SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
May 27, 1999
(date of earliest event reported)
PNC MORTGAGE SECURITIES CORP.
as Depositor and Master Servicer under a
Pooling and Servicing Agreement
dated as of May 1, 1999
providing for the issuance of
$278,421,463
MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1999-7
Delaware 333-72879 94-2528990
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification
Incorporation) Number)
75 NORTH FAIRWAY DRIVE
VERNON HILLS, ILLINOIS 60061
(Address of principal executive offices)
Registrant's telephone number, including area code:
(847) 549-6500
Item 1. Changes in Control of Registrant. Not applicable.
Item 2. Acquisition or Disposition of Assets. Not applicable.
Item 3. Bankruptcy or Receivership. Not applicable.
Item 4. Changes in Registrant's Certifying Accountant. Not
applicable.
Item 5. Other Events. Not applicable.
Item 6. Resignation of Registrant's Directors. Not applicable.
Item 7. Financial Statements and Exhibits.
The following exhibit is furnished herewith:
7.1 Pooling and Servicing Agreement between
PNC Mortgage Securities Corp., Depositor and
Master Servicer, and Bankers Trust Company of
California, N.A., Trustee, dated as of May 1,
1999.
Item 8. Change in Fiscal Year. Not applicable.
Item 9. Sales of Equity Securities Pursuant to Regulation S.
Not applicable.
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: June 14, 1999.
PNC MORTGAGE SECURITIES CORP.
(Registrant)
By: /s/ Richard Careaga
-----------------------------------
Richard Careaga
Second Vice President
and Assistant General Counsel
(Authorized Officer)
<PAGE> 1
EXHIBIT 7.1
PNC MORTGAGE SECURITIES CORP.,
as Depositor and Master Servicer
and
BANKERS TRUST COMPANY OF CALIFORNIA, N.A.,
as Trustee
POOLING AND SERVICING AGREEMENT
$278,421,463
PNC Mortgage Securities Corp.
Mortgage Pass-Through Certificates
Series 1999-7
Cut-Off Date: May 1, 1999
This Pooling and Servicing Agreement, dated and effective as of May
1, 1999 (this "Agreement"), is executed by and between PNC Mortgage
Securities Corp., as Depositor and Master Servicer (the "Company") and
Bankers Trust Company of California, N.A., as Trustee (the "Trustee").
Capitalized terms used in this Agreement and not otherwise defined have
the meanings ascribed to such terms in Article I hereof.
PRELIMINARY STATEMENT
The Company at the Closing Date is the owner of the Mortgage Loans
and the other property being conveyed by it to the Trustee for inclusion
in the Trust Fund. On the Closing Date, the Company will acquire the
Certificates from the Trust Fund as consideration for its transfer to
the Trust Fund of the Mortgage Loans and certain other assets and will
be the owner of the Certificates. The Company has duly authorized the
execution and delivery of this Agreement to provide for the conveyance
to the Trustee of the Mortgage Loans and the issuance to the Company of
the Certificates representing in the aggregate the entire beneficial
ownership of the Trust. All covenants and agreements made by the
Company and the Trustee herein with respect to the Mortgage Loans and
the other property constituting the assets of the Trust are for the
benefit of the Holders from time to time of the Certificates and the
Certificate Insurer. The Company is entering into this Agreement, and
the Trustee is accepting the trust created hereby, for good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged.
<PAGE> 2
The Class A Certificates issued hereunder have been offered for
sale pursuant to a Prospectus, dated May 25, 1999, and a Prospectus
Supplement, dated May 26, 1999, of the Company (together, the
"Prospectus"). The Class B Certificates have been offered for sale
pursuant to a Private Placement Memorandum, dated May 28, 1999. The
Trust Fund created hereunder is intended to be the "Trust" described in
the Prospectus and the Private Placement Memorandum and the Certificates
are intended to be the "Certificates" described therein. The following
table sets forth the designation, type of interest, initial Certificate
Interest Rate, initial Class Principal Balance and Last Scheduled
Distribution Date for the Certificates:
<TABLE>
<CAPTION>
Trust Fund
Class Designation Certificate Last
Scheduled
for each Type of Interest Initial Class Distribution
Certificate Interest Rate (1) Principal Balance Date*
- ----------------- -------- ------------- ----------------- ------------
<S> <C> <C> <C> <C>
Class A Regular Variable (2) 272,156,900.00 June 2029
Class B-1 Regular Variable (3) 2,784,200.00 June 2029
Class B-2 Regular Variable (3) 1,670,600.00 June 2029
Class B-3 Regular Variable (3) 1,809,763.00 June 2029
Class R+ Residual ---- ----
* The Distribution Date in the month following the month the latest
maturing Mortgage Loan matures.
+ The Class R Certificate is entitled to receive the Residual
Distribution Amount and any Excess Liquidation Proceeds. The Class R
Certificate will not be entitled to any distributions of interest or
principal.
(1) Interest distributed to the Certificates (other than the Class R
Certificate, which will not be entitled to receive any distributions of
interest) on each Distribution Date will have accrued at the applicable
per annum Certificate Interest Rate on the Class Principal Balance
outstanding following the immediately prior Distribution Date (or, with
respect to the first Distribution Date, as of the Closing Date).
(2) With respect to any Distribution Date, the Certificate Interest Rate
on the Class A Certificates shall equal the weighted average (by
principal balance) of the Pass-Through Rates on the Mortgage Loans as of
the second preceding Due Date less the Premium Payment Rate.
(3) With respect to any Distribution Date, the Certificate Interest Rate
on the Class B Certificates shall equal the weighted average (by
principal balance) of the Pass-Through Rates on the Mortgage Loans as of
the second preceding Due Date.
</TABLE>
As provided herein, with respect to REMIC I, the Company will cause
an election to be made on behalf of REMIC I to be treated for federal
<PAGE> 3
income tax purposes as a REMIC. The Certificates (other than the Class R
Certificate) will be designated regular interests in REMIC I, and the
Class R Certificate will be designated the sole class of residual
interest in REMIC I, for purposes of the REMIC Provisions. As of the
Cut-Off Date, the Mortgage Loans have an aggregate Principal Balance of
$278,421,463 and the Certificates have an Aggregate Certificate
Principal Balance of $278,421,463.
W I T N E S S E T H :
WHEREAS, the Company is a corporation duly organized and existing
under and by virtue of the laws of the State of Delaware and has full
corporate power and authority to enter into this Agreement and to
undertake the obligations undertaken by it herein;
WHEREAS, the Company is the owner of the Mortgage Loans identified
in the Mortgage Loan Schedule hereto having unpaid Principal Balances on
the Cut-Off Date as stated therein;
WHEREAS, the Company has been duly authorized to (i) create a trust
to hold the Mortgage Loans and certain other property and (ii) sell
undivided beneficial ownership interests therein and in order to do so
is selling the Certificates (other than the Class R Certificate) issued
hereunder as hereinafter provided; and
WHEREAS, the Trustee is a national banking association duly
organized and existing under the laws of the United States of America
and has full power and authority to enter into this Agreement.
NOW, THEREFORE, in order to declare the terms and conditions upon
which the Certificates are, and are to be, authenticated, issued and
delivered, and in consideration of the premises and of the purchase and
acceptance of the Certificates by the Holders thereof, the Company
covenants and agrees with the Trustee, for the equal and proportionate
benefit of the respective Holders from time to time of the Certificates
and the Certificate Insurer, as follows:
ARTICLE I
Section 1.01. Definitions.
Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the following
meanings:
Additional Collateral: Any real or personal property, securities,
cash, instruments, contracts (including any third-party guarantee) or
other documents constituting or evidencing collateral pledged as
additional security for a Mortgage Loan (other than the related
Mortgaged Property).
<PAGE> 4
Additional Collateral Loans: Those Mortgage Loans secured by, in
addition to the related Mortgaged Property, Additional Collateral.
Adjustment Date: Any date upon which adjustments to the Mortgage
Interest Rate are provided for in each Mortgage Note.
Aggregate Certificate Principal Balance: At any given time, the sum
of the then current Class Principal Balances of the Certificates.
Appraised Value: The amount set forth in an appraisal of the
Mortgaged Property made by or for the mortgage originator in connection
with its origination of each Mortgage Loan, or with respect to certain
Mortgage Loans originated to refinance mortgage debt, the appraisal made
by or for the mortgage originator in connection with the origination of
such mortgage debt.
Assignment of Proprietary Lease: With respect to a Cooperative
Loan, the assignment or mortgage of the related Cooperative Lease from
the Mortgagor to the originator of the Cooperative Loan.
Authenticating Agent: Any authenticating agent appointed by the
Trustee pursuant to Section 8.11.
Authorized Denomination: With respect to the Certificates (other
than the Residual Certificate), an initial Certificate Principal Balance
equal to $25,000 and multiples of $1 in excess thereof; provided that
one Certificate of each Class may be issued in a different amount. With
respect to the Class R Certificate, one Certificate with a Percentage
Interest equal to 100%.
Balloon Loan: Any Mortgage Loan which, by its terms, does not fully
amortize the principal balance thereof by its stated maturity and thus
requires a payment at the stated maturity larger than the monthly
payments due thereunder.
Bankruptcy Coverage: "Bankruptcy Coverage" for the Certificates
shall be zero.
Bankruptcy Loss: A loss on a Mortgage Loan arising out of (i) a
reduction in the scheduled Monthly Payment for such Mortgage Loan by a
court of competent jurisdiction in a case under the United States
Bankruptcy Code, other than any such reduction that arises out of clause
(ii) of this definition of "Bankruptcy Loss", including, without
limitation, any such reduction that results in a permanent forgiveness
of principal, or (ii) with respect to any Mortgage Loan, a valuation, by
a court of competent jurisdiction in a case under such Bankruptcy Code,
of the related Mortgaged Property in an amount less than the then
outstanding Principal Balance of such Mortgage Loan.
Beneficial Holder: A Person holding a beneficial interest in any
Book-Entry Certificate as or through a DTC Participant or an Indirect
DTC Participant or a Person holding a beneficial interest in any
<PAGE> 5
Definitive Certificate.
Book-Entry Certificates: The Class A Certificates, beneficial
ownership and transfers of which shall be made through book entries as
described in Section 5.07.
Business Day: Any day other than a Saturday, a Sunday, or a day on
which the Certificate Insurer or banking institutions in Chicago,
Illinois, Los Angeles, California or New York, New York are authorized
or obligated by law or executive order to be closed.
Buydown Agreement: An agreement between a Person and a Mortgagor
pursuant to which such Person has provided a Buydown Fund.
Buydown Fund: A fund provided by the originator of a Mortgage Loan
or another Person with respect to a Buydown Loan which provides an
amount sufficient to subsidize regularly scheduled principal and
interest payments due on such Buydown Loan for a period. Buydown Funds
may be (i) funded at the par values of future payment subsidies, or (ii)
funded in an amount less than the par values of future payment
subsidies, and determined by discounting such par values in accordance
with interest accruing on such amounts, in which event they will be
deposited in an account bearing interest. Buydown Funds may be held in a
separate Buydown Fund Account or may be held in a Custodial Account for
P&I or a Custodial Account for Reserves and monitored by a Servicer.
Buydown Fund Account: A separate account or accounts created and
maintained pursuant to Section 3.02 (a) with the corporate trust
department of the Trustee or another financial institution approved by
the Master Servicer, (b) within FDIC insured accounts (or other accounts
with comparable insurance coverage acceptable to the Rating Agencies)
created, maintained and monitored by a Servicer or (c) in a separate non-
trust account without FDIC or other insurance in an Eligible
Institution. Such account or accounts may be non-interest bearing or may
bear interest. In the event that a Buydown Fund Account is established
pursuant to clause (b) of the preceding sentence, amounts held in such
Buydown Fund Account shall not exceed the level of deposit insurance
coverage on such account; accordingly, more than one Buydown Fund
Account may be established.
Buydown Loan: A Mortgage Loan for which the Mortgage Interest Rate
has been subsidized through a Buydown Fund provided at the time of
origination of such Mortgage Loan.
Certificate: Any one of the Class A, Class B or Class R
Certificates, issued pursuant to this Agreement, executed by the Trustee
and authenticated by or on behalf of the Trustee hereunder in
substantially one of the forms set forth in Exhibit A hereto. The
additional matter appearing in Exhibit H shall be deemed incorporated
into Exhibit A as though set forth at the end of such Exhibit.
Certificate Account: The separate trust account created and
<PAGE> 6
maintained pursuant to Section 3.04 with the Trustee, the Investment
Depository or any other bank or trust company acceptable to the Rating
Agencies and the Certificate Insurer which is incorporated under the
laws of the United States or any state thereof, which account shall bear
a designation clearly indicating that the funds deposited therein are
held in trust for the benefit of the Trustee on behalf of the
Certificateholders or any other account serving a similar function
acceptable to the Rating Agencies and the Certificate Insurer. Funds in
the Certificate Account may be invested in Eligible Investments pursuant
to Section 3.04(b) and reinvestment earnings thereon shall be paid to
the Master Servicer as additional servicing compensation. Funds
deposited in the Certificate Account (exclusive of the Master Servicing
Fee) shall be held in trust for the Certificateholders and the
Certificate Insurer and for the uses and purposes set forth in Section
2.01, Section 3.04, Section 3.05 and Section 4.01.
Certificateholder or Holder: With respect to the Certificates, the
person in whose name a Certificate is registered in the Certificate
Register, except that, solely for the purposes of giving any consent
pursuant to this Agreement, any Certificate registered in the name of
the Company, the Master Servicer or any affiliate thereof shall be
deemed not to be outstanding and the Percentage Interest evidenced
thereby shall not be taken into account in determining whether the
requisite percentage of Percentage Interests necessary to effect any
such consent has been obtained; provided, that the Trustee may
conclusively rely upon an Officer's Certificate to determine whether any
Person is an affiliate of the Company or the Master Servicer.
Certificate Insurance Policy: The certificate guaranty insurance
policy no. AB0258BE issued by the Certificate Insurer in respect of the
Class A Certificates, a copy of which is attached hereto as Exhibit K.
Certificate Insurer: Ambac Assurance Corporation, a Wisconsin-
domiciled stock insurance corporation.
Certificate Insurer Default: The existence and continuance of any
of the following: (a) a failure by the Certificate Insurer to make a
payment required under the Certificate Insurance Policy in accordance
with its terms; (b) the entry of a decree or order of a court or agency
having jurisdiction in respect of the Certificate Insurer in an
involuntary case under any present or future Federal or state
bankruptcy, insolvency or similar law appointing a conservator or
receiver or liquidator or other similar official of the Certificate
Insurer or of any substantial part of its property, or the entering of
an order for the winding up or liquidation of the affairs of the
Certificate Insurer and the continuance of any such decree or order
undischarged or unstayed and in force for a period of 90 consecutive
days; (c) the Certificate Insurer shall consent to the appointment of a
conservator or receiver or liquidator or other similar official in any
insolvency, readjustment of debt, marshaling of assets and liabilities
or similar proceedings of or relating to the Certificate Insurer or of
or relating to all or substantially all of its property; or (d) the
<PAGE> 7
Certificate Insurer shall admit in writing its inability to pay its
debts generally as they become due, file a petition to take advantage of
or otherwise voluntarily commence a case or proceeding under any
applicable bankruptcy, insolvency, reorganization or other similar
statute, make an assignment for the benefit of its creditors, or
voluntarily suspend payment of its obligations.
Certificate Insurer Premium: With respect to each Distribution
Date, the premium payable to the Certificate Insurer, defined in the
Insurance Agreement as the "Premium."
Certificate Insurer Reimbursement Amount: The sum of (a) all
amounts previously paid by the Certificate Insurer under the Certificate
Insurance Policy and all amounts due to the Certificate Insurer under
the Insurance Agreement which have not been previously reimbursed and
(b) interest on the foregoing at the Late Payment Rate from the date
such amount was paid by the Certificate Insurer until paid in full.
Certificate Interest Rate: For each of the Class A, Class B-1,
Class B-2 and Class B-3 Certificates, the per annum rate set forth as
the Certificate Interest Rate for such Class in the Preliminary
Statement hereto. All calculations with respect to the Certificate
Interest Rate shall be made on a 30/360 basis.
Certificate Principal Balance: For each Certificate of any Class,
the portion of the related Class Principal Balance, if any, represented
by such Certificate.
Certificate Register and Certificate Registrar: The register
maintained and the registrar appointed, respectively, pursuant to
Section 5.03.
Class: All Certificates having the same priority and rights to
payments on the Mortgage Loans from the REMIC I Available Distribution
Amount, which Certificates shall be designated as a separate Class, and
which shall be set forth in the applicable forms of Certificates
attached hereto as Exhibit A. Each Class of Certificates shall be
entitled to receive the amounts allocated to such Class pursuant to the
definition of "REMIC I Distribution Amount" only to the extent of the
REMIC I Available Distribution Amount for such Distribution Date
remaining after distributions in accordance with prior clauses of the
definition of "REMIC I Distribution Amount."
Class A Certificates: The Certificates designated as "Class A" on
the face thereof in substantially the form attached hereto as Exhibit A.
Class B Certificates: The Class B-1, Class B-2 and Class B-3
Certificates.
Class B-1 Certificates: The Certificates designated as "Class B-1"
on the face thereof in substantially the form attached hereto as Exhibit
A.
<PAGE> 8
Class B-2 Certificates: The Certificates designated as "Class B-2"
on the face thereof in substantially the form attached hereto as Exhibit
A.
Class B-3 Certificates: The Certificates designated as "Class B-3"
on the face thereof in substantially the form attached hereto as Exhibit
A.
Class Principal Balance: For each of the Class A and Class B
Certificates, the applicable initial Class Principal Balance therefor
set forth in the Preliminary Statement hereto, corresponding to the
rights of such Class in payments of principal due to be passed through
to Certificateholders from principal payments on the Mortgage Loans, as
reduced from time to time by (x) distributions of principal to
Certificateholders of such Class and (y) the portion of Realized Losses
allocated to the Class Principal Balance of such Class pursuant to the
definition of "Realized Loss" with respect to a given Distribution Date.
For any Distribution Date, the reduction of the Class Principal Balance
of any Class of Certificates pursuant to the definition of "Realized
Loss" shall be deemed effective prior to the determination and
distribution of principal on such Class pursuant to the definition of
"REMIC I Distribution Amount". Notwithstanding the foregoing, any
amounts distributed in respect of losses pursuant to paragraph (xiv) of
the definition of "REMIC I Distribution Amount" shall not cause a
further reduction in the Class B Principal Balance. The Class Principal
Balance for the Class A Certificates shall be referred to as the "Class
A Principal Balance" and likewise for the Class B Certificates. The
Class Principal Balances for the Class R Certificate shall be zero.
Exclusively for the purpose of determining any subrogation rights of the
Certificate Insurer arising under Section 3.16 hereof, "Class Principal
Balance" of the Class A Certificates shall not be reduced by the amount
of any payments made by the Certificate Insurer in respect of principal
on such Certificates under the Certificate Insurance Policy, except to
the extent such payments have been reimbursed to the Certificate Insurer
pursuant to the provisions of this Agreement.
Class R Certificate: The Certificate designated as "Class R" on the
face thereof in substantially the form attached hereto as Exhibit A,
which have been designated as the single class of "residual interest" in
REMIC I pursuant to Section 2.01.
Clearing Agency: An organization registered as a "clearing agency"
pursuant to Section 17A of the Securities Exchange Act of 1934, as
amended, which initially shall be DTC.
Closing Date: May 27, 1999, which is the date of settlement of the
sale of the Certificates to the original purchasers thereof.
Code: The Internal Revenue Code of 1986, as amended.
Company: PNC Mortgage Securities Corp., a Delaware corporation, or
its successor-in-interest.
<PAGE> 9
Compensating Interest: For any Distribution Date, the lesser of (i)
the aggregate Servicing Fee payable in respect of such Distribution Date
and (ii) the sum of the aggregate Curtailment Shortfall and aggregate
Uncollected Interest. For purposes of this definition of "Compensating
Interest," all of the Mortgage Loans that are serviced on the Closing
Date by Merrill Lynch Credit Corporation pursuant to the related Selling
and Servicing Contract shall be deemed to have a Servicing Fee equal to
0.25%.
Cooperative: A private, cooperative housing corporation organized
under the laws of, and headquartered in, the States of California, New
York, New Jersey, North Carolina, Washington, Virginia or Hawaii which
owns or leases land and all or part of a building or buildings located
in any such state, including apartments, spaces used for commercial
purposes and common areas therein and whose board of directors
authorizes, among other things, the sale of Cooperative Stock.
Cooperative Apartment: A dwelling unit in a multi-dwelling building
owned or leased by a Cooperative, which unit the Mortgagor has an
exclusive right to occupy pursuant to the terms of a proprietary lease
or occupancy agreement.
Cooperative Lease: With respect to a Cooperative Loan, the
proprietary lease or occupancy agreement with respect to the Cooperative
Apartment occupied by the Mortgagor and relating to the related
Cooperative Stock, which lease or agreement confers an exclusive right
to the holder of such Cooperative Stock to occupy such apartment.
Cooperative Loans: Any of the Mortgage Loans made in respect of a
Cooperative Apartment, evidenced by a Mortgage Note and secured by (i) a
Security Agreement, (ii) the related Cooperative Stock Certificate,
(iii) an assignment or mortgage of the Cooperative Lease, (iv) financing
statements and (v) a stock power (or other similar instrument), and
ancillary thereto, a recognition agreement between the Cooperative and
the originator of the Cooperative Loan, each of which was transferred
and assigned to the Trustee pursuant to Section 2.01 and are from time
to time held as part of the Trust Fund created hereunder.
Cooperative Stock: With respect to a Cooperative Loan, the single
outstanding class of stock, partnership interest or other ownership
instrument in the related Cooperative.
Cooperative Stock Certificate: With respect to a Cooperative Loan,
the stock certificate or other instrument evidencing the related
Cooperative Stock.
Corporate Trust Office: The corporate trust office of the Trustee
in the State of California, at which at any particular time its
corporate trust business with respect to this Agreement shall be
administered, which office at the date of the execution of this
Agreement is located at 3 Park Plaza, 16th floor, Irvine, CA 92614,
Attention: Corporate Trust PNC 1999-7.
<PAGE> 10
Curtailment: Any payment of principal (exclusive of any prepayment
penalty) on a Mortgage Loan, made by or on behalf of the related
Mortgagor, other than a Monthly Payment, a Prepaid Monthly Payment or a
Payoff, which is applied to reduce the outstanding principal balance of
the Mortgage Loan.
Curtailment Shortfall: With respect to any Curtailment applied with
a Monthly Payment, an amount equal to one month's interest on such
Curtailment at the applicable Pass-Through Rate on such Mortgage Loan.
Custodial Account for P&I: The Custodial Account for principal and
interest established and maintained by each Servicer pursuant to its
Selling and Servicing Contract and caused by the Master Servicer to be
established and maintained pursuant to Section 3.02 (a) with the
corporate trust department of the Investment Depository or another
financial institution approved by the Master Servicer such that the
rights of the Master Servicer, the Trustee, the Certificate Insurer and
the Certificateholders thereto shall be fully protected against the
claims of any creditors of the applicable Servicer and of any creditors
or depositors of the institution in which such account is maintained,
(b) within FDIC insured accounts (or other accounts with comparable
insurance coverage acceptable to the Rating Agencies and the Certificate
Insurer) created, maintained and monitored by a Servicer or (c) in a
separate non-trust account without FDIC or other insurance in an
Eligible Institution. In the event that a Custodial Account for P&I is
established pursuant to clause (b) of the preceding sentence, amounts
held in such Custodial Account for P&I shall not exceed the level of
deposit insurance coverage on such account; accordingly, more than one
Custodial Account for P&I may be established. Any amount that is at any
time not protected or insured in accordance with the first sentence of
this definition of "Custodial Account for P&I" shall promptly be
withdrawn from such Custodial Account for P&I and be remitted to the
Investment Account.
Custodial Account for Reserves: The Custodial Account for Reserves
established and maintained by each Servicer pursuant to its Selling and
Servicing Contract and caused by the Master Servicer to be established
and maintained pursuant to Section 3.02 (a) with the corporate trust
department of the Investment Depository or another financial institution
approved by the Master Servicer such that the rights of the Master
Servicer, the Trustee, the Certificate Insurer and the
Certificateholders thereto shall be fully protected against the claims
of any creditors of the applicable Servicer and of any creditors or
depositors of the institution in which such account is maintained, (b)
within FDIC insured accounts (or other accounts with comparable
insurance coverage acceptable to the Rating Agencies and the Certificate
Insurer) created, maintained and monitored by a Servicer or (c) in a
separate non-trust account without FDIC or other insurance in an
Eligible Institution. In the event that a Custodial Account for Reserves
is established pursuant to clause (b) of the preceding sentence, amounts
held in such Custodial Account for Reserves shall not exceed the level
of deposit insurance coverage on such account; accordingly, more than
<PAGE> 11
one Custodial Account for Reserves may be established. Any amount that
is at any time not protected or insured in accordance with the first
sentence of this definition of "Custodial Account for Reserves" shall
promptly be withdrawn from such Custodial Account for Reserves and be
remitted to the Investment Account.
Custodial Agreement: The agreement, if any, among the Master
Servicer, the Trustee and a Custodian providing for the safekeeping of
the Mortgage Files on behalf of the Certificateholders and the
Certificate Insurer.
Custodian: A custodian (other than the Trustee) which is not an
affiliate of the Master Servicer or the Company and which is appointed
pursuant to a Custodial Agreement. Any Custodian so appointed shall act
as agent on behalf of the Trustee, and shall be compensated by the
Trustee at no additional charge to the Master Servicer. The Trustee
shall remain at all times responsible under the terms of this Agreement,
notwithstanding the fact that certain duties have been assigned to a
Custodian.
Cut-Off Date: May 1, 1999.
Deficiency Amount: With respect to the Class A Certificates as of
any Distribution Date, (i) any shortfall in amounts available in the
Certificate Account to pay interest accrued during the preceding
calendar month on the Class A Principal Balance at the Class A
Certificate Interest Rate, net of any interest shortfalls relating to
the Relief Act allocated to the Class A Certificates and any
Uncompensated Interest Shortfalls allocated to the Class A Certificates,
(ii) the principal portion of any Realized Loss allocated to the Class A
Certificates, and (iii) the Class A Principal Balance to the extent
unpaid on the Distribution Date occurring in November 2029.
Definitive Certificates: Certificates in definitive, fully
registered and certificated form.
Depositary Agreement: The Letter of Representations, dated May 26,
1999 by and among DTC, the Company and the Trustee.
Destroyed Mortgage Note: A Mortgage Note the original of which was
permanently lost or destroyed and has not been replaced.
Determination Date: A day not later than the 10th Business Day
preceding a related Distribution Date.
Disqualified Organization: Any Person which is not a Permitted
Transferee, but does not include any Pass-Through Entity which owns or
holds the Residual Certificate and of which a Disqualified Organization,
directly or indirectly, may be a stockholder, partner or beneficiary.
Distribution Date: With respect to distributions on the
Certificates, the 25th day (or, if such 25th day is not a Business Day,
<PAGE> 12
the Business Day immediately succeeding such 25th day) of each month,
with the first such date being June 25, 1999. The "related Due Date"
for any Distribution Date is the Due Date immediately preceding such
Distribution Date.
DTC: The Depository Trust Company.
DTC Participant: A broker, dealer, bank, other financial
institution or other Person for whom DTC effects book-entry transfers
and pledges of securities deposited with DTC.
Due Date: The day on which the Monthly Payment for each Mortgage
Loan is due.
Eligible Institution: An institution having (i) the highest short-
term debt rating, and one of the two highest long-term debt ratings of
the Rating Agencies, (ii) with respect to any Custodial Account for P&I
and Custodial Account for Reserves, an unsecured long-term debt rating
of at least one of the two highest unsecured long-term debt ratings of
the Rating Agencies, (iii) with respect to any Buydown Fund Account or
Custodial Account which also serves as a Buydown Fund Account, the
highest unsecured long-term debt rating by the Rating Agencies or (iv)
the approval of the Rating Agencies and the Certificate Insurer. Such
institution may be the Servicer if the applicable Selling and Servicing
Contract requires the Servicer to provide the Master Servicer with
written notice on the Business Day following the date on which the
Servicer determines that such Servicer's short-term debt and unsecured
long-term debt ratings fail to meet the requirements of the prior
sentence.
Eligible Investments: Any one or more of the obligations or
securities listed below in which funds deposited in the Investment
Account, the Certificate Account, the Custodial Account for P&I and the
Custodial Account for Reserves may be invested:
(i) Obligations of, or guaranteed as to principal and interest by,
the United States or any agency or instrumentality thereof when such
obligations are backed by the full faith and credit of the United
States;
(ii) Repurchase agreements on obligations described in clause (i) of
this definition of "Eligible Investments", provided that the unsecured
obligations of the party (including the Trustee in its commercial
capacity) agreeing to repurchase such obligations have at the time one
of the two highest short term debt ratings of the Rating Agencies and
provided that such repurchaser's unsecured long term debt has one of the
two highest unsecured long term debt ratings of the Rating Agencies;
(iii) Federal funds, certificates of deposit, time deposits and
bankers' acceptances of any U.S. bank or trust company incorporated
under the laws of the United States or any state (including the Trustee
in its commercial capacity), provided that the debt obligations of such
bank or trust company (or, in the case of the principal bank in a bank
<PAGE> 13
holding company system, debt obligations of the bank holding company) at
the date of acquisition thereof have one of the two highest short term
debt ratings of the Rating Agencies and unsecured long term debt has one
of the two highest unsecured long term debt ratings of the Rating
Agencies;
(iv) Obligations of, or obligations guaranteed by, any state of the
United States or the District of Columbia, provided that such
obligations at the date of acquisition thereof shall have the highest
long-term debt ratings available for such securities from the Rating
Agencies;
(v) Commercial paper of any corporation incorporated under the laws of
the United States or any state thereof, which on the date of acquisition
has the highest commercial paper rating of the Rating Agencies, provided
that the corporation has unsecured long term debt that has one of the
two highest unsecured long term debt ratings of the Rating Agencies;
(vi) Securities (other than stripped bonds or stripped coupons) bearing
interest or sold at a discount that are issued by any corporation
incorporated under the laws of the United States or any state thereof
and have the highest long-term unsecured rating available for such
securities from the Rating Agencies; provided, however, that securities
issued by any such corporation will not be investments to the extent
that investment therein would cause the outstanding principal amount of
securities issued by such corporation that are then held as part of the
Investment Account or the Certificate Account to exceed 20% of the
aggregate principal amount of all Eligible Investments then held in the
Investment Account and the Certificate Account;
(vii) Units of taxable money market funds (which may be 12b-1 funds,
as contemplated under the rules promulgated by the Securities and
Exchange Commission under the Investment Company Act of 1940), which
funds have the highest rating available for such securities from the
Rating Agencies or which have been designated in writing by the Rating
Agencies as Eligible Investments; and
(viii) Such other investments the investment in which will not, as
evidenced by a letter from each of the Rating Agencies, result in the
downgrading or withdrawal of the Ratings (determined in the case of the
Class A Certificates, without giving effect to the Certificate Insurance
Policy) and which have been approved by the Certificate Insurer;
provided, however, that such obligation or security is held for a
temporary period pursuant to Section 1.860G-2(g)(1) of the Treasury
Regulations, and that such period can in no event exceed thirteen
months.
In no event shall an instrument be an Eligible Investment if such
instrument (a) evidences a right to receive only interest payments with
respect to the obligations underlying such instrument or (b) has been
purchased at a price greater than the outstanding principal balance of
such instrument.
ERISA: The Employee Retirement Income Security Act of 1974, as
amended.
Event of Default: Any event of default as specified in Section
<PAGE> 14
7.01.
Excess Liquidation Proceeds: With respect to any Distribution Date,
the excess, if any, of aggregate Liquidation Proceeds received during
the Prior Period over the amount that would have been received if
Payoffs had been made with respect to such Mortgage Loans on the date
such Liquidation Proceeds were received.
FDIC: Federal Deposit Insurance Corporation, or any successor
thereto.
FHA: Federal Housing Administration, or any successor thereto.
Fannie Mae: The entity formerly known as the Federal National
Mortgage Association, or any successor thereto.
Fraud Coverage: "Fraud Coverage" for the Certificates shall be
zero.
Fraud Loss: The occurrence of a loss on a Mortgage Loan arising
from any action, event or state of facts with respect to such Mortgage
Loan which, because it involved or arose out of any dishonest,
fraudulent, criminal, negligent or knowingly wrongful act, error or
omission by the Mortgagor, originator (or assignee thereof) of such
Mortgage Loan, Lender, a Servicer or the Master Servicer, would result
in an exclusion from, denial of, or defense to coverage which otherwise
would be provided by a Primary Insurance Policy previously issued with
respect to such Mortgage Loan.
Freddie Mac: The entity formerly known as the Federal Home Loan
Mortgage Corporation, or any successor thereto.
Indirect DTC Participants: Entities such as banks, brokers, dealers
or trust companies, that clear through or maintain a custodial
relationship with a DTC Participant, either directly or indirectly.
Index: For each Mortgage Loan, the "index" specified in the related
Mortgage Note and identified on the Mortgage Loan Schedule.
Insurance Agreement: The Insurance and Indemnity Agreement, dated
as of the Closing Date, among the Certificate Insurer, the Trustee and
the Company, as the same may be further amended or supplemented from
time to time.
Insurance Proceeds: Amounts paid or payable by the insurer under
any Primary Insurance Policy or any other insurance policy (including
any replacement policy permitted under this Agreement) covering any
Mortgage Loan, any Mortgaged Property or the Additional Collateral, any
hazard insurance policy required pursuant to Section 3.07, any title
insurance policy required pursuant to Section 2.03 and any FHA insurance
policy or VA guaranty. Proceeds under the Certificate Insurance Policy
shall not constitute "Insurance Proceeds."
<PAGE> 15
Insured Amount: As of any Distribution Date, any Deficiency Amount
and any Preference Amount.
Interest Distribution Amount: On any Distribution Date, for any
Class of Certificates (other than the Class R Certificate), the amount
of interest accrued on the respective Class Principal Balance at the
related Certificate Interest Rate for such Class during the Prior
Period, in each case before giving effect to allocations of Realized
Losses for the Prior Period or distributions to be made on such
Distribution Date, reduced by Uncompensated Interest Shortfall, interest
shortfalls related to the Relief Act and the interest portion of
Realized Losses allocated to such Class pursuant to the definitions of
"Uncompensated Interest Shortfall", "Relief Act" and "Realized Loss",
respectively. The Interest Distribution Amount for the Class R
Certificate shall equal zero.
Investment Account: The commingled account (which shall be
commingled only with investment accounts related to series of pass-
through certificates with a class of certificates which has a rating
equal to the highest of the Ratings of the Certificates) maintained by
the Master Servicer in the trust department of the Investment Depository
pursuant to Section 3.03 and which bears a designation acceptable to the
Rating Agencies.
Investment Depository: The Chase Manhattan Bank, New York, New York
or another bank or trust company designated from time to time by the
Master Servicer. The Investment Depository shall at all times be an
Eligible Institution.
Last Scheduled Distribution Date: With respect to each Class of
the Certificates, the date set forth in the table contained in the
Preliminary Statement hereto.
Late Payment Rate: The meaning given to such term in the Insurance
Agreement.
Lender: An institution from which the Company purchased any
Mortgage Loans pursuant to a Selling and Servicing Contract.
Liquidated Mortgage Loan: A Mortgage Loan as to which the Master
Servicer or the applicable Servicer has determined in accordance with
its customary servicing practices that all amounts which it expects to
recover from or on account of such Mortgage Loan, whether from Insurance
Proceeds, Liquidation Proceeds or otherwise, have been recovered. For
purposes of this definition, acquisition of a Mortgaged Property by the
Trust Fund shall not constitute final liquidation of the related
Mortgage Loan.
Liquidation Principal: The principal portion of Liquidation
Proceeds received with respect to each Mortgage Loan which became a
Liquidated Mortgage Loan (but not in excess of the principal balance
thereof) during the Prior Period.
<PAGE> 16
Liquidation Proceeds: Amounts after deduction of amounts
reimbursable under Section 3.05(a)(i) and (ii) received and retained in
connection with the liquidation of defaulted Mortgage Loans, whether
through foreclosure or otherwise, including any proceeds realized with
respect to the Additional Collateral, including any payment due under
the Surety Bond issued with respect to the Additional Collateral.
Loan-to-Value Ratio: The original principal amount of a Mortgage
Loan divided by the Original Value; however, references to "current Loan-
to-Value Ratio" shall mean the then current Principal Balance of a
Mortgage Loan divided by the Original Value.
Margin: The number of basis points to be added to the Index on
each Adjustment Date in order to determine the Mortgage Interest Rate,
as specified in the related Mortgage Note and identified on the Mortgage
Loan Schedule.
Master Servicer: The Company, or any successor thereto appointed
as provided pursuant to Section 7.02, acting to service and administer
the Mortgage Loans pursuant to Section 3.01.
Master Servicing Fee: The fee charged by the Master Servicer for
supervising the mortgage servicing and advancing certain expenses, equal
to a per annum rate set forth for each Mortgage Loan in Exhibit D on the
outstanding Principal Balance of such Mortgage Loan, payable monthly
from the Certificate Account, the Investment Account or the Custodial
Account for P&I.
Monthly P&I Advance: An advance of funds by the Master Servicer
pursuant to Section 4.02 or a Servicer pursuant to its Selling and
Servicing Contract to cover delinquent principal and interest
installments.
Monthly Payment: The scheduled payment of principal and interest on
a Mortgage Loan (including any amounts due from a Buydown Fund, if any)
which is due on the related Due Date for such Mortgage Loan.
Moody's: Moody's Investors Service, Inc. or any successor thereto.
Mortgage: The mortgage, deed of trust or other instrument securing
a Mortgage Note.
Mortgaged Property: With respect to any Mortgage Loan, other than a
Cooperative Loan, the real property, together with improvements thereto,
and, with respect to any Cooperative Loan, the related Cooperative Stock
and Cooperative Lease, securing the indebtedness of the Mortgagor under
the related Mortgage Loan.
