PAGE>
-8-
the Originator of, or compliance by the Originator with, this Agreement or the
consummation by the Originator of any other transaction contemplated hereby and
by the Pooling and Servicing Agreement; provided, however, that the Originator
makes no representation or warranty regarding federal or state securities laws
in connection with the sale or distribution of the Certificates.
(v) In this Agreement the Originator has not made any untrue
statement of material fact or omit to state a material fact necessary to make
the statements contained herein
<PAGE>
-8-
not misleading. The written statements, reports and other documents prepared and
furnished or to be prepared and furnished by the Originator pursuant to this
Agreement or in connection with the transactions contemplated hereby taken in
the aggregate do not contain any untrue statement of material fact or omit to
state a material fact necessary to make the statements contained therein not
misleading.
(vi) The Originator is not in violation of, and the execution
and delivery of this Agreement by the Originator and its performance and
compliance with the terms of this Agreement will not constitute a violation with
respect to, any order or decree of any court or any order or regulation of any
federal, state, municipal or governmental agency having jurisdiction over the
Originator or its assets, which violation might have consequences that would
materially and adversely affect the condition (financial or otherwise) or the
operation of the Originator or its assets or might have consequences that would
materially and adversely affect the performance of its obligations and duties
hereunder.
(vii) The Originator is a HUD approved mortgagee pursuant to
Section 203 of the National Housing Act. No event has occurred, including but
not limited to a change in insurance coverage, that would make the Originator
unable to comply with HUD eligibility requirements or that would require
notification to HUD.
(viii) The Originator does not believe, nor does it have any
reason or cause to believe, that it cannot perform each and every covenant
contained in this Agreement.
(ix) Immediately prior to the sale of the Mortgage Loans to the
Seller, the Originator was the owner of the related Mortgage and the
indebtedness evidenced by the related Mortgage Note, and, upon the payment to
the Originator of the Purchase Price, in the event that the Originator retains
or has retained record title, the Originator shall retain such record title to
each Mortgage, each related Mortgage Note and the related Mortgage Files with
respect thereto in trust for the Seller as the owner thereof from and after the
date hereof.
(x) There are no actions or proceedings against, or
investigations known to it of, the Originator before any court, administrative
or other tribunal (A) that might prohibit its entering into this Agreement, (B)
seeking to prevent the sale of the Mortgage Loans by the Originator or the
consummation of the transactions contemplated by this Agreement or (C) that
might prohibit or materially and adversely affect the performance by the
Originator of its obligations under, or validity or enforceability of, this
Agreement.
<PAGE>
-9-
(xi) The consummation of the transactions contemplated by this
Agreement are in the ordinary course of business of the Originator, and the
transfer, assignment and conveyance of the Mortgage Notes and the Mortgages by
the Originator are not subject to the bulk transfer or any similar statutory
provisions.
(xii) The information delivered by the Originator to the Seller
with respect to the Originator's loan loss, foreclosure and delinquency
experience on mortgage loans is true and correct in all material respects.
(xiii) The Originator has not dealt with any broker, investment
banker, agent or other person, except for the Seller or any of its affiliates,
that may be entitled to any commission or compensation in connection with the
sale of the Mortgage Loans (except that an entity that previously financed the
Originator's ownership of the Mortgage Loans may be entitled to a fee to release
its security interest in the Mortgage Loans, which fee shall have been paid and
which security interest shall have been released on or prior to the Closing
Date).
(xiv) There is no litigation currently pending or, to the best
of the Originator's knowledge without independent investigation, threatened
against the Originator that would reasonably be expected to adversely affect the
transfer of the Mortgage Loans, the issuance of the Certificates or the
execution, delivery, performance or enforceability of this Agreement, or that
would result in a material adverse change in the financial condition of the
Originator.
SECTION 6. REPRESENTATIONS AND WARRANTIES OF THE ORIGINATOR RELATING
TO THE MORTGAGE LOANS.
REPRESENTATIONS AND WARRANTIES AS TO INDIVIDUAL MORTGAGE LOANS. The
Originator hereby represents and warrants to the Purchaser that as to each
Mortgage Loan as of the Closing Date:
(i) The information set forth in the Mortgage Loan Schedule,
including the field concerning any related Prepayment Charge, is complete, true
and correct as of the Cut-off Date;
(ii) The Mortgage Loan is in compliance with all requirements set
forth on Exhibit 6, and the characteristics of the Mortgage Loans as set forth
on Exhibit 6 are true and correct;
(iii) (a) All payments required to be made on or before the first
day of the month prior to the month of the Closing Date, with respect to such
Mortgage Loan under the terms of the Mortgage Note have been made; (b) the
Originator has not advanced funds, or induced, solicited or knowingly received
any advance of funds from a party other than the owner of the related Mortgaged
Property, directly or indirectly, for the payment of any amount required by the
Mortgage Note or Mortgage; and (c) except with respect to approximately 1.46% of
the Mortgage Loans which were 30 days or more but less than 60 days delinquent
in payments and with respect to approximately 0.07% of the Mortgage Loans which
were 60 days or more but less than 90 days
<PAGE>
-10-
delinquent in their payments as of the Cut-off Date, in each case by outstanding
principal balance of the Mortgage Loans as of the Cut-off Date, as of the
Cut-off Date, the payment required under any Mortgage Loan is not now and has
not been 30 or more days delinquent more than once during the last twelve
months;
(iv) There are no delinquent taxes, ground rents, water charges,
sewer rents, assessments, insurance premiums, leasehold payments, including
assessments payable in future installments or other outstanding charges
affecting the related Mortgaged Property;
(v) To the best knowledge of the Originator, the terms of the
Mortgage Note and the Mortgage have not been impaired, waived, altered or
modified in any respect, except by written instruments, recorded in the
applicable public recording office if necessary to maintain the lien priority of
the Mortgage; the substance of any such waiver, alteration or modification has
been approved by the title insurer, to the extent required by the related
policy, and is reflected on the Mortgage Loan Schedule. No instrument of waiver,
alteration or modification has been executed by the Originator or the Seller or
any other person in the chain of title from the Originator to the Seller, and no
Mortgagor has been released, in whole or in part, except in connection with an
assumption agreement approved by the title insurer, to the extent required by
the policy, and the terms of which are reflected in the Mortgage Loan Schedule;
(vi) Prior to their transfer to the Purchaser by the Seller, the
Mortgage Note and the Mortgage are not subject to any right of rescission,
set-off, counterclaim or defense, including the defense of usury, nor will the
operation of any of the terms of the Mortgage Note and the Mortgage, or the
exercise of any right thereunder, render the Mortgage unenforceable, in whole or
in part, or subject to any right of rescission, set-off, counterclaim or
defense, including the defense of usury and no such right of rescission,
set-off, counterclaim or defense has been asserted with respect thereto;
(vii) All buildings upon the Mortgaged Property are insured by a
generally acceptable insurer against loss by fire, hazards of extended coverage
and such other hazards as are customary in the area where the Mortgaged Property
is located, pursuant to insurance policies conforming to the requirements of the
Pooling and Servicing Agreement. All such insurance policies contain a standard
mortgagee clause naming the Originator, its successors and assigns as mortgagee
and all premiums thereon have been paid. If upon origination of the Mortgage
Loan, the Mortgaged Property was in an area identified on a Flood Hazard Map or
Flood Insurance Rate Map issued by the Federal Emergency Management Agency as
having special flood hazards (and such flood insurance has been made available)
a flood insurance policy meeting the requirements of the current guidelines of
the Federal Insurance Administration is in effect which policy conforms to the
requirements of Fannie Mae and Freddie Mac. The Mortgage obligates the Mortgagor
thereunder to maintain all such insurance at the Mortgagor's cost and expense,
and on the Mortgagor's failure to do so, authorizes the holder of the Mortgage
to maintain such insurance at Mortgagor's cost and expense and to seek
reimbursement therefor from the Mortgagor;
<PAGE>
-11-
(viii) Any and all requirements of any federal, state or local law
including, without limitation, usury, truth in lending, real estate settlement
procedures, consumer credit protection, equal credit opportunity or disclosure
laws applicable to the origination and servicing of the Mortgage Loan have been
complied with. Any and all statements or acknowledgments required to be made by
the Mortgagor relating to such requirements are and will remain in the Mortgage
File;
(ix) The Mortgage has not been satisfied, canceled, subordinated or
rescinded, in whole or in part, and the Mortgaged Property has not been released
from the lien of the Mortgage, in whole or in part, nor has any instrument been
executed that would effect any such satisfaction, cancellation, subordination,
rescission or release;
(x) The Mortgage is a valid, existing and enforceable first lien on
the Mortgaged Property, including all improvements on the Mortgaged Property
subject only to (a) the lien of current real property taxes and assessments not
yet due and payable, (b) covenants, conditions and restrictions, rights of way,
easements and other matters of the public record as of the date of recording
being acceptable to mortgage lending institutions generally and specifically
referred to in the lender's title insurance policy delivered to the originator
of the Mortgage Loan and which do not adversely affect the appraised value of
the Mortgaged Property and (c) other matters to which like properties are
commonly subject which do not materially interfere with the benefits of the
security intended to be provided by the Mortgage or the use, enjoyment, value or
marketability of the related Mortgaged Property. Any security agreement, chattel
mortgage or equivalent document related to and delivered in connection with the
Mortgage Loan establishes and creates a valid, existing and enforceable first
lien and first priority security interest on the property described therein and,
as of the time it contributed the Mortgage Loan to the Seller, the Originator
had full right to contribute and assign the same to the Seller. The Mortgaged
Property was not, as of the date of origination of the Mortgage Loan, subject to
a mortgage, deed of trust, deed to secure debt or other security instrument
creating a lien subordinate to the lien of the Mortgage;
(xi) The Mortgage Note and the related Mortgage are genuine and each
is the legal, valid and binding obligation of the maker thereof, enforceable in
accordance with its terms;
(xii) All parties to the Mortgage Note and the Mortgage had legal
capacity to enter into the Mortgage Loan and to execute and deliver the Mortgage
Note and the Mortgage, and the Mortgage Note and the Mortgage have been duly and
properly executed by such parties. The Mortgagor is a natural person who is a
party to the Mortgage Note and the Mortgage is in an individual capacity or
family trust that is guaranteed by a natural person;
(xiii) The proceeds of the Mortgage Loan have been fully disbursed
to or for the account of the Mortgagor and there is no obligation for the
Mortgagee to advance additional funds thereunder and any and all requirements as
to completion of any on-site or off-site improvement and as to disbursements of
any escrow funds therefor have been complied with. All costs, fees and expenses
incurred in making or closing the Mortgage Loan and the recording of the
Mortgage have
<PAGE>
-12-
been paid, and the Mortgagor is not entitled to any refund of any
amounts paid or due to the Mortgagee pursuant to the Mortgage Note or Mortgage;
(xiv) As of the Closing Date and prior to the sale of the Mortgage
Loan to the Purchaser, the Seller was the sole legal, beneficial and equitable
owner of the Mortgage Note and the Mortgage and has full right to transfer and
sell the Mortgage Loan to the Purchaser free and clear of any encumbrance,
equity, lien, pledge, charge, claim or security interest;
(xv) All parties which have had any interest in the Mortgage Loan,
whether as mortgagee, assignee, pledgee or otherwise, are (or, during the period
in which they held and disposed of such interest, were) in compliance with any
and all applicable "doing business" and licensing requirements of the laws of
the state wherein the Mortgaged Property is located (except with respect to the
time during which the Mortgage Loan was held by Salomon Brothers Realty Corp.);
(xvi) The Mortgage Loan is covered by an ALTA lender's title
insurance policy with an adjustable rate mortgage endorsement, such endorsement
substantially in the form of ALTA Form 6.0 or 6.1, acceptable to Fannie Mae or
Freddie Mac, issued by a title insurer acceptable to Fannie Mae and Freddie Mac
and qualified to do business in the jurisdiction where the Mortgaged Property is
located, insuring (subject to the exceptions contained in (x)(a) and (b) above)
the Originator, its successors and assigns as to the first priority lien of the
Mortgage in the original principal amount of the Mortgage Loan and against any
loss by reason of the invalidity or unenforceability of the lien resulting from
the provisions of the Mortgage providing for adjustment in the Mortgage Rate and
monthly payment. Additionally, such lender's title insurance policy
affirmatively insures ingress and egress to and from the Mortgaged Property, and
against encroachments by or upon the Mortgaged Property or any interest therein.
