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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) December 17, 1996
Credit Suisse First Boston Mortgage Securities Corp.
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(Exact name of registrant as specified in its charter)
Delaware 333-16145 13-3320910
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(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
11 Madison Avenue
New York, New York 10010 10010
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(Address of Principal (Zip Code)
Executive Offices)
Registrant's telephone number, including area code (212) 325-7537
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CS First Boston Mortgage Securities Corp.
Park Avenue Plaza
New York, New York 10055
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(Former name or former address, if changed since last report)
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Item 2.Acquisition or Disposition of Assets
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Description of the Certificates and the Mortgage Loans
Credit Suisse First Boston Mortgage Securities Corp. registered issuances
of up to $300,000,000 principal amount of Conduit Mortgage and Manufactured
Housing Contract Pass-Through Certificates on a delayed or continuous basis
pursuant to Rule 415 under the Securities Act of 1933, as amended (the "Act"),
by a Registration Statement on Form S-3 (Registration File No. 333-16145) (as
amended, the "Registration Statement"). Pursuant to the Registration Statement,
Preferred Mortgage Loan Trust 1996-2 (the "Trust") issued $280,000,000 in
aggregate principal amount of its Preferred Mortgage Asset-Backed Certificates,
Series 1996-2 (the "Certificates"), on December 17, 1996. This Current Report
on Form 8-K is being filed to satisfy an undertaking to file copies of certain
agreements executed in connection with the issuance of the Certificates, the
forms of which were filed as Exhibits to the Registration Statement.
The Certificates were issued pursuant to a Pooling and Servicing
Agreement (the "Pooling and Servicing Agreement") attached hereto as Exhibit
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4.2, dated as of December 1, 1996, among CS First Boston Mortgage Securities
Corp., a Delaware corporation (the "Depositor") and T.A.R. Preferred Mortgage
Corporation, a California corporation (the "Seller"), Advanta Mortgage Corp.
USA, as servicer, and Bankers Trust Company, as trustee (the "Trustee"). The
Certificates consist of six classes of fixed rate certificates, the Class A-1
Certificates, the Class A-2 Certificates, the Class A-3 Certificates, the Class
A-4 Certificates, the Class A-5 Certificates and the Class A-6 Certificates
(collectively, the "Class A Certificates"). In addition to the Class A
Certificates the Trust will also issue two subordinate Classes of Certificates
(the "Class B Certificates" and the "Class C Certificates") and one or more
Classes of Residual 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 consist primarily of a pool of fixed-rate,
closed-end loans which are secured by mortgages on residential properties, which
are generally subordinate (the "Mortgage Loans").
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, the Class A-2
Certificates, the Class A-3 Certificates, the Class A-4 Certificates, the Class
A-5 Certificates and the Class A-6 Certificates will be 6.43%, 6.32%, 6.39%,
6.62%, 6.96% and 7.18% per annum, respectively.
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The Class A-1 Certificates have an aggregate principal amount of
$80,200,000, the Class A-2 Certificates have an aggregate principal amount of
$29,800,000, the Class A-3 Certificates have an aggregate principal amount of
$43,700,000, the Class A-4 Certificates have an aggregate principal amount of
$59,800,000, the Class A-5 Certificates have an aggregate principal amount of
$16,300,000, and the Class A-6 Certificates have an aggregate principal amount
of $50,200,000.
As of the Closing Date, the Mortgage Loans possessed the characteristics
described in the Prospectus dated November 26, 1996 and the Prospectus
Supplement dated December 9, 1996, filed pursuant to Rule 424(b)(2) of the Act
on December 18, 1996.
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Item 7. Financial Statements, Pro Forma Financial Information and
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Exhibits.
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(a) Not applicable
(b) Not applicable
(c) Exhibits:
1.1 Underwriting Agreement dated December 9, 1996 between CS First
Boston Mortgage Securities Corp. and Credit Suisse First Boston Corporation.
4.1 Sale and Purchase Agreement, dated as of December 17, 1996
between T.A.R. Preferred Mortgage Corporation and CS First Boston Mortgage
Securities Corp.
4.2 Pooling and Servicing Agreement dated as of December 1, 1996,
among CS First Boston Mortgage Securities Corp., T.A.R. Preferred Mortgage
Corporation, Advanta Mortgage Corp. USA and Bankers Trust Company.
10.1 Indemnification Agreement, dated as of December 9, 1996 among
MBIA, T.A.R. Preferred Mortgage Corporation, Advanta Mortgage Corp. USA and CS
First Boston Corporation.
23.1 Consent of Coopers & Lybrand regarding financial statements of
MBIA Insurance Company and their report.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this report
to be signed on its behalf by the undersigned thereunto duly authorized.
CREDIT SUISSE FIRST BOSTON MORTGAGE
SECURITIES CORP.
Registrant and on behalf of
PREFERRED MORTGAGE LOAN TRUST 1996-2
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By:/s/ Joy Margioles
_________________________________________
Name: Joy Margioles
Title: Vice President
Dated: January 23, 1997
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EXHIBIT INDEX
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EXHIBIT NO. DESCRIPTION
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1.1 Underwriting Agreement dated December 9,
1996 between CS First Boston Mortgage
Securities Corp. and Credit Suisse First
Boston Corporation.
4.1 Sale and Purchase Agreement, dated as of
December 17, 1996 between T.A.R.
Preferred Mortgage Corporation and CS
First Boston Mortgage Securities Corp.
4.2 Pooling and Servicing Agreement dated as
of December 1, 1996, among CS First
Boston Mortgage Securities Corp., T.A.R.
Preferred Mortgage Corporation, Advanta
Mortgage Corp. USA and Bankers Trust
Company.
10.1 Indemnification Agreement, dated as of
December 9, 1996 among MBIA, T.A.R.
Preferred Mortgage Corporation, Advanta
Mortgage Corp. USA and CS First Boston
Corporation.
23.1 Consent of Coopers & Lybrand regarding
financial statements of MBIA Insurance
Company and their report.
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EXHIBIT 1.1
CS FIRST BOSTON MORTGAGE SECURITIES CORP.
Depositor
Preferred Mortgage Asset-Backed
Certificates, Series 1996-2
December 9, 1996
UNDERWRITING AGREEMENT
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CS First Boston Corporation
Park Avenue Plaza
55 East 52nd Street
New York, New York 10055
Dear Sirs:
I. Introduction. CS First Boston Mortgage Securities Corp., a
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Delaware corporation (the "Depositor"), proposes to form one or more real estate
mortgage investment conduits (each, a "Trust"), which will issue, from time to
time, securities entitled Preferred Mortgage Asset-Backed
Certificates (the "Certificates") in one or more series (each, a "Series").
Each Certificate will evidence a fractional, undivided percentage interest or
beneficial interest in a Trust. The property of each Trust may consist
primarily of a pool (the "Mortgage Loan Pool") of fixed rate, closed-end loans
secured by mortgages on residential one-to-four family properties (the "Mortgage
Loans") and certain related property to be conveyed to the Trust by the
Depositor (the "Trust Fund"). The Contracts may be sold to the Depositor
pursuant to one or more Sale and Purchase Agreements, dated as set forth in the
applicable Terms Agreement (as hereinafter defined) (each, a "Sale and Purchase
Agreement"), between the Depositor, as purchaser, and a third party seller. The
Certificates will be issued pursuant to a Pooling and Servicing Agreement to be
dated as set forth in the applicable Terms Agreement (the "Pooling and Servicing
Agreement" and, together with this Agreement and the related Sale and Purchase
Agreement, the "Agreements"), among the Depositor, a servicer (the "Servicer")
named in such Terms Agreement and a trustee (the "Trustee") named in such Terms
Agreement.
The Certificates are more fully described in the Registration
Statement (as such term is defined in Section 2(a)), which the Depositor has
furnished to you. Each Series of Certificates and any classes or subclasses of
Certificates (each, a "Class" or "Subclass", respectively) within such Series
may vary, among other things, as to number and types of
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Classes or Subclasses, aggregate principal balance or notional amount or
aggregate stated principal balance, the pass-through rate with respect to each
Class or Subclass, the percentage interest, if any, evidenced by each Class or
Subclass in payments of principal and interest on, or with respect to, the
Mortgage Loans included in the related Trust Fund, the stated principal balance
and interest rate, if any, priority of payment among Classes or Subclasses, the
method of credit enhancement with respect to the Mortgage Loans in the Trust
Fund for such Series, the Classes or Subclasses of Certificates of such Series
subject to this Agreement, and any other variable terms contemplated by the
Pooling and Servicing Agreement and in the Certificates of such Series. The
Depositor will elect to treat the related Trust Fund as a "real estate mortgage
investment conduit" (a "REMIC") under the Internal Revenue Code of 1986, as
amended (the "Code").
Each offering of Certificates will be made through you, through you
and other underwriters from whom you are acting as representative or through an
underwriting syndicate managed by you. Whenever the Depositor determines to
form a Trust and to make such an offering of Certificates, it will enter into an
agreement (the "Terms Agreement") providing for the sale of such Certificates
to, and the purchase and offering thereof by, (i) you, (ii) you and such other
underwriters who execute the Terms Agreement and agree thereby to become
obligated to purchase Certificates from the Depositor, or (iii) you and such
other underwriters, if any, selected by you as have authorized you to enter into
such Terms Agreement on their behalf (in each case, the "Underwriters"). Such
Terms Agreement shall specify the fractional undivided interest, principal or
notional amount, or stated principal balance, of each Class or Subclass of the
Certificates to be issued and their terms not otherwise specified in the Pooling
and Servicing Agreement, the Classes or Subclasses of Certificates subject to
this Agreement, the price at which such Certificates are to be purchased by the
Underwriters from the Depositor, the aggregate amount of Certificates to be
purchased by each Underwriter and any other Underwriter that is a party to such
Terms Agreement and the initial public offering price or the method by which the
price at which such Certificates are to be sold will be determined. The Terms
Agreement, which shall be substantially in the form of Exhibit A hereto, which
may take the form of an exchange of any standard form of written
telecommunication between you and the Depositor. Each offering of Certificates
will be governed by this Agreement, as supplemented by the applicable Terms
Agreement, and this Agreement and such Terms Agreement shall inure to the
benefit of and be binding upon the related Underwriters. Except as otherwise
required by the context, all references herein to a Terms Agreement, Delivery
Date, Pooling and Servicing Agreement and Underwriters shall refer to the Terms
Agreement, Delivery Date, Pooling and Servicing
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Agreement and Underwriter or Underwriters, as the case may be, relating to the
related offering of Certificates.
II. Representations and Warranties of the Depositor. The Depositor
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represents and warrants to the Underwriters as of the date hereof and as of the
date of the applicable Terms Agreement, as follows:
(a) A registration statement on Form S-3 (No. 333-16145), including a
prospectus and such amendments thereto as may have been required to the
date hereof, relating to the Certificates and the offering of each Series
thereof from time to time in accordance with Rule 415 under the Securities
Act of 1933, as amended (the "Act"), has been filed with the Securities and
Exchange Commission (the "Commission") and such registration statement, as
amended, has become effective. For purposes of this Agreement, "Effective
Time" means the date and time as of which such registration statement, or
the most recent post-effective amendment thereto (if any) filed prior to
the execution and delivery of this Agreement, was declared effective by the
Commission and "Effective Date" means the date of the Effective Time.
Such registration statement, as amended, and the prospectus and related
prospectus supplement that the Depositor has filed with the Commission
pursuant to Rule 424(b) relating to the sale of the Certificates of the
applicable Series offered thereby constituting a part thereof, as from time
to time amended or supplemented (including any prospectus filed with the
Commission pursuant to Rule 424(b) of the rules and regulations of the
Commission promulgated under the Act (the "Rules and Regulations")),
including all documents incorporated therein by reference, are respectively
referred to as the "Registration Statement" and the "Prospectus"; provided,
however, that a supplement to the Prospectus prepared pursuant to Section
5(a) shall be deemed to have supplemented the Prospectus only with respect
to the offering of the Series of Certificates to which it relates. The
conditions to the use of a registration statement on Form S-3 under the
Act, as set forth in the General Instructions to Form S-3, and the
conditions of Rule 415 under the Act, have been satisfied with respect to
the Registration Statement.
(b) The Registration Statement, on the Effective Date, and the
Prospectus, as of the date of the related Prospectus Supplement, conformed
in all material respects to the requirements of the Act and the Rules and
Regulations, and did not include 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 therein not misleading, and on the date of
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this Agreement, at the time of the filing of the Prospectus pursuant to
Rule 424(b) and at the Delivery Date (as such terms as defined in Section
3), the Prospectus conforms and will conform in all material respects to
the requirements of the Act and the Rules and Regulations, and does not
include and will not include, any untrue statement of a material fact and
does not omit and will not omit to state any material fact necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading. The Prospectus delivered to
the Underwriters for use in connection with the related offering was
identical to the electronically transmitted copies thereof filed with the
Commission pursuant to its Electronic Data Gathering, Analysis and
Retrieval system, except to the extent permitted by Regulation S-T. The
two immediately preceding sentences do not apply to statements or omissions
from either of such documents based upon written information (including
Computational Materials (as such term is defined in Section 8(a)) furnished
to the Depositor by any Underwriter specifically for use therein.
(c) The Depositor has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Delaware, with
full corporate power and authority to own its assets and conduct its
business as described in the Prospectus, is duly qualified as a foreign
corporation in good standing in all jurisdictions in which the ownership or
lease of its property or the conduct of its business requires such
qualification, except where the failure to be so qualified would not have a
material adverse effect on the Depositor, and is conducting its business so
as to comply in all material respects with the applicable statutes,
ordinances, rules and regulations of the jurisdictions in which it is
conducting business.
(d) The Pooling and Servicing Agreement and the Certificates conform,
or will conform as of the Delivery Date, to the description thereof
contained in the Registration Statement and the Prospectus; and the
Certificates, on the date of the Terms Agreement, will have been duly and
validly authorized and, when such Certificates are duly and validly
executed by the Depositor or the Trustee, authenticated by the Trustee and
delivered in accordance with such Pooling and Servicing Agreement and
delivered and paid for as provided herein, will be validly issued and
outstanding and entitled to the benefits and security afforded by the
Pooling and Servicing Agreement.
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(e) The execution and delivery by the Depositor of this Agreement, the
Terms Agreement, the Pooling and Servicing Agreement and the Certificates
are within the corporate power of the Depositor and have been, or will have
been, duly authorized by all necessary corporate action on the part of the
Depositor; and neither the execution and delivery by the Depositor of such
instruments, nor the consummation by the Depositor of the transactions
herein or therein contemplated, nor the compliance by the Depositor with
the provisions hereof or thereof, will (i) conflict with or result in a
breach of, or constitute a default under, any of the provisions of the
certificate of incorporation or by-laws of the Depositor, (ii) conflict
with any of the provisions of any law, governmental rule, regulation,
judgement, decree or order binding on the Depositor or its properties,
(iii) conflict with any of the provisions of any indenture, mortgage,
contract or other instrument to which the Depositor is a party or by which
it is bound, or (iv) result in the creation or imposition of any lien,
charge or encumbrance upon any of its property pursuant to the terms of any
such indenture, mortgage, contract or other instrument.
(f) At the date thereof, the Pooling and Servicing Agreement will
constitute a legal, valid and binding obligation of the Depositor,
enforceable against the Depositor in accordance with its terms, subject, as
to enforcement of remedies, to applicable bankruptcy, reorganization,
insolvency, moratorium and other similar laws affecting creditors' rights
generally from time to time in effect, and to general principles of equity.
(g) All approvals, authorizations, consents, orders or other actions
of any person, corporation or other organization, or of any court,
governmental agency or body or official (except with respect to the state
securities or Blue Sky laws of various jurisdictions), required in
connection with the valid and proper authorization, issuance and sale of
the Certificates pursuant to this Agreement, the Terms Agreement and the
Pooling and Servicing Agreement, has been or will be taken or obtained on
or prior to the applicable Delivery Date.
(h) The Reserve Fund, if any, will be established in accordance with
the Pooling and Servicing Agreement on or prior to the Delivery Date; and a
UCC-1 financing statement with respect to such Reserve Fund naming the
Trustee, for the benefit of the holders of the Certificates, as the secured
party has been filed in the office of the Secretary of State of the state
in which the principal trust office of the Trustee is located and,
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upon the purchase by you of the Certificates subject to this Agreement in
the manner contemplated by this Agreement, and the initial deposit of any
amount required to be deposited therein pursuant to the Pooling and
Servicing Agreement, the Trustee, for the benefit of the holders of the
Certificates will, on the date of such deposit, have a first perfected
priority security interest in such Reserve Fund.
(i) At the applicable Delivery Date, each of the Mortgage Loans
included in the Trust Fund will meet the criteria for selection described
in the Prospectus.
(j) Certificates subject to this Agreement and offered by means of the
Registration Statement will, when issued pursuant to the Pooling and
Servicing Agreement, be "mortgage related securities", as such term is
defined in Section 3(a)(41) of the Securities Act of 1934, as amended (the
"Exchange Act"), if, and for so long as, such Certificates are rated in one
of the two highest rating categories assigned by at least one nationally
recognized statistical rating organization.
(k) At the date of its execution and delivery, the Pooling and
Servicing Agreement constituted a legal, valid and binding agreement, and
as of the Delivery Date will be enforceable by the Trustee, in accordance
with its terms, subject, as to enforcement of remedies, to applicable
bankruptcy, reorganization insolvency or other similar laws affecting
creditors' rights generally from time to time in effect, and to general
principles of equity.
(l) The characteristics of the Trust Fund will not subject the related
Trust to registration as an investment company under the Investment Company
Act of 1940, as amended (the "Investment Company Act").
3. Purchase, Sale and Delivery of Certificates. Delivery of and payment
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for the Certificates to which this Agreement applies will be made at the office
of CS First Boston Corporation, Park Avenue Plaza, 55 East 52nd Street, New
York, New York 10055 or such other place as specified in the Terms Agreement, at
such time as shall be specified in the Terms Agreement, or at such other time
thereafter as set forth in the Terms Agreement, or as you and the Depositor
shall agree upon, each such time being herein referred to as a "Delivery Date".
Delivery of such Certificates shall be made by the Depositor to the Underwriters
against payment of the purchase price specified in the applicable Terms
Agreement in same day funds wired to such bank as may be designated by the
Depositor, or by such other manner of payment as may be agreed upon by the
Depositor and you. Except as otherwise provided
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in the related Terms Agreement, each Class of Certificates of a Series sold to
the Underwriters pursuant to such Terms Agreement will be represented initially
by one or more certificates registered in the name of Cede & Co., the nominee of
the Depository Trust Company (the "DTC Certificates"). The interests of the
beneficial owners of the DTC Certificates will be represented by book entries on
the records of DTC and participating members thereof. Definitive certificates
for the DTC Certificates will be made available only under the limited
circumstances specified in the Pooling and Servicing Agreement. Except as
otherwise provided in the related Terms Agreement, each Class of Certificates of
a Series not sold to the Underwriters pursuant to such Terms Agreement will be
in definitive, fully registered form, in such denominations and registered in
such names as the Underwriter shall request, and will be made available at least
24 hours prior to the applicable Closing Date, for checking and packaging at the
offices of Dewey Ballantine, 1301 Avenue of the Americas, New York, New York
10019 in such amounts as determined pursuant to the Terms Agreement.
Except as otherwise provided in the related Terms Agreement, pursuant to
Rule 15c6-1(d) under the Exchange Act, the Depositor and the Underwriters have
agreed that the Delivery Date will not be less than five business days following
the date hereof.
4. Offering by Underwriters. It is understood that the Underwriters
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propose to offer the Certificates subject to this Agreement for sale to the
public as set forth in the Prospectus.
5. Covenants of the Depositor. The Depositor covenants and agrees with
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the Underwriters participating in the applicable offering of the Certificates
that:
(a) Immediately following the execution of the Terms Agreement, the
Depositor will prepare a supplement to the Prospectus setting forth the
amount of Certificates covered thereby and the terms thereof not otherwise
specified in the Prospectus, the price at which such Certificates are to be
purchased by the Underwriters, from the Depositor, either the initial
public offering price or the method by which the price at which such
Certificates are to be sold will be determined, the selling concessions and
reallowances, if any, and such other information as you and the Depositor
deem appropriate in connection with the offering of such Certificates, but
the Depositor will not file, for so long as the delivery of a Prospectus is
required in connection with the offering or sale of such Certificates, any
amendments to the Registration Statement as in effect with respect to such
Certificates,
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or any amendments or supplements to the Prospectus, unless it shall first
have delivered copies of such amendments or supplements to you, or if you
shall have reasonably objected thereto promptly after receipt thereof; the
Depositor will, during such period, immediately advise you or your counsel
(i) when notice is received from the Commission that any post-effective
amendment to the Registration Statement has become or will become effective
and (ii) of any order or communications suspending or preventing, or
threatening to suspend or prevent, the offer and sale of the Certificates
or of any proceedings or examinations that may lead to such an order or
communication, whether by or of the Commission or any authority
administering any state securities or Blue Sky law, as soon as the
Depositor is advised thereof, and will use its best efforts to prevent the
issuance of any such order or communication and to obtain as soon as
possible its lifting, if issued. Subject to the Underwriters' compliance
with their obligations set forth in Section 8, the Depositor shall file
with the Commission a current report on Form 8-K including any
Computational Materials provided to it by the Underwriters pursuant to
Section 8 no later than the date that the Prospectus Supplement is filed.
(b) If, at any time when a Prospectus relating to the Certificates is
required to be delivered under the Act, 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 a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or if it is
necessary at any time to amend or supplement the Prospectus to comply with
the Act or the Rules and Regulations, the Depositor will promptly prepare
and file with the Commission, an amendment or supplement that will correct
such statement or omission or an amendment that will effect such
compliance.
(c) The Depositor will make generally available to the holders of the
Certificates (the "Certificateholders"), and deliver to you, in each case
as soon as practicable, an earning statement which will satisfy the
provisions of Section 11(a) of the Act and Rule 158 of the Commission with
respect to the Certificates; and the Depositor will cause the Trustee to
furnish or make available, within a reasonable time after the end of each
calendar year, to each holder of a Certificate at any time during such
year, such information as the Depositor deems necessary or desirable
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to assist Certificateholders in preparing their federal income tax returns.
(d) The Depositor will furnish to you copies of the Registration
Statement (two of which will be signed and will include all documents and
exhibits thereto or incorporated by reference therein), each related
preliminary prospectus, the Prospectus and all amendments and supplements
to such documents relating to the Certificates, in each case as soon as
available, but in no event later than five business days after signing the
related Terms Agreement, and in such quantities as you reasonably request.
(e) The Depositor will arrange for the qualification of the
Certificates for sale and the determination of their eligibility for
investment under the laws of such jurisdictions as you designate and will
continue such qualifications in effect so long as required for the
distribution of the Certificates; provided, however, that neither the
Depositor nor the Trust shall be required to do business in any
jurisdiction where it is now not qualified or to take any action which
would subject it to general or unlimited service of process in any
jurisdiction in which it is now not subject to service of process.
(f) The Depositor will, while the Certificates of a Series are
outstanding furnish to you, and upon request of each other Underwriter,
other information with respect to the related Trust or its financial
condition or results of operations, as any Underwriter may reasonably
request, including but not limited to information necessary or appropriate
to the maintenance of a secondary market in the Certificates of such
Series.
(g) The Depositor will pay all expenses incident to the performance of
its obligations under this Agreement and the Terms Agreement and will
reimburse the Underwriters for any expenses (including fees and
disbursements of its counsel) incurred by them in connection with
qualification of the related Series of Certificates and determination of
their eligibility for investment under the laws of such jurisdictions as
you may designate and the reproduction of memoranda relating thereto, for
any fees charged by investment rating agencies for the rating of the
Certificates and, to the extent previously agreed upon with you, the
expenses incurred in distributing any preliminary prospectuses, the
Prospectus or any amendments or supplements thereto to the Underwriters.
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(h) During the period when a prospectus is required by law to be
delivered in connection with the sale of Certificates pursuant to this
Agreement, the Depositor will file, or cause the Trustee to file on behalf
of the related Trust, on a timely and complete basis, all documents that
are required by the related Trust with the Commission pursuant to Sections
13, 14 or 15(d) of the Exchange Act.
(i) The Depositor will prepare, or cause to be prepared, and file, or
cause to be filed, a timely election to treat the Trust as a REMIC for
federal income tax purposes and will file, or cause to be filed, such tax
returns and take such actions, all on a timely basis, as are required to
elect and maintain such status.
6. Conditions to the Obligations of the Underwriters. The obligations of
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the Underwriters to purchase and pay for the Certificates subject to this
Agreement will be subject to the accuracy of the representations and warranties
on the part of the Depositor as of the date hereof, the date of the Terms
Agreement and the applicable Delivery Date, to the accuracy of the statements of
the Depositor made pursuant to the provisions thereof, to the performance by the
Depositor in all material respects of its obligations hereunder and to the
following additional conditions precedent:
(a) You shall have received a letter from KPMG Peat Marwick L.L.P.,
dated the date of the Terms Agreement, and, if requested by you, a letter
from KPMG Peat Marwick L.L.P., dated the Delivery Date, and addressed to
you each in the forms heretofore agreed to.
(b) You shall have received a copy of the Prospectus for the related
Series.
(c) All actions required to be taken and all filings required to be
made by the Depositor under the Act prior to the sale of the Certificates
shall have been duly taken or made; and prior to the applicable Delivery
Date, 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 to the knowledge of the Depositor or any
Underwriter, shall be contemplated by the Commission.
(d) The Certificates subject to this Agreement and offered by means of
the Registration Statement shall be rated at the time of issuance as set
forth in the Terms Agreement.
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(e) you shall have received an opinion of counsel or counsels for the
Depositor, dated the applicable Delivery Date, substantially to the effect
that:
(i) The Depositor is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware,
with corporate power and corporate authority to own its assets, operate
its business as described in the Prospectus, and is duly qualified to do
business as a foreign corporation in the State of New York which the
Depositor has advised us in writing are the jurisdictions in which the
Depositor owns or leases real property or conducts material operations.
(ii) This Agreement and the Terms Agreement have been duly
authorized, executed and delivered by the Depositor.
(iii) The execution, delivery and performance of the Agreements
do not conflict with the Certificate of Incorporation or the By-laws of
the Depositor and, to the knowledge of such counsel and based solely on
its examination of the documents referred to herein, (A) do not conflict
with or violate or constitute a material breach of, or constitute a
default under, any material written contract, indenture, undertaking or
other agreement or instrument by which the Depositor is now bound or to
which it is now a party, or result in the imposition of any material lien
upon any of its material properties, and (B) do not conflict with or
violate any order, write, injunction or the decree of any court or
governmental authority against the Depositor or by which any of its
properties is bound.
(iv) Each of the Sale and Purchase Agreement and the Pooling and
Servicing Agreement has been duly authorized, executed and delivered by
the Depositor and, assuming the due authorization, execution and delivery
thereof by the other parties thereto, constitutes the legal, valid and
binding agreement of the Depositor, enforceable against the Depositor in
accordance with its terms, except as enforcement thereof may be subject
to or limited by bankruptcy, insolvency, moratorium, reorganization,
arrangement, fraudulent conveyance or other laws relating to or affecting
creditors' rights generally or by general equitable principles.
(v) The Certificates have been duly authorized by the Depositor
and, when executed and authenticated pursuant to the Pooling and
Servicing Agreement and paid for and delivered pursuant to this Agreement
and
11
<PAGE>
the Terms Agreement, will be validly issued and outstanding and will be
entitled to the benefits afforded by the Pooling and Servicing Agreement.
(vi) No consent, approval, authorization or order of any court or
governmental agency or body is required for the consummation by the
Depositor of the transactions contemplated by the Agreements except such
as may be required under federal or state securities laws in connection
with the purchase by the Underwriters of the Certificates, filings with
respect to the transfer of the Contracts from the Seller to the Depositor
pursuant to the Sale and Purchase Agreement and from the Depositor to the
Trustee pursuant to the Pooling and Servicing Agreement and such other
approvals as have been obtained.
(vii) The Pooling and Servicing Agreement is not required to be
qualified under the Trust Indenture Act of 1939 and the Trust Fund is not
required to be registered under the Investment Company Act.
(viii) The Registration Statement has become effective under the
Act, and, to the knowledge of such counsel, no stop order suspending the
effectiveness of the Registration Statement has been issued and no
proceedings for that purpose have been instituted or are pending or
contemplated under the Act; the Registration Statement and the
Prospectus, and each amendment or supplement thereto, as of their
respective effective or issue dates complied as to form in all material
respects to the requirements of the Act and the Rules and Regulations;
such counsel has no reason to believe that either the Registration
Statement, at the Effective Time, or any such amendment or supplement, as
of its effective date, contained any untrue statement of a material fact
or omitted to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, or that the
Prospectus, at the date of this Agreement, or any such amendment or
supplement, as of its respective date, or at the Delivery Date, included
or includes an untrue statement of a material fact or omitted or omits to
state a material fact necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not
misleading; it being understood that such counsel need express no opinion
as to the financial statements or other financial or statistical data
contained in the Registration Statement or the Prospectus.
(ix) The statements in the Prospectus under the caption
"Description of Certificates", insofar as such
12
<PAGE>
statements constitute a summary of certain terms of the Certificates, the
Sale and Purchase Agreement and the Pooling and Servicing Agreement,
while they do not purport to discuss all aspects of such documents,
constitute a fair summary of such documents in all material respects; the
statements in the Basic Prospectus and the Prospectus Supplement, as the
case may be, under the captions "Certain Legal Aspects of the Mortgage
Loans and Contracts", "ERISA Considerations", "Certain Federal Income Tax
Consequences", and "Certain Legal Aspects of the Contracts" to the extent
that they constitute matters of law or legal conclusions with respect
thereto, have been prepared or reviewed by us and are correct in all
material respects.
(x) Assuming that, and for so long as, each Class of Certificates
offered pursuant to the Registration Statement are rated by a nationally
recognized statistical rating organization in one of its two highest
rating categories, each such Class of Certificates constitutes "mortgage
related securities" within the meaning of Section 3(a)(41) of the
Exchange Act.
(e) You shall have received an opinion of counsel to the seller of the
Mortgage Loans, addressed to the Underwriters and the Depositor, dated the
applicable Delivery Date, substantially to the effect that the statements in
the Prospectus Supplement prepared by the Depositor pursuant to Section 5(a)
under the captions "The Seller" and "The Mortgage Loans" 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, in
the light of the circumstances under which they were made, not misleading (it
being understood that such counsel need not render any opinion with respect to
any financial or statistical information contained therein).
(f) You shall have received an opinion of counsel to the Trustee, dated
the Delivery Date, and in the form agreed to on or prior to the date of the
Terms Agreement.
(g) If applicable, you shall have received an opinion of counsel to the
Servicer, dated the Delivery Date, and in the form agreed to on or prior to
the date of the Terms Agreement.
(h) You shall have received from Dewey Ballantine, special counsel for
the Underwriters, such opinion or opinions, dated the Delivery Date, with
respect to the existence of the Depositor, the Registration Statement, the
Prospectus and other related matters as the Underwriters may
13
<PAGE>
require, and the Depositor shall have furnished to such counsel such documents
as they request for the purpose of enabling them to pass upon such matters.
(i) You shall have received a certificate or certificates signed by such
of the principal executive, financial and accounting officers of the Depositor
as you may request, dated the applicable Delivery Date, in which such
officers, to the best of their knowledge after reasonable investigation, shall
state that (i) the representations and warranties of the Depositor in this
Agreement are true and correct; (ii) the Depositor has complied with all
agreements and satisfied all conditions on its part to be performed or
satisfied at or prior to the Closing Date; (iii) no stop order suspending the
effectiveness of the Registration Statement has been issued and no proceedings
for that purpose have been instituted or are contemplated; (iv) subsequent to
the respective dates as of which information is given in the Prospectus, and
except as otherwise set forth in or contemplated by the Prospectus, there has
not been any material adverse change in the general affairs, capitalization,
financial condition or results of operations of the Depositor; (v) except as
otherwise stated in the Prospectus, there are no material actions, suits or
proceedings pleading before any court or governmental agency, authority or
body or, to their knowledge, threatened, affecting the Depositor or the
transactions contemplated by this Agreement; (vi) attached thereto are true
and correct copies of a letter from the rating agency or agencies rating the
Certificates subject to this Agreement confirming that the Certificates have
been rated in one of the four highest rating categories established by such
agency or agencies as set forth in the Terms Agreement and such rating has not
been lowered since the date of such letter; and (vii) the Reserve Fund, if
any, shall have been established by the Depositor as contemplated by the
Pooling and Servicing Agreement.
(j) If applicable, you shall have received letters dated the applicable
Delivery Date from counsel rendering opinions to any nationally recognized
statistical rating organization rating the applicable Series of Certificates,
to the effect that you may rely upon their opinion to such rating
organization, as if such opinion were rendered to you.
(k) You shall have received a certificate of the Trustee, signed by one
or more duly authorized officers of the Trustee, dated the applicable Delivery
Date, as to the due acceptance of the Pooling and Servicing Agreement by the
Trustee and the due authorization and delivery of the Certificates of such
Series by the Trustee thereunder.
14
<PAGE>
(l) To the extent, if any, that the ratings provided to the Certificates
by either Standard & Poor's, Fitch or Moody's is conditional upon the
furnishing of documents or the taking of any other actions by the Depositor or
the Servicer, the Depositor or the Servicer, as the case may be, shall furnish
such documents and take any such other actions.
(m) You shall have received letters from each Rating Agency confirming
the ratings set forth in the related Terms Agreement.
(n) The Reserve Fund and Reserve Accounts, if any, shall have been
established as provided in the Pooling and Servicing Agreement.
The Depositor will furnish you with such conformed copies of such opinions,
certificates, letters and documents as you reasonably request.
7. Indemnification
---------------
(a) The Depositor will indemnify and hold harmless each Underwriter and each
person, if any, who controls such Underwriter within the meaning of the Act,
against any losses, claims, damages or liabilities, joint or several, to which
such Underwriter or such controlling person may become subject, under the 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 or alleged
untrue statement of any material fact contained in the Registration Statement or
the Prospectus or any amendment or supplement thereto, 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 not
misleading; and will reimburse each Underwriter and each such controlling person
for any legal or other expenses reasonably incurred by such Underwriter and each
such controlling person in connection with investigating or defending any such
loss, claim, damage, liability or action; provided however, that the Depositor
will 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 any such untrue statement or
alleged untrue statement in or omission or alleged omission made in any of such
documents in reliance upon and in conformity with written information furnished
to the Depositor by the relevant Underwriter specifically for use therein. This
indemnity agreement will be in addition to any liability which the Depositor may
otherwise have.
(b) Each Underwriter will indemnify and hold harmless the Depositor, each of
its directors, each of its officers who
15
<PAGE>
signed the Registration Statement and each person, if any, who controls the
Depositor within the meaning of the Act against any losses, claims, damages or
liabilities to which the Depositor or any such director, officer or controlling
person may become subject, under the Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise of or are
based upon any untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement or the Prospectus or any amendment or
supplement thereto, or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Depositor by such
Underwriter specifically for use therein, and will reimburse any legal or other
expenses reasonably incurred by the Depositor or any such director, officer or
controlling person in connection with investigating or defending any such loss,
claim, damage, liability or action. This indemnity agreement will be in
addition to any liability that such Underwriter may otherwise have. The
Depositor acknowledges that, for purposes of this Section, the statements set
forth in the Prospectus Supplement on page S-2 regarding stabilization, in the
third paragraph under the heading "Underwriting" and under the heading "Plan of
Distribution", with respect to the Certificates to be purchased by the
Underwriters, constitute the only information furnished to the Depositor by the
Underwriters for inclusion in the Prospectus.
(c) Promptly after receipt by an indemnified party under this Section of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section, notify the indemnifying party of the commencement thereof; but the
omission so to notify the indemnifying party will not relieve it from any
liability which it may have to any indemnified party otherwise in this Section.
In case any such action is brought against any indemnified party, and it
notifies the indemnifying party of the commencement thereof, the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, the indemnifying party will be entitled to participate therein, and, to
the extent that it may wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel satisfactory to such
indemnified party (who shall not, except with the consent of the indemnified
party, be counsel to the indemnifying party) and, after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party will not be liable to such indemnified
party under this Section for any legal or
16
<PAGE>
other expenses subsequently incurred by such indemnified party in connection
with the defense thereof other than reasonable costs of investigation.
(d) If the indemnification provided for in this Section is unavailable or
insufficient to hold harmless an indemnified party under subsection (a) or (b)
above, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of the losses, claims, damages or
liabilities referred to in subsection (a) or (b) above (i) in such proportion as
is appropriate to reflect the relative benefits received by the Depositor on the
one hand and the Underwriters on the other from the offering of the Offered
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 the relative benefits referred to in clause (i) above but also the relative
fault of the Depositor on the one hand and the Underwriters on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities as well as any other relevant equitable
considerations. The relative benefits received by the Depositor on the one hand
and the Underwriters on the other shall be deemed to be in the same proportion
as the total net proceeds from the offering (before deducting expenses) received
by the Depositor bear to the total underwriting discounts and commissions
received by the Underwriters. The relative fault 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 Depositor or the Underwriters and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such untrue statement or omission. The amount paid by an
indemnified party as a result of the losses, claims, damages or liabilities
referred to in the first sentence of this subsection (d) shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified in
connection with investigating or defending any action or claim which is the
subject to this subsection (d). Notwithstanding the provisions of this
subsection (d), no Underwriter shall be required to contribute any amount in
excess of the amount by which the total price at which the Certificates
underwritten by it and distributed to the public were offered to the public
exceeds the amount of any damages which such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. 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. The
Underwriters' obligations in this subsection (d) to contribute are several in
proportion to their respective underwriting obligations and not joint.
17
<PAGE>
8. Computational Materials.
-----------------------
(a) Each Underwriter agrees to provide to the Depositor no less than two
business days prior to the date on which the Prospectus is proposed to be filed
pursuant to Rule 424(b) under the Act, for the purpose of permitting the
Depositor to comply with the filing requirement set forth in Section 5(a), all
information (in such written or electronic format as required by the Depositor)
with respect to the Certificates which constitutes "Computational Materials", as
defined in the Commission's No-Action Letter, dated May 20, 1994, addressed to
Kidder, Peabody Acceptance Corporation I, Kidder, Peabody & Co. Incorporated and
Kidder Structured Asset Corporation (the "Kidder Letter"), and that is required
to be filed as described in the Kidder Letter.
(b) The Representative shall provide to the Depositor, together with the
information required to be provided to the Depositor pursuant to Section 8(a) or
8(c)(iii) hereof, a letter, in form and substance acceptable to the Depositor,
of independent certified public accountants acceptable to the Depositor, stating
in effect that such independent certified public accountants have performed
certain specified procedures, all of which have been agreed to by the Depositor,
and that they have verified or confirmed, as appropriate, the financial,
numerical or statistical information to be filed by the Depositor as part of the
Computational Materials and have found such information to be accurate without
exception. Such letter will be obtained at the sole expense of the
Representative.
(c) (i) The relevant Underwriter represents and warrants to, and covenant
with, the Depositor that all information provided to the Depositor pursuant to
this Section, as of the date such information is so provided and as of the date
such information is filed by the Depositor with the Commission will not include
any untrue statement of a material fact and will not omit to state any material
facts required to be stated therein or necessary in order to make the statements
contained therein, in the light of the circumstances under which they were made,
not misleading.
(ii) The relevant Underwriter further covenants with the Depositor that
if any Computational Materials required to be provided to the Depositor pursuant
to Section 8(a) are determined to contain any information that is inaccurate or
misleading, the relevant Underwriter (whether or not such Computational
Materials are provided to the Depositor or filed by the Depositor with the
Commission) shall promptly prepare and deliver to the Depositor and each
prospective investor which received such Computational Materials corrected
Computational Materials. All information provided to the
18
<PAGE>
Depositor pursuant to this Section 8(c)(ii) shall be provided within the time
periods set forth in Section 8(a) hereof.
(iii) The Underwriters represent and warrant to the Depositor that the
Underwriters have taken all necessary and required steps to ensure that no
written material of any kind relating to the Certificates (or any certificates
similar to the Certificates) will be delivered to potential investors others
than Computational Materials required to be filed pursuant to the Kidder Letter
and that all Computational Materials will be provided to the Depositor and to
ensure that all such Computational Materials are accurate and not misleading.
(iv) The Underwriters covenant with the Depositor that all
Computational Materials delivered to prospective investors shall contain a
legend substantially to the following effect:
"THIS INFORMATION IS FURNISHED TO YOU SOLELY BY CS FIRST BOSTON
CORPORATION AND/OR THE OTHER UNDERWRITERS AND NOT BY CS FIRST BOSTON
MORTGAGE SECURITIES CORP. (THE "DEPOSITOR") OR ANY OF ITS AFFILIATES
(OTHER THAN CS FIRST BOSTON CORPORATION IN ITS CAPACITY AS AN
UNDERWRITER). THE UNDERWRITERS ARE NOT ACTING AS AGENTS FOR THE DEPOSITOR
OR ITS AFFILIATES IN CONNECTION WITH THE PROPOSED TRANSACTION."
(d) The relevant Underwriter agrees to indemnify and hold harmless the
Depositor, each of the Depositor's officers and directors and each person who
controls the Depositor within the meaning of either the Act or the Exchange Act
against any and all losses, claims, damages or liabilities, joint or several, to
which they may become subject under the Act, the Exchange Act, or other Federal
or State statutory law or regulation, at common law or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof) (i)
are based on, result from or arise of: (A) the relevant Underwriter's use or
delivery to any prospective investor in the Certificates of any Computational
Materials; (B) the relevant Underwriter's failure to comply with Sections 8(a)
or 8(c); (C) the filing by the Depositor with the Commission of any information
pursuant to the last sentence of Section 5(a); or (ii) arise out of or are based
upon any untrue statement or alleged untrue statement of a material fact
contained in any information required to be delivered to the Depositor pursuant
to a Section 8(a) or 8(c)(ii) hereof, 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 each such indemnified
19
<PAGE>
party for any legal or other expenses reasonably incurred by him, her or it in
connection with investigating or defending any such loss, claim, damage,
liability or action. The obligations of such Underwriter under this Section
shall be in addition to any liability which such Underwriter may otherwise have.
The procedures set forth in Section 7(c) and 7(d) shall be equally applicable
to this Section.
(e) Notwithstanding any other provision herein, (a) the Underwriter shall not
be required to be responsible for any amount in excess of the amount by which
the total re-offering price at which the Certificates underwritten by it and
distributed and offered to the public exceeds the amount paid hereunder by the
Underwriter for the Certificates. For the purposes of this Section 8(e), each
person, if any, who controls the Underwriter within the meaning of the
Securities Act or the Exchange Act shall have the same rights to contribution as
the Underwriter and each director of the Depositor, each officer of the
Depositor who signed the Registration Statement, and each person, if any, who
controls the Depositor within the meaning of the Securities Act or the Exchange
Act shall have the same rights to contribution as the Depositor and (b) the
relevant Underwriter agrees to pay all costs and expenses of the Depositor
incurred in connection with (i) the filing by the Depositor of any Computational
Material with the Commission and (ii) any action by the Depositor against the
relevant Underwriter to enforce any of its rights set forth in this Section,
including, without limitation, legal fees and expenses.
9. Default of Underwriters. If any Underwriter or Underwriters
-----------------------
participating in an offering of Certificates default in their obligations to
purchase Certificates hereunder and under the Terms Agreement and the aggregate
principal amount of such Certificates which such defaulting Underwriter or
Underwriters agreed, but failed, to purchase does not exceed 10% of the total
principal amount of the Certificates set forth in such Terms Agreement, you may
make arrangements satisfactory to the Depositor for the purchase of such
Certificates by other persons, including any of the Underwriters participating
in such offering, but regardless of whether such arrangements are made the non-
defaulting Underwriters shall remain obligated severally to purchase the
Certificates which they committed to purchase in accordance with the terms
hereunder and under the Terms Agreement. If any Underwriter or Underwriters so
default and the aggregate principal amount of Certificates with respect to which
such default or defaults occur is more than 10% of the total principal amount of
the Certificates set forth in such Terms Agreement and arrangements satisfactory
to you and the Depositor for the purchase of such Certificates by other
20
<PAGE>
persons are not made, this Agreement will terminate without liability on the
part of any nondefaulting Underwriter, except as provided in Section 10. As
used in this Agreement, the term "Underwriter" includes any person substituted
for an Underwriter under this Section. Nothing herein will relieve a defaulting
Underwriter from liability for its default.
10. Termination of the Obligations of the Underwriters. The obligations of
--------------------------------------------------
the Underwriters to purchase the Certificates on the Delivery Date shall be
terminable by the Underwriters if (a) at any time on or prior to the Delivery
Date (i) trading in securities generally on the New York Stock Exchange shall
have been suspended or materially limited, or there shall have been any setting
of minimum prices for trading on such exchange, (ii) a general moratorium on
commercial banking activities in New York shall have been declared by either
Federal or New York State authorities, (iii) there shall have occurred any
material outbreak or escalation of hostilities or other calamity or crisis, the
effect of which on the financial markets of the United States is such as to make
it, in your judgment as representative of the Underwriters, impracticable to
consummate the transactions contemplated herein or is such as would materially
and adversely affect the marketability of or the market price for the
Certificates or (iv) any change or any development involving a prospective
change, materially and adversely affecting (A) the Trust Fund taken as a whole
or (B) the business or properties of the Depositor occurs, which, in your
reasonable judgment as representative of the Underwriters, in the case of either
clause (A) or (B), materially impairs the investment quality of the Certificates
or (b) any representation or warranty of another party shall be incorrect in any
material respect.
11. Survival of Certain Representations and Obligations. The respective
---------------------------------------------------
indemnities, agreements, representations, warranties and other statements by the
Depositor or its officers and of the Underwriters set forth in or made pursuant
to this Agreement will remain in full force and effect, regardless of any
investigation, or statement as to the results thereof, made by or on behalf of
the Underwriters, the Depositor or any of its officers or directors or any
controlling person, and will survive delivery of and payment of the
Certificates.
If this Agreement is terminated pursuant to Section 9 or if for any reason the
purchase of the Certificates by the Underwriters is not consummated, the
Depositor shall remain responsible for the expenses to be paid or reimbursed by
them pursuant to Section 5(g), and the obligations of the Depositor and the
Underwriters pursuant to Sections 7 and 8 shall remain in effect.
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<PAGE>
12. Notices. All communications hereunder will be in writing and, if sent to
-------
an Underwriter will be mailed, delivered or telegraphed and confirmed to you at
Park Avenue Plaza, 55 East 52nd Street, New York, New York 10055 or if sent the
Depositor, will be mailed, delivered or telegraphed and confirmed to it at Park
Avenue Plaza, 55 East 52nd Street, New York, New York 10055 Attention:
President; provided, however, that any notice to an Underwriter pursuant to
Section 7 or 8 will be mailed, delivered or telegraphed to such Underwriter at
the addressed furnished by it.
13. Successors. This Agreement and the Terms Agreement will inure to the
----------
benefit of and be binding upon the parties hereto and their respective
successors and the officers, directors and controlling persons referred to in
Sections 7 and 8, and their successors and assigns, and no other person will
have any right or obligations hereunder.
14. Representation of Underwriters. You will act for the several
------------------------------
Underwriters set forth in the applicable Terms Agreement in connection with the
transactions described in this Agreement and such Terms Agreement, and any
action taken by you under this Agreement will be binding upon all the
Underwriters.
15. Applicable Law. THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN
--------------
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE
PRINCIPLES OF CONFLICTS OF LAWS.
16. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same instrument.
22
<PAGE>
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to us a counterpart hereof, whereupon, it will become a
binding agreement among the Depositor and the several Underwriters in accordance
with its terms.
Very truly yours,
CS FIRST BOSTON MORTGAGE
SECURITIES CORP.,
as Depositor
By: /s/ Joy Margioles
------------------------------
Name: Joy Margioles
Title: Vice President
The foregoing Agreement is
hereby confirmed and accepted
as of the date first above
written.
CS FIRST BOSTON CORPORATION
as Underwriter
By: /s/ Fiachra O'Driscoll
---------------------------
Name: Fiachra O'Driscoll
Title: Vice President
[Underwriting Agreement]
<PAGE>
EXHIBIT A
CS FIRST BOSTON MORTGAGE SECURITIES CORP.
(DEPOSITOR)
PREFERRED MORTGAGE ASSET-BACKED CERTIFICATES,
SERIES 1996-2
TERMS AGREEMENT
December 9, 1996
To: CS First Boston Mortgage Securities Corp., as Depositor under the Pooling
and Servicing Agreement dated as of December 1, 1996.
Re: Underwriting Agreement dated December 9, 1996.
Title: Preferred Mortgage Asset-Backed Certificates, Series 1996-2, Class A-1,
- -----
Class A-2, Class A-3, Class A-4, Class A-5, Class A-6.
Principal Amount: $280,000,000
- ----------------
Terms of the Certificates:
- -------------------------
Original
Principal Pass-Through
Class Amount Rate
- ----- ----------- ------------
A-1 $80,200,000 6.43%
A-2 $29,800,000 6.32%
A-3 $43,700,000 6.39%
A-4 $59,800,000 6.62%
A-5 $16,300,000 6.96%
A-6 $50,200,000 7.18%
1
<PAGE>
Certificate Rating:
- ------------------
Standard
&
Class Moody's Poor's
----- ------- ----------
A-1 Aaa AAA
A-2 Aaa AAA
A-3 Aaa AAA
A-4 Aaa AAA
A-5 Aaa AAA
A-6 Aaa AAA
Servicer: Advanta Mortgage Corp. U.S.A. (in such capacity, the "Servicer").
--------
Trustee: Bankers Trust Company (in such capacity, the "Trustee").
-------
Terms of Sale: The purchase price payable by the Underwriters for each Class
-------------
of Certificates is 99.704091% of the principal amount of the Class A-1
Certificates, 99.568975% of the principal amount of the Class A-2 Certificates,
99.465850% of the principal amount of the Class A-3 Certificates, 99.345039% of
the principal amount of the Class A-4 Certificates, 99.246062% of the principal
amount of the Class A-5 Certificates, and 99.180605% of the principal amount of
the Class A-6 Certificates, in each case plus accrued interest at the related
Pass-Through Rate from the date of initial issuance.
Payment of the purchase price shall be in immediately available Federal funds
wired to such bank as may be designated by the Depositor.
The Class B, C-1, C-2 and R Certificates issued pursuant to the Pooling and
Servicing Agreement are not subject to this Agreement.
Underwriting Commissions:
------------------------
Notwithstanding anything to the contrary in the Underwriting Agreement, no
additional underwriting commission shall be payable by the Depositor to the
Underwriter in connection with the purchase of the Certificates.
2
<PAGE>
Public offering price and/or method of determining price at which the
Underwriter will sell the Certificates:
Class A-1: 99.954091%
Class A-2: 99.968975%
Class A-3: 99.965850%
Class A-4: 99.965039%
Class A-5: 99.946062%
Class A-6: 99.930605%
Mortgage Loans: The mortgage loans (the "Mortgage Loans") sold by T.A.R.
--------------
Preferred Mortgage Corporation (the "Seller") to the Depositor pursuant to the
Sale and Purchase Agreement, dated as of December 1, 1996, between the
Depositor, as purchaser, and the Seller, as seller and conveyed by the Depositor
to the Trust pursuant to the Pooling and Servicing Agreement, dated as of
December 1, 1996 (the "Pooling and Servicing Agreement"), among the Depositor,
the Seller, the Servicer and the Trustee, as more fully described in Exhibit C
to the Pooling and Servicing Agreement.
