================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
December 17, 1999
First Alliance Mortgage Company
(on behalf of First Alliance Mortgage Loan Trust 1999-4)
--------------------------------------------------------
(Exact name of registrant as specified in its charter)
California 333-86411-01 95-2944875
- - - - - - - - - - - ------------------------------- ---------------- -------------------
(State or Other Jurisdiction of (Commission File (I.R.S. Employer
Incorporation) Number) Identification No.)
The Chase Manhattan Bank, as Trustee
450 West 33rd Street, 15th Floor 10001-2697
New York, New York ----------
---------------------------------------- (Zip Code)
(Address of Principal Executive Offices)
Registrant's telephone number, including area code (212) 946-8600
--------------
No Change
-------------------------------------------------------------
(Former name or former address, if changed since last report)
================================================================================
<PAGE>
Item 5. Other Events.
Reference is hereby made to the Registration Statement on Form S-3
(Registration File No. 333-86411) filed by First Alliance Mortgage Company
("First Alliance") with the Securities and Exchange Commission (the
"Commission") on September 2, 1999, as amended by Amendment No. 1 to the
Registration Statement on Form S-3 dated October 1, 1999, pursuant to which
First Alliance registered $750,000,000 aggregate principal amount of its
mortgage loan asset-backed certificates and notes, issuable in various series,
for sale in accordance with the provisions of the Securities Act of 1933, as
amended (the "Act"). Reference is also hereby made to the Prospectus dated
October 1, 1999, and the related Prospectus Supplement, dated December 10, 1999,
which were previously filed with the Commission pursuant to Rule 424(b)(5), with
respect to the FIRST ALLIANCE MORTGAGE LOAN TRUST 1999-4 Mortgage Loan Asset
Backed Certificates, Series 1999-4 (the "Certificates").
The Certificates were issued pursuant to a Pooling and Servicing
Agreement (the "Pooling and Servicing Agreement") attached hereto as Exhibit
4.1, dated as of December 1, 1999, between First Alliance Mortgage Company in
its capacities as the Seller (the "Seller") and the Servicer (the "Servicer")
and The Chase Manhattan Bank, in its capacity as trustee (the "Trustee") and the
Oversight Agent (the "Oversight Agent"). The Certificates consist of two
classes: the Class A-1 and Class A-2 Certificates (the "Class A Certificates")
and the Class R Certificates (the "Class R Certificates" and, together with the
Class A Certificates, the "Certificates"). Only the Class A Certificates were
issued pursuant to the Registration Statement. The Certificates initially
evidence, in the aggregate, 100% of the undivided beneficial ownership interests
in the Trust.
The assets of the Trust initially will include two pools (each, a
"Mortgage Loan Group") of closed-end mortgage loans (the "Mortgage Loans")
secured by mortgages or deeds of trust on one-to-four family residential
properties. The Class A-1 Fixed Rate Group Certificates represent undivided
ownership interests in a pool of fixed rate Mortgage Loans secured by mortgages
that may be either in a first or in a junior lien position. The Class A-2
Variable Rate Group Certificates represent undivided ownership interests in a
pool of variable rate Mortgage Loans secured by mortgages in a first lien
position.
Interest distributions on the Class A Certificates are based on the
Certificate Principal Balance thereof and the then applicable Pass-Through Rate
thereof. The Pass-Through Rate for the Class A-1 Certificates will be 7.52% per
annum. The Pass-Through Rate for the Class A-2 Certificates adjusts monthly
based on one-month LIBOR and with respect to the first Payment Date will be
6.84% per annum.
The Class A-1 Certificates have an aggregate principal amount of
$28,000,000. The Class A-2 Certificates have an aggregate principal amount of
$75,075,000.
As of the Startup Day, the Mortgage Loans possessed the
characteristics described in the Prospectus dated October 1, 1999 and the
Prospectus Supplement dated December 10, 1999, filed pursuant to Rule 424(b)(5)
of the Act on December 17, 1999 except that the 7 Mortgage Loans set out on
Exhibit 99.1 were removed from the Mortgage Loan Pool as a result of such
Mortgage Loans having breached the representations and warranties set out in the
Pooling and Servicing Agreement.
- 2 -
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Not applicable
(b) Not applicable
(c) Exhibits:
1.1 Underwriting Agreement, dated December 10, 1999,
between First Alliance Mortgage Company and Lehman
Brothers Inc.
4.1 Pooling and Servicing Agreement, dated as of December
1, 1999, between First Alliance Mortgage Company, as
Seller and Servicer, and The Chase Manhattan Bank, as
Trustee and Oversight Agent.
99.1 Schedule of Loans Removed Prior to Closing.
- 3 -
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
By: FIRST ALLIANCE MORTGAGE
COMPANY
By: /s/ Francisco Nebot
-----------------------------------
Name: Francisco Nebot
Title: Executive Vice President and
Chief Financial Officer
Dated: December 30, 1999
- 4 -
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description Page No.
- - - - - - - - - - - ----------- ----------- --------
<S> <C> <C>
1.1 Underwriting Agreement, dated December 10, 1999, between
First Alliance Mortgage Company and Lehman Brothers Inc.
4.1 Pooling and Servicing Agreement, dated as of December 1, 1999,
between First Alliance Mortgage Company, as Seller and
Servicer, and The Chase Manhattan Bank, as Trustee and
Oversight Agent.
99.1 Schedule of Loans Removed Prior to Closing.
</TABLE>
- 5 -
Exhibit 1.1
FIRST ALLIANCE MORTGAGE COMPANY
AND
LEHMAN BROTHERS INC.
UNDERWRITING AGREEMENT
FOR
FIRST ALLIANCE MORTGAGE LOAN TRUST 1999-4
MORTGAGE LOAN ASSET BACKED CERTIFICATES
7.52% CLASS A-1 FIXED RATE GROUP CERTIFICATES
CLASS A-2 VARIABLE RATE GROUP CERTIFICATES
December 10, 1999
<PAGE>
December 10, 1999
First Alliance Mortgage Company
17305 Von Karman Avenue
Irvine, California 92614
Lehman Brothers Inc.
Three World Financial Center
New York, New York 10285
First Alliance Mortgage Company (the "Seller") hereby confirms its
agreement to sell certain mortgage loan asset backed certificates to Lehman
Brothers Inc. (the "Underwriter") as described herein relating to the First
Alliance Mortgage Loan Trust 1999-4 (the "Trust"). The certificates, together
with certain subordinate certificates to be issued by the Trust, will evidence
in the aggregate the entire beneficial interest in a trust estate (the "Trust")
consisting of two pools (the "Mortgage Pools") of closed-end mortgage loans (the
"Initial Mortgage Loans") and such amounts as may be held by the Trustee in the
Pre-Funding Account (the "Pre-Funding Account"), the Capitalized Interest
Account (the "Capitalized Interest Account") and any other accounts held by the
Trustee for the Trust. The Initial Mortgage Loans shall have, as of the close of
business on December 1, 1999 (the "Cut-Off Date"), an aggregate principal
balance of $83,489,610.42. The certificates are to be issued under a pooling and
servicing agreement dated as of December 1, 1999 (the "Pooling and Servicing
Agreement"), among the Seller, in its individual capacity and in its capacity as
servicer (the "Servicer") and The Chase Manhattan Bank, in its capacity as
trustee (the "Trustee") and in its capacity as oversight agent (the "Oversight
Agent"). On the Closing Date, $21,510,389.58 will be deposited in the name of
the Trustee in the Pre-Funding Account from the sale of the Certificates. It is
intended that additional Mortgage Loans satisfying the criteria specified in the
Pooling and Servicing Agreement (the "Subsequent Mortgage Loans") will be
purchased by the Trust from the Seller from time to time on or before January
28, 2000 from funds on deposit in the Pre-Funding Account at the time of
execution and delivery of each Subsequent Transfer Agreement ("Subsequent
Transfer Agreement"). Funds in the Capitalized Interest Account will be applied
by the Trustee to cover shortfalls in interest during the Funding Period.
On or prior to the date of issuance of the Certificates, the Seller
will obtain two certificate guaranty insurance policies (the "Policies") issued
by MBIA Insurance Corporation (the "Insurer") which will unconditionally and
irrevocably guarantee to the Trustee for the benefit of the holders of the Class
A-1 Certificates and the Class A-2 Certificates full and complete payment of all
amounts payable on the Class A-1 Certificates and the Class A-2 Certificates.
All capitalized terms used but not otherwise defined herein have the respective
meanings set forth in the form of Pooling and Servicing Agreement heretofore
delivered to the Underwriter.
<PAGE>
1. Securities. The certificates will be issued in classes as follows:
(i) a senior class with respect to each Mortgage Loan Group consisting of the
Class A-1 Fixed Rate Group Certificates (the "Class A-1 Certificates") and the
Class A-2 Variable Rate Group Certificates (the "Class A-2 Certificates" and
collectively with the Class A-1 Certificates, the "Class A Certificates") and
(ii) a residual class (the "Class R Certificates"). The Class A Certificates and
the Class R Certificates are hereinafter referred to as the "Certificates."
2. Representations and Warranties of the Seller. The Seller represents
and warrants to, and covenants with, the Underwriter that:
A. The Seller has filed with the Securities and Exchange Commission
(the "Commission"), a registration statement (No. 333-86411) on Form S-3 for the
registration under the Securities Act of 1933, as amended (the "Act"), of
Mortgage Loan Asset Backed Certificates and Notes (issuable in series), which
registration statement, as amended at the date hereof, has become effective.
Such registration statement, as amended to the date of this Agreement, meets the
requirements set forth in Rule 415(a)(1)(vii) under the Act and complies in all
other material respects with such Rule. The Seller proposes to file with the
Commission pursuant to Rule 424(b)(5) under the Act, a supplement dated December
10, 1999 to the prospectus dated October 1, 1999 relating to the Certificates
and the method of distribution thereof and has previously advised the
Underwriter of all further information (financial and other) with respect to the
Certificates to be set forth therein. Such registration statement, including the
exhibits thereto, as amended at the date hereof, is hereinafter called the
"Registration Statement"; such prospectus dated October 1, 1999, in the form in
which it will be filed with the Commission pursuant to Rule 424(b)(5) under the
Act is hereinafter called the "Basic Prospectus"; such supplement dated December
10, 1999 to the Basic Prospectus, in the form in which it will be filed with the
Commission pursuant to Rule 424(b)(5) of the Act, is hereinafter called the
"Prospectus Supplement"; and the Basic Prospectus and the Prospectus Supplement
together are hereinafter called the "Prospectus." There are no contracts or
documents of the Seller which are required to be filed as exhibits to the
Registration Statement pursuant to the Act or the Rules and Regulations which
have not been so filed or incorporated by reference therein on or prior to the
effective date of the Registration Statement. The conditions for use by the
Seller of the Registration Statement on Form S-3 under the Act have been
satisfied. The Seller will file with the Commission (i) promptly after receipt
from the Underwriter of any Derived Information (as defined herein) a Form 8-K
incorporating such Derived Information and (ii) within fifteen days of the
issuance of the Certificates a report on Form 8-K setting forth specific
information concerning the related Mortgage Loans (the "8-K").
B. As of the date hereof, when the Registration Statement became
effective, when the Prospectus Supplement is first filed pursuant to Rule
424(b)(5) under the Act and at the Closing Date, (i) the Registration Statement,
as amended as of any such time, and the Prospectus, as amended or supplemented
as of any such time, will comply in all material respects with the applicable
requirements of the Act and the rules and regulations thereunder and (ii) the
Registration Statement, as amended as of any such time, did not and will not
contain any untrue statement of a material fact and did not and will not omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading and the Prospectus, as amended or supplemented
as of any such time, did not and will not contain an untrue statement of a
material fact and did not and will not omit to state a material fact necessary
in order to make
2
<PAGE>
the statements therein, in light of the circumstances under which they were
made, not misleading; provided, however, that the Seller makes no
representations or warranties as to the information contained in or omitted from
the Prospectus Supplement or any amendment thereof or supplement thereto in
reliance upon and in conformity with the information furnished in writing to the
Seller by or on behalf of the Underwriter specifically for use in connection
with the preparation of the Prospectus Supplement.
C. The Seller is duly organized, validly existing and in good standing
under the laws of the State of California, has full power and authority
(corporate and other) to own its properties and conduct its business as now
conducted by it, and as described in the Prospectus, and is duly qualified to do
business in each jurisdiction in which it owns or leases real property (to the
extent such qualification is required by applicable law) or in which the conduct
of its business requires such qualification except where the failure to be so
qualified does not involve (i) a material risk to, or a material adverse effect
on, the business, properties, financial position, operations or results of
operations of the Seller or (ii) any risk whatsoever as to the enforceability of
any Mortgage Loan.
D. There are no actions, proceedings or investigations pending, or, to
the knowledge of the Seller, threatened, before any court, governmental agency
or body or other tribunal (i) asserting the invalidity of this Agreement, the
Certificates, the Insurance Agreement, the Indemnification Agreement or of the
Pooling and Servicing Agreement, (ii) seeking to prevent the issuance of the
Certificates or the consummation of any of the transactions contemplated by this
Agreement, the Pooling and Servicing Agreement or any Subsequent Transfer
Agreement, (iii) which (except as noted in the Prospectus Supplement under the
Caption "RISK FACTORS -- Litigation") may, individually or in the aggregate,
materially and adversely affect the performance by the Seller of its obligations
under, or the validity or enforceability of, this Agreement, the Certificates,
the Pooling and Servicing Agreement or any Subsequent Transfer Agreement, or
(iv) which may affect adversely the federal income tax attributes of the
Certificates as described in the Prospectus.
E. The execution and delivery by the Seller of this Agreement, the
Indemnification Agreement, the Insurance Agreement and the Pooling and Servicing
Agreement, the issuance of the Certificates and the transfer and delivery of the
Mortgage Loans to the Trustee by the Seller are within the corporate power of
the Seller and have been, or will be, prior to the Closing Date duly authorized
by all necessary corporate action on the part of the Seller and the execution
and delivery of such instruments, the consummation of the transactions therein
contemplated and compliance with the provisions thereof will not result in a
breach or violation of any of the terms and provisions of, or constitute a
default under, any statute or any agreement or instrument to which the Seller or
any of its affiliates is a party or by which it or any of them is bound or to
which any of the property of the Seller or any of its affiliates is subject, the
Seller's charter or bylaws, or any order, rule or regulation of any court,
governmental agency or body or other tribunal having jurisdiction over the
Seller, any of its affiliates or any of its or their properties; and no consent,
approval, authorization or order of, or filing with, any court or governmental
agency or body or other tribunal is required for the consummation of the
transactions contemplated by this Agreement or the Prospectus in connection with
the issuance and sale of the Certificates by the Seller except pursuant to the
Act. Neither the Seller nor any of its affiliates is a party to, bound by or in
breach or violation of any indenture or other agreement or
3
<PAGE>
instrument, or subject to or in violation of any statute, order, rule or
regulation of any court, governmental agency or body or other tribunal having
jurisdiction over the Seller or any of its affiliates, which materially and
adversely affects, or may in the future materially and adversely affect, (i) the
ability of the Seller to perform its obligations under the Pooling and Servicing
Agreement, this Agreement, the Insurance Agreement, the Indemnification
Agreement and any Subsequent Transfer Agreement or (ii) the business,
operations, results of operations, financial position, income, properties or
assets of the Seller, taken as a whole.
F. This Agreement and the Indemnification Agreement have been duly
executed and delivered by the Seller, and on or prior to the Closing Date the
Pooling and Servicing Agreement, the Insurance Agreement and any Subsequent
Transfer Agreement will be duly executed and delivered by the Seller, and each
constitutes and/or will constitute, as applicable, the legal, valid and binding
obligation of the Seller enforceable in accordance with their respective terms,
except as enforceability may be limited by (i) bankruptcy, insolvency,
liquidation, receivership, moratorium, reorganization or other similar laws
affecting the enforcement of the rights of creditors and (ii) general principles
of equity, whether enforcement is sought in a proceeding at law or in equity.
G. The Certificates will conform in all material respects to the
description thereof to be contained in the Prospectus and will be duly and
validly authorized and, when duly and validly executed, authenticated, issued
and delivered in accordance with the Pooling and Servicing Agreement and sold to
the Underwriter as provided herein, will be validly issued and outstanding and
entitled to the benefits of the Pooling and Servicing Agreement.
H. No consent, approval, authorization, order, registration or
qualification of or with any court or governmental agency or body of the United
States is required for the issuance of the Certificates and the sale of the
Certificates to the Underwriter, or for the consummation by the Seller, of the
other transactions contemplated by this Agreement, the Indemnification
Agreement, the Pooling and Servicing Agreement, the Insurance Agreement and any
Subsequent Transfer Agreement, other than those that have been obtained.
I. On the Closing Date, the Initial Mortgage Loans will conform in all
material respects to the description thereof contained in the Prospectus and the
representations and warranties contained in this Agreement will be true and
correct in all material respects. The representations and warranties set out in
the Pooling and Servicing Agreement are hereby made to the Underwriter as though
set out herein, and at the dates specified in the Pooling and Servicing
Agreement, and in any Subsequent Transfer Agreement, such representations and
warranties were, or will be, true and correct in all material respects.
J. On the Closing Date, (x) the Seller will have good title to the
Initial Mortgage Loans free of any liens, (y) the Trustee on behalf of the Trust
will have acquired beneficial ownership of the Seller's right, title and
interest in the Initial Mortgage Loans and (z) the Underwriter will have good
title to the Certificates free of any liens. The transfer of the Initial
Mortgage Loans to the Trust on the Closing Date will be treated by the Seller
for financial accounting and reporting purposes as a sale of assets and not as a
pledge of assets to secure debt.
4
<PAGE>
K. The Seller possesses all material licenses, certificates, permits or
other authorizations issued by the appropriate state, federal or foreign
regulatory agencies or bodies necessary to conduct the business now operated by
it and as described in the Prospectus and, except as noted in the Prospectus
Supplement under the caption "RISK FACTORS -- Litigation," there are no
proceedings, pending or, to the best knowledge of the Seller, threatened,
relating to the revocation or modification of any such license, certificate,
permit or other authorization which singly or in the aggregate, if the subject
of an unfavorable decision, ruling or finding, would materially and adversely
affect the business, operations, results of operations, financial position,
income, property or assets of the Seller taken as a whole.
L. Any taxes, fees and other governmental charges in connection with
the execution and delivery of this Agreement, the Insurance Agreement, the
Indemnification Agreement, and the Pooling and Servicing Agreement or the
execution and issuance of the Certificates have been or will be paid on or prior
to the Closing Date.
M. There has not been any material adverse change, or any development
involving a prospective material adverse change, in the condition, financial or
otherwise, or in the earnings, business or operations of the Seller or its
subsidiaries, taken as a whole, from September 30, 1999, to the date hereof.
N. This Agreement and the Pooling and Servicing Agreement will conform
in all material respects to the descriptions thereof contained in the
Prospectus.
O. The Seller is not aware of (i) any request by the Commission for any
further amendment of the Registration Statement or the Prospectus or for any
additional information, (ii) the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the institution or
threatening of any proceeding for that purpose or (iii) any notification with
respect to the suspension of the qualification of the Certificates for sale in
any jurisdiction or the initiation or threatening of any proceeding for such
purpose.
P. Each assignment of Mortgages required to be prepared pursuant to the
Pooling and Servicing Agreement is based on forms recently utilized by the
Seller with respect to mortgaged properties located in the appropriate
jurisdiction and used in the regular course of the Seller's business. Based on
the Seller's experience with such matters it is reasonable to believe that upon
execution each such assignment will be in recordable form and will be sufficient
to effect the assignment of the Mortgage to which it relates as provided in the
Pooling and Servicing Agreement.
Q. The Seller is eligible to use the Registration Statement.
R. Neither the Seller nor the Trust created by the Pooling and
Servicing Agreement is an "investment company" within the meaning of such term
under the Investment Company Act of 1940 (the "1940 Act") and the rules and
regulations of the Commission thereunder.
S. On the Closing Date, the Class A Certificates shall have been rated
in the highest rating category by at least two nationally recognized rating
agencies.
5
<PAGE>
T. The Seller is not in violation of its articles of incorporation or
by-laws or, to our knowledge, in default in the performance or observance of any
material obligation, agreement, covenant or condition contained in any contract,
indenture, mortgage, loan agreement, note, lease or other instrument to which
the Seller is a party or by which it or its properties may be bound, which
default might result in any material adverse changes in the financial condition,
earnings, affairs or business of the Seller or which might materially and
adversely affect the properties or assets, taken as a whole, of the Seller.
U. To the best knowledge of the Seller, Deloitte & Touche LLP are
independent public accountants with respect to the Sellers as required by the
Securities Act and the Rules and Regulations.
Any certificate signed by any officer of the Seller and delivered to
the Underwriter in connection with the sale of the Certificates hereunder shall
be deemed a representation and warranty as to the matters covered thereby by the
Seller to each person to whom the representations and warranties in this Section
2 are made.
3. Agreements of the Underwriter. The Underwriter agrees with the
Seller that upon the execution of this Agreement and authorization by the
Underwriter of the release of the Class A Certificates, the Underwriter shall
offer the Class A Certificates for sale upon the terms and conditions set forth
in the Prospectus as amended or supplemented.
4. Purchase, Sale and Delivery of the Class A Certificates. The Seller
hereby agrees, subject to the terms and conditions hereof, to sell the Class A
Certificates to the Underwriter, who, upon the basis of the representations and
warranties herein contained, but subject to the conditions hereinafter stated,
hereby agrees to purchase the entire aggregate principal amount of the Class A
Certificates, consisting of the Class A-1 Certificates in the amount of
$28,000,000 and the Class A-2 Certificates in the amount of $75,075,000. At the
time of issuance of the Certificates, the Initial Mortgage Loans will be sold by
the Seller to the Trust pursuant to the Pooling and Servicing Agreement. The
Subsequent Mortgage Loans will be purchased by the Trust for inclusion in both
Mortgage Loan Groups, from time to time on or before January 28, 2000. The
Servicer and the Oversight Agent will be obligated, under the Pooling and
Servicing Agreement, to service the Mortgage Loans either directly or through
sub-servicers.
The Class A Certificates to be purchased by the Underwriter will be
delivered by the Seller to the Underwriter (which delivery shall be made through
the facilities of The Depository Trust Company ("DTC")) against payment of the
purchase price therefor, equal to 99.68634084% of the aggregate principal amount
of the Class A Certificates, including accrued interest at the Class A-1
Pass-Through Rate on the Class A-1 Certificates from December 1, 1999 to, but
not including, the Closing Date, by a same day federal funds wire payable to the
order of the Seller. No accrued interest will be payable on the Class A-2
Variable Rate Group Certificates, which shall be dated their date of delivery.
Settlement shall take place at the offices of Arter & Hadden LLP, 1801
K Street, N.W., Washington, D.C. 20006, at 10:00 a.m. (E.S.T.), on December 17,
1999, or at such other time thereafter as the Underwriter and the Seller
determine (such time being herein referred to as the "Closing Date"). The Class
A Certificates will be prepared in definitive form and in such
6
<PAGE>
authorized denominations as the Underwriter may request, registered in the name
of Cede & Co., as nominee of DTC.
The Seller agrees to have the Class A Certificates available for
inspection and review by the Underwriter in New York City not later than 1:00
p.m. (E.S.T.) on the business day prior to the Closing Date.
5. Covenants of the Seller. The Seller covenants and agrees with the
Underwriter that:
A. The Seller will promptly advise the Underwriter and its counsel (i)
when any amendment to the Registration Statement shall have become effective,
(ii) of any request by the Commission for any amendment to the Registration
Statement or the Prospectus or for any additional information, (iii) of the
issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement or the institution or threatening of any proceeding for
that purpose and (iv) of the receipt by the Seller of any notification with
respect to the suspension of the qualification of the Class A Certificates for
sale in any jurisdiction or the initiation or threatening of any proceeding for
such purpose. The Seller will not file any amendment to the Registration
Statement or supplement to the Prospectus after the date hereof and prior to the
Closing Date for the Certificates unless the Seller has furnished the
Underwriter and its counsel copies of such amendment or supplement for their
review prior to filing and will not file any such proposed amendment or
supplement to which the Underwriter reasonably objects, unless such filing is
required by law. The Seller will use its best efforts to prevent the issuance of
any stop order suspending the effectiveness of the Registration Statement and,
if issued, to obtain as soon as possible the withdrawal thereof.
B. If, at any time during the period in which the Prospectus is
required by law to be delivered, any event occurs as a result of which the
Prospectus as then amended or supplemented would include any untrue statement of
a material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, or if it shall be necessary to amend or supplement the
Prospectus to comply with the Act or the rules under the Act, the Seller will
promptly prepare and file with the Commission, subject to Paragraph A of this
Section 5, an amendment or supplement that will correct such statement or
omission or an amendment that will effect such compliance and, if such amendment
or supplement is required to be contained in a post-effective amendment to the
Registration Statement, will use its best efforts to cause such amendment of the
Registration Statement to be made effective as soon as possible.
C. The Seller will furnish to the Underwriter, without charge, executed
copies of the Registration Statement (including exhibits thereto) and, so long
as delivery of a Prospectus by the Underwriter or a dealer may be required by
the Act, as many copies of the Prospectus, as amended or supplemented, and any
amendments and supplements thereto as the Underwriter may reasonably request.
The Seller will pay the expenses of printing (or otherwise reproducing) all
offering documents relating to the offering of the Class A Certificates.
D. As soon as practicable, but not later than sixteen months after the
date hereof, the Seller will cause the Trust to make generally available to
Owners of the Certificates an earning
7
<PAGE>
statement of the Trust covering a period of at least 12 months beginning after
the effective date of the Registration Statement which will satisfy the
provisions of Section 11(a) of the Act and, at the option of the Seller, will
satisfy the requirements of Rule 158 under the Act.
E. During a period of 20 calendar days from the date as of which this
Agreement is executed, neither the Seller nor any affiliate of the Seller will,
without the Underwriter's prior written consent (which consent shall not be
unreasonably withheld), enter into any agreement to offer or sell mortgage loan
asset-backed securities backed by mortgage loans, except pursuant to this
Agreement.
F. So long as any of the Class A Certificates are outstanding, the
Seller will cause to be delivered to the Underwriter (i) all documents required
to be distributed to Owners of the Class A Certificates and (ii) from time to
time, any other information concerning the Trust filed with any government or
regulatory authority that is otherwise publicly available.
G. The Seller, whether or not the transactions contemplated hereunder
are consummated or this Agreement is terminated, will pay all expenses in
connection with the transactions contemplated herein, including, but not limited
to, the expenses of printing (or otherwise reproducing) all documents relating
to the offering, the reasonable fees and disbursements of its counsel and
expenses of the Underwriter (including the reasonable fees and disbursements of
Brown & Wood LLP, as special counsel to the Underwriter) incurred in connection
with (i) the issuance and delivery of the Certificates, (ii) preparation,
printing, reproducing and delivery of all documents specified in this Agreement,
(iii) any fees and expenses of the Trustee, the Insurer and any other credit
support provider (including legal fees), accounting fees and disbursements, and
(iv) any fees charged by investment rating agencies for rating the Class A
Certificates.
H. The Seller agrees that, so long as any of the Class A Certificates
shall be outstanding, it will deliver or cause to be delivered to the
Underwriter (i) the annual statement as to compliance delivered to the Trustee
pursuant to the Pooling and Servicing Agreement, (ii) the annual statement of a
firm of independent public accountants furnished to the Trustee pursuant to the
Pooling and Servicing Agreement as soon as such statement is furnished to the
Seller and (iii) any information required to be delivered by the Seller or the
Servicer to the Trustee in order for the Trustee to prepare the report required
pursuant to Section 7.8 of the form of Pooling and Servicing Agreement
heretofore delivered to the Underwriter.
I. The Seller will enter into the Pooling and Servicing Agreement, the
Insurance Agreement, and all related agreements on or prior to the Closing Date.
J. The Seller will endeavor to qualify the Class A Certificates for
sale to the extent necessary under any state securities or Blue Sky laws in any
jurisdictions as may be reasonably requested by the Underwriter, if any, and
will pay all expenses (including fees and disbursements of counsel) in
connection with such qualification and in connection with the determination of
the eligibility of the Class A Certificates for investment under the laws of
such jurisdictions as the Underwriter may reasonably designate, if any.
8
<PAGE>
6. Conditions of the Underwriter's Obligation. The obligation of the
Underwriter to purchase and pay for the Class A Certificates as provided herein
shall be subject to the accuracy as of the date hereof and the Closing Date (as
if made at the Closing Date) of the representations and warranties of the Seller
contained herein (including those representations and warranties set forth in
the Pooling and Servicing Agreement and incorporated herein), to the accuracy of
the statements of the Seller made in any certificate or other document delivered
pursuant to the provisions hereof, to the performance by the Seller of its
obligations hereunder, and to the following additional conditions:
A. The Registration Statement shall have become effective no later than
the date hereof, and no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that
purpose shall have been instituted or threatened, and the Prospectus shall have
been filed pursuant to Rule 424(b).
B. The Underwriter shall have received the Pooling and Servicing
Agreement and the Class A Certificates in form and substance satisfactory to the
Underwriter, duly executed by all signatories required pursuant to the
respective terms thereof.
C.1. The Underwriter shall have received the favorable opinion of the
General Counsel to the Seller, with respect to the following items, dated the
Closing Date, to the effect that:
(a) The Seller has been duly organized and is validly existing
as a corporation in good standing under the laws of the State of
California, and is qualified to do business in each state necessary to
enable it to perform its obligations as Servicer under the Pooling and
Servicing Agreement. The Seller has the requisite power and authority
to execute and deliver, engage in the transactio ns contemplated by,
and perform and observe the conditions of, this Agreement, the Pooling
and Servicing Agreement, any Subsequent Transfer Agreement, the
Insurance Agreement and the Indemnification Agreement.
(b) This Agreement, the Certificates, the Pooling and
Servicing Agreement, the Insurance Agreement and the Indemnification
Agreement have been duly and validly authorized, executed and delivered
by the Seller, all requisite corporate action having been taken with
respect thereto, and each (other than the Certificates) constitutes the
valid, legal and binding agreement of the Seller enforceable against
the Seller in accordance with its respective terms.
(c) Neither the transfer of the Initial Mortgage Loans to the
Trust, the issuance or sale of the Certificates nor the execution,
delivery or performance by the Seller of the Pooling and Servicing
Agreement, this Agreement, any Subsequent Transfer Agreement, the
Insurance Agreement or the Indemnification Agreement (A) conflicts or
will conflict with or results or will result in a breach of, or
constitutes or will constitute a default under, (i) any term or
provision of the articles of incorporation or bylaws of the Seller;
(ii) any term or provision of any material agreement, contract,
instrument or indenture, to which the Seller is a party or is bound; or
(iii) any order, judgment, writ, injunction or decree of any court or
governmental agency or body or other tribunal having jurisdiction over
the Seller; or (B) results in, or will result in the creation or
9
<PAGE>
imposition of any lien, charge or encumbrance upon the Trust or upon
the Certificates, except as otherwise contemplated by the Pooling and
Servicing Agreement.
(d) The endorsement and delivery of each Note, and the
preparation, delivery and recording of an Assignment in recordable
form, with respect to each Mortgage (in the absence of the delivery of
the opinions described in Section 3.6(b)(ii)(y) of the Pooling and
Servicing Agreement), as and in the manner contemplated by the Pooling
and Servicing Agreement, is sufficient fully to transfer to the Trustee
for the benefit of the Owners all right, title and interest of the
Seller in the Note and Mortgage, as noteholder and mortgagee or
assignee thereof, and will be sufficient to permit the Trustee to avail
itself of all protection available under applicable law against the
claims of any present or future creditors of the Seller and to prevent
any other sale, transfer, assignment, pledge or other encumbrance of
the Mortgage Loans by the Seller from being enforceable.
(e) No consent, approval, authorization or order of,
registration or filing with, or notice to, courts, governmental agency
or body or other tribunal is required under the laws of the State of
California, for the execution, delivery and performance of the Pooling
and Servicing Agreement, the Insurance Agreement, this Agreement, the
Indemnification Agreement or the offer, issuance, sale or delivery of
the Certificates or the consummation of any other transaction
contemplated thereby by the Seller, except such which have been
obtained.
(f) The Seller possesses all material licenses, certificates,
permits or other authorizations issued by the appropriate state,
federal or foreign regulatory agencies or bodies necessary to conduct
the business now operated by it and as described in the Prospectus and,
except as noted in the Prospectus Supplement under the caption "RISK
FACTORS-- Litigation," there are no proceedings, pending or, to the
best knowledge of the Seller, threatened, relating to the revocation or
modification of any such license, certificate, permit or other
authorization which singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would materially and adversely
affect the business, operations, results of operations, financial
position, income, property or assets of the Seller taken as a whole.
(g) There are no actions, proceedings or investigations
pending or, to such counsel's knowledge, threatened against the Seller
before any court, governmental agency or body or other tribunal (i)
asserting the invalidity of the Pooling and Servicing Agreement, the
Insurance Agreement, this Agreement, the Indemnification Agreement or
the Certificates, (ii) seeking to prevent the issuance of the
Certificates or the consummation of any of the transactions
contemplated by the Pooling and Servicing Agreement, the
Indemnification Agreement, the Insurance Agreement or this Agreement or
(iii) which (except as noted in the Prospectus Supplement under the
caption "RISK FACTORS-- Litigation") would materially and adversely
affect the performance by the Seller of obligations under, or the
validity or enforceability of, the Pooling and Servicing Agreement, the
Certificates, the Indemnification Agreement, the Insurance Agreement or
this Agreement.
10
<PAGE>
(h) The statements in the Prospectus under the caption
"CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS AND RELATED MATTERS," to the
extent that statements in such section constitute matters of law or
legal conclusions with respect thereto, have been reviewed by attorneys
under the supervision of General Counsel to the Seller and are complete
and correct in all material respects.
2. The Underwriter shall have received the favorable opinion of Arter &
Hadden LLP, special counsel to the Seller, dated the Closing Date, to the effect
that:
(a) The Certificates, assuming due execution and
authentication by the Trustee, and delivery and payment therefor
pursuant to this Agreement are validly issued and outstanding and are
entitled to the benefits of the Pooling and Servicing Agreement.
(b) No consent, approval, authorization or order of,
registration or filing with, or notice to, any governmental authority
or court is required under federal laws or the laws of the State of New
York, for the execution, delivery and performance by the Seller of the
Pooling and Servicing Agreement, this Agreement, any Subsequent
Transfer Agreement, the Indemnification Agreement, the Insurance
Agreement or the offer, issue, sale or delivery of the Certificates or
the consummation of any other transaction contemplated thereby by the
Seller, except such which have been obtained.
(c) Neither the transfer of the Initial Mortgage Loans to the
Trustee, the issuance or sale of the Class A Certificates, nor the
execution, delivery or performance by the Seller of the Pooling and
Servicing Agreement, the Insurance Agreement, any Subsequent Transfer
Agreement, the Indemnification Agreement or this Agreement will (a)
conflict with or result in a breach of, or constitute a default under
any law, rule or regulation of the State of New York or the federal
government, or (b) to such counsel's knowledge, without independent
investigation, results in, or will result in, the creation or
imposition of any lien, charge or encumbrance upon the Trust or upon
the Certificates, except as otherwise contemplated by the Pooling and
Servicing Agreement.
(d) Each Subsequent Transfer Agreement at the time of its
execution and delivery will be sufficient to convey all of the Seller's
right, title and interest in the Subsequent Mortgage Loans to the
Trustee and following the consummation of the transaction contemplated
by each Subsequent Transfer Agreement, the transfer of the Subsequent
Mortgage Loans by the Seller to the Trustee will be a sale thereof.
(e) The Registration Statement has become effective under the
Act, no objection to the use of Form S-3 with respect to the
Registration Statement was made by the Commission prior to the time it
became effective and, to the best of such counsel's knowledge, no stop
order has been issued and no proceedings therefor initiated or
threatened and the Registration Statement, the Basic Prospectus and the
Prospectus Supplement (other than the financial and statistical data
included therein, as to which such counsel need express no opinion), as
of the date on which the Registration Statement was declared effective
and as of the date hereof, comply as to form in all material respects
with the requirements of the Act and the rules and regulations
thereunder, and such counsel does not know of any amendment to the
Registration
11
<PAGE>
Statement required to be filed, or of any contracts, indentures or
other documents of a character required to be filed as an exhibit to
the Registration Statement or required to be described in the
Registration Statement, the Basic Prospectus or the Prospectus
Supplement which has not been filed or described as required.
(f) Neither the qualification of the Pooling and Servicing
Agreement under the Trust Indenture Act of 1939 nor the registration of
the Trust created by such Agreement under the 1940 Act is presently
required.
(g) The statements in the Basic Prospectus set forth under the
captions "DESCRIPTION OF THE SECURITIES" and "THE POOLING AND SERVICING
AGREEMENT" and the statements in the Prospectus Supplement set forth
under the captions "DESCRIPTION OF THE CLASS A CERTIFICATES" and "THE
POOLING AND SERVICING AGREEMENT," to the extent such statements purport
to summarize certain provisions of the Certificates or of the Pooling
and Servicing Agreement, are fair and accurate in all material
respects.
(h) Except as to any financial or statistical data contained
in the Registration Statement, the statements set forth in the Basic
Prospectus under the caption "DESCRIPTION OF CREDIT ENHANCEMENT," and
in the Prospectus Supplement under the caption "THE CERTIFICATE
INSURANCE POLICIES AND THE CERTIFICATE INSURER," and any Derived
Information as to which no opinion or belief need be expressed, to the
best of such counsel's knowledge, the Registration Statement, the Basic
Prospectus and the Prospectus Supplement do not contain any untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary in order to make the statements
therein not misleading.
(i) Upon receipt by the Trustee, on behalf of the Owners of
the Certificates, of the related Notes, endorsed as described in the
Pooling and Servicing Agreement, and the receipt by the Seller of the
purchase price for the Certificates and for so long as the Trustee
maintains actual physical possession of such Notes, (i) the Trustee
shall be vested with good and indefeasible title to, and shall be the
sole owner of, and shall obtain all right, title and interest of the
Seller in, each Mortgage Loan, (ii) in the event that the sale of the
Mortgage Loans were to be recharacterized as a financing secured by the
Mortgage Loans, the Trustee has a first perfected security interest in
the Mortgage Loans and (iii) in the jurisdictions listed in such
opinion, the recordation of the assignments of the Mortgages is not
required for the Trustee to obtain such rights, as against creditors
of, and purported transferees of, the Seller.
(j) To the best of the knowledge of such counsel, the
Commission has not issued any stop order suspending the effectiveness
of the Registration Statement or any order directed to any prospectus
relating to the Certificates (including the Prospectus), and has not
initiated or threatened any proceeding for that purpose.
3. The Underwriter shall have received the favorable opinion of Arter &
Hadden LLP, special tax and bankruptcy counsel to the Seller, dated the Closing
Date, to the effect that:
12
<PAGE>
(a) Assuming the REMIC election is made in compliance with the
Pooling and Servicing Agreement, (i) the Trust, exclusive of the
Pre-Funding Account and the Capitalized Interest Account (as defined in
the Prospectus Supplement) will qualify as a real estate mortgage
investment conduit ("REMIC") (as defined in the Internal Revenue Code
of 1986, as amended (the "Code")) for federal income tax purposes and
(ii) each Class of the Class A Certificates (as defined in the
Prospectus Supplement) will be treated as "regular interests" in the
REMIC and the Class R Certificates will be treated as the sole
"residual interest" in the REMIC.
(b) To the best of such counsel's knowledge, there are no
actions, proceedings or investigations pending that would adversely
affect the Trust Estate (exclusive of the Pre-Funding Account and the
Capitalized Interest Account) as a real estate mortgage investment
conduit ("REMIC") as such term is defined in the Code.
(c) The statements under the captions "SUMMARY OF TERMS -- TAX
STATUS" "-- ERISA" "CERTAIN FEDERAL INCOME TAX CONSEQUENCES" and "ERISA
CONSIDERATIONS" in the Basic Prospectus and under the captions "SUMMARY
OF TERMS -- TAX ASPECTS," "-- ERISA," "CERTAIN FEDERAL INCOME TAX
CONSEQUENCES" and "ERISA CONSIDERATIONS" in the Prospectus Supplement
as they relate to federal tax matters are true and correct in all
material respects.
(d) As a consequence of the qualification of the Trust
(exclusive of the Pre-Funding Account and the Capitalized Interest
Account) as a REMIC, the Class A Certificates will be treated as
"regular . . . interest(s) in a REMIC" under Section 7701(a)(19)(C) of
the Code and "real estate assets" under Section 856(c) of the Code in
the same proportion that the assets in the Trust consist of qualifying
assets under such Sections. In addition, as a consequence of the
qualification of the Trust (exclusive of the Pre-Funding Account and
the Capitalized Interest Account) as a REMIC, interest on the Class A
Certificates will be treated as "interest on obligations secured by
mortgages on real property" under Section 856(c) of the Code to the
extent that such Class A Certificates are treated as "real estate
assets" under Section 856(c) of the Code.
(e) The Trust will not be subject to tax upon its income or
assets by the taxing authority of New York State or New York City.
(f) The Trust will not be subject to the California state
income tax. While REMICs are subject to the California state minimum
franchise tax imposed under Article 2, Section 23153 of the California
Revenue and Taxation Code, such counsel does not express an opinion as
to whether the Trust is subject to such tax.
(g) A court would hold that the conveyance by the Seller of
all right, title and interest in the Mortgage Loans to the Trustee
(except for the Seller's right, title and interest in the principal and
interest due on such Mortgage Loans on or prior to the Cut-Off Date),
constitutes a sale of the Mortgage Loans and not a borrowing by the
Seller secured by the pledge of the Mortgage Loans. A court would find
that, following such conveyance, the Mortgage Loans and proceeds
thereof (net of payments of principal and
13
<PAGE>
interest due on such Mortgage Loans on or prior to the Cut-Off Date)
are not property of the estate of the Seller within the meaning of
Section 541 of the Bankruptcy Code, and, further that the Trustee's
rights with respect to the Mortgage Loans and the proceeds thereof
would not subject it to the automatic stay provisions of Section 362 of
the Bankruptcy Code. Since the conveyance of the Mortgage Loans (net of
payments of scheduled principal due and interest accrued on or prior to
the Cut-Off Date) constitutes a sale of said Mortgage Loans then the
payments thereunder (net of payments of scheduled principal due on and
interest accrued on or prior to the Cut-Off Date) are not property of
the estate of the Seller and the distributions of such payments by the
Trustee to the Owners of the Certificates are not preferential payments
made by, for, or on behalf of the Seller under the provisions of
Section 547 of the Bankruptcy Code.
(h) If a court characterized the transfer of the Mortgage
Loans to the Trustee, on behalf of the Owners of the Certificates, as a
pledge of collateral rather than an absolute sale or assignment, with
respect to the Mortgage Loans and other property included in the Trust
on the date hereof, to the extent governed by the laws of the State of
New York, a valid security interest has been created in favor of the
Trustee, which security interest of the Trustee will be perfected and
will constitute a first perfected security interest, with respect to
the Seller's right, title and interest in and to the Notes, upon
endorsement and delivery thereof to the Trustee. With respect to the
security interest of the Trustee in the Notes, New York law would
govern.
4. The Underwriter shall have received the favorable opinion of Brown &
Wood LLP, special counsel to the Underwriter, dated the Closing Date, to the
effect that:
(a) The Certificates, assuming due execution and
authentication by the Trustee, and delivery and payment therefor
pursuant to this Agreement, are validly issued and outstanding and are
entitled to the benefits of the Pooling and Servicing Agreement.
(b) No fact has come to such counsel's attention which causes
them to believe that the Prospectus (other than the financial statement
and other financial and statistical data contained therein, as to which
such counsel need express no opinion), as of the date thereof,
contained any untrue statement of a material fact or omitted to state a
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(c) Such other matters as the Underwriter may reasonably
request.
In rendering their opinions, the counsels described in this Paragraph
(C) may rely, as to matters of fact, on certificates of responsible officers of
the Seller, the Trustee and public officials. Such opinions may also assume the
due authorization, execution and delivery of the instruments and documents
referred to therein by the parties thereto other than the Seller.
D. The Underwriter shall have received a letter from Deloitte & Touche
LLP, dated on or before the Closing Date, in form and substance satisfactory to
the Underwriter and counsel for the Underwriter, to the effect that they have
performed certain specified procedures requested
14
<PAGE>
by the Underwriter with respect to the information set forth in the Prospectus
and certain matters relating to the Seller.
E. The Class A Certificates shall have been rated in the highest rating
category by Moody's Investors Service, Inc. and by Standard & Poor's Ratings
Service, a division of The McGraw-Hill Companies, Inc., and such ratings shall
not have been rescinded. The Underwriter and its counsel shall have received
copies of any opinions of counsel supplied to the rating organizations relating
to any matters with respect to the Class A Certificates. Any such opinions shall
be dated the Closing Date and addressed to the Underwriter or accompanied by
reliance letters to the Underwriter or shall state that the Underwriter may rely
upon them.
F. The Underwriter shall have received from the Seller a certificate,
signed by the president, a senior vice president or a vice president of the
Seller, dated the Closing Date, to the effect that the signer of such
certificate has carefully examined the Registration Statement, the Pooling and
Servicing Agreement and this Agreement and that, to the best of his or her
knowledge based upon reasonable investigation:
1. the representations and warranties of the Seller in this Agreement,
and in the Indemnification Agreement, as of the Closing Date, in the
Pooling and Servicing Agreement, in the Insurance Agreement and in all
related agreements, as of the date specified in such agreements, are
true and correct, and the Seller has complied with all the agreements
and satisfied all the conditions on its part to be performed or
satisfied at or prior to the Closing Date;
2. except as noted in the Prospectus Supplement under the caption "RISK
FACTORS -- Litigation," there are no actions, suits or proceedings
pending, or to the best of such officer's knowledge, threatened against
or affecting the Seller which if adversely determined, individually or
in the aggregate, would be reasonably likely to adversely affect the
Seller's obligations under the Pooling and Servicing Agreement, the
Insurance Agreement, this Agreement or under the Indemnification
Agreement in any material way; and no merger, liquidation, dissolution
or bankruptcy of the Seller is pending or contemplated;
3. the information contained in the Registration Statement and
Prospectus relating to the Seller, the Mortgage Loans or the servicing
procedures of it or its affiliates or the subservicer is true and
accurate in all material respects and nothing has come to his or her
attention that would lead such officer to believe that the Registration
Statement and Prospectus includes any untrue statement of a material
fact or omits to state a material fact necessary to make the statements
therein not misleading;
4. the information set forth in the Schedules of Mortgage Loans
required to be furnished pursuant to the Pooling and Servicing
Agreement is true and correct in all material respects;
5. there has been no amendment or other document filed affecting the
articles of incorporation or bylaws of the Seller since August 1, 1996,
and no such amendment has
15
<PAGE>
been authorized. No event has occurred since December 16, 1999, which
has affected the good standing of the Seller under the laws of the
State of California;
6. there has not occurred any material adverse change, or any
development involving a prospective material adverse change, in the
condition, financial or otherwise, or in the earnings, business or
operations of the Seller and its subsidiaries, taken as a whole, from
September 30, 1999;
7. on or prior to the Closing Date, there has been no downgrading, nor
has any notice been given of (A) any intended or potential downgrading
or (B) any review or possible changes in rating, the direction of which
has not been indicated, in the rating, if any, accorded the Seller or
in any rating accorded any securities of the Seller, if any, by any
"nationally recognized statistical rating organization," as such term
is defined for purposes of the Act; and
8. each person who, as an officer or representative of the Seller,
signed or signs the Registration Statement, the Pooling and Servicing
Agreement, this Agreement, the Indemnification Agreement, the Insurance
Agreement, or any other document delivered pursuant hereto, on the date
of such execution, or on the Closing Date, as the case may be, in
connection with the transactions described in the Pooling and Servicing
Agreement, the Indemnification Agreement, the Insurance Agreement and
this Agreement was, at the respective times of such signing and
delivery, and is now, duly elected or appointed, qualified and acting
as such officer or representative, and the signatures of such persons
appearing on such documents are their genuine signatures.
The Seller shall attach to such certificate a true and correct copy of
its certificate or articles of incorporation, as appropriate, and bylaws which
are in full force and effect on the date of such certificate and a certified
true copy of the resolutions of its Board of Directors with respect to the
transactions contemplated herein.
G. The Underwriter shall have received an opinion of counsel to the
Trustee and Oversight Agent, dated the Closing Date and in form and substance
satisfactory to the Underwriter and its counsel, to the effect that:
1. each of the Trustee and Oversight Agent is a New York banking
corporation duly organized, validly existing and in good standing under
the laws of the State of New York and has the power and authority to
enter into and to take all actions required of it under the Pooling and
Servicing Agreement;
2. the Pooling and Servicing Agreement has been duly authorized,
executed and delivered by each of the Trustee and Oversight Agent and
the Pooling and Servicing Agreement constitutes the legal, valid and
binding obligation of such party, enforceable against it in accordance
with its terms, except as enforceability thereof may be limited by (A)
bankruptcy, insolvency, reorganization or other similar laws affecting
the enforcement of creditors' rights generally, as such laws would
apply in the event of a bankruptcy, insolvency or reorganization or
similar occurrence affecting such party, and
16
<PAGE>
(B) general principles of equity regardless of whether such enforcement
is sought in a proceeding at law or in equity;
3. no consent, approval, authorization or other action by any
governmental agency or body or other tribunal is required on the part
of the Trustee or Oversight Agent in connection with its execution and
delivery of the Pooling and Servicing Agreement or the performance of
its obligations thereunder;
4. the Certificates have been duly executed, authenticated and
delivered by the Trustee;
5. the execution and delivery of, and performance by each of the
Trustee and Oversight Agent of its obligations under, the Pooling and
Servicing Agreement do not conflict with or result in a violation of
any statute or regulation applicable to such party, or the articles or
bylaws of the such party, or to the best knowledge of such counsel, any
governmental authority having jurisdiction over such party or the terms
of any indenture or other agreement or instrument to which the Trustee
or Oversight Agent, is a party or by which it is bound; and
6. in the event that the Servicer defaults in its obligation to make
advances under the Pooling and Servicing Agreement, the Trustee or the
Oversight Agent or any affiliate of such party, is not prohibited by a
provision of its Articles of Incorporation or Bylaws or by any
provision of the banking and trust laws of the United States of America
or the State of New York, as the case may be (or any rule, regulation,
decree or order thereunder), from assuming its obligation to make such
advances.
In rendering such opinion, such counsel may rely, as to matters of
fact, on certificates of responsible officers of the Seller, the Trustee, the
Oversight Agent and public officials. Such opinion may also assume the due
authorization, execution and delivery of the instruments and documents referred
to therein by the parties thereto other than the Trustee or the Oversight Agent,
as the case may be.
H. The Underwriter shall have received from the Trustee a certificate,
signed by the President, a senior vice president or an assistant vice president
of the Trustee, dated the Closing Date, to the effect that each person who, as
an officer or representative of the Trustee, signed or signs the Certificates,
the Pooling and Servicing Agreement or any other document delivered pursuant
hereto, on the date hereof or on the Closing Date, in connection with the
transactions described in the Pooling and Servicing Agreement was, at the
respective times of such signing and delivery, and is now, duly elected or
appointed, qualified and acting as such officer or representative, and the
signatures of such persons appearing on such documents are their genuine
signatures.
I. The Underwriter shall have received from the Oversight Agent a
certificate, signed by the President, a senior vice president or an assistant
vice president of the Oversight Agent, dated the Closing Date, to the effect
that each person who, as an officer or representative of the Oversight Agent,
signed or signs the Pooling and Servicing Agreement or any other document
delivered pursuant hereto, on the date hereof or on the Closing Date, in
connection
17
<PAGE>
with the transactions described in the Pooling and Servicing Agreement was, at
the respective times of such signing and delivery, and is now, duly elected or
appointed, qualified and acting as such officer or representative, and the
signatures of such persons appearing on such documents are their genuine
signatures.
J. The Policies relating to the Class A Certificates shall have been
duly executed and issued at or prior to the Closing Date and shall conform in
all material respects to the description thereof in the Prospectus.
K. The Underwriter shall have received a favorable opinion of Kutak
Rock, counsel to the Insurer, dated the Closing Date and in form and substance
satisfactory to counsel for the Underwriter, to the effect that:
1. The Insurer is a stock insurance corporation, duly incorporated and
validly existing under the laws of the State of New York. The Insurer
is validly licensed and authorized to issue the Policies and perform
its obligations under the Policies in accordance with the terms
thereof, under the laws of the State of New York.
2. The execution and delivery by the Insurer of the Policies, the
Insurance Agreement and the Indemnification Agreement are within the
corporate power of the Insurer and have been authorized by all
necessary corporate action on the part of the Insurer; the Policies
have been duly executed and are the valid and binding obligations of
the Insurer enforceable in accordance with their terms except that the
enforcement of the Policies may be limited by laws relating to
bankruptcy, insolvency, reorganization, moratorium, receivership and
other similar laws affecting creditors' rights generally and by general
principles of equity.
3. The Insurer is authorized to deliver the Insurance Agreement, and
the Indemnification Agreement, and the Insurance Agreement and the
Indemnification Agreement have been duly executed and are the valid and
binding obligations of the Insurer enforceable in accordance with their
terms except that the enforcement of the Insurance Agreement and the
Indemnification Agreement may be limited by laws relating to
bankruptcy, insolvency, reorganization, moratorium, receivership and
other similar laws affecting creditors' rights generally and by general
principles of equity and by public policy considerations relating to
indemnification for securities law violations.