The Originator is the sole insured of such lender's title insurance policy, and
such lender's title insurance policy is in full force and effect and will be in
full force and effect upon the consummation of the transactions contemplated by
this Agreement. No claims have been made under such lender's title insurance
policy, and no prior holder of the related Mortgage, including the Originator,
has done, by act or omission, anything which would impair the coverage of such
lender's title insurance policy;
(xvii) Other than as specified in paragraph (iii) above, there is no
default, breach, violation or event of acceleration existing under the Mortgage
or the Mortgage Note and no event which, with the passage of time or with notice
and the expiration of any grace or cure period, would constitute a default,
breach, violation or event of acceleration, and the Originator has not waived
any default, breach, violation or event of acceleration;
(xviii) There are no mechanics' or similar liens or claims which
have been filed for work, labor or material (and no rights are outstanding that
under law could give rise to such lien) affecting the related Mortgaged Property
which are or may be liens prior to, or equal or coordinate with, the lien of the
related Mortgage;
<PAGE>
-13-
(xix) All improvements which were considered in determining the
appraised value of the related Mortgaged Property lay wholly within the
boundaries and building restriction lines of the Mortgaged Property, and no
improvements on adjoining properties encroach upon the Mortgaged Property. Each
appraisal has been performed in accordance with the provisions of the Financial
Institutions Reform, Recovery and Enforcement Act of 1989;
(xx) The Mortgage Loan was (i) originated by the Originator or by a
savings and loan association, a savings bank, a commercial bank or similar
banking institution which is supervised and examined by a federal or state
authority, or by a mortgagee approved as such by the Secretary of HUD or (ii)
acquired by the Originator directly through loan brokers or correspondents such
that (a) the Mortgage Loan was originated in conformity with the Originator's
underwriting guidelines, (b) the Originator approved the Mortgage Loan prior to
funding and (c) the Originator provided the funds used to originate the Mortgage
Loan and acquired the Mortgage Loan on the date of origination thereof;
(xxi) Principal payments on the Mortgage Loan commenced no more than
two months after the proceeds of the Mortgage Loan were disbursed. The Mortgage
Loan bears interest at the Mortgage Rate. The Mortgage Note is payable on the
first day of each month in Monthly Payments which are changed on each Adjustment
Date to an amount which will amortize the Stated Principal Balance of the
Mortgage Loan over its remaining term at the Mortgage Rate. Interest on the
Mortgage Loan is calculated on the basis of a 360-day year consisting of twelve
30- day months. The Mortgage Note does not permit negative amortization. The
Mortgage Loan does not permit the Mortgagor to convert the Mortgage Loan to a
fixed rate Mortgage Loan;
(xxii) The origination and collection practices used by the
Originator with respect to each Mortgage Note and Mortgage have been in all
respects legal, proper, prudent and customary in the mortgage origination and
servicing industry. The Mortgage Loan has been serviced by the Originator
(directly or through a subservicer) and any predecessor servicer in accordance
with the terms of the Mortgage Note. With respect to escrow deposits and Escrow
Payments, if any, all such payments are in the possession of, or under the
control of, the Originator and there exist no deficiencies in connection
therewith for which customary arrangements for repayment thereof have not been
made. No escrow deposits or Escrow Payments or other charges or payments due the
Originator have been capitalized under any Mortgage or the related Mortgage
Note;
(xxiii) The Mortgaged Property is free of damage and waste and there
is no proceeding pending for the total or partial condemnation thereof;
(xxiv) The Mortgage and related Mortgage Note contain customary and
enforceable provisions such as to render the rights and remedies of the holder
thereof adequate for the realization against the Mortgaged Property of the
benefits of the security provided thereby, including, (a) in the case of a
Mortgage designated as a deed of trust, by trustee's sale, and (b) otherwise by
judicial foreclosure. Since the date of origination of the Mortgage Loan, the
Mortgaged Property has not been subject to any bankruptcy proceeding or
foreclosure proceeding
<PAGE>
-14-
and the Mortgagor has not filed for protection under applicable bankruptcy laws.
There is no homestead or other exemption available to the Mortgagor which would
interfere with the right to sell the Mortgaged Property at a trustee's sale or
the right to foreclose the Mortgage. The Mortgagor has not notified the
Originator and the Originator has no knowledge of any relief requested or
allowed to the Mortgagor under the Soldiers and Sailors Civil Relief Act of
1940;
(xxv) The related Mortgaged Property is not a leasehold estate or,
if such Mortgaged Property is a leasehold estate, the remaining term of such
lease is at least ten (10) years greater than the remaining term of the related
Mortgage Note;
(xxvi) The Mortgage Note is not and has not been secured by any
collateral except the lien of the corresponding Mortgage on the Mortgaged
Property and the security interest of any applicable security agreement or
chattel mortgage referred to in (x) above;
(xxvii) The Mortgage File contains an appraisal of the related
Mortgaged Property made and signed, prior to the approval of the Mortgage Loan
application, by a qualified appraiser, approved by the Originator, who had no
interest, direct or indirect in the Mortgaged Property or in any loan made on
the security thereof, whose compensation is not affected by the approval or
disapproval of the Mortgage Loan and who met the minimum qualifications of
Fannie Mae and Freddie Mac;
(xxviii) In the event the Mortgage constitutes a deed of trust, a
trustee, duly qualified under applicable law to serve as such, has been properly
designated and currently so serves and is named in the Mortgage, and no fees or
expenses are or will become payable by the Purchaser to the trustee under the
deed of trust, except in connection with a trustee's sale after default by the
Mortgagor;
(xxix) No Mortgage Loan contains provisions pursuant to which
Monthly Payments are (a) paid or partially paid with funds deposited in any
separate account established by the Originator, the Mortgagor, or anyone on
behalf of the Mortgagor, (b) paid by any source other than the Mortgagor or (c)
contains any other similar provisions which may constitute a "buydown"
provision. The Mortgage Loan is not a graduated payment mortgage loan and the
Mortgage Loan does not have a shared appreciation or other contingent interest
feature;
(xxx) The Mortgagor has executed a statement to the effect that the
Mortgagor has received all disclosure materials required by applicable law with
respect to the making of adjustable rate mortgage loans; and if the Mortgage
Loan is a Refinanced Mortgage Loan, the Mortgagor has received all disclosure
and rescission materials required by applicable law with respect to the making
of a Refinanced Mortgage Loan, and evidence of such receipt is and will remain
in the Mortgage File;
(xxxi) No Mortgage Loan was made in connection with (a) the
construction or rehabilitation of a Mortgaged Property or (b) facilitating the
trade-in or exchange of a Mortgaged Property;
<PAGE>
-15-
(xxxii) The Mortgage Note, the Mortgage, the Assignment of Mortgage
and any other documents required to be delivered with respect to each Mortgage
Loan pursuant to the Pooling and Servicing Agreement, have been delivered to the
Trustee all in compliance with the specific requirements of the Pooling and
Servicing Agreement;
(xxxiii) The Mortgaged Property is lawfully occupied under
applicable law; all inspections, licenses and certificates required to be made
or issued with respect to all occupied portions of the Mortgaged Property and,
with respect to the use and occupancy of the same, including but not limited to
certificates of occupancy, have been made or obtained from the appropriate
authorities;
(xxxiv) No error, omission, misrepresentation, negligence, fraud or
similar occurrence with respect to a Mortgage Loan has taken place on the part
of any person, including, without limitation, the Mortgagor, any appraiser, any
builder or developer, or any other party involved in the origination of the
Mortgage Loan or in the application of any insurance in relation to such
Mortgage Loan;
(xxxv) The Assignment of Mortgage is in recordable form and is
acceptable for recording under the laws of the jurisdiction in which the
Mortgaged Property is located;
(xxxvi) Any principal advances made to the Mortgagor prior to the
Cut-off Date have been consolidated with the outstanding principal amount
secured by the Mortgage, and the secured principal amount, as consolidated,
bears a single interest rate and single repayment term. The lien of the Mortgage
securing the consolidated principal amount is expressly insured as having first
lien priority by a title insurance policy, an endorsement to the policy insuring
the mortgagee's consolidated interest or by other title evidence acceptable to
Fannie Mae and Freddie Mac. The consolidated principal amount does not exceed
the original principal amount of the Mortgage Loan;
(xxxvii) No Mortgage Loan has a balloon payment feature;
(xxxviii) If the Residential Dwelling on the Mortgaged Property is a
condominium unit or a unit in a planned unit development (other than a de
minimis planned unit development) such condominium or planned unit development
project meets the Fannie Mae's eligibility requirements;
(xxxix) Neither the Originator nor any affiliate of the Originator
has made a mortgage on any Mortgaged Property other than the Mortgage Loan;
(xl) Any Mortgage Loan subject to the provisions of the
Homeownership and Equity Protection Act of 1994, P.L. 103-325, 108 Stat 2160 was
originated in compliance therewith;
<PAGE>
-16-
(xli) The Mortgage Loan was not intentionally selected by the
Originator in a manner intended to adversely affect the interest of the
Purchaser;
(xlii) The Originator has not dealt with any broker or agent or
other Person who might be entitled to a fee, commission or compensation in
connection with the transaction contemplated by this Agreement other than the
Purchaser except as set forth in the parenthetical in Section 5(xiii) hereof;
(xliii) The Mortgaged Property consists of a parcel of real property
of not more than ten acres with a single family residence erected thereon, or a
two to four-family dwelling, or an individual condominium unit in a low-rise or
high-rise condominium project, or an individual unit in a planned unit
development. The Mortgaged Property is improved with a Residential Dwelling.
Without limiting the foregoing, the Mortgaged Property does NOT consist of any
of the following property types: (a) co-operative units, (b) log homes, (c)
earthen homes, (d) underground homes, (e) mobile homes and (f) manufactured
homes (as defined in the Fannie Mae Originator-Servicer's Guide), except when
the appraisal indicates that the home is of comparable construction to a stick
or beam construction home, is readily marketable, has been permanently affixed
to the site and is not in a mobile home "park." The Mortgaged Property is either
a fee simple estate or a long-term residential lease. If the Mortgage Loan is
secured by a long-term residential lease, unless otherwise specifically
disclosed in the Mortgage Loan Schedule, (A) the terms of such lease expressly
permit the mortgaging of the leasehold estate, the assignment of the lease
without the lessor's consent (or the lessor's consent has been obtained and such
consent is the Mortgage File) and the acquisition by the holder of the Mortgage
of the rights of the lessee upon foreclosure or assignment in lieu of
foreclosure or provide the holder of the Mortgage with substantially similar
protection; (B) the terms of such lease do not (x) allow the termination thereof
upon the lessee's default without the holder of the Mortgage being entitled to
receive written notice of, and opportunity to cure, such default or (y) prohibit
the holder of the Mortgage from being insured under the hazard insurance policy
relating to the Mortgaged Property; (C) the original term of such lease is not
less than 15 years; (D) the term of such lease does not terminate earlier than
ten years after the maturity date of the Mortgage Note; and (E) the Mortgaged
Property is located in a jurisdiction in which the use of leasehold estates for
residential properties is an accepted practice;
(xliv) At the time of origination, the Loan-To-Value Ratio of the
Mortgage Loan was not greater than 95%;
(xlv) The Mortgage, and if required by applicable law the related
Mortgage Note, contains a provision for the acceleration of the payment of the
unpaid principal balance of the Mortgage Loan in the event that the Mortgaged
Property is sold or transferred without the prior written consent of the
Mortgagee, at the option of the Mortgagee;
(xlvi) The Mortgage Loan either contains a customary due-on-sale
clause or may be assumed by a creditworthy purchaser of the related Mortgaged
Property; and
<PAGE>
-17-
(xlvii) As of any Adjustment Date for such Mortgage Loan, the Index
applicable to the determination of the Mortgage Rate on such Mortgage Loan will
be the average of the interbank offered rates for six-month United States dollar
deposits in the London market, generally as published in THE WALL STREET JOURNAL
and as most recently available as of either (i) the first business day 45 days
prior to such Adjustment Date or (ii) the first business day of the month
preceding the month of such Adjustment Date, as specified in the related
Mortgage Note.
SECTION 7. REPURCHASE OBLIGATION FOR DEFECTIVE DOCUMENTATION AND FOR
BREACH OF REPRESENTATION AND WARRANTY.
(a) The representations and warranties contained in Section 6 shall
not be impaired by any review and examination of loan files or other documents
evidencing or relating to the Mortgage Loans or any failure on the part of the
Seller or the Purchaser to review or examine such documents and shall inure to
the benefit of any assignee, transferee or designee of the Purchaser, including
the Trust Administrator on behalf of the Trustee for the benefit of holders of
the Certificates. With respect to the representations and warranties contained
herein as to which the Originator has no knowledge, if it is discovered that the
substance of any such representation and warranty was inaccurate as of the date
such representation and warranty was made or deemed to be made, and such
inaccuracy materially and adversely affects the value of the related Mortgage
Loan or the interest therein of the Purchaser or the Purchaser's assignee,
transferee or designee, then notwithstanding the lack of knowledge by the
Originator with respect to the substance of such representation and warranty
being inaccurate at the time the representation and warranty was made, the
Originator 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 6
that materially and adversely affects the value of any Mortgage Loan or the
interest therein of the Purchaser or the Purchaser's assignee, transferee or
designee, the party discovering such breach shall give prompt written notice to
the Originator. Within sixty (60) days of its discovery or its receipt of notice
of any such missing documentation that was not transferred by the Seller as
described above, or of materially defective documentation, or of any such breach
of a representation and warranty, the Originator promptly shall deliver such
missing document or cure such defect or breach in all material respects or, in
the event the Originator cannot deliver such missing document or cannot cure
such defect or breach, the Originator shall, within ninety (90) days of its
discovery or receipt of notice, repurchase the affected Mortgage Loan at the
Purchase Price (as such term is defined in the Pooling and Servicing Agreement).
The Originator shall amend the Closing Schedule to reflect the withdrawal of
such Mortgage Loan from the terms of this Agreement and the Pooling and
Servicing Agreement. The Originator shall deliver to the Purchaser such amended
Closing Schedule and shall deliver such other documents as are required by this
Agreement or the Pooling and Servicing Agreement within five (5) days of any
such amendment. Any repurchase pursuant to this Section 7(a) shall be
accomplished by transfer to an
<PAGE>
-18-
account designated by the Purchaser of the amount of the Purchase Price in
accordance with Section 2.03 of the Pooling and Servicing Agreement. Any
repurchase required by this Section shall be made in a manner consistent with
Section 2.03 of the Pooling and Servicing Agreement.
(b) It is understood and agreed that the obligations of the
Originator set forth in this Section 7 to cure or repurchase a defective
Mortgage Loan constitute the sole remedies of the Purchaser against the
Originator respecting a missing document or a breach of the representations and
warranties contained in Section 6.
SECTION 8. CLOSING; PAYMENT FOR THE MORTGAGE LOANS. The closing of
the purchase and sale of the Mortgage Loans shall be held at the New York City
office of Thacher Proffitt & Wood at 10:00 a.m. New York City time on the
Closing Date.