Distribution Dates: The 25th day (or, if such day is not a business day, the
------------------
next succeeding business day) of each month, commencing with January 27, 1997.
Delivery Date and Location: 10:00 a.m., New York Time, on or about December
--------------------------
17, 1996, or at such other time not later than seven full business days
thereafter as may be agreed upon, at the offices of Dewey Ballantine, 1301
Avenue of the Americas, New York, New York 10019.
CS FIRST BOSTON CORPORATION,
as Underwriter
By: /s/ Joy Margioles
______________________________
Name: Joy Margioles
Title: Vice President
Accepted:
CS FIRST BOSTON MORTGAGE
SECURITIES CORP.,
as Depositor
By: /s/ Fiachra O'Driscoll
______________________________
Name: Fiachra O'Driscoll
Title: Vice President
3
<PAGE>
EXHIBIT 4.1
CS FIRST BOSTON MORTGAGE SECURITIES CORP.
Depositor
and
T.A.R. PREFERRED MORTGAGE CORPORATION
Unaffiliated Seller
___________________________
SALE AND PURCHASE AGREEMENT
Dated as of December 17, 1996
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE ONE DEFINITIONS................................................. 1
Section 1.01. Definitions................................................. 1
ARTICLE TWO PURCHASE, SALE AND CONVEYANCE OF MORTGAGE
LOANS....................................................... 5
Section 2.01. Agreement to Purchase the Initial Mortgage Loans............ 5
Section 2.02. Agreement to Purchase the Subsequent Mortgage Loans......... 5
Section 2.03. Purchase Price.............................................. 6
Section 2.04. Conveyance of Mortgage Loans; Possession of Mortgage Files.. 7
Section 2.05. Delivery of Mortgage Loan Documents......................... 7
Section 2.06. Acceptance of Mortgage Loans................................ 10
Section 2.07. Transfer of Mortgage Loans; Assignment of Agreement......... 11
Section 2.08. Examination of Mortgage Files............................... 11
Section 2.09. Books and Records........................................... 12
Section 2.10. Cost of Delivery and Recordation of Documents............... 12
ARTICLE THREE REPRESENTATIONS AND WARRANTIES.............................. 12
Section 3.01. RESERVED.................................................... 12
Section 3.02. Representations and Warranties as to the Unaffiliated Seller 12
Section 3.03. Representations and Warranties Relating to the Mortgage
Loans....................................................... 14
Section 3.04. Representations and Warranties of the Depositor............. 24
Section 3.05. Repurchase Obligation for Defective Documentation and for
Breach of a Representation or Warranty...................... 24
ARTICLE FOUR THE UNAFFILIATED SELLER..................................... 27
Section 4.01. Covenants of the Unaffiliated Seller........................ 27
Section 4.02. Merger or Consolidation..................................... 27
Section 4.03. Costs....................................................... 28
Section 4.04. Indemnification............................................. 28
ARTICLE FIVE CONDITIONS OF CLOSING....................................... 30
Section 5.01. Conditions of Depositor's Obligations....................... 30
Section 5.02. Conditions of Unaffiliated Seller's Obligations............. 32
Section 5.03. Termination of Depositor's Obligations...................... 32
ARTICLE SIX MISCELLANEOUS............................................... 33
Section 6.01. Notices..................................................... 33
Section 6.02. Severability of Provisions.................................. 33
Section 6.03. Agreement of Unaffiliated Seller............................ 33
</TABLE>
i
<PAGE>
<TABLE>
<S> <C> <C>
Section 6.04. Survival.................................................... 33
Section 6.05. Effect of Headings and Table of Contents.................... 34
Section 6.06. Successors and Assigns...................................... 34
Section 6.07. Confirmation of Intent; Grant of Security Interest.......... 34
Section 6.08. Miscellaneous............................................... 34
Section 6.09. Amendments.................................................. 34
Section 6.10. Third-Party Beneficiaries................................... 35
Section 6.11. GOVERNING LAW; CONSENT TO JURISDICTION;
WAIVER OF JURY TRIAL........................................ 35
Section 6.12. Execution in Counterparts................................... 36
</TABLE>
Exhibit A - Mortgage Loan Schedule
Exhibit B - Officer's Certificate
Exhibit C - Opinion of Counsel to Unaffiliated Seller
ii
<PAGE>
This Sale and Purchase Agreement, dated as of December 17, 1996, by and
among CS FIRST BOSTON MORTGAGE SECURITIES CORP., a Delaware corporation, its
successors and assigns (the "Depositor") and T.A.R. PREFERRED MORTGAGE
CORPORATION, a California corporation and its successors (the "Unaffiliated
Seller").
WHEREAS, Exhibit A attached hereto and made a part hereof lists certain
fixed rate first, second and third lien mortgage loans (the "Mortgage Loans")
owned by the Unaffiliated Seller and the Unaffiliated Seller desires to sell to
the Depositor and that the Depositor desires to purchase;
WHEREAS, it is the intention of the Unaffiliated Seller and the Depositor
that simultaneously with the Unaffiliated Seller's conveyance of the Mortgage
Loans to the Depositor on the Closing Date, (a) the Depositor shall deposit the
Mortgage Loans in a trust fund pursuant to a Pooling and Servicing Agreement to
be dated as of December 1, 1996 (the "Pooling and Servicing Agreement"), to be
entered into by and among the Depositor, as depositor T.AR. Preferred Mortgage
Corporation, as seller, Advanta Mortgage Corp USA, as servicer and Bankers Trust
Company, as trustee (the "Trustee") and (b) the Trustee shall issue certificates
evidencing beneficial ownership interests in the property of the trust fund
formed by the Pooling and Servicing Agreement to the Depositor;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
hereinafter set forth, the parties hereto agree as follows:
ARTICLE ONE
DEFINITIONS
Section 1.01. Definitions. Whenever used herein, the following words and
-----------
phrases, unless the context otherwise requires, shall have the meanings
specified in this Article:
"Accepted Servicing Practices" means the Servicer's normal servicing
----------------------------
practices, which in general will conform to the mortgage servicing practices of
prudent mortgage lending institutions which service for their own account
mortgage loans of the same type as the Mortgage Loans in the jurisdictions in
which the related Mortgaged Properties are located.
"Agreement" means this Sale and Purchase Agreement, as amended or
---------
supplemented in accordance with the provisions hereof.
"Appraised Value" means the appraised value of the Mortgaged Property based
---------------
upon the appraisal made by or on behalf of the Unaffiliated Seller at the time
the Mortgage Loan was originated.
"Certificate Insurer" means MBIA Insurance Corporation, a stock insurance
-------------------
company organized and created under the laws of the State of New York, and any
successors thereto.
<PAGE>
"Closing Date" shall have the meaning ascribed thereto in Section 2.01(c).
------------
"Commission" means the Securities and Exchange Commission.
----------
"Cut-Off Date" means, with respect to the Initial Mortgage Loans, the
------------
Initial Cut-Off Date, and with respect to the Subsequent Mortgage Loans, the
Subsequent Cut-Off Date.
"Cut-Off Date Aggregate Principal Balance" means the aggregate unpaid
----------------------------------------
principal balance of the Initial Mortgage Loans as of the Cut-Off Date. The
Cut-Off Date Aggregate Principal Balance is $ 215,246,226.63.
"Cut-Off Date Principal Balance" means as to each Mortgage Loan, its unpaid
------------------------------
principal balance as of the Cut-Off Date.
"Deleted Mortgage Loan" means a Mortgage Loan replaced by or to be replaced
---------------------
by a Qualified Substitute Mortgage Loan pursuant to the terms of the Pooling and
Servicing Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
------------
"Initial Cut-Off Date" means the opening of business on December 1, 1996.
--------------------
"Initial Mortgage Loans" means the Mortgage Loans transferred and assigned
----------------------
to the Depositor on the Closing Date.
"Monthly Payment" means, as to any Mortgage Loan (including any REO
---------------
Mortgage Loan) and any Due Date, the scheduled payment of principal and interest
due thereon by such Due Date (after adjustment for any Curtailments and
Deficient Valuations occurring prior to such Due Date but before any adjustment
to such amortization schedule by reason of any bankruptcy, other than Deficient
Valuations or similar proceeding or any moratorium or similar waiver or grace
period).
"Mortgage" means the mortgage, deed of trust or other instrument creating a
--------
first, second or third lien on the Mortgaged Property.
"Mortgage Interest Rate" means, as to any Mortgage Loan, the fixed per
----------------------
annum rate at which interest accrues on the unpaid principal balance thereof.
"Mortgage Loans" means such of the mortgage loans to be sold, transferred
--------------
and assigned to the Depositor on the Closing Date and each Subsequent Transfer
Date pursuant to Article Two hereof (including the related Mortgage Notes and
related Mortgages), all as identified in the Mortgage Loan Schedule, and
including any mortgage loan substituting or replacing a Mortgage Loan pursuant
to the terms of the Pooling and Servicing Agreement.
"Mortgage Loan Schedule" shall have the meaning ascribed thereto in Section
----------------------
2.01(b).
2
<PAGE>
"Mortgage Note" means the original, executed note or other evidence of
-------------
indebtedness evidencing the indebtedness of a Mortgagor under a Mortgage Loan,
as amended or modified.
"Mortgaged Property" means the underlying property securing a Mortgage
------------------
Loan, consisting of a fee simple estate in a single parcel of land improved by a
Residential Dwelling.
"Mortgagor" means the obligor on a Mortgage Note.
---------
"Pooling and Servicing Agreement" shall have the meaning ascribed thereto
-------------------------------
in the recitals hereof.
"Prospectus" means the Prospectus dated November 26, 1996 relating to the
----------
offering by the Depositor from time to time of its Conduit Mortgage and
Manufactured Housing Contract Pass-Through Certificates (Issuable in Series) in
the form in which it was or will be filed with the Securities Exchange
Commission pursuant to Rule 424(b) under the Securities Act with respect to the
offer and sale of the Certificates.
"Prospectus Supplement" means the Prospectus Supplement dated December 9,
---------------------
1996, relating to the offering of the Class A Certificates in the form in which
it was or will be filed with the Commission pursuant to Rule 424(b) under the
Securities Act with respect to the offer and sale of the Class A Certificates.
"Qualified Appraiser" means an appraiser, duly appointed by the
-------------------
Unaffiliated Seller, who had no interest, direct or indirect, in the Mortgaged
Property or in any loan made on the security thereof, and whose compensation is
not affected by the approval or disapproval of the Mortgage Loan, and such
appraiser and the appraisal made by such appraiser both satisfy the requirements
of Title XI of the Federal Institutions Reform, Recovery and Enforcement Act of
1989 and the regulations promulgated thereunder, all as in effect on the date
the Mortgage Loan was originated.
"Registration Statement" means that certain registration statement on Form
----------------------
S-3, as amended (Registration No. 333-16145) relating to the offering by the
Depositor from time to time of its Conduit Mortgage and Manufactured Housing
Contract Pass-Through Certificates (Issuable in Series) as heretofore declared
effective by the Commission.
"Securities Act" means the Securities Act of 1933, as amended.
--------------
"Subsequent Mortgage Loans" means the Mortgage Loans hereafter transferred
-------------------------
and assigned to the Depositor on a Subsequent Transfer Date such Mortgage Loan
identified on the Mortgage Loan Schedule attached to a Subsequent Transfer
Instrument.
"Termination Event" means the existence of any one or more of the following
-----------------
conditions:
(a) a stop order suspending the effectiveness of the Registration
Statement shall have been issued or a proceeding for that purpose shall have
been initiated or threatened by the Commission; or
3
<PAGE>
(b) subsequent to the execution and delivery of this Agreement, a
downgrading, or public notification of a possible change, without indication of
direction, shall have occurred in the rating afforded any of the debt securities
or claims paying ability of any person providing any form of credit enhancement
for any of the Class A Certificates, by any "nationally recognized statistical
rating organization," as that term is defined by the Commission for purposes of
Rule 436(g)(2) under the Securities Act; or
(c) subsequent to the execution and delivery of this Agreement, there
shall have occurred an adverse change in the condition, financial or otherwise,
earnings, affairs, regulatory situation or business prospects of the Certificate
Insurer or the Unaffiliated Seller reasonably determined by the Depositor to be
material; or
(d) subsequent to the date of this Agreement there shall have occurred
any of the following: (i) a suspension or material limitation in trading in
securities substantially similar to the Class A Certificates; (ii) a general
moratorium on commercial banking activities in New York declared by either
Federal or New York State authorities; or (iii) the engagement by the United
States in hostilities, or the escalation of such hostilities, or any calamity or
crisis, if the effect of any such event specified in this clause (iii) in the
reasonable judgment of the Depositor makes it impracticable or inadvisable to
proceed with the public offering or the delivery of the Class A Certificates on
the terms and in the manner contemplated in the Prospectus Supplement.
"Unaffiliated Seller" means T.A.R. Preferred Mortgage Corporation, in
-------------------
its capacity as Unaffiliated Seller of the Mortgage Loans under this Agreement
and any successor to T.A.R. Preferred Mortgage Corporation, whether through
merger, consolidation, purchase and assumption of T.A.R. Preferred Mortgage
Corporation nor all or substantially all of its assets or otherwise.
Capitalized terms used herein that are not otherwise defined shall
have the respective meanings ascribed thereto in the Pooling and Servicing
Agreement.
4
<PAGE>
ARTICLE TWO
PURCHASE, SALE AND CONVEYANCE OF MORTGAGE LOANS
Section 2.01. Agreement to Purchase the Initial Mortgage Loans. (a)
------------------------------------------------
Subject to the terms and conditions of this Agreement, the Unaffiliated Seller
agrees to sell, and the Depositor agrees to purchase, the Mortgage Loans having
the Cut-Off Date Aggregate Principal Balance or, in accordance with Section
2.08, such other balance as is evidenced by the actual Cut-Off Date Aggregate
Principal Balance of the Mortgage Loans accepted by the Depositor on the Closing
Date and listed in the Mortgage Loan Schedule.
(b) Subject to Section 2.08, the Depositor and the Unaffiliated Seller
have agreed upon which of the Unaffiliated Seller's Mortgage Loans are to be
purchased by the Depositor on the Closing Date pursuant to this Agreement, and
the Unaffiliated Seller has prepared a schedule describing the Mortgage Loans
(the "Mortgage Loan Schedule") setting forth all of the Mortgage Loans to be
purchased under this Agreement, which schedule is attached hereto as Exhibit A.
The Mortgage Loan Schedule shall conform to the requirements of the Depositor
and to the definition of "Mortgage Loan Schedule" under the Pooling and
Servicing Agreement.
(c) The closing for the purchase and sale of the Mortgage Loans shall
take place at the offices of Dewey Ballantine, New York, New York, at 10:00
a.m., New York time, on December 11, 1996 or such other place and time as the
parties shall agree (such time being herein referred to as the "Closing Date").
Section 2.02. Agreement to Purchase the Subsequent Mortgage Loans.
---------------------------------------------------
(a) Subject to the terms and conditions of this Agreement, the Unaffiliated
Seller agrees to sell, and the Depositor agrees to purchase, Subsequent Mortgage
Loans, having an Aggregate Principal Balance of up to $71,500,000 as listed in
the Mortgage Loan Schedule attached to the related Addition Notice.
(b) Subject to Section 2.08, the Depositor and the Unaffiliated Seller
shall agree upon which of the Unaffiliated Seller's Mortgage Loans are to be
purchased by the Depositor on a Subsequent Transfer Date, and the Unaffiliated
Seller shall prepare a Mortgage Loan Schedule setting forth all of the
Subsequent Mortgage Loans to be purchased under the related Subsequent Transfer
Instrument.
(c) Subject to the satisfaction of the conditions set forth in
paragraph (d) below, in consideration of the Depositor's delivery on the related
Subsequent Transfer Dates to or upon the order of the Unaffiliated Seller of the
purchase price, the Unaffiliated Seller shall on any Subsequent Transfer Date
sell, transfer, assign, set over and convey to the Depositor without recourse
but subject to terms and provisions of this Agreement, all of the right, title
and interest of the Unaffiliated Seller in and to the Subsequent Mortgage Loans,
and all other assets included or to be included in the Trust Fund for the
benefit of the Certificateholders and the Certificate Insurer.
(d) The Subsequent Mortgage Loans and the other property and rights
related thereto described in paragraph (c) above shall be transferred by the
Unaffiliated Seller to the
5
<PAGE>
Depositor and by the Depositor to the Trust Fund only upon the satisfaction of
each of the following conditions on or prior to the related Subsequent Transfer
Date:
(i) the Unaffiliated Seller shall have provided the Trustee, the Rating
Agencies and the Certificate Insurer with a timely Addition Notice in no
event later than five Business Days prior to the Subsequent Transfer Date
and shall have provided any other information reasonably requested by any
of the foregoing with respect to the Subsequent Mortgage Loans;
(ii) the Unaffiliated Seller shall have delivered to the Trustee a duly
executed Subsequent Transfer Instrument, which shall include a Mortgage
Loan Schedule listing the Subsequent Mortgage Loans;
(iii) the Unaffiliated Seller shall have deposited or cause to have
deposited in the Collection Account all collections of (x) principal in
respect of the Subsequent Mortgage Loans received on and after the related
Subsequent Cut-Off Date and (y) interest due on the Subsequent Mortgage
Loans on and after the related Subsequent Cut-Off Date;
(iv) as of each Subsequent Transfer Date, the Unaffiliated Seller was
not insolvent nor will be made insolvent by such transfer nor is the
Unaffiliated Seller aware of any pending insolvency;
(v) such sale and transfer will not result in a material adverse tax
consequence to the Trust Fund or the Holders of the Certificates;
(vi) the Funding Period shall not have terminated;
(vii) the Unaffiliated Seller shall have delivered to the Trustee an
Officer's Certificate confirming the satisfaction of each condition
precedent specified in this paragraph (d) and that the Subsequent Mortgage
Loans comply with the provisions of this Section 2.09 of the Pooling and
Servicing Agreement; and
(viii) there shall have been delivered to the Certificate Insurer, the
Rating Agencies and the Trustee, independent Opinions of Counsel addressed
to such Persons 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 Date (bankruptcy,
corporate and tax opinions).
(e) The obligation of the Depositor to purchase a Subsequent Mortgage
Loan on any Subsequent Transfer Date is subject to the requirements set forth in
Section 2.09 of the Pooling and Servicing Agreement.
Section 2.03. Purchase Price. On the Closing Date, as full
--------------
consideration for the Unaffiliated Seller's sale of the Initial Mortgage Loans
to the Depositor, the Depositor will deliver to the Unaffiliated Seller (i) an
amount in cash equal to the sum of (A) 99.704091% of the aggregate principal
balance as of the Closing Date of the Class A-1 Certificates, 99.568975% of the
aggregate principal balance as of the Closing Date of the Class A-2
Certificates, 99.465850% of the aggregate principal balance as of the Closing
Date of the Class A-3 Certificates, 99.345039% of the aggregate principal
balance as of the Closing Date of the Class A-4 Certificates, 99.246062% of the
aggregate principal balance as of the Closing Date of the Class A-5
Certificates, 99.180605% of the aggregate principal balance as of the Closing
Date of the Class A-6 Certificates, and (B) accrued interest on the principal
balances of such Certificates at the rate of 6.43% per annum for the Class A-1
Certificates, 6.32% per annum for the Class A-2 Certificates, 6.39% per annum
for the Class A-3 Certificates, 6.62% per annum for the Class A-4 Certificates,
6.96% per annum for the Class A-5 Certificates and 7.18% per annum for the Class
A-6 Certificates, in each case from (and including) December 1, 1996 to (but not
including) December 17, 1996, payable by wire transfer of same day funds and
(ii) the
6
<PAGE>
Class B, Class C-1, (a portion of the) Class C-2 and Class R Certificates to be
issued pursuant to the Pooling and Servicing Agreement.
Section 2.04. Conveyance of Mortgage Loans; Possession of Mortgage
----------------------------------------------------
Files. (a) On the Closing Date and on each Subsequent Transfer Date, the
- -----
Unaffiliated Seller shall sell, transfer, assign, set over and convey to the
Depositor, without recourse but subject to the terms of this Agreement, all
right, title and interest in and to the applicable Mortgage Loans, together with
the Mortgage Files relating thereto and the insurance policies relating to each
such Mortgage Loan and all right, title and interest in and to all collections
thereon and the proceeds thereof on and after the Cut-Off Date. Upon payment of
the purchase price for such Mortgage Loans as provided in Section 2.03 of this
Agreement, the Unaffiliated Seller shall have hereby, and shall be deemed to
have, sold, transferred, assigned, set over and conveyed such Mortgage Loans
together with the Mortgage Files relating thereto and the insurance policies
relating to each such Mortgage Loan and all right, title and interest in and to
all collections thereon and the proceeds thereof on and after the Cut-Off Date.
In connection with the sale, transfer, assignment and conveyance from
the Unaffiliated Seller to the Depositor, the Unaffiliated Seller has filed, or
shall cause to be filed, in the appropriate office or offices in the States of
California and New York, a UCC-1 financing statement executed by the
Unaffiliated Seller as debtor, naming the Depositor as secured party and listing
the Mortgage Loans and the other property described above as collateral. The
characterization of the Unaffiliated Seller as a debtor and the Depositor 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 Unaffiliated Seller's entire right,
title and interest in the Mortgage Loans to the Depositor. In connection with
such filing, the Unaffiliated Seller agrees that it 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, the Certificateholders' and the Certificate Insurer's interests in
the Mortgage Loans.
(b) Upon the sale of such Mortgage Loans, the ownership of each
related Mortgage Note, each related Mortgage and the contents of the related
Mortgage File shall immediately vest in the Depositor and the ownership of all
related records and documents with respect to each Mortgage Loan prepared by or
which come into the possession of the Unaffiliated Seller shall immediately vest
in the Depositor. The contents of any Mortgage File in the possession of the
Unaffiliated Seller at any time after such sale, and any scheduled payments of
principal and interest on the Mortgage Loans due on and after the Cut-Off Date
and received by the Unaffiliated Seller, shall be held in trust by the
Unaffiliated Seller for the benefit of the Trustee (as assignee of the Depositor
pursuant to the Pooling and Servicing Agreement), and shall be promptly
delivered by the Unaffiliated Seller to or upon the order of the Trustee.
(c) Pursuant to the Pooling and Servicing Agreement, the Depositor
shall, on the Closing Date, assign all of its right, title and interest in and
to the applicable Mortgage Loans to the Trustee for the benefit of the
Certificateholders and the Certificate Insurer.
Section 2.05. Delivery of Mortgage Loan Documents. (a) On or prior
-----------------------------------
to the Closing Date or Subsequent Transfer Date, as applicable, the Unaffiliated
Seller shall deliver to the Trustee (as assignee of the Depositor pursuant to
the Pooling and Servicing Agreement), each of the following documents for each
applicable Mortgage Loan:
7
<PAGE>
(i) The original Mortgage Note, bearing all intervening endorsements
showing a complete chain of endorsements from the originator of such
Mortgage Loan to the Unaffiliated Seller endorsed by the Unaffiliated
Seller without recourse in the following form: "Pay to the order of Bankers
Trust Company, as Trustee for the benefit of the Certificateholders and the
Certificate Insurer for Preferred Mortgage Asset-Backed Certificates,
Series 1996-2, without recourse" and signed in the name of the Unaffiliated
Seller by an authorized officer;
(ii) The original Mortgage with evidence of recording indicated thereon
or if such Mortgage has not been returned from the applicable recording
office, a copy of the Mortgage certified by an authorized officer of the
Unaffiliated Seller (such original recorded Mortgage shall be delivered
when so returned);
(iii) An original assignment of the original Mortgage, in suitable
form for recordation in the jurisdiction in which the related Mortgaged
Property is located, in the name of the Unaffiliated Seller signed by an
authorized officer (with evidence of submission for recordation of such
assignment in the appropriate real estate recording office for such
Mortgaged Property); provided, however, that assignments of mortgages shall
not be required to be submitted for recording with respect to any Mortgage
Loan which relates to the Trustee's Mortgage File if the Trustee, each of
the Rating Agencies and the Certificate Insurer shall have received an
opinion of counsel at the expense of the Unaffiliated Seller satisfactory
to the Trustee, each of the Rating Agencies and the Certificate Insurer
stating that, in such counsel's opinion, the failure to record such
assignment of Mortgage shall not have a materially adverse effect on the
security interest of the Trustee in the Mortgage; provided, further, that
-------- -------
any assignment of Mortgage for which an opinion has been delivered shall be
recorded by the Unaffiliated Seller upon the earlier to occur of (i)
receipt by the Trustee of the Certificate Insurer's written direction to
record such Mortgage, (ii) the occurrence of any Event of Default, as such
term is defined in the Pooling and Servicing Agreement, or (iii) a
bankruptcy or insolvency proceeding involving the Mortgagor is initiated or
foreclosure proceedings are initiated against the Mortgaged Property as a
consequence of an event of default under the Mortgage Loan; provided,
--------
further, that if the related Mortgage has not been returned from the
-------
applicable recording office, then a copy of such Mortgage certified by an
authorized officer of the Unaffiliated Seller shall be delivered (such
original assignment shall be delivered when so returned);
(iv) The original of any intervening assignments of the Mortgage with
evidence of recording thereon showing a complete chain of assignment from
the originator of such Mortgage Loan to the Unaffiliated Seller;
(v) The original of any assumption, modification, consolidation or
extension agreements with evidence of recording thereon; and
(vi) The title report or policy of title insurance (or a commitment
for title insurance if the policy is being held by the title insurance
company pending recordation of the Mortgage) issued with respect to such
Mortgage Loan;
provided, however, that in the case of any Mortgage Loans which have been
- -------- -------
prepaid in full after the Cut-Off Date and prior to the date of the execution of
this Agreement, the Unaffiliated Seller,
8
<PAGE>
in lieu of delivering the above documents, hereby delivers to the Depositor a
certification of an officer of the Unaffiliated Seller of the nature set forth
in Exhibit N attached to the Pooling and Servicing Agreement; and provided,
--------
further, however, that as to certain Mortgages or assignments thereof which have
- ------- -------
been delivered or are being delivered to recording offices for recording and
have not been returned to the Unaffiliated Seller in time to permit their
delivery hereunder at the time of such transfer, in lieu of delivering such
original documents, the Depositor is delivering to the Trustee a true copy
thereof with a certification by the Unaffiliated Seller on the face of such copy
substantially as follows: "certified true and correct copy of original which has
been transmitted for recordation." The Unaffiliated Seller agrees that it will
deliver such original documents, together with any related title report or
policy of title insurance not previously delivered, on behalf of the Depositor
to the Trustee promptly after they are received, and no later than 120 days
after the Closing Date; provided, however, that in those instances where the
-------- -------
public recording office retains the original Mortgage or assignment of Mortgage
after it has been recorded or such original document has been lost by the
recording office, the Unaffiliated Seller shall be deemed to have satisfied its
obligations hereunder if it shall have delivered to the Trustee a copy of such
original Mortgage or assignment of Mortgage certified by the public recording
office to be a true copy of the recorded original thereof. The Unaffiliated
Seller agrees, at its own expense, to record (or to provide the Trustee with
evidence of recordation thereof) each assignment within 60 days of the Closing
Date in the appropriate public office for real property records, provided that
such assignments are redelivered by the Trustee to the Unaffiliated Seller upon
the Unaffiliated Seller's written request and at the Unaffiliated Seller's
expense, unless the Unaffiliated Seller (at its expense) furnishes to the
Trustee, the Certificate Insurer and the Rating Agencies an Opinion of Counsel
reasonably acceptable to the Trustee and the Certificate Insurer to the effect
that recordation of such assignment is not necessary under applicable state law
to preserve the Trustee's interest in the related Mortgage Loan against the
claim of any subsequent transferee of such Mortgage Loan or any successor to, or
creditor of, the Unaffiliated Seller.
Within a period of 21 days from the Closing Date, the Trustee, at the
Unaffiliated Seller's expense shall complete the endorsement of each Mortgage
Note such that the final endorsement appears in the following form:
(i) "Pay to the order of Bankers Trust Company, as Trustee for the
benefit of the Certificateholders and the Certificate Insurer for Preferred
Mortgage Asset-Backed Certificates Series 1996-2, without recourse".
Within a period of 21 days from the Closing Date, the Trustee, at the
Unaffiliated Seller's expense, shall also complete each assignment of Mortgage
such that the final assignment of Mortgage appears in the following form:
"Bankers Trust Company, as Trustee for the benefit of the
Certificateholders and the Certificate Insurer for Preferred Mortgage
Asset-Backed Certificates Series 1996-2."
(b) In the event that any additional original documents are required
pursuant to the terms of this Section 2.05 to be a part of a Mortgage File, the
Unaffiliated Seller or the Depositor, respectively, shall promptly deliver
written notice to the Trustee that such additional original documents are
required hereunder and deliver such original documents to the Trustee. In
acting as custodian of any such original document, the Servicer agrees further
that it does not
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and will not have or assert any beneficial ownership interest in the Mortgage
Loans or the Mortgage Files.
(c) In the event that any Mortgage Note required to be delivered
pursuant to this Section 2.05 is conclusively determined by any of the
Unaffiliated Seller, the Servicer or the Trustee to be lost, stolen or destroyed
the Unaffiliated Seller shall, within 14 days of the Closing Date, deliver to
the Trustee a "lost note affidavit" in form and substance acceptable to the
Trustee, and shall simultaneously therewith request the obligor on such Mortgage
Note to execute and return a replacement Mortgage Note, and shall further agree
to hold the Trustee and the Certificate Insurer harmless from any loss or damage
resulting from any action taken in reliance on the delivery and possession by
the Trustee of such lost note affidavit. Upon the receipt of such replacement
Mortgage Note, the Trustee shall return the lost note affidavit. Delivery by the
Unaffiliated Seller of such lost note affidavit shall not affect the obligations
of the Unaffiliated Seller hereunder with respect to the related Mortgage Loan.
(d) Promptly after the Closing Date, the Unaffiliated Seller shall,
with respect to each Mortgage Loan, cause to be recorded in the appropriate
public office for real property records, where permitted by applicable law and
where applicable law does not require that a subordinate mortgagee be named as a
party defendant in foreclosure or comparable proceedings in order to foreclose
or otherwise preempt such mortgagee's equity of redemption, a request for notice
of any action by or on behalf of any mortgagee under the related senior lien.
Section 2.06. Acceptance of Mortgage Loans. (a) Pursuant to the
----------------------------
Pooling and Servicing Agreement, the Trustee has agreed to execute and deliver
on or prior to the Closing Date an acknowledgment of receipt of, for each
Mortgage Loan, the original Mortgage Note with respect to each Mortgage Loan
(with any exceptions noted), in the form attached as Exhibit D to the Pooling
and Servicing Agreement and declares that it will hold such documents and any
amendments, replacements or supplements thereto, as well as any other assets
included in the definition of Trust Fund in the Pooling and Servicing Agreement
and delivered to the Trustee, as Trustee in trust upon and subject to the
conditions set forth in the Pooling and Servicing Agreement for the benefit of
the Certificateholders and the Certificate Insurer. Pursuant to the Pooling and
Servicing Agreement, the Trustee has agreed, for the benefit of the
Certificateholders and the Certificate Insurer, to review (or cause to be
reviewed) each Trustee's Mortgage File within 30 days after the Closing Date
(or, with respect to any Subsequent Mortgage Loan or Qualified Substitute
Mortgage Loan, within 30 days after the receipt by the Trustee thereof) and to
deliver to the initial Certificateholders, the Unaffiliated Seller, the Servicer
and the Certificate Insurer a final certification in the form attached to the
Pooling and Servicing Agreement as Exhibit F to the effect that, as to each
Mortgage Loan listed in the Mortgage Loan Schedule (other than any Mortgage Loan
paid in full or any Mortgage Loan specifically identified in such certification
as not covered by such certification), (i) all documents required to be
delivered to it pursuant to the Pooling and Servicing Agreement are in its
possession, (ii) each such document has been reviewed by it, has been, to the
extent required, executed and has not been mutilated, damaged, torn or otherwise
physically altered (handwritten additions, changes or corrections shall not
constitute physical alteration if initialled by the Mortgagor), appears regular
on its face and relates to such Mortgage Loan, and (iii) based on its
examination and only as to the foregoing documents, the information set forth on
the Mortgage Loan Schedule accurately reflects the information set forth in the
Trustee's Mortgage File delivered on such date. Pursuant to the Pooling and
Servicing Agreement, the Trustee shall be under no duty or obligation to
inspect, review or examine any such documents, instruments, certificates or
other papers to determine that
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they are genuine, enforceable, or appropriate for the represented purpose or
that they are other than what they purport to be on their face.
(b) The Pooling and Servicing Agreement provides that, if the
Certificate Insurer or the Trustee during the process of reviewing the Trustee's
Mortgage Files finds any document constituting a part of a Trustee's Mortgage
File which is not executed, has not been received, is unrelated to the Mortgage
Loan identified in the Mortgage Loan Schedule, or does not conform to the
requirements of Section 2.05 or the description thereof as set forth in the
Mortgage Loan Schedule, the Trustee or the Certificate Insurer, as applicable,
shall promptly so notify the Servicer, the Unaffiliated Seller, the Certificate
Insurer and the Trustee. The Unaffiliated Seller agrees that in performing any
such review, the Trustee may conclusively rely on the Unaffiliated Seller as to
the purported genuineness of any such document and any signature thereon. The
Unaffiliated Seller agrees to use reasonable efforts to remedy a material defect
in a document constituting part of a Mortgage File of which it is notified. If,
however, within 60 days after such notice the Unaffiliated Seller has not
remedied the defect and the defect materially and adversely affects the interest
of the Certificateholders in the related Mortgage Loan or the interests of the
Certificate Insurer, then the Unaffiliated Seller shall either substitute in
lieu of such Mortgage Loan a Qualified Substitute Mortgage Loan or purchase such
Mortgage Loan in the manner and subject to the conditions set forth in Section
3.05.
(c) The failure of the Trustee or the Certificate Insurer to give any
notice contemplated herein within the time periods specified above shall not
affect or relieve the Unaffiliated Seller's obligation to repurchase for any
Mortgage Loan pursuant to this Section 2.06 or Section 3.05 of this Agreement.
Section 2.07. Transfer of Mortgage Loans; Assignment of Agreement.
---------------------------------------------------
The Unaffiliated Seller hereby acknowledges and agrees that the Depositor may
assign its interest under this Agreement to the Trustee as may be required to
effect the purposes of the Pooling and Servicing Agreement, without further
notice to, or consent of, the Unaffiliated Seller, and the Trustee shall succeed
to such of the rights and obligations of the Depositor hereunder as shall be so
assigned. The Depositor shall, pursuant to the Pooling and Servicing Agreement,
assign all of its right, title and interest in and to the Mortgage Loans and its
right to exercise the remedies created by Sections 2.06 and 3.05 hereof for
breaches of the representations, warranties, agreements and covenants of the
Unaffiliated Seller contained in Sections 2.05, 2.06, 3.02 and 3.03 hereof to
the Trustee for the benefit of the Certificateholders and the Certificate
Insurer. The Unaffiliated Seller agrees that, upon such assignment to the
Trustee, such representations, warranties, agreements and covenants will run to
and be for the benefit of the Trustee and the Trustee may enforce, without
joinder of the Depositor, the repurchase obligations of the Unaffiliated Seller
set forth herein with respect to breaches of such representations, warranties,
agreements and covenants.
Section 2.08. Examination of Mortgage Files. Prior to the Closing
-----------------------------
Date and each Subsequent Transfer Date, as applicable, the Unaffiliated Seller
shall make the Mortgage Files available to the Depositor or its designee for
examination at the Unaffiliated Seller's offices or at such other place as the
Unaffiliated Seller shall reasonably specify. Such examination may be made by
the Depositor or its designee at any time on or before the Closing Date or
Subsequent Transfer Date, as the case may be. If the Depositor or its designee
makes such examination prior to the Closing Date or Subsequent Transfer Date, as
the case may be, and identifies any Mortgage Loans that do not conform to the
requirements of the Depositor as described in this Agreement,
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such Mortgage Loans shall be deleted from the Mortgage Loan Schedule and may be
replaced, prior to the Closing Date or Subsequent Transfer Date, as the case may
be, by substitute Mortgage Loans acceptable to the Depositor. The Depositor
may, at its option and without notice to the Unaffiliated Seller, purchase all
or part of the Mortgage Loans without conducting any partial or complete
examination. The fact that the Depositor or the Trustee has conducted or has
failed to conduct any partial or complete examination of the Mortgage Files
shall not affect the rights of the Depositor or the Trustee to demand repurchase
or other relief as provided in this Agreement.
Section 2.09. Books and Records. The sale of each Mortgage Loan
-----------------
shall be reflected on the Unaffiliated Seller's accounting and other records,
balance sheet and other financial statements as a sale of assets by the
Unaffiliated Seller to the Depositor. The Unaffiliated Seller shall be
responsible for maintaining, and shall maintain, a complete set of books and
records for each Mortgage Loan which shall be clearly marked to reflect the
ownership of each Mortgage Loan by the Trustee for the benefit of the
Certificateholders and the Certificate Insurer.
Section 2.10. Cost of Delivery and Recordation of Documents. The
---------------------------------------------
costs relating to the delivery and recordation of the documents specified in
this Article Two in connection with the Mortgage Loans shall be borne by the
Unaffiliated Seller.
ARTICLE THREE
REPRESENTATIONS AND WARRANTIES
Section 3.01. RESERVED
Section 3.02. Representations and Warranties as to the Unaffiliated
-----------------------------------------------------
Seller. The Unaffiliated Seller hereby represents and warrants to the
- ------
Depositor, as of the Closing Date, that:
(a) The Unaffiliated Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of California and has
all licenses necessary to carry on its business as now being conducted and is
licensed, qualified and in good standing in each state where a Mortgaged
Property is located if the laws of such state require licensing or qualification
in order to conduct business of the type conducted by the Unaffiliated Seller
and to perform its obligations as the Unaffiliated Seller hereunder and under
the Pooling and Servicing Agreement, and in any event the Unaffiliated Seller is
in compliance with the laws of any such state to the extent necessary to ensure
the enforceability of the related Mortgage Loan; the Unaffiliated Seller has the
full power and authority, corporate and otherwise, to execute and deliver this
Agreement and the Pooling and Servicing Agreement and to perform in accordance
herewith and therewith; the execution, delivery and performance of this
Agreement (including all instruments of transfer to be delivered pursuant to
this Agreement and the Pooling and Servicing Agreement) and the Pooling and
Servicing Agreement by the Unaffiliated Seller and the consummation of the
transactions contemplated hereby and thereby have been duly and validly
authorized; each of this Agreement and the Pooling and Servicing Agreement
evidences the valid, binding and enforceable obligation of the Unaffiliated
Seller; and all requisite corporate action has been taken by the Unaffiliated
Seller to make this Agreement and the Pooling and Servicing Agreement valid and
binding upon the Unaffiliated Seller in accordance with its terms;
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(b) No consent, approval, authorization or order of any court or
governmental agency or body is required for the execution, delivery and
performance by the Unaffiliated Seller of or compliance by the Unaffiliated
Seller with the Pooling and Servicing Agreement, this Agreement or the sale of
the Mortgage Loans pursuant to the terms of this Agreement or the consummation
of the transactions contemplated by this Agreement and the Pooling and Servicing
Agreement, or if required, such approval has been obtained prior to the Closing
Date;
(c) Neither the execution and delivery of this Agreement or the
Pooling and Servicing Agreement, the acquisition or origination of the Mortgage
Loans by the Unaffiliated Seller or the transactions contemplated hereby or
thereby, nor the fulfillment of or compliance with the terms and conditions of
this Agreement or the Pooling and Servicing Agreement, has or will conflict with
or result in a breach of any of the terms, conditions or provisions of the
Unaffiliated Seller's charter or by-laws or any legal restriction or any
agreement or instrument to which the Unaffiliated Seller is now a party or by
which it is bound or to which its property is subject, or constitute a default
or result in an acceleration under any of the foregoing, or result in the
violation of any law, rule, regulation, order, judgment or decree to which the
Unaffiliated Seller or its property is subject, or impair the ability of the
Trustee (or the Servicer as the agent of the Trustee) to realize on the Mortgage
Loans, or impair the value of the Mortgage Loans;
(d) None of this Agreement, the Pooling and Servicing Agreement or the
information contained in the Prospectus Supplement under the captions
"Description of the Mortgage Loans", "The Seller" nor any statement, report or
other document prepared by the Unaffiliated Seller and furnished or to be
furnished pursuant to this Agreement, the Pooling and Servicing Agreement or in
connection with the transactions contemplated hereby or thereby contains any
untrue statement or alleged untrue statement of any material fact or omits to
state a material fact necessary to make the statements contained herein or
therein, in light of the circumstances under which they were made, not
misleading;
(e) There is no action, suit, proceeding or investigation pending or,
to the knowledge of the Unaffiliated Seller, threatened before a court,
administrative agency or government tribunal against the Unaffiliated Seller
which, either in any one instance or in the aggregate, may result in any
material adverse change in the business, operations, financial condition,
properties or assets of the Unaffiliated Seller, or in any material impairment
of the right or ability of the Unaffiliated Seller to carry on its business
substantially as now conducted, or in any material liability on the part of the
Unaffiliated Seller, or which would draw into question the validity of this
Agreement, the Pooling and Servicing Agreement, the Mortgage Loans, or of any
action taken or to be taken in connection with the obligations of the
Unaffiliated Seller contemplated herein or therein, or which would impair
materially the ability of the Unaffiliated Seller to perform under the terms of
this Agreement or the Pooling and Servicing Agreement or that might prohibit its
entering into this Agreement, the Pooling and Servicing Agreement, or the
consummation of any of the transactions contemplated hereby;
(f) The Unaffiliated Seller is not in violation of or in default with
respect to, and the execution and delivery of this Agreement and the Pooling and
Servicing Agreement by the Unaffiliated Seller and its performance of and
compliance with the terms hereof and thereof will not constitute a violation or
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 violation or default might have consequences that would materially and
adversely affect the condition (financial or other) or operations of the
Unaffiliated Seller or its properties or might
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<PAGE>
have consequences that would materially and adversely affect its performance
hereunder or under the Pooling and Servicing Agreement;
(g) Upon the receipt of each Trustee's Mortgage File by the Depositor
under this Agreement, the Depositor will have good title on behalf of the Trust
Fund to each related Mortgage Loan and such other items comprising the corpus of
the Trust Fund free and clear of any lien created by the Unaffiliated Seller
(other than liens which will be simultaneously released);
(h) The consummation of the transactions contemplated by this
Agreement and the Pooling and Servicing Agreement are in the ordinary course of
business of the Unaffiliated Seller, and the transfer, assignment and conveyance
of the Mortgage Notes and the Mortgages by the Unaffiliated Seller pursuant to
this Agreement are not subject to the bulk transfer or any similar statutory
provisions in effect in any applicable jurisdiction;
(i) With respect to any Mortgage Loan purchased by the Unaffiliated
Seller, the Unaffiliated Seller acquired title to the Mortgage Loan in good
faith, without notice of any adverse claim;
(j) The Unaffiliated Seller does not believe, nor does it have any
reason or cause to believe, that it cannot perform each and every covenant
contained in this Agreement and in the Pooling and Servicing Agreement. The
Unaffiliated Seller is solvent and the sale of the Mortgage Loans by the
Unaffiliated Seller pursuant to the terms of this Agreement will not cause the
Unaffiliated Seller to become insolvent. The sale of the Mortgage Loans by the
Unaffiliated Seller pursuant to the terms of this Agreement was not undertaken
with the intent to hinder, delay or defraud any of the Unaffiliated Seller's
creditors;
(k) The Mortgage Loans are not intentionally selected in a manner so
as to affect adversely the interests of the Depositor or of any transferee of
the Depositor (including the Trustee);
(l) The Unaffiliated Seller has determined that it will treat the
disposition of the Mortgage Loans pursuant to this Agreement as a sale for
accounting and tax purposes;
(m) The Unaffiliated Seller has not dealt with any broker or agent or
anyone else that may be entitled to any commission or compensation in connection
with the sale of the Mortgage Loans to the Depositor other than to the Depositor
or an affiliate thereof; and
(n) The consideration received by the Unaffiliated Seller upon the
sale of the Mortgage Loans under this Agreement constitutes fair consideration
and reasonably equivalent value for the Mortgage Loans.
Section 3.03. Representations and Warranties Relating to the Mortgage
-------------------------------------------------------
Loans. The Unaffiliated Seller represents to the Depositor that, as of the
- -----
Closing Date, as to each Initial Mortgage Loan, and as of the Subsequent
Transfer Date, as to each Subsequent Mortgage Loan, immediately prior to the
sale and transfer of such Mortgage Loan by the Unaffiliated Seller to the
Depositor:
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(a) The Mortgage Loans had, as of the Cut-Off Date, an aggregate
Principal Balance equal to $215,246,226.63, and all of the information set
forth in the Mortgage Loan Schedule is complete, true and correct;
(b) All payments required to be made up to the Cut-Off Date for the
Mortgage Loan under the terms of the Mortgage Note have been made and credited,
except, unless otherwise specified on the Mortgage Loan Schedule, no payment
required under the Mortgage Loan is more than 30 days delinquent nor has any
payment under the Mortgage Loan been delinquent for more than 30 days more than
once in the 12 months preceding the Cut-Off Date; and the first Monthly Payment
has been made or shall be made, as the case may be, with respect to the Mortgage
Loan on the Due Date or within the grace period;
(c) There are no defaults in complying with the terms of the Mortgage,
and all taxes, governmental assessments, insurance premiums, water, sewer and
municipal charges which have become liens against the Mortgaged Property,
leasehold payments or ground rents which previously became due and owing have
been paid. The Seller has not advanced funds, or induced, solicited or
knowingly received any advance of funds by a party other than the Mortgagor,
directly or indirectly, for the payment of any amount required under the
Mortgage Loan;
(d) The terms of the Mortgage Note and Mortgage have not been
impaired, waived, altered or modified in any respect, except by a written
instrument which has been recorded, if necessary, to protect the interests of
the Trustee on behalf of the Certificateholders and the Certificate Insurer and
which has been delivered to the Trustee. The substance of any such waiver,
alteration or modification has been approved by the title insurer, to the extent
required by the policy, and its terms are reflected on the Mortgage Loan
Schedule. No Mortgagor has been released, in whole or in part, except in
connection with an assumption agreement approved by the title insurer, to the
extent required by the policy, and which assumption agreement is part of the
Mortgage File delivered to the Trustee and the terms of which are reflected in
the Mortgage Loan Schedule;
(e) The Mortgage Loan is not subject to any right of rescission, set-
off, counterclaim or defense, including, without limitation, the defense of
usury, nor will the operation of any of the terms of the Mortgage Note or the
Mortgage, or the exercise of any right thereunder, render either the Mortgage
Note or the Mortgage unenforceable, in whole or in part, or subject to any right
of rescission, set-off, recoupment, counterclaim or defense, including, without
limitation, the defense of usury, and no such right of rescission, set-off,
recoupment, counterclaim or defense has been asserted with respect thereto, and
no Mortgagor was a debtor in any state or federal bankruptcy or insolvency
proceeding at the time the Mortgage Loan was originated;
(f) Pursuant to the terms of the Mortgage, the Mortgaged Property is
subject to fire and casualty insurance with a standard mortgagee clause and
extended coverage which provides guaranteed replacement value of the
improvements securing such Mortgage Loan, or coverage in the amount of the full
replacement value of the improvements securing such Mortgage Loan or the amount
of the unpaid principal balance of the first mortgage plus the unpaid principal
balance of the Mortgage Loan, whichever is less. The fire and casualty
insurance is standard in the industry for property similar (in terms of the
property type, value and location) to the Mortgaged Property. If the Mortgaged
Property is in an area identified in the Federal Register by the Federal
Emergency Management Agency as having special flood hazards (and such flood
insurance has been made available), a flood insurance policy is in effect with
respect to the
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<PAGE>
Mortgaged Property meeting the requirements of the current guidelines of the
Federal Insurance Administration with a generally acceptable insurance carrier,
in an amount representing coverage not less than the least of (i) the unpaid
principal balance of the Mortgage Loan, (ii) the full insurable value of the
Mortgaged Property or (iii) the maximum amount of insurance available under the
Flood Disaster Protection Act of 1973. To the best of Seller's knowledge, all
such insurance policies (collectively, the "hazard insurance policy") meet the
requirements of the current guidelines of the Federal Insurance Administration,
conform to the requirements of the FNMA Sellers' Guide and the FNMA Servicers'
Guide, and are a standard policy of insurance for the locale where the Mortgaged
Property is located. It is understood and agreed that such insurance is with
insurers approved by the Servicer and that no earthquake or other additional
insurance is to be required of any Mortgagor or to be maintained on property
acquired in respect of a defaulted loan, other than pursuant to such applicable
laws and regulations as shall at any time be in force and as shall require such
additional insurance. The hazard insurance policy names (and will name) the
Mortgagor as the insured and contains a standard mortgagee loss payable clause
in favor of the Seller, and its successors and assigns. The Seller has caused
and will cause to be performed any and all acts required to be performed to
preserve the rights and remedies of the Trustee in any hazard insurance policies
applicable to the Mortgage Loans including, without limitation, any necessary
notifications of insurers and assignments of policies or interests therein. The
Mortgage obligates the Mortgagor thereunder to maintain the hazard insurance
policy at the Mortgagor's cost and expense, and on the Mortgagor's failure to do
so, authorizes the holder of the Mortgage to obtain and maintain such insurance
at such Mortgagor's cost and expense, and to seek reimbursement therefor from
the Mortgagor; provided, however, that the addition of any such cost shall not
--------
be taken into account for purposes of calculating the principal amount of the
Mortgage Note or the Mortgage Loan secured by the Mortgage Note. Where required
by state law or regulation, the Mortgagor has been given an opportunity to
choose the carrier of the required hazard insurance, provided the policy is not
a "master" or "blanket" hazard insurance policy covering a condominium or the
common facilities of a planned unit development. To the best of Seller's
knowledge, the hazard insurance policy is the valid and binding obligation of
the insurer, is in full force and effect, and will be in full force and effect
and inure to the benefit of the Trustee upon the consummation of the
transactions contemplated by this Agreement. The Seller has not engaged in, has
knowledge of the Mortgagor's or any subservicer's having engaged in, any act or
omission which would impair the coverage of any such policy, the benefits of the
endorsement provided for herein, or the validity and binding effect of either.
To the best of Seller's knowledge, in connection with the issuance of the hazard
insurance policy, no unlawful fee, commission, kickback or other unlawful
compensation or value of any kind has been or will be received, retained or
realized by any attorney, firm or other person or entity, and no such unlawful
items have been received, retained or realized by the Seller;
(g) Any and all requirements of any federal, state or local law,
including, without limitation, usury, truth-in-lending, real estate settlement
procedures, consumer credit protection, equal credit opportunity or disclosure
laws applicable to the Mortgage Loan have been complied with and the
consummation of the transactions contemplated hereby will not involve the
violation of any such laws;
(h) The Mortgage has not been satisfied, canceled, subordinated (other
than in connection with a refinancing of the first mortgage on the Mortgaged
Property) or rescinded, in whole or in part, and the Mortgaged Property has not
been released from the lien of the Mortgage, in whole or in part, nor has any
instrument been executed that would effect any such release, cancellation,
subordination or rescission. The Seller has not waived the performance by the
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Mortgagor of any action, if the Mortgagor's failure to perform such action would
cause the Mortgage Loan to be in default, nor has the Seller waived any default
resulting from any action or inaction by the Mortgagor;
(i) The Mortgaged Property is located in the state identified in the
Mortgage Loan Schedule and consists of a fee simple estate in a one or more
parcels of real property improved by a one- to four-family residential dwelling;
(j) The Mortgage is a valid, subsisting, enforceable and perfected
lien on the Mortgaged Property, including all buildings on the Mortgaged
Property and all installations and mechanical, electrical, plumbing, heating and
air conditioning systems located in or annexed to such buildings, and all
additions, alterations and replacements made at any time with respect to the
foregoing. The lien of the Mortgage is subject only to:
(i) in the case of Mortgage Loans in a second priority lien position, a
first mortgage;
(ii) in the case of Mortgage Loans in a third priority position, a
first and second mortgage;
(iii) the lien of current real property taxes and assessments not yet
due and payable;
(iv) covenants, conditions and restrictions, rights of way, easements
and other matters of the public record as of the date of recording
acceptable to prudent mortgage lending institutions generally and
specifically referred to in the lender's title report delivered to the
originator of the Mortgage Loan and referred to or otherwise considered in
the appraisal made for the originator of the Mortgage Loan; and
(v) other matters to which like properties are commonly subject which
do not materially interfere with the benefits of the security intended to
be provided by the Mortgage or the use, enjoyment, value or marketability
of the related Mortgaged Property.