4. No consent, approval, authorization or order of any state or federal
court or governmental agency or body is required on the part of the
Insurer, the lack of which would adversely affect the validity or
enforceability of the Policies; to the extent required by applicable
legal requirements that would adversely affect validity or
enforceability of the Policies, the form of the Policies has been filed
with, and approved by, all governmental authorities having jurisdiction
over the Insurer in connection with such Policies.
5. To the extent any Policy constitutes a security within the meaning
of Section 2(1) of the Act, it is a security that is exempt from the
registration requirements of the Act.
18
<PAGE>
6. The information set forth under the caption "THE CERTIFICATE
INSURANCE POLICIES AND THE CERTIFICATE INSURER" in the Prospectus
Supplement, insofar as such statements constitute a description of the
Policies, accurately summarizes the Policies.
In rendering this opinion, such counsel may rely, as to matters of
fact, on certificates of responsible officers of the Seller, the Trustee, the
Oversight Agent, the Insurer and public officials. Such opinion may assume the
due authorization, execution and delivery of the instruments and documents
referred to therein by the parties thereto other than the Insurer.
L. On or prior to the Closing Date, there has been no downgrading, nor
has any notice been given of (A) any intended or potential downgrading or (B)
any review or possible changes in rating, the direction of which has not been
indicated, in the rating, if any, accorded the Seller or in any rating accorded
any securities of the Seller, if any, by any "nationally recognized statistical
rating organization," as such term is defined for purposes of the Act.
M. On or prior to the Closing Date there shall not have occurred any
downgrading, nor shall any notice have been given of (A) any intended or
potential downgrading or (B) any review or possible change in rating the
direction of which has not been indicated, in the rating accorded the Insurer's
claims paying ability by any "nationally recognized statistical rating
organization," as such term is defined for purposes of the Act.
N. There has not occurred any change, or any development involving a
prospective change, in the condition, financial or otherwise, or in the
earnings, business or operations, since September 30, 1999, (A) of the Seller or
its subsidiaries and affiliates, or (B) of the Insurer, that is in the
Underwriter's judgment material and adverse and that makes it in the
Underwriter's judgment impracticable to market the Class A Certificates on the
terms and in the manner contemplated in the Prospectus.
O. The Underwriter shall have received from the Insurer a certificate,
signed by the President, a senior vice president or a vice president of the
Insurer, dated the Closing Date, to the effect that the signer of such
certificate has carefully examined the Policies, the Insurance Agreement, the
Indemnification Agreement and the related documents and that, to the best of his
or her knowledge based on reasonable investigation:
1. each person who as an officer or representative of the Insurer,
signed or signs the Policies, the Insurance Agreement, the
Indemnification Agreement or any other document delivered pursuant
hereto, on the date thereof, or on the Closing Date, in connection with
the transactions described in this Agreement was, at the respective
times of such signing and delivery, and is now a duly authorized
representative of the Insurer and is authorized to execute and deliver
this certificate.
2. The financial data presented in the table set forth under the
heading "THE CERTIFICATE INSURANCE POLICIES AND THE CERTIFICATE
INSURER" in the Prospectus Supplement presents fairly the
capitalization of the Insurer and its wholly-owned subsidiaries as of
the dates indicated therein, and to the best of the Insurer's
19
<PAGE>
knowledge since such date, no material and adverse change has occurred
in the financial position of the Insurer other than as set forth in the
Prospectus Supplement.
3. The financial statements of the Insurer incorporated by reference
into the Prospectus Supplement are true and accurate.
4. The information which relates to the Insurer or the Policies under
the caption titled "THE CERTIFICATE INSURANCE POLICIES AND THE
CERTIFICATE INSURER" in the Prospectus Supplement is true and correct
in all material respects.
5. There are no actions, suits, proceedings or investigations pending
or, to the best of the Insurer's knowledge, threatened against it at
law or in equity or before or by any court, governmental agency, board
or commission or any arbitrator which, if decided adversely, would
materially and adversely affect its condition (financial or otherwise)
or operations or which would materially and adversely affect its
ability to perform its obligations under the Policies or the Insurance
Agreement.
6. The execution and delivery of the Insurance Agreement and the
Policies and the compliance with the terms and provisions thereof will
not conflict with, result in a breach of, or constitute a default under
any of the terms, provisions or conditions of the Restated Charter or
By-Laws of the Insurer or of any agreement, indenture or instrument to
which the Insurer is a party.
7. The issuance of the Policies and the execution, delivery and
performance of the Insurance Agreement have been duly authorized by all
necessary corporate proceedings. No further approvals or filings of any
kind, including, without limitation, any further approvals or further
filing with any governmental agency or other governmental authority, or
any approval of the Insurer's board of directors or stockholders, are
necessary for the Policies and the Insurance Agreement to constitute
the legal, valid and binding obligations of the Insurer.
The officer of the Insurer certifying to items 2 and 3 shall be an
officer in charge of a principal financial function.
The Insurer shall attach to such certificate a true and correct copy of
its certificate or articles of incorporation, as appropriate, and its bylaws,
all of which are in full force and effect on the date of such certificate.
P. The Underwriter shall have received from Brown & Wood LLP, special
counsel to the Underwriter, such opinion or opinions, dated the Closing Date,
with respect to the issuance and sale of the Certificates, the Prospectus and
such other related matters as the Underwriter shall reasonably require.
Q. The Underwriter and its counsel shall have received copies of any
opinions of counsel to the Seller or the Insurer supplied to the Trustee
relating to matters with respect to the Certificates or the Policies. Any such
opinions shall be dated the Closing Date and addressed to the Underwriter or
accompanied by reliance letters to the Underwriter or shall state that the
Underwriter may rely thereon.
20
<PAGE>
R. The Underwriter shall have received such further information,
certificates and documents as the Underwriter may reasonably have requested not
fewer than three (3) full business days prior to the Closing Date.
If any of the conditions specified in this Section 6 shall not have
been fulfilled in all respects when and as provided in this Agreement, if the
Seller is in breach of any covenants or agreements contained herein or if any of
the opinions and certificates mentioned above or elsewhere in this Agreement
shall not be in all material respects reasonably satisfactory in form and
substance to the Underwriter and its counsel, this Agreement and all obligations
of the Underwriter hereunder, may be canceled on, or at any time prior to, the
Closing Date by the Underwriter. Notice of such cancellation shall be given to
the Seller in writing, or by telephone or telegraph confirmed in writing.
7. Expenses. If the sale of the Class A Certificates provided for
herein is not consummated by reason of a default by the Seller in its
obligations hereunder, then the Seller will reimburse the Underwriter, upon
demand, for all reasonable out-of-pocket expenses (including, but not limited
to, the reasonable fees and expenses of Brown & Wood LLP) that shall have been
incurred by the Underwriter in connection with its investigation with regard to
the Seller, the Class A Certificates and the proposed purchase and sale of the
Class A Certificates.
8. Indemnification and Contribution. A. Regardless of whether any Class
A Certificates are sold, the Seller will indemnify and hold harmless the
Underwriter, each of its respective officers and directors and each person who
controls the Underwriter within the meaning of the Act or the Securities
Exchange Act of 1934 (the "1934 Act"), against any and all losses, claims,
damages, or liabilities (including the cost of any investigation, legal and
other expenses incurred in connection with any amounts paid in settlement of any
action, suit, proceeding or claim asserted), joint or several, to which they may
become subject, under the Act, the 1934 Act or other federal or state law or
regulation, at common law or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained (i) in
the Registration Statement, or any amendment thereof or supplement thereto, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact necessary to make the statements therein, not misleading or (ii)
in the Basic Prospectus or the Prospectus Supplement or any amendment thereto or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, and will promptly reimburse each such indemnified party upon demand
for any legal or other expenses reasonably incurred by it in connection with
investigating or defending against such loss, claim, damage, liability or
action; provided, however, that the Seller shall not be liable in any such case
to the extent that any such loss, claim, damage or liability arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission made therein in reliance upon and in conformity with written
information furnished to the Seller by or on behalf of the Underwriter
specifically for use in connection with the preparation thereof.
B. Regardless of whether any Class A Certificates are sold, the
Underwriter agrees to indemnify and hold harmless the Seller, each of its
officers and directors and each person, if any, who controls the Seller within
the meaning of the Act or the 1934 Act against any losses, claims,
21
<PAGE>
damages or liabilities to which they or any of them become subject under the
Act, the 1934 Act or other federal or state law or regulation, at common law or
otherwise, to the same extent as the foregoing indemnity, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in (i) the Registration Statement, or any amendment
thereof or supplement thereto, or arise out of or are based upon the omission or
alleged omission to state therein a material fact necessary to make the
statements therein not misleading or in (ii) the Basic Prospectus or the
Prospectus Supplement or any amendment thereto or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made therein in reliance upon and
in conformity with written information furnished to the Seller by or on behalf
of the Underwriter specifically for use in the preparation thereof and so
acknowledged in writing, and will promptly reimburse the Seller upon demand for
any legal or other expenses reasonably incurred by the Seller in connection with
investigating or defending against such loss, claim, damage, liability or
action.
C. In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to Paragraphs A and B above such person (hereinafter called the
indemnified party) shall promptly notify the person against whom such indemnity
may be sought (hereinafter called the indemnifying party) in writing thereof;
but the omission to notify the indemnifying party shall not relieve such
indemnifying party from any liability which it may have to any indemnified party
otherwise than under such Paragraph. The indemnifying party, upon request of the
indemnified party, shall retain counsel reasonably satisfactory to the
indemnified party to represent the indemnified party and any others the
indemnifying party may designate in such proceeding and shall pay the fees and
disbursements of such counsel related to such proceeding. In any such proceeding
any indemnified party shall have the right to retain its own counsel, but the
fees and expenses of such counsel shall be at the expense of such indemnified
party unless (i) the indemnifying party has not retained counsel reasonably
satisfactory to the indemnified party, (ii) the indemnifying party and the
indemnified party shall have mutually agreed to the retention of such counsel,
or (iii) the named parties to any such proceeding (including any impleaded
parties) include both the indemnifying party and the indemnified party and
representation of both parties by the same counsel would be inappropriate due to
actual or potential differing interests between them. It is understood that the
indemnifying party shall not, in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the fees and expenses of
more than one separate firm for all such indemnified parties, and that all such
fees and expenses shall be reimbursed as they are incurred. Such firm shall be
designated in writing by the Underwriter in the case of parties indemnified
pursuant to Paragraph A and by the Seller in the case of parties indemnified
pursuant to Paragraph B. The indemnifying party shall not be liable for any
settlement of any proceeding effected without its written consent, but if
settled with such consent or if there is a final judgment for the plaintiff, the
indemnifying party agrees to indemnify the indemnified party from and against
any loss or liability by reason of such settlement or judgment. Notwithstanding
the foregoing sentence, if at any time an indemnified party shall have requested
an indemnifying party to reimburse the indemnified party for fees and
22
<PAGE>
expenses of counsel as contemplated above, the indemnifying party agrees that it
shall be liable for any settlement of any proceeding effected without its
written consent if (i) such settlement is entered into more than 30 days after
receipt by such indemnifying party of the aforesaid request and (ii) such
indemnifying party shall not have reimbursed the indemnified party in accordance
with such request prior to the date of such settlement. No indemnifying party
shall, without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such proceeding.
D. The Underwriter agrees to provide the Seller, for its review, no
later than two Business Days prior to the date on which the information required
to be filed in accordance with the terms of the No-Action Letters (as defined
herein) with a copy of its Derived Information for filing with the Commission on
Form 8-K.
E. The Underwriter agrees, assuming all Seller-Provided Information (as
defined below) is accurate and complete in all material respects, to indemnify
and hold harmless the Seller, each of the Seller's officers and directors and
each person who controls the Seller within the meaning of Section 15 of the
Securities Act against any and all losses, claims, damages or liabilities, joint
or several, to which they may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement of a
material fact contained in the Derived Information provided by the Underwriter,
or arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, and agrees to reimburse such indemnified party for any
legal or other expenses reasonably incurred by him, her or it in connection with
investigating or defending or preparing to defend any such loss, claim, damage,
liability or action as such expenses are incurred. The obligations of the
Underwriter under this Section 8(E) shall be in addition to any liability which
the Underwriter may otherwise have.
The procedures set forth in Section 8(C) shall be equally applicable to
this Section 8(E).
F. If the indemnification provided for in this Section 8 is unavailable
to an indemnified party in respect of any losses, claims, damages or liabilities
referred to herein, then each indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities (i)
in such proportion as is appropriate to reflect the relative benefits received
by the Seller and the Underwriter from the sale of the Class A Certificates or
(ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only
relative benefits referred to in clause (i) above but also the relative fault of
the Seller and of the Underwriter in connection with the statements or omissions
that resulted in such losses, claims, damages or liabilities, as well as any
other relevant equitable considerations.
23
<PAGE>
The relative benefits received by the Seller and the Underwriter shall
be deemed to be in such proportion so that the Underwriter is responsible for
that portion determined by multiplying the total amount of such losses, claims,
damages and liabilities, including legal and other expenses, by a fraction, the
numerator of which is (x) the excess of the Aggregate Resale Price of the Class
A Certificates purchased by the Underwriter over the aggregate purchase price of
the Class A Certificates specified in Section 4 of this Agreement and the
denominator of which is (y) the Aggregate Resale Price of the Class A
Certificates purchased by the Underwriter and the Seller is responsible for the
balance, provided, however, that no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of the immediately preceding sentence, the
"Aggregate Resale Price" of the Class A Certificates at the time of any
determination shall be the weighted average of the purchase prices (in each case
expressed as a percentage of the aggregate principal amount of the Class A
Certificates so purchased), determined on the basis of such principal amounts,
paid to the Underwriter by all subsequent purchasers that purchased the Class A
Certificates on or prior to such date of determination. The relative fault of
the Seller and the Underwriter shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Seller or by the Underwriter and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
G. The Seller and the Underwriter agree that it would not be just and
equitable if contribution pursuant to this Section 8 were determined by pro rata
allocation or by any other method of allocation that does not take account of
the equitable considerations referred to in Paragraph D. The amount paid or
payable by an indemnified party as a result of the losses, claims, damages and
liabilities referred to in Paragraph D shall be deemed to include, subject to
the limitations set forth above, any legal or other expenses reasonably incurred
by such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 8, the
Underwriter shall not be required to contribute any amount in excess of the
amount of the underwriting discounts and commissions received by the Underwriter
in connection with its purchase of the Certificates.
H. For purposes of this Section VIII, the term "Derived Information"
means such portion, if any, of the information delivered to the Seller pursuant
to Section 8(D) for filing with the Commission on Form 8-K as:
(i) is not contained in the Prospectus without taking into
account information incorporated therein by reference; and
(ii) does not constitute Seller-Provided Information.
(iii) is of the type of information defined as Collateral term
sheets, structural term sheets or Computational Materials (as such
terms are interpreted in the No-Action Letters (as defined below)).
24
<PAGE>
"Seller-Provided Information" means the information contained on any computer
tape furnished to the Underwriter by the Seller concerning the assets comprising
the Trust.
The terms "Collateral term sheet" and "Structural term sheet" shall
have the respective meanings assigned to them in the February 13, 1995 letter
(the "PSA Letter") of Cleary, Gottlieb, Steen & Hamilton on behalf of the Public
Securities Association (which letter, and the SEC staff's response thereto, were
publicly available February 17, 1995). The term "Collateral term sheet" as used
herein includes any subsequent Collateral term sheet that reflects a substantive
change in the information presented. The term "Computational Materials" has the
meaning assigned to it in the May 17, 1994 letter (the "Kidder letter" and
together with the PSA Letter, the "No-Action Letters") of Brown & Wood LLP on
behalf of Kidder, Peabody & Co., Inc. (which letter, and the SEC staff's
response thereto, were publicly available May 20, 1994).
I. The Seller and the Underwriter each expressly waive, and agree not
to assert, any defense to their respective indemnification and contribution
obligations under this Section 8 which they might otherwise assert based upon
any claim that such obligations are unenforceable under federal or state
securities laws or by reasons of public policy.
J. The obligations of the Seller under this Section 8 shall be in
addition to any liability which the Seller may otherwise have and shall extend,
upon the same terms and conditions, to each person, if any, who controls the
Underwriter within the meaning of the Act or the 1934 Act; and the obligations
of the Underwriter under this Section 8 shall be in addition to any liability
that the Underwriter may otherwise have and shall extend, upon the same terms
and conditions, to each director of the Seller and to each person, if any, who
controls the Seller within the meaning of the Act or the 1934 Act; provided,
however, that in no event shall the Seller or the Underwriter be liable for
double indemnification.
9. Information Supplied by the Underwriter. The statements set forth in
the first sentence of the second and sixth paragraphs under the heading
"UNDERWRITING" in the Prospectus Supplement (to the extent such statements
relate to the Underwriter), constitute the only information furnished by the
Underwriter to the Seller for the purposes of Sections 2(B) and 8(A) hereof.
10. Notices. All communications hereunder shall be in writing and, if
sent to the Underwriter, shall be mailed or delivered or telecopied and
confirmed in writing to the Underwriter at Lehman Brothers Inc., Three World
Financial Center, New York, New York 10285, Attention: Samir Tabet, and, if sent
to the Seller, shall be mailed, delivered or telegraphed and confirmed in
writing to the Seller at the address set forth above, Attention: Director of
Secondary Marketing.
11. Survival. All representations, warranties, covenants and agreements
of the Seller contained herein or in agreements or certificates delivered
pursuant hereto, the agreements of the Underwriter and the Seller contained in
Section 8 hereof, and the representations, warranties and agreements of the
Underwriter contained in Section 3 hereof, shall remain operative and in full
force and effect regardless of any investigation made by or on behalf of the
Underwriter or any controlling persons, or any subsequent purchaser or the
Seller or any of its officers, directors or any controlling persons, and shall
survive delivery of and payment for the Class A Certificates.
25
<PAGE>
The provisions of Sections 5, 7 and 8 hereof shall survive the termination or
cancellation of this Agreement.
12. Termination. The Underwriter shall have the right to terminate this
Agreement by giving notice as hereinafter specified at any time at or prior to
the Closing Date if (a) trading generally shall have been suspended or
materially limited on or by, as the case may be, any of the New York Stock
Exchange, the American Stock Exchange, the National Association of Securities
Dealers, Inc., the Chicago Board Options Exchange, the Chicago Mercantile
Exchange or the Chicago Board of Trade, (b) trading of any securities of the
Seller shall have been suspended on any exchange or in any over-the-counter
market, (c) a general moratorium on commercial banking activities shall have
been declared by either federal or New York State authorities, (d) there shall
have occurred any outbreak or escalation of hostilities or any change in
financial markets or any calamity or crisis which, in the Underwriter's
reasonable judgment, is material and adverse, and, in the case of any of the
events specified in clauses (a) through (d), such event singly or together with
any other such event makes it in the Underwriter's reasonable judgment
impractical to market the Class A Certificates. Any such termination shall be
without liability of any other party except that the provisions of Paragraph G
of Section 5 (except with respect to expenses of the Underwriter) and Sections 7
and 8 hereof shall at all times be effective. If the Underwriter elects to
terminate this Agreement as provided in this Section 12, the Seller shall be
notified promptly by the Underwriter by telephone, telegram or facsimile
transmission, in any case, confirmed by letter.
13. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and assigns
(which successors and assigns do not include any person purchasing a Class A
Certificate from the Underwriter), and the officers and directors and
controlling persons referred to in Section 8 hereof and their respective
successors and assigns, and no other persons will have any right or obligations
hereunder.
14. Applicable Law; Venue. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York. Any
action or proceeding brought to enforce or arising out of any provision of this
Agreement shall be brought only in a state or federal court located in the
Borough of Manhattan, New York City, New York, and the parties hereto expressly
consent to the jurisdiction of such courts and agree to waive any defense or
claim of forum non conveniens they may have with respect to any such action or
proceeding brought.
15. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall together constitute but one and the same
instrument.
16. Amendments and Waivers. This Agreement may be amended, modified,
altered or terminated, and any of its provisions waived, only in a writing
signed on behalf of the parties hereto.
26
<PAGE>
IN WITNESS WHEREOF, the parties hereto hereby execute this Underwriting
Agreement, as of the day and year first above written.
FIRST ALLIANCE MORTGAGE COMPANY
By: /s/ Francisco Nebot
----------------------
LEHMAN BROTHERS INC.
By: /s/ Martin P. Harding
----------------------
27
Exhibit 4.1
POOLING AND SERVICING AGREEMENT
Relating to
FIRST ALLIANCE MORTGAGE LOAN TRUST
1999-4
Among
FIRST ALLIANCE MORTGAGE COMPANY,
as Seller and Servicer
and
THE CHASE MANHATTAN BANK,
as Trustee and Oversight Agent
Dated as of December 1, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Article I DEFINITIONS; RULES OF CONSTRUCTION......................................................................1
Section 1.1 Definitions..................................................................................1
Section 1.2 Use of Words and Phrases....................................................................26
Section 1.3 Captions; Table of Contents.................................................................26
Section 1.4 Opinions....................................................................................26
Article II ESTABLISHMENT AND ORGANIZATION OF THE TRUST...........................................................27
Section 2.1 Establishment of the Trust..................................................................27
Section 2.2 Office......................................................................................27
Section 2.3 Purposes and Powers.........................................................................27
Section 2.4 Appointment of the Trustee; Declaration of Trust............................................27
Section 2.5 Expenses of Trustee.........................................................................27
Section 2.6 Ownership of the Trust......................................................................27
Section 2.7 Situs of the Trust..........................................................................27
Section 2.8 Miscellaneous REMIC Provisions..............................................................28
Article III REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE SELLER, THE SERVICER AND THE OVERSIGHT AGENT;
COVENANT OF SELLER TO CONVEY MORTGAGE LOANS......................................................................28
Section 3.1 Representations and Warranties of the Seller................................................28
Section 3.2 Representations and Warranties of the Servicer..............................................31
Section 3.3 Representations and Warranties of the Oversight Agent.......................................33
Section 3.4 Representations and Warranties of the Seller with Respect to
the Mortgage Loans..........................................................................34
Section 3.5 Covenants of the Seller to Take Certain Actions with Respect to the
Mortgage Loans In Certain Situations........................................................41
Section 3.6 Conveyance of the Mortgage Loans............................................................43
Section 3.7 Acceptance by Trustee; Certain Substitutions of Mortgage Loans;
Certification by Trustee....................................................................47
Section 3.8 Cooperation Procedures......................................................................48
Section 3.9 Conveyance of the Subsequent Mortgage Loans.................................................48
Section 3.10 Books and Records...........................................................................51
Article IV ISSUANCE AND SALE OF CERTIFICATES.....................................................................51
Section 4.1 Issuance of Certificates....................................................................51
Section 4.2 Sale of Certificates........................................................................51
Article V CERTIFICATES AND TRANSFER OF INTERESTS.................................................................52
Section 5.1 Terms.......................................................................................52
Section 5.2 Forms.......................................................................................52
Section 5.3 Execution, Authentication and Delivery......................................................52
Section 5.4 Registration and Transfer of Certificates...................................................52
Section 5.5 Mutilated, Destroyed, Lost or Stolen Certificates...........................................54
Section 5.6 Persons Deemed Owners.......................................................................55
Section 5.7 Cancellation................................................................................55
Section 5.8 Limitation on Transfer of Ownership Rights..................................................55
Section 5.9 Assignment of Rights........................................................................55
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C>
Article VI COVENANTS.............................................................................................56
Section 6.1 Distributions...............................................................................56
Section 6.2 Money for Distributions to be Held in Trust; Withholding....................................56
Section 6.3 Protection of Trust Estate..................................................................56
Section 6.4 Performance of Obligations..................................................................57
Section 6.5 Negative Covenants..........................................................................57
Section 6.6 No Other Powers.............................................................................58
Section 6.7 Limitation of Suits.........................................................................58
Section 6.8 Unconditional Rights of Owners to Receive Distributions.....................................59
Section 6.9 Rights and Remedies Cumulative..............................................................59
Section 6.10 Delay or Omission Not Waiver................................................................59
Section 6.11 Control by Owners...........................................................................59
Section 6.12 Access to Owners of Certificates'Names and Addresses........................................59
Article VII ACCOUNTS, DISBURSEMENTS AND RELEASES.................................................................60
Section 7.1 Collection of Money.........................................................................60
Section 7.2 Establishment of Accounts...................................................................60
Section 7.3 The Certificate Insurance Policies..........................................................60
Section 7.4 Pre-Funding Account and Capitalized Interest Account........................................61
Section 7.5 Flow of Funds...............................................................................62
Section 7.6 Investment of Accounts......................................................................65
Section 7.7 Eligible Investments........................................................................66
Section 7.8 Reports by Trustee..........................................................................67
Section 7.9 Additional Reports by Trustee...............................................................70
Article VIII SERVICING AND ADMINISTRATION OF MORTGAGE LOANS......................................................70
Section 8.1 Servicer and Sub-Servicers..................................................................70
Section 8.2 Collection of Certain Mortgage Loan Payments................................................71
Section 8.3 Sub-Servicing Agreements BetweenServicer and Sub-Servicers..................................72
Section 8.4 Successor Sub-Servicers.....................................................................72
Section 8.5 Liability of Servicer.......................................................................72
Section 8.6 No Contractual Relationship Between Sub-Servicer and Trustee,
Oversight Agent or the Owners...............................................................72
Section 8.7 Assumption or Termination of Sub-Servicing Agreement by
Oversight Agent.............................................................................72
Section 8.8 Principal and Interest Account..............................................................73
Section 8.9 Delinquency Advances, Compensating Interest and Servicing Advances..........................75
Section 8.10 Purchase of Delinquent Mortgage Loans.......................................................75
Section 8.11 Maintenance of Insurance....................................................................76
Section 8.12 Due-on-Sale Clauses; Assumption and Substitution Agreements.................................76
Section 8.13 Realization Upon Defaulted Mortgage Loans...................................................77
Section 8.14 Trustee to Cooperate; Release of Files......................................................78
Section 8.15 Servicing Compensation......................................................................79
Section 8.16 Annual Statement as to Compliance...........................................................79
Section 8.17 Annual Independent Certified Public Accountants'Reports.....................................79
Section 8.18 Access to Certain Documentation and Information Regarding the
Mortgage Loans..............................................................................80
Section 8.19 Assignment of Agreement.....................................................................80
Section 8.20 Events of Servicing Termination.............................................................80
Section 8.21 Resignation of Servicer and Appointment of Successor........................................84
Section 8.22 Waiver of Past Events of Servicing Termination..............................................86
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C>
Section 8.23 Inspections by Certificate Insurer; Errors and Omissions Insurance..........................87
Section 8.24 Merger, Conversion, Consolidation or Succession to Business of Servicer.....................87
Section 8.25 Notices of Material Events..................................................................87
Section 8.26 Monthly Servicing Report and Servicing Certificate..........................................88
Section 8.27 Indemnification by the Seller...............................................................90
Section 8.28 Indemnification by the Servicer.............................................................90
Section 8.29 Appointment and Term of the Servicer........................................................91
Section 8.30 Appointment and Duties of the Oversight Agent...............................................91
Section 8.31 Removal of Oversight Agent for Cause........................................................93
Article IX TERMINATION OF TRUST..................................................................................95
Section 9.1 Termination of Trust........................................................................95
Section 9.2 Termination Upon Option of Servicer.........................................................95
Section 9.3 Termination Upon Loss of REMIC Status.......................................................96
Section 9.4 Disposition of Proceeds.....................................................................97
Section 9.5 Netting of Amounts..........................................................................97
Article X THE TRUSTEE............................................................................................97
Section 10.1 Certain Duties and Responsibilities.........................................................97
Section 10.2 Removal of Trustee for Cause...............................................................100
Section 10.3 Certain Rights of the Trustee..............................................................101
Section 10.4 Not Responsible for Recitals or Issuance of Certificates...................................102
Section 10.5 May Hold Certificates......................................................................102
Section 10.6 Money Held in Trust........................................................................102
Section 10.7 No Lien for Fees...........................................................................102
Section 10.8 Corporate Trustee Required; Eligibility....................................................102
Section 10.9 Resignation and Removal; Appointment of Successor..........................................102
Section 10.10 Acceptance of Appointment by Successor Trustee.............................................104
Section 10.11 Merger, Conversion, Consolidation or Succession to Business of
the Trustee................................................................................104
Section 10.12 Reporting; Withholding.....................................................................104
Section 10.13 Liability of the Trustee...................................................................104
Section 10.14 Appointment of Co-Trustee or Separate Trustee..............................................105
Section 10.15 Appointment of Custodians..................................................................106
Article XI MISCELLANEOUS........................................................................................106
Section 11.1 Compliance Certificates and Opinions.......................................................106
Section 11.2 Form of Documents Delivered to the Trustee.................................................107
Section 11.3 Acts of Owners.............................................................................107
Section 11.4 Notices, etc. to Trustee...................................................................108
Section 11.5 Notices and Reports to Owners; Waiver of Notices...........................................108
Section 11.6 Rules by Trustee and the Seller............................................................108
Section 11.7 Successors and Assigns.....................................................................108
Section 11.8 Severability...............................................................................108
Section 11.9 Benefits of Agreement......................................................................108
Section 11.10 Legal Holidays.............................................................................108
Section 11.11 Governing Law..............................................................................109
Section 11.12 Counterparts...............................................................................109
Section 11.13 Usury......................................................................................109
Section 11.14 Amendment..................................................................................109
</TABLE>
-iii-
<PAGE>
<TABLE>
<S> <C>
Section 11.15 REMIC Status; Taxes........................................................................110
Section 11.16 Additional Limitation on Action and Imposition of Tax......................................111
Section 11.17 Appointment of Tax Matters Person..........................................................112
Section 11.18 The Certificate Insurer....................................................................112
Section 11.19 Maintenance of Records.....................................................................112
Section 11.20 Notices....................................................................................112
EXHIBIT A-1 -- Form of Class A-1 Certificate EXHIBIT A-2 -- Form of Class A-2
Certificate EXHIBIT B -- Form of Class R Certificate EXHIBIT C -- Mortgage Loan
Schedule
EXHIBIT D -- Form of Certificate Re: Mortgage Loans Prepaid in full After the Cut-Off Date
EXHIBIT E -- Form of Initial Certification
EXHIBIT F -- Form of Final Certification
EXHIBIT G -- Form of Delivery Order
EXHIBIT H -- Form of Class R Tax Matters Transfer Certificate
EXHIBIT I -- Form of Notice for Certificate Insurance Policy
EXHIBIT J -- Form of Request for Release
EXHIBIT K -- Form of Servicer Renewal Notice
EXHIBIT L -- Form of Custodial Agreement
</TABLE>
-iv-
<PAGE>
POOLING AND SERVICING AGREEMENT, relating to FIRST ALLIANCE MORTGAGE
LOAN TRUST 1999-4, dated as of December 1, 1999, by and among FIRST ALLIANCE
MORTGAGE COMPANY, a California corporation in its capacities as the Seller and
the Servicer (respectively, the "Seller" and the "Servicer"), and THE CHASE
MANHATTAN BANK, a New York banking corporation, in its capacities as the Trustee
and the Oversight Agent (respectively, the "Trustee" and the "Oversight Agent").
WHEREAS, the Seller wishes to establish the Trust and two subtrusts and
provide for the allocation and sale of the beneficial interests therein and the
maintenance and distribution thereof;
WHEREAS, the Servicer has agreed to service the Mortgage Loans, which
constitute the principal assets of the trust estate;
WHEREAS, all things necessary to make the Certificates, when executed
and authenticated by the Trustee, valid instruments, and to make this Agreement
a valid agreement, in accordance with their and its terms, have been done;
WHEREAS, The Chase Manhattan Bank is willing to serve in the capacities
of Trustee and Oversight Agent hereunder; and
WHEREAS, MBIA Insurance Corporation (the "Certificate Insurer") is
intended to be a third party beneficiary of this Agreement and is hereby
recognized by the parties hereto to be a third-party beneficiary of this
Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the Seller, the Servicer, the Oversight Agent and
the Trustee hereby agree as follows:
ARTICLE I
DEFINITIONS; RULES OF CONSTRUCTION
Section 1.1 Definitions. For all purposes of this Agreement, the
following terms shall have the meanings set forth below, unless the context
clearly indicates otherwise:
"Account": Any account established in accordance with Section 7.2 or
8.8 hereof.
"Addition Notice": With respect to the transfer of Subsequent Mortgage
Loans to the Trust for inclusion in Group I or Group II pursuant to Section 3.9
hereof, notice given not less than two Business Days prior to the Subsequent
Transfer Date of the Seller's designation of Subsequent Mortgage Loans to be
sold to the Trust for inclusion in Group I or Group II and the aggregate Loan
Balance of such Subsequent Mortgage Loans to be delivered for inclusion in each
such Group.
"Agreement": This Pooling and Servicing Agreement, as it may be amended
from time to time, and including the Exhibits hereto.
"Appraised Value": The appraised value of any Property based upon the
appraisal or other valuation made at the time of the origination of the related
Mortgage Loan, or, in the case of a Mortgage Loan which is a purchase money
mortgage, the sales price of the Property at such time of origination, if such
sales price is less than such appraised value.
"Authorized Officer": With respect to any Person, any person who is
authorized to act for such Person in matters relating to this Agreement, and
whose action is binding upon such Person and, with
- 1 -
<PAGE>
respect to the Seller and the Servicer, initially including those individuals
whose names appear on the lists of Authorized Officers delivered on the Startup
Day, and with respect to the Trustee, any Vice President, Assistant Vice
President, Assistant Treasurer, Assistant Secretary or Trust Officer of the
Trustee, and with respect to the Oversight Agent, any Vice President, Assistant
Vice President or Trust Officer.
"Available Funds": With respect to Group I, the Group I Available Funds
and with respect to Group II, the Group II Available Funds.
"Available Funds Shortfall": Any of the Group I Available Funds
Shortfall or the Group II Available Funds Shortfall, as the case may be.
"Business Day": Any day that is not a Saturday, Sunday or other day on
which commercial banking institutions in the States of New York or California or
in the city in which the Corporate Trust Office is located or the city in which
the principal office of the Certificate Insurer is located are authorized or
obligated by law or executive order to be closed.
"Capitalized Interest Account": The Capitalized Interest Account
established in accordance with Section 7.2 hereof and maintained by the Trustee.
"Certificate": Any one of the Class A Certificates or the Class R
Certificates, each representing the interests and the rights described in this
Agreement.
"Certificate Account": The Certificate Account established in
accordance with Section 7.2 hereof and maintained by the Trustee; provided that
the funds in such account shall not be commingled with any other funds held by
the Trustee.
"Certificate Insurance Policies": The Group I Certificate Insurance
Policy and the Group II Certificate Insurance Policy.
"Certificate Insurer": MBIA Insurance Corporation or any successor
thereto, as issuer of the Certificate Insurance Policies.
"Certificate Insurer Default": The existence and continuance of any of
the following:
(a) the failure of the Certificate Insurer to make a payment required
under a Certificate Insurance Policy in accordance with the terms thereof; or
(b) (i) the entry by a court having jurisdiction in the premises of (A)
a decree or order for relief in respect of the Certificate Insurer in an
involuntary case or proceeding under any applicable United States federal or
state bankruptcy, insolvency, rehabilitation, reorganization or other similar
law or (B) a decree or order adjudging the Certificate Insurer as bankrupt or
insolvent, or approving as properly filed a petition seeking reorganization,
rehabilitation, arrangement, adjustment or composition of or in respect of the
Certificate Insurer under any applicable United States, federal or state law, or
appointing a custodian, receiver, liquidator, rehabilitator, assignee, trustee,
sequestrator or other similar official of any substantial part of the
Certificate Insurer's property, or ordering the winding-up or liquidation of its
affairs, and the continuance of any such decree or order for relief or any such
other decree or order unstayed and in effect for a period of 90 consecutive
days; or
(ii) the commencement by the Certificate Insurer of a voluntary case or
proceeding under any applicable United States federal or state bankruptcy,
insolvency, reorganization or other similar law or of any other case or
proceeding to be adjudicated as bankrupt or insolvent, or the consent of the
Certificate Insurer to the entry of a decree or order for relief in respect of
the Certificate Insurer in an involuntary
- 2 -
<PAGE>
case or proceeding under any applicable United States federal or state
bankruptcy, insolvency case or proceeding against the Certificate Insurer, or
the filing by the Certificate Insurer to the filing of such petition or to the
appointment of or the taking possession by a custodian, receiver, liquidator,
assignee, trustee, sequestrator or similar official of the Certificate Insurer
of any substantial part of its property, or the failure of the Certificate
Insurer to pay debts generally as they become due, or the admission by the
Certificate Insurer in writing of its inability to pay its debts generally as
they become due.
"Certificate Principal Balance": As to the Class A-1 Certificates, the
Class A-1 Certificate Principal Balance and as to the Class A-2 Certificates,
the Class A-2 Certificate Principal Balance. The Class R Certificates do not
have a Certificate Principal Balance.
"Class": All of the Class A-1 Certificates or all of the Class A-2
Certificates.
"Class A Certificate": Any one of the Class A-1 Certificates or the
Class A-2 Certificates.
"Class A Distribution Amount": Any of the Class A-1 Distribution Amount
or the Class A-2 Distribution Amount.
"Class A-1 Certificate": Any Certificate designated as a "Class A-1
Certificate" on the face thereof, in the form of Exhibit A-1 hereto,
representing the right to distributions as set forth herein. The Class A-1
Certificates shall be issued with an initial aggregate Certificate Principal
Balance equal to the Original Certificate Principal Balance therefor.
"Class A-1 Certificate Principal Balance": As of any time of
determination, the Original Certificate Principal Balance of the Class A-1
Certificates less any amounts actually distributed on account of the Group I
Principal Distribution Amount to the Owners of the Class A-1 Certificates
pursuant to Section 7.5(d)(iv)(C) hereof with respect to principal thereon on
all prior Payment Dates.
"Class A-1 Certificate Termination Date": The Payment Date on which the
Class A-1 Certificate Principal Balance is reduced to zero.
"Class A-1 Current Interest": With respect to interest accruing after
the Cut-Off Date and as of any Payment Date, the sum of (i) the aggregate amount
of interest accrued on the Class A-1 Certificate Principal Balance immediately
prior to such Payment Date during the related Interest Accrual Period at the
Class A-1 Pass-Through Rate and (ii) any Class A-1 Interest Carry-Forward Amount
for such Payment Date.
"Class A-1 Distribution Amount": With respect to a Payment Date, the
sum of (x) the Group I Principal Distribution Amount payable to the Owners of
the Class A-1 Certificates pursuant to Section 7.5(d)(iv)(C) on such Payment
Date and (y) the Class A-1 Current Interest payable to the Owners of the Class
A-1 Certificates pursuant to Section 7.5(d)(iv)(B).
"Class A-1 Interest Carry Forward Amount": With respect to the Class
A-1 Certificates and any Payment Date, the sum of (x) the amount, if any, by
which (i) the Class A-1 Current Interest as of the immediately preceding Payment
Date exceeded (ii) the amount of the actual payments of interest made to the
Owners of the Class A-1 Certificates on such immediately preceding Payment Date
and (y) interest on such amount, calculated at the Class A-1 Pass-Through Rate
for the number of days in the related Interest Accrual Period.
"Class A-1 Pass-Through Rate": For any Payment Date, the lesser of (i)
(A) with respect to any Payment Date that occurs on or prior to the Clean-Up
Call Date, 7.52% per annum or (B) with respect to any Payment Date thereafter,
8.02% per annum and (ii) the Group I Available Funds Cap for such Payment Date.
- 3 -
<PAGE>
"Class A-1 Principal Carry-Forward Amount": With respect to any Payment
Date, the amount, if any, by which (i) the portion of the Group I Principal
Distribution Amount described in clause (y) thereof as of the immediately
preceding Payment Date exceeded (ii) the amount of the actual payment of
principal made to the Owners of the Class A-1 Certificates on such immediately
preceding Payment Date.
"Class A-2 Certificate": Any Certificate designated as a "Class A-2
Certificate" on the face thereof, in the form of Exhibit A-2 hereto,
representing the right to distributions as set forth herein. The Class A-2
Certificates shall be issued with an initial aggregate Certificate Principal
Balance equal to the Original Certificate Principal Balance therefor.
"Class A-2 Certificate Principal Balance": As of any time of
determination, the Original Certificate Principal Balance of the Class A-2
Certificates less any amounts actually distributed on account of the Group II
Principal Distribution Amount to the Owners of the Class A-2 Certificates
pursuant to Section 7.5(d)(iv)(E) hereof with respect to principal thereon on
all prior Payment Dates.
"Class A-2 Certificate Termination Date": The Payment Date on which the
Class A-2 Certificate Principal Balance is reduced to zero.
"Class A-2 Current Interest": With respect to interest accruing after
the Cut-Off Date and as of any Payment Date, the sum of (i) the aggregate amount
of interest accrued on the Class A-2 Certificate Principal Balance immediately
prior to such Payment Date during the related Interest Accrual Period at the
Class A-2 Pass-Through Rate and (ii) any Class A-2 Interest Carry-Forward Amount
for such Payment Date.
"Class A-2 Distribution Amount": With respect to a Payment Date, the
sum of (x) the Group II Principal Distribution Amount payable to the Owners of
the Class A-2 Certificates pursuant to Section 7.5(d)(iv)(E) on such Payment
Date and (y) the Class A-2 Current Interest payable to the Owners of the Class
A-2 Certificates pursuant to Section 7.5(d)(iv)(D).
"Class A-2 Formula Pass-Through Rate": For any Payment Date, the lesser
of (i) (A) with respect to any Payment Date that occurs on or prior to the Clean
Up Call Date, LIBOR plus 0.38% per annum or (B) with respect to any Payment Date
thereafter, LIBOR plus 0.76% per annum and (ii) 15% per annum.
"Class A-2 Interest Carry Forward Amount": With respect to the Class
A-2 Certificates and any Payment Date, the sum of (x) the amount, if any, by
which (i) the Class A-2 Current Interest as of the immediately preceding Payment
Date exceeded (ii) the amount of the actual payments of interest made to the
Owners of the Class A-2 Certificates on such immediately preceding Payment Date
and (y) interest on such amount, calculated at the Class A-2 Pass-Through Rate
for the number of days in the related Interest Accrual Period.
"Class A-2 Pass-Through Rate": For the initial Payment Date, 6.84%. As
of any Payment Date thereafter, the lesser of (i) the Class A-2 Formula
Pass-Through Rate and (ii) the Group II Available Funds Cap for such Payment
Date.
"Class A-2 Principal Carry-Forward Amount": With respect to any Payment
Date, the amount, if any, by which (i) the Group II Principal Distribution
Amount described in clause (y) thereof as of the immediately preceding Payment
Date exceeded (ii) the amount of the actual payment of principal made to the
Owners of the Class A-2 Certificates on such immediately preceding Payment Date.
- 4 -
<PAGE>
"Class R Certificate": Any of those Certificates representing certain
residual rights to distributions from the REMIC, designated as a "Class R
Certificate" on the face thereof, in the form of Exhibit B hereto and evidencing
an interest designated as the "residual interest" in the Trust for purposes of
the REMIC Provisions.
"Clean-Up Call Date": The first Payment Date on which the aggregate
outstanding Loan Balance of the Mortgage Loans has declined to less than
$10,500,000.
"Code": The Internal Revenue Code of 1986, as amended and any successor
statute.
"Combined Loan-to-Value Ratio": With respect to any First Mortgage
Loan, the percentage equal to the Original Principal Amount of the related Note
divided by the Appraised Value of the related Property, and with respect to any
Second Mortgage Loan, the percentage equal to (a) the sum of (i) the remaining
principal balance, as of origination of the Second Mortgage Loan, of the Senior
Lien note(s) relating to such Second Mortgage Loan and (ii) the Original
Principal Amount of the Note relating to such Second Mortgage Loan divided by
(b) the Appraised Value of the related Property.
"Compensating Interest": The amount calculated pursuant to Section
8.9(b) hereof.
"Corporate Trust Office": The principal office of the Trustee at 450
West 33rd Street, 14th Floor, New York, New York 10001, Attention: First
Alliance Mortgage Loan Trust 1999-4 or any other office of the Trustee
designated as such hereunder.
"Coupon Rate": The annual rate of interest borne by each Note.
"Current Interest": As of any Payment Date, the sum of the Class A-1
Current Interest and the Class A-2 Current Interest.
"Curtailment": With respect to a Mortgage Loan, any payment of
principal received during a Remittance Period as part of a payment that is in
excess of the amount of the monthly payment due for such Remittance Period and
which is not a Prepaid Installment or made in respect of a Paid-in-Full Mortgage
Loan, nor is intended to cure a delinquency.
"Custodial Agreement": The Custodial Agreement dated as of December 1,
1999 among the Custodian, the Trustee, the Seller and the Servicer.
"Custodian": Norwest Bank Minnesota, National Association, a national
banking association, or any successor custodian under the Custodial Agreement.
"Cut-Off Date": December 1, 1999.
"Delinquency Advance": The amount calculated pursuant to Section 8.9(a)
hereof.
"Delinquent": A Mortgage Loan is "Delinquent" if any payment due
thereon is not made by the close of business on the day such payment is
scheduled to be due. A Mortgage Loan is "30 days Delinquent" if such payment has
not been received by the close of business on the second day of the month
immediately succeeding the month in which such payment was due. Similarly for
"60 days Delinquent," "90 days Delinquent" and so on.
"Delivery Order": The delivery order in the form set forth as Exhibit G
hereto and delivered by the Seller to the Trustee on the Startup Day pursuant to
Section 4.1 hereof.
- 5 -
<PAGE>
"Depository": The Depository Trust Company, 55 Water Street, New York,
New York 10041-0099 and any successor Depository hereafter named.
"Designated Depository Institution": With respect to any Account, an
institution whose deposits are insured by the Bank Insurance Fund or the Savings
Association Insurance Fund of the FDIC, the long-term deposits of which shall be
rated (x) "A" or better by Standard & Poor's and (y) "A2" or better by Moody's
and in one of the highest short-term rating categories, unless otherwise
approved in writing by the Certificate Insurer and each of Moody's and Standard
& Poor's, and which is any of the following: (i) a federal savings and loan
association duly organized, validly existing and in good standing under the
federal banking laws, (ii) an institution duly organized, validly existing and
in good standing under the applicable banking laws of any state, (iii) a
national banking association duly organized, validly existing and in good
standing under the federal banking laws, (iv) a principal subsidiary of a bank
holding company, or (v) approved in writing by the Certificate Insurer, Moody's
and Standard & Poor's and, in each case acting or designated by the Servicer as
the depository institution for the Principal and Interest Account; provided,
however, that any such institution or association shall have combined capital,
surplus and undivided profits of at least $100,000,000. Notwithstanding the
foregoing, any Account may be held by (a) the Trustee or (b) an institution
otherwise meeting the preceding requirements except that the only applicable
rating requirement shall be that the unsecured and uncollateralized debt
obligations thereof shall be rated "Baa3" or better by Moody's if such
institution has trust powers and the Principal and Interest Account is held by
such institution in its trust capacity and not in its commercial capacity.
"Determination Date": The 10th day of each month, or if such day is not
a Business Day, the immediately preceding Business Day.
"Direct Participant" or "DTC Participant": Any broker-dealer, bank or
other financial institution for which the Depository holds Class A Certificates
from time to time as a securities depository.
"Disqualified Organization": "Disqualified Organization" shall have the
meaning set forth from time to time in the definition thereof at Section
860E(e)(5) of the Code (or any successor statute thereto) and applicable to the
Trust.
"Due Date": The first day of the month of the related Payment Date.
"Due Period": With respect to any Payment Date, the period commencing
on the second day of the month preceding the month of such Payment Date (or,
with respect to the first Due Period, the day following the Cut-Off Date) and
ending on the first day of the month of such Payment Date.
"Eligible Investments": Those investments so designated pursuant to
Section 7.7 hereof.
"Event of Default": Any event described in clauses (a) or (b) of
Section 8.20 hereof.
"Event of Servicing Termination": Any event as described in Section
8.20 hereof.
"Excess Subordinated Amount": With respect to any Mortgage Loan Group
and Payment Date, the excess, if any, of (x) the Subordinated Amount that would
apply to such Mortgage Loan Group on such Payment Date after taking into account
the payment of the related Class A Distribution Amount on such Payment Date
(before giving effect to any related Subordination Reduction Amount on such
Payment Date) over (y) the related Specified Subordinated Amount for such
Payment Date.
"Fannie Mae": The Federal National Mortgage Association, a
federally-chartered and privately-owned corporation existing under the Federal
National Mortgage Association Charter Act, as amended, or any successor thereof.
- 6 -
<PAGE>
"FDIC": The Federal Deposit Insurance Corporation, or any successor
thereto.
"Fees and Expenses": With respect to any Payment Date, and Group I, the
sum of the Group I Premium Amount and the portion of the Oversight Agent Fee
applicable to Group I; and with respect to any Payment Date and Group II, the
sum of the Group II Premium Amount and the portion of the Oversight Agent Fee
applicable to Group II.
"File": The documents delivered to the Custodian, on behalf of the
Trustee, pursuant to Section 3.6 hereof pertaining to a particular Mortgage Loan
and any additional documents required to be added to the mortgage file pursuant
to this Agreement.
"Final Certification": The final certification in the form set forth as
Exhibit F hereto (and as an exhibit to the Custodial Agreement) and delivered by
the Custodian, on behalf of the Trustee, to the Seller within 90 days after the
Startup Day pursuant to Section 3.7 hereof.
"Final Determination": As defined in Section 9.3(a) hereof.
"First Mortgage Loan": A Mortgage Loan which constitutes a first
priority mortgage lien with respect to any Property.
"Freddie Mac": The Federal Home Loan Mortgage Corporation, a corporate
instrumentality of the United States created pursuant to the Emergency Home
Finance Act of 1970, as amended, or any successor thereof.
"Funding Period": With respect to each of Group I and Group II, the
period commencing on the Startup Day and ending on the earliest to occur of (i)
the date on which the amount on deposit in the Pre-Funding Account with respect
to such Group (exclusive of any Pre-Funding Account Earnings with respect to
such Group) is less than $100,000, (ii) the date on which the Servicer may be
removed pursuant to Section 8.20(a) hereof and (iii) January 28, 2000.
"Group I": The pool of Mortgage Loans identified in the related
Schedules of Mortgage Loans as having been assigned to Group I, including any
Qualified Replacement Mortgages delivered in replacement thereof and each
Subsequent Mortgage Loan delivered to the Trust for inclusion therein.
"Group I Amortized Subordinated Amount Requirement": As of any date of
determination, the product of (x) 1.65% and (y) the Group I Maximum Collateral
Amount, which product is equivalent to $462,000.00.
"Group I Available Funds": The amount calculated pursuant to Section
7.3(a)(i) hereof.
"Group I Available Funds Cap": As of any Payment Date, the weighted
average of the Coupon Rates on the Mortgage Loans in Group I less the sum of (a)
the Group I Servicing Fee Rate and (b) the rates at which the Fees and Expenses
applicable to Group I are determined.
"Group I Available Funds Shortfall": The amount calculated pursuant to
Section 7.5(d)(ii)(A).
"Group I Capitalized Interest Requirement": With respect to the Payment
Dates in January and February 2000, an amount equal to interest accruing from
the first day of the related Due Period through the Subsequent Transfer Date at
a rate equal to the sum of the Class A-1 Pass-Through Rate plus the Fees and
Expenses related to Group I (expressed as a per annum rate), less the portion of
the Pre-Funding Account earnings allocable to Group I (expressed as a per annum
rate), on the amount by which the Class A-1 Certificate Principal Balance
exceeds the aggregate Loan Balance of the Mortgage Loans in Group I at the date
of determination.
- 7 -
<PAGE>
"Group I Certificate Insurance Policy": The certificate guaranty
insurance policy (number 31037) dated December 17, 1999 issued by the
Certificate Insurer to the Trustee for the benefit of the Owners of the Class
A-1 Certificates.
"Group I Insured Payment": As defined in the Group I Certificate
Insurance Policy.
"Group I Interest Remittance Amount": As of any Remittance Date, the
sum, without duplication, of (i) all scheduled interest due on the Due Date
occurring during the related Due Period, with respect to the Group I Mortgage
Loans to the extent collected by the Servicer during the related Due Period,
(ii) all Delinquency Advances relating to interest made by the Servicer on such
Remittance Date with respect to the Group I Mortgage Loans and (iii) all
Compensating Interest paid by the Servicer on such Remittance Date with respect
to the Group I Mortgage Loans, which sum shall be net of the Group I Servicing
Fee retained by the Servicer pursuant to Sections 8.8(c)(i) and 8.15 hereof.
"Group I Maximum Collateral Amount": $28,000,000.
"Group I Monthly Remittance Amount": As of any Remittance Date, the sum
of (i) the Group I Interest Remittance Amount for such Remittance Date and (ii)
the Group I Principal Remittance Amount for such Remittance Date.
"Group I Original Aggregate Loan Balance": The aggregate Loan Balance
of all Initial Mortgage Loans in Group I ($25,322,654.33 as of the Cut-Off Date
and $25,102,199.54 as of the Startup Day).