The closing shall be subject to each of the following conditions:
(a) All of the representations and warranties of the Seller under
this Agreement shall be true and correct in all material
respects as of the date as of which they are made and no event
shall have occurred which, with notice or the passage of time,
would constitute a default under this Agreement;
(b) All of the representations and warranties of the Originator
under this Agreement shall be true and correct in all material
respects as of the date as of which they are made and no event
shall have occurred which, with notice or the passage of time,
would constitute a default under this Agreement;
(c) The Purchaser shall have received, or the attorneys of the
Purchaser shall have received in escrow (to be released from
escrow at the time of closing), all Closing Documents as
specified in Section 9 of this Agreement, in such forms as are
agreed upon and acceptable to the Purchaser, duly executed by
all signatories other than the Purchaser as required pursuant
to the respective terms thereof;
(d) The Seller shall have delivered or caused to be delivered and
released to the Purchaser or to its designee, all documents
(including without limitation, the Mortgage Loans) required to
be so delivered by the Purchaser pursuant to Section 2.01 of
the Pooling and Servicing Agreement; and
(e) All other terms and conditions of this Agreement and the
Pooling and Servicing Agreement shall have been complied with.
Subject to the foregoing conditions, the Purchaser shall deliver or
cause to be delivered to the Seller on the Closing Date, against delivery and
release by the Seller to the Trustee of all documents required pursuant to the
Pooling and Servicing Agreement, the
<PAGE>
-19-
consideration for the Mortgage Loans as specified in Section 3 of this
Agreement, by delivery to the Seller of the Purchase Price in immediately
available funds.
SECTION 9. CLOSING DOCUMENTS. Without limiting the generality of
Section 8 hereof, the closing shall be subject to delivery of each of the
following documents:
(a) An Officers' Certificate of the Seller, dated the Closing
Date, upon which the Originator, the Purchaser, Financial
Security Assurance, Inc. ("FSA") and Salomon Smith Barney Inc.
(the "Underwriter") may rely, in the form of Exhibit 1 hereto,
and attached thereto copies of the certificate of
incorporation, by-laws and certificate of good standing of the
Seller under the laws of California;
(b) An Officers' Certificate of the Seller, dated the Closing
Date, upon which the Originator, the Purchaser, FSA and the
Underwriter may rely, in the form of Exhibit 2 hereto, with
respect to certain facts regarding the sale of the Mortgage
Loans by the Seller to the Purchaser;
(c) An Opinion of Counsel of the Seller, dated the Closing Date
and addressed to the Originator, the Purchaser, FSA and the
Underwriter, substantially in the form attached hereto as
Exhibit 3;
(d) An Officer's Certificate of the Originator, dated the Closing
Date, upon which the Seller, the Purchaser, FSA and the
Underwriter may rely, in the form of Exhibit 4 hereto, and
attached thereto copies of the certificate of incorporation,
by-laws and certificate of good standing of the Originator
under the laws of its state of incorporation;
(e) An opinion of Counsel of the Originator, dated the Closing
Date and addressed to the Seller, the Purchaser, FSA and the
Underwriter substantially in the form attached hereto as
Exhibit 5;
(f) Such opinions of counsel as the Rating Agencies or the Trustee
may request in connection with the sale of the Mortgage Loans
by the Seller to the Purchaser or the Seller's execution and
delivery of, or performance under, this Agreement;
(g) A letter from KPMG Peat Marwick, L.L.P., certified public
accountants, dated the date hereof, to the effect that they
have performed certain specified procedures as a result of
which they determined that certain information of an
accounting, financial or statistical nature set forth in the
Depositor's Prospectus Supplement, dated December 18, 1998
under the captions "Summary--The Mortgage Loans," "Risk
Factors," "The Mortgage Pool" (except with respect to the
information contained under the caption
<PAGE>
-20-
"The Mortgage Pool--Underwriting Standards") agrees with the
records of the Seller and the information contained under the
captions "The Mortgage Pool--Underwriting Standards" and
"Pooling and Servicing Agreement-- The Master Servicer" agrees
with the records of the Master Servicer; and
(h) Such further information, certificates, opinions and documents
as the Purchaser or the Underwriter may reasonably request.
SECTION 10. COSTS. The Seller shall pay (or shall reimburse the
Purchaser or any other Person to the extent that the Purchaser or such other
Person shall pay) all costs and expenses incurred in connection with the
transfer and delivery of the Mortgage Loans, including without limitation,
recording fees, fees for title policy endorsements and continuations and the
fees for recording Assignments of Mortgage, the fees and expenses of the
Seller's accountants and attorneys, the costs and expenses incurred in
connection with producing the Master Servicer's or any Subservicer's loan loss,
foreclosure and delinquency experience, and the costs and expenses incurred in
connection with obtaining the documents referred to in Sections 9(d), 9(e) and
9(g), the costs and expenses of printing (or otherwise reproducing) and
delivering this Agreement, the Pooling and Servicing Agreement, the
Certificates, the prospectus and prospectus supplement, and any private
placement memorandum relating to the Certificates, the Insurance Agreement and
other related documents, the initial fees, costs and expenses of the Trustee and
the Trust Administrator, the initial fees, costs and expenses of FSA, the fees
and expenses of the Purchaser's counsel in connection with the preparation of
all documents relating to the securitization of the Mortgage Loans, the filing
fee charged by the Securities and Exchange Commission for registration of the
Certificates and the fees charged by any rating agency to rate the Certificates.
All other costs and expenses in connection with the transactions contemplated
hereunder shall be borne by the party incurring such expense.
SECTION 11. SERVICING. The Originator has represented to the
Purchaser that the Mortgage Loans are being serviced by the Originator, in its
capacity as Master Servicer under the Pooling and Servicing Agreement, and that
such Mortgage Loans are not subject to any other servicing agreements with third
parties. It is understood and agreed among the Originator, the Seller and the
Purchaser that the Mortgage Loans are to be delivered free and clear of any
servicing agreements. The Originator, without reimbursement from the Purchaser,
shall pay any fees or penalties required by any servicer for releasing the
Mortgage Loans from any such servicing agreement (it being understood that
neither the Purchaser nor any affiliate of the Purchaser is servicing the
Mortgage Loans under any such servicing agreement and, accordingly, that neither
the Purchaser nor any affiliate of the Purchaser is entitled to receive any fee
for releasing the Mortgage Loans from any such servicing agreement) and shall
arrange for the orderly transfer, as of the Cut-off Date, of such servicing from
any such servicer to the Master Servicer. The Mortgage Loans shall be serviced
by the Originator, in accordance with the terms of the Pooling and Servicing
Agreement. For so long as the Originator services the Mortgage Loans, the
Originator shall be entitled to the Servicing Fee and such other payments as
provided for under the terms of the Pooling and Servicing Agreement.
<PAGE>
-21-
SECTION 12. MANDATORY DELIVERY; GRANT OF SECURITY INTEREST. The sale
and delivery on the Closing Date of the Mortgage Loans described on the Mortgage
Loan Schedule in accordance with the terms and conditions of this Agreement is
mandatory. It is specifically understood and agreed that each Mortgage Loan is
unique and identifiable on the date hereof and that an award of money damages
would be insufficient to compensate the Purchaser for the losses and damages
incurred by the Purchaser in the event of the Seller's failure to deliver the
Mortgage Loans on or before the Closing Date. The Seller hereby grants to the
Purchaser a lien on and a continuing security interest in the Seller's interest
in each Mortgage Loan and each document and instrument evidencing each such
Mortgage Loan to secure the performance by the Seller of its obligation
hereunder, and the Seller agrees that it holds such Mortgage Loans in custody
for the Purchaser, subject to the Purchaser's (i) right, prior to the Closing
Date, to reject any Mortgage Loan to the extent permitted by this Agreement, and
(ii) obligation to deliver or cause to be delivered the consideration for the
Mortgage Loans pursuant to Section 8 hereof. Any Mortgage Loans rejected by the
Purchaser shall concurrently therewith be released from the security interest
created hereby. All rights and remedies of the Purchaser under this Agreement
are distinct from, and cumulative with, any other rights or remedies under this
Agreement or afforded by law or equity and all such rights and remedies may be
exercised concurrently, independently or successively.
Notwithstanding the foregoing, if on the Closing Date, each of the
conditions set forth in Section 8 hereof shall have been satisfied and the
Purchaser shall not have paid or caused to be paid the Purchase Price, or any
such condition shall not have been waived or satisfied and the Purchaser
determines not to pay or cause to be paid the Purchase Price, the Purchaser
shall immediately effect the redelivery of the Mortgage Loans, if delivery to
the Purchaser has occurred, and the security interest created by this Section 12
shall be deemed to have been released.
SECTION 13. NOTICES. All demands, notices and communications
hereunder shall be in writing and shall be deemed to have been duly given if
personally delivered to or mailed by registered mail, postage prepaid, or
transmitted by fax and, receipt of which is confirmed by telephone, if to the
Purchaser, addressed to the Purchaser at 18400 Von Karman, Suite 11-0107,
Irvine, California 92612, fax (949) 440-7033, or such other address as may
hereafter be furnished to the Seller and the Originator in writing by the
Purchaser; and if to the Seller, addressed to the Seller at 18400 Von Karman,
Suite 1000, Irvine, California 92612, fax (949) 440-7033, or to such other
address as the Seller may designate in writing to the Purchaser and the Seller
and if to the Originator, addressed to the Originator at 18400 Von Karman, Suite
1000, Irvine, California 92612, fax (949) 440-7033, or such other address as may
hereafter be furnished to the Seller and the Purchaserr in writing by the
Originator.
SECTION 14. SEVERABILITY OF PROVISIONS. Any part, provision,
representation or warranty of this Agreement that is prohibited or that is held
to be void or unenforceable shall be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions
hereof. Any part, provision, representation or warranty of this Agreement that
is prohibited or unenforceable or is held to be void or unenforceable in any
<PAGE>
-22-
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction as to any Mortgage Loan shall not invalidate or render
unenforceable such provision in any other jurisdiction. To the extent permitted
by applicable law, the parties hereto waive any provision of law which prohibits
or renders void or unenforceable any provision hereof.
SECTION 15. AGREEMENT OF PARTIES. The Originator, the Seller and the
Purchaser each agree to execute and deliver such instruments and take such
actions as either of the others may, from time to time, reasonably request in
order to effectuate the purpose and to carry out the terms of this Agreement and
the Pooling and Servicing Agreement.
SECTION 16. SURVIVAL. (a) The Seller agrees that the
representations, warranties and agreements made by it herein and in any
certificate or other instrument delivered pursuant hereto shall be deemed to be
relied upon by the Purchaser, notwithstanding any investigation heretofore or
hereafter made by the Purchaser or on its behalf, and that the representations,
warranties and agreements made by the Seller herein or in any such certificate
or other instrument shall survive the delivery of and payment for the Mortgage
Loans and shall continue in full force and effect, notwithstanding any
restrictive or qualified endorsement on the Mortgage Notes and notwithstanding
subsequent termination of this Agreement, the Pooling and Servicing Agreement or
the Trust Fund.
(b) The Originator agrees that the representations, warranties and
agreements made by it herein and in any certificate or other instrument
delivered pursuant hereto shall be deemed to be relied upon by the Seller and
the Purchaser notwithstanding any investigation heretofore or hereafter made by
the Seller or the Purchaser or on the behalf of either of them, and that the
representations, warranties and agreements made by the Originator herein or in
any such certificate shall continue in full force and effect, notwithstanding
subsequent termination of this Agreement, the Pooling and Servicing Agreement or
the Trust Fund.
SECTION 17. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS, DUTIES,
OBLIGATIONS AND RESPONSIBILITIES OF THE PARTIES HERETO SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS (INCLUDING THE CHOICE OF LAW PROVISIONS)
AND DECISIONS OF THE STATE OF NEW YORK. THE PARTIES HERETO INTEND THAT THE
PROVISIONS OF SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW SHALL APPLY
TO THIS AGREEMENT.
SECTION 18. MISCELLANEOUS. This Agreement may be executed in two or
more counterparts, each of which when so executed and delivered shall be an
original, but all of which together shall constitute one and the same
instrument. This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective successors and assigns. This Agreement
supersedes all prior agreements and understandings relating to the subject
matter hereof. Neither this Agreement nor any term hereof may be changed,
waived, discharged or
<PAGE>
-23-
terminated orally, but only by an instrument in writing signed by the party
against whom enforcement of the change, waiver, discharge or termination is
sought. The headings in this Agreement are for purposes of reference only and
shall not limit or otherwise affect the meaning hereof.
It is the express intent of the parties hereto that the conveyance
of the Mortgage Loans by the Seller to the Purchaser as provided in Section 4
hereof be, and be construed as, a sale of the Mortgage Loans by the Seller to
the Purchaser and not as a pledge of the Mortgage Loans by the Seller to the
Purchaser to secure a debt or other obligation of the Seller. However, in the
event that, notwithstanding the aforementioned intent of the parties, the
Mortgage Loans are held to be property of the Seller, then (a) it is the express
intent of the parties that such conveyance be deemed a pledge of the Mortgage
Loans by the Seller to the Purchaser to secure a debt or other obligation of the
Seller and (b) (1) this Agreement shall also be deemed to be a security
agreement within the meaning of Articles 8 and 9 of the New York Uniform
Commercial Code; (2) the conveyance provided for in Section 4 hereof shall be
deemed to be a grant by the Seller to the Purchaser of a security interest in
all of the Seller's right, title and interest in and to the Mortgage Loans and
all amounts payable to the holders of the Mortgage Loans in accordance with the
terms thereof and all proceeds of the conversion, voluntary or involuntary, of
the foregoing into cash, instruments, securities or other property, including
without limitation all amounts, other than investment earnings, from time to
time held or invested in the Collection Account whether in the form of cash,
instruments, securities or other property; (3) the possession by the Purchaser
or its agent of Mortgage Notes, the related Mortgages and such other items of
property that constitute instruments, money, negotiable documents or chattel
paper shall be deemed to be "possession by the secured party" for purposes of
perfecting the security interest pursuant to Section 9-305 of the New York
Uniform Commercial Code; and (4) notifications to persons holding such property
and acknowledgments, receipts or confirmations from persons holding such
property shall be deemed notifications to, or acknowledgments, receipts or
confirmations from, financial intermediaries, bailees or agents (as applicable)
of the Purchaser for the purpose of perfecting such security interest under
applicable law. Any assignment of the interest of the Purchaser pursuant to
Section 4(d) hereof shall also be deemed to be an assignment of any security
interest created hereby. The Seller and the Purchaser shall, to the extent
consistent with this Agreement, take such actions as may be necessary to ensure
that, if this Agreement were deemed to create a security interest in the
Mortgage Loans, such security interest would be deemed to be a perfected
security interest of first priority under applicable law and will be maintained
as such throughout the term of this Agreement and the Pooling and Servicing
Agreement.