Any security agreement, chattel mortgage or equivalent document related to and
delivered in connection with the Mortgage Loan establishes and creates a valid,
subsisting and enforceable junior lien and junior priority security interest on
the property described therein and immediately prior to the sale of such
Mortgage Loan to the Depositor pursuant to this Agreement, the Seller had full
right to sell and assign the same to the Depositor; as of the date of
origination of the Mortgage Loan, the Mortgage Property was not subject to a
Mortgage, deed of trust, deed to secure debt or other security instrument
creating a lien subordinate to the lien of the Mortgage.
(k) The Mortgage Note and the Mortgage and every other agreement, if
any, executed and delivered by the Mortgagor in connection with the Mortgage
Loan are genuine, and each is the legal, valid and binding obligation of the
maker thereof enforceable in accordance with its terms. All parties to the
Mortgage Note and the Mortgage and any other related agreement had legal
capacity to enter into the Mortgage Loan and to execute and deliver the Mortgage
Note, the Mortgage and such other related agreements, and the Mortgage Note and
the Mortgage and such other related agreements have been duly and properly
executed by such parties. The Seller has reviewed, or has caused to be
reviewed, all of the documents constituting the Mortgage File and
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<PAGE>
have made such inquiries as it deems necessary to make and confirm the accuracy
of the representations set forth herein;
(l) The Mortgage Loan has been closed and any proceeds of the Mortgage
Loan drawn by the Mortgagor as of the Cut-Off Date have been fully disbursed and
there is no requirement for future advances thereunder. All costs, fees and
expenses incurred in making or closing the Mortgage Loan and the recording of
the Mortgage were paid or will be paid, and the Mortgagor is not entitled to any
refund of any amounts paid or due under the Mortgage Note or Mortgage;
(m) At the time of the sale of the Mortgage Loan to the Depositor
under this Agreement, (i) the Seller was the sole owner and holder of the
Mortgage Loan, (ii) the Mortgage Loan was not assigned to any Person other than
the Trustee on behalf of the Trust Fund, or pledged, unless such assignment or
pledge has been duly released, (iii) the Seller had good, indefeasible and
marketable title thereto, (iv) the Seller had full right to transfer and sell
the Mortgage Loan therein to the Depositor free and clear of any encumbrance,
equity interest, participation interest, lien, pledge, charge, claim or security
interest, and (v) the Seller had full right and authority subject to no interest
or participation of, or agreement with, any other party, to sell and assign each
Mortgage Loan to the Depositor under this Agreement, and following the sale of
each Mortgage Loan, the Depositor will own such Mortgage Loan free and clear of
any encumbrance, equity interest, participation interest, lien, pledge, charge,
claim or security interest;
(n) All parties which had any interest in the Mortgage Loan, whether
as mortgagee, assignee, pledgee or otherwise, and including, without limitation,
the Seller, are (or, during the period in which they held and disposed of such
interest, were) (i) in compliance with any and all applicable licensing
requirements of the laws of the state wherein the Mortgaged Property is located
to the extent required to avoid a material adverse effect to the interest of the
Trustee on behalf of the Certificateholders and the Certificate Insurer, (ii)
(1) organized under the laws of such state, or (2) qualified to do business in
such state, or (3) federal savings and loan associations, savings banks, or
national banks having principal offices in such state, or (4) not doing business
in such state;
(o) The Mortgage Loan has an original Combined Loan-to-Value ratio
(calculated at the time of origination by dividing the outstanding principal
amount of the first and second Mortgage Loan by the appraised value of the
Mortgaged Property) equal to or less than 125%;
(p) Each Mortgage Loan was originated pursuant to a title report or a
limited liability lender's title insurance policy or other generally acceptable
form of policy of insurance issued by a title insurer qualified to do business
in the jurisdiction, where the Mortgaged Property is located, evidencing the
Seller, its successors and assigns, of the priority of its lien of the Mortgage
in the original principal amount of the Mortgage Loan, and subject only to the
exceptions contained in clauses (i), (ii), (iii) and (iv) of paragraph (j)
above. Where required by state law or regulation, the Mortgagor has been given
the opportunity to choose the carrier of the required mortgage title insurance.
Immediately prior to the sale of the Mortgage Loan to the Depositor under the
terms of this Agreement, the Seller, its successors and assigns were the sole
insureds of such lender's title insurance policy. Such lender's title insurance
policy is in full force and effect and will be in force and effect upon the
consummation of the transactions contemplated by this Agreement. No claims have
been made under such lender's title insurance policy, and no
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prior holder of the Mortgage, including the Seller, has done, by act or
omission, anything which would impair the coverage of such lender's title
insurance policy. In connection with the issuance of such lender's title
insurance policy, no unlawful fee, commission, kickback or other unlawful
compensation or value of any kind has been or will be received, retained or
realized by any attorney, firm or other person or entity, and no such unlawful
items have been received, retained or realized by the Seller;
(q) There is no default, breach, violation or event of acceleration
existing under the Mortgage or the Mortgage Note and no event which, with the
passage of time or with notice and the expiration of any grace or cure period,
would constitute a default, breach, violation or event of acceleration, and
neither the Seller nor its predecessors have waived any default, breach,
violation or event of acceleration;
(r) After reasonable due diligence, there are no mechanics' or similar
liens or claims which have been filed for work, labor or material (and no rights
are outstanding that under the law could give rise to such liens) affecting the
related Mortgaged Property which are or may be liens prior to, or equal or
coordinate with, the lien of the related Mortgage;
(s) To the best of Seller's knowledge, all improvements which were
considered in determining the Appraised Value of the Mortgaged Property lay
wholly within the boundaries and building restriction lines of the Mortgaged
Property and no improvements on adjoining properties encroach upon the Mortgaged
Property. To the best of Seller's knowledge, no improvement located on or being
part of the Mortgaged Property is in violation of any applicable zoning law or
regulation; provided, that in no event shall a legal nonconforming use of the
Mortgaged Property be considered a violation of any such zoning law or
regulation;
(t) The Mortgage Note is payable on the day specified in such Mortgage
Note;
(u) The Mortgage contains customary and enforceable provisions such as
to render the rights and remedies of the holder thereof adequate for the
realization against the Mortgaged Property of the benefits of the security
provided thereby, including, (i) in the case of a Mortgage designated as a deed
of trust, by trustee's sale, and (ii) otherwise by judicial foreclosure. Upon
default by a Mortgagor on a Mortgage Loan and foreclosure on, or trustee's sale
of, the Mortgaged Property pursuant to the proper procedures, the holder of the
Mortgage Loan will be able to deliver good and merchantable title to the
Mortgaged Property. There is no homestead or other exemption available to the
Mortgagor which would interfere with the right to sell the Mortgaged Property at
a trustee's sale or the right to foreclose the Mortgage subject to applicable
federal and state laws and judicial precedent with respect to bankruptcy and
right of redemption;
(v) To the best of Seller's knowledge, all inspections, licenses and
certificates required to be made are issued with respect to all occupied
portions of the Mortgaged Property and, with respect to the use and occupancy of
the same, including, but not limited to, certificates of occupancy and fire
underwriting certificates, have been made or obtained from the appropriate
authorities;
(w) The Mortgage Note is not and has not been secured by any
collateral except the lien of the corresponding Mortgage and the security
interest of any applicable security agreement or chattel mortgage referred to in
(j) above;
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(x) In the event the Mortgage constitutes a deed of trust, a trustee,
authorized and duly qualified under applicable law to serve as such, has been
properly designated and currently so serves and is named in the Mortgage, and no
fees or expenses are or will become payable by the Trustee out of the assets of
the Trust Fund to the trustee under the deed of trust, except in connection with
a trustee's sale after default by the Mortgagor, provided that this
representation and warranty shall in no way obligate the Trustee to pay any such
amounts;
(y) The Mortgage Note, the Mortgage, the related Assignment of
Mortgage and any other documents required to be delivered by the Seller have
been delivered to the Trustee in accordance with the Pooling and Servicing
Agreement. The Trustee is in possession of a complete, true and accurate
Mortgage File in accordance with the Pooling and Servicing Agreement,
(z) The Mortgage contains a provision for the acceleration of the
payment of the unpaid principal balance of the Mortgage Loan in the event that
the Mortgaged Property is sold or transferred without the prior written consent
of the Mortgagee thereunder, at the option of the Mortgagee;
(aa) Each of the Mortgage and the Assignment of Mortgage is in
recordable form and is acceptable for recording under the laws of the
jurisdiction in which the Mortgaged Property is located;
(ab) The Mortgage Loan does not contain provisions pursuant to which
Monthly Payments are paid or partially paid with funds deposited in any separate
account established by the Seller, the Mortgagor or anyone on behalf of the
Mortgagor, or paid by any source other than the Mortgagor, nor does it contain
any other similar provisions currently in effect which may constitute a
"buydown" provision. The Mortgage Loan is not a graduated payment mortgage
loan and the Mortgage Loan does not have a shared appreciation or other
contingent interest feature;
(ac) There is no proceeding pending or, to the best of Seller's
knowledge, threatened, for the total or partial condemnation of the Mortgaged
Property; the Mortgaged Property is undamaged by waste, fire, earthquake or
earth movement, windstorm, flood, tornado, other types of water damage, or other
casualty so as to affect adversely the value of the Mortgaged Property as
security for the Mortgage Loan or the use for which the premises were intended
and each Mortgaged Property is in good repair; and there have not been any
condemnation proceedings with respect to the Mortgaged Property and the Seller
has no knowledge of any such proceedings in the future;
(ad) The origination and collection practices with respect to the
Mortgage Loan have been, and in all respects are in accordance with Accepted
Servicing Practices, and with all applicable laws and regulations;
(ae) The Mortgage File contains an appraisal of the related Mortgage
Property of the Mortgage Loan application by an independent appraiser acceptable
to the Seller;
(af) The Mortgagor has not notified the Seller, and the Seller has no
knowledge of any relief requested or allowed to the Mortgagor under the
Soldiers' and Sailors' Civil Relief Act of 1940;
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(ag) There exists no violation of any local, state, or federal
environmental law, rule or regulation in respect of the Mortgaged Property which
violation has or could have a material adverse effect on the market value of
such Mortgaged Property. There is no pending action or proceeding directly
involving the related Mortgaged Property in which compliance with any
environmental law, rule or regulation is in issue; and nothing further remains
to be done to satisfy in full all requirements of each such law, rule or
regulation constituting a prerequisite to the use and employment of such
Mortgaged Property;
(ah) Any and all requirements of any federal, state or local law,
including, without limitation, usury, truth-in-lending, real estate settlement
procedures, consumer credit protection, equal credit opportunity or disclosure
laws, applicable to the Mortgage Loan have been complied with, and the
Unaffiliated Seller has and shall maintain in its possession, available for the
Trustee's inspection, and shall deliver to the Trustee upon demand, evidence of
compliance with all such requirements;
(ai) The Mortgage Loans are representative of the mortgage loans in
the Seller's portfolio of closed-end fixed rate loans secured by one-to-four
family residential properties;
(aj) All information regarding the Mortgage Loans which could
reasonably be expected to adversely affect the value or the marketability of any
Mortgaged Property or Mortgage Loan and of which the Unaffiliated Seller is
aware has been provided by the Seller to the Depositor and the Certificate
Insurer;
(ak) The Mortgage Loan was originated in accordance with the
underwriting criteria of the Seller and was underwritten in accordance
therewith. The documents, instruments and agreements submitted for loan
underwriting and the documents constituting a part of the Mortgage File were not
falsified by or with the knowledge of the Seller and contain no untrue statement
of material fact and do not omit to state a material fact required to be stated
therein or necessary to make the information and statements therein not
misleading. The Seller has not made any representations to the Mortgagor that
are inconsistent with the mortgage instruments used;
(al) All amounts, with respect to the Mortgage Loans, received after
the Cut-Off Date and to which the Seller is not entitled, have been deposited
into the Collection Account;
(am) After due inquiry, there is no delinquent recording or other tax
or assessment lien on the Mortgage Property;
(an) The Seller has performed or directed the Servicer to perform any
and all acts required to be performed to preserve the rights and remedies of the
Trustee in any insurance policies applicable to the Mortgage Loan, including,
without limitation, any necessary notification of insurers, assignments of
policies (other than the title policy) or interests therein, and establishment
of co-insurer, joint loan payer and mortgagee rights in favor of the Trustee;
(ao) The Mortgage Loan conforms, and all such Mortgage Loans in the
aggregate conform, to the description thereof set forth in the Prospectus
Supplement:
(ap) As of the Cut-Off Date, no more than ___% of the Mortgage Loans
will be secured by Mortgaged Properties located within any single zip code area;
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(aq) Each Mortgage Loan constitutes a Qualified Mortgage;
(ar) Each Mortgaged Property does not include cooperatives or mobile
homes attached to a foundation or otherwise and does not constitute other than
real property under state law;
(as) With respect to each Mortgage Loan, there is only one originally
executed Mortgage Note not stamped as a duplicate;
(at) As of the Closing Date, there is no valid offset, defense or
counterclaim to any Mortgage, including, without limitation, any offset,
defense, or counterclaim against the obligation to pay principal and interest in
accordance with the Mortgage;
(au) As of the Closing Date, each Mortgage Loan and Mortgage is an
enforceable obligation of the related Mortgagor, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect affecting the enforcement of
creditors' rights in general and except as such enforceability may be limited by
general principles of equity (whether considered in a proceeding at law or in
equity); no instrument of release or waiver has been executed in connection with
any Mortgage Loan and no Mortgagor has been released, in whole or in part;
(av) The Mortgage Loans are not being transferred with any intent to
hinder, delay or defraud any creditors;
(aw) As of the Closing Date, the Seller has not received, and is not
aware of, a notice of default of any senior mortgage loan related to a Mortgaged
Property which has not been cured;
(ax) No selection procedure reasonably believed by the Seller to be
materially adverse to the interests of the Certificateholders or the Certificate
Insurer was utilized in selecting the Mortgage Loans; and
(ay) Each Mortgage was recorded or will be recorded (if necessary) and
all subsequent assignments of the original Mortgage have been recorded in the
appropriate jurisdictions wherein such recordation is necessary to perfect the
lien thereof as against creditors of the Seller.
(az) The Mortgage Note related to each Mortgage Loan bears a fixed
coupon rate of at least 10.0% per annum.
(ba) No Mortgage Loan requires a balloon payment at the end of its
term except with respect to certain Mortgage Loans which at the end of their
amortization period, the remaining balance is less than one month's scheduled
payment.
(bb) No more than 8.0% of the Mortgage Loans are secured by
condominiums, townhouse or planned unit developments.
(bc) None of the Mortgage Loans are secured by investor-owned
properties.
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(bd) Approximately all of the Mortgage Loans are junior mortgage
loans.
(be) With respect to each Mortgage Loan that is not a first mortgage
loan, either (i) no consent for the Mortgage Loan is required by the holder of
the related prior lien or (ii) such consent has been obtained and has been
delivered to the Trustee.
(bf) No Mortgage Loan has a remaining term in excess of 240 months.
(bg) No Mortgage Loan was made in connection with (i) the construction
of a Mortgaged Property or (ii) facilitating the trade-in or exchange or a
Mortgaged Property.
(bh) None of the Mortgage Loans are second homes and none of the
Mortgage Loans are non-owner occupied.
(bi) No funds provided to a borrower from a second Mortgage Loan were
used as a down payment for a first mortgage loan of the same Mortgaged Property.
(bj) The Unaffiliated Seller further represents and warrants to the
Trustee and the Certificateholders that as of the Subsequent Cut-Off Date all
representations and warranties set forth in clauses (a) through (bi) above will
be correct in all material respects as to each Subsequent Mortgage Loan, and the
representations so made in this subsection (bj) as to the following matters will
be deemed to be correct if: (i) such Subsequent Mortgage Loan may not be more
than 30 days contractually delinquent as of the related Subsequent Cut-Off Date;
(ii) the remaining term to maturity of such Subsequent Mortgage Loan may not
exceed 20 years; (iii) such Subsequent Mortgage Loan has a Mortgage Interest
Rate of at least 10.25%; (iv) the Subsequent Mortgage Loans in the aggregate
have a weighted average CLTV (based on the original appraisal) of no greater
than 100%; (v) such Subsequent Mortgage Loan is a fully amortizing loan with
level payments generally over 15 years; (vi) such Subsequent Mortgage Loan is
secured by a residential dwelling; (vii) the related Trustee's Mortgage File
with respect to such Subsequent Mortgage Loan shall have been delivered to the
Trustee; (viii) no such Subsequent Mortgage Loan is secured by an investor
property or associated with the purchase of a home; and (ix) following the
purchase of such Subsequent Mortgage Loans by the Trust Fund, the Mortgage Loans
(including the Subsequent Mortgage Loans) (a) will have a weighted average
Mortgage Interest Rate of a least 13.4%; (b) will have a weighted average CLTV
(based on the original appraisal) of not more than 102%; (c) will have no
Mortgage Loan with a principal balance in excess of $75,000; (d) will not have
any non-owner occupied properties; (e) will have a weighted average Subordinate
Mortgage Ratio of not more than 26.5%; (f) will not have a concentration in a
single zip code in excess of 2.0% by aggregate principal balance; (g) will not
have a concentration in Los Angeles County, California in excess of 10% by
aggregate principal balance; (h) will not have concentration in any other county
in excess of 9.5% by aggregate principal balance; (i) will not have a
concentration of Credit Bureau Risk Scores under 620 in excess of 1.5% by
aggregate principal balance; (j) will not have a concentration of Mortgage Loans
with self employed mortgagors in excess of 4% by aggregate principal balance;
(k) will have a weighted average Credit Bureau Risk Score of at least 680 and a
weighted average DTI of no more than 42% and (l) will have a concentration of
Mortgage Loans secured by single family residences of at least 92% by aggregate
Principal Balances; (m) will not have a concentration of Mortgage Loans secured
by condominiums in excess of 6.2% by aggregate Principal Balances and (n) except
as modified by this clause (bj), such Subsequent Mortgage Loan satisfies the
representations and warranties set forth in this Section 3.03. The Pooling and
Servicing Agreement will provide that any of such requirements
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may be waived or modified in any respect upon prior written consent of the
Certificate Insurer and certain other parties.
Section 3.04. Representations and Warranties of the Depositor. The
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Depositor hereby represents, warrants and covenants to the Unaffiliated Seller,
as of the date of execution of this Agreement and the Closing Date, that:
(a) The Depositor is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware;
(b) The Depositor has the corporate power and authority to purchase
each Mortgage Loan and to execute, deliver and perform, and to enter into and
consummate all the transactions contemplated by this Agreement;
(c) This Agreement has been duly and validly authorized, executed and
delivered by the Depositor, and, assuming the due authorization, execution and
delivery hereof by the Unaffiliated Seller, constitutes the legal, valid and
binding agreement of the Depositor, enforceable against the Depositor in
accordance with its terms, except as such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting the rights of creditors generally, and by general
equity principles (regardless of whether such enforcement is considered in a
proceeding in equity or at law);
(d) No consent, approval, authorization or order of or registration or
filing with, or notice to, any governmental authority or court is required for
the execution, delivery and performance of or compliance by the Depositor with
this Agreement or the consummation by the Depositor of any of the transactions
contemplated hereby, except such as have been made on or prior to the Closing
Date;
(e) The Depositor has filed or will file the Prospectus and Prospectus
Supplement with the Commission in accordance with Rule 424(b) under the
Securities Act; and
(f) None of the execution and delivery of this Agreement, the purchase
of the Mortgage Loans from the Unaffiliated Seller, the consummation of the
other transactions contemplated hereby, or the fulfillment of or compliance with
the terms and conditions of this Agreement, (i) conflicts or will conflict with
the charter or bylaws of the Depositor or conflicts or will conflict with or
results or will result in a breach of, or constitutes or will constitute a
default or results or will result in an acceleration under, any term, condition
or provision of any indenture, deed of trust, contract or other agreement or
other instrument to which the Depositor is a party or by which it is bound and
which is material to the Depositor, or (ii) results or will result in a
violation of any law, rule, regulation, order, judgment or decree of any court
or governmental authority having jurisdiction over the Depositor.
Section 3.05. Repurchase Obligation for Defective Documentation and
-----------------------------------------------------
for Breach of a Representation or Warranty. (a) Each of the representations and
- ------------------------------------------
warranties contained in Sections 3.01, 3.02 and 3.03 shall survive the purchase
by the Depositor of the Mortgage Loans and the subsequent transfer thereof by
the Depositor to the Trustee and shall continue in full force and effect,
notwithstanding any restrictive or qualified endorsement on the Mortgage Notes
and notwithstanding subsequent termination of this Agreement or the Pooling and
Servicing Agreement.
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(b) With respect to any representation or warranty contained in
Sections 3.02 or 3.03 hereof that is made to the best of the Unaffiliated
Seller's knowledge, if it is discovered by the Servicer, any Subservicer, the
Trustee, the Certificate Insurer, the Depositor or any Certificateholder that
the substance of such representation and warranty was inaccurate as of the
Closing Date (or in the case of the Subsequent Mortgage Loans, as of the
respective Subsequent Transfer Date) and such inaccuracy materially and
adversely affects the value of the related Mortgage Loan or the interest of the
Certificate Insurer, then notwithstanding the Unaffiliated Seller's lack of
knowledge with respect to the inaccuracy at the time the representation or
warranty was made, such inaccuracy shall be deemed a breach of the applicable
representation or warranty. Upon discovery by the Unaffiliated Seller, the
Depositor, the Servicer, any Subservicer, the Trustee, the Certificate Insurer
or any Certificateholder of a breach of any of such representations and
warranties which materially and adversely affects the value of Mortgage Loans or
the interest of the Certificateholders, or which materially and adversely
affects the interests of the Certificate Insurer or the Certificateholders in
the related Mortgage Loan in the case of a representation and warranty relating
to a particular Mortgage Loan (notwithstanding that such representation and
warranty was made to the Unaffiliated Seller's best knowledge), the party
discovering such breach shall give pursuant to Section 3.4 of the Pooling and
Servicing Agreement prompt written notice to the others. Subject to the next to
last paragraph of this Section 3.05, within 60 days of the earlier of its
discovery or its receipt of notice of any breach of a representation or
warranty, the Unaffiliated Seller shall (a) promptly cure such breach in all
material respects, (b) purchase such Mortgage Loan on or prior to the next
succeeding Servicer Remittance Date at a purchase price equal to the Principal
Balance of such Mortgage Loan as of the date of purchase, plus the greater of
(i) all accrued and unpaid interest on such Principal Balance and (ii) 30 days'
interest on such Principal Balance, computed at the Mortgage Interest Rate, plus
the amount of any unpaid and accrued Servicing Fees, plus the amount of any
unreimbursed Delinquency Interest Advances and Servicing Advances made by the
Servicer with respect to such Mortgage Loan, or (c) remove such Mortgage Loan
from the Trust Fund (in which case it shall become a Deleted Mortgage Loan) and
substitute one or more Qualified Substitute Mortgage Loans; provided, that, such
substitution is effected not later than the date which is 2 years after the
Startup Date or at such later date, if the Trustee and the Certificate Insurer
receive an Opinion of Counsel to the effect that such substitution will not
constitute a prohibited transaction for the purposes of the REMIC provisions of
the Code or cause the Trust Fund to fail to qualify as a REMIC at any time any
Certificates are outstanding. Any such substitution shall be accompanied by
payment by the Unaffiliated Seller of the Substitution Adjustment, if any, to be
deposited in the Certificate Account pursuant to the Pooling and Servicing
Agreement.
(c) As to any Deleted Mortgage Loan for which the Unaffiliated Seller
substitutes a Qualified Substitute Mortgage Loan or Loans, the Unaffiliated
Seller shall effect such substitution by delivering to the Trustee a
certification in the form attached to the Pooling and Servicing Agreement as
Exhibit G, executed by a Servicing Officer and the documents described in
Section 2.05(a) for such Qualified Substitute Mortgage Loan or Loans. Pursuant
to the Pooling and Servicing Agreement, upon receipt by the Trustee of a
certification of a Servicing Officer of such substitution or purchase and, in
the case of a substitution, upon receipt of the related Trustee's Mortgage File,
and the deposit of certain amounts in the Collection Account pursuant to Section
2.4 of the Pooling and Servicing Agreement (which certification shall be in the
form of Exhibit G to the Pooling and Servicing Agreement), the Trustee shall be
required to release to the Servicer for release to the Unaffiliated Seller the
related Trustee's Mortgage File and shall be required to execute, without
recourse, and deliver such instruments of transfer furnished by the Unaffiliated
Seller as may be necessary to transfer such Mortgage Loan to the Unaffiliated
Seller.
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(d) Pursuant to the Pooling and Servicing Agreement, the Servicer
shall deposit in the Collection Account all payments received in connection with
such Qualified Substitute Mortgage Loan or Loans after the date of such
substitution. Monthly Payments received with respect to Qualified Substitute
Mortgage Loans on or before the date of substitution will be retained by the
Unaffiliated Seller. The Trust Fund will own all payments received on the
Deleted Mortgage Loan on or before the date of substitution, and the
Unaffiliated Seller shall thereafter be entitled to retain all amounts
subsequently received in respect of such Deleted Mortgage Loan. Pursuant to the
Pooling and Servicing Agreement, the Servicer shall be required to give written
notice to the Trustee and the Certificate Insurer that such substitution has
taken place and shall amend the Mortgage Loan Schedule to reflect the removal of
such Deleted Mortgage Loan from the terms of the Pooling and Servicing Agreement
and the substitution of the Qualified Substitute Mortgage Loan. The parties
hereto agree to amend the Mortgage Loan Schedule accordingly. Upon such
substitution, such Qualified Substitute Mortgage Loan or Loans shall be subject
to the terms of the Pooling and Servicing Agreement and this Agreement in all
respects, and the Unaffiliated Seller shall be deemed to have made with respect
to such Qualified Substitute Mortgage Loan or Loans, as of the date of
substitution, the representations and warranties set forth in Sections 3.02 and
3.03 herein. On the date of such substitution, the Unaffiliated Seller will
remit to the Servicer and pursuant to the Pooling and Servicing Agreement the
Servicer will deposit into the Collection Account an amount equal to the
Substitution Adjustment, if any.
(e) It is understood and agreed that the obligations of the
Unaffiliated Seller set forth in Section 2.06 and this Section 3.05 to cure,
purchase or substitute for a defective Mortgage Loan as provided in Section 2.06
and this Section 3.05 constitute the sole remedies of the Depositor, the
Trustee, the Certificate Insurer and the Certificateholders respecting a breach
of the foregoing representations and warranties (other than the representation
and warranty set forth in Section 3.03(g) to the extent of any fines, penalties,
costs or other damages or losses except for the lost economic value of the
Mortgage Loan, the value of which the remedies provided for in Section 2.06 and
this Section 3.05 shall be deemed adequate.
(f) Any cause of action against the Unaffiliated Seller relating to or
arising out of the breach of any representations and warranties or covenants
made in Sections 2.06, 3.02 or 3.03 shall accrue as to any Mortgage Loan upon
(i) discovery of such breach by any party and notice thereof to the Unaffiliated
Seller, (ii) failure by the Unaffiliated Seller to cure such breach or purchase
or substitute such Mortgage Loan as specified above, and (iii) demand upon the
Unaffiliated Seller by the Trustee for all amounts payable in respect of such
Mortgage Loan.
(g) Notwithstanding any contrary provision of this Agreement, with
respect to any Mortgage Loan which is not in default or as to which no default
is imminent, no purchase, or substitution pursuant to Section 2.06(b) or this
Section 3.04 shall be made unless the Unaffiliated Seller provides to the
Trustee and the Certificate Insurer an Opinion of Counsel to the effect that
such purchase or substitution would not (i) result in the imposition of taxes on
"prohibited transactions" of the REMIC, as defined in Section 860F of the Code
or a tax on contributions to the REMIC Trust under the REMIC Provisions, or (ii)
cause the Trust Fund to fail to qualify as a REMIC at any time that any
Certificates are outstanding. Any Mortgage Loan as to which purchase or
substitution was delayed pursuant to this paragraph shall be purchased or
substituted (subject to compliance with Section 2.06 and this Section 3.05) upon
the earlier of (a) the occurrence of a default or imminent default with respect
to such loan and (b) receipt by the Trustee and the Certificate Insurer of an
Opinion of Counsel to the effect that such purchase
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or substitution will not result in the events described in clauses (i) and (ii)
of the preceding sentence.
(h) Pursuant to the Pooling and Servicing Agreement, upon discovery by
the Unaffiliated Seller, the Servicer, the Trustee, the Certificate Insurer or
any Certificateholder that any Mortgage Loan does not constitute a Qualified
Mortgage, the party discovering such fact shall promptly (and in any event
within 5 days of the discovery) give written notice thereof to the other parties
and the Certificate Insurer. In connection therewith, the Unaffiliated Seller
shall repurchase or substitute a Qualified Substitute Mortgage Loan for the
affected Mortgage Loan within 60 days of the earlier of such discovery by any of
the foregoing parties, or the Trustee's or the Unaffiliated Seller's receipt of
notice, in the same manner as it would a Mortgage Loan for a breach of
representation or warranty contained in Sections 3.02 or 3.03. Pursuant to the
Pooling and Servicing Agreement the Trustee shall reconvey to the Unaffiliated
Seller the Mortgage Loan to be released pursuant hereto in the same manner, and
on the same terms and conditions, as it would a Mortgage Loan repurchased for
breach of a representation or warranty contained in Sections 3.02 or 3.03.
ARTICLE FOUR
THE UNAFFILIATED SELLER
Section 4.01. Covenants of the Unaffiliated Seller. The Unaffiliated
------------------------------------
Seller covenants to the Depositor as follows:
(a) The Unaffiliated Seller shall cooperate with the Depositor and the
firm of independent certified public accountants retained with respect to the
issuance of the Certificates in making available all information and taking all
steps reasonably necessary to permit the accountants' letters required hereunder
to be delivered within the times set for delivery herein.
(b) The Unaffiliated Seller agrees to satisfy or cause to be satisfied
on or prior to the Closing Date, all of the conditions to the Depositor's
obligations set forth in Section 5.01 hereof that are within the Unaffiliated
Seller's (or its agents') control.
(c) The Unaffiliated Seller hereby agree to do all acts, transactions,
and things and to execute and deliver all agreements, documents, instruments,
and papers by and on behalf of the Unaffiliated Seller as the Depositor or its
counsel may reasonably request in order to consummate the transfer of the
Mortgage Loans to the Depositor and the subsequent transfer thereof to the
Trustee, and the rating, issuance and sale of the Certificates.
Section 4.02. Merger or Consolidation. The Unaffiliated Seller will
-----------------------
keep in full effect its existence, rights and franchises as a corporation and
will obtain and preserve its qualification to do business as a foreign
corporation, in each jurisdiction necessary to protect the validity and
enforceability of this Agreement or any of the Mortgage Loans and to perform its
duties under this Agreement. Any Person into which the Unaffiliated Seller may
be merged or consolidated, or any corporation resulting from any merger,
conversion or consolidation to which Unaffiliated Seller shall be a party, or
any Person succeeding to the business of the Unaffiliated Seller, shall be
approved by the Certificate Insurer which approval shall not be unreasonably
withheld and in all events shall be the successor of the Unaffiliated Seller
without the execution
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or filing of any paper or any further act on the part of any of the parties
hereto, anything herein to the contrary notwithstanding. The Unaffiliated
Seller shall send notice of any such merger or consolidation to the Trustee and
the Certificate Insurer.
Section 4.03. Costs. In connection with the transactions
-----
contemplated under this Agreement and the Pooling and Servicing Agreement, the
Unaffiliated Seller shall promptly pay (or shall promptly reimburse the
Depositor to the extent that the Depositor shall have paid or otherwise
incurred): (a) the fees and disbursements of the Depositor's counsel; (b) the
fees of Standard & Poor's Ratings Group and Moody's Investors Service, Inc.; (c)
any of the fees of the Trustee and the fees and disbursements of the Trustee's
counsel; (d) expenses incurred in connection with printing the Prospectus, the
Prospectus Supplement, any amendment or supplement thereto, any preliminary
prospectus and the Certificates; (e) fees and expenses relating to the filing of
documents with the Securities and Exchange Commission (including without
limitation periodic reports under the Exchange Act); (f) the shelf registration
amortization fee (which fee shall equal 1/29th of 1% of the amount of the
Certificates plus $_____) paid in connection with the issuance of Certificates;
and (g) all of the initial expenses (not to exceed $________) of the Certificate
Insurer including, without limitation, legal fees and expenses, accountant fees
and expenses and expenses in connection with due diligence conducted on the
Mortgage Files. For the avoidance of doubt, the parties hereto acknowledge that
it is the intention of the parties that the Depositor shall not pay any of the
Trustee's fees and expenses in connection with the transactions contemplated by
the Pooling and Servicing Agreement. All other costs and expenses in connection
with the transactions contemplated hereunder shall be borne by the party
incurring such expenses.
Section 4.04. Indemnification. (a) (i) The Unaffiliated Seller,
---------------
agrees to indemnify and hold harmless the Depositor, each of its directors, each
of its officers who have signed the Registration Statement, and each of its
directors and each person or entity who controls the Depositor or any such
person, within the meaning of Section 15 of the Securities Act, against any and
all losses, claims, damages or liabilities, joint and several, to which the
Depositor or any such person or entity may become subject, under the Securities
Act or otherwise, and will reimburse the Depositor and each such controlling
person for any legal or other expenses incurred by the Depositor or such
controlling person in connection with investigating or defending any such loss,
claim, damage, liability or action, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
the Prospectus Supplement or any amendment or supplement to the Prospectus
Supplement or the omission or the alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements in the
Prospectus Supplement or any amendment or supplement to the Prospectus
Supplement approved in writing by the Unaffiliated Seller, in light of the
circumstances under which they were made, not misleading, but only to the extent
that such untrue statement or alleged untrue statement or omission or alleged
omission relates to the information contained in the Prospectus Supplement
referred to in Section 3.02(d). This indemnity agreement will be in addition to
any liability which the Unaffiliated Seller may otherwise have.
(ii) The Unaffiliated Seller agrees to indemnify and to hold the
Depositor 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 Depositor may sustain in any way related to the
failure of any of the Unaffiliated Seller to perform its duties in
compliance with the terms of this Agreement. The Unaffiliated Seller shall
immediately notify the Depositor if a claim is made by a third party with
respect to this Agreement, and the Unaffiliated Seller shall assume the
defense of any such claim and
28
<PAGE>
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 Depositor in respect of such claim. Pursuant to
the Pooling and Servicing Agreement, the Trustee shall reimburse the
Unaffiliated Seller in accordance with Section 3.6 of the Pooling and
Servicing Agreement for all amounts advanced by the Unaffiliated Seller
pursuant to the preceding sentence except when the claim relates directly
to the failure of the Unaffiliated Seller to perform its duties in
compliance with the terms of this Agreement.
(b) The Depositor agrees to indemnify and hold harmless the
Unaffiliated Seller, each of its directors and each person or entity who
controls the Unaffiliated Seller or any such person, within the meaning of
Section 15 of the Securities Act, against any and all losses, claims, damages or
liabilities, joint and several, to which the Unaffiliated Seller or any such
person or entity may become subject, under the Securities Act or otherwise, and
will reimburse the Unaffiliated Seller and any such director or controlling
person for any legal or other expenses incurred by such party or any such
director or controlling person in connection with investigating or defending any
such loss, claim, damage, liability or action, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement, the Prospectus, the Prospectus
Supplement, any amendment or supplement to the Prospectus or the Prospectus
Supplement or the omission or the alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading, but
only to the extent that such untrue statement or alleged untrue statement or
omission or alleged omission is other than a statement or omission relating to
the information set forth in subsection (a)(i) of this Section 4.04. This
indemnity agreement will be in addition to any liability which the Depositor may
otherwise have.
(c) Promptly after receipt by an indemnified party under this Section
4.04 of notice of the commencement of any action, such indemnified party will,
if a claim in respect thereof is to be made against the indemnifying party under
this Section 4.04, notify the indemnifying party in writing of the commencement
thereof, but the omission to so notify the indemnifying party will not relieve
the indemnifying party from any liability which the indemnifying party may have
to any indemnified party hereunder except to the extent such indemnifying party
has been prejudiced thereby. In case any such action is brought against any
indemnified party, and it notifies the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate therein and, to
the extent that it may elect by written notice delivered to the indemnified
party promptly after receiving the aforesaid notice from such indemnified party,
to assume the defense thereof with counsel reasonably satisfactory to such
indemnified party. After notice from the indemnifying party to such indemnified
party of its election to assume the defense thereof, the indemnifying party will
not be liable to such indemnified party under this Section 4.04 for any legal or
other expenses subsequently incurred by such indemnified party in connection
with the defense thereof other than reasonable costs of investigation; provided,
however, if the defendants in any such action include both the indemnified party
and the indemnifying party and the indemnified party shall have reasonably
concluded that there may be legal defenses available to it that are different
from or additional to those available to the indemnifying party, the indemnified
party or parties shall have the right to select separate counsel to assert such
legal defenses and to otherwise participate in the defense of such action on
behalf of such indemnified party or parties. The indemnifying party shall not
be liable for the expenses of more than one separate counsel.
29
<PAGE>
(d) In order to provide for just and equitable contribution in
circumstances in which the indemnity agreement provided for in the preceding
parts of this Section 4.04 is for any reason held to be unavailable to or
insufficient to hold harmless an indemnified party under subsection (a) or
subsection (b) of this Section 4.04 in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, the
indemnifying party shall contribute to the amount paid or payable by the
indemnified party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof); provided, however, that no person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. In determining the amount of
contribution to which the respective parties are entitled, there shall be
considered the relative benefits received by the Unaffiliated Seller on the one
hand, and the Depositor on the other, the Unaffiliated Seller's and the
Depositor's relative knowledge and access to information concerning the matter
with respect to which the claim was asserted, the opportunity to correct and
prevent any statement or omission, and any other equitable considerations
appropriate in the circumstances. The Unaffiliated Seller and the Depositor
agree that it would not be equitable if the amount of such contribution were
determined by pro rata or per capita allocation. For purposes of this Section
4.04, each director of the Depositor, each officer of the Depositor who signed
the Registration Statement, and each person, if any who controls the Depositor
within the meaning of Section 15 of the Securities Act, shall have the same
rights to contribution as the Depositor, and each director of Unaffiliated
Seller, and each person, if any who controls the Unaffiliated Seller within the
meaning of Section 15 of the Securities Act, shall have the same rights to
contribution as the Unaffiliated Seller.
ARTICLE FIVE
CONDITIONS OF CLOSING
Section 5.01. Conditions of Depositor's Obligations. The obligations
-------------------------------------
of the Depositor to purchase the Mortgage Loans will be subject to the
satisfaction on the Closing Date of the following conditions. Upon payment of
the purchase price for the Mortgage Loans, such conditions shall be deemed
satisfied or waived.
(a) Each of the obligations of the Unaffiliated Seller required to be
performed by it on or prior to the Closing Date pursuant to the terms of this
Agreement shall have been duly performed and complied with and all of the
representations and warranties of the Unaffiliated Seller under this Agreement
shall be true and correct as of the Closing Date and no event shall have
occurred which, with notice or the passage of time, would constitute a default
under this Agreement, and the Depositor shall have received a certificate to the
effect of the foregoing signed by an authorized officer of the Unaffiliated
Seller.
(b) The Depositor shall have received a letter dated the date of this
Agreement, in form and substance acceptable to the Depositor and its counsel,
prepared by KPMG Peat Marwick, independent certified public accountants,
regarding the numerical information contained in the Prospectus Supplement under
the captions "Prepayment and Yield Considerations" and "Description of the
Mortgage Loans."
(c) The Mortgage Loans will be acceptable to the Depositor, in its
sole discretion.
30
<PAGE>
(d) The Depositor shall have received the following additional closing
documents, in form and substance satisfactory to the Depositor and its counsel:
(i) the Mortgage Loan Schedule;
(ii) the Pooling and Servicing Agreement dated as of December 1, 1996
and the Underwriting Agreement dated as of December 9, 1996 between the
Depositor and CS First Boston Corporation and all documents required
thereunder, duly executed and delivered by each of the parties thereto
other than the Depositor;
(iii) officer's certificates of an officer of the Unaffiliated Seller,
dated as of the Closing Date, in the form of Exhibit B hereto, and attached
thereto resolutions of the board of directors and a copy of the charter and
by-laws;
(iv) copy of the Unaffiliated Seller's charter and all amendments,
revisions, and supplements thereof, certified by a secretary of each
entity;
(v) an opinion of the counsel for the Unaffiliated Seller as to various
corporate matters substantially in the form attached hereto as Exhibit C
(it being agreed that the opinion shall expressly provide that the Trustee
shall be entitled to rely on the opinion);
(vi) opinions of counsel for the Unaffiliated Seller, in forms
acceptable to the Depositor, its counsel, S&P and Moody's as to such
matters as shall be required for the assignment of a rating to the Class A
Certificates of AAA by S&P, and Aaa by Moody's (it being agreed that such
opinions shall expressly provide that the Trustee shall be entitled to rely
on such opinions);
(vii) a letter from Moody's that it has assigned a rating of Aaa to
the Class A Certificates;
(viii) a letter from S&P that it has assigned a rating of AAA to the
Class A Certificates;
(ix) an opinion of counsel for the Trustee in form and substance
acceptable to the Depositor, its counsel, Moody's and S&P (it being agreed
that the opinion shall expressly provide that the Unaffiliated Seller shall
be entitled to rely on the opinion);
(x) an opinion or opinions of counsel for the Master Servicer, in form
and substance acceptable to the Depositor, its counsel, Moody's and S&P (it
being agreed that the opinion shall expressly provide that the Unaffiliated
Seller shall be entitled to rely on the opinion); and
(xi) an opinion or opinions of counsel for the Certificate Insurer, in
each case in form and substance acceptable to the Depositor, its counsel,
Moody's and S&P (it being agreed that the opinion shall expressly provide
that the Unaffiliated Seller shall be entitled to rely on the opinion).
(e) The Certificate Insurance Policy shall have been duly executed,
delivered and issued with respect to the Certificates.
31
<PAGE>
(f) All proceedings in connection with the transactions contemplated
by this Agreement and all documents incident hereto shall be satisfactory in
form and substance to the Depositor and its counsel.
(g) The Unaffiliated Seller shall have furnished the Depositor with
such other certificates of its officers or others and such other documents or
opinions as the Depositor or its counsel may reasonably request.
Section 5.02. Conditions of Unaffiliated Seller's Obligations. The
-----------------------------------------------
obligations of the Unaffiliated Seller under this Agreement shall be subject to
the satisfaction, on the Closing Date, of the following conditions:
(a) Each of the obligations of the Depositor required to be performed
by it at or prior to the Closing Date pursuant to the terms of this Agreement
shall have been duly performed and complied with and all of the representations
and warranties of the Depositor contained in this Agreement shall be true and
correct as of the Closing Date and the Unaffiliated Seller shall have received a
certificate to that effect signed by an authorized officer of the Depositor.
(b) The Unaffiliated Seller shall have received the following
additional documents:
(i) the Pooling and Servicing Agreement, and all documents required
thereunder, in each case executed by the Depositor as applicable; and
(ii) a copy of a letter from Moody's to the Depositor to the effect
that it has assigned a rating of Aaa to the Class A Certificates and a copy
of a letter from S&P to the Depositor to the effect that it has assigned a
rating of AAA to the Class A Certificates.
(iii) an opinion of counsel for the Trustee in form and substance
acceptable to the Unaffiliated Seller and its counsel;
(iv) an opinion or opinions of counsel for the Certificate Insurer,
in each case in form and substance acceptable to the Unaffiliated Seller
and its counsel;
(v) an opinion of the counsel for the Depositor as to securities
and tax matters; and
(vi) an opinion of the counsel for the Depositor as to true sale
matters.
(c) The Depositor shall have furnished the Unaffiliated Seller with
such other certificates of its officers or others and such other documents to
evidence fulfillment of the conditions set forth in this Agreement as the
Unaffiliated Seller may reasonably request.
Section 5.03. Termination of Depositor's Obligations. The Depositor
--------------------------------------
may terminate its obligations hereunder by notice to the Unaffiliated Seller at
any time before delivery of and payment of the purchase price for the Mortgage
Loans if: (a) any of the conditions set forth in Section 5.01 are not satisfied
when and as provided therein; (b) there shall have been the entry of a decree or
order by a court or agency or supervisory authority having jurisdiction in the
premises for the appointment of a conservator, receiver or liquidator in any
insolvency,
32
<PAGE>
readjustment of debt, marshalling of assets and liabilities or similar
proceedings of or relating to the Unaffiliated Seller, or for the winding up or
liquidation of the affairs of the Unaffiliated Seller; (c) there shall have been
the consent by the Unaffiliated Seller to the appointment of a conservator or
receiver or liquidator in any insolvency, readjustment of debt, marshalling of
assets and liabilities or similar proceedings of or relating to the Unaffiliated
Seller or of or relating to substantially all of the property of the
Unaffiliated Seller; (d) any purchase and assumption agreement with respect to
the Unaffiliated Seller or the assets and properties of the Unaffiliated Seller
shall have been entered into; or (e) a Termination Event shall have occurred.
The termination of the Depositor's obligations hereunder shall not terminate the
Depositor's rights hereunder or its right to exercise any remedy available to it
at law or in equity.
ARTICLE SIX
MISCELLANEOUS
Section 6.01. Notices. All demands, notices and communications
-------
hereunder shall be in writing and shall be deemed to have been duly given if
personally delivered to or mailed by registered mail, postage prepaid, or
transmitted by telex or telegraph and confirmed by a similar mailed writing, if
to the Depositor, addressed to the Depositor at CS First Boston Mortgage
Securities Corp., Park Avenue Plaza, 55 East 52nd Street, New York, New York
10055, Attention: Nita S. Cherry, or to such other address as the Depositor may
designate in writing to the Unaffiliated Seller and if to the Unaffiliated
Seller, addressed to the Unaffiliated Seller at 19782 MacArthur Boulevard, Suite
260, Irvine, California 92715 Attention: President, or to such other address as
the Unaffiliated Seller may designate in writing to the Depositor.
Section 6.02. Severability of Provisions. Any part, provision,
--------------------------
representation, warranty or covenant of this Agreement which is prohibited or
which is held to be void or unenforceable shall be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof. Any part, provision, representation, warranty or covenant of
this Agreement which is prohibited or unenforceable or is held to be void or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction as to any Mortgage Loan shall not invalidate or render
unenforceable such provision in any other jurisdiction. To the extent permitted
by applicable law, the parties hereto waive any provision of law which prohibits
or renders void or unenforceable any provision hereof.
Section 6.03. Agreement of Unaffiliated Seller. The Unaffiliated
--------------------------------
Seller agrees to execute and deliver such instruments and take such actions as
the Depositor may, from time to time, reasonably request in order to effectuate
the purpose and to carry out the terms of this Agreement.
Section 6.04. Survival. The parties to this Agreement agree that the
--------
representations, warranties and agreements made by each of them herein and in
any certificate or other instrument delivered pursuant hereto shall be deemed to
be relied upon by the other party hereto, notwithstanding any investigation
heretofore or hereafter made by such other party or on such other party's
behalf, and that the representations, warranties and agreements made by the
parties hereto in this Agreement or in any such certificate or other instrument
shall survive the delivery of and payment for the Mortgage Loans.
33
<PAGE>
Section 6.05. Effect of Headings and Table of Contents. The Article
----------------------------------------
and Section headings herein and the Table of Contents are for convenience only
and shall not affect the construction hereof.
Section 6.06. Successors and Assigns. This Agreement shall inure to
----------------------
the benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns. Except as expressly permitted by the terms
hereof, this Agreement may not be assigned, pledged or hypothecated by any party
hereto to a third party without the written consent of the other party to this
Agreement and the Certificate Insurer; provided, however, that the Depositor may
assign its rights hereunder without the consent of the Unaffiliated Seller.
Section 6.07. Confirmation of Intent; Grant of Security Interest. It
--------------------------------------------------
is the express intent of the parties hereto that the conveyance of the Mortgage
Loans and the related property by the Unaffiliated Seller to the Depositor as
contemplated by this Sale and Purchase Agreement be, and be treated for all
purposes as, a sale of the Mortgage Loans and the related property. It is,
further, not the intention of the parties that such conveyance be deemed a
pledge of the Mortgage Loans and the related property by the Unaffiliated Seller
to the Depositor to secure a debt or other obligation of the Unaffiliated
Seller. However, in the event that, notwithstanding the intent of the parties,
the Mortgage Loans and the related property are held to continue to be property
of the Unaffiliated Seller then (a) this Sale and Purchase Agreement shall also
be deemed to be a security agreement within the meaning of Articles 8 and 9 of
the New York Uniform Commercial Code; (b) the transfer of the Mortgage Loans
provided for herein shall be deemed to be a grant by the Unaffiliated Seller to
the Depositor of a security interest in all of the Unaffiliated Seller's right,
title and interest in and to the Mortgage Loans and all amounts payable on the
Mortgage Loans in accordance with the terms thereof and all proceeds of the
conversion, voluntary or involuntary, of the foregoing into cash, instruments,
securities or other property; (c) the possession by the Depositor or its
respective agents of Mortgage Notes and such other items of property as
constitute instruments, money, negotiable documents or chattel paper shall be
deemed to be "possession by the secured party" for purposes of perfecting the
security interest pursuant to Section 9-305 of the New York Uniform Commercial
Code and the Uniform Commercial Code of any other applicable jurisdiction; and
(d) notifications to persons holding such property, and acknowledgments,
receipts or confirmations from persons holding such property, shall be deemed
notifications to, or acknowledgments, receipts or confirmations from, financial
intermediaries, bailees or agents (as applicable) of the Depositor for the
purpose of perfecting such security interest under applicable law. Any
assignment of the interest of the Depositor pursuant to any provision hereof
shall also be deemed to be an assignment of any security interest created
hereby. The Unaffiliated Seller and the Depositor shall, to the extent
consistent with this Sale and Purchase Agreement, take such actions as may be
necessary to ensure that, if this Sale and Purchase Agreement were deemed to
create a security interest in the Mortgage Loans, such security interest would
be deemed to be a perfected security interest of first priority under applicable
law and will be maintained as such throughout the term of this Agreement.
Section 6.08. Miscellaneous. This Agreement supersedes all prior
-------------
agreements and understandings relating to the subject matter hereof.