"Group I Original Capitalized Interest Amount": $22,573.87, which
represents the expected amount of interest accruing from December 1, 1999
through January 31, 2000, at a rate equal to the sum of the Class A-1
Pass-Through Rate plus the Fees and Expenses related to Group I (expressed as a
per annum rate), less the portion of the Pre-Funding Account earnings allocable
to Group I (expressed as a per annum rate), on the amount by which the Class A-1
Certificate Principal Balance exceeds the Initial Mortgage Loans in Group I.
"Group I Overfunded Interest Amount": The portion of the Group I
Original Capitalized Interest Amount in the Capitalized Interest Account
remaining on deposit on the second Payment Date after the Startup Day, after
taking into account the distribution of the Class A-1 Distribution Amount.
"Group I Preference Amount": As defined in the Group I Certificate
Insurance Policy.
"Group I Premium Amount": As to any Payment Date, the product of
one-twelfth of (x) the Group I Premium Percentage and (y) the Class A-1
Certificate Principal Balance on such Payment Date (before taking into account
any distributions of principal to be made to the Owners of the Class A-1
Certificates on such Payment Date).
"Group I Premium Percentage": As defined in the commitment with respect
to the Group I Certificate Insurance Policy.
"Group I Principal Distribution Amount": With respect to the Class A-1
Certificates for any Payment Date, the lesser of:
- 8 -
<PAGE>
(x) the Group I Total Available Funds plus any Group I
Insured Payment minus the Class A-1 Current Interest
and any Fees and Expenses related to Group I for such
Payment Date; and
(y) the excess, if any, of
(i) the sum, without duplication of:
(a) the Class A-1 Principal Carry Forward
Amount for such Payment Date,
(b) the principal portion of all scheduled
monthly payments on the Mortgage Loans
in Group I due on the related Due Date
during the related Due Period, to the
extent actually received by the Servicer
on or prior to the related Remittance
Date or to the extent advanced by the
Servicer on or prior to the related
Remittance Date and the principal
portion of any Prepayments made by the
respective Mortgagors during the related
Remittance Period,
(c) the Loan Balance of each Mortgage Loan
in Group I that either was repurchased
by the Seller or an Originator or
purchased by the Servicer on the related
Remittance Date,
(d) any Substitution Amounts delivered by
the Seller or an Originator on the
related Remittance Date in connection
with a substitution of a Mortgage Loan
in Group I (to the extent such
Substitution Amounts relate to
principal),
(e) all Net Liquidation Proceeds actually
collected by the Servicer with respect
to the Mortgage Loans in Group I during
the related Remittance Period (to the
extent such Net Liquidation Proceeds
relate to principal),
(f) the amount of any Group I Subordination
Deficit for such Payment Date,
(g) the proceeds received by the Trustee of
any termination as set forth in Article
IX hereof of Group I (to the extent such
proceeds related to principal),
(h) any moneys released from the Pre-Funding
Account as a prepayment of the Class A-1
Certificates on the Payment Date that
immediately follows the end of the
Funding Period; and
(i) the amount of any Subordination Increase
Amount with respect to Group I for such
Payment Date, to the extent of any Net
Monthly Excess Cashflow available for
such purpose;
over
(ii) the amount of any Subordination Reduction
Amount with respect to Group I for such Payment
Date.
- 9 -
<PAGE>
"Group I Principal Remittance Amount": As of any Remittance Date, the
sum, without duplication, of (i) the scheduled principal due on the Due Date
occurring during the related Due Period with respect to Mortgage Loans in Group
I to the extent actually collected by the Servicer during the related Due
Period, (ii) Prepayments collected in the related Remittance Period and relating
to principal on the Mortgage Loans in Group I, (iii) the Loan Balance of each
such Mortgage Loan in Group I that either was repurchased by an Originator or by
the Seller or purchased by the Servicer on such Remittance Date, to the extent
such Loan Balance was actually deposited in the Principal and Interest Account,
(iv) any Substitution Amounts delivered by the Seller in connection with a
substitution of a Mortgage Loan in Group I, to the extent such Substitution
Amounts relate to principal, (v) all Net Liquidation Proceeds actually collected
by the Servicer with respect to such Mortgage Loans in Group I during the
related Remittance Period (to the extent such Liquidation Proceeds are related
to principal), (vi) all Delinquency Advances relating to principal made by the
Servicer on such Remittance Date with respect to Group I and (vii) the amount of
any investment losses required to be deposited by the Seller or the Servicer
pursuant to Sections 7.6(f) or 8.8(b) hereof.
"Group I Reimbursement Amount": As of any Payment Date, the sum of
(x)(i) all Group I Insured Payments previously received by the Trustee and not
previously repaid to the Certificate Insurer pursuant to Section
7.5(d)(iv)(A)(I) hereof plus (ii) interest accrued on each such Group I Insured
Payment not previously repaid calculated at the Late Payment Rate from the date
the Trustee received the related Group I Insured Payment to, but not including,
such Payment Date and (y)(i) any amounts then due and owing to the Certificate
Insurer relating to Group I under the Insurance Agreement plus (ii) interest on
such amounts at the Late Payment Rate. The Certificate Insurer shall notify the
Trustee and the Seller of the amount of any Group I Reimbursement Amount.
"Group I Servicing Fee": With respect to Group I, as to any Remittance
Period, the product of (x) the Servicing Fee Rate over such period and (y) the
aggregate Loan Balances of the Mortgage Loans in Group I as of the opening of
business on the first day of the related Remittance Period. Such Group I
Servicing Fee is retained by the Servicer pursuant to Sections 8.8(c)(i) and
8.15 hereof.
"Group I Specified Subordinated Amount": Means (a) on the Startup Day,
$0, (b) for any Payment Date occurring during the period commencing on the
Startup Day and ending on the later of (i) the date on which the principal
balance of the Class A-1 Certificates has been reduced to one-half of the Group
I Maximum Collateral Amount and (ii) the 30th Payment Date following the Startup
Day, the greater of (A) the Group I Amortized Subordinated Amount Requirement
and (B) 80% of the product of (x) the Group I Pool Rolling Three Month
Delinquency Rate and (y) the aggregate Loan Balance of all Mortgage Loans in
Group I, (c) for any Payment Date occurring after the end of the period in
clause (b) above, the greatest of (i) the product of (x) two (2) times the Group
I Amortized Subordinated Amount Requirement, stated as a percentage of the Group
I Maximum Collateral Amount and (y) the aggregate Loan Balance of all Mortgage
Loans in Group I, (ii) the amount specified in clause (b)(i)(B) above, (iii) an
amount equal to 0.75% of the Group I Maximum Collateral Amount; and (iv) the
three largest outstanding Loan Balances of the Mortgage Loans in Group I, and
(d) provided, however, notwithstanding the foregoing, (i) in the event that any
Group I Insured Payment or Group II Insured Payment is made by the Certificate
Insurer, the amount described in clause (c) shall remain equal to the Group I
Amortized Subordinated Amount Requirement, and (ii) for any Payment Date
occurring after the end of the period specified in clause (b) above, if the Pool
Rolling Three Month Delinquency Rate for Group I exceeds 3.00%, the Group I
Specified Subordinated Amount shall be no less than the Group I Specified
Subordinated Amount as of the previous Payment Date. The Group I Specified
Subordinated Amount may be reduced or eliminated by the Certificate Insurer in
its sole discretion. Prior to any such reduction or elimination, the Servicer
and the Certificate Insurer shall give written notice to the Rating Agencies and
the Trustee.
"Group I Subordinated Amount": As of any Payment Date, the positive
difference, if any, between (x) the sum of (i) the aggregate Loan Balances of
- 10 -
<PAGE>
the Mortgage Loans in Group I as of the close of business on the last day of the
related Remittance Period, after taking into account payments of scheduled
principal on the Mortgage Loans in Group I due on the Due Date which immediately
follows the last day of such Remittance Period, and (ii) any amount on deposit
in the Pre-Funding Account relating to Group I less any Pre-Funding Account
Earnings related to Group I on the last day of the related Remittance Period and
(y) the Class A-1 Certificate Principal Balance as of such Payment Date (after
taking into account the payment of the Group I Principal Distribution Amount
(except payment to be made as to principal on such Payment Date from the
proceeds of the Group I Certificate Insurance Policy) on such Payment Date).
"Group I Subordination Deficit": With respect to any Payment Date, the
amount, if any, by which (x) the Class A-1 Certificate Principal Balance, after
taking into account the payment of the Group I Principal Distribution Amount on
such Payment Date (except any payment to be made as to principal on such Payment
Date from the proceeds of the Group I Certificate Insurance Policy), exceeds the
sum of (y) the aggregate Loan Balance of the Mortgage Loans in Group I as of the
close of business on the last day of the preceding Remittance Period after
taking into account payments of scheduled principal on such Mortgage Loans due
on the Due Date in the calendar month in which such Payment Date occurs and (z)
the portion of the Pre-Funded Amount related to Group I as of the close of
business on the last day of the related Remittance Period; provided that for the
purpose of calculating Loan Balances to determine if a Group I Subordination
Deficit exists, the aggregate amount of the principal component of all
unreimbursed Delinquency Advances relating to Group I shall be deducted from the
related actual Loan Balances.
"Group I Total Available Funds": The amount calculated pursuant to
Section 7.3(a)(i) hereof.
"Group I Total Available Funds Shortfall": The amount calculated
pursuant to Section 7.3(b) hereof.
"Group I Total Monthly Excess Spread": With respect to any Payment
Date, the positive difference between (i) the Group I Interest Remittance Amount
for the Due Period relating to such Payment Date plus any amount transferred
from the Capitalized Interest Account relating to Group I and (ii) the sum of
(x) the interest due on the Class A-1 Certificates on such Payment Date and (y)
the Fees and Expenses related to Group I, if any, for such Payment Date.
"Group II": The pool of Mortgage Loans identified in the related
Schedules of Mortgage Loans as having been assigned to Group II, including any
Qualified Replacement Mortgages delivered in replacement thereof and each
Subsequent Mortgage Loan delivered to the Trust for inclusion therein.
"Group II Amortized Subordinated Amount Requirement": As of any date of
determination, the product of (x) 5.15% and (y) the Group II Maximum Collateral
Amount, which product is equivalent to $3,965,500.00.
"Group II Available Funds": The amount calculated pursuant to Section
7.3(a)(ii) hereof.
"Group II Available Funds Cap": As of any Payment Date, the weighted
average of the Coupon Rates on the Mortgage Loans in Group II less the sum of
(a) the Group II Servicing Fee Rate, (b) the rates at which the Fees and
Expenses applicable to Group II are determined and (c) beginning on the
thirteenth Payment Date following the Startup Day, 0.50% per annum.
"Group II Available Funds Cap Carry-Forward Amortization Amount": As of
any Payment Date, any Group II Available Funds Cap Carry-Forward Amount
distributed to the Owners of the Class A-2 Certificates on such Payment Date
pursuant to Section 7.5(d)(iii) hereof.
- 11 -
<PAGE>
"Group II Available Funds Cap Carry-Forward Amount": As of any Payment
Date, the sum of (A) an amount equal to (x) the excess, if any, of (a) the
aggregate amount of interest accrued on the Class A-2 Certificates on all prior
Payment Dates, calculated at the Class A-2 Formula Pass-Through Rate applicable
to each such Payment Date over (b) the aggregate amount of interest accrued on
the Class A-2 Certificates on all prior Payment Dates, calculated at the Class
A-2 Pass-Through Rate applicable to each such Payment Date, minus (y) all Group
II Available Funds Cap Carry-Forward Amortization Amounts actually paid on or
before such Payment Date, and (B) the product of (x) one-twelfth of the Class
A-2 Formula Pass-Through Rate on such Payment Date and (y) the amounts described
in clause (A).
"Group II Available Funds Shortfall": The amount calculated pursuant to
Section 7.5(d)(ii)(A).
"Group II Capitalized Interest Requirement": With respect to the
Payment Dates in January and February 2000, an amount equal to interest accruing
from the first day of the related Due Period (or from the Startup Day, in the
case of the January 2000 Payment Date) through the Subsequent Transfer Date at a
rate equal to the sum of the Class A-2 Pass-Through Rate plus the Fees and
Expenses related to Group II (expressed as a per annum rate), less the portion
of the Pre-Funding Account earnings allocable to Group II (expressed as a per
annum rate), on the amount by which the Class A-2 Certificate Principal Balance
exceeds the aggregate Loan Balance of the Mortgage Loans in Group II at the date
of determination.
"Group II Certificate Insurance Policy": The certificate guaranty
insurance policy (number 31038) dated December 17, 1999 issued by the
Certificate Insurer to the Trustee for the benefit of the Owners of the Class
A-2 Certificates.
"Group II Insured Payment": As defined in the Group II Certificate
Insurance Policy.
"Group II Interest Remittance Amount": As of any Remittance Date, the
sum, without duplication, of (i) all scheduled interest due on the Due Date
occurring during the related Due Period, with respect to the Group II Mortgage
Loans to the extent collected by the Servicer during the related Due Period,
(ii) all Delinquency Advances relating to interest made by the Servicer on such
Remittance Date with respect to the Group II Mortgage Loans and (iii) all
Compensating Interest paid by the Servicer on such Remittance Date with respect
to the Group II Mortgage Loans, which sum shall be net of the Group II Servicing
Fee retained by the Servicer pursuant to Sections 8.8(c)(i) and 8.15 hereof.
"Group II Maximum Collateral Amount": $77,000,000.
"Group II Monthly Remittance Amount": As of any Remittance Date, the
sum of (i) the Group II Interest Remittance Amount for such Remittance Date and
(ii) the Group II Principal Remittance Amount for such Remittance Date.
"Group II Original Aggregate Loan Balance": The aggregate Loan Balance
of all Initial Mortgage Loans in Group II, i.e., $58,871,097.89 as of the
Cut-Off Date and $58,387,410.88 as of the Startup Day.
"Group II Original Capitalized Interest Amount": $68,018.67, which
represents the expected amount of interest accruing from the Startup Day through
February 20, 2000, at a rate equal to the sum of the Class A-2 Pass-Through Rate
plus the Fees and Expenses related to Group II (expressed as a per annum rate),
less the amount of the Pre-Funding Account earnings allocable to Group II
(expressed as a per annum rate), on the amount by which the Class A-2
Certificate Principal Balance exceeds the Initial Mortgage Loans in Group II.
"Group II Overfunded Interest Amount": The portion of the Group II
Original Capitalized Interest Amount in the Capitalized Interest Account
remaining on deposit on the second Payment Date
- 12 -
<PAGE>
after the Startup Day, after taking into account the distribution of the Class
A-2 Distribution Amount.
"Group II Preference Amount": As defined in the Group II Certificate
Insurance Policy.
"Group II Premium Amount": As to any Payment Date, the product of
one-twelfth of (x) the Group II Premium Percentage and (y) the Class A-2
Certificate Principal Balance on such Payment Date (before taking into account
any distributions of principal to be made to the Owners of Class A-2
Certificates on such Payment Date).
"Group II Premium Percentage": As defined in the commitment with
respect to the Group II Certificate Insurance Policy.
"Group II Principal Distribution Amount": With respect to the Class A-2
Certificates for any Payment Date, the lesser of:
(x) the Group II Total Available Funds plus any Group II
Insured Payment minus the Class A-2 Current Interest
and any Fees and Expenses related to Group II for
such Payment Date; and
(y) the excess, if any, of
(i) the sum, without any duplication of:
(a) the Class A-2 Principal Carry-Forward
Amount for such Payment Date,
(b) the principal portion of all scheduled
monthly payments on the Mortgage Loans
in Group II due on the related Due Date
during the related Due Period, to the
extent actually received by the Servicer
on or prior to the related Remittance
Date or to the extent advanced by the
Servicer on or prior to the related
Remittance Date and the principal
portion of any Prepayments made by the
respective Mortgagors during the related
Remittance Period,
(c) the Loan Balance of each Mortgage Loan
in Group II that either was repurchased
by the Seller or an Originator or
purchased by the Servicer on the related
Remittance Date,
(d) any Substitution Amounts delivered by
the Seller or an Originator on the
related Remittance Date in connection
with a substitution of a Mortgage Loan
in Group II (to the extent such
Substitution Amounts relate to
principal),
(e) all Net Liquidation Proceeds actually
collected by the Servicer with respect
to the Mortgage Loans in Group II during
the related Remittance Period (to the
extent such Net Liquidation Proceeds
relate to principal),
(f) the amount of any Group II Subordination
Deficit for such Payment Date,
- 13 -
<PAGE>
(g) the proceeds received by the Trustee of
any termination as set forth in Article
IX hereto of Group II (to the extent
such proceeds related to principal),
(h) any moneys released from the Pre-Funding
Account as a prepayment of the Class A-2
Certificates on the Payment Date that
immediately follows the end of the
Pre-Funding Period, and
(i) the amount of any Subordination Increase
Amount with respect to Group II for such
Payment Date, to the extent of any Net
Monthly Excess Cashflow available for
such purpose;
over
(ii) the amount of any Subordination Reduction
Amount with respect to Group II for such
Payment Date.
"Group II Principal Remittance Amount": As of any Remittance Date, the
sum, without duplication, of (i) the scheduled principal due on the Due Date
occurring during the related Due Period with respect to Mortgage Loans in Group
II to the extent actually collected by the Servicer during the related Due
Period, (ii) Prepayments collected in the related Remittance Period and relating
to principal on the Mortgage Loans in Group II, (iii) the Loan Balance of each
such Mortgage Loan in Group II that either was repurchased by an Originator or
by the Seller or purchased by the Servicer on such Remittance Date, to the
extent such Loan Balance was actually deposited in the Principal and Interest
Account, (iv) any Substitution Amounts delivered by the Seller in connection
with a substitution of a Mortgage Loan in Group II, to the extent such
Substitution Amounts relate to principal, (v) all Net Liquidation Proceeds
actually collected by the Servicer with respect to such Mortgage Loans in Group
II during the related Remittance Period (to the extent such Liquidation Proceeds
are related to principal), (vi) all Delinquency Advances relating to principal
made by the Servicer on such Remittance Date with respect to Group II and (vii)
the amount of any investment losses required to be deposited by the Seller or
the Servicer pursuant to Sections 7.6(f) and 8.8(b) hereof.
"Group II Reimbursement Amount": As of any Payment Date, the sum of
(x)(i) all Group II Insured Payments previously received by the Trustee and not
previously repaid to the Certificate Insurer pursuant to Section
7.5(d)(iv)(A)(1) hereof plus (ii) interest accrued on each such Group II Insured
Payment not previously repaid calculated at the Late Payment Rate from the date
the Trustee received the related Group II Insured Payment to, but not including,
such Payment Date and (y)(i) any amounts then due and owing to the Certificate
Insurer relating to Group II under the Insurance Agreement plus (ii) interest on
such amounts at the Late Payment Rate. The Certificate Insurer shall notify the
Trustee and the Seller of the amount of any Group II Reimbursement Amount.
"Group II Servicing Fee": With respect to Group II, as to any
Remittance Period, the product of (x) the Servicing Fee Rate over such period
and (y) the aggregate Loan Balances of the Mortgage Loans in Group II as of the
opening of business on the first day of the related Remittance Period. Such
Group II Servicing Fee is retained by the Servicer pursuant to Sections
8.8(c)(i) and 8.15 hereof.
"Group II Specified Subordinated Amount": Means (a) on the Startup Day,
$1,925,000, (b) for any Payment Date occurring during the period commencing on
the Startup Day and ending on the later of (i) the date on which the principal
balance of the Class A-2 Certificates has been reduced to one-half of the Group
II Maximum Collateral Amount and (ii) the 30th Payment Date following the
Startup Day, the greater of (A) the Group II Amortized Subordinated Amount
Requirement and (B) the product of (x) the Group II Pool Rolling Three Month
Delinquency Rate and (y) the aggregate Loan Balance of all Mortgage Loans in
Group II, (c) for any Payment Date occurring after the end of the period in
clause (b) above, the greatest of (i) the product of (x) two (2) times the Group
II Amortized Subordinated Amount Requirement stated as a percentage of the Group
II Maximum Collateral Amount and (y) the aggregate Loan Balance of all
- 14 -
<PAGE>
Mortgage Loans in Group II, (ii) the amount specified in clause (b)(i)(B) above,
(iii) an amount equal to 0.75% of the Group II Maximum Collateral Amount and
(iv) the three largest Loan Balances of the Mortgage Loans in Group II, and (d)
provided, however, notwithstanding the foregoing, (i) in the event that any
Group I Insured Payment or Group II Insured Payment is made by the Certificate
Insurer, the amount described in clause (c) shall remain equal to the Group II
Amortized Subordinated Amount Requirement, and (ii) for any Payment Date
occurring after the end of the period specified in clause (a) above, if the Pool
Rolling Three Month Delinquency Rate for Group II exceeds 8.00%, the Group II
Specified Subordinated Amount shall be no less than the Group II Specified
Subordinated Amount as of the previous Payment Date. The Group II Specified
Subordinated Amount may be reduced or eliminated by the Certificate Insurer in
its sole discretion. Prior to any such reduction or elimination, the Servicer
and the Certificate Insurer shall give written notice to the Rating Agencies and
the Trustee.
"Group II Subordinated Amount": As of any Payment Date, the difference,
if any, between (x) the sum of (i) the aggregate Loan Balances of the Mortgage
Loans in Group II as of the close of business on the last day of the related
Remittance Period, after taking into account payments of scheduled principal on
the Mortgage Loans in Group II due on the Due Date which immediately follows the
last day of such Remittance Period, and (ii) any amount on deposit in the
Pre-Funding Account relating to Group II less any Pre-Funding Account Earnings
related to Group II on the last day of the related Remittance Period and (y) the
Class A-2 Certificate Principal Balance as of such Payment Date (after taking
into account the payment of the Class Group II Principal Distribution Amount
(except any payment to be made as to principal on such Payment Date from the
proceeds of the Group II Certificate Insurance Policy) on such Payment Date).
"Group II Subordination Deficit": With respect to any Payment Date, the
amount, if any, by which (x) the Class A-2 Certificate Principal Balance, after
taking into account the payment of the Group II Principal Distribution Amount on
such Payment Date (except any payment to be made as to principal on such Payment
Date from the proceeds of the Group II Certificate Insurance Policy), exceeds
the sum of (y) the aggregate Loan Balance of the Mortgage Loans in Group II as
of the close of business on the last day of the preceding Remittance Period
after taking into account payments of scheduled principal on such Mortgage Loans
due on the Due Date in the calendar month in which such Payment Date occurs and
(z) the portion of the Pre-Funded Amount related to Group II as of the close of
business on the last day of the related Remittance Period; provided that for the
purpose of calculating Loan Balances to determine if a Group II Subordination
Deficit exists, the aggregate amount of the principal component of all
unreimbursed Delinquency Advances relating to Group II shall be deducted from
the related actual Loan Balances.
"Group II Total Available Funds": The amount calculated pursuant to
Section 7.3(a)(ii) hereof.
"Group II Total Available Funds Shortfall": The amount calculated
pursuant to Section 7.3(b) hereof.
"Group II Total Monthly Excess Spread": With respect to any Payment
Date, the positive difference between (i) the Group II Interest Remittance
Amount for the Due Period relating to such Payment Date plus any amount
transferred from the Capitalized Interest Account relating to Group II and (ii)
the sum of (x) the interest due on the Class A-2 Certificates on such Payment
Date and (y) the Fees and Expenses related to Group II, if any, for such Payment
Date.
"Highest Lawful Rate": As set forth in Section 11.13.
- 15 -
<PAGE>
"Indemnification Agreement": The Indemnification Agreement dated
December 10, 1999, among the Certificate Insurer, the Seller and the
Underwriter.
"Indirect Participant": Any financial institution for whom any Direct
Participant holds an interest in a Class A Certificate.
"Initial Certification": The initial certification in the form set
forth as Exhibit E hereto (and as an exhibit to the Custodial Agreement) and
delivered by the Custodian, on behalf of the Trustee, to the Seller on the
Startup Day, pursuant to Section 3.7 hereof.
"Initial Mortgage Loans": The Mortgage Loans to be sold to the Trust by
the Seller on the Startup Day.
"Initial Premium": The initial premium (covering one month) for Group I
and Group II payable by the Seller on behalf of the Trust to the Certificate
Insurer in consideration of the delivery to the Trustee of the Certificate
Insurance Policies.
"Insurance Agreement": The Insurance Agreement dated as of December 1,
1999, among the Seller, the Servicer, the Trustee, the Oversight Agent and the
Certificate Insurer, as it may be amended from time to time.
"Insurance Policy": Any hazard, flood, title or primary mortgage
insurance policy relating to a Mortgage Loan.
"Insured Payment": A Group I Insured Payment or a Group II Insured
Payment.
"Interest Accrual Period": With respect to the Class A-1 Certificates
and any Payment Date, the calendar month immediately preceding such Payment
Date. A "Calendar Month" shall be deemed to be 30 days. With respect to the
Class A-2 Certificates and any Payment Date, the period commencing on the
immediately preceding Payment Date (or in the case of the first Payment Date,
the Startup Day) and ending on the day immediately preceding the current Payment
Date. All calculations of interest on the Class A-1 Certificates will be made on
the basis of a 360-day year assumed to consist of twelve 30-day months and all
calculations of interest on the Class A-2 Certificates will be made on the basis
of the actual number of days elapsed in the related Interest Accrual Period and
in a year of 360 days.
"Interest Determination Date": With respect to any Interest Accrual
Period for the Class A-2 Certificates, the second London Business Day preceding
such Interest Accrual Period or, in case of the first Payment Date, December 15,
1999.
"Late Payment Rate": For any Payment Date, the rate of interest, as it
is publicly announced by Citibank, N.A. at its principal office in New York, New
York as its prime rate (any change in such prime rate of interest to be
effective on the date such change is announced by Citibank, N.A.) plus 3%. The
Late Payment Rate shall be computed on the basis of a year of 365 days
calculating the actual number of days elapsed. In no event shall the Late
Payment Rate exceed the maximum rate permissible under any applicable law
limiting interest rates.
"LIBOR": With respect to any Interest Accrual Period for the Class A-2
Certificates, the rate determined by the Trustee on the related Interest
Determination Date on the basis of the London interbank offered rate for
one-month U.S. dollar deposits, as such rate appears on the Telerate Page 3750,
as of 11:00 a.m. (London time) on such Interest Determination Date; provided
that if such rate does not appear on Telerate Page 3750, the rate for such date
will be determined on the basis of the rates at which deposits in U.S. Dollars
are offered by the Reference Banks as of 11:00 a.m. (London time) on such
Interest
- 16 -
<PAGE>
Determination Date to prime banks in the London interbank market for a period of
one month in amounts approximately equal to the Class A-2 Certificate Principal
Balance. In such event, the Trustee will request the principal London office of
each of the Reference Banks to provide a quotation of its rate. If at least two
such quotations are provided, the rate for that date will be the arithmetic mean
of the quotations (rounded upwards if necessary to the nearest whole multiple of
1/16%). If fewer than two quotations are provided as requested, the rate for
that date will be the arithmetic mean of the rates quoted by one or more major
banks in New York City, selected by the Trustee, as of 11:00 a.m. (New York City
time) on such date for loans in U.S. Dollars to leading European banks for a
period of one month in amounts approximately equal to the Class A-2 Certificate
Principal Balance. If no such quotations can be obtained, the rate will be LIBOR
for the prior Payment Date, or in the case of the initial Payment Date, 6.4675%.
"Liquidated Loan": As defined in Section 8.13(b) hereof. A Mortgage
Loan which is purchased from the Trust pursuant to Section 3.5, 3.7 or 8.10
hereof is not a "Liquidated Loan".
"Liquidation Expenses": Expenses which are incurred by the Servicer in
connection with the liquidation of any defaulted Mortgage Loan, such expenses,
including, without limitation, legal fees and expenses, and any unreimbursed
Servicing Advances expended by the Servicer pursuant to Sections 8.9(c) and 8.13
with respect to the related Mortgage Loan.
"Liquidation Proceeds": With respect to any Liquidated Loan, as of any
date of determination any amounts (including the proceeds of any Insurance
Policy) recovered by the Servicer in connection with such Liquidated Loan,
whether through trustee's sale, foreclosure sale or otherwise.
"Loan Balance": With respect to a Mortgage Loan and a date of
determination, the principal balance thereof on the Cut-Off Date with respect to
the Initial Mortgage Loans or the relevant Subsequent Cut-Off Date with respect
to the Subsequent Mortgage Loans after giving effect to all principal payments
due on or before the Cut-Off Date or Subsequent Cut-Off Date, as applicable,
whether or not received, less any related Principal Remittance Amounts relating
to such Mortgage Loan included in previous related Monthly Remittance Amounts
that were received by the Servicer or any Sub-Servicer whether or not delivered
to the Trustee, provided, that the Loan Balance for any Mortgage Loan which has
become a Liquidated Loan shall be zero as of the first day of the Remittance
Period following the Remittance Period in which such Mortgage Loan becomes a
Liquidated Loan, and at all times thereafter.
"Loan Purchase Price": With respect to any Mortgage Loan purchased from
the Trust on a Remittance Date pursuant to Section 3.5, 3.7 or 8.10 hereof, an
amount equal to the Loan Balance of such Mortgage Loan as of the date of
purchase, plus one month's interest on the outstanding Loan Balance thereof as
of the beginning of the preceding Remittance Period computed at the then
applicable Coupon Rate less the Servicing Fee Rate, if any, together with,
without duplication, the aggregate amount of (i) all delinquent interest, all
Delinquency Advances and Servicing Advances theretofore made with respect to
such Mortgage Loan and not subsequently recovered from the related Mortgage Loan
and (ii) the interest portion of any Delinquency Advances which the Servicer or
any Sub-Servicer has theretofore failed to remit with respect to such Mortgage
Loan.
"London Business Day": A day on which banks are open for dealing in
foreign currency and exchange in London and New York City.
"Monthly Exception Report": The monthly report delivered by the
Servicer to the Trustee and the Oversight Agent on each Determination Date,
pursuant to Section 8.8(d)(ii). Each Monthly Exception Report shall cover the
immediately preceding Remittance Period (or, as necessary, the related Due
Period) and shall consist of, for each Mortgage Loan Group and in the aggregate
(i) an activity report of the Mortgage Loans setting forth the Loan Balance of
Mortgage Loans as of the first day of the related
- 17 -
<PAGE>
Remittance Period (or, as necessary, the related Due Period), scheduled payments
due, Prepayments, Liquidated Loan balances, and the resulting Loan Balance of
the Mortgage Loans as of the last day of the related Remittance Period (or, as
necessary, the related Due Period) and (ii) separate reports of (a) payoffs,
Curtailments, foreclosures and bankruptcies, such reports to provide the payment
details for each Mortgage Loan covering the immediately preceding Remittance
Period and any Prepayments not previously reported from a prior Remittance
Period (or, as necessary, the related Due Period), and (b) Prepayments and
delinquencies, such reports to reflect the current status of each Mortgage Loan
with payment details as of the last day of the related Remittance Period (or, as
necessary, the related Due Period).
"Monthly Remittance Amount": With respect to Group I, the Group I
Monthly Remittance Amount and with respect to Group II, the Group II Monthly
Remittance Amount.
"Monthly Servicing Report": The monthly report required to be furnished
by the Servicer pursuant to Section 8.26(a) hereof.
"Moody's": Moody's Investors Service, Inc., and any successor thereto.
"Mortgage": The mortgage, deed of trust, deed to secure debt or other
instrument creating a first or second lien on an estate in fee simple interest
in real property securing a Note.
"Mortgage Loans": Such of the mortgage loans (including Initial
Mortgage Loans and Subsequent Mortgage Loans) transferred and assigned to the
Trust pursuant to Section 3.6(a) and Section 3.9 hereof, together with any
Qualified Replacement Mortgages substituted therefor in accordance with this
Agreement, as from time to time are held as a part of the Trust Estate, the
Mortgage Loans originally so held being identified in the Schedule of Mortgage
Loans. The term "Mortgage Loan" includes the terms "First Mortgage Loan" and
"Second Mortgage Loan". The term "Mortgage Loan" includes any Mortgage Loan
which is Delinquent, which relates to a foreclosure or which relates to a
Property which is REO Property prior to such Property's disposition by the
Trust. Any mortgage loan which, although intended by the parties hereto to have
been, and which purportedly was, transferred and assigned to the Trust by the
Seller, in fact was not transferred and assigned to the Trust for any reason
whatsoever shall nevertheless be considered a "Mortgage Loan" for all purposes
of this Agreement.
"Mortgage Loan Group": Either Group I or Group II. References herein to
the related Class of Class A Certificates, when used with respect to a Mortgage
Loan Group, shall mean (A) in the case of Group I, the Class A-1 Certificates
and (B) in the case of Group II, the Class A-2 Certificates.
"Mortgagor": The obligor on a Note.
"Net Liquidation Proceeds": As to any Liquidated Loan, Liquidation
Proceeds net of, without duplication, Liquidation Expenses and unreimbursed
Servicing Advances, unreimbursed Delinquency Advances and accrued and unpaid
Servicing Fees through the date of liquidation relating to such Liquidated Loan.
In no event shall Net Liquidation Proceeds with respect to any Liquidated Loan
be less than zero.
"Net Monthly Excess Cashflow": The amount calculated pursuant to
Section 7.5(d)(iii) hereof.
"Non-REMIC Accounts": Collectively, the Pre-Funding Account and the
Capitalized Interest Account.
"Note": The note or other evidence of indebtedness evidencing the
indebtedness of a Mortgagor under a Mortgage Loan.
- 18 -
<PAGE>
"Officer's Certificate": A certificate signed by any Authorized Officer
of any Person delivering such certificate and delivered to the Trustee.
"Operative Documents": Collectively, this Agreement, the Certificate
Insurance Policies, the Certificates, the Insurance Agreement, the Underwriting
Agreement, the Custodial Agreement, any Sub-Servicing Agreement, any Subsequent
Transfer Agreement, the Registration Statement and the Indemnification
Agreement.
"Original Aggregate Loan Balance": The aggregate Loan Balances of all
Initial Mortgage Loans i.e., $84,193,752.22 as of the Cut-Off Date and
$83,489,610.42 as of the Startup Day.
"Original Certificate Principal Balance": As of the Startup Day and as
to each Class of Class A Certificates, the original Certificate Principal
Balances thereof, as follows:
Class A-1 Certificates $28,000,000.
Class A-2 Certificates $75,075,000.
The Class R Certificates do not have an Original Certificate
Principal Balance.
"Original Group I Pre-Funded Amount": $2,897,800.46.
"Original Group II Pre-Funded Amount": $18,612,589.12.
"Original Pre-Funded Amount": The amount deposited in the Pre-Funding
Account on the Startup Day from the proceeds of the sale of the Certificates,
which amount is $21,510,389.58.
"Original Principal Amount": With respect to each Note, the principal
amount of such Note on the date of origination thereof.
"Originator": The Seller and any entity from which the Seller acquires
Mortgage Loans, provided that in the case of a Mortgage Loan previously owned by
a securitization trust created by the Seller, the Seller shall be deemed the
Originator of such Mortgage Loan.
"Outstanding": With respect to all Certificates of a Class, as of any
date of determination, all such Certificates theretofore executed and delivered
hereunder except:
(i) Certificates theretofore canceled by the Trustee or
delivered to the Trustee for cancellation;
(ii) Certificates or portions thereof for which full and final
payment of money in the necessary amount has been theretofore deposited
with the Trustee in trust for the Owners of such Certificates;
(iii) Certificates in exchange for or in lieu of which other
Certificates have been executed and delivered pursuant to this
Agreement, unless proof satisfactory to the Trustee is presented that
any such Certificates are held by a bona fide purchaser; and
(iv) Certificates alleged to have been destroyed, lost or
stolen for which replacement Certificates have been issued as provided
for in Section 5.5 hereof.
- 19 -
<PAGE>
(v) Certificates as to which the Trustee has made the final
distribution thereon, whether or not such Certificates have been
returned to the Trustee.
"Oversight Agent": The Chase Manhattan Bank, a New York banking
corporation, as Oversight Agent hereunder, or any successor Oversight Agent
hereunder.
"Oversight Agent Fee": The fee payable monthly to the Oversight Agent
on each Payment Date, which shall equal the product of (a) one-twelfth (1/12) of
0.03% and (b) the aggregate Loan Balance of the Mortgage Loans at the date of
determination.
"Owner": The Person in whose name a Certificate is registered in the
Register, to the extent described in Section 5.6.
"Paid-in-Full Mortgage Loan": With respect to any Payment Date, a
Mortgage Loan on which the entire obligation of the related Mortgagor has been
satisfied and the lien on the property may be removed during the related
Remittance Period.
"Pass-Through Rate": As to the Class A-1 Certificates, the Class A-1
Pass-Through Rate and as to the Class A-2 Certificates, the Class A-2
Pass-Through Rate.
"Payment Date": Any date on which the Trustee is required to make
distributions to the Owners, which shall be the 20th day of each month, or if
such day is not a Business Day, the next succeeding Business Day, commencing in
the month following the Startup Day.
"Percentage Interest": As to any Class of Class A Certificate, that
percentage, expressed as a fraction, the numerator of which is the Certificate
Principal Balance set forth on such Certificate as of the Startup Day and the
denominator of which is the Original Certificate Principal Balance of all Class
A Certificates of the same Class as of the Startup Day; and as to any Class R
Certificate, that Percentage Interest set forth on such Class R Certificate.
"Person": Any individual, corporation, partnership, joint venture,
limited liability company, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Pool Cumulative Expected Losses": With respect to a Mortgage Loan
Group and any period, the sum of (i) all Realized Losses with respect to the
Mortgage Loans in such Mortgage Loan Group experienced during such period and
(ii) the product of (A) 43% and (B) with respect to any date of determination,
the sum of (x) 25% of the Loan Balances of all Mortgage Loans which are 30-59
days Delinquent (inclusive), (y) 50% of the Loan Balances of all Mortgage Loans
which are 60-89 days Delinquent (inclusive), and (z) 100% of the Loan Balances
of all Mortgage Loans which are 90 or more days Delinquent (including, without
duplication, REO Properties and Mortgage Loans in foreclosure or bankruptcy).
"Pool Cumulative Realized Losses": With respect to a Mortgage Loan
Group and any period, the sum of all Realized Losses experienced since the
Startup Day with respect to the Mortgage Loans in such Mortgage Loan Group.
"Pool Delinquency Rate": With respect to any Remittance Period, the
fraction, expressed as a percentage, equal to (x) the aggregate principal
balances of all Mortgage Loans in a Mortgage Loan Group 90 or more days
Delinquent (including, without duplication, Mortgage Loans in foreclosure,
bankruptcy or REO Properties) as of the close of business on the last day of
such Remittance Period over (y) the Pool Principal Balance of such Mortgage Loan
Group as of the close of business on the last day of such Remittance Period.
- 20 -
<PAGE>
"Pool Principal Balance": With respect to any date of determination
thereof, the aggregate principal balances of the Group I Mortgage Loans or the
Group II Mortgage Loans as of such date of determination.
"Pool Rolling Three Month Delinquency Rate": As of any Payment Date,
and for either Mortgage Loan Group, the fraction, expressed as a percentage,
equal to the average of the Pool Delinquency Rates for such Mortgage Loan Group
for each of the three (or one and two, in the case of the first and second
Payment Dates) immediately preceding Remittance Periods.
"Preference Amount": Either of the Group I Preference Amount or the
Group II Preference Amount.
"Pre-Funded Amount": With respect to any date of determination, the
amount remaining on deposit in the Pre-Funding Account.
"Pre-Funding Account": The Pre-Funding Account established in
accordance with Section 7.2 hereof and maintained by the Trustee.
"Pre-Funding Account Earnings": With respect to the initial Payment
Date, the actual investment earnings earned during the period from the Startup
Day through the Determination Date for the January 2000 Payment Date (inclusive)
on the Pre-Funding Account during such period as calculated by the Trustee
pursuant to Section 3.9(e) hereof; and with respect to the February 2000 Payment
Date, the actual investment earnings earned during the period from February 1,
2000 through the February 2000 Payment Date (inclusive) on the Pre-Funding
Account during such period as calculated by the Trustee pursuant to Section
3.9(e) hereof.
"Prepaid Installment": With respect to any Mortgage Loan, any
installment of principal thereof and interest thereon received by the Servicer
prior to the scheduled due date for such installment, intended by the Mortgagor
as an early payment thereof and not as a Prepayment with respect to such
Mortgage Loan.
"Prepayment": A Curtailment or a payment causing a Mortgage Loan to
become a Paid-in-Full Mortgage Loan.
"Preservation Expenses": Expenditures made by the Servicer in
connection with a foreclosed Mortgage Loan prior to the liquidation thereof,
including, without limitation, expenditures for real estate property taxes,
hazard insurance premiums, property restoration or preservation.
"Principal and Interest Account": Collectively, each principal and
interest account created by the Servicer pursuant to Section 8.8(a) hereof, or
pursuant to any Sub-Servicing Agreement.
"Principal Remittance Amount": As applicable, the Group I Principal
Remittance Amount or the Group II Principal Remittance Amount.
"Prohibited Transaction": As defined at Section 860F(a)(2) of the Code
(or any successor statute thereto) and applicable to the Trust.
"Property": The underlying property securing a Mortgage Loan.
"Prospectus": The Seller's Prospectus dated October 1, 1999.
- 21 -
<PAGE>
"Prospectus Supplement": The First Alliance Mortgage Loan Trust 1999-4
Prospectus Supplement dated December 10, 1999 to the Prospectus.
"Qualified Liquidation": As defined at Section 860F(a)(4) of the Code
(or any successor statute thereto) and applicable to the Trust and the Trust
Estate.
"Qualified Mortgage": As defined at Section 860G(a)(4) of the Code (or
any successor statute thereto) and applicable to the Trust and the Mortgage Loan
Groups.
"Qualified Replacement Mortgage": A Mortgage Loan substituted for
another pursuant to Section 3.5 or 3.7 hereof, which (i) bears a fixed rate of
interest if the Mortgage Loan to be substituted for is in Group I or bears a
variable rate of interest if the Mortgage Loan to be substituted for is in Group
II, (ii) has a Coupon Rate at least equal to the Coupon Rate of the Mortgage
Loan being replaced (which, in the case of a Mortgage Loan in Group II, shall
mean a Mortgage Loan having the same interest rate index, a margin over such
index and a maximum interest rate at least equal to those applicable to the
Mortgage Loan being replaced), (iii) is of the same or better property type and
the same or better occupancy status as the replaced Mortgage Loan, (iv) shall be
of the same or better credit quality classification (determined in accordance
with the Originators' credit underwriting guidelines) as the Mortgage Loan being
replaced, (v) shall mature no later than March 1, 2030, (vi) has a Combined
Loan-to-Value Ratio as of the Cut-Off Date, no higher than the Combined
Loan-to-Value Ratio of the replaced Mortgage Loan at such time, (vii) has a Loan
Balance as of the related Replacement Cut-Off Date equal to or less than the
Loan Balance of the replaced Mortgage Loan as of such Replacement Cut-Off Date,
(viii) satisfies the criteria set forth from time to time in the definition
thereof at Section 860G(a)(4) of the Code (or any successor statute thereto) and
applicable to the Trust, all as evidenced by an Officer's Certificate of the
Seller delivered to the Trustee and the Certificate Insurer prior to any such
substitution, (ix) is of the same lien status or better lien status (x) is not
Delinquent, (xi) meets the representations and warranties set out in Section 3.4
hereof and (xii) is a valid fixed rate Mortgage Loan, if the Mortgage Loan to be
substituted for is in Group I, and is a valid variable rate Mortgage Loan, if
the Mortgage Loan to be substituted for is in Group II. In the event that one or
more mortgage loans are proposed to be substituted for one or more mortgage
loans, the Certificate Insurer may allow the foregoing tests to be met on a
weighted average basis or other aggregate basis acceptable to the Certificate
Insurer, as evidenced by a written approval delivered to the Trustee by the
Certificate Insurer, except that the requirement of clauses (vi) and (viii)
hereof must be satisfied as to each Qualified Replacement Mortgage.
"Rating Agencies": Moody's and Standard & Poor's or any successors
thereto.
"Realized Loss": As to any Liquidated Loan, the amount, if any, by
which the Loan Balance thereof as of the date of liquidation is in excess of Net
Liquidation Proceeds realized thereon.
"Record Date": With respect to each Payment Date, the last Business Day
of the calendar month immediately preceding the calendar month in which such
Payment Date occurs.
"Reference Banks": Bankers Trust Company, Barclay's Bank PLC and
National Westminster Bank PLC; provided that if any of the foregoing banks are
not suitable to serve as a Reference Bank, then any leading banks selected by
the Trustee which are engaged in transactions in Eurodollar deposits in the
international Eurocurrency market (i) with an established place of business in
London, (ii) not controlling, under the control of or under common control with
the Seller or any affiliate thereof and (iii) which have been designated as such
by the Trustee.
"Register": The register maintained by the Trustee in accordance with
Section 5.4 hereof, in which the names of the Owners are set forth.
- 22 -
<PAGE>
"Registrar": The Trustee, acting in its capacity as Trustee appointed
pursuant to Section 5.4 hereof, or any duly appointed and eligible successor
thereto.
"Registration Statement": The Registration Statement filed by the
Seller with the Securities and Exchange Commission (Registration Statement
Number 333-86411), including all amendments thereto and including the Prospectus
and Prospectus Supplement constituting a part thereof.
"Reimbursement Amount": A Group I Reimbursement Amount or a Group II
Reimbursement Amount.
"REMIC": A "real estate mortgage investment conduit" within the meaning
of Section 860D of the Code.
"REMIC Provisions": Provisions of the federal income tax law relating
to real estate mortgage investment conduits, which appear at Sections 860A
through 860G of the Code, and related provisions, and regulations and rulings
promulgated thereunder, as the foregoing may be in effect from time to time.
"Remittance Date": Any date on which the Servicer is required to remit
moneys on deposit in the Principal and Interest Account to the Certificate
Account, which shall be the day five Business Days prior to each Payment Date.
"Remittance Period": The period (inclusive) beginning on the first day
of the calendar month immediately preceding the month in which a Remittance Date
occurs and ending on the last day of such immediately preceding calendar month.
"REO Property": A Property acquired by the Servicer or any Sub-Servicer
on behalf of the Trust through foreclosure or deed-in-lieu of foreclosure in
connection with a defaulted Mortgage Loan.
"Replacement Cut-Off Date": With respect to any Qualified Replacement
Mortgage, the first day of the calendar month in which such Qualified
Replacement Mortgage is conveyed to the Trust.
"Representation Letter": Letters to, or agreements with, the Depository
to effectuate a book entry system with respect to the Class A Certificates
registered in the Register under the nominee name of the Depository.
"Request for Release": The request for release in the form set forth as
Exhibit J hereto.
"Residual Net Monthly Excess Cashflow": With respect to any Payment
Date, the aggregate Net Monthly Excess Cashflow, if any, remaining with respect
to each of the Mortgage Loan Groups after the making of all applications
described in Sections 7.5(d)(i), 7.5(d)(ii), 7.5(d)(iii) and 7.5(d)(iv) hereof.
"Responsible Officer": When used with respect to the Trustee, any
officer assigned to the corporate trust group (or any successor thereto),
including any vice president, assistant vice president, trust officer, any
assistant secretary, any assistant treasurer, any trust officer or any other
officer of the Trustee customarily performing functions similar to those
performed by any of the above designated officers and having direct
responsibility for the administration of this Agreement. When used with respect
to the Oversight Agent, the president, any vice president or any other officer
of the Oversight Agent customarily performing functions with respect to the
Oversight Agent's monitoring of loan servicing.
"Schedule of Mortgage Loans": The Schedule of Mortgage Loans, separated
by Mortgage Loan Group, with respect to the Mortgage Loans listing each Mortgage
Loan in the related Group to be
- 23 -
<PAGE>
conveyed on the Startup Day (or Subsequent Transfer Date). Such Schedule of
Mortgage Loans shall identify each Mortgage Loan by the Servicer's loan number
and address (including the state) of the Property and shall set forth as to each
Mortgage Loan the lien status, the Combined Loan-to-Value Ratio, the Loan
Balance as of the Cut-Off Date or Subsequent Cut-Off Date, as the case may be,
the Coupon Rate thereof (and, with respect to Mortgage Loans in Group II, the
index and the margin), the current scheduled monthly payment of principal and
interest and the maturity of the related Note, the property type, occupancy
status, Appraised Value and the Originator of the Mortgage Loan, all as
delivered to the Trustee in physical and computer readable form and delivered to
the Certificate Insurer in physical form.
"Second Mortgage Loan": A Mortgage Loan that constitutes a second
priority mortgage lien with respect to the related Property.
"Securities Act": The Securities Act of 1933, as amended.
"Seller": First Alliance Mortgage Company, a California corporation,
and its permitted successors and assigns.
"Senior Lien": With respect to any Second Mortgage Loan, the mortgage
loan relating to the corresponding Property having a first priority lien.
"Servicer": First Alliance Mortgage Company, a California corporation,
and its permitted successors and assigns.
"Servicer Affiliate": A Person (i) controlling, controlled by or under
common control with the Servicer and (ii) which is qualified to service
residential mortgage loans.
"Servicing Advance": The amount calculated pursuant to Section 8.9(c)
and Section 8.13 hereof.
"Servicing Certificate": A certificate completed by and executed by an
Authorized Officer of the Servicer.
"Servicing Fee": The sum of the Group I Servicing Fee and the Group II
Servicing Fee.
"Servicing Fee Rate": 0.50% per annum.
"Six Month LIBOR Loans": Mortgage Loans, other than the Two Year Fixed
Loans or the Three Year Fixed Loans, whose interest rates adjust semi-annually
based on the London interbank offered rate for six-month United States Dollar
deposits in the London Market and as published in The Wall Street Journal.
"Specified Subordinated Amount": As applicable, the Group I Specified
Subordinated Amount or the Group II Specified Subordinated Amount.
"Standard & Poor's": Standard & Poor's Ratings Services, a division of
The McGraw-Hill Companies, Inc., and any successor thereto.
"Startup Day": December 17, 1999.
"Subordinated Amount": As applicable, the Group I Subordinated Amount
or the Group II Subordinated Amount.
- 24 -
<PAGE>
"Subordination Deficiency Amount": With respect to any Mortgage Loan
Group and Payment Date, the excess, if any, of (i) the related Specified
Subordinated Amount applicable to such Payment Date over (ii) the related
Subordinated Amount applicable to such Payment Date prior to taking into account
the payment of any related Subordination Increase Amount on such Payment Date.
"Subordination Deficit": As applicable, the Group I Subordination
Deficit or the Group II Subordination Deficit.
"Subordination Increase Amount": With respect to any Mortgage Loan
Group and Payment Date, the lesser of (i) the related Subordination Deficiency
Amount as of such Payment Date (after taking into account the payment of the
related Class A Distribution Amount on such Payment Date (except for any related
Subordination Increase Amount)) and (ii) the aggregate amount of Net Monthly
Excess Cashflow to be allocated to such Mortgage Loan Group pursuant to either
Section 7.5(d)(iii)(A) or Section 7.5(d)(iii)(B) on such Payment Date.
"Subordination Reduction Amount": With respect to any Mortgage Loan
Group and Payment Date, an amount equal to the lesser of (x) the Excess
Subordinated Amount for such Mortgage Loan Group and Payment Date and (y) the
Principal Remittance Amount for such Mortgage Loan Group for the related
Remittance Date.
"Subsequent Cut-Off Date": The beginning of business on the date
specified in the Subsequent Transfer Agreement with respect to the Subsequent
Mortgage Loans which are transferred and assigned to the Trust pursuant to the
related Subsequent Transfer Agreement.
"Subsequent Mortgage Loans": The Mortgage Loans sold to the Trust for
inclusion in Group I or Group II pursuant to Section 3.9 hereof, which shall be
listed on the Schedules of Mortgage Loans attached to a Subsequent Transfer
Agreement.
"Subsequent Transfer Agreement": The Subsequent Transfer Agreement
dated as of the Subsequent Transfer Date executed by the Trustee and the Seller,
by which Subsequent Mortgage Loans are sold and assigned to the Trust.
"Subsequent Transfer Date": The date so specified in each Subsequent
Transfer Agreement, which shall be no later than January 28, 2000.
"Sub-Servicer": Any Person with whom the Servicer has entered into a
Sub-Servicing Agreement and who satisfies any requirements set forth in Section
8.3 hereof in respect of the qualification of a Sub-Servicer.
"Sub-Servicing Agreement": The written contract between the Servicer
and any Sub-Servicer relating to servicing and/or administration of certain
Mortgage Loans as permitted by Section 8.3.
"Substitution Amount": In connection with the delivery of any Qualified
Replacement Mortgage, if the outstanding principal amount of such Qualified
Replacement Mortgage as of the applicable Replacement Cut-Off Date is less than
the Loan Balance of the Mortgage Loan being replaced as of such Replacement
Cut-Off Date, an amount equal to such difference together with accrued and
unpaid interest on such amount calculated at the Coupon Rate (net of the
Servicing Fee Rate) of the Mortgage Loan being replaced.
"Tax Matters Person": The Tax Matters Person appointed pursuant to
Section 11.17 hereof.
"Telerate Page 3750": The display page currently so designated on the
Bridge Telerate Capital Markets Report (or such other page as may replace that
page on that service for the purpose of displaying London interbank offered
rates of major banks).
- 25 -
<PAGE>
"Termination Notice": As defined in Section 9.3(b) hereof.
"Termination Price": The amount calculated pursuant to Section 9.2(a)
hereof.