<PAGE>
IN WITNESS WHEREOF, the Purchaser and the Seller have caused their
names to be signed by their respective officers thereunto duly authorized as of
the date first above written.
NC CAPITAL CORPORATION
By:________________________________
Name: John Kontoulis
Title:
NC RESIDUAL II CORPORATION
By:________________________________
Name: John Kontoulis
Title:
NEW CENTURY MORTGAGE CORPORATION
By:________________________________
Name: John Kontoulis
Title: Vice President
<PAGE>
EXHIBIT 1
[FORM OF OFFICER'S CERTIFICATE OF THE SELLER]
I, __________________ hereby certify that I am the duly appointed
__________________________ of NC Capital Corporation, a California corporation
(the "Company"), and further certify, on behalf of the Company, as follows:
1. Attached hereto as Attachment I is a true and correct copy of the
Articles of Incorporation and By-laws of the Company as in full force and
effect on the date hereof. Attached hereto as Attachment II is a
certificate of good standing, dated December __, 1998, issued by the State
of California with respect to the Company. No event has occurred since the
date thereof that has affected the good standing of the Company under the
laws of the State of California.
2. There are no actions, suits or proceedings pending or, to the
best of my knowledge, threatened against or affecting the Company which,
if adversely determined, individually or in the aggregate, would
materially and adversely affect the Company's ability to perform its
obligations under the Mortgage Loan Purchase Agreement, dated December 18,
1998 (the "Mortgage Loan Purchase Agreement"), among the Company, NC
Residual II Corporation (the "Purchaser") and New Century Mortgage
Corporation (the "Originator"). No proceedings looking toward merger,
consolidation or liquidation, dissolution or bankruptcy of the Company are
pending or contemplated.
3. Each person who, as an officer or representative of the Company,
signed the Mortgage Loan Purchase Agreement and any other document
delivered prior hereto or on the date hereof in connection with the
transactions contemplated by the Mortgage Loan Purchase Agreement was at
the respective times of such signing and delivery, and is as of the date
hereof, duly elected or appointed, qualified and acting as such officer or
representative, and the signatures of such persons appearing on such
documents are their genuine signatures.
4. Each of the Mortgage Loans referred to in the Mortgage Loan
Purchase Agreement was originated in accordance with Section 6(xx) of the
Mortgage Loan Purchase Agreement.
5. Attached hereto as Attachment III is a true and correct copy of
the resolutions duly adopted by the Board of Directors of the Company on
December ___, 1998 (the "Resolutions") with respect to the transactions
contemplated by the Mortgage Loan Purchase Agreement said Resolutions have
not been amended or modified, annulled or revoked and are in full force
and effect on the date hereof.
6. All of the representations and warranties of the Company
contained in the Mortgage Loan Purchase Agreement are true and correct in
all material respects as of the
<PAGE>
Closing Date, and no event has occurred which, with notice or the passage
of time or both, would constitute a default under the Mortgage Loan
Purchase Agreement.
7. The information set forth in the Mortgage Loan Schedule is true
and correct in all material respects.
8. The transactions contemplated in the Mortgage Loan Purchase
Agreement will be reported as a sale in the Company's financial reports.
9. The Company has performed all of its duties and has satisfied all
of the material conditions on its part to be performed or satisfied prior
to the Closing Date.
10. Capitalized terms used but not defined herein shall have the
meanings assigned in the Mortgage Loan Purchase Agreement.
<PAGE>
IN WITNESS WHEREOF, I have hereunto signed my name and affixed the
seal of the Company.
Dated: December ___, 1998
By:________________________________
Name:
[Seal] Title:
I, ____________________________, an [Assistant] Secretary of NC
Capital Corporation, hereby certify that __________________ is the duly
appointed, qualified and acting _______________________ of NC Capital
Corporation and that the signature appearing above is his genuine signature.
IN WITNESS WHEREOF, I have hereunto signed my name.
Dated: December___, 1998
By:________________________________
Name:
Title:
<PAGE>
EXHIBIT 2
[FORM OF OFFICER'S CERTIFICATE OF THE SELLER WITH RESPECT TO CERTAIN
FACTS REGARDING THE SALE OF THE MORTGAGE LOANS]
Salomon Brothers Mortgage Securities VII, Inc.
Callable Floating Rate Mortgage Pass-Through Certificates
Series 1998-NC5
Reference is made to the sale of mortgage loans (the "Mortgage
Loans") by NC Capital Corporation ("NC Capital") to NC Residual II Corporation
("NC Residual") pursuant to the Mortgage Loan Purchase Agreement, dated December
18, 1998 (the "Purchase Agreement"), between NC Residual and NC Capital.
Reference is further made to the transfer of the Mortgage Loans by NC Residual
to Salomon Brothers Mortgage securities VII, Inc. (the "Depositor") pursuant to
the Transfer Agreement dated December 18, 1998 (the "Transfer Agreement"),
between NC Residual and the Depositor and the simultaneous issuance of Callable
Floating Rate Mortgage Pass-Through Certificates, Series 1998-NC5, Class A,
Class CE, Class P, Class S, Class R-I, Class R-II and Class R-III (the
"Certificates"), pursuant to a Pooling and Servicing Agreement, dated as of
December 1, 1998 (the "Pooling and Servicing Agreement"), among the Depositor as
depositor, New Century Mortgage Corporation as master servicer (the "Master
Servicer"), Firstar Bank Milwaukee, N.A. as trustee (the "Trustee") and U.S.
Bank National Association as trust administrator. In consideration for its
purchase of the Mortgage Loans, the Depositor will deliver to NC Capital
immediately available funds, the Class CE Certificates, the Class P
Certificates, the Class R-I Certificates, the Class R-II Certificates and the
Class R-III Certificates. The Depositor will sell the Class A Certificates to
Salomon Smith Barney, Inc. (the "Underwriter") for offer and sale pursuant to
the terms of an Underwriting Agreement, dated December 18, 1998 (the
"Underwriting Agreement"), between the Depositor and the Underwriter. The
Purchase Agreement, the Transfer Agreement, the Pooling and Servicing Agreement
and the Underwriting Agreement are hereinafter collectively referred to as the
"Agreements." Capitalized terms not otherwise defined herein shall have the
meanings set forth in the Agreements.
The undersigned is a duly appointed ___________________ of NC
Capital Corporation and hereby certifies after reasonable investigation that:
1. The price to be paid to NC Capital for the Mortgage Loans will
have been paid in full at the closing of the sale pursuant to the Purchase
Agreement, and no agreement or arrangement exists or will exist that permits the
modification of the consideration for the Mortgage Loans subsequent to that
sale. NC Capital will not have any right or obligation to repurchase any
Mortgage Loan, except as provided in the Purchase Agreement.
2. Each Mortgage Note and each related Mortgage has been
appropriately prepared and duly executed and delivered by the related Mortgagor,
and each Mortgage has been appropriately recorded in the applicable jurisdiction
and any intervening endorsement of any Mortgage Note and any intervening
assignment of any Mortgage, which was required in order to transfer to NC
Capital ownership of the Mortgage Loans, was obtained and completed.
<PAGE>
3. Each Mortgage Note has been endorsed or assigned in a manner that
satisfies all requirements necessary to transfer to the Trustee all right, title
and interest of the party so endorsing or assigning, as noteholder or transferee
thereof, in and to that Mortgage Note, as provided in the Purchase Agreement and
the Pooling and Servicing Agreement. Each Assignment is in recordable form and
is sufficient to effect the assignment and transfer to the Depositor of the
benefits of the assignor, as original mortgagee or assignee thereof, under each
Mortgage to which that Assignment relates, as provided in the Purchase Agreement
and the Pooling and Servicing Agreement. Each Assignment has been or will be
appropriately recorded to the extent required under applicable law, as provided
in the Purchase Agreement.
4. Each original Mortgage Note, each original recorded Mortgage,
each original recorded intervening Assignment and each Assignment has been
delivered to the Trustee at the direction of the Depositor.
5. Immediately prior to the transfer of the Mortgage Loans by NC
Capital to NC Residual, NC Capital was the sole owner of each Mortgage Loan,
free and clear of any and all prior liens, mortgages, security interests,
pledges, participation interests, adverse claims, charges or other equities or
encumbrances of any nature, and had full right and authority to sell, assign and
transfer the Mortgage Loans.
6. No Mortgage Note, Mortgage or other document constituting part of
the Mortgage File reflects or will reflect on its face any interest that is
inconsistent with the ownership interest of the Trustee in and to the Mortgage
Loans or the transfer of the Mortgage Loans by NC Capital to the Trustee.
7. The transfer of the Mortgage Loans by NC Capital to NC Residual
as provided in the Purchase Agreement is intended by NC Capital to be, and is in
fact, a contemporaneous exchange in which NC Capital receives new value.
8. NC Capital was solvent at all relevant times prior to, and will
not be rendered insolvent by, the transfer of the Mortgage Loans to NC Capital.
9. NC Capital did not transfer the Mortgage Loans to the Depositor
with any intent to hinder, delay or defraud any of NC Capital's creditors.
10. Neither NC Capital nor any agent acting on behalf of it, has
been or will become a party to any fraud or illegality affecting any Mortgage
Loan or Certificate.
11. To the best of my knowledge, no breach of the Agreements by any
party, misrepresentation or failure by any party to perform all acts required to
be performed prior to the Closing Date, or fraud or mistake on the part of any
party to the Agreements in connection with the transactions contemplated by the
Agreements, has occurred or will occur.
12. To the best of my knowledge, no party to the Agreements has
taken or will take any action that is unreasonable, arbitrary or capricious, or
that is not taken in good faith or
<PAGE>
in a commercially reasonable manner, affecting the Mortgage Loans in connection
with the transactions contemplated by the Agreements.
13. To the best of my knowledge, there is not and will not be any
other agreement among the parties to the Agreements that modifies or otherwise
supplements the agreement of the parties as expressed in the Agreements.
14. NC Capital does not have and will not have any right to modify
or alter the terms of the transfer of the Mortgage Loans by NC Capital to the
Depositor, or to substitute or add any mortgage loan thereafter, except as
provided in the Agreements.
15. NC Capital will not take any action that is inconsistent with
the ownership interest in the Mortgage Loans evidenced by the Certificates. NC
Capital will promptly indicate to other persons or entities, when a response is
appropriate, that the Mortgage Loans were transferred by NC Capital to the
Depositor. NC Capital will not claim any ownership interest directly in the
Mortgage Loans other than that represented by Certificates in which it may have
an ownership interest from time to time.
16. Under generally accepted accounting principles ("GAAP") and for
federal income tax purposes, NC Capital will report the transfer of the Mortgage
Loans to NC Residual, as provided in the Purchase Agreement as a sale of all of
its interest in the Mortgage Loans. NC Capital has been advised by or has
confirmed with its independent public accountants for similar transactions that
the sale will be so classified under GAAP in accordance with Statement No. 125
of the Financial Accounting Standards Board.
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Certificate as
of the ___th day of December, 1998.
NC CAPITAL CORPORATION
By:________________________________
Name:
Title:
<PAGE>
EXHIBIT 3
[FORM OF OPINION OF COUNSEL TO THE SELLER]
<PAGE>
EXHIBIT 4
[FORM OF OFFICER'S CERTIFICATE OF THE ORIGINATOR]
I, __________________ hereby certify that I am the duly appointed
__________________________ of New Century Corporation, a California corporation
(the "Company"), and further certify, on behalf of the Company, as follows:
1. Attached hereto as Attachment I is a true and correct copy of the
Articles of Incorporation and By-laws of the Company as in full force and
effect on the date hereof. Attached hereto as Attachment II is a
certificate of good standing, dated December __, 1998, issued by the State
of California with respect to the Company. No event has occurred since the
date thereof that has affected the good standing of the Company under the
laws of the State of California.
2. There are no actions, suits or proceedings pending or, to the
best of my knowledge, threatened against or affecting the Company which,
if adversely determined, individually or in the aggregate, would
materially and adversely affect the Company's ability to perform its
obligations under the Mortgage Loan Purchase Agreement, dated December
___, 1998 (the "Mortgage Loan Purchase Agreement"), among the Company, NC
Residual II Corporation (the "Purchaser") and NC Capital Corporation (the
"Seller") or the Pooling and Servicing Agreement, dated as of December 1,
1998 (the "Pooling and Servicing Agreement"), among Salomon Brothers
Mortgage Securities VII, Inc. (the "Depositor") as depositor, the Company
as master servicer, Firstar Bank Milwaukee, N.A. as trustee and U.S. Bank
National Association as trust administrator. No proceedings looking toward
merger, consolidation or liquidation, dissolution or bankruptcy of the
Company are pending or contemplated.