Section 6.09. Amendments. (a) This Agreement may be amended from
----------
time to time by the Unaffiliated Seller and the Depositor by written agreement,
upon the prior written consent of the Certificate Insurer, without notice to or
consent of the Certificateholders to cure any ambiguity, to correct or
supplement any provisions herein, to comply with any changes in the Code, or to
make any other provisions with respect to matters or questions arising under
this
34
<PAGE>
Agreement which shall not be inconsistent with the provisions of this Agreement;
provided, however, that such action shall not, as evidenced by an Opinion of
Counsel, at the expense of the party requesting the change, delivered to the
Trustee and the Certificate Insurer, adversely affect in any material respect
the interests of any Certificateholder; and provided further, 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 Holder of such Certificate, or change the
rights or obligations of any other party hereto without the consent of such
party. The Unaffiliated Seller shall give prompt written notice to Moody's and
S&P of any amendment made pursuant to this Section 6.09 and shall promptly send
copies of any such amendment to Moody's and S&P.
(b) This Agreement may be amended from time to time by the
Unaffiliated Seller and the Depositor with the consent of the Certificate
Insurer, the Majority Certificateholders and the Holders of the majority of the
Percentage Interest in the Class R 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 Holders;
provided, however, that no such amendment shall be made unless the Trustee
receives an Opinion of Counsel, at the expense of the party requesting the
change, that such change will not adversely affect the status of the Upper-Tier
REMIC or the Lower-Tier REMIC as a REMIC or cause a tax to be imposed on such
Upper-Tier REMIC or the Lower-Tier REMIC, and provided further, 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 Holder of such Certificate or reduce the
percentage for each Class the Holders of which are required to consent to any
such amendment without the consent of the Holders of 100% of each Class of
Certificates affected thereby.
(c) It shall not be necessary for the consent of Holders under this
Section to approve the particular form of any proposed amendment, but it shall
be sufficient if such consent shall approve the substance thereof.
Section 6.10. Third-Party Beneficiaries. The parties agree that each
-------------------------
of the Certificate Insurer and the Trustee is an intended third-party
beneficiary of this Agreement. The parties further agree that CS First Boston
Corporation and each of its directors and each person or entity who controls CS
First Boston Corporation or any such person, within the meaning of Section 15 of
the Securities Act (each, an "Underwriter Entity") is an intended third-party
beneficiary of this Agreement to the extent necessary to obtain the benefit of
the enforcement of the obligations and covenants of the Unaffiliated Seller with
respect to each Underwriter Entity under Section 4.04(a)(i) of this Agreement.
SECTION 6.11. GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF
-------------------------------------------------
JURY TRIAL. (a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
- ----------
ACCORDANCE WITH, THE INTERNAL LAWS (AS OPPOSED TO CONFLICT OF LAWS PROVISIONS)
OF THE STATE OF NEW YORK.
(b) THE DEPOSITOR AND THE UNAFFILIATED SELLER EACH HEREBY SUBMIT TO
THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND THE
UNITED STATES DISTRICT COURT LOCATED IN THE BOROUGH OF MANHATTAN IN NEW YORK
CITY, AND EACH WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND
CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE BY REGISTERED MAIL DIRECTED TO
THE ADDRESS SET FORTH IN SECTION 6.01 OF THIS
35
<PAGE>
AGREEMENT AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED FIVE DAYS AFTER
THE SAME SHALL HAVE BEEN DEPOSITED IN THE U.S. MAIL, POSTAGE PREPAID. THE
DEPOSITOR AND THE UNAFFILIATED SELLER EACH HEREBY WAIVE ANY OBJECTION BASED ON
FORUM NON CONVENIENS, AND ANY OBJECTION TO VENUE OF ANY ACTION INSTITUTED
- --------------------
HEREUNDER AND CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS
DEEMED APPROPRIATE BY THE COURT. NOTHING IN THIS SECTION SHALL AFFECT THE RIGHT
OF THE DEPOSITOR AND THE UNAFFILIATED SELLER TO SERVE LEGAL PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW OR AFFECT EITHER'S RIGHT TO BRING ANY ACTION OR
PROCEEDING IN THE COURTS OF ANY OTHER JURISDICTION.
(c) THE DEPOSITOR AND THE UNAFFILIATED SELLER EACH HEREBY WAIVE ANY
RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN
CONTRACT, TORT, OR OTHERWISE ARISING OUT OF, CONNECTED WITH, RELATED TO, OR IN
CONNECTION WITH THIS AGREEMENT. INSTEAD, ANY DISPUTE RESOLVED IN COURT WILL BE
RESOLVED IN A BENCH TRIAL WITHOUT A JURY.
Section 6.12. Execution in Counterparts. This Agreement 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.
[Remainder of Page Intentionally Left Blank]
36
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their names to be
signed by their respective officers thereunto duly authorized as of the date
first above written.
CS FIRST BOSTON MORTGAGE SECURITIES CORP.
By: /s/ Joy Margolies
----------------------------------------
Name: Joy Margolies
Title: Vice President
T.A.R. PREFERRED MORTGAGE
CORPORATION
By: /s/ Todd Rodriguez
----------------------------------------
Name: Todd Rodriguez
Title: Chief Executive Officer
[Signature Page to Sale and Purchase Agreement]
<PAGE>
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
On December 17, 1996 before me, the undersigned, a Notary Public in
and for said County and State, personally appeared _______________, personally
known to me (or proved to me on the basis of satisfactory evidence) to be a
__________ of CS First Boston Mortgage Securities Corp., a Delaware corporation,
the corporation that executed the within Sale and Purchase Agreement on behalf
of said corporation, and acknowledged to me that said corporation executed it.
----------------------------------------
Notary Public
My Commission expires:
<PAGE>
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
On December 17, 1996 before me, the undersigned, a Notary Public in
and for said County and State, personally appeared Todd A. Rodriguez, personally
known to me (or proved to me on the basis of satisfactory evidence) to be Chief
Executive Officer of T.A.R. Preferred Mortgage Corporation, the entity that
executed the within Sale and Purchase Agreement; on behalf of said corporation,
and acknowledged to me that said corporation executed it.
----------------------------------------
Notary Public
My Commission expires:
<PAGE>
EXHIBIT 4.2
POOLING AND SERVICING AGREEMENT
Dated as of December 1, 1996
by and among
CS First Boston Mortgage Securities Corp.
(Depositor)
T.A.R. Preferred Mortgage Corporation
(Seller)
and
Advanta Mortgage Corp. USA
(Servicer)
and
Bankers Trust Company
(Trustee)
Preferred Mortgage Asset-Backed Certificates,
Series 1996-2
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
Definitions
Section 1.1 Certain Defined Terms........................................... 1
Section 1.2 Provisions of General Application............................... 40
ARTICLE II
Establishment of the Trust
Sale and Conveyance of the Trust Fund
Section 2.1 Sale and Conveyance of Trust Fund; Priority and
Subordination of Ownership Interests; Establishment of the Trust.. 42
Section 2.2 Possession of Mortgage Files; Access to Mortgage Files.......... 43
Section 2.3 Delivery of Mortgage Loan Documents............................. 44
Section 2.4 Acceptance by Trustee of the Trust Fund; Certain
Substitutions; Certification by Trustee........................... 47
Section 2.5 [RESERVED]...................................................... 48
Section 2.6 Execution of Certificates....................................... 48
Section 2.7 Application of Principal and Interest........................... 49
Section 2.8 Further Assurances; Powers of Attorney.......................... 49
Section 2.9 Conveyance of the Subsequent Mortgage Loans..................... 49
ARTICLE III
Representations and Warranties
Section 3.1 Representations of the Servicer................................. 53
Section 3.2 Representations, Warranties and Covenants of the Depositor...... 54
Section 3.3 RESERVED........................................................ 55
Section 3.4 Purchase and Substitution....................................... 55
Section 3.5 Indemnification of the Trust Fund by the Indemnitors............ 57
ARTICLE IV
The Certificates
Section 4.1 The Certificates................................................ 58
Section 4.2 Registration of Transfer and Exchange of Certificates........... 58
Section 4.3 Mutilated, Destroyed, Lost or Stolen Certificates............... 64
Section 4.4 Persons Deemed Owners........................................... 64
ARTICLE V
Administration and Servicing of the Mortgage Loans
Section 5.1 Appointment of the Servicer..................................... 65
i
<PAGE>
Section 5.2 Subservicing Agreements Between the Servicer and
Subservicers................................................. 66
Section 5.3 Collection of Certain Mortgage Loan Payments; Collection
Account...................................................... 67
Section 5.4 Permitted Withdrawals from the Collection Account......... 69
Section 5.5 Payment of Taxes, Insurance and Other Charges............. 70
Section 5.6 Maintenance of Casualty Insurance......................... 70
Section 5.7 Servicer Account.......................................... 71
Section 5.8 Fidelity Bond; Errors and Omissions Policy................ 71
Section 5.9 Collection of Taxes, Assessments and Other Items.......... 72
Section 5.10 Enforcement of Due-on-Sale Clauses; Assumption
Agreements.................................................. 72
Section 5.11 Realization upon Defaulted Mortgage Loans................. 73
Section 5.12 Trustee to Cooperate; Release of Mortgage Files........... 76
Section 5.13 Servicing Fee; Servicing Compensation..................... 77
Section 5.14 Reports to the Trustee; Collection Account Statements..... 77
Section 5.15 Annual Statement as to Compliance......................... 78
Section 5.16 Annual Independent Public Accountants' Servicing Report... 78
Section 5.17 [Reserved]................................................ 78
Section 5.18 Reports to be Provided by the Servicer.................... 78
Section 5.19 Adjustment of Servicing Compensation in Respect of Prepaid
Mortgage Loans.............................................. 79
Section 5.20 Delinquency Interest Advances............................. 79
Section 5.21 [Reserved] 79
Section 5.22 Maintenance of Corporate Existence and Licenses; Merger or
Consolidation of the Servicer............................... 79
Section 5.23 Assignment of Agreement by Servicer; Servicer Not to
Resign...................................................... 80
Section 5.24 Information Reports to be Filed by the Servicer........... 80
ARTICLE VI
Distributions and Payments
Section 6.1 Establishment of Certificate Account; Deposits to the
Certificate Account........................................... 81
Section 6.2 Permitted Withdrawals From the Certificate Account........ 81
Section 6.3 Collection of Money....................................... 82
Section 6.4 The Certificate Insurance Policy.......................... 82
Section 6.5 Distributions............................................. 84
Section 6.6 Investment of Accounts.................................... 85
Section 6.7 Reports by Trustee........................................ 86
Section 6.8 Additional Reports by Trustee............................. 88
Section 6.9 Compensating Interest..................................... 88
Section 6.10 Effect of Payments by the Certificate Insurer;
Subrogation.................................................. 89
Section 6.11 Pre-Funding Account....................................... 89
Section 6.12 Capitalized Interest Accounts............................. 90
ii
<PAGE>
ARTICLE VII
Default
Section 7.1 Events of Default......................................... 92
Section 7.2 Trustee to Act; Appointment of Successor.................. 94
Section 7.3 Waiver of Defaults........................................ 95
Section 7.4 Mortgage Loans, Trust Fund and Accounts Held for Benefit
of the Certificate Insurer.................................... 96
ARTICLE VIII
Termination
Section 8.1 Termination 97
Section 8.2 Additional Termination Requirements....................... 98
Section 8.3 Accounting Upon Termination of Servicer................... 99
ARTICLE IX
The Trustee
Section 9.1 Duties of Trustee......................................... 101
Section 9.2 Certain Matters Affecting the Trustee..................... 102
Section 9.3 Not Liable for Certificates or Mortgage Loans............. 104
Section 9.4 Trustee May Own Certificates.............................. 104
Section 9.5 Payment of Trustee Fees................................... 104
Section 9.6 Eligibility Requirements for Trustee...................... 104
Section 9.7 Resignation and Removal of the Trustee.................... 105
Section 9.8 Successor Trustee......................................... 106
Section 9.9 Merger or Consolidation of Trustee........................ 106
Section 9.10 Appointment of Co-Trustee or Separate Trustee............. 106
Section 9.11 Retirement of Certificates................................ 107
ARTICLE X
REMIC Administration and Provisions
Section 10.1 REMIC Administration..................................... 109
Section 10.2 Prohibited Transactions and Activities................... 114
Section 10.3 Servicer, Trustee and REMIC Administrator Indemnification. 114
ARTICLE XI
Miscellaneous Provisions
Section 11.1 Limitation on Liability of the Depositor and the Servicer. 116
Section 11.2 Acts of Certificateholders; Certificateholders' Rights.... 116
Section 11.3 Amendment................................................. 117
Section 11.4 Recordation of Agreement.................................. 118
Section 11.5 Duration of Agreement..................................... 118
Section 11.6 Notices................................................... 118
iii
<PAGE>
Section 11.7 Severability of Provisions................................ 119
Section 11.8 No Partnership............................................ 119
Section 11.9 Counterparts.............................................. 119
Section 11.10 Successors and Assigns.................................... 119
Section 11.11 Headings.................................................. 119
Section 11.12 The Certificate Insurer Default........................... 119
Section 11.13 Third Party Beneficiary................................... 119
Section 11.14 Intent of the Parties..................................... 119
Section 11.15 GOVERNING LAW CONSENT TO JURISDICTION;
WAIVER OF JURY TRIAL........................................ 120
EXHIBITS
EXHIBIT A-1 Certificate Insurance Policy
EXHIBIT A-2 Statement of Insurance
EXHIBIT B-1 Form of Class A-1 Certificate
EXHIBIT B-2 Form of Class A-2 Certificate
EXHIBIT B-3 Form of Class A-3 Certificate
EXHIBIT B-4 Form of Class A-4 Certificate
EXHIBIT B-5 Form of Class A-5 Certificate
EXHIBIT B-6 Form of Class A-6 Certificate
EXHIBIT B-7 Form of Class B Certificate
EXHIBIT B-8 Form of Class C Certificate
EXHIBIT B-9 Form of Class RL Certificate
EXHIBIT B-10 Form of Class RU Certificate
EXHIBIT C Mortgage Loan Schedule
EXHIBIT D Trustee's Acknowledgement of Receipt of files
EXHIBIT E Initial Certification of Trustee
EXHIBIT F Final Certification of Trustee
EXHIBIT G Request for Release of Documents
EXHIBIT H Form of Investor Representation Letter
EXHIBIT I Form of Transferor Representation Letter
EXHIBIT J Form of Rule 144A Investment Representation
EXHIBIT K Transfer Affidavit and Agreement
EXHIBIT L Transferor's Certificate
EXHIBIT M-1 ERISA Investment Representation Letter
EXHIBIT M-2 ERISA Investment Representation Letter
EXHIBIT N Certificate Re: Prepaid Loans
EXHIBIT O Addition Notice and Subsequent Transfer Instrument
iv
<PAGE>
This Pooling and Servicing Agreement, dated as of December 1, 1996, by and
among CS First Boston Mortgage Securities Corp., a Delaware corporation, in its
capacity as depositor (the "Depositor"), T.A.R. Preferred Mortgage Corporation,
a California corporation, in its capacity as seller (the "Seller"), Advanta
Mortgage Corp. USA, a Delaware corporation, in its capacity as servicer (the
"Servicer"), and Bankers Trust Company, a New York banking corporation, in its
capacity as trustee (the "Trustee).
PRELIMINARY STATEMENT:
The Depositor intends to sell asset-backed certificates (collectively, the
"Certificates"), to be issued hereunder in ten classes (each, a "Class"), which
in the aggregate will evidence the entire beneficial ownership interest in the
Trust Fund (as defined herein), consisting primarily of the Mortgage Loans, the
Collection Account, the Certificate Account, the Pre-Funding Account and the
Capitalized Interest Account (each, as defined herein).
In consideration of the mutual agreements herein contained, the Depositor, the
Seller, the Servicer and the Trustee agree as follows:
ARTICLE I
Definitions
-----------
Section 1.1 Certain Defined Terms. Whenever used herein, the following
---------------------
words and phrases, unless the context otherwise requires, shall have the
following meanings.
"Accepted Servicing Practices" shall mean the Servicer's normal servicing
----------------------------
practices in servicing and administering mortgage loans for its own account,
which in general will conform to the mortgage servicing practices of prudent
mortgage lending institutions which service for their own account mortgage loans
of the same type as the Mortgage Loans in the jurisdictions in which the related
Mortgaged Properties are located and will give due consideration to the
Certificate Insurer's and the Certificateholders' reliance on the Servicer.
"Account" shall mean any Eligible Account established hereunder.
-------
"Accrual Period" shall mean with respect to any Distribution Date, the
--------------
calendar month immediately preceding the month in which such Distribution Date
occurs.
"Addition Notice" shall mean, with respect to the transfer of Subsequent
---------------
Mortgage Loans to the Trust Fund pursuant to Section 2.9 of this Agreement and
the related Subsequent Transfer Instrument, a notice, substantially in the form
of Exhibit O, which shall be given not later than five Business Days prior to
the related Subsequent Transfer Date, of the Depositor's designation of
Subsequent Mortgage Loans to be sold to the Trust Fund and the aggregate
Principal Balance as of the related Subsequent Cut-Off Date of such Subsequent
Mortgage Loans.
<PAGE>
"Advanta" shall mean Advanta Mortgage Corp. USA, a Delaware corporation.
-------
"Affiliate" shall mean, with respect to any Person, any other Person
---------
directly or indirectly controlling, controlled by, or under direct or indirect
common control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Agreement" shall mean this Pooling and Servicing Agreement, including the
---------
Exhibits hereto, as amended or supplemented from time to time.
"Appraised Value" shall mean the appraised value of any Mortgaged
---------------
Property, equal to the value of the related Mortgaged Property based upon the
appraisal made at the time the Mortgage Loan is originated.
"Assignment of Mortgage" shall mean, with respect to each Mortgage Loan,
----------------------
an assignment of the Mortgage, notice of transfer or equivalent instrument
sufficient under the laws of the jurisdiction wherein the related Mortgaged
Property is located to reflect of record the sale of the Mortgage to the Trustee
for the benefit of the Certificateholders and the Certificate Insurer.
"Authorized Denominations" shall mean with respect to each of the Class A
------------------------
Certificates, the minimum Percentage Interest corresponding to a minimum
denomination of $1,000 or integral multiples of $1.00 in excess thereof; with
respect to the Class B Certificates, the Class C Certificates and the Residual
Certificates, a minimum Percentage Interest of 10.00% and integral multiples of
0.01% in excess thereof.
"Available Funds" as defined in Section 6.4(a).
---------------
"Available Funds Shortfall" shall mean, with respect to the Mortgage Loans
-------------------------
and any Distribution Date, the excess of (x) the Insured Distribution Amount
over (y) the Available Funds for such Distribution Date.
"Business Day" shall mean any day other than (a) a Saturday or Sunday, or
------------
(b) a day on which banking institutions in the States of California or New York
or in the city in which the Corporate Trust Office of the Trustee or the
principal offices of the Certificate Insurer are authorized or obligated by law
or executive order to be closed.
"Capitalized Interest Account" shall mean the Account established and
----------------------------
maintained pursuant to Section 6.12, which must be an Eligible Account.
"Capitalized Interest Addition" shall mean, as to any Distribution Date,
-----------------------------
an amount equal to interest accrued for the related Collection Period on an
amount equal to (i) $69,876,633.56 minus (ii) the aggregate Principal Balance
of any related Subsequent
2
<PAGE>
Mortgage Loans transferred prior to the first day of the month in which such
Distribution Date occurs, calculated at a rate equal to the weighted average
Class A Pass-Through Rate.
"Capitalized Interest Amount" shall mean $717,982.41.
---------------------------
"CERCLA" shall mean the Comprehensive Environmental Response, Compensation
------
and Liability Act of 1980.
"Certificate" shall mean any Class A Certificate, Class B Certificate,
-----------
Class C Certificate, Class RU Certificate or Class RL Certificate executed by
the Trustee on behalf of the Trust Fund and authenticated by the Trustee.
"Certificate Account" shall mean the Eligible Account established in
-------------------
accordance with Section 6.1(a) hereof and maintained by the Trustee.
"Certificateholder or Holder" shall mean the Person in whose name a
---------------------------
Certificate is registered in the Certificate Register, except that, neither a
Disqualified Organization nor a Non-United States Person shall be a Holder of a
Residual Certificate for any purposes hereof and, solely for the purposes of
giving any consent (except any consent required to be obtained pursuant to
Section 11.02), waiver, request or demand pursuant to this Agreement, any
Certificate registered in the name of the Depositor or the Seller or any
Affiliate thereof shall be deemed not to be outstanding and the rights to which
it is entitled shall not be taken into account in determining whether the
requisite percentage of rights necessary to effect any such consent has been
obtained, except as otherwise provided in Section 11.03. The Trustee shall be
entitled to rely upon a certification of the Depositor or the Seller in
determining if any Certificates are registered in the name of a respective
Affiliate. Any Class A Certificates on which payments are made under the
Certificate Insurance Policy shall be deemed to be outstanding and held by the
Certificate Insurer to the extent of such payment.
"Certificate Insurance Agreement" shall mean that certain agreement dated
-------------------------------
as of December 1, 1996 between the Certificate Insurer, the Depositor and the
parties named therein.
"Certificate Insurance Payments Account" shall mean the Eligible Account
--------------------------------------
established in accordance with Section 6.4(c) hereof and maintained by the
Trustee.
"Certificate Insurance Policy" shall mean the certificate guaranty
----------------------------
insurance policy No. 22647, and all endorsements thereto dated the Closing Date,
issued by the Certificate Insurer for the benefit of the Class A
Certificateholders, a copy of which is attached hereto as Exhibit A-1.
"Certificate Insurance Policy Premium Amount" shall mean, the product of
-------------------------------------------
the Premium Percentage and the Class A Principal Balance for the related
Distribution Date.
3
<PAGE>
"Certificate Insurer" shall be MBIA Insurance Corporation, a stock
-------------------
insurance company organized and created under the laws of the State of New York,
and any successors thereto.
"Certificate Insurer Default" shall mean the failure, and continuance of
---------------------------
such failure, by the Certificate Insurer to make a payment required under the
Certificate Insurance Policy in accordance with its terms.
"Certificate Register" shall have the meaning described in Section 4.2(a).
--------------------
"Charged-off Loan": a Mortgage Loan shall become a Charged-off Loan on the
----------------
earlier to occur of (a) the date on which any payment due or portion thereof
with respect to such Mortgage Loan has become delinquent for a period of 180
consecutive days, (b) the time such Mortgage Loan becomes a Liquidated Loan or
(c) the date on which the Holder of the Subordinate Certificates repurchases
such Mortgage Loan pursuant to the last paragraph of Section 5.11(a) hereof.
"Civil Relief Act" shall mean the Soldiers' and Sailors' Civil Relief Act
----------------
of 1940, as amended.
"Class" shall mean any designated Class of Certificates of this Series.
-----
"Class A Certificate" shall mean any of the Certificates designated as a
-------------------
"Class A-1 Certificate," "Class A-2 Certificate," "Class A-3 Certificate,"
"Class A-4 Certificate," "Class A-5 Certificate" or "Class A-6 Certificate" on
the face thereof, in the form of Exhibit B-1-1, B-1-2, B-1-3, B-1-4, B-1-5 and
B-1-6, respectively, hereto, and executed, authenticated and delivered by the
Trustee in accordance with the procedures set forth herein and evidencing an
interest designated as a "regular interest" in the Upper-Tier REMIC for the
purposes of the REMIC Provisions.
"Class A Final Scheduled Maturity Date" shall mean with respect to each
-------------------------------------
Class of Class A Certificates, the scheduled final maturity date for such Class
A Certificates.
"Class A Interest Distribution Amount" shall mean the sum of the Class A-1
------------------------------------
Interest Distribution Amount, the Class A-2 Interest Distribution Amount, the
Class A-3 Interest Distribution Amount, the Class A-4 Interest Distribution
Amount, the Class A-5 Interest Distribution Amount and the Class A-6 Interest
Distribution Amount.
"Class A Principal Balance" shall mean, as of any date of determination,
-------------------------
the sum of the Class A-1 Principal Balance, the Class A-2 Principal Balance, the
Class A-3 Principal Balance, the Class A-4 Principal Balance, the Class A-5
Principal Balance and the Class A-6 Principal Balance.
"Class A Principal Distribution Amount" shall mean the related principal
-------------------------------------
distribution with respect to the Class A-1 Principal Distribution Amount, the
Class A-2 Principal Distribution Amount, the Class A-3 Principal Distribution
Amount, the Class A-4
4
<PAGE>
Principal Distribution Amount, the Class A-5 Principal Distribution Amount or
the Class A-6 Principal Distribution Amount, as the case may be.
"Class A-1 Carry-Forward Amount" shall mean, as of any Distribution Date,
------------------------------
the sum of (a) the amount, if any, by which (i) the Insured Distribution Amount
relating to the Class A-1 Certificates as of the immediately preceding
Distribution Date exceeded (ii) the amount actually distributed to the Holders
of the Class A-1 Certificates on such Distribution Date in respect thereof
(including, without limitation, any amounts paid to the Class A-1
Certificateholders by the Certificate Insurer pursuant to Section 6.5 hereof)
and (b) interest accrued for the related Accrual Period on the amount described
in clause (a), calculated at an interest rate equal to the Class A-1 Pass-
Through Rate. Any Class A-1 Carry-Forward Amount shall be deemed to be
allocated first to any related Overcollateralization Deficit and second to any
related Class A-1 Interest Distribution Amount.
"Class A-1 Final Scheduled Maturity Date" shall mean with respect to the
---------------------------------------
Class A-1 Certificates, May 25, 2003, or if such date is not a Business Day, the
first Business Day thereafter.
"Class A-1 Interest Distribution Amount" shall mean, with respect to the
--------------------------------------
Class A-1 Certificates for any Distribution Date the sum of (i) the aggregate
amount of interest accrued for the related Accrual Period on the Class A-1
Principal Balance immediately prior to such Distribution Date at the Class A-1
Pass-Through Rate (based on a 360-day year and a 30-day month) and (ii) the
portion of any Class A-1 Carry-Forward Amount which equals the unpaid interest
shortfall from any prior Distribution Date in a distribution of a Class A-1
Interest Distribution Amount in respect of the Class A-1 Certificates.
"Class A-1 Pass-Through Rate" with respect to any Distribution Date, will
---------------------------
be equal to a per annum rate of 6.43%.
"Class A-1 Principal Balance" shall mean, as of any time of determination,
---------------------------
the Original Class A-1 Principal Balance less any amounts distributed with
respect to principal thereon on all prior Distribution Dates.
"Class A-1 Principal Distribution Amount" shall mean, with respect to the
---------------------------------------
Class A-1 Certificates for any Distribution Date, the lesser of:
(a) the excess of (i) the sum, as of such Distribution Date, of (A) the
Available Funds, plus (B) any Insured Payment over (ii) the Class A-1
----
Interest Distribution Amount; and
(b) the sum, without duplication, of:
(i) the portion of any Class A-1 Carry-Forward Amount which
relates to a shortfall in a distribution of an
Overcollateralization Deficit,
5
<PAGE>
(ii) all scheduled and unscheduled amounts relating to principal
with respect to the Mortgage Loans received by the Servicer
during the prior Collection Period to the extent actually
received by the Trustee,
(iii) the Principal Balance of each Mortgage Loan that either
was repurchased by a Seller or by the Depositor on the related
Servicer Remittance Date to the extent such Principal Balances
are actually received by the Trustee,
(iv) any Substitution Adjustments delivered by the Seller or the
Depositor on the related Servicer Remittance Date in connection
with a substitution of a Mortgage Loan to the extent such
Substitution Adjustments are actually received by the Trustee,
(v) the Net Liquidation Proceeds collected by the Servicer of all
Mortgage Loans during the related Collection Period (to the
extent such Net Liquidation Proceeds are related to principal)
to the extent actually received by the Trustee,
(vi) any amounts released from the Pre-Funding Account as a
prepayment of such Class A-1 Certificates on the Distribution
Date which immediately follows the end of the Funding Period,
(vii) the proceeds received by the Trustee of any termination of
the Trust Fund (to the extent such proceeds are related to
principal),
(viii) the amount of any Overcollateralization Deficit for such
Distribution Date, and
(ix) without duplication of amounts distributed under clause
(viii) above, the amount of any Overcollateralization Increase
Amount for such Distribution Date;
minus
-----
(x) the amount of any Overcollateralization Reduction Amount for
such Distribution Date.
"Class A-2 Carry-Forward Amount" shall mean, as of any Distribution
------------------------------
Date, the sum of (a) the amount, if any, by which (i) the Insured Distribution
Amount relating to the Class A-2 Certificates as of the immediately preceding
Distribution Date exceeded (ii) the amount actually distributed to the Holders
of the Class A-2 Certificates on such Distribution Date in respect thereof
(including, without limitation, any amounts paid to the Class A-2
Certificateholders by the Certificate Insurer pursuant to Section 6.5 hereof)
and (b) interest accrued for the related Accrual Period on the amount described
in clause (a), calculated at
6
<PAGE>
an interest rate equal to the Class A-2 Pass-Through Rate. Any Class A-2 Carry-
Forward Amount shall be deemed to be allocated first to any related
Overcollateralization Deficit and second to any related Class A-2 Interest
Distribution Amount.
"Class A-2 Final Scheduled Maturity Date" shall mean with respect to the
---------------------------------------
Class A-2 Certificates, March 25, 2005, or if such day is not a Business Day,
the first Business Day thereafter.
"Class A-2 Interest Distribution Amount" shall mean, with respect to the
--------------------------------------
Class A-2 Certificates for any Distribution Date the sum of (i) the aggregate
amount of interest accrued for the related Accrual Period on the Class A-2
Principal Balance immediately prior to such Distribution Date at the Class A-2
Pass-Through Rate (based on a 360-day year and a 30-day month) and (ii) the
portion of any Class A-2 Carry-Forward Amount which equals the unpaid interest
shortfall from any prior Distribution Date in a distribution of a Class A-2
Interest Distribution Amount in respect of the Class A-2 Certificates.
"Class A-2 Pass-Through Rate" with respect to any Distribution Date,
---------------------------
will be equal to a per annum rate of 6.32%.
"Class A-2 Principal Balance" shall mean, as of any time of
---------------------------
determination, the Original Class A-2 Principal Balance less any amounts
distributed with respect to principal thereon on all prior Distribution Dates.
"Class A-2 Principal Distribution Amount" shall mean, with respect to
---------------------------------------
the Class A-2 Certificates for any Distribution Date after the Class A-1
Principal Balance has been reduced to zero, the lesser of:
(a) the excess of (i) the sum, as of such Distribution Date, of (A) the
Available Funds, plus (B) any Insured Payment over (ii) the Class A-2
----
Interest Distribution Amount; and
(b) the sum, without duplication, of:
(i) the portion of any Class A-2 Carry-Forward Amount which
relates to a shortfall in a distribution of an
Overcollateralization Deficit,
(ii) all scheduled and unscheduled amounts relating to principal
with respect to the Mortgage Loans received by the Servicer
during the prior Collection Period to the extent actually
received by the Trustee,
(iii) the Principal Balance of each Mortgage Loan that either
was repurchased by a Seller or by the Depositor on the related
Servicer Remittance Date to the extent such Principal Balances
are actually received by the Trustee,
7
<PAGE>
(iv) any Substitution Adjustments delivered by the Seller or the
Depositor on the related Servicer Remittance Date in connection
with a substitution of a Mortgage Loan to the extent such
Substitution Adjustments are actually received by the Trustee,
(v) the Net Liquidation Proceeds collected by the Servicer of all
Mortgage Loans during the related Collection Period (to the
extent such Net Liquidation Proceeds are related to principal)
to the extent actually received by the Trustee,
(vi) any amounts released from the Pre-Funding Account as a
prepayment of such Class A-2 Certificates on the Distribution
Date which immediately follows the end of the Funding Period,
(vii) the proceeds received by the Trustee of any termination of
the Trust Fund (to the extent such proceeds are related to
principal),
(viii) the amount of any Overcollateralization Deficit for such
Distribution Date, and
(ix) without duplication of amounts distributed under clause
(viii) above, the amount of any Overcollateralization Increase
Amount for such Distribution Date;
minus
-----
(x) the amount of any Overcollateralization Reduction Amount for
such Distribution Date.
"Class A-3 Carry-Forward Amount" shall mean, as of any Distribution
------------------------------
Date, the sum of (a) the amount, if any, by which (i) the Insured Distribution
Amount relating to the Class A-3 Certificates as of the immediately preceding
Distribution Date exceeded (ii) the amount actually distributed to the Holders
of the Class A-3 Certificates on such Distribution Date in respect thereof
(including, without limitation, any amounts paid to the Class A-3
Certificateholders by the Certificate Insurer pursuant to Section 6.5 hereof)
and (b) interest accrued for the related Accrual Period on the amount described
in clause (a), calculated at an interest rate equal to the Class A-3 Pass-
Through Rate. Any Class A-3 Carry-Forward Amount shall be deemed to be
allocated first to any related Overcollateralization Deficit and second to any
related Class A-3 Interest Distribution Amount.
"Class A-3 Final Schedule Maturity Date" shall mean with respect to the
--------------------------------------
Class A-3 Certificates, April 25, 2007, or if such day is not a Business Day,
the first Business Day thereafter.
"Class A-3 Interest Distribution Amount" shall mean, with respect to the
--------------------------------------
Class A-3 Certificates for any Distribution Date the sum of (i) the aggregate
amount of interest
8
<PAGE>
accrued for the related Accrual Period on the Class A-3 Principal Balance
immediately prior to such Distribution Date at the Class A-3 Pass-Through Rate
(based on a 360-day year and a 30-day month) and (ii) the portion of any Class
A-3 Carry-Forward Amount which equals the unpaid interest shortfall from any
prior Distribution Date in a distribution of a Class A-3 Interest Distribution
Amount in respect of the Class A-3 Certificates.
"Class A-3 Pass-Through Rate" with respect to any Distribution Date,
---------------------------
will be equal to a per annum rate of 6.39%.
"Class A-3 Principal Balance" shall mean, as of any time of
---------------------------
determination, the Original Class A-3 Principal Balance less any amounts
distributed with respect to principal thereon on all prior Distribution Dates.
"Class A-3 Principal Distribution Amount" shall mean, with respect to
---------------------------------------
the Class A-3 Certificates for any Distribution Date after the Class A-1
Principal Balance and the Class A-2 Principal Balance have been reduced to zero,
the lesser of:
(a) the excess of (i) the sum, as of such Distribution Date, of (A) the
Available Funds, plus (B) any Insured Payment over (ii) the Class A-3
----
Interest Distribution Amount; and
(b) the sum, without duplication, of:
(i) the portion of any Class A-3 Carry-Forward Amount which
relates to a shortfall in a distribution of an
Overcollateralization Deficit,
(ii) all scheduled and unscheduled amounts relating to principal
with respect to the Mortgage Loans received by the Servicer
during the prior Collection Period to the extent actually
received by the Trustee,
(iii) the Principal Balance of each Mortgage Loan that either
was repurchased by a Seller or by the Depositor on the related
Servicer Remittance Date to the extent such Principal Balances
are actually received by the Trustee,
(iv) any Substitution Adjustments delivered by the Seller or the
Depositor on the related Servicer Remittance Date in connection
with a substitution of a Mortgage Loan to the extent such
Substitution Adjustments are actually received by the Trustee,
(v) the Net Liquidation Proceeds collected by the Servicer of all
Mortgage Loans during the related Collection Period (to the
extent such Net Liquidation Proceeds are related to principal)
to the extent actually received by the Trustee,
9
<PAGE>
(vi) any amounts released from the Pre-Funding Account as a
prepayment of such Class A-3 Certificates on the Distribution
Date which immediately follows the end of the Funding Period,
(vii) the proceeds received by the Trustee of any termination of
the Trust Fund (to the extent such proceeds are related to
principal),
(viii) the amount of any Overcollateralization Deficit for such
Distribution Date, and
(ix) without duplication of amounts distributed under clause
(viii) above, the amount of any Overcollateralization Increase
Amount for such Distribution Date;
minus
-----
(x) the amount of any Overcollateralization Reduction Amount for
such Distribution Date.
"Class A-4 Carry-Forward Amount" shall mean, as of any Distribution
------------------------------
Date, the sum of (a) the amount, if any, by which (i) the Insured Distribution
Amount relating to the Class A-4 Certificates as of the immediately preceding
Distribution Date exceeded (ii) the amount actually distributed to the Holders
of the Class A-4 Certificates on such Distribution Date in respect thereof
(including, without limitation, any amounts paid to the Class A-4
Certificateholders by the Certificate Insurer pursuant to Section 6.5 hereof)
and (b) interest accrued for the related Accrual Period on the amount described
in clause (a), calculated at an interest rate equal to the Class A-4 Pass-
Through Rate. Any Class A-4 Carry-Forward Amount shall be deemed to be
allocated first to any related Overcollateralization Deficit and second to any
related Class A-4 Interest Distribution Amount.
"Class A Final Scheduled Maturity Date" shall mean with respect to the
-------------------------------------
Class A-4 Certificates, September 25, 2009, or if such day is not a Business
Day, the first Business Day thereafter.
"Class A-4 Interest Distribution Amount" shall mean, with respect to the
--------------------------------------
Class A-4 Certificates for any Distribution Date the sum of (i) the aggregate
amount of interest accrued for the related Accrual Period on the Class A-4
Principal Balance immediately prior to such Distribution Date at the Class A-4
Pass-Through Rate (based on a 360-day year and a 30-day month) and (ii) the
portion of any Class A-4 Carry-Forward Amount which equals the unpaid interest
shortfall from any prior Distribution Date in a distribution of a Class A-4
Interest Distribution Amount in respect of the Class A-4 Certificates.
"Class A-4 Pass-Through Rate" with respect to any Distribution Date,
---------------------------
will be equal to a per annum rate of 6.62%.
10
<PAGE>
"Class A-4 Principal Balance" shall mean, as of any time of
---------------------------
determination, the Original Class A-4 Principal Balance less any amounts
distributed with respect to principal thereon on all prior Distribution Dates.
"Class A-4 Principal Distribution Amount" shall mean, with respect to
---------------------------------------
the Class A-4 Certificates for any Distribution Date after the Class A-1
Principal Balance, the Class A-2 Principal Balance and the Class A-3 Principal
Balance have been reduced to zero, the lesser of:
(a) the excess of (i) the sum, as of such Distribution Date, of (A) the
Available Funds, plus (B) any Insured Payment over (ii) the Class A-4
----
Interest Distribution Amount; and
(b) the sum, without duplication, of:
(i) the portion of any Class A-4 Carry-Forward Amount which
relates to a shortfall in a distribution of an
Overcollateralization Deficit,
(ii) all scheduled and unscheduled amounts relating to principal
with respect to the Mortgage Loans received by the Servicer
during the prior Collection Period to the extent actually
received by the Trustee,
(iii) the Principal Balance of each Mortgage Loan that either
was repurchased by a Seller or by the Depositor on the related
Servicer Remittance Date to the extent such Principal Balances
are actually received by the Trustee,
(iv) any Substitution Adjustments delivered by the Seller or the
Depositor on the related Servicer Remittance Date in connection
with a substitution of a Mortgage Loan to the extent such
Substitution Adjustments are actually received by the Trustee,
(v) the Net Liquidation Proceeds collected by the Servicer of all
Mortgage Loans during the related Collection Period (to the
extent such Net Liquidation Proceeds are related to principal)
to the extent actually received by the Trustee,
(vi) any amounts released from the Pre-Funding Account as a
prepayment of such Class A-4 Certificates on the Distribution
Date which immediately follows the end of the Funding Period,
(vii) the proceeds received by the Trustee of any termination of
the Trust Fund (to the extent such proceeds are related to
principal),
11
<PAGE>
(viii) the amount of any Overcollateralization Deficit for such
Distribution Date, and
(ix) without duplication of amounts distributed under clause
(viii) above, the amount of any Overcollateralization Increase
Amount for such Distribution Date;
minus
-----
(x) the amount of any Overcollateralization Reduction Amount for
such Distribution Date.
"Class A-5 Carry-Forward Amount" shall mean, as of any Distribution
------------------------------
Date, the sum of (a) the amount, if any, by which (i) the Insured Distribution
Amount relating to the Class A-5 Certificates as of the immediately preceding
Distribution Date exceeded (ii) the amount actually distributed to the Holders
of the Class A-5 Certificates on such Distribution Date in respect thereof
(including, without limitation, any amounts paid to the Class A-5
Certificateholders by the Certificate Insurer pursuant to Section 6.5 hereof)
and (b) interest accrued for the related Accrual Period on the amount described
in clause (a), calculated at an interest rate equal to the Class A-5 Pass-
Through Rate. Any Class A-5 Carry-Forward Amount shall be deemed to be
allocated first to any related Overcollateralization Deficit and second to any
related Class A-5 Interest Distribution Amount.
"Class A-5 Final Scheduled Maturity Date" shall mean with respect to the
---------------------------------------
Class A-5 Certificates, April 25, 2010, or if such day is not a Business Day,
the first Business Day thereafter.
"Class A-5 Interest Distribution Amount" shall mean, with respect to the
--------------------------------------
Class A-5 Certificates for any Distribution Date the sum of (i) the aggregate
amount of interest accrued for the related Accrual Period on the Class A-5
Principal Balance immediately prior to such Distribution Date at the Class A-5
Pass-Through Rate (based on a 360-day year and a 30-day month) and (ii) the
portion of any Class A-5 Carry-Forward Amount which equals the unpaid interest
shortfall from any prior Distribution Date in a distribution of a Class A-5
Interest Distribution Amount in respect of the Class A-5 Certificates.
"Class A-5 Pass-Through Rate" with respect to any Distribution Date,
---------------------------
will be equal to a per annum rate of 6.96%.
"Class A-5 Principal Balance" shall mean, as of any time of
---------------------------
determination, the Original Class A-5 Principal Balance less any amounts
distributed with respect to principal thereon on all prior Distribution Dates.
"Class A-5 Principal Distribution Amount" shall mean, with respect to
---------------------------------------
the Class A-5 Certificates for any Distribution Date after the Class A-1
Principal Balance, the Class A-2 Principal Balance, the Class A-3 Principal
Balance and the Class A-4 Principal Balance have been reduced to zero, the
lesser of:
12
<PAGE>
(a) the excess of (i) the sum, as of such Distribution Date, of (A) the
Available Funds, plus (B) any Insured Payment over (ii) the Class A-5 Interest
----
Distribution Amount; and
(b) the sum, without duplication, of:
(i) the portion of any Class A-5 Carry-Forward Amount which
relates to a shortfall in a distribution of an
Overcollateralization Deficit,
(ii) all scheduled and unscheduled amounts relating to principal
with respect to the Mortgage Loans received by the Servicer
during the prior Collection Period to the extent actually
received by the Trustee,
(iii) the Principal Balance of each Mortgage Loan that either
was repurchased by a Seller or by the Depositor on the related
Servicer Remittance Date to the extent such Principal Balances
are actually received by the Trustee,
(iv) any Substitution Adjustments delivered by the Seller or the
Depositor on the related Servicer Remittance Date in connection
with a substitution of a Mortgage Loan to the extent such
Substitution Adjustments are actually received by the Trustee,
(v) the Net Liquidation Proceeds collected by the Servicer of all
Mortgage Loans during the related Collection Period (to the
extent such Net Liquidation Proceeds are related to principal)
to the extent actually received by the Trustee,
(vi) any amounts released from the Pre-Funding Account as a
prepayment of such Class A-5 Certificates on the Distribution
Date which immediately follows the end of the Funding Period,
(vii) the proceeds received by the Trustee of any termination of
the Trust Fund (to the extent such proceeds are related to
principal),
(viii) the amount of any Overcollateralization Deficit for such
Distribution Date, and
(ix) without duplication of amounts distributed under clause
(viii) above, the amount of any Overcollateralization Increase
Amount for such Distribution Date;
minus
-----
13
<PAGE>
(x) the amount of any Overcollateralization Reduction Amount for
such Distribution Date.
"Class A-6 Carry-Forward Amount" shall mean, as of any Distribution
------------------------------
Date, the sum of (a) the amount, if any, by which (i) the Insured Distribution
Amount relating to the Class A-6 Certificates as of the immediately preceding
Distribution Date exceeded (ii) the amount actually distributed to the Holders
of the Class A-6 Certificates on such Distribution Date in respect thereof
(including, without limitation, any amounts paid to the Class A-6
Certificateholders by the Certificate Insurer pursuant to Section 6.5 hereof)
and (b) interest accrued for the related Accrual Period on the amount described
in clause (a), calculated at an interest rate equal to the Class A-6 Pass-
Through Rate. Any Class A-6 Carry-Forward Amount shall be deemed to be
allocated first to any related Overcollateralization Deficit and second to any
related Class A-6 Interest Distribution Amount.
"Class A-6 Final Scheduled Maturity Date" shall mean with respect to the
---------------------------------------
Class A-6 Certificates, February 25, 2018, or if such day is not a Business Day,
the first Business Day thereafter.
"Class A-6 Interest Distribution Amount" shall mean, with respect to the
--------------------------------------
Class A-6 Certificates for any Distribution Date the sum of (i) the aggregate
amount of interest accrued for the related Accrual Period on the Class A-6
Principal Balance immediately prior to such Distribution Date at the Class A-6
Pass-Through Rate (based on a 360-day year and a 30-day month) and (ii) the
portion of any Class A-6 Carry-Forward Amount which equals the unpaid interest
shortfall from any prior Distribution Date in a distribution of a Class A-6
Interest Distribution Amount in respect of the Class A-6 Certificates.
"Class A-6 Pass-Through Rate" with respect to any Distribution Date,
---------------------------
will be equal to a per annum rate of 7.18%.
"Class A-6 Principal Balance" shall mean, as of any time of
---------------------------
determination, the Original Class A-6 Principal Balance less any amounts
distributed with respect to principal thereon on all prior Distribution Dates.
"Class A-6 Principal Distribution Amount" shall mean, with respect to
---------------------------------------
the Class A-6 Certificates for any Distribution Date after the Class A-1
Principal Balance, the Class A-2 Principal Balance, the Class A-3 Principal
Balance, the Class A-4 Principal Balance and the Class A-5 Principal Balance
have been reduced to zero, the lesser of:
(a) the excess of (i) the sum, as of such Distribution Date, of (A) the
Available Funds, plus (B) any Insured Payment over (ii) the Class A-6
----
Interest Distribution Amount; and
(b) the sum, without duplication, of:
(i) the portion of any Class A-6 Carry-Forward Amount which
relates to a shortfall in a distribution of an
Overcollateralization Deficit,
14
<PAGE>
(ii) all scheduled and unscheduled amounts relating to principal
with respect to the Mortgage Loans received by the Servicer
during the prior Collection Period to the extent actually
received by the Trustee,
(iii) the Principal Balance of each Mortgage Loan that either
was repurchased by a Seller or by the Depositor on the related
Servicer Remittance Date to the extent such Principal Balances
are actually received by the Trustee,
(iv) any Substitution Adjustments delivered by the Seller or the
Depositor on the related Servicer Remittance Date in connection
with a substitution of a Mortgage Loan to the extent such
Substitution Adjustments are actually received by the Trustee,
(v) the Net Liquidation Proceeds collected by the Servicer of all
Mortgage Loans during the related Collection Period (to the
extent such Net Liquidation Proceeds are related to principal)
to the extent actually received by the Trustee,
(vi) any amounts released from the Pre-Funding Account as a
prepayment of such Class A-6 Certificates on the Distribution
Date which immediately follows the end of the Funding Period,
(vii) the proceeds received by the Trustee of any termination of
the Trust Fund (to the extent such proceeds are related to
principal),
(viii) the amount of any Overcollateralization Deficit for such
Distribution Date, and
(ix) without duplication of amounts distributed under clause
(viii) above, the amount of any Overcollateralization Increase
Amount for such Distribution Date;
minus
-----
(x) the amount of any Overcollateralization Reduction Amount for
such Distribution Date.
"Class B Accrued Interest" shall mean, with respect to any Distribution
------------------------
Date, (i) the sum of (x) the Class B Accrued Interest immediately prior to such
Distribution Date plus (y) the product of (1) one-twelfth of the Class B Pass-
----
Through Rate and (2) the Class B Principal Balance immediately prior to such
Distribution Date; provided, that if the sum of (x) and (y) would, on any
--------
Distribution Date, exceed $16,750,000.00, then the amount described in clause
(y) shall equal $16,750,000.00 minus the amount described in clause (x),
15
<PAGE>
minus (ii) the aggregate, cumulative amounts previously applied in reduction of
- -----
the Class B Accrued Interest pursuant to Section 6.5(vi)(x) on all prior
Remittance Dates.
"Class B Certificate" shall mean any Certificate denominated as a "Class
-------------------
B Certificate" on the face thereof and subordinate to the Class A Certificates
in right of payment to the extent set forth herein, which Certificates shall be
executed, authenticated and delivered by the Trustee in accordance with the
procedures set forth herein and shall be in the form of Exhibit B-2 hereto and
evidencing an interest designated as a "regular interest" in the Upper-Tier
REMIC for the purposes of the REMIC Provisions.
"Class B Certificateholder" shall mean a Holder of a Class B
-------------------------
Certificate.
"Class B Final Scheduled Distribution Date" shall mean the February 2018
-----------------------------------------
Distribution Date.
"Class B Pass-Through Rate" means, on or prior to the Distribution Date
-------------------------
on which the Class B Accrued Interest equals $16,750,000.00, 99.0%; for each
Distribution Date thereafter, 0%.
"Class B Principal Balance" shall mean, as of any time of determination,
-------------------------
the Original Class B Principal Balance plus the product of (i) the Principal
----
Balance (as of the related Subsequent Cut-Off Date) of each Subsequent Mortgage
Loan acquired by the Trust Fund and (ii) 2.38%, less any amounts distributed
----
with respect to principal thereon on all prior Distribution Dates.
"Class C Certificate" shall mean any of the Certificates denominated as
-------------------
a "Class C Certificate" on the face thereof and subordinate to the Class A
Certificates and the Class B Certificates in the right of payment to the extent
set forth herein, which Certificates shall be executed, authenticated and
delivered by the Trustee in accordance with the procedures set forth herein and
shall be in the form of Exhibit B-3 hereto and evidencing an interest designated
as a "regular interest" in the Upper-Tier REMIC for the purpose of the REMIC
Provisions.
"Class C Certificateholder" shall mean a Holder of a Class C
-------------------------
Certificate.
"Class C Distribution Amount" shall mean, as to the Class C Certificates
---------------------------
for any Distribution Date, the sum of (i) the lesser of (x) the Class C Formula
Distribution Amount and (y) the Available Funds after making the distributions
described in clauses (i) - (vi) of Section 6.5 on such Distribution Date and
(ii) on and after the Class B Final Scheduled Distribution Date, the amount of
the Overcollateralization Reduction Amount for such Distribution Date (such
amount being, on the Class B Final Scheduled Distribution Date, the excess of
the Overcollateralization Reduction Amount for such Distribution Date over the
amount distributed to the Class B Certificateholders on such Class B Final
Scheduled Distribution Date).
16
<PAGE>
"Class C Final Scheduled Distribution Date" shall mean the Distribution
-----------------------------------------
Date in February, 2018.
"Class C Formula Distribution Amount" shall mean, as to the Class C
-----------------------------------
Certificates for any Distribution Date, the product of (x) the Class C Pass-
Through Rate and (y) the Pool Principal Balance as of the beginning of the
immediately preceding Collection Period.