Mortgage File: The following documents or instruments with respect
to each Mortgage Loan transferred and assigned by the Company pursuant
to Section 2.01, (X) with respect to each Mortgage Loan that is not a
Cooperative Loan:
<PAGE> 17
(i) The original Mortgage Note endorsed to "Bankers Trust Company of
California, N.A., as Custodian/Trustee, without recourse" or "Bankers
Trust Company of California, N.A., as Trustee for the benefit of the
Holders from time to time of PNC Mortgage Securities Corp. Mortgage Pass-
Through Certificates, Series 1999-7, without recourse" and all
intervening endorsements evidencing a complete chain of endorsements
from the originator to the Trustee, or, in the event of any Destroyed
Mortgage Note, a copy or a duplicate original of the Mortgage Note,
together with an original lost note affidavit from the originator of the
related Mortgage Loan or the Company, as applicable, stating that the
original Mortgage Note was lost, misplaced or destroyed, together with a
copy of the related Mortgage Note; in the event the Mortgage Notes are
endorsed in blank as of the Closing Date, the Company shall, within 45
days of the Closing Date, cause such Mortgage Notes to be endorsed
pursuant to the terms set forth herein; provided, that, with respect to
any Mortgage Note whereby the related Mortgaged Property is located in
California, such original Mortgage Note may be endorsed in blank and the
Company shall not be required to endorse such Mortgage Notes pursuant to
the terms otherwise set forth in this clause (i);
(ii) The Buydown Agreement, if applicable;
(iii) A Mortgage that is either
(1) the original recorded Mortgage with recording
information thereon for the jurisdiction in which the
Mortgaged Property is located and a Mortgage assignment
thereof in recordable form to "Bankers Trust Company of
California, N.A., as Custodian/Trustee", or to "Bankers Trust
Company of California, N.A., as Trustee for the Holders of PNC
Mortgage Securities Corp. Mortgage Pass-Through Certificates,
Series 1999-7" and all intervening assignments evidencing a
complete chain of assignment, from the originator to the name
holder or the payee endorsing the related Mortgage Note; or
(2) a copy of the Mortgage which represents a true and
correct reproduction of the original Mortgage and which has
either been certified (i) on the face thereof by the public
recording office in the appropriate jurisdiction in which the
Mortgaged Property is located, or (ii) by the originator or
Lender as a true and correct copy the original of which has
been sent for recordation and an original Mortgage assignment
thereof duly executed and acknowledged in recordable form to
"Bankers Trust Company of California, N.A., as
Custodian/Trustee" or to "Bankers Trust Company of California,
N.A., as Trustee for the Holders of PNC Mortgage Securities
Corp. Mortgage Pass-Through Certificates, Series 1999-7" and
all intervening assignments evidencing a complete chain of
assignment from the originator to the name holder or the payee
endorsing the related Mortgage Note; provided, that, in the
case of this clause (iii)(2) and clause (iii)(1), in the event
the assignments are executed in blank as of the Closing Date,
the Company shall, within 45 days of the Closing Date, cause
<PAGE> 18
such assignments to be executed pursuant to the terms set
forth herein; provided, that, in the case of this clause
(iii)(2) and clause (iii)(1), with respect to any Mortgage
whereby the related Mortgaged Property is located in
California, the Mortgage assignment may be executed and
acknowledged in blank and the Company shall not be required to
deliver such Mortgage assignment in the form otherwise set
forth in clause (iii)(1) or this clause (iii)(2);
(iv) A copy of (a) the title insurance policy, or (b) in lieu
thereof, a title insurance binder, a copy of an attorney's title opinion,
certificate or other evidence of title acceptable to the Company;
(v) For any Mortgage Loan that has been modified or amended, the
original instrument or instruments effecting such modification or
amendment; and
(vi) For each Mortgage Loan that is an Additional Collateral
Loan, a copy of the security agreement or guaranty constituting
part of the Additional Collateral;
and (Y) with respect to each Cooperative Loan:
(i) the original Mortgage Note endorsed to "Bankers Trust Company of
California, N.A., as Custodian/Trustee", or to "Bankers Trust Company of
California, N.A., as Trustee for the Holders of PNC Mortgage Securities
Corp. Mortgage Pass-Through Certificates, Series 1999-7" and all
intervening endorsements evidencing a complete chain of endorsements,
from the originator to the Trustee, or, in the event of any Destroyed
Mortgage Note, a copy or a duplicate original of the Mortgage Note,
together with an original lost note affidavit from the originator of the
related Mortgage Loan or the Company, as applicable, stating that the
original Mortgage Note was lost, misplaced or destroyed, together with a
copy of the related Mortgage Note; in the event the Mortgage Notes are
endorsed in blank as of the Closing Date, the Company shall, within 45
days of the Closing Date, cause such Mortgage Notes to be endorsed
pursuant to the terms set forth herein; provided, that, with respect to
any Mortgage Note whereby the related Mortgaged Property is located in
California, such original Mortgage Note may be endorsed in blank and the
Company shall not be required to endorse such Mortgage Notes pursuant to
the terms otherwise set forth in this clause (i);
(ii) A counterpart of the Cooperative Lease and the Assignment of
Proprietary Lease to the originator of the Cooperative Loan with
intervening assignments showing an unbroken chain of title from such
originator to the Company and then from the Company to blank;
(iii) The related Cooperative Stock Certificate, representing the
related Cooperative Stock pledged with respect to such Cooperative Loan,
together with an undated stock power (or other similar instrument)
executed in blank;
(iv) The original recognition agreement by the Cooperative of the
interests of the mortgagee with respect to the related Cooperative Loan;
<PAGE> 19
(v) The Security Agreement;
(vi) Copies of the original UCC-1 financing statement, and any
continuation statements, filed by the originator of such Cooperative
Loan as secured party, each with evidence of recording thereof,
evidencing the interest of the originator under the Security Agreement
and the Assignment of Proprietary Lease;
(vii) Copies of the filed UCC-3 assignments of the security interest
referenced in clause (vi) above showing an unbroken chain of title from
the originator to the Company and then from the Company to blank, each
with evidence of recording thereof, evidencing the interest of the
originator under the Security Agreement and the Assignment of
Proprietary Lease;
(viii) An executed assignment of the interest of the originator in
the Security Agreement, Assignment of Proprietary Lease and the
recognition agreement referenced in clause (iv) above, showing an
unbroken chain of title from the originator to Company and from the
Company to blank; and
(ix) For any Cooperative Loan that has been modified or amended, the
original instrument or instruments effecting such modification or
amendment.
Mortgage Interest Rate: For any Mortgage Loan, the per annum rate
at which interest accrues on such Mortgage Loan pursuant to the terms of
the related Mortgage Note.
Mortgage Loans: With respect to each Cooperative Loan, the related
Mortgage Note, Security Agreement, Assignment of Proprietary Lease,
Cooperative Stock Certificate and Cooperative Lease, and, with respect
to each Mortgage Loan other than a Cooperative Loan, the Mortgages and
the related Mortgage Notes, each transferred and assigned to the Trustee
pursuant to the provisions hereof as from time to time are held as part
of the Trust Fund, the Mortgage Loans so held being identified in the
Mortgage Loan Schedule.
Mortgage Loan Schedule: The schedule, as amended from time to time,
of Mortgage Loans attached hereto as Exhibit D, which shall set forth as
to each Mortgage Loan the following, among other things:
(i) its loan number,
(ii) the address of the Mortgaged Property,
(iii) the name of the Mortgagor,
(iv) the Original Value of the property subject to the Mortgage,
(v) the Principal Balance as of the Cut-Off Date,
(vi) the Mortgage Interest Rate in effect as of the Cut-Off Date,
(vii) the Margin and the Index,
(viii) the next Adjustment Date,
(ix) the Adjustment Date frequency,
(x) the Periodic Cap,
(xi) the Rate Ceiling and the Rate Floor, if any,
(xii) whether a Primary Insurance Policy is in effect as of the Cut-
Off Date,
<PAGE> 20
(xiii) the maturity of the Mortgage Note,
(xiv) the Servicing Fee and the Master Servicing Fee;,
(xv) whether such Mortgage Loan is an Additional Collateral Loan, and
(xvi) whether such Mortgage Loan is a Cooperative Loan.
Mortgage Note: The note or other evidence of the indebtedness of a
Mortgagor under a Mortgage Loan.
Mortgage Pool: All of the Mortgage Loans.
Mortgagor: The obligor on a Mortgage Note.
Nonrecoverable Advance: With respect to any Mortgage Loan, any
advance which the Master Servicer shall determine to be a Nonrecoverable
Advance pursuant to Section 4.03 and which was, or is proposed to be,
made by (i) the Master Servicer or (ii) a Servicer pursuant to its
Selling and Servicing Contract.
Non-U.S. Person: A Person that is not a U.S. Person.
Notice: The telephonic or telegraphic notice, promptly confirmed in
writing by telecopy substantially in the form of Exhibit A attached to
the Certificate Insurance Policy, the original of which is subsequently
delivered by registered or certified mail, from the Trustee specifying
the Insured Amount which shall be due and owing on the applicable
Distribution Date.
OTS: The Office of Thrift Supervision, or any successor thereto.
Officer's Certificate: A certificate signed by the Chairman of the
Board, the President, a Vice President, or the Treasurer of the Master
Servicer and delivered to the Trustee.
Opinion of Counsel: A written opinion of counsel, who shall be
reasonably acceptable to the Trustee and the Certificate Insurer and who
may be counsel (including in-house counsel) for the Company or the
Master Servicer.
Original Value: With respect to any Mortgage Loan other than a
Mortgage Loan originated for the purpose of refinancing an existing
mortgage debt, the lesser of (a) the Appraised Value (if any) of the
Mortgaged Property at the time the Mortgage Loan was originated or (b)
the purchase price paid for the Mortgaged Property by the Mortgagor.
With respect to a Mortgage Loan originated for the purpose of
refinancing existing mortgage debt, the Original Value shall be equal to
the Appraised Value of the Mortgaged Property at the time the Mortgage
Loan was originated or the appraised value at the time the refinanced
mortgage debt was incurred. "Original Value" shall exclude the value of
any Additional Collateral.
Ownership Interest: With respect to the Class R Certificate, any
ownership or security interest in such Class R Certificate, including
any interest in a Class R Certificate as the Holder thereof and any
<PAGE> 21
other interest therein whether direct or indirect, legal or beneficial,
as owner or as pledgee.
Pass-Through Entity: Any regulated investment company, real estate
investment trust, common trust fund, partnership, trust or estate, and
any organization to which Section 1381 of the Code applies.
Pass-Through Rate: For each Mortgage Loan, a rate equal to the
Mortgage Interest Rate for such Mortgage Loan less the applicable per
annum percentage rates related to each of (i) the Servicing Fee and (ii)
the Master Servicing Fee. For each Mortgage Loan, any calculation of
monthly interest at such rate shall be based upon annual interest at
such rate (computed on the basis of a 360-day year of twelve 30-day
months) on the unpaid Principal Balance of the related Mortgage Loan
divided by twelve, and any calculation of interest at such rate by
reason of a Payoff shall be based upon annual interest at such rate on
the outstanding Principal Balance of the related Mortgage Loan
multiplied by a fraction, the numerator of which is the number of days
elapsed from the Due Date of the last scheduled payment of principal and
interest to, but not including, the date of such Payoff, and the
denominator of which is (a) for Payoffs received on a Due Date, 360, and
(b) for all other Payoffs, 365.
Paying Agent: Any paying agent appointed by the Trustee pursuant to
Section 8.12.
Payoff: Any Mortgagor payment of principal (exclusive of any
prepayment penalty) on a Mortgage Loan equal to the entire outstanding
Principal Balance of such Mortgage Loan, if received in advance of the
last scheduled Due Date for such Mortgage Loan and accompanied by an
amount of interest equal to accrued unpaid interest on the Mortgage Loan
to the date of such payment-in-full.
Percentage Interest: (a) With respect to the right of each
Certificate of a particular Class in the distributions allocated to such
Class, "Percentage Interest" shall mean the percentage undivided
beneficial ownership interest evidenced by such Certificate of such
Class, which percentage shall equal:
(i) with respect to any Certificate (other than the Residual
Certificate), its Certificate Principal Balance divided by the
applicable Class Principal Balance; and
(ii) with respect to the Residual Certificate, the percentage set
forth on the face of such Certificate.
(b) With respect to the rights of each Certificate in connection
with Sections 5.09, 7.01, 8.01(c), 8.02, 8.07, 10.01 and 10.03,
"Percentage Interest" shall mean the percentage undivided beneficial
interest evidenced by such Certificate in the Trust Fund, which for
purposes of such rights only shall equal:
<PAGE> 22
(i) with respect to any Certificate (other than the Class R
Certificate), percentage calculated by dividing its Certificate
Principal Balance by the Aggregate Certificate Principal Balance of
the Certificates; and
(ii) with respect to the Class R Certificate, zero.
Periodic Cap: Any limitation contained in a Mortgage Note that,
with respect to each Adjustment Date, the Mortgage Interest Rate after
such adjustment may not vary from the Mortgage Interest Rate in effect
prior to such adjustment by more than the number of basis points
specified in the Mortgage Note, which may be a different amount with
respect to the first Adjustment Date.
Permitted Transferee: With respect to the holding or ownership of
the Class R Certificate, any Person other than (i) the United States, a
State or any political subdivision thereof, or any agency or
instrumentality of any of the foregoing, (ii) a foreign government,
International Organization or any agency or instrumentality of either of
the foregoing, (iii) an organization (except certain farmers'
cooperatives described in Code Section 521) which is exempt from the
taxes imposed by Chapter 1 of the Code (unless such organization is
subject to the tax imposed by Section 511 of the Code on unrelated
business taxable income), (iv) rural electric and telephone cooperatives
described in Code Section 1381(a)(2)(C), (v) any "electing large
partnership" as defined in Section 775(a) of the Code, (vi) any Person
from whom the Trustee has not received an affidavit to the effect that
it is not a "disqualified organization" within the meaning of Section
860E(e)(5) of the Code, and (vii) any other Person so designated by the
Company based upon an Opinion of Counsel that the transfer of an
Ownership Interest in the Class R Certificate to such Person may cause
REMIC I to fail to qualify as a REMIC at any time that the Certificates
are outstanding. The terms "United States", "State" and "International
Organization" shall have the meanings set forth in Code Section 7701 or
successor provisions. A corporation shall not be treated as an
instrumentality of the United States or of any State or political
subdivision thereof if all of its activities are subject to tax, and,
with the exception of the Freddie Mac, a majority of its board of
directors is not selected by such governmental unit.
Person: Any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political
subdivision thereof.
Preference Amount: <*> Any amount previously distributed to a
Holder of a Class A Certificate that is recoverable and sought to be
recovered as a voidable preference by a trustee in bankruptcy pursuant
to the United States Bankruptcy Code (11 U.S.C.) as amended from time to
time, in accordance with a final non-appealable order of a court having
competent jurisdiction.
<PAGE> 23
Premium Payment Rate: For each Distribution Date, a ratio expressed
as a percentage equal to the Certificate Insurer Premium payable on such
Distribution Date divided by the Class A Principal Balance as of the
immediately preceding Distribution Date (after giving effect to
distributions on such date), or with respect to the first Distribution
Date, as of the Closing Date.
Prepaid Monthly Payment: Any Monthly Payment received prior to its
scheduled Due Date, which is intended to be applied to a Mortgage Loan
on its scheduled Due Date and held in the related Custodial Account for
P&I until the Withdrawal Date following its scheduled Due Date.
Primary Insurance Policy: A policy of mortgage guaranty insurance,
if any, on an individual Mortgage Loan or on pools of mortgage loans
that include an individual Mortgage Loan, providing coverage as required
by Section 2.03(xi).
Principal Balance: Except as used in Sections 2.02, 3.09 and 9.01
and for purposes of the definition of Purchase Price, at the time of any
determination, the principal balance of a Mortgage Loan remaining to be
paid at the close of business on the Cut-Off Date, after application of
all scheduled principal payments due on or before the Cut-Off Date,
whether or not received, reduced by all amounts distributed or (except
when such determination occurs earlier in the month than the
Distribution Date) to be distributed to Certificateholders through the
Distribution Date in the month of determination that are reported as
allocable to principal of such Mortgage Loan.
For purposes of the definition of Purchase Price and as used in
Sections 2.02, 3.09 and 9.01, at the time of any determination, the
principal balance of a Mortgage Loan remaining to be paid at the close
of business on the Cut-Off Date, after deduction of all scheduled
principal payments due on or before the Cut-Off Date, whether or not
received, reduced by all amounts distributed or to be distributed to
Certificateholders through the Distribution Date in the month of
determination that are reported as allocable to principal of such
Mortgage Loan.
In the case of a Substitute Mortgage Loan, "Principal Balance"
shall mean, at the time of any determination, the principal balance of
such Substitute Mortgage Loan transferred to the Trust Fund, on the date
of substitution, reduced by all amounts distributed or to be distributed
to Certificateholders through the Distribution Date in the month of
determination that are reported as allocable to principal of such
Substitute Mortgage Loan.
The Principal Balance of a Mortgage Loan (including a Substitute
Mortgage Loan) shall not be adjusted solely by reason of any bankruptcy
or similar proceeding or any moratorium or similar waiver or grace
period. Whenever a Realized Loss has been incurred with respect to a
Mortgage Loan during a calendar month, the Principal Balance of such
Mortgage Loan shall be reduced by the amount of such Realized Loss as of
<PAGE> 24
the Distribution Date next following the end of such calendar month
after giving effect to the allocation of Realized Losses and
distributions of principal to the Certificates.
Principal Payment: Any payment of principal on a Mortgage Loan
other than a Principal Prepayment.
Principal Payment Amount: On any Distribution Date, the sum of (i)
the scheduled principal payments on the Mortgage Loans due on the
related Due Date, (ii) the principal portion of proceeds received with
respect to any Mortgage Loan which was purchased or repurchased by the
Company pursuant to a Purchase Obligation or as permitted by this
Agreement during the Prior Period and (iii) any other unscheduled
payments of principal which were received with respect to any Mortgage
Loan during the Prior Period, other than Payoffs, Curtailments and
Liquidation Principal.
Principal Prepayment: Any payment of principal on a Mortgage Loan
which constitutes a Payoff or a Curtailment.
Principal Prepayment Amount: On any Distribution Date, the sum of
Curtailments and Payoffs received during the Prior Period.
Prior Period: The calendar month immediately preceding the month in
which the related Distribution Date occurs.
Prospectus: The Prospectus, dated May 25, 1999, and the Prospectus
Supplement, dated May 26, 1999, of the Company.
Purchase Obligation: An obligation of the Company to purchase or
repurchase Mortgage Loans under the circumstances and in the manner
provided in Section 2.02 or Section 2.03.
Purchase Price: With respect to any Mortgage Loan to be purchased
pursuant to a Purchase Obligation, an amount equal to the sum of the
Principal Balance thereof, and unpaid accrued interest thereon, if any,
to the last day of the calendar month in which the date of purchase or
repurchase occurs at a rate equal to the applicable Pass-Through Rate;
provided, however, that no Mortgage Loan shall be purchased or required
to be purchased pursuant to Section 2.03, or more than two years after
the Closing Date under Section 2.02, unless (a) the Mortgage Loan to be
purchased is in default, or default is in the judgment of the Company
reasonably imminent, or (b) the Company, at its expense, delivers to the
Trustee an Opinion of Counsel to the effect that the purchase of such
Mortgage Loan will not give rise to a tax on a prohibited transaction,
as defined in Section 860F(a) of the Code.
Qualified Insurer: A mortgage guaranty insurance company duly
qualified as such under the laws of the states in which the Mortgaged
Properties are located if such qualification is necessary to issue the
applicable insurance policy or bond, duly authorized and licensed in
such states to transact the applicable insurance business and to write
<PAGE> 25
the insurance provided by the Primary Insurance Policies and approved as
an insurer by Freddie Mac or Fannie Mae and the Master Servicer. A
Qualified Insurer must have the rating required by the Rating Agencies.
Rate Ceiling: Any lifetime maximum interest rate specified in a
Mortgage Note.
Rate Floor: Any lifetime minimum interest rate specified in a
Mortgage Note.
Rating Agency: Initially, each of S&P and Moody's and thereafter,
each nationally recognized statistical rating organization that has
rated the Certificates at the request of the Company, or their
respective successors in interest.
Ratings: As of any date of determination, the ratings, if any, of
the Certificates as assigned by the Rating Agencies.
Realized Loss: For any Distribution Date, with respect to any
Mortgage Loan which became a Liquidated Mortgage Loan during the related
Prior Period, the sum of (i) the principal balance of such Mortgage Loan
remaining outstanding and the principal portion of Nonrecoverable
Advances actually reimbursed with respect to such Mortgage Loan (the
principal portion of such Realized Loss), and (ii) the accrued interest
on such Mortgage Loan remaining unpaid and the interest portion of
Nonrecoverable Advances actually reimbursed with respect to such
Mortgage Loan (the interest portion of such Realized Loss). For any
Distribution Date, with respect to any Mortgage Loan which is not a
Liquidated Mortgage Loan, the amount of the Bankruptcy Loss incurred
with respect to such Mortgage Loan as of the related Due Date.
Realized Losses with respect to the Mortgage Loans shall be
allocated among the Class A and Class B Certificates (i) for Realized
Losses allocable to principal (a) first, to the Class B-3 Certificates,
until the Class B-3 Principal Balance has been reduced to zero, (b)
second, to the Class B-2 Certificates, until the Class B-2 Principal
Balance has been reduced to zero, (c) third, to the Class B-1
Certificates, until the Class B-1 Principal Balance has been reduced to
zero and (d) fourth, to the Class A Certificates, until the Class A
Principal Balance has been reduced to zero; and (ii) for Realized Losses
allocable to interest (a) first, to the Class B-3 Certificates, in
reduction of accrued but unpaid interest thereon and then in reduction
of the Class B-3 Principal Balance, (b) second, to the Class B-2
Certificates, in reduction of accrued but unpaid interest thereon and
then in reduction of the Class B-2 Principal Balance, (c) third, to the
Class B-1 Certificates, in reduction of accrued but unpaid interest
thereon and then in reduction of the Class B-1 Principal Balance and (d)
fourth, to the Class A Certificates, in reduction of accrued but unpaid
interest thereon and then in reduction of the Class A Principal Balance.
On each Distribution Date, after giving effect to the principal
distributions and allocations of losses as provided in this Agreement
<PAGE> 26
(without regard to this paragraph), if the aggregate Class Principal
Balance of all outstanding Class A and Class B Certificates exceeds the
aggregate principal balance of the Mortgage Loans remaining to be paid
at the close of business on the Cut-Off Date, after deduction of (i) all
principal payments due on or before the Cut-Off Date in respect of the
Mortgage Loans whether or not paid and (ii) all amounts of principal in
respect of the Mortgage Loans that have been received or advanced and
included in the REMIC I Available Distribution Amount, and all losses in
respect of the Mortgage Loans that have been allocated to the Class A
and Class B Certificates on such Distribution Date or prior Distribution
Dates, then such excess will be deemed a principal loss and will be
allocated to the most junior Class of Class B Certificates, in reduction
of the Class Principal Balance thereof.
Record Date: The last Business Day of the month immediately
preceding the month in which the related Distribution Date occurs.
Regular Interests: The Class A Certificates and each Class of the
Class B Certificates.
Relief Act: The Soldiers' and Sailors' Civil Relief Act of 1940,
as amended. Interest shortfalls related to the Relief Act shall be
allocated in the same manner as Uncompensated Interest Shortfall is
allocated.
REMIC: A real estate mortgage investment conduit, as such term is
defined in the Code.
REMIC Provisions: Sections 860A through 860G of the Code, related
Code provisions and regulations promulgated thereunder, as the foregoing
may be in effect from time to time.
REMIC I: The segregated pool of assets consisting of the REMIC I
Trust Fund, with respect to which a separate REMIC election is to be
made.
REMIC I Available Distribution Amount: With respect to any
Distribution Date, the sum of the following amounts:
(1) the total amount of all cash received by or on behalf of the
Master Servicer with respect to the Mortgage Loans by the Determination
Date for such Distribution Date and not previously distributed,
including Monthly P&I Advances made by Servicers, Insurance Proceeds,
Liquidation Proceeds and scheduled amounts of distributions from Buydown
Funds respecting Buydown Loans, if any, except:
(a) all scheduled payments of principal and interest
collected but due on or subsequent to the first day in the month of
such Distribution Date;
(b) all Curtailments received after the Prior Period
(together with any interest payment received with such prepayments
<PAGE> 27
to the extent that it represents the payment of interest accrued on
a related Mortgage Loan subsequent to the Prior Period);
(c) all Payoffs received after the Prior Period (together
with any interest payment received with such Payoffs to the extent
that it represents the payment of interest accrued on the Mortgage
Loans for the period subsequent to the Prior Period);
(d) Insurance Proceeds and Liquidation Proceeds received on
such Mortgage Loans after the Prior Period;
(e) all amounts in the Certificate Account which are due and
reimbursable to a Servicer or the Master Servicer pursuant to the
terms of this Agreement;
(f) the sum of the Master Servicing Fee and the Servicing Fee
for each Mortgage Loan;
(g) Excess Liquidation Proceeds; and
(h) the Certificate Insurer Premium;
(2) the sum, to the extent not previously distributed, of the
following amounts, to the extent advanced or received, as applicable, by
the Master Servicer:
(a) any Monthly P&I Advance made by the Master Servicer to
the Trustee with respect to such Distribution Date relating to such
Mortgage Loans; and
(b) Compensating Interest; and
(3) the total amount, to the extent not previously distributed, of
all cash received by the Distribution Date by the Trustee or the Master
Servicer, in respect of a Purchase Obligation under Section 2.02 and
Section 2.03 or any permitted purchase or repurchase of a Mortgage Loan.
REMIC I Distribution Amount: For any Distribution Date, the REMIC I
Available Distribution Amount shall be distributed to the Certificates
in the following amounts and priority:
(i) first, to the Class A Certificates, the Interest Distribution
Amount for such Class remaining unpaid from previous Distribution Dates;
(ii) second, to the Class A Certificates, the Interest Distribution
Amount for such Class for the current Distribution Date;
(iii) third, to the Class A Certificates, as principal, the Senior
Principal Distribution Amount;
(iv) fourth, to the Certificate Insurer, the Certificate Insurer
Reimbursement Amount;
(v) fifth, to the Class B-1 Certificates, the Interest Distribution
<PAGE> 28
Amount for such Class remaining unpaid from previous Distribution Dates;
(vi) sixth, to the Class B-1 Certificates, the Interest Distribution
Amount for such Class for the current Distribution Date;
(vii) seventh, to the Class B-1 Certificates, as principal, the
portion of the Subordinate Principal Distribution Amount allocable to
the Class B-1 Certificates pursuant to the definition of "Subordinate
Principal Distribution Amount;"
(viii) eighth, to the Class B-2 Certificates, the Interest
Distribution Amount for such Class remaining unpaid from previous
Distribution Dates;
(ix) ninth, to the Class B-2 Certificates, the Interest Distribution
Amount for such Class for the current Distribution Date;
(x) tenth, to the Class B-2 Certificates, as principal, the portion
of the Subordinate Principal Distribution Amount allocable to the Class B-2
Certificates pursuant to the definition of "Subordinate Principal
Distribution Amount;"
(xi) eleventh, to the Class B-3 Certificates, the Interest Distri-
bution Amount for such Class remaining unpaid from previous Distribution
Dates;
(xii) twelfth, to the Class B-3 Certificates, the Interest
Distribution Amount for such Class for the current Distribution Date;
(xiii) thirteenth, to the Class B-3 Certificates, as principal,
the portion of the Subordinate Principal Distribution Amount allocable to
the Class B-3 Certificates pursuant to the definition of "Subordinate
Principal Distribution Amount;"
(xiv) fourteenth, to each Class of Class B Certificates in the
order of seniority, the remaining portion, if any, of the REMIC I Available
Distribution Amount, up to the amount of unreimbursed Realized Losses
previously allocated to such Class, if any, provided that any amounts
distributed pursuant to this paragraph (xiv) of this definition of
"REMIC I Distribution Amount" shall not cause a further reduction in the
Class Principal Balances of the Class B Certificates; and
(xv) fifteenth, to the Class R Certificate, the Residual Distribution
Amount for such Distribution Date.
REMIC I Regular Interests: The Classes of Regular Interests in the
REMIC I Trust Fund designated as "regular interests" in the table titled
"Trust Fund" in the Preliminary Statement hereto.
REMIC I Trust Fund: All of the assets in the Trust Fund other than
the Certificate Insurance Policy.
Residual Certificate: With respect to REMIC I, the Class R
Certificate, which is being issued in a single class. The Class R
Certificate is hereby designated the sole Class of "residual interests"
in REMIC I for purposes of Section 860G(a)(2) of the Code.
Residual Distribution Amount: On any Distribution Date, with
<PAGE> 29
respect to the Class R Certificate, any portion of the REMIC I Available
Distribution Amount remaining after all distributions of such REMIC I
Available Distribution Amount pursuant to clauses (i) through (xiv) of
the definition of "REMIC I Distribution Amount."
Responsible Officer: When used with respect to the Trustee, any
officer assigned to and working in its Corporate Trust and Agency
Services department or similar group and also, with respect to a
particular matter, any other officer to whom such matter is referred
because of such officer's knowledge of and familiarity with the
particular subject.
S&P: Standard & Poor's Ratings Services, a division of The McGraw-
Hill Companies, Inc., provided that at any time it be a Rating Agency.
Securities Act: The Securities Act of 1933, as amended.
Security Agreement: With respect to a Cooperative Loan, the
agreement or mortgage creating a security interest in favor of the
originator of the Cooperative Loan in the related Cooperative Stock.
Selling and Servicing Contract: (a) The contract (including the PNC
Mortgage Securities Corp. Selling Guide and PNC Mortgage Securities
Corp. Servicing Guide to the extent incorporated by reference therein)
between the Company and a Person relating to the sale of the Mortgage
Loans to the Company and the servicing of such Mortgage Loans for the
benefit of the Certificateholders, which contract is substantially in
the form of Exhibit E hereto, as such contract may be amended or
modified from time to time; provided, however, that any such amendment
or modification shall not materially adversely affect the interests and
rights of Certificateholders or the Certificate Insurer and (b) any
other similar contract providing substantially similar rights and
benefits as those provided by the forms of contract attached as Exhibit
E hereto.
Senior Certificates: The Class A Certificates.
Senior Liquidation Amount: The aggregate, for each Mortgage Loan
which became a Liquidated Mortgage Loan during the Prior Period, of the
lesser of: (i) the Senior Percentage of the Principal Balance of such
Mortgage Loan and (ii) the Senior Prepayment Percentage of the
Liquidation Principal with respect to such Mortgage Loan.
Senior Percentage: With respect to any Distribution Date, the Class
A Principal Balance divided by the aggregate Class Principal Balance of
the Certificates, in each case immediately prior to the Distribution
Date.
Senior Prepayment Percentage: (i) On any Distribution Date
occurring before the Distribution Date in the month of the tenth
anniversary of the first Distribution Date, the Senior Prepayment
Percentage shall equal 100%; (ii) on any other Distribution Date on
<PAGE> 30
which the Senior Percentage for such Distribution Date exceeds the
Senior Percentage as of the Closing Date or on any Distribution Date
after the occurrence of a claim under the Certificate Insurance Policy,
the Senior Prepayment Percentage shall equal 100%; and (iii) on any
other Distribution Date in each of the months of the tenth anniversary
of the first Distribution Date and thereafter, the Senior Prepayment
Percentage shall equal 100%, unless the following tests specified in
clauses (a) and (b) are met:
(a) the mean aggregate Principal Balance of the Mortgage Loans
which are 60 or more days delinquent (including loans in
foreclosure and property held by REMIC I) for each of the
immediately preceding six calendar months is less than or
equal to 35% of the aggregate Class Principal Balance of the
Class B Certificates as of such Distribution Date,
(b) cumulative Realized Losses on the Mortgage Loans allocated to
the Class B Certificates are less than or equal to (1) for any
Distribution Date before the month of the eleventh anniversary
of the month of the first Distribution Date, 30% of the Class
B Principal Balance as of the Closing Date, (2) for any
Distribution Date in or after the month of the eleventh
anniversary of the month of the first Distribution Date but
before the twelfth anniversary of the month of the first
Distribution Date, 35% of the Class B Principal Balance as of
the Closing Date, (3) for any Distribution Date in or after
the month of the twelfth anniversary of the month of the first
Distribution Date but before the thirteenth anniversary of the
month of the first Distribution Date, 40% of the Class B
Principal Balance as of the Closing Date, (4) for any
Distribution Date in or after the month of the thirteenth
anniversary of the month of the first Distribution Date but
before the fourteenth anniversary of the month of the first
Distribution Date, 45% of the Class B Principal Balance as of
the Closing Date and (5) for any Distribution Date in or after
the month of the fourteenth anniversary of the month of the
first Distribution Date, 50% of the Class B Principal Balance
as of the Closing Date,
in which case the Senior Prepayment Percentage will be calculated as
follows: (1) for any such Distribution Date in or after the month of the
tenth anniversary of the month of the first Distribution Date but before
the eleventh anniversary of the month of the first Distribution Date,
the Senior Percentage for such Distribution Date plus 70% of the
Subordinate Percentage for such Distribution Date; (2) for any such
Distribution Date in or after the month of the eleventh anniversary of
the month of the first Distribution Date but before the twelfth
anniversary of the month of the first Distribution Date, the Senior
Percentage for such Distribution Date plus 60% of the Subordinate
Percentage for such Distribution Date; (3) for any such Distribution
Date in or after the month of the twelfth anniversary of the month of
the first Distribution Date but before the thirteenth anniversary of the
<PAGE> 31
month of the first Distribution Date, the Senior Percentage for such
Distribution Date plus 40% of the Subordinate Percentage for such
Distribution Date; (4) for any such Distribution Date in or after the
month of the thirteenth anniversary of the month of the first
Distribution Date but before the fourteenth anniversary of the month of
the first Distribution Date, the Senior Percentage for such Distribution
Date plus 20% of the Subordinate Percentage for such Distribution Date;
and (5) for any such Distribution Date thereafter, the Senior Percentage
for such Distribution Date.
Notwithstanding the foregoing, on any Distribution Date occuring on
or after the month of the fifth anniversary of the first Distribution
Date, if the Subordinate Percentage for any such Distribution Date is
greater than twice the Subordinate Percentage as of the Closing Date and
if (i) the test specified in clause (a) above is met and (ii) cumulative
Realized Losses on the Mortgage Loans are less than or equal to 35% of
the aggregate Class Principal Balance of the Class B Certificates as of
the Closing Date, then the Senior Prepayment Percentage for such
Distribution Date will equal the Senior Percentage.
If on any Distribution Date the allocation to the Class A
Certificates of Principal Prepayments in the percentage required would
reduce the Class A Principal Balance below zero, the Senior Prepayment
Percentage for such Distribution Date shall be limited to the percentage
necessary to reduce such sum to zero.
Senior Principal Distribution Amount: For any Distribution Date, an
amount equal to the sum of (a) the Senior Percentage of the Principal
Payment Amount, (b) the Senior Prepayment Percentage of the Principal
Prepayment Amount and (c) the Senior Liquidation Amount.
Servicer: A mortgage loan servicing institution to which the Master
Servicer has assigned servicing duties with respect to any Mortgage Loan
under a Selling and Servicing Contract; provided, however, the Master
Servicer may designate itself or one or more other mortgage loan
servicing institutions as Servicer upon termination of an initial
Servicer's servicing duties.
Servicing Fee: For each Mortgage Loan, the fee paid to the Servicer
thereof to perform primary servicing functions for the Master Servicer
with respect to such Mortgage Loan, equal to the per annum rate set
forth for each Mortgage Loan in the Mortgage Loan Schedule on the
outstanding Principal Balance of such Mortgage Loan. In addition, any
prepayment penalty received on a Mortgage Loan will be paid as
additional servicing compensation to the related Servicer.
Servicing Officer: Any officer of the Master Servicer involved in,
or responsible for, the administration and servicing of the Mortgage
Loans or the Certificates, as applicable, whose name and specimen
signature appear on a list of servicing officers furnished to the
Trustee by the Master Servicer, as such list may from time to time be
amended.
<PAGE> 32
Special Hazard Coverage: "Special Hazard Coverage" for the
Certificates shall be zero.
Special Hazard Loss: The occurrence of any direct physical loss or
damage to a Mortgaged Property not covered by a standard hazard
maintenance policy with extended coverage which is caused by or results
from any cause except: (i) fire, lightning, windstorm, hail, explosion,
riot, riot attending a strike, civil commotion, vandalism, aircraft,
vehicles, smoke, sprinkler leakage, except to the extent of that portion
of the loss which was uninsured because of the application of a co-
insurance clause of any insurance policy covering these perils; (ii)
normal wear and tear, gradual deterioration, inherent vice or inadequate
maintenance of all or part thereof; (iii) errors in design, faulty
workmanship or materials, unless the collapse of the property or a part
thereof ensues and then only for the ensuing loss; (iv) nuclear reaction
or nuclear radiation or radioactive contamination, all whether
controlled or uncontrolled and whether such loss be direct or indirect,
proximate or remote or be in whole or in part caused by, contributed to
or aggravated by a peril covered by this definition of Special Hazard
Loss; (v) hostile or warlike action in time of peace or war, including
action in hindering, combating or defending against an actual, impending
or expected attack (a) by any government of sovereign power (de jure or
de facto), or by an authority maintaining or using military, naval or
air forces, (b) by military, naval or air forces, or (c) by an agent of
any such government, power, authority or forces; (vi) any weapon of war
employing atomic fission or radioactive force whether in time of peace
or war; (vii) insurrection, rebellion, revolution, civil war, usurped
power or action taken by governmental authority in hindering, combating
or defending against such occurrence; or (viii) seizure or destruction
under quarantine or customs regulations, or confiscation by order of any
government or public authority.
Subordinate Liquidation Amount: The excess, if any, of the
aggregate of Liquidation Principal for all Mortgage Loans which became
Liquidated Mortgage Loans during the Prior Period over the Senior
Liquidation Amount for such Distribution Date.
Subordinate Percentage: On any Distribution Date, the excess of
100% over the Senior Percentage for such date.
Subordinate Prepayment Percentage: On any Distribution Date, the
excess of 100% over the Senior Prepayment Percentage for such
Distribution Date; provided, however, that if the Class A Principal
Balance has been reduced to zero, then the Subordinate Prepayment
Percentage shall equal 100%.
Subordinate Principal Distribution Amount: On any Distribution
Date, the sum of (i) the Subordinate Percentage of the Principal Payment
Amount, (ii) the Subordinate Prepayment Percentage of the Principal
Prepayment Amount and (iii) the Subordinate Liquidation Amount.
On any Distribution Date, the Subordinate Principal Distribution
<PAGE> 33
Amount shall be allocated pro rata, by Class Principal Balance, among
the Class B-1, Class B-2 and Class B-3 Certificates and paid in the
order of distribution to such Classes pursuant to the definition of
"REMIC I Distribution Amount." Notwithstanding the foregoing, on any
Distribution Date prior to distributions on such date, if the
Subordination Level for any Class of Class B Certificates is less than
such percentage as of the Closing Date, the pro rata portion of the
Principal Prepayment Amount otherwise allocable to the Class or Classes
of Class B Certificates junior to such Class will be distributed to the
most senior Class of Class B Certificates for which the Subordination
Level is less than such percentage as of the Closing Date (and to the
Class of Class B Certificates senior thereto, if applicable) pro rata
according to the Class Principal Balances of such Classes. For purposes
of this definition and the definition of "Subordination Level," the
relative seniority, from highest to lowest, of the Class B Certificates
shall be as follows: Class B-1, Class B-2 and Class B-3.
Subordination Level: On any specified date, with respect to any
Class of the Class B Certificates, the percentage obtained by dividing
the sum of the Class Principal Balances of the Classes of Class B
Certificates which are subordinate in right of payment to such Class by
the sum of the Class Principal Balances of the Certificates as of such
date prior to giving effect to distributions of principal or interest or
allocations of Realized Losses on such date.
Substitute Mortgage Loan: A Mortgage Loan which is substituted for
another Mortgage Loan pursuant to and in accordance with the provisions
of Section 2.02.
Surety: Ambac Assurance Corporation, or its successors in interest.
Surety Bond: The Limited Purpose Surety Bond (Policy No.
AB0039BE), dated February 28, 1996, issued by Ambac Assurance
Corporation for the benefit of certain beneficiaries, including the
Trustee for the benefit of the Holders of the Certificates, but only to
the extent that such Limited Purpose Surety Bond covers any Additional
Collateral Mortgage Loans.
Tax Matters Person: The Holder of the Class R Certificate or any
Permitted Transferee of such Class R Certificateholder designated as
succeeding to the position of Tax Matters Person with respect to REMIC I
in a notice to the Trustee signed by authorized representatives of the
transferor and transferee of such Class R Certificate. If the Tax
Matters Person for REMIC I becomes a Disqualified Organization, the last
preceding Holder of such Certificate that is not a Disqualified
Organization shall be Tax Matters Person for such trust pursuant to
Section 5.01(c). If any Person is appointed as tax matters person by the
Internal Revenue Service pursuant to the Code, such Person shall be Tax
Matters Person. Each Holder of the Class R Certificate, by acceptance
of its Class R Certificate, or any Permitted Transferee of such Class R
Certificateholder, by acceptance of its Class R Certificate and that is
designated as succeeding to the position of Tax Matters Person with
<PAGE> 34
respect to REMIC I in a notice to the Trustee signed by authorized
representatives of the transferor and transferee of such Class R
Certificate hereby agrees to the appointment of the Company as agent for
the Tax Matters Person and to the performance by the Company of all
actions required to be performed by the Tax Matters Person.