"Three Year Fixed Loans": Mortgage Loans that bear interest at a fixed
rate for three years after origination and thereafter have periodic adjustments
at frequencies in the same manner as Six Month LIBOR Loans.
"Total Monthly Excess Cashflow": The amount calculated pursuant to
Section 7.5(d)(ii) hereof.
"Total Monthly Excess Spread": As applicable, the Group I Total Monthly
Excess Spread or the Group II Total Monthly Excess Spread.
"Trust": First Alliance Mortgage Loan Trust 1999-4, the trust created
under this Agreement.
"Trust Estate": Collectively, all money, instruments and other
property, to the extent such money, instruments and other property are subject
or intended to be held in trust, and in the subtrusts, for the benefit of the
Owners, including all proceeds thereof, including, without limitation, (i) the
Mortgage Loans, (ii) such amounts, including Eligible Investments, as from time
to time may be held in all Accounts, (iii) any Property, the ownership of which
has been effected on behalf of the Trust as a result of foreclosure or
acceptance by the Servicer of a deed in lieu of foreclosure and that has not
been withdrawn from the Trust, (iv) any Insurance Policies relating to the
Mortgage Loans and any rights of the Seller under such Insurance Policies, (v)
Net Liquidation Proceeds with respect to any Liquidated Loan, (vi) the
Certificate Insurance Policies and (vii) the proceeds of any of the above.
"Trustee": The Chase Manhattan Bank located on the date of execution of
this Agreement at 450 West 33rd Street, 14th Floor, New York, New York 10001,
not in its individual capacity but solely as Trustee under this Agreement, and
any successor hereunder.
"Two Year Fixed Loans": Mortgage Loans that bear interest at a fixed
rate for two years after origination and thereafter have periodic adjustments at
frequencies in the same manner as Six Month LIBOR Loans.
"Underwriter": Lehman Brothers Inc.
"Underwriting Agreement": The Underwriting Agreement dated December 10,
1999 between the Underwriter and the Seller.
Section 1.2 Use of Words and Phrases. "Herein", "hereby", "hereunder",
"hereof", "hereinbefore", "hereinafter" and other equivalent words refer to this
Agreement as a whole and not solely to the particular section of this Agreement
in which any such word is used. The definitions set forth in Section 1.1 hereof
include both the singular and the plural. Whenever used in this Agreement, any
pronoun shall be deemed to include both singular and plural and to cover all
genders.
Section 1.3 Captions; Table of Contents. The captions or headings in
this Agreement and the Table of Contents are for convenience only and in no way
define, limit or describe the scope and intent of any provisions of this
Agreement.
Section 1.4 Opinions. Each opinion with respect to the validity,
binding nature and enforceability of documents or Certificates may be qualified
to the extent that the same may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the
- 26 -
<PAGE>
enforcement of creditors' rights generally and by general principles of equity
(whether considered in a proceeding or action in equity or at law) and may state
that no opinion is expressed on the availability of the remedy of specific
enforcement, injunctive relief or any other equitable remedy. Any opinion
required to be furnished by any Person hereunder must be delivered by counsel
upon whose opinion the addressee of such opinion may reasonably rely, and such
opinion may state that it is given in reasonable reliance upon an opinion of
another, a copy of which must be attached, concerning the laws of a foreign
jurisdiction.
ARTICLE II
ESTABLISHMENT AND ORGANIZATION OF THE TRUST
Section 2.1 Establishment of the Trust. The parties hereto do hereby
create and establish, pursuant to the laws of the State of New York and this
Agreement, the Trust, which, for convenience, shall be known as "First Alliance
Mortgage Loan Trust 1999-4" and which shall contain two subtrusts.
Section 2.2 Office. The office of the Trust shall be in care of the
Trustee, at 450 West 33rd Street, 14th Floor, New York, New York 10001, or at
such other address as the Trustee may designate by notice to the Seller, the
Servicer, the Owners and the Certificate Insurer.
Section 2.3 Purposes and Powers. The purpose of the Trust is to engage
in the following activities and only such activities: (i) the issuance of the
Certificates and the acquiring, owning and holding of Mortgage Loans and the
Trust Estate in connection therewith; (ii) activities that are necessary,
suitable or convenient to accomplish the foregoing or are incidental thereto or
connected therewith, including the investment of moneys in accordance with this
Agreement; and (iii) such other activities as may be required in connection with
conservation of the Trust Estate and distributions to the Owners; provided,
however, that nothing contained herein shall permit the Trustee to take any
action which would result in the loss of REMIC status for the Trust (other than
the Non-REMIC Accounts).
Section 2.4 Appointment of the Trustee; Declaration of Trust. The
Seller hereby appoints the Trustee as trustee of the Trust effective as of the
Startup Day, to have all the rights, powers and duties set forth herein. The
Trustee hereby acknowledges and accepts such appointment, represents and
warrants its eligibility as of the Startup Day to serve as Trustee pursuant to
Section 10.8 hereof and declares that it will hold the Trust Estate in trust
upon and subject to the conditions set forth herein for the benefit of the
Owners and the Certificate Insurer, as their interests may appear.
Section 2.5 Expenses of Trustee. The expenses of the Trust, including
(i) any reasonable expenses of the Trustee, and (ii) any other expenses of the
Trust that have been reviewed by the Servicer, which review shall not be
required in connection with the enforcement of a remedy by the Trustee resulting
from a default under this Agreement, shall be paid directly by the Servicer. The
Servicer shall pay directly the reasonable fees and expenses of counsel to the
Trustee. The reasonable fees and expenses of the Trustee's counsel in connection
with the review and delivery of this Agreement and related documentation shall
be paid by the Servicer on the Startup Day.
Section 2.6 Ownership of the Trust. On the Startup Day the ownership
interests in the Trust and the subtrusts shall be transferred as set forth in
Section 4.2 hereof, such transfer to be evidenced by sale of the Certificates as
described therein. Thereafter, transfer of any ownership interest shall be
governed by Sections 5.4 and 5.8 hereof.
Section 2.7 Situs of the Trust. It is the intention of the parties
hereto that the Trust constitute a trust under the laws of the State of New
York; provided that it is understood that the Files may be held by the
Custodian, on behalf of the Trustee, outside the State of New York. The Trust
will be created and administered in, the State of New York. The Trust's only
office will be at the office of the Trustee as set forth in Section 2.2 hereof.
- 27 -
<PAGE>
Section 2.8 Miscellaneous REMIC Provisions.
(a) The Trust (other than the Non-REMIC Accounts) shall elect
to be treated as a REMIC under Section 860D of the Code, as described in Section
11.15. Any inconsistencies or ambiguities in this Agreement or in the
administration of the Trust shall be resolved in a manner that preserves the
validity of the election of the Trust (other than the Non-REMIC Accounts) to be
treated as a REMIC.
(b) The Class A Certificates are hereby designated as "regular
interests" in the REMIC and the Class R Certificates are hereby designated as
the "residual interest" in the REMIC, as defined in Section 860G(a) of the Code.
(c) The Startup Day is hereby designated as the "startup day"
of the REMIC within the meaning of Section 860G(a)(9) of the Code.
(d) The final scheduled Payment Date for any Class of Class A
Certificates is hereby set to be the Payment Date succeeding by one year the
latest maturity date of any Mortgage Loan in the related Mortgage Loan Group.
The final scheduled Payment Dates for the Class A Certificates and the Class R
Certificates are as follows:
Class Final Scheduled Payment Date
----- ----------------------------
Class A-1 Certificates March 20, 2031
Class A-2 Certificates March 20, 2031
Class R Certificates March 20, 2031
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE SELLER, THE SERVICER AND THE OVERSIGHT AGENT;
COVENANT OF SELLER TO CONVEY MORTGAGE LOANS
Section 3.1 Representations and Warranties of the Seller. The Seller
hereby represents, warrants and covenants to the Trustee, the Oversight Agent,
the Certificate Insurer and to the Owners as of the Startup Day that:
(a) The Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of California and is
in good standing as a foreign corporation in each jurisdiction in which the
nature of its business, or the properties owned or leased by it, make such
qualification necessary. The Seller has all requisite corporate power and
authority to own and operate its properties, to carry out its business as
presently conducted and as proposed to be conducted and to enter into and
discharge its obligations under this Agreement and the other Operative Documents
to which it is a party.
(b) The execution and delivery of this Agreement and the other
Operative Documents to which it is a party by the Seller and its performance and
compliance with the terms of this Agreement and of the other Operative Documents
to which it is a party have been duly authorized by all necessary corporate
action on the part of the Seller and will not violate the Seller's Articles of
Incorporation or Bylaws or constitute a default (or an event which, with notice
or lapse of time, or both, would constitute a default) under, or result in the
breach of, any material contract, agreement or other
- 28 -
<PAGE>
instrument to which the Seller is a party or by which the Seller is bound, or
violate any statute or any order, rule or regulation of any court, governmental
agency or body or other tribunal having jurisdiction over the Seller or any of
its properties.
(c) This Agreement and the other Operative Documents to which
the Seller is a party, assuming due authorization, execution and delivery by the
other parties hereto and thereto, each constitutes a valid, legal and binding
obligation of the Seller, enforceable against it in accordance with the terms
hereof and thereof, except as the enforcement hereof and thereof may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting creditors' rights generally and by general principles of
equity (whether considered in a proceeding or action in equity or at law).
(d) The Seller is not in default with respect to any order or
decree of any court or any order, regulation or demand of any federal, state,
municipal or governmental agency, which might have consequences that would
materially and adversely affect the condition (financial or otherwise) or
operations of the Seller or its properties or might have consequences that would
materially and adversely affect its performance hereunder or under the other
Operative Documents to which it is a party.
(e) Except as noted in the Prospectus Supplement under the
caption "RISK FACTORS -- Litigation," no action, suit, proceeding or
investigation is pending or, to the best of the Seller's knowledge, threatened
against the Seller which, individually or in the aggregate, might have
consequences that would prohibit the Seller from entering into this Agreement or
any other Operative Document to which it is a party or that would materially and
adversely affect the condition (financial or otherwise) or operations of the
Seller or its properties or might have consequences that would materially and
adversely affect the validity or enforceability of Mortgage Loans or the
Seller's performance hereunder or under the other Operative Documents to which
it is a party.
(f) No certificate of an officer, statement furnished in
writing or report delivered pursuant to the terms hereof by the Seller contains
any untrue statement of a material fact or omits to state any material fact
necessary to make the certificate, statement or report not misleading.
(g) The statements contained in the Registration Statement
which describe the Seller or matters or activities for which the Seller is
responsible in accordance with the Operative Documents or which are attributed
to the Seller therein are true and correct in all material respects, and the
Registration Statement does not contain any untrue statement of a material fact
with respect to the Seller or omit to state a material fact required to be
stated therein or necessary in order to make the statements contained therein
with respect to the Seller not misleading. With respect to matters other than
those referred to in the immediately preceding sentence, to the best of the
Seller's knowledge and belief, the Registration Statement does not contain any
untrue statement of a material fact required to be stated therein or omit to
state any material fact required to be stated therein or necessary to make the
statements contained therein not misleading.
(h) All actions, approvals, consents, waivers, exemptions,
variances, franchises, orders, permits, authorizations, rights and licenses
required to be taken, given or obtained, as the case may be, by or from any
federal, state or other governmental authority or agency (other than any such
actions, approvals, etc. under any state securities laws, real estate
syndication or "Blue Sky" statutes, as to which the Seller makes no such
representation or warranty), that are necessary or advisable in connection with
the purchase and sale of the Certificates and the execution and delivery by the
Seller of the Operative Documents to which it is a party, have been duly taken,
given or obtained, as the case may be, are in full force and effect on the
Startup Day and, except as noted in the Prospectus Supplement under the caption
"RISK FACTORS -- Litigation," are not subject to any pending proceedings or
appeals (administrative, judicial or otherwise) and either the time within which
any appeal therefrom may be taken or review thereof may be obtained has expired
or no review
- 29 -
<PAGE>
thereof may be obtained or appeal therefrom taken, and are adequate to authorize
the consummation of the transactions contemplated by this Agreement and the
other Operative Documents on the part of the Seller and the performance by the
Seller of its obligations under this Agreement and such of the other Operative
Documents to which it is a party.
(i) The transactions contemplated by this Agreement are in the
ordinary course of business of the Seller.
(j) The Seller received fair consideration and reasonably
equivalent value in exchange for the sale of the interests in the Mortgage
Loans.
(k) The Seller did not sell any interest in any Mortgage Loan
with any intent to hinder, delay or defraud any of its creditors.
(l) The Seller is solvent and the Seller will not be rendered
insolvent as a result of the sale of the Mortgage Loans.
(m) On the Startup Day, the Trustee will have good title on
behalf of the Trust to each Initial Mortgage Loan and such other items
comprising the corpus of the Trust Estate free and clear of any lien.
(n) There has been no material adverse change in any
information submitted by the Seller in writing to the Certificate Insurer.
(o) To the best knowledge of the Seller, no document
(including any information provided in electronic form) submitted by or on
behalf of the Seller to the Certificate Insurer contains any untrue or
misleading statement of a material fact or fails to state a material fact
required to be stated therein or necessary in order to make the statements
therein not misleading.
(p) To the best knowledge of the Seller, no material adverse
change affecting any security for the Class A Certificates has occurred prior to
delivery of and payment for the Class A Certificates.
(q) The Seller is not in default under any agreement involving
financial obligations or on any outstanding obligation which would materially
adversely impact the financial condition or operations of the Seller or legal
documents associated with the transaction contemplated in this Agreement.
(r) The Seller shall not generally solicit refinancings of the
Mortgage Loans; provided however, that this covenant shall not prevent or
restrict the Seller from soliciting or otherwise agreeing to refinancings on the
following basis: (1) general solicitations, by mail, advertisement or otherwise
of the general public or persons on a targeted list, so long as the list was not
generated from the Mortgage Loan Schedule, (2) unsolicited refinancings by the
Seller in connection with a Mortgagor's request for refinancing, (3)
refinancings in connection with the Seller's policy to solicit (i) Mortgagors
who indicate to the Seller their intent to refinance their Mortgage Loans, (ii)
with respect to Mortgage Loans in Group II, Mortgagors with Mortgage Loans for
which the next interest rate adjustment is determined by the Seller to be higher
than the current market rate for a fixed rate mortgage loan with the same risk
qualifications or (iii) in connection with the general solicitation described in
(1) above, and (4) as otherwise disclosed in the Prospectus Supplement or the
Prospectus.
It is understood and agreed that the representations and warranties set
forth in this Section 3.1 shall survive delivery of the Mortgage Loans to the
Trustee.
- 30 -
<PAGE>
Section 3.2 Representations and Warranties of the Servicer. The
Servicer hereby represents, warrants and covenants to the Trustee, the
Certificate Insurer, the Oversight Agent and to the Owners as of the Startup Day
that:
(a) The Servicer is a corporation duly organized, validly
existing and in good standing under the laws of the State of California. The
Servicer is in compliance with the laws of each state in which any Property is
located to the extent necessary to enable it to perform its obligations
hereunder and is in good standing as a foreign corporation in each jurisdiction
in which the nature of its business, or the properties owned or leased by it,
make such qualification necessary. The Servicer has all requisite corporate
power and authority to own and operate its properties, to carry out its business
as presently conducted and as proposed to be conducted and to enter into and
discharge its obligations under this Agreement and the other Operative Documents
to which it is a party. The Servicer has equity of at least $20,000,000, as
determined in accordance with generally accepted accounting principles.
(b) The execution and delivery of this Agreement by the
Servicer and its performance and compliance with the terms of this Agreement and
the other Operative Documents to which it is a party have been duly authorized
by all necessary corporate action on the part of the Servicer and will not
violate the Servicer's Articles of Incorporation or Bylaws or constitute a
default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, or result in the breach of, any material contract,
agreement or other instrument to which the Servicer is a party or by which the
Servicer is bound or violate any statute or any order, rule or regulation of any
court, governmental agency or body or other tribunal having jurisdiction over
the Servicer or any of its properties.
(c) This Agreement and the other Operative Documents to which
the Servicer is a party, assuming due authorization, execution and delivery by
the other parties hereto and thereto, each constitutes a valid, legal and
binding obligation of the Servicer, enforceable against it in accordance with
the terms hereof and thereof, except as the enforcement hereof and thereof may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting creditors' rights generally and by general
principles of equity (whether considered in a proceeding or action in equity or
at law).
(d) The Servicer is not in default with respect to any order
or decree of any court or any order, regulation or demand of any federal, state,
municipal or governmental agency which might have consequences that would
materially and adversely affect the condition (financial or otherwise) or
operations of the Servicer or its properties or might have consequences that
would materially and adversely affect its performance hereunder or under the
other Operative Documents to which the Servicer is a party.
(e) Except as noted in the Prospectus Supplement under the
caption "RISK FACTORS -- Litigation," no action, suit, proceeding or
investigation is pending or, to the best of the Servicer's knowledge, threatened
against the Servicer which, individually or in the aggregate, might have
consequences that would prohibit its entering into this Agreement or any other
Operative Document to which it is a party or that would materially and adversely
affect the condition (financial or otherwise) or operations of the Servicer or
its properties or might have consequences that would materially and adversely
affect the validity or the enforceability of the Mortgage Loans or the
Servicer's performance hereunder or under the other Operative Documents to which
the Servicer is a party.
(f) No certificate of an officer, statement furnished in
writing or report delivered pursuant to the terms hereof by the Servicer
contains any untrue statement of a material fact or omits to state any material
fact necessary to make the certificate, statement or report not misleading.
- 31 -
<PAGE>
(g) The statements contained in the Registration Statement
which describe the Servicer or matters or activities for which the Servicer is
responsible in accordance with the Operative Documents or which are attributed
to the Servicer therein are true and correct in all material respects, and the
Registration Statement does not contain any untrue statement of a material fact
with respect to the Servicer or omit to state a material fact required to be
stated therein or necessary to make the statements contained therein with
respect to the Servicer not misleading. With respect to matters other than those
referred to in the immediately preceding sentence, to the best of the Servicer's
knowledge and belief, the Registration Statement does not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements contained therein not
misleading.
(h) All actions, approvals, consents, waivers, exemptions,
variances, franchises, orders, permits, authorizations, rights and licenses
required to be taken, given or obtained, as the case may be, by or from any
federal, state or other governmental authority or agency (other than any such
actions, approvals, etc. under any state securities laws, real estate
syndication or "Blue Sky" statutes, as to which the Servicer makes no such
representation or warranty), that are necessary or advisable in connection with
the execution and delivery by the Servicer of the Operative Documents to which
it is a party, have been duly taken, given or obtained, as the case may be, are
in full force and effect on the date hereof, and, except as noted in the
Prospectus Supplement under the caption "RISK FACTORS -- Litigation," are not
subject to any pending proceedings or appeals (administrative, judicial or
otherwise) and either the time within which any appeal therefrom may be taken or
review thereof may be obtained has expired or no review thereof may be obtained
or appeal therefrom taken, and are adequate to authorize the consummation of the
transactions contemplated by this Agreement and the other Operative Documents on
the part of the Servicer and the performance by the Servicer of its obligations
under this Agreement and such of the other Operative Documents to which it is a
party.
(i) The collection practices used by the Servicer with respect
to the Mortgage Loans directly serviced by it have been, and are in all material
respects, legal, proper, prudent and customary in the mortgage loan servicing
business.
(j) The transactions contemplated by this Agreement are in the
ordinary course of business of the Servicer.
(k) There are no Sub-Servicers as of the Startup Day.
(l) The Servicer covenants that it will terminate any
Sub-Servicer within ninety (90) days after being directed by the Certificate
Insurer to do so.
(m) There has been no material adverse change in any
information submitted by the Servicer in writing to the Certificate Insurer.
(n) To the best knowledge of the Servicer, no document
(including any information provided in electronic form) submitted by or on
behalf of the Servicer to the Certificate Insurer contains any untrue or
misleading statement of a material fact or fails to state a material fact
required to be stated therein or necessary in order to make the statements
therein not misleading.
(o) To the best knowledge of the Servicer, no material adverse
change affecting any security for the Class A Certificates has occurred prior to
delivery of and payment for the Class A Certificates.
(p) The Servicer is not in default under any agreement
involving financial obligations or on any outstanding obligation which would
materially and adversely impact the financial
- 32 -
<PAGE>
condition or operations of the Servicer or legal documents associated with the
transaction contemplated in this Agreement.
(q) The Servicer's computer and other systems used in
servicing the Mortgage Loans currently are capable of operating in a manner so
that on and after January 1, 2000 (i) the Servicer can service the Mortgage
Loans in accordance with the terms of this Agreement and (ii) the Servicer can
operate its business in the same manner as it is operating on the date hereof.
(r) The Servicer shall not generally solicit refinancings of
the Mortgage Loans; provided however, that this covenant shall not prevent or
restrict the Servicer from soliciting or otherwise agreeing to refinancings on
the following basis: (1) general solicitations, by mail, advertisement or
otherwise of the general public or persons on a targeted list, so long as the
list was not generated from the Mortgage Loan Schedule, (2) unsolicited
refinancings by the Servicer in connection with a Mortgagor's request for
refinancing, (3) refinancings in connection with the Servicer's policy to
solicit (i) Mortgagors who indicate to the Servicer their intent to refinance
their Mortgage Loans, (ii) with respect to Mortgage Loans in Group II,
Mortgagors with Mortgage Loans for which the next interest rate adjustment is
determined by the Servicer to be higher than the current market rate for a fixed
rate mortgage loan with the same risk qualifications or (iii) in connection with
the general solicitation described in (1) above, and (4) as otherwise disclosed
in the Prospectus Supplement or the Prospectus.
It is understood and agreed that the representations and warranties set
forth in this Section 3.2 shall survive delivery of the Mortgage Loans to the
Trustee.
Upon discovery by any of the Originators, the Servicer, the Oversight
Agent, the Seller, any Sub-Servicer, the Certificate Insurer or the Trustee of a
breach of any of the representations and warranties set forth in this Section
3.2 or in Section 3.1 hereof which materially and adversely affects the
interests of the Owners or of the Certificate Insurer, without regard to any
limitation set forth in such representation or warranty concerning the knowledge
of the party making such representation or warranty as to the facts stated
therein, the party discovering such breach shall give prompt written notice to
the other parties hereto and the Certificate Insurer. Within 30 days of its
discovery or its receipt of notice of breach, the breaching party shall cure
such breach in all material respects and, if such breaching party is the
Servicer and upon the Servicer's continued failure to cure such breach, the
Servicer may be removed by the Trustee, the Oversight Agent or the Certificate
Insurer pursuant to Section 8.20 hereof; provided, however, that if the Servicer
can demonstrate to the reasonable satisfaction of the Certificate Insurer that
it is diligently pursuing remedial action, then the cure period may be extended
with the written approval of the Certificate Insurer.
Section 3.3 Representations and Warranties of the Oversight Agent. The
Oversight Agent hereby represents, warrants and covenants to the Trustee, the
Servicer, the Certificate Insurer and to the Owners as of the Startup Day that:
(a) The Oversight Agent is a New York banking corporation duly
organized, validly existing and in good standing under the laws of the State of
New York. The Oversight Agent has all requisite corporate power and authority to
own and operate its properties, to carry out its business as presently conducted
and as proposed to be conducted and to enter into and discharge its obligations
under this Agreement and the other Operative Documents to which it is a party.
(b) The execution and delivery of this Agreement by the
Oversight Agent and its performance and compliance with the terms of this
Agreement and the other Operative Documents to which it is a party have been
duly authorized by all necessary action on the part of the Oversight Agent and
will not violate the Oversight Agent's articles of organization or bylaws or
constitute a default (or an event which, with notice or lapse of time, or both,
would constitute a default) under, or result in the
- 33 -
<PAGE>
breach of, any material contract, agreement or other instrument to which the
Oversight Agent is a party or by which the Oversight Agent is bound or violate
any statute or any order, rule or regulation of any court, governmental agency
or body or other tribunal having jurisdiction over the Oversight Agent or any of
its properties.
(c) This Agreement and the other Operative Documents to which
the Oversight Agent is a party, assuming due authorization, execution and
delivery by the other parties hereto and thereto, each constitutes a valid,
legal and binding obligation of the Oversight Agent, enforceable against it in
accordance with the terms hereof and thereof, except as the enforcement hereof
and thereof may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors' rights generally and by
general principles of equity (whether considered in a proceeding or action in
equity or at law).
(d) The Oversight Agent is not in default with respect to any
order or decree of any court or any order, regulation or demand of any federal,
state, municipal or governmental agency which might have consequences that would
materially and adversely affect the condition (financial or otherwise) or
operations of the Oversight Agent or its properties or might have consequences
that would materially and adversely affect its performance hereunder or under
the other Operative Documents to which the Oversight Agent is a party.
(e) No action, suit, proceeding or investigation is pending
or, to the best of the Oversight Agent's knowledge, threatened against the
Oversight Agent which, individually or in the aggregate, might have consequences
that would prohibit its entering into this Agreement or any other Operative
Document to which it is a party or that would materially and adversely affect
the condition (financial or otherwise) or operations of the Oversight Agent or
its properties or the Oversight Agent's performance hereunder or under the other
Operative Documents to which the Oversight Agent is a party.
(f) The Oversight Agent represents and warrants that to the
best knowledge of the Oversight Agent, relying on vendor and manufacturer
warranties, that any custom-made software or hardware designed or purchased or
licensed by the Oversight Agent and used by the Oversight Agent in the course of
operation or management of, or the compiling, reporting or generation of data
required by the Oversight Agent, will be capable of identifying, correcting,
performing calculations and processing accurately, such date with respect to
dates after December 31, 1999.
(g) The Oversight Agent shall not solicit any refinancing of
any of the Mortgage Loans; provided, however, that this covenant shall not
prevent or restrict either (1) the Oversight Agent from making general
solicitations, by mail, advertisement or otherwise of the general public or
persons on a targeted list, so long as the list was not generated from the
Mortgage Loan Schedule or (2) any refinancing in connection with a Mortgagor's
unsolicited request for refinancing.
(h) The Oversight Agent shall not sell, transfer, assign or
otherwise dispose of a customer or similar list comprised of the names of the
Mortgagors under the Mortgage Loans to any third party.
It is understood and agreed that the representations and warranties set
forth in this Section 3.3 shall survive delivery of the Mortgage Loans to the
Trustee.
Section 3.4 Representations and Warranties of the Seller with Respect
to the Mortgage Loans.
(a) The Seller makes the following representations and
warranties as to the Mortgage Loans on which the Certificate Insurer relies in
issuing the Certificate Insurance Policies. Such
- 34 -
<PAGE>
representations and warranties speak as of the Cut-Off Date (with respect to the
Initial Mortgage Loans) and as of the respective Subsequent Cut-Off Date (with
respect to the Subsequent Mortgage Loans) but shall survive the sale, transfer,
and assignment of the related Mortgage Loans to the Trust:
(i) The information with respect to each Initial Mortgage
Loan and Subsequent Mortgage Loan set forth in the
related Schedule of Mortgage Loans is true and
correct as of the Cut-Off Date (or in the case of the
Subsequent Mortgage Loans, on the related Subsequent
Transfer Date); the Group I Original Aggregate Loan
Balance in the Trust as of the Cut-Off Date is
$25,322,654.33 and the Group II Original Aggregate
Loan Balance in the Trust as of the Cut-Off Date is
$58,871,097.89.
(ii) All of the original or certified documentation set
forth in Section 3.6 (including all material
documents related thereto) with respect to each
Initial Mortgage Loan has been or will be delivered
to the Trustee on the Startup Day (or in the case of
the Subsequent Mortgage Loans, as of the related
Subsequent Transfer Date) or as otherwise provided in
Section 3.6;
(iii) Each Mortgage Loan is being serviced by the Servicer
or a Servicer Affiliate;
(iv) The Note related to each Initial Mortgage Loan in
Group I bears a fixed Coupon Rate of at least 7.85%
per annum and the Note related to each Mortgage Loan
in Group II bears a current Coupon Rate of at least
6.69% per annum;
(v) None of the Initial Mortgage Loans in either Group I
or Group II was more than 30 days Delinquent.
(vi) As of the Cut-Off Date, no more than 1.35% of the
Group I Original Aggregate Loan Balance is secured by
Properties located within any single zip code area,
and no more than 1.66% of the Group II Original
Aggregate Loan Balance is secured by Properties
located within any single zip code area.
(vii) Each Mortgage Loan conforms, and all such Mortgage
Loans in the aggregate conform, in all material
respects, to the description thereof set forth in the
Registration Statement, the Prospectus and the
Prospectus Supplement;
(viii) As of the Cut-Off Date, no more than 2.40% and 2.85%
of the Group I Original Aggregate Loan Balance and
the Group II Original Aggregate Loan Balance,
respectively, are secured by condominiums or planned
unit developments;
(ix) As of the Cut-Off Date, no more than 2.68% and 2.97%
of the Group I Original Aggregate Loan Balance and
the Group II Original Aggregate Loan Balance,
respectively, are secured by investor-owned
Properties;
- 35 -
<PAGE>
(x) The credit underwriting guidelines applicable to each
Mortgage Loan conform in all material respects to the
description thereof set forth in the Prospectus and
the Prospectus Supplement;
(xi) No funds provided to borrower from a Second Mortgage
Loan originated by the Seller were concurrently used
as a down payment for a First Mortgage Loan
originated by the Seller;
(xii) All of the Mortgage Loans in Group I and Group II are
actuarial loans;
(xiii) All of the Group II Mortgage Loans are First Mortgage
Loans, and 94.70% of the Group I Mortgage Loans are
First Mortgage Loans. The liens on the related First
Mortgage Loans are subject only to any exceptions to
title set forth in the title insurance policy, which
exceptions are generally acceptable to mortgage
lending companies, as applicable, and such other
exceptions to which similar properties are commonly
subject and which do not individually, or in the
aggregate, materially and adversely affect the
benefits of the security intended to be provided by
such Mortgage. The lien on each junior Mortgage Loan
is subject to any related Senior Liens, and to the
exceptions to title described above;
(xiv) As of the Cut-Off Date, all of the Mortgage Loans in
Group II were Six Month LIBOR Loans, Two Year Fixed
Loans or Three Year Fixed Loans and 99.75% of such
Mortgage Loans had interest rates which were not
fully indexed;
(xv) The gross margin range for the Six Month LIBOR Loans
is 4.95% to 10.01%, and the gross margin for all Six
Month LIBOR Loans when added to the current index,
creates the fully-indexed range for the Six Month
LIBOR Loans;
(xvi) The gross margin range for (A) the Two Year Fixed
Loans is 4.49% to 7.75%, and (B) the Three Year Fixed
Loans is 4.95% to 7.00%, and the gross margin for all
Two Year Fixed Loans and Three Year Fixed Loans when
added to the current index, creates the fully-indexed
range for the Two Year Fixed Loans, and the Three
Year Fixed Loans, respectively.
(xvii) No Mortgage Loan has a remaining term in excess of
360 months;
(xviii) With respect to each Mortgage Loan in Group II, each
Mortgagor's debt-to-income ratio will qualify for the
related Originator's underwriting guidelines for a
similar credit grade borrower when the related
Mortgage Loan in Group II is at a rate equal to (i)
the applicable initial Coupon Rate in the case of Two
Year Fixed Loans and Three Year Fixed Loans and (ii)
the applicable initial Coupon Rate plus 2.0%, in the
case of Six Month LIBOR Loans;
(xix) There is no proceeding pending or to the best of the
Seller's knowledge threatened for the total or
partial condemnation of any Property. No Property is
damaged by waste, fire, earthquake or earth
- 36 -
<PAGE>
movement, windstorm, flood, other types of water
damage, tornado, or other casualty so as to affect
adversely the value of such Property as security for
the Mortgage Loans or the use for which the premises
were intended and each Property free of material
damage and in good repair;
(xx) The origination and servicing of each Mortgage Loan
complies, and at all times has complied, in all
material respects with all applicable federal and
state laws and regulations including without
limitation the Truth-in-Lending Act, as amended;
(xxi) Each Mortgage Loan is secured by a Property having an
Appraised Value of $900,000 or less;
(xxii) The first Due Date of each Initial Mortgage Loan is
no later than March 1, 2000;
(xxiii) On the Startup Day with respect to each Initial
Mortgage Loan and on the related Subsequent Transfer
Date with respect to each Subsequent Mortgage Loan,
the Trustee will have good title on behalf of the
Trust to each Mortgage Loan transferred on such date
free and clear of all liens, encumbrances, mortgages
or rights of others; and
(xxiv) 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).
(xxv) The Seller and any Originator complied with all
applicable federal and state laws and regulations in
connection with the origination of the Mortgage Loan;
(xxvi) No more than 23.26% and 8.89% of the Initial Mortgage
Loans in Group I and Group II, respectively, were
originated on an "alternative documentation" basis;
(xxvii) No more than 8.05% and 24.21% of the Initial Mortgage
Loans in Group I and Group II, respectively, were
originated on a "non-conforming documentation" basis;
(xxviii) No fraud, error, omission, misrepresentation or
negligence with respect to the origination of a
Mortgage Loan has taken place on the part of any
person, including, without limitation, the Mortgagor,
the Originator, the Seller, any appraiser or any
other party involved in the origination of the
Mortgage Loan;
(xxix) Each Property consists of a single parcel of
residential real property that is separately assessed
for tax purposes and that is owned by the related
Mortgagor in fee simple absolute, and each Property
is improved by a one- to four-family residential
dwelling, which does not include cooperatives or
mobile homes and does not constitute other than real
property under state law. No Property is a
manufactured housing unit.
- 37 -
<PAGE>
(xxx) Each Note will provide for a schedule of
substantially equal monthly payments which are, if
timely paid, sufficient to fully amortize the
principal balance of such Note on or before its
maturity date;
(xxxi) No Mortgage Loan is subject to any right of
rescission, set-off, counterclaim or defense,
including the defense of usury, nor will the
operation of any of the terms of the Note or the
Mortgage, or the exercise of any right thereunder,
render either the Note or the Mortgage unenforceable
in whole or in part, or subject to any right of
rescission, set-off, counterclaim or defense,
including the defense of usury, and no such right of
rescission, set-off, counterclaim or defense has been
asserted with respect thereto;
(xxxii) To the best of the Seller's knowledge, there is no
mechanics' lien or claim for work, labor or material
affecting any Property which is or may be a lien
prior to, or equal with, the lien of such Mortgage
except those which are insured against by the title
insurance policy referred to in Section
3.4(a)(xxxiii) below;
(xxxiii) With respect to each Mortgage Loan, a lender's title
insurance policy or a written commitment therefor,
issued in standard American Land Title Association or
California Land Title Association form, or other form
acceptable in a particular jurisdiction, by a title
insurance company authorized to transact business in
the state in which the related Property is situated,
together with a condominium endorsement, if
applicable, in an amount at least equal to the
original principal balance of such Mortgage Loan
insuring the mortgagee's interest under the related
Mortgage Loan as the holder of a valid first mortgage
lien of record on the real property described in the
Mortgage, subject only to exceptions of the character
referred to in Section 3.4(a)(xxxii) above, was
effective on the date of the origination of such
Mortgage Loan, and, as of the Cut-Off Date, such
commitment, if applicable, will be valid and
thereafter the policy issued, pursuant to such
commitment shall continue in full force and effect.
Either the Seller is the sole named insured of such
mortgage title insurance policy, or, in the case of a
loan purchased from an Originator, the Originator and
the Seller (as the Originator's successor or
assignee) are named as the insureds, the assignment
to the Trust of the Seller's or the Originator's
interest in such mortgage title insurance policy
would not require the consent of or notification to
the insurer, and such mortgage title insurance policy
is in full force and effect and will be in full force
and effect and inure to the benefit of the Trust on
the Startup Day. No claims have been made under such
mortgage title insurance policy and no prior holder
of the related Mortgage, including (without
limitation) the Seller, has done, by act or omission,
anything that would impair the coverage of such
mortgage title insurance policy;
(xxxiv) The improvements upon each Property are covered by a
valid and existing hazard insurance policy with a
generally acceptable carrier that provides for fire
and extended coverage representing generally
acceptable coverage against casualty to such
improvements and, in any
- 38 -
<PAGE>
event, coverage not less than the least of (A) the
outstanding principal balance of the related
Mortgage, (B) the minimum amount required to
compensate for damage or loss on a replacement cost
basis, and (C) the full insurable value of such
Property. Each individual insurance policy is the
valid and binding obligation of the insurer and
contains a standard mortgage clause naming the
Seller, its successors and assigns as mortgagee. All
premiums thereon have been paid. The related Mortgage
obligates the Mortgagor thereunder to maintain all
such insurance at the Mortgagor's cost and expense,
and upon the Mortgagor's failure to do so, authorizes
the holder of the Mortgage to obtain and maintain
such insurance at the Mortgagor's cost and expense
and to seek reimbursement therefor from the
Mortgagor;
(xxxv) If any Property is in an area identified in the
Federal Register by the Federal Emergency Management
Agency as having special flood hazards, a flood
insurance policy in a form meeting the requirements
of the current guidelines of the Federal Insurance
Administration is in effect with respect to such
Property with a generally acceptable carrier in an
amount representing coverage not less than the least
of (A) the outstanding principal balance of the
related Mortgage Loan, (B) the minimum amount
required to compensate for damage or loss on a
replacement cost basis, and (C) the maximum amount of
insurance that is available under the Flood Disaster
Protection Act of 1973, as amended;
(xxxvi) Each Mortgage and 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 bankruptcy,
insolvency, reorganization, moratorium or other
similar laws affecting the enforcement of creditors'
rights generally and by general principles of equity
(whether considered in a proceeding or action in
equity or at law), and all parties to each Mortgage
Loan had full legal capacity to execute all Mortgage
Loan documents and convey the estate therein
purported to be conveyed, and such Mortgage and Note
have been duly and properly executed by such parties;
(xxxvii) The Seller has caused or will cause to be performed
any and all acts required to be performed to preserve
the rights and remedies of the Trust and its
successors and assigns in any insurance policies
applicable to the Mortgage Loans including, without
limitation, any necessary notifications of insurers,
assignments of policies or interests therein, and the
establishment of co-insured, joint loss payee and
mortgagee rights in favor of the Trust;
(xxxviii) No instrument of release or waiver has been executed
in connection with the Mortgage Loan, and no
Mortgagor has been released, in whole or in part;
(xxxix) The proceeds of the Mortgage Loan have been fully
disbursed, and there is no obligation on the part of
the mortgagee to make future advances thereunder.
- 39 -
<PAGE>
(xl) There is no obligation on the part of the Seller or
any other party to make payments in addition to those
made by the Mortgagor;
(xli) With respect to each Mortgage constituting a deed of
trust, a trustee, duly qualified under applicable law
to serve as such, has been properly designated and
currently so serves and is named in such Mortgage,
and no fees or expenses are or will become payable by
the Trust or its successors or assigns to the trustee
under the deed of trust, except in connection with a
trustee's sale after default by the Mortgagor;
(xlii) The Mortgage contains a customary provision for the
acceleration of the payment of the unpaid principal
balance of the Mortgage Loan in the event the related
Property is sold or further encumbered without the
prior consent of the mortgagee thereunder;
(xliii) No Note permits or obligates any person to make
future advances to the Mortgagor at the option of the
Mortgagor;
(xliv) The related Mortgage contains customary and
enforceable provisions which render the rights and
remedies of the holder thereof adequate for the
realization against the Property of the benefits of
the security, including, (i) in the case of a
Mortgage designated as a deed of trust, by trustee's
sale, and (ii) otherwise by judicial foreclosure.
There is no homestead or other exemption available to
the Mortgagor which would materially interfere with
the right to sell the Property at a trustee's sale or
the right to foreclose the Mortgage;
(xlv) There is no default, breach, violation or event of
acceleration existing under the Mortgage or the
related Note and no event which, with the passage of
time or with notice and the expiration of any grace
or cure period, would constitute a default, breach,
violation or event of acceleration; and neither the
Seller nor any servicer has waived any default,
breach, violation or event of acceleration;
(xlvi) All parties to the Note and the Mortgage had legal
capacity to execute the Note and the Mortgage and
each Note and Mortgage have been duly and properly
executed by such parties;
(xlvii) All amounts received on and after the Cut-Off Date
with respect to the Mortgage Loans have been
deposited into the Principal and Interest Account and
are, as of the Startup Day, in the Principal and
Interest Account. All amounts received prior to the
Cut-Off Date but representing payments that the
Mortgagor is obligated to make after the Cut-Off Date
have been deposited into the Principal and Interest
Account and are, as of the Startup Day, in the
Principal and Interest Account;
(xlviii) The Mortgage Loans were not selected by the Seller on
any basis intended to adversely affect the Trust, the
Owners, the Certificate Issuer or any of their
successors and assigns;
(xlix) A full appraisal was performed in connection with
each Property;
- 40 -
<PAGE>
(l) To the best of the Seller's knowledge, no Property
was in violation of any state or federal
environmental law or regulation and no hazardous
material substance or waste is present at any
Property;
(li) None of the Mortgage Loans is subject to any
bankruptcy plan;
(lii) No duplicate original Note was executed by any
Mortgagor;
(liii) No more than 79.34% and 62.37% of the Initial
Mortgage Loans in Group I and Group II, respectively,
are subject to the Home Ownership and Equity
Protection Act of 1994 (the "Home Protection Act").
With respect to each Initial Mortgage Loan subject to
the Home Protection Act, each such Mortgage Loan has
been originated and serviced in compliance with the
provisions thereof; and
(liv) As of the Cut-Off Date, there is no delinquent tax or
delinquent assessment lien against any Property.
(b) Upon the discovery by the Seller, the Servicer, the
Oversight Agent, the Certificate Insurer or the Trustee of a breach of any of
the representations and warranties made herein in respect of any Mortgage Loan,
without regard to any limitation set forth in such representation or warranty
concerning the knowledge of the Seller or any related Originator as to the facts
stated therein, which materially and adversely affects the interests of the
Owners or of the Certificate Insurer in such Mortgage Loan the party discovering
such breach shall give prompt written notice to the other parties and the
Certificate Insurer. If the breaching Mortgage Loan was acquired from an
Originator, the Servicer shall promptly notify the related Originator of such
breach and request that such Originator cure such breach or take the actions
described in Section 3.5(b) hereof within the time periods required thereby, and
if such Originator does not cure such breach in all material respects, the
Seller shall cure such breach or take such actions within the time periods
specified in Section 3.5. Except as set forth in Section 3.5, the obligations of
the Seller or Servicer, as the case may be, shall be limited to the remedies for
cure set forth in Section 3.5 with respect to any Mortgage Loan as to which such
a breach has occurred and is continuing; the remedies set forth in Section 3.5
shall constitute the sole remedy with respect to such breach available to the
Owners, the Trustee and the Certificate Insurer; provided, however, that the
Seller shall indemnify the Trust for any fines, fees and penalties incurred by
the Trust by reason of the Seller's breach of the representation set forth in
Section 3.4(a)(xix) hereof.
The Seller acknowledges that a breach of any representation or warranty
(x) relating to marketability of title sufficient to transfer unencumbered title
to a Mortgage Loan and (y) relating to enforceability of the Mortgage Loan
against the related Mortgagor or Property constitutes a breach of a
representation or warranty which "materially and adversely affects the interests
of the Owners or of the Certificate Insurer" in such Mortgage Loan.
Section 3.5 Covenants of the Seller to Take Certain Actions with
Respect to the Mortgage Loans In Certain Situations.
(a) With the provisos and limitations as to remedies set forth
in this Section 3.5, upon the discovery by any Originator, the Seller, the
Servicer, the Oversight Agent, the Certificate Insurer, any Sub-Servicer or the
Trustee that the representations and warranties set forth in Section 3.4 of this
Agreement were untrue in any material respect as of the Cut-Off Date (or in the
case of the Subsequent Mortgage Loans, as of the respective Subsequent Cut-Off
Date), and that such breach of the representations and warranties materially and
adversely affects the interests of the Owners or of the
- 41 -
<PAGE>
Certificate Insurer, the party hereto discovering such breach shall give prompt
written notice to the other parties hereto and to the Certificate Insurer.
(b) Upon the earliest to occur of the Seller's discovery, its
receipt of notice of breach from any one of the other parties hereto or from the
Certificate Insurer or such time as a breach of any representation and warranty
materially and adversely affects the interests of the Owners or of the
Certificate Insurer as set forth above, the Seller hereby covenants and warrants
that it shall promptly cure such breach in all material respects (or shall cause
an affiliate of the Seller or the related Originator to cure such breach) or it
shall, subject to the further requirements of this paragraph, on the second
Remittance Date next succeeding such discovery, receipt of notice or such other
time (i) substitute (or cause an affiliate of the Seller or the related
Originator to substitute) in lieu of each Mortgage Loan in the related Mortgage
Loan Group which has given rise to the requirement for action by the Seller a
Qualified Replacement Mortgage and deliver the Substitution Amount applicable
thereto, together with the aggregate amount of all Delinquency Advances and
Servicing Advances theretofore made with respect to such Mortgage Loan, to the
Servicer for deposit in the Principal and Interest Account or (ii) purchase (or
cause an affiliate of the Seller or the related Originator to purchase) such
Mortgage Loan from the Trust at a purchase price equal to the Loan Purchase
Price thereof, which purchase price shall be delivered to the Servicer for
deposit in the Principal and Interest Account. In connection with any such
proposed purchase or substitution, the Seller, at its expense, shall cause to be
delivered to the Trustee, the Oversight Agent and the Certificate Insurer an
opinion of counsel experienced in federal income tax matters stating whether or
not such a proposed purchase or substitution would constitute a Prohibited
Transaction for the Trust or would jeopardize the status of the Trust (other
than the Non-REMIC Accounts) as a REMIC, and the Seller shall only be required
to take either such action to the extent such action would not constitute a
Prohibited Transaction for the Trust or would not jeopardize the status of the
Trust (other than the Non-REMIC Accounts) as a REMIC. Any required purchase or
substitution, if delayed by the absence of such opinion shall nonetheless occur
upon the earlier of (i) the occurrence of a default or imminent default with
respect to the Mortgage Loan or (ii) the delivery of such opinion. It is
understood and agreed that the obligation of the Seller to cure the defect, or
substitute for or purchase any Mortgage Loan as to which a representation or
warranty is untrue in any material respect and has not been remedied shall
constitute the sole remedy available to the Owners, the Trustee, the Oversight
Agent and the Certificate Insurer.
(c) In the event that any Qualified Replacement Mortgage is
delivered by an Originator or by the Seller to the Trust pursuant to this
Section 3.5 or Section 3.7 hereof, the related Originator and the Seller shall
be obligated to take the actions described in Section 3.5(b) with respect to
such Qualified Replacement Mortgage upon the discovery by any of the Owners, the
Seller, the Servicer, the Oversight Agent the Certificate Insurer, any
Sub-Servicer or the Trustee that any of the representations and warranties set
forth in Section 3.4 above are untrue in any material respect on the date such
Qualified Replacement Mortgage is conveyed to the Trust such that the interests
of the Owners or the Certificate Insurer in the related Qualified Replacement
Mortgage are materially and adversely affected; provided, however, that for the
purposes of this subsection (c) the representations and warranties in Section
3.4 above referring to items "as of the Cut-Off Date" or "as of the Startup Day"
shall be deemed to refer to such items as of the date such Qualified Replacement
Mortgage is conveyed to the Trust.
(d) It is understood and agreed that the covenants set forth
in this Section 3.5 shall survive delivery of the respective Mortgage Loans
(including Qualified Replacement Mortgages) to the Trustee.
(e) Neither the Trustee nor the Oversight Agent shall have any
duty to conduct any affirmative investigation other than as specifically set
forth in this Agreement as to the occurrence of any condition requiring the
repurchase or substitution of any Mortgage Loan pursuant to this section or the
eligibility of any Mortgage Loan for purposes of this Agreement.
- 42 -
<PAGE>
Section 3.6 Conveyance of the Mortgage Loans.
(a) The Seller, concurrently with the execution and delivery
hereof, hereby transfers, assigns, sets over and otherwise conveys without
recourse, to the Trustee for the benefit of the Owners of the Certificates and
the Certificate Insurer, all right, title and interest of the Seller in and to
each Initial Mortgage Loan listed on the Schedule of Mortgage Loans delivered by
the Seller on the Startup Day, all right, title and interest in and to principal
and interest (including prepaid interest) due on each such Initial Mortgage Loan
after the Cut-Off Date (other than payments of principal and interest due on or
before the Cut-Off Date) and all its right, title and interest in and to all
Insurance Policies; provided, however, that the Seller reserves and retains all
its right, title and interest in and to principal (including Prepayments)
collected and principal and interest due on each Initial Mortgage Loan on or
prior to the Cut-Off Date. The transfer by the Seller of the Initial Mortgage
Loans and the Subsequent Mortgage Loans set forth on the Schedule of Mortgage
Loans is absolute and is intended by the Owners and all parties hereto to be
treated as a sale by the Seller.
It is intended that the sale, transfer, assignment and conveyance
herein contemplated constitute a sale of the Mortgage Loans conveying good title
thereto free and clear of any liens and encumbrances from the Seller to the
Trust and that the Mortgage Loans not be part of the Seller's estate in the
event of an insolvency. In the event that any such conveyance or a conveyance
pursuant to Section 3.9 and any Subsequent Transfer Agreement is deemed to be a
loan, the parties intend that the Seller shall be deemed to have granted to the
Trustee a security interest of first priority in all of the Seller's right,
title and interest in the Mortgage, Note and the File, and that this Agreement
shall constitute a security agreement under applicable law.
In connection with the sale, transfer, assignment, and conveyance, from
the Seller to the Trustee, the Seller has filed, in the appropriate office or
offices in the State of California, a UCC-1 financing statement executed by the
Seller as debtor, naming the Trustee as secured party and listing the Mortgage
Loans (both Initial Mortgage Loans and Subsequent Mortgage Loans) and the other
property described above as collateral. The characterization of the Seller as a
debtor and the Trustee as the secured party in such financing statements is
solely for protective purposes and shall in no way be construed as being
contrary to the intent of the parties that this transaction be treated as a sale
of the Seller's entire right, title and interest in the Mortgage Loans and the
related Files to the Trust. In connection with such filing, the Seller shall
cause to be filed all necessary continuation statements thereof and to take or
cause to be taken such actions and execute such documents as are necessary to
perfect and protect the Trustee's and the Owners' interests in the Mortgage
Loans and the related Files.
(b) In connection with the transfer and assignment of the
Mortgage Loans, the Seller agrees to:
(i) cause to be delivered, on or prior to the Startup Day
(except as otherwise stated below) without recourse
to the Custodian, on behalf of the Trustee, on the
Startup Day with respect to each Initial Mortgage
Loan listed on the Schedule of Mortgage Loans or on
each Subsequent Transfer Date with respect to each
Subsequent Mortgage Loan:
(a) the original Notes, endorsed without
recourse by the related Originator "Pay to
the order of _____________, without
recourse" or "Pay to the order of The Chase
Manhattan Bank, as trustee for the First
Alliance Mortgage Loan Trust 1999-4, without
recourse." In the event that the Mortgage
Loan was acquired by the related Originator
in a merger, the endorsement
- 43 -
<PAGE>
must be by the "(related Originator),
successor by merger to (name of
predecessor)"; and in the event that the
Mortgage Loan was acquired or originated by
the related Originator while doing business
under another name, the endorsement must be
by the "(related Originator), formerly known
as (previous name)";
(b) originals of all intervening assignments,
showing a complete chain of assignment from
origination to the related Originator, if
any, including warehousing assignments, with
evidence of recording thereon (or, if an
original intervening assignment has not been
returned from the recording office, a
certified copy thereof, the original to be
delivered to the Custodian, on behalf of the
Trustee, forthwith after return);
(c) originals of all assumption and modification
agreements, if any (or, if an original
assumption and/or modification agreement has
not been returned from the recording office,
a certified copy thereof, the original to be
delivered to the Custodian, on behalf of the
Trustee, forthwith after return);
(d) either (A) the original Mortgage with
evidence of recording thereon or a certified
copy of the Mortgage as recorded, or (B) if
the original Mortgage has not yet been
returned from the recording office, a
certified copy of the Mortgage, together
with a receipt from the recording office or
from a title insurance company or a
certificate of an Authorized Person of the
related Originator indicating that such
Mortgage has been delivered for recording;
(e) the original assignment of Mortgage for each
Mortgage Loan conveying the Mortgage from
the Seller to "The Chase Manhattan Bank, as
Trustee of the First Alliance Mortgage Loan
Trust 1999-4, without recourse," which
assignment shall be in form and substance
acceptable for recording in the state or
other jurisdiction where the mortgaged
property is located and, within 75 Business
Days following the Startup Day with respect
to the Initial Mortgage Loans, or within 75
Business Days of each Subsequent Transfer
Date with respect to the Subsequent Mortgage
Loans, a recorded assignment of each such
Mortgage; provided that in the event that
the Mortgage Loan was acquired by the
related Originator in a merger, the
assignment of Mortgage must be by the
"(related Originator), successor by merger
to (name of predecessor)"; and in the event
that the Mortgage Loan was acquired or
originated by the related Originator while
doing business under another name, the
assignment of Mortgage must be by the
"(related Originator), formerly known as
(previous name)" (subject to the foregoing,
and where permitted under the applicable
laws of the jurisdiction where the mortgaged
property is located, the assignments of
Mortgage may be made by blanket assignments
for Mortgage Loans covering mortgaged
properties situated within the same county
or other permitted governmental
subdivision); and
- 44 -
<PAGE>
(f) evidence of title insurance with respect to
the mortgaged property in the form of a
binder or commitment.