3. Each person who, as an officer or representative of the Company,
signed the Mortgage Loan Purchase Agreement and the Pooling and Servicing
Agreement and any other document delivered prior hereto or on the date
hereof in connection with the transactions contemplated by the Mortgage
Loan Purchase Agreement and the Pooling and Servicing Agreement was at the
respective times of such signing and delivery, and is as of the date
hereof, duly elected or appointed, qualified and acting as such officer or
representative, and the signatures of such persons appearing on such
documents are their genuine signatures.
4. Each of the Mortgage Loans referred to in the Mortgage Loan
Purchase Agreement was originated in accordance with Section 6(xx) of the
Mortgage Loan Purchase Agreement.
5. Attached hereto as Attachment III is a true and correct copy of
the resolutions duly adopted by the Board of Directors of the Company on
December ___, 1998 (the "Resolutions") with respect to the transactions
contemplated by the Mortgage Loan Purchase Agreement and the Pooling and
Servicing Agreement; said Resolutions
<PAGE>
have not been amended or modified, annulled or revoked and are in full
force and effect on the date hereof.
6. All of the representations and warranties of the Company
contained in the Mortgage Loan Purchase Agreement and the Pooling and
Servicing Agreement are true and correct in all material respects as of
the Closing Date, and no event has occurred which, with notice or the
passage of time or both, would constitute a default under the Mortgage
Loan Purchase Agreement or an Event of Default under the Pooling and
Servicing Agreement.
7. The information set forth in the Mortgage Loan Schedule is true
and correct in all material respects.
8. The information contained in the Prospectus Supplement, dated
December 18, 1998 including, but not limited to, information contained in
the data file, specifically for use in the preparation of the Prospectus
Supplement, relating to the Mortgage Loans and its loan portfolio,
specifically the information, in the summary under the subheadings
"Summary--The Mortgage Pool," "Risk Factors," "The Mortgage Pool" and
"Pooling and Servicing Agreement--The Master Servicer" is true and
accurate and does not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which
they were made, not misleading.
9. The Company has performed all of its duties and has satisfied all
of the material conditions on its part to be performed or satisfied prior
to the Closing Date.
11. Capitalized terms used but not defined herein shall have the
meanings assigned in the Mortgage Loan Purchase Agreement.
<PAGE>
IN WITNESS WHEREOF, I have hereunto signed my name and affixed the
seal of the Company.
Dated: December ___, 1998
By:________________________________
Name:
[Seal] Title:
I, ____________________________, an [Assistant] Secretary of NC
Capital Corporation, hereby certify that __________________ is the duly
appointed, qualified and acting _______________________ of NC Capital
Corporation and that the signature appearing above is his genuine signature.
IN WITNESS WHEREOF, I have hereunto signed my name.
Dated: December___, 1998
By:________________________________
Name:
Title:
<PAGE>
EXHIBIT 5
[FORM OF OPINION OF COUNSEL FOR ORIGINATOR]
December __, 1998
NC Capital Corporation Salomon Smith Barney Inc.
18400 Von Karman, Suite 1000 Seven World Trade Center
Irvine, California 92612 New York, New York 10048
NC Residual II Corporation Financial Security Assurance Inc.
18400 Von Karman, Suite 1000 350 Park Avenue
Irvine, California 92612 New York, New York 10162
Re: Salomon Brothers Mortgage Securities VII, Inc.
Callable Floating Rate Mortgage Pass-Through
Certificates, Series 1998-NC5
----------------------------------------------
Ladies and Gentlemen:
I have acted as counsel to New Century Mortgage Corporation, a
California corporation (the "Company"), in connection with the sale of certain
mortgage loans, previously sold by the Company to NC Capital Corporation ("NC
Capital"), to NC Residual II Corporation ("NC Residual") pursuant to a Mortgage
Loan Purchase Agreement, dated December 18, 1998 (the "Purchase Agreement"),
among the Company, NC Capital and NC Residual. Salomon Brothers Mortgage
Securities VII, Inc., Callable Floating Rate Mortgage Pass-Through Certificates,
Series 1998-NC5 have or will be issued pursuant to the Pooling and Servicing
Agreement, dated as of December 1, 1998 (the "Pooling Agreement"), among Salomon
Brothers Mortgage Securities VII, Inc., the Company, Firstar Bank Milwaukee,
N.A. and U.S. Bank National Association. Capitalized terms not otherwise defined
herein have the meanings set forth in the Pooling Agreement.
In connection with rendering this opinion letter, I, or attorneys
working under my direction, have examined, among other things, originals,
certified copies or copies otherwise identified to my satisfaction as being true
copies of the following:
A. The Purchase Agreement;
B. The Pooling Agreement;
C. The Company's Certificate of Incorporation and Bylaws, as amended
to date; and
D. Resolutions adopted by the Board of Directors of the Company
with specific reference to actions relating to the transactions
covered by this opinion.
<PAGE>
For the purpose of rendering this opinion, I have made such documentary, factual
and legal examinations as I deemed necessary under the circumstances. As to
factual matters, I have relied upon statements, certificates and other
assurances of public officials and of officers and other representatives of the
Company, and upon such other certificates as I deemed appropriate, which factual
matters have not been independently established or verified by me. I have also
assumed, among other things, the genuineness of all signatures, the legal
capacity of all natural persons, the authenticity of all documents submitted to
me as originals, and the conformity to original documents of all documents
submitted to me as copies and the authenticity of the originals of such copied
documents.
On the basis of and subject to the foregoing examination, and in
reliance thereon, and subject to the assumptions, qualifications, exceptions and
limitations expressed herein, I am of the opinion that:
1. The Company has been duly incorporated and is validly existing and
in good standing under the laws of the State of California with corporate power
and authority to own its properties and conduct its business as presently
conducted by it. The Company has the corporate power and authority to execute,
deliver, and perform its obligations under the Purchase Agreement.
2. The Purchase Agreement has been duly and validly authorized,
executed and delivered by the Company.
3. The Purchase Agreement constitutes valid, legal and binding
obligations of the Company, enforceable against the Company in accordance with
its terms.
4. No consent, approval, authorization or order of any state or
federal court or government agency or body is required for the execution,
delivery and performance by the Company of the Purchase Agreement or the
consummation of the transactions contemplated by the Purchase Agreement, except
for those consents, approvals, authorizations or orders which previously have
been obtained.
5. The fulfillment of the terms of or the consummation of the
transactions contemplated in the Purchase Agreement will not result in a breach
of any term or provision of the Certificate of Incorporation or By-laws of the
Company, or, to the best of my knowledge, will conflict with, result in a breach
or violation of, or constitute a default under, (i) the terms of any indenture
or other agreement or instrument known to me to which the Company is a party or
by which it is bound, (ii) any State of California or federal statute or
regulation applicable to the Company, or (iii) any order of any State of
California or federal court, regulatory body, administrative agency or
governmental body having jurisdiction over the Company, except in any such case
where the default, breach or violation would not have a material adverse effect
on the Company or its ability to perform its obligations under the Purchase
Agreement.
6. There is no action, suit, proceeding or investigation pending or,
to the best of my knowledge, threatened against the Company which, in my
judgment, either in any one instance or in the aggregate, would draw into
question the validity of the Purchase Agreement, which seeks
<PAGE>
to prevent the consummation of any of the transactions contemplated in the
Purchase Agreement or which would be likely to impair materially the ability of
the Company to perform under the terms of the Purchase Agreement.
7. No information has come to my attention that causes me to believe
that the information contained in the Prospectus Supplement, dated December 18,
1998, relating to the Company, its financial condition, its underwriting
standards and its loan portfolio, specifically the information in the
"Summary--The Mortgage Loans," "Risk Factors," "The Mortgage Pool," and "Pooling
and Servicing Agreement--Master Servicer" contained an untrue statement of
material fact or omitted to state a material fact necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading.
The opinions above are subject to the following additional
assumptions, exceptions, qualifications and limitations:
A. I have assumed that all parties to the Purchase Agreement other
than the Seller have all requisite power and authority to
execute, deliver and perform their respective obligations under
the Purchase Agreement, and that the Purchase Agreement has been
duly authorized by all necessary corporate actions on the part of
such parties, has been executed and delivered by such parties and
constitutes the legal, valid and binding obligations of such
parties.
B. My opinion expressed in paragraph 3 above is subject to the
qualifications that the enforceability of the Purchase Agreement
may be limited by the effect of laws relating to (1) bankruptcy,
reorganization, insolvency, moratorium or other similar laws now
or hereafter in effect relating to creditors' rights generally,
including, without limitation, the effect of statutory or other
laws regarding fraudulent conveyances or preferential transfers,
and (2) general principles of equity upon the specific
enforceability of any of the remedies, covenants or other
provisions of the Purchase Agreement and upon the availability of
injunctive relief or other equitable remedies and the application
of principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law)
as such principles relate to limit or affect the enforcement of
creditors' rights generally and the discretion of the court
before which any proceeding for such enforcement may be brought.
I express no opinion as to whether the courts of the United States
located in California or state courts of California would respect or enforce any
contractual provision regarding choice of law, selection of forum or waiver of a
jury trial.
This opinion is given to you for your sole benefit, and no other
person or entity is entitled to rely hereon.
<PAGE>
I am admitted to practice in the State of California, and I render no
opinion herein as to matters involving the laws of any jurisdiction other than
the State of California and the Federal laws of the United States of America.
Very truly yours,
________________________________
<PAGE>
EXHIBIT 6
References to percentage of the Mortgage Loans as set forth in this
Exhibit 6, unless otherwise noted, are calculated based on the aggregate
principal balance of the Mortgage Loans as of the Cut-off Date.
On the Cut-off Date, the Mortgage Loans shall comply with the
following conditions:
(i) no less than _____% of the Mortgage Loans shall have a risk grade
of A+, A+MO, A- or A-MO, no more than_____% of such loans shall have a risk
grade of B and no more than ____% of such loans shall have a risk grade of C, C-
or C-HS; provided, however, with regard to the Delayed First Adjustment Mortgage
Loans, no less than ____% of such loans shall have a risk grade of A+, A+MO, A-
or A-MO, no more than ____% of such loans shall have a risk grade of B and no
more than _____% of such loans shall have a risk grade of C or C-;
(ii) any Mortgage Loan with a loan-to-value ratio between ______% and
_____% shall have a risk grade of A+, A+MO, A-, A-MO or B;
(iii) the weighted average loan-to-value ratio for each of the Mortgage
Loans at origination shall be approximately _____%; provided, however, the
weighted average loan-to-value ratio for each of the Delayed First Adjustment
Mortgage Loans at origination shall be approximately _______%;
(iv) the maximum percentage concentration of Mortgage Loans secured by
mortgaged properties in any one zip code shall be approximately _____%;
(v) approximately _____% of the Mortgage Loans provide for payment by
the mortgagor of a prepayment charge within a specified period as provided in
the related Mortgage Note not in excess of 5 years; provided, however,
approximately _____% of the Delayed First Adjustment Mortgage Loans provide for
payment by the mortgagor of a prepayment charge within a specified period as
provided in the related Mortgage Note not in excess of ___ years;
(vi) the Mortgage Loans shall have a weighted average Mortgage Rate
equal to approximately _____% per annum and a weighted average Gross Margin
equal to approximately _____% per annum, provided, however, the Delayed First
Adjustment Mortgage Loans to be purchased shall have a weighted average Mortgage
Rate equal to approximately _____% per annum and a weighted average Gross Margin
equal to approximately _____% per annum. The Mortgage Loans will be adjustable
rate mortgage loans, payable on the first day of each month. Interest on the
Mortgage Loans and the monthly payments will be adjusted on each Adjustment Date
to equal the sum of the Index and the margin, rounded to the next highest
multiple of 0.125%, subject to the Periodic Rate Cap, the Maximum Mortgage Rate
and the Minimum Mortgage Rate. The Mortgage Loans will not be subject to
negative amortization and will not provide for graduated payments. None of the
Mortgage Loans will be convertible to a fixed mortgage interest rate. None of
the Mortgage Loans shall be subject to temporary buydown agreements. Each of the
Mortgage Loans shall be fully-amortizing and none of the Mortgage Loans shall
provide for the payment of a balloon payment.
<PAGE>
EXHIBIT 7
---------
Loan #: ____________
Borrower: _____________
LOST NOTE AFFIDAVIT
-------------------
I, as ____________________ of ______________________, a corporation am
authorized to make this Affidavit on behalf of _____________________ (the
"Seller"). In connection with the administration of the Mortgage Loans held by
____________________, a _________________ corporation as Seller on behalf of NC
Residual II Corporation (the "Purchaser"), __________________ (the "Deponent"),
being duly sworn, deposes and says that:
1. The Seller's address is : _____________________
_____________________
2. The Seller previously delivered to the Purchaser a signed Initial
Certification with respect to such Mortgage and/or Assignment of
Mortgage;
3. Such Mortgage Note and/or Assignment of Mortgage was assigned or
sold to the Purchaser by ________________________, a ____________
corporation pursuant to the terms and provisions of a Mortgage Loan
Purchase Agreement dated as of December __, 1998;
4. Such Mortgage Note and/or Assignment of Mortgage is not outstanding
pursuant to a request for release of Documents;
5. Aforesaid Mortgage Note and/or Assignment of Mortgage (the
"Original") has been lost;
6. Deponent has made or caused to be made a diligent search for the
Original and has been unable to find or recover same;
7. The Seller was the Seller of the Original at the time of the loss;
and
8. Deponent agrees that, if said Original should ever come into
Seller's possession, custody or power, Seller will immediately and
without consideration surrender the Original to the Purchaser.