Termination Date: The date upon which final payment of the
Certificates will be made pursuant to the procedures set forth in
Section 9.01(b).
Termination Payment: The final payment delivered to the
Certificateholders on the Termination Date pursuant to the procedures
set forth in Section 9.01(b).
Transfer: Any direct or indirect transfer or sale of any Ownership
Interest in the Residual Certificate.
Transferee: Any Person who is acquiring by Transfer any Ownership
Interest in the Residual Certificate.
Transferee Affidavit and Agreement: An affidavit and agreement in
the form attached hereto as Exhibit J.
Trust: The pool of assets consisting of the Trust Fund conveyed
pursuant to Section 2.01 of this Agreement.
Trustee: Bankers Trust Company of California, N.A., or its
successor-in-interest as provided in Section 8.09, or any successor
trustee appointed as herein provided.
Trust Fund: The corpus of the trust created pursuant to Section
2.01 of this Agreement. The Trust Fund consists of (i) the Mortgage
Loans and all rights pertaining thereto, including rights in and to the
Additional Collateral; (ii) such assets as from time to time may be held
by the Trustee (or its duly appointed agent) in the Certificate Account
or the Investment Account (except amounts representing the Master
Servicing Fee or the Servicing Fee); (iii) such assets as from time to
time may be held by Servicers in a Custodial Account for P&I or
Custodial Account for Reserves or a Buydown Fund Account related to the
Mortgage Loans (except amounts representing the Master Servicing Fee or
the Servicing Fee); (iv) property which secured a Mortgage Loan and
which has been acquired by foreclosure or deed in lieu of foreclosure
or, in the case of a Cooperative Loan, a similar form of conversion,
after the Cut-Off Date; and (v) the Certificate Insurance Policy and any
amounts paid or payable by the insurer under any FHA insurance policy or
any Primary Insurance Policy and proceeds of any VA guaranty and any
other insurance policy related to any Mortgage Loan or the Mortgage
Pool, including rights in and to the Surety Bond.
Uncollected Interest: With respect to any Distribution Date for any
Mortgage Loan on which a Payoff was made by a Mortgagor during the
related Prior Period, an amount equal to one month's interest at the
<PAGE> 35
applicable Pass-Through Rate on such Mortgage Loan less the amount of
interest actually paid by the Mortgagor with respect to such Payoff.
Uncompensated Interest Shortfall: For any Distribution Date, the
excess, if any, of (i) the sum of (a) aggregate Uncollected Interest and
(b) aggregate Curtailment Shortfall over (ii) Compensating Interest.
Uncompensated Interest Shortfall shall be allocated to each Class
of the Certificates pro rata according to the amount of the Interest
Distribution Amount to which each such Class would otherwise be entitled
in reduction thereof.
Underwriting Standards: The underwriting standards of Merrill Lynch
Credit Corporation and, with respect to the Mortgage Loans for which
Thornburg Mortgage Asset Corporation is the related Seller, the
underwriting standards of Fannie Mae or Freddie Mac.
Uninsured Cause: Any cause of damage to a Mortgaged Property, the
cost of the complete restoration of which is not fully reimbursable
under the hazard insurance policies required to be maintained pursuant
to Section 3.07.
U.S. 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, any state thereof or the District
of Columbia, or an estate or trust that is subject to U.S. federal
income tax regardless of the source of its income.
VA: The Department of Veterans Affairs, formerly known as the
Veterans Administration, or any successor thereto.
Withdrawal Date: Any day during the period commencing on the 18th
day of the month of the related Distribution Date (or if such day is not
a Business Day, the immediately preceding Business Day) and ending on
the last Business Day prior to the 21st day of the month of such
Distribution Date. The "related Due Date" for any Withdrawal Date is the
Due Date immediately preceding the related Distribution Date.
ARTICLE II
Conveyance of the Trust Fund; REMIC Election and Designation;
Original Issuance of Certificates
Section 2.01. Conveyance of the Trust Fund; REMIC Election and
Designations. The Trust of which the Trustee is the trustee is hereby
created under the laws of the State of New York for the benefit of the
Holders of the Certificates and the Certificate Insurer. The purpose of
the Trust is to hold the Trust Fund and provide for the issuance,
execution and delivery of the Certificates. The assets of the Trust
shall consist of the Trust Fund. The Trust shall be irrevocable.
The assets of the Trust shall remain in the custody of the Trustee,
<PAGE> 36
on behalf of the Trust, and shall be kept in the Trust except as
otherwise expressly set forth herein. Moneys to the credit of the Trust
shall be held by the Trustee and invested as provided herein. All
assets received and held in the Trust will not be subject to any right,
charge, security interest, lien or claim of any kind in favor of Bankers
Trust Company of California, N.A. in its own right, or any Person
claiming through it. The Trustee, on behalf of the Trust, shall not
have the power or authority to transfer, assign, hypothecate, pledge or
otherwise dispose of any of the assets of the Trust to any Person,
except as permitted herein. No creditor of a beneficiary of the Trust,
of the Trustee, of the Master Servicer or of the Company shall have any
right to obtain possession of, or otherwise exercise legal or equitable
remedies with respect to, the property of the Trust, except in
accordance with the terms of this Agreement.
Concurrently with the execution and delivery hereof, the Company
does hereby irrevocably sell, transfer, assign, set over and otherwise
convey to the Trustee, in trust for the benefit of the Holders of the
Certificates and the Certificate Insurer, without recourse, all the
Company's right, title and interest in and to the Trust Fund, including
but not limited to all scheduled payments of principal and interest due
after the Cut-Off Date and received by the Company at any time, and all
Principal Prepayments received by the Company after the Cut-Off Date.
The Trustee hereby accepts the Trust created hereby and accepts delivery
of the Trust Fund on behalf of the Trust and acknowledges that it holds
the Mortgage Loans for the benefit of the Holders of the Certificates
issued pursuant to this Agreement and the Certificate Insurer.
It is the express intent of the parties hereto that the conveyance
of the Trust Fund to the Trustee by the Company as provided in this
Section 2.01 be, and be construed as, an absolute sale of the Trust
Fund. It is, further, not the intention of the parties that such
conveyance be deemed a pledge of the Trust Fund by the Company to the
Trustee to secure a debt or other obligation of the Company. However, in
the event that, notwithstanding the intent of the parties, the Trust
Fund is held to be the property of the Company, or if for any other
reason this Agreement is held or deemed to create a security interest in
the Trust Fund, then
(a) this Agreement shall be deemed to be a security agreement;
(b) the conveyance provided for in this Section 2.01 shall be
deemed to be a grant by the Company to the Trustee of a security
interest in all of the Company's right, title, and interest, whether now
owned or hereafter acquired, in and to:
(I) All accounts, general intangibles, chattel paper,
instruments, documents, money, deposit accounts, certificates of
deposit, goods, letters of credit, advices of credit and investment
property consisting of, arising from or relating to any of the
property described in (i), (ii) and (iii) below: (i) the Mortgage
Loans identified on the Mortgage Loan Schedule, including the
<PAGE> 37
related Mortgage Notes, Mortgages, Cooperative Stock Certificates,
and Cooperative Leases, the Additional Collateral, all related
Substitute Mortgage Loans and all distributions with respect to the
Mortgage Loans and related Substitute Mortgage Loans payable on and
after the Cut-Off Date, including rights in and to the Additional
Collateral; (ii) the Certificate Account, the Investment Account
and all money or other property held therein, and the Custodial
Accounts for P&I and the Custodial Accounts for Reserves (to the
extent of the amounts on deposit or other property therein
attributable to the Mortgage Loans); and (iii) the Certificate
Insurance Policy and amounts paid or payable by the insurer under
any FHA insurance policy or any Primary Insurance Policy and
proceeds of any VA guaranty and any other insurance policy related
to any Mortgage Loan or the Mortgage Pool, including the Surety
Bond;
(II) All accounts, general intangibles, chattel paper,
instruments, documents, money, deposit accounts, certificates of
deposit, goods, letters of credit, advices of credit, investment
property, and other rights arising from or by virtue of the
disposition of, or collections with respect to, or insurance
proceeds payable with respect to, or claims against other persons
with respect to, all or any part of the collateral described in (I)
above (including any accrued discount realized on liquidation of
any investment purchased at a discount); and
(III) All cash and non-cash proceeds of the collateral
described in (I) and (II) above;
(c) the possession by the Trustee of the Mortgage Notes, the
Mortgages, documents and instruments related to the Additional
Collateral, the Security Agreements, Assignments of Proprietary Lease,
Cooperative Stock Certificates and Cooperative Leases related to the
Mortgage Loans and such other goods, letters of credit, advices of
credit, instruments, money, documents, chattel paper or certificated
securities shall be deemed to be possession by the secured party or
possession by a purchaser for purposes of perfecting the security
interest pursuant to the Uniform Commercial Code (including, without
limitation, Sections 9-305 and 9-115 thereof) as in force in the
relevant jurisdiction; and
(d) notifications to persons holding such property, and
acknowledgments, receipts or confirmations from persons holding such
property, shall be deemed to be notifications to, or acknowledgments,
receipts or confirmations from, securities intermediaries, bailees or
agents of, or persons holding for, the Trustee, as applicable for the
purpose of perfecting such security interest under applicable law.
The Company and the Trustee at the direction and expense of the
Company 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 Trust Fund, such security
<PAGE> 38
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 the Agreement. In connection herewith, the Trustee shall
have all of the rights and remedies of a secured party and creditor
under the Uniform Commercial Code as in force in the relevant
jurisdiction.
In connection with the sale, transfer and assignment referred to in
the third paragraph of this Section 2.01, the Company, concurrently with
the execution and delivery hereof, does deliver to, and deposit with, or
cause to be delivered to and deposited with, the Trustee or Custodian
the Mortgage Files for the Mortgage Loans, which shall on original
issuance thereof and at all times be registered in the name of the
Trustee.
Concurrently with the execution and delivery hereof, the Company
shall cause assignments of the Mortgage Loans to the Trustee to be
recorded or filed, except in states where, in the opinion of counsel
admitted to practice in such state acceptable to the Company, the
Trustee, the Certificate Insurer and the Rating Agencies submitted in
lieu of such recording or filing, such recording or filing is not
required to protect the Trustee's interest in such Mortgage Loans
against creditors of, or against sale, further assignments, satisfaction
or discharge by the Lender, a Servicer, the Company or the Master
Servicer, and the Company shall cause to be filed the Form UCC-3
assignment and Form UCC-1 financing statement referred to in clause
(Y)(vii) and (Y)(ix), respectively, of the definition of "Mortgage
File." Notwithstanding the immediately preceding sentence, in the event
that any Mortgage Loan is delivered to the Trustee by a custodian which
is not an affiliate of the Company and the related Mortgage File does
not contain an assignment of the Mortgage as required by clause
(X)(iii)(1) or clause (X)(iii)(2) of the definition of "Mortgage File,"
the Company shall cause such custodian promptly to deliver such an
assignment, but in no event later than 30 days after the Closing Date.
In connection with its servicing of Cooperative Loans, the Master
Servicer will use its best efforts to file timely continuation
statements, if necessary, with regard to each financing statement and
assignment relating to Cooperative Loans.
In instances where the original recorded Mortgage or any
intervening assignment thereof (recorded or in recordable form) relating
to a Mortgage Loan is not included in the Mortgage File delivered to the
Trustee prior to or concurrently with the execution and delivery hereof
(due to a delay on the part of the recording office), the Company shall
deliver to the Trustee a fully legible reproduction of the original
Mortgage or intervening assignment provided that the related Lender or
originator certifies on the face of such reproduction(s) or copy as
follows: "Certified true and correct copy of original which has been
transmitted for recordation." For purposes hereof, transmitted for
recordation means having been mailed or otherwise delivered for
recordation to the appropriate authority. In all such instances, the
Company shall transmit the original recorded Mortgage and any
<PAGE> 39
intervening assignments with evidence of recording thereon (or a copy of
such original Mortgage or intervening assignment certified by the
applicable recording office) (collectively, "Recording Documents") to
the Trustee within 270 days after the execution and delivery hereof. In
instances where, due to a delay on the part of the recording office
where any such Recording Documents have been delivered for recordation,
the Recording Documents cannot be delivered to the Trustee within 270
days after execution and delivery hereof, the Company shall deliver to
the Trustee within such time period a certificate (a "Company Officer's
Certificate") signed by the Chairman of the Board, President, any Vice
President or Treasurer of the Company stating the date by which the
Company expects to receive such Recording Documents from the applicable
recording office. In the event that Recording Documents have still not
been received by the Company and delivered to the Trustee by the date
specified in its previous Company Officer's Certificate delivered to the
Trustee, the Company shall deliver to the Trustee by such date an
additional Company Officer's Certificate stating a revised date by which
the Company expects to receive the applicable Recording Documents. This
procedure shall be repeated until the Recording Documents have been
received by the Company and delivered to the Trustee.
In instances where, due to a delay on the part of the title
insurer, a copy of the title insurance policy for a particular Mortgage
Loan is not included in the Mortgage File delivered to the Trustee prior
to or concurrently with the execution and delivery hereof, the Company
shall provide a copy of such title insurance policy to the Trustee
within 90 days after the Company's receipt of the Recording Documents
necessary to issue such title insurance policy. In addition, the Company
shall, subject to the limitations set forth in the preceding sentence,
provide to the Trustee upon request therefor a duplicate title insurance
policy for any Mortgage Loan.
For Mortgage Loans for which the Company has received a Payoff
after the Cut-Off Date and prior to the date of execution and delivery
hereof, the Company, in lieu of delivering the above documents, herewith
delivers to the Trustee a certification of a Servicing Officer of the
nature set forth in Section 3.10.
The Trustee is authorized, with the Master Servicer's consent, to
appoint any bank or trust company approved by and unaffiliated with each
of the Company and the Master Servicer as Custodian of the documents or
instruments referred to above in this Section 2.01, and to enter into a
Custodial Agreement for such purpose, provided, however, that the
Trustee shall be and remain liable for the acts of any such Custodian
only to the extent that it is responsible for its own acts hereunder.
The Company, the Tax Matters Person and the Trustee agree that the
Company, as agent for the Tax Matters Person, shall, on behalf of the
REMIC I Trust Fund, elect to treat the REMIC I Trust Fund as a REMIC
within the meaning of Section 860D of the Code and, if necessary, under
applicable state laws. Such election shall be included in the Form 1066
and any appropriate state return to be filed on behalf of REMIC I for
<PAGE> 40
its first taxable year.
The Closing Date is hereby designated as the "startup day" of REMIC
I within the meaning of Section 860G(a)(9) of the Code.
The regular interests (as set forth in the table contained in the
Preliminary Statement hereto) relating to the REMIC I Trust Fund are
hereby designated as "regular interests" for purposes of Section
860G(a)(1) of the Code. The Class R Certificate is being issued in a
single Class, which is hereby designated as the sole class of "residual
interest" in REMIC I for purposes of Section 860G(a)(2) of the Code.
The parties intend that the affairs of the REMIC I Trust Fund
formed hereunder shall constitute, and that the affairs of the REMIC I
Trust Fund shall be conducted so as to qualify the REMIC I Trust Fund as
a REMIC. In furtherance of such intention, the Company covenants and
agrees that it shall act as agent for the Tax Matters Person (and the
Tax Matters Person hereby appoints the Company to act as agent for such
Tax Matters Person) on behalf of the REMIC I Trust Fund and that in such
capacity it shall: (a) prepare and file, or cause to be prepared and
filed, a federal tax return using a calendar year as the taxable year
and using an accrual method of accounting for the REMIC I Trust Fund
when and as required by the REMIC Provisions and other applicable
federal income tax laws; (b) make an election, on behalf of the trust,
for the REMIC I Trust Fund to be treated as a REMIC on the federal tax
return of the REMIC I Trust Fund for its first taxable year, in
accordance with the REMIC Provisions; (c) prepare and forward, or cause
to be prepared and forwarded, to the Holders of the Certificates and the
Trustee, all information reports as and when required to be provided to
them in accordance with the REMIC Provisions, and make available the
information necessary for the application of Section 860E(e) of the
Code; (d) conduct the affairs of the REMIC I Trust Fund at all times
that any Certificates are outstanding so as to maintain the status of
the REMIC I Trust Fund as a REMIC under the REMIC Provisions; (e) not
knowingly or intentionally take any action or omit to take any action
that would cause the termination of the REMIC status of the REMIC I
Trust Fund; and (f) pay the amount of any federal prohibited transaction
penalty taxes imposed on the REMIC I Trust Fund when and as the same
shall be due and payable (but such obligation shall not prevent the
Company or any other appropriate person from contesting any such tax in
appropriate proceedings and shall not prevent the Company from
withholding payment of such tax, if permitted by law, pending the
outcome of such proceedings); provided, that the Company shall be
entitled to be indemnified by the REMIC I Trust Fund for any such
prohibited transaction penalty taxes if the Company's failure to
exercise reasonable care was not the primary cause of the imposition of
such prohibited transaction penalty taxes.
The Trustee and the Master Servicer shall promptly provide the
Company with such information in the possession of the Trustee or the
Master Servicer, respectively, as the Company may from time to time
request for the purpose of enabling the Company to prepare tax returns.
<PAGE> 41
In the event that a Mortgage Loan is discovered to have a defect
which, had such defect been discovered before the startup day, would
have prevented such Mortgage Loan from being a "qualified mortgage"
within the meaning of Section 860G(a)(3) of the Code, and the Company
does not purchase or repurchase such Mortgage Loan within 90 days of
such date, the Master Servicer, on behalf of the Trustee, shall within
90 days of the date such defect is discovered sell such Mortgage Loan at
such price as the Master Servicer in its sole discretion, determines to
be the greatest price that will result in the purchase thereof within 90
days of such date, unless the Master Servicer delivers to the Trustee an
Opinion of Counsel to the effect that continuing to hold such Mortgage
Loan will not adversely affect the status of the REMIC I Trust Fund as a
REMIC for federal income tax purposes.
In the event that any tax is imposed on "prohibited transactions"
of the REMIC I Trust Fund as defined in Section 860F of the Code and not
paid by the Company pursuant to clause (f) of the third preceding
paragraph, such tax shall be charged against amounts otherwise
distributable to the Class R Certificateholder. Notwithstanding anything
to the contrary contained herein, the Trustee is hereby authorized to
retain from amounts otherwise distributable to the Class R
Certificateholder on any Distribution Date sufficient funds to reimburse
the Company in its capacity as agent for the Tax Matters Person for the
payment of such tax (upon the written request of the Company, to the
extent reimbursable, and to the extent that the Company has not been
previously reimbursed therefor).
Section 2.02. Acceptance by Trustee. The Trustee acknowledges receipt
(or with respect to any Mortgage Loan subject to a Custodial Agreement,
receipt by the Custodian thereunder) of the documents (or certified
copies thereof as specified in Section 2.01) referred to in Section 2.01
above, but without having made the review required to be made within 45
days pursuant to this Section 2.02, and declares that as of the Closing
Date it holds and will hold such documents and the other documents
constituting a part of the Mortgage Files delivered to it, and the Trust
Fund, as Trustee in trust, upon the trusts herein set forth, for the use
and benefit of the Holders from time to time of the Certificates and the
Certificate Insurer. The Trustee agrees, for the benefit of the Holders
of the Certificates and the Certificate Insurer, to review or cause the
Custodian to review each Mortgage File within 45 days after the Closing
Date and deliver to the Company and the Certificate Insurer a
certification in the form attached as Exhibit M hereto, to the effect
that, except as noted, all documents required (in the case of
instruments described in clauses (X)(v) and (Y)(x) of the definition of
"Mortgage File", known by the Trustee to be required) pursuant to the
definition of "Mortgage File" and Section 2.01 have been executed and
received, and that such documents relate to the Mortgage Loans
identified in the Mortgage Loan Schedule. In performing such review, the
Trustee may rely upon the purported genuineness and due execution of any
such document, and on the purported genuineness of any signature
thereon. The Trustee shall not be required to make any independent
examination of any documents contained in each Mortgage File beyond the
<PAGE> 42
review specifically required herein. The Trustee makes no
representations as to: (i) the validity, legality, enforceability or
genuineness of any documents contained in each Mortgage File or of any
of the Mortgage Loans identified on the Mortgage Loan Schedule, or (ii)
the collectability, insurability, effectiveness or suitability of any
Mortgage Loan. If the Trustee finds any document or documents
constituting a part of a Mortgage File not to have been executed or
received, or to be unrelated to the Mortgage Loans identified in the
Mortgage Loan Schedule, the Trustee shall promptly so notify the
Company. The Company hereby covenants and agrees that, if any such
defect cannot be corrected or cured, the Company shall, not later than
60 days after the Trustee's notice to it respecting such defect, within
the three-month period commencing on the Closing Date (or within the two-
year period commencing on the Closing Date if the related Mortgage Loan
is a "defective obligation" within the meaning of Section
860G(a)(4)(B)(ii) of the Code and Treasury Regulation Section 1.860G-
2(f)), either (i) purchase or repurchase the related Mortgage Loan from
the Trustee at the Purchase Price, or (ii) substitute for any Mortgage
Loan to which such defect relates a different mortgage loan (a
"Substitute Mortgage Loan") which is a "qualified replacement mortgage"
(as defined in the Code) and, (iii) after such three-month or two-year
period, as applicable, the Company shall purchase or repurchase the
Mortgage Loan from the Trustee at the Purchase Price but only if the
Mortgage Loan is in default or default is, in the judgment of the
Company, reasonably imminent. If such defect would cause the Mortgage
Loan to be other than a "qualified mortgage" (as defined in the Code),
then notwithstanding the previous sentence, purchase, repurchase or
substitution must occur within the sooner of (i) 90 days from the date
the defect was discovered or (ii) in the case of substitution, two years
from the Closing Date.
Such Substitute Mortgage Loan shall mature no later than, and not
more than two years earlier than, have a principal balance and Loan-to-
Value Ratio equal to or less than, and have a Pass-Through Rate on the
date of substitution equal to or no more than 1% greater than the
Mortgage Loan being substituted for. If the aggregate of the principal
balances of the Substitute Mortgage Loans substituted for a Mortgage
Loan is less than the Principal Balance of such Mortgage Loan, the
Company shall pay the difference in cash to the Trustee for deposit into
the Certificate Account, and such payment by the Company shall be
treated in the same manner as proceeds of the purchase or repurchase by
the Company of a Mortgage Loan pursuant to this Section 2.02.
Furthermore, such Substitute Mortgage Loan shall otherwise have such
characteristics so that the representations and warranties of the
Company set forth in Section 2.03 hereof would not have been incorrect
had such Substitute Mortgage Loan originally been a Mortgage Loan, and
the Company shall be deemed to have made such representations and
warranties as to such Substitute Mortgage Loan. A Substitute Mortgage
Loan may be substituted for a defective Mortgage Loan whether or not
such defective Mortgage Loan is itself a Substitute Mortgage Loan.
Notwithstanding anything herein to the contrary, each Substitute
Mortgage Loan shall be deemed to have the same Pass-Through Rate as the
<PAGE> 43
Mortgage Loan for which it was substituted.
The Purchase Price for each purchased or repurchased Mortgage Loan
shall be deposited by the Company in the Certificate Account and, upon
receipt by the Trustee of written notification of such deposit signed by
a Servicing Officer, the Trustee shall release to the Company the
related Mortgage File and shall execute and deliver such instruments of
transfer or assignment, in each case without recourse, as shall be
necessary to vest in the Company or its designee or assignee title to
any Mortgage Loan released pursuant hereto. The obligation of the
Company to purchase or repurchase or substitute any Mortgage Loan as to
which such a defect in a constituent document exists shall constitute
the sole remedy respecting such defect available to the Holders of the
Certificateholders or the Trustee on behalf of the Certificateholders.
Section 2.03. Representations and Warranties of the Company Concerning
the Mortgage Loans. With respect to the conveyance of the Mortgage Loans
provided for in Section 2.01 herein, the Company hereby represents and
warrants to the Trustee and the Certificate Insurer that as of the Cut-
Off Date unless otherwise indicated:
(i) The information set forth in the Mortgage Loan Schedule was true
and correct in all material respects at the date or dates respecting
which such information is furnished;
(ii) As of the Closing Date, each Mortgage relating to a Mortgage Loan
that is not a Cooperative Loan is a valid and enforceable (subject to
Section 2.03(xvi)) first lien on an unencumbered estate in fee simple or
leasehold estate in the related Mortgaged Property subject only to (a)
liens for current real property taxes and special assessments; (b)
covenants, conditions and restrictions, rights of way, easements and
other matters of public record as of the date of recording such
Mortgage, such exceptions appearing of record being acceptable to
mortgage lending institutions generally or specifically reflected in the
appraisal obtained in connection with the origination of the Mortgage
Loan; (c) exceptions set forth in the title insurance policy relating to
such Mortgage, such exceptions being acceptable to mortgage lending
institutions generally; and (d) 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;
(iii) Immediately upon the transfer and assignment contemplated
herein, the Trustee shall have good title to, and will be the sole legal
owner of, each Mortgage Loan, respectively, free and clear of any
encumbrance or lien (other than any lien under this Agreement);
(iv) As of the day prior to the Cut-Off Date and other than with respect
to 1 Mortgage Loan representing 0.03% (by principal balance) of the
Mortgage Pool, all payments due on each Mortgage Loan had been made and
no Mortgage Loan had been delinquent (i.e., was more than 30 days past
due) more than once in the preceding 12 months and any such delinquency
lasted for no more than 30 days;
(v) As of the Closing Date, there is no late assessment for delinquent
<PAGE> 44
taxes outstanding against any Mortgaged Property;
(vi) As of the Closing Date, there is no offset, defense or counterclaim
to any Mortgage Note, including the obligation of the Mortgagor to pay
the unpaid principal or interest on such Mortgage Note except to the
extent that the Buydown Agreement for a Buydown Loan forgives certain
indebtedness of a Mortgagor;
(vii) As of the Closing Date, each Mortgaged Property is free of
damage and in good repair, ordinary wear and tear excepted;
(viii) Each Mortgage Loan at the time it was made complied with all
applicable state and federal laws, including, without limitation, usury,
equal credit opportunity, disclosure and recording laws;
(ix) Each Mortgage Loan was originated by a savings association, savings
bank, credit union, insurance company, or similar institution which is
supervised and examined by a federal or state authority or by a
mortgagee approved by the FHA and will be serviced by an institution
which meets the servicer eligibility requirements established by the
Company;
(x) As of the Closing Date, each Mortgage Loan which is not a
Cooperative Loan is covered by an ALTA form or CLTA form of mortgagee
title insurance policy or other form of policy of insurance which, as of
the origination date of such Mortgage Loan, was acceptable to Fannie Mae
or Freddie Mac, and has been issued by, and is the valid and binding
obligation of, a title insurer which, as of the origination date of such
Mortgage Loan, was acceptable to Fannie Mae or Freddie Mac and qualified
to do business in the state in which the related Mortgaged Property is
located. Such policy insures the originator of the Mortgage Loan, its
successors and assigns as to the first priority lien of the Mortgage in
the original principal amount of the Mortgage Loan subject to the
exceptions set forth in such policy. Such policy is in full force and
effect and will be in full force and effect and inure to the benefit of
the Certificateholders upon the consummation of the transactions
contemplated by this Agreement and no claims have been made under such
policy, and no prior holder of the related Mortgage, including the
Company, has done, by act or omission, anything which would impair the
coverage of such policy;
(xi) Not less than approximately 9.11% (by Principal Balance) of the
Mortgage Loans with Loan-to-Value Ratios in excess of 80% at origination
were covered by a Primary Insurance Policy or an FHA insurance policy or
a VA guaranty, and such policy or guaranty is valid and remains in full
force and effect;
(xii) As of the Closing Date, all policies of insurance required by
this Agreement or by a Selling and Servicing Contract have been validly
issued and remain in full force and effect, including such policies
covering the Company, the Master Servicer or any Servicer;
(xiii) As of the Closing Date, each insurer issuing a Primary
Insurance Policy holds a rating acceptable to the Rating Agencies;
(xiv) Each Mortgage was documented by appropriate Fannie Mae/Freddie
Mac mortgage instruments in effect at the time of origination, or other
instruments approved by the Company;
(xv) As of the Closing Date, the Mortgaged Property securing each
Mortgage relating to a Mortgage Loan that is not a Cooperative Loan is
improved with a one- to four-family dwelling unit, including units in a
<PAGE> 45
duplex, condominium project, townhouse, a planned unit development or a
de minimis planned unit development;
(xvi) As of the Closing Date, each Mortgage and Mortgage Note is the
legal, valid and binding obligation of the maker thereof and is
enforceable in accordance with its terms, except only as such
enforcement may be limited by laws affecting the enforcement of
creditors' rights generally and principles of equity;
(xvii) As of the date of origination, as to Mortgaged Properties
which are units in condominiums or planned unit developments, all of
such units met Fannie Mae or Freddie Mac requirements, are located in a
condominium or planned unit development projects which have received
Fannie Mae or Freddie Mac approval, or are approvable by Fannie Mae or
Freddie Mac or have otherwise been approved by the Company;
(xviii) None of the Mortgage Loans are Buydown Loans;
(xix) Based solely on representations of the Mortgagors obtained at
the origination of the related Mortgage Loans, approximately 80.89% (by
Principal Balance) of the Mortgage Loans will be secured by owner
occupied Mortgaged Properties which are the primary residences of the
related Mortgagors, approximately 12.25% (by Principal Balance) of the
Mortgage Loans will be secured by owner occupied Mortgaged Properties
which were second or vacation homes of the Mortgagors and approximately
6.86% (by Principal Balance) of the Mortgage Loans will be secured by
Mortgaged Properties which were investor properties of the related
Mortgagors;
(xx) Prior to origination or refinancing, an appraisal of each Mortgaged
Property was made by an appraiser on a form satisfactory to Fannie Mae
or Freddie Mac;
(xxi) The Mortgage Loans have been underwritten substantially in
accordance with the applicable Underwriting Standards;
(xxii) All of the Mortgage Loans have due-on-sale clauses; by the
terms of the Mortgage Notes, however, the due on sale provisions may not
be exercised at the time of a transfer if prohibited by law;
(xxiii) The Company used no adverse selection procedures in selecting
the Mortgage Loans from among the outstanding adjustable-rate
conventional mortgage loans purchased by it which were available for
inclusion in the Mortgage Pool and as to which the representations and
warranties in this Section 2.03 could be made;
(xxiv) With respect to each Cooperative Loan, the Cooperative Stock
that is pledged as security for the Cooperative Loan is held by a person
as a tenant-stockholder (as defined in Section 216 of the Code) in a
cooperative housing corporation (as defined in Section 216 of the Code);
(xxv) Each Cooperative Loan is secured by a valid, subsisting and
enforceable (except as such enforcement may be limited by laws affecting
the enforcement of creditors' rights generally and principles of equity)
perfected first lien and security interest in the related Cooperative
Stock securing the related Mortgage Note, subject only to (a) liens of
the Cooperative for unpaid assessments representing the Mortgagor's pro
rata share of the Cooperative's payments for its blanket mortgage,
current and future real property taxes, insurance premiums, maintenance
fees and other assessments to which like collateral is commonly subject,
and (b) other matters to which like collateral is commonly subject which
do not materially interfere with the benefits of the security intended
<PAGE> 46
to be provided by the Security Agreement;
(xxvi) With respect to any Mortgage Loan as to which an affidavit has
been delivered to the Trustee certifying that the original Mortgage Note
is a Destroyed Mortgage Note, if such Mortgage Loan is subsequently in
default, the enforcement of such Mortgage Loan or of the related
Mortgage by or on behalf of the Trustee will not be materially adversely
affected by the absence of the original Mortgage Note;
(xxvii) Based upon an appraisal of the Mortgaged Property securing
each Mortgage Loan, approximately 58.62% (by Principal Balance) of the
Mortgage Loans had a current Loan-to-Value Ratio less than or equal to
80%, approximately 10.84% (by Principal Balance) of the Mortgage Loans
had a current Loan-to-Value Ratio greater than 80% but less than or
equal to 95% and approximately 30.53% (by Principal Balance) of the
Mortgage Loans had a current Loan-to-Value Ratio greater than 95%;
(xxviii) Approximately 50.47% (by Principal Balance) of the Mortgage
Loans were originated for the purpose of refinancing existing mortgage
debt, including cash-out refinancings; and approximately 49.53% (by
Principal Balance) of the Mortgage Loans were originated for the purpose
of purchasing the Mortgaged Property;
(xxix) Not less than approximately 94.09% (by Principal Balance) of
the Mortgage Loans were originated under full documentation programs;
(xxx) All of the Additional Collateral Loans are covered by the
Surety Bond; and
(xxxi) Each Mortgage Loan constitutes a qualified mortgage under
Section 860G(a)(3)(A) of the Code and Treasury Regulations Section
1.860G-2(a)(1).
It is understood and agreed that the representations and warranties
set forth in this Section 2.03 shall survive delivery of the respective
Mortgage Files to the Trustee or the Custodian, as the case may be, and
shall continue throughout the term of this Agreement. Upon discovery by
any of the Company, the Master Servicer, the Certificate Insurer, the
Trustee or the Custodian of a breach of any of the foregoing
representations and warranties which materially and adversely affects
the value of the related Mortgage Loans or the interests of the
Certificateholders or the Certificate Insurer in the related Mortgage
Loans, the Company, the Master Servicer, the Trustee, the Certificate
Insurer or the Custodian, as the case may be, discovering such breach
shall give prompt written notice to the others. Within 90 days of its
discovery or its receipt of notice of breach, the Company shall purchase
or repurchase, subject to the limitations set forth in the definition of
"Purchase Price", or substitute for the affected Mortgage Loan or
Mortgage Loans or any property acquired in respect thereof from the
Trustee, unless it has cured such breach in all material respects. After
the end of the three-month period beginning on the "start-up day" (which
is the Closing Date), any such substitution shall be made only if the
Company provides to the Trustee an Opinion of Counsel reasonably
satisfactory to the Trustee that each Substitute Mortgage Loan will be a
"qualified replacement mortgage" within the meaning of Section
860G(a)(4) of the Code. Such substitution shall be made in the manner
and within the time limits set forth in Section 2.02. Any such purchase
or repurchase by the Company shall be accomplished in the manner and at
<PAGE> 47
the Purchase Price, if applicable, but shall not be subject to the time
limits, set forth in Section 2.02. It is understood and agreed that the
obligation of the Company to provide such substitution or to make such
purchase or repurchase of any affected Mortgage Loan or Mortgage Loans
or any property acquired in respect thereof as to which a breach has
occurred and is continuing shall constitute the sole remedy respecting
such breach available to the Certificateholders or the Trustee on behalf
of the Certificateholders.
Section 2.04. Acknowledgment of Transfer of Trust Fund; Authentication
of Certificates. The Trustee acknowledges the transfer and assignment to
it of the property constituting the Trust Fund, but without having made
the review required to be made within 45 days pursuant to Section 2.02,
and declares that as of the Closing Date it holds and shall hold any
documents constituting a part of the Trust Fund, and the Trust Fund, as
Trustee in trust, upon the trusts herein set forth, for the use and
benefit of all present and future Certificateholders and the Certificate
Insurer. In connection therewith, as of the Closing Date, the Trustee
shall cause to be authenticated and delivered, upon and pursuant to the
order of the Company, in exchange for the property constituting the
Trust Fund, the Certificates in Authorized Denominations evidencing the
entire ownership of the Trust Fund.
ARTICLE III
Administration and Servicing of Mortgage Loans
Section 3.01. The Company to Act as Master Servicer. The Company shall
act as Master Servicer to service and administer the Mortgage Loans on
behalf of the Trustee and for the benefit of the Certificateholders and
the Certificate Insurer in accordance with the terms hereof and in the
same manner in which, and with the same care, skill, prudence and
diligence with which, it services and administers similar mortgage loans
for other portfolios, and shall have full power and authority 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, including,
without limitation, the power and authority to bring actions and defend
the Trust Fund on behalf of the Trustee in order to enforce the terms of
the Mortgage Notes. The Master Servicer may perform its master
servicing responsibilities through agents or independent contractors,
but shall not thereby be released from any of its responsibilities
hereunder and the Master Servicer shall diligently pursue all of its
rights against such agents or independent contractors.
The Master Servicer shall make reasonable efforts to collect or
cause to be collected 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 Primary Insurance Policy, any FHA insurance policy or
VA guaranty, any hazard insurance policy, and federal flood insurance,
cause to be followed such collection procedures as are followed with
respect to mortgage loans comparable to the Mortgage Loans and held in
<PAGE> 48
portfolios of responsible mortgage lenders in the local areas where each
Mortgaged Property is located. The Master Servicer shall enforce "due-on-
sale" clauses with respect to the related Mortgage Loans, to the extent
permitted by law, subject to the provisions set forth in Section 3.08.
Consistent with the foregoing, the Master Servicer may in its
discretion (i) waive or cause to be waived any assumption fee or late
payment charge in connection with the prepayment of any Mortgage Loan
and (ii) only upon determining that the coverage of any applicable
insurance policy or guaranty related to a Mortgage Loan will not be
materially adversely affected, arrange a schedule, running for no more
than 180 days after the first delinquent Due Date, for payment of any
delinquent installment on any Mortgage Note or for the liquidation of
delinquent items. The Master Servicer shall have the right, but not the
obligation, to purchase or repurchase any related delinquent Mortgage
Loan 90 days after the first delinquent Due Date or any time thereafter
for an amount equal to its Purchase Price; provided, however, that the
aggregate Purchase Price of Mortgage Loans so purchased or repurchased
shall not exceed one-half of one percent (0.50%) of the aggregate
Principal Balance, as of the Cut-Off Date, of all Mortgage Loans.
Consistent with the terms of this Section 3.01, the Master Servicer
may waive, modify or vary any term of any Mortgage Loan or consent to
the postponement of strict compliance with any such term or in any
manner grant indulgence to any Mortgagor if it has determined,
exercising its good faith business judgment in the same manner as it
would if it were the owner of the related Mortgage Loan, that the
security for, and the timely and full collectability of, such Mortgage
Loan would not be adversely affected by such waiver, modification,
postponement or indulgence; provided, however, that (unless the
Mortgagor is in default with respect to the Mortgage Loan or in the
reasonable judgment of the Master Servicer such default is imminent) the
Master Servicer shall not permit any modification with respect to any
Mortgage Loan that would (i) change the applicable Mortgage Interest
Rate, defer or forgive the payment of any principal or interest, reduce
the outstanding principal balance (except for actual payments of
principal) or extend the final maturity date with respect to such
Mortgage Loan, or (ii) be inconsistent with the terms of any applicable
Primary Insurance Policy, FHA insurance policy, VA guaranty, hazard
insurance policy or federal flood insurance policy. Notwithstanding the
foregoing, the Master Servicer shall not permit any modification with
respect to any Mortgage Loan that would both constitute a sale or
exchange of such Mortgage Loan within the meaning of Section 1001 of the
Code (including any proposed, temporary or final regulations promulgated
thereunder) (other than in connection with a proposed conveyance or
assumption of such Mortgage Loan that is treated as a Principal
Prepayment or in a default situation) and cause the REMIC I Trust Fund
to fail to qualify as a REMIC under the Code.
The Master Servicer is hereby authorized and empowered by the
Trustee to execute and deliver or cause to be executed and delivered on
behalf of the Certificateholders, and the Trustee or any of them, any
<PAGE> 49
and all instruments of satisfaction or cancellation, or of partial or
full release, discharge or modification, assignments of Mortgages and
endorsements of Mortgage Notes in connection with refinancings (in
jurisdictions where such assignments are the customary and usual
standard of practice of mortgage lenders) and all other comparable
instruments, with respect to the Mortgage Loans and with respect to the
Mortgaged Properties. The Trustee shall execute and furnish to the
Master Servicer, at the Master Servicer's direction, any powers of
attorney and other documents prepared by the Master Servicer and
determined by the Master Servicer to be necessary or appropriate to
enable the Master Servicer to carry out its supervisory, servicing and
administrative duties under this Agreement.