(ii) except with respect to Mortgage Loans covered by
opinions of counsel delivered in the manner set forth
below ("Assignment Opinions"), cause, as soon as
possible but no more than 75 Business Days following
the Startup Day with respect to the Initial Mortgage
Loans, or within 75 Business Days of each Subsequent
Transfer Date with respect to the Subsequent Mortgage
Loans, the Originators to deliver to the Custodian,
on behalf of the Trustee, copies of all Mortgage
assignments described in Section 3.6(b)(i)(e) above
submitted for recording, together with a list of (x)
all Mortgages for which no Mortgage assignment has
yet been submitted for recording by the related
Originator and (y) reasons why the related Originator
has not yet submitted such Mortgage assignments for
recording; provided, however, that with respect to
Mortgage Loans relating to Properties located in the
states of Arizona, California, Colorado, District of
Columbia, Georgia, Idaho, Illinois, Maryland,
Massachusetts, Ohio, Oregon, Pennsylvania, Virginia
and Washington, an Originator shall not be required
to record an assignment of a Mortgage if the Seller
furnishes to the Trustee, the Custodian and the
Certificate Insurer, on or before the Startup Day
with respect to the Initial Mortgage Loans, or on
each Subsequent Transfer Date with respect to the
Subsequent Mortgage Loans, at the Seller's expense,
the Assignment Opinions for the relevant
jurisdictions, which opine that recording is not
necessary to perfect the rights of the Trustee in the
related Mortgage (in form satisfactory to the
Certificate Insurer, Moody's and Standard & Poor's);
provided further, however, notwithstanding the
delivery of any legal opinions, each assignment of
mortgage shall be recorded upon the earliest to occur
of: (i) the instructions by the Certificate Insurer
to so record such assignments (such instructions
shall be given by the Certificate Insurer using
reasonable discretion) or (ii) the occurrence of an
Event of Servicing Termination. With respect to any
Mortgage assignment set forth on the aforementioned
list which has not been submitted for recording for a
reason other than a lack of original recording
information or with respect to Mortgages not covered
by the Assignment Opinions, the Trustee (after
receiving written notification from the Custodian)
shall make an immediate demand on the Seller to cause
such Mortgage assignments to be prepared and shall
inform the Certificate Insurer of the Seller's
failure to cause such Mortgage assignments to be
prepared. Thereafter, the Custodian, on behalf of the
Trustee, shall cooperate in executing any documents
prepared by the Certificate Insurer and submitted to
the Custodian and the Trustee in connection with this
provision. Following the expiration of the
75-Business Day period following the Startup Day with
respect to the Initial Mortgage Loans, or within 75
Business Days of each Subsequent Transfer Date with
respect to the Subsequent Mortgage Loans and except
with respect to Mortgages covered by the Assignment
Opinions, the Seller shall cause to be prepared a
Mortgage assignment for any Mortgage for which
original recording information is subsequently
received by the related
- 45 -
<PAGE>
Originator and shall promptly deliver a copy of such
Mortgage assignment to the Custodian, on behalf of
the Trustee.
All recording required pursuant to this Section 3.6 shall be
accomplished at the expense of the Originators or of the Seller. Notwithstanding
anything to the contrary contained in this Section 3.6, in those instances where
the public recording office retains the original Mortgage, the assignment of a
Mortgage or the intervening assignments of the Mortgage after it has been
recorded, the Seller shall be deemed to have satisfied its obligations hereunder
upon delivery to the Custodian, on behalf of the Trustee, of a copy of such
Mortgage, such assignment or assignments of Mortgage certified by the public
recording office to be a true copy of the recorded original thereof.
Copies of all Mortgage assignments received by the Custodian, on behalf
of the Trustee, shall be kept in the related File.
(c) In the case of Initial Mortgage Loans which have been
prepaid in full on or after the Cut-Off Date and prior to the Startup Day, the
Seller, in lieu of the foregoing, will deliver within 15 Business Days after the
Startup Day to the Trustee a certification of an Authorized Officer in the form
set forth in Exhibit D.
(d) The Seller shall transfer, assign, set over and otherwise
convey without recourse, to the Trustee all right, title and interest of the
Seller in and to any Qualified Replacement Mortgage delivered to the Custodian,
on behalf of the Trustee, on behalf of the Trust by the Seller pursuant to
Section 3.5 or Section 3.7 hereof and all its right, title and interest to
principal and interest due on such Qualified Replacement Mortgage after the
applicable Replacement Cut-Off Date; provided, however, that the Seller shall
reserve and retain all right, title and interest in and to payments of principal
and interest due on such Qualified Replacement Mortgage on and prior to the
applicable Replacement Cut-Off Date.
(e) As to each Mortgage Loan released from the Trust in
connection with the conveyance of a Qualified Replacement Mortgage therefor, the
Trustee will transfer, assign, set over and otherwise convey without recourse,
on the Seller's order, all of its right, title and interest in and to such
released Mortgage Loan and all the Trust's right, title and interest to
principal and interest due on such released Mortgage Loan after the applicable
Replacement Cut-Off Date; provided, however, that the Trust shall reserve and
retain all right, title and interest in and to payments of principal and
interest due on such released Mortgage Loan after the related Cut-Off Date or
Subsequent Cut-Off Date, as applicable, but on and prior to the applicable
Replacement Cut-Off Date.
(f) In connection with any transfer and assignment of a
Qualified Replacement Mortgage to the Custodian, on behalf of the Trustee, as
Trustee on behalf of the Trust, the Seller agrees to cause to be delivered to
the Custodian, on behalf of the Trustee, the items described in Section 3.6(b)
on the date of such transfer and assignment or if a later delivery time is
permitted by Section 3.6(b) then no later than such later delivery time.
(g) As to each Mortgage Loan released from the Trust in
connection with the conveyance of a Qualified Replacement Mortgage the
Custodian, on behalf of the Trustee, shall deliver on the date of conveyance of
such Qualified Replacement Mortgage, and on the order of the Seller (i) the
original Note, or the certified copy, relating thereto, endorsed without
recourse, to the Seller and (ii) such other documents as constituted the File
with respect thereto.
(h) If a Mortgage assignment is lost during the process of
recording, or is returned from the recorder's office unrecorded due to a defect
therein, the Seller shall prepare a substitute assignment or cure such defect,
as the case may be, and thereafter cause each such assignment to be duly
recorded.
- 46 -
<PAGE>
(i) The Seller shall reflect on its records that the Mortgage
Loans have been sold to the Trust.
Section 3.7 Acceptance by Trustee; Certain Substitutions of Mortgage
Loans; Certification by Trustee.
(a) The Trustee agrees to cause the Custodian to execute and
deliver to the Trustee, the Seller, the Servicer and the Certificate Insurer on
the Startup Day an Initial Certification in the form annexed hereto as Exhibit E
(and as an exhibit to the Custodial Agreement) to the effect that, as to each
Mortgage Loan listed in the Schedule of Mortgage Loans (other than any Mortgage
Loan paid in full or any Mortgage Loan specifically identified in such
certification as not covered by such certification), (i) all documents required
to be delivered to it pursuant to this Agreement with respect to such Mortgage
Loan are in its possession, (ii) such documents have been reviewed by it and
appear regular on their face and relate to such Mortgage Loan and (iii) based on
its examination and only as to the foregoing documents, the information set
forth on the Schedule of Mortgage Loans as to (a) the Seller's loan number, (b)
the Mortgagor's name, (c) the address (including the state and zip code) of the
Property, (d) the original Loan Balance, (e) the monthly payment of principal
and interest, (f) the initial Coupon Rate, (g) the date the loan was closed, (h)
the first payment date and (i) the maturity of the related Note, accurately
reflects information set forth in the File. The Trustee and the Custodian shall
not be under any duty or obligation to inspect, review or examine said
documents, instruments, certificates or other papers to determine that the same
are genuine, enforceable or appropriate for the represented purpose, or that
they are in recordable form or have actually been recorded or that they are
other than what they purport to be on their face. Within 90 days of the Startup
Day (or, with respect to any document delivered after the Startup Day, within 45
days of receipt or 90 days after the Startup Day, whichever is later and with
respect to any Subsequent Mortgage Loan or Qualified Replacement Mortgage,
within 45 days after the assignment thereof or 90 days after the Startup Day,
whichever is later) the Trustee shall cause the Custodian to deliver to the
Trustee, the Seller, the Certificate Insurer and the Servicer a Final
Certification in the form annexed hereto as Exhibit F (and as an exhibit to the
Custodial Agreement) evidencing the completeness of the Files, with any
applicable exceptions noted thereon.
(b) If in the process of reviewing the Files and preparing the
certifications referred to above, the Custodian, on behalf of the Trustee, finds
any document or documents constituting a part of a File (which the Trustee is
required to review) which is not properly executed, has not been received within
the specified period or is unrelated to the Mortgage Loans identified in the
Schedule of Mortgage Loans, or that any Mortgage Loan does not conform as to
loan number and address as set forth in the Schedule of Mortgage Loans, the
Custodian, on behalf of the Trustee, shall promptly notify the Trustee, the
Seller and the Certificate Insurer. The Seller shall use reasonable efforts to
cure any such defect within 60 days from the date on which the Seller was
notified of such defect, and if the Seller does not cure such defect in all
material respects during such period, the Seller will (or will cause the related
Originator or an affiliate of the Seller to) on the next succeeding Remittance
Date (i) substitute in lieu of such Mortgage Loan a Qualified Replacement
Mortgage and deliver the Substitution Amount applicable thereto to the Servicer
for deposit in the Principal and Interest Account or (ii) purchase such Mortgage
Loan at a purchase price equal to the Loan Purchase Price thereof, which
purchase price shall be delivered to the Servicer for deposit in the Principal
and Interest Account. In connection with any such proposed purchase or
substitution the Seller shall cause at the Seller's expense to be delivered to
the Trustee and to the Certificate Insurer an opinion of counsel experienced in
federal income tax matters stating whether or not such a proposed purchase or
substitution would constitute a Prohibited Transaction for the Trust or would
jeopardize the status of the Trust (other than the Non-REMIC Accounts) as a
REMIC, and the Seller shall only be required to take either such action to the
extent such action would not constitute a Prohibited Transaction for the Trust
or would not jeopardize the status of the Trust (other than the Non-REMIC
Accounts) as a REMIC. Any required purchase or substitution, if delayed by the
absence of such
- 47 -
<PAGE>
opinion shall nonetheless occur upon the earlier of (i) the occurrence of a
default or imminent default with respect to the Mortgage Loan or (ii) the
delivery of such opinion.
Section 3.8 Cooperation Procedures.
(a) The Seller shall, in connection with the delivery of each
Qualified Replacement Mortgage to the Custodian, on behalf of the Trustee,
provide the Trustee and the Custodian, with the information set forth in the
Schedule of Mortgage Loans with respect to such Qualified Replacement Mortgage.
(b) The Seller, the Servicer, the Oversight Agent and the
Trustee covenant to provide each other with all data and information required to
be provided by them hereunder at the times required hereunder, and additionally
covenant reasonably to cooperate with each other in providing any additional
information required to be obtained by any of them in connection with their
respective duties hereunder.
(c) The Servicer shall maintain such accurate and complete
accounts, records and computer systems pertaining to each File as shall enable
it and the Trustee to comply with this Agreement. In performing its
recordkeeping duties the Servicer shall act in accordance with the servicing
standards set forth in this Agreement. The Servicer shall conduct, or cause to
be conducted, periodic audits of its accounts, records and computer systems as
set forth in Sections 8.16 and 8.17 hereof. The Servicer shall promptly report
to the Trustee and the Oversight Agent any failure on its part to maintain its
accounts, records and computer systems as herein provided and promptly take
appropriate action to remedy any such failure.
(d) The Seller further confirms to the Trustee that it has
caused the portions of the electronic ledger relating to the Mortgage Loans to
be clearly and unambiguously marked to indicate that such Mortgage Loans have
been sold, transferred, assigned and conveyed to the Trustee and constitute part
of the Trust Estate in accordance with the terms of the trust created hereunder
and that the Seller will treat the transaction contemplated by such sale,
transfer, assignment and conveyance as a sale for accounting purposes.
Section 3.9 Conveyance of the Subsequent Mortgage Loans. Subject to the
satisfaction of the conditions set forth in Sections 3.6(b) and 3.6(i) with
respect to the Subsequent Mortgage Loans and paragraphs (b), (c) and (d) below
(based on the Trustee's review of such conditions) in consideration of the
Trustee's delivery on the Subsequent Transfer Date to or upon the order of the
Seller of all or a portion of the balance of funds in the Pre-Funding Account,
the Seller shall on the Subsequent Transfer Date sell, transfer, assign, set
over and otherwise convey without recourse, to the Trustee, all of the Seller's
right, title and interest in and to principal and interest (including prepaid
interest) due on each Subsequent Mortgage Loan after the Subsequent Cut-Off Date
(other than payments of principal and interest due on or before the Subsequent
Cut-Off Date) which Subsequent Mortgage Loans shall have been approved by the
Certificate Insurer and which the Seller is causing to be delivered to the
Custodian, on behalf of the Trustee, with the related Subsequent Transfer
Agreement (and all substitutions therefor as provided by Sections 3.4, 3.5 and
3.7) together with the related Subsequent Mortgage Loan documents and the
Seller's interest in any Property which secures a Subsequent Mortgage Loan but
which is acquired by foreclosure or deed in lieu of foreclosure, and all
payments thereon and proceeds of the conversion, voluntary or involuntary, of
the foregoing and proceeds of all the foregoing (including, but not by way of
limitation, all proceeds of any mortgage insurance, hazard insurance and title
insurance policy relating to the Subsequent Mortgage Loans, cash proceeds,
accounts, accounts receivable, notes, drafts, acceptances, chattel paper,
checks, deposit accounts, rights to payment of any and every kind, and other
forms of obligations and receivables which at any time constitute all or part of
or are included in the proceeds of any of the foregoing). On each Subsequent
Transfer Date, the Trustee agrees to cause the Custodian to
- 48 -
<PAGE>
execute and deliver to the Seller, the Servicer and the Certificate Insurer a
certification substantially in the form annexed hereto as Exhibit E evidencing
receipt of each Subsequent Mortgage Loan.
The transfer by the Seller of the Subsequent Mortgage Loans set forth
on the related Schedule of Mortgage Loans to the Trust shall be absolute and
shall be intended by the Owners and all parties hereto to be treated as a sale
by the Seller to the Trust. Any Subsequent Mortgage Loan so transferred will be
included in one (and only one) of either Group I or Group II. The amount
released from the Pre-Funding Account shall be one hundred percent (100%) of the
aggregate principal balances of the Subsequent Mortgage Loans so transferred.
Upon the transfer by the Seller of the Subsequent Mortgage Loans hereunder, such
Subsequent Mortgage Loans (and all principal and interest due thereon subsequent
to the Subsequent Cut Off Date) and all other rights and interests with respect
to such Subsequent Mortgage Loans transferred pursuant to a Subsequent Transfer
Agreement shall be deemed for all purposes hereunder to be part of the Trust
Estate. The Seller hereby covenants and agrees to use its best efforts to ensure
that a sufficient amount of Subsequent Mortgage Loans will be transferred to the
Trust during the Funding Period to reduce the Pre-Funded Amount to less than
$100,000 for each Group.
(b) The obligation of the Trustee to accept the transfer of
the Subsequent Mortgage Loans and the other property and rights related thereto
described in paragraph (a) above is subject to the satisfaction of each of the
following conditions on or prior to the related Subsequent Transfer Date:
(i) the Seller shall have provided the Trustee, the
Oversight Agent and the Certificate Insurer with an
Addition Notice and shall have provided any
information reasonably requested by any of the
foregoing with respect to the Subsequent Mortgage
Loans; provided, however, that the parties hereto
agree that the initial Subsequent Transfer Date is
December 30, 1999 and that no Addition Notice is
necessary in connection with the Subsequent Mortgage
Loans to be transferred on such date;
(ii) the Seller shall have delivered to the Trustee a duly
executed Subsequent Transfer Agreement (including an
acceptance by the Trustee) which shall include a
Schedule of Mortgage Loans, listing the Subsequent
Mortgage Loans and any other exhibits listed thereon
(a copy of such Schedule of Mortgage Loans shall be
delivered to the Custodian);
(iii) the Seller shall have caused to be delivered to the
Custodian, on behalf of the Trustee, all the
documents required for the transfer and assignment of
the Subsequent Mortgage Loans, as set forth in
Section 3.6(b) hereof;
(iv) the Seller shall have deposited in the Principal and
Interest Account all principal collected and interest
due in respect of such Subsequent Mortgage Loans on
or after the Subsequent Cut Off Date, including
prepaid interest collected through the first due date
of the Subsequent Mortgage Loans;
(v) as of the Subsequent Transfer Date, the Seller is not
insolvent, nor will it be made insolvent by such
transfer, nor is it aware of any pending insolvency;
(vi) the Funding Period shall not have ended;
- 49 -
<PAGE>
(vii) the Seller shall have delivered to the Trustee, the
Oversight Agent and the Certificate Insurer an
Officer's Certificate confirming the satisfaction of
each condition precedent specified in items (i)
through (v) of this paragraph (b) and paragraphs (c)
and (d) below and in the Subsequent Transfer
Agreement;
(viii) the Seller shall have delivered to the Trustee, the
Oversight Agent, the Rating Agencies and the
Certificate Insurer opinions of counsel with respect
to the transfer of the Subsequent Mortgage Loans
substantially in the form of the opinions of counsel
delivered to the Certificate Insurer and the Trustee
on the Startup Day with respect to the Initial
Mortgage Loans (bankruptcy, corporate and tax); and
(ix) the Certificate Insurer retains the right to adjust
the loss coverage requirements, including, but not
limited to the related Specified Subordinated Amount,
if a final Mortgage Loan Group differs materially
from the Initial Mortgage Loans in such Mortgage Loan
Group. Prior to any such adjustment, the Certificate
Insurer shall give written notice to the Rating
Agencies.
The obligation of the Trust to purchase Subsequent Mortgage Loans on the
Subsequent Transfer Date for inclusion in Group I is subject to the following
requirements: (i) such Subsequent Mortgage Loan may not be 30 or more days
contractually delinquent as of the Subsequent Cut Off Date; (ii) the remaining
term to maturity of such Subsequent Mortgage Loan may not exceed 30 years; (iii)
such Subsequent Mortgage Loan will have a Combined Loan-to-Value Ratio of not
more than 85.00% and; (iv) the Certificate Insurer shall have given its consent
to the inclusion of such Subsequent Mortgage Loan; and, (v) following the
purchase of such Subsequent Mortgage Loans by the Trust, the Mortgage Loans in
Group I (including the Subsequent Mortgage Loans in Group I) (a) will have a
weighted average Coupon Rate of at least 9.95% (b) will have a weighted average
Combined Loan-to-Value Ratio of not more than 60.00% (c) will have an average
current loan balance of not greater than $76,000 and not more than 5.00% of the
Mortgage Loans in Group I may have a principal balance greater than $175,000;
(d) will satisfy the representations and warranties set forth in Section 3.4
hereof; (e) have a first due date no later than April 1, 2000 and (f) no such
Subsequent Mortgage Loan shall have been made to repay or refinance a loan made
by the Seller with regard to which, immediately prior to such payment or
refinancing, the Servicer had initiated foreclosure action for non-payment of
principal and interest and/or for violation of any of the loan's terms and
provisions.
(c) shall have been made to repay or refinance a loan made by
the Seller, which, immediately prior to such payment or refinancing, was or
would have been forty-five (45) or more days delinquent or in default under any
of the loan's terms or provisions.
The obligation of the Trust to purchase Subsequent Mortgage Loans on the
Subsequent Transfer Date for inclusion in Group II is subject to the following
requirements: (i) such Subsequent Mortgage Loan may not be 30 or more days
contractually delinquent as of the Subsequent Cut Off Date; (ii) the remaining
term to maturity of such Subsequent Mortgage Loan may not exceed 30 years; (iii)
such Subsequent Mortgage Loan will have a Loan to Value Ratio of not more than
85.00%; and (iv) the Certificate Insurer shall have given its consent to the
inclusion of such Subsequent Mortgage Loan; and, (v) following the purchase of
such Subsequent Mortgage Loans by the Trust, the Mortgage Loans in Group II
(including the Subsequent Mortgage Loans in Group II): (a) will have a weighted
average coupon rate of at least 8.86%; (b) will have a weighted average Loan to
Value Ratio of not more than 66.75%; and (c) will have an average current loan
balance not greater than $130,000 and not more than 28.50% of the Mortgage
- 50 -
<PAGE>
Loans in Group II may have a principal balance in excess of $200,000; (d) will
satisfy the representations and warranties set forth in Section 3.4 hereof; (e)
have a first due date no later than April 1, 2000 and (f) no such Subsequent
Mortgage Loan shall have been made to repay or refinance a loan made by the
Seller with regard to which, immediately prior to such payment or refinancing,
the Servicer had initiated foreclosure action for non-payment of principal and
interest and/or for violation of any of the loan's terms and provisions.
(d) In connection with each Subsequent Transfer Date and, if
applicable, on the Payment Dates occurring in January and February 2000, as
applicable, the Trustee shall determine: (i) the amount and correct dispositions
of the Group I Capitalized Interest Requirement and the Group II Capitalized
Interest Requirement, the Group I Overfunded Interest Amount, the Group II
Overfunded Interest Amount, the Pre-Funding Account Earnings and the Pre-Funded
Amount (and the portion of such amounts allocable to Group I and Group II) and
(ii) any other necessary matters in connection with the administration of the
Pre-Funding Account and of the Capitalized Interest Account. In the event that
any amounts are released as a result of an error in calculation to the Owners or
the Seller from the Pre-Funding Account or from the Capitalized Interest
Account, such Owners or the Seller shall immediately repay such amounts to the
Trustee.
Section 3.10 Books and Records. The sale of each Mortgage Loan shall be
reflected in the Seller's balance sheets and other financial statements as a
sale of assets by the Seller under generally accepted accounting principles.
ARTICLE IV
ISSUANCE AND SALE OF CERTIFICATES
Section 4.1 Issuance of Certificates. On the Startup Day, upon the
Trustee's receipt from the Seller of an executed Delivery Order in the form set
forth as Exhibit G hereto, the Trustee shall execute, authenticate and deliver
the Certificates on behalf of the Trust in accordance with the directions set
forth in such Delivery Order.
Section 4.2 Sale of Certificates. At 10:00 a.m. Eastern Time on the
Startup Day, at the offices of Arter & Hadden LLP, 1801 K Street, N.W.,
Washington, D.C. 20006, the Seller will sell and convey the Mortgage Loans and
the money, instruments and other property related thereto to the Trustee, and
the Trustee will (i) deliver to the Underwriter the Class A Certificates with an
aggregate Percentage Interest in each Class equal to 100%, registered in the
name of Cede & Co. or in such other names as the Underwriter shall direct,
against payment of the purchase price thereof by wire transfer of immediately
available funds to the Trustee, and (ii) deliver to First Alliance Portfolio
Services, Inc. a Class R Certificate, with a Percentage Interest equal to 100%.
Upon the Trustee's receipt of the entire net proceeds of the sale of the Class A
Certificates the Seller shall instruct the Trustee to: (a) deposit (i) an amount
equal to the Original Pre-Funded Amount in the Pre-Funding Account and (ii) an
amount equal to the sum of the Group I Original Capitalized Interest Amount and
the Group II Original Capitalized Interest Amount in the Capitalized Interest
Account contributed by the Seller out of such proceeds or otherwise, (b) pay any
fees and expenses identified by the Seller and (c) pay to the Seller the balance
after deducting such amounts. The Seller shall pay directly to the Certificate
Insurer the Initial Premium.
- 51 -
<PAGE>
ARTICLE V
CERTIFICATES AND TRANSFER OF INTERESTS
Section 5.1 Terms.
(a) The Certificates are pass-through securities having the
rights described therein and herein. Notwithstanding references herein or
therein with respect to the Certificates as to "principal" and "interest" no
debt of any Person is represented thereby, nor are the Certificates or the
underlying Notes guaranteed by any Person (except that the Notes may be recourse
to the Mortgagors thereof to the extent permitted by law and except for the
rights of the Trustee with respect to the Certificate Insurance Policies).
Distributions on the Certificates are payable solely from payments received on
or with respect to the Mortgage Loans (other than the Servicing Fees), moneys in
the Principal and Interest Account, except as otherwise provided herein, moneys
in the Pre-Funding Account and the Capitalized Interest Account from earnings on
moneys and the proceeds of property held as a part of the Trust Estate and, upon
the occurrence of certain events, from Insured Payments. Each Certificate
entitles the Owner thereof to receive monthly on each Payment Date, in order of
priority of distributions with respect to such Class of Certificates a specified
portion of such payments with respect to the Mortgage Loans in the related
Mortgage Loan Group and certain related Insured Payments, pro rata in accordance
with such Owner's Percentage Interest.
(b) Each Owner is required, and hereby agrees, to return to
the Trustee at the Corporate Trust Office any Certificate prior to the final
distribution due thereon. Any such Certificate as to which the Trustee has made
the final distribution thereon shall be deemed canceled and shall no longer be
Outstanding for any purpose of this Agreement.
Section 5.2 Forms. The Class A-1 Certificates, the Class A-2
Certificates and the Class R Certificates shall be in substantially the forms
set forth in Exhibits A-1, A-2 and B hereof, respectively, with such appropriate
insertions, omissions, substitutions and other variations as are required or
permitted by this Agreement or as may in the Seller's judgment be necessary,
appropriate or convenient to comply, or facilitate compliance, with applicable
laws, and may have such letters, numbers or other marks of identification and
such legends or endorsements placed thereon as may be required to comply with
the rules of any applicable securities laws or as may, consistently herewith, be
determined by the Authorized Officer of the Trustee executing such Certificates,
as evidenced by his execution thereof.
Section 5.3 Execution, Authentication and Delivery. Each Certificate
shall be executed on behalf of the Trust, by the manual or facsimile signature
of one of the Trustee's Authorized Officers and shall be authenticated by the
manual or facsimile signature of one of the Trustee's Authorized Officers.
Certificates bearing the manual signature of individuals who were at
any time the proper officers of the Trustee shall, upon proper authentication by
the Trustee, bind the Trust, notwithstanding that such individuals or any of
them have ceased to hold such offices prior to the execution and delivery of
such Certificates or did not hold such offices at the date of authentication of
such Certificates.
The initial Certificates shall be dated as of the Startup Day and
delivered at the Closing to the parties specified in Section 4.2 hereof.
No Certificate shall be valid until executed and authenticated as set
forth above.
Section 5.4 Registration and Transfer of Certificates.
(a) The Trustee, as registrar, shall cause to be kept a
register (the "Register") in which, subject to such reasonable regulations as it
may prescribe, the Trustee shall provide for the registration of Certificates
and the registration of transfer of Certificates. The Trustee is hereby
appointed registrar (the "Registrar") for the purpose of registering
Certificates and transfers of Certificates as herein provided. The Owners and
the Certificate Insurer shall have the right to inspect the Register during
business hours upon reasonable notice (but no less than 2 Business Days) and to
obtain copies thereof.
- 52 -
<PAGE>
(b) Subject to the provisions of Section 5.8 hereof, upon
surrender for registration of transfer of any Certificate at the office
designated as the location of the Register, the Trustee shall execute,
authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Certificates of a like Class and in the aggregate
principal amount of the Certificate so surrendered.
(c) At the option of any Owner, Certificates of any Class
owned by such Owner may be exchanged for other Certificates authorized of like
Class, tenor, aggregate original principal amount and bearing numbers not
contemporaneously outstanding, upon surrender of the Certificates to be
exchanged at the office designated as the location of the Register. Whenever any
Certificate is so surrendered for exchange, the Trustee shall execute,
authenticate and deliver the Certificate or Certificates which the Owner making
the exchange is entitled to receive.
(d) All Certificates issued upon any registration of transfer
or exchange of Certificates shall be valid evidence of the same ownership
interests in the Trust and entitled to the same benefits under this Agreement as
the Certificates surrendered upon such registration of transfer or exchange.
(e) Every Certificate presented or surrendered for
registration of transfer or exchange shall be duly endorsed, or be accompanied
by a written instrument of transfer in form satisfactory to the Trustee duly
executed by the Owner thereof or his attorney duly authorized in writing.
(f) No service charge shall be made to an Owner for any
registration of transfer or exchange of Certificates, but the Trustee may
require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any registration of transfer or
exchange of Certificates; any other expenses in connection with such transfer or
exchange shall be an expense of the Trust.
(g) It is intended that the Class A Certificates be registered
so as to participate in a global book-entry system with the Depository, as set
forth herein. Each Class of Class A Certificates shall, except as otherwise
provided in the next paragraph, be initially issued in the form of a single
fully registered Class A Certificate with a denomination equal to the Original
Certificate Principal Balance of such Class. Upon initial issuance, the
ownership of each such Class A Certificate shall be registered in the Register
in the name of Cede & Co., or any successor thereto, as nominee for the
Depository.
On the Startup Day, no Class A Certificates shall be issued in
denominations of less than $25,000 except for one Certificate of each Class
which may be in a denomination of less than $1,000; accordingly the Trust shall
not issue tail certificates on the Startup Day.
The Seller and the Trustee are hereby authorized to execute and deliver
the Representation Letter with the Depository.
With respect to Class A Certificates registered in the Register in the
name of Cede & Co., as nominee of the Depository, the Seller, the Servicer, the
Oversight Agent and the Trustee shall have no responsibility or obligation to
Direct or Indirect Participants or beneficial owners for which the Depository
holds Class A Certificates from time to time as a Depository. Without limiting
the immediately preceding sentence, the Seller, the Servicer, the Oversight
Agent and the Trustee shall have no responsibility or obligation with respect to
(i) the accuracy of the records of the Depository, Cede & Co., or any Direct or
Indirect Participant with respect to the ownership interest in the Class A
Certificates, (ii) the delivery to any Direct or Indirect Participant or any
other Person, other than a registered Owner of a Class A Certificate as shown in
the Register, of any notice with respect to the Class A Certificates or (iii)
the payment to any Direct or Indirect Participant or any other Person, other
than a registered Owner of a Class A Certificate as shown in the Register, of
any amount with respect to any distribution of
- 53 -
<PAGE>
principal or interest on the Class A Certificates. No Person other than a
registered Owner of a Class A Certificate as shown in the Register shall receive
a certificate evidencing such Class A Certificate.
Upon delivery by the Depository to the Trustee of written notice to the
effect that the Depository has determined to substitute a new nominee in place
of Cede & Co., and subject to the provisions hereof with respect to the payment
of interest by the mailing of checks or drafts to the registered Owners of Class
A Certificates appearing as registered Owners in the registration books
maintained by the Trustee at the close of business on a Record Date, the name
"Cede & Co." in this Agreement shall refer to such new nominee of the
Depository.
(h) In the event that (i) the Depository or the Seller advises
the Trustee and the Certificate Insurer in writing that the Depository is no
longer willing or able to discharge properly its responsibilities as nominee and
depository with respect to the Class A Certificates and the Seller or the
Trustee is unable to locate a qualified successor or (ii) the Seller at its sole
option elects to terminate the book-entry system through the Depository, the
Class A Certificates shall no longer be restricted to being registered in the
Register in the name of Cede & Co. (or a successor nominee) as nominee of the
Depository. At that time, the Seller may determine that the Class A Certificates
shall be registered in the name of and deposited with a successor depository
operating a global book-entry system, as may be acceptable to the Seller and at
the Seller's expense, or such depository's agent or designee but, if the Seller
does not select such alternative global book-entry system, then the Class A
Certificates may be registered in whatever name or names registered Owners of
Class A Certificates transferring Class A Certificates shall designate, in
accordance with the provisions hereof.
(i) Notwithstanding any other provision of this Agreement to
the contrary, so long as any Class A Certificate is registered in the name of
Cede & Co., as nominee of the Depository, all distributions of principal or
interest on such Class A Certificates and all notices with respect to such Class
A Certificates shall be made and given, respectively, in the manner provided in
the Representation Letter.
Section 5.5 Mutilated, Destroyed, Lost or Stolen Certificates. If (i)
any mutilated Certificate is surrendered to the Trustee, or the Trustee receives
evidence to its satisfaction of the destruction, loss or theft of any
Certificate, and (ii) in the case of any mutilated Certificate, such mutilated
Certificate shall first be surrendered to the Trustee, and in the case of any
destroyed, lost or stolen Certificate, there shall be first delivered to the
Trustee such security or indemnity as may be reasonably required by it to hold
the Trustee harmless, then, in the absence of notice to the Trustee that such
Certificate has been acquired by a bona fide purchaser, the Trustee shall
execute, authenticate and deliver, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Certificate, a new Certificate of like
Class, tenor and aggregate principal amount, bearing a number not
contemporaneously outstanding.
Upon the issuance of any new Certificate under this Section, the
Trustee may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto; any other expenses
in connection with such issuance shall be an expense of the Trust.
Every new Certificate issued pursuant to this Section in exchange for
or in lieu of any mutilated, destroyed, lost or stolen Certificate shall
constitute evidence of a substitute interest in the Trust and shall be entitled
to all the benefits of this Agreement equally and proportionately with any and
all other Certificates of the same Class duly issued hereunder and such
mutilated, destroyed, lost or stolen Certificate shall not be valid for any
purpose.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Certificates.
- 54 -
<PAGE>
Section 5.6 Persons Deemed Owners. The Trustee and any agent of the
Trustee may treat the Person in whose name any Certificate is registered as the
Owner of such Certificate for the purpose of receiving distributions with
respect to such Certificate and for all other purposes whatsoever, and neither
the Trustee nor any agent of the Trustee shall be affected by notice to the
contrary.
Section 5.7 Cancellation. All Certificates surrendered for registration
of transfer or exchange shall, if surrendered to any Person other than the
Trustee, be delivered to the Trustee and shall be promptly canceled by it. No
Certificate shall be authenticated in lieu of or in exchange for any Certificate
canceled as provided in this Section, except as expressly permitted by this
Agreement. All canceled Certificates may be held by the Trustee in accordance
with its standard retention policy.
Section 5.8 Limitation on Transfer of Ownership Rights.
(a) No sale or other transfer of any Class A Certificate shall
be made to the Seller, any Originator or any of their respective affiliates.
(b) No sale or other transfer of record or beneficial
ownership of a Class R Certificate (whether pursuant to a purchase, a transfer
resulting from a default under a secured lending agreement or otherwise) shall
be made to a Disqualified Organization or agent of a Disqualified Organization.
The transfer, sale or other disposition of a Class R Certificate (whether
pursuant to a purchase, a transfer resulting from a default under a secured
lending agreement or otherwise) to a Disqualified Organization shall be deemed
to be of no legal force or effect whatsoever and such transferee shall not be
deemed to be an Owner for any purpose hereunder, including, but not limited to,
the receipt of distributions on such Class R Certificate. Furthermore, in no
event shall the Trustee accept surrender for transfer, registration of transfer,
or register the transfer, of any Class R Certificate nor authenticate and make
available any new Class R Certificate unless the Trustee has received an
affidavit from the proposed transferee that such transferee is not a pension or
benefit plan or individual retirement arrangement that is subject to the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") or to
Section 4975 of the Code or an entity whose underlying assets are deemed to be
assets of such a plan or arrangement by reason of such plan's or arrangement's
investment in the entity, as determined under U.S. Department of Labor
Regulations 29 C.F.R. ss. 2510.3-101 or otherwise. Each holder of a Class R
Certificate, by his acceptance thereof, shall be deemed for all purposes to have
consented to the provisions of this Section 5.8(b).
(c) No other sale or other transfer of record or beneficial
ownership of a Class R Certificate shall be made unless such transfer is exempt
from the registration requirements of the Securities Act, as amended, and any
applicable state securities laws or is made in accordance with said Act and
laws. In the event such a transfer is to be made within three years from the
Startup Day, (i) the Trustee and the Seller shall require a written opinion of
counsel acceptable to and in form and substance satisfactory to the Seller and
the Certificate Insurer in the event that such transfer may be made pursuant to
an exemption, describing the applicable exemption and the basis therefor, from
said Act and laws or is being made pursuant to said Act and laws, which opinion
of counsel shall not be an expense of the Trustee, the Trust Estate or the
Certificate Insurer, and (ii) the Trustee shall require the Transferee to
execute an investment letter acceptable to and in form and substance
satisfactory to the Seller and the Certificate Insurer certifying to the
Trustee, the Certificate Insurer and the Seller the facts surrounding such
transfer, which investment letter shall not be an expense of the Trustee, the
Trust Estate, the Certificate Insurer or the Seller. The Owner of a Class R
Certificate desiring to effect such transfer shall, and does hereby agree to,
indemnify the Trustee, the Certificate Insurer and the Seller 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.
Section 5.9 Assignment of Rights. An Owner may pledge, encumber,
hypothecate or assign all or any part of its right to receive distributions
hereunder, but such pledge, encumbrance, hypothecation
- 55 -
<PAGE>
or assignment shall not constitute a transfer of an ownership interest
sufficient to render the transferee an Owner of the Trust without compliance
with the provisions of Section 5.4 and Section 5.8 hereof.
ARTICLE VI
COVENANTS
Section 6.1 Distributions. On each Payment Date, the Trustee will
withdraw amounts from the Certificate Account and make the distributions with
respect to the Certificates in accordance with the terms of the Certificates and
this Agreement. Such distributions shall be made (i) by check mailed on each
Payment Date or (ii) if requested by any Owner, to such Owner by wire transfer
to an account within the United States designated no later than five Business
Days prior to the related Record Date, made on each Payment Date, in each case
to each Owner of record on the immediately preceding Record Date; provided,
however, that an Owner of a Class A Certificate shall only be entitled to
payment by wire transfer if such Owner owns Class A Certificates in the
aggregate denomination of at least $5,000,000.
Section 6.2 Money for Distributions to be Held in Trust; Withholding.
(a) All payments of amounts due and payable with respect to
any Certificate that are to be made from amounts withdrawn from the Certificate
Account pursuant to Section 7.5 hereof or from Insured Payments shall be made by
and on behalf of the Trustee, and no amounts so withdrawn from the Certificate
Account for payments of the Certificates and no Insured Payment shall be paid
over to the Trustee except as provided in this Section.
(b) The Trustee on behalf of the Trust shall comply with all
requirements of the Code and applicable state and local law with respect to the
withholding from any distributions made by it to any Owner of any applicable
withholding taxes imposed thereon and with respect to any applicable reporting
requirements in connection therewith.
(c) Any money held by the Trustee in trust for the payment of
any amount due with respect to any Class A Certificate and remaining unclaimed
by the Owner of such Class A Certificate for the period then specified in the
escheat laws of the State of New York after such amount has become due and
payable shall be discharged from such trust and be paid first to the Certificate
Insurer on account of any Reimbursement Amounts and second to the Owners of the
Class R Certificates; and the Owner of such Class A Certificate shall
thereafter, as an unsecured general creditor, look only to the Certificate
Insurer or the Owners of the Class R Certificates for payment thereof (but only
to the extent of the amounts so paid to the Certificate Insurer or the Owners of
the Class R Certificates), and all liability of the Trustee with respect to such
trust money shall thereupon cease; provided, however, that the Trustee, before
being required to make any such payment, shall at the expense of the Trust cause
to be published once, in the eastern edition of The Wall Street Journal, notice
that such money remains unclaimed and that, after a date specified therein,
which shall be not fewer than 30 days from the date of such publication, any
unclaimed balance of such money then remaining will be paid to the Certificate
Insurer or the Owners of the Class R Certificates. The Trustee shall, at the
direction of the Seller, also adopt and employ, at the expense of the Trust, any
other reasonable means of notification of such payment (including but not
limited to mailing notice of such payment to Owners whose right to or interest
in moneys due and payable but not claimed is determinable from the Register at
the last address of record for each such Owner).
Section 6.3 Protection of Trust Estate.
(a) The Trustee will hold the Trust Estate in trust for the
benefit of the Owners and, upon request of the Certificate Insurer, or, with the
consent of the Certificate Insurer, at the request and
- 56 -
<PAGE>
expense of the Seller, will from time to time execute and deliver all such
supplements and amendments hereto pursuant to Section 11.14 hereof and all
instruments of further assurance and other instruments, and will take such other
action upon such request from the Seller or the Certificate Insurer, to:
(i) more effectively hold in trust all or any portion of
the Trust Estate;
(ii) perfect, publish notice of or protect the validity of
any grant made or to be made by this Agreement;
(iii) enforce any of the Mortgage Loans; or
(iv) preserve and defend title to the Trust Estate and the
rights of the Trustee, and the ownership interests of
the Owners represented thereby, in such Trust Estate
against the claims of all Persons and parties.
The Trustee shall send copies of any request received from the
Certificate Insurer or the Seller to take any action pursuant to this Section
6.3 to the other party.
(b) The Trustee shall have the power to enforce, shall enforce
the obligations of the other parties to this Agreement and of the Certificate
Insurer, by action, suit or proceeding at law or equity and shall also have the
power to enjoin, by action or suit in equity, any acts or occurrences which may
be unlawful or in violation of the rights of the Owners; provided, however, that
nothing in this Section shall require any action by the Trustee unless the
Trustee shall first (i) have been furnished indemnity satisfactory to it and
(ii) when required by this Agreement, have been requested to take such action by
a majority of the Percentage Interests represented by the affected Class or
Classes of Class A Certificates then Outstanding or, if there are no longer any
affected Class A Certificates then outstanding, by such majority of the
Percentage Interests represented by the Class R Certificates.
(c) The Trustee shall execute any instrument required pursuant
to this Section so long as such instrument does not conflict with this Agreement
or with the Trustee's fiduciary duties.
Section 6.4 Performance of Obligations. The Trustee will not take any
action that would release the Seller, the Servicer, the Oversight Agent or the
Certificate Insurer from any of their respective covenants or obligations under
any instrument or document relating to the Trust Estate or the Certificates or
which would result in the amendment, hypothecation, subordination, termination
or discharge of, or impair the validity or effectiveness of, any such instrument
or document, except as expressly provided in this Agreement or such other
instrument or document.
The Trustee may contract with other Persons to assist it in performing
its duties hereunder.
Section 6.5 Negative Covenants. The Trustee will not, to the extent
within the control of the Trustee, take any of the following actions:
(i) sell, transfer, exchange or otherwise dispose of any of
the Trust Estate except as expressly permitted by this Agreement;
(ii) claim any credit on or make any deduction from the
distributions payable in respect of, the Certificates (other than amounts
properly withheld from such payments under the Code) or assert any claim against
any present or former Owner by reason of the payment of any taxes levied or
assessed upon any of the Trust Estate;
- 57 -
<PAGE>
(iii) incur, assume or guaranty on behalf of the Trust any
indebtedness of any Person except pursuant to this Agreement;
(iv) dissolve or liquidate the Trust Estate in whole or in
part, except pursuant to Article IX hereof; or
(v) (A) impair the validity or effectiveness of this
Agreement, or release any Person from any covenants or obligations with respect
to the Trust or to the Certificates under this Agreement, except as may be
expressly permitted hereby or (B) create or extend any lien, charge, adverse
claim, security interest, mortgage or other encumbrance to or upon the Trust
Estate or any part thereof or any interest therein or the proceeds thereof,
except as may have been created pursuant to the Agreement.
Section 6.6 No Other Powers. The Trustee will not, to the extent within
the control of the Trustee, permit the Trust to engage in any business activity
or transaction other than those activities permitted by Section 2.3 hereof.
Section 6.7 Limitation of Suits. No Owner shall have any right to
institute any proceeding, judicial or otherwise, with respect to this Agreement
or the Certificate Insurance Policies or for the appointment of a receiver or
trustee, or for any other remedy hereunder, unless:
(1) such Owner has previously given written notice to the
Seller and the Trustee of such Owner's intention to institute such
proceeding;
(2) the Owners of not less than 25% of the Percentage
Interests represented by the affected Class or Classes of Certificates
then Outstanding or, if there are no affected Classes of Class A
Certificates then Outstanding, by such percentage of the Percentage
Interests represented by the Class R Certificates shall have made
written request to the Trustee to institute such proceeding in respect
of such Event of Default;
(3) such Owner or Owners have offered to the Trustee indemnity
against the costs, expenses and liabilities to be incurred in
compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute such proceeding;
(5) as long as any Class A Certificates are Outstanding, the
Certificate Insurer has consented in writing thereto (unless the action
is against the Certificate Insurer); and
(6) no direction inconsistent with such written request has
been given to the Trustee during such 60-day period by the Certificate
Insurer or by the Owners of a majority of the Percentage Interests
represented by the Class A Certificates or, if there are no Class A
Certificates then Outstanding, by such majority of the Percentage
Interests represented by the Class R Certificates;
it being understood and intended that no one or more Owners shall have any right
in any manner whatever by virtue of, or by availing themselves of, any provision
of this Agreement to affect, disturb or prejudice the rights of any other Owner
of the same Class or to obtain or to seek to obtain priority or preference over
any other Owner of the same Class or to enforce any right under this Agreement,
except in the manner herein provided and for the equal and ratable benefit of
all the Owners of the same Class.
In the event the Trustee shall receive conflicting or inconsistent
requests and indemnity from two or more groups of Owners, each representing less
than a majority of the applicable Class of Certificates, the Trustee will act at
the direction of the group of Owners representing a greater Percentage Interest
of the applicable Class of Certificates. If the Trustee receives conflicting or
inconsistent requests and
- 58 -
<PAGE>
indemnity from two or more groups of Owners with an equal Percentage Interest of
the applicable Class of Certificates, the Trustee in its sole discretion may
determine what action, if any, shall be taken, notwithstanding any other
provision of this Agreement.
Section 6.8 Unconditional Rights of Owners to Receive Distributions.
Notwithstanding any other provision in this Agreement, the Owner of any
Certificate shall have the right, which is absolute and unconditional, to
receive distributions to the extent provided herein and therein with respect to
such Certificate or to institute suit for the enforcement of any such
distribution, and such right shall not be impaired without the consent of such
Owner.
Section 6.9 Rights and Remedies Cumulative. Except as otherwise
provided herein, no right or remedy herein conferred upon or reserved to the
Trustee, the Certificate Insurer or to the Owners is intended to be exclusive of
any other right or remedy, and every right and remedy shall, to the extent
permitted by law, be cumulative and in addition to every other right and remedy
given hereunder or now or hereafter existing at law or in equity or otherwise.
Except as otherwise provided herein, the assertion or employment of any right or
remedy hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
Section 6.10 Delay or Omission Not Waiver. No delay of the Trustee, the
Oversight Agent, the Certificate Insurer or any Owner of any Certificate to
exercise any right or remedy under this Agreement to any Event of Default shall
impair any such right or remedy or constitute a waiver of any such Event of
Default or an acquiescence therein. Every right and remedy given by this Article
VI or by law to the Trustee, the Oversight Agent, the Certificate Insurer or the
Owners may be exercised from time to time, and as often as may be deemed
expedient, by the Trustee, the Certificate Insurer or the Owners, as the case
may be.
Section 6.11 Control by Owners. The Certificate Insurer or the Owners
of a majority of the Percentage Interests represented by the Class A
Certificates then Outstanding, with the consent of the Certificate Insurer
(which may not be unreasonably withheld), or, if there are no longer any Class A
Certificates then Outstanding, by such majority of the Percentage Interests
represented by the Class R Certificates then Outstanding, with the consent of
the Certificate Insurer (which may not be unreasonably withheld), may direct the
time, method and place of conducting any proceeding for any remedy available to
the Trustee with respect to the Certificates or exercising any trust or power
conferred on the Trustee with respect to the Certificates or the Trust Estate,
including, but not limited to, those powers set forth in Section 6.3, Section
8.20 and Section 10.1 hereof, provided that:
(1) such direction shall not be in conflict with any rule of
law or with this Agreement;
(2) the Trustee shall have been provided with indemnity
satisfactory to it; and
(3) the Trustee may take any other action deemed proper by the
Trustee, which is not inconsistent with such direction; provided,
however, that the Trustee need not take any action which it determines
might involve it in liability or may be unjustly prejudicial to the
Owners not so directing.
Section 6.12 Access to Owners of Certificates' Names and Addresses.
(a) If any Owner (for purposes of this Section 6.12, an
"Applicant") applies in writing to the Trustee, and such application states that
the Applicant desires to communicate with other Owners with respect to their
rights under this Agreement or under the Certificates and is accompanied by a
copy of the communication which such Applicant proposes to transmit, then the
Trustee shall, at the expense of such Applicant, within ten (10) Business Days
after the receipt of such application, furnish or cause to be furnished to such
Applicant a list of the names and addresses of the Owners of record as of the
most recent Payment Date.
- 59 -
<PAGE>
(b) Every Owner, by receiving and holding such list, agrees
with the Trustee that the Trustee shall not be held accountable in any way by
reason of the disclosure of any information as to the names and addresses of the
Owners hereunder, regardless of the source from which such information was
derived.
ARTICLE VII
ACCOUNTS, DISBURSEMENTS AND RELEASES
Section 7.1 Collection of Money. Except as otherwise expressly provided
herein, the Trustee shall demand payment or delivery of all money and other
property payable to or receivable by the Trustee pursuant to this Agreement,
including (a) all payments due on the Mortgage Loans in accordance with the
respective terms and conditions of such Mortgage Loans and required to be paid
over to the Trustee by the Servicer or by any Sub-Servicer and (b) Insured
Payments. The Trustee shall hold all such money and property received by it,
other than pursuant to or as contemplated by Section 6.2(b) hereof as part of
the Trust Estate and shall apply it as provided in this Agreement.
Section 7.2 Establishment of Accounts. The Seller shall cause to be
established, and the Trustee shall maintain, at the Corporate Trust Office, a
Certificate Account, a Pre-Funding Account and a Capitalized Interest Account to
be held by the Trustee so long as the Trustee qualifies as a Designated
Depository Institution and if the Trustee does not so qualify, then by any
Designated Depository Institution in the name of the Trust for the benefit of
the Owners of the Certificates and the Certificate Insurer, as their interests
may appear.
Section 7.3 The Certificate Insurance Policies.
(a) Two Business Days prior to each Payment Date the Trustee
shall determine with respect to the immediately following Payment Date:
(i) the amount on deposit in the Certificate Account on
such Payment Date and available to be distributed to
the Owners on such Payment Date with respect to Group
I (disregarding the sum of (x) the amount of any
Insured Payments and (y) the amount of any expected
investment earnings) and equal to the sum of (A) such
amount excluding the amount of any Total Monthly
Excess Cashflow from either Group on account of Group
I included in such amount plus (B) any amount of
Total Monthly Excess Cashflow from either Group to be
applied on account of Group I on such Payment Date to
the Class A-1 Certificates. The amount described in
clause (A) of the preceding sentence with respect to
each Payment Date is the "Group I Available Funds";
the sum of the amounts described in clauses (A) and
(B) of the preceding sentence with respect to each
Payment Date is the "Group I Total Available Funds."
(ii) the amount on deposit in the Certificate Account on
such Payment Date and available to be distributed to
the Owners on such Payment Date with respect to Group
II (disregarding the sum of (x) the amount of any
Insured Payments and (y) the amount of any expected
investment earnings), and equal to the sum of (A)
such amount excluding the amount of any Total Monthly
Excess Cashflow from either Group on account of Group
II included in such amount plus (B) any amount of
Total Monthly Excess Cashflow from either Group to
- 60 -
<PAGE>
be applied on account of Group II on such Payment
Date to the Class A-2 Certificates. The amount
described in clause (A) of the preceding sentence
with respect to each Payment Date is the "Group II
Available Funds"; the sum of the amounts described in
clauses (A) and (B) of the preceding sentence with
respect to each Payment Date is the "Group II Total
Available Funds".
(b) If (i) the Class A-1 Current Interest for any Payment Date
exceeds the Group I Total Available Funds for such Payment Date after deducting
amounts payable therefrom, if any, for the Fees and Expenses relating to Group I
due on such Payment Date and/or (ii) a Group I Subordination Deficit exists for
such Payment Date (any such event being a "Group I Total Available Funds
Shortfall"), the Trustee shall complete a Notice in the form of Exhibit A to the
Group I Certificate Insurance Policy and submit such notice to the Certificate
Insurer no later than 12:00 noon New York City time on the Business Day
preceding such Payment Date as a claim for an Insured Payment in an amount equal
to such Group I Total Available Funds Shortfall. Similarly, if (x) the Class A-2
Current Interest for any Payment Date exceeds the Group II Total Available Funds
for such Payment Date after deducting amounts payable therefrom, if any, for the
Fees and Expenses relating to Group II due on such Payment Date and/or (y) a
Group II Subordination Deficit exists for such Payment Date (any such event
being a "Group II Total Available Funds Shortfall"), the Trustee shall complete
a Notice in the form of Exhibit A to the Group II Certificate Insurance Policy
and submit such notice to the Certificate Insurer no later than 12:00 noon New
York City time on the Business Day preceding such Payment Date as a claim for an
Insured Payment in an amount equal to such Group II Total Available Funds
Shortfall.
(c) The Certificate Insurer shall forward to the Trustee
Insured Payments at such time and in the manner specified in the related
Certificate Insurance Policy. Upon receipt of Insured Payments from the
Certificate Insurer on behalf of Owners, the Trustee shall deposit such Insured
Payments in the Certificate Account and shall distribute such Insured Payments,
or the proceeds thereof, in accordance with Section 7.5(d)(iv) to the Owners of
the Class A Certificates of the related Class.