9. Attached hereto is a true and correct copy of (i) the Note,
endorsed in blank by the Mortgagee and (ii) the Mortgage or Deed of
Trust (strike one) which secures the Note, which Mortgage or Deed of
Trust is recorded in the county where the property is located.
<PAGE>
10. Deponent hereby agrees that the Seller (a) shall indemnify and
hold harmless the Purchaser, its successors and assigns, against any
loss, liability or damage, including reasonable attorney's fees,
resulting from the unavailability of any Notes, including but not
limited to any loss, liability or damage arising from (i) any false
statement contained in this Affidavit, (ii) any claim of any party
that purchased a mortgage loan evidenced by the Lost Note or any
interest in such mortgage loan, (iii) any claim of any borrower with
respect to the existence of terms of a mortgage loan evidenced by the
Lost Note on the related property to the fact that the mortgage loan
is not evidenced by an original note and (iv) the issuance of a new
instrument in lieu thereof (items (i) through (iv) above hereinafter
referred to as the "Losses") and (b) if required by any Rating Agency
in connection with placing such Lost Note into a Pass-Through
Transfer, shall obtain a surety from an insurer acceptable to the
applicable Rating Agency to cover any Losses with respect to such Lost
Note.
11. This Affidavit is intended to be relied upon by the Purchaser, its
successors and assigns. _____________________, a ______________
corporation represents and warrants that is has the authority to
perform its obligations under this Affidavit of Lost Note.
Executed this ____ day, of ___________ 199_.
SELLER
By:______________________
Name:
Title:
On this ___ day of _______, 199_, before me appeared _______________
to me personally known, who being duly sworn did say that he is the
_____________________ of ____________________ a ______________ corporation and
that said Affidavit of Lost Note was signed and sealed on behalf of such
corporation and said acknowledged this instrument to be the free act and deed of
said corporation.
Signature:
[Seal]
<PAGE>
EXHIBIT D-2
-----------
FORM OF TRANSFER AGREEMENT
<PAGE>
TRANSFER AGREEMENT
------------------
This TRANSFER AGREEMENT (this "Agreement"), dated as of December 18,
1998, is made between NC Residual II Corporation 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, NC Capital Corporation (the "Seller") will transfer the Mortgage
Loans to the Transferor on the Closing Date;
WHEREAS, pursuant to the terms of this Agreement, the Transferor will
transfer the Mortgage Loans and all of its rights under the Mortgage Loan
Purchase Agreement (the "Mortgage Loan Purchase Agreement"), dated December 18,
1998 between NC Capital Corporation and the Transferor 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 Agreement and the
Mortgage Loan Purchase Agreement to the Trust Fund on the Closing Date;
WHEREAS, pursuant to the terms of the Pooling and Servicing Agreement,
the Trust Fund will issue and transfer to or at the direction of the Depositor,
the Callable Floating Rate Mortgage Pass-Through Certificates, Series 1998-NC5
(the "Certificates"); and
WHEREAS, pursuant to the terms of the Pooling and Servicing Agreement,
the Master Servicer will service the Mortgage Loans;
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 the Pooling and Servicing Agreement relating to Salomon
Brothers Mortgage Securities VII, Inc., Callable Floating Rate Mortgage
Pass-Through Certificates, Series 1998-NC5, dated as of December 1, 1998 (the
"Pooling and Servicing Agreement"), among the Depositor, the Master Servicer,
Firstar Bank Milwaukee, N.A. as trustee and U.S. Bank National Association, as
trust administrator (the "Trust Administrator"), which definitions are
incorporated by reference herein. All other capitalized terms used herein shall
have the meanings specified herein.
-1-
<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) creating
the Trust Fund and transferring the Mortgage Loans to the Trust Fund pursuant to
the Pooling and Servicing Agreement; (ii) selling the Certificates under the
Depositor's shelf registration statement and (iii) 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
ownership of the Mortgage Loans and will not be subject to the economic burdens
associated with the ownership of the Mortgage Loans.
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 TRUST FUND
The Transferor, by the execution and delivery of this Agreement, for
purposes of transferring the Mortgage Loans to the Trust Fund, 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.
5. PURCHASE PRICE
The "Purchase Price" for the Mortgage Loans transferred to the Depositor
for transfer to the Trust Fund shall be the cash proceeds of the sale of the
Class A Certificates to Salomon Smith Barney Inc., the Class CE Certificates,
the Class P Certificates, the Class R-I Certificates, the Class R-II
Certificates and the Class R-III Certificates.
-2-
<PAGE>
6. SUCCESSORS AND ASSIGNS; ASSIGNMENT OF AGREEMENT
This Agreement shall bind and inure to the benefit of and be enforceable
by the Transferor and the Depositor and their respective successors and assigns,
the Trustee. The obligations of the Transferor under this Agreement cannot be
assigned or delegated to a third party without the consent of the Depositor,
which consent shall be at the Depositor's sole discretion. The parties hereto
acknowledge that the Depositor, as agent of the Transferor, is obtaining 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 Trust Fund for the benefit of the Certificateholders. 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 Trust Fund 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) 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 Trust Fund or the Trustee, as applicable, shall have the same
force and effect as if the right or remedy had been enforced or exercised by the
Depositor directly. The 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.
-3-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
day and year first above written.
NC RESIDUAL II CORPORATION
By:____________________________
Name:
Title:
SALOMON BROTHERS
MORTGAGE SECURITIES VII, INC.
By:____________________________
Name:
Title:
<PAGE>
EXHIBIT 1
---------
MORTGAGE LOAN SCHEDULE
AVAILABLE UPON REQUEST
<PAGE>
EXHIBIT 2
MORTGAGE LOAN PURCHASE AGREEMENT
<PAGE>
EXHIBIT E-1
-----------
REQUEST FOR RELEASE
(for Trustee/Custodian)
Loan Information
- ----------------
Name of Mortgagor: ________________________
Master Servicer
Loan No.: ________________________
Trustee/Custodian
- -----------------
Name: ________________________
Address: ________________________
________________________
Trustee/Custodian
Mortgage File No.: ________________________
Depositor
- ---------
Name: SALOMON BROTHERS MORTGAGE
SECURITIES VII, INC.
Address: ________________________
________________________
Certificates: Callable Floating Rate Mortgage Pass-Through
Certificates, Series 1998-NC5.
<PAGE>
The undersigned Master Servicer hereby acknowledges that it has
received from _______________________, as Trustee for the Holders of Callable
Floating Rate Mortgage Pass-Through Certificates, Series 1998-NC5, the documents
referred to below (the "Documents"). All capitalized terms not otherwise defined
in this Request for Release shall have the meanings given them in the Pooling
and Servicing Agreement, dated as of December 1, 1998, among the Trustee, the
Trust Administrator, the Depositor and the Master Servicer (the "Pooling and
Servicing Agreement").
( ) Promissory Note dated _______________, 19__, in the original principal sum
of $__________, made by _____________________, payable to, or endorsed to
the order of, the Trustee.
( ) Mortgage recorded on _________________________ as instrument no.
____________________ in the County Recorder's Office of the County of
_________________, State of __________________ in book/reel/docket
_________________ of official records at page/image _____________.
( ) Deed of Trust recorded on ___________________ as instrument no.
________________ in the County Recorder's Office of the County of
_________________, State of ____________________ in book/reel/docket
_________________ of official records at page/image ______________.
( ) Assignment of Mortgage or Deed of Trust to the Trustee, recorded on
___________________ as instrument no. _________ in the County Recorder's
Office of the County of _______________, State of _______________________
in book/reel/docket ____________ of official records at page/image
____________.
( ) Other documents, including any amendments, assignments or other assumptions
of the Mortgage Note or Mortgage.
( ) ________________________________________________
( ) ________________________________________________
( ) ________________________________________________
( ) ________________________________________________
The undersigned Master Servicer hereby acknowledges and agrees as
follows:
(1) The Master Servicer shall hold and retain possession of the
Documents in trust for the benefit of the Trustee, solely for the purposes
provided in the Agreement.
(2) The Master Servicer shall not cause or permit the Documents to
become subject to, or encumbered by, any claim, liens, security interest,
charges, writs of
<PAGE>
attachment or other impositions nor shall the Master Servicer assert or
seek to assert any claims or rights of setoff to or against the Documents
or any proceeds thereof.
(3) The Master Servicer shall return each and every Document
previously requested from the Mortgage File to the Trustee when the need
therefor no longer exists, unless the Mortgage Loan relating to the
Documents has been liquidated and the proceeds thereof have been remitted
to the Collection Account and except as expressly provided in the
Agreement.
(4) The Documents and any proceeds thereof, including any proceeds
of proceeds, coming into the possession or control of the Master Servicer
shall at all times be earmarked for the account of the Trustee, and the
Master Servicer shall keep the Documents and any proceeds separate and
distinct from all other property in the Master Servicer's possession,
custody or control.
Dated:
NEW CENTURY MORTGAGE CORPORATION
By:___________________________
Name:
Title:
<PAGE>
EXHIBIT E-2
-----------
REQUEST FOR RELEASE
[Mortgage Loans Paid in Full]
OFFICERS' CERTIFICATE AND TRUST RECEIPT
CALLABLE FLOATING RATE MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1998-NC5
_________________________________________________________ HEREBY
CERTIFIES THAT HE/SHE IS AN OFFICER OF THE MASTER SERVICER, HOLDING
THE OFFICE SET FORTH BENEATH HIS/HER SIGNATURE, AND HEREBY FURTHER
CERTIFIES AS FOLLOWS:
WITH RESPECT TO THE MORTGAGE LOANS, AS THE TERM IS DEFINED IN THE
POOLING AND SERVICING AGREEMENT DESCRIBED IN THE ATTACHED SCHEDULE:
ALL PAYMENTS OF PRINCIPAL, PREMIUM (IF ANY), AND INTEREST HAVE BEEN
MADE.
LOAN NUMBER:________________ BORROWER'S NAME:_________________
COUNTY:_____________________
WE HEREBY CERTIFY THAT ALL AMOUNTS RECEIVED IN CONNECTION WITH SUCH
PAYMENTS, WHICH ARE REQUIRED TO BE DEPOSITED IN THE COLLEC TION
ACCOUNT PURSUANT TO SECTION 3.10 OF THE POOLING AND SERVICING
AGREEMENT, HAVE BEEN OR WILL BE CREDITED.
________________________________ DATED:___________________
/ / VICE PRESIDENT
/ / ASSISTANT VICE PRESIDENT
<PAGE>
EXHIBIT F-1
-----------
FORM OF TRANSFEROR REPRESENTATION LETTER
[Date]
[Trustee]
____________________
____________________
Re: Salomon Brothers Mortgage Securities VII, Inc.,
Callable Floating Rate Mortgage Pass-Through Certificates,
Series 1998-NC5, Class ___, representing a ___%
Class ___ Percentage Interest
----------------------------------------------------------
Ladies and Gentlemen:
In connection with the transfer by ________________ (the
"Transferor") to ________________ (the "Transferee") of the captioned mortgage
pass-through certificates (the "Certificates"), the Transferor hereby certifies
as follows:
Neither the Transferor nor anyone acting on its behalf has (a)
offered, pledged, sold, disposed of or otherwise transferred any Certificate,
any interest in any Certificate or any other similar security to any person in
any manner, (b) has solicited any offer to buy or to accept a pledge,
disposition or other transfer of any Certificate, any interest in any
Certificate or any other similar security from any person in any manner, (c) has
otherwise approached or negotiated with respect to any Certificate, any interest
in any Certificate or any other similar security with any person in any manner,
(d) has made any general solicitation by means of general advertising or in any
other manner, (e) has taken any other action, that (in the case of each of
subclauses (a) through (e) above) would constitute a distribution of the
Certificates under the Securities Act of 1933, as amended (the "1933 Act"), or
would render the disposition of any Certificate a violation of Section 5 of the
1933 Act or any state securities law or would require registration or
qualification pursuant thereto. The Transferor will not act, nor has it
authorized or will it authorize any person to act, in any manner set forth in
the foregoing sentence with respect to any Certificate. The Transferor will not
sell or otherwise transfer any of the Certificates, except in compliance with
the provisions of that certain Pooling and Servicing Agreement, dated as of
December 1, 1998, among Salomon Brothers Mortgage Securities VII, Inc. as
Depositor, New Century Mortgage Corporation as Master Servicer Firstar Bank
Milwaukee, N.A. as Trustee and U.S. Bank National Association as Trust
Administrator (the "Pooling and Servicing Agreement"), pursuant to which Pooling
and Servicing Agreement the Certificates were issued.
<PAGE>
Capitalized terms used but not defined herein shall have the
meanings assigned thereto in the Pooling and Servicing Agreement.
Very truly yours,
[Transferor]
By:____________________________
Name:
Title:
<PAGE>
FORM OF TRANSFEREE REPRESENTATION LETTER
[Date]
[Trustee]
___________________
___________________
Re: Salomon Brothers Mortgage Securities VII, Inc.,
Callable Floating Rate Mortgage Pass-Through Certificates,
Series 1998-NC5, Class ___, representing a ___%
Class ___ Percentage Interest
----------------------------------------------------------
Ladies and Gentlemen:
In connection with the purchase from ______________________ (the
"Transferor") on the date hereof of the captioned trust certificates (the
"Certificates"), _______________ (the "Transferee") hereby certifies as follows:
1. The Transferee is a "qualified institutional buyer" as that term
is defined in Rule 144A ("Rule 144A") under the Securities Act of 1933
(the "1933 Act") and has completed either of the forms of certification to
that effect attached hereto as Annex 1 or Annex 2. The Transferee is aware
that the sale to it is being made in reliance on Rule 144A. The Transferee
is acquiring the Certificates for its own account or for the account of a
qualified institutional buyer, and understands that such Certificate may
be resold, pledged or transferred only (i) to a person reasonably believed
to be a qualified institutional buyer that purchases for its own account
or for the account of a qualified institutional buyer to whom notice is
given that the resale, pledge or transfer is being made in reliance on
Rule 144A, or (ii) pursuant to another exemption from registration under
the 1933 Act.