"Class C Pass-Through Rate" shall mean, with respect to any Distribution
-------------------------
Date, the weighted average of the interest rates borne by the LT-1, LT-2, LT-3,
LT-4, LT-5, LT-6 and LT-7 Lower-Tier Interests for the immediately preceding
Remittance Period less two times the weighted average of the interest rates
borne by the LT-8 and LT-9 Lower-Tier Interests for such Remittance Period,
with the rate on the LT-9 Lower-Tier Interests deemed to be zero for purposes
of this calculation.
"Class LT1 Certificates" means the uncertificated class of interests in
----------------------
the Lower-Tier REMIC, as described in and designated in Section 10.1 hereof.
"Class LT2 Certificates" means the uncertificated class of interests in
----------------------
the Lower-Tier REMIC, as described in and designated in Section 10.1 hereof.
"Class LT3 Certificates" means the uncertificated class of interests in
----------------------
the Lower-Tier REMIC, as described in and designated in Section 10.1 hereof.
"Class LT4 Certificates" means the uncertificated class of interests in
----------------------
the Lower-Tier REMIC, as described in and designated in Section 10.1 hereof.
"Class LT5 Certificates" means the uncertificated class of interests in
----------------------
the Lower-Tier REMIC, as described in and designated in Section 10.1 hereof.
"Class LT6 Certificates" means the uncertificated class of interests in
----------------------
the Lower-Tier REMIC, as described in and designated in Section 10.1 hereof.
"Class LT7 Certificates" means the uncertificated class of interests in
----------------------
the Lower-Tier REMIC, as described in and designated in Section 10.1 hereof.
"Class LT8 Certificates" means the uncertificated class of interests in
----------------------
the Lower-Tier REMIC, as described in and designated in Section 10.1 hereof.
"Class LT9 Certificates" means the uncertificated class of interests in
----------------------
the Lower-Tier REMIC, as described in and designated in Section 10.1 hereof.
"Class RL Certificates" shall mean those Certificates executed,
---------------------
authenticated and delivered by the Trustee in the form of Exhibit B-4 hereto,
which represent certain residual rights to distributions from the Lower-Tier
REMIC.
17
<PAGE>
"Class RU Certificates" shall mean those Certificates executed,
---------------------
authenticated and delivered by the Trustee in the form of Exhibit B-5 hereto,
which represent certain residual rights to distributions from the Upper-Tier
REMIC.
"Clean-Up Call Date" shall mean the first date on which the Holder of
------------------
the Residual Certificates can exercise its option set forth in Section 8.1(b).
"Closing Date" shall mean December 17, 1996.
------------
"Code" shall mean the Internal Revenue Code of 1986, as amended.
----
"Collection Account" shall mean the Eligible Account established and
------------------
maintained by the Servicer for the benefit of the Certificateholders and the
Certificate Insurer pursuant to Section 5.3(a) hereof.
"Collection Period" shall mean, with respect to each Distribution Date,
-----------------
the period beginning on the opening of business on the first day of the calendar
month preceding the calendar month in which such Distribution Date occurs, and
ending at the close of business on the last day of the calendar month preceding
the calendar month in which such Distribution Date occurs.
"Combined Loan-to-Value Ratio" shall mean, with respect to any Mortgage
----------------------------
Loan, the sum of (x) any outstanding (as of the date of origination of such
Mortgage Loan) senior mortgage balance plus (y) the original principal balance
of the Mortgage Loan as of the Cut-Off Date, divided by the Appraised Value of
such Mortgaged Property.
"Commission" shall mean the Securities and Exchange Commission.
----------
"Compensating Interest" shall have the meaning defined in Section 6.9
---------------------
hereof.
"Credit Bureau Risk Score" shall mean a statistical ranking of likely
------------------------
future credit performance developed by Fair, Isaac & Company and the three
national credit repositories, Equifax, TransUnion and TRW; such score is
obtained from one of the three national credit repositories previously stated
and is used by the Seller to provide a means of analysis to assist in
underwriting to estimate the probability that a mortgage loan will be paid in
accordance with its terms.
"Curtailment" shall mean, with respect to a Mortgage Loan, any payment
-----------
of principal received during a Collection Period as part of a payment that is in
excess of the amount of the Monthly Payment due for such Collection Period and
which is neither intended to satisfy the Mortgage Loan in full, intended as an
advance payment of an amount due in a subsequent Collection Period, nor intended
to cure a delinquency.
"Cut-Off Date" shall mean the opening of business on December 1, 1996.
------------
18
<PAGE>
"Deleted Mortgage Loan" shall mean a Mortgage Loan replaced by a
---------------------
Qualified Substitute Mortgage Loan.
"Delinquency Interest Advance" shall mean, with respect to any
----------------------------
Delinquent Mortgage Loan and Collection Period, the interest due, but not
collected, with respect to such Mortgage Loan during such Collection Period.
"Delinquent" shall mean a Mortgage Loan is "delinquent" if any payment
----------
due thereon or any portion thereof is not made by the close of business on the
Due Date therefor. A Mortgage Loan is "30 days delinquent" if such payment has
not been received by the close of business on the corresponding day of the month
immediately succeeding the month in which such payment was due, or, if there is
no such corresponding day (e.g., as when a 30-day month follows a 31-day month
in which a payment was due on the 31st day of such month) then on the last day
of such immediately succeeding month. Similarly for "60 days delinquent," "90
days delinquent" and so on.
"Depositor" shall mean CS First Boston Mortgage Securities Corp., a
---------
Delaware corporation, and any successor thereto.
"Depository" shall mean the Depository Trust Company, 7 Hanover Square,
----------
New York, New York 10004 and any successor Depository hereafter named.
"Determination Date" shall mean, with respect to each Distribution Date,
------------------
the 15th day of each calendar month in which such Distribution Date occurs or,
if such 15th day is not a Business Day, the Business Day immediately preceding
such 15th day.
"Direct Participant" shall mean any broker-dealer, bank or other
------------------
financial institution for which the Depository holds Class A Certificates from
time to time as a securities depositary.
"Disqualified Organization" shall mean any of (i) the United States, any
-------------------------
State or political subdivision thereof, any possession of the United States, or
any agency or instrumentality of any of the foregoing (other than an
instrumentality which is a corporation if all of its activities are subject to
tax and, except for the FHLMC, a majority of its board of directors is not
selected by such governmental unit), (ii) any foreign government, any
international organization, or any agency or instrumentality of any of the
foregoing, (iii) any organization (other than certain farmers' cooperatives
described in Section 521 of the Code) which is exempt from the tax imposed by
Chapter 1 of the Code (unless such organization is subject to the tax imposed by
Section 511 of the Code on unrelated business taxable income), or rural electric
and telephone cooperatives described in Section 1381(a)(2)(C) of the Code and
(iv) any other Person so designated by the Trustee based upon an Opinion of
Counsel provided to the Trustee that the holding of an ownership interest in a
Residual Certificate by such Person may cause the Trust Fund or any Person
having an ownership interest in any Class of Certificates (other than such
Person) to incur liability for any federal tax imposed under the Code that would
not otherwise be imposed but for the transfer of an ownership interest in the
Residual Certificate to such Person. The terms "United States",
19
<PAGE>
"State" and "international organization" shall have the meanings set forth in
section 7701 of the Code.
"Distribution Date" shall mean the 25th day of any month or if such 25th
-----------------
day is not a Business Day, the first Business Day immediately following,
commencing on January 27, 1997.
"Due Date" shall mean the day of each calendar month specified in the
--------
related Mortgage Note.
"Eligible Account" shall mean either (A) a segregated account or
----------------
accounts maintained with an institution (which may include the Trustee, provided
such institution otherwise meets these requirements) whose deposits are insured
by the FDIC, the unsecured and uncollateralized long term debt obligations of
which institution shall be rated A or better by S&P and Aa1 or better by Moody's
and in the highest short term rating by each of the Rating Agencies, and which
is (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 laws of
any state, (iii) a national banking association (including the Trustee) 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 and each of the Rating Agencies or (B) a
segregated trust account or accounts maintained with the trust department of a
federal or state chartered depository institution acceptable to each Rating
Agency and the Certificate Insurer (the Trustee shall be deemed acceptable,
provided that the Trustee otherwise meets these requirements), having capital
and surplus of not less than $100,000,000, acting in its fiduciary capacity.
"ERISA" shall have the meaning defined in Section 4.2(i) hereof.
-----
"Event of Default" shall have the meaning described in Section 7.1.
----------------
"Excess Overcollateralization Amount" shall mean, with respect to any
-----------------------------------
Distribution Date, the difference, if any, between (a) the Overcollateralization
Amount that would exist on such Distribution Date after taking into account all
distributions to be made on such Distribution Date (exclusive of any reductions
thereto attributable to Overcollateralization Reduction Amounts on such
Distribution Date) and (b) the Required Overcollateralization Level for such
Distribution Date.
"FDIC" shall mean the Federal Deposit Insurance Corporation and any
----
successor thereto.
"FHLMC" shall mean the Federal Home Loan Mortgage Corporation and any
-----
successor thereto.
"Fiscal Agent shall have the meaning set forth in the Certificate
------------
Insurance Policy.
20
<PAGE>
"FNMA" shall mean the Federal National Mortgage Association and any
----
successor thereto.
"Foreclosure Profits" shall mean, as to any Distribution Date, the
-------------------
excess, if any, of (i) Net Liquidation Proceeds in respect of each Mortgage Loan
that became a Liquidated Loan during the month immediately preceding the month
of such Distribution Date over (ii) the sum of the unpaid Principal Balance of
each such Liquidated Loan plus accrued and unpaid interest at the applicable
Mortgage Interest Rate on the unpaid Principal Balance thereof from the Due Date
to which interest was last paid by the Mortgagor (or, in the case of a
Liquidated Loan that had been an REO Mortgage Loan, from the Due Date to which
interest was last deemed to have been paid pursuant to Section 5.11 to the first
day of the month following the month in which such Mortgage Loan became a
Liquidated Loan).
"Funding Period" shall mean the period beginning on the Closing Date and
--------------
ending on the earlier of the date on which (a) the amount on deposit in the Pre-
Funding Account is less than $50,000.00, (b) the date on which an Event of
Default occurs hereunder or (c) the close of business on March 17, 1997.
"Hazardous Materials" shall mean any dangerous, toxic or hazardous
-------------------
pollutants, chemical wastes or substances, including, without limitation, those
identified pursuant to CERCLA or any other federal, state or local environmental
related laws now existing or hereafter enacted.
"Holder of the Subordinate Certificates" shall mean the person indicated
--------------------------------------
in the Certificate Register as an owner of the Class B Certificates and the
Class C Certificates.
"Indirect Participant" shall mean any financial institution for whom any
--------------------
Direct Participant holds an interest in a Class A Certificate.
"Insurance Proceeds" shall mean proceeds paid by any insurer pursuant to
------------------
any insurance policy covering a Mortgage Loan to the extent such proceeds are
not applied to the restoration of the related Mortgaged Property or released to
the related Mortgagor in accordance with Accepted Servicing Practices or
pursuant to applicable law plus amounts required to be paid by the Servicer
pursuant to Section 5.6. "Insurance Proceeds" do not include "Insured
Payments."
"Insured Distribution Amount" shall mean, with respect to any
---------------------------
Distribution Date, the sum of (a) the Class A Interest Distribution Amount with
respect to such Distribution Date and (b) the Overcollateralization Deficit, if
any, as of such Distribution Date.
"Insured Payment" shall mean, the sum of (i) with respect to any
---------------
Distribution Date, the related Available Funds Shortfall plus (ii) any unpaid
----
Preference Amount.
"Interest Collections" shall mean all amounts (including, without
--------------------
limitation, Monthly Payments (or Delinquency Interest Advances in respect
thereof) and Liquidation Proceeds) collected on any Mortgage Loan allocable to
interest pursuant to the terms of the
21
<PAGE>
related Mortgage Note, or if no provision for allocation is made therein,
pursuant to the terms hereof.
"Late Payment Rate" shall have the meaning assigned thereto in the
-----------------
Certificate Insurance Agreement.
"Liquidated Loan" shall mean a Mortgage Loan as to which the Servicer,
---------------
in its good faith, reasonable business judgment in accordance with Accepted
Servicing Practices, has determined that all amounts which will be recovered
with respect to such Mortgage Loan have been so recovered (exclusive of a
possibility of a deficiency judgment).
"Liquidation Expenses" shall mean expenses incurred by the Servicer in
--------------------
connection with the charge-off or liquidation of any defaulted Mortgage Loan,
REO Mortgage Loan or REO Property (including, without limitation, legal fees and
expenses, committee or referee fees, and, if applicable, brokerage commissions
and conveyance taxes), any unreimbursed amount expended by the Servicer pursuant
to Sections 5.5, 5.6 and 5.11 respecting the related Mortgage Loan and any
unreimbursed expenditures for real property taxes or for property restoration or
preservation of the related Mortgaged Property. Liquidation Expenses shall not
include any previously incurred expenses in respect of an REO Mortgage Loan
which have been netted against related REO Proceeds.
"Liquidation Proceeds" shall mean amounts, if any, received by the
--------------------
Servicer (including Insurance Proceeds) in connection with the liquidation of
Liquidated Loans or property acquired in respect thereof, whether through
foreclosure, sale or otherwise, including payments in connection with such
Mortgage Loans received from the Mortgagor, other than amounts required to be
paid to the Mortgagor pursuant to the terms of the applicable Mortgage or to be
applied otherwise pursuant to law and other than any Loan Repurchase Price
deposited into the Certificate Account pursuant to the last paragraph of Section
5.11(a).
"Loan Repurchase Price" shall have the meaning defined in Section
---------------------
2.4(b).
"Lower Tier Distribution Amount" means, as of any Distribution Date, a
------------------------------
sum equal to the Available Funds.
"Lower-Tier Interests"" means the uncertificated classes of interests in
---------------------
the Lower-Tier REMIC, as described and designated in Section 10.1(c) hereof.
"Lower Tier Required Subordinated Amount" means, with respect to any
---------------------------------------
Distribution Date, an amount equal to the product of (a) the product of (i) 0.50
and (ii) the sum of the principal balances of LT-8 and LT-9 divided by the Pool
Principal Balance then outstanding and (b) the product of (i) the target
percentage and (ii) the pool principal balance.
"Lower Tier Subordinated Amount" means, as of any date of determination,
------------------------------
(i) 0.50 times the sum of the principal balances of LT-8 and LT-9 minus (ii) the
principal balance of LT-8, and of such date of determination.
22
<PAGE>
"Lower-Tier REMIC" means the segregated pool of assets held by the Trust
----------------
Fund consisting of the Mortgage Loans, the Collection Account, the Certificate
Insurance Policy and the Certificate Account.
"Majority Certificateholders" shall mean the Holder or Holders of Class
---------------------------
A Certificates evidencing a Percentage Interest in excess of 50% in the
aggregate; once the Class A Certificates have been paid in full, then the Holder
or Holders of Class C Certificates evidencing a Percentage Interest in excess of
50% in the aggregate.
"Maturity Date" shall mean the latest possible maturity date as defined
-------------
in Section 1.860G-1(a)(4)(iii) of the Treasury regulations, by which the
Certificates representing a regular interest in the REMIC of the Trust Fund
would be reduced to zero as determined under a hypothetical scenario that
assumes, among other things, that (a) scheduled interest and principal payments
on the Mortgage Loans are received in a timely manner, with no delinquencies or
losses, (b) there are no principal prepayments on the Mortgage Loans, (c) the
Depositor and the Seller will not repurchase any Mortgage Loan and neither the
Seller, the Servicer nor the Certificate Insurer will exercise its option to
purchase the Mortgage Loans and thereby cause a termination of the REMIC of the
Trust Fund, and (d) the Mortgage Loans generally have an original term to
maturity of 240 months and, on a latest maturing loan basis, a remaining term to
maturity of 240 months.
"Maximum Collateral Amount" shall mean an amount equal to the sum of (i)
-------------------------
the Original Pool Principal Balance and (ii) the Principal Balance (as of the
related Subsequent Cut-Off Date) of each Subsequent Mortgage Loan acquired by
the Trust Fund.
"Maximum LT-9 Interest Deferral Amount" means, with respect to any
-------------------------------------
Distribution Date, the excess of (i) accrued interest at the stated interest
rate applicable to LT-9 for such Distribution Date on a balance equal to the
principal balance of LT-9 minus the Lower tier Subordinated Amount, in each case
for such Distribution date over (ii) interest on LT-8 and LT-9 for such
Distribution Date.
"Monthly Payment" shall mean, as to any Mortgage Loan (including any REO
---------------
Mortgage Loan) and any Due Date, the scheduled payment of principal and interest
due thereon by such Due Date (after adjustment for any Curtailments and
Deficient Valuations occurring prior to such Due Date but before any adjustment
to such amortization schedule by reason of any bankruptcy, other than Deficient
Valuations or similar proceeding or any moratorium or similar waiver or grace
period). With respect to any Monthly Payment made by or on behalf of a
Mortgagor and received by the Servicer, 100% of the principal payment portion of
such Monthly Payment shall be applied to the outstanding Principal Balance until
such Principal Balance shall be reduced to zero; the interest payment portion of
such Monthly Payment shall be appropriately allocated to the balance of such
Mortgage Loan as provided for herein.
23
<PAGE>
"Moody's" shall mean Moody's Investors Service, Inc., a corporation
-------
organized and existing under Delaware law, or any successor thereto and if such
corporation no longer for any reason performs the services of a securities
rating agency, "Moody's" shall be deemed to refer to any other nationally
recognized rating agency designated by the Certificate Insurer.
"Mortgage" shall mean the mortgage, deed of trust or other instrument
--------
creating a first, second or third lien on the Mortgaged Property.
"Mortgage File" shall include the Mortgage Loan documents described in
-------------
Section 2.3 hereof.
"Mortgage Interest Rate" shall mean, as to any Mortgage Loan, the per
----------------------
annum rate at which interest accrues on the unpaid principal balance thereof.
"Mortgage Loan" shall mean (i) each closed-end home equity loan
-------------
identified on the Mortgage Loan Schedule on the Closing Date, (ii) any
additional such closed-end home equity loans identified on the Mortgage Loan
Schedule after the Closing Date, as such schedule is amended and supplemented
from time to time to reflect the substitution of Qualified Substitute Mortgage
Loans for loans deleted from the Trust Fund, (iii) from and after the date a
mortgage loan becomes a Subsequent Mortgage Loan in accordance with Section 6.11
hereof, each Subsequent Mortgage Loan and (iv) the related Mortgage. Unless
otherwise clearly indicated by the context, Mortgage Loan shall be deemed to
refer to the related REO Mortgage Loan and REO Property.
"Mortgage Loan Interest Shortfall" shall mean, with respect to any
--------------------------------
Distribution Date, as to any Mortgage Loan, any Prepayment Interest Shortfall
for which no payment of Compensating Interest is paid.
"Mortgage Loan Schedule" shall mean the list of the Mortgage Loans
----------------------
transferred to the Trustee on the Closing Date as part of the Trust Fund and
attached hereto as Exhibit C (and also provided to the Trustee and the
Certificate Insurer on a computer readable magnetic tape or disk) and any
Subsequent Mortgage Loans transferred to the Trustee pursuant to any Subsequent
Transfer Instrument as provided in Section 6.11 and attached to such Subsequent
Transfer Instrument as an Exhibit (and also provided to the Trustee and the
Certificate Insurer on a computer readable magnetic tape or disk). The Mortgage
Loan Schedule shall set forth at a minimum the following information as to each
Mortgage Loan:
(i) the Mortgage Loan identifying number;
(ii) the Mortgagor's name;
(iii) the original Principal Balance of the Mortgage Loan;
(iv) the Due Date;
24
<PAGE>
(v) the date of the first Monthly Payment;
(vi) the origination date;
(vii) the Principal Balance of the Mortgage Loan as of the Cut-
Off Date or with respect to Subsequent Mortgage Loans, the
Subsequent Cut-Off Date;
(viii) the city, state and zip code of the Mortgaged Property;
(ix) the type of Mortgaged Property;
(x) the current Monthly Payment as of the Cut-Off Date (and
with respect to any Subsequent Mortgage Loan, the current
Monthly Payment as of the Subsequent Cut-Off Date
applicable thereto);
(xi) the original number of months to maturity;
(xii) the scheduled maturity date;
(xiii) the Principal Balance of such Mortgage Loan as of the Cut-
Off Date (or, with respect to any Qualified Substituted
Mortgage Loans, the revised Principal Balance as of the
date of such substitution);
(xiv) as of the Cut-Off Date, Substitution Date or Subsequent
Cut-Off Date, as applicable, the remaining number of
months to stated maturity;
(xv) the Subordinate Mortgage Ratio at origination and the
Combined Loan-to-Value Ratio as of the Cut-Off Date;
(xvi) the Mortgage Interest Rate at origination;
(xvii) the Mortgage Interest Rate as of the Cut-Off Date, or,
with respect to Subsequent Mortgage Loans, the Subsequent
Cut-Off Date applicable thereto (the "Current Mortgage
Interest Rate");
(xviii) the Appraised Value;
(xix) the occupancy status; and
(xx) the lien priority of each Mortgage Loan.
Such "Mortgage Loan Schedule" may consist of multiple reports that collectively
set forth all of the information required, including the aggregate number of
Mortgage Loans and the aggregate Principal Balance as of the Cut-Off Date. In
addition, a summary of the
25
<PAGE>
information regarding the Mortgage Loans shall be included as a part of the
Mortgage Loan Schedule which summary shall include such consolidated and
aggregated information as may be requested by the Trustee and the Certificate
Insurer from time to time.
"Mortgage Note" shall mean the original, executed note or other evidence
-------------
of indebtedness evidencing the indebtedness of a Mortgagor under a Mortgage
Loan.
"Mortgaged Property" shall mean the underlying property securing a
------------------
Mortgage Loan, consisting of a fee simple estate in a single parcel of land
improved by a Residential Dwelling.
"Mortgaged Property State" shall mean any state in which any Mortgaged
------------------------
Property is located.
"Mortgagor" shall mean the obligor on a Mortgage Note.
---------
"Net Foreclosure Profits" shall mean, as to any Distribution Date, the
-----------------------
excess, if any, of (i) the aggregate Foreclosure Profits with respect to such
Distribution Date over (ii) the aggregate Realized Losses with respect to such
Distribution Date.
"Net Liquidation Proceeds" shall mean, as to any Liquidated Loan,
------------------------
Liquidation Proceeds net of Liquidation Expenses and net of any unreimbursed
Delinquency Interest Advances or Servicing Advances made by the Servicer with
respect to the related Mortgage Loan. For all purposes of this Agreement, Net
Liquidation Proceeds shall be allocated first to accrued and unpaid interest on
the related Mortgage Loan and then to the unpaid principal balance thereof.
"Net Monthly Excess Cashflow" shall mean, as of any Distribution Date,
---------------------------
an amount equal to (x) the Available Funds minus (y) the sum of (i) sum of the
Class A Interest Distribution Amount and the amount described in clause (b) of
the definition of the related Class A Principal Distribution Amount (calculated
for this purpose without regard to any Overcollateralization Increase Amount or
portion thereof included therein); and (ii) the Reimbursement Amount, if any,
for such Distribution Date.
"Net Mortgage Interest Rate" shall mean, with respect to each Mortgage
--------------------------
Loan at any time of determination, a rate equal to (i) the Mortgage Interest
Rate on such Mortgage Loan minus (ii) the sum of the per annum rates used to
determine the Servicing Fee and Trustee Fee and the Premium Percentage. Any
regular monthly computation of interest at such rate shall be based upon annual
interest at such rate on the applicable amount divided by twelve.
"Net REO Proceeds" shall mean, as to any REO Mortgage Loan, REO Proceeds
----------------
net of any related expenses of the Servicer.
"Nonrecoverable Advance" shall mean, with respect to any Mortgage Loan,
----------------------
(a) any Delinquency Interest Advance or Servicing Advance previously made and
not
26
<PAGE>
reimbursed from late collections pursuant to Section 5.4(b), or (b) a
Delinquency Interest Advance or Servicing Advance proposed to be made in respect
of a Mortgage Loan or REO Property either of which, in the good faith business
judgment of the Servicer, as evidenced by an Officer's Certificate delivered to
the Certificate Insurer and the Trustee, would not be ultimately recoverable
pursuant to Section 5.4.
"Officer's Certificate" shall mean a certificate signed by the Chairman
---------------------
of the Board, the President or a Vice President and the Treasurer, the Secretary
or one of the Assistant Treasurers or Assistant Secretaries of the Seller and/or
the Servicer, or the Depositor, as required by this Agreement.
"Opinion of Counsel" shall mean a written opinion of counsel, who may,
------------------
without limitation, be counsel for the Seller, the Servicer, the Trustee, a
Certificateholder or a Certificateholder's prospective transferee or the
Certificate Insurer (including except as otherwise provided herein, in-house
counsel) reasonably acceptable to each addressee of such opinion and experienced
in matters relating to the subject of such opinion; except that any opinion of
counsel relating to (a) the qualification of the Trust Fund as a REMIC or (b)
compliance with the REMIC Provisions must be an opinion of counsel who (i) is in
fact independent of the Depositor, the Seller, the Servicer and the Trustee,
(ii) does not have any direct financial interest or any material indirect
financial interest in the Depositor, the Seller, the Servicer or the Trustee or
any Affiliate thereof, (iii) is not connected with the Depositor or the Seller
or the Servicer or the Trustee as an officer, employee, director or person
performing similar functions and (iv) is reasonably acceptable to the
Certificate Insurer. The Certificate Insurer shall be an addressee on each
Opinion of Counsel relating to, or otherwise affecting, the Trust Fund and the
Class A Certificates.
"Original Class A Principal Balance" shall mean, the respective original
----------------------------------
class principal balance of each of the Class A Certificates.
"Original Class A-1 Principal Balance" shall mean, as of the Startup
------------------------------------
Date and as to the Class A-1 Certificates, $80,200,000.
"Original Class A-2 Principal Balance" shall mean, as of the Startup
------------------------------------
Date and as to the Class A-2 Certificates, $29,800,000.
"Original Class A-3 Principal Balance" shall mean, as of the Startup
------------------------------------
Date and as to the Class A-3 Certificates, $43,700,000.
"Original Class A-4 Principal Balance" shall mean, as of the Startup
------------------------------------
Date and as to the Class A-4 Certificates, $59,800,000.
"Original Class A-5 Principal Balance" shall mean, as of the Startup
------------------------------------
Date and as to the Class A-5 Certificates, $16,300,000.
"Original Class A-6 Principal Balance" shall mean, as of the Startup
------------------------------------
Date and as to the Class A-6 Certificates, $50,200,000.
27
<PAGE>
"Original Class B Principal Balance" shall mean, as of the Startup Date
----------------------------------
and as to the Class B Certificates, $5,118,860.19.
"Original Pool Principal Balance" shall mean the Pool Principal Balance
-------------------------------
as of the Cut-off Date, which amount is equal to $215,246,226.63.
"Original Pre-Funded Amount" shall mean $69,876,633.56
--------------------------
"Outstanding Mortgage Loan" shall mean, as to any Due Date, a Mortgage
-------------------------
Loan (including an REO Mortgage Loan) which has not been prepaid in full prior
to such Due Date, which did not become a Charged-off Loan prior to such Due Date
and which was not repurchased by the Seller prior to such Due Date pursuant to
Section 2.4 and which is not a Deleted Mortgage Loan.
"Overcollateralization Amount" shall mean, as of any Distribution Date,
----------------------------
the amount, if any, by which (a) the Pool Principal Balance plus the Pre-Funded
----
Amount (exclusive of any investment earning thereon) as of the close of business
on the last day of the related Collection Period exceeds (b) the aggregate Class
A Principal Balance as of such Distribution Date (after taking into account the
payment of the aggregate Class A Principal Distribution Amount on such
Distribution Date, but without regard to any portion thereof funded by the
proceeds of an Insured Payment); provided, however, that such amount shall not
-------- -------
be less than zero.
"Overcollateralization Deficiency Amount" shall mean, with respect to
---------------------------------------
any Distribution Date, the amount, if any, by which (a) the Required
Overcollateralization Level applicable to such Distribution Date exceeds (b) the
Overcollateralization Amount applicable to such Distribution Date prior to
taking into account the payment of any related Overcollateralization Increase
Amounts on such Distribution Date.
"Overcollateralization Deficit" shall mean, as of any Distribution Date,
-----------------------------
the amount, if any, by which (a) the aggregate Class A Principal Balance of each
Class of Class A Certificates (after taking into account the payment of the
related Class A Principal Distribution Amount (other than payments in respect
thereof under the Certificate Insurance Policy) on such date) exceeds (b) the
Pool Principal Balance plus the Pre-Funded Amount, each determined as of the end
of the immediately preceding Collection Period.
"Overcollateralization Increase Amount" shall mean, with respect to any
-------------------------------------
Distribution Date, the lesser of (a) the Overcollateralization Deficiency Amount
as of such Distribution Date (after taking into account the payment of the
related Class A Principal Distribution Amount on such Distribution Date (other
than clause (viii) thereof) and (b) the amount of Net Monthly Excess Cashflow on
such Distribution Date.
"Overcollateralization Reduction Amount" shall mean, with respect to any
--------------------------------------
Distribution Date, an amount equal to the lesser of (a) the Excess
Overcollateralization Amount for such Distribution Date and (b) the Principal
Remittance Amount for the prior Collection Period.
28
<PAGE>
"Ownership Interest" shall mean, as to any Certificate, any ownership or
------------------
security interest in such Certificate, including any interest in such
Certificate as the Holder thereof and any other interest therein, whether direct
or indirect, legal or beneficial, as owner or as pledgee.
"Owner-Occupied Mortgaged Property" shall mean a Residential Dwelling as
---------------------------------
to which (a) the related Mortgagor represented an intent to occupy as such
Mortgagor's primary residence at the origination of the Mortgage Loan, and (b)
the Seller has no actual knowledge that such Residential Dwelling is not so
occupied.
"Percentage Interest" shall mean, with respect to a Class A Certificate,
-------------------
the portion evidenced by such Certificate, expressed as a percentage rounded to
four decimal places, equal to a fraction the numerator of which is the original
denomination of such Certificate and the denominator of which is the related
Original Class A Principal Balance, and with respect to a Class B, Class C-1,
Class C-2, Class RL or RU Certificate, the portion evidenced thereby as stated
on the face of such Certificate.
"Permitted Investments" shall mean, as used herein, Permitted
---------------------
Investments shall include the following:
(a) direct general obligations of, or obligations fully and
unconditionally guaranteed as to the timely payment of principal and
interest by, the United States or any agency or instrumentality thereof,
provided such obligations are backed by the full faith and credit of the
United States and any obligation of, or guaranties by, FHLMC or FNMA (other
than senior debt obligations and mortgage pass-through certificates
guaranteed by FHLMC or FNMA) shall be a Permitted Investment; provided,
--------
that at the time of such investment, such investment is acceptable to the
Certificate Insurer, but excluding any of such securities whose terms do
not provide for payment of a fixed dollar amount upon maturity or call for
redemption;
(b) federal funds and certificates of deposit, time and demand deposits
and banker's acceptances issued by any bank or trust company incorporated
under the laws of the United States or any state thereof and subject to
supervision and examination by federal or state banking authorities,
provided that at the time of such investment or contractual commitment
providing for such investment the short-term debt obligations of such bank
or trust company at the date of acquisition thereof have been rated A-1 +
by S&P and P-1 by Moody's;
(c) commercial paper (having original maturities of not more than 180
days) rated A-1 + by S&P and P-1 by Moody's;
(d) investments in money market funds rated "AAAm" or "AAAm-G" by S&P
and Aaa by Moody's; and
(e) investments approved by the Rating Agencies and the Certificate
Insurer in writing delivered to the Trustee;
29
<PAGE>
provided, that each such Permitted Investment shall be a "permitted investment"
- --------
within the meaning of Section 860G(a)(5) of the Code and that no instrument
described hereunder shall evidence either the right to receive (x) only interest
with respect to the obligations underlying such instrument or (y) 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
-------- -------
hereunder may be purchased at a price greater than par if such instrument may be
prepaid or called at a price less than its purchase price prior to stated
maturity.
"Permitted Transferee" shall mean any Person other than a Non-United
--------------------
States Person or Disqualified Organization.
"Person" shall mean any individual, corporation, partnership, joint
------
venture, association, joint-stock company, limited liability company, trust,
national banking association, unincorporated organization or government or any
agency or political subdivision thereof.
"Plan" shall have the meaning defined in Section 4.2(i).
----
"Pool Cumulative Realized Losses" shall mean, with respect to any
-------------------------------
period, the sum of all Realized Losses with respect to the Mortgage Loans
experienced during such period.
"Pool Default Rate" shall mean with respect to any Collection Period,
-----------------
the fraction, expressed as a percentage, equal to (x) twelve times the aggregate
Principal Balances of all Mortgage Loans that became Charged-off Loans
(including all foreclosures and REO Properties) as of the close of business on
the last day of such Collection Period over (y) the Pool Principal Balance as of
the close of business on the last day of such Collection Period.
"Pool Delinquency Rate" shall mean with respect to any Collection
---------------------
Period, the fraction, expressed as a percentage, equal to (x) the aggregate
Principal Balances of all Mortgage Loans 60 or more days Delinquent (including
all foreclosures and REO Properties) as of the close of business on the last day
of such Collection Period over (y) the Pool Principal Balance as of the close of
business on the last day of such Collection Period.
"Pool Principal Balance" shall mean the sum of the aggregate Principal
----------------------
Balances of the Outstanding Mortgage Loans in the Trust Fund as of any date of
determination.
"Pool Rolling Three Month Delinquency Rate" shall mean as of any
-----------------------------------------
Distribution Date, the fraction, expressed as a percentage, equal to the average
of the Pool Delinquency Rates for each of the three (or one or two, in the case
of the first and second Distribution Dates) immediately preceding Collection
Periods.
"Preference Amount" shall mean any amount previously distributed to a
-----------------
Class A Certificateholder that is recoverable and sought to be recovered as a
voidable preference
30
<PAGE>
by a trustee in bankruptcy pursuant to the U.S. Bankruptcy Code as amended from
time to time, in accordance with a final nonappealable order of a court having
competent jurisdiction.
"Preference Claim" shall have the meaning defined in Section 6.4(f).
----------------
"Pre-Funding Account" shall mean the Eligible Account established and
-------------------
maintained pursuant to Section 6.11 as defined therein.
"Pre-Funded Amount" shall mean, with respect to any Determination Date,
-----------------
the amount on deposit in the Pre-Funding Account.
"Premium Percentage" shall have the meaning assigned thereto in the
------------------
Certificate Insurance Agreement.
"Prepayment Assumption" shall mean (used solely for determining the
---------------------
accrual of original issue discount and market discount on the Certificates for
federal income tax purposes) a prepayment rate of 4% per annum of the then
outstanding principal balance of the Mortgage Loans in the first month in the
life of the mortgage loans and an additional 1.0% per annum in each month
thereafter until the twelfth month. In the twelfth month and thereafter, the
Prepayment Assumption shall mean a prepayment rate of 15% per annum each month.
"Prepayment Interest Shortfall" shall mean, with respect to any
-----------------------------
Distribution Date, for each Mortgage Loan that was the subject during the
related Collection Period of a Principal Prepayment, an amount equal to the
excess, if any, of (a) 30 days' interest on the Principal Balance of such
Mortgage Loan at a per annum rate equal to the Mortgage Interest Rate, minus the
-----
rate at which the Servicing Fee is calculated over (b) the amount of interest
----
actually remitted by the Mortgagor in connection with such Principal Prepayment
less the Servicing Fee for such Mortgage Loan in such month.
- ----
"Principal Balance" shall mean, as to any Mortgage Loan and Distribution
-----------------
Date, initially the outstanding principal balance of such Mortgage Loan as of
the Cut-Off Date or the related Subsequent Cut-Off Date, as applicable, and
thereafter, as of any Distribution Date such balance as of the last day of the
Collection Period related to such Distribution Date after giving effect to
Principal Prepayments received and payments of principal collected during such
Collection Period and any Curtailments applied by the Servicer in reduction of
the unpaid principal balance of such Mortgage Loan as of such Due Date; once a
Mortgage Loan becomes a Charged-off Loan, its Principal Balance, for purposes of
the Trust Fund, will thereafter be considered to be zero.
"Principal Prepayment" shall mean any payment or other recovery of
--------------------
principal on a Mortgage Loan equal to the outstanding principal balance thereof,
received in advance of the final scheduled Due Date which is not intended as an
advance payment of a scheduled Monthly Payment.
"Principal Remittance Amount" shall mean, as of any Distribution Date,
---------------------------
the sum, without duplication of the amounts specified in clauses (b)(ii) through
(v) and (vii) of the definition of Class A Principal Distribution Amount for
such Distribution Date.
31
<PAGE>
"Qualified Mortgage" shall have the meaning set forth from time to time
------------------
in the definition of "Qualified Mortgage" at Section 860G(a)(3) of the Code (or
any successor statute thereto).
"Qualified Substitute Mortgage Loan" shall mean a mortgage loan or
----------------------------------
mortgage loans which on the date of substitution (a) has or have a mortgage
interest rate or rates of not less than (and not more than two percentage points
more than) the Mortgage Interest Rate for the Deleted Mortgage Loan for which it
is to be substituted, (b) relates or relate to a detached one-family residence
or to the same type of Residential Dwelling as the Deleted Mortgage Loan for
which it is to be substituted and in each case has or have the same or a better
lien priority as the Deleted Mortgage Loan for which it is to be substituted and
has or have the same occupancy status or is an Owner-Occupied Mortgaged
Property, (c) matures or mature no later than (and not more than one year
earlier than) the Deleted Mortgage Loan for which it is to be substituted, (d)
has or have a Subordinate Mortgage Ratio or Combined Loan-to-Value Ratios at the
time of such substitution no higher than the Subordinate Mortgage Ratio or the
Combined Loan-to-Value Ratio of the Deleted Mortgage Loan for which it is to be
substituted, (e) has or have a principal balance or principal balances (after
deduction of all payments received on or prior to the date of substitution) not
substantially less and not more than the Principal Balance of the Deleted
Mortgage Loan for which it is to be substituted as of such date, (f) satisfies
or satisfy the criteria set forth from time to time in the definition of
"qualified replacement mortgage" at Section 860G(a)(4) of the Code (or any
successor statute thereto), (g) has or have an applicable borrower or borrowers
with the same or better traditionally ranked credit status as the borrower or
borrowers under the Deleted Mortgage Loan for which it is to be substituted, and
(h) complies or comply as of the date of substitution with each representation
and warranty set forth in Section 3.3 herein.
"Rating Agency" shall mean S&P or Moody's.
-------------
"Realized Loss" shall mean, with respect to each Mortgage Loan which
-------------
became a Charged-off Loan, the excess, if any, of (i) the Principal Balance of
such Mortgage Loan as of the date of charge-off and accrued interest thereon
over (ii) Net Liquidation Proceeds, if any, realized thereon and allocated to
principal and accrued interest.
"Record Date" shall mean, with respect to any Distribution Date, the
-----------
close of business on the last Business Day of the calendar month immediately
preceding the month in which such Distribution Date occurs. The Record Date for
the first Distribution Date shall be the Closing Date.
"Reimbursement Amount" shall mean, as of any Distribution Date, the sum
--------------------
of (i) all Insured Payments (as defined in the Certificate Insurance Policy)
previously paid by the Certificate Insurer and in each case not previously
repaid to the Certificate Insurer pursuant to Section 6.5(iii) hereof; plus (ii)
interest accrued on each such Insured Payment not previously repaid calculated
at the rate specified in the Certificate Insurance Agreement from the date such
Insured Payment was made and (b)(i) any amounts then due and owing to the
Certificate Insurer under the Certificate Insurance Agreement, as certified to
the Trustee by the Certificate Insurer plus (ii) interest on such amounts at the
rate specified in
32
<PAGE>
the Certificate Insurance Agreement. The Certificate Insurer shall notify the
Trustee and the Depositor of the amount of any Reimbursement Amount.
"Released Mortgaged Property Proceeds" shall mean, as to any Mortgage
------------------------------------
Loan, proceeds received by the Servicer in connection with (a) a taking of an
entire Mortgaged Property by exercise of the power of eminent domain or
condemnation or (b) any release of part of the Mortgaged Property from the lien
of the related Mortgage, whether by partial condemnation, sale or otherwise;
which are not released to the Mortgagor in accordance with applicable law,
Accepted Servicing Practices and this Agreement.
"REMIC" shall mean a "real estate mortgage investment conduit" within
-----
the meaning of Section 860D of the Code.
"REMIC Administrator" shall mean initially Bankers Trust Company, its
-------------------
successor or assigns, provided, that each REMIC Administrator shall be
reasonably acceptable to the Certificate Insurer.
"REMIC Provisions" shall mean provisions of the federal income tax law
----------------
relating to real estate mortgage investment conduits, which appear at Sections
860A through 860G of Subchapter M of Chapter I of the Code, and related
provisions, and temporary and final regulations promulgated thereunder and
published rulings, notices and announcements, as the foregoing may be in effect
from time to time.
"REO Disposition" shall mean the final sale by the Servicer of a
---------------
Mortgaged Property acquired by the Servicer in foreclosure or by deed in lieu of
foreclosure.
"REO Mortgage Loan" shall mean any Mortgage Loan which is not a
-----------------
Liquidated Loan and as to which the indebtedness evidenced by the related
Mortgage Note is discharged and the related Mortgaged Property is held as part
of the Trust Fund.
"REO Proceeds" shall mean proceeds received in respect of any REO
------------
Mortgage Loan (including, without limitation, proceeds from the rental of the
related Mortgaged Property).
"REO Property" shall have the meaning described in Section 5.11.
------------
"Representation Letter" shall mean letters to, or agreements with, the
---------------------
Depository to effectuate a book entry system with respect to the Class A
Certificates registered in the Certificate Register under the nominee name of
the Depository.
"Request for Release" shall mean a request for release in substantially
-------------------
the form attached as Exhibit G hereto.
"Required Overcollateralization Level" shall mean, for each Distribution
------------------------------------
Date, the amount determined as follows:
33
<PAGE>
(a) for any Distribution Date occurring during the period commencing on
the Closing Date and ending on the later of (x) the date upon which
principal payments on the Mortgage Loans equal to one-half of the sum of
(1) the Original Pool Principal Balance plus (2) the aggregate Principal
----
Balances (as of the related Subsequent Cut-Off Dates) of all Subsequent
Mortgage Loans acquired by the Trust Fund have been received by the Class A
Certificateholders and (y) the thirtieth Distribution Date following the
Closing Date, the greater of the following:
(i) the product of (x) $280,000,000 and (y) the Target Percentage
applicable to such Distribution Date; and
(ii) two times an amount equal to (x) the aggregate Principal
Balances of all Mortgage Loans which are 91 or more days Delinquent
(including REO Properties) minus (y) five times the Net Monthly Excess
Cashflow for such Distribution Date; and
(b) for any Distribution Date occurring after the end of the period in
clause (a) above, the greatest of the following:
(i) the lesser of (A) the product of (x) $280,000,000 and (y) the
Target Percentage applicable to such Distribution Date and (B) the
product of (i) the Class A Principal Balance immediately preceding such
Distribution Date and (ii) two times the Target Percentage applicable to
such Distribution Date;
(ii) two times the difference of (A) the aggregate Principal
Balances of all Mortgage Loans which are 91 or more days Delinquent
(including REO Properties) and (B) five times the Net Monthly Excess
Cashflow for such Distribution Date; and
(iii) an amount equal to 0.50% of the sum of (1) the Original Pool
Principal Balance plus (2) the aggregate Principal Balances (as of the
----
related Subsequent Cut-Off Dates) of all Subsequent Mortgage Loans
acquired by the Trust Fund.
Notwithstanding anything to the contrary set forth in clauses (a) or (b)
above, on or after any Distribution Date on which an Insured Payment is made, or
any Distribution Date on which an Event of Default has occurred and is
continuing, the Required Overcollateralization Level shall be equal to the
Required Overcollateralization Level as of the Distribution Date immediately
prior to the Distribution Date on which either such event occurred.
"Residential Dwelling" shall mean a one -to four-family dwelling, a unit
--------------------
in a planned unit development, a unit in a condominium development or a
townhouse.
"Residual Certificate" means any Class RL Certificate or any Class RU
--------------------
Certificate.
34
<PAGE>
"Residual Certificateholder" means the person in whose name a Residual
--------------------------
Certificate is registered on the Certificate Register.
"Responsible Officer" shall mean, when used with respect to the Trustee,
-------------------
any officer assigned to the Corporate Trust Department (or any successor
thereto), including any Vice President, Assistant Vice President, Senior Trust
Officer, Trust Officer, Assistant Trust Officer, any Assistant Secretary, 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
to whom, with respect to a particular matter, such matter is referred because of
such officer's knowledge of and familiarity with the particular subject. When
used with respect to the Seller or the Servicer, the President or any Vice
President, Assistant Vice President, or any Secretary or Assistant Secretary.
"S&P" shall mean Standard & Poor's Ratings Services, a division of
---
McGraw Hill, Inc., or any successor thereto and if such corporation no longer
for any reason performs the services of a securities rating agency, "S&P" shall
be deemed to refer to any other nationally recognized statistical rating
organization designated by the Certificate Insurer.
"Sale and Purchase Agreement" shall mean that certain Sale and Purchase
---------------------------
Agreement dated December 17, 1996 between the Seller and the Depositor.
"Seller" shall mean T.A.R. Preferred Mortgage Corporation, a California
------
corporation.
"Servicer" shall mean Advanta Mortgage Corp. USA, a Delaware
--------
corporation, or any successor appointed as herein provided.
"Servicer Account" shall mean the Eligible Account created and
----------------
maintained pursuant to Section 5.7.
"Servicer Employees" shall have the meaning as defined in Section 5.8
------------------
hereof.
"Servicer Remittance Amount" shall mean, with respect to any Servicer
--------------------------
Remittance Date, an amount equal to the sum of (i) all scheduled and unscheduled
collections of principal on the Mortgage Loans (including Principal Prepayments,
Curtailments, Net REO Proceeds and Net Liquidation Proceeds, if any, and any
amounts deposited in the Collection Account in connection with a complete plan
of liquidation of the assets of the Trust or termination of the Trust) collected
by the Servicer during the Collection Period and all interest due during such
Collection Period and received by the Servicer on or prior to the related
Determination Date, plus (ii) all Delinquency Interest Advances made by the
----
Servicer with respect to interest payments due to be received on the Mortgage
Loans during the related Collection Period plus (iii) the amount of Compensating
----
Interest due with respect to the related Collection Period, plus (iv) any other
amounts required to be deposited in the Collection Account pursuant to this
Agreement, but excluding, without duplication, the following:
35
<PAGE>
(a) amounts received on particular Mortgage Loans as late payments of
principal or interest and respecting which the Servicer has previously made
an unreimbursed Delinquency Interest Advance or Servicing Advance;
(b) the portion of Liquidation Proceeds used to reimburse any
unreimbursed Delinquency Interest Advances or Servicing Advances by the
Servicer;
(c) the Servicing Fee;
(d) that portion of Liquidation Proceeds and REO Proceeds which
represents any unpaid Servicing Fee;
(e) all income from Permitted Investments that is held in the Collection
Account for the account of the Servicer;
(f) all amounts in respect of late fees, assumption fees, prepayment
fees and similar fees;
(g) all other amounts which are explicitly reimbursable to the Servicer
hereunder, including (i) as provided in Section 5.4 hereof; and (ii) any
unreimbursed and accrued Liquidation Expenses; and
(h) the portion of Net Foreclosure Profits representing any unpaid
Servicing Fee.
"Servicer Remittance Date" shall mean, with respect to any Distribution
------------------------
Date, the 18th day of the month in which such Distribution Date occurs, or if
such day is not a Business Day, the first Business Day preceding such 18th day.
"Servicer Trigger Event" has the meaning set forth in Section 7.1(c)
----------------------
hereof.
"Servicing Advances" shall mean all reasonable and customary "out-of-
------------------
pocket" costs and expenses incurred in the performance by the Servicer of its
servicing obligations, including, but not limited to, the cost of (a) the
preservation, restoration and protection of the Mortgaged Property, (b) any
enforcement proceedings, including foreclosures, (c) expenditures relating to
the purchase or maintenance of a first lien not included in the Trust Fund on
the Mortgaged Property, (d) the management and liquidation of the REO Property,
including reasonable fees paid to any independent contractor in connection
therewith, (e) compliance with the obligations under Sections 5.5, 5.9 or 5.11,
all of which reasonable and customary out-of-pocket costs and expenses are
reimbursable to the Servicer to the extent provided in Section 5.4(a) and (b)
and 5.11.
"Servicing Compensation" shall mean the Servicing Fee and other amounts
----------------------
to which the Servicer is entitled pursuant to Section 5.13.
36
<PAGE>
"Servicing Fee" shall mean, as to each Distribution Date, the annual fee
-------------
payable to the Servicer, which is calculated as an amount equal to the product
of (a) 0.65% per annum and (b) the aggregate Principal Balance of the Mortgage
Loans (except any Charged-off Loan as to which the Servicer is not pursuing any
collection activity). Such fee shall be calculated and payable monthly. The
Servicing Fee includes any servicing fees owed or payable to any Subservicer.
"Servicing Officer" shall mean any officer of the Servicer involved in,
-----------------
or responsible for, the administration and servicing of the Mortgage Loans whose
name and specimen signature appear on a list of servicing officers furnished to
the Trustee and the Certificate Insurer by the Servicer, as such list may from
time to time be amended.
"Startup Date" shall mean the day designated as such pursuant to Section
------------
10.1(d) hereof.
"Subordinate Mortgage Ratio" shall mean, with respect to any Mortgage
---------------------------
Loan, an amount equal to the ratio (expressed as a percentage) of the original
principal balance of such Mortgage Loan to the sum of (i) the original principal
balance of such Mortgage Loan and (ii) the principal balance at the time of
origination of any senior liens (computed at the time of origination of such
Mortgage Loan).
"Subsequent Cut-Off Date" shall mean, with respect to those Subsequent
-----------------------
Mortgage Loans which are transferred and assigned to the Trust Fund pursuant to
a Subsequent Transfer Instrument the opening of business on the first day of the
month in which the related Subsequent Transfer Date occurs.
"Subsequent Mortgage Loan" shall mean a Mortgage Loan assigned and
------------------------
transferred by the Depositor to the Trustee pursuant to Section 6.11, such
Mortgage Loan being identified on the Mortgage Loan Schedule attached to a
Subsequent Transfer Instrument.
"Subsequent Transfer Date" shall mean the date on which a Subsequent
------------------------
Mortgage Loan is transferred and assigned to the Trustee.
"Subsequent Transfer Instrument" shall mean each Subsequent Transfer
------------------------------
Instrument dated as of a Subsequent Transfer Date executed by the Trustee, the
Seller and the Depositor substantially in the form of Exhibit O, by which
Subsequent Mortgage Loans are transferred and assigned to the Trustee.
"Subservicer" shall mean any Person with whom the Servicer has entered
-----------
into a Subservicing Agreement and who satisfies the requirements set forth in
Section 5.2(a) hereof in respect of the qualification of a Subservicer.
"Subservicing Agreement" shall mean any agreement between the Servicer
----------------------
and any Subservicer relating to subservicing and/or administration of certain
Mortgage Loans as
37
<PAGE>
provided in Section 5.2(b), a copy of which shall be delivered, along with any
modifications thereto, to the Trustee and the Certificate Insurer.
"Substitution Adjustment" shall mean, as to any date on which a
-----------------------
substitution occurs pursuant to Section 2.4 or 3.3, the amount (if any) by which
the aggregate Principal Balances (after application of principal payments
received on or before the date of substitution of any Qualified Substitute
Mortgage Loans as of the date of substitution) of the related Qualified
Substitute Mortgage Loans are less than the aggregate of the Principal Balances
of the related Deleted Mortgage Loans together with 30 days' interest thereon at
the Mortgage Interest Rate plus any unreimbursed Servicing Advances and any
unreimbursed Delinquency Interest Advances with respect to such Deleted Mortgage
Loan.