The Master Servicer and each Servicer shall obtain (to the extent
generally commercially available from time to time) and maintain
fidelity bond and errors and omissions coverage acceptable to Fannie Mae
or Freddie Mac with respect to their obligations under this Agreement
and the applicable Selling and Servicing Contract, respectively. The
Master Servicer or each Servicer, as applicable, shall establish escrow
accounts for, or pay when due (by means of an advance), any tax liens in
connection with the Mortgaged Properties that are not paid by the
Mortgagors when due to the extent that any such payment would not
constitute a Nonrecoverable Advance when made. Notwithstanding the
foregoing, the Master Servicer shall not permit any modification with
respect to any Mortgage Loan that would both constitute a sale or
exchange of such Mortgage Loan within the meaning of Section 1001 of the
Code (including any proposed, temporary or final regulations promulgated
thereunder) (other than in connection with a proposed conveyance or
assumption of such Mortgage Loan that is treated as a Principal
Prepayment or in a default situation) and cause the REMIC I Trust Fund
to fail to qualify as a REMIC under the Code. The Master Servicer shall
be entitled to approve a request from a Mortgagor for a partial release
of the related Mortgaged Property, the granting of an easement thereon
in favor of another Person, any alteration or demolition of the related
Mortgaged Property or other similar matters if it has determined,
exercising its good faith business judgment in the same manner as it
would if it were the owner of the related Mortgage Loan, that the
security for, and the timely and full collectability of, such Mortgage
Loan would not be adversely affected thereby and that the REMIC I Trust
Fund would not fail to continue to qualify as a REMIC under the Code as
a result thereof and that no tax on "prohibited transactions" or
"contributions" after the startup day would be imposed on the REMIC I
Trust Fund as a result thereof.
In connection with the servicing and administering of each Mortgage
Loan, the Master Servicer and any affiliate of the Master Servicer (i)
may perform services such as appraisals, default management and
brokerage services that are not customarily provided by servicers of
mortgage loans, and shall be entitled to reasonable compensation
therefor and (ii) may, at its own discretion and on behalf of the
Trustee, obtain credit information in the form of a "credit score" from
a credit repository.
<PAGE> 50
Section 3.02. Custodial Accounts. The Master Servicer shall cause to be
established and maintained by each Servicer under the Master Servicer's
supervision the Custodial Account for P&I, Buydown Fund Accounts (if
any) and Custodial Account for Reserves and shall deposit or cause to be
deposited therein daily the amounts related to the Mortgage Loans
required by the Selling and Servicing Contracts to be so deposited.
Proceeds received with respect to individual Mortgage Loans from any
title, hazard, or FHA insurance policy, VA guaranty, Primary Insurance
Policy or other insurance policy covering such Mortgage Loans shall be
deposited first in the Custodial Account for Reserves if required for
the restoration or repair of the related Mortgaged Property. Proceeds
from such insurance policies not so deposited in the Custodial Account
for Reserves shall be deposited in the Custodial Account for P&I, and
shall be applied to the balances of the related Mortgage Loans as
payments of interest and principal.
The Master Servicer is hereby authorized to make withdrawals from
and to issue drafts against the Custodial Accounts for P&I and the
Custodial Accounts for Reserves for the purposes required or permitted
by this Agreement. Each Custodial Account for P&I and each Custodial
Account for Reserves shall bear a designation clearly showing the
respective interests of the applicable Servicer, as trustee, and of the
Master Servicer, in substantially one of the following forms:
(a) With respect to the Custodial Account for P&I: (i)
[Servicer's Name], as agent, trustee and/or bailee of principal and
interest custodial account for PNC Mortgage Securities Corp., its
successors and assigns, for various owners of interests in PNC
Mortgage Securities Corp. mortgage-backed pools or (ii) [Servicer's
Name] in trust for PNC Mortgage Securities Corp.;
(b) With respect to the Custodial Account for Reserves: (i)
[Servicer's Name], as agent, trustee and/or bailee of taxes and
insurance custodial account for PNC Mortgage Securities Corp., its
successors and assigns for various mortgagors and/or various owners
of interests in PNC Mortgage Securities Corp. mortgage-backed pools
or (ii) [Servicer's Name] in trust for PNC Mortgage Securities
Corp. and various Mortgagors.
The Master Servicer hereby undertakes to assure remittance to the
Certificate Account of all amounts relating to the Mortgage Loans that
have been collected by any Servicer and are due to the Certificate
Account pursuant to Section 4.01 of this Agreement. If any Servicer
shall fail to pay Compensating Interest, the Master Servicer shall be
obligated to pay such amount.
Section 3.03. The Investment Account; Eligible Investments.(a) Not
later than the Withdrawal Date, the Master Servicer shall withdraw or
direct the withdrawal of funds in the Custodial Accounts for P&I, for
deposit in the Investment Account, in an amount representing:
(i) Scheduled installments of principal and interest on the Mortgage
<PAGE> 51
Loans received or advanced by the applicable Servicers which were due on
the related Due Date, net of Servicing Fees (as reduced by Compensating
Interest) due the applicable Servicers and less any amounts to be
withdrawn later by the applicable Servicers from the applicable Buydown
Fund Accounts;
(ii) Payoffs and the proceeds of other types of liquidations of the
Mortgage Loans received by the applicable Servicer for such Mortgage
Loans during the applicable Prior Period, with interest to the date of
Payoff or liquidation less any amounts to be withdrawn later by the
applicable Servicers from the applicable Buydown Fund Accounts; and
(iii) Curtailments received by the applicable Servicers in the Prior
Period.
At its option, the Master Servicer may invest funds withdrawn from
the Custodial Accounts for P&I, as well as any Buydown Funds, Insurance
Proceeds and Liquidation Proceeds previously received by the Master
Servicer (including amounts paid by the Company in respect of any
Purchase Obligation or its substitution obligations set forth in Section
2.02 or Section 2.03 or in connection with the exercise of the option to
terminate this Agreement pursuant to Section 9.01) for its own account
and at its own risk, during any period prior to their deposit in the
Certificate Account. Such funds, as well as any funds which were
withdrawn from the Custodial Accounts for P&I on or before the
Withdrawal Date, but not yet deposited into the Certificate Account,
shall immediately be deposited by the Master Servicer with the
Investment Depository in an Investment Account in the name of the Master
Servicer and the Trustee for investment only as set forth in this
Section 3.03. The Master Servicer shall bear any and all losses incurred
on any investments made with such funds and shall be entitled to retain
all gains realized on such investments as additional servicing
compensation. Not later than the Business Day prior to the Distribution
Date, the Master Servicer shall deposit such funds, net of any gains
earned thereon, in the Certificate Account.
(b) Funds held in the Investment Account shall be invested in (i)
one or more Eligible Investments which shall in no event mature later
than the Business Day prior to the related Distribution Date (except if
such Eligible Investments are obligations of the Trustee, such Eligible
Investments may mature on the Distribution Date) or (ii) such other
instruments as shall be required to maintain the Ratings (determined in
the case of the Class A Certificates without regard to the effect of the
Certificate Insurance Policy) and which are acceptable to the
Certificate Insurer
Section 3.04. The Certificate Account.
(a) Not later than the Business Day prior to the related
Distribution Date, the Master Servicer shall direct the Investment
Depository to deposit the amounts previously deposited into the
Investment Account (which may include a deposit of Eligible Investments)
to which the Certificateholders, the Trustee and the Certificate Insurer
are entitled into the Certificate Account. In addition, not later than
<PAGE> 52
the Business Day prior to the Distribution Date, the Master Servicer
shall deposit into the Certificate Account any Monthly P&I Advances or
other payments required to be made by the Master Servicer pursuant to
Section 4.02 of this Agreement and any Insurance Proceeds or Liquidation
Proceeds (including amounts paid by the Company in respect of any
Purchase Obligation or in connection with the exercise of its option to
terminate this Agreement pursuant to Section 9.01) not previously
deposited in the Custodial Accounts for P&I or the Investment Account.
(b) Funds held in the Certificate Account shall be invested at the
direction of the Master Servicer in (i) one or more Eligible Investments
which shall in no event mature later than the Business Day prior to the
related Distribution Date (except if such Eligible Investments are
obligations of the Trustee, such Eligible Investments may mature on the
Distribution Date), or (ii) such other instruments as shall be required
to maintain the Ratings. The Master Servicer shall be entitled to
receive any gains earned on such Eligible Investments and shall bear any
losses suffered in connection therewith.
Section 3.05. Permitted Withdrawals from the Certificate Account, the
Investment Account and Custodial Accounts for P&I and of Buydown Funds
from the Buydown Fund Accounts.
(a) The Master Servicer is authorized to make withdrawals, from
time to time, from the Investment Account, the Certificate Account or
the Custodial Accounts for P&I established by the Servicers of amounts
deposited therein in respect of the Certificates, as follows:
(i) To reimburse itself or the applicable Servicer for Monthly P&I
Advances made pursuant to Section 4.02 or a Selling and Servicing
Contract, such right to reimbursement pursuant to this paragraph (i)
being limited to amounts received on particular Mortgage Loans
(including, for this purpose, Insurance Proceeds and Liquidation
Proceeds) which represent late recoveries of principal and/or interest
respecting which any such Monthly P&I Advance was made;
(ii) To reimburse itself or the applicable Servicer for amounts expended
by or for the account of the Master Servicer pursuant to Section 3.09 or
amounts expended by such Servicer pursuant to the Selling and Servicing
Contracts in connection with the restoration of property damaged by an
Uninsured Cause or in connection with the liquidation of a Mortgage
Loan;
(iii) To pay to itself, with respect to the related Mortgage Loans,
the Master Servicing Fee as to which no prior withdrawals from funds
deposited by the Master Servicer have been made;
(iv) To reimburse itself or the applicable Servicer for advances made
with respect to related Mortgage Loans which the Master Servicer has
determined to be Nonrecoverable Advances;
(v) To pay to itself reinvestment earnings deposited or earned in the
Investment Account and the Certificate Account to which it is entitled
and to reimburse itself for expenses incurred by and reimbursable to it
pursuant to Section 6.03;
<PAGE> 53
(vi) To deposit to the Investment Account amounts in the Certificate
Account not required to be on deposit therein at the time of such
withdrawal;
(vii) To deposit in the Certificate Account, not later than the
Business Day prior to the related Distribution Date, the amounts
specified in Section 3.04(a); and
after making or providing for the above withdrawals
(viii) To clear and terminate the Investment Account and the
Certificate Account following termination of this Agreement pursuant to
Section 9.01.
Since, in connection with withdrawals pursuant to paragraphs (i)
and (ii), the Master Servicer's entitlement thereto is limited to
collections or other recoveries on the related Mortgage Loan, the Master
Servicer or the applicable Servicer shall keep and maintain separate
accounting for each Mortgage Loan, for the purpose of justifying any
such withdrawals.
(b) The Master Servicer (or the applicable Servicer, if such
Servicer holds and maintains a Buydown Fund Account) is authorized to
make withdrawals, from time to time, from the Buydown Fund Account or
Custodial Account for P&I established by any Servicer under its
supervision of the following amounts of Buydown Funds:
(i) To deposit each month in the Investment Account the amount
necessary to supplement payments received on Buydown Loans;
(ii) In the event of a Payoff of any Mortgage Loan having a related
Buydown Fund, to apply amounts remaining in Buydown Fund Accounts to
reduce the required amount of such principal Payoff (or, if the
Mortgagor has made a Payoff, to refund such remaining Buydown Fund
amounts to the Person entitled thereto);
(iii) In the event of foreclosure or liquidation of any Mortgage
Loan having a Buydown Fund, to deposit remaining Buydown Fund amounts in
the Investment Account as Liquidation Proceeds; and
(iv) To clear and terminate the portion of any account representing
Buydown Funds following termination of this Agreement pursuant to
Section 9.01;
(c) The Trustee is authorized to make withdrawals from time to
time from the Certificate Account to reimburse itself for advances it
has made pursuant to Section 7.01(a) hereof that it has determined to be
Nonrecoverable Advances.
Section 3.06. Maintenance of Primary Insurance Policies; Collections
Thereunder. The Master Servicer shall use commercially reasonable
efforts to keep, and to cause the Servicers to keep, in full force and
effect each Primary Insurance Policy required with respect to a Mortgage
Loan, in the manner set forth in the applicable Selling and Servicing
Contract, until no longer required. Notwithstanding the foregoing, the
Master Servicer shall have no obligation to maintain any Primary
<PAGE> 54
Insurance Policy for a Mortgage Loan for which the outstanding Principal
Balance thereof at any time subsequent to origination was 80% or less of
the sum of (i) the value of the related Mortgaged Property (as
determined by the appraisal obtained at the time of origination) and
(ii) the value of any Additional Collateral (as determined at the time
of origination), unless required by applicable law.
Unless required by applicable law, the Master Servicer shall not
cancel or refuse to renew, or allow any Servicer under its supervision
to cancel or refuse to renew, any such Primary Insurance Policy in
effect at the date of the initial issuance of the Certificates that is
required to be kept in force hereunder; provided, however, that neither
the Master Servicer nor any Servicer shall advance funds for the payment
of any premium due under any Primary Insurance Policy if it shall
determine that such an advance would be a Nonrecoverable Advance.
Section 3.07. Maintenance of Hazard Insurance. The Master Servicer
shall cause to be maintained for each Mortgage Loan (other than a
Cooperative Loan) fire insurance with extended coverage in an amount
which is not less than the original principal balance of such Mortgage
Loan, except in cases approved by the Master Servicer in which such
amount exceeds the value of the improvements to the Mortgaged Property.
The Master Servicer shall also require fire insurance with extended
coverage in a comparable amount on property acquired upon foreclosure,
or deed in lieu of foreclosure, of any Mortgage Loan (other than a
Cooperative Loan). Any amounts collected under any such policies (other
than amounts to be applied to the restoration or repair of the related
Mortgaged Property) shall be deposited into the Custodial Account for
P&I, subject to withdrawal pursuant to the applicable Selling and
Servicing Contract and pursuant to Section 3.03 and Section 3.05. Any
unreimbursed costs incurred in maintaining any insurance described in
this Section 3.07 shall be recoverable as an advance by the Master
Servicer from the Investment Account or the Certificate Account. Such
insurance shall be with insurers approved by the Master Servicer and
Fannie Mae or Freddie Mac. Other additional insurance may be required of
a Mortgagor, in addition to that required pursuant to such applicable
laws and regulations as shall at any time be in force and as shall
require such additional insurance. Where any part of any improvement to
the Mortgaged Property (other than a Mortgaged Property secured by a
Cooperative Loan) is located in a federally designated special flood
hazard area and in a community which participates in the National Flood
Insurance Program at the time of origination of the related Mortgage
Loan, the Master Servicer shall cause flood insurance to be provided.
The hazard insurance coverage required by this Section 3.07 may be met
with blanket policies providing protection equivalent to individual
policies otherwise required. The Master Servicer or the applicable
Servicer shall be responsible for paying any deductible amount on any
such blanket policy. The Master Servicer agrees to present, or cause to
be presented, on behalf of and for the benefit of the Trustee, the
Certificate Insurer and the Certificateholders, claims under the hazard
insurance policy respecting any Mortgage Loan, and in this regard to
take such reasonable actions as shall be necessary to permit recovery
<PAGE> 55
under such policy.
Section 3.08. Enforcement of Due-on-Sale Clauses; Assumption
Agreements. When any Mortgaged Property is about to be conveyed by the
Mortgagor, the Master Servicer shall, to the extent it has knowledge of
such prospective conveyance and prior to the time of the consummation of
such conveyance, exercise on behalf of the Trustee the Trustee's rights
to accelerate the maturity of such Mortgage Loan, to the extent that
such acceleration is permitted by the terms of the related Mortgage
Note, under any "due-on-sale" clause applicable thereto; provided,
however, that the Master Servicer shall not exercise any such right if
the due-on-sale clause, in the reasonable belief of the Master Servicer,
is not enforceable under applicable law or if such exercise would result
in non-coverage of any resulting loss that would otherwise be covered
under any insurance policy. In the event the Master Servicer is
prohibited from exercising such right, the Master Servicer is authorized
to take or enter into an assumption and modification agreement from or
with the Person to whom a Mortgaged Property has been or is about to be
conveyed, pursuant to which such Person becomes liable under the
Mortgage Note and, unless prohibited by applicable state law or unless
the Mortgage Note contains a provision allowing a qualified borrower to
assume the Mortgage Note, the Mortgagor remains liable thereon; provided
that the Mortgage Loan shall continue to be covered (if so covered
before the Master Servicer enters such agreement) by any related Primary
Insurance Policy. 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 Mortgagor and becomes liable under the Mortgage Note.
The Master Servicer shall not enter into any substitution or assumption
with respect to a Mortgage Loan if such substitution or assumption shall
(i) both constitute a "significant modification" effecting an exchange
or reissuance of such Mortgage Loan under the Code (or Treasury
regulations promulgated thereunder) and cause the REMIC I Trust Fund to
fail to qualify as a REMIC under the REMIC Provisions or (ii) cause the
imposition of any tax on "prohibited transactions" or "contributions"
after the startup day under the REMIC Provisions. The Master Servicer
shall notify the Trustee that any such substitution or assumption
agreement has been completed by forwarding to the Trustee the original
copy of such substitution or assumption agreement and other documents
and instruments constituting a part thereof. In connection with any such
assumption or substitution agreement, the terms of the related Mortgage
Note shall not be changed. Any fee collected by the applicable Servicer
for entering into an assumption or substitution of liability agreement
shall be retained by such Servicer as additional servicing compensation.
Notwithstanding the foregoing paragraph or any other provision of
this Agreement, the Master Servicer shall not be deemed to be in
default, breach or any other violation of its obligations hereunder by
reason of any assumption of a Mortgage Loan by operation of law or any
assumption which the Master Servicer may be restricted by law from
preventing, for any reason whatsoever.
<PAGE> 56
Section 3.09. Realization Upon Defaulted Mortgage Loans. The Master
Servicer shall foreclose upon or otherwise comparably convert, or cause
to be foreclosed upon or comparably converted, the ownership of any
Mortgaged Property securing a Mortgage Loan which comes into and
continues in default and as to which no satisfactory arrangements can be
made for collection of delinquent payments pursuant to Section 3.01. In
lieu of such foreclosure or other conversion, and taking into
consideration the desirability of maximizing net Liquidation Proceeds
after taking into account the effect of Insurance Proceeds upon
Liquidation Proceeds, the Master Servicer may, to the extent consistent
with prudent mortgage loan servicing practices, accept a payment of less
than the outstanding Principal Balance of a delinquent Mortgage Loan in
full satisfaction of the indebtedness evidenced by the related Mortgage
Note and release the lien of the related Mortgage upon receipt of such
payment. The Master Servicer shall not foreclose upon or otherwise
comparably convert a Mortgaged Property if the Master Servicer is aware
of evidence of toxic waste, other hazardous substances or other evidence
of environmental contamination thereon and the Master Servicer
determines that it would be imprudent to do so. In connection with such
foreclosure or other conversion, the Master Servicer shall cause to be
followed such practices and procedures as it shall deem necessary or
advisable and as shall be normal and usual in general mortgage servicing
activities. The foregoing is subject to the provision that, in the case
of damage to a Mortgaged Property from an Uninsured Cause, the Master
Servicer shall not be required to advance its own funds towards the
restoration of the property unless it shall be determined in the sole
judgment of the Master Servicer, (i) that such restoration will increase
the proceeds of liquidation of the Mortgage Loan to Certificateholders
after reimbursement to itself for such expenses, and (ii) that such
expenses will be recoverable to it through Liquidation Proceeds. The
Master Servicer shall be responsible for all other costs and expenses
incurred by it in any such proceedings; provided, however, that it shall
be entitled to reimbursement thereof (as well as its normal servicing
compensation) as an advance. The Master Servicer shall maintain
information required for tax reporting purposes regarding any Mortgaged
Property which is abandoned or which has been foreclosed or otherwise
comparably converted. The Master Servicer shall report such information
to the Internal Revenue Service and the Mortgagor in the manner required
by applicable law. In addition, in the case of any Mortgage Loan
secured by Additional Collateral, the Master Servicer shall direct the
related Servicer to realize upon the related Additional Collateral.
With respect to each of the Class B Certificates, the Master
Servicer may enter into one or more special servicing agreements with
unaffiliated holders of a 100% Percentage Interest of the Class B
Certificate with the lowest priority or holders of a 100% interest in a
class of securities representing such interests in such Class, subject
to each Rating Agency's acknowledgment that the Ratings of the
Certificates in effect immediately prior to the entering into of such
agreement would not be qualified, downgraded or withdrawn and the
Certificates would not be placed on credit review status (except for
possible upgrading) as a result of such agreement. Any such agreement
<PAGE> 57
may contain provisions whereby such holder may (a) instruct the Master
Servicer to instruct a Servicer to the extent provided in the applicable
Selling and Servicing Contract to commence or delay foreclosure
proceedings with respect to delinquent Mortgage Loans, provided that the
holder deposits cash with the Master Servicer that will be available for
distribution to Certificateholders if Liquidation Proceeds are less than
they otherwise may have been had the Servicer acted in accordance with
its normal servicing procedures or (b) purchase delinquent Mortgage
Loans from the Trust Fund immediately prior to the commencement of
foreclosure proceedings at a price equal to the aggregate outstanding
Principal Balance of such Mortgage Loans plus accrued interest thereon
at the applicable Mortgage Interest Rate through the last day of the
month in which such Mortgage Loans are purchased and/or (c) assume all
of the servicing rights and obligations with respect to delinquent
Mortgage Loans so long as (i) the Master Servicer has the right to
transfer the servicing rights and obligations of such Mortgage Loans to
another servicer and (ii) such holder will service such Mortgage Loans
in accordance with the applicable Selling and Servicing Contract.
REMIC I shall not acquire any real property (or personal property
incident to such real property) except in connection with a default or
imminent default of a Mortgage Loan. In the event that REMIC I acquires
any real property (or personal property incident to such real property)
in connection with a default or imminent default of a Mortgage Loan,
such property shall be disposed of by the Master Servicer within three
years after its acquisition by the Master Servicer for REMIC I, unless
the Master Servicer provides to the Trustee an Opinion of Counsel to the
effect that the holding by REMIC I of such Mortgaged Property subsequent
to three years after its acquisition will not result in the imposition
of taxes on "prohibited transactions" of REMIC I as defined in Section
860F of the Code or under the law of any state in which real property
securing a Mortgage Loan owned by REMIC I is located or cause REMIC I to
fail to qualify as a REMIC for federal income tax purposes or for state
tax purposes under the laws of any state in which real property securing
a Mortgage Loan owned by REMIC I is located at any time that any
Certificates are outstanding. The Master Servicer shall manage,
conserve, protect and operate each such property for the
Certificateholders and the Certificate Insurer solely for the purpose of
its prompt disposition and sale in a manner which does not cause such
property to fail to qualify as "foreclosure property" within the meaning
of Section 860G(a)(8) or result in the receipt by REMIC I 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. Pursuant to its
efforts to sell such property, the Master Servicer shall either itself
or through an agent selected by the Master Servicer protect and conserve
such property in the same manner and to such extent as is customary in
the locality where such property is located and may, incident to its
conservation and protection of the interests of the Certificateholders
and the Certificate Insurer, rent the same, or any part thereof, as the
Master Servicer deems to be in the best interest of the Master Servicer,
the Certificate Insurer and the Certificateholders for the period prior
<PAGE> 58
to the sale of such property. Additionally, the Master Servicer shall
perform the tax withholding and shall file information returns with
respect to the receipt of mortgage interests received in a trade or
business, the reports of foreclosures and abandonments of any Mortgaged
Property and the information returns relating to cancellation of
indebtedness income with respect to any Mortgaged Property required by
Sections 6050H, 6050J and 6050P, respectively, of the Code, and deliver
to the Trustee an Officers' Certificate on or before March 31 of each
year stating that such reports have been filed. Such reports shall be
in form and substance sufficient to meet the reporting requirements
imposed by Sections 6050H, 6050J and 6050P of the Code.
Notwithstanding any other provision of this Agreement, the Master
Servicer and the Trustee, as applicable, shall comply with all federal
withholding requirements with respect to payments to Certificateholders
of interest or original issue discount that the Master Servicer or the
Trustee reasonably believes are applicable under the Code. The consent
of Certificateholders shall not be required for any such withholding.
Without limiting the foregoing, the Master Servicer agrees that it will
not withhold with respect to payments of interest or original issue
discount in the case of a Certificateholder that has furnished or caused
to be furnished an effective Form W-8 or an acceptable substitute form
or a successor form and who is not a "10 percent shareholder" within the
meaning of Code Section 871(h)(3)(B) or a "controlled foreign
corporation" described in Code Section 881(c)(3)(C) with respect to
REMIC I or the Depositor. In the event the Trustee withholds any
amount from interest or original issue discount payments or advances
thereof to any Certificateholder pursuant to federal withholding
requirements, the Trustee shall indicate the amount withheld to such
Certificateholder.
Section 3.10. Trustee to Cooperate; Release of Mortgage Files. Upon the
Payoff or scheduled maturity of any Mortgage Loan, the Master Servicer
shall cause such final payment to be immediately deposited in the
related Custodial Account for P&I or the Investment Account. Upon notice
thereof, the Master Servicer shall promptly notify the Trustee by a
certification (which certification shall include a statement to the
effect that all amounts received in connection with such payment which
are required to be deposited in either such account have been so
deposited) of a Servicing Officer and shall request delivery to it of
the Mortgage File. Upon receipt of such certification and request, the
Trustee shall, not later than the fifth succeeding Business Day, release
the related Mortgage File to the Master Servicer or the applicable
Servicer indicated in such request. With any such Payoff or other final
payment, the Master Servicer is authorized to prepare for and procure
from the trustee or mortgagee under the Mortgage which secured the
Mortgage Note a deed of full reconveyance or other form of satisfaction
or assignment of Mortgage and endorsement of Mortgage Note in connection
with a refinancing covering the Mortgaged Property, which satisfaction,
endorsed Mortgage Note or assigning document shall be delivered by the
Master Servicer to the person or persons entitled thereto. No expenses
incurred in connection with such satisfaction or assignment shall be
<PAGE> 59
payable to the Master Servicer by the Trustee or from the Certificate
Account, the related Investment Account or the related Custodial Account
for P&I. From time to time as appropriate for the servicing or
foreclosure of any Mortgage Loan, including, for this purpose,
collection under any Primary Insurance Policy, the Trustee shall, upon
request of the Master Servicer and delivery to it of a trust receipt
signed by a Servicing Officer, release not later than the fifth Business
Day following the date of receipt of such request and trust receipt the
related Mortgage File to the Master Servicer or the related Servicer as
indicated by the Master Servicer and shall execute such documents as
shall be necessary to the prosecution of any such proceedings. Such
trust receipt shall obligate the Master Servicer to return the Mortgage
File to the Trustee when the need therefor by the Master Servicer no
longer exists, unless the Mortgage Loan shall be liquidated, in which
case, upon receipt of a certificate of a Servicing Officer similar to
that herein above specified, the trust receipt shall be released by the
Trustee to the Master Servicer.
Section 3.11. Compensation to the Master Servicer and the Servicers. As
compensation for its activities hereunder, the Master Servicer shall be
entitled to receive from the Investment Account or the Certificate
Account the amounts provided for by Section 3.05(a)(iii). The Master
Servicer shall be required to pay all expenses incurred by it in
connection with its activities hereunder and shall not be entitled to
reimbursement therefor, except as specifically provided herein. The
Master Servicer shall be obligated to pay any franchise tax imposed on
REMIC I under Section 23153 of the California Bank and Corporate Tax Law
by Section 24874 of the California Bank and Corporate Tax Law and shall
not be entitled to reimbursement therefore.
As compensation for its activities under the applicable Selling and
Servicing Contract, the applicable Servicer shall be entitled to
withhold or withdraw from the related Custodial Account for P&I the
amounts provided for in such Selling and Servicing Contract. Each
Servicer is required to pay all expenses incurred by it in connection
with its servicing activities under its Selling and Servicing Contract
(including payment of premiums for Primary Insurance Policies, if
required) and shall not be entitled to reimbursement therefor except as
specifically provided in such Selling and Servicing Contract and not
inconsistent with this Agreement.
Section 3.12. Reports to the Trustee; Certificate Account Statement.
Not later than 15 days after each Distribution Date, the Master Servicer
shall forward a statement, certified by a Servicing Officer, to the
Trustee and the Certificate Insurer setting forth the status of the
Certificate Account as of the close of business on such Distribution
Date and showing, for the period covered by such statement, the
aggregate of deposits into and withdrawals from the Certificate Account
for each category of deposit specified in Section 3.04 and each category
of withdrawal specified in Section 3.05, and stating that all
distributions required by this Agreement have been made (or if any
required distribution has not been made, specifying the nature and
<PAGE> 60
amount thereof). The Trustee shall provide such statements to any
Certificateholder upon request at the expense of the Master Servicer.
Such statement shall also, to the extent available, include information
regarding delinquencies on the Mortgage Loans, indicating the number and
aggregate Principal Balance of Mortgage Loans which are one, two, three
or more months delinquent, the number and aggregate Principal Balance of
Mortgage Loans with respect to which foreclosure proceedings have been
initiated and the book value of any Mortgaged Property acquired by the
Trust Fund through foreclosure, deed in lieu of foreclosure or other
exercise of the Trust Fund's security interest in the Mortgaged
Property.
Section 3.13. Annual Statement as to Compliance. The Master Servicer
shall deliver to the Trustee and the Certificate Insurer, on or before
April 30 of each year, beginning with the first April 30 succeeding the
Cut-Off Date by at least six months, an Officer's Certificate stating as
to the signer thereof, that (i) a review of the activities of the Master
Servicer during the preceding calendar year and performance under this
Agreement has been made under such officer's supervision, and (ii) to
the best of such officer's knowledge, based on such review, the Master
Servicer has fulfilled all its obligations under this Agreement
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 such statement
shall be provided by the Master Servicer to Certificateholders upon
request or by the Trustee (solely to the extent that such copies are
available to the Trustee) at the expense of the Master Servicer, should
the Master Servicer fail to so provide such copies.
Section 3.14. Access to Certain Documentation and Information Regarding
the Mortgage Loans. In the event that the Certificates are legal for
investment by federally-insured savings associations, the Master
Servicer shall provide to the OTS, the FDIC and the supervisory agents
and examiners of the OTS and the FDIC access to the documentation
regarding the related Mortgage Loans required by applicable regulations
of the OTS or the FDIC, as applicable, and shall in any event provide
such access to the documentation regarding such Mortgage Loans to the
Trustee and its representatives, such access being afforded without
charge, but only upon reasonable request and during normal business
hours at the offices of the Master Servicer designated by it.
Section 3.15. Annual Independent Public Accountants' Servicing Report.
On or before April 30 of each year, beginning with the first April 30
succeeding the Cut-Off Date by at least six months, the Master Servicer,
at its expense, shall cause a firm of independent public accountants to
furnish a statement to the Trustee and the Certificate Insurer to the
effect that, in connection with the firm's examination of the financial
statements as of the previous December 31 of the Master Servicer's
parent corporation (which shall include a limited examination of the
Master Servicer's financial statements), nothing came to their attention
that indicated that the Master Servicer was not in compliance with
Section 3.02, Section 3.03, Section 3.04, Section 3.05, Section 3.11,
<PAGE> 61
Section 3.12 and Section 3.13 of this Agreement, except for (i) such
exceptions as such firm believes to be immaterial, and (ii) such other
exceptions as are set forth in such statement.
Section 3.16. Maintenance of the Certificate Insurance Policy;
Collections Thereunder.
(a) Prior to 5:00 P.M. New York City time on the third Business
Day prior to each Distribution Date, the Master Servicer shall determine
if a Deficiency Amount for such Distribution Date, exists and, if so,
shall immediately notify the Trustee in writing who shall complete the
Notice and submit such Notice in accordance with the Certificate
Insurance Policy to the Certificate Insurer no later than 12:00 Noon,
New York City time, on the Business Day immediately preceding each
Distribution Date, as a claim for an Insured Amount in an amount equal
to such Deficiency Amount. If at any time the Trustee determines that a
Preference Amount is payable under the terms of the Certificate
Insurance Policy, the Trustee shall take the actions required by the
terms of the Certificate Insurance Policy to obtain payment of such
Preference Amount by the Certificate Insurer.
(b) Upon receipt of an Insured Amount from the Certificate Insurer
on behalf of the Class A Certificateholders, the Trustee shall deposit
such Insured Amount in the Certificate Account. All such amounts on
deposit in the Certificate Account shall remain uninvested. The Trustee
shall include on each Distribution Date the Deficiency Amount for such
Distribution Date in the amount distributed to the Class A Certificates
pursuant to Section 4.01. If on any Distribution Date, the Trustee or
the Master Servicer determines that the Certificate Insurer has paid
more under the Certificate Insurance Policy than is required by the
terms thereof, the Trustee shall promptly return the excess amount to
the Certificate Insurer.
(c) The Trustee shall (i) receive as attorney-in-fact of each
Class A Certificateholder any Insured Amount from the Certificate
Insurer and (ii) distribute such Insured Amount to the Class A
Certificateholders as set forth in subsection (b) above. Insured
Amounts disbursed by the Trustee from proceeds of the Certificate
Insurance Policy shall not be considered payment by the Trust Fund with
respect to the Class A Certificates, nor shall such disbursement of such
Insured Amounts discharge the obligations of the Trust Fund with respect
to the amounts thereof, and the Certificate Insurer shall become owner
of such amounts to the extent covered by such Insured Amounts as the
deemed assignee of the Class A Certificateholders. The Trustee hereby
agrees on behalf of each Class A Certificateholder (and each Class A
Certificateholder, by its acceptance of its Class A Certificates, hereby
agrees) for the benefit of the Certificate Insurer that the Trustee
shall recognize that to the extent the Certificate Insurer pays Insured
Amounts, either directly or indirectly (as by paying through the
Trustee), to the Class A Certificateholders, the Certificate Insurer
will be entitled to be subrogated to the rights of the Class A
Certificateholders to the extent of such payments and will be entitled
<PAGE> 62
to receive the Certificate Insurer Reimbursement Amount as set forth in
Section 4.01 and the definition of "REMIC I Distribution Amount."
Section 3.17. Surety Bond. In connection with its activities
hereunder, the Master Servicer agrees to present, on behalf of the
Trustee and Certificateholders, claims to the Surety under the Surety
Bond, and, in this regard, to take such commercially reasonable action
(other than the making of Nonrecoverable Advances) as shall be necessary
to permit recovery under the Surety Bond. The Master Servicer shall
collect all amounts relating to the Certificates under the Surety Bond
and shall deposit such amounts in the related Custodial Account for P&I
or in the Certificate Account until distributed in accordance with
Section 4.01 or withdrawn in accordance with Section 3.03 or Section
3.05 of this Agreement.
Section 3.18. [Reserved.]
Section 3.19. [Reserved.]
Section 3.20. Assumption or Termination of Selling and Servicing
Contracts by Trustee. In the event the Master Servicer, or any successor
Master Servicer, shall for any reason no longer be the Master Servicer
(including by reason of an Event of Default), the Trustee as trustee
hereunder or its designee shall thereupon assume all of the rights and
obligations of the Master Servicer under the Selling and Servicing
Contracts with respect to the related Mortgage Loans unless the Trustee
elects to terminate the Selling and Servicing Contracts with respect to
such Mortgage Loans in accordance with the terms thereof. Any
termination fee shall remain the responsibility of the Master Servicer
hereunder. The Trustee, its designee or the successor servicer for the
Trustee shall be deemed to have assumed all of the Master Servicer's
interest therein with respect to the related Mortgage Loans and to have
replaced the Master Servicer as a party to the Selling and Servicing
Contracts to the same extent as if the rights and duties under the
Selling and Servicing Contracts relating to such Mortgage Loans had been
assigned to the assuming party, except that the Master Servicer shall
not thereby be relieved of any liability or obligations under the
Selling and Servicing Contracts with respect to the Master Servicer's
duties to be performed prior to its termination hereunder.
The Master Servicer at its expense shall, upon request of the
Trustee, deliver to the assuming party all documents and records
relating to the Selling and Servicing Contracts and the Mortgage Loans
then being master serviced by the Master Servicer and an accounting of
amounts collected and held by the Master Servicer and otherwise use its
best efforts to effect the orderly and efficient transfer of the rights
and duties under the related Selling and Servicing Contracts relating to
such Mortgage Loans to the assuming party.
ARTICLE IV
<PAGE> 63
Payments to Certificateholders; Payment of Expenses
Section 4.01. Distributions to Certificateholders. (a) On each
Distribution Date and prior to making any distributions on such date,
the Trustee (or any duly appointed paying agent) shall withdraw from the
Certificate Account the Certificate Insurer Premium and pay such amount
to the Certificate Insurer. Thereafter on each Distribution Date, the
Trustee (or any duly appointed paying agent) shall (i) withdraw from the
Certificate Account the REMIC I Available Distribution Amount for such
Distribution Date and distribute, from the amount so withdrawn, to the
extent of the REMIC I Available Distribution Amount, the REMIC I
Distribution Amount to the Certificateholders and the Certificate
Insurer in respect of amounts owed to the Certificateholders and the
Certificate Insurer pursuant to the definition of "REMIC I Distribution
Amount" and payments to the Certificate Insurer (as set forth in
Section 3.16) in respect of the Certificate Insurer's subrogation of
certain rights to payment due to the Class A Certificateholders, (ii)
distribute Excess Liquidation Proceeds to the Class R Certificateholder
and (iii) withdraw the Deficiency Amount, if any, from the Certificate
Account and distribute such amount to the Class A Certificates in
accordance with Section 3.16. All such distributions from the
Certificate Account on each Distribution Date shall be done in
accordance with written statements received from the Master Servicer
pursuant to Section 4.02(b). Payments to Certificateholders shall be
made by wire transfer in immediately available funds for the account of,
or by check mailed to, each such Certificateholder of record on the
immediately preceding Record Date (other than as provided in Section
9.01 respecting the final distribution), as specified by each such
Certificateholder and at the address of such Holder appearing in the
Certificate Register. Payments to the Certificate Insurer shall be made
in a manner acceptable to the Certificate Insurer.
(b) All reductions in the Certificate Principal Balance of a
Certificate effected by distributions of principal and all allocations
of Realized Losses made on any Distribution Date shall be binding upon
all Holders of such Certificates and of any Certificates issued upon the
registration of transfer or exchange therefor or in lieu thereof,
whether or not such distribution is noted on such Certificate. The final
distribution of principal of each Certificate shall be payable in the
manner provided above only upon presentation and surrender thereof on or
after the Distribution Date therefor at the office or agency of the
Certificate Registrar specified in the notice delivered pursuant to
Section 4.01(c)(ii) and Section 9.01(b).
(c) Whenever, on the basis of proceeds from the Certificate
Insurance Policy, Curtailments, Payoffs and Monthly Payments on the
Mortgage Loans and Insurance Proceeds and Liquidation Proceeds received
and expected to be received during the Prior Period, the Master Servicer
has notified the Trustee that it believes that the entire remaining
unpaid Class Principal Balance of any Class of Certificates will become
distributable on the next Distribution Date, the Trustee shall, no later
<PAGE> 64
than the 18th day of the month of such Distribution Date (to the extent
the Trustee has received such notification no later than 5 Business Days
prior to such 18th day), mail or cause to be mailed to each Person in
whose name a Certificate to be so retired is registered at the close of
business on the Record Date and to the Rating Agencies and the
Certificate Insurer a notice to the effect that:
(i) it is expected that funds sufficient to make such final
distribution will be available in the Certificate Account on such
Distribution Date, and
(ii) if such funds are available, (A) such final distribution will be
payable on such Distribution Date, but only upon presentation and
surrender of such Certificate at the office or agency of the Certificate
Registrar maintained for such purpose (the address of which shall be set
forth in such notice), and (B) no interest shall accrue on such
Certificate after such Distribution Date.