2. The Transferee has been furnished with all information regarding
(a) the Certificates and distributions thereon, (b) the nature,
performance and servicing of the Mortgage Loans, (c) the Pooling and
Servicing Agreement referred to below, and (d) any credit enhancement
mechanism associated with the Certificates, that it has requested.
<PAGE>
All capitalized terms used but not otherwise defined herein have the
respective meanings assigned thereto in the Pooling and Servicing Agreement,
dated as of December 1, 1998, among Salomon Brothers Mortgage Securities VII,
Inc. as Depositor, New Century Mortgage Corporation as Master Servicer, Firstar
Bank Milwaukee, N.A. as trustee and U.S. Bank National Association as Trust
Administrator, pursuant to which the Certificates were issued.
[TRANSFEREE]
By:____________________________-
Name:
Title:
<PAGE>
ANNEX 1 TO EXHIBIT F-1
----------------------
QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
--------------------------------------------------------
[For Transferees Other Than Registered Investment Companies]
The undersigned hereby certifies as follows to [name of Transferor]
(the "Transferor") and U.S. Bank National Association, as Trust Administrator,
with respect to the mortgage pass-through certificates (the "Certificates")
described in the Transferee Certificate to which this certification relates and
to which this certification is an Annex:
1. As indicated below, the undersigned is the President, Chief
Financial Officer, Senior Vice President or other executive officer of the
entity purchasing the Certificates (the "Transferee").
2. In connection with purchases by the Transferee, the Transferee is
a "qualified institutional buyer" as that term is defined in Rule 144A under the
Securities Act of 1933 ("Rule 144A") because (i) the Transferee owned and/or
invested on a discretionary basis $______________________1 in securities (except
for the excluded securities referred to below) as of the end of the Transferee's
most recent fiscal year (such amount being calculated in accordance with Rule
144A) and (ii) the Transferee satisfies the criteria in the category marked
below.
___ CORPORATION, ETC. The Transferee is a corporation (other than a
bank, savings and loan association or similar institution),
Massachusetts or similar business trust, partnership, or any
organization described in Section 501(c)(3) of the Internal Revenue
Code of 1986.
___ BANK. The Transferee (a) is a national bank or banking institution
organized under the laws of any State, territory or the District of
Columbia, the business of which is substantially confined to banking
and is supervised by the State or territorial banking commission or
similar official or is a foreign bank or equivalent institution, and
(b) has an audited net worth of at least $25,000,000 as demonstrated
in its latest annual financial statements, A COPY OF WHICH IS
ATTACHED HERETO.
___ SAVINGS AND LOAN. The Transferee (a) is a savings and loan
association, building and loan association, cooperative bank,
homestead association or similar institution, which is supervised
and examined by a State or Federal authority having supervision over
any such institutions or is a foreign savings and loan association
or equivalent institution and (b) has an audited net worth of
_______________________
1 Transferee must own and/or invest on a discretionary basis at least
$100,000,000 in securities unless Transferee is a dealer, and, in that case,
Transferee must own and/or invest on a discretionary basis at least $10,000,000
in securities.
<PAGE>
at least $25,000,000 as demonstrated in its latest annual financial
statements, A COPY OF WHICH IS ATTACHED HERETO.
___ BROKER-DEALER. The Transferee is a dealer registered pursuant to
Section 15 of the Securities Exchange Act of 1934.
___ INSURANCE COMPANY. The Transferee is an insurance company whose
primary and predominant business activity is the writing of
insurance or the reinsuring of risks underwritten by insurance
companies and which is subject to supervision by the insurance
commissioner or a similar official or agency of a State, territory
or the District of Columbia.
___ STATE OR LOCAL PLAN. The Transferee is a plan established and
maintained by a State, its political subdivisions, or any agency or
instrumentality of the State or its political subdivisions, for the
benefit of its employees.
___ ERISA PLAN. The Transferee is an employee benefit plan within the
meaning of Title I of the Employee Retirement Income Security Act of
1974.
___ INVESTMENT ADVISOR. The Transferee is an investment advisor
registered under the Investment Advisers Act of 1940.
3. The term "SECURITIES" as used herein DOES NOT INCLUDE (i)
securities of issuers that are affiliated with the Transferee, (ii) securities
that are part of an unsold allotment to or subscription by the Transferee, if
the Transferee is a dealer, (iii) securities issued or guaranteed by the U.S. or
any instrumentality thereof, (iv) bank deposit notes and certificates of
deposit, (v) loan participations, (vi) repurchase agreements, (vii) securities
owned but subject to a repurchase agreement and (viii) currency, interest rate
and commodity swaps.
4. For purposes of determining the aggregate amount of securities
owned and/or invested on a discretionary basis by the Transferee, the Transferee
used the cost of such securities to the Transferee and did not include any of
the securities referred to in the preceding paragraph. Further, in determining
such aggregate amount, the Transferee may have included securities owned by
subsidiaries of the Transferee, but only if such subsidiaries are consolidated
with the Transferee in its financial statements prepared in accordance with
generally accepted accounting principles and if the investments of such
subsidiaries are managed under the Transferee's direction. However, such
securities were not included if the Transferee is a majority-owned, consolidated
subsidiary of another enterprise and the Transferee is not itself a reporting
company under the Securities Exchange Act of 1934.
5. The Transferee acknowledges that it is familiar with Rule 144A
and understands that the Transferor and other parties related to the
Certificates are relying and will continue to rely on the statements made herein
because one or more sales to the Transferee may be in reliance on Rule 144A.
___ ___ Will the Transferee be purchasing the Certificates
<PAGE>
Yes No only for the Transferee's own account?
6. If the answer to the foregoing question is "no", the Transferee
agrees that, in connection with any purchase of securities sold to the
Transferee for the account of a third party (including any separate account) in
reliance on Rule 144A, the Transferee will only purchase for the account of a
third party that at the time is a "qualified institutional buyer" within the
meaning of Rule 144A. In addition, the Transferee agrees that the Transferee
will not purchase securities for a third party unless the Transferee has
obtained a current representation letter from such third party or taken other
appropriate steps contemplated by Rule 144A to conclude that such third party
independently meets the definition of "qualified institutional buyer" set forth
in Rule 144A.
7. The Transferee will notify each of the parties to which this
certification is made of any changes in the information and conclusions herein.
Until such notice is given, the Transferee's purchase of the Certificates will
constitute a reaffirmation of this certification as of the date of such
purchase. In addition, if the Transferee is a bank or savings and loan as
provided above, the Transferee agrees that it will furnish to such parties
updated annual financial statements promptly after they become available.
Dated:
_________________________________
Print Name of Transferee
By:______________________________
Name:
Title:
<PAGE>
ANNEX 2 TO EXHIBIT F-1
----------------------
QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
--------------------------------------------------------
[For Transferees That Are Registered Investment Companies]
The undersigned hereby certifies as follows to [name of Transferor]
(the "Transferor") and U.S. Bank National Association, as Trust Administrator,
with respect to the mortgage pass-through certificates (the "Certificates")
described in the Transferee Certificate to which this certification relates and
to which this certification is an Annex:
1. As indicated below, the undersigned is the President, Chief
Financial Officer or Senior Vice President of the entity purchasing the
Certificates (the "Transferee") or, if the Transferee is a "qualified
institutional buyer" as that term is defined in Rule 144A under the Securities
Act of 1933 ("Rule 144A") because the Transferee is part of a Family of
Investment Companies (as defined below), is such an officer of the investment
adviser (the "Adviser").
2. In connection with purchases by the Transferee, the Transferee is
a "qualified institutional buyer" as defined in Rule 144A because (i) the
Transferee is an investment company registered under the Investment Company Act
of 1940, and (ii) as marked below, the Transferee alone, or the Transferee's
Family of Investment Companies, owned at least $100,000,000 in securities (other
than the excluded securities referred to below) as of the end of the
Transferee's most recent fiscal year. For purposes of determining the amount of
securities owned by the Transferee or the Transferee's Family of Investment
Companies, the cost of such securities was used.
____ The Transferee owned $___________________ in securities (other than
the excluded securities referred to below) as of the end of the
Transferee's most recent fiscal year (such amount being calculated
in accordance with Rule 144A).
____ The Transferee is part of a Family of Investment Companies which
owned in the aggregate $______________ in securities (other than the
excluded securities referred to below) as of the end of the
Transferee's most recent fiscal year (such amount being calculated
in accordance with Rule 144A).
3. The term "FAMILY OF INVESTMENT COMPANIES" as used herein means
two or more registered investment companies (or series thereof) that have the
same investment adviser or investment advisers that are affiliated (by virtue of
being majority owned subsidiaries of the same parent or because one investment
adviser is a majority owned subsidiary of the other).
4. The term "SECURITIES" as used herein does not include (i)
securities of issuers that are affiliated with the Transferee or are part of the
Transferee's Family of
<PAGE>
Investment Companies, (ii) securities issued or guaranteed by the U.S. or any
instrumentality thereof, (iii) bank deposit notes and certificates of deposit,
(iv) loan participations, (v) repurchase agreements, (vi) securities owned but
subject to a repurchase agreement and (vii) currency, interest rate and
commodity swaps.
5. The Transferee is familiar with Rule 144A and understands that
the parties to which this certification is being made are relying and will
continue to rely on the statements made herein because one or more sales to the
Transferee will be in reliance on Rule 144A. In addition, the Transferee will
only purchase for the Transferee's own account.
6. The undersigned will notify the parties to which this
certification is made of any changes in the information and conclusions herein.
Until such notice, the Transferee's purchase of the Certificates will constitute
a reaffirmation of this certification by the undersigned as of the date of such
purchase.
Dated:
______________________________________
Print Name of Transferee or Advisor
By:___________________________________
Name:
Title:
IF AN ADVISER:
______________________________________
Print Name of Transferee
<PAGE>
FORM OF TRANSFEREE REPRESENTATION LETTER
The undersigned hereby certifies on behalf of the purchaser named
below (the "Purchaser") as follows:
1. I am an executive officer of the Purchaser.
2. The Purchaser is a "qualified institutional buyer", as defined in
Rule 144A, ("Rule 144A") under the Securities Act of 1933, as amended.
3. As of the date specified below (which is not earlier than the
last day of the Purchaser's most recent fiscal year), the amount of
"securities", computed for purposes of Rule 144A, owned and invested on a
discretionary basis by the Purchaser was in excess of $100,000,000.
Name of Purchaser______________________________________________________________
By: (Signature)___________________________________________________________
Name of Signatory______________________________________________________________
Title__________________________________________________________________________
Date of this certificate_______________________________________________________
Date of information provided in paragraph 3____________________________________
<PAGE>
EXHIBIT F-2
-----------
FORM OF TRANSFER AFFIDAVIT AND AGREEMENT
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK)
________________________ , being duly sworn, deposes, represents and
warrants as follows:
1. I am a ________________________ of ___________________________
(the "Owner") a corporation duly organized and existing under the laws of
______________, the record owner of Salomon Brothers Mortgage Securities VII,
Inc., Callable Floating Rate Mortgage Pass-Through Certificates, Series
1998-NC5, [Class R-I] [Class R-II] [and Class R- III] (the "Class R
Certificates"), on behalf of whom I make this affidavit and agreement.
Capitalized terms used but not defined herein have the respective meanings
assigned thereto in the Pooling and Servicing Agreement pursuant to which the
Class R Certificates were issued.
2. The Owner (i) is and will be a "Permitted Transferee" as of
____________________, 199___ and (ii) is acquiring the Class R Certificates for
its own account or for the account of another Owner from which it has received
an affidavit in substantially the same form as this affidavit. A "Permitted
Transferee" is any person other than a "disqualified organization" or a
possession of the United States. For this purpose, a "disqualified organization"
means the United States, any state or political subdivision thereof, any agency
or instrumentality of any of the foregoing (other than an instrumentality all of
the activities of which are subject to tax and, except for the Federal Home Loan
Mortgage Corporation, a majority of whose board of directors is not selected by
any such governmental entity) or any foreign government, international
organization or any agency or instrumentality of such foreign government or
organization, any rural electric or telephone cooperative, or any organization
(other than certain farmers' cooperatives) that is generally exempt from federal
income tax unless such organization is subject to the tax on unrelated business
taxable income.
3. The Owner is aware (i) of the tax that would be imposed on
transfers of the Class R Certificates to disqualified organizations under the
Internal Revenue Code of 1986 that applies to all transfers of the Class R
Certificates after March 31, 1988; (ii) that such tax would be on the transferor
or, if such transfer is through an agent (which person includes a broker,
nominee or middleman) for a non-Permitted Transferee, on the agent; (iii) that
the person otherwise liable for the tax shall be relieved of liability for the
tax if the transferee furnishes to such person an affidavit that the transferee
is a Permitted Transferee and, at the time of transfer, such person does not
have actual knowledge that the affidavit is false; and (iv) that each of the
Class R Certificates may be a "noneconomic residual interest" within the meaning
of proposed Treasury regulations promulgated under the Code and that the
transferor of a "noneconomic residual interest" will remain liable for any taxes
due with respect to the
<PAGE>
income on such residual interest, unless no significant purpose of the transfer
is to impede the assessment or collection of tax.
4. The Owner is aware of the tax imposed on a "pass-through entity"
holding the Class R Certificates if, at any time during the taxable year of the
pass-through entity, a non-Permitted Transferee is the record holder of an
interest in such entity. (For this purpose, a "pass-through entity" includes a
regulated investment company, a real estate investment trust or common trust
fund, a partnership, trust or estate, and certain cooperatives.)