"Target Percentage" shall mean, initially, 8.80%, provided, however,
----------------- -------- -------
that the Target Percentage shall be increased to 10.25% if:
(i) on any Distribution Date, the Pool Rolling Three Month
Delinquency Rate for each of the three (or one or two, in the case of the
first and second Distribution Dates) immediately preceding Collection
Periods, is 4.0% or greater; or
(ii) on any Distribution Date, the Three Month Average Annualized
Default Rate for each of the three (or one or two, in the case of the first
and second Distribution Dates) immediately preceding Collection Periods, is
3.50% or greater; or
(iii) (a) on any Distribution Date occurring before January 1,
1998, the aggregate Pool Cumulative Realized Losses since the Cut-off Date
exceed 1.5% of the Maximum Collateral Amount, (b) on any Distribution Date
on or after January 1, 1998 and before January 1, 1999, the aggregate Pool
Cumulative Realized Losses since the Cut-off Date exceed 3.0% of the
Maximum Collateral Amount, (c) on any Distribution Date on or after January
1, 1999 and before January 1, 2000, the aggregate Pool Cumulative Realized
Losses since the Cut-off Date exceed 4.5% of the Maximum Collateral Amount,
(d) on any Distribution Date on or after January 1, 2000 and before January
1, 2001, the aggregate Pool Cumulative Realized Losses since the Cut-off
Date exceed 6.0% of the Maximum Collateral Amount, or (e) on any
Distribution Date on or after January 1, 2001, the aggregate Pool
Cumulative Realized Losses since the Cut-off Date exceed 7.5% of the
Maximum Collateral Amount;
provided, further, however, that if the Target Percentage has increased to
- -------- ------- -------
10.25% pursuant to application of clause (i) above, the Target Percentage may
thereafter revert to 8.80% if (x) the Pool Rolling Three Month Delinquency Rate
has remained below 4.00% for six consecutive Distribution Dates (y) the Three
Month Average Annualized Default Rate has remained below 3.50% for six
consecutive Distribution Dates and (z) Pool Cumulative Realized Losses remain
below the levels set forth in clause (iii) above.
38
<PAGE>
"Tax Matters Person" shall mean the Person or Persons appointed pursuant
------------------
to Section 10.1(e) from time to time to act as the "tax matters person" (within
the meaning of the REMIC Provisions) of a REMIC of the Trust Fund.
"Tax Return" shall mean the federal income tax return on Internal
----------
Revenue Service Form 1066, "U.S. Real Estate Mortgage Investment Conduit Income
Tax Return," including Schedule Q thereto, Quarterly Notice to Residual Interest
Holders of REMIC Taxable Income or Net Loss Allocation, or any successor forms,
to be filed on behalf of the Trust Fund due to its classification as a REMIC
under the REMIC Provisions, together with any and all other information reports
or returns that may be required to be furnished to the Certificateholders or
filed with the Internal Revenue Service or any other governmental taxing
authority under any applicable provision of federal, state or local tax laws.
"Three Month Average Annualized Default Rate" shall mean as of any
-------------------------------------------
Distribution Date, the fraction, expressed as a percentage, equal to the average
of the Pool Default Rates for each of the three (or one or two, in the case of
the first and second Distribution Dates) immediately preceding Collection
Periods.
"Total Expected Losses" shall mean, as of Distribution Date, the sum, as
---------------------
of such Distribution Date, of (x) Pool Cumulative Realized Losses since the Cut-
Off Date and (y) the sum of (i) 25% of the aggregate Principal Balances of all
Mortgage Loans 30-59 days Delinquent as of the end of the preceding Collection
Period, (ii) 50% of the aggregate Principal Balances of all Mortgage Loans 60-89
days Delinquent as of the end of the preceding Collection Period and (iii) 100%
of the aggregate Principal Balances of all Mortgage Loans 90 or more days
Delinquent (including foreclosures and REO Properties) at the end of the
preceding Collection Period.
"Transfer" shall mean any direct or indirect transfer, sale, pledge,
--------
hypothecation or other form of assignment of any Ownership Interest in a
Certificate.
"Transfer Affidavit and Agreement" shall have the meaning as defined in
--------------------------------
Section 4.2(f)(ii).
"Transferee" shall mean any Person who is acquiring by Transfer any
----------
Ownership Interest in a Certificate.
"Transferor" shall mean any Person who is disposing by Transfer any
----------
Ownership Interest in a Certificate.
"Trust Fund" shall mean the segregated pool of assets subject hereto,
----------
and to be administered hereunder, consisting of: (a) such Mortgage Loans as
from time to time are subject to this Agreement, together with the Mortgage
Files relating thereto and all collections thereon and proceeds thereof on and
after the Cut-Off Date (other than Monthly Payments due on each Mortgage Loan up
to and including any Due Date prior to the Cut-Off Date), (b) such assets as
from time to time are identified as REO Property and collections thereon and
proceeds thereof, (c) amounts (including Permitted Investments as may be held
from time
39
<PAGE>
to time, except as otherwise provided herein) on deposit in each Account, (d)
the Trustee's rights with respect to the Mortgage Loans under the Certificate
Insurance Policy and all insurance policies required to be maintained pursuant
to this Agreement and any Insurance Proceeds, (e) Liquidation Proceeds, (f)
Released Mortgaged Property Proceeds, (g) amounts (including Permitted
Investments as may be held from time to time) on deposit in the Capitalized
Interest Account and the Pre-Funding Account, (h) all of the income, payments
and proceeds of each of the foregoing, except to the extent provided herein; (i)
the rights and remedies of the Trustee against any representation or warranty
made to the Trustee hereby and (j) the rights and remedies of the Depositor
against the Seller under the Sale and Purchase Agreement.
"Trustee" shall mean Bankers Trust Company, or its successor in
-------
interest, or any successor trustee appointed as herein provided.
"Trustee Fee" shall mean, as to any Distribution Date, the fee payable
-----------
to the Trustee in respect of its services as Trustee that accrues at a monthly
rate equal to 1/12 of 0.0095% of the Pool Principal Balance of each Outstanding
Mortgage Loan and the amount of funds in the Pre-Funding Account as of the
opening of the immediately preceding Collection Period; provided, however, in
-------- -------
the event the Trustee is no longer the REMIC Administrator, the REMIC
Administrator shall be entitled to 0.020% of the Trustee Fee.
"Trustee's Mortgage File" shall mean the documents delivered to the
-----------------------
Trustee or its designated agent pursuant to Section 2.3.
"Trustee's Remittance Report" shall have the meaning as defined in
---------------------------
Section 6.7.
"Underwriter" shall mean CS First Boston Corporation and its successors
-----------
and assigns.
"United States Person" shall mean a citizen or resident of the United
--------------------
States, a corporation, partnership or other entity created or organized in, or
under the laws of, the United States or any political subdivision thereof, or an
estate or trust whose income from sources without the United States is
includible in gross income for United States federal income tax purposes
regardless of its connection with the conduct of a trade or business within the
United States.
"Unpaid REO Amortization" shall mean, as to any REO Mortgage Loan and
-----------------------
any month, the aggregate of the installments of principal and accrued interest
(adjusted to the related Net Mortgage Interest Rate) deemed to be due in such
month and in any prior months that remain unpaid, calculated in accordance with
Section 5.11.
"Upper-Tier REMIC" means the segregated pool of assets held by the Trust
----------------
Fund consisting of the Lower-Tier Interests (except for the RL Lower-Tier
Interest, as set forth in the chart in Section 10.1(c) hereof).
40
<PAGE>
Section 1.2 Provisions of General Application. (a) All accounting
---------------------------------
terms not specifically defined herein shall be construed in accordance with
GAAP.
(b) The terms defined in this Article include the plural as well as
the singular.
(c) The words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole. All references to Articles
and Sections shall be deemed to refer to Articles and Sections of this
Agreement.
(d) Reference to statutes are to be construed as including all
statutory provisions consolidating, amending or replacing the statute to which
reference is made and all regulations promulgated pursuant to such statutes.
(e) All calculations of interest (other than with respect to the
Mortgage Loans, or as otherwise specifically set forth herein) provided for
herein shall be made on the basis of actual days elapsed divided by a year
comprised of 360 days. All calculations of interest with respect to any
Mortgage Loan provided for herein shall be made in accordance with the terms of
the related Note and Mortgage or, if such documents do not specify the basis
upon which interest accrues thereon, on the basis of dividing actual days
elapsed by a 360 day year.
(f) Any Mortgage Loan payment is deemed to be received on the date
such payment is actually received by the Servicer; provided, however, that for
-------- -------
purposes of calculating distributions on the Certificates prepayments with
respect to any Mortgage Loan are deemed to be received on the date they are
applied in accordance with customary servicing practices consistent with the
terms of the related Note and Mortgage to reduce the outstanding principal
balance of such Mortgage Loan on which interest accrues.
[Remainder of this page intentionally left blank]
41
<PAGE>
ARTICLE II
Establishment of the Trust
Sale and Conveyance of the Trust Fund
-------------------------------------
Section 2.1 Sale and Conveyance of Trust Fund; Priority and
-----------------------------------------------
Subordination of Ownership Interests; Establishment of the Trust. (a) The
- ----------------------------------------------------------------
Depositor, as of the Closing Date, does hereby sell, transfer, assign, set over
and convey to the Trust Fund for the benefit of the Certificateholders, as their
respective interests may, from time to time appear and the Certificate Insurer
without recourse but subject to the provisions in this Section 2.1 and the other
terms and provisions of this Agreement, all of the right, title and interest of
the Depositor in and to the Trust Fund, exclusive of the obligations of the
Depositor, Seller or any other party with respect to the Mortgage Loans. In
connection with such transfer and assignment, and pursuant to Section 2.07 of
the Sale and Purchase Agreement, the Depositor does hereby also irrevocably
transfer, assign, set over and otherwise convey to the Trustee all of its rights
under the Sale and Purchase Agreement including, without limitation, its right
to exercise the remedies created by Section 3.05 of the Sale and Purchase
Agreement for breaches of representations and warranties, agreements and
covenants of the Seller contained in Sections 3.02 and 3.03 of the related Sale
and Purchase Agreement.
It is intended that the conveyance of the Mortgage Loans by the
Depositor to the Trustee as provided in this Section 2.1(b) and of the
Subsequent Mortgage Loans and the related property pursuant to Section 2.9 be,
and be construed as, a sale of the Mortgage Loans by the Depositor to the
Trustee for the benefit of the Certificateholders and the Certificate Insurer,
and it is, further, not intended that such conveyance be deemed a pledge of the
Mortgage Loans by the Depositor to the Trustee to secure a debt or other
obligation of the Depositor. However, in the event that the Mortgage Loans are
held to be property of the Depositor or if for any reason this Agreement is held
or deemed to create a security interest in the Mortgage Loans, then it is
intended that, (a) this Agreement shall also be deemed to be a security
agreement within the meaning of Articles 8 and 9 of the New York Uniform
Commercial Code; (b) the conveyance provided for in this Section 2.1 shall be
deemed (1) to be a grant by the Depositor to the Trustee of a security interest
in all of the Depositor's right, title and interest in and to the Mortgage Loans
and all amounts payable to the holders of the Mortgage Loans in accordance with
the terms thereof and all proceeds of the conversion, voluntary or involuntary,
of the foregoing into cash, instruments, securities or other property,
including, without limitation, all amounts from time to time held or invested in
the Certificate Account, the Collection Account, the Pre-Funding Account and the
Capitalized Interest Account, whether in the form of cash, instruments,
securities or other property and (2) an assignment by the Depositor to the
Trustee of any security interest in any and all of the Depositor's right
(including the power to convey title thereto), title and interest, whether now
owned or hereafter acquired, in and to the property described in the foregoing
clause (b) granted by the Seller to the Depositor pursuant to the Sale and
Purchase Agreement; (c) the possession by the Trustee or its agent of Mortgage
Notes and such other items of property as constitute instruments, money,
negotiable documents or chattel paper shall be deemed to be "possession by the
secured party" for purposes of perfecting the security interest pursuant to the
New York Uniform Commercial Code and the Uniform
42
<PAGE>
Commercial Code of any other applicable jurisdiction (including, without
limitation, Section 9-305, 8-313 or 8-321 thereof); and (d) notifications to
persons holding such property, and acknowledgments, receipts or confirmations
from, financial intermediaries, bailees or agents (as applicable) of the Trustee
shall be made for the purpose of perfecting such security interest under
applicable law. The Depositor and the Trustee, as directed by the Servicer, the
Certificate Insurer or the Depositor, shall, to the extent consistent with this
Agreement, take such actions as may be necessary to ensure that, if this
Agreement were deemed to create a security interest in the Mortgage Loans, such
security interest would be deemed to be a perfected security interest of first
priority under applicable law and will be maintained as such throughout the term
of the Agreement, including the filing by the Depositor of any financing
statements and continuation statements evidencing such security interest.
In connection with the sale, transfer, assignment, and conveyance,
from the Depositor to the Trust Fund, the Depositor has filed, or shall cause to
be filed, in the appropriate office or offices in the States of Delaware and New
York, a UCC-1 financing statement executed by the Depositor as debtor, naming
the Trustee as secured party and listing the Mortgage Loans and the other
property described above as collateral. The characterization of the Depositor
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 Depositor's entire right, title and interest in the Mortgage Loans to the
Trust Fund. In connection with such filing, the Depositor agrees that it 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, the Certificateholders' and the Certificate
Insurer's interests in the Mortgage Loans.
(b) The rights of the Certificateholders to receive payments with
respect to the Mortgage Loans in respect of the Certificates, and all ownership
interests of the Certificateholders, in such payments, shall be as set forth in
this Agreement. In this regard, all rights of the Class B Certificateholders,
the Class C Certificateholders and the Residual Certificateholders to receive
payments in respect of the Class B Certificateholders, the Class C
Certificateholders and the Residual Certificates, respectively, are subject and
subordinate to the preferential rights of the Class A Certificateholders to
receive payments in respect of the Class A Certificates and to the Certificate
Insurer's rights to be reimbursed for Insured Payments together with interest
thereon at the rate specified in the Certificate Insurance Agreement. In
accordance with the foregoing, the ownership interest of the Class B
Certificateholders, the Class C Certificateholders, and the Residual
Certificateholders in amounts deposited in the Certificate Account, the
Collection Account, the Pre-Funding Account or the Capitalized Interest Account
from time to time shall not vest unless and until such amounts are distributed
in respect of the Class B Certificateholders, the Class C Certificateholders and
the Residual Certificates in accordance with the terms of this Agreement.
Section 2.2 Possession of Mortgage Files; Access to Mortgage Files.
------------------------------------------------------
(a) Upon the issuance of the Certificates, the ownership of each Mortgage Note,
the Mortgage and the contents of the related Mortgage File related to each
Mortgage Loan is
43
<PAGE>
vested in the Trustee for the benefit of the Certificateholders and the
Certificate Insurer, as their respective interests may, from time to time,
appear.
(b) The Trustee shall or cause to afford the Depositor, the
Certificate Insurer and the Servicer reasonable access to all records and
documentation regarding the Mortgage Loans relating to this Agreement, such
access being afforded at customary charges, upon reasonable request and during
normal business hours at the offices of the Trustee.
Section 2.3 Delivery of Mortgage Loan Documents. (a) In connection
-----------------------------------
with each conveyance pursuant to Section 2.1 or 2.9 hereof, the Depositor has
delivered or does hereby agree to deliver or cause to be delivered to the
Trustee the Certificate Insurance Policy and each of the following documents for
each Mortgage Loan sold by the Seller to the Depositor and sold by the Depositor
to the Trust Fund:
(i) The original Mortgage Note, bearing all intervening endorsements
showing a complete chain of endorsements from the originator of such
Mortgage Loan to the Seller endorsed by the Seller endorsed without
recourse in the following form: "Pay to the order of Bankers Trust Company,
as Trustee for the benefit of the Certificateholders and the Certificate
Insurer for Preferred Mortgage Asset-Backed Certificates Series 1996-2,
without recourse" and signed in the name of the Seller by an authorized
officer;
(ii) The original Mortgage with evidence of recording indicated
thereon; provided, however, that if such Mortgage has not been returned
-------- -------
from the applicable recording office, a copy of the Mortgage certified by
an authorized officer of the Seller (such original recorded Mortgage shall
be delivered when so returned);
(iii) An original assignment of the original Mortgage, in suitable
form for recordation in the jurisdiction in which the related Mortgaged
Property is located, in the name of the Seller signed by an authorized
officer (with evidence of submission for recordation of such assignment in
the appropriate real estate recording office for such Mortgaged Property);
provided, however, that Assignments of Mortgages shall not be required to
-------- -------
be submitted for recording with respect to any Mortgage Loan which relates
to the Trustee's Mortgage File if the Trustee, each of the Rating Agencies
and the Certificate Insurer shall have received an opinion of counsel at
the expense of the Seller satisfactory to the Trustee, each of the Rating
Agencies and the Certificate Insurer stating that, in such counsel's
opinion, the failure to record such Assignment of Mortgage shall not have a
materially adverse effect on the security interest of the Trustee in the
Mortgage; provided, further, that any Assignment of Mortgage for which an
-------- -------
opinion has been delivered shall be recorded by the Seller upon the earlier
to occur of (i) receipt by the Trustee of the Certificate Insurer's written
direction to record such Mortgage, (ii) the occurrence of any Event of
Default, as such term is defined in this Pooling and Servicing Agreement,
or (iii) a bankruptcy or insolvency proceeding involving the Mortgagor is
initiated or foreclosure proceedings are initiated against the Mortgaged
Property as a consequence of an event of default under the Mortgage Loan;
provided, further, that if the related Mortgage
-------- -------
44
<PAGE>
has not been returned from the applicable recording office, a copy of the
Mortgage certified by an authorized officer of the Seller (such original
assignment shall be delivered when so returned);
(iv) The original of any intervening Assignments of the Mortgage with
evidence of recording thereon showing a complete chain of assignment from
the originator of such Mortgage Loan to the Seller;
(v) The original of any assumption, modification, consolidation or
extension agreements with evidence of recording thereon; and
(vi) The title report or policy of title insurance (or a commitment
for title insurance, if the policy is being held by the title insurance
company pending recordation of the Mortgage) issued with respect to such
Mortgage Loan;
provided, however, that in the case of any Mortgage Loans which have been
- -------- -------
prepaid in full after the Cut-Off Date and prior to the date of the execution of
this Agreement, the Depositor, in lieu of delivering the above documents, hereby
delivers to the Trustee a certification of an officer of the Seller of the
nature set forth in Exhibit N attached hereto; and provided, further, however,
-------- ------- -------
that as to certain Mortgages or assignments thereof which have been delivered or
are being delivered to recording offices for recording and have not been
returned to the Seller in time to permit their delivery hereunder at the time of
such transfer, in lieu of delivering such original documents, the Depositor is
delivering to the Trustee a true copy thereof with a certification by the Seller
on the face of such copy substantially as follows: "certified true and correct
copy of original which has been transmitted for recordation." The Seller agrees
that it will deliver such original documents, together with any related policy
of title insurance not previously delivered, on behalf of the Depositor to the
Trustee promptly after they are received, and no later than 120 days after the
Closing Date; provided, however, that in those instances where the public
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recording office retains the original Mortgage or Assignment of Mortgage after
it has been recorded or such original document has been lost by the recording
office, the Seller shall be deemed to have satisfied its obligations hereunder
if it shall have delivered to the Trustee a copy of such original Mortgage or
Assignment of Mortgage certified by the public recording office to be a true
copy of the recorded original thereof. The Seller agrees, at its own expense,
to record (or to provide the Trustee with evidence of recordation thereof) each
assignment within 60 days of the Closing Date in the appropriate public office
for real property records, provided that such assignments are redelivered by the
Trustee to the Seller upon the Seller's written request and at the Seller's
expense, unless the Seller (at its expense) furnishes to the Trustee, the
Certificate Insurer and the Rating Agencies an Opinion of Counsel reasonably
acceptable to the Trustee and the Certificate Insurer to the effect that
recordation of such assignment is not necessary under applicable state law to
preserve the Trustee's interest in the related Mortgage Loan against the claim
of any subsequent transferee of such Mortgage Loan or any successor to, or
creditor of, the Seller.
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Within a period of 21 days from the Closing Date, the Trustee, at the
Seller's expense shall complete the endorsement of each Mortgage Note such that
the final endorsement appears in the following form:
(i) "Pay to the order of Bankers Trust Company, as Trustee for the
benefit of the Certificateholders and the Certificate Insurer for Preferred
Mortgage Asset-Backed Certificates Series 1996-2, without recourse".
Within a period of 21 days from the Closing Date, the Trustee, at the
Seller's expense, shall also complete each Assignment of Mortgage such that the
final Assignment of Mortgage appears in the following form:
"Bankers Trust Company, as Trustee for the benefit of the
Certificateholders and the Certificate Insurer for Preferred Mortgage
Asset-Backed Certificates Series 1996-2."
(b) In the event that any additional original documents are required
pursuant to the terms of this Section 2.3 to be a part of a Mortgage File, the
Seller or the Depositor, respectively, shall promptly deliver written notice to
the Trustee that such additional original documents are required hereunder and
deliver such original documents to the Trustee. In acting as custodian of any
such original document, the Servicer agrees further that it does not and will
not have or assert any beneficial ownership interest in the Mortgage Loans or
the Mortgage Files.
(c) In the event that any Mortgage Note required to be delivered
pursuant to this Section 2.3 is conclusively determined by any of the Seller,
the Servicer or the Trustee to be lost, stolen or destroyed the Seller shall,
within 14 days of the Closing Date, deliver to the Trustee a "lost note
affidavit" in form and substance acceptable to the Trustee, and shall
simultaneously therewith request the obligor on such Mortgage Note to execute
and return a replacement Mortgage Note, and shall further agree to hold the
Trustee and the Certificate Insurer harmless from any loss or damage resulting
from any action taken in reliance on the delivery and possession by the Trustee
of such lost note affidavit. Upon the receipt of such replacement Mortgage
Note, the Trustee shall return the lost note affidavit. Delivery by the Seller
of such lost note affidavit shall not affect the obligations of the Seller
hereunder with respect to the related Mortgage Loan.
(d) Promptly after the Closing Date, the Seller shall, with respect to
each Mortgage Loan, cause to be recorded in the appropriate public office for
real property records, where permitted by applicable law and where applicable
law does not require that a subordinate mortgagee be named as a party defendant
in foreclosure or comparable proceedings in order to foreclose or otherwise
preempt such mortgagee's equity of redemption, a request for notice of any
action by or on behalf of any mortgagee under the related senior lien.
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Section 2.4 Acceptance by Trustee of the Trust Fund; Certain
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Substitutions; Certification by Trustee. (a) The Trustee agrees to execute and
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deliver to the Depositor, the Certificate Insurer, the Servicer and the Seller
on or prior to the Closing Date an acknowledgment of receipt of the related
Certificate Insurance Policy and, with respect to each Mortgage Loan, the
original Mortgage Note (with any exceptions noted), in the form attached as
Exhibit D hereto and declares that it will hold such documents and any
amendments, replacements or supplements thereto, as well as any other assets
included in the definition of Trust Fund and delivered to the Trustee, as
Trustee in trust upon and subject to the conditions set forth herein for the
benefit of the Certificateholders and the Certificate Insurer. The Trustee
agrees, for the benefit of the Certificateholders and the Certificate Insurer,
to review (or cause to be reviewed) each Trustee's Mortgage File prior to the
Closing Date (with respect to the Mortgage Loans) and to deliver to the Seller,
the Servicer, the Depositor and the Certificate Insurer a certification in the
form attached hereto as Exhibit E to the effect that, as to each Mortgage Loan
listed in the related Mortgage Loan Schedule (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 Mortgage Notes required to be
delivered to it pursuant to Section 2.3(a)(i) hereof are in its possession, (ii)
each such Mortgage Note has been reviewed by it, has been, to the extent
required, executed and has not been mutilated, damaged, torn or otherwise
physically altered (handwritten additions, changes or corrections shall not
constitute physical alteration if initialled by the Mortgagor), appears regular
on its face and relates to such Mortgage Loan. The Trustee shall be under no
duty or obligation to inspect, review or examine any such documents,
instruments, certificates or other papers to determine that they are genuine,
enforceable, or appropriate for the represented purpose or that they are other
than what they purport to be on their face.
Within thirty (30) days after the Closing Date and within thirty (30)
days of receipt of a Subsequent Mortgage Loan or Qualified Substitute Mortgage
Loan, the Trustee shall deliver (or cause to be delivered) to the Servicer, the
Seller, the Depositor and the Certificate Insurer a final certification in the
form attached hereto as Exhibit F to the effect that, as to each Mortgage Loan
listed in the Mortgage Loan Schedule (other than any Mortgage Loan paid in full
or any Mortgage Loan specifically identified in such certification as not
covered by such certification), and as to any document noted as an exception
included in the Trustee's initial certification, (i) all documents required to
be delivered to it pursuant to Section 2.3 hereof are in its possession, (ii)
each such document has been reviewed by it, has been, to the extent required,
executed and has not been mutilated, damaged, torn or otherwise physically
altered (handwritten additions, changes or corrections shall not constitute
physical alteration if initialled by the Mortgagor), appears regular on its face
and relates to such Mortgage Loan.
(b) If the Certificate Insurer or the Trustee during the process of
reviewing the Trustee's Mortgage Files finds any document constituting a part of
a Trustee's Mortgage File which is not executed, has not been received, is
unrelated to the Mortgage Loan identified in the related Mortgage Loan Schedule,
or does not conform to the requirements of Section 2.3 or the description
thereof as set forth in the related Mortgage Loan Schedule, the Trustee or the
Certificate Insurer, as applicable, shall promptly so notify the Servicer, the
Seller, the Depositor, the Certificate Insurer and the Trustee. In performing
any such review,
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the Trustee may conclusively rely on the Seller as to the purported genuineness
of any such document and any signature thereon. It is understood that the scope
of the Trustee's review of the Mortgage Files is limited solely to confirming
that the documents listed in Section 2.3 have been executed and received and
relate to the Mortgage Files identified in the related Mortgage Loan Schedule.
The Seller agrees to use reasonable efforts to cause to be remedied a material
defect in a document constituting part of a Mortgage File of which it is so
notified by the Trustee. If, however, within 60 days after the Trustee's notice
to it respecting such defect the Seller has not caused to be remedied the defect
and the defect materially and adversely affects the interest of the
Certificateholders in the related Mortgage Loan or the interests of the
Certificate Insurer, the Trustee shall enforce the Seller's obligation to either
(i) substitute in lieu of such Mortgage Loan a Qualified Substitute Mortgage
Loan in the manner and subject to the conditions set forth in Section 3.4 hereof
or (ii) purchase such Mortgage Loan at a purchase price equal to the outstanding
Principal Balance of such Mortgage Loan as of the date of purchase, plus the
greater of (x) all accrued and unpaid interest thereon and (y) 30 days' interest
thereon, computed at the related Mortgage Interest Rate, plus the amount of any
unpaid and accrued Servicing Fees, any unreimbursed Delinquency Interest
Advances and Servicing Advances made by the Servicer with respect to such
Mortgage Loan, which purchase price shall be deposited in the Collection Account
prior to the next succeeding Servicer Remittance Date, after deducting therefrom
any amounts received in respect of such repurchased Mortgage Loan or Loans and
being held in the Collection Account for future distribution to the extent such
amounts have not yet been applied to principal or interest on such Mortgage Loan
(the "Loan Repurchase Price"); provided, however, that the Seller may not,
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pursuant to clause (ii) preceding, purchase the Principal Balance of any
Mortgage Loan that is not in default or as to which no default is imminent
unless the Seller has theretofore delivered an Opinion of Counsel knowledgeable
in federal income tax matters which states that such a purchase would not
constitute a prohibited transaction under the Code.
(c) Upon receipt by the Trustee of a certification of a Servicing
Officer of such substitution or purchase and, in the case of a substitution,
upon receipt of the related Trustee's Mortgage File for the applicable Qualified
Substitute Mortgage Loan or Loans, and the deposit of the amounts described
above into the Collection Account (which certification shall be in the form of
Exhibit G hereto), the Trustee shall release to the Servicer for release to the
Seller the related Trustee's Mortgage File and shall execute, without recourse,
and deliver such instruments of transfer furnished by the Seller as may be
necessary to transfer such Mortgage Loan to the Seller. The Trustee shall
promptly notify the Certificate Insurer if the Seller fails to repurchase or
substitute for a Mortgage Loan in accordance with the foregoing.
Section 2.5 [RESERVED].
Section 2.6 Execution of Certificates. The Trustee acknowledges the
-------------------------
assignment to it of the Mortgage Loans and the delivery to it of the Trustee's
Mortgage Files relating thereto and, concurrently with such delivery, has
executed, authenticated and delivered to or upon the order of the Depositor, in
exchange for the Mortgage Loans, the Trustee's Mortgage Files and the other
assets included in the definition of Trust Fund,
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Certificates duly authenticated by the Trustee, in Authorized Denominations,
evidencing the entire beneficial ownership interest in the Trust Fund.
Section 2.7 Application of Principal and Interest. In the event that
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Net Liquidation Proceeds on a Liquidated Mortgage Loan are less than the
outstanding Principal Balance of the related Mortgage Loan plus accrued interest
thereon, or any Mortgagor makes a partial payment of any Monthly Payment due on
a Mortgage Loan, such Net Liquidation Proceeds or partial payment shall be
applied to payment of the related Mortgage Note as provided therein, and if not
so provided, first to interest accrued at the Mortgage Interest Rate, then to
the principal owed on such Mortgage Loan.
Section 2.8 Further Assurances; Powers of Attorney. (a) The
--------------------------------------
Depositor and the Servicer shall take no action inconsistent with the Trust's
ownership of the Trust Fund and shall indicate or shall cause to be indicated in
its records and records held on its behalf that ownership of each Mortgage Loan
and the assets in the Trust Fund are held by the Trustee on behalf of the Trust
Fund. In addition, the Depositor and the Servicer shall respond to any
inquiries from third parties with respect to ownership of a Mortgage Loan or any
other asset in the Trust Fund by stating that it is not the owner of such asset
and that ownership of such Mortgage Loan or other Trust Fund asset is held by
the Trustee on behalf of the Trust Fund.
(b) The Servicer agrees that, from time to time, at the Seller's
expense, it shall cause the Seller (and the Depositor also agrees that it
shall), promptly to execute and deliver all further instruments and documents,
and take all further action, that may be necessary or appropriate, or that the
Servicer or the Trustee or the Certificate Insurer may reasonably request, in
order to perfect, protect or more fully evidence the transfer of ownership of
the Trust Fund or to enable the Trustee to exercise or enforce any of its rights
hereunder. Without limiting the generality of the foregoing, the Servicer, the
Seller and the Depositor will, upon the request of the Servicer or of the
Trustee execute and file (or cause to be executed and filed) such real estate
flings, financing or continuation statements, or amendments thereto or
assignments thereof, and such other instruments or notices, as may be necessary
or appropriate.
(c) The Depositor hereby grants to the Servicer and the Trustee powers
of attorney to execute all documents on its behalf under this Agreement as may
be necessary or desirable to effectuate the foregoing.
Section 2.9 Conveyance of the Subsequent Mortgage Loans. (a)
-------------------------------------------
Subject to the conditions set forth in Section 2.3 above and paragraph (b) below
in consideration of the Trustee's delivery on the related Subsequent Transfer
Dates to or upon the order of the Depositor of all or a portion of the balance
of funds in the Pre-Funding Account, the Depositor shall on any Subsequent
Transfer Date sell, transfer, assign, set over and convey without recourse to
the Trustee but subject to the other terms and provisions of this Agreement all
of the right, title and interest of the Depositor in and to (i) the Subsequent
Mortgage Loans identified on the Mortgage Loan Schedule attached to the related
Subsequent Transfer Instrument delivered by the Depositor on such Subsequent
Transfer Date,
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(ii) principal due and interest accruing on the Subsequent Mortgage Loans on and
after the related Subsequent Cut-Off Date and (iii) all items with respect to
such Subsequent Mortgage Loans to be delivered pursuant to Section 2.3 above and
the other items in the related Mortgage Files; provided, however, that the
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Depositor reserves and retains all right, title and interest in and to principal
received and interest accruing on the Subsequent Mortgage Loans prior to the
related Subsequent Cut-Off Date. The transfer to the Trustee by the Depositor
of the Subsequent Mortgage Loans identified on the Mortgage Loan Schedule shall
be absolute and is intended by the Depositor, the Servicer, the Trustee and the
Certificateholders to constitute and to be treated as a sale of the Subsequent
Mortgage Loans by the Depositor to the Trust Fund. The related Mortgage File
for each Subsequent Mortgage Loan shall be delivered to the Trustee three
Business Days (or such shorter period as may be agreed between the Depositor and
the Trustee) prior to the Subsequent Transfer Date.
The purchase price paid by the Trustee from amounts released from the
Pre-Funding Account shall be 97.62% of the aggregate Principal Balances as of
the related Subsequent Cut-Off Date of the Subsequent Mortgage Loans so
transferred. This Agreement shall constitute a fixed-price purchase contract in
accordance with Section 860G(a)(3)(A)(ii) of the Code.
(b) The Depositor shall transfer to the Trustee the Subsequent
Mortgage Loans and the other property and rights related thereto described in
Section 2.9 (a) above, and the Trustee shall release funds from the Pre-Funding
Account, only upon the satisfaction of each of the following conditions on or
prior to the related Subsequent Transfer Date:
(i) the Depositor shall have provided the Trustee and the Certificate
Insurer no later than five Business Days prior to the Subsequent Transfer
Date an Addition Notice and shall have provided any information reasonably
requested by the Trustee or the Certificate Insurer with respect to the
Subsequent Mortgage Loans;
(ii) the Depositor shall have delivered to the Trustee a duly executed
Subsequent Transfer Instrument, which shall include a Mortgage Loan
Schedule, listing the Subsequent Mortgage Loans;
(iii) as of each Subsequent Transfer Date, the Depositor shall not be
insolvent nor shall it have been made insolvent by such transfer nor shall
it be aware of any pending insolvency;
(iv) such sale and transfer shall not result in a material adverse tax
consequence to the Trust Fund or the Certificateholders;
(v) the Funding Period shall not have terminated;
(vi) the Depositor shall have delivered to the Trustee an Officer's
Certificate, substantially in the form delivered at closing, confirming the
satisfaction of each condition precedent and representations specified in
this Section 2.9(b) and Section 2.9(c) following and in the related
Subsequent Transfer Instrument;
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(vii) the Depositor shall have delivered to the Trustee and the
Certificate Insurer Opinions of Counsel addressed to the Certificate
Insurer, the Rating Agencies and the Trustee 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
Closing Date regarding certain bankruptcy, tax and corporate matters; and
(viii) the Trustee shall have delivered to the Certificate Insurer
and the Depositor an Opinion of Counsel addressed to the Depositor, the
Rating Agencies and the Certificate Insurer with respect to the Subsequent
Transfer Instrument substantially in the form of the Opinion of Counsel
delivered to the Certificate Insurer and the Depositor on the Closing Date
regarding certain corporate matters relating to the Trustee.
(c) The obligation of the Trust Fund to purchase a Subsequent Mortgage
Loan on any Subsequent Transfer Date is subject to the following representations
and warranties of the Seller and the Depositor with respect to such Subsequent
Mortgage Loan being satisfied (i) such Subsequent Mortgage Loan may not be more
than 30 days Delinquent as of the related Subsequent Cut-Off Date; (ii) the
remaining term to maturity of such Subsequent Mortgage Loan may not exceed 20
years; (iii) such Subsequent Mortgage Loan has a Mortgage Interest Rate of at
least 10.25%; (iv) the Subsequent Mortgage Loans in the aggregate have a
weighted average CLTV (based on the original appraisal) no greater than 100%;
(v) such Subsequent Mortgage Loan is a fully amortizing loan with level payments
generally over 15 years; (vi) such Subsequent Mortgage Loan is secured by a
Residential Dwelling; (vii) the related Trustee's Mortgage File with respect to
such Subsequent Mortgage Loan shall have been delivered to the Trustee; (viii)
no such Subsequent Mortgage Loan is secured by an investor property or
associated with the purchase of a home; and (ix) following the purchase of such
Subsequent Mortgage Loans by the Trust Fund, the Mortgage Loans (including the
Subsequent Mortgage Loans) (a) will have a weighted average Mortgage Interest
Rate of at least 13.4%; (b) will have a weighted average CLTV (based on the
original appraisal) of not more than 102%; (c) will have no subsequent Mortgage
Loan with a Principal Balance in excess of $75,000; (d) will not have any non-
owner occupied properties; (e) will have a weighted average Subordinate Mortgage
Ratio of not more than 26.5%; (f) will not have a concentration in a single zip
code in excess of 2.0% by aggregate Principal Balance; (g) will not have a
concentration in Los Angeles County, California in excess of 10% by aggregate
Principal Balance; (h) will not have concentration in any other county in excess
of 9.5% by aggregate Principal Balance; (i) will not have a concentration of
Credit Bureau Risk Scores under 620 in excess of 1.5% by aggregate Principal
Balance; (j) will not have a concentration of Mortgage Loans with self employed
mortgagors in excess of 4% by aggregate Principal Balances; (k) will have a
weighted average Credit Bureau Risk Score of at least 680 and a weighted average
DTI of no more than 42%; (l) will have a concentration of Mortgage Loans secured
by single family residences of at least 92% by aggregate Principal Balances; and
(m) will not have a concentration of Mortgage Loans secured by condominiums in
excess of 6.20% by aggregate Principal Balance; and (n) such Subsequent Mortgage
Loan satisfies all representations and warranties set forth in Sections 3.02 and
3.03 of the Sale and Purchase Agreement hereof as of the related Subsequent
Transfer Date. Such requirements may be
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waived or modified in writing by the Certificate Insurer; provided that, if the
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Certificate Insurer waives or modifies any such requirements because such
Subsequent Mortgage Loans do not satisfy such requirements, the Certificate
Insurer, in its sole discretion, may modify the definitions of "Required
Overcollateralization Level" and/or "Target Percentage," without the consent of
any party hereto or any Certificateholder; provided, further, that the
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Certificate Insurer agrees to notify the Depositor and the Trustee in writing of
any modifications to the definitions of "Required Overcollateralization Level"
and/or "Target Percentage" no later than the Determination Date immediately
preceding a Distribution Date (or such shorter period as the Trustee shall
reasonably agree).
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ARTICLE III
Representations and Warranties
------------------------------
Section 3.1 Representations of the Servicer. The Servicer hereby
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represents and warrants to the Trustee, the Depositor, the Certificate Insurer
and the Certificateholders as of the Closing Date:
(a) The Servicer is a Delaware corporation duly organized, validly
existing and in good standing under the laws of the state of its
incorporation and is in compliance with the laws of each state in which any
Mortgaged Property is located to the extent necessary to enable it to
perform its obligations under the terms of this Agreement; the Servicer has
the full corporate power and authority to execute and deliver this
Agreement and to perform in accordance herewith: the execution, delivery
and performance of this Agreement by the Servicer and the consummation of
the transactions contemplated hereby have been duly and validly authorized;
this Agreement evidences the legal, valid, binding and enforceable
obligation of the Servicer; and all requisite corporate action has been
taken by the Servicer to make this Agreement valid and binding upon the
Servicer in accordance with its terms;
(b) Neither the execution and delivery of this Agreement, nor the
fulfillment of or compliance with the terms and conditions of this
Agreement, will conflict with or result in a breach of any of the terms,
conditions or provisions of the Servicer's charter or by-laws or any legal
restriction or any agreement or instrument to which the Servicer is now a
party or by which it is bound, or constitute a default or result in an
acceleration under any of the foregoing, or result in the violation of any
law, rule, regulation, order, judgment or decree to which the Servicer or
its property is subject, or impair the ability of the Trustee (or the
Servicer as the agent of the Trustee) to realize on the Mortgage Loans, or
impair the value of the Mortgage Loans;
(c) The Servicer is an approved seller/servicer of conventional
residential mortgage loans for FNMA and FHLMC;
(d) There is no action, suit, proceeding or investigation pending or,
to the knowledge of the Servicer, threatened against the Servicer which,
either in any one instance or in the aggregate, may result in any material
adverse change in the business, operations, financial condition, properties
or assets of the Servicer, or in any material impairment of the right or
ability of the Servicer to carry on its business substantially as now
conducted, or of any action taken or to be taken in connection with the
obligations of the Servicer contemplated herein, or which would materially
impair the ability of the Servicer to perform under the terms of this
Agreement;
(e) No consent, approval, authorization or order of any court or
governmental agency or body is required for the execution, delivery and
performance by the Servicer of or compliance by the Servicer with this
Agreement or the Mortgage Loans
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or the consummation of the transactions contemplated by this Agreement or,
if required, such approval has been obtained prior to the Closing Date; and
(f) Neither this Agreement nor any statement, report or other
document furnished by the Servicer pursuant to this Agreement or in
connection with the transactions contemplated hereby contains any untrue
statement of material fact regarding the Servicer or omits to state a
material fact necessary to make the statements regarding the Servicer
contained herein or therein not misleading.
It is understood and agreed that the representations, warranties and covenants
set forth in this Section 3.1 shall survive the delivery of the respective
Mortgage Files to the Trustee or to a custodian, as the case may be, and inure
to the benefit of the Trustee.
Section 3.2 Representations, Warranties and Covenants of the
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Depositor. (a) The Depositor hereby represents, warrants and covenants to the
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Trustee and the Certificate Insurer that as of the Closing Date or as of such
date specifically provided herein:
(i) The Depositor is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware;
(ii) The Depositor has the corporate power and authority to convey the
Mortgage Loans and to execute, deliver and perform, and to enter into and
consummate transactions contemplated by, this Agreement;
(iii) This Agreement has been duly and validly authorized, executed
and delivered by the Depositor, all requisite corporate action having been
taken, and, assuming the due authorization, execution and delivery hereof
by the Servicer and the Trustee, constitutes or will constitute the legal,
valid and binding agreement of the Depositor, enforceable against the
Depositor in accordance with its terms, except as such enforcement may be
limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to or affecting the rights of creditors generally,
and by general equity principles (regardless of whether such enforcement is
considered in a proceeding in equity or at law);
(iv) No consent, approval, authorization or order of, or registration
or filing with, or notice to, any governmental authority or court is
required for the execution, delivery and performance of or compliance by
the Depositor with this Agreement or the consummation by the Depositor of
any of the transactions contemplated hereby, except as have been received
or obtained on or prior to the Closing Date;
(v) None of the execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby or thereby, or the
fulfillment of or compliance with the terms and conditions of this
Agreement, (a) conflicts or will conflict with or results or will result in
a breach of, or constitutes or will constitute a default or results or will
result in an acceleration (I) under the charter or bylaws of the Depositor,
or (II) of any term, condition or provision of any material indenture,
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deed of trust, contract or other agreement or instrument to which the
Depositor or any of its subsidiaries is a party or by which it or any of
its subsidiaries is bound; (b) results or will result in a violation of any
law, rule, regulation, order, judgment or decree applicable to the
Depositor of any court or governmental authority having jurisdiction over
the Depositor or its subsidiaries; or (c) results in the creation or
imposition of any lien, charge or encumbrance which would have a material
adverse effect upon the Mortgage Loans or any documents or instruments
evidencing or securing the Mortgage Loans;
(vi) There are no actions, suits or proceedings before or against or
investigations of, the Depositor pending, or to the knowledge of the
Depositor, threatened, before any court, administrative agency or other
tribunal, and no notice of any such action, which, in the Depositor's
reasonable judgment, might materially and adversely affect the performance
by the Depositor of its obligations under this Agreement, or the validity
or enforceability of this Agreement; and
(vii) The Depositor 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 that would materially and adversely
affect its performance hereunder.
Section 3.3 RESERVED.
Section 3.4 Purchase and Substitution. (a) It is understood and
-------------------------
agreed that the representations and warranties set forth herein shall survive
delivery of the Certificates to the Certificateholders. With respect to any
representation or warranty contained in Section 3.03 of the Sale and Purchase
Agreement that is made to the best of the Seller's knowledge, if it is
discovered by the Servicer, any Subservicer, the Depositor, the Trustee, the
Certificate Insurer or any Certificateholder that the substance of such
representation and warranty was inaccurate as of the Closing Date (or in the
case of the Subsequent Mortgage Loans, as of the respective Subsequent Transfer
Date) and such inaccuracy materially and adversely affects the value of the
related Mortgage Loan or the interest of the Certificate Insurer, then
notwithstanding the Seller's lack of knowledge with respect to the inaccuracy at
the time the representation or warranty was made, such inaccuracy shall be
deemed a breach of the applicable representation or warranty. Upon discovery by
the Seller, the Depositor, the Servicer, any Subservicer, the Trustee or the
Certificate Insurer of a breach of any representations and warranties which
materially and adversely affects the value of the Mortgage Loans or the interest
of the Certificateholders, or which materially and adversely affects the
interests of the Certificate Insurer or the Certificateholders in the related
Mortgage Loan in the case of a representation and warranty relating to a
particular Mortgage Loan (notwithstanding that such representation and warranty
was made to the Seller's best knowledge), the party discovering such breach
shall give prompt written notice to the others. Subject to the last paragraph
of this Section 3.4, within 60 days of the earlier of its discovery or its
receipt of notice of any breach of a representation or warranty, the Seller
shall be required to (i) promptly cure such breach in all material respects,
(ii) purchase such Mortgage Loan on the next succeeding Servicer Remittance
Distribution Date, in the manner and at the
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related Loan Repurchase Price, or (iii) remove such Mortgage Loan from the Trust
Fund (in which case the Mortgage Loan shall become a Deleted Mortgage Loan) and
substitute one or more Qualified Substitute Mortgage Loans; provided, that, such
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substitution is effected not later than the date which is two years after the
Startup Date or at such later date, if the Trustee and the Certificate Insurer
receive an Opinion of Counsel to the effect that such substitution will not
constitute a prohibited transaction for the purposes of the REMIC provisions of
the Code or cause the Trust Fund to fail to qualify as a REMIC at any time any
Certificates are outstanding. Any such substitution shall be accompanied by
payment by the Seller of the Substitution Adjustment, if any, to the Servicer to
be deposited in the Collection Account.
(b) As to any Deleted Mortgage Loan for which the Seller substitutes a
Qualified Substitute Mortgage Loan or Loans, the Seller shall be required to
effect such substitution by delivering to the Trustee a certification in the
form attached hereto as Exhibit G, executed by a Servicing Officer and the
documents described in Sections 2.3(a)(i)-(vi) for such Qualified Substitute
Mortgage Loan or Loans.
(c) The Servicer shall deposit in the Collection Account all payments
received in connection with such Qualified Substitute Mortgage Loan or Loans
after the date of such substitution. Monthly Payments received with respect to
Qualified Substitute Mortgage Loans on or before the date of substitution will
be retained by the Seller. The Trust Fund will own all payments received on the
Deleted Mortgage Loan on or before the date of substitution, and the Seller
shall thereafter be entitled to retain all amounts subsequently received in
respect of such Deleted Mortgage Loan. The Servicer shall give written notice
to the Trustee and the Certificate Insurer that such substitution has taken
place and shall amend the Mortgage Loan Schedule to reflect the removal of such
Deleted Mortgage Loan from the terms of this Agreement and the substitution of
the Qualified Substitute Mortgage Loan. Upon such substitution, such Qualified
Substitute Mortgage Loan or Loans shall be subject to the terms of this
Agreement in all respects.
(d) It is understood and agreed that the obligations of the Seller to
cure, purchase or substitute for a defective Mortgage Loan constitute the sole
remedies of the Trustee, the Certificate Insurer and the Certificateholders with
respect to a breach of the representations and warranties of the Seller set
forth in Sections 3.02 and 3.03 of the Sale and Purchase Agreement. The Trustee
shall give prompt written notice to the Certificate Insurer and each of the
Rating Agencies of any repurchase or substitution made pursuant to this Section
3.4 or Section 2.4(b) hereof.
(e) Upon discovery by the Servicer, the Trustee, the Certificate
Insurer or any Certificateholder that any Mortgage Loan does not constitute a
Qualified Mortgage, the party discovering such fact shall promptly (and in any
event within 5 days of the discovery) give written notice thereof to the other
parties and the Certificate Insurer. In connection therewith, the Seller shall
be required to repurchase or substitute a Qualified Substitute Mortgage Loan for
the affected Mortgage Loan within 60 days of the earlier of such discovery by
any of the foregoing parties, or the Trustee's or the Seller's receipt of
notice, in the same manner as it would a Mortgage Loan for a breach of
representation or warranty
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contained in Section 3.02 or 3.03 of the Sale and Purchase Agreement. The
Trustee shall reconvey to the Seller the Mortgage Loan to be released pursuant
hereto in the same manner, and on the same terms and conditions, as it would a
Mortgage Loan repurchased for breach of a representation or warranty contained
in Section 3.02 or 3.03 of the Sale and Purchase Agreement.
Section 3.5 Indemnification of the Trust Fund by the Indemnitors.
----------------------------------------------------
The Indemnitors hereby agree to indemnify the Trust Fund for any losses incurred
by it on any Liquidated Loan which had a CLTV at origination of greater than
100%; provided that such indemnity is limited to the dollar amount of the
difference at origination between the aggregate loan balance and the Appraised
Value; provided further, that such indemnity is a nonrecourse obligation of the
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Indemnitors and is limited to amounts received by the Indemnitors pursuant to
Section 6.5(vi) through (viii). "Indemnitors" means, together, Preferred
Mortgage SPC Funding Corp. II and Preferred Mortgage SPC Funding Corp.
The Trustee, the Certificate Insurer and each Certificateholder agree
that they will not at any time institute against any Indemnitor or join in any
institution against any Indemnitor of any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings, or other proceedings under
any United States Federal or state bankruptcy or similar law.
Section 3.6 Third Party Claims. The Trustee shall reimburse the
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Seller from amounts otherwise distributable on the Class R Certificates for all
amounts advanced by the Seller pursuant to the second sentence of Section
4.04(a)(ii) of the Sale and Purchase Agreement except when the relevant claim
relates directly to the failure of the Seller to perform its duties in
compliance with the terms of the Sale and Purchase Agreement.
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ARTICLE IV
The Certificates
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Section 4.1 The Certificates. The Certificates shall be
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substantially in the forms annexed hereto as Exhibit B-1-1, Exhibit B-1-2,
Exhibit B-1-3, Exhibit B-1-4, Exhibit B-1-5, Exhibit B-1-6, Exhibit B-2, Exhibit
B-3, Exhibit B-4 and Exhibit B-5. All Certificates shall be executed by manual
or facsimile signature on behalf of the Trustee by an authorized officer and
authenticated by the manual or facsimile signature of an authorized officer.
Any Certificates bearing the signatures of individuals who were at the time of
the execution thereof the authorized officers of the Trustee shall bind the
Trustee, notwithstanding that such individuals or any of them have ceased to
hold such offices prior to the delivery of such Certificates or did not hold
such offices at the date of such Certificates. All Certificates issued
hereunder shall be dated the date of their authentication.
Section 4.2 Registration of Transfer and Exchange of Certificates.
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(a) The Trustee, as registrar, shall cause to be kept a register (the
"Certificate 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 for the purpose of registering and transferring
Certificates, as herein provided. The Certificate Insurer and the Servicer
shall be entitled to inspect and copy the Certificate Register and the records
of the Trustee relating to the Certificates during normal business hours upon
reasonable notice.