Section 4.02. Advances by the Master Servicer; Distribution Reports to
the Trustee.
(a) To the extent described below, the Master Servicer is
obligated to advance its own funds to the Certificate Account to cover
any shortfall between (i) payments scheduled to be received in respect
of Mortgage Loans, and (ii) the amounts actually deposited in the
Certificate Account on account of such payments; provided that, with
respect to any Balloon Loan that is delinquent on its maturity date, the
Master Servicer will not be required to advance the related balloon
payment but will be required to continue to make advances in accordance
with this Section 4.02 with respect to such Balloon Loan in an amount
equal to one month's interest on the unpaid principal balance at the
applicable Pass-Through Rate for each Distribution Date. The Master
Servicer's obligation to make any advance or advances described in this
Section 4.02 is effective only to the extent that such advance is, in
the good faith judgment of the Master Servicer made on or before the
Business Day immediately following the Withdrawal Date, reimbursable
from Insurance Proceeds or Liquidation Proceeds of the related Mortgage
Loans or recoverable as late Monthly Payments with respect to the
related Mortgage Loans or otherwise.
Prior to the close of business on the Business Day immediately
following each Withdrawal Date, the Master Servicer shall determine
whether or not it will make a Monthly P&I Advance on the Business Day
prior to the next succeeding Distribution Date (in the event that the
applicable Servicer fails to make such advances) and shall furnish a
written statement to the Trustee, the Certificate Insurer, the Paying
Agent, if any, and to any Certificateholder requesting the same, setting
forth the aggregate amount to be distributed on the next succeeding
Distribution Date on account of principal and interest in respect of the
Mortgage Loans, stated separately. In the event that full scheduled
amounts of principal and interest in respect of the Mortgage Loans shall
not have been received by or on behalf of the Master Servicer prior to
such Determination Date and the Master Servicer shall have determined
<PAGE> 65
that a Monthly P&I Advance shall be made in accordance with this Section
4.02, the Master Servicer shall so specify and shall specify the
aggregate amount of such advance.
In the event that the Master Servicer shall be required to make a
Monthly P&I Advance, it shall on the Business Day prior to the related
Distribution Date either (i) deposit in the Certificate Account an
amount equal to such Monthly P&I Advance, (ii) make an appropriate entry
in the records of the Certificate Account that funds in such account
being held for future distribution or withdrawal have been, as permitted
by this Section 4.02, used by the Master Servicer to make such Monthly
P&I Advance, or (iii) make advances in the form of any combination of
(i) and (ii) aggregating the amount of such Monthly P&I Advance. Any
funds being held for future distribution to Certificateholders and so
used shall be replaced by the Master Servicer by deposit in the
Certificate Account on the Business Day immediately preceding any future
Distribution Date to the extent that funds in the Certificate Account on
such Distribution Date with respect to the Mortgage Loans shall be less
than payments to Certificateholders required to be made on such date
with respect to the Mortgage Loans. Under each Selling and Servicing
Contract, the Master Servicer is entitled to receive from the Custodial
Accounts for P&I established by the Servicers amounts received by the
applicable Servicers on particular Mortgage Loans as late payments of
principal and interest or as Liquidation or Insurance Proceeds and
respecting which the Master Servicer has made an unreimbursed advance of
principal and interest. The Master Servicer is also entitled to receive
other amounts from the related Custodial Accounts for P&I established by
the Servicers to reimburse itself for prior Nonrecoverable Advances
respecting Mortgage Loans serviced by such Servicers. The Master
Servicer shall deposit these amounts in the Investment Account prior to
withdrawal pursuant to Section 3.05.
In accordance with Section 3.05, Monthly P&I Advances are
reimbursable to the Master Servicer from cash in the Investment Account
or the Certificate Account to the extent that the Master Servicer shall
determine that any such advances previously made are Nonrecoverable
Advances pursuant to Section 4.03.
(b) Prior to noon New York City time two Business Days prior to
each Distribution Date, the Master Servicer shall provide the Trustee
and the Certificate Insurer with a statement regarding the amount of the
Deficiency Amount, if any, to be paid by the Certificate Insurer, the
amount of principal and interest, the Residual Distribution Amount and
the Excess Liquidation Proceeds to be distributed to each Class of
Certificates on such Distribution Date (such amounts to be determined in
accordance with the definitions of "REMIC I Distribution Amount," and
Section 4.01 hereof and other related definitions set forth in Article I
hereof).
Section 4.03. Nonrecoverable Advances. Any advance previously made by a
Servicer pursuant to its Selling and Servicing Contract with respect to
a Mortgage Loan or by the Master Servicer that the Master Servicer shall
<PAGE> 66
determine in its good faith judgment not to be ultimately recoverable
from Insurance Proceeds or Liquidation Proceeds or otherwise with
respect to such Mortgage Loan or recoverable as late Monthly Payments
with respect to such Mortgage Loan shall be a Nonrecoverable Advance.
The determination by the Master Servicer that it or the applicable
Servicer has made a Nonrecoverable Advance or that any advance would
constitute a Nonrecoverable Advance, shall be evidenced by an Officer's
Certificate of the Master Servicer delivered to the Trustee and the
Certificate Insurer on the Determination Date and detailing the reasons
for such determination. Notwithstanding any other provision of this
Agreement, any insurance policy relating to the Mortgage Loans, or any
other agreement relating to the Mortgage Loans to which the Company or
the Master Servicer is a party, (a) the Master Servicer and each
Servicer shall not be obligated to, and shall not, make any advance
that, after reasonable inquiry and in its sole discretion, the Master
Servicer or such Servicer shall determine would be a Nonrecoverable
Advance, and (b) the Master Servicer and each Servicer shall be entitled
to reimbursement for any advance as provided in Section 3.05(a)(i), (ii)
and (iv) of this Agreement.
Section 4.04. Statements to Certificateholders. With each distribution
from the Certificate Account on a Distribution Date, the Master Servicer
shall prepare and forward to the Trustee (and to the Company if the
Company is no longer acting as Master Servicer), and the Trustee shall
forward to each Certificateholder and the Certificate Insurer, a
statement setting forth, to the extent applicable: the amount of the
distribution payable to the applicable Class that represents principal
and the amount that represents interest, and the applicable Class
Principal Balance after giving effect to such distribution.
Upon request by any Certificateholder, the Certificate Insurer or
the Trustee, the Master Servicer shall forward to such
Certificateholder, the Trustee, the Certificate Insurer and the Company
(if the Company is no longer acting as Master Servicer) an additional
report which sets forth with respect to the Mortgage Loans:
(a) The number and aggregate Principal Balance of the
Mortgage Loans delinquent one, two and three months or more;
(b) The (i) number and aggregate Principal Balance of
Mortgage Loans with respect to which foreclosure proceedings have
been initiated, and (ii) the number and aggregate book value of
Mortgaged Properties acquired through foreclosure, deed in lieu of
foreclosure or other exercise of rights respecting the Trustee's
security interest in the Mortgage Loans;
(c) The amount of the Certificate Insurer Reimbursement
Amount as of the applicable Determination Date, the amount of any
Preference Amount and any Deficiency Amount with respect to the
Class A Certificates; and
(d) The amount of Realized Losses allocable to the
<PAGE> 67
Certificates on the related Distribution Date and the cumulative
amount of Realized Losses allocated to the Certificates since the
Cut-Off Date.
Upon request by any Certificateholder, the Master Servicer, as soon
as reasonably practicable, shall provide the requesting
Certificateholder with such information as is necessary and appropriate,
in the Master Servicer's sole discretion, for purposes of satisfying
applicable reporting requirements under Rule 144A of the Securities Act.
ARTICLE V
The Certificates
Section 5.01. The Certificates.
(a) The Certificates shall be substantially in the forms set forth
in Exhibit A with the additional insertion from Exhibit H attached
hereto, and shall be executed by the Trustee, authenticated by the
Trustee (or any duly appointed Authenticating Agent) and delivered upon
and pursuant to the order of the Company upon receipt by the Trustee of
the documents specified in Section 2.01. The Certificates shall be
issuable in Authorized Denominations evidencing Percentage Interests.
Certificates shall be executed by manual or facsimile signature on
behalf of the Trustee by authorized officers of the Trustee.
Certificates bearing the manual or facsimile signatures of individuals
who were at the time of execution the proper officers of the Trustee
shall bind the Trustee, notwithstanding that such individuals or any of
them have ceased to hold such offices prior to the authentication and
delivery of such Certificates or did not hold such offices at the date
of such Certificates. No Certificate shall be entitled to any benefit
under this Agreement, or be valid for any purpose, unless there appears
on such Certificate a certificate of authentication substantially in the
form provided for herein executed by the Trustee or any Authenticating
Agent by manual signature, and such certificate upon any Certificate
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 following definitions apply for purposes of this Section
5.01: "Disqualified Organization" means any Person which is not a
Permitted Transferee, but does not include any "Pass-Through Entity"
which owns or holds the Residual Certificate and of which a Disqualified
Organization, directly or indirectly, may be a stockholder, partner or
beneficiary; "Pass-Through Entity" means any regulated investment
company, real estate investment trust, common trust fund, partnership,
trust or estate, and any organization to which Section 1381 of the Code
applies; "Ownership Interest" means, with respect to the Residual
Certificate, any ownership or security interest in the Residual
Certificate, including any interest in the Residual Certificate as the
<PAGE> 68
Holder thereof and any other interest therein whether direct or
indirect, legal or beneficial, as owner or as pledgee; "Transfer" means
any direct or indirect transfer or sale of, or directly or indirectly
transferring or selling any Ownership Interest in the Residual
Certificate; and "Transferee" means any Person who is acquiring by
Transfer any Ownership Interest in the Residual Certificate.
(c) Restrictions on Transfers of the Residual Certificate to
Disqualified Organizations are set forth in this Section 5.01(c).
(i) Each Person who has or who acquires any Ownership Interest in the
Residual Certificate shall be deemed by the acceptance or acquisition of
such Ownership Interest to have agreed to be bound by the following
provisions and to have irrevocably authorized the Trustee or its
designee under clause (iii)(A) below to deliver payments to a Person
other than such Person and to negotiate the terms of any mandatory sale
under clause (iii)(B) below and to execute all instruments of transfer
and to do all other things necessary in connection with any such sale.
The rights of each Person acquiring any Ownership Interest in the
Residual Certificate are expressly subject to the following provisions:
(A) Each Person holding or acquiring any Ownership
Interest in the Residual Certificate shall be a Permitted
Transferee and shall promptly notify the Trustee of any change
or impending change in its status as a Permitted Transferee.
(B) In connection with any proposed Transfer of any
Ownership Interest in the Residual Certificate to a U.S.
Person, the Trustee shall require delivery to it, and shall
not register the Transfer of the Residual Certificate until
its receipt of (1) an affidavit and agreement (a "Transferee
Affidavit and Agreement") attached hereto as Exhibit J from
the proposed Transferee, in form and substance satisfactory to
the Company, representing and warranting, among other things,
that it is not a Non-U.S. Person, that such transferee is a
Permitted Transferee, that it is not acquiring its Ownership
Interest in the Residual Certificate that is the subject of
the proposed Transfer as a nominee, trustee or agent for any
Person who is not a Permitted Transferee, that for so long as
it retains its Ownership Interest in the Residual Certificate,
it will endeavor to remain a Permitted Transferee, and that it
has reviewed the provisions of this Section 5.01(c) and agrees
to be bound by them, and (2) a certificate, attached hereto as
Exhibit I, from the Holder wishing to transfer the Residual
Certificate, in form and substance satisfactory to the
Company, representing and warranting, among other things, that
no purpose of the proposed Transfer is to allow such Holder to
impede the assessment or collection of tax.
(C) Notwithstanding the delivery of a Transferee
Affidavit and Agreement by a proposed Transferee under clause
(B) above, if the Trustee has actual knowledge that the
<PAGE> 69
proposed Transferee is not a Permitted Transferee, no Transfer
of an Ownership Interest in the Residual Certificate to such
proposed Transferee shall be effected.
(D) Each Person holding or acquiring any Ownership
Interest in the Residual Certificate agrees by holding or
acquiring such Ownership Interest (i) to require a Transferee
Affidavit and Agreement from any other Person to whom such
Person attempts to transfer its Ownership Interest and to
provide a certificate to the Trustee in the form attached
hereto as Exhibit J; (ii) to obtain the express written
consent of the Company prior to any transfer of such Ownership
Interest, which consent may be withheld in the Company's sole
discretion; and (iii) to provide a certificate to the Trustee
in the form attached hereto as Exhibit I.
(ii) The Trustee shall register the Transfer of the Residual Certifi-
cate only if it shall have received the Transferee Affidavit and Agreement,
a certificate of the Holder requesting such transfer in the form attached
hereto as Exhibit J and all of such other documents as shall have been
reasonably required by the Trustee as a condition to such registration.
(iii) (A) If any "disqualified organization" (as defined in
Section 860E(e)(5) of the Code) shall become a holder of the Residual
Certificate, then the last preceding Permitted Transferee shall be
restored, to the extent permitted by law, to all rights and obligations
as Holder thereof retroactive to the date of registration of such
Transfer of the Residual Certificate. If any Non-U.S. Person shall
become a holder of the Residual Certificate, then the last preceding
holder which is a U.S. Person shall be restored, to the extent permitted
by law, to all rights and obligations as Holder thereof retroactive to
the date of registration of the Transfer to such Non-U.S. Person of the
Residual Certificate. If a transfer of the Residual Certificate is
disregarded pursuant to the provisions of Treasury Regulations Section
1.860E-1 or Section 1.860G-3, then the last preceding Permitted
Transferee shall be restored, to the extent permitted by law, to all
rights and obligations as Holder thereof retroactive to the date of
registration of such Transfer of the Residual Certificate. The Trustee
shall be under no liability to any Person for any registration of
Transfer of the Residual Certificate that is in fact not permitted by
this Section 5.01(c) 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
the Residual Certificate in violation of the restrictions in
this Section 5.01(c) and to the extent that the retroactive
restoration of the rights of the Holder of the Residual
Certificate as described in clause (iii)(A) above shall be
invalid, illegal or unenforceable, then the Company shall have
the right, without notice to the Holder or any prior Holder of
the Residual Certificate, to sell the Residual Certificate to
<PAGE> 70
a purchaser selected by the Company on such terms as the
Company may choose. Such purported Transferee shall promptly
endorse and deliver each Residual Certificate in accordance
with the instructions of the Company. Such purchaser may be
the Company itself or any affiliate of the Company. The
proceeds of such sale, net of the commissions (which may
include commissions payable to the Company or its affiliates),
expenses and taxes due, if any, shall be remitted by the
Company 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 Company, and the Company shall not
be liable to any Person having an Ownership Interest in the
Residual Certificate as a result of its exercise of such
discretion.
(iv) The Company, on behalf of the Trustee, shall make available, upon
written request from the Trustee, all information necessary to compute
any tax imposed (A) as a result of the Transfer of an Ownership Interest
in the Residual Certificate to any Person who is not a Permitted
Transferee, including the information regarding "excess inclusions" of
the Residual Certificate required to be provided to the Internal Revenue
Service and certain Persons as described in Treasury Regulation Section
1.860D-1(b)(5), and (B) as a result of any regulated investment company,
real estate investment trust, common trust fund, partnership, trust,
estate or organizations described in Section 1381 of the Code having as
among its record holders at any time any Person who is not a Permitted
Transferee. Reasonable compensation for providing such information may
be required by the Company from such Person.
(v) The provisions of this Section 5.01 set forth prior to this Section
(v) may be modified, added to or eliminated by the Company and the
Trustee, provided that there shall have been delivered to the Trustee
the following:
(A) written notification from each of the Rating
Agencies to the effect that the modification, addition to or
elimination of such provisions will not cause such Rating
Agency to downgrade its then-current Ratings of the
Certificates (determined in the case of the Class A
Certificates without regard to the effect of the Certificate
Insurance Policy); and
(B) an Opinion of Counsel, in form and substance
satisfactory to the Company and the Certificate Insurer (as
evidenced by a certificate of the Company and the Certificate
Insurer), to the effect that such modification, addition to or
absence of such provisions will not cause REMIC I, to cease to
qualify as a REMIC and will not create a risk that (1) REMIC I
may be subject to an entity-level tax caused by the Transfer
of the Residual Certificate to a Person which is not a
Permitted Transferee or (2) a Certificateholder or another
Person will be subject to a REMIC-related tax caused by the
Transfer of the Residual Certificate to a Person which is not
<PAGE> 71
a Permitted Transferee.
(vi) The following legend shall appear on the Residual Certificate:
ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CERTIFICATE MAY
BE MADE ONLY IF THE PROPOSED TRANSFEREE PROVIDES A TRANSFER
AFFIDAVIT TO THE COMPANY AND THE TRUSTEE THAT (1) SUCH TRANSFEREE
IS NOT EITHER (A) THE UNITED STATES, ANY STATE OR POLITICAL
SUBDIVISION THEREOF, ANY FOREIGN GOVERNMENT, ANY INTERNATIONAL
ORGANIZATION, OR ANY AGENCY OR INSTRUMENTALITY OF ANY OF THE
FOREGOING, (B) ANY ORGANIZATION (OTHER THAN A COOPERATIVE DESCRIBED
IN SECTION 521 OF THE CODE) WHICH IS EXEMPT FROM THE TAX IMPOSED BY
CHAPTER 1 OF THE CODE UNLESS SUCH ORGANIZATION IS SUBJECT TO THE
TAX IMPOSED BY SECTION 511 OF THE CODE, (C) ANY ORGANIZATION
DESCRIBED IN SECTION 1381(a)(2)(C) OF THE CODE (ANY SUCH PERSON
DESCRIBED IN THE FOREGOING CLAUSES (A), (B), OR (C) BEING
HEREINAFTER REFERRED TO AS A "DISQUALIFIED ORGANIZATION"), OR (D)
AN AGENT OF A DISQUALIFIED ORGANIZATION AND (2) NO PURPOSE OF SUCH
TRANSFER IS TO ENABLE THE TRANSFEROR TO IMPEDE THE ASSESSMENT OR
COLLECTION OF TAX. SUCH AFFIDAVIT SHALL INCLUDE CERTAIN
REPRESENTATIONS AS TO THE FINANCIAL CONDITION OF THE PROPOSED
TRANSFEREE. NOTWITHSTANDING THE REGISTRATION IN THE CERTIFICATE
REGISTER OF ANY TRANSFER, SALE OR OTHER DISPOSITION OF THIS CLASS R
CERTIFICATE TO A DISQUALIFIED ORGANIZATION OR AN AGENT OF A
DISQUALIFIED ORGANIZATION, SUCH REGISTRATION SHALL BE DEEMED TO BE
OF NO LEGAL FORCE OR EFFECT WHATSOEVER AND SUCH PERSON SHALL NOT BE
DEEMED TO BE A CERTIFICATEHOLDER FOR ANY PURPOSE HEREUNDER,
INCLUDING, BUT NOT LIMITED TO, THE RECEIPT OF DISTRIBUTIONS ON THIS
CERTIFICATE. EACH HOLDER OF THE CLASS R CERTIFICATE BY ACCEPTANCE
OF THIS CERTIFICATE SHALL BE DEEMED TO HAVE CONSENTED TO THE
PROVISIONS OF THIS PARAGRAPH.
(vii) The Tax Matters Person for REMIC I, while not a Disqualified
Organization, shall be the tax matters person for REMIC I within the
meaning of Section 6231(a)(7) of the Code and Treasury Regulation
Section 1.860F-4(d).
(d) In the case of any Class B or Residual Certificate presented
for registration in the name of any Person, the Trustee shall require
either (i) an Opinion of Counsel acceptable to and in form and substance
satisfactory to the Trustee, the Certificate Insurer and the Company to
the effect that the purchase or holding of a Class B or Residual
Certificate is permissible under applicable law, will not constitute or
result in a non-exempt prohibited transaction under Section 406 of ERISA
or Section 4975 of the Code, and will not subject the Trustee, the
Master Servicer or the Company to any obligation or liability (including
obligations or liabilities under Section 406 of 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 Trustee, the Master
Servicer or the Company or (ii) only in the case of a Class B
Certificate, an officer's certificate substantially in the form of
Exhibit N attached hereto acceptable to and in form and substance
<PAGE> 72
satisfactory to the Trustee and the Company, which officer's certificate
shall not be an expense of the Trustee, the Master Servicer or the
Company.
(e) No transfer, sale, pledge or other disposition of a Class B or
Class R Certificate shall be made unless such transfer, sale, pledge or
other disposition is made in accordance with this Section 5.01(e) or
Section 5.01(f). Each Person who, at any time, acquires any ownership
interest in any Class B or Class R Certificate shall be deemed by the
acceptance or acquisition of such ownership interest to have agreed to
be bound by the following provisions of this Section 5.01(e) and Section
5.01(f), as applicable. No transfer of a Class B or Class R Certificate
shall be deemed to be made in accordance with this Section 5.01(e)
unless such transfer is made pursuant to an effective registration
statement under the Securities Act or unless the Trustee is provided
with the certificates and an Opinion of Counsel, if required, on which
the Trustee may conclusively rely, which establishes or establish to the
Trustee's satisfaction that such transfer is exempt from the
registration requirements under the Securities Act, as follows: In the
event that a transfer is to be made in reliance upon an exemption from
the Securities Act, the Trustee shall require, in order to assure
compliance with the Securities Act, that the Certificateholder desiring
to effect such transfer certify to the Trustee in writing, in
substantially the form attached hereto as Exhibit F, the facts
surrounding the transfer, with such modifications to such Exhibit F as
may be appropriate to reflect the actual facts of the proposed transfer,
and that the Certificateholder's proposed transferee certify to the
Trustee in writing, in substantially the form attached hereto as Exhibit
G, the facts surrounding the transfer, with such modifications to such
Exhibit G as may be appropriate to reflect the actual facts of the
proposed transfer. If such certificate of the proposed transferee does
not contain substantially the substance of Exhibit G, the Trustee shall
require an Opinion of Counsel satisfactory to it that such transfer may
be made without registration, which Opinion of Counsel shall not be
obtained at the expense of the Trustee, the Trust Fund or the Company.
Such Opinion of Counsel shall allow for the forwarding, and the Trustee
shall forward, a copy thereof to the Rating Agencies. Notwithstanding
the foregoing, any Class B or Class R Certificate may be transferred,
sold, pledged or otherwise disposed of in accordance with the
requirements set forth in Section 5.01(f).
(f) To effectuate a Certificate transfer of a Class B or Class R
Certificate in accordance with this Section 5.01(f), the proposed
transferee of such Certificate must provide the Trustee and the Company
with an investment letter substantially in the form of Exhibit L
attached hereto, which investment letter shall not be an expense of the
Trustee or the Company, and which investment letter states that, among
other things, such transferee (i) is a "qualified institutional buyer"
as defined under Rule 144A, acting for its own account or the accounts
of other "qualified institutional buyers" as defined under Rule 144A,
and (ii) is aware that the proposed transferor intends to rely on the
exemption from registration requirements under the Securities Act
<PAGE> 73
provided by Rule 144A. Notwithstanding the foregoing, the proposed
transferee of such Certificate shall not be required to provide the
Trustee or the Company with Annex 1 or Annex 2 to the form of Exhibit L
attached hereto if the Company so consents prior to each such transfer.
Such transfers shall be deemed to have complied with the requirements of
this Section 5.01(f). The Holder of a Certificate desiring to effect
such transfer does hereby agree to indemnify the Trustee, the Company,
and the Certificate Registrar against any liability that may result if
transfer is not made in accordance with this Agreement.
Section 5.02. Certificates Issuable in Classes; Distributions of
Principal and Interest; Authorized Denominations. The aggregate
principal amount of the Certificates that may be authenticated and
delivered under this Agreement is limited to the aggregate Principal
Balance of the Mortgage Loans as of the Cut-Off Date, as specified in
the Preliminary Statement to this Agreement, except for Certificates
authenticated and delivered upon registration of transfer of, or in
exchange for, or in lieu of, other Certificates pursuant to Section
5.03. Such aggregate principal amount shall be allocated among one or
more Classes having designations, types of interests, initial per annum
Certificate Interest Rates, initial Class Principal Balances and Last
Scheduled Distribution Dates as specified in the Preliminary Statement
to this Agreement. Certificates shall be issued in Authorized
Denominations.
Section 5.03. Registration of Transfer and Exchange of Certificates.
The Trustee shall cause to be maintained at one of its offices or at its
designated agent, a Certificate Register in which there shall be
recorded the name and address of each Certificateholder. Subject to such
reasonable rules and regulations as the Trustee may prescribe, the
Certificate Register shall be amended from time to time by the Trustee
or its agent to reflect notice of any changes received by the Trustee or
its agent pursuant to Section 10.06. The Trustee hereby appoints itself
as the initial Certificate Registrar.
Upon surrender for registration of transfer of any Certificate to
the Trustee at the office of Bankers Trust Company of California, N.A.
maintained at 123 Washington Street, New York, New York 10006,
Attention: Corporate Trust Window, or such other address or agency as
may hereafter be provided to the Master Servicer in writing by the
Trustee, the Trustee shall execute, and the Trustee or any
Authenticating Agent shall authenticate and deliver, in the name of the
designated transferee or transferees, one or more new Certificates of
Authorized Denominations of like Percentage Interest. At the option of
the Certificateholders, Certificates may be exchanged for other
Certificates in Authorized Denominations of like Percentage Interest,
upon surrender of the Certificates to be exchanged at any such office or
agency. Whenever any Certificates are so surrendered for exchange, the
Trustee shall execute, and the Trustee, or any Authenticating Agent,
shall authenticate and deliver, the Certificates which the
Certificateholder making the exchange is entitled to receive. Every
Certificate presented or surrendered for transfer shall (if so required
<PAGE> 74
by the Trustee or any Authenticating Agent) be duly endorsed by, or be
accompanied by a written instrument of transfer in form satisfactory to
the Trustee or any Authenticating Agent and duly executed by, the Holder
thereof or such Holder's attorney duly authorized in writing.
A reasonable service charge may be made for any such exchange or
transfer of Certificates, and the Trustee may require payment of a sum
sufficient to cover any tax or governmental charge that may be imposed
in connection with any exchange or transfer of Certificates.
All Certificates surrendered for exchange or transfer shall be
cancelled by the Trustee or any Authenticating Agent.
Section 5.04. Mutilated, Destroyed, Lost or Stolen Certificates. If (i)
any mutilated Certificate is surrendered to the Trustee or any
Authenticating Agent, or (ii) the Trustee or any Authenticating Agent
receives evidence to their satisfaction of the destruction, loss or
theft of any Certificate, and there is delivered to the Trustee or any
Authenticating Agent and the Certificate Insurer (in the case of a Class
A Certificate) such security or indemnity as may be required by them to
save each of them harmless, then, in the absence of notice to the
Trustee or any Authenticating Agent that such Certificate has been
acquired by a bona fide purchaser, the Trustee shall execute and the
Trustee or any Authenticating Agent shall authenticate and deliver, in
exchange for or in lieu of any such mutilated, destroyed, lost or stolen
Certificate, a new Certificate of like Percentage Interest. Upon the
issuance of any new Certificate under this Section 5.04, the Trustee or
any Authenticating Agent 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 or any Authenticating Agent) connected therewith. Any
replacement Certificate issued pursuant to this Section 5.04 shall
constitute complete and indefeasible evidence of ownership in the Trust
Fund as if originally issued, whether or not the lost or stolen
Certificate shall be found at any time.
Section 5.05. Persons Deemed Owners. The Company, the Master Servicer,
the Certificate Insurer, the Trustee and any agent of any of them may
treat the Person in whose name any Certificate is registered as the
owner of such Certificate for the purpose of receiving distributions
pursuant to Section 4.01 and for all other purposes whatsoever, and
neither the Company, the Master Servicer, the Certificate Insurer, the
Trustee, the Certificate Registrar nor any agent of the Company, the
Master Servicer or the Trustee shall be affected by notice to the
contrary.
Section 5.06. Temporary Certificates. Upon the initial issuance of the
Certificates, the Trustee may execute, and the Trustee or any
Authenticating Agent shall authenticate and deliver, temporary
Certificates which are printed, lithographed, typewritten or otherwise
produced, in any Authorized Denomination, of the tenor of the definitive
Certificates in lieu of which they are issued and with such variations
<PAGE> 75
in form from the forms of the Certificates set forth as Exhibit A and H
hereto as the Trustee's officers executing such Certificates may
determine, as evidenced by their execution of the Certificates.
Notwithstanding the foregoing, the Certificates may remain in the form
of temporary Certificates.
If temporary Certificates are issued, the Trustee shall cause
definitive Certificates to be prepared within ten Business Days of the
Closing Date or as soon as practicable thereafter. After preparation of
definitive Certificates, the temporary Certificates shall be
exchangeable for definitive Certificates upon surrender of the temporary
Certificates at the office or agency of the Trustee to be maintained as
provided in Section 5.10 hereof, without charge to the holder. Any tax
or governmental charge that may be imposed in connection with any such
exchange shall be borne by the Master Servicer. Upon surrender for
cancellation of any one or more temporary Certificates, the Trustee
shall execute and the Trustee or any Authenticating Agent shall
authenticate and deliver in exchange therefor a like principal amount of
definitive Certificates of Authorized Denominations. Until so exchanged,
the temporary Certificates shall in all respects be entitled to the same
benefits under this Agreement as definitive Certificates.
Section 5.07. Book-Entry for Book-Entry Certificates. Notwithstanding
the foregoing, the Book-Entry Certificates, upon original issuance,
shall be issued in the form of one or more typewritten Certificates of
Authorized Denomination representing the Book-Entry Certificates, to be
delivered to DTC, the initial Clearing Agency, by, or on behalf of, the
Company. The Book-Entry Certificates shall initially be registered on
the Certificate Register in the name of Cede & Co., the nominee of DTC,
as the initial Clearing Agency, and no Beneficial Holder shall receive a
definitive certificate representing such Beneficial Holder's interest in
any Class of Book-Entry Certificate, except as provided above and in
Section 5.09. Each Book-Entry Certificate shall bear the following
legend:
Unless this Certificate is presented by an authorized
representative of The Depository Trust Company, a New York
corporation ("DTC"), to the Company or its agent for
registration of transfer, exchange, or payment, and any
Certificate issued is registered in the name of Cede & Co. or
such other name as is requested by an authorized
representative of DTC (and any payment is made to Cede & Co.
or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
inasmuch as the registered owner hereof, Cede & Co., has an
interest herein.
Unless and until definitive, fully registered Book-Entry Certificates
(the "Definitive Certificates") have been issued to the Beneficial
Holders pursuant to Section 5.09:
<PAGE> 76
(a) the provisions of this Section 5.07 shall be in full
force and effect with respect to the Book-Entry Certificates;
(b) the Master Servicer and the Trustee may deal with the
Clearing Agency for all purposes with respect to the Book-Entry
Certificates (including the making of distributions on the Book-
Entry Certificates) as the sole Certificateholder;
(c) to the extent that the provisions of this Section 5.07
conflict with any other provisions of this Agreement, the
provisions of this Section 5.07 shall control; and
(d) the rights of the Beneficial Holders shall be exercised
only through the Clearing Agency and the DTC Participants and shall
be limited to those established by law and agreements between such
Beneficial Holders and the Clearing Agency and/or the DTC
Participants. Pursuant to the Depositary Agreement, unless and
until Definitive Certificates are issued pursuant to Section 5.09,
the initial Clearing Agency will make book-entry transfers among
the DTC Participants and receive and transmit distributions of
principal and interest on the related Class of Book-Entry
Certificates to such DTC Participants.
For purposes of any provision of this Agreement requiring or
permitting actions with the consent of, or at the direction of, Holders
of Book-Entry Certificates evidencing a specified Percentage Interest,
such direction or consent may be given by the Clearing Agency at the
direction of Beneficial Holders owning Book-Entry Certificates
evidencing the requisite Percentage Interest represented by the Book-
Entry Certificates. The Clearing Agency may take conflicting actions
with respect to the Book-Entry Certificates to the extent that such
actions are taken on behalf of the Beneficial Holders.
Section 5.08. Notices to Clearing Agency. Whenever notice or other
communication to the Certificateholders is required under this
Agreement, unless and until Definitive Certificates shall have been
issued to the related Certificateholders pursuant to Section 5.09, the
Trustee shall give all such notices and communications specified herein
to be given to Holders of the Book-Entry Certificates to the Clearing
Agency which shall give such notices and communications to the related
DTC Participants in accordance with its applicable rules, regulations
and procedures.
Section 5.09. Definitive Certificates. If (a) the Master Servicer
notifies the Trustee in writing that the Clearing Agency is no longer
willing or able to discharge properly its responsibilities under the
Depositary Agreement with respect to the Book-Entry Certificates and the
Trustee or the Master Servicer is unable to locate a qualified
successor, (b) the Master Servicer, at its option, advises the Trustee
in writing that it elects to terminate the book-entry system with
respect to the Book-Entry Certificates through the Clearing Agency or
(c) after the occurrence of an Event of Default, Certificateholders
<PAGE> 77
holding Book-Entry Certificates evidencing Percentage Interests
aggregating not less than 66% of the aggregate Class Principal Balance
of such Certificates advise the Trustee and the Clearing Agency through
DTC Participants in writing that the continuation of a book-entry system
with respect to the Book-Entry Certificates through the Clearing Agency
is no longer in the best interests of the Certificateholders with
respect to such Certificates, the Trustee shall notify all
Certificateholders of Book-Entry Certificates and the Certificate
Insurer of the occurrence of any such event and of the availability of
Definitive Certificates. Upon surrender to the Trustee of the Book-Entry
Certificates by the Clearing Agency, accompanied by registration
instructions from the Clearing Agency for registration, the Trustee
shall execute and the Trustee or any Authenticating Agent shall
authenticate and deliver the Definitive Certificates. Neither the
Company, the Master Servicer nor the Trustee shall be liable for any
delay in delivery of such instructions and may conclusively rely on, and
shall be protected in relying on, such instructions. Upon the issuance
of Definitive Certificates for all of the Certificates all references
herein to obligations imposed upon or to be performed by the Clearing
Agency shall be deemed to be imposed upon and performed by the Trustee,
to the extent applicable with respect to such Definitive Certificates,
and the Trustee shall recognize the Holders of Definitive Certificates
as Certificateholders hereunder.
Section 5.10. Office for Transfer of Certificates. The Trustee shall
maintain an office or agency where Certificates may be surrendered for
registration of transfer or exchange. The Trustee's offices maintained
at 123 Washington Street, New York, New York 10006, Attention: Corporate
Trust Window is initially designated for said purposes.
ARTICLE VI
The Company and the Master Servicer
Section 6.01. Liability of the Company and the Master Servicer. The
Company and the Master Servicer shall be liable in accordance herewith
only to the extent of the obligations specifically imposed upon and
undertaken by the Company or the Master Servicer, as applicable, herein.
Section 6.02. Merger or Consolidation of the Company, or the Master
Servicer. Any corporation into which the Company or the Master Servicer
may be merged or consolidated, or any corporation resulting from any
merger, conversion or consolidation to which the Company or the Master
Servicer shall be a party, or any corporation succeeding to the business
of the Company or the Master Servicer, shall be the successor of the
Company or the Master Servicer hereunder, without the execution or
filing of any paper or any further act on the part of any of the parties
hereto, anything herein to the contrary notwithstanding.
Section 6.03. Limitation on Liability of the Company, the Master
Servicer and Others. Neither the Company nor the Master Servicer nor any
of the directors, officers, employees or agents of the Company or the
<PAGE> 78
Master Servicer shall be under any liability to the Trust Fund or the
Certificateholders for any action taken by such Person or by a Servicer
or for such Person's or Servicer's 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
Company, the Master Servicer or any such Person 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 duties and obligations hereunder. The Company, the
Master Servicer and any director, officer, employee or agent of the
Company or the Master Servicer may rely in good faith on any document of
any kind properly executed and submitted by any Person respecting any
matters arising hereunder. The Company, the Master Servicer and any
director, officer, employee or agent of the Company or the Master
Servicer shall be indemnified by the Trust Fund and held harmless
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 Mortgage Loan (other than
as otherwise permitted in this Agreement) or 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. The Company and the Master Servicer shall not be under
any obligation to appear in, prosecute or defend any legal action which
is not incidental to its duties to service the Mortgage Loans in
accordance with this Agreement and which in its opinion may involve it
in any expense or liability; provided, however, that the Company or the
Master Servicer may in its discretion undertake any such action which it
may deem necessary or desirable with respect to the Mortgage Loans, this
Agreement, the Certificates or the rights and duties of the parties
hereto and the interests of the Certificateholders hereunder. In such
event, the legal expenses and costs of such action and any liability
resulting therefrom shall be expenses, costs and liabilities of the
Trust Fund and the Company and the Master Servicer shall be entitled to
be reimbursed therefor out of the Certificate Account, as provided by
Section 3.05.
Section 6.04. The Company and the Master Servicer not to Resign. The
Company shall not resign from the obligations and duties (including,
without limitation, its obligations and duties as initial Master
Servicer) hereby imposed on it except upon determination that its duties
hereunder are no longer permissible under applicable law. Any successor
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
permitting the resignation of the Company or any successor Master
Servicer shall be evidenced by an Opinion of Counsel to such effect
delivered to the Trustee and the Certificate Insurer. No such
resignation shall become effective until the Trustee or a successor
Master Servicer shall have assumed the Master Servicer's
responsibilities and obligations in accordance with Section 7.02 hereof.
If the Company is no longer acting as Master Servicer, then the
<PAGE> 79
successor Master Servicer shall give prompt written notice to the
Company of any information received by such successor Master Servicer
which affects or relates to an ongoing obligation or right of the
Company under this Agreement.
Section 6.05. Trustee Access. The Master Servicer shall afford the
Company, the Certificate Insurer and the Trustee, upon reasonable
notice, during normal business hours access to all records maintained by
the Master Servicer, in respect of its rights and obligations hereunder
and access to such of its officers as are responsible for such
obligations. Upon reasonable request, the Master Servicer, shall
furnish the Company, the Certificate Insurer and the Trustee with its
most recent financial statements (or, for so long as the Company is the
Master Servicer, the most recent consolidated financial statements for
the Company appearing in the audited financial statements of PNC Bank
Corp., or the entity with whose financial statements the financial
statements of the Company are consolidated) and such other information
as it possesses, and which it is not prohibited by law or, to the extent
applicable, binding obligations to third parties with respect to
confidentiality from disclosing, regarding its business, affairs,
property and condition, financial or otherwise.