5. The Owner is aware that the Trustee will not register the
transfer of any Class R Certificate unless the transferee, or the transferee's
agent, delivers to the Trustee, among other things, an affidavit in
substantially the same form as this affidavit. The Owner expressly agrees that
it will not consummate any such transfer if it knows or believes that any of the
representations contained in such affidavit and agreement are false.
6. The Owner consents to any additional restrictions or arrangements
that shall be deemed necessary upon advice of counsel to constitute a reasonable
arrangement to ensure that the Class R Certificates will only be owned, directly
or indirectly, by an Owner that is a Permitted Transferee.
7. The Owner's taxpayer identification number is _______________.
8. The Owner has reviewed the restrictions set forth on the face of
the Class R Certificates and the provisions of Section 5.02(d) of the Pooling
and Servicing Agreement under which the Class R Certificates were issued (in
particular, clauses (iii)(A) and (iii)(B) of Section 5.02(d) which authorize the
Trustee to deliver payments to a person other than the Owner and negotiate a
mandatory sale by the Trustee in the event that the Owner holds such Certificate
in violation of Section 5.02(d)); and that the Owner expressly agrees to be
bound by and to comply with such restrictions and provisions.
9. The Owner is not acquiring and will not transfer the Class R
Certificates in order to impede the assessment or collection of any tax.
10. The Owner anticipates that it will, so long as it holds the
Class R Certificates, have sufficient assets to pay any taxes owed by the holder
of such Class R Certificates, and hereby represents to and for the benefit of
the person from whom it acquired the Class R Certificates that the Owner intends
to pay taxes associated with holding such Class R Certificates as they become
due, fully understanding that it may incur tax liabilities in excess of any cash
flows generated by the Class R Certificates.
11. The Owner has no present knowledge that it may become insolvent
or subject to a bankruptcy proceeding for so long as it holds the Class R
Certificates.
12. The Owner has no present knowledge or expectation that it will
be unable to pay any United States taxes owed by it so long as any of the
Certificates remain outstanding.
<PAGE>
13. The Owner is not acquiring the Class R Certificates with the
intent to transfer the Class R Certificates to any person or entity that will
not have sufficient assets to pay any taxes owed by the holder of such Class R
Certificates, or that may become insolvent or subject to a bankruptcy
proceeding, for so long as the Class R Certificates remain outstanding.
14. The Owner will, in connection with any transfer that it makes of
the Class R Certificates, obtain from its transferee the representations
required by Section 5.02(d) of the Pooling and Servicing Agreement under which
the Class R Certificate were issued and will not consummate any such transfer if
it knows, or knows facts that should lead it to believe, that any such
representations are false.
15. The Owner will, in connection with any transfer that it makes of
the Class R Certificates, deliver to the Trustee an affidavit, which represents
and warrants that it is not transferring the Class R Certificates to impede the
assessment or collection of any tax and that it has no actual knowledge that the
proposed transferee: (i) has insufficient assets to pay any taxes owed by such
transferee as holder of the Class R Certificates; (ii) may become insolvent or
subject to a bankruptcy proceeding for so long as the Class R Certificates
remains outstanding; and (iii) is not a "Permitted Transferee".
16. The Owner is a citizen or resident of the United States, a
corporation, partnership or other entity created or organized in, or under the
laws of, the United States or any political subdivision thereof, or an estate or
trust whose income from sources without the United States may be included in
gross income for United States federal income tax purposes regardless of its
connection with the conduct of a trade or business within the United States.
<PAGE>
IN WITNESS WHEREOF, the Owner has caused this instrument to be
executed on its behalf, pursuant to the authority of its Board of Directors, by
its [Vice] President, attested by its [Assistant] Secretary, this ____ day of
__________, 199___.
[OWNER]
By:______________________________________
Name:
Title: [Vice] President
ATTEST:
By:_____________________________
Name:
Title: [Assistant] Secretary
Personally appeared before me the above-named _____________________,
known or proved to me to be the same person who executed the foregoing
instrument and to be a [Vice] President of the Owner, and acknowledged to me
that [he/she] executed the same as [his/her] free act and deed and the free act
and deed of the Owner.
Subscribed and sworn before me this ____ day of __________, 199___.
_____________________________
Notary Public
County of____________________
State of_____________________
My Commission expires:
<PAGE>
FORM OF TRANSFEROR AFFIDAVIT
STATE OF NEW YORK )
: ss. :
COUNTY OF NEW YORK)
_______________________ , being duly sworn, deposes, represents and
warrants as follows:
1. I am a ____________________ of _____________________________ (the "Owner"),
a corporation duly organized and existing under the laws of ______________, on
behalf of whom I make this affidavit.
2. The Owner is not transferring the [Class R-I][Class R-II][Class
R-III] (the "Residual Certificates") to impede the assessment or collection of
any tax.
3. The Owner has no actual knowledge that the Person that is the
proposed transferee (the "Purchaser") of the Residual Certificates: (i) has
insufficient assets to pay any taxes owed by such proposed transferee as holder
of the Residual Certificates; (ii) may become insolvent or subject to a
bankruptcy proceeding for so long as the Residual Certificates remain
outstanding and (iii) is not a Permitted Transferee.
4. The Owner understands that the Purchaser has delivered to the
Trust Administrator a transfer affidavit and agreement in the form attached to
the Pooling and Servicing Agreement as Exhibit F-2. The Owner does not know or
believe that any representation contained therein is false.
5. At the time of transfer, the Owner has conducted a reasonable
investigation of the financial condition of the Purchaser as contemplated by
Treasury Regulations Section 1.860E-1(c)(4)(i) and, as a result of that
investigation, the Owner has determined that the Purchaser has historically paid
its debts as they became due and has found no significant evidence to indicate
that the Purchaser will not continue to pay its debts as they become due in the
future. The Owner understands that the transfer of a Residual Certificate may
not be respected for United States income tax purposes (and the Owner may
continue to be liable for United States income taxes associated therewith)
unless the Owner has conducted such an investigation.
6. Capitalized terms not otherwise defined herein shall have the
meanings ascribed to them in the Pooling and Servicing Agreement.
<PAGE>
IN WITNESS WHEREOF, the Owner has caused this instrument to be
executed on its behalf, pursuant to the authority of its Board of Directors, by
its [Vice] President, attested by its [Assistant] Secretary, this ____ day of
___________, 199___.
[OWNER]
By:______________________________________
Name:
Title: [Vice] President
ATTEST:
By:_____________________________
Name:
Title: [Assistant] Secretary
Personally appeared before me the above-named ____________________,
known or proved to me to be the same person who executed the foregoing
instrument and to be a [Vice] President of the Owner, and acknowledged to me
that [he/she] executed the same as [his/her] free act and deed and the free act
and deed of the Owner.
Subscribed and sworn before me this ____ day of __________, 199___.
_____________________________
Notary Public
County of____________________
State of_____________________
My Commission expires:
<PAGE>
EXHIBIT G
---------
FORM OF CERTIFICATION WITH RESPECT TO ERISA AND THE CODE
_____________, 199__
Salomon Brothers Mortgage Securities VII, Inc.
Seven World Trade Center
New York, New York 10048
U.S. Bank National Association
___________________________
___________________________
New Century Mortgage Corporation
___________________________
___________________________
Re: Salomon Brothers Mortgage Securities VII, Inc.
Callable Floating Rate Mortgage Pass-Through
Certificates,series 1998-NC5, Class ___
-----------------------------------------------
Dear Sirs:
__________________________________ (the "Transferee") intends to
acquire from _____________________ (the "Transferor") $____________ Initial
Certificate Principal Balance of Salomon Brothers Mortgage Securities VII, Inc.
Callable Floating Rate Mortgage Pass-Through Certificates, Series 1998-NC5,
Class ___ (the "Certificates"), issued pursuant to a Pooling and Servicing
Agreement (the "Pooling and Servicing Agreement") dated as of December 1, 1998
among Salomon Brothers Mortgage Securities VII, Inc. as depositor (the
"Depositor"), New Century Mortgage Corporation as master servicer (the "Master
Servicer") Firstar Bank Milwaukee, N.A. as trustee and U.S. Bank National
Association as trust administrator (the "Trust Administrator"). Capitalized
terms used herein and not otherwise defined shall have the meanings assigned
thereto in the Pooling and Servicing Agreement. The Transferee hereby certifies,
represents and warrants to, and covenants with the Depositor, the Trustee, the
Trust Administrator and the Master Servicer that the following statements in
either (1) or (2) are accurate:
_____ (1) The Certificates (i) are not being acquired by, and will not be
transferred to, any employee benefit plan within the meaning of section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or other retirement arrangement, including individual
retirement accounts and annuities, Keogh plans and bank collective
investment funds and insurance company general or separate accounts in
<PAGE>
which such plans, accounts or arrangements are invested, that is subject
to Section 406 of ERISA or Section 4975 of the Internal Revenue Code of
1986 (the "Code") (any of the foregoing, a "Plan"), (ii) are not being
acquired with "plan assets" of a Plan within the meaning of the Department
of Labor ("DOL") regulation, 29 C.F.R. ss. 2510.3-101, and (iii) will not
be transferred to any entity that is deemed to be investing in plan assets
within the meaning of the DOL regulation at 29 C.F.R. ss. 2510.3-101; or
_____ (2) The purchase of Certificates is permissible under applicable
law, will not constitute or result in any prohibited transaction under
ERISA or Section 4975 of the Code, will not subject the Depositor, the
Trustee or the Master Servicer to any obligation in addition to those
undertaken in the Pooling and Servicing Agreement and each of the
following statements are accurate: (a) the Transferee is an insurance
company; (b) the source of funds used to purchase such Certificates is an
"insurance company general account" (as such term is defined in Prohibited
Transaction Class Exemption ("PTCE") 95-60 issued by the DOL); (c) the
conditions set forth in Sections I and III of PTCE 95-60 have been
satisfied and the purchase, holding and transfer of Certificates by or on
behalf of the Transferee are exempt under PTCE 95-60; and (d) 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 he same employer (or any "affiliate" thereof, as
defined in PTCE 95-60) or by the same employee organization exceed 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 the
Certificates.
Very truly yours,
____________________________________
By:_________________________________
Name:
Title:
<PAGE>
EXHIBIT H
FORM OF REPORT PURSUANT TO SECTION 4.06
<PAGE>
EXHIBIT I
FORM OF LOST NOTE AFFIDAVIT
<PAGE>
Loan #: ____________
Borrower: _____________
LOST NOTE AFFIDAVIT
-------------------
I, as ____________________ of ______________________, a corporation am
authorized to make this Affidavit on behalf of _____________________ (the
"Seller"). In connection with the administration of the Mortgage Loans held by
____________________, a _________________ corporation as Seller on behalf of NC
Residual II Corporation (the "Purchaser"), __________________ (the "Deponent"),
being duly sworn, deposes and says that:
1. The Seller's address is : _____________________
_____________________
2. The Seller previously delivered to the Purchaser a signed Initial
Certification with respect to such Mortgage and/or Assignment of
Mortgage;
3. Such Mortgage Note and/or Assignment of Mortgage was assigned or
sold to the Purchaser by ________________________, a ____________
corporation pursuant to the terms and provisions of a Mortgage Loan
Purchase Agreement dated as of December __, 1998;
4. Such Mortgage Note and/or Assignment of Mortgage is not outstanding
pursuant to a request for release of Documents;
5. Aforesaid Mortgage Note and/or Assignment of Mortgage (the
"Original") has been lost;
6. Deponent has made or caused to be made a diligent search for the
Original and has been unable to find or recover same;
7. The Seller was the Seller of the Original at the time of the loss;
and
8. Deponent agrees that, if said Original should ever come into
Seller's possession, custody or power, Seller will immediately and
without consideration surrender the Original to the Purchaser.
9. Attached hereto is a true and correct copy of (i) the Note,
endorsed in blank by the Mortgagee and (ii) the Mortgage or Deed of
Trust (strike one) which secures the Note, which Mortgage or Deed of
Trust is recorded in the county where the property is located.
<PAGE>
10. Deponent hereby agrees that the Seller (a) shall indemnify and
hold harmless the Purchaser, its successors and assigns, against any
loss, liability or damage, including reasonable attorney's fees,
resulting from the unavailability of any Notes, including but not
limited to any loss, liability or damage arising from (i) any false
statement contained in this Affidavit, (ii) any claim of any party
that purchased a mortgage loan evidenced by the Lost Note or any
interest in such mortgage loan, (iii) any claim of any borrower with
respect to the existence of terms of a mortgage loan evidenced by the
Lost Note on the related property to the fact that the mortgage loan
is not evidenced by an original note and (iv) the issuance of a new
instrument in lieu thereof (items (i) through (iv) above hereinafter
referred to as the "Losses") and (b) if required by any Rating Agency
in connection with placing such Lost Note into a Pass-Through
Transfer, shall obtain a surety from an insurer acceptable to the
applicable Rating Agency to cover any Losses with respect to such Lost
Note.
11. This Affidavit is intended to be relied upon by the Purchaser, its
successors and assigns. _____________________, a ______________
corporation represents and warrants that is has the authority to
perform its obligations under this Affidavit of Lost Note.
Executed this ____ day, of ___________ 199_.
SELLER
By:______________________
Name:
Title:
On this ___ day of _______, 199_, before me appeared _______________
to me personally known, who being duly sworn did say that he is the
_____________________ of ____________________ a ______________ corporation and
that said Affidavit of Lost Note was signed and sealed on behalf of such
corporation and said acknowledged this instrument to be the free act and deed of
said corporation.
Signature:
[Seal]
<PAGE>
SCHEDULE 1
----------
MORTGAGE LOAN SCHEDULE
FILED BY PAPER
<PAGE>
Schedule 2
SCHEDULE OF PREPAYMENT CHARGES