(d) The Trustee shall (i) receive Insured Payments as
attorney-in-fact of each Owner of the Class A Certificates of the related Class
receiving any Insured Payment from the Certificate Insurer and (ii) disburse
such Insured Payment to the Owners of Offered Certificates as set forth in
Section 7.5(d)(iv). Insured Payments disbursed by the Trustee from proceeds of a
Certificate Insurance Policy shall not be considered payment by the Trust nor
shall such payments discharge the obligation of the Trust with respect to the
related Class A Certificates, and the Certificate Insurer shall be entitled to
receive the related Reimbursement Amount pursuant to Sections 7.5(d)(ii)(C) and
7.5(d)(ii)(D) hereof. Each Owner of Class A Certificates by its acceptance
thereof recognizes that to the extent the Certificate Insurer makes Insured
Payments, either directly or indirectly (as by paying through the Trustee), to
the Owners of such Class A Certificates the Certificate Insurer will be entitled
to receive the related Reimbursement Amount pursuant to Sections 7.5(d)(ii)(C)
and 7.5(d)(ii)(D) hereof.
Section 7.4 Pre-Funding Account and Capitalized Interest Account.
(a) On the Startup Day, from the proceeds of the sale of the
Class A Certificates, the Seller will deposit (i) an amount equal to the
Original Pre-Funded Amount in the Pre-Funding Account and (ii) an amount equal
to the sum of the Group I Original Capitalized Interest Amount and the Group II
Original Capitalized Interest Amount in the Capitalized Interest Account.
(b) On any Subsequent Transfer Date, the Seller shall instruct
the Trustee to withdraw from the Pre-Funding Account an amount equal to 100% of
the aggregate Loan Balances of the Subsequent Mortgage Loans sold to the Trust
on such Subsequent Transfer Date and pay such amount to or upon the order of the
Seller upon satisfaction of the conditions set forth in Sections 3.6 and 3.9
hereof
- 61 -
<PAGE>
with respect to such transfer; in connection with such instructions the Seller
shall additionally inform the Trustee whether such Subsequent Mortgage Loans are
being transferred to Group I or Group II. In no event shall the Seller be
permitted to instruct the Trustee to release from the Pre-Funding Account to the
Certificate Account with respect to Subsequent Mortgage Loans to be transferred
to Group I an amount in excess of the Original Group I Pre-Funded Amount or to
release from the Pre-Funding Account to the Certificate Account with respect to
Subsequent Mortgage Loans to be transferred to Group II an amount in excess of
the Original Group II Pre-Funded Amount.
(c) On the first Business Day after the end of the Funding
Period, all amounts, if any, remaining in the Pre-Funding Account, shall be
transferred to the Certificate Account, and the Pre-Funding Account shall be
closed.
(d) On the Payment Dates during and immediately following the
Funding Period, the Trustee shall transfer from the Pre-Funding Account to the
Capitalized Interest Account, the Pre-Funding Account Earnings, if any,
applicable to such Payment Date.
(e) On each Payment Date during and immediately following the
Funding Period, the Trustee shall transfer from the Capitalized Interest Account
to the Certificate Account, (i) with respect to Group I, the Group I Capitalized
Interest Requirement for such Payment Date, if any plus the related Pre-Funding
Account Earnings transferred to the Capitalized Interest Account, and (ii) with
respect to Group II, the Group II Capitalized Interest Requirement, if any, for
such Payment Date plus the related Pre-Funding Account Earnings transferred to
the Capitalized Interest Account.
(f) On the second Payment Date after the Startup Day, the
Trustee shall distribute the Group I Overfunded Interest Amount, if any, and the
Group II Overfunded Interest Amount, if any (each calculated by the Trustee on
the day prior to such second Payment Date) from the Capitalized Interest Account
to the Seller. All amounts, if any, remaining in the Capitalized Interest
Account on such day shall be transferred to the Seller, and the Capitalized
Interest Account shall be closed.
Section 7.5 Flow of Funds.
(a) The Trustee shall deposit to the Certificate Account with
respect to Group I, without duplication, upon receipt, any Group I Insured
Payments, the proceeds of any liquidation of the assets of the Trust, insofar as
such assets relate to Group I and the Group I Monthly Remittance Amount,
together with any Substitution Amounts and any Loan Purchase Price amounts
relating to Group I received by the Trustee.
(b) The Trustee shall deposit to the Certificate Account with
respect to Group II, without duplication, upon receipt, any Group II Insured
Payments, the proceeds of any liquidation of the assets of the Trust, insofar as
such assets relate to Group II and the Group II Monthly Remittance Amount,
together with any Substitution Amounts and any Loan Purchase Price amounts
relating to Group II received by the Trustee.
(c) [Reserved].
(d) With respect to amounts on deposit in the Certificate
Account, on each Payment Date, the Trustee shall make the following allocations,
disbursements and transfers for each Mortgage Loan Group from amounts deposited
therein pursuant to subsections (a) and (b), respectively in the following order
of priority, and each such allocation, transfer and disbursement shall be
treated as having occurred only after all preceding allocations, transfers and
disbursements have occurred:
- 62 -
<PAGE>
(i) first, on each Payment Date (A) to the Oversight
Agent, the Oversight Agent Fee and (B) to the
Certificate Insurer, (x) from amounts then on deposit
in the Certificate Account with respect to Group I,
the Group I Premium Amount for such Payment Date and
(y) from amounts then on deposit in the Certificate
Account with respect to Group II, the Group II
Premium Amount for such Payment Date;
(ii) second, on each Payment Date, the Trustee shall
allocate an amount equal to the sum of (x) the Total
Monthly Excess Spread with respect to such Mortgage
Loan Group and Payment Date plus (y) any
Subordination Reduction Amount with respect to such
Mortgage Loan Group and Payment Date (such sum being
the "Total Monthly Excess Cashflow" with respect to
such Mortgage Loan Group and Payment Date) with
respect to each Mortgage Loan Group in the following
order of priority:
(A) first, such Total Monthly Excess Cashflow
with respect to each Group shall be
allocated to the payment of the related
Class A Distribution Amount pursuant to
clause (iv) below on such Payment Date with
respect to the related Mortgage Loan Group
in an amount equal to the difference, if
any, between (x) the related Class A
Distribution Amount (calculated only with
respect to clause (y) of the definition of
the related Group I or Group II Principal
Distribution Amount and without any
Subordination Increase Amount) for such
Payment Date and (y) the Available Funds
with respect to such Mortgage Loan Group for
such Payment Date (the amount of such
difference with respect to the related
Mortgage Loan Group) being the "Group I
Available Funds Shortfall" or the "Group II
Available Funds Shortfall";
(B) second, any portion of the Total Monthly
Excess Cashflow with respect to such
Mortgage Loan Group remaining after the
application described in clause (A) above
shall be allocated against any Available
Funds Shortfall with respect to the other
Mortgage Loan Group and to the payment of
the Class A Distribution Amount with respect
to the other Mortgage Loan Group pursuant to
clause (iv) below;
(C) third, any portion of the Total Monthly
Excess Cashflow with respect to such
Mortgage Loan Group remaining after the
allocations described in clauses (A) and (B)
above shall be allocated to the payment of
any Reimbursement Amount with respect to the
related Mortgage Loan Group pursuant to
clause (iv)(A)(I) below; and
(D) fourth, any portion of the Total Monthly
Excess Cashflow with respect to such
Mortgage Loan Group remaining after the
allocations described in clauses (A), (B)
and (C) above shall be allocated to the
payment of any Reimbursement Amount with
respect to the other Mortgage Loan Group
pursuant to clause (iv)(A)(I) below.
- 63 -
<PAGE>
(iii) third, the amount, if any, of the Total Monthly
Excess Cashflow with respect to a Mortgage Loan Group
on a Payment Date remaining after the allocations
described in clause (ii) above is the "Net Monthly
Excess Cashflow" with respect to such Mortgage Loan
Group for such Payment Date; such Net Monthly Excess
Cashflow is required to be allocated in the following
order of priority:
(A) first, such Net Monthly Excess Cashflow
shall be used to reduce to zero, through the
allocation of a Subordination Increase
Amount to the payment of the related Class A
Distribution Amount pursuant to clause (iv)
below, any Subordination Deficiency Amount
with respect to the related Mortgage Loan
Group as of such Payment Date;
(B) second, the Net Monthly Excess Cashflow
remaining after the application described in
clause (A) above shall be used to reduce to
zero, through the allocation of a
Subordination Increase Amount to the payment
of the related Class A Distribution Amount
pursuant to clause (iv) below, any
Subordination Deficiency Amounts with
respect to the other Mortgage Loan Group;
(C) third, an amount equal to the lesser of (i)
any portion of the Net Monthly Excess
Cashflow remaining after the applications
described in clauses (A) and (B) above and
(ii) the Group II Available Funds Cap
Carry-Forward Amount for such Payment Date
shall be distributed to the Owners of the
Class A-2 Certificates; and
(D) fourth, any Net Monthly Excess Cashflow
remaining after the applications described
in clauses (A), (B) and (C) above shall be
allocated to the Servicer and distributed
pursuant to clause (iv)(A)(II) to the extent
of any unreimbursed Delinquency Advances,
unreimbursed Servicing Advances and accrued
and unpaid Servicing Fees on a pro rata
basis, in each case as certified to the
Trustee by the Servicer to be owing to it as
of such Payment Date;
(iv) fourth, following the making by the Trustee of all
allocations, transfers and disbursements described
above under Section 7.3 hereof and the prior clauses
of this Section 7.5, from amounts (including any
related Insured Payment which shall be paid only to
the Owners of the Class A Certificates) then on
deposit in the Certificate Account with respect to
the related Mortgage Loan Group, the Trustee shall
distribute in the following order of priority:
(A) distribute (I) to the Certificate Insurer
the amounts described in clauses (ii)(C) and
(ii)(D) above and (II) to the Servicer the
amounts described in clause (iii)(D) above;
(B) from the amounts then on deposit in the
Certificate Account with respect to Group I,
to the Owners of the Class A-1 Certificates,
- 64 -
<PAGE>
the related Class A-1 Current Interest
thereon until the related Class A-1
Certificate Termination Date;
(C) from the amounts then on deposit in the
Certificate Account with respect to Group I,
as a distribution of principal to the Owners
of the Class A-1 Certificates, the Group I
Principal Distribution Amount until the
Class A-1 Certificate Termination Date;
(D) from the amounts then on deposit in the
Certificate Account with respect to Group
II, to the Owners of the Class A-2
Certificates, the Class A-2 Current Interest
until the Class A-2 Certificate Termination
Date; and
(E) from the amounts then on deposit in the
Certificate Account with respect to Group
II, to the Owners of the Class A-2
Certificates, the Group II Principal
Distribution Amount until the Class A-2
Certificate Termination Date.
Notwithstanding anything to the contrary herein, the amounts described in
Section 7.5(d)(iv)(B) and (D) shall be distributed prior to all other
allocations, distributions and transfers described in Section 7.3 and 7.5 hereof
(other than the amount described in Section 7.5(d)(i)).
(v) fifth, to the Oversight Agent to reimburse
the Oversight Agent for all costs and
expenses incurred in connection with
Sections 8.20(c) and 8.30(h) hereof, and to
reimburse the Trustee pursuant to Section
10.13 hereof.
(vi) sixth, following the making by the Trustee
of all allocations, transfers and
disbursements described above under Section
7.3 hereof and the prior clauses of this
Section 7.5, from amounts then on deposit in
the Certificate Account for both Mortgage
Loan Groups, the Trustee shall distribute to
the Owners of the Class R Certificates, the
Residual Net Monthly Excess Cashflow, if
any, for such Payment Date.
(e) Notwithstanding clause (d)(iv) above, the aggregate
amounts distributed on all Payment Dates to the Owners of the related Class A
Certificates on account of principal shall not exceed the Original Certificate
Principal Balance for the related Class A Certificates.
Section 7.6 Investment of Accounts.
(a) So long as no event described in Sections 8.20(a) or (b)
hereof shall have occurred and be continuing, and consistent with any
requirements of the Code, all or a portion of the Accounts held by the Trustee
(except the Certificate Account) shall be invested and reinvested by the
Trustee, for the benefit of the Owners and the Certificate Insurer, as their
interests may appear, as directed in writing by the Servicer on the Startup Day
and from time to time thereafter, in one or more Eligible Investments bearing
interest or sold at a discount. During the continuance of an event described in
Sections 8.20(a) or (b) hereof and following any removal of the Servicer, the
Certificate Insurer shall direct such investments in the Accounts (except the
Certificate Account). No investment in any Account shall mature later than the
second Business Day preceding the next Payment Date (or, if such investment is
an obligation of the Trustee or money market funds for which the Trustee or an
affiliate is the manager or the advisor, the investment shall mature no later
than such Payment Date).
(b) [Reserved].
- 65 -
<PAGE>
(c) If any amounts are needed for disbursement from any
Account held by the Trustee and sufficient uninvested funds are not available to
make such disbursement, the Trustee shall cause to be sold or otherwise
converted to cash a sufficient amount of the investments in such Account. No
investments will be liquidated prior to maturity unless the proceeds thereof are
needed for disbursement.
(d) Subject to Section 10.1 hereof, the Trustee shall not in
any way be held liable by reason of any insufficiency in any Account held by the
Trustee (except the Certificate Account) resulting from any loss on any Eligible
Investment included therein.
(e) The Trustee shall hold funds in the Accounts held by the
Trustee (except the Certificate Account) uninvested upon the occurrence of
either of the following events:
(i) the Servicer or the Certificate Insurer, as
the case may be, shall have failed to give
investment directions to the Trustee within
ten days after receipt of a written request
for such directions from the Trustee; or
(ii) the Servicer or the Certificate Insurer, as
the case may be, shall have failed to give
investment directions to the Trustee with
respect to any investment by the Trustee
that shall mature during the ten-day period
described in clause (i).
(f) For purposes of investment, the Trustee shall aggregate
all amounts on deposit in each Account (except the Certificate Account). All
income or other gain from investments in any Account (except the Certificate
Account) shall be deposited in such Account immediately on receipt, and any loss
resulting from such investments shall be charged to the Seller, and upon request
by the Trustee, the Seller shall reimburse the Trust for such losses.
(g) All income or other gain from investments in the
Certificate Account shall be deposited in the Certificate Account immediately on
receipt (subject to the right of the Trustee to withdraw such income or gain
from time to time), and any loss resulting from such investments shall be
charged to the Trustee, which shall reimburse the Trust for such losses.
(h) Each institution at which the Certificate Account is
maintained shall invest the funds therein in Eligible Investments, which shall
mature not later than the Business Day next preceding the related Payment Date
(except that if such Eligible Investment is an obligation of the institution
that maintains such account, then such Eligible Investment shall mature not
later than such Payment Date) and, in each case, shall not be sold or disposed
of prior to its maturity. All such Eligible Investments shall be made in the
name of the Trustee, for the benefit of the Owners and the Certificate Insurer.
All income and gain (net of any losses) realized from any such investment of
funds on deposit in the Certificate Account shall be for the benefit of the
Trustee as compensation. The amount of any realized losses in the Certificate
Account incurred in any such account in respect of any such investments shall
promptly be deposited by the Trustee in the Certificate Account.
(i) The Servicer shall give notice to the Trustee, the Seller,
the Oversight Agent, the Trust, each Rating Agency, and the Certificate Insurer
of any proposed change of the location of the Certificate Account not later than
30 days and not more than 45 days prior to any change thereof.
Section 7.7 Eligible Investments. The following are Eligible
Investments:
(a) Direct general obligations of the United States or the
obligations of any agency or instrumentality of the United States fully and
unconditionally guaranteed, the timely payment or the guarantee of which
constitutes a full faith and credit obligation of the United States.
- 66 -
<PAGE>
(b) Federal funds, certificates of deposit, time and demand
deposits, and bankers' acceptances (having original maturities of not more than
365 days) of any domestic bank, the short-term debt obligations of which have
been rated "A-1" or better by Standard & Poor's and "P-1" by Moody's.
(c) Investment agreements approved by the Certificate Insurer
provided:
1. The agreement is with a bank or insurance
company which has an unsecured, uninsured
and unguaranteed obligation (or
claims-paying ability) rated "Aa2" or better
by Moody's and "AA" or better by Standard &
Poor's,
2. Moneys invested thereunder may be withdrawn
without any penalty, premium or charge upon
not more than one day's notice (provided
such notice may be amended or canceled at
any time prior to the withdrawal date),
3. The agreement is not subordinated to any
other obligations of such insurance company
or bank,
4. The same guaranteed interest rate will be
paid on any future deposits made pursuant to
such agreement, and
5. The Trustee and the Certificate Insurer
receive an opinion of counsel that such
agreement is an enforceable obligation of
such insurance company or bank.
(d) Commercial paper (having original maturities of not more
than 365 days) rated "A-1" or better by Standard & Poor's and "P-1" or better by
Moody's.
(e) Investments in no load money market funds sponsored by the
Trustee or any affiliate of the Trustee or for which the Trustee or any of its
affiliates acts as an advisor, so long as such fund is rated "AAAm" or "AAAm-G"
by Standard & Poor's and "Aaa" by Moody's.
(f) Investments approved in writing by the Certificate Insurer
and acceptable to Moody's and Standard & Poor's.
provided that no instrument described above is permitted to evidence either the
right to receive (a) only interest with respect to obligations underlying such
instrument or (b) both principal and interest payments derived from obligations
underlying such instrument and the interest and principal payments with respect
to such instrument provided a yield to maturity at par greater than 120% of the
yield to maturity at par of the underlying obligations; and provided, further,
that no instrument described above may be purchased at a price greater than par.
Section 7.8 Reports by Trustee.
(a) On each Payment Date the Trustee shall make available to
each Owner, the Servicer, the Certificate Insurer, the Underwriter, the Seller,
Standard & Poor's and Moody's a report in a form to be agreed upon by the
Trustee, the Oversight Agent and the Servicer and setting forth the following
information:
(i) the amount of the distribution with respect
to the related Class of the Class A
Certificates and the Class R Certificates;
- 67 -
<PAGE>
(ii) the amount of such distributions allocable
to principal, separately identifying the
aggregate amount of any Prepayments or
Prepaid Installments of principal included
therein, and any Subordination Increase
Amounts with respect to the related Mortgage
Loan Group;
(iii) the amount of such distributions allocable
to interest;
(iv) the Certificate Principal Balance for each
Class of Class A Certificates as of such
Payment Date together with the principal
amount of such Class of Class A Certificates
(based on a Certificate in an original
principal amount of $1,000) then
outstanding, in each case after giving
effect to any payment of principal on such
Payment Date;
(v) the amount of any Insured Payment included
in the amounts distributed with respect to
the Class A Certificates on such Payment
Date;
(vi) information to the extent and in the form
furnished by the Seller pursuant to Section
6049(d)(7)(C) of the Code and the
regulations promulgated thereunder to assist
the Owners in computing their market
discount;
(vii) the total of any Substitution Amounts and
any Loan Purchase Price amounts included in
such distribution;
(viii) the amount of any Subordination Reduction
Amount with respect to each Mortgage Loan
Group;
(ix) the amounts, if any, of any Realized Losses
in each Mortgage Loan Group for the related
Remittance Period and the cumulative amount
of Realized Losses in each Mortgage Loan
Group since the Startup Day;
(x) for the related Remittance Period and
cumulatively since the Startup Day, the
number and aggregate Loan Balance of
Mortgage Loans in each Group bought back by
the Servicer or the Seller pursuant to
Sections 3.5, 3.7 and 8.10 (identified
separately for each such section);
(xi) the amount of any Group II Available Funds
Cap Carry-Forward Amount;
(xii) identify any loans purchased by the Servicer
pursuant to Section 8.10; and
(xiii) for each of the Payment Dates during and
immediately after the Funding Period, (A)
the Pre-Funded Amount previously used to
purchase Subsequent Mortgage Loans, (B) the
Pre-Funded Amount distributed as principal,
(C) the Pre-Funding Account Earnings
transferred to the Capitalized Interest
Account and (D) the amounts transferred from
the Capitalized Interest Account to the
Certificate Account, the Group I Overfunded
Interest Amount, the Group II Overfunded
Interest Amount and the amount transferred
to the Seller, if any.
- 68 -
<PAGE>
Items (i) through (iii) above shall, with respect to each Class of
Class A Certificates, be presented on the basis of a Certificate having a $1,000
denomination. In addition, by January 31 of each calendar year following any
year during which the Certificates are outstanding, the Trustee shall furnish a
report to each Owner of record requesting the same in writing at any time during
each calendar year as to the aggregate of amounts reported pursuant to (i), (ii)
and (iii) with respect to the Certificates for such calendar year.
(b) In addition, on each Payment Date the Trustee will mail to
each Owner, the Certificate Insurer, the Underwriter, the Servicer, the Seller,
Standard & Poor's and Moody's, together with the information described in
Subsection (a) preceding, the following information with respect to each
Mortgage Loan Group as of the last day of the related Remittance Period, which
is hereby required to be prepared by the Servicer and furnished to the Trustee
for such purpose on or prior to the related Remittance Date:
(i) the total number of Mortgage Loans in each
Mortgage Loan Group and the aggregate Loan
Balances thereof, together with the number,
aggregate principal balances of such
Mortgage Loans in such Mortgage Loan Group
and the percentage (based on the aggregate
Loan Balances of the Mortgage Loans in such
Mortgage Loan Group) (a) 30-59 days
Delinquent, (b) 60-89 days Delinquent and
(c) 90 or more days Delinquent;
(ii) the number and aggregate Loan Balances of
all Mortgage Loans in each Mortgage Loan
Group and percentage (based on the aggregate
Loan Balances of the Mortgage Loans in such
Mortgage Loan Group) in foreclosure
proceedings (and whether any such Mortgage
Loans are also included in any of the
statistics described in the foregoing clause
(i));
(iii) the number, aggregate Loan Balances of all
Mortgage Loans in each Mortgage Loan Group
and percentage (based on the aggregate Loan
Balances of the Mortgage Loans in such
Mortgage Loan Group) relating to Mortgagors
in bankruptcy proceedings (and whether any
such Mortgage Loans are also included in any
of the statistics described in the foregoing
clause (i));
(iv) the number, aggregate Loan Balances of all
Mortgage Loans in each Mortgage Loan Group
and percentage (based on the aggregate Loan
Balances of the Mortgage Loans in such
Mortgage Loan Group) relating to REO
Properties and Mortgage Loans in foreclosure
or bankruptcy (and whether any such Mortgage
Loans are also included in any of the
statistics described in the foregoing clause
(i));
(v) the aggregate Loan Balance of all Mortgage
Loans, in each Mortgage Loan Group after
giving effect to any payment of principal on
such Payment Date; and
(vi) the book value of any REO Property and any
Mortgage Loans in foreclosure in each
Mortgage Loan Group.
(c) The foregoing reports shall be sent to an Owner only
insofar as such Owner owns a Certificate with respect to the related Mortgage
Loan Group.
- 69 -
<PAGE>
(d) Notwithstanding the foregoing, the Seller shall file with
the Securities and Exchange Commission all reports prepared by the Trustee and
delivered to the Seller hereunder, which are required to be filed as current
reports on Form 8-K.
Section 7.9 Additional Reports by Trustee.
(a) The Trustee shall report to the Seller, the Oversight
Agent, the Servicer, Standard & Poor's, Moody's and the Certificate Insurer with
respect to the amount then held in each Account (including investment earnings
accrued or scheduled to accrue) held by the Trustee and the identity of the
investments included therein, as the Seller, the Servicer, the Oversight Agent
or the Certificate Insurer may from time to time request.
(b) Not later than 20 days after each Payment Date, the
Trustee shall forward, upon request, to the Certificate Insurer, the Seller, the
Servicer and the Oversight Agent a statement, setting forth the status of the
Certificate Account as of the close of business on the last Business Day of the
related Remittance Period showing, for the period covered by such statement, the
aggregate of deposits into and withdrawals from the Certificate Account.
ARTICLE VIII
SERVICING AND ADMINISTRATION OF MORTGAGE LOANS
Section 8.1 Servicer and Sub-Servicers.
(a) Acting directly or through one or more Sub-Servicers as
provided in Section 8.3, the Servicer, as servicer, shall service and administer
the Mortgage Loans in accordance with this Agreement and with reasonable care,
and using that degree of skill and attention that the Servicer exercises with
respect to comparable mortgage loans that it services for itself or others, and
shall have full power and authority, acting alone, 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.
(b) The duties of the Servicer shall include collecting and
posting of all payments, responding to inquiries of Mortgagors or by federal,
state or local government authorities with respect to the Mortgage Loans,
investigating delinquencies, reporting tax information to Mortgagors in
accordance with its customary practices and accounting for collections,
furnishing monthly and annual statements to the Trustee and the Oversight Agent
with respect to distributions, paying Compensating Interest and making
Delinquency Advances and Servicing Advances pursuant hereto. The Servicer shall
follow its customary standards, policies and procedures in performing its duties
as Servicer. The Servicer shall cooperate with the Trustee and the Oversight
Agent and furnish to the Trustee and the Oversight Agent with reasonable
promptness information in its possession as may be necessary or appropriate to
enable the Trustee and the Oversight Agent to perform their respective duties
hereunder. The Trustee shall furnish the Servicer with any powers of attorney
and other documents necessary or appropriate to enable the Servicer to carry out
its servicing and administrative duties hereunder.
(c) Without limiting the generality of the foregoing, the
Servicer (i) shall continue, and is hereby authorized and empowered by the
Trustee, to execute and deliver, on behalf of itself, the Owners and the Trustee
or any of them, any and all instruments of satisfaction or cancellation, or of
partial or full release or discharge and all other comparable instruments, with
respect to the Mortgage Loans and with respect to the related Properties; (ii)
may consent to any modification of the terms of any Note not expressly
prohibited hereby if the effect of any such modification (x) will not be to
affect materially and adversely the security afforded by the related Property,
the timing of receipt of any
- 70 -
<PAGE>
payments required hereby or the interests of the Certificate Insurer and (y)
will not cause the Trust (other than the Non-REMIC Accounts) to fail to qualify
as a REMIC.
(d) The parties intend that the Trust (other than the
Non-REMIC Accounts) shall constitute and that the affairs of Trust shall be
conducted so as to qualify the Trust (other than the Non-REMIC Accounts) as a
REMIC. In furtherance of such intention, the Servicer covenants and agrees that
it shall act as agent (and the Servicer is hereby appointed to act as agent) on
behalf of the Trust and that in such capacity it shall: (i) use its best efforts
to conduct the affairs of the Trust at all times that any Class of Certificates
are outstanding so as to maintain the status of the Trust (other than the
Non-REMIC Accounts) as a REMIC under the REMIC Provisions; (ii) not knowingly or
intentionally take any action or omit to take any action that would cause the
termination of the REMIC status of the Trust (other than the Non-REMIC Accounts)
or that would subject the Trust to tax and (iii) exercise reasonable care not to
allow the Trust to receive income from the performance of services or from
assets not permitted under the REMIC Provisions to be held by a REMIC.
(e) With the consent of the Certificate Insurer and the
Oversight Agent, the Servicer may, and is hereby authorized to, perform any of
its servicing responsibilities with respect to all or certain of the Mortgage
Loans through a Sub-Servicer as it may from time to time designate but no such
designation of a Sub-Servicer shall serve to release the Servicer from any of
its obligations under this Agreement. Such Sub-Servicer shall have all the
rights and powers of the Servicer with respect to such Mortgage Loans under this
Agreement.
(f) Without limiting the generality of the foregoing, but
subject to Sections 8.13 and 8.14, the Servicer in its own name or in the name
of a Sub-Servicer may be authorized and empowered pursuant to a power of
attorney executed and delivered by the Trustee to execute and deliver, on behalf
of itself, the Owners and the Trustee or any of them, (i) any and all
instruments of satisfaction or cancellation or of partial or full release or
discharge and all other comparable instruments with respect to the Mortgage
Loans and with respect to the Properties, (ii) to institute foreclosure
proceedings or obtain a deed in lieu of foreclosure so as to effect ownership of
any Property on behalf of the Trustee and (iii) to hold title to any Property
upon such foreclosure or deed in lieu of foreclosure on behalf of the Trustee;
provided, however, that Section 8.14(a) shall constitute a power of attorney
from the Trustee to the Servicer to execute an instrument of satisfaction (or
assignment of mortgage without recourse) with respect to any Mortgage Loan paid
in full (or with respect to which payment in full has been escrowed). Subject to
Sections 8.13 and 8.14, the Trustee shall execute a power of attorney to the
Servicer and any Sub-Servicer and furnish them with any other documents as the
Servicer or such Sub-Servicer shall reasonably request to enable the Servicer
and such Sub-Servicer to carry out their respective servicing and administrative
duties hereunder.
(g) The Servicer shall give prompt notice to the Trustee and
the Certificate Insurer of any action, of which the Servicer has actual
knowledge, to (i) assert a claim against the Trust or (ii) assert jurisdiction
over the Trust.
(h) Servicing Advances incurred by the Servicer or any
Sub-Servicer in connection with the servicing of the Mortgage Loans (including
any penalties in connection with the payment of any taxes and assessments or
other charges) on any Property shall be recoverable by the Servicer or such
Sub-Servicer to the extent described in Section 8.9(c) and in Section
7.5(d)(iii)(D) hereof.
Section 8.2 Collection of Certain Mortgage Loan Payments.
(a) The Servicer shall, to the extent such procedures shall be
consistent with this Agreement and the terms and provisions of any applicable
Insurance Policies follow such collection procedures as it follows from time to
time with respect to mortgage loans in its servicing portfolio that are
- 71 -
<PAGE>
comparable to the Mortgage Loans; provided that the Servicer shall always at
least follow collection procedures that are consistent with or better than
standard industry practices. Consistent with the foregoing, the Servicer may in
its discretion (i) waive any assumption fees, late payment charges, charges for
checks returned for insufficient funds, prepayment fees, if any, or other fees
which may be collected in the ordinary course of servicing the Mortgage Loans,
(ii) if a Mortgagor is in default or about to be in default because of a
Mortgagor's financial condition, arrange with the Mortgagor a schedule for the
payment of delinquent payments due on the related Mortgage Loan; provided,
however, the Servicer shall not reschedule the payment of delinquent payments
more than one time in any twelve (12) consecutive months with respect to any
Mortgagor or (iii) modify payments of monthly principal and interest on any
Mortgage Loan becoming subject to the terms of the Soldiers' and Sailors' Civil
Relief Act of 1940, as amended, in accordance with the Servicer's general
policies of the comparable mortgage loans subject to such Act.
(b) The Servicer shall hold in escrow on behalf of the related
Mortgagor all Prepaid Installments received by it, and shall apply such Prepaid
Installments as directed by such Mortgagor and as set forth in the related Note.
Section 8.3 Sub-Servicing Agreements Between Servicer and
Sub-Servicers. The Servicer may enter into Sub-Servicing Agreements for any
servicing and administration of Mortgage Loans with any institution which is
acceptable to the Certificate Insurer and the Oversight Agent and which is in
compliance with the laws of each state necessary to enable it to perform its
obligations under such Sub-Servicing Agreement and (x) has (i) been designated
an approved seller-servicer by Freddie Mac or Fannie Mae for Mortgage Loans and
(ii) has equity of at least $5,000,000, as determined in accordance with
generally accepted accounting principles or (y) is a Servicer Affiliate. The
Servicer shall give notice to the Certificate Insurer, the Rating Agencies, the
Oversight Agent and the Trustee of the appointment of any Sub-Servicer and shall
furnish to the Certificate Insurer, the Oversight Agent and the Trustee a copy
of such Sub-Servicing Agreement. For purposes of this Agreement, the Servicer
shall be deemed to have received payments on Mortgage Loans when any
Sub-Servicer has received such payments. Any such Sub-Servicing Agreement shall
be consistent with and not violate the provisions of this Agreement.
Section 8.4 Successor Sub-Servicers. With the consent of the
Certificate Insurer, the Servicer may terminate any Sub-Servicing Agreement in
accordance with the terms and conditions of such Sub-Servicing Agreement and
either itself directly service the related Mortgage Loans or enter into a
Sub-Servicing Agreement with a successor Sub-Servicer that qualifies under
Section 8.3.
Section 8.5 Liability of Servicer. The Servicer shall not be relieved
of its obligations under this Agreement notwithstanding any Sub-Servicing
Agreement or any of the provisions of this Agreement relating to agreements or
arrangements between the Servicer and a Sub-Servicer or otherwise, and the
Servicer shall be obligated to the same extent and under the same terms and
conditions as if it alone were servicing and administering the Mortgage Loans.
The Servicer shall be entitled to enter into any agreement with a Sub-Servicer
for indemnification of the Servicer by such Sub-Servicer and nothing contained
in such Sub-Servicing Agreement shall be deemed to limit or modify this
Agreement. The Trust shall not indemnify the Servicer for any losses due to the
Servicer's or any Sub-Servicer's negligence.
Section 8.6 No Contractual Relationship Between Sub-Servicer and
Trustee, Oversight Agent or the Owners. Any Sub-Servicing Agreement and any
other transactions or services relating to the Mortgage Loans involving a
Sub-Servicer shall be deemed to be between the Sub-Servicer and the Servicer
alone and the Certificate Insurer, the Oversight Agent, the Trustee and the
Owners shall not be deemed parties thereto and shall have no claims, rights,
obligations, duties or liabilities with respect to any Sub-Servicer except as
set forth in Section 8.7.
Section 8.7 Assumption or Termination of Sub-Servicing Agreement by
Oversight Agent. In connection with the assumption, if applicable, of the
responsibilities, duties and liabilities and of the
- 72 -
<PAGE>
authority, power and rights of the Servicer hereunder by the Oversight Agent
pursuant to Section 8.21, it is understood and agreed that the Servicer's rights
and obligations under any Sub-Servicing Agreement then in force between the
Servicer and a Sub-Servicer may be assumed or terminated by the Oversight Agent
at the Certificate Insurer's option without the payment of a fee notwithstanding
any contrary provision in any Sub-Servicing Agreement.
The Servicer shall, upon reasonable request of the Trustee or the
Oversight Agent, but at the expense of the Servicer, deliver to the assuming
party documents and records relating to each Sub-Servicing Agreement and an
accounting of amounts collected and held by it and otherwise use its best
reasonable efforts to effect the orderly and efficient transfer of the
Sub-Servicing Agreements to the assuming party.
Section 8.8 Principal and Interest Account.
(a) The Servicer shall establish in the name of the Trust for
the benefit of the Owners of the Certificates and the Certificate Insurer and
maintain at one or more Designated Depository Institutions the Principal and
Interest Account. The funds held in the Principal and Interest Account shall not
be commingled with any other funds.
Subject to Subsection (c) below, the Servicer shall deposit all
receipts related to the Mortgage Loans into the Principal and Interest Account
on a daily basis (but no later than the first Business Day after receipt).
Subject to Subsection (c) below, on the Startup Day, the Seller and/or
the Servicer shall deposit into the Principal and Interest Account all receipts
related to the related Mortgage Loans received after the Cut-Off Date.
(b) Any investment of funds in the Principal and Interest
Account shall mature or be withdrawable at par on or prior to the immediately
succeeding Remittance Date. All funds in the Principal and Interest Account may
only be held (i) uninvested, up to the limits insured by the FDIC or (ii)
invested in Eligible Investments. The Principal and Interest Account shall be
held in trust in the name of the Trust and for the benefit of the Owners of the
Certificates. Any investment earnings on funds held in the Principal and
Interest Account shall be for the account of the Servicer and may only be
withdrawn from the Principal and Interest Account by the Servicer on the second
Business Day of the month for the investment earnings for the previous calendar
month. The Servicer shall withdraw from the Principal and Interest Account, on
the second Business Day of the month, investment earnings for the previous
calendar month. The Servicer shall deposit into the Principal and Interest
Account the amount of all losses on investment of funds in the Principal and
Interest Account upon request from the Trustee. Any references herein to amounts
on deposit in the Principal and Interest Account shall refer to amounts net of
investment earnings.
(c) The Servicer shall deposit to the Principal and Interest
Account all principal and interest collections on the Mortgage Loans received
after the Cut-Off Date, including any Prepayments and Net Liquidation Proceeds,
all Loan Purchase Prices and Substitution Amounts received or paid by the
Servicer with respect to the Mortgage Loans, other recoveries or amounts related
to the Mortgage Loans received by the Servicer, Compensating Interest and
Delinquency Advances together with any amounts which are reimbursable from the
Principal and Interest Account but net of (i) the Servicing Fee with respect to
each Mortgage Loan and other servicing compensation to the Servicer as permitted
by Section 8.15 hereof, (ii) principal (including Prepayments) due on the
related Mortgage Loans on or prior to the Cut-Off Date, (iii) interest due on
the related Mortgage Loans on or prior to the Cut-Off Date and (iv) Net
Liquidation Proceeds to the extent such Net Liquidation Proceeds exceed the Loan
Balance of the related Mortgage Loan plus any accrued and unpaid interest
thereon through the Remittance Period in which the liquidation occurred.
- 73 -
<PAGE>
(d) (i) The Servicer may make withdrawals from the Principal
and Interest Account only for the following purposes:
(A) to effect the timely remittance to the
Trustee of the Group I Monthly Remittance
Amount and the Group II Monthly Remittance
Amount due on the Remittance Date;
(B) to reimburse itself pursuant to Section
8.9(a) hereof for unrecovered Delinquency
Advances and Servicing Advances;
(C) to withdraw investment earnings on amounts
on deposit in the Principal and Interest
Account;
(D) to withdraw amounts that have been deposited
to the Principal and Interest Account in
error; and
(E) to clear and terminate the Principal and
Interest Account following the termination
of the Trust Estate pursuant to Article IX
hereof.
(ii) On the Determination Date of each month, the Servicer
shall send to the Trustee and the Oversight Agent the
Monthly Exception Report detailing the payments on
the Mortgage Loans during the prior Remittance Period
(or, as necessary, the related Due Period) and
certifying the amounts and purpose of withdrawals
permitted pursuant to (d)(i) above from the Principal
and Interest Account. Such report shall contain the
specified data, as described in Section 8.26 hereof,
and shall be in the form and have the specifications
as may be agreed to between the Servicer, the
Certificate Insurer and the Trustee from time to
time.
(iii) On each Remittance Date, the Servicer shall remit to
the Trustee by wire transfer, or otherwise make funds
available in immediately available funds for deposit
to the Certificate Account, the Group I Interest
Remittance Amount and the Group I Principal
Remittance Amount for such Remittance Date.
(iv) On each Remittance Date, the Servicer shall remit to
the Trustee by wire transfer or otherwise make funds
available in immediately available funds for deposit
to the Certificate Account, the Group II Interest
Remittance Amount and the Group II Principal
Remittance Amount for such Remittance Date, and, if
the Trustee and the Oversight Agent are not the same
Person, shall provide the Oversight Agent with
written notice (by facsimile or electronic mail) of
the amount of such deposit.
- 74 -
<PAGE>
Section 8.9 Delinquency Advances, Compensating Interest and Servicing
Advances.
(a) The Servicer is required, not later than each Remittance
Date, to deposit into the Principal and Interest Account (except that if the
Trustee is also acting as Servicer hereunder, Delinquency Advances shall be
deposited into the Certificate Account on each Payment Date) an amount equal to
the sum of (i) the interest due (net of the Servicing Fees due) but not
collected as of the last day of the related Due Period and, (ii) scheduled
principal due but not collected as of the last day of the related Due Period,
with respect to Delinquent Mortgage Loans during the related Due Period but only
if, in its good faith business judgment, the Servicer reasonably believes that
such amount will ultimately be recovered from the related Mortgage Loan. Such
amounts are "Delinquency Advances".
The Servicer shall be permitted to fund its payment of Delinquency
Advances on any Remittance Date and to reimburse itself for any Delinquency
Advances paid from the Servicer's own funds, from collections on any Mortgage
Loan in the same Mortgage Loan Group deposited to the Principal and Interest
Account subsequent to the related Due Period and shall deposit into the
Principal and Interest Account with respect thereto (i) collections from the
Mortgagor whose Delinquency gave rise to the shortfall which resulted in such
Delinquency Advance, and (ii) Net Liquidation Proceeds recovered on account of
the related Mortgage Loan to the extent of the amount of aggregate Delinquency
Advances related thereto. If not thereto recovered from the related Mortgagor or
the related Net Liquidation Proceeds, Delinquency Advances shall be recoverable
pursuant to Section 7.5(d)(iii)(D).
(b) On or prior to each Remittance Date (except that if the
Trustee is also acting as Servicer hereunder, Compensating Interest shall be
deposited into the Certificate Account on each Payment Date), the Servicer shall
deposit in the Principal and Interest Account with respect to any Paid-in-Full
Mortgage Loan during the related Remittance Period out of its own funds without
any right of reimbursement therefor an amount equal to the difference between
(x) 30 days' interest at such Mortgage Loan's Coupon Rate (less the Servicing
Fee Rate) on the Loan Balance of such Mortgage Loan as of the first day of the
related Remittance Period and (y) to the extent not previously advanced, the
interest (less the Servicing Fee) paid by the Mortgagor with respect to the
Mortgage Loan during such Remittance Period (any such amount paid by the
Servicer, "Compensating Interest"). The Servicer shall in no event be required
to pay Compensating Interest with respect to any Remittance Period in an amount
in excess of the aggregate Servicing Fee received by the Servicer with respect
to all Mortgage Loans for such Remittance Period. Further, the Servicer is not
obligated to cover shortfalls in collections in interest due to Curtailments.
(c) The Servicer will pay all "out-of-pocket" costs and
expenses incurred in the performance of its servicing obligations, including,
but not limited to, the cost of (i) Preservation Expenses, (ii) any enforcement
or judicial proceedings, including foreclosures, and (iii) the management and
liquidation of REO Property, but is only required to pay such costs and expenses
to the extent the Servicer reasonably believes such costs and expenses will
increase Net Liquidation Proceeds on the related Mortgage Loan. Each such amount
so paid will constitute a "Servicing Advance". The Servicer may recover
Servicing Advances (x) from the Mortgagors to the extent permitted by the
Mortgage Loans, (y) from Liquidation Proceeds realized upon the liquidation of
the related Mortgage Loan, and (z) as provided in Section 7.5(d)(iii)(D) hereof.
In no case may the Servicer recover Servicing Advances from principal and
interest payments on any Mortgage Loan or from any amounts relating to any other
Mortgage Loan except as provided pursuant to Section 7.5(d)(iii)(D) hereof.
Section 8.10 Purchase of Delinquent Mortgage Loans. The Servicer may,
but is not obligated to, purchase for its own account any Mortgage Loan which
becomes Delinquent, in whole or in part, as to three consecutive monthly
installments or any Mortgage Loan as to which enforcement proceedings have been
brought by the Servicer or by any Sub-Servicer pursuant to Section 8.13. Any
such Mortgage Loan so purchased shall be purchased by the Servicer not later
than the related Remittance Date at a purchase
- 75 -
<PAGE>
price equal to the Loan Purchase Price thereof, which purchase price shall be
deposited in the Principal and Interest Account.
Section 8.11 Maintenance of Insurance.
(a) The Servicer shall cause to be maintained with respect to
each Mortgage Loan a hazard insurance policy with a generally acceptable carrier
that provides for fire and extended coverage, and which provides for a recovery
by the Servicer on behalf of the Trust of insurance proceeds relating to such
Mortgage Loan in an amount not less than the least of (i) the outstanding
principal balance of the Mortgage Loan, (ii) the minimum amount required to
compensate for damage or loss on a replacement cost basis or (iii) the full
insurable value of the premises.
(b) If the Mortgage Loan at the time of origination relates to
a Property in an area identified in the Federal Register by the Federal
Emergency Management Agency as having special flood hazards, the Servicer will
cause to be maintained with respect thereto a flood insurance policy in a form
meeting the requirements of the current guidelines of the Federal Insurance
Administration with a generally acceptable carrier in an amount representing
coverage, and which provides for a recovery by the Servicer on behalf of the
Trust of insurance proceeds relating to such Mortgage Loan of not less than the
least of (i) the outstanding principal balance of the Mortgage Loan, (ii) the
minimum amount required to compensate for damage or loss on a replacement cost
basis or (iii) the maximum amount of insurance that is available under the Flood
Disaster Protection Act of 1973. The Servicer shall indemnify the Trust and the
Certificate Insurer out of the Servicer's own funds for any loss to the Trust
and the Certificate Insurer resulting from the Servicer's failure to maintain
the insurance required by this Section.
(c) In the event that the Servicer shall obtain and maintain a
blanket policy insuring against fire, flood and hazards of extended coverage on
all of the Mortgage Loans, then, to the extent such policy names the Servicer as
loss payee and provides coverage in an amount equal to the aggregate unpaid
principal balance on the Mortgage Loans without co-insurance and otherwise
complies with the requirements of this Section 8.11, the Servicer shall be
deemed conclusively to have satisfied its obligations with respect to fire and
hazard insurance coverage under this Section 8.11, it being understood and
agreed that such blanket policy may contain a deductible clause, in which case
the Servicer shall, in the event that there shall not have been maintained on
the related Property a policy complying with the preceding paragraphs of this
Section 8.11, and there shall have been a loss which would have been covered by
such policy, deposit in the Principal and Interest Account from the Servicer's
own funds the difference, if any, between the amount that would have been
payable under a policy complying with the preceding paragraphs of this Section
8.11 and the amount paid under such blanket policy. Upon the request of the
Trustee or the Certificate Insurer, the Servicer shall cause to be delivered to
the Trustee or the Certificate Insurer a certified true copy of such policy.
Section 8.12 Due-on-Sale Clauses; Assumption and Substitution
Agreements. When a Property has been or is about to be conveyed by the
Mortgagor, the Servicer shall, to the extent it has knowledge of such conveyance
or prospective conveyance, exercise its rights to accelerate the maturity of the
related Mortgage Loan under any "due-on-sale" clause contained in the related
Mortgage or Note; provided, however, that the Servicer shall not exercise any
such right if (i) the "due-on-sale" clause, in the reasonable belief of the
Servicer, is not enforceable under applicable law or (ii) the Servicer
reasonably believes that to permit an assumption of the Mortgage Loan would not
materially and adversely affect the interest of the Owners or of the Certificate
Insurer. In such event, the Servicer shall enter into an assumption and
modification agreement with the person to whom such property has been or is
about to be conveyed, pursuant to which such Person becomes liable under the
Note and, unless prohibited by applicable law or the related Mortgage Loan
documents, the Mortgagor remains liable thereon. If the foregoing is not
permitted under applicable law, the Servicer is authorized to enter into a
substitution of liability agreement with such person, pursuant to which the
original Mortgagor is released from liability
- 76 -
<PAGE>
and such person is substituted as Mortgagor and becomes liable under the Note;
provided, however, that to the extent any such substitution of liability
agreement would be delivered by the Servicer outside of its usual procedures for
mortgage loans held in its own portfolio the Servicer shall, prior to executing
and delivering such agreement, obtain the prior written consent of the
Certificate Insurer. The Mortgage Loan, as assumed, shall conform in all
respects to the requirements, representations and warranties of this Agreement.
The Servicer shall notify the Trustee that any such assumption or substitution
agreement has been completed by forwarding to the Trustee the original copy of
such assumption or substitution agreement, which copy shall be added by the
Trustee to the related File and which shall, for all purposes, be considered a
part of such File to the same extent as all other documents and instruments
constituting a part thereof. The Servicer shall be responsible for recording any
such assumption or substitution agreements. In connection with any such
assumption or substitution agreement, the required monthly payment on the
related Mortgage Loan shall not be changed but shall remain as in effect
immediately prior to the assumption or substitution, the stated maturity or
outstanding principal amount of such Mortgage Loan shall not be changed nor
shall any required monthly payments of principal or interest be deferred or
forgiven. Any fee collected by the Servicer or the Sub-Servicer for consenting
to any such conveyance or entering into an assumption or substitution agreement
shall be retained by or paid to the Servicer as additional servicing
compensation.
Notwithstanding the foregoing paragraph or any other provision of this
Agreement, the Servicer shall not be deemed to be in default, breach or any
other violation of its obligations hereunder by reason of any assumption of a
Mortgage Loan by operation of law or any assumption which the Servicer may be
restricted by law from preventing, for any reason whatsoever.
Section 8.13 Realization Upon Defaulted Mortgage Loans.
(a) The Servicer shall foreclose upon or otherwise comparably
effect the ownership on behalf of the Trust of Properties relating to defaulted
Mortgage Loans as to which no satisfactory arrangements can be made for
collection of Delinquent payments and which the Servicer has not purchased
pursuant to Section 8.10. In connection with such foreclosure or other
conversion, the Servicer shall exercise such of the rights and powers vested in
it hereunder, and use the same degree of care and skill in its exercise or use
as prudent mortgage lenders would exercise or use under the circumstances in the
conduct of their own affairs, including, but not limited to, advancing funds for
the payment of taxes, amounts due with respect to Senior Liens and insurance
premiums. Any amounts so advanced shall constitute "Servicing Advances" within
the meaning of Section 8.9(c) hereof. The Servicer shall sell any REO Property
within 35 months of its acquisition by the Trust, unless the Servicer obtains
for the Trustee, the Oversight Agent and the Certificate Insurer an opinion of
counsel experienced in federal income tax matters and reasonably acceptable to
the Certificate Insurer, addressed to the Trustee, the Oversight Agent, the
Certificate Insurer and the Servicer, to the effect that the holding by the
Trust of such REO Property for any greater period will not result in the
imposition of taxes on "Prohibited Transactions" of the Trust as defined in
Section 860F of the Code or cause the Trust (other than the Non-REMIC Accounts)
to fail to qualify as a REMIC under the REMIC Provisions at any time that any
Certificates are outstanding, in which case the Servicer shall sell any REO
Property by the end of any extended period specified in any such opinion.
Notwithstanding the generality of the foregoing provisions, the
Servicer shall manage, conserve, protect and operate each REO Property for the
Owners solely for the purpose of its prompt disposition and sale in a manner
which does not cause such REO Property to fail to qualify as "foreclosure
property" within the meaning of Section 860G(a)(8) of the Code or result in the
receipt by the Trust 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 REO Property, the Servicer shall either itself or
through an agent selected by the Servicer protect and conserve such REO Property
in the same manner and to such extent as is customary
- 77 -
<PAGE>
in the locality where such REO Property is located and may, incident to its
conservation and protection of the interests of the Owners, rent the same, or
any part thereof, as the Servicer deems to be in the best interest of the Owners
for the period prior to the sale of such REO Property. The Servicer shall take
into account the existence of any hazardous substances, hazardous wastes or
solid wastes, as such terms are defined in the Comprehensive Environmental
Response Compensation and Liability Act, the Resource Conservation and Recovery
Act of 1976, or other federal, state or local environmental legislation, on a
Property in determining whether to foreclose upon or otherwise comparably
convert the ownership of such Property.
(b) The Servicer shall determine, with respect to each
defaulted Mortgage Loan, when it has recovered, whether through trustee's sale,
foreclosure sale or otherwise, all amounts it expects to recover from or on
account of such defaulted Mortgage Loan, whereupon such Mortgage Loan shall
become a "Liquidated Loan".
Section 8.14 Trustee to Cooperate; Release of Files.
(a) Upon the payment in full of any Mortgage Loan (including
the repurchase of any Mortgage Loan or any liquidation of such Mortgage Loan
through foreclosure or otherwise) or the receipt by the Servicer of a
notification that payment in full will be escrowed in a manner customary for
such purposes, the Servicer shall deliver to the Trustee and the Custodian, on
behalf of the Trustee, two copies of a Request for Release. Upon receipt of the
two copies of the Request for Release (acknowledged by the Trustee), or in a
mutually agreeable electronic format which will, in lieu of a signature on its
face, originate from a servicing officer, the Trustee shall cause the Custodian
to promptly release the related File, in trust to (i) the Servicer, (ii) an
escrow agent or (iii) any employee, agent or attorney of the Trustee, in each
case pending its release by the Servicer, such escrow agent or such employee,
agent or attorney of the Trustee, as the case may be. Upon any such payment in
full or the receipt of such notification that such funds have been placed in
escrow, the Servicer is authorized to give, as attorney-in-fact for the Trustee
and the mortgagee under the Mortgage which secured the Note, an instrument of
satisfaction (or assignment of Mortgage without recourse) regarding the Property
relating to such Mortgage, which instrument of satisfaction or assignment, as
the case may be, shall be delivered to the Person or Persons entitled thereto
against receipt therefor of payment in full, it being understood and agreed that
no expense incurred in connection with such instrument of satisfaction or
assignment, as the case may be, shall be chargeable to the Principal and
Interest Account. In lieu of executing any such satisfaction or assignment, as
the case may be, the Servicer may prepare and submit to the Trustee a
satisfaction (or assignment without recourse, if requested by the Person or
Persons entitled thereto) in form for execution by the Trustee with all
requisite information completed by the Servicer; in such event, the Trustee
shall execute and acknowledge such satisfaction or assignment, as the case may
be, and deliver or cause to be delivered the same with the related File, as
aforesaid.