ARTICLE VII
Default
Section 7.01. Events of Default. (a) In case one or more of the
following Events of Default by the Master Servicer or by a successor
Master Servicer shall occur and be continuing, that is to say:
(i) Any failure by the Master Servicer to deposit into the Certifi-
cate Account any payment required to be deposited therein by the Master
Servicer under the terms of this Agreement which continues unremedied
for a period of ten days 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 Trustee or to the Master Servicer and the
Trustee by the Certificate Insurer or the Holders of Certificates
evidencing Percentage Interests aggregating not less than 25% of the
Trust Fund; or
(ii) Failure on the part of the Master Servicer duly to observe or
perform in any material respect any other of the covenants or agreements
on the part of the Master Servicer contained in the Certificates or in
this Agreement which continues unremedied for a period of 60 days after
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
Trustee, or to the Master Servicer and the Trustee by the Certificate
Insurer or the Holders of Certificates evidencing Percentage Interests
aggregating not less than 25% of the Trust Fund; or
(iii) A decree or order of a court or agency or supervisory
authority having jurisdiction in the premises for the appointment of a
trustee in bankruptcy, conservator or receiver or liquidator in any
<PAGE> 80
bankruptcy, insolvency, readjustment of debt, marshalling of assets and
liabilities or similar proceedings, or for the winding-up or liquidation
of its affairs, shall have been entered against the Master Servicer and
such decree or order shall have remained in force undischarged or
unstayed for a period of 60 days; or
(iv) The Master Servicer shall consent to the appointment of a trustee
in bankruptcy, conservator or receiver or liquidator in any bankruptcy,
insolvency, readjustment of debt, marshalling of assets and liabilities
or similar proceedings of or relating to the Master Servicer 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 bankruptcy, insolvency or reorganization statute, make an
assignment for the benefit of its creditors, or voluntarily suspend
payment of its obligations; or
(vi) Any failure of the Master Servicer to make any Monthly P&I Advance
(other than a Nonrecoverable Advance) which continues unremedied at the
opening of business on the Distribution Date in respect of which such
Monthly P&I Advance was to have been made;
then, and in each and every such case, so long as an Event of Default
shall not have been remedied, either the Trustee, the Certificate
Insurer or the Holders of Certificates evidencing Percentage Interests
aggregating not less than 25% of the Trust Fund, by notice in writing to
the Company and the Master Servicer (and to the Trustee if given by the
Certificateholders, in which case such notice shall set forth evidence
reasonably satisfactory to the Trustee that such Event of Default has
occurred and shall not have been remedied) may terminate all of the
rights (other than its right to reimbursement for advances) and
obligations of the Master Servicer, including its right to the Master
Servicing Fee, under this Agreement and in and to the Mortgage Loans and
the proceeds thereof, if any. Such determination shall be final and
binding. 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 or the Mortgage
Loans or otherwise, shall pass to and be vested in the Trustee pursuant
to and under this Section 7.01; and, without limitation, the Trustee is
hereby authorized and empowered to execute and deliver, on behalf of the
Master Servicer, as attorney-in-fact or otherwise, 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 to cooperate with the Trustee in effecting
the termination of the Master Servicer's responsibilities and rights
hereunder, including, without limitation, the transfer to the Trustee
for administration by it of all cash amounts which shall at the time be
credited by the Master Servicer to the Certificate Account or thereafter
be received with respect to the Mortgage Loans.
Notwithstanding the foregoing, if an Event of Default described in
clause (vi) of this Section 7.01(a) shall occur, the Trustee shall, by
notice in writing to the Master Servicer, which may be delivered by
<PAGE> 81
telecopy, immediately suspend all of the rights and obligations of the
Master Servicer thereafter arising under this Agreement, but without
prejudice to any rights it may have as a Certificateholder or to
reimbursement of Monthly P&I Advances and other advances of its own
funds, and the Trustee shall act as provided in Section 7.02 to carry
out the duties of the Master Servicer, including the obligation to make
any Monthly P&I Advance the nonpayment of which was an Event of Default
described in clause (vi) of this Section 7.01(a). Any such action taken
by the Trustee must be prior to the distribution on the relevant
Distribution Date. If the Master Servicer shall within two Business Days
following such suspension remit to the Trustee the amount of any Monthly
P&I Advance the nonpayment of which by the Master Servicer was an Event
of Default described in clause (vi) of this Section 7.01(a), the
Trustee, subject to the last sentence of this paragraph, shall permit
the Master Servicer to resume its rights and obligations as Master
Servicer hereunder. The Master Servicer agrees that it will reimburse
the Trustee for actual, necessary and reasonable costs incurred by the
Trustee because of action taken pursuant to clause (vi) of this Section
7.01(a). The Master Servicer agrees that if an Event of Default as
described in clause (vi) of this Section 7.01(a) shall occur more than
two times in any twelve month period, the Trustee shall be under no
obligation to permit the Master Servicer to resume its rights and
obligations as Master Servicer hereunder.
(b) In case one or more of the following Events of Default by the
Company shall occur and be continuing, that is to say:
(i) Failure on the part of the Company duly to observe or perform in
any material respect any of the covenants or agreements on the part of
the Company contained in the Certificates or in this Agreement which
continues unremedied for a period of 60 days after the date on which
written notice of such failure, requiring the same to be remedied, shall
have been given to the Company by the Trustee, or to the Company and the
Trustee by the Certificate Insurer or the Holders of Certificates
evidencing Percentage Interests aggregating not less than 25% of the
Trust Fund; or
(ii) A decree or order of a court or agency or supervisory authority
having jurisdiction in the premises for the appointment of a trustee in
bankruptcy, conservator or receiver or liquidator in any bankruptcy,
insolvency, readjustment of debt, marshalling of assets and liabilities
or similar proceedings, or for the winding-up or liquidation of its
affairs, shall have been entered against the Company and such decree or
order shall have remained in force undischarged or unstayed for a period
of 60 days; or
(iii) The Company shall consent to the appointment of a trustee in
bankruptcy, conservator or receiver or liquidator in any bankruptcy,
insolvency, readjustment of debt, marshalling of assets and liabilities
or similar proceedings of or relating to the Company or of or relating
to all or substantially all of its property; or
(iv) The Company shall admit in writing its inability to pay its debts
<PAGE> 82
generally as they become due, file a petition to take advantage of any
applicable bankruptcy, insolvency or reorganization statute, make an
assignment for the benefit of creditors, or voluntarily suspend payment
of its obligations;
then, and in each and every such case, so long as such Event of Default
shall not have been remedied, the Certificate Insurer or the Holders of
Certificates evidencing Percentage Interests aggregating not less than
25% of the Trust Fund, by notice in writing to the Company and the
Trustee, may direct the Trustee in accordance with Section 10.03 to
institute an action, suit or proceeding in its own name as Trustee
hereunder to enforce the Company's obligations hereunder.
(c) In any circumstances in which this Agreement states that
Certificateholders owning Certificates evidencing a certain percentage
Percentage Interest in the Trust Fund may take certain action, such
action shall be taken by the Trustee, but only if the requisite
percentage of Certificateholders required under this Agreement for
taking like action or giving like instruction to the Trustee under this
Agreement shall have so directed the Trustee in writing.
Section 7.02. Trustee to Act; Appointment of Successor. On and after
the time the Master Servicer receives a notice of termination pursuant
to Section 7.01, the Trustee shall be the successor in all respects to
the Master Servicer under this Agreement and under the Selling and
Servicing Contracts with respect to the Mortgage Loans in the Mortgage
Pool and with respect to the transactions set forth or provided for
herein and shall have all the rights and powers and be subject to all
the responsibilities, duties and liabilities relating thereto arising
after the Master Servicer receives such notice of termination placed on
the Master Servicer by the terms and provisions hereof and thereof, and
shall have the same limitations on liability herein granted to the
Master Servicer; provided, that the Trustee shall not under any
circumstances be responsible for any representations and warranties or
any Purchase Obligation of the Company or any liability incurred by the
Master Servicer at or prior to the time the Master Servicer was
terminated as Master Servicer and the Trustee shall not be obligated to
make a Monthly P&I Advance if it is prohibited by law from so doing. As
compensation therefor, the Trustee shall be entitled to all funds
relating to the Mortgage Loans which the Master Servicer would have been
entitled to retain or to withdraw from the Certificate Account if the
Master Servicer had continued to act hereunder, except for those amounts
due to the Master Servicer as reimbursement for advances previously made
or amounts previously expended and are otherwise reimbursable hereunder.
Notwithstanding the above, the Trustee may, if it shall be unwilling to
so act, or shall if it is unable to so act, appoint, or petition a court
of competent jurisdiction to appoint, any established housing and home
finance institution having a net worth of not less than $10,000,000 as
the successor to the Master Servicer hereunder in the assumption of all
or any part of the responsibilities, duties or liabilities of the Master
Servicer hereunder. Pending any such appointment, the Trustee is
obligated to act in such capacity. In connection with such appointment
and assumption, the Trustee may make such arrangements for the
<PAGE> 83
compensation of such successor out of payments on Mortgage Loans as it
and such successor shall agree; provided, however, that no such
compensation shall, together with the compensation to the Trustee, be in
excess of that permitted the Master Servicer hereunder. The Trustee and
such successor shall take such actions, consistent with this Agreement,
as shall be necessary to effectuate any such succession.
Section 7.03. Notification to Certificateholders. Upon any such
termination or appointment of a successor to the Master Servicer, the
Trustee shall give prompt written notice thereof to the Certificate
Insurer and the Certificateholders at their respective addresses
appearing in the Certificate Register.
ARTICLE VIII
Concerning the Trustee
Section 8.01. Duties of Trustee.
(a) The Trustee, prior to the occurrence of an Event of Default
and after the curing of all Events of Default which may have occurred,
undertakes to perform such duties and only such duties as are
specifically set forth in this Agreement. In case an Event of Default
has occurred (which has not been cured or waived) the Trustee shall
exercise such of the rights and powers vested in it by this Agreement,
and use the same degree of care and skill in its exercise as a prudent
person would exercise or use under the circumstances in the conduct of
such person's own affairs.
(b) The Trustee, upon receipt of all resolutions, certificates,
statements, opinions, reports, documents, orders or other instruments
furnished to the Trustee which are specifically required to be furnished
pursuant to any provision of this Agreement, shall examine them to
determine whether they are in the form required by this Agreement;
provided, however, that the Trustee shall not be responsible for the
accuracy or content of any such certificate, statement, opinion, report,
or other order or instrument furnished by the Company or Master Servicer
to the Trustee pursuant to this Agreement.
(c) No provision of this Agreement shall be construed to relieve
the Trustee from liability for its own negligent action, its own
negligent failure to act or its own willful misconduct; provided,
however, that:
(i) Prior to the occurrence of an Event of Default and after the
curing of all such Events of Default which may have occurred, the duties
and obligations of the Trustee shall be determined solely by the express
provisions of this Agreement,
(ii) the Trustee shall not be liable except for the performance of such
duties and obligations as are specifically set forth in this Agreement,
no implied covenants or obligations shall be read into this Agreement
<PAGE> 84
against the Trustee, and, in the absence of bad faith on the part of the
Trustee, the Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed therein, upon
any certificates or opinions furnished to the Trustee and conforming to
the requirements of this Agreement; and
(iii) The Trustee shall not be personally liable with respect to any
action taken or omitted to be taken by it in good faith in accordance
with the direction of the Certificateholders holding Certificates which
evidence Percentage Interests aggregating not less than 25% of the Trust
Fund relating to the time, method and place of conducting any proceeding
for any remedy available to the Trustee, or relating to the exercise of
any trust or power conferred upon the Trustee under this Agreement.
(d) Within three Business Days after the occurrence of any Event
of Default known to the Trustee, the Trustee shall transmit by facsimile
to the Certificate Insurer and the Rating Agencies notice of each Event
of Default. Within 90 days after the occurrence of any Event of Default
known to the Trustee, the Trustee shall transmit by mail to all
Certificateholders (with a copy to the Rating Agencies) notice of each
Event of Default, unless such Event of Default shall have been cured or
waived; provided, however, the Trustee shall be protected in withholding
such notice if and so long as a Responsible Officer of the Trustee in
good faith determines that the withholding of such notice is in the best
interests of the Certificateholders; and provided, further, that in the
case of any Event of Default of the character specified in Section
7.01(a)(i) and Section 7.01(a)(ii) no such notice to Certificateholders
or to the Rating Agencies shall be given until at least 30 days after
the occurrence thereof.
(e) The Trustee acknowledges that it is named as the "insured"
under the Surety Bond and acknowledges that the Master Servicer has
agreed, pursuant to Section 3.17 hereof, to perform the obligations of
the Trustee under the Surety Bond on behalf of the Trustee. Each of the
Trustee and the Master Servicer hereby covenant not to cancel the Surety
Bond until the Trust Fund is terminated in accordance with the
provisions hereof.
Section 8.02. Certain Matters Affecting the Trustee. Except as
otherwise provided in Section 8.01:
(i) The Trustee may request and rely upon and shall be protected in
acting or refraining from acting upon any resolution, Officer's
Certificate, certificate of auditors or any other certificate,
statement, instrument, opinion, report, notice, request, consent, order,
approval, bond or other paper or document believed by it to be genuine
and to have been signed or presented by the proper party or parties;
(ii) The Trustee may consult with counsel and any Opinion of Counsel
shall be full and complete authorization and protection in respect of
any action taken or suffered or omitted by it hereunder in good faith
and in accordance with such Opinion of Counsel;
(iii) The Trustee shall not be personally liable for any action
taken or omitted by it in good faith and reasonably believed by it to be
<PAGE> 85
authorized or within the discretion or rights or powers conferred upon
it by this Agreement;
(iv) Prior to the occurrence of an Event of Default hereunder and after
the curing of all Events of Default which may have occurred, the Trustee
shall not be bound to make any investigation into the facts or matters
stated in any resolution, certificate, statement, instrument, opinion,
report, notice, request, consent, order, approval, bond or other paper
or document, unless requested in writing to do so by the Holders of
Certificates evidencing Percentage Interests aggregating not less than
25% of the Trust Fund; provided, however, that if the payment within a
reasonable time to the Trustee of the costs, expenses or liabilities
likely to be incurred by it in the making of such investigation is, in
the opinion of the Trustee, not reasonably assured to the Trustee by the
security, if any, afforded to it by the terms of this Agreement, the
Trustee may require reasonable indemnity against such expense or
liability as a condition to proceeding;
(v) The Trustee may execute the trust or any of the powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys;
(vi) The Trustee shall not be deemed to have knowledge or notice of any
matter, including without limitation an Event of Default, unless
actually known by a Responsible Officer, or unless written notice
thereof referencing this Agreement or the Certificates is received at
the Corporate Trust Office at the address set forth in Section 10.06;
and
(vii) In no event shall the Trustee be held liable for acts or
omissions of the Master Servicer (excepting the Trustee's own actions as
Master Servicer). No provision of this Agreement shall require the
Trustee to expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder (except for
the giving of required notices), or in the exercise of any of its rights
or powers, if it shall have reasonable grounds for believing the
repayment of such funds or adequate indemnity against such risk or
liability is not reasonably assured to it.
Section 8.03. Trustee Not Liable for Certificates or Mortgage Loans.
The recitals contained herein (other than those relating to the due
organization, power and authority of the Trustee) and in the
Certificates (other than the execution of, and certificate of
authentication on, the Certificates) shall be taken as the statements of
the Company and the Trustee assumes no responsibility for their
correctness. The Trustee makes no representations as to the validity or
sufficiency of this Agreement or of the Certificates or any Mortgage
Loan. The Trustee shall not be accountable for the use or application by
the Company of any of the Certificates or of the proceeds of such
Certificates, or for the use or application of any funds paid to the
Master Servicer, the Servicers or the Company in respect of the Mortgage
Loans or deposited into the Custodial Accounts for P&I, any Buydown Fund
Account, or the Custodial Accounts for P&I by any Servicer or into the
Investment Account, or the Certificate Account by the Master Servicer or
the Company.
Section 8.04. Trustee May Own Certificates. The Trustee or any agent or
<PAGE> 86
affiliate of the Trustee, in its individual or any other capacity, may
become the owner or pledgee of Certificates with the same rights it
would have if it were not Trustee.
Section 8.05. The Master Servicer to Pay Trustee's Fees and Expenses.
Subject to the separate written agreement with the Trustee dated as of
May 1, 1999, the Master Servicer covenants and agrees to, and the Master
Servicer shall, pay the Trustee from time to time, and the Trustee shall
be entitled to payment, 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 hereunder of the Trustee. Except as otherwise
expressly provided herein, the Master Servicer shall pay or reimburse
the Trustee upon its request for all reasonable expenses and
disbursements incurred or made by the Trustee in accordance with any of
the provisions of this Agreement and indemnify the Trustee from any
loss, liability or expense incurred by it hereunder (including the
reasonable compensation and the expenses and disbursements of its
counsel and of all persons not regularly in its employ) except any such
expense or disbursement as may arise from its negligence or bad faith.
Such obligation shall survive the termination of this Agreement or
resignation or removal of the Trustee. The Company shall, at its
expense, prepare or cause to be prepared all federal and state income
tax and franchise tax and information returns relating to the REMIC I
Trust Fund required to be prepared or filed by the Trustee and shall
indemnify the Trustee for any liability of the Trustee arising from any
error in such returns.
Section 8.06. Eligibility Requirements for Trustee. The Trustee
hereunder shall at all times be (i) an institution insured by the FDIC,
the Bank Insurance Fund or the Savings Association Insurance Fund, (ii)
a corporation or association organized and doing business under the laws
of the United States of America or of any state, authorized under such
laws to exercise corporate trust powers, having a combined capital and
surplus of not less than $50,000,000 and subject to supervision or
examination by federal or state authority and (iii) acceptable to the
Rating Agencies and the Certificate Insurer. If such corporation or
association publishes reports of condition at least annually, pursuant
to law or to the requirements of any aforementioned supervising or
examining authority, then for the purposes of this Section 8.06, the
combined capital and surplus of such corporation shall be deemed to be
its combined capital and surplus as set forth in its most recent report
of condition so published. In case at any time the Trustee shall cease
to be eligible in accordance with the provisions of this Section 8.06,
the Trustee shall resign immediately in the manner and with the effect
specified in Section 8.07.
Section 8.07. Resignation and Removal of Trustee. The Trustee may at
any time resign and be discharged from the trusts hereby created by
giving written notice thereof to the Master Servicer and the Certificate
Insurer. Upon receiving such notice of resignation, the Master Servicer
shall promptly appoint a successor trustee by written instrument, in
duplicate, one copy of which instrument shall be delivered to the
<PAGE> 87
resigning Trustee and one copy to the successor trustee. If no successor
trustee shall have been so appointed and shall have accepted appointment
within 30 days after the giving of such notice of resignation, the
resigning Trustee may petition any court of competent jurisdiction for
the appointment of a successor trustee.
If at any time the Trustee shall cease to be eligible in accordance
with the provisions of Section 8.06 and shall fail to resign after
written request therefor by the Master Servicer, or if at any time the
Trustee shall become incapable of acting, or shall be adjudged bankrupt
or insolvent, or a receiver of the Trustee or of its property shall be
appointed, or any public officer shall take charge or control of the
Trustee or of its property or affairs for the purpose of rehabilitation,
conservation or liquidation, then the Master Servicer may remove the
Trustee and appoint a successor trustee by written instrument, in
duplicate, one copy of which instrument shall be delivered to the
Trustee so removed, one copy to the successor and one copy to the
Certificate Insurer.
The Holders of Certificates evidencing Percentage Interests
aggregating more than 50% of the Trust Fund may at any time remove the
Trustee and appoint a successor trustee by written instrument or
instruments, in triplicate, signed by such Holders or their attorneys in-
fact duly authorized, one complete set of which instruments shall be
delivered to the Master Servicer, one complete set to the Trustee so
removed and one complete set to the successor so appointed.
Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to any of the provisions of this Section 8.07
shall become effective upon acceptance of appointment by the successor
trustee as provided in Section 8.08. Any expenses associated with the
resignation of the Trustee shall be borne by the Trustee, and any
expenses associated with the removal of the Trustee shall be borne by
the Master Servicer. As long as the Certificate Insurance Policy is in
effect, the Master Servicer will send a written notice to the
Certificate Insurer of any such resignation, removal or appointment.
Section 8.08. Successor Trustee. Any successor trustee appointed as
provided in Section 8.07 shall execute, acknowledge and deliver to the
Master Servicer and to its predecessor trustee an instrument accepting
such appointment hereunder, and thereupon the resignation or removal of
the predecessor trustee shall become effective and such successor
trustee, without any further act, deed or conveyance, shall become fully
vested with all the rights, powers, duties and obligations of its
predecessor hereunder, with like effect as if originally named as
Trustee herein. The predecessor shall deliver to the successor trustee
all Mortgage Files, related documents, statements and all other property
held by it hereunder, and the Master Servicer and the predecessor
trustee shall execute and deliver such instruments and do such other
things as may reasonably be required for more fully and certainly
vesting and confirming in the successor trustee all such rights, powers,
duties and obligations.
<PAGE> 88
No successor trustee shall accept appointment as provided in this
Section 8.08 unless at the time of such appointment such successor
trustee shall be eligible under the provisions of Section 8.06.
Upon acceptance of appointment by a successor trustee as provided
in this Section 8.08, the Master Servicer shall mail notice of the
succession of such trustee hereunder to (i) all Certificateholders at
their addresses as shown in the Certificate Register, (ii) the Rating
Agencies and (iii) the Certificate Insurer. If the Master Servicer fails
to mail such notice within ten days after acceptance of appointment by
the successor trustee, the successor trustee shall cause such notice to
be mailed.
Section 8.09. Merger or Consolidation of Trustee. Any corporation or
association into which the Trustee may be merged or converted or with
which it may be consolidated, or any corporation resulting from any
merger, conversion or consolidation to which the Trustee shall be a
party, or any corporation succeeding to the corporate trust business of
the Trustee, shall be the successor of the Trustee hereunder, provided
such resulting or successor corporation shall be eligible under the
provisions of Section 8.06, without the execution or filing of any paper
or any further act on the part of any of the parties hereto, anything
herein to the contrary notwithstanding.
Section 8.10. Appointment of Co-Trustee or Separate Trustee.
Notwithstanding any other provisions hereof, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which
any part of the Trust Fund may at the time be located, the Master
Servicer and the Trustee acting jointly shall have the power and shall
execute and deliver all instruments to appoint one or more Persons
approved by the Trustee to act as co-trustee or co-trustees, jointly
with the Trustee, or separate trustee or separate trustees, of all or
any part of the Trust Fund and to vest in such Person or Persons, in
such capacity, such title to the Trust Fund, or any part thereof, and,
subject to the other provisions of this Section 8.10, such powers,
duties, obligations, rights and trusts as the Master Servicer and the
Trustee may consider necessary or desirable; provided, that the Trustee
shall remain liable for all of its obligations and duties under this
Agreement. If the Master Servicer shall not have joined in such
appointment within 15 days after the receipt by it of a request so to
do, or in case an Event of Default shall have occurred and be
continuing, the Trustee alone shall have the power to make such
appointment; provided, that the Trustee shall remain liable for all of
its obligations and duties under this Agreement. 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 Certificateholders 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
<PAGE> 89
imposed upon and exercised or performed by the Trustee and such separate
trustee or co-trustee jointly and severally, 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 the Master Servicer hereunder), the Trustee shall be
incompetent or unqualified to perform such act or acts, in which event
such rights, powers, duties and obligations (including the holding of
title to the Trust Fund or any portion thereof in any such jurisdiction)
shall be exercised and performed by such separate trustee or co-trustee
at the direction of the Trustee.
Any notice, request or other writing given to the Trustee shall be
deemed to have been given to each of the then separate trustee(s) and co-
trustee(s), as effectively as if given to each of them. Every instrument
appointing any separate trustee(s) or co-trustee(s) shall refer to this
Agreement and the conditions of this Article VIII. Each separate trustee
and co-trustee, upon its acceptance of the trusts conferred, shall be
vested with the estates or property specified in its instrument of
appointment, either jointly with the 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 the
trust shall vest in and be exercised by the Trustee, to the extent
permitted by law, without the appointment of a new or successor trustee.
Section 8.11. Authenticating Agents. The Trustee may appoint one or
more Authenticating Agents which shall be authorized to act on behalf of
the Trustee in authenticating Certificates. Wherever reference is made
in this Agreement to the authentication of Certificates by the Trustee
or the Trustee's certificate of authentication, such reference shall be
deemed to include authentication on behalf of the Trustee by an
Authenticating Agent and a certificate of authentication executed on
behalf of the Trustee by an Authenticating Agent. Each Authenticating
Agent must be acceptable to the Master Servicer and the Certificate
Insurer and must be a corporation or banking association organized and
doing business under the laws of the United States of America or of any
state, having a principal office and place of business in New York, New
York, having a combined capital and surplus of at least $15,000,000,
authorized under such laws to do a trust business and subject to
supervision or examination by federal or state authorities.
Any corporation into which any Authenticating Agent may be merged
or converted or with which it may be consolidated, or any corporation
resulting from any merger, conversion or consolidation to which any
<PAGE> 90
Authenticating Agent shall be a party, or any corporation succeeding to
the corporate agency business of any Authenticating Agent, shall
continue to be the Authenticating Agent so long as it shall be eligible
in accordance with the provisions of the first paragraph of this Section
8.11 without the execution or filing of any paper or any further act on
the part of the Trustee or the Authenticating Agent.
Any Authenticating Agent may at any time resign by giving written
notice of resignation to the Trustee, the Certificate Insurer and to the
Master Servicer. The Trustee may, upon prior written approval of the
Master Servicer and the Certificate Insurer, at any time terminate the
agency of any Authenticating Agent by giving written notice of
termination to such Authenticating Agent and to the Master Servicer.
Upon receiving a notice of resignation or upon such a termination, or in
case at any time any Authenticating Agent shall cease to be eligible in
accordance with the provisions of the first paragraph of this Section
8.11, the Trustee may appoint, upon prior written approval of the Master
Servicer and the Certificate Insurer, a successor Authenticating Agent,
shall give written notice of such appointment to the Master Servicer and
shall mail notice of such appointment to all Certificateholders. Any
successor Authenticating Agent upon acceptance of its appointment
hereunder shall become vested with all the rights, powers, duties and
responsibilities of its predecessor hereunder, with like effect as if
originally named as Authenticating Agent. Any reasonable compensation
paid to an Authenticating Agent shall be a reimbursable expense pursuant
to Section 8.05 if paid by the Trustee.
Section 8.12. Paying Agents. The Trustee may appoint one or more Paying
Agents which shall be authorized to act on behalf of the Trustee in
making withdrawals from the Certificate Account, and distributions to
Certificateholders as provided in Section 4.01 and Section 9.01(b) to
the extent directed to do so by the Master Servicer. Wherever reference
is made in this Agreement to the withdrawal from the Certificate Account
by the Trustee, such reference shall be deemed to include such a
withdrawal on behalf of the Trustee by a Paying Agent. Whenever
reference is made in this Agreement to a distribution by the Trustee or
the furnishing of a statement to Certificateholders by the Trustee, such
reference shall be deemed to include such a distribution or furnishing
on behalf of the Trustee by a Paying Agent. Each Paying Agent shall
provide to the Trustee such information concerning the Certificate
Account as the Trustee shall request from time to time. Each Paying
Agent must be reasonably acceptable to the Master Servicer and the
Certificate Insurer and must be a corporation or banking association
organized and doing business under the laws of the United States of
America or of any state, having a principal office and place of business
in New York, New York, having a combined capital and surplus of at least
$15,000,000, authorized under such laws to do a trust business and
subject to supervision or examination by federal or state authorities.
Any corporation into which any Paying Agent may be merged or
converted or with which it may be consolidated, or any corporation
resulting from any merger, conversion or consolidation to which any
<PAGE> 91
Paying Agent shall be a party, or any corporation succeeding to the
corporate agency business of any Paying Agent, shall continue to be the
Paying Agent provided that such corporation after the consummation of
such merger, conversion, consolidation or succession meets the
eligibility requirements of this Section 8.12, without the execution or
filing of any paper or any further act on the part of the Trustee or the
Paying Agent.
Any Paying Agent may at any time resign by giving written notice of
resignation to the Trustee and to the Master Servicer; provided, that
the Paying Agent has returned to the Certificate Account or otherwise
accounted, to the reasonable satisfaction of the Master Servicer and the
Certificate Insurer, for all amounts it has withdrawn from the
Certificate Account. The Trustee may, upon prior written approval of the
Master Servicer and the Certificate Insurer, at any time terminate the
agency of any Paying Agent by giving written notice of termination to
such Paying Agent and to the Master Servicer. Upon receiving a notice of
resignation or upon such a termination, or in case at any time any
Paying Agent shall cease to be eligible in accordance with the
provisions of the first paragraph of this Section 8.12, the Trustee may
appoint, upon prior written approval of the Master Servicer and the
Certificate Insurer, a successor Paying Agent, shall give written notice
of such appointment to the Master Servicer and shall mail notice of such
appointment to all Certificateholders. Any successor Paying Agent upon
acceptance of its appointment hereunder shall become vested with all the
rights, powers, duties and responsibilities of its predecessor
hereunder, with like effect as if originally named as Paying Agent. Any
reasonable compensation paid to any Paying Agent shall be a reimbursable
expense pursuant to Section 8.05 if paid by the Trustee.
ARTICLE IX
Termination
Section 9.01. Termination Upon Repurchase by the Company or Liquidation
of All Mortgage Loans.
(a) Except as otherwise set forth in this Article IX, including,
without limitation, the obligation of the Master Servicer to make
payments to Certificateholders as hereafter set forth, the respective
obligations and responsibilities of the Company, the Master Servicer and
the Trustee created hereby shall terminate upon (i) the purchase or
repurchase by the Company pursuant to the following paragraph of this
Section 9.01(a) of all Mortgage Loans and all property acquired in
respect of any Mortgage Loan remaining in the Trust Fund at a price
equal, after the deduction of related advances, to the sum of (x) the
excess of (A) 100% of the aggregate outstanding Principal Balance of
such Mortgage Loans (other than Liquidated Mortgage Loans) plus accrued
interest at the applicable Pass-Through Rate with respect to such
Mortgage Loan (other than a Liquidated Mortgage Loan) through the last
day of the month of such purchase or repurchase, over (B) with respect
<PAGE> 92
to any Mortgage Loan which is not a Liquidated Mortgage Loan, the amount
of the Bankruptcy Loss incurred with respect to such Mortgage Loan as of
the date of such purchase or repurchase by the Company to the extent
that the Principal Balance of such Mortgage Loan has not been previously
reduced by such Bankruptcy Loss, and (y) the appraised fair market value
as of the effective date of the termination of the trust created hereby
of (A) all property in the Trust Fund which secured a Mortgage Loan and
which was acquired by foreclosure or deed in lieu of foreclosure after
the Cut-Off Date, including related Insurance Proceeds, and (B) all
other property in the Trust Fund, any such appraisal to be conducted by
an appraiser mutually agreed upon by the Company, the Trustee and the
Certificate Insurer, or (ii) the later of the final payment or other
liquidation (or any advance with respect thereto) of the last Mortgage
Loan remaining in the Trust Fund or the disposition of all property
acquired upon foreclosure in respect of any Mortgage Loan, and the
payment to Certificateholders and the Certificate Insurer of all amounts
required to be paid to them hereunder; provided, however, that in no
event shall the trusts created hereby continue beyond the expiration of
21 years from the death of the survivor of the issue of Joseph P.
Kennedy, the late ambassador of the United States to the Court of St.
James, living on the date hereof.
The Company may repurchase the outstanding Mortgage Loans and any
Mortgaged Properties acquired by the Trust Fund at the price stated in
clause (i) of the preceding paragraph provided that (A) the aggregate
Principal Balance of the Mortgage Loans at the time of any such purchase
or repurchase aggregates less than ten percent of the aggregate
Principal Balance of the Mortgage Loans as of the Cut-Off Date and (B)
the exercise of such repurchase would not result in a claim under the
Certificate Insurance Policy. If such right is exercised, the Company
shall provide to the Trustee and the Certificate Insurer (and to the
Master Servicer, if the Company is no longer acting as Master Servicer)
the written certification of an officer of the Company (which
certification shall include a statement to the effect that all amounts
required to be paid in order to purchase or repurchase the Mortgage
Loans have been deposited in the Certificate Account) and the Trustee
shall promptly execute all instruments as may be necessary to release
and assign to the Company the Mortgage Files and any foreclosed
Mortgaged Property pertaining to the Trust Fund.
In no event shall the Company be required to expend any amounts
other than those described in the first paragraph of this Section
9.01(a) in order to terminate the Trust Fund or purchase or repurchase
the Mortgage Loans under this Section 9.01.
(b) Notice of any termination, specifying the date upon which the
Certificateholders may surrender their Certificates to the Trustee for
payment and cancellation, shall be given promptly by letter from the
Trustee to Certificateholders mailed not less than 30 days prior to such
final distribution, specifying (i) the date upon which final payment of
the Certificates will be made upon presentation and surrender of
Certificates at the office of the Certificate Registrar therein
<PAGE> 93
designated (the "Termination Date"), (ii) the amount of such final
payment (the "Termination Payment") and (iii) that the Record Date
otherwise applicable to the Distribution Date upon which the Termination
Date occurs is not applicable, payments being made only upon
presentation and surrender of the Certificates at the office of the
Certificate Registrar therein specified. Upon any such notice, the
Certificate Account shall terminate subject to the Master Servicer's
obligation to hold all amounts payable to Certificateholders in trust
without interest pending such payment.
In the event that all of the Certificateholders shall not surrender
their Certificates for cancellation within six months after the
Termination Date, the Company shall give a second written notice to the
remaining Certificateholders to surrender their Certificates for
cancellation and receive the Termination Payment with respect thereto.
If within one year after the second notice all the Certificates shall
not have been surrendered for cancellation, the Company may take
appropriate steps to contact the remaining Certificateholders concerning
surrender of their Certificates, and the cost thereof shall be paid out
of the funds and other assets which remain in trust hereunder.
Section 9.02. Additional Termination Requirements.
(a) In the event the Company exercises its purchase option as
provided in Section 9.01, the REMIC I Trust Fund shall be terminated in
accordance with the following additional requirements, unless the
Company, at its own expense, obtains for the Trustee and the Certificate
Insurer an Opinion of Counsel to the effect that the failure of the
REMIC I Trust Fund to comply with the requirements of this Section 9.02
will not (i) result in the imposition of taxes on "prohibited
transactions" of the REMIC I Trust Fund as described in Section 860F of
the Code, or (ii) cause the REMIC I Trust Fund to fail to qualify as a
REMIC at any time that any Certificates are outstanding:
(i) Within 90 days prior to the final Distribution Date set forth in
the notice given by the Trustee under Section 9.01, the Company, in its
capacity as agent of the Tax Matters Person shall prepare the
documentation required and adopt a plan of complete liquidation on
behalf of the REMIC I Trust Fund meeting the 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 Company, on behalf of the REMIC I Trust Fund; and
(ii) At or after the time of adoption of such a plan of complete
liquidation and at or prior to the final Distribution Date, the Master
Servicer as agent of the Trustee shall sell all of the assets of the
REMIC I Trust Fund to the Company for cash in the amount specified in
Section 9.01.
(b) By its acceptance of the Residual Certificate, the Holder
thereof hereby agrees to authorize the Company to adopt such a plan of
complete liquidation upon the written request of the Company and to take
such other action in connection therewith as may be reasonably requested
<PAGE> 94
by the Company.
Section 9.03. Trust Irrevocable. Except as expressly provided herein,
the trust created hereby is irrevocable.
ARTICLE X
Miscellaneous Provisions
Section 10.01. Amendment.
(a) With the consent of the Certificate Insurer, this Agreement
may be amended from time to time by the Master Servicer, the Company and
the Trustee, without the consent of any of the Certificateholders: (i)
to cure any ambiguity; (ii) to correct or supplement any provision
herein which may be defective or inconsistent with any other provisions
herein; (iii) to comply with any requirements imposed by the Code or any
regulations thereunder; (iv) to correct the description of any property
at any time included in the Trust Fund, or to assure the conveyance to
the Trustee of any property included in the Trust Fund; and (v) pursuant
to Section 5.01(c)(v). No such amendment (other than one entered into
pursuant to clause (iii) of the preceding sentence) shall adversely
affect in any material respect the interest of any Certificateholder.
Prior to entering into any amendment without the consent of
Certificateholders pursuant to this paragraph, the Trustee may require
an Opinion of Counsel to the effect that such amendment is permitted
under this paragraph. The placement of an "original issue discount"
legend on, or any change required to correct any such legend previously
placed on a Certificate shall not be deemed any amendment to this
Agreement.
(b) This Agreement may also be amended from time to time by the
Master Servicer, the Company and the Trustee with the consent of the
Certificate Insurer and the Holders of Certificates evidencing
Percentage Interests aggregating not less than 66% of the Trust Fund 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 Certificateholders; provided, however, that
no such amendment shall, without the consent of the Holder of each
Certificate affected thereby (i) reduce in any manner the amount of, or
delay the timing of, distributions of principal or interest required to
be made hereunder or reduce the Certificateholder's Percentage Interest,
the Certificate Interest Rate or the Termination Payment with respect to
any of the Certificates, (ii) reduce the percentage of Percentage
Interests specified in this Section 10.01 which are required to amend
this Agreement, (iii) create or permit the creation of any lien against
any part of the Trust Fund, or (iv) modify any provision in any way
which would permit an earlier retirement of the Certificates.
Promptly after the execution of any such amendment, the Trustee
shall furnish written notification of the substance of such amendment to
each Certificateholder and the Certificate Insurer. Any failure to
<PAGE> 95
provide such notice, or any defect therein, shall not, however, in any
way impair or affect the validity of any such amendment.
It shall not be necessary for the consent of Certificateholders
under this Section 10.01 to approve the particular form of any proposed
amendment, but it shall be sufficient if such consent shall approve the
substance thereof. The manner of obtaining such consents and of
evidencing the authorization of the execution thereof by
Certificateholders shall be subject to such reasonable regulations as
the Trustee may prescribe.
Section 10.02. Recordation of Agreement. 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 the comparable jurisdictions in which any Mortgaged Property is
situated, and in any other appropriate public recording office or
elsewhere, such recordation to be effected by the Company and at its
expense on direction by the Trustee, but only upon direction accompanied
by an Opinion of Counsel (not at the Trustee's expense) to the effect
that such recordation materially and beneficially affects the interests
of the Certificateholders and the Certificate Insurer.
Section 10.03. Limitation on Rights of Certificateholders. The death or
incapacity of any Certificateholder shall not operate to terminate this
Agreement or the Trust Fund, nor entitle such Certificateholder's legal
representatives or heirs to claim an accounting or to take any action or
proceeding in any court for a partition or winding-up of the Trust Fund,
nor otherwise affect the rights, obligations and liabilities of the
parties hereto or any of them.
No Certificateholder shall have any right to vote or in any manner
otherwise to control the operation and management of the Trust Fund or
the obligations of the parties hereto (except as provided in Section
5.09, Section 7.01, Section 8.01, Section 8.02, Section 8.07, Section
10.01 and this Section 10.03), nor shall anything herein set forth, or
contained in the terms 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 or by availing
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
evidencing Percentage Interests aggregating not less than 25% of the
Trust Fund 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
<PAGE> 96
therein or thereby, and the Trustee, for 60 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. However, the
Trustee is under no obligation to exercise any of the extraordinary
trusts or powers vested in it by this Agreement or to make any
investigation of matters arising hereunder or to institute, conduct or
defend any litigation hereunder or in relation hereto at the request,
order or direction of any of the Certificateholders unless such
Certificateholders have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which may be
incurred therein or thereby. 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 whatever by virtue or by
availing 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 10.03, each and every Certificateholder and
the Trustee shall be entitled to such relief as can be given either at
law or in equity.
By accepting its Class A Certificate, each Class A
Certificateholder agrees that, unless a Certificate Insurer Default
exists and is continuing, the Certificate Insurer shall have the right
to exercise all rights of the Class A Certificateholders under this
Agreement (other than (i) the right to receive distributions on the
Class A Certificates, except as provided in Section 3.16 and (ii) the
right to receive statements and reports hereunder) without any further
consent of the Class A Certificateholders and the Class A
Certificateholders shall exercise any such rights only upon the written
consent of the Certificate Insurer. Notwithstanding the foregoing, the
Certificate Insurer shall have no power without the consent of the Owner
of each Certificate affected thereby to: (i) reduce in any manner the
amount of, or delay the timing of, distributions of principal or
interest required to be made hereunder or reduce the Class A
Certificateholder's Percentage Interest, the Certificate Interest Rate
or the Termination Payment with respect to any of the Class A
Certificates; (ii) reduce the percentage of Percentage Interests
specified in Section 10.01 which are required to amend this Agreement;
(iii) create or permit the creation of any lien against any part of the
Trust Fund; (iv) modify any provision in any way which would permit an
earlier retirement of the Class A Certificates; or (v) amend this
sentence.