(b) All Certificates issued upon any registration of transfer or
exchange of Certificates shall be valid evidence of the same ownership interests
in the Trust Fund and entitled to the same benefits under this Agreement as the
Certificates surrendered upon such registration of transfer or exchange.
(c) 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
Holder or holder thereof or his attorney duly authorized in writing. Every
Class A Certificate issued in definitive form shall include a statement of
insurance, attached hereto as Exhibit A-2 provided by the Certificate Insurer.
(d) (i) No service charge shall be made to a Holder or holder 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.
(ii) 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. The Class A Certificates shall, except as otherwise provided in the
next paragraph, be initially issued in the form of six fully registered Class A
Certificates with a denomination equal to the related Original Class A Principal
Balance. Upon initial issuance, the ownership of each such Class A Certificate
shall be registered in the Certificate Register in the name of Cede & Co.,
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or any successor thereto, as nominee for the Depository. The Depositor 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
Certificate Register in the name of Cede & Co., as nominee of the Depository,
the Depositor, the Seller, the Servicer, the Trustee and the Certificate Insurer
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 Depositor, the Seller, the Servicer, the Trustee and the Certificate Insurer
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 any Ownership Interest, (ii) the delivery to any Direct or
Indirect Participant or any other Person, other than a Certificateholder, 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
Certificateholder, of any amount with respect to any distribution of principal
or interest on the Class A Certificates. No Person other than a
Certificateholder 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 Certificateholders
appearing as Certificateholders 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.
In the event that (x) 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 Depository is
unable to locate a qualified successor or (ii) the Trustee 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
Certificate 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 as may be acceptable to the
Seller, 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 Certificateholders transferring
Class A Certificates shall designate, in accordance with the provisions hereof.
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 as the case may be and all notices with respect to such
Class A Certificates as the case may be shall be made and given, respectively,
in the manner provided in the Representation Letter.
(e) Except as provided in Section 4.2(e)(ii), no transfer, sale,
pledge or other disposition of any Class B, Class C or Residual Certificate
shall be made unless such transfer, sale, pledge or other disposition is exempt
from the registration requirements of the Securities Act of 1933, as amended
(the "Act"), and any applicable state securities laws or is made in
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accordance with said Act and laws. In the event that a transfer of a Class B,
Class C or Residual Certificate is to made under this Section 4.2(e)(i), (a) the
Trustee shall require an Opinion of Counsel acceptable to and in form and
substance satisfactory to the Trustee and the Depositor that such transfer shall
be made pursuant to an exemption, describing the application 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
Depositor or the Servicer, provided that such Opinion of Counsel will not be
required in connection with the initial transfer of any such Certificate by the
Depositor or any affiliate thereof, to a non-affiliate of the Depositor and (b)
the Trustee shall require the transferee to execute a representation letter,
substantially in the form of Exhibit H hereto, and Trustee shall require the
transferor to execute a representation letter, substantially in the form of
Exhibit I hereto, each acceptable to and in form and substance satisfactory to
the Depositor and the Trustee certifying to the Depositor and the Trustee the
facts surrounding such transfer, which representation letters shall not be an
expense of the Trustee, the Depositor or the Servicer, provided that such
representation letter will not be required in connection with any transfer of
any such Certificate by the Depositor to an affiliate of the Depositor. Any
such Certificateholder desiring to effect such transfer shall, and does hereby
agree to, indemnify the Trustee, the Depositor, the Servicer and the Certificate
Insurer against any liability that may result if the transfer is not so exempt
or is not made in accordance with such applicable federal and state laws.
(ii) Transfers of Certificates may be made in accordance with Section
4.2(e)(ii) if the prospective transferee of a Certificate provides the Trustee
and the Depositor with an investment letter substantially in the form of Exhibit
J attached hereto, which investment letter shall not be an expense of the
Trustee, the Depositor or the Servicer, and which investment letter states that,
among other things, such transferee is a "qualified institutional buyer" as
defined under Rule 144A. Such transfers shall be deemed to have complied with
the requirements of Section 4.2(e)(i) hereof; provided, however, that no
Transfer of any of the Certificates may be made pursuant to this Section
4.2(e)(ii) by the Depositor. Any such Certificateholder desiring to effect such
transfer shall, and does hereby agree to indemnify the Trustee, the Depositor,
the Servicer and the Certificate Insurer against any liability that may result
if the transfer is not so exempt or is not made in accordance with such
applicable federal and state laws.
(f) Each Person who has or who acquires any Ownership Interest in a
Residual Certificate shall be deemed by the acceptance or acquisition of such
Ownership Interest to have agreed to be bound by the following provisions and to
have irrevocably appointed the Trustee or its designee as its attorney-in-fact
to negotiate the terms of any mandatory sale under subclause (vii) below and to
execute all instruments of transfer and to do all other things necessary in
connection with any such sale, and the rights of each Person acquiring any
Ownership Interest in a Residual Certificate are expressly subject to the
following provisions:
(i) Each Person holding or acquiring any Ownership Interest in a
Residual Certificate shall be a Permitted Transferee and shall promptly
notify the Trustee of any change or impending change in its status as
either a United States Person or a Permitted Transferee.
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(ii) In connection with any proposed Transfer of any Ownership
Interest in a Residual Certificate, the Trustee shall require delivery to
it, and shall not register the Transfer of any Residual Certificate until
its receipt of, an affidavit and agreement (a "Transfer Affidavit and
Agreement") attached hereto as Exhibit K from the proposed Transferee,
representing and warranting, among other things, that such Transferee is a
Permitted Transferee, that it is not acquiring its Ownership Interest in
the Residual Certificate that is the subject of the proposed Transfer as a
nominee, trustee or agent for any Person that is not a Permitted
Transferee, that for so long as it retains its Ownership Interest in a
Residual Certificate, it will endeavor to remain a Permitted Transferee,
and that it has reviewed the provisions of this Section 4.2(f) and agrees
to be bound by them.
(iii) Notwithstanding the delivery of a Transfer Affidavit and
Agreement by a proposed Transferee under clause (ii) above, if a
Responsible Officer of the Trustee has actual knowledge that the proposed
Transferee is not a Permitted Transferee, no Transfer of an Ownership
Interest in a Residual Certificate to such proposed Transferee shall be
effected.
(iv) Each Person holding or acquiring any Ownership Interest in
a Residual Certificate shall agree (x) to require a Transfer Affidavit and
Agreement from any other Person to whom such Person attempts to transfer
its Ownership Interest in a Residual Certificate and (y) not to transfer
its Ownership Interest unless it provides a certificate (attached hereto as
Exhibit L) to the Trustee stating that, among other things, it has no
actual knowledge that such other Person is not a Permitted Transferee.
(v) Each Person holding or acquiring an Ownership Interest in a
Residual Certificate, by purchasing an Ownership Interest in such
Certificate, agrees to give the Trustee written notice that it is a "pass-
through interest holder" within the meaning of temporary Treasury
Regulation Section 1.67-3T(a)(2)(i)(A) immediately upon acquiring an
Ownership Interest in a Residual Certificate, if it is, or is holding an
Ownership Interest in a Residual Certificate on behalf of, a "pass-through
interest holder."
(vi) The Trustee will register the Transfer of any Residual
Certificate only if it shall have received the Transfer Affidavit and
Agreement. In addition, no Transfer of a Residual Certificate shall be
made unless the Trustee shall have received a representation letter from
the Transferee of such Certificate to the effect that such Transferee is a
Permitted Transferee and is not a "disqualified organization" (as defined
in Section 860E(e)(5) of the Code).
(vii) Any attempted or purported transfer of any Ownership
Interest in a Residual Certificate in violation of the provisions of this
Section 4.2 shall be absolutely null and void and shall vest no rights in
the purported
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transferee. If any purported transferee shall become a Holder of a
Residual Certificate in violation of the provisions of this Section 4.2,
then the last preceding Permitted Transferee shall be restored to all
rights as Holder thereof retroactive to the date of registration of
transfer of such Residual Certificate. The Trustee shall notify the
Servicer upon receipt of written notice or discovery by a Responsible
Officer that the registration of transfer of a Residual Certificate was not
in fact permitted by this Section 4.2. Knowledge shall not be imputed to
the Trustee with respect to an impermissible transfer in the absence of
such a written notice or discovery by a Responsible Officer. The Trustee
shall be under no liability to any Person for any registration of transfer
of a Residual Certificate that is in fact not permitted by this Section 4.2
or for making any payments due on such Certificate to the Holder thereof or
taking any other action with respect to such Holder under the provisions of
this Agreement so long as the transfer was registered after receipt of the
related Transfer Affidavit and Transfer Certificate. The Trustee shall be
entitled, but not obligated to recover from any Holder of a Residual
Certificate that was in fact not a Permitted Transferee at the time it
became a Holder or, at such subsequent time as it became other than a
Permitted Transferee, all payments made on such Residual Certificate at and
after either such time. Any such payments so recovered by the Trustee
shall be paid and delivered by the Trustee to the last preceding Holder of
such Certificate.
(viii) If any purported transferee shall become a Holder of a
Residual Certificate in violation of the restrictions in this Section 4.2,
then the Trustee or its designee shall have the right, without notice to
the Holder or any prior Holder of such Residual Certificate, to sell such
Residual Certificate to a purchaser selected by the Trustee or its designee
on such reasonable terms as the Trustee or its designee may choose. Such
purchaser may be the Trustee itself or any Affiliate of the Trustee. The
proceeds of such sale, net of commissions, expenses and taxes due, if any,
will be remitted by the Trustee to the last preceding purported transferee
of such Residual Certificate, except that in the event that the Trustee
determines that the Holder or any prior Holder of such Residual Certificate
may be liable for any amount due under this Section 4.2 or any other
provision of this Agreement, the Trustee may withhold a corresponding
amount from such remittance as security for such claim. The terms and
conditions of any sale under this subclause (viii) shall be determined in
the sole discretion of the Trustee or its designee, and it shall not be
liable to any Person having an Ownership Interest in a Residual Certificate
as a result of its exercise of such discretion.
(g) The Trustee shall make available to the Internal Revenue Service
and those Persons specified by the REMIC Provisions, all information necessary
to compute any tax imposed (A) as a result of the transfer of an ownership
interest in a Residual Certificate to any Person who is a Disqualified
Organization, including the information regarding "excess inclusions" of such
Residual Certificates required to be provided to the Internal Revenue Service
and certain Persons as described in Treasury Regulations Sections 1.860D-1(b)(5)
and
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1.860E-2(a)(5), and (B) as a result of any regulated investment company, real
estate investment trust, common trust fund, partnership, trust, estate or
organization described in Section 1381 of the Code holds an Ownership Interest
in a Residual Certificate having as among its record holders at any time any
Person who is a Disqualified Organization. The Trustee may charge and shall be
entitled to reasonable compensation for providing such information as may be
required from those Persons which may have had a tax imposed upon them as
specified in clauses (A) and (B) of this paragraph for providing such
information.
(h) The provisions of Section 4.2 may be modified, added to or
eliminated, provided that there shall have been delivered to the Trustee and the
Certificate Insurer an Opinion of Counsel to the effect that such modification
of, addition to or elimination of such provisions will not cause the Trust Fund
to cease to qualify as a REMIC and will not cause (x) the Trust Fund to be
subject to an entity-level tax caused by the Transfer of any Ownership Interest
in a Residual Certificate to a Person that is not a Permitted Transferee or (y)
a Person other than the prospective transferee to be subject to a REMIC-related
tax caused by the Transfer of an Ownership Interest in a Residual Certificate to
a Person that is not a Permitted Transferee.
(i) No transfer of a Class B Certificate, a Class C Certificate or a
Residual Certificate or any interest therein shall be made to any (a) employee
benefit plans (as defined in Section 3(3) of ERISA) subject to the provisions of
Title I of ERISA, (b) plans described in section 4975(e)(1) of the Code,
including individual retirement accounts or Keogh plans, (c) any entities whose
underlying assets include assets of a plan described in (a) or (b) above by
reason of such a plan's investment in such entities (each a "Plan"). Prior to
the earlier of (i) the date on which the Funding Period expires and (ii) the
date on which the U.S. Department of Labor amends Prohibited Transaction Class
Exemption 90-32 to permit the use thereunder of pre-funding accounts as
described herein, no transfer of a Class A Certificate shall be made to any
Plan. The Trustee and the Servicer shall require the prospective transferee of
any Class B Certificate, Class C Certificate or Residual Certificate to certify
(in the form of Exhibit M-1 hereto) that it is not a Plan. The Trustee and the
Servicer shall require the prospective transferee of any Class A Certificate (1)
if such proposed transfer shall occur during the period the proposed transfer of
the Class A Certificates is not permitted to be made to Plans (as described
above), to certify (in the form of Exhibit M-1 hereto) that it is not a Plan or
(2) if such proposed transfer shall occur after such period, to execute a
certificate in the form of Exhibit M-2 hereto.
(j) Subject to the restrictions set forth in this Agreement, upon
surrender for registration of transfer of any Certificate at the office or
agency of the Trustee located in New York, New York, the Trustee shall execute,
authenticate and deliver in the name of the designated transferee or
transferees, a new Certificate of the same Class and evidencing the same
Percentage Interest, and in any other case, the equivalent undivided beneficial
ownership interest in the Trust Fund and dated the date of authentication by the
Trustee. At the option of the Certificateholders, Certificates may be exchanged
for other Certificates of Authorized Denominations of a like aggregate undivided
beneficial ownership interest, upon surrender of the Certificates to be
exchanged at such office. Whenever any Certificates are so surrendered for
exchange, the Trustee shall execute, authenticate and deliver the
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Certificates which the Certificateholder making the exchange is entitled to
receive. No service charge shall be made for any transfer or exchange of
Certificates, but the Trustee may require payment of a sum sufficient to cover
any tax or governmental charge that may be imposed in connection with any
transfer or exchange of Certificates. All Certificates surrendered for transfer
and exchange shall be cancelled by the Trustee.
Section 4.3 Mutilated, Destroyed, Lost or Stolen Certificates. If
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(a) 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 (b) there is delivered to the Certificate Insurer and the
Trustee such security or indemnity as may reasonably be required by each of them
to save each of them harmless, then, in the absence of notice to the Certificate
Insurer and 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 tenor and representing an equivalent beneficial ownership
interest, but bearing a number not contemporaneously outstanding. Upon the
issuance of any new Certificate under this Section 4.3, the Trustee may require
the payment by the transferee Certificateholder of a sum sufficient to cover any
tax or other governmental charge that may be imposed in relation thereto and
their fees and expenses connected therewith. Any duplicate Certificate issued
pursuant to this Section 4.3 shall constitute complete and indefeasible evidence
of ownership in the Trust Fund, as if originally issued, whether or not the
mutilated, destroyed, lost or stolen Certificate shall be found at any time.
Section 4.4 Persons Deemed Owners. Prior to due presentation of a
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Certificate for registration of transfer and subject to the provisions of
Section 4.2 and Article XI, the Servicer, the Depositor, the Seller, the
Certificate Insurer and the Trustee may treat the Person in whose name any
Certificate is registered as the owner of such Certificate for the purpose of
receiving remittances pursuant to Section 6.5 and for all other purposes
whatsoever, and the Servicer, the Depositor, the Seller, the Certificate Insurer
and the Trustee shall not be affected by notice to the contrary.
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ARTICLE V
Administration and Servicing of the Mortgage Loans
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Section 5.1 Appointment of the Servicer. (a) Advanta Mortgage Corp.
---------------------------
USA agrees to act as the Servicer and to perform all servicing duties under this
Agreement subject to the terms hereof.
(b) The Servicer shall service and administer the Mortgage Loans on
behalf of the Trustee and the Certificate Insurer and shall have full power and
authority, acting alone or through one or more Subservicers, to do any and all
things in connection with such servicing and administration which it may deem
necessary or desirable. Without limiting the generality of the foregoing, the
Servicer, in its own name or the name of a Subservicer, may, and is hereby
authorized and empowered by the Trustee to, execute and deliver, on behalf of
itself, the Certificateholders 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, the insurance policies and accounts related thereto and the properties
subject to the Mortgages. Upon the execution and delivery of this Agreement,
and from time to time as may be required thereafter, the Trustee shall furnish
the Servicer or its Subservicers with any powers of attorney and such other
documents as may be necessary or appropriate to enable the Servicer to carry out
its servicing and administrative duties hereunder.
In servicing and administering the Mortgage Loans, the Servicer shall
employ procedures consistent with Accepted Servicing Practices and in a manner
consistent with recovery under any insurance policy required to be maintained by
the Servicer pursuant to this Agreement. The Servicer shall notify the
Certificate Insurer and the Seller of any material changes to its Accepted
Servicing Practices.
In servicing and administering the Mortgage Loans, the Servicer may,
in its sole discretion, and is hereby authorized to obtain and use consumer
reports, including but not limited to Credit Bureau Risk Scores, on behalf of
the Trust Fund for any lawful purpose, including but not limited to account
review and collection activities.
Costs incurred by the Servicer in effectuating the timely payment of
taxes and assessments on the property securing a Mortgage Note and foreclosure
costs may be added by the Servicer to the amount owing under such Mortgage Note
where the terms of such Mortgage Note so permit; provided, however, that the
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addition of any such cost shall not be taken into account for purposes of
calculating the principal amount of the Mortgage Note and the Mortgage Loan
secured by the Mortgage Note or distributions to be made to Certificateholders.
Such costs shall be recoverable by the Servicer pursuant to Section 5.9.
Notwithstanding any other provision of this Agreement, the Servicer shall at all
times service the Mortgage Loans in a manner consistent with the provisions of
this Section 5.1(b).
(c) Subject to Section 5.11, the Servicer is hereby authorized and
empowered to execute and deliver on behalf of the Trustee and each
Certificateholder, all instruments of satisfaction or cancellation, or of
partial or full release, discharge and all other comparable
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instruments, with respect to the Mortgage Loans and with respect to the
Mortgaged Properties. If reasonably required by the Servicer, the Trustee shall
execute any powers of attorney furnished to the Trustee by the Servicer and
other documents necessary or appropriate to enable the Servicer to carry out its
servicing and administrative duties under this Agreement.
(d) On and after such time as the Trustee receives the resignation
of, or notice of the removal of, the Servicer from its rights and obligations
under this Agreement, and with respect to resignation pursuant to Section 5.23,
after receipt by the Trustee and the Certificate Insurer of the Opinion of
Counsel required pursuant to Section 5.23, the Trustee or its designee approved
by the Certificate Insurer or other successor servicer approved by the
Certificate Insurer shall assume all of the rights and obligations of the
Servicer, subject to Section 7.2 hereof. The Servicer shall, upon request of
the Trustee but at the expense of the Servicer, deliver to the Trustee all
documents and records relating to the Mortgage Loans and an accounting of
amounts collected and held by the Servicer and otherwise use its best efforts to
effect the orderly and efficient transfer of servicing rights and obligations to
the assuming party.
(e) The Servicer shall deliver a list of Servicing Officers to the
Trustee and the Certificate Insurer by the Closing Date, which list may, from
time to time, be amended, modified or supplemented by the subsequent delivery to
the Trustee and the Certificate Insurer of any superseding list of Servicing
Officers.
Section 5.2 Subservicing Agreements Between the Servicer and
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Subservicers. (a) The Servicer may, subject to the prior written approval of
- ------------
the Certificate Insurer, enter into Subservicing Agreements with Subservicers
for the performance of servicing and administration of the Mortgage Loans. Each
Subservicer shall be either (i) a depository institution the accounts of which
are insured by the FDIC or (ii) another entity that engages in the business of
originating, acquiring or servicing mortgage loans, and in either case shall be
authorized to transact business in the state or states where the related
Mortgaged Properties it is to service are situated. In addition, each
Subservicer will obtain and preserve its qualifications to do business as a
foreign corporation in each jurisdiction in which such qualification is or shall
be necessary to protect the validity and enforceability of this Agreement, the
Certificates and any of the Mortgage Loans and to perform or cause to be
performed its duties under the related Subservicing Agreement which shall
provide that the Subservicer's rights shall automatically terminate upon the
termination, resignation or other removal of the Servicer under this Agreement.
Each account used by any Subservicer for the deposit of payments on any of the
Mortgage Loans shall be an Eligible Account.
(b) Notwithstanding any Subservicing Agreement or arrangement with a
collection agency, any of the provisions of this Agreement relating to
agreements or arrangements between the Servicer and a Subservicer or any
collection agency or reference to actions taken through a Subservicer, a
collection agency or otherwise, the Servicer shall remain obligated and
primarily liable to the Trustee, the Certificate Insurer and the
Certificateholders for the servicing and administering of the Mortgage Loans in
accordance with the provisions of this Agreement without diminution of such
obligation or liability by virtue of such Subservicing Agreements or
arrangements with a Subservicer or any collection
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agency or by virtue of indemnification from the Subservicer or any collection
agency and to the same extent and under the same terms and conditions as if the
Servicer alone were servicing and administering the Mortgage Loans. For
purposes of this Agreement, the Servicer shall be deemed to have received
payments on Mortgage Loans when the Subservicer or any collection agency, as the
case may be, has received such payments.
In the event the Servicer shall for any reason no longer be the
Servicer (including by reason of an Event of Default), the Trustee or its
designee may, with the prior written consent of the Certificate Insurer, or
shall, at the direction of the Certificate Insurer, either (i) assume all of the
rights and obligations of the Servicer under each Subservicing Agreement that
the Servicer may have entered into or (ii) notwithstanding anything to the
contrary contained in each such Subservicing Agreement, terminate the related
Subservicer without being required to pay any fee in connection therewith.
Section 5.3 Collection of Certain Mortgage Loan Payments; Collection
--------------------------------------------------------
Account. (a) The Servicer shall use its best efforts to collect all payments
- -------
called for under the terms and provisions of the Mortgage Loans, and shall, to
the extent such procedures shall be consistent with this Agreement and any
applicable primary mortgage insurance policy, follow such collection procedures
as shall constitute Accepted Servicing Practices. The Servicer may utilize the
services of any collection agencies in connection with its collection efforts.
The costs of any such collection agency shall be a "Servicing Advance."
The Servicer shall establish and maintain in the name of the Trustee
the Collection Account (collectively, the "Collection Account"), in trust for
the benefit of the Holders of the Certificates and the Certificate Insurer. The
Servicer shall promptly provide notice to the Certificate Insurer, the Trustee
and each Rating Agency of any creation and establishment of a Collection Account
hereunder. The Collection Account shall be established and maintained as an
Eligible Account.
The Servicer shall deposit in the Collection Account any amounts
representing Monthly Payments on the Mortgage Loans due or to be applied as of a
date after the Cut-Off Date, and thereafter, on a daily basis within two
Business Days of receipt (except as otherwise permitted herein), the following
payments and collections received or made by it (other than in respect of
principal of and interest on the Mortgage Loans due on or before the Cut-Off
Date):
(i) all payments received after the Cut-Off Date on account of
principal on the Mortgage Loans and all Principal Prepayments, Curtailments
and all Net REO Proceeds collected after the Cut-Off Date;
(ii) all payments received after the Cut-Off Date on account of
interest on the Mortgage Loans (other than payments of interest that
accrued on each Mortgage Loan up to and including the Due Date immediately
preceding the Cut-Off Date);
(iii) all Net Liquidation Proceeds;
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(iv) all Insurance Proceeds;
(v) all Released Mortgaged Property Proceeds;
(vi) any amounts payable in connection with the repurchase of
any Mortgage Loan and the amount of any Substitution Adjustment pursuant to
Sections 2.4 and 3.4 hereof; and
(vii) any amount expressly required to be deposited in the
Collection Account in accordance with certain provisions of this Agreement,
including, without limitation amounts in respect of the termination of the
Trust Fund, and amounts referenced in Sections 2.4(b), 3.4, 5.3, 5.6, and
6.6(d) of this Agreement;
provided, however, that the Servicer shall be entitled, at its election to pay
- -------- -------
to itself the applicable Servicing Fee. All other amounts shall be deposited in
the Collection Account not later than the second Business Day following the day
of receipt by the Servicer.
The Servicer may direct, in writing, the institution maintaining the
Collection Account to invest the funds in the Collection Account, only in
Permitted Investments. No Permitted Investment shall be sold or disposed of at
a gain prior to maturity unless the Servicer has obtained an Opinion of Counsel
delivered to the Trustee and the Certificate Insurer (at the Servicer's expense)
that such sale or disposition will not cause the Trust Fund to be subject to the
tax on income from prohibited transactions imposed by Code Section 860F(a)(1),
otherwise subject the Trust Fund to tax or cause the Trust Fund to fail to
qualify as a REMIC. All income (other than any gain from a sale or disposition
of the type referred to in the preceding sentence) realized from any such
Permitted Investment shall be for the benefit of the Servicer as additional
servicing compensation. The amount of any losses incurred in respect of any
such investments shall be deposited in the Collection Account by the Servicer
out of its own funds immediately as realized.
The foregoing requirements for deposit in the Collection Account shall
be exclusive, it being understood and agreed that, without limiting the
generality of the foregoing, payments in the nature of those described in the
last paragraph of Section 5.13 and payments in the nature of prepayment charges,
late payment charges or assumption fees need not be deposited by the Servicer in
the Collection Account. Notwithstanding any provision herein to the contrary,
if the Servicer deposits in the Collection Account any amount not required to be
deposited therein, it may at any time withdraw such amount from the Collection
Account. All funds deposited by the Servicer in the Collection Account shall be
held therein for the account of the Trustee in trust for the Certificateholders
and the Certificate Insurer until disbursed in accordance with Section 6.1 or
withdrawn in accordance with Section 5.4.
(b) Prior to the time of their required deposit in the Collection
Account, all amounts required to be deposited therein may be deposited in an
account in the name of Servicer, provided that such account is an Eligible
Account. The Servicer hereby
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acknowledges all such related funds shall be held in trust for the benefit of
the Certificateholders and the Certificate Insurer pursuant to the terms hereof.
(c) The Collection Account may, upon written notice by the Trustee to
the Certificate Insurer, be transferred by the Servicer to a different
depository so long as such transfer is to an Eligible Account.
Section 5.4 Permitted Withdrawals from the Collection Account. The
-------------------------------------------------
Servicer may, from time to time, make withdrawals from the Collection Account
for the following purposes, without duplication:
(a) to pay to itself from any funds in the Collection Account any
accrued and unpaid Servicing Fees and unreimbursed Delinquency Interest Advances
and Servicing Advances, provided, however, that Servicing Advances may only be
-------- -------
reimbursed from late collections on the related Mortgage Loan, Insurance
Proceeds and Liquidation Proceeds;
(b) to reimburse itself for any Delinquency Interest Advances or
Servicing Advances determined in good faith to have become Nonrecoverable
Advances, such reimbursement to be made from any funds in the Collection
Account;
(c) to withdraw from the Collection Account any Preference Amount
received from a Mortgagor;
(d) to withdraw any funds deposited in the Collection Account that
were not required to be deposited therein;
(e) to withdraw from the Collection Account any funds needed to pay
itself Servicing Compensation pursuant to Section 5.13 hereof to the extent not
retained or paid pursuant to Section 5.3, 5.4 or 5.13;
(f) to withdraw from the Collection Account to pay to the Seller with
respect to each Mortgage Loan or property acquired in respect thereof that has
been repurchased or replaced pursuant to Section 2.4 or 3.4 or to pay to itself
with respect to each Mortgage Loan or property acquired in respect thereof that
has been purchased pursuant to Section 8.1, all amounts received thereon and not
required to be distributed as of the date on which the related repurchase or
purchase price or Principal Balance, as the case may be, was determined as a
result of such repurchase or replacement;
(g) to withdraw from the Collection Account to pay to the Seller with
respect to each Mortgage Loan any interest accrued and unpaid on such Mortgage
Loan prior to the Cut-Off Date, to the extent received;
(h) to transfer funds from the Collection Account necessary to make
deposits to the Certificate Account (which shall include the Trustee Fee) in the
amounts and in the manner provided for herein;
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(i) to pay itself any interest earned on or investment income earned
with respect to funds in the Collection Account;
(j) to reimburse itself or the Depositor pursuant to 11.1; and
(k) to clear and terminate the Collection Account upon the
termination of this Agreement.
Section 5.5 Payment of Taxes, Insurance and Other Charges. With
---------------------------------------------
respect to each Mortgage Loan as to which the Servicer maintains escrow
accounts, the Servicer shall maintain accurate records reflecting the status of
ground rents, taxes, assessments, water rates and other charges which are or may
become a lien upon the Mortgaged Property and the status of primary mortgage
guaranty insurance premiums, if any, and casualty insurance coverage and shall
obtain, from time to time, all bills for the payment of such charges (including
renewal premiums) and shall effect payment thereof prior to the applicable
penalty or termination date and at a time appropriate for securing maximum
discounts allowable, employing for such purpose deposits of the Mortgagor in any
escrow account which shall have been estimated and accumulated by the Servicer
in amounts sufficient for such purposes, as allowed under the terms of the
Mortgage. To the extent that a Mortgage does not provide for escrow payments,
the Servicer shall, if it has received notice of a default or deficiency,
monitor such payments to determine if they are made by the Mortgagor.
Section 5.6 Maintenance of Casualty Insurance. With respect to each
---------------------------------
Mortgage Loan, the Servicer shall maintain accurate records reflecting casualty
insurance coverage. For each Mortgage Loan, the Servicer shall maintain or
cause to be maintained, to the extent required by the related Mortgage Loan to
be maintained by the Mortgagor, fire and casualty insurance with a standard
mortgagee clause and extended coverage in an amount which is not less than the
replacement value of the improvements securing such Mortgage Loan or the unpaid
principal balance of such Mortgage Loan, whichever is less. If, upon
origination of the Mortgage Loan, the Mortgaged Property was in an area
identified in the Federal Register by the Federal Emergency Management Agency as
having special flood hazards (and such flood insurance has been made available)
the Servicer will cause to be maintained, to the extent required by the related
Mortgage Loan to be maintained by the Mortgagor, a flood insurance policy
meeting the requirements of the current guidelines of the Federal Insurance
Administration with a generally acceptable insurance carrier, in an amount
representing coverage not less than the least of (i) the unpaid principal
balance of the Mortgage Loan, (ii) the full insurable value of the Mortgaged
Property and (iii) the maximum amount of insurance available under the Flood
Disaster Protection Act of 1973. With respect to each Mortgage Loan, the
Servicer shall also maintain fire insurance with extended coverage and, if
applicable, flood insurance on REO Property in an amount which is at least equal
to the lesser of (i) the maximum insurable value of the improvements which are a
part of such property and (ii) the principal balance owing on such Mortgage Loan
at the time of such foreclosure or grant of deed in lieu of foreclosure. It is
understood and agreed that such insurance shall be with insurers approved by the
Servicer and that no earthquake or other additional insurance is to be required
of any Mortgagor or to be maintained on property acquired in respect of a
defaulted loan, other than pursuant to such applicable laws and regulations as
shall at any time be in force and as shall require such additional insurance.
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Pursuant to Section 5.3, any amounts collected by the Servicer under any
insurance policies maintained pursuant to this Section 5.6 (other than amounts
to be applied to the restoration or repair of the related Mortgaged Property or
released to the Mortgagor in accordance with Accepted Servicing Practices and
applicable law) shall be deposited into the Collection Account, subject to
withdrawal pursuant to Section 5.4. Any cost incurred by the Servicer in
maintaining any such insurance shall be added to the amount owing under the
Mortgage Loan where the terms of the Mortgage Loan so permit; provided, however,
-------- -------
that the addition of any such cost shall not be taken into account for purposes
of calculating the principal amount of the Mortgage Note or the Mortgage Loan
secured by the Mortgage Note or the distributions to be made to the
Certificateholders. Such costs shall be recoverable by the Servicer pursuant to
Section 5.4. In the event that the Servicer shall obtain and maintain a blanket
policy issued by an insurer that is acceptable to FNMA or FHLMC, insuring
against hazard losses on all of the Mortgage Loans, it shall conclusively be
deemed to have satisfied its obligation as set forth in the second and third
sentences of this Section 5.6, it being understood and agreed that such policy
may contain a deductible clause, in which case the Servicer shall, in the event
that there shall not have been maintained on the related mortgaged or acquired
property an insurance policy complying with the second and third sentences of
this Section 5.6 and there shall have been a loss which would have been covered
by such a policy had it been maintained, be required to deposit from its own
funds into the Collection Account the amount not otherwise payable under the
blanket policy because of such deductible clause.
Section 5.7 Servicer Account. In addition to the Collection Account,
----------------
the Servicer shall be permitted to establish and maintain one or more Servicer
Accounts (collectively, the "Servicer Account"), which shall be an Eligible
Account, in which the Servicer may deposit all payments by, and collections
from, the Mortgagors received in connection with the Mortgage Loans prior to the
Servicer's deposit of all such funds required to be deposited into the
Collection Account. Withdrawals may be made out of such collections in the
Servicer Account to reimburse the Servicer for any required advances not
otherwise made from amounts on deposit in the Collection Account or for any
refunds made by the Servicer of any sums determined to be overages, or to pay
any interest owed to Mortgagors on such account to the extent required by law,
and in order to terminate and clear the Servicer Account upon the termination of
this Agreement upon the termination of the Trust Fund.
Section 5.8 Fidelity Bond; Errors and Omissions Policy. (a) The
------------------------------------------
Servicer shall maintain with a responsible company, and at its own expense, a
blanket fidelity bond (a "Fidelity Bond") and an errors and omissions insurance
policy (an "Errors and Omissions Policy"), in a minimum amount acceptable to
FNMA or otherwise in an amount as is commercially available at a cost that is
not generally regarded as excessive by industry standards, with broad coverage
on all officers, employees or other persons acting in any capacity requiring
such persons to handle funds, money, documents or papers relating to the
Mortgage Loans ("Servicer Employees"). Any such fidelity bond and errors and
omissions insurance shall protect and insure the Servicer against losses,
including losses resulting from forgery, theft, embezzlement, fraud, errors and
omissions and negligent acts of such Servicer Employees. Such fidelity bond
shall also protect and insure the Servicer against losses in connection with the
release or satisfaction of a Mortgage Loan without having obtained
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payment in full of the indebtedness secured thereby. No provision of this
Section 5.8 requiring such fidelity bond and errors and omissions insurance
shall diminish or relieve the Servicer from its duties and obligations as set
forth in this Agreement.
(b) The Servicer shall be deemed to have complied with this provision
if one of its respective Affiliates has such a Fidelity Bond and Errors and
Omissions Policy and, by the terms of such fidelity bond and errors and omission
policy, the coverage afforded thereunder extends to the Servicer and the
Servicer Employees. The Servicer shall cause each and every Subservicer for it
to maintain a policy of insurance covering errors and omissions and a fidelity
bond which would meet the requirements of Section 5.8(a) hereof.
Section 5.9 Collection of Taxes, Assessments and Other Items. The
------------------------------------------------
Servicer shall deposit all payments by Mortgagors for taxes, assessments,
primary mortgage or hazard insurance premiums or comparable items in the
Servicer Account. Withdrawals from the Servicer Account may be made to effect
payment of taxes, assessments, primary mortgage or hazard insurance premiums or
comparable items, to reimburse the Servicer out of related collections for any
advances made in the nature of any of the foregoing, to refund to any Mortgagors
any sums determined to be overages, or to pay any interest owed to Mortgagors on
such account to the extent required by law or to clear and terminate the
Servicer Account at the termination of this Agreement upon the termination of
the Trust Fund. The Servicer shall advance the payments referred to in the
first sentence of this Section 5.9 that are not timely paid by the Mortgagors on
the date when the tax, assessment, premium or other cost for which such payment
is intended is due, but the Servicer shall be required to so advance only to the
extent that such advances, in the good faith judgment of the Servicer, will be
recoverable by the Servicer pursuant to Section 5.4 out of Liquidation Proceeds,
Insurance Proceeds or otherwise.
Section 5.10 Enforcement of Due-on-Sale Clauses; Assumption
----------------------------------------------
Agreements. In any case in which a Mortgaged Property is about to be conveyed
- ----------
by the Mortgagor (whether by absolute conveyance or by contract of sale, and
whether or not the Mortgagor remains liable thereon) and the Servicer has
knowledge of such prospective conveyance, the Servicer shall effect assumptions
in accordance with the terms of any due-on-sale provision contained in the
related Mortgage Note or Mortgage. The Servicer shall enforce any due-on-sale
provision contained in such Mortgage Note or Mortgage to the extent the
requirements thereunder for an assumption of the Mortgage Loan have not been
satisfied to the extent permitted under the terms of the related Mortgage Note,
unless such provision is not exercisable under applicable law and governmental
regulations or in the Servicer's judgment, such exercise is reasonably likely to
result in legal action by the Mortgagor, or such conveyance is in connection
with a permitted assumption of the related Mortgage Loan. Subject to the
foregoing, the Servicer is authorized to take or enter into an assumption
agreement from or with the Person to whom such property is about to be conveyed,
pursuant to which such person becomes liable under the related Mortgage Note
and, unless prohibited by applicable state law, the Mortgagor remains liable
thereon, provided that the Mortgage Interest Rate with respect to such Mortgage
Loan shall remain unchanged. The Servicer is also authorized to release the
original Mortgagor from liability upon the Mortgage Loan and substitute the new
Mortgagor as obligor thereon. In connection with such assumption or
substitution, the Servicer shall apply such underwriting standards and follow
such practices
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and procedures as shall be normal and usual for mortgage loans similar to the
Mortgage Loans and as it applies to mortgage loans owned solely by it. 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 Mortgage File and shall, for all purposes, be considered
a part of such Mortgage File to the same extent as all other documents and
instruments constituting a part thereof. In connection with any such assumption
or substitution agreement, the Mortgage Interest Rate of the related Mortgage
Note and the payment terms shall not be changed. Any fee collected by the
Servicer for entering into an assumption or substitution of liability agreement
will be retained by the Servicer as 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 conveyance by the
Mortgagor of the property subject to the Mortgage or any assumption of a
Mortgage Loan by operation of law which the Servicer in good faith determines it
may be restricted by law from preventing, for any reason whatsoever, or if the
exercise of such right would impair or threaten to impair any recovery under any
applicable insurance policy or, in the Servicer's judgment, be reasonably likely
to result in legal action by the Mortgagor.
Section 5.11 Realization upon Defaulted Mortgage Loans. (a) In the
-----------------------------------------
event that any payment due under any Mortgage Loan is not paid when the same
becomes due and payable, or in the event the Mortgagor fails to perform any
other covenant or obligation under the Mortgage Loan and such failure continues
beyond any applicable grace period, the Servicer shall take such action as it
shall deem to be in the best interest of the Certificateholders and the
Certificate Insurer. With respect to any Charged-off Loan as to which no
satisfactory arrangements can be made for collection of delinquent payments in
accordance with the provisions of Section 5.1, and in accordance with the
standard of care specified in Section 5.1, in the event that in the Servicer's
reasonable judgment a foreclosure or the taking of title to a related Mortgaged
Property is likely to result in a positive economic benefit to the Trust Fund by
creating Net Liquidation Proceeds, the Servicer shall foreclose upon or
otherwise comparably effect the ownership thereof in the name of Trustee for the
benefit of the Certificateholders and the Certificate Insurer. The Servicer
shall give the Trustee and the Certificate Insurer notice of the election of
remedies made pursuant to this Section 5.11. In connection with any foreclosure
or other conversion, the Servicer shall exercise collection and foreclosure
procedures with the same degree of care and skill as it customarily employs and
exercises in collecting and foreclosing on mortgage loans for its own account
and in accordance with accepted collection and foreclosure practices of prudent
lending institutions and servicers of loans similar to the Mortgage Loans and
giving due consideration to the Certificateholders' and the Certificate
Insurer's reliance on the Servicer. Any amounts advanced in connection with
such foreclosure or other action shall constitute "Servicing Advances". The
foregoing is subject to the proviso that the Servicer shall not expend its own
funds in connection with any foreclosure or to restore any damaged property
unless it shall determine that (i) such foreclosure and/or restoration will
increase the proceeds of liquidation of the Mortgage Loan to Certificateholders
after reimbursement to itself for such expenses and (ii) such expenses will be
recoverable to it through Liquidation Proceeds
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(respecting which it shall reimburse itself for such expense prior to the
deposit in the Collection Account of such proceeds). The Servicer shall be
entitled to reimbursement of the Servicing Fee and other amounts due it, if any,
to the extent, but only to the extent, that withdrawals from the Collection
Account with respect thereto are permitted under Section 5.4.
In the event that title to any Mortgaged Property is acquired in
foreclosure or by deed in lieu of foreclosure (an "REO Property"), the deed or
certificate of sale shall be issued to the Trustee, or to the Servicer in the
name of the Trustee on behalf of the Trustee and the Certificateholders and the
Certificate Insurer. Notwithstanding any such acquisition of title and
cancellation of the related Mortgage Loan, such REO Mortgage Loan shall be
considered to be a Mortgage Loan held in the Trust Fund until such time as the
related Mortgaged Property shall be sold and such REO Mortgage Loan becomes a
Liquidated Loan. Consistent with the foregoing, for purposes of all
calculations hereunder, so long as such REO Mortgage Loan shall be considered to
be an Outstanding Mortgage Loan:
(i) It shall be assumed that, notwithstanding that the
indebtedness evidenced by the related Mortgage Note shall have been
discharged, such Mortgage Note and the related amortization schedule in
effect at the time of any such acquisition of title (after giving effect to
any previous Curtailments and before any adjustment thereto by reason of
any bankruptcy or similar proceeding or any moratorium or similar waiver or
grace period) shall be assumed to remain in effect, except that such
schedule shall be adjusted to reflect the application of Net REO Proceeds
received in any month pursuant to the succeeding clause.
(ii) Net REO Proceeds received in any month shall be deemed to
have been received first in payment of the accrued interest that remained
unpaid on the date that such Mortgage Loan became an REO Mortgage Loan,
with the excess thereof, if any, being deemed to have been received in
respect of the delinquent principal installments that remained unpaid on
such date. Thereafter, Net REO Proceeds received in any month shall be
applied to the payment of installments of principal and accrued interest on
such Mortgage Loan deemed to be due and payable in accordance with the
terms of such Mortgage Note and such amortization schedule. If such Net
REO Proceeds exceed the then Unpaid REO Amortization, the excess shall be
treated as a Curtailment received in respect of such Mortgage Loan.
In the event that the Trust Fund acquires any Mortgaged Property as
aforesaid or otherwise in connection with a default or imminent default on a
Mortgage Loan, such Mortgaged Property shall be disposed of by or on behalf of
the Trust Fund within two years after its acquisition thereby unless (a) the
Servicer shall have provided to the Trustee and the Certificate Insurer an
Opinion of Counsel (at the expense of the Trust Fund) to the effect that the
holding by the Trust Fund of such Mortgaged Property subsequent to two years
after its acquisition (and specifying the period beyond such two-year period for
which the Mortgaged Property may be held) will not cause the Trust Fund to be
subject to the tax on prohibited transactions imposed by Code Section
860F(a)(1), otherwise subject the Trust Fund to tax or
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cause the Trust Fund to fail to qualify as a REMIC at any time that any
Certificates are outstanding, or (b) the Servicer or the Trustee (at the Trust
Fund's expense) shall have applied for, at least 60 days prior to the expiration
of such two-year period, an extension of such two-year period in the manner
contemplated by Code Section 856(e)(3), in which case the two-year period shall
be extended by the applicable period. The Servicer shall further ensure that
the Mortgaged Property is administered so that it constitutes "foreclosure
property" within the meaning of Code Section 860G(a)(8) at all times, that the
sale of such property does not result in the receipt by the Trust Fund of any
income from non-permitted assets as described in Code Section 860F(a)(2)(B), and
that the Trust Fund does not derive any "net income from foreclosure property"
within the meaning of Code Section 860G(c)(2) with respect to such property.
Any REO Disposition shall be for cash only (unless changes in the
REMIC Provisions made subsequent to the Startup Date allow for a sale for other
consideration).
In lieu of foreclosing upon any defaulted Mortgage Loan, the Servicer
may, in its discretion, permit the assumption of such Mortgage Loan if, in the
Servicer's judgment, such default is unlikely to be cured and if the assuming
borrower satisfies the Servicer's good faith underwriting guidelines with
respect to mortgage loans owned by the Servicer. In connection with any such
assumption, the Mortgage Interest Rate of the related Mortgage Note and the
payment terms shall not be changed. Any fee collected by the Servicer for
entering into an assumption agreement will be retained by the Servicer as
servicing compensation. Alternatively, the Servicer may encourage the
refinancing of any defaulted Mortgage Loan by the Mortgagor.
Notwithstanding the foregoing, prior to instituting foreclosure
proceedings or accepting a deed-in-lieu of foreclosure with respect to any
Mortgaged Property, the Servicer shall make, or cause to be made, inspection of
the Mortgaged Property in accordance with the Accepted Servicing Practices and,
with respect to environmental hazards, such procedures as are required by the
provisions of the FNMA's selling and servicing guide applicable to single-family
homes and in effect on the date hereof. The Servicer shall be entitled to rely
upon the results of any such inspection made by others. In cases where the
inspection reveals that such Mortgaged Property is potentially contaminated with
or affected by hazardous wastes or hazardous substances, the Servicer shall
promptly give written notice of such fact to the Certificate Insurer, the
Trustee and each Class A Certificateholder. The Servicer shall not proceed with
any foreclosure proceedings or accept a deed in lieu of foreclosure for such
Mortgaged Property without the prior written consent of the Certificate Insurer.
In addition to the foregoing, the Holder of the Subordinate
Certificates may purchase from the Trust Fund any Charged-off Loan (or any
Mortgage Loan which will imminently become a Charged-off Loan) by depositing in
the Certificate Account an amount equal to the Loan Repurchase Price; provided,
--------
that the Holder of the Subordinate Certificates may only make such repurchases
if, following such repurchase, the aggregate Loan Repurchase Price of all such
repurchased Mortgage Loans does not exceed 10% of the Maximum Collateral Amount.
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(b) Upon becoming aware that a first lien mortgage loan relating to
any Mortgage Loan has come into default or of any action that the related
mortgagee has taken or may take in respect thereof, the Servicer shall,
consistent with the REMIC Provisions, take such actions as it shall deem
necessary or advisable, as shall be normal and usual in its general mortgage
servicing activities and as shall be required or permitted by Accepted Servicing
Practices. In taking such actions, the Servicer may advance such funds as are
necessary to cure such default, maintain such first lien mortgage loan relating
to any Mortgage Loan, acquire the related mortgagee's interest therein or redeem
the related Mortgaged Property. The Servicer, however, shall not be required to
expend its own funds in connection therewith unless it shall determine that such
expense will be recoverable to it. All such expenses shall be included as
Liquidation Expenses pursuant to the definition thereof, and shall be
reimbursable from the related Liquidation Proceeds in accordance with Section
5.4.
Section 5.12 Trustee to Cooperate; Release of Mortgage Files. (a)
-----------------------------------------------
Upon the payment in full of any Mortgage Loan, or the receipt by the Servicer of
a notification that payment in full will be escrowed in a manner customary for
such purposes, the Servicer shall (i) immediately deliver to the Trustee a
notice substantially in the form of the Request for Release of Documents
attached hereto as Exhibit G (which request shall include a statement to the
effect that all amounts received in connection with such payment which are
required to be deposited in the Collection Account pursuant to Section 5.3 have
been or shall be so deposited) and executed by a Servicing Officer and (ii)
request delivery to it of the Mortgage File. Upon receipt of such Request for
Release of Documents, the Trustee, or the Custodian on its behalf, shall
promptly release the related Mortgage File to the Servicer. Upon any such
payment in full, the Servicer is authorized to give, as agent for the Trustee
and the mortgagee under the Mortgage which secured the Mortgage Loan, an
instrument of satisfaction (or assignment of mortgage without recourse)
regarding the property subject 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 such payment, it being
understood and agreed that no expenses incurred in connection with such
instrument of satisfaction or assignment, as the case may be, shall be
chargeable to the Collection Account. In connection therewith, the Trustee
shall execute and return to the Servicer any required power of attorney provided
to the Trustee by the Servicer and other required documentation in accordance
with Section 5.1(b). From time to time and as appropriate for the servicing or
foreclosure of any Mortgage Loan and in accordance with Accepted Servicing
Practices, the Trustee shall, upon request of the Servicer and delivery to the
Trustee of a Request for Release of Documents signed by a Servicing Officer,
release, or cause the Custodian to release, the related Mortgage File to the
Servicer and shall execute such documents as shall be necessary to the
prosecution of any such proceedings. Such Request for Release of Documents
shall obligate the Servicer to return the Mortgage File to the Trustee when the
need therefor by the Servicer no longer exists unless the Mortgage Loan shall be
liquidated, in which case, upon receipt of a certificate of a Servicing Officer
similar to the Request for Release of Documents or an additional Request for
Release of Documents hereinabove specified, the Mortgage File shall be delivered
by the Trustee to the Servicer.
(b) Each Request for Release of Documents may be delivered to the
Trustee (i) via mail or courier, (ii) via facsimile or (iii) by such other
means, including, without
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limitation, electronic or computer readable medium, as the Servicer and the
Trustee shall mutually agree. The Trustee shall promptly release the related
Mortgage File(s) within five (5) to seven (7) Business Days of receipt of a
properly completed Request for Release of Documents pursuant to clauses (i),
(ii) or (iii) above or such shorter period as may be agreed upon by the Servicer
and the Trustee. Receipt of a Request for Release of Documents pursuant to
clauses (i), (ii) or (iii) above shall be authorization to the Trustee to
release such Mortgage Files, provided the Trustee has determined that such
Request for Release of Documents has been executed, with respect to clauses (i)
or (ii) above, or approved, with respect to clause (iii) above, by a Servicing
Officer of the Servicer, and so long as the Trustee complies with its duties and
obligations under this Agreement. If the Trustee is unable to release the
Mortgage Files within the time frames previously specified, the Trustee shall
immediately notify the Servicer indicating the reason for such delay, but in no
event shall such notification be later than five Business Days after receipt of
a Request for Release of Documents. If the Servicer is required to pay
penalties or damages due solely to the Trustee's negligent failure to release
the related Mortgage File or the Trustee's negligent failure to execute and
release documents in a timely manner, the Trustee shall be liable for such
penalties or damages.
On each day that the Servicer remits to the Trustee Requests for
Release of Documents pursuant to clauses (ii) or (iii) above, the Servicer shall
also submit to the Trustee a summary of the total amount of such Request for
Release of Documents requested on such day by the same method as described in
such clauses (ii) or (iii) above.
Section 5.13 Servicing Fee; Servicing Compensation. (a) The Servicer
-------------------------------------
shall be entitled, to pay itself the Servicing Fee pursuant to Section 5.3.
The aggregate Servicing Fee is reserved for the administration of the
Trust Fund and, in the event of replacement of the Servicer as servicer of the
Mortgage Loans, for the payment of other expenses related to such replacement.
The Trustee, in its capacity as successor servicer, shall not be liable for the
costs of replacement of a predecessor servicer, unless the Trustee is the
predecessor servicer.
The aggregate Servicing Fee shall be offset as provided in Section
5.19. The Servicer shall be required to pay all expenses incurred by it in
connection with its servicing activities hereunder (including maintenance of the
hazard insurance required by Section 5.5) and shall not be entitled to
reimbursement therefor except as specifically provided herein.
(b) Servicing compensation in the form of assumption fees, late
payment charges, tax service fees, fees for statement of account or payoff of
the Mortgage Loan (to the extent permitted by applicable law) or otherwise shall
be retained by the Servicer and are not required to be deposited in the
Collection Account.
Section 5.14 Reports to the Trustee; Collection Account Statements.