(b) From time to time and as appropriate in the servicing of
any Mortgage Loan, including, without limitation, foreclosure or other
comparable conversion of a Mortgage Loan or collection under any applicable
Insurance Policy (except in the case of the payment or liquidation pursuant to
which the related File is released to an escrow agent or an employee, agent or
attorney of the Trustee), upon request of the Servicer and delivery to the
Trustee and the Custodian of two copies of the Request for Release (acknowledged
by the Trustee), or in a mutually agreeable electronic format which will, in
lieu of a signature on its face, originate from a servicing officer, the Trustee
shall cause the Custodian to release the related File to the Servicer and shall
execute such documents as shall be necessary to the prosecution of any such
proceedings, including, without limitation, an assignment without recourse of
the related Mortgage to the Servicer; provided that there shall not be released
and unreturned at any one time more than 10% of the entire number of Files, in
which case the Trustee shall reject the Request for Release. The Trustee shall
complete in the name of the Trustee any endorsement in blank on any Note prior
to the release of such Note to the Servicer. Such receipt shall obligate the
- 78 -
<PAGE>
Servicer to return the File to the Custodian on behalf of the Trustee, when the
need therefor by the Servicer no longer exists.
(c) The Servicer shall have the right to approve applications
of Mortgagors for consent to (i) partial releases of Mortgages, (ii) alterations
and (iii) removal, demolition or division of properties subject to Mortgages. No
application for approval shall be considered by the Servicer unless: (x) the
provisions of the related Note and Mortgage have been complied with; (y) the
Loan-to-Value Ratio or Combined Loan-to-Value Ratio (which may, for this
purpose, be determined at the time of any such action in a manner reasonably
acceptable to the Certificate Insurer) after any release does not exceed the
Loan-to-Value Ratio or the Combined Loan-to-Value Ratio as of the Cut-Off Date
or Subsequent Cut-Off Date, as applicable, and the Mortgagor's debt-to-income
ratio after any release does not exceed the debt-to-income ratio as of the
Cut-Off Date or Subsequent Cut-Off Date, as the case may be, and in no event
exceeds the maximum debt-to-income levels under the related Originator's
underwriting guidelines for a similar credit grade borrower and (z) the lien
priority of the related Mortgage is not adversely affected. Upon receipt by the
Trustee of an Officer's Certificate executed on behalf of the Servicer setting
forth the action proposed to be taken in respect of a particular Mortgage Loan
and certifying that the criteria set forth in the immediately preceding sentence
have been satisfied, the Trustee shall execute and deliver to the Servicer the
consent or partial release so requested by the Servicer. A proposed form of
consent or partial release, as the case may be, shall accompany any Officer's
Certificate delivered by the Servicer pursuant to this paragraph.
(d) No costs associated with the procedures described in this
Section 8.14 shall be an expense of the Trust or the Custodian.
Section 8.15 Servicing Compensation. As compensation for its activities
hereunder, the Servicer shall be entitled to retain the amount of the Servicing
Fee with respect to each Mortgage Loan. Additional servicing compensation in the
form of prepayment charges, release fees, bad check charges, assumption fees,
late payment charges, prepayment penalties, any other servicing-related fees,
Net Liquidation Proceeds not required to be deposited in the Principal and
Interest Account pursuant to Section 8.8(c)(iv) and similar items shall, to the
extent collected from Mortgagors, be retained by the Servicer.
Section 8.16 Annual Statement as to Compliance.
(a) The Servicer, at its own expense, will deliver to the
Oversight Agent, the Trustee, the Certificate Insurer, Standard & Poor's and
Moody's, on or before the last day of March of each year, commencing in 2001, an
Officer's Certificate stating, as to each signer thereof, that (i) a review of
the activities of the Servicer during such preceding calendar year and of
performance under this Agreement has been made under such officers' supervision
and (ii) to the best of such officers' knowledge, based on such review, the
Servicer has fulfilled all its obligations under this Agreement for such year,
or, if there has been a default in the fulfillment of all such obligations,
specifying each such default known to such officers and the nature and status
thereof including the steps being taken by the Servicer to remedy such defaults.
(b) The Servicer shall deliver to the Trustee, the Oversight
Agent, the Certificate Insurer, the Owners and the Rating Agencies, promptly
after having obtained knowledge thereof but in no event later than five Business
Days thereafter, written notice by means of an Officer's Certificate of any
event which with the giving of notice or lapse of time, or both, would become an
Event of Servicing Termination.
Section 8.17 Annual Independent Certified Public Accountants' Reports.
On or before the last day of March of each year, commencing in 2001, the
Servicer, at its own expense, shall cause to be
- 79 -
<PAGE>
delivered to the Trustee, the Oversight Agent, the Certificate Insurer, Standard
& Poor's and Moody's a letter or letters of a firm of independent, nationally-
recognized certified public accountants reasonably acceptable to the Certificate
Insurer stating that such firm has, with respect to the Servicer's overall
servicing operations during the preceding calendar year, examined such
operations in accordance with the requirements of the Uniform Single Audit
Program for Mortgage Bankers, and in either case stating such firm's conclusions
relating thereto.
Section 8.18 Access to Certain Documentation and Information Regarding
the Mortgage Loans. The Servicer shall provide to the Trustee, the Oversight
Agent, the Certificate Insurer, the FDIC and the supervisory agents and
examiners of each of the foregoing access to the documentation in its possession
regarding the Mortgage Loans required by applicable state and federal
regulations, such access being afforded without charge but only upon reasonable
request and during normal business hours at the offices of the Servicer
designated by it. In the event that any such documents are not in the possession
of the Servicer, the Trustee shall use reasonable commercial means to obtain
such documents from the Custodian.
Upon any change in the format of the computer tape maintained by the
Servicer in respect of the Mortgage Loans, the Servicer shall deliver a copy of
such computer tape to the Trustee, the Oversight Agent, and in addition shall
provide a copy of such computer tape to the Trustee, the Oversight Agent and the
Certificate Insurer at such other times as the Trustee, the Oversight Agent or
the Certificate Insurer may reasonably request.
Section 8.19 Assignment of Agreement. The Servicer may not assign its
obligations under this Agreement, in whole or in part, unless it shall have
first obtained the written consent of the Trustee, the Oversight Agent and the
Certificate Insurer, which such consent shall not be unreasonably withheld;
provided, however, that any assignee must meet the eligibility requirements set
forth in Section 8.21(f) hereof for a successor servicer. Notice of any such
assignment shall be given by the Servicer to the Trustee, the Oversight Agent,
the Certificate Insurer and the Rating Agencies.
Section 8.20 Events of Servicing Termination.
(a) The Trustee or the Oversight Agent (each with the consent
of the Certificate Insurer) or the Certificate Insurer (or the Owners pursuant
to Section 6.11 hereof) may remove the Servicer (including any successor entity
serving as the Servicer) upon the occurrence of any of the following events:
(i) The Servicer shall fail to deliver to the Trustee any
proceeds or required payment, which failure continues
unremedied for five Business Days following written
notice to an Authorized Officer of the Servicer from
the Trustee, the Oversight Agent or from any Owner;
(ii) The Servicer shall (I) apply for or consent to the
appointment of a receiver, trustee, liquidator or
custodian or similar entity with respect to itself or
its property, (II) admit in writing its inability to
pay its debts generally as they become due, (III)
make a general assignment for the benefit of
creditors, (IV) be adjudicated a bankrupt or
insolvent, (V) commence a voluntary case under the
federal bankruptcy laws of the United States of
America or file a voluntary petition or answer
seeking reorganization, an arrangement with creditors
or an order for relief or seeking to take advantage
of any insolvency law or file an answer admitting the
material allegations of a petition filed against it
in any bankruptcy, reorganization or insolvency
- 80 -
<PAGE>
proceeding or (VI) take corporate action for the
purpose of effecting any of the foregoing;
(iii) If without the application, approval or consent of
the Servicer, a proceeding shall be instituted in any
court of competent jurisdiction, under any law
relating to bankruptcy, insolvency, reorganization or
relief of debtors, seeking in respect of the Servicer
an order for relief or an adjudication in bankruptcy,
reorganization, dissolution, winding up, liquidation,
a composition or arrangement with creditors, a
readjustment of debts, the appointment of a trustee,
receiver, liquidator, custodian or similar entity
with respect to the Servicer or of all or any
substantial part of its assets, or other like relief
in respect thereof under any bankruptcy or insolvency
law, and, if such proceeding is being contested by
the Servicer in good faith, the same shall (A) result
in the entry of an order for relief or any such
adjudication or appointment or (B) continue
undismissed or pending and unstayed for any period of
seventy-five (75) consecutive days;
(iv) The Servicer shall fail to perform any one or more of
its obligations hereunder (other than the obligations
set out in (i) above) and shall continue in default
thereof for a period of sixty (60) days after the
earlier of (x) notice by the Trustee, the Oversight
Agent or the Certificate Insurer of said failure or
(y) actual knowledge of an officer of the Servicer;
provided, however, that if the Servicer can
demonstrate to the reasonable satisfaction of the
Certificate Insurer that it is diligently pursuing
remedial action, then the cure period may be extended
with the written approval of the Certificate Insurer;
or
(v) The Servicer shall fail to cure any breach of any of
its representations and warranties set forth in
Section 3.2 which materially and adversely affects
the interests of the Owners or Certificate Insurer
for a period of sixty (60) days after the Servicer's
discovery or receipt of notice thereof; provided,
however, that if the Servicer can demonstrate to the
reasonable satisfaction of the Certificate Insurer
that it is diligently pursuing remedial action, then
the cure period may be extended with the written
approval of the Certificate Insurer.
(b) The Certificate Insurer may remove the Servicer (including
any successor entity serving as the Servicer) upon the occurrence of any of the
following events:
(i) a Group I Total Available Funds Shortfall or a Group
II Total Available Funds Shortfall;
(ii) the failure by the Servicer to make any required
Servicing Advance;
(iii) the failure by the Servicer to perform any one or
more of its obligations hereunder, which failure
materially and adversely affects the interests of the
Certificate Insurer, and the continuance of such
failure for a period of 30 days or such longer period
as agreed to in writing by the Certificate Insurer;
- 81 -
<PAGE>
(iv) the failure by the Servicer to make any required
Delinquency Advance or to pay any Compensating
Interest;
(v) if on any Payment Date the Pool Rolling Three Month
Delinquency Rate exceeds 7.0% for either Mortgage
Loan Group, except that following a transition to a
successor servicer, this Section 8.20(b)(v) shall not
apply to such successor servicer for a period of 90
days after the appointment of such successor servicer
as Servicer hereunder;
(vi) if on any Payment Date occurring in June of any year,
commencing in June 2000, the aggregate Pool
Cumulative Realized Losses for a Mortgage Loan Group
over the prior twelve month period exceed 2.0% of the
average Pool Principal Balance of such Mortgage Loan
Group as of the close of business on the last day of
each of the twelve preceding Remittance Periods;
(vii) (a) if on any of the first 60 Payment Dates from the
Startup Day the aggregate Pool Cumulative Expected
Losses for a Mortgage Loan Group for all prior
Remittance Periods since the Startup Day exceed 5.0%
of the Pool Principal Balance of such Mortgage Loan
Group as of the Cut-Off Date and (b) if on any
Payment Date thereafter the aggregate Pool Cumulative
Expected Losses for a Mortgage Loan Group for all
prior Remittance Periods from the Startup Day exceed
6.5% of the Pool Principal Balance of such Mortgage
Loan Group as of the Cut-Off Date,
provided, however, with respect to clauses (v), (vi) and
(vii), if the Servicer can demonstrate to the reasonable
satisfaction of the Certificate Insurer that any such event
was due to circumstances beyond the control of the Servicer,
such event shall not be considered an event of termination of
the Servicer.
Notwithstanding the foregoing, the events of servicing termination set
forth in clauses (viii) - (xii) below shall apply only to First Alliance
Mortgage Company (and any affiliate thereof), during its term as Servicer, and
shall not apply to any successor servicer.
(viii) there shall be a change in control of the Servicer
which results in Brian Chisick no longer being the
majority owner;
(ix) the Servicer shall fail to maintain committed
"warehouse facility" line(s) of credit or loan
agreements entitling the Servicer to borrow at least
$100 million against its mortgage loan inventory;
(x) a default shall have occurred or been declared under
any short-term or long-term indebtedness of the
Servicer;
(xi) the Servicer shall fail to maintain at least the
following financial requirements, based upon its most
recent financial statements:
a) shareholders' equity of at least $70 million
plus 50% of the Servicer's net income since
December 1, 1998; and
b) a ratio of total liabilities to
shareholders' equity of no greater than 3:1;
- 82 -
<PAGE>
(xii) a state or federal court shall enter a substantial
and material judgment (a judgment in an amount which
if it were subtracted from the existing shareholder's
equity as set forth in the Servicer's most recent
financial statements would be an event described in
clause (xi) above against the Servicer, in any action
in which the Servicer, acting in any capacity, is a
party defendant, ruling that the Servicer violated
any consumer protection act or deceptive trade
practices act of any state in the origination or
collection of consumer loans, including mortgage
loans. In such event, the Servicer shall immediately
notify in writing the Trustee and the Certificate
Insurer of the entry of any such judgment and shall
provide the calculation; or
(xiii) The Servicer shall not at all times have in place,
for a stated term extending at least thirty (30) days
into the future, a committed warehouse financing
facility in at least the same amount and for
substantially identical terms as the current $150
million facility under the Master Repurchase
Agreement with Lehman Commercial Paper, Inc.
Upon the Oversight Agent or the Trustee's determination that a required
Delinquency Advance or payment of Compensating Interest has not been made by the
Servicer, the Oversight Agent or the Trustee shall so notify in writing an
Authorized Officer of the Servicer and the Certificate Insurer as soon as is
reasonably practical.
(c) In the case of clauses (i), (ii), (iii), (iv) or (v) of
Subsection (b) the Owners of Certificates evidencing not less than 33 1/3% of
the aggregate Class A Certificate Principal Balance (with the consent of the
Certificate Insurer) by notice then given in writing to the Servicer (and a copy
to the Trustee and the Oversight Agent) may terminate all of the rights and
obligations of the Servicer under this Agreement; provided, however, that the
responsibilities and duties of the initial Servicer with respect to the
repurchase of Mortgage Loans pursuant to Section 3.5 shall not terminate. The
Trustee shall mail a copy of any notice given by it hereunder to the Rating
Agencies. On or after the receipt by the Servicer of such written notice, all
authority and power of the Servicer under this Agreement, whether with respect
to the Certificates or the Mortgage Loans or otherwise, shall without further
action pass to and be vested in the Oversight Agent (for this purpose, the term
includes an affiliate thereof) or such successor Servicer as may be appointed
hereunder, and, without limitation, the Trustee is hereby authorized and
empowered (which authority and power are coupled with an interest and are
irrevocable) to execute and deliver, on behalf of the predecessor 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 or termination, whether to complete the transfer and
endorsement of the Mortgage Loans and related documents or otherwise. The
predecessor Servicer shall cooperate with the successor Servicer or the
Oversight Agent in effecting the termination of the responsibilities and rights
of the predecessor Servicer under this Agreement including the transfer to the
successor Servicer or to the Oversight Agent for administration by it of all
cash accounts that shall at the time be held by the predecessor Servicer for
deposit or shall thereafter be received with respect to a Mortgage Loan. All
reasonable costs and expenses (including attorneys' fees) incurred in connection
with the transfer of servicing, including, without limitation, transferring the
Files and the other necessary data to the successor Servicer and amending this
Agreement to reflect such succession as Servicer pursuant to this Section 8.20
or Section 8.21 shall be paid by the predecessor Servicer upon presentation of
reasonable documentation of such costs and expenses (but only to the extent the
Oversight Agent has not been previously reimbursed therefor under Section 7.5(d)
hereof or otherwise).
- 83 -
<PAGE>
(d) If any event described in subsections (a) or (b) above
occurs and is continuing, during the 30 day period following receipt of notice,
the Trustee, the Oversight Agent and the Certificate Insurer shall cooperate
with each other to determine if the occurrence of such event is more likely than
not the result of the acts or omissions of the Servicer or more likely than not
the result of events beyond the control of the Servicer. If the Trustee, the
Oversight Agent and the Certificate Insurer conclude that the event is the
result of the latter, the Servicer may not be terminated, unless and until some
other event set forth in subsection (a) or (b) has occurred and is continuing.
If the Trustee, the Oversight Agent and the Certificate Insurer conclude that
the event is the result of the former, the Certificate Insurer may terminate the
Servicer in accordance with this Section, and the Oversight Agent shall act as
successor Servicer unless a successor Servicer is otherwise appointed hereunder.
If the Trustee, the Oversight Agent and the Certificate Insurer cannot
agree, and the basis for such disagreement is not arbitrary or unreasonable, as
to the cause of the event, the decision of the Certificate Insurer shall
control.
For purposes of this Section 8.20, neither the Trustee nor the
Oversight Agent shall be deemed to have knowledge of an Event of Default unless
a Responsible Officer of (i) the Trustee assigned to and working in the
Corporate Trust Office, or (ii) the Oversight Agent, respectively, has actual
knowledge thereof or unless written notice of any event which is in fact such an
Event of Default is received by the Trustee or the Oversight Agent, as
applicable, and such notice references the Certificates, the Trust or this
Agreement.
The Certificate Insurer agrees to use its best efforts to inform the
Trustee and the Oversight Agent of any materially adverse information regarding
the Servicer's servicing activities that comes to the attention of the
Certificate Insurer from time to time.
Section 8.21 Resignation of Servicer and Appointment of Successor.
(a) Upon the Servicer's receipt of notice of termination
pursuant to Section 8.20 or the Servicer's resignation in accordance with the
terms of this Section 8.21, the predecessor Servicer shall continue to perform
its functions as Servicer under this Agreement, in the case of termination, only
until the date specified in such termination notice (except that the successor
Servicer must be given 90 days prior written notice of any termination) or, if
no such date is specified in a notice of termination, until receipt of such
notice and, in the case of resignation, until the earlier of (x) the date 90
days from the delivery to the Certificate Insurer, the Oversight Agent and the
Trustee of written notice of such resignation (or written confirmation of such
notice) in accordance with the terms of this Agreement and (y) the date upon
which the predecessor Servicer shall become unable to act as Servicer, as
specified in the notice of resignation and accompanying opinion of counsel. All
collections then being held by the predecessor Servicer prior to its removal and
any collections received by the Servicer after removal or resignation shall be
appropriately endorsed by it and remitted directly and immediately to the
Oversight Agent or the successor Servicer. In the event of the Servicer's
resignation or termination hereunder, the Oversight Agent shall (at the
direction of the Certificate Insurer) appoint a successor Servicer and the
successor Servicer shall accept its appointment by a written assumption in form
acceptable to the Oversight Agent and the Certificate Insurer, with copies to
the Certificate Insurer and the Rating Agencies. Pending such appointment, the
Oversight Agent shall act as the Servicer hereunder.
(b) The Servicer shall not resign from the obligations and
duties hereby imposed on it, except (i) upon determination that its duties
hereunder are no longer permissible under applicable law or are in material
conflict by reason of applicable law with any other activities carried on by it,
the other activities of the Servicer so causing such a conflict being of a type
and nature carried on by the Servicer at the date of this Agreement or (ii) upon
written consent of the Certificate Insurer, the Oversight Agent and the Trustee.
Any such determination permitting the resignation of the Servicer shall be
evidenced by an
- 84 -
<PAGE>
opinion of counsel to such effect which shall be delivered to the Trustee, the
Oversight Agent and the Certificate Insurer.
(c) No resignation of the Servicer shall become effective
until the Oversight Agent or a successor Servicer shall have assumed the
Servicer's responsibilities and obligations in accordance with this Section.
(d) Upon removal or resignation of the Servicer, the Servicer
also shall promptly deliver or cause to be delivered to a successor Servicer or
the Oversight Agent all the books and records (including, without limitation,
records kept in electronic form) that the Servicer has maintained for the
Mortgage Loans, including all tax bills, assessment notices, insurance premium
notices and all other documents as well as all original documents then in the
Servicer's possession.
(e) Any collections received by the Servicer after removal or
resignation shall be appropriately endorsed by it and remitted directly and
immediately to the Oversight Agent, or the successor Servicer.
(f) Upon removal or resignation of the Servicer, the Oversight
Agent (x) shall appoint a successor Servicer in accordance with the instructions
of the Certificate Insurer, or if the Certificate Insurer fails to provide such
instruction, solicit bids for a successor Servicer as described below and (y)
pending the appointment of a successor Servicer, shall serve as Servicer. The
Oversight Agent shall, if the Certificate Insurer fails to instruct it as to the
appointment of a successor Servicer and if the Oversight Agent is unable to
obtain a qualifying bid and is prevented by law from acting as Servicer, (I)
appoint, or petition a court of competent jurisdiction to appoint, any housing
and home finance institution, bank or mortgage servicing institution which has
been designated as an approved seller-servicer by Fannie Mae or Freddie Mac for
second mortgage loans and having equity of not less than $15,000,000 or such
lower level as may be acceptable to the Certificate Insurer as determined in
accordance with generally accepted accounting principles as the successor to the
Servicer hereunder in the assumption of all or any part of the responsibilities,
duties or liabilities of the Servicer hereunder and (II) give notice thereof to
the Certificate Insurer and Rating Agencies. The compensation of any successor
Servicer (including, without limitation, the Oversight Agent) so appointed shall
be the Servicing Fee, together with the other servicing compensation in the form
of assumption fees, late payment charges or otherwise as provided in Sections
8.8 and 8.15; provided, however, that if the Oversight Agent acts as successor
Servicer, then the former Servicer agrees to pay to the Oversight Agent at such
time that the Oversight Agent becomes such successor Servicer a set-up fee of
fifteen dollars ($15.00) for each Mortgage Loan then included in the Trust
Estate. The Oversight Agent shall be obligated to serve as successor Servicer
whether or not the fee described in the preceding sentence is paid by the
Seller, but shall in any event be entitled to receive, and to enforce payment
of, such fee from the former Servicer.
(g) In the event the Oversight Agent solicits bids as provided
above, the Oversight Agent shall solicit, by public announcement, bids from
housing and home finance institutions, banks and mortgage servicing institutions
meeting the qualifications set forth above. Such public announcement shall
specify that the successor Servicer shall be entitled to the full amount of the
Servicing Fee as servicing compensation, together with the other servicing
compensation in the form of assumption fees, late payment charges or otherwise
as provided in Sections 8.8 and 8.15. Within thirty days after any such public
announcement, the Oversight Agent shall negotiate and effect the sale, transfer
and assignment of the servicing rights and responsibilities hereunder to the
qualified party submitting the highest satisfactory bid as to the price they
will pay to obtain such servicing. The Oversight Agent shall deduct from any sum
received by the Oversight Agent from the successor to the Servicer in respect of
such sale, transfer and assignment all costs and expenses of any public
announcement and of any sale, transfer and assignment of
- 85 -
<PAGE>
the servicing rights and responsibilities hereunder. After such deductions, the
remainder of such sum shall be paid by the Oversight Agent to the Servicer at
the time of such sale.
(h) The Oversight Agent and such successor shall take such
action consistent with this Agreement as shall be necessary to effectuate any
such succession, including the notification to all Mortgagors of the transfer of
servicing if such notification is not done by the Servicer as required by
subsection (j) below. The Servicer agrees to cooperate with the Oversight Agent
and any successor Servicer in effecting the termination of the Servicer's
servicing responsibilities and rights hereunder and shall promptly provide the
Oversight Agent or such successor Servicer, as applicable, all documents and
records reasonably requested by it to enable it to assume the Servicer's
functions hereunder and shall promptly also transfer to the Oversight Agent or
such successor Servicer, as applicable, all amounts which then have been or
should have been deposited in the Principal and Interest Account by the Servicer
or which are thereafter received with respect to the Mortgage Loans. Neither the
Oversight Agent nor any other successor Servicer shall be held liable by reason
of any failure to make, or any delay in making, any distribution hereunder or
any portion thereof caused by (i) the failure of the Servicer to deliver, or any
delay in delivery, cash, documents or records to it or (ii) restrictions imposed
by any regulatory authority having jurisdiction over the Servicer.
(i) The Oversight Agent or any other successor Servicer, upon
assuming the duties of Servicer hereunder, shall immediately make all
Delinquency Advances and pay all Compensating Interest which the Servicer has
theretofore failed to remit with respect to the Mortgage Loans; provided,
however, that if the Oversight Agent is acting as successor Servicer, the
Oversight Agent shall only be required to make Delinquency Advances (including
the Delinquency Advances described in this clause (i)) if, in the Oversight
Agent's reasonable good faith judgment, such Delinquency Advances will
ultimately be recoverable from the Mortgage Loans.
(j) The Servicer which is being removed or is resigning shall
give notice to the Mortgagors in accordance with applicable law, and to the
Rating Agencies, of the transfer of the servicing to the successor Servicer.
(k) Upon appointment, the successor Servicer shall be the
successor in all respects to the predecessor Servicer and shall be subject to
all the responsibilities, duties and liabilities of the predecessor Servicer
including, but not limited to, the maintenance of the hazard insurance
policy(ies), the fidelity bond and an errors and omissions policy pursuant to
Section 8.23 and shall be entitled to the Servicing Fee and all of the rights
granted to the predecessor Servicer by the terms and provisions of this
Agreement. The appointment of a successor Servicer shall not affect any
liability of the predecessor Servicer which may have arisen under this Agreement
prior to its termination as Servicer (including, without limitation, any
deductible under an insurance policy) nor shall any successor Servicer be liable
for any acts or omissions of the predecessor Servicer or for any breach by such
Servicer of any of its representations or warranties contained herein or in any
related document or agreement.
(l) The Trustee or the Oversight Agent shall give notice to
the Certificate Insurer, Moody's and Standard & Poor's and the Owners of the
occurrence of any event specified in Section 8.20 of which a Responsible Officer
of the Trustee or the Oversight Agent has actual knowledge.
Section 8.22 Waiver of Past Events of Servicing Termination. Subject to
the rights of the Certificate Insurer pursuant to Section 8.20 to terminate all
of the rights and obligations of the Servicer under this Agreement, the Owners
of at least 51% of the Class A Certificate Principal Balance may (with the
consent of the Certificate Insurer), on behalf of all Owners of Certificates,
waive any default by the Servicer in the performance of its obligations
hereunder and its consequences, except a default in making any required deposits
to or payments from the Principal and Interest Account in accordance with this
Agreement. Upon any such waiver of a past default, such default shall cease to
exist, and any Event of
- 86 -
<PAGE>
Servicing Termination arising therefrom shall be deemed to have been remedied
for every purpose of this Agreement. No such waiver shall extend to any
subsequent or other default or impair any right consequent thereon.
Section 8.23 Inspections by Certificate Insurer; Errors and Omissions
Insurance.
(a) At any reasonable time and from time to time upon
reasonable notice, the Certificate Insurer, the Trustee, the Oversight Agent or
any agents or representatives thereof may inspect the Servicer's servicing
operations and discuss the servicing operations of the Servicer with any of its
officers or directors. The costs and expenses incurred by the Servicer or its
agents or representatives in connection with any such examinations or
discussions shall be paid by the Servicer.
(b) The Servicer agrees to maintain errors and omissions
coverage and a fidelity bond, each at least to the extent generally maintained
by prudent mortgage loan servicers having servicing portfolios of a similar
size. Upon request of the Oversight Agent, the Servicer shall deliver to the
Oversight Agent a certified true and correct copy of such fidelity bond and
errors and omissions policy to the Oversight Agent.
(c) For each year this Agreement is in effect, the Servicer
shall submit to the Oversight Agent, (i) within 120 days of the end of each
calendar year, a copy of the Servicer's annual audited financial statements and
(ii) within 60 days of the end of each calendar quarter, the Servicer's
quarterly unaudited financial statements. Such financial statements shall
include a balance sheet, income statement and statement of retained earnings.
Section 8.24 Merger, Conversion, Consolidation or Succession to
Business of Servicer. Any corporation into which the Servicer may be merged or
converted or with which it may be consolidated, or corporation resulting from
any merger, conversion or consolidation to which the Servicer shall be a party
or any corporation succeeding to all or substantially all of the business of the
Servicer shall be the successor of the Servicer hereunder, without the execution
or filing of any paper or any further act on the part of any of the parties
hereto provided that such corporation meets the qualifications set forth in
Section 8.21(f).
Section 8.25 Notices of Material Events. The Servicer shall give prompt
notice to the Certificate Insurer, the Trustee, the Oversight Agent, Moody's and
Standard & Poor's of the occurrence of any of the following events:
(a) Any default or any fact or event which results, or which
with notice or the passage of time, or both, would result in the occurrence of a
default by the Seller, any Originator or the Servicer under any Operative
Document or would constitute a material breach of a representation, warranty or
covenant under any Operative Document;
(b) The submission of any claim or the initiation of any legal
process, litigation or administrative or judicial investigation against the
Seller or the Servicer in any federal, state or local court or before any
governmental body or agency or before any arbitration board or any such
proceedings threatened by any governmental agency, which, if adversely
determined, would have a material adverse effect upon any the Seller's or the
Servicer's ability to perform its obligations under any Operative Document;
(c) The commencement of any proceedings by or against the
Seller or the Servicer under any applicable bankruptcy, reorganization,
liquidation, insolvency or other similar law now or hereafter in effect or of
any proceeding in which a receiver, liquidator, trustee or other similar
official shall have been, or may be, appointed or requested for the Seller or
the Servicer; and
- 87 -
<PAGE>
(d) The receipt of notice from any agency or governmental body
having authority over the conduct of any of the Seller's or the Servicer's
business that the Seller or the Servicer is to cease and desist, or to undertake
any practice, program, procedure or policy employed by the Seller or the
Servicer in the conduct of the business of any of them, and such cessation or
undertaking will materially and adversely affect the conduct of the Seller's or
the Servicer's business or its ability to perform under the Operative Documents
or materially and adversely affect the financial affairs of the Seller or the
Servicer.
Section 8.26 Monthly Servicing Report and Servicing Certificate.
(a) The Servicer shall, not later than the related
Determination Date, deliver to the Oversight Agent, the Trustee, the Rating
Agencies, the Underwriter and the Certificate Insurer Monthly Servicing Reports,
each in a mutually agreeable electronic and paper format, relating to the Group
I Mortgage Loans and the Group II Mortgage Loans stating the following:
(i) As to the related Due Period, the Interest Remittance
Amount (in both cases specifying the (a) scheduled
interest collected; (b) Delinquency Advances relating
to interest; and (c) Compensating Interest paid) and
the Principal Remittance Amount (in both cases
specifying the (1) scheduled principal collected; (2)
Delinquency Advance relating to Mortgage principal;
(3) Prepayments; (4) Loan Balance of Loans
repurchased; (5) Substitution Amounts; and (6) Net
Liquidation Proceeds (related to principal));
(ii) With respect to the related Remittance Period, the
Servicing Fee payable to the Servicer;
(iii) With respect to the related Remittance Period, the
net scheduled principal and interest payments
remitted by the Servicer to the Principal and
Interest Account;
(iv) The scheduled principal and interest payments on the
Mortgage Loans that were not made by the related
Mortgagors as of the last day of the related
Remittance Period;
(v) The number and aggregate Loan Balances (computed in
accordance with the terms of the Mortgage Loans) and
the percentage of the total number of Mortgage Loans
and of the Loan Balance which they represent of
Mortgage Loans Delinquent, if any, (i) 30-59 days,
(ii) 60-89 days and (iii) 90 days or more,
respectively, as of the last day of the related
Remittance Period;
(vi) The number and aggregate Loan Balances of Mortgage
Loans, if any, in foreclosure and the book value
(within the meaning of 12 Code of Federal Regulations
Section 571.13 or any comparable provision) of any
real estate acquired through foreclosure or deed in
lieu of foreclosure, including REO Properties as of
the last day of the related Remittance Period;
(vii) The Loan Balances (immediately prior to being
classified as Liquidated Mortgage Loans) of
Liquidated Mortgage Loans as of the last day of the
related Remittance Period;
- 88 -
<PAGE>
(viii) Liquidation Proceeds received during the related
Remittance Period;
(ix) The amount of any Liquidation Expenses being deducted
from Liquidation Proceeds or otherwise being charged
to the Principal and Interest Account with respect to
such Determination Date;
(x) Liquidation Expenses incurred during the related
Remittance Period which are not being deducted from
Liquidation Proceeds or otherwise being charged to
the Principal and Interest Account with respect to
such Determination Date;
(xi) Net Liquidation Proceeds as of the last day of the
related Remittance Period;
(xii) Insurance payments received from Insurance Policies
during the related Remittance Period;
(xiii) The number of Mortgage Loans and the aggregate
scheduled Loan Balances as of the last day of the Due
Period relating to the Payment Date;
(xiv) The Group I Total Available Funds and the Group II
Total Available Funds for each Remittance Date;
(xv) The number and aggregate Loan Balances and Loan
Purchase Prices of Mortgage Loans required to be
repurchased by the Seller or purchased by the
Servicer as of the Replacement Cut-Off Date occurring
during the Remittance Period preceding such Date;
(xvi) The number and aggregate Loan Balances of Mortgage
Loans (at the time they became Defaulted Mortgage
Loans) which are being carried as REO Properties;
(xvii) The amount of any Delinquency Advances made by the
Servicer during the related Remittance Period and any
unreimbursed Delinquency Advances as of such Payment
Date;
(xviii) The weighted average Coupon Rates of the Mortgage
Loans;
(xix) The Monthly Exception Report;
(xx) The amount of any Substitution Amounts delivered by
the Seller;
(xxi) The number and aggregate Loan Balances of Mortgage
Loans, if any, in bankruptcy proceedings as of the
last day of related Remittance Period;
(xxii) The amount of unreimbursed Delinquency Advances made
by the Servicer;
- 89 -
<PAGE>
(xxiii) The amounts, if any, of the Realized Losses for the
related Remittance Period and the cumulative amount
of Realized Losses since the Startup Day.
(xxiv) The amount of unreimbursed Servicing Advances made by
the Servicer;
(xxv) Unpaid Servicing Fees;
(xxvi) The amount of Compensating Interest to be paid by the
Servicer during the related Remittance Period;
(xxvii) The weighted average net Coupon Rate of the Mortgage
Loans;
(xxviii) For the related Remittance Period and cumulatively
since the Startup Day, the number and aggregate Loan
Balance of Mortgage Loans bought back by the Servicer
or the Seller pursuant to Section 3.5, 3.7 and 8.10
hereof (identified separately for each such section).
(xxix) Any other information reasonably requested by the
Certificate Insurer or the Trustee;
(xxx) The aggregate actual Loan Balance as of the last day
of the Due Period relating to the Payment Date; and
(xxxi) For each of the Payment Dates during and immediately
after the Funding Period, (A) the Pre-Funded Amount
previously used to purchase Subsequent Mortgage
Loans, (B) the Pre-Funded Amount distributed as
principal, (C) the Pre-Funding Account Earnings
transferred to the Capitalized Interest Account and
(D) the amounts transferred from the Capitalized
Interest Account to the Certificate Account and the
amount transferred to the Seller, if any.
(b) On each Payment Date, the Trustee shall provide to the
Certificate Insurer, the Underwriter, the Seller, Standard & Poor's and Moody's
a written report (the "Servicing Certificate"), as such form may be revised by
the Trustee, the Servicer, Moody's and Standard & Poor's from time to time, but
in every case setting forth the information required under Section 7.8 hereof.
Section 8.27 Indemnification by the Seller. The Seller agrees to
indemnify and hold the Trustee, the Oversight Agent, the Certificate Insurer and
each Owner harmless against any and all claims, losses, penalties, fines,
forfeitures, legal fees and related costs, judgments, and any other costs, fees
and expenses that the Trustee, the Oversight Agent, the Certificate Insurer and
any Owner may sustain in any way related to the failure of the Seller to perform
its duties under this Agreement. A party against whom a claim is brought shall
immediately notify the other parties and the Rating Agencies if a claim is made
by a third party with respect to this Agreement, and the Seller shall assume
(with the consent of the Certificate Insurer and the Trustee) the defense of any
such claim and pay all expenses in connection therewith, including reasonable
counsel fees, and promptly pay, discharge and satisfy any judgment or decree
which may be entered against the Certificate Insurer, the Oversight Agent, the
Servicer, the Seller, the Trustee and/or Owner in respect of such claim.
Section 8.28 Indemnification by the Servicer. The Servicer agrees to
indemnify and hold the Trustee, the Oversight Agent, the Certificate Insurer and
each Owner harmless against any and all claims, losses, penalties, fines,
forfeitures, legal fees and related costs, judgments, and any other costs, fees
and
- 90 -
<PAGE>
expenses that the Trustee, the Oversight Agent, the Certificate Insurer and any
Owner may sustain in any way related to the failure of the Servicer to perform
its duties and service the Mortgage Loans in compliance with the terms of this
Agreement. A party against whom a claim is brought shall immediately notify the
other parties and the Rating Agencies if a claim is made by a third party with
respect to this Agreement, and the Servicer shall assume (with the consent of
the Trustee) the defense of any such claim and pay all expenses in connection
therewith, including reasonable counsel fees, and promptly pay, discharge and
satisfy any judgment or decree which may be entered against the Certificate
Insurer, the Servicer, the Trustee, the Oversight Agent and/or Owner in respect
of such claim. In no event will any successor servicer be liable for, or have
any obligation to indemnify any person for the acts or omissions of a
predecessor servicer.
Section 8.29 Appointment and Term of the Servicer.
(a) Initial Appointment. The Trust, the Owners, the
Certificate Insurer and the Trustee hereby appoint the Servicer to act as the
Servicer for the Mortgage Loans (including all of the duties, obligations and
rights of the Servicer) under this Agreement, which appointment shall be for an
initial term that begins on the Startup Day and ends on February 28, 2000. The
Servicer hereby accepts its appointment as Servicer hereunder.
(b) Two Month Renewal of Servicer Term. Beginning March 1,
2000, the term of the Servicer shall be extended for successive two calendar
month terms that end on April 30, June 30, August 31, October 31, December 31
and February 28 of each year, until the Certificates are paid in full; provided
that the Oversight Agent delivers written notice of renewal in the form attached
hereto as Exhibit K (the "Servicer Renewal Notice") prior to expiration of the
preceding two month term. The Oversight Agent, on behalf of the Certificate
Insurer, shall send such Servicer Renewal Notice at least 30 days prior to the
beginning of the next successive two calendar month term, unless at least 45
days prior to such next two calendar month term the Certificate Insurer delivers
written notice to the Oversight Agent (with a copy to the Trustee) that
instructs the Oversight Agent not to renew the term of the Servicer hereunder.
Each such Servicer Renewal Notice shall be delivered by the Oversight Agent to
the other parties hereto and the Certificate Insurer.
The Servicer agrees that, as of the date hereof and upon its receipt of
any such Servicer Renewal Notice, the Servicer shall be bound for the duration
of the initial term and each successive two month term covered by such Servicer
Renewal Notice to act as the Servicer for the Mortgage Loans hereunder, unless
the Servicer is otherwise terminated in accordance with Section 8.20 hereof. If
the Oversight Agent has not sent the Servicer Renewal Notice at least 30 days
prior to expiration of the preceding two month term, then the Certificate
Insurer may deliver the Servicer Renewal Notice to the Servicer, which shall be
binding upon the parties hereto, with the same effect as if the Oversight Agent
had delivered such Servicer Renewal Notice.
(c) Non-renewal or Termination. Upon any non-renewal or
termination of the Servicer pursuant to this Section 8.29, the servicing of the
Mortgage Loans hereunder shall be transferred to a successor servicer in
accordance with Sections 8.21 and 8.30 hereof.
Section 8.30 Appointment and Duties of the Oversight Agent.
(a) Appointment and Compensation of Oversight Agent. The
Trust, the Owners, the Trustee and the Certificate Insurer hereby assign and
appoint the Oversight Agent to act as the Oversight Agent for the Mortgage Loans
and to perform all of the duties, obligations and rights of the Oversight Agent
expressly set forth in this Agreement. The Oversight Agent hereby accepts its
appointment as the Oversight Agent hereunder. The Oversight Agent shall not
consent to any material amendment,
- 91 -
<PAGE>
modification or waiver of the servicing provisions of this Agreement, without
the consent of the Certificate Insurer and the Trustee.
As compensation for its services hereunder, the Oversight Agent shall
be entitled to receive the Oversight Agent Fee. The Oversight Agent shall be
required to pay all expenses incurred by it in connection with its Oversight
Agent duties and activities hereunder and shall not be entitled to reimbursement
therefor except as specifically provided for herein.
(b) Oversight Agent Assumes Servicing Responsibility. If a
Servicer Termination Event occurs, or, upon any non-renewal of the Servicer
pursuant to Section 8.29(b), the Oversight Agent shall be obligated pursuant to
Section 8.21, (1) to appoint, or petition a court to appoint a successor
Servicer, as provided therein, or (2) to act as the Servicer of the Mortgage
Loans hereunder.
(c) Monitoring of Servicing. The Oversight Agent shall: (i)
review the servicing reports, loan level information or other relevant
information prepared by the Servicer (1) to determine whether such reports are
inaccurate or incomplete, in any material respect, (2) to ascertain that the
Servicer is in compliance, in all material respects, with its duties and
obligations with respect to such reports under this Agreement and (3) in the
event that any servicing report is inaccurate or incomplete, to promptly notify
the Servicer of such inaccuracy or incompleteness, and to prepare and deliver an
exception report to the Trustee, the Certificate Insurer and the Rating
Agencies, which describes such inaccuracy or incompleteness; and (ii) otherwise
monitor the performance by the Servicer of its duties and obligations hereunder
(other than with regard to Sections 8.11, 8.12 and 8.13).
(d) Successor Servicer. The Oversight Agent agrees that it
shall at all times be prepared to perform the duties and obligations of the
Servicer and become the successor servicer, if the Servicer fails to perform its
duties and obligations hereunder.
(e) Servicer Termination. At the direction of the Certificate
Insurer, or the Oversight Agent (with the prior consent of the Certificate
Insurer) or the Owners of a majority or 33|_|%, as applicable, of the
Percentage Interests of the Class A Certificates (with the prior consent of the
Certificate Insurer), the Trustee, on behalf of the Trust and the Owners, shall
terminate the Servicer upon the occurrence and continuance of an Event of
Servicing Termination pursuant to Section 8.20 hereof.
(f) Servicer Cooperation. The Servicer shall act, in a good
faith and reasonable manner, to assist and cooperate with the Oversight Agent in
performing its duties and obligations under this Section 8.30. On a monthly
basis pursuant to Section 8.26 hereof, the Servicer shall provide the Oversight
Agent with its Monthly Servicing Reports in a compatible computer readable
format.
(g) Resignation of Oversight Agent. The Oversight Agent shall
resign as Oversight Agent hereunder if it determines that its duties hereunder
are no longer permissible under applicable law or are in material conflict by
reason of applicable law with any other activities carried on by it and cannot
be cured, provided that such determination shall be evidenced by an Opinion of
Counsel to such effect delivered to the Trustee and the Certificate Insurer. In
addition, the Oversight Agent may resign for any reason with 30 day's prior
written notice to the Trustee and the Certificate Insurer. No resignation of the
Oversight Agent shall become effective until a successor oversight agent
reasonably acceptable to the Trustee and the Certificate Insurer shall have
assumed the obligations of the Oversight Agent hereunder.
(h) Limitation on Liability of Oversight Agent. Neither the
Oversight Agent nor any directors, officers, employees or agents of the
Oversight Agent shall be under any liability to the Trustee, the Servicer, the
Certificate Insurer, the Owners or any other Person for any action taken or for
refraining from the taking of any action in good faith pursuant to this
Agreement, or for errors in judgment; provided, however, that this provision
shall not protect the Oversight Agent or any such Person against
- 92 -
<PAGE>
any liability that would otherwise be imposed by reason of willful misfeasance,
bad faith or negligence in its performance of its duties or by reason of
reckless disregard for its obligations and duties under this Agreement. The
Oversight Agent and each director, officer, employee and agent of the Oversight
Agent may rely in good faith on any document of any kind prima facie properly
executed and submitted by any Person respecting any matters arising hereunder.
The Oversight Agent shall be under no obligation to appear in, prosecute or
defend any legal action that is not incidental to its duties to monitor and
oversee the servicing of the Mortgage Loans in accordance with this Agreement
and that in its opinion may involve it in any expenses or liability; provided,
however, that the Oversight Agent may in its sole discretion undertake any such
action that it may deem necessary or desirable in respect of this Agreement and
the rights and duties of the parties hereto and the interests of the Owners
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, and the Oversight Agent shall be entitled to be reimbursed therefor out
of the Certificate Account as provided herein.
Section 8.31 Removal of Oversight Agent for Cause.
(a) The Certificate Insurer, the Trustee (with the consent of
the Certificate Insurer), or the Owners pursuant to Section 6.11 hereof may
remove the Oversight Agent (including any successor entity serving as the
Oversight Agent) by notice given in writing to the Oversight Agent, with a copy
to the Trustee, upon the occurrence of any of the following events (whatever the
reason for such event and whether it shall be voluntary or involuntary or be
effected by operation of law or pursuant to any judgment, decree or order of any
court or any order, rule or regulation of any administrative or governmental
body):
(1) the Oversight Agent shall fail in the
performance of, or breach, any covenant or
agreement of the Oversight Agent in this
Agreement, or if any representation or
warranty of the Oversight Agent made in this
Agreement or in any certificate or other
writing delivered pursuant hereto or in
connection herewith shall prove to be
incorrect in any material respect as of the
time when the same shall have been made, and
such failure or breach shall continue or not
be cured for a period of 30 days after there
shall have been given, by registered or
certified mail, to the Oversight Agent by
the Seller, the Trustee, the Certificate
Insurer or by the Owners of at least 25% of
the aggregate Percentage Interests
represented by the Class A Certificates then
Outstanding, or, if there are no Class A
Certificates then Outstanding, by such
Percentage Interests represented by the
Class R Certificates, a written notice
specifying such failure or breach and
requiring it to be remedied; or
(2) a decree or order of a court or agency or
supervisory authority having jurisdiction
for the appointment of a conservator or
receiver or liquidator in any 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
Oversight Agent, and such decree or order
shall have remained in force undischarged or
unstayed for a period of 75 days; or
(3) a conservator or receiver or liquidator or
sequestrator or custodian of the property of
the Oversight Agent is appointed in any
insolvency, readjustment of debt,
marshalling of assets and liabilities or
similar proceedings of or relating to the
Oversight Agent or relating to all or
substantially all of its property; or
- 93 -
<PAGE>
(4) the Oversight Agent shall become insolvent
(however insolvency is evidenced), generally
fail to pay its debts as they come due, file
or consent to the filing of a petition to
take advantage of any applicable insolvency
or reorganization statute, make an
assignment for the benefit of its creditors,
voluntarily suspend payment of its
obligations or take corporate action for the
purpose of any of the foregoing.
The Trustee shall give to Moody's and Standard & Poor's notice of the
occurrence of any such event of which the Trustee is aware.
(b) If any event described in Paragraph (a) occurs and is
continuing and the Oversight Agent is acting as successor Servicer, then and in
every such case the Trustee (unless the Oversight Agent and the Trustee are the
same person) shall, on and after the receipt by the Oversight Agent of such
written notice of removal, become obligated to appoint a successor Servicer
pursuant to Section 10.1(b), whether or not the Oversight Agent resigns pursuant
to Section 8.30(g) hereof. Upon the removal of the Oversight Agent hereunder,
the Trustee (unless the Oversight Agent and the Trustee are the same person)
shall appoint a successor Oversight Agent reasonably acceptable to the
Certificate Insurer. Until the appointment of a successor Oversight Agent and a
successor Servicer, the Oversight Agent Fee and the Servicing Fee shall be paid
to the Trustee as additional compensation for the performance of such duties.
- 94 -
<PAGE>
ARTICLE IX
TERMINATION OF TRUST
Section 9.1 Termination of Trust. The Trust created hereunder and all
obligations created by this Agreement will terminate upon the earliest of (i)
the payment to the Owners of all Certificates from amounts other than those
available under the Certificate Insurance Policies of all amounts held by the
Trustee and required to be paid to such Owners pursuant to this Agreement upon
the later to occur of (a) the final payment or other liquidation (or any advance
made with respect thereto) of the last Mortgage Loan in the Trust Estate or (b)
the disposition of all property acquired in respect of any Mortgage Loan
remaining in the Trust Estate, (ii) at any time when a Qualified Liquidation of
both Mortgage Loan Groups included within the Trust is effected as described
below or (iii) as described in Section 9.2, 9.3 and 9.4 hereof; provided, that
the Trust created hereunder shall not terminate at any time that the Certificate
Principal Balance of any Class of Class A Certificates is greater than zero. To
effect a termination of this Agreement pursuant to clause (ii) above, the Owners
of all Certificates then Outstanding shall (x) unanimously direct the Trustee on
behalf of the Trust to adopt a plan of complete liquidation for both Mortgage
Loan Groups, as contemplated by Section 860F(a)(4) of the Code and (y) provide
to the Trustee an opinion of counsel experienced in federal income tax matters
to the effect that such liquidation constitutes a Qualified Liquidation, and the
Trustee either shall sell the Mortgage Loans and distribute the proceeds of the
liquidation of the Trust Estate, or shall distribute equitably in kind all of
the assets of the Trust Estate to the remaining Owners of the Certificates based
on their interests in the Trust, each in accordance with such plan, so that the
liquidation or distribution of the Trust Estate, the distribution of any
proceeds of the liquidation and the termination of this Agreement occur no later
than the close of the 90th day after the date of adoption of the plan of
liquidation and such liquidation qualifies as a Qualified Liquidation. In no
event, however, will the Trust created by this Agreement continue beyond the
expiration of twenty-one (21) years from the death of the last survivor of the
descendants of Joseph P. Kennedy, the late Ambassador of the United States to
the United Kingdom, living on the date hereof. The Trustee shall give written
notice of termination of the Agreement to each Owner in the manner set forth in
Section 11.5 hereof.
Section 9.2 Termination Upon Option of Servicer.
(a) On any Remittance Date on or after the Clean-Up Call Date,
the Servicer acting directly or through one or more affiliates, may determine to
purchase and may cause the purchase from the Trust of all (but not fewer than
all) of the Mortgage Loans and all property theretofore acquired in respect of
any such Mortgage Loan by foreclosure, deed in lieu of foreclosure, or otherwise
then remaining at a price equal to the sum of (v) the greater of (i) 100% of the
aggregate Loan Balances of the related Mortgage Loans as of the day of purchase
minus amounts actually remitted by the Servicer representing collections of
principal on the Mortgage Loans during the related Remittance Period and (ii)
the greater of (A) the fair market value of such Mortgage Loans (disregarding
accrued interest) and (B) the aggregate outstanding Certificate Principal
Balance of the related Certificates, (w) one month's interest on the purchase
price computed at the weighted average of the Class A-1 Pass-Through Rate and
the Class A-2 Pass-Through Rate, (x) any Group II Available Funds Cap
Carry-Forward Amount at such time, (y) the related Reimbursement Amount, if any,
as of such Remittance Date and (z) the aggregate amount of any Delinquency
Advances and Servicing Advances remaining unreimbursed, together with any
accrued and unpaid Servicing Fees, and Oversight Agent Fees each, relating to
such Mortgage Loan Group as of such Remittance Date (such amount, the
"Termination Price"). In connection with such purchase, the Servicer shall remit
to the Trustee all amounts then on deposit in the Principal and Interest Account
for deposit to the Certificate Account, which deposit shall be deemed to have
occurred immediately preceding such purchase.
- 95 -
<PAGE>
(b) In connection with any such purchase, the Servicer shall
provide to the Trustee an opinion of counsel experienced in federal income tax
matters and reasonably acceptable to the Certificate Insurer to the effect that
such purchase constitutes a Qualified Liquidation of the Trust Estate.
(c) Promptly following any such purchase, the Trustee will
release the Files to the Servicer, or otherwise upon its order, in a manner
similar to that described in Section 8.14 hereof.
(d) If the Servicer does not exercise its option pursuant to
this Section 9.2 with respect to the Trust Estate, then the Certificate Insurer
may do so on the same terms.
Section 9.3 Termination Upon Loss of REMIC Status.
(a) Following a final determination by the Internal Revenue
Service, or by a court of competent jurisdiction, in either case from which no
appeal is taken within the permitted time for such appeal, or if any appeal is
taken, following a final determination of such appeal from which no further
appeal can be taken, to the effect that the Trust (other than the Non-REMIC
Accounts) does not and will no longer qualify as a "REMIC" pursuant to Section
860D of the Code (the "Final Determination"), at any time on or after the date
which is 30 calendar days following such Final Determination, (i) the
Certificate Insurer or the Owners of a majority in Percentage Interest
represented by the Class A Certificates then Outstanding with the consent of the
Certificate Insurer (which consent shall not be unreasonably withheld) may
direct the Trustee on behalf of the Trust to adopt a plan of complete
liquidation, as contemplated by Section 860F(a)(4) of the Code and (ii) the
Certificate Insurer may notify the Trustee of the Certificate Insurer's
determination to purchase from the Trust all (but not fewer than all) Mortgage
Loans in the Trust Estate and all property theretofore acquired by foreclosure,
deed in lieu of foreclosure, or otherwise in respect of any Mortgage Loan then
remaining in the Trust Estate at a price equal to the Termination Price. In
connection with such purchase, the Servicer shall remit to the Trustee all
amounts then on deposit in the Principal and Interest Account for deposit in the
Certificate Account, which deposit shall be deemed to have occurred immediately
preceding such purchase.
(b) Upon receipt of such direction from the Certificate
Insurer, the Trustee shall notify the holders of the Class R Certificates of
such election to liquidate or such determination to purchase, as the case may be
(the "Termination Notice"). The Owner of a majority of the Percentage Interest
of the Class R Certificates then Outstanding may, on any Remittance Date, within
60 days from the date of receipt of the Termination Notice (the "Purchase Option
Period"), at their option, purchase from the Trust all (but not fewer than all)
Mortgage Loans in the Trust Estate, and all property theretofore acquired by
foreclosure, deed in lieu of foreclosure, or otherwise in respect of any
Mortgage Loan then remaining in the Trust Estate at a purchase price equal to
the Termination Price.