Section 10.04. Access to List of Certificateholders. The Certificate
Registrar shall furnish or cause to be furnished to the Trustee, within
30 days after receipt of a request by the Trustee in writing, a list, in
such form as the Trustee may reasonably require, of the names and
addresses of the Certificateholders as of the most recent Record Date
<PAGE> 97
for payment of distributions to such Certificateholders.
If three or more Certificateholders (hereinafter referred to as
"applicants") apply in writing to the Trustee, and such application
states that the applicants desire to communicate with other
Certificateholders with respect to their rights under this Agreement or
under the Certificates and is accompanied by a copy of the communication
which such applicants propose to transmit, then the Trustee shall,
within five Business Days after the receipt of such list from the
Certificate Registrar, afford such applicants access during normal
business hours to the most recent list of Certificateholders held by the
Trustee. If such a list is as of a date more than 90 days prior to the
date of receipt of such applicants' request, the Trustee shall promptly
request from the Certificate Registrar a current list as provided above,
and shall afford such applicants access to such list promptly upon
receipt.
Every Certificateholder, by receiving and holding the same, agrees
with the Master Servicer and the Trustee that neither the Master
Servicer nor the Trustee shall be held accountable by reason of the
disclosure of any such information as to the names and addresses of the
Certificateholders hereunder, regardless of the source from which such
information was derived.
Section 10.05. Governing Law. This Agreement shall be construed in
accordance with the laws of the State of California and the obligations,
rights and remedies of the parties hereunder shall be determined in
accordance with such laws without giving effect to conflict of laws
principles.
Section 10.06. Notices. All demands, notices and communications
hereunder shall be in writing and shall be deemed to have been duly
given if personally delivered at or mailed by registered or certified
mail to (a) in the case of the Company, 75 North Fairway Drive, Vernon
Hills, Illinois 60061, Attention: General Counsel (with a copy directed
to the attention of the Master Servicing Department) or such other
address as may hereafter be furnished to the Trustee in writing by the
Company, (b) in the case of the Trustee, at its Corporate Trust Office,
or such other address as may hereafter be furnished to the Master
Servicer in writing by the Trustee, (c) in the case of the Certificate
Registrar, at its Corporate Trust Office, or such other address as may
hereafter be furnished to the Trustee in writing by the Certificate
Registrar, (d) in the case of S&P, 26 Broadway, 15th Floor, New York,
New York 10004, Attention: Frank Raiter, or such other address as may
hereafter be furnished to the Trustee and Master Servicer in writing by
S&P, (e) in the case of Moody's, 99 Church Street, New York, New York
10007, Attention: Phil Wubenna, or such other address as may hereafter
be furnished to the Trustee and Master Servicer in writing by Moody's
and (f) in the case of the Certificate Insurer, Ambac Assurance
Corporation, One State Street Plaza, New York, New York, 10004,
Attention: Structured Finance Mortgage-Backed Securities, or such other
address as may hereafter be furnished to the Trustee and Master Servicer
<PAGE> 98
in writing by the Certificate Insurer. Notices to the Rating Agencies
shall also be deemed to have been duly given if mailed by first class
mail, postage prepaid, to the above listed addresses of the Rating
Agencies. Any notice required or permitted to be mailed 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, whether or not the
Certificateholder receives such notice.
Section 10.07. 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 10.08. Counterpart Signatures. 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 10.09. Benefits of Agreement. Except as provided below, nothing
in this Agreement or in any Certificate, expressed or implied, shall
give to any Person, other than the parties hereto and their respective
successors hereunder, any separate trustee or co-trustee appointed under
Section 8.10 and the Certificateholders, any benefit or any legal or
equitable right, remedy or claim under this Agreement.
The Certificate Insurer is a third-party beneficiary of this
Agreement. Any right conferred to the Certificate Insurer shall be
suspended after the occurrence and during the continuation of a
Certificate Insurer Default. During any period of suspension, the
Certificate Insurer's rights hereunder shall vest in the Holders of the
Class A Certificates and shall be exercisable by the Holders of at least
a majority in Percentage Interest of the Class A Certificates. At such
time as the Class A Principal Balance has been reduced to zero and the
Certificate Insurer has been reimbursed for all amounts to which it is
entitled hereunder and has been paid all Certificate Insurer Premium
amounts due and owing hereunder, the Certificate Insurer's rights
hereunder shall terminate.
Section 10.10. Notices and Copies to Rating Agencies.
(a) The Trustee shall notify the Rating Agencies of the Trustee's
actual knowledge of the occurrence of any of the following events, in
the manner provided in Section 10.06:
<PAGE> 99
(i) the occurrence of an Event of Default pursuant to Section 7.01,
subject to the provisions of Section 8.01(d);
(ii) the appointment of a successor Master Servicer pursuant to Section
7.02;
(b) The Master Servicer shall notify the Rating Agencies of the
occurrence of any of the following events, or in the case of clauses
(iii), (iv), (vii) and (viii) promptly upon receiving notice thereof, in
the manner provided in Section 10.06:
(i) any amendment of this Agreement pursuant to Section 10.01;
(ii) the appointment of a successor Trustee pursuant to Section 8.08;
(iii) the filing of any claim under or the cancellation or
modification of any fidelity bond and errors and omissions coverage
pursuant to Section 3.01 and Section 3.06 with respect to the Master
Servicer or any Servicer;
(iv) any change in the location of the Certificate Account, any
Custodial Account for P&I or any Custodial Account for Reserves;
(v) the purchase or repurchase of any Mortgage Loan pursuant to a
Purchase Obligation or the purchase or repurchase of the outstanding
Mortgage Loans pursuant to Section 9.01;
(vi) the occurrence of the final Distribution Date or the termination of
the trust pursuant to Section 9.01(a)(ii);
(vii) the failure of the Master Servicer to make a Monthly P&I
Advance following a determination on the Determination Date that the
Master Servicer would make such advance pursuant to Section 4.02; and
(viii) the failure of the Master Servicer to make a determination on
the Determination Date regarding whether it would make a Monthly P&I
Advance when a shortfall exists between (x) payments scheduled to be
received in respect of the Mortgage Loans and (y) the amounts actually
deposited in the Certificate Account on account of such payments,
pursuant to Section 4.02.
The Master Servicer shall provide copies of the statements pursuant to
Section 4.02, Section 4.04, Section 3.12, Section 3.13 or Section 3.15
or any other statements or reports to the Rating Agencies in such time
and manner that such statements or determinations are required to be
provided to Certificateholders. With respect to the reports described in
the second paragraph of Section 4.01(c), the Master Servicer shall
provide such reports to the Rating Agencies in respect of each
Distribution Date, without regard to whether any Certificateholder or
the Trustee has requested such report for such Distribution Date.
IN WITNESS WHEREOF, the Company and the Trustee have caused their
names to be signed hereto by their respective officers, thereunto duly
authorized, and their respective seals, duly attested, to be hereunto
affixed, all as of the day and year first above written.
PNC MORTGAGE SECURITIES CORP.
<PAGE> 100
By: /s/ Alexander T. Topping, Jr.
- - - - - - - - - - - - - - -
Its: Senior Vice President
BANKERS TRUST COMPANY OF CALIFORNIA, N.A.,
as Trustee
By: /s/ Katherine M. Wannenmacher
- - - - - - - - - - - - - - -
Its: Assistant Vice President
ACKNOWLEDGEMENT OF CORPORATION
STATE OF ILLINOIS )
) SS.
COUNTY OF LAKE )
On this 28th day of May, 1999 before me, a Notary Public in and for
said State, personally appeared Alexander T. Topping, Jr. known to me to
be the Senior Vice President of PNC MORTGAGE SECURITIES CORP., 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
pursuant to its By-Laws or a resolution of its Board of Directors.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in the certificate first above written.
/s/ Laura A. Kelsey
- - - - - - - - - -
Notary Public
(SEAL)
<PAGE> 101
CERTIFICATE OF ACKNOWLEDGEMENT
STATE OF CALIFORNIA )
) SS.
COUNTY OF ORANGE )
On this 28th day of May, 1999 before me, a Notary Public in and for
said State, personally appeared Katie Wannenmacher, personally known to
me (or proved to me on the basis of satisfactory evidence) to be the
person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which the
person(s) acted, executed the instrument.
WITNESS my hand and official seal.
Signature /s/ Marc Smith (SEAL)
- - - - - - - -
Exhibit A
CUSIP: 69348R NA0
MORTGAGE PASS-THROUGH CERTIFICATE
Class A
Evidencing a Percentage Interest in a trust fund whose assets, among
other things, a pool of conventional one- to four-family mortgage loans
formed and administered by
PNC MORTGAGE SECURITIES CORP.
This Certificate represents ownership of a "regular interest" in a "real
estate mortgage investment conduit," as those terms are defined in
Sections 860G and 860D, respectively, of the Internal Revenue Code of
1986, as amended. The issue date of this Certificate is May 27, 1999.
[Assuming that the Mortgage Loans underlying the Certificates prepay at
the prepayment assumption used by the issuer in pricing this Certificate
(i.e., [___]% of the Constant Prepayment Rate as described in the
Prospectus Supplement), this Certificate has been issued with original
issue discount ("OID") of no more than $ per $100,000 of
initial Certificate Principal Balance, the yield to maturity is %,
and the amount of OID attributable to the short period is not more than
$ per $100,000 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 Constant Prepayment
Rate or any other rate.]
Unless this Certificate is presented by an authorized
representative of The Depository Trust Company, a New York corporation
("DTC"), to the Company or its agent for registration of transfer,
exchange, or payment, and any Certificate issued is registered in the
name of Cede & Co. or such other name as is requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or to such
other entity as is requested by an authorized representative of DTC),
<PAGE> 102
ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede &
Co., has an interest herein.
Series 1999-7 Portion of the Class A Principal Balance
as of
the Cut-Off Date Evidenced by this
Certificate:
$[_______________]
Class A Certificate Interest Rate: Variable
Cut-Off Date: May 1, 1999
First Distribution Date: June 25, 1999
Last Scheduled Distribution Date: [____________]
Class A Principal Balance
as of the Cut-Off Date: $[_______________]
Cede & Co.
Registered Owner
Exhibit A
CUSIP: 69348R NB8
MORTGAGE PASS-THROUGH CERTIFICATE
Class B-1
Evidencing a Percentage Interest in a trust fund whose assets consist of
interests in another trust fund whose assets consist of interests in
another trust fund whose assets consists of, among other things, a pool
of conventional one- to four-family mortgage loans formed and
administered by
PNC MORTGAGE SECURITIES CORP
This Certificate represents ownership of a "regular interest" in a "real
estate mortgage investment conduit," as those terms are defined in
Sections 860G and 860D, respectively, of the Internal Revenue Code of
1986, as amended (the "Code"). The issue date of this Certificate is May
27, 1999. [Assuming that the Mortgage Loans underlying the Certificates
prepay at the prepayment assumption used by the issuer in pricing this
Certificate (i.e., [___]% of the Constant Prepayment Rate as described
in the Prospectus Supplement), this Certificate has been issued with
original issue discount ("OID") of no more than $ per
$100,000 of initial Certificate Principal Balance, the yield to maturity
is %, and the amount of OID attributable to the short period is not
more than $ per $100,000 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 Constant
Prepayment Rate or any other rate.]
IN THE CASE OF ANY CLASS B-1 CERTIFICATE PRESENTED FOR REGISTRATION IN
THE NAME OF ANY PERSON, THE TRUSTEE SHALL REQUIRE, EXCEPT AS OTHERWISE
SET FORTH IN SECTION 5.01(d) OF THE POOLING AGREEMENT, AN OPINION OF
<PAGE> 103
COUNSEL ACCEPTABLE TO AND IN FORM AND SUBSTANCE SATISFACTORY TO THE
TRUSTEE AND THE COMPANY TO THE EFFECT THAT THE PURCHASE OR HOLDING OF
A CLASS B-1 CERTIFICATE IS PERMISSIBLE UNDER APPLICABLE LAW, WILL NOT
CONSTITUTE OR RESULT IN A NON-EXEMPT PROHIBITED TRANSACTION UNDER
SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE AND WILL NOT SUBJECT
THE TRUSTEE, THE MASTER SERVICER OR THE COMPANY TO ANY OBLIGATION OR
LIABILITY (INCLUDING OBLIGATIONS OR LIABILITIES UNDER SECTION 406 OF
ERISA OR SECTION 4975 OF THE CODE) IN ADDITION TO THOSE UNDERTAKEN IN
THE POOLING AGREEMENT, WHICH OPINION OF COUNSEL SHALL NOT BE AN
EXPENSE OF THE TRUSTEE, THE MASTER SERVICER OR THE COMPANY. THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933. THESE SECURITIES MAY NOT BE OFFERED,
SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF
REGISTRATION OR THE AVAILABILITY OF AN EXEMPTION FROM REGISTRATION
UNDER THE SECURITIES ACT OF 1933 AND EXCEPT IN ACCORDANCE WITH SECTION
5.01(e) OF THE POOLING AGREEMENT.
The Class B-1 Certificates will be subordinate in right of payment to
and provide credit support to the Class A Certificates, as described in
the Pooling Agreement.
Series 1999-7 Portion of the Class B-1 Principal
Balance as of the Cut-Off Date
Evidenced by this Certificate:
$[______________]
Class B-1 Certificate Interest Rate: Variable
Cut-Off Date: May 1, 1999
First Distribution Date: June 25, 1999
Last Scheduled Distribution Date: [_________________]
Class B-1 Principal Balance
as of the Cut-Off Date: $[_______________]
[_____________]
Registered Owner
Certificate No. _________
Exhibit A
CUSIP: 69348R NC6
MORTGAGE PASS-THROUGH CERTIFICATE
Class B-2
Evidencing a Percentage Interest in a trust fund whose assets consist of
interests in another trust fund whose assets consist of interests in
another trust fund whose assets consists of, among other things, a pool
of conventional one- to four-family mortgage loans formed and
administered by
PNC MORTGAGE SECURITIES CORP
This Certificate represents ownership of a "regular interest" in a "real
estate mortgage investment conduit," as those terms are defined in
Sections 860G and 860D, respectively, of the Internal Revenue Code of
1986, as amended (the "Code"). The issue date of this Certificate is May
27, 1999. [Assuming that the Mortgage Loans underlying the Certificates
prepay at the prepayment assumption used by the issuer in pricing this
Certificate (i.e., [___]% of the Constant Prepayment Rate as described
<PAGE> 104
in the Prospectus Supplement), this Certificate has been issued with
original issue discount ("OID") of no more than $ per
$100,000 of initial Certificate Principal Balance, the yield to maturity
is %, and the amount of OID attributable to the short period is not
more than $ per $100,000 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 Constant
Prepayment Rate or any other rate.]
IN THE CASE OF ANY CLASS B-2 CERTIFICATE PRESENTED FOR REGISTRATION IN
THE NAME OF ANY PERSON, THE TRUSTEE SHALL REQUIRE, EXCEPT AS OTHERWISE
SET FORTH IN SECTION 5.01(d) OF THE POOLING AGREEMENT, AN OPINION OF
COUNSEL ACCEPTABLE TO AND IN FORM AND SUBSTANCE SATISFACTORY TO THE
TRUSTEE AND THE COMPANY TO THE EFFECT THAT THE PURCHASE OR HOLDING OF
A CLASS B-2 CERTIFICATE IS PERMISSIBLE UNDER APPLICABLE LAW, WILL NOT
CONSTITUTE OR RESULT IN A NON-EXEMPT PROHIBITED TRANSACTION UNDER
SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE AND WILL NOT SUBJECT
THE TRUSTEE, THE MASTER SERVICER OR THE COMPANY TO ANY OBLIGATION OR
LIABILITY (INCLUDING OBLIGATIONS OR LIABILITIES UNDER SECTION 406 OF
ERISA OR SECTION 4975 OF THE CODE) IN ADDITION TO THOSE UNDERTAKEN IN
THE POOLING AGREEMENT, WHICH OPINION OF COUNSEL SHALL NOT BE AN
EXPENSE OF THE TRUSTEE, THE MASTER SERVICER OR THE COMPANY. THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933. THESE SECURITIES MAY NOT BE OFFERED,
SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF
REGISTRATION OR THE AVAILABILITY OF AN EXEMPTION FROM REGISTRATION
UNDER THE SECURITIES ACT OF 1933 AND EXCEPT IN ACCORDANCE WITH SECTION
5.01(e) OF THE POOLING AGREEMENT.
The Class B-2 Certificates will be subordinate in right of payment to
and provide credit support to the Class A and Class B-1 Certificates, as
described in the Pooling Agreement.
Series 1999-7 Portion of the Class B-2 Principal
Balance as of the Cut-Off Date
Evidenced by this Certificate:
$[______________]
Class B-2 Certificate Interest Rate: Variable
Cut-Off Date: May 1, 1999
First Distribution Date: June 25, 1999
Last Scheduled Distribution Date: [_________________]
Class B-2 Principal Balance
as of the Cut-Off Date: $[_______________]
[_________________]
Registered Owner
Certificate No. _________
Exhibit A
CUSIP: 69348R ND4
MORTGAGE PASS-THROUGH CERTIFICATE
Class B-3
<PAGE> 105
Evidencing a Percentage Interest in a trust fund whose assets consist of
interests in another trust fund whose assets consist of interests in
another trust fund whose assets consists of, among other things, a pool
of conventional one- to four-family mortgage loans formed and
administered by
PNC MORTGAGE SECURITIES CORP
This Certificate represents ownership of a "regular interest" in a "real
estate mortgage investment conduit," as those terms are defined in
Sections 860G and 860D, respectively, of the Internal Revenue Code of
1986, as amended (the "Code"). The issue date of this Certificate is May
27, 1999. [Assuming that the Mortgage Loans underlying the Certificates
prepay at the prepayment assumption used by the issuer in pricing this
Certificate (i.e., [___]% of the Constant Prepayment Rate as described
in the Prospectus Supplement), this Certificate has been issued with
original issue discount ("OID") of no more than $ per
$100,000 of initial Certificate Principal Balance, the yield to maturity
is %, and the amount of OID attributable to the short period is not
more than $ per $100,000 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 Constant
Prepayment Rate or any other rate.]
IN THE CASE OF ANY CLASS B-3 CERTIFICATE PRESENTED FOR REGISTRATION IN
THE NAME OF ANY PERSON, THE TRUSTEE SHALL REQUIRE, EXCEPT AS OTHERWISE
SET FORTH IN SECTION 5.01(d) OF THE POOLING AGREEMENT, AN OPINION OF
COUNSEL ACCEPTABLE TO AND IN FORM AND SUBSTANCE SATISFACTORY TO THE
TRUSTEE AND THE COMPANY TO THE EFFECT THAT THE PURCHASE OR HOLDING OF
A CLASS B-3 CERTIFICATE IS PERMISSIBLE UNDER APPLICABLE LAW, WILL NOT
CONSTITUTE OR RESULT IN A NON-EXEMPT PROHIBITED TRANSACTION UNDER
SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE AND WILL NOT SUBJECT
THE TRUSTEE, THE MASTER SERVICER OR THE COMPANY TO ANY OBLIGATION OR
LIABILITY (INCLUDING OBLIGATIONS OR LIABILITIES UNDER SECTION 406 OF
ERISA OR SECTION 4975 OF THE CODE) IN ADDITION TO THOSE UNDERTAKEN IN
THE POOLING AGREEMENT, WHICH OPINION OF COUNSEL SHALL NOT BE AN
EXPENSE OF THE TRUSTEE, THE MASTER SERVICER OR THE COMPANY. THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933. THESE SECURITIES MAY NOT BE OFFERED,
SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF
REGISTRATION OR THE AVAILABILITY OF AN EXEMPTION FROM REGISTRATION
UNDER THE SECURITIES ACT OF 1933 AND EXCEPT IN ACCORDANCE WITH SECTION
5.01(e) OF THE POOLING AGREEMENT.
The Class B-3 Certificates will be subordinate in right of payment to
and provide credit support to the Class A, Class B-1 and Class B-2
Certificates, as described in the Pooling Agreement.
Series 1999-7 Portion of the Class B-3 Principal
Balance as of the Cut-Off Date
Evidenced by this Certificate:
$[______________]
Class B-3 Certificate Interest Rate: Variable
Cut-Off Date: May 1, 1999
<PAGE> 106
First Distribution Date: June 25, 1999
Last Scheduled Distribution Date: [_________________]
Class B-3 Principal Balance
as of the Cut-Off Date: $[_______________]
[_________________]
Registered Owner
Certificate No. _________
Exhibit A
MORTGAGE PASS-THROUGH CERTIFICATE
Class R
Evidencing a Percentage Interest in certain distributions with respect
to a pool of conventional one- to four-family mortgage loans formed and
administered by
PNC MORTGAGE SECURITIES CORP.
ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CERTIFICATE MAY BE
MADE ONLY IF THE PROPOSED TRANSFEREE PROVIDES A TRANSFER AFFIDAVIT TO
THE COMPANY AND THE CERTIFICATE REGISTRAR THAT (1) SUCH TRANSFEREE IS
NOT EITHER (A) THE UNITED STATES, ANY STATE OR POLITICAL SUBDIVISION
THEREOF, ANY FOREIGN GOVERNMENT, ANY INTERNATIONAL ORGANIZATION, OR ANY
AGENCY OR INSTRUMENTALITY OF ANY OF THE FOREGOING, (B) ANY ORGANIZATION
(OTHER THAN A COOPERATIVE DESCRIBED IN SECTION 521 OF THE CODE) WHICH IS
EXEMPT FROM THE TAX IMPOSED BY CHAPTER 1 OF THE CODE UNLESS SUCH
ORGANIZATION IS SUBJECT TO THE TAX IMPOSED BY SECTION 511 OF THE CODE,
(C) ANY ORGANIZATION DESCRIBED IN SECTION 1381(a)(2)(C) OF THE CODE (ANY
SUCH PERSON DESCRIBED IN THE FOREGOING CLAUSES (A), (B), OR (C) BEING
HEREINAFTER REFERRED TO AS A "DISQUALIFIED ORGANIZATION"), OR (D) AN
AGENT OF A DISQUALIFIED ORGANIZATION AND (2) NO PURPOSE OF SUCH TRANSFER
IS TO ENABLE THE TRANSFER TO IMPEDE THE ASSESSMENT OR COLLECTION OF TAX.
SUCH AFFIDAVIT SHALL INCLUDE CERTAIN REPRESENTATIONS AS TO THE FINANCIAL
CONDITION OF THE PROPOSED TRANSFEREE. NOTWITHSTANDING THE REGISTRATION
IN THE CERTIFICATE REGISTER OF ANY TRANSFER, SALE OR OTHER DISPOSITION
OF THIS CLASS R CERTIFICATE TO A DISQUALIFIED ORGANIZATION OR AN AGENT
OF A DISQUALIFIED ORGANIZATION, SUCH REGISTRATION SHALL BE DEEMED TO BE
OF NO LEGAL FORCE OR EFFECT WHATSOEVER AND SUCH PERSON SHALL NOT BE
DEEMED TO BE A CERTIFICATEHOLDER FOR ANY PURPOSE HEREUNDER, INCLUDING,
BUT NOT LIMITED TO, THE RECEIPT OF DISTRIBUTIONS ON THIS CERTIFICATE.
EACH HOLDER OF A CLASS R CERTIFICATE BY ACCEPTANCE OF THIS CERTIFICATE
SHALL BE DEEMED TO HAVE CONSENTED TO THE PROVISIONS OF THIS PARAGRAPH.
IN THE CASE OF ANY CLASS R CERTIFICATE PRESENTED FOR REGISTRATION IN THE
NAME OF ANY PERSON, THE TRUSTEE SHALL REQUIRE AN OPINION OF COUNSEL
ACCEPTABLE TO AND IN FORM AND SUBSTANCE SATISFACTORY TO THE TRUSTEE AND
THE COMPANY TO THE EFFECT THAT THE PURCHASE OR HOLDING OF A CLASS R
CERTIFICATE IS PERMISSIBLE UNDER APPLICABLE LAW, WILL NOT CONSTITUTE OR
<PAGE> 107
RESULT IN A NON-EXEMPT PROHIBITED TRANSACTION UNDER SECTION 406 OF THE
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"),
OR SECTION 4975 OF THE CODE AND WILL NOT SUBJECT THE TRUSTEE, THE MASTER
SERVICER OR THE COMPANY TO ANY OBLIGATION OR LIABILITY (INCLUDING
OBLIGATIONS OR LIABILITIES UNDER SECTION 406 OF ERISA OR SECTION 4975 OF
THE CODE) IN ADDITION TO THOSE UNDERTAKEN IN THE POOLING AGREEMENT,
WHICH OPINION OF COUNSEL SHALL NOT BE AN EXPENSE OF THE TRUSTEE, THE
MASTER SERVICER, THE TRUST FUND OR THE COMPANY. THE SECURITIES
REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933. THESE SECURITIES MAY NOT BE OFFERED, SOLD,
TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF REGISTRATION OR
THE AVAILABILITY OF AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
ACT OF 1933 AND EXCEPT IN ACCORDANCE WITH SECTION 5.01(e) OF THE POOLING
AGREEMENT.
Solely for U.S. federal income tax purposes, this Certificate represents
a "residual interest" in a "real estate mortgage investment conduit," as
those terms are defined in Sections 860G and 860D, respectively, of the
Internal Revenue Code of 1986, as amended. Principal and interest are
not payable with respect to this certificate. The Class R Certificate
is entitled to the Residual Distribution Amount and Excess Liquidation
Proceeds, each as defined in the Pooling Agreement
Series 1999-7 Percentage Interest evidenced by
this Class R Certificate in the
distributions to be made with
respect to the Class R
Certificate:
100%
Cut-Off Date: May 1, 1999
First Distribution Date: June 25, 1999
Last Scheduled Distribution Date: [________________]
[_____________________]
Registered Owner
Certificate No. _________
Exhibit B
Reserved
Exhibit C
Reserved
<PAGE> 108
Exhibit D
MORTGAGE LOAN SCHEDULE
Copies of the Mortgage Loan Schedule(which has been intentionally
omitted from this filing) may be obtained from PNC Mortgage Securities
Corp. or Bankers Trust Company of California, N.A. by contacting,
in the case of PNC Mortgage Securities Corp.,
Richie Moore
Master Servicing Department
PNC Mortgage Securities Corp.
75 N. Fairway Drive
Vernon Hills, Illinois 60061
Telephone: (847) 549-3683
Facsimile: (847) 549-3681
in the case of Bankers Trust Company of California, N.A.
Bankers Trust Company of California, N.A.
3 Park Plaza, 16th floor, Irvine, CA 92614,
Attention: Corporate Trust PNC 1999-7
Exhibit E
FORM OF "SELLING AND SERVICING CONTRACT"
SERVICING AGREEMENT
This Servicing Agreement (this "Agreement") is made and entered
into by PNC Mortgage Securities Corp. ("Purchaser") and its successors
and assigns ("Purchaser") and [_______________], its successors and
assigns (the "Company").
WITNESSETH:
WHEREAS, this Company wishes to service those certain first lien
residential mortgage loans on behalf of Purchaser, as Purchaser under
that certain Master Mortgage Loan Purchase Agreement, dated as of May 1,
1999, by and between Purchaser and [Merrill Lynch Credit
Corporation][Thornburg Mortgage Asset Corporation] (the "Seller") (the
"Purchase Agreement"), as are set forth on the Mortgage Loan Schedule
attached to each Warranty Bill of Sale executed and delivered by the
Seller to the Purchaser pursuant to the Purchase Agreement (such
mortgage loans, the "Mortgage Loans").
<PAGE> 109
WHEREAS, the Company has received and reviewed the PNC Mortgage
Servicing Guide (the "Servicing Guide").
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements herein contained, Purchaser and the Company hereby agree as
follows:
1. Servicing Guide. The Servicing Guide, which sets forth the terms
and conditions under which the Company shall service mortgage loans on
behalf of Purchaser, is a supplement to this Agreement. The Servicing
Guide, as may be amended or supplemented from time to time by the
Purchaser, is incorporated into this Agreement in full by reference and
made a part hereof as fully as if set forth at length herein. All
capitalized terms used and not defined herein have the meanings ascribed
to them in the Servicing Guide; provided, however, that notwithstanding
anything in the Servicing Guide to the contrary, as between Purchaser
and the Company, the Company's shall not be deemed to be a Seller of the
Mortgage Loans to the Purchaser pursuant to the PNC Mortgage Purchase
Programs Seller Guide.
2. Modifications to the Servicing Guide. The parties agree that the
Company shall be entitled to retain certain payments on the Mortgage
Loans for a longer duration than provided for in the Servicing Guide and
shall remit to Purchaser certain compensating interest payments as set
forth in the following paragraph. All references to the "Servicing
Guide" shall be deemed references to the Servicing Guide with such
modifications in the following paragraph.
3. Compensating Interest. Notwithstanding the second paragraph of
Section 303 of the Servicing Guide, the Custodial Account for P&I may be
established in (a) with the corporate trust department of a financial
institution approved by Purchaser such that the rights of Purchaser
thereto shall be fully protected against the claims of any creditors of
the Company, and of any creditors or depositors of the institution in
which such account is maintained, (b) within FDIC insured accounts (or
other accounts approved by Purchaser) created, maintained and monitored
by the Company or (c) in a separate non-trust account without FDIC or
other insurance in an institution approved by Purchaser. In the event
that a Custodial Account for P&I is established pursuant to clause (b)
of the preceding sentence, amounts held in such Custodial Account for
P&I shall not exceed the level of deposit insurance coverage on such
account; accordingly, more than one Custodial Account for P&I may be
established. Any amount that is at any time not protected or insured in
accordance with the first sentence paragraph shall promptly be withdrawn
from such Custodial Account for P&I and be remitted to Purchaser.
Notwithstanding Section 305 of the Servicing Guide, Notice of Automatic
Withdrawal and the related withdrawals from the Custodial Account for
P&I via an ACH transaction will be given and the related withdrawal will
be consistent with withdrawal on the 20th calendar day or preceding
business day. Notwithstanding any other provision of the Servicing Guide
to the contrary, with respect to any Mortgage Loan on which a partial
payment of principal or full prepayment in full is received from the
related mortgagor in any calendar month, the Company shall deposit into
the Custodial Account for P&I prior to the withdrawal date for the
following month an amount ("Compensating Interest") equal to the
difference between the amount of such prepayment received allocable to
<PAGE> 110
interest on the date received and the amount that would be so allocable
if such prepayment were received on the last day of the related calendar
month, at a per annum rate equal to the excess of (i) the rate of
interest borne by the related Mortgage Loan over (ii) the servicing fee
provided in Section 301.02 of the Servicing Guide; provided, however,
that with respect to prepayments received during any calendar month, the
Company shall not be obligated to remit Compensating Interest in excess
of the aggregate servicing fees accrued with respect to the Mortgage
Loans during such month. It is expressly understood and agreed that the
Company shall not be required under the Servicing Guide to remit partial
principal prepayments or prepayments in full prior to the withdrawal
date described above notwithstanding Section 305.02 of the Servicing
Guide; provided that the Company deposits all such prepayments in a
Custodial Account for P&I of a type permitted by this paragraph 3 of
this Agreement within the time required by the Servicing Guide.
4. Company's Duties. The Company shall diligently perform all duties
incident to the servicing of the mortgage loans subject to this
Agreement. In the performance of its servicing duties, the Company shall
exercise the same degree of care it exercises when servicing mortgage
loans for its own account, but in no event shall the Company exercise
less care than a reasonable prudent servicer would exercise under
similar circumstances. In addition, the Company shall comply with all of
the provisions of the Servicing Guide and with all other requirements
and instructions of Purchaser. The Company shall perform such duties at
its sole expense, except as otherwise expressly provided in the
Servicing Guide.
5. Compensation. The Company shall be compensated for its services
hereunder as specified in the Servicing Guide, to the extent of the
Servicing Fee established for each Mortgage Loan.
6. No Assignment. This Agreement may not be assigned by the Company
without the prior written consent of Purchaser. The Company hereby
consents to the assignment by Purchaser of all or any part of its rights
and obligations under this Agreement to any affiliate designated by
Purchaser. Any other transfer by Purchaser will be allowed and be
effective upon written notice by Purchaser to the Company.
7. Other Agreements. It is the intent of the parties that this
Agreement shall govern the servicing by the Company of the Mortgage
Loans and that no other agreements between the parties with respect to
the servicing of other mortgage loans shall be affected, including,
without limitation, any Selling and Servicing Contract, which shall
remain in force and effect between the parties without regard to this
Agreement.
8. Effective Date of Agreement. This Agreement is not effective until
it is executed and accepted by Purchaser at its home office.
9. Notices. All notices, requests, demands or other communications
that are to be given under this Agreement shall be in writing, addressed
to the appropriate parties, and shall be sent by certified mail, return
receipt requested, postage prepaid at the address below. Any such
notice, request, demand or other communication shall be deemed effective
upon receipt.
10. Independent Contractor. At no time shall the Company represent that
it is acting as an agent, partner or joint venturer of Purchaser. The
<PAGE> 111
Company shall at all times act as an independent contracting party.
11. Amendment. This Agreement may not be amended or modified orally,
and no provision of this Agreement may be waived or amended, except in
writing signed by the party against whom enforcement is sought. Such a
written waiver or amendment must expressly reference this Agreement.
However, by its terms the Servicing Guide may be amended or supplemented
by Purchaser from time to time. Any such amendment(s) to the Servicing
Guide shall be in writing and be binding upon the parties hereto on and
after the effective date specified therein.
12. Integration. This Agreement, including all documents incorporated
by reference herein, constitutes the entire understanding between the
parties hereto and supersedes all other agreements, covenants,
representations, warranties, understandings and communications between
the parties, whether written or oral, with respect to the transactions
concerning the servicing of the Mortgage Loans contemplated by this
Agreement.
13. Miscellaneous. All section headings contained herein are for
convenience only and shall not be construed as part of this Agreement.
Any provision of this Agreement that is prohibited or unenforceable in
any jurisdiction shall as to such jurisdiction be ineffective to the
extent of such prohibition or unenforceability without invalidating the
remaining portions hereof or affecting the validity or enforceability of
such provision in any other jurisdiction, and to this end, the
provisions hereof are severable. This Agreement shall be governed by,
and construed and enforced in accordance with, applicable federal laws
and laws of the State of Illinois, without reference to conflict of laws
principles. This Agreement may be executed in one or more counterparts,
each of which shall constitute an original and all of which shall
constitute the same Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement by
proper officials duly authorized on the dates hereinafter set forth.
This Agreement shall take effect as of the date of its execution in
original or facsimile signature by a duly authorized officer of
Purchaser.
Name of the Company Company I.D. Number
Type of organization Organized under laws of
Principal place of business: street address, city, state, zip code
Typed name and title of the Company's authorized officer
Signature of the Company's authorized officer Date
<PAGE> 112
Agreed to and accepted by PNC Mortgage Securities Corp.
Principal place of business: street address, city, state, zip code
Typed name and title of the Purchaser's authorized officer
Signature of the Purchaser's authorized officer Date
Exhibit F
FORM OF TRANSFEROR CERTIFICATE FOR
CLASS B CERTIFICATES
[Date]
Bankers Trust Company of California, N.A.
3 Park Plaza, 16th Floor
Irvine, CA 92614
Attn: Corporate Trust Department, PNC 1999-7
Re: Purchase of PNC Mortgage Securities Corp. Mortgage Pass-
Through Certificates Series 1999-7, Class [B-1] [B-2] [B-3]
(the "Certificates")
Ladies and Gentlemen:
In connection with our disposition of the above Certificates we
certify that (a) we understand the Certificates have not been registered
under the Securities Act of 1933, as amended (the "Act") and are being
disposed by us in a transaction that is exempt from the registration
requirements of the Act, and (b) we have not offered or sold any
certificates to, or solicited offers to buy any Certificates from, any
person, or otherwise approached or negotiated with any person with
respect thereto, or taken any other action which would result in a
violation of Section 5 of the Act.
Very truly yours,
[Name of Transferor]
By:
<PAGE> 113
Authorized Officer
Exhibit G
FORM OF TRANSFEREE'S AGREEMENT FOR
CLASS B CERTIFICATES
[Date]
Bankers Trust Company of California, N.A.
3 Park Plaza, 16th Floor
Irvine, CA 92614
Attn: Corporate Trust Department, PNC 1999-7
PNC Mortgage Securities Corp.
75 N. Fairway Drive
Vernon Hills, Illinois 60061
The undersigned (the "Purchaser") proposes to purchase Class
[B-1] [B-2] [B-3] Certificates evidencing an undivided interest in PNC
Mortgage Securities Corp. Mortgage Pass-Through Certificates, Series
1999-7 (the "Purchased Certificates") in the principal amount of
$______________. In doing so, the Purchaser hereby acknowledges and
agrees as follows:
Section 1. Definitions. Each capitalized term used herein and
not otherwise defined herein shall have the meaning ascribed to it in
the Pooling and Servicing Agreement, dated as of May 1, 1999 (the
"Pooling Agreement"), by and between PNC Mortgage Securities Corp.
("PNC") and Bankers Trust Company of California, N.A., as trustee (the
"Trustee"), of the PNC Mortgage Securities Corp. Mortgage Pass-Through
Certificates, Series 1999-7.
Section 2. Representations and Warranties of the Purchaser. In
connection with the proposed transfer, the Purchaser represents and
warrants to PNC and the Trustee that:
(a) The Purchaser is duly organized, validly existing and in
good standing under the laws of the jurisdiction in which the Purchaser
is organized, is authorized to invest in the Purchased Certificates, and
to enter into this Agreement, and duly executed and delivered this
Agreement;
(b) The Purchaser is acquiring the Purchased Certificates for
its own account as principal and not with a view to the distribution
thereof, in whole or in part;
(c) The Purchaser is an "accredited investor" as such term is
defined in paragraph (a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) of Section
501 of Regulation D under the Securities Act of 1933, as amended (the
<PAGE> 114
"Act"), has knowledge of financial and business matters and is capable
of evaluating the merits and risks of an investment in the Purchased
Certificates; the Purchaser has sought such accounting, legal and tax
advice as it has considered necessary to make an informed investment
decision; and the Purchaser is able to bear the economic risk of an
investment in the Purchased Certificates and can afford a complete loss
of such investment;
(d) The Purchaser is not affiliated with the Trustee;
(e) The Purchaser confirms that PNC has made available to the
Purchaser the opportunity to ask questions of, and receive answers from
PNC concerning the trust fund created pursuant to the Pooling Agreement
(the "Trust Fund"), the purchase by the Purchaser of the Purchased
Certificates and all matters relating thereto that PNC possesses or can
acquire without unreasonable effort or expense; and
(f) If applicable, the Purchaser has complied, and will
continue to comply, with the guidelines established by Thrift Bulletin
13a issued April 23, 1998, by the Office of Thrift Supervision; and
(g) The Purchaser will provide the Trustee and the Master
Servicer with affidavits substantially in the form of Exhibit A attached
hereto.
Section 3.Transfer of Purchased Certificates.
(a) The Purchaser understands that the Purchased Certificates
have not been registered under the Act, or any state securities laws and
that no transfer may be made unless the Purchased Certificates are
registered under the Act and under applicable state law or unless an
exemption from registration is available. The Purchaser further
understands that neither PNC nor the Trust Fund is under any obligation
to register the Purchased Certificates or make an exemption available.