(c) If, during the Purchase Option Period, the Owners of the
Class R Certificates have not exercised the option described in the immediately
preceding paragraph, then upon the expiration of the Purchase Option Period (i)
in the event that the Certificate Insurer or the Owners of the Class A
Certificates, with the consent of the Certificate Insurer have given the Trustee
the direction described in clause (a)(i) above, the Trustee shall sell the
Mortgage Loans and distribute the proceeds of the liquidation of the Trust
Estate, each in accordance with the plan of complete liquidation, such that, if
so directed, the liquidation of the Trust Estate, the distribution of the
proceeds of such liquidation and the termination of this Agreement occur no
later than the close of the 60th day, or such later day as the Certificate
Insurer or the Owners of the Class A Certificates, with the consent of the
Certificate Insurer shall permit or direct in writing, after the expiration of
the Purchase Option Period and (ii) in the event that the Certificate Insurer
has given the Trustee notice of the Certificate Insurer's determination to
purchase the Mortgage Loans in the Trust Estate described in clause (a)(ii)
preceding, the Certificate Insurer shall, on any Remittance Date within 60 days,
purchase all (but not fewer than all) Mortgage Loans in the Trust Estate, and
all property theretofore acquired by foreclosure, deed in lieu of foreclosure
- 96 -
<PAGE>
or otherwise in respect of any Mortgage Loan then remaining in the Trust Estate.
In connection with such purchase, the Servicer shall remit to the Trustee all
amounts then on deposit in the Principal and Interest Account for deposit to the
Certificate Account, which deposit shall be deemed to have occurred immediately
preceding such purchase.
(d) Following a Final Determination, the Owners of a majority
of the Percentage Interest of the Class R Certificates then Outstanding may, at
their option on any Remittance Date and upon delivery to the Owners of the Class
A Certificates and the Certificate Insurer of an opinion of counsel experienced
in federal income tax matters acceptable to the Certificate Insurer selected by
the Owners of such Class R Certificates which opinion shall be reasonably
satisfactory in form and substance to the Certificate Insurer, to the effect
that the effect of the Final Determination is to increase substantially the
probability that the gross income of the Trust will be subject to federal
taxation, purchase from the Trust all (but not fewer than all) Mortgage Loans in
the Trust Estate, and all property theretofore acquired by foreclosure, deed in
lieu of foreclosure, or otherwise in respect of any Mortgage Loan then remaining
in the Trust Estate at a purchase price equal to the Termination Price. In
connection with such purchase, the Servicer shall remit to the Trustee all
amounts then on deposit in the Principal and Interest Account for deposit to the
Certificate Account, which deposit shall be deemed to have occurred immediately
preceding such purchase. The foregoing opinion shall be deemed satisfactory
unless the Certificate Insurer gives the Owners of a majority of the Percentage
Interest of the Class R Certificates notice that such opinion is not
satisfactory within thirty days after receipt of such opinion.
In connection with any such purchase, such Owners shall direct the
Trustee to adopt a plan of complete liquidation as contemplated by Section
860F(a)(4) of the Code and shall provide to the Trustee an opinion of counsel
experienced in federal income tax matters to the effect that such purchase
constitutes a Qualified Liquidation.
Section 9.4 Disposition of Proceeds. The Trustee shall, upon receipt
thereof, deposit the proceeds of any liquidation of a Mortgage Loan Group
pursuant to this Article IX to the Certificate Account; provided, however, that
any amounts representing Servicing Fees or Oversight Agent Fees, unreimbursed
Delinquency Advances or unreimbursed Servicing Advances relating to such
Mortgage Loan Group theretofore funded by the Servicer from the Servicer's own
funds shall be paid by the Trustee to the Oversight Agent or Servicer from the
proceeds of the Trust Estate.
Section 9.5 Netting of Amounts. If any Person paying the Termination
Price would receive a portion of the amount so paid, such Person may net any
such amount against the Termination Price otherwise payable.
ARTICLE X
THE TRUSTEE
Section 10.1 Certain Duties and Responsibilities.
(a) The Trustee (i) undertakes to perform such duties and only
such duties as are specifically set forth in this Agreement, and no implied
covenants or obligations shall be read into this Agreement against the Trustee
and (ii) in the absence of bad faith on its part, may conclusively rely, as to
the truth of the statements and the correctness of the opinions expressed
therein, upon certificates or opinions furnished pursuant to and conforming to
the requirements of this Agreement; but in the case of any such certificates or
opinions which by any provision hereof are specifically required to be furnished
to the Trustee, shall be under a duty to examine the same to determine whether
or not they conform to the requirements of this Agreement.
- 97 -
<PAGE>
(b) Following the removal of the Oversight Agent hereunder, in
the event that either (i) prior to such removal, the servicing of the Mortgage
Loans had previously been transferred to the Oversight Agent or (ii) the
Servicer is removed hereunder, and pending the appointment of any other Person
as successor Servicer, the Trustee, or an affiliate thereof (unless the
Oversight Agent and the Trustee are the same person) shall and is hereby
empowered to perform the duties of the Servicer hereunder and shall, for such
period, have all of the rights of the Servicer. Specifically, and not in
limitation of the foregoing, the Trustee shall upon removal of the Oversight
Agent, and pending the appointment of any other Person as successor Oversight
Agent or Servicer, have the power and duty during its performance as successor
Servicer:
(i) to collect Mortgage payments;
(ii) to foreclose on defaulted Mortgage Loans;
(iii) to enforce due-on-sale clauses and to enter into
assumption and substitution agreements as permitted
by Section 8.12 hereof;
(iv) to deliver instruments of satisfaction pursuant to
Section 8.14 hereof;
(v) to make Delinquency Advances and Servicing Advances
and to pay Compensating Interest, and
(vi) to enforce the Mortgage Loans.
(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, except that:
(i) this subsection shall not be construed to limit the
effect of subsection (a) of this Section;
(ii) the Trustee shall not be liable for any error of
judgment made in good faith by an Authorized Officer,
unless it shall be proved that the Trustee was
negligent in ascertaining the pertinent facts;
(iii) the Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in good
faith in accordance with the direction of the
Certificate Insurer or of the Owners of a majority in
Percentage Interest of the Certificates of the
affected Class or Classes and the Certificate Insurer
relating to the time, method and place of conducting
any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred
upon the Trustee, under this Agreement relating to
such Certificates;
(iv) The Trustee shall not be required to expend or risk
its own funds or otherwise incur financial liability
for the performance of any of its duties hereunder or
the exercise of any of its rights or powers if there
is reasonable ground for believing that the repayment
of such funds or adequate indemnity against such risk
or liability is not reasonably assured to it, and
none of the provisions contained in this Agreement
shall in any event require the Trustee to perform, or
be responsible for the manner of performance of, any
of the obligations of the Servicer
- 98 -
<PAGE>
under this Agreement except during such time, if any,
as the Trustee shall be the successor to, and be
vested with the rights, duties, powers and privileges
of, the Servicer in accordance with the terms of this
Agreement;
(v) Subject to the other provisions of this Agreement and
without limiting the generality of this Section 10.1,
the Trustee shall have no duty (A) to see any
recording, filing, or depositing of this Agreement or
any agreement referred to herein or any financing
statement or continuation statement evidencing a
security interest, or to see to the maintenance of
any such recording or filing or depositing or to any
rerecording, refiling or redepositing of any thereof,
(B) to see to any insurance (C) to see to the payment
or discharge of any tax, assessment, or other
governmental charge or any lien or encumbrance of any
kind owing with respect to, assessed or levied
against, any part of the Trust Estate from funds
available in the Certificate Account, (D) to confirm
or verify the contents of any reports or certificates
of the Servicer delivered to the Trustee pursuant to
this Agreement believed by the Trustee to be genuine
and to have been signed or presented by the proper
party or parties;
(vi) The Trustee shall not be accountable for the use or
application of any funds paid to the Seller or the
Servicer in respect of the Mortgage Loans or
withdrawn from the Principal and Interest Account or
the Certificate Account by the Seller or the
Servicer; and
(vii) The Trustee shall not be required to take notice or
be deemed to have notice or knowledge of any default
or any of the events described in Section 8.20 unless
a Responsible Officer of the Trustee shall have
received written notice thereof or a Responsible
Officer has actual knowledge thereof. In the absence
of receipt of such notice, the Trustee may
conclusively assume that no default or event
described in Section 8.20 has occurred.
(d) Whether or not therein expressly so provided, every
provision of this Agreement relating to the conduct or affecting the liability
of or affording protection to the Trustee shall be subject to the provisions of
this Section.
(e) 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, or in the exercise of any of its
rights or powers, if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
(f) The permissive right of the Trustee to take actions
enumerated in this Agreement shall not be construed as a duty and the Trustee
shall not be answerable for other than its own negligence or willful misconduct.
(g) The Trustee shall be under no obligation to institute any
suit, or to take any remedial proceeding under this Agreement, or to take any
steps in the execution of the trusts hereby created or in the enforcement of any
rights and powers hereunder until it shall be indemnified to its satisfaction
against any and all costs and expenses, outlays, counsel fees and other
reasonable disbursements and against all liability, except liability which is
adjudicated to have resulted from its negligence or willful misconduct, in
connection with any action so taken.
- 99 -
<PAGE>
Section 10.2 Removal of Trustee for Cause.
(a) The Trustee may be removed pursuant to paragraph (b)
hereof upon the occurrence of any of the following events (whatever the reason
for such event and whether it shall be voluntary or involuntary or be effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(1) the Trustee shall fail to distribute to the
Owners entitled thereto on any Payment Date
amounts available for distribution received
by the Trustee in accordance with the terms
hereof; or
(2) the Trustee shall fail in the performance
of, or breach, any covenant or agreement of
the Trustee in this Agreement, or if any
representation or warranty of the Trustee
made in this Agreement or in any certificate
or other writing delivered pursuant hereto
or in connection herewith shall prove to be
incorrect in any material respect as of the
time when the same shall have been made, and
such failure or breach shall continue or not
be cured for a period of 30 days after there
shall have been given, by registered or
certified mail, to the Trustee by the
Seller, the Certificate Insurer or by the
Owners of at least 25% of the aggregate
Percentage Interests represented by the
Class A Certificates then Outstanding, or,
if there are no Class A Certificates then
Outstanding, by such Percentage Interests
represented by the Class R Certificates, a
written notice specifying such failure or
breach and requiring it to be remedied; or
(3) a decree or order of a court or agency or
supervisory authority having jurisdiction
for the appointment of a conservator or
receiver or liquidator in any 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
Trustee, and such decree or order shall have
remained in force undischarged or unstayed
for a period of 75 days; or
(4) a conservator or receiver or liquidator or
sequestrator or custodian of the property of
the Trustee is appointed in any insolvency,
readjustment of debt, marshalling of assets
and liabilities or similar proceedings of or
relating to the Trustee or relating to all
or substantially all of its property; or
(5) the Trustee shall become insolvent (however
insolvency is evidenced), generally fail to
pay its debts as they come due, file or
consent to the filing of a petition to take
advantage of any applicable insolvency or
reorganization statute, make an assignment
for the benefit of its creditors,
voluntarily suspend payment of its
obligations or take corporate action for the
purpose of any of the foregoing.
The Seller shall give to Moody's and Standard & Poor's notice of the
occurrence of any such event of which the Seller is aware.
- 100 -
<PAGE>
(b) If any event described in Paragraph (a) occurs and is
continuing, then and in every such case (i) the Certificate Insurer or (ii) with
the prior written consent (which shall not be unreasonably withheld) of the
Certificate Insurer (x) the Seller or (y) the Owners of a majority of the
Percentage Interests represented by the Class A Certificates may, whether or not
the Trustee resigns pursuant to Section 10.9 hereof, immediately, concurrently
with the giving of notice to the Trustee, and without delaying the 30 days
required for notice therein, appoint a successor Trustee pursuant to the terms
of Section 10.9 hereof.
Section 10.3 Certain Rights of the Trustee. Except as otherwise
provided in Section 10.1 hereof:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, note or other
paper or document believed by it to be genuine and to have been signed or
presented by the proper party or parties;
(b) any request or direction of the Seller, the Certificate
Insurer or the Owners of any Class of Certificates mentioned herein shall be
sufficiently evidenced in writing;
(c) whenever in the administration of this Agreement the
Trustee shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless other
evidence be herein specifically prescribed) may, in the absence of bad faith on
its part, rely upon an Officer's Certificate;
(d) the Trustee may consult with counsel of its selection, and
the written advice of such counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it hereunder
in good faith and in reasonable reliance thereon;
(e) the Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Agreement at the request or
direction of any of the Owners pursuant to this Agreement, unless such Owners
shall have offered to the Trustee reasonable security or indemnity against the
costs, expenses and liabilities which might be incurred by it in compliance with
such request or direction;
(f) 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, direction, consent, order, bond,
note or other paper or document, but the Trustee in its discretion may make such
further inquiry or investigation into such facts or matters as it may see fit;
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 afforded to it by the terms of this Agreement,
the Trustee may require reasonable indemnity against such cost, expense or
liability as a condition to taking any such action. The reasonable expense of
every such examination shall be paid by the Servicer or, if paid by the Trustee,
shall be repaid by the Servicer upon demand by the Trustee from the Servicer's
own funds;
(g) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys, and the Trustee shall not be responsible for any misconduct
or negligence on the part of any agent or attorney appointed and supervised with
due care by it hereunder;
(h) the Trustee shall not be personally liable for any action
it takes or omits to take in good faith which it reasonably believes to be
authorized by the Authorized Officer of any Person or within its rights or
powers under this Agreement;
- 101 -
<PAGE>
(i) the right of the Trustee to perform any discretionary act
enumerated in this Agreement shall not be construed as a duty, and the Trustee
shall not be answerable for other than its negligence or willful misconduct in
the performance of such act; and
(j) the Trustee shall not be required to give any bond or
surety in respect of the execution of the Trust Estate created hereby or the
powers granted hereunder.
Section 10.4 Not Responsible for Recitals or Issuance of Certificates.
The recitals and representations contained herein and in the Certificates,
except any such recitals relating to the Trustee, shall be taken as the
statements of the Seller, and the Trustee assumes no responsibility for their
correctness. The Trustee makes no representation as to the validity or
sufficiency of this Agreement, of the Certificates, of the Mortgage Loans or any
document relating thereto other than as to validity and sufficiency of its
authentication of the Certificates.
Section 10.5 May Hold Certificates. The Trustee or any agent of the
Trust, in its individual or any other capacity, may become an Owner or pledgee
of Certificates and may otherwise deal with the Trust with the same rights it
would have if it were not Trustee or such agent.
Section 10.6 Money Held in Trust. Money held by the Trustee in trust
hereunder need not be segregated from other trust funds except to the extent
required herein or required by law. The Trustee shall be under no liability for
interest on any money received by it hereunder except as otherwise agreed with
the Seller and except to the extent of income or other gain on investments which
are deposits in or certificates of deposit of the Trustee in its commercial
capacity and income or other gain actually received by the Trustee on Eligible
Investments.
Section 10.7 No Lien for Fees. The Trustee shall have no lien on the
Trust Estate for the payment of any fees and expenses.
Section 10.8 Corporate Trustee Required; Eligibility. There shall at
all times be a Trustee hereunder which shall be 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 at least $100,000,000, subject to
supervision or examination by the United States of America or any such State
having a rating or ratings acceptable to the Certificate Insurer and having a
long-term deposit rating of at least BBB from Standard & Poor's (or such lower
rating as may be acceptable to Standard & Poor's) and at least Baa2 from Moody's
(or such lower rating as may be acceptable to Moody's). If such Trustee
publishes reports of condition at least annually, pursuant to law or to the
requirements of the aforesaid supervising or examining authority, then for the
purposes of this Section, the combined capital and surplus of such corporation
or association shall be deemed to be its combined capital and surplus as set
forth in its most recent report of condition so published. If at any time the
Trustee shall cease to be eligible in accordance with the provisions of this
Section, it shall, upon the request of the Seller with the consent of the
Certificate Insurer (which consent shall not be unreasonably withheld) or of the
Certificate Insurer, resign immediately in the manner and with the effect
hereinafter specified in this Article X.
Section 10.9 Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no
appointment of a successor trustee pursuant to this Article X shall become
effective until the acceptance of appointment by the successor trustee under
Section 10.10 hereof.
(b) The Trustee, or any trustee or trustees hereafter
appointed, may resign at any time by giving written notice of resignation to the
Seller and by mailing notice of resignation by registered mail, postage prepaid,
to the Certificate Insurer and the Owners at their addresses appearing on the
Register. A copy of such notice shall be sent by the resigning Trustee to
Moody's and Standard &
- 102 -
<PAGE>
Poor's. Upon receiving notice of resignation, the Seller shall promptly appoint
a successor trustee or trustees reasonably acceptable to the Certificate Insurer
evidenced by its written consent by written instrument, in duplicate, executed
on behalf of the Trust by an Authorized Officer of the Seller, one copy of which
instrument shall be delivered to the Trustee so resigning and one copy to the
successor trustee or trustees. If no successor trustee shall have been appointed
by the Seller and have accepted appointment within 30 days after the giving of
such notice of resignation, the Trustee shall give notice to the Certificate
Insurer of such failure and the Certificate Insurer shall have an additional 30
days to appoint a successor trustee. If after such time no successor has been
appointed and accepted then the resigning trustee may petition any court of
competent jurisdiction for the appointment of a successor trustee. Such court
may thereupon, after such notice, if any, as it may deem proper, appoint a
successor trustee.
(c) If at any time the Trustee shall cease to be eligible
under Section 10.8 hereof and shall fail to resign after written request
therefor by the Seller or by the Certificate Insurer, the Certificate Insurer or
the Seller with the written consent of the Certificate Insurer may remove the
Trustee and appoint a successor trustee by written instrument, in duplicate,
executed on behalf of the Trust by an Authorized Officer of the Seller, one copy
of which instrument shall be delivered to the Trustee so removed and one copy to
the successor trustee.
(d) The Owners of a majority of the Percentage Interests
represented by the Class A Certificates, or, if there are no Class A
Certificates then Outstanding, by such majority of the Percentage Interests
represented by the Class R Certificates, may at any time remove the Trustee and
appoint a successor trustee by delivering to the Trustee to be removed, to the
successor trustee so appointed, to the Seller and to the Certificate Insurer,
copies of the record of the act taken by the Owners, as provided for in Section
11.3 hereof.
(e) If the Trustee fails to perform its duties in accordance
with the terms of this Agreement or becomes ineligible to serve as Trustee, the
Certificate Insurer may remove the Trustee and appoint a successor trustee by
written instrument, in triplicate, signed by the Certificate Insurer duly
authorized, one complete set of which instruments shall be delivered to the
Seller, one complete set to the Trustee so removed and one complete set to the
successor Trustee so appointed. If no successor is appointed, then the removed
trustee may petition any court of competent jurisdiction for the appointment of
a successor trustee. Such court may thereupon, after such notice, if any, as it
may deem proper and prescribe, appoint a successor trustee.
(f) If the Trustee shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of the Trustee
for any cause, the Seller shall promptly appoint a successor Trustee. If within
one year after such resignation, removal or incapability or the occurrence of
such vacancy, a successor Trustee shall be appointed by act of the Owners of a
majority of the Percentage Interests represented by the Class A Certificates
then Outstanding or, if there are no Class A Certificates then Outstanding, by
such majority of the Percentage Interest of the Class R Certificates delivered
to the Seller and the retiring Trustee, the successor Trustee so appointed shall
forthwith upon its acceptance of such appointment become the successor Trustee
and supersede the successor Trustee appointed by the Seller. If no successor
Trustee shall have been so appointed by the Seller or the Owners and shall have
accepted appointment in the manner hereinafter provided, any Owner may, on
behalf of himself and all others similarly situated, petition any court of
competent jurisdiction for the appointment of a successor Trustee. Such court
may thereupon, after such notice, if any, as it may deem proper and prescribe,
appoint a successor Trustee.
(g) The Seller shall give notice of any removal of the Trustee
by mailing notice of such event by registered mail, postage prepaid, to the
Certificate Insurer and to the Owners as their names and addresses appear in the
Register. Each notice shall include the name of the successor Trustee and the
address of its corporate trust office.
- 103 -
<PAGE>
Section 10.10 Acceptance of Appointment by Successor Trustee. Every
successor Trustee appointed hereunder shall execute, acknowledge and deliver to
the Seller on behalf of the Trust, to the Certificate Insurer and to its
predecessor Trustee an instrument accepting such appointment hereunder and
stating its eligibility to serve as Trustee 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 vested with all the rights, powers, trusts, duties and obligations of its
predecessor hereunder; but, on request of the Seller, the Certificate Insurer or
the successor Trustee, such predecessor Trustee shall, upon payment of its
charges then unpaid, execute and deliver an instrument transferring to such
successor Trustee all of the rights, powers and trusts of the Trustee so ceasing
to act, and shall duly assign, transfer and deliver to such successor Trustee
all property and money held by such Trustee so ceasing to act hereunder. Upon
request of any such successor Trustee, the Seller on behalf of the Trust shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Trustee all such rights, powers and trusts.
Upon acceptance of appointment by a successor Trustee as provided in
this Section, the Seller shall mail notice thereof by first-class mail, postage
prepaid, to the Owners at their last addresses appearing upon the Register and
to the Certificate Insurer. The Seller shall send a copy of such notice to
Moody's and Standard & Poor's. If the Seller 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 at the expense of the Trust.
No successor Trustee shall accept its appointment unless at the time of
such acceptance such successor shall be qualified and eligible under this
Article X.
Section 10.11 Merger, Conversion, Consolidation or Succession to
Business of the Trustee. Any corporation or association into which the Trustee
may be merged or converted or with which it may be consolidated, any corporation
or association resulting from any merger, conversion or consolidation to which
the Trustee shall be a party or any corporation or association succeeding to all
or substantially all of the corporate trust business of the Trustee shall be the
successor of the Trustee hereunder, without the execution or filing of any paper
or any further act on the part of any of the parties hereto; provided, however,
that such corporation or association shall be otherwise qualified and eligible
under this Article X. In case any Certificates have been executed, but not
delivered, by the Trustee then in office, any successor by merger, conversion or
consolidation to such Trustee may adopt such execution and deliver the
Certificates so executed with the same effect as if such successor Trustee had
itself executed such Certificates.
Section 10.12 Reporting; Withholding. The Trustee shall timely provide
to the Owners the Internal Revenue Service's Form 1099 and any other statement
required by applicable Treasury regulations as determined by the Seller and
shall withhold, as required by applicable law, federal, state or local taxes, if
any, applicable to distributions to the Owners, including but not limited to
backup withholding under Section 3406 of the Code and the withholding tax on
distributions to foreign investors under Sections 1441 and 1442 of the Code.
Section 10.13 Liability of the Trustee. The Trustee shall be liable in
accordance herewith only to the extent of the obligations specifically imposed
upon and undertaken by the Trustee herein. Neither the Trustee nor any of the
directors, officers, employees or agents of the Trustee shall be under any
liability on any Certificate or otherwise to any Account, the Seller, the
Servicer or any Owner for any action taken or for refraining from the taking of
any action in good faith pursuant to this Agreement, or for errors in judgment;
provided, however, that this provision shall not protect the Trustee or any such
Person against any liability which would otherwise be imposed by reason of
negligent action, negligent failure to act or bad faith in the performance of
duties or by reason of reckless disregard of obligations and duties hereunder.
Subject to the foregoing sentence, the Trustee shall not be liable for losses on
investments of amounts in any Account (except for any losses on investments on
the amounts in the
- 104 -
<PAGE>
Certificate Account). In addition, the Seller and the Servicer covenant and
agree to indemnify the Trustee, the Oversight Agent and the Certificate Insurer,
and the Seller covenants and agrees to indemnify the Servicer when the Trustee
is acting as Servicer, from, and hold it harmless against, any and all losses,
liabilities, damages, claims or expenses (including legal fees and expenses)
other than those resulting from the negligence or bad faith of the Trustee. In
the event that the Trustee (or the Servicer, when the Trustee is acting in such
capacity) delivers written demand for indemnification pursuant to this Section
10.13 to the Seller and/or the Servicer, as applicable, and the Seller and the
Servicer fail, within 30 days of the delivery of such demand, to reimburse the
Trustee for any such loss, liability, damage, claim or expense (or to
affirmatively assume in writing the defense of any action asserting liability of
or claim against the Trustee and to provide to the Trustee reasonable evidence
of the Seller's or the Servicer's, as the case may be, ability to pay for the
defense of any such action and any resulting loss, liability, claim or expense),
then such loss, liability, damage, claim or expense shall be an obligation of
the Trust, and the Trustee shall be entitled to be reimbursed therefor out of
the Certificate Account as provided in Section 7.5(d) hereof. The Trustee and
the Certificate Insurer and any director, officer, employee or agent thereof may
rely and shall be protected in acting or refraining from acting in good faith on
any certificate, notice or other document of any kind prima facie properly
executed and submitted by the Authorized Officer of any Person respecting any
matters arising hereunder. Provisions of this Section 10.13 shall survive the
termination of this Agreement.
Section 10.14 Appointment of Co-Trustee or Separate Trustee.
Notwithstanding any other provisions of this Agreement, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any part
of the Trust Estate or Property may at the time be located, the 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 and the
Certificate Insurer to act as co-Trustee or co-Trustees, jointly with the
Trustee, of all or any part of the Trust Estate or separate Trustee or separate
Trustees of any part of the Trust Estate and to vest in such Person or Persons,
in such capacity and for the benefit of the Owners, such title to the Trust
Estate, or any part thereof, and, subject to the other provisions of this
Section 10.14, such powers, duties, obligations, rights and trusts as the
Servicer and the Trustee may consider necessary or desirable. If the Servicer
shall not have joined in such appointment within 15 days after the receipt by it
of a request so to do, or in the case any event indicated in Sections 8.20(a) or
8.20(b) shall have occurred and be continuing, the Trustee alone shall have the
power to make such appointment (with the written consent of the Certificate
Insurer). No co-Trustee or separate Trustee hereunder shall be required to meet
the terms of eligibility as a successor Trustee under Section 10.8 and no notice
to Owner of the appointment of any co-Trustee or separate Trustee shall be
required under Section 10.8.
Every separate Trustee and co-Trustee shall, to the extent permitted,
be appointed and act subject to the following provisions and conditions:
(i) All rights, powers, duties and obligations conferred
or imposed upon the Trustee shall be conferred or
imposed upon and exercised or performed by the
Trustee and such separate Trustee or co-Trustee
jointly (it being understood that such separate
Trustee or co-Trustee is not authorized to act
separately without the Trustee joining in such act),
except to the extent that under any law of any
jurisdiction in which any particular act or acts are
to be performed (whether as Trustee hereunder or as
successor to the 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 Estate or any portion thereof in
any such jurisdiction) shall be exercised and
performed singly by such separate Trustee or
co-Trustee, but solely at the direction of the
Trustee;
- 105 -
<PAGE>
(ii) No co-Trustee hereunder shall be held personally
liable by reason of any act or omission of any other
co-Trustee hereunder; and
(iii) The Servicer and the Trustee acting jointly may at
any time accept the resignation of or remove any
separate Trustee or co-Trustee.
Any notice, request or other writing given to the Trustee shall be
deemed to have been given to each of the then separate Trustees and co-Trustees,
as effectively as if given to each of them. Every instrument appointing any
separate Trustee or co-Trustee shall refer to this Agreement and the conditions
of this Section 10.14. 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 and a copy thereof given to the
Servicer.
Any separate Trustee or co-Trustee may, at any time, constitute the
Trustee, its agent or attorney-in-fact, with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. If any separate Trustee or co-Trustee
shall die, become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Trustee, to the extent permitted by law, without the appointment of a new or
successor Trustee.
The Trustee shall give to Moody's, the Seller and the Certificate
Insurer notice of the appointment of any Co-Trustee or separate Trustee.
Section 10.15 Appointment of Custodians. The Trustee may appoint one or
more Custodians to hold all or a portion of the Trustee's Files as agent for the
Trustee, by entering into a Custodial Agreement acceptable to the Certificate
Insurer in substantially the form of Exhibit L. Subject to this Article X, the
Trustee agrees to comply with the terms of each Custodial Agreement and to
enforce the terms and provisions thereof against the Custodian for the benefit
of the Owners of the Certificates and the Certificate Insurer.
ARTICLE XI
MISCELLANEOUS
Section 11.1 Compliance Certificates and Opinions. Upon any application
or request by the Seller, the Certificate Insurer or the Owners to the Trustee
to take any action under any provision of this Agreement, the Seller, the
Certificate Insurer or the Owners, as the case may be, shall furnish to the
Trustee a certificate stating that all conditions precedent, if any, provided
for in this Agreement relating to the proposed action have been complied with,
except that in the case of any such application or request as to which the
furnishing of any documents is specifically required by any provision of this
Agreement relating to such particular application or request, no additional
certificate need be furnished.
Except as otherwise specifically provided herein, each certificate or
opinion with respect to compliance with a condition or covenant provided for in
this Agreement shall include:
(a) a statement that each individual signing such certificate
or opinion has read such covenant or condition and the definitions herein
relating thereto;
(b) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions contained in
such certificate or opinion are based; and
- 106 -
<PAGE>
(c) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
Section 11.2 Form of Documents Delivered to the Trustee. In any case
where several matters are required to be certified by, or covered by an opinion
of, any specified Person, it is not necessary that all such matters be certified
by, or covered by the opinion of, only one such Person or that they be so
certified or covered by only one document, but one such Person may certify or
give an opinion with respect to some matters and one or more other such Persons
as to other matters, and any such Person may certify or give an opinion as to
such matters in one or several documents.
Any certificate of an Authorized Officer of the Trustee may be based,
insofar as it relates to legal matters, upon an opinion of counsel, unless such
Authorized Officer knows, or in the exercise of reasonable care should know,
that the opinion is erroneous. Any such certificate of an Authorized Officer of
the Trustee or any opinion of counsel may be based, insofar as it relates to
factual matter upon a certificate or opinion of, or representations by, one or
more Authorized Officers of the Seller or of the Servicer, stating that the
information with respect to such factual matters is in the possession of the
Seller or of the Servicer, unless such Authorized Officer or counsel knows, or
in the exercise of reasonable care should know, that the certificate or opinion
or representations with respect to such matters are erroneous. Any opinion of
counsel may also be based, insofar as it relates to factual matters, upon a
certificate or opinion of, or representations by, an Authorized Officer of the
Trustee, stating that the information with respect to such matters is in the
possession of the Trustee, unless such counsel knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to such matters are erroneous. Any opinion of counsel may be based
on the written opinion of other counsel, in which event such opinion of counsel
shall be accompanied by a copy of such other counsel's opinion and shall include
a statement to the effect that such counsel believes that such counsel and the
Trustee may reasonably rely upon the opinion of such other counsel.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Agreement, they may, but need not, be consolidated and
form one instrument.
Section 11.3 Acts of Owners. Any request, demand, authorization,
direction, notice, consent, waiver or other action provided by this Agreement to
be given or taken by the Owners may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such Owners in person or by
an agent duly appointed in writing; and, except as herein otherwise expressly
provided, such action shall become effective when such instrument or instruments
are delivered to the Trustee, and, where it is hereby expressly required, to the
Seller. Such instrument or instruments (and the action embodied therein and
evidenced thereby) are herein sometimes referred to as the "act" of the Owners
signing such instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent shall be sufficient for any
purpose of this Agreement and conclusive in favor of the Trustee and the Trust,
if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any
such instrument or writing may be proved by the affidavit of a witness of such
execution or by the certificate of any notary public or other officer authorized
by law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Whenever
such execution is by an officer of a corporation or a member of a partnership on
behalf of such corporation or partnership, such certificate or affidavit shall
also constitute sufficient proof of his authority.
(c) The ownership of Certificates shall be proved by the
Register.
- 107 -
<PAGE>
(d) Any request, demand, authorization, direction, notice,
consent, waiver or other action by the Owner of any Certificate shall bind the
Owner of every Certificate issued upon the registration of transfer thereof or
in exchange therefor or in lieu thereof, in respect of anything done, omitted or
suffered to be done by the Trustee or the Trust in reliance thereon, whether or
not notation of such action is made upon such Certificates.
Section 11.4 Notices, etc. to Trustee. Any request, demand,
authorization, direction, notice, consent, waiver or act of the Owners or other
documents provided or permitted by this Agreement to be made upon, given or
furnished to or filed with the Trustee by any Owner, the Certificate Insurer or
by the Seller shall be sufficient for every purpose hereunder if made, given,
furnished or filed in writing to or with and received by the Trustee at its
corporate trust office as set forth in Section 2.2 hereof.
Section 11.5 Notices and Reports to Owners; Waiver of Notices. Where
this Agreement provides for notice to Owners of any event or the mailing of any
report to Owners, such notice or report shall be sufficiently given (unless
otherwise herein expressly provided) if mailed, first-class postage prepaid, to
each Owner affected by such event or to whom such report is required to be
mailed, at the address of such Owner as it appears on the Register, not later
than the latest date, and not earlier than the earliest date, prescribed for the
giving of such notice or the mailing of such report. In any case where a notice
or report to Owners is mailed in the manner provided above, neither the failure
to mail such notice or report nor any defect in any notice or report so mailed
to any particular Owner shall affect the sufficiency of such notice or report
with respect to other Owners, and any notice or report which is mailed in the
manner herein provided shall be conclusively presumed to have been duly given or
provided.
Where this Agreement provides for notice in any manner, such notice may
be waived in writing by any Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Owners shall be filed with the Trustee, but such
filing shall not be a condition precedent to the validity of any action taken in
reliance upon such waiver.
In case, by reason of the suspension of regular mail service as a
result of a strike, work stoppage or similar activity, it shall be impractical
to mail notice of any event to Owners when such notice is required to be given
pursuant to any provision of this Agreement, then any manner of giving such
notice as shall be satisfactory to the Trustee shall be deemed to be a
sufficient giving of such notice.
Where this Agreement provides for notice to any rating agency that
rated any Certificates, failure to give such notice shall not affect any other
rights or obligations created hereunder.
Section 11.6 Rules by Trustee and the Seller. The Trustee may make
reasonable rules for any meeting of Owners. The Seller may make reasonable rules
and set reasonable requirements for its functions.
Section 11.7 Successors and Assigns. All covenants and agreements in
this Agreement by any party hereto shall bind its successors and assigns,
whether so expressed or not.
Section 11.8 Severability. In case any provision in this Agreement or
in the Certificates shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
Section 11.9 Benefits of Agreement. Nothing in this Agreement or in the
Certificates, expressed or implied, shall give to any Person, other than the
Owners, the Certificate Insurer and the parties hereto and their successors
hereunder, any benefit or any legal or equitable right, remedy or claim under
this Agreement.
Section 11.10 Legal Holidays. In any case where the date of any
Remittance Date, any Payment Date, any other date on which any distribution to
any Owner is proposed to be paid or any date on which a notice is required to be
sent to any Person pursuant to the terms of this Agreement shall not be
- 108 -
<PAGE>
a Business Day, then (notwithstanding any other provision of the Certificates or
this Agreement) payment or mailing need not be made on such date but may be made
on the next succeeding Business Day with the same force and effect as if made or
mailed on the nominal date of any such Remittance Date, such Payment Date or
such other date for the payment of any distribution to any Owner or the mailing
of such notice, as the case may be, and no interest shall accrue for the period
from and after any such nominal date, provided such payment is made in full on
such next succeeding Business Day.
Section 11.11 Governing Law. In view of the fact that Owners are
expected to reside in many states and outside the United States and the desire
to establish with certainty that this Agreement will be governed by and
construed and interpreted in accordance with the law of a state having a
well-developed body of commercial and financial law relevant to transactions of
the type contemplated herein, this Agreement and each Certificate shall be
construed in accordance with and governed by the laws of the State of New York
applicable to agreements made and to be performed therein, without regard to the
conflicts of law principles thereof.
Section 11.12 Counterparts. This instrument may be executed in any
number of counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instrument.
Section 11.13 Usury. The amount of interest payable or paid on any
Certificate under the terms of this Agreement shall be limited to an amount
which shall not exceed the maximum nonusurious rate of interest allowed by the
applicable laws of the State of New York or any applicable law of the United
States permitting a higher maximum nonusurious rate that preempts such
applicable New York laws, which could lawfully be contracted for, charged or
received (the "Highest Lawful Rate"). In the event any payment of interest on
any Certificate exceeds the Highest Lawful Rate, the Trust stipulates that such
excess amount will be deemed to have been paid to the Owner of such Certificate
as a result of an error on the part of the Trustee acting on behalf of the Trust
and the Owner receiving such excess payment shall promptly, upon discovery of
such error or upon notice thereof from the Trustee on behalf of the Trust,
refund the amount of such excess or, at the option of such Owner, apply the
excess to the payment of principal of such Certificate, if any, remaining
unpaid. In addition, all sums paid or agreed to be paid to the Trustee for the
benefit of Owners of Certificates for the use, forbearance or detention of money
shall, to the extent permitted by applicable law, be amortized, prorated,
allocated and spread throughout the full term of such Certificates.
Section 11.14 Amendment.
(a) The Trustee, the Seller, the Oversight Agent and the
Servicer, may at any time and from time to time, with the prior approval of the
Certificate Insurer but without the giving of notice to or the receipt of the
consent of the Owners, amend this Agreement for the purposes of (i) removing the
restriction against the transfer of a Class R Certificate to a Disqualified
Organization (as such term is defined in the Code) if accompanied by an opinion
of counsel experienced in federal income tax matters addressed to the
Certificate Insurer and the Trustee that there is or will be no adverse effect
as a result of such amendment, (ii) complying with the requirements of the Code
including any amendments necessary to maintain the treatment of the Trust (other
than the Non-REMIC Accounts) as a REMIC hereunder, (iii) curing any ambiguity
and (iv) correcting or supplementing any provisions of this Agreement which are
inconsistent with any other provisions of this Agreement or adding provisions to
this Agreement which are not inconsistent with the provisions of this Agreement;
(v) adding any other provisions with respect to matters or questions arising
under this Agreement; or (vi) for any other purpose, provided that in the case
of clause (vi), (A) prior to the effectiveness of such amendment, the Seller
delivers an opinion of counsel acceptable to the Trustee and the Certificate
Insurer that such amendment will not adversely affect in any material respect
the interest of the Owners and the Certificate Insurer and (B) such amendment
will not result in a withdrawal or reduction of the rating of the Class A
Certificates without regard to the Certificate Insurance Policies.
Notwithstanding anything to the contrary, no such amendment shall (a) change in
any manner the amount of, or delay the timing of, payments which are required to
be
- 109 -
<PAGE>
distributed to any Owner without the consent of the Owner of such Certificate,
(b) change the percentages of Percentage Interest which are required to consent
to any such amendments, without the consent of the Owners of all Certificates of
the Class or Classes affected then outstanding or (c) which affects in any
manner the terms or provisions of the related Certificate Insurance Policy.
(b) This Agreement may be amended from time to time by the
Servicer, the Seller, the Oversight Agent and the Trustee with the consent of
the Certificate Insurer (which consent shall not be withheld if, in an opinion
of counsel addressed to the Trustee and the Certificate Insurer, failure to
amend would adversely affect the interests of the Owners) and the Owners of 66
2/3% of the Class A Certificates 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 Owners; provided, however, that no
such amendment shall be made that no such amendment shall reduce in any manner
the amount of, or delay the timing of, payments received on Mortgage Loans which
are required to be distributed on any Certificate without the consent of the
Owner of such Certificate or reduce the percentage for each Class the Owners of
which are required to consent to any such amendment without the consent of the
Owners of 100% of each affected Class of Certificates.
(c) Each proposed amendment to this Agreement shall be
accompanied by an opinion of counsel nationally recognized in federal income tax
matters and reasonably acceptable to the Certificate Insurer addressed to the
Trustee and to the Certificate Insurer to the effect that such amendment would
not adversely affect the status of the Trust (other than the Non-REMIC Accounts)
as a REMIC.
(d) The Certificate Insurer, the Owners, the Custodian,
Moody's and Standard & Poor's shall be provided with copies of any amendments to
this Agreement, together with copies of any opinions or other documents or
instruments executed in connection therewith.
(e) Prior to consenting to any amendment to the Agreement
pursuant to this Section 11.14, the Trustee shall be entitled to receive an
Opinion of Counsel (not at the expense of the Trustee) stating that the
amendment is authorized and permitted under this Agreement.
Section 11.15 REMIC Status; Taxes.
(a) The Tax Matters Person shall prepare and file or cause to
be filed with the Internal Revenue Service federal tax or information returns
with respect to the Trust and the Certificates containing such information and
at the times and in such manner as may be required by the Code or applicable
Treasury regulations and shall furnish to Owners such statements or information
at the times and in such manner as may be required thereby. For this purpose,
the Tax Matters Person may, but need not, rely on any proposed regulations of
the United States Department of the Treasury. The Tax Matters Person shall
indicate the election to treat the Trust (other than the Non-REMIC Accounts) as
a REMIC (which election shall apply to the taxable period ending December 31,
1999 and each calendar year thereafter) in such manner as the Code or applicable
Treasury regulations may prescribe. First Alliance Portfolio Services, Inc., as
Tax Matters Person appointed pursuant to Section 11.17 hereof, shall sign all
tax information returns filed pursuant to this Section 11.15. The Tax Matters
Person shall provide information necessary for the computation of tax imposed on
the transfer of a Class R Certificate to a Disqualified Organization, an agent
of a Disqualified Organization or a pass-through entity in which a Disqualified
Organization is the record holder of an interest. The Tax Matters Person shall
provide the Trustee with copies of any Federal tax or information returns filed,
or caused to be filed, by the Tax Matters Person with respect to the Trust or
the Certificates. Notwithstanding the foregoing, the Trustee will apply for an
Employer Identification Number from the Internal Revenue Service by means of
submitting a Form SS-4 or any other acceptable method.
- 110 -
<PAGE>
(b) The Tax Matters Person shall timely file all reports
required to be filed by the Trust with any federal, state or local governmental
authority having jurisdiction over the Trust, including other reports that must
be filed with the Owners, such as the Internal Revenue Service's Form 1066 and
Schedule Q and the form required under Section 6050K of the Code, if applicable
to REMICs. Furthermore, the Tax Matters Person shall report to Owners, if
required, with respect to the allocation of expenses pursuant to Section 212 of
the Code in accordance with the specific instructions to the Tax Matters Person
by the Seller with respect to such allocation of expenses. The Tax Matters
Person shall collect any forms or reports from the Owners determined by the
Seller to be required under applicable federal, state and local tax laws.
Notwithstanding the foregoing, the Trustee will make all filings with the
Internal Revenue Service required to be made on Form 8811.
(c) The Tax Matters Person shall provide to the Internal
Revenue Service and to persons described in Section 860E(e)(3) and (6) of the
Code the information described in Proposed Treasury Regulation Section
1.860D-1(b)(5)(ii), or any successor regulation thereto. Such information will
be provided in the manner described in Proposed Treasury Regulation Section
1.860E(2)(a)(5), or any successor regulation thereto.
(d) The Seller covenants and agrees that within ten Business
Days after the Startup Day it shall provide to the Tax Matters Person any
information necessary to enable the Tax Matters Person to meet its obligations
under subsections (b) and (c) above.
(e) The Trustee, the Seller and the Servicer each covenants
and agrees for the benefit of the Owners and the Certificate Insurer (i) to take
no action which would result in the termination of "REMIC" status for the Trust
(other than the Non-REMIC Accounts) (ii) not to engage in any "prohibited
transaction", as such term is defined in Section 860F(a)(2) of the Code and
(iii) not to engage in any other action which may result in the imposition on
the Trust of any other taxes under the Code.
(f) The Trust shall, for federal income tax purposes, maintain
books on a calendar year basis and report income on an accrual basis.
(g) Except as otherwise permitted by Section 7.6(b) hereof, no
Eligible Investment shall be sold prior to its stated maturity (unless sold
pursuant to a plan of liquidation in accordance with Article IX hereof).
(h) Neither the Seller nor the Trustee shall enter into any
arrangement by which the Trustee will receive a fee or other compensation for
services rendered pursuant to this Agreement, which fee or other compensation is
paid from the Trust Estate, other than as expressly contemplated by this
Agreement.
(i) Notwithstanding the foregoing clauses (g) and (h), the
Trustee or the Seller may engage in any of the transactions prohibited by such
clauses, provided that the Trustee shall have received an opinion of counsel
experienced in federal income tax matters and reasonably acceptable to the
Certificate Insurer, which opinion shall not be at the expense of the Trustee,
to the effect that such transaction does not result in a tax imposed on the
Trustee or cause a termination of REMIC status for the Trust (other than the
Non-REMIC Accounts); provided, however, that such transaction is otherwise
permitted under this Agreement.
Section 11.16 Additional Limitation on Action and Imposition of Tax.
(a) Any provision of this Agreement to the contrary
notwithstanding, the Trustee shall not, without having obtained an opinion of
counsel experienced in federal income tax matters and reasonably acceptable to
the Certificate Insurer, which opinion shall not be at the expense of the
Trustee,
- 111 -
<PAGE>
to the effect that such transaction does not result in a tax imposed on the
Trust or cause a termination of REMIC status for the Trust (other than the
Non-REMIC Accounts), (i) sell any assets in the Trust Estate, (ii) accept any
contribution of assets after the Startup Day or (iii) agree to any modification
of this Agreement.
(b) In the event that any tax is imposed on "prohibited
transactions" of the Trust as defined in Section 860F(a)(2) of the Code, on the
"net income from foreclosure property" as defined in Section 860G(c) of the
Code, on any contribution to the Trust after the Startup Day pursuant to Section
860G(d) of the Code or any other tax (other than any minimum tax imposed by
Sections 23151(a) or 23153(a) of the California Revenue and Taxation Code) is
imposed, such tax shall be paid by (i) the Trustee, if such tax arises out of or
results from the negligence of the Trustee in the performance of any of its
obligations under this Agreement, (ii) the Servicer, if such tax arises out of
or results from a breach by the Servicer of any of its obligations under this
Agreement or (iii) the Owners of the Class R Certificates in proportion to their
Percentage Interests. To the extent such tax is chargeable against the Owners of
the Class R Certificates, notwithstanding anything to the contrary contained
herein, the Trustee is hereby authorized to retain from amounts otherwise
distributable to the Owners of the Class R Certificates on any Payment Date
sufficient funds to reimburse the Trustee for the payment of such tax (to the
extent that the Trustee has not been previously reimbursed or indemnified
therefor). The Trustee agrees to first seek indemnification for any such tax
payment from any indemnifying parties before reimbursing itself from amounts
otherwise distributable to the Owners of the Class R Certificates.
Section 11.17 Appointment of Tax Matters Person. A Tax Matters Person
will be appointed for the Trust for all purposes of the Code, and such Tax
Matters Person will perform, or cause to be performed through agents, such
duties and take, or cause to be taken, such actions as are required to be
performed or taken by the Tax Matters Person under the Code. The Tax Matters
Person for the Trust shall be First Alliance Portfolio Services, Inc. as long as
it owns a Class R Certificate or, if First Alliance Portfolio Services, Inc.
does not own a Class R Certificate, may be any other entity selected by First
Alliance Portfolio Services, Inc. that owns a Class R Certificate.
Section 11.18 The Certificate Insurer. The Certificate Insurer is a
third-party beneficiary of this Agreement. Any right conferred to the
Certificate Insurer shall be suspended during any period in which the
Certificate Insurer is in default in its payment obligations under the
Certificate Insurance Policies. During any period of suspension the Certificate
Insurer's rights hereunder shall vest in the Owners of the Class A Certificates
and shall be exercisable by the Owners of at least a majority in Percentage
Interest of the Class A Certificates then Outstanding. At such time as the Class
A Certificates are no longer Outstanding hereunder and the Certificate Insurer
has been reimbursed for all Insured Payments to which it is entitled hereunder,
the Certificate Insurer's rights hereunder shall terminate.
Section 11.19 Maintenance of Records. Each Owner of a Class R
Certificate shall each continuously keep an original executed counterpart of
this Agreement in its official records.
Section 11.20 Notices. All notices hereunder shall be given as follows,
until any superseding instructions are given to all other Persons listed below:
The Trustee: The Chase Manhattan Bank
450 West 33rd Street
14th Floor
New York, New York 10001
Attention: First Alliance Mortgage Loan Trust 1999-4
Tel: (212) 946-8600
Fax: (212) 946-3240
The Seller: First Alliance Mortgage Company
17305 Von Karman Avenue
Irvine, California 92614-6203
Attention: Director, Secondary Marketing
Tel: (949) 224-8378
Fax: (949) 224-8366
- 112 -
<PAGE>
The Servicer: First Alliance Mortgage Company
17305 Von Karman Avenue
Irvine, California 92614-6203
Attention: Manager, Investor Reporting
Tel: (949) 224-8585
Fax: (949) 224-8366
The Oversight Agent: The Chase Manhattan Bank
1400 E. Newport Center Drive
Deerfield Beach, Florida 33442
Attention: First Alliance Mortgage Loan Trust 1999-4
Tel: (954) 698-1189
Fax: (954) 698-1194
The Certificate
Insurer: MBIA Insurance Corporation
113 King Street
Armonk, New York 10504
Attention: Insured Portfolio Management -
Structured Finance (IPM-SF)
First Alliance Mortgage Loan Trust 1999-4
Tel: (914) 765-3781
Fax: (914) 765-3810
Moody's: Moody's Investors Service
99 Church Street
New York, New York 10007
Attention: The Home Equity Monitoring Department
Standard & Poor's: Standard & Poor's Ratings Services,
a division of The McGraw-Hill Companies
55 Water Street
New York, New York 10041
Attention: Residential Mortgage
Surveillance Dept.
Underwriter: Lehman Brothers Inc.
Three World Financial Center
New York, New York 10285
Attention: Samir Tabet
Tel: (212) 526-7512
Fax: (212) 526-8579
- 113 -
<PAGE>
IN WITNESS WHEREOF, the Seller, the Servicer, the Oversight Agent and
the Trustee have caused this Agreement to be duly executed by their respective
officers thereunto duly authorized, all as of the day and year first above
written.
FIRST ALLIANCE MORTGAGE COMPANY,
as Seller
By: /s/ Francisco Nebot
-------------------------------
Name: Francisco Nebot
Title: Exec. Vice President and CFO
FIRST ALLIANCE MORTGAGE COMPANY,
as Servicer
By: /s/ Francisco Nebot
-------------------------------
Name: Francisco Nebot
Title: Exec. Vice President and CFO
THE CHASE MANHATTAN BANK, as Trustee
By: /s/ Diane E. Wallace
-------------------------------
Name: Diane E. Wallace
Title: Trust Officer
THE CHASE MANHATTAN BANK, as Oversight Agent
By: /s/ Diane E. Wallace
-------------------------------
Name: Diane E. Wallace
Title: Trust Officer
<PAGE>
STATE OF CALIFORNIA )
) ss.:
COUNTY OF ORANGE )
On the 15th day of December, 1999, before me, a Notary Public,
personally appeared Francisco Nebot, personally known to me (or proved to me on
the basis of satisfactory evidence) to be the person whose name is subscribed to
the within instrument and acknowledged to me that he executed the same in his
authorized capacity, and that by his signature on the instrument the person, or
the entity upon behalf of which the person acted, executed the instrument.
WITNESS my hand and official seal.
/s/ M. Parga
-------------------------
[NOTARIAL SEAL]
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 17th day of December, 1999, before me, personally came Diane
Wallace, to me known, who being by me duly sworn did depose and say that his/her
office is located at 450 West 33rd Street, 14th Floor, New York, New York 10001;
that (s)he is a Trust Officer of The Chase Manhattan Bank, the New York banking
corporation herein that executed the above instrument as Trustee and Oversight
Agent; and that (s)he signed his/her name thereto under the authority granted by
the Board of Directors of said New York banking corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this Certificate first above written.
/s/ Margaret M. Price
---------------------
[NOTARIAL SEAL]
Exhibit 99.1
FIRST ALLIANCE MORTGAGE LOAN TRUST 1999-4
SCHEDULE OF LOANS REMOVED PRIOR TO CLOSING
<TABLE>
<CAPTION>
Loan # Borrower Name Security Balance Property Address City State Zip
- - - - - - - - - - - --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
205249 CHARLTON, WILLIAM A $ 45,964.00 1105 39TH STREET SAN DIEGO CA 92113
303491 CARBAJAL, GREGORIO L. $ 71,819.79 11906 165TH STREET NORWALK CA 90650
2102378 SOUTH, FED A $ 58,645.00 2812 SE 115TH AVENUE PORTLAND OR 97266
2202212 ALVAREZ, CANDIDO $ 201,329.01 2514 W. PALMER ST. CHICAGO IL 60647
2202220 TUFFEY, MARY T $ 185,500.71 2141 W. CULLOM AVE. CHICAGO IL 60618
2600839 HARRINGTON, EILEEN $ 89,990.00 1729 E BELL DE MAR DR TEMPE AZ 85283
92004495 WILLEY, GAIL J. $ 50,893.29 23733 N.E. 192 ND WAY WOODINVILLE WA 98072
- - - - - - - - - - - -----------------------------------------------------------------------------------------------------------
7 $ 704,141.80
</TABLE>