In the event that such a transfer is to be made within two years from
the Closing Date without registration under the Act or applicable state
securities laws, (i) the Trustee shall require, in order to assure
compliance with such laws, that the Certificateholder's prospective
transferee each certify to PNC and the Trustee as to the factual basis
for the registration or qualification exemption relied upon, and (ii)
the Trustee or PNC may require an Opinion of Counsel that such transfer
may be made pursuant to an exemption from the Act and state securities
laws, which Opinion of Counsel shall not be an expense of the Trustee or
PNC. Any such Certificateholder desiring to effect such transfer shall,
and does hereby agree to, indemnify the Trustee and PNC 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.
(b) No transfer of a Purchased Certificate shall be made
unless the transferee provides PNC and the Trustee with (i) a
Transferee's Agreement, substantially in the form of this Agreement or
Exhibit L to the Pooling Agreement, and (ii) either (a) an affidavit
<PAGE> 115
substantially in the form of Exhibit A hereto that the proposed
transferee (x) is not an employee benefit plan or other plan or
arrangement subject to the prohibited transaction provisions of ERISA or
Section 4975 of the Internal Revenue Code of 1986, as amended, or
comparable provisions of any subsequent enactments (a "Plan"), a trustee
of any Plan, or any other Person who is using the "plan assets" of any
Plan to effect such acquisition or (y) is an insurance company, the
source of funds to be used by it to purchase the Purchased Certificates
is an "insurance company general account" (within the meaning of
Department of Labor Prohibited Transaction Class Exemption ("PTCE") 95-
60), and the purchase is being made in reliance upon the availability of
the exemptive relief afforded under Sections I and III of PTCE 95-60, or
(b) a Benefit Plan Opinion (as defined in Exhibit A hereto).
(c) The Purchaser acknowledges that its Purchased
Certificates bear a legend setting forth the applicable restrictions on
transfer.
IN WITNESS WHEREOF, the undersigned has caused this Agreement
to be validly executed by its duly authorized representative as of the
day and the year first above written.
[Purchaser]
By:
Its:
Exhibit A to Form of Transferee Agreement (Exhibit G)
PNC MORTGAGE SECURITIES CORP.
BENEFIT PLAN AFFIDAVIT
RE: PNC MORTGAGE SECURITIES CORP.
MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1999-7
(THE "TRUST") CLASS [ B-1] [ B-2] [ B-3] CERTIFICATES
(THE "PURCHASED CERTIFICATES")
Under penalties of perjury, I, _____________________, declare that,
to the best of my knowledge and belief, the following representations
are true, correct and complete; and
1. That I am the _______________ of __________________ (the
"Purchaser"), whose taxpayer identification number is ___________, and
on behalf of which I have the authority to make this affidavit.
2. That the Purchaser is acquiring a Purchased Certificate
representing an interest in the Trust Fund.
3. That the Purchaser (i) is not an employee benefit plan or
other plan or arrangement subject to the prohibited transaction
<PAGE> 116
provisions of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), or Section 4975 of the Internal Revenue Code of 1986,
as amended (the "Code"), or comparable provisions of any subsequent
enactments (a "Plan"), a trustee of any Plan, or any other Person who is
using the "plan assets" of any Plan to effect such acquisition, (ii) has
provided a "Benefit Plan Opinion" satisfactory to PNC Mortgage
Securities Corp. (the "Company") and the Trustee of the Trust Fund or
(iii) is an insurance company, the source of funds to be used by it to
purchase the Purchased Certificates is an "insurance company general
account" (within the meaning of Department of Labor Prohibited
Transaction Class Exemption ("PTCE") 95-60), and the purchase is being
made in reliance upon the availability of the exemptive relief afforded
under Sections I and III of PTCE 95-60. A Benefit Plan Opinion is an
opinion of counsel to the effect that the proposed transfer (a) is
permissible under applicable law, (b) will not constitute or result in a
non-exempt prohibited transaction under Section 406 of ERISA or Section
4975 of the Code, and (c) will not subject the Trustee, the Master
Servicer or the Company to any obligation or liability (including
obligations or liabilities under Section 406 of ERISA or Section 4975 of
the Code) in addition to those undertaken in this Agreement, which
Benefit Plan Opinion shall not be an expense of the Trustee, the Master
Servicer or the Company.
IN WITNESS WHEREOF, the Purchaser has caused this instrument
to be duly executed on its behalf, by its duly authorized officer this
_____ day of __________________, 199__.
[Purchaser]
By:
Its:
Personally appeared before me ______________________, known or
proved to me to be the same person who executed the foregoing instrument
and to be a ________________ of the Purchaser, and acknowledged to me
that (s)he executed the same as his/her free act and deed and as the
free act and deed of the Purchaser.
SUBSCRIBED and SWORN to before me this day of ____________,
19__.
Notary Public
Exhibit H
FORM OF ADDITIONAL MATTER INCORPORATED INTO
THE FORM OF THE CERTIFICATES
This Certificate does not represent an obligation of or interest in
PNC Mortgage Securities Corp. or any of its affiliates, including PNC
<PAGE> 117
Bank Corp. Neither this Certificate nor the underlying Mortgage Loans
are guaranteed by any agency or instrumentality of the United States.
This certifies that the above-named Registered Owner is the
registered owner of certain interests in a trust fund (the "Trust Fund")
whose assets consist of, among other things, a pool (the "Mortgage
Pool") of conventional one- to four-family mortgage loans (the "Mortgage
Loans"), formed and administered by PNC Mortgage Securities Corp. (the
"Company"), which term includes any successor entity under the Pooling
Agreement referred to below. The Mortgage Pool was created pursuant to a
Pooling and Servicing Agreement, dated as of the Cut-Off Date stated
above (the "Pooling Agreement"), between the Company and Bankers Trust
Company of California, N.A., as Trustee (the "Trustee"), a summary of
certain of the pertinent provisions of which is set forth hereafter. To
the extent not defined herein, the capitalized terms used herein have
the meanings assigned in the Pooling Agreement. Nothing herein shall be
deemed inconsistent with such meanings, and in the event of any conflict
between the Pooling Agreement and the terms of this Certificate, the
Pooling Agreement shall control. This Certificate is issued under and is
subject to the terms, provisions and conditions of the Pooling
Agreement, to which Pooling Agreement the Holder of this Certificate, by
virtue of the acceptance hereof, assents and by which such Holder is
bound.
Distributions will be made, pursuant to the Pooling Agreement, on
the 25th day of each month or, if such 25th day is not a Business Day,
the Business Day immediately following (the "Distribution Date"),
commencing on the first Distribution Date specified above, to the Person
in whose name this Certificate is registered at the close of business on
the last day (or if such last day is not a Business Day, the Business
Day immediately preceding such last day) of the month immediately
preceding the month of such distribution (the "Record Date"), to the
extent of such Certificateholder's Percentage Interest represented by
this Certificate in the portion of the Available Distribution Amount for
such Distribution Date then distributable on the Certificates of this
Class, as specified in Section 4.01 of the Pooling Agreement.
Distributions on this Certificate will be made by the Trustee by
wire transfer or check mailed 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 to the Certificate Registrar.
Reference is hereby made to the further provisions of this
Certificate set forth below, which further provisions shall for all
purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed
by or on behalf of the Trustee, by manual signature, this Certificate
shall not be entitled to any benefit under the Pooling Agreement or be
<PAGE> 118
valid for any purpose.
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be
duly executed.
BANKERS TRUST COMPANY OF CALIFORNIA, N.A., as
Trustee
By:
(TRUSTEE'S CERTIFICATE OF AUTHENTICATION)
This is one of the Certificates referred to in the within-
mentioned Pooling Agreement.
BANKERS TRUST COMPANY OF CALIFORNIA, N.A.,
as Trustee
By:
Dated:
PNC MORTGAGE SECURITIES CORP.
MORTGAGE PASS-THROUGH CERTIFICATE
This Certificate is one of a duly authorized issue of Certificates
designated as Mortgage Pass-Through Certificates of the Series and Class
specified hereon (herein called the "Certificates") and representing
certain interests in the Trust Fund.
The Certificates do not represent an obligation of, or an interest
in, the Company or any of its affiliates and are not insured or
guaranteed by any governmental agency. 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
Pooling Agreement. In the event funds are advanced with respect to any
Mortgage Loan, such advance is reimbursable to the Master Servicer from
the related recoveries on such Mortgage Loan or from other cash
deposited in the Certificate Account to the extent that such advance is
not otherwise recoverable.
As provided in the Pooling Agreement, withdrawals from the
Certificate Account may be made from time to time for purposes other
than distributions to Certificateholders, such purposes including
<PAGE> 119
reimbursement to the Master Servicer of advances made, or certain
expenses incurred, by it.
The Pooling Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Company and the rights of the Certificateholders
under the Pooling Agreement at any time by the Company, the Master
Servicer and the Trustee with the consent of the Holders of the
Certificates evidencing Percentage Interests aggregating not less than
66% of the Trust Fund. 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 Pooling
Agreement also permits the amendment thereof, in certain limited
circumstances, without the consent of the Holders of any of the
Certificates.
As provided in the Pooling 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 of the
Certificate Registrar or the office maintained by the Trustee in the
City and State of New York, duly endorsed by, or accompanied by an
assignment in the form below or other written instrument of transfer in
form satisfactory to the Trustee or any Authenticating Agent duly
executed by, the Holder hereof or such Holder's attorney duly authorized
in writing, and thereupon one or more new Certificates of Authorized
Denominations evidencing the same Percentage Interest set forth
hereinabove will be issued to the designated transferee or transferees.
No transfer of a Certificate will be made unless such transfer is
exempt from or is made in accordance with the registration requirements
of the Securities Act of 1933, as amended (the "Securities Act") and any
applicable state securities laws. In the event that a transfer is to be
made without registration or qualification under applicable laws, (i) in
the event such transfer is made pursuant to Rule 144A under the
Securities Act, the Company and the Trustee shall require the transferee
to execute an investment letter in substantially the form attached as
Exhibit L to the Pooling Agreement, which investment letter shall not be
an expense of the Company, the Master Servicer or the Trustee and (ii)
in the event that such a transfer is not made pursuant to Rule 144A
under the Securities Act, the Company may require an Opinion of Counsel
satisfactory to the Company that such transfer may be made without such
registration or qualification, which Opinion of Counsel shall not be an
expense of the Company, the Master Servicer or the Trustee. Neither the
Company nor the Trustee will register the Certificate under the
Securities Act, qualify the Certificate under any state securities law
or provide registration rights to any purchaser. Any Holder desiring to
effect such transfer shall, and does hereby agree to, indemnify the
Trustee, the Company and the Master Servicer against any liability that
may result if the transfer is not so exempt or is not made in accordance
<PAGE> 120
with such federal and state laws.
The Certificates are issuable only as registered Certificates
without coupons in Authorized Denominations specified in the Pooling
Agreement. As provided in the Pooling Agreement and subject to certain
limitations therein set forth, Certificates are exchangeable for new
Certificates of Authorized Denominations evidencing the same aggregate
interest in the portion of the Available Distribution Amount
distributable on this Class of Certificate, as requested by the Holder
surrendering the same.
A reasonable service charge may be made for any such registration
of transfer or exchange, and the Trustee may require payment of a sum
sufficient to cover any tax or other governmental charge payable in
connection therewith.
The Company, the Trustee and the Certificate Registrar and any
agent of the Company, the Trustee or the Certificate Registrar may treat
the Person in whose name this Certificate is registered as the owner
hereof for all purposes, and neither the Company, the Trustee, the
Certificate Registrar nor any such agent shall be affected by notice to
the contrary.
The obligations created by the Pooling Agreement and the trust fund
created thereby shall terminate upon (i) the later of the maturity or
other liquidation (including repurchase by the Company) of the last
Mortgage Loan remaining in the Trust Fund or the disposition of all
property acquired upon foreclosure or deed in lieu of foreclosure of any
Mortgage Loan, and (ii) the payment to Certificateholders of all amounts
held by the Trustee and required to be paid to them pursuant to the
Pooling Agreement. In the event that the Company repurchases any
Mortgage Loan pursuant to the Pooling Agreement, such Pooling Agreement
generally requires that the Trustee distribute to the Certificateholders
in the aggregate an amount equal to 100% of the unpaid Principal Balance
of such Mortgage Loan, plus accrued interest at the applicable Pass-
Through Rate to the next scheduled Due Date for the Mortgage Loan. The
Pooling Agreement permits, but does not require, the Company to
repurchase from the Trust Fund all Mortgage Loans at the time subject
thereto and all property acquired in respect of any Mortgage Loan upon
payment to the Certificateholders of the amounts specified in the
Pooling Agreement. The exercise of such right will effect early
retirement of the Certificates, the Company's right to repurchase being
subject to (i) the aggregate unpaid Principal Balance of the Mortgage
Loans at the time of repurchase being less than ten percent (10%) of the
aggregate unpaid Principal Balance of the Mortgage Loans as of the Cut-
Off Date and (ii) the condition precedent that such exercise will not
result in a draw under the Certificate Insurance Policy.
ASSIGNMENT
<PAGE> 121
FOR VALUE RECEIVED the undersigned hereby sell(s) and assign(s) and
transfer(s) unto
(Please print or typewrite name and address, including postal zip code
of assignee. Please insert social security or other identifying number
of assignee.)
the within Mortgage Pass-Through Certificate and hereby irrevocably
constitutes and appoints
Attorney to transfer said Certificate on the Certificate Register, with
full power of substitution in the premises.
Dated:
Signature Guaranteed
NOTICE:The signature to this assignment must
correspond with the name as written upon the
face of the within instrument in every
particular, without alteration or enlargement
or any change whatever. This Certificate
does not represent an obligation of or an
interest in PNC Mortgage Securities Corp. or
any of its affiliates, including PNC Bank
Corp. Neither this Certificate nor the
underlying Mortgage Loans are guaranteed by
any agency or instrumentality of the United
States.
Exhibit I
TRANSFEROR CERTIFICATE
[Date]
Bankers Trust Company of California, N.A.
3 Park Plaza, 16th Floor
Irvine, CA 92614
Attn: Corporate Trust Department, PNC 1999-7
Re: PNC Mortgage Securities Corp. Mortgage Pass-Through
Certificates, Series 1999-4, Class R
Ladies and Gentlemen:
This letter is delivered to you in connection with the sale from
(the "Seller") to (the "Purchaser") of the Mortgage
Pass-Through Certificates, Series 1999-7, Class R (the "Certificate"),
pursuant to Section 5.01 of the Pooling and Servicing Agreement (the
"Pooling Agreement"), dated as of May 1, 1999 among PNC Mortgage
Securities Corp., as depositor and master servicer (the "Company") and
<PAGE> 122
Bankers Trust Company of California, N.A., as trustee (the "Trustee").
All terms used herein and not otherwise defined shall have the meanings
set forth in the Pooling Agreement. The Seller hereby certifies,
represents and warrants to, and covenants with, the Company and the
Trustee that:
1. No purpose of the Seller relating to the sale of the
Certificate by the Seller to the Purchaser is or will be to enable the
Seller to impede the assessment or collection of tax.
2. The Seller understands that the Purchaser has delivered to the
Trustee and the Company a transferee affidavit and agreement in the form
attached to the Pooling Agreement as Exhibit J. The Seller does not know
or believe that any representation contained therein is false.
3. The Seller has no actual knowledge that the proposed
Transferee is not a Permitted Transferee.
4. The Seller has no actual knowledge that the Purchaser would be
unwilling or unable to pay taxes due on its share of the taxable income
attributable to the Certificates.
5. The Seller has conducted a reasonable investigation of the
financial condition of the Purchaser and, as a result of the
investigation, found that the Purchaser has historically paid its debts
as they came due, and found no significant evidence to indicate that the
Purchaser will not continue to pay its debts as they come due in the
future.
6. The Purchaser has represented to the Seller that, if the
Certificates constitute a noneconomic residual interest, it (i)
understands that as holder of a noneconomic residual interest it may
incur tax liabilities in excess of any cash flows generated by the
interest, and (ii) intends to pay taxes associated with its holding of
the Certificates as they become due.
Very truly yours,
[Seller]
By:
Name:
Title:
Exhibit J
TRANSFEREE AFFIDAVIT AND AGREEMENT
STATE OF )
) ss:
<PAGE> 123
COUNTY OF )
[NAME OF OFFICER], being first duly sworn, deposes and says:
1. That he is [Title of Officer] of [Name of Owner] (record
or beneficial owner of the Class R Certificate (the "Owner")), a
[savings institution] [corporation] duly organized and existing under
the laws of [the State of ] [the United States], on
behalf of which he makes this affidavit and agreement.
2. That the Owner (i) is not and will not be a "disqualified
organization" as of [date of transfer] within the meaning of Section
860E(e)(5) of the Internal Revenue Code of 1986, as amended (the "Code")
and will endeavor to remain other than a disqualified organization for
so long as it retains its ownership interest in the Class R Certificate,
and (ii) is acquiring the Class R Certificate for its own account or for
the account of another Owner from which it has received an affidavit and
agreement in substantially the same form as this affidavit and
agreement. (For this purpose, a disqualified organization" means the
United States, any state or political subdivision thereof, or 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 or 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. That the Owner is aware (i) of the tax that would be
imposed on transfers of the Class R Certificate 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 middle-man)
for a disqualified organization, on the agent; (iii) that the person
other-wise 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 not a disqualified organization and, at the time of
transfer, such person does not have actual knowledge that the affidavit
is false; and (iv) that the Class R Certificate may be a "noneconomic
residual interest" within the meaning of Treasury regulations
promulgated pursuant to the Code and that the transferor of a
noneconomic residual interest will remain liable for any taxes due with
respect to the income on such residual interest, if a significant
purpose of the transfer was to enable the transferor to impede the
assessment or collection of tax.
4. That the Owner is aware of the tax imposed on a "pass-
through entity" holding the Class R Certificate if at any time during
<PAGE> 124
the taxable year of the pass-through entity a disqualified organization
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. That the Owner is aware that the Trustee will not
register the Transfer of the Class R Certificate unless the transferee,
or the transferees' agent, delivers to it an affidavit and agreement,
among other things, in substantially the same form as this affidavit and
agreement. 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. That the Owner has reviewed the restrictions set forth on
the face of the Class R Certificate and the provisions of Section 5.01
of the Pooling Agreement under which the Class R Certificate was issued
(in particular, clauses (iii)(A) and (iii)(B) of Section 5.01(c) 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 the
Owner holds such Certificates in violation of Section 5.01). The Owner
expressly agrees to be bound by and to comply with such restrictions and
provisions.
7. That 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
Certificate will only be owned, directly or indirectly, by an Owner that
is not a disqualified organization.
8. The Owner's Taxpayer Identification Number is
.
9. That no purpose of the Owner relating to the purchase of
the Class R Certificate by the Owner is or will be to enable the
transferor to impede the assessment or collection of tax.
10. That 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.
11. That the Owner has no present knowledge or expectation
that it will become insolvent or subject to a bankruptcy proceeding for
so long as any of the Certificates remain outstanding.
12. That no purpose of the Owner relating to any sale of the
Class R Certificate by the Owner will be to impede the assessment or
collection of tax.
13. 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
<PAGE> 125
thereof, or an estate or trust whose income from sources without the
United States is includible in gross income for United States federal
income tax purposes regardless of its connection with the conduct of a
trade or business within the United States.
14. The Owner hereby agrees to cooperate with the Company and
to take any action required of it by the Code or Treasury regulations
thereunder (whether now or hereafter promulgated) in order to create or
maintain the REMIC status of the REMIC I Trust Fund.
15. The Owner hereby agrees that it will not take any action
that could endanger the REMIC status of the REMIC I Trust Fund or result
in the imposition of tax on the REMIC I Trust Fund unless counsel for,
or acceptable to, the Company has provided an opinion that such action
will not result in the loss of such REMIC status or the imposition of
such tax, as applicable.
16. The Owner as transferee of the Class R Certificate has
represented to their transferor that, if the Class R Certificate
constitutes a noneconomic residual interest, the Owner (i) understands
that as holder of a noneconomic residual interest it may incur tax
liabilities in excess of any cash flows generated by the interest, and
(ii) intends to pay taxes associated with its holding of the Class R
Certificate as they become due.
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 [Title of Officer] and its corporate seal to be
hereunto attached, attested by its [Assistant] Secretary, this
day of , 19 __ .
[Name of Owner]
By:
[Name of Officer]
[Title of Officer]
[Corporate Seal]
ATTEST:
[Assistant] Secretary
Personally appeared before me the above-named [Name of Officer],
known or proved to me to be the same person who executed the foregoing
instrument and to be the [Title of Officer] of the Owner, and
Acknowledged to me that he executed the same as his free act and deed
and the free act and deed of the Owner.
<PAGE> 126
Subscribed and sworn before me this ___ day of __________________,
19__.
NOTARY PUBLIC
COUNTY OF
STATE OF
My Commission expires the
day
of , 19
Exhibit K
Form of Certificate Insurance Policy
A copy of the Certificate Insurance Policy (which has been
intentionally omitted from this filing) may be obtained from PNC
Mortgage Securities Corp. or Bankers Trust Company of California, N.A.
by contacting,
in the case of PNC Mortgage Securities Corp.,
Richie Moore
Master Servicing Department
PNC Mortgage Securities Corp.
75 N. Fairway Drive
Vernon Hills, Illinois 60061
Telephone: (847) 549-3683
Facsimile: (847) 549-3681
in the case of Bankers Trust Company of California, N.A.
Bankers Trust Company of California, N.A.
3 Park Plaza, 16th floor, Irvine, CA 92614,
Attention: Corporate Trust PNC 1999-7
Exhibit L
[FORM OF RULE 144A INVESTMENT REPRESENTATION]
Description of Rule 144A Securities, including numbers:
The undersigned seller, as registered holder (the "Seller"),
intends to transfer the Rule 144A Securities described above to the
undersigned buyer (the "Buyer").
1. In connection with such transfer and in accordance with the
agreements pursuant to which the Rule 144A Securities were issued, the
<PAGE> 127
Seller hereby certifies the following facts: Neither the Seller nor
anyone acting on its behalf has offered, transferred, pledged, sold or
otherwise disposed of the Rule 144A Securities, any interest in the Rule
144A Securities or any other similar security to, or solicited any offer
to buy or accept a transfer, pledge or other disposition of the Rule
144A Securities, any interest in the Rule 144A Securities or any other
similar security from, or otherwise approached or negotiated with
respect to the Rule 144A Securities, any interest in the Rule 144A
Securities or any other similar security with, any person in any manner,
or made any general solicitation by means of general advertising or in
any other manner, or taken any other action, that would constitute a
distribution of the Rule 144A Securities under the Securities Act of
1933, as amended (the "1933 Act"), or that would render the disposition
of the Rule 144A Securities a violation of Section 5 of the 1933 Act or
require registration pursuant thereto, and that the Seller has not
offered the Rule 144A Securities to any person other than the Buyer or
another "qualified institutional buyer" as defined in Rule 144A under
the 1933 Act.
2. The Buyer warrants and represents to, and covenants with, the
Seller, the Trustee and the Master Servicer (as defined in the Pooling
and Servicing Agreement (the "Agreement") dated as of May 1, 1999
between PNC Mortgage Securities Corp., as Depositor and Master Servicer
and Bankers Trust Company of California, N.A., as Trustee) pursuant to
Section 5.01(f) of the Agreement, as follows:
a. The Buyer understands that the Rule 144A Securities have
not been registered under the 1933 Act or the securities laws of
any state.
b. The Buyer considers itself a substantial, sophisticated
institutional investor having such knowledge and experience in
financial and business matters that it is capable of evaluating the
merits and risks of investment in the Rule 144A Securities.
c. The Buyer has received and reviewed the Private Placement
Memorandum dated as of May __, 1999 relating to the Rule 144A
Securities and has been furnished with all information regarding
the Rule 144A Securities that it has requested from the Seller, the
Trustee, the Company or the Master Servicer.
d. Neither the Buyer nor anyone acting on its behalf has
offered, transferred, pledged, sold or otherwise disposed of the
Rule 144A Securities, any interest in the Rule 144A Securities or
any other similar security to, or solicited any offer to buy or
accept a transfer, pledge or other disposition of the Rule 144A
Securities, any interest in the Rule 144A Securities or any other
similar security from, or otherwise approached or negotiated with
respect to the Rule 144A Securities, any interest in the Rule 144A
Securities or any other similar security with, any person in any
manner, or made any general solicitation by means of general
advertising or in any other manner, or taken any other action, that
<PAGE> 128
would constitute a distribution of the Rule 144A Securities under
the 1933 Act or that would render the disposition of the Rule 144A
Securities a violation of Section 5 of the 1933 Act or require
registration pursuant thereto, nor will it act, nor has it
authorized or will it authorize any person to act, in such manner
with respect to the Rule 144A Securities.
e. The Buyer is a "qualified institutional buyer" as that
term is defined in Rule 144A under the 1933 Act and has (1)
completed either of the forms of certification to that effect
attached hereto as Annex 1 or Annex 2, or (2) obtained the waiver
of the Company with respect to Annex 1 and Annex 2 pursuant to
Section 5.01(f) of the Agreement. The Buyer is aware that the sale
to it is being made in reliance on Rule 144A. The Buyer is
acquiring the Rule 144A Securities for its own account or the
accounts of other qualified institutional buyers, understands that
such Rule 144A Securities may be resold, pledged or transferred
only (i) to a person reasonably believed to be a qualified
institutional buyer that purchases for its own account or for the
account of a qualified institutional buyer to whom notice is given
that the resale, pledge or transfer is being made in reliance on
Rule 144A, or (ii) pursuant to another exemption from registration
under the 1933 Act.
f. The Buyer is not affiliated with (i) the Trustee or
(ii) any Rating Agency that rated the Rule 144A Securities.
g. If applicable, the Buyer has complied, and will continue
to comply, with the guidelines established by Thrift Bulletin 12
issued December 13, 1988, by the Office of Regulatory Activities of
the Federal Home Loan Bank System.
3. The Buyer warrants and represents to, and covenants with, the
Trustee, the Master Servicer and the Company that (1) the Buyer is not
an employee benefit plan (within the meaning of Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")),
subject to the prohibited transaction provisions of ERISA ("Plan"), or a
plan (within the meaning of Section 4975(e)(1) of the Internal Revenue
Code of 1986 ("Code")) subject to Section 4975 of the Code (also a
"Plan"), and the Buyer is not directly or indirectly purchasing the Rule
144A Securities on behalf of, as investment manager of, as named
fiduciary of, as trustee of, or with "plan assets" of any Plan, (2) the
Buyer's purchase of the Rule 144A Securities is permissible under
applicable law, will not constitute or result in a non-exempt prohibited
transaction under Section 406 of ERISA or Section 4975 of the Code and
will not subject the Trustee, the Master Servicer or the Company to any
obligation or liability (including obligations or liabilities under
Section 406 of ERISA or Section 4975 of the Code) in addition to those
undertaken in this Agreement and the Buyer has provided an Opinion of
Counsel to such effect in accordance with Section 5.01(d) of the
Agreement or (3) the Buyer is an insurance company, the source of funds
to be used by it to purchase the Rule 144A Securities is an "insurance
<PAGE> 129
company general account" (within the meaning of Department of Labor
Prohibited Transaction Class Exemption ("PTCE") 95-60), and the purchase
is being made in reliance upon the availability of the exemptive relief
afforded under Sections I and III of PTCE 95-60.
4. This document may be executed in one or more counterparts and
by the different parties hereto on separate counterparts, each of which,
when so executed, shall be deemed to be an original; such counterparts,
together, shall constitute one and the same document.
IN WITNESS WHEREOF, each of the parties has executed this document
as of the date set forth below.
Print Name of Seller Print Name of Buyer
By: By:
Name: Name:
Title: Title:
Taxpayer Identification: Taxpayer Identification:
No.: No.:
Date: Date:
Annex 1 to Exhibit L
QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
[For Buyers Other Than Registered Investment Companies]
The undersigned hereby certifies as follows in connection with the
Rule 144A Investment Representation to which this Certification is
attached:
1. As indicated below, the undersigned is the President, Chief
Financial Officer, Senior Vice President or other executive officer of
the Buyer.
2. In connection with purchases by the Buyer, the Buyer is a
"qualified institutional buyer" as that term is defined in Rule 144A
under the Securities Act of 1933 ("Rule 144A") because (i) the Buyer
owned and/or invested on a discretionary basis $______________________
(the Buyer must own and/or invest on a discretionary basis at least
$100,000,000 in securities unless the Buyer is a dealer, and, in that
case, the Buyer must own and/or invest on a discretionary basis at least
$10,000,000 in securities) in securities (except for the excluded
securities referred to below) as of the end of the Buyer's most recent
fiscal year (such amount being calculated in accordance with Rule 144A)
and (ii) the Buyer satisfies the criteria in the category marked below.
___ Corporation, etc. The Buyer is a corporation (other than a
bank, savings and loan association or similar institution),
<PAGE> 130
Massachusetts or similar business trust, partnership, or charitable
organization described in Section 501(c)(3) of the Internal Revenue
Code.
___ Bank. The Buyer (a) is a national bank or banking institution
organized under the laws of any State, territory or the District of
Columbia, the business of which is substantially confined to
banking and is supervised by the State or territorial banking
commission or similar official or is a foreign bank or equivalent
institution, and (b) has an audited net worth of at least
$25,000,000 as demonstrated in its latest annual financial
statements, a copy of which is attached hereto.
___ Savings and Loan. The Buyer (a) is a savings and loan
association, building and loan association, cooperative bank,
homestead association or similar institution, which is supervised
and examined by a State or Federal authority having supervision
over any such institutions or is a foreign savings and loan
association or equivalent institution and (b) has an audited net
worth of at least $25,000,000 as demonstrated in its latest annual
financial statements.
___ Broker-Dealer. The Buyer is a dealer registered pursuant to
Section 15 of the Securities Exchange Act of 1934.
___ Insurance Company. The Buyer is an insurance company whose
primary and predominant business activity is the writing of
insurance or the reinsuring of risks underwritten by insurance
companies and which is subject to supervision by the insurance
commissioner or a similar official or agency of a State or
territory or the District of Columbia.
___ State or Local Plan. The Buyer is a plan established and
maintained by a State, its political subdivisions, or any agency or
instrumentality of the State or its political subdivisions, for the
benefit of its employees.
___ ERISA Plan. The Buyer is an employee benefit plan within the
meaning of Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA") and is subject to the fiduciary
responsibility provisions of ERISA.
___ Investment Adviser. The Buyer is an investment adviser
registered under the Investment Advisers Act of 1940.
___ SBIC. The Buyer is a Small Business Investment Company
licensed by the U.S. Small Business Administration under Section
301(c) or (d) of the Small Business Investment Act of 1958.
___ Business Development Company. The Buyer is a business
development company as defined in Section 202(a)(22) of the
Investment Advisers Act of 1940.
<PAGE> 131
___ Trust Fund. The Buyer is a trust fund whose trustee is a bank
or trust company and whose participants are exclusively (a) plans
established and maintained by a State, its political subdivisions,
or any agency or instrumentality of the State or its political
subdivisions, for the benefit of its employees, or (b) employee
benefit plans within the meaning of Title I of the Employee
Retirement Income Security Act of 1974, but is not a trust fund
that includes as participants individual retirement accounts or
H.R. 10 plans.
3. The term "securities" as used herein does not include
(i) securities of issuers that are affiliated with the Buyer,
(ii) securities that are part of an unsold allotment to or subscription
by the Buyer, if the Buyer is a dealer, (iii) bank deposit notes and
certificates of deposit, (iv) loan participations, (v) repurchase
agreements, (vi) securities owned but subject to a repurchase agreement
and (vii) currency, interest rate and commodity swaps.
4. For purposes of determining the aggregate amount of securities
owned and/or invested on a discretionary basis by the Buyer, the Buyer
used the cost of such securities to the Buyer and did not include any of
the securities referred to in the preceding paragraph. Further, in
determining such aggregate amount, the Buyer may have included
securities owned by subsidiaries of the Buyer, but only if such
subsidiaries are consolidated with the Buyer in its financial statements
prepared in accordance with generally accepted accounting principles and
if the investments of such subsidiaries are managed under the Buyer's
direction. However, such securities were not included if the Buyer is a
majority-owned, consolidated subsidiary of another enterprise and the
Buyer is not itself a reporting company under the Securities Exchange
Act of 1934.
5. The Buyer acknowledges that it is familiar with Rule 144A and
understands that the seller to it and other parties related to the
Certificates are relying and will continue to rely on the statements
made herein because one or more sales to the Buyer may be in reliance on
Rule 144A.
Will the Buyer be purchasing the Rule 144A Securities only for
the Buyer's own account?
Yes No
6. If the answer to the foregoing question is "no", the Buyer
agrees that, in connection with any purchase of securities sold to the
Buyer for the account of a third party (including any separate account)
in reliance on Rule 144A, the Buyer will only purchase for the account
of a third party that at the time is a "qualified institutional buyer"
within the meaning of Rule 144A. In addition, the Buyer agrees that the
Buyer will not purchase securities for a third party unless the Buyer
has obtained a current representation letter from such third party or
<PAGE> 132
taken other appropriate steps contemplated by Rule 144A to conclude that
such third party independently meets the definition of "qualified
institutional buyer" set forth in Rule 144A.
7. The Buyer will notify each of the parties to which this
certification is made of any changes in the information and conclusions
herein. Until such notice is given, the Buyer's purchase of Rule 144A
Securities will constitute a reaffirmation of this certification as of
the date of such purchase.
Print Name of Buyer
By:
Name:
Title:
Date:
ANNEX 2 TO EXHIBIT L
QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
[For Buyers That Are Registered Investment Companies]
The undersigned hereby certifies as follows in connection with the
Rule 144A Investment Representation to which this Certification is
attached:
1. As indicated below, the undersigned is the President, Chief
Financial Officer or Senior Vice President of the Buyer or, if the Buyer
is a "qualified institutional buyer" as that term is defined in Rule
144A under the Securities Act of 1933 ("Rule 144A") because Buyer is
part of a Family of Investment Companies (as defined below), is such an
officer of the Adviser.
2. In connection with purchases by Buyer, the Buyer is a
"qualified institutional buyer" as defined in SEC Rule 144A because (i)
the Buyer is an investment company registered under the Investment
Company Act of 1940, and (ii) as marked below, the Buyer alone, or the
Buyer's Family of Investment Companies, owned at least $100,000,000 in
securities (other than the excluded securities referred to below) as of
the end of the Buyer's most recent fiscal year. For purposes of
determining the amount of securities owned by the Buyer or the Buyer's
Family of Investment Companies, the cost of such securities was used.
____ The Buyer owned $___________________ in securities (other than
the excluded securities referred to below) as of the end of the
Buyer's most recent fiscal year (such amount being calculated in
accordance with Rule 144A).
____ The Buyer is part of a Family of Investment Companies which
owned in the aggregate $______________ in securities (other than
<PAGE> 133
the excluded securities referred to below) as of the end of the
Buyer's most recent fiscal year (such amount being calculated in
accordance with Rule 144A).
3. The term "Family of Investment Companies" as used herein means
two or more registered investment companies (or series thereof) that
have the same investment adviser or investment advisers that are
affiliated (by virtue of being majority owned subsidiaries of the same
parent or because one investment adviser is a majority owned subsidiary
of the other).
4. The term "securities" as used herein does not include (i)
securities of issuers that are affiliated with the Buyer or are part of
the Buyer's Family of Investment Companies, (ii) bank deposit notes and
certificates of deposit, (iii) loan participations, (iv) repurchase
agreements, (v) securities owned but subject to a repurchase agreement
and (vi) currency, interest rate and commodity swaps.
5. The Buyer is familiar with Rule 144A and understands that each
of the parties to which this certification is made are relying and will
continue to rely on the statements made herein because one or more sales
to the Buyer will be in reliance on Rule 144A. In addition, the Buyer
will only purchase for the Buyer's own account.
6. The undersigned will notify each of the parties to which this
certification is made of any changes in the information and conclusions
herein. Until such notice, the Buyer's purchase of Rule 144A Securities
will constitute a reaffirmation of this certification by the undersigned
as of the date of such purchase.
Print Name of Buyer
By:
Name:
Title:
Date:
IF AN ADVISER:
Print Name of Buyer
By:
Name:
Title:
Date:
(SEAL)
Exhibit M
<PAGE> 134
[Date]
[Company]
Re: Pooling and Servicing Agreement dated as of May 1, 1999
by and between PNC Mortgage Securities Corp., as
Depositor and Master Servicer, and Bankers Trust Company
of California, N.A., as Trustee, relating to PNC Mortgage
Securities Corp. Mortgage Pass-Through Certificates,
Series 1999-7
Ladies and Gentlemen:
In accordance with Section 2.02 of the above-captioned Pooling and
Servicing Agreement, the undersigned, as Trustee, hereby certifies that,
except as noted on the attachment hereto, 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 the Custodian on its
behalf has reviewed the documents delivered to it or to the Custodian on
its behalf pursuant to Section 2.01 of the Pooling and Servicing
Agreement and has determined that (i) all documents required (in the
case of instruments described in clauses (X)(v) and (Y)(x) of the
definition of "Mortgage File," known by the Trustee to be required)
pursuant to the definition of "Mortgage File" and Section 2.01 of the
Pooling and Servicing Agreement have been executed and received as of
the date hereof are in its possession or in the possession of the
Custodian on its behalf and (ii) all such documents have been executed
and relate to the Mortgage Loans identified in the Mortgage Loan
Schedule. The Trustee has made no independent examination of such
documents beyond the review specifically required in the above
referenced Pooling and Servicing Agreement and has relied upon the
purported genuineness and due execution of any such documents and upon
the purported genuineness of any signature thereon. The Trustee makes no
representations as to: (i) the validity, legality, enforceability or
genuineness of any of the documents contained in each Mortgage File or
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.
as Trustee
By:
Name:
Title:
<PAGE> 135
EXHIBIT N
BENEFIT PLAN AFFIDAVIT
Bankers Trust Company of California, N.A., as Trustee
3 Park Plaza, 16th Floor
Irvine, CA 92614
Attn: Corporate Trust Department, PNC 1999-7
PNC Mortgage Securities Corp.
75 North Fairway Drive
Vernon Hills, IL 60061
RE: PNC MORTGAGE SECURITIES CORP.
MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1999-7
(THE "TRUST") CLASS [B-1] [B-2] [B-3] CERTIFICATES
(THE "PURCHASED CERTIFICATES")
Under penalties of perjury, I, _____________________, declare that,
to the best of my knowledge and belief, the following representations
are true, correct and complete; and
1. That I am the _______________ of __________________ (the
"Purchaser"), whose taxpayer identification number is ___________, and
on behalf of which I have the authority to make this affidavit.
2. That the Purchaser is acquiring a Purchased Certificate
representing an interest in the Trust Fund.
3. That the Purchaser is either:
(a) not an employee benefit plan or other plan subject to the
prohibited transaction provisions of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") or Section 4975 of the
Internal Revenue Code of 1986, as amended (the "Code") (a "Plan") or any
other person (including an investment manager, a named fiduciary or a
trustee of any Plan) acting directly or indirectly on behalf of, or
purchasing any of the Purchased Certificates with "plan assets" of, any
Plan within the meaning of the Department of Labor ("DOL") regulation at
29 C.F.R. Section 2510.3-101; or
(b) an insurance company, the source of funds to be used by it to
purchase the Purchased Certificates is an "insurance company general
account" (within the meaning of DOL Prohibited Transaction Class
Exemption ("PTCE") 95-60), and the purchase is being made in reliance
upon the availability of the exemptive relief afforded under Sections I
and III of PTCE 95-60.
IN WITNESS WHEREOF, the Purchaser has caused this instrument
to be duly executed on its behalf, by its duly authorized officer this
<PAGE> 136
_____ day of __________________, 199__.
[Purchaser]
By:
Its:
Personally appeared before me ______________________, known or proved to
me to be the same person who executed the foregoing instrument and to be
a ________________ of the Purchaser, and acknowledged to me that (s)he
executed the same as his/her free act and deed and as the free act and
deed of the Purchaser.
SUBSCRIBED and SWORN to before me this day of ____________,
19__.
Notary Public