-----------------------------------------------------
Not later than 15 days after each Distribution Date, the Servicer shall provide
to the Trustee, the Certificate Insurer, the Underwriter and the Depositor a
statement, certified by a Servicing Officer, setting forth the status of the
Collection Account as of the close of business on the last day of the
immediately preceding calendar month, stating that all distributions required
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by this Agreement to be made by the Servicer on behalf of the Trustee have been
made (or if any required distribution has not been made by the Servicer,
specifying the nature and status thereof) and showing, for the period covered by
such statement, the aggregate of deposits into and withdrawals from the
Collection Account for each category of deposit specified in Section 5.3 and
each category of withdrawal specified in Section 5.4 and the aggregate of
deposits into the Certificate Account specified in Section 6.1(c). Copies of
such statement shall be provided by the Trustee to any Certificateholder upon
request.
Section 5.15 Annual Statement as to Compliance. The Servicer will
---------------------------------
deliver to the Trustee, the Certificate Insurer, the Underwriter, and each of
the Rating Agencies not later than the last day of the fifth month subsequent to
the end of the Servicer's fiscal year beginning in 1997, an Officers'
Certificate stating as to each signer thereof, that (i) a review of the
activities of the Servicer during the preceding calendar year and of its
performance under this Agreement has been made under such officer's supervision,
and (ii) to the best of such officer's knowledge, based on such review, the
Servicer has fulfilled all its obligations under this Agreement throughout such
year, or if there has been a default in the fulfillment of any such obligation,
specifying each such default known to such officer and the nature and status
thereof and (iii) the Servicer has in full force and effect a blanket fidelity
bond and an errors and omissions insurance policy in accordance with the terms
and requirements of Section 5.8 hereof. Such Officers' Certificate shall be
accompanied by the statement described in Section 5.16 of this Agreement.
Copies of such statement shall, upon request, be provided to any
Certificateholder by the Servicer, or by the Trustee at the Servicer's expense
if the Servicer shall fail to provide such copies.
Section 5.16 Annual Independent Public Accountants' Servicing Report.
-------------------------------------------------------
Not later than the last day of the fifth month subsequent to the end of the
Servicer's fiscal year, beginning in 1997, the Servicer, at its expense, shall
cause a firm of nationally recognized independent public accountants to furnish
a statement to the Trustee, the Certificate Insurer, the Underwriter, each of
the Rating Agencies, each Certificateholder to the effect that, on the basis of
an examination of certain documents and records relating to the servicing of the
mortgage loans being serviced by the Servicer under pooling and servicing
agreements similar to this Agreement (which agreements shall be described in a
schedule to such statement), conducted substantially in compliance with the
Uniform Single Attestation Program for Mortgage Bankers, such firm is of the
opinion that such servicing has been conducted in compliance with this
Agreement. Copies of such statement shall, upon request, be provided to
Certificateholders by the Servicer, or by the Trustee at the Servicer's expense
if the Servicer shall fail to provide such copies. For purposes of such
statement, such firm may conclusively presume that any pooling and servicing
agreement which governs mortgage pass-through certificates offered by the
Depositor (or any predecessor or successor thereto) in a registration statement
under the Securities Act of 1933, as amended, is similar to this Agreement,
unless such other pooling and servicing agreement expressly states otherwise.
Section 5.17 [Reserved].
Section 5.18 Reports to be Provided by the Servicer. The Servicer
--------------------------------------
agrees to make available on a reasonable basis to the Certificate Insurer a
knowledgeable financial or accounting officer for the purpose of answering
reasonable questions respecting recent
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developments affecting the Servicer or the financial statements of the Servicer
and to permit the Certificate Insurer to inspect the Servicer's servicing
facilities during normal business hours for the purpose of satisfying the
Certificate Insurer that the Servicer has the ability to service the Mortgage
Loans in accordance with this Agreement.
Section 5.19 Adjustment of Servicing Compensation in Respect of
--------------------------------------------------
Prepaid Mortgage Loans. The aggregate amount of the Servicing Fees that the
- ----------------------
Servicer shall be entitled to receive with respect to all of the Mortgage Loans
and each Distribution Date shall be offset on such Distribution Date by an
amount equal to the aggregate Prepayment Interest Shortfall with respect to all
Mortgage Loans which were subjects of Principal Prepayments during the
Collection Period applicable to such Distribution Date. The amount of any
offset against the aggregate Servicing Fee with respect to any Distribution Date
under this Section 5.19 shall be limited to the aggregate amount of the
Servicing Fees otherwise payable to the Servicer and any Subservicer (without
adjustment on account of Prepayment Interest Shortfalls) with respect to (i)
scheduled payments having the Due Date occurring in Collection Period applicable
to such Distribution Date, and (ii) Principal Prepayments and Liquidation
Proceeds applicable to such Distribution Date, and the rights of the
Certificateholders to the offset of the aggregate Prepayment Interest Shortfalls
shall not be cumulative.
Section 5.20 Delinquency Interest Advances. By 3:00 p.m. New York
-----------------------------
time on each Servicer Remittance Date, the Servicer shall make a Delinquency
Interest Advance with respect to delinquent interest on each Mortgage Loan which
was a Delinquent Mortgage Loan with respect to the related Collection Period by
depositing such Delinquency Interest Advance into the Certificate Account;
provided, however, that the Servicer will not be required to make any
- -------- -------
Delinquency Interest Advance if the Servicer has determined in accordance with
customary mortgage loan servicing practices that all amounts which it expects to
receive with respect to such Mortgage Loan have been received. Such deposit may
be made in whole or in part or in part from funds in the Collection Account
being held for future distribution or withdrawal on or in connection with
Distribution Dates in subsequent months. Any funds being held for future
distribution to Certificateholders and so used shall be replaced by Servicer
from its own funds by deposit in the Certificate Account on or before the
Business Day preceding any such future Servicer Remittance Date to the extent
that funds in the Certificate Account on such Servicer Remittance Date shall be
less than payments to Certificateholders required to be made on such date.
The Servicer shall be permitted to reimburse itself for any
Delinquency Interest Advance from any subsequent collections or Net Liquidation
Proceeds relating to such Mortgage Loan. If not theretofore recovered by the
Servicer, and the Servicer determines that any Delinquency Interest Advance was
a Nonrecoverable Advance, such Delinquency Interest Advance shall be recoverable
pursuant to Section 5.4 hereof.
Section 5.21 [Reserved].
----------
Section 5.22 Maintenance of Corporate Existence and Licenses; Merger
-------------------------------------------------------
or Consolidation of the Servicer. (a) The Servicer will keep in full effect its
- --------------------------------
existence, rights and franchises as a corporation, will obtain and preserve its
qualification to do business as a foreign corporation in each jurisdiction
necessary to protect the validity and enforceability
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of this Agreement or any of the Mortgage Loans and to perform its duties under
this Agreement and will otherwise operate its business so as to cause the
representations and warranties under Section 3.1 to be true and correct at all
times under this Agreement.
(b) Any Person into which the Servicer may be merged or consolidated,
or any corporation resulting from any merger, conversion or consolidation to
which the Servicer shall be a party, or any Person succeeding to the business of
the Servicer, shall be an established mortgage loan servicing institution
acceptable to the Certificate Insurer that has a net worth of at least
$15,000,000 and is a Permitted Transferee, and in all events shall be the
successor of the Servicer without the execution or filing of any paper or any
further act on the part of any of the parties hereto, anything herein to the
contrary notwithstanding. The Servicer shall send notice of any such merger or
consolidation to the Trustee and the Certificate Insurer.
Section 5.23 Assignment of Agreement by Servicer; Servicer Not to
----------------------------------------------------
Resign. The Servicer shall not assign this Agreement nor resign from the
- ------
obligations and duties hereby imposed on it except by mutual written consent of
the Servicer, the Seller, the Depositor, the Certificate Insurer and the Trustee
or upon the determination that the Servicer's duties hereunder are no longer
permissible under applicable law and that such incapacity cannot be cured by the
Servicer without the incurrence, in the reasonable judgment of the Certificate
Insurer, of unreasonable expense. Any such determination that the Servicer's
duties hereunder are no longer permissible under applicable law permitting the
resignation of the Servicer shall be evidenced by a written Opinion of Counsel
(who may be counsel for the Servicer) to such effect delivered to the Trustee,
the Seller, the Depositor and the Certificate Insurer. No such resignation
shall become effective until the Trustee or a successor appointed in accordance
with the terms of this Agreement has assumed the Servicer's responsibilities and
obligations hereunder in accordance with Section 7.2. The Servicer shall
provide the Trustee, each of the Rating Agencies and the Certificate Insurer
with 30 days prior written notice of its intention to resign pursuant to this
Section 5.23.
Section 5.24 Information Reports to be Filed by the Servicer. The
-----------------------------------------------
Servicer or Subservicers shall file information returns with respect to the
receipt of mortgage interest received in a trade or business, reports of
foreclosures and abandonments of any Mortgaged Property and cancellation of
indebtedness income with respect to any Mortgaged Property as required by
Sections 6050H, 6050J and 6050P of the Code, respectively.
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ARTICLE VI
Distributions and Payments
--------------------------
Section 6.1 Establishment of Certificate Account; Deposits to the
-----------------------------------------------------
Certificate Account. (a) The Trustee shall establish and maintain the
- -------------------
Certificate Account which shall be titled "Certificate Account, Bankers Trust
Company, as trustee for the registered holders of Preferred Mortgage Asset-
Backed Certificates, Series 1996-2 and MBIA Insurance Corporation as Certificate
Insurer" and which shall be an Eligible Account. Notice of the establishment of
the Certificate Account shall be promptly provided in writing to each of the
Servicer, the Rating Agencies and the Certificate Insurer.
(b) Subject to Section 6.6 hereof, the Servicer may direct the Trustee
in writing to invest the funds in the Certificate Account only in Permitted
Investments which mature not later than the Business Day prior to the
Distribution Date. No Permitted Investment shall be sold or disposed of at a
gain prior to maturity unless the Servicer has delivered to the Trustee and the
Certificate Insurer an Opinion of Counsel (at the Servicer's expense) that such
sale or disposition will not cause the Trust Fund to be subject to the tax on
income from prohibited transactions imposed by Code Section 860F(a)(1),
otherwise subject the Trust Fund to tax or cause the REMIC 1996-2 to fail to
qualify as a REMIC. All income (other than any gain from a sale or disposition
of the type referred to in the preceding sentence) realized from any such
Permitted Investment shall be for the benefit of the Servicer as additional
servicing compensation. The amount of any losses incurred in respect of any
such investments shall be deposited in the Certificate Account by the Servicer
out of its own funds immediately as realized.
(c) On each Servicer Distribution Date, the Servicer shall cause to be
deposited in the Certificate Account, from related funds on deposit in the
Collection Account, an amount equal to the related Servicer Remittance Amount.
(d) The Trustee shall make deposits to the Certificate Account
pursuant to Section 6.11 and 6.12.
Section 6.2 Permitted Withdrawals From the Certificate Account. The
--------------------------------------------------
Trustee shall, in accordance with the Servicer's written directions to the
Trustee as described in Section 6.5, withdraw or cause to be withdrawn funds
from the Certificate Account for the following purposes:
(i) to effect the distributions described in Section 6.5;
(ii) to pay the Servicer any interest earned on or investment
income earned with respect to funds in the Certificate Account;
(iii) to return to the Collection Account any amount deposited
in the Certificate Account that was not required to be deposited therein;
(iv) to pay to itself the Trustee Fee in accordance with Section
9.5; and
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(v) to clear and terminate the Certificate Account upon termination of
the Trust Fund pursuant to Article VIII.
The Trustee shall keep and maintain a separate accounting for
withdrawals from the Certificate Account pursuant to each of subclauses (i)
through (vi) listed above.
Section 6.3 Collection of Money. Except as otherwise expressly
-------------------
provided herein, the Trustee may demand payment or delivery of all money and
other property payable to or receivable by the Trustee pursuant to this
Agreement, including, but not limited to, (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
Subservicer and (b) Insured Payments. The Trustee shall hold all such money and
property received by it, as part of the Trust Fund and shall apply it as
provided in this Agreement.
Section 6.4 The Certificate Insurance Policy. (a) Subject to receipt
--------------------------------
of the report referenced in Section 6.5, within three Business Days after each
Determination Date, the Trustee shall determine with respect to the immediately
following Distribution Date the amount to be on deposit in the Certificate
Account on such Distribution Date less the amounts described in clauses (i) and
(ii) of Section 6.5 for the related Distribution Date, and not including the
amount of any Insured Payment which is required to be deposited in the related
Certificate Account for such Distribution Date. The amounts described in the
preceding sentence with respect to each Distribution Date are the "Available
Funds" for such Distribution Date.
(b) If on any Distribution Date there is an Available Funds Shortfall,
the Trustee shall complete a Notice in the form of Exhibit A to the Certificate
Insurance Policy and submit such Notice to the Certificate Insurer no later than
12:00 noon New York City time on the third Business Day preceding such
Distribution Date as a claim for an Insured Payment in an amount equal to such
Available Funds Shortfall.
(c) The Trustee shall establish a separate Eligible Account for the
benefit of Holders of the Certificates and the Certificate Insurer referred to
herein as the "Certificate Insurance Payments Account" over which the Trustee
shall have exclusive control and sole right of withdrawal. The Trustee shall
deposit upon receipt any amount paid under the Certificate Insurance Policy in
the Certificate Insurance Payments Account and distribute such amount only for
purposes of payment to Certificateholders of the portion of the Insured
Distribution Amount for which a claim was made and such amount may not be
applied to satisfy any costs, expenses or liabilities of the Servicer, the
Trustee or the Trust Fund. Amounts paid under the Certificate Insurance Policy,
to the extent needed to pay the Insured Distribution Amount, shall be
transferred by the Trustee from the Certificate Insurance Payments Account to
the Certificate Account on the related Distribution Date and disbursed by the
Trustee to the Class A Certificateholders in accordance with Section 6.5. It
shall not be necessary for payments made under the Certificate Insurance Policy
to be made by checks or wire transfers separate from other amounts distributed
pursuant to Section 6.5. However, the amount of any payment of principal of or
interest on the Class A Certificates to be paid from funds transferred from the
Certificate Insurance Payments Account shall be noted as
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provided in paragraph (d) below. Funds held in the Certificate Insurance
Payments Account shall not be invested. Any funds remaining in the Certificate
Insurance Payments Account on the first Business Day following a Distribution
Date shall be returned to the Certificate Insurer by the Trustee pursuant to the
written instructions of the Certificate Insurer by the end of such Business Day.
(d) The Trustee shall keep a complete and accurate record of the
amount of interest and principal paid in respect of any Class A Certificate from
moneys received under the Certificate Insurance Policy. The Certificate Insurer
shall have the right to inspect such records at reasonable times during normal
business hours upon one Business Day's prior notice to the Trustee.
(e) In the event that the Trustee has received a certified copy of an
order of the appropriate court that any amount distributed on the Class A
Certificates, including any amounts represented by an Insured Payment, has been
voided in whole or in part as a preference payment under applicable bankruptcy
law that constitutes a Preference Amount under the Certificate Insurance Policy,
the Trustee shall so notify the Certificate Insurer, shall comply with the
provisions of the Certificate Insurance Policy to obtain payment by the
Certificate Insurer of such voided amount distributed, and shall, at the time it
provides notice to the Certificate Insurer, notify, by mail to Class A
Certificateholders of the affected Class A Certificates that, in the event any
Class A Certificateholder's amount distributed is so recovered, such Class A
Certificateholder will be entitled to payment pursuant to the Certificate
Insurance Policy, a copy of which shall be made available through the Trustee,
the Certificate Insurer or the Certificate Insurer's Fiscal Agent, if any, and
the Trustee shall furnish to the Certificate Insurer or its Fiscal Agent, if
any, its records evidencing the payments which have been made by the Trustee and
subsequently recovered from Certificateholders, and dates on which such payments
were made.
(f) The Trustee shall promptly notify the Certificate Insurer of any
proceeding or the institution of any action, of which a Responsible Officer of
the Trustee has actual knowledge, seeking the avoidance as a preferential
transfer under applicable bankruptcy, insolvency, receivership or similar law (a
"Preference Claim") of any distribution made with respect to the Certificates.
Each Certificateholder, by its purchase of Certificates, the Seller, the
Depositor, the Servicer and the Trustee agree that, the Certificate Insurer (so
long as no Certificate Insurer Default exists) may at any time during the
continuation of any proceeding relating to a Preference Claim direct all matters
relating to such Preference Claim, including, without limitation, (i) the
direction of any appeal of any order relating to such Preference Claim and (ii)
the posting of any surety, supersedeas or performance bond pending any such
appeal. In addition and without limitation of the foregoing, the Certificate
Insurer shall be subrogated to, and each Certificateholder, the Servicer, the
Seller, the Depositor and the Trustee hereby delegate and assign to the
Certificate Insurer, to the fullest extent permitted by law, the rights of the
Servicer, the Trustee, the Depositor, the Seller and each Certificateholder in
the conduct of any such Preference Claim, including, without limitation, all
rights of any party to any adversary proceeding or action with respect to any
court order issued in connection with any such Preference Claim.
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Section 6.5 Distributions. No later than 12:00 noon California time
-------------
on the Business Day following the Determination Date, the Servicer shall deliver
to the Trustee and the Certificate Insurer a report in computer-readable form
(including electronic transmission) containing such information as to the
Mortgage Loans as of such date and such other information as the Trustee and the
Certificate Insurer may reasonably require. With respect to funds on deposit in
the Certificate Account (inclusive of amounts transferred from the Certificate
Insurance Payments Account, the Pre-Funding Account and the Capitalized Interest
Account), on each Distribution Date, the Trustee shall make the following
allocations, disbursements and transfers 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:
(i) to the Certificate Insurer, the Certificate Insurance Policy
Premium Amount;
(ii) to the Trustee, an amount equal to the Trustee Fees then due
to it;
(iii) to the Certificate Insurer, the lesser of (x) an amount equal
to (i) the Available Funds minus (ii) the Insured Distribution Amount for such
-----
Distribution Date and (y) the outstanding Reimbursement Amount, if any, as of
such Distribution Date;
(iv) to each Class A Certificateholder, an amount equal to the
related Class A Interest Distribution Amount;
(v) to each of the Class A Certificateholders, an amount equal to the
lesser of (a) the related Class A Principal Distribution Amount and (b) the
amount remaining in the Certificate Account after distributions pursuant to
clauses (i) through (iv) above, as follows;
(1) to the Class A-1 Certificateholders until the Class A-1
Principal Balance has been reduced to zero;
(2) to the Class A-2 Certificateholders until the Class A-2
Principal Balance has been reduced to zero;
(3) to the Class A-3 Certificateholders until the Class A-3
Principal Balance has been reduced to zero; and
(4) to the Class A-4 Certificateholders until the Class A-4
Principal Balance has been reduced to zero;
(5) to the Class A-5 Certificateholders until the Class A-5
Principal Balance has been reduced to zero; and
(6) to the Class A-6 Certificateholders until the Class A-6
Principal Balance has been reduced to zero;
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(vi) to the Class B Certificateholders, on any Distribution Date on
which the Overcollateralization Reduction Amount is greater than zero, the
amount of such Overcollateralization Reduction Amount shall be applied, on and
prior to the Class B Final Scheduled Distribution Date;
(x) to reduce the Class B Accrued Interest until the Class B Accrued
Interest has been reduced to zero;
(y) to reduce the Class B Principal Balance until the Class B
Principal Balance has been reduced to zero;
(vii) to the Holders of the Class C Certificates, the Class C
Distribution Amount;
(viii) to the Holders of the Class RU Certificates, the amount
remaining on such Distribution Date, if any;
provided, however, that if, on any Distribution Date, (x) the Certificate
- -------- -------
Insurer is then in default under the Certificate Insurance Policy relating to
the Mortgage Loans and (y) a Subordination Deficit exists, then any distribution
of the Principal Distribution Amount on such Distribution Date shall be made pro
---
rata to the holders of each of the Class A Certificates.
- ----
Notwithstanding clause (iv) above, the aggregate amounts distributed
on all Distribution Dates to the Holders of the Class A Certificates on account
of the related Class A Principal Distribution Amount shall not exceed the
related Original Class A Principal Balance.
Section 6.6 Investment of Accounts. (a) So long as no Event of
----------------------
Default shall have occurred and be continuing, and consistent with any
requirements of the Code, all or a portion of any Account (other than the
Certificate Insurance Payments Account) held by the Trustee shall be invested
and reinvested by the Trustee, as directed in writing by the Servicer (with
respect to the Collection Account and the Certificate Account) or the Seller
(with respect to the Pre-Funding Account and the Capitalized Interest Account),
in one or more Permitted Investments bearing interest or sold at a discount. If
an Event of Default shall have occurred and be continuing or if the Servicer or
the Seller do not provide investment directions, the Trustee shall invest all
Accounts in Permitted Investments described in paragraph (d) of the definition
of Permitted Investments. No such investment in any Account shall mature later
than the Business Day immediately preceding the next Distribution Date (except
that if such Permitted Investment is an obligation of the Trustee, then such
Permitted Investment shall mature not later than such Distribution Date).
Notwithstanding anything to the contrary in this Section 6.6(a), all amounts
received under the Certificate Insurance Policy shall remain uninvested.
(b) If any amounts are needed for disbursement from any Account (other
than the Certificate Insurance Payments Account) held by the Trustee and
sufficient uninvested funds are not available to make such disbursement, the
Trustee shall cause to be
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sold or otherwise converted to cash a sufficient amount of the investments in
such Account. The Trustee shall not be liable for any investment loss or other
charge resulting therefrom unless the Trustee's failure to perform in accordance
with this Section 6.6 is the cause of such loss or charge or the Trustee is the
obligor of the related investment.
(c) Subject to Section 9.1 hereof, the Trustee shall not in any way be
held liable by reason of any insufficiency in any Account held by the Trustee
resulting from any investment loss on any Permitted Investment included therein
(except as provided in subsection (b) of this Section 6.6).
(d) So long as no Event of Default shall have occurred and be
continuing, all net income and gain realized from investment of, and all
earnings on, funds deposited in the Collection Account shall be for the benefit
of the Servicer as servicing compensation (in addition to the Servicing Fee).
The Servicer shall deposit in the Collection Account and the Certificate Account
and the Seller shall deposit in the Pre-Funding Account and the Capitalized
Interest Account, the amount of any loss incurred in respect of any Permitted
Investment held therein which is in excess of the income and gain thereon
immediately upon realization of such loss, without any right to reimbursement
therefor from its own funds.
Section 6.7 Reports by Trustee. (a) On each Distribution Date the
------------------
Trustee shall, based on a report delivered to it by the Servicer on the
Determination Date, as described in Section 6.5 hereof, provide to each Holder,
to the Certificate Insurer, to the Depositor, to the Servicer, to the
Underwriter, to S&P and to Moody's a written report (the "Trustee Remittance
Report"), setting forth information, including, without limitation, the
following information:
(i) the amount of the distributions made on such Distribution
Date with respect to the Class A Certificates, the Class B Certificates,
the Class C Certificates and any Residual Certificates;
(ii) the amount of such distributions allocable to principal,
separately identifying the aggregate amount of any Prepayments,
Curtailments, any Pre-Funded Amounts distributed as a prepayment or other
unscheduled recoveries of principal included therein;
(iii) the amount of such distributions allocable to interest and
the calculation thereof;
(iv) the amount of any Net Liquidation Proceeds and Net REO
Proceeds included in such distributions and the calculation thereof:
(v) the principal amount of the related 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 principal payments made
on such Distribution Date:
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(vi) the amount of any Insured Payment included in the amounts
distributed to the Class A Certificateholders on such Distribution Date,
together with any Reimbursement Amount paid to the Certificate Insurer;
(vii) the Required Overcollateralization Level and the
Overcollateralization Amount as of such Distribution Date;
(viii) the total of any Substitution Adjustments and any Loan
Repurchase Price amounts included in such distribution;
(ix) the amounts, if any, of any Realized Losses for the
related Collection Period; and
(x) for Distribution Dates during the Funding Period, the
remaining Pre-Funded Amount.
Items (i), (ii) and (iii) above shall, with respect to the 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 the
Certificate Insurer and to each Holder of record if so requested 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) All distributions made to the Certificateholders according to
Class or type of Certificate on each Distribution Date will be made on a pro
rata basis among the Certificateholders as of the next preceding Record Date
based on the Percentage Interest represented by their respective Certificates,
and shall be made by wire transfer of immediately available funds to the account
of such Certificateholder at a bank or other entity having appropriate
facilities therefor, if, in the case of a Class A Certificateholder, such
Certificateholder shall own of record Class A Certificates having an aggregate
initial Class A Principal Balance of at least $5,000,000 appearing in the
Certificate Register and shall have provided complete wiring instructions at
least five Business Days prior to the Record Date, and otherwise by check mailed
to the address of such Certificateholder appearing in the Certificate Register.
(c) In addition, on each Distribution Date the Trustee will distribute
to each Holder, to the Certificate Insurer, to the Underwriter, to the
Depositor, to each of the Rating Agencies, together with the information
described in subsection (a) preceding, the following information with respect to
the Mortgage Loans as of the close of business on the last Business Day of the
prior Collection Period (except as otherwise provided in clause (v) below),
which is hereby required to be prepared by the Servicer and furnished to the
Trustee for such purpose on or prior to the related Servicer Remittance Date:
(i) the total number of Mortgage Loans and the aggregate
Principal Balances thereof, together with the number, aggregate Principal
Balances of such Mortgage Loans and the percentage of the aggregate
Principal Balances of such
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Mortgage Loans to the aggregate Principal Balance of all Mortgage Loans (A)
30-59 days Delinquent, (B) 60-89 days Delinquent and (C) 90 or more days
Delinquent;
(ii) the number, aggregate Principal Balances of all Mortgage
Loans and percentage of the aggregate Principal Balances of such Mortgage
Loans to the aggregate Principal Balance of all Mortgage Loans in
foreclosure proceedings and the number, aggregate Principal Balances of all
Mortgage Loans and percentage of any such Mortgage Loans that are also
included in any of the statistics described in the foregoing clause (i);
(iii) (a) the number, aggregate Principal Balances of all
Mortgage Loans and percentage of the aggregate Principal Balances of such
Mortgage Loans to the aggregate Principal Balance of all Mortgage Loans
relating to Mortgagors in bankruptcy proceedings and (b) the number,
aggregate Principal Balances of all Mortgage Loans and percentage of any
such Mortgage Loans that are also included in any of the statistics
described in the foregoing clause (i);
(iv) the number, aggregate Principal Balances of all Mortgage
Loans and percentage of the aggregate Principal Balances of such Mortgage
Loans to the aggregate Principal Balance of all REO Mortgage Loans and the
number, aggregate Principal Balances of all Mortgage Loans and percentage
of any such Mortgage Loans that are also included in any of the statistics
described in the foregoing clause (i);
(v) the weighted average Mortgage Interest Rate and the Net
Mortgage Interest Rate as of the Due Date occurring in the Collection
Period related to such Distribution Date;
(vi) the weighted average remaining term to stated maturity of
all Mortgage Loans; and
(vii) the book value of any REO Property.
Section 6.8 Additional Reports by Trustee. (a) The Trustee shall
-----------------------------
report to the Depositor, the Servicer 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 Depositor, the Servicer or the Certificate Insurer may
from time to time request in writing.
(b) From time to time, at the request of the Certificate Insurer, the
Trustee shall report to the Certificate Insurer with respect to its actual
knowledge, without independent investigation, of any breach of any of the
representations or warranties relating to individual Mortgage Loans set forth in
Section 3.2 or 3.3 hereof.
Section 6.9 Compensating Interest. By 3:00 pm New York time on each
---------------------
Servicer Remittance Date, the Servicer or any Subservicer shall remit to the
Trustee (without right of reimbursement therefor) for deposit into the
Certificate Account an amount equal to the lesser of (a) the aggregate of the
Prepayment Interest Shortfalls for the related
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Distribution Date resulting from Principal Prepayments during the related
Collection Period and (b) its aggregate Servicing Fees received in the related
Collection Period (the "Compensating Interest").
Section 6.10 Effect of Payments by the Certificate Insurer;
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Subrogation. Anything herein to the contrary notwithstanding, any payment with
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respect to principal of or interest on the Certificates which is made with
moneys received pursuant to the terms of the Certificate Insurance Policy shall
not be considered payment of the Certificates from the Trust Fund. The
Depositor, the Servicer and the Trustee acknowledge, and each Holder by its
acceptance of a Certificate agrees, that without the need for any further action
on the part of the Certificate Insurer, the Depositor, the Servicer, the Trustee
or the Certificate Registrar (i) to the extent the Certificate Insurer makes
payments, directly or indirectly, on account of principal of or interest on the
Certificates to the Holders of such Certificates, the Certificate Insurer will
be fully subrogated to, and each Certificateholder, the Depositor, the Servicer
and the Trustee hereby delegate and assign to the Certificate Insurer, to the
fullest extent permitted by law, the rights of such Holders to receive such
principal and interest from the Trust Fund, including, without limitation, any
amounts due to the Certificateholders in respect of securities law violations
arising from the offer and sale of the Certificates, and (ii) the Certificate
Insurer shall be paid such amounts but only from the sources and in the manner
provided herein for the payment of such amounts. The Depositor, the Seller and
Trustee and the Servicer shall cooperate in all respects with any reasonable
request by the Certificate Insurer for action to preserve or enforce the
Certificate Insurer's rights or interests under this Agreement without limiting
the rights or affecting the interests of the Holders as otherwise set forth
herein.
Section 6.11 Pre-Funding Account.
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(a) No later than the Closing Date, the Trustee shall establish and
maintain with itself one or more segregated trust accounts that are Eligible
Accounts, which shall be titled "Pre-Funding Account, Bankers Trust Company, as
trustee for the registered holders of Preferred Home Equity Loan Pass-Through
Certificates, Series 1996-2 and MBIA Insurance Corporation, as Certificate
Insurer" (the "Pre-Funding Account"). On the Closing Date, the Trustee shall
from the proceeds of the sale of the Class A Certificates deposit in the Pre-
Funding Account and retain therein the Original Pre-Funded Amount. Funds
deposited in the Pre-Funding Account shall be held in trust by the Trustee for
the Holders of the Certificates and the Certificate Insurer for the uses and
purposes set forth herein. For federal income tax purposes, the Depositor shall
be the owner of the Pre-Funding Account and shall report all items of income,
deduction, gain or loss arising therefrom. All income and gain realized from
investment of funds deposited in the Pre-Funding Account shall be transferred to
the Capitalized Interest Account on the Business Day immediately preceding each
Distribution Date.
(b) Amounts on deposit in the Pre-Funding Account shall be withdrawn
by the Trustee as follows:
(i) On any Subsequent Transfer Date, the Trustee, upon written
direction from the Depositor, shall withdraw from the Pre-Funding
Account
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and pay to the Depositor an amount equal to 97.62% of the Principal
Balances of the Subsequent Mortgage Loans transferred and assigned to
the Trustee on such Subsequent Transfer Date upon satisfaction of the
conditions set forth in Sections 2.3 and 2.9(b) above with respect to
such transfer and assignment; and
(ii) If the Pre-Funded Amount has not been reduced to zero during
the Funding Period, or if the Pre-Funded Amount has been reduced to
$50,000 or less on the immediately succeeding Determination Date, the
Trustee shall deposit into the Certificate Account any amounts
remaining in the Pre-Funding Account.
Section 6.12 Capitalized Interest Accounts.
-----------------------------
(a) No later than the Closing Date, the Trustee shall establish and
maintain with itself a separate, aggregated trust account, which shall be an
Eligible Account, titled "Capitalized Interest Account, Bankers Trust Company,
as trustee for the registered holders of Preferred Home Equity Loan Pass-Through
Certificates, Series 1996-2 and MBIA Insurance Corporation, as Certificate
Insurer" (the "Capitalized Interest Account"). On the Closing Date, the Trustee
shall from proceeds of the sale of the Class A Certificates deposit in the
Capitalized Interest Account and retain therein the Capitalized Interest Amount.
In addition, the Trustee shall deposit into the Capitalized Interest Account all
income and gain on investments in the Pre-Funding Account pursuant to Section
6.11. Funds deposited in the Capitalized Interest Account shall be held in
trust by the Trustee for the Holders of the Certificates and the Certificate
Insurer for the uses and purposes set forth herein. For federal income tax
purposes, the Depositor shall be the owner of the Capitalized Interest Account
and shall report all items of income, deduction, gain or loss arising therefrom.
The Depositor shall deposit in the Capitalized Interest Account the amount of
any net loss incurred in respect of any such Permitted Investment immediately
upon realization of such loss, without any right of reimbursement.
(b) On each of the first three Distribution Dates, the Trustee shall
withdraw from the Capitalized Interest Account and deposit in the Certificate
Account the related Capitalized Interest Addition.
(c) On each Determination Date following the conveyance of a
Subsequent Mortgage Loan to the Trustee, funds on deposit in the Capitalized
Interest Account in an amount equal to the product of (i) the Principal Balance
of such Subsequent Mortgage Loan and (ii) the weighted average of the Class A-1
Pass-Through Rate, the Class A-2 Pass-Through Rate, the Class A-3 Pass-Through
Rate, the Class A-4 Pass-Through Rate, the Class A-5 Pass-Through Rate and the
Class A-6 Pass-Through Rate, and (iii) a fraction, the numerator of which is the
number of days from the Subsequent Cut-Off Date to March 1, 1997 and the
denominator of which is 360, shall be remitted immediately to the Depositor.
(d) Upon the earliest of (i) termination of the Trust Fund in
accordance with Section 8.1 or (ii) the first Remittance Day following the end
of the Funding Period, any amount remaining on deposit in the Capitalized
Interest Account after distributions pursuant to Section 6.12(b) above shall be
withdrawn by the Trustee and paid to the Depositor.
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ARTICLE VII
Default
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Section 7.1 Events of Default. (a) In case one or more of the
-----------------
following Events of Default by the Servicer shall occur and be continuing, that
is to say:
(i) any failure by the Servicer to remit to the Trustee any payment,
other than a Servicing Advance, required to be made by the Servicer under
the terms of this Agreement which continues unremedied for two days after
the date upon which such payment was required to be made;
(ii) the failure by the Servicer to make any required Servicing
Advance which failure continues unremedied for a period of 30 days after
the date on which written notice of such failure, requiring the same to be
remedied, shall have been given to the Servicer by the Trustee or to the
Servicer and the Trustee by any Certificateholder or the Certificate
Insurer;
(iii) any failure on the part of the Servicer duly to observe or
perform in any material respect any other of the covenants or agreements on
the part of the Servicer contained in this Agreement or in the Certificate
Insurance Agreement, or the failure of any representation and warranty made
pursuant to Section 3.1 to be true and correct which continues unremedied
for a period of 30 days (or 15 days in the case of a failure to pay the
premium for any insurance policy which is required to be maintained under
this Agreement) after the date on which written notice of such failure,
requiring the same to be remedied, shall have been given to the Servicer,
as the case may be, by the Depositor or the Trustee or to the Servicer and
the Trustee by any Certificateholder or the Certificate Insurer;
(iv) a decree or order of a court or agency or supervisory authority
having jurisdiction in an involuntary case under any present or future
federal or state bankruptcy, insolvency or similar law or 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 Servicer and such decree or order shall have
remained in force, undischarged or unstayed for a period of 60 days;
(v) the Servicer shall consent to the appointment of a conservator or
receiver or liquidator in any insolvency, readjustment of debt, marshalling
of assets and liabilities or similar proceedings of or relating to the
Servicer or of or relating to all or substantially all of the Servicer's
property;
(vi) the Servicer shall admit in writing its inability to pay its
debts as they become due, file a petition to take advantage of any
applicable insolvency or reorganization statute, make an assignment for the
benefit of its creditors, or voluntarily suspend payment of its
obligations; or
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(vii) a Servicer Trigger Event that the Certificate Insurer declares
is an Event of Default.
(b) If an Event of Default described in this Section shall occur,
then, and in each and every such case, so long as such Event of Default shall
not have been remedied or waived pursuant to Section 7.3: (1) with respect
solely to clause (i) above, if such payment is not made on the second day after
the date upon which such payment was required to be made, the Trustee shall give
immediate telephonic notice of such failure to a Responsible Officer of the
Servicer and to the Certificate Insurer and the Trustee shall terminate all of
the rights and obligations of the Servicer under this Agreement and the Trustee,
or a successor Servicer appointed in accordance with Section 7.2, shall
immediately make such payment and assume, pursuant to Section 7.2, the duties of
a successor Servicer and (2) with respect to clauses (ii), (iii), (iv), (v),
(vi) and (vii) above, the Trustee shall, but only at the direction of the
Certificate Insurer or the Majority Certificateholders and with the prior
written consent of the Certificate Insurer, by notice in writing to the Servicer
and a Responsible Officer of the Trustee, and in addition to whatever rights
such Certificateholders may have at law or equity to damages, including
injunctive relief and specific performance, terminate all the rights and
obligations of the Servicer under this Agreement and in and to the Mortgage
Loans and the proceeds thereof, as servicer.
Upon receipt by the Servicer of such written notice, all authority and
power of the Servicer under this Agreement, whether with respect to the Mortgage
Loans or otherwise, shall, subject to Section 7.2, pass to and be vested in the
Trustee or its designee approved by the Certificate Insurer and the Trustee is
hereby authorized and empowered to execute and deliver, on behalf of the
Servicer, as attorney-in-fact or otherwise, at the expense of the Servicer, any
and all documents and other instruments and do or cause to be done all other
acts or things necessary or appropriate to effect the purposes of such notice of
termination, including, but not limited to, the transfer and endorsement or
assignment of the Mortgage Loans and related documents. The Servicer agrees to
cooperate (and pay any related costs and expenses) with the Trustee in effecting
the termination of the Servicer's responsibilities and rights hereunder,
including, without limitation, the transfer to the Trustee or its designee for
administration by it of all amounts which shall at the time be credited by the
Servicer to the Collection Account or the Servicer Account or thereafter
received with respect to the Mortgage Loans. The Trustee shall promptly notify
the Certificate Insurer, each Certificateholder and each of the Rating Agencies
of the occurrence of an Event of Default.
(c) Upon the occurrence of a Servicer Trigger Event, the Certificate
Insurer may require that an audit of the Servicer's servicing practices be
performed, at the expense of the Seller, by a Person selected by the Certificate
Insurer. The Servicer shall promptly provide the Certificate Insurer the
written results of such audit. If, upon being furnished with the results of
such audit, the Certificate Insurer reasonably concludes that the Servicer's
servicing practices have not been in compliance with the Accepted Servicing
Practices, the Certificate Insurer may declare an Event of Default and may
remove the Servicer by giving written notice of such determination to the
Seller, the Servicer and the Trustee.
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As used above, "Servicer Trigger Event" means (a) prior to the
----------------------
Distribution Date in January 2002, Total Expected Losses exceed 7.75% of the
Maximum Collateral Amount or (b) on and after the Distribution Date in January
2002, Total Expected Losses exceed 12.00% of the Maximum Collateral Amount.
Section 7.2 Trustee to Act; Appointment of Successor. (a) On and
----------------------------------------
after the time the Servicer receives a notice of termination pursuant to Section
7.1, or the Trustee receives the resignation of the Servicer evidenced by an
Opinion of Counsel pursuant to Section 5.23, or the Servicer is removed as
Servicer pursuant to Article VII, in which event the Trustee shall promptly
notify the Certificate Insurer and each of the Rating Agencies, except as
otherwise provided in Section 7.1, the Trustee shall be the successor in all
respects to the Servicer in its capacity as servicer under this Agreement and
the transactions set forth or provided for herein and shall be subject to all
the responsibilities, duties and liabilities relating thereto placed on the
Servicer by the terms and provisions hereof arising on or after the date of
succession; provided, however, that the Trustee shall not be liable for any
-------- -------
actions or the representations and warranties of any servicer prior to it and
including, without limitation, the obligations of the Servicer set forth in
Section 3.4. The Trustee, as successor servicer, or any other successor
servicer shall be obligated to pay Compensating Interest pursuant to Section 6.9
hereof; the Trustee, as successor servicer shall be obligated to make advances
pursuant to Section 5.20 unless, and only to the extent the Trustee, as
successor servicer or any other successor servicer determines reasonably and in
good faith that such advances would not be recoverable, such determination to be
evidenced by a certification of a Responsible Officer of the Trustee, as
successor servicer or any other successor servicer delivered to the Certificate
Insurer.
(b) Notwithstanding the above, the Trustee may, if it shall be
unwilling to so act, or shall, if it is unable to so act or if the Majority
Certificateholders with the consent of the Certificate Insurer or the
Certificate Insurer so requests in writing to the Trustee, appoint, pursuant to
the provisions set forth in paragraph (c) below, or petition a court of
competent jurisdiction to appoint, any established mortgage loan servicing
institution acceptable to the Certificate Insurer that has a net worth of not
less than $15,000,000 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.
(c) In the event the Trustee is the successor servicer, it shall be
entitled to the Servicing Compensation and other funds pursuant to Section 5.13
hereof as the Servicer if the Servicer had continued to act as servicer
hereunder. In the event the Trustee is unable or unwilling to act as successor
servicer, the Trustee 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 aggregate
Servicing Fees hereunder as servicing compensation, together with the other
Servicing Compensation. Within thirty days after any such public announcement,
the Trustee shall negotiate and effect the sale, transfer and assignment of the
servicing rights and responsibilities hereunder to the qualifying party
submitting the highest qualifying bid. The Trustee shall deduct from any sum
received by the Trustee from the successor to the Servicer in respect of such
sale, transfer and assignment all costs and expenses of any public announcement
and of any sale,
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transfer and assignment of the servicing rights and responsibilities hereunder
and the amount of any unreimbursed Servicing Advances and Delinquency Interest
Advances owed to the Trustee. After such deductions, the remainder of such sum
shall be paid by the Trustee to the Servicer at the time of such sale, transfer
and assignment to the Servicer's successor.
(d) The Trustee and such successor shall take such action, consistent
with this Agreement, as shall be necessary to effectuate any such succession.
The Servicer agrees to cooperate with the Trustee and any successor servicer in
effecting the termination of the Servicer's servicing responsibilities and
rights hereunder and shall promptly provide the Trustee or such successor
servicer, as applicable, at the Servicer's cost and expense, 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 Trustee or such
successor servicer, as applicable, all amounts that then have been or should
have been deposited in the Collection Account by the Servicer or that are
thereafter received with respect to the Mortgage Loans. Any collections
received by the Servicer after such removal or resignation shall be held by the
Servicer in trust for the benefit of the Certificateholders and the Certificate
Insurer and shall be endorsed by it to the Trustee and remitted directly to the
Trustee or, at the direction of the Trustee, to the successor servicer. Neither
the Trustee 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 delivering, cash, documents or records to it, or (ii) restrictions
imposed by any regulatory authority having jurisdiction over the Servicer
hereunder. No appointment of a successor to the Servicer hereunder shall be
effective until the Trustee and the Certificate Insurer shall have consented
thereto, and written notice of such proposed appointment shall have been
provided by the Trustee to the Certificate Insurer and to each
Certificateholder. The Trustee shall not resign as servicer until a successor
servicer reasonably acceptable to the Certificate Insurer has been appointed and
has assumed the Servicer's responsibilities and obligations hereunder.
(e) Pending appointment of a successor to the Servicer hereunder, the
Trustee shall act in such capacity as hereinabove provided. In connection with
such appointment and assumption, the Trustee may make such arrangements for the
compensation of such successor out of payments on Mortgage Loans as it and such
successor shall agree; provided, however, that no such compensation shall be in
-------- -------
excess of that permitted the Servicer pursuant to Section 5.13, together with
other Servicing Compensation. The Servicer, the Trustee and such successor
shall take such action, consistent with this Agreement, as shall be necessary to
effectuate any such succession.
Section 7.3 Waiver of Defaults. The Certificate Insurer or the
------------------
Majority Certificateholders may, on behalf of all Certificateholders, and
subject to the consent of the Certificate Insurer, waive any events permitting
removal of the Servicer as servicer pursuant to this Article VII; provided,
--------
however, that the Majority Certificateholders may not waive a default in making
- -------
a required distribution on a Certificate without the consent of the holder of
such Certificate. Upon any waiver of a past default, such default shall cease
to exist, and any Event of Default 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
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or impair any right consequent thereto except to the extent expressly so waived.
Notice of any such waiver shall be given by the Trustee to each of the Rating
Agencies.
Section 7.4 Mortgage Loans, Trust Fund and Accounts Held for Benefit
--------------------------------------------------------
of the Certificate Insurer. (a) The Trustee shall hold the Trust Fund and the
- --------------------------
Mortgage Files for the benefit of the Certificateholders and the Certificate
Insurer and all references in this Agreement and in the Certificates to the
benefit of Holders of the Certificates shall be deemed to include the
Certificate Insurer. The Trustee shall cooperate in all reasonable respects
with any reasonable request by the Certificate Insurer for action to preserve or
enforce the Certificate Insurer's rights or interests under this Agreement and
the Certificates unless, as stated in an Opinion of Counsel addressed to the
Trustee and the Certificate Insurer, such action is adverse to the interests of
the Certificateholders or diminishes the rights of the Certificateholders or
imposes additional burdens or restrictions on the Certificateholders.
(b) The Servicer hereby acknowledges and agrees that it shall service
the Mortgage Loans for the benefit of the Certificateholders and for the benefit
of the Certificate Insurer, and all references in this Agreement to the benefit
of or actions on behalf of the Certificateholders shall be deemed to include the
Certificate Insurer.
[Remainder of this page intentionally left blank]
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ARTICLE VIII
Termination
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Section 8.1 Termination. (a) Subject to Section 8.2, this Agreement
-----------
shall terminate upon notice to the Trustee and the Certificate Insurer of
either: (i) the later of the distribution to Certificateholders of the final
payment or collection with respect to the last Mortgage Loan (or Delinquency
Interest Advances of same by the Servicer), or the disposition of all funds with
respect to the last Mortgage Loan and the remittance of all funds due hereunder
and the payment of all amounts due and payable to the Certificate Insurer and
the Trustee or (ii) mutual consent of the Servicer, the Certificate Insurer and
all Certificateholders in writing; provided, however, that in no event shall the
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Trust Fund established by this Agreement terminate later than twenty-one years
after the death of the last survivor of the descendants of John D. Rockefeller,
alive as of the date hereof.
(b) In addition, subject to Section 8.2, the holder of a 50.01%
Percentage Interest or greater of the Class C Certificates or the Servicer (or
the Certificate Insurer, if the Servicer fails to exercise such option) may, at
its option and at its sole cost and expense, terminate this Agreement on any
date on which the related Pool Principal Balance is less than 10% of the Maximum
Collateral Amount (if the holders of the Class C Certificates exercise this
option) or is less than 5% of the Maximum Collateral Amount (if the Servicer or
the Certificate Insurer exercises this option), by purchasing, on the next
succeeding Distribution Date, all of the outstanding Mortgage Loans and REO
Properties at a price equal to the sum of (i) the greater of (x) 100% of the
Principal Balance of each Outstanding Mortgage Loan and each REO Property and
(y) the fair market value (disregarding accrued interest) of the Mortgage Loans
and REO Properties, determined as the average of three written bids (copies of
which are to be delivered to the Trustee and the Certificate Insurer by the
Servicer and the reasonable cost of which may be deducted from the final
purchase price provided that such deduction will not cause a draw on the
Certificate Insurance Policy) made by nationally recognized dealers acceptable
to the Certificate Insurer and based on a valuation process which would be used
to value comparable mortgage loans and REO property, (ii) the greater of (x) the
aggregate amount of accrued and unpaid interest on the Mortgage Loans through
the related Collection Period and (y) 30 days' accrued interest thereon at a
rate equal to the Mortgage Interest Rate, (iii) and in the event the Holders of
the Residual Certificates or the Certificate Insurer exercises such option, plus
any unpaid and accrued Servicing Fees or in the event the Servicer exercises
such option, net of the Servicing Fee, and (iv) any unreimbursed amounts due to
the Certificate Insurer hereunder or under the Certificate Insurance Agreement
(the "Termination Price"). Any such purchase shall be accomplished by deposit
into the Certificate Account of the Termination Price. No such termination is
permitted without the prior written consent of the Certificate Insurer (i) if it
would result in a draw on the Certificate Insurance Policy and (ii) unless the
Servicer shall have delivered to the Certificate Insurer an Opinion of Counsel
reasonably satisfactory to the Certificate Insurer stating that no amounts paid
hereunder are subject to recapture as preferential transfers under the United
States Bankruptcy Code, 11 U.S.C. (S)(S) 101 et seq., as amended.
-- ---
(c) If on any Distribution Date, the Servicer determines that there
are no Outstanding Mortgage Loans and no other funds or assets in the Trust Fund
other than funds
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in the Certificate Account, the Servicer shall send a final distribution notice
promptly to the Certificate Insurer and to each such Certificateholder in
accordance with paragraph (d) below.
(d) Notice of any termination, specifying the Distribution Date upon
which the Trust Fund will terminate and the Certificateholders shall surrender
their Certificates to the Trustee for payment of the final distribution and
cancellation, shall be given promptly by the Servicer by letter to the
Certificate Insurer and to each of the Certificateholders identified to the
Servicer by the Trustee as the Certificateholders of record as of the most
recent Record Date, and shall be mailed during the month of such final
distribution before the Servicer Distribution Date in such month, specifying (i)
the Distribution Date upon which final payment of the Certificates will be made
upon presentation and surrender of Certificates at the office of the Trustee
therein designated, (ii) the amount of any such final payment and (iii) that the
Record Date otherwise applicable to such Distribution Date is not applicable,
payments being made only upon presentation and surrender of the Certificates at
the office of the Trustee therein specified. The Servicer shall give such
notice to the Trustee therein specified. The Servicer shall give such notice to
the Trustee at the time such notice is given to Certificateholders. The rights
of the Certificate Insurer hereunder shall terminate (i) upon the deposit by the
Servicer with the Trustee of a sum sufficient to purchase all of the Mortgage
Loans and REO Properties as set forth above and when the Class A Principal
Balance has been reduced to zero and (ii) when the Certificate Insurer has
received all amounts owing to it hereunder and under the Certificate Insurance
Agreement.
(e) In the event that all of the Certificateholders shall not
surrender their Certificates for cancellation within six months after the time
specified in the above-mentioned written notice, the Trustee shall give a second
written notice to the remaining Certificateholders to surrender their
Certificates for cancellation and receive the final distribution with respect
thereto. If within six months after the second notice, all of the Certificates
shall not have been surrendered for cancellation, the Trustee may take
appropriate steps, or may appoint an agent to take appropriate steps, to contact
the remaining Certificateholders concerning surrender of their Certificates and
the cost thereof shall be paid out of the funds and other assets which remain
subject hereto. If within nine months after the second notice all the
Certificates shall not have been surrendered for cancellation, the Residual
Certificateholders shall be entitled to all unclaimed funds and other assets
which remain subject hereto and the Trustee upon transfer of such funds shall be
discharged of any responsibility for such funds and the Certificateholders shall
look only to the Residual Certificateholders for payment. Such funds shall
remain uninvested.
Section 8.2 Additional Termination Requirements. (a) In the event
-----------------------------------
that the Class C Certificateholders, the Servicer or the Certificate Insurer
(any of which, an "Exercising Party") exercises its purchase option as provided
in Section 8.1, the Trust Fund shall be terminated in accordance with the
following additional requirements, unless the Trustee and the Certificate
Insurer have been furnished with an Opinion of Counsel to the effect that the
failure of the Trust Fund to comply with the requirements of this Section 8.2
will not (i) result in the imposition of taxes on "prohibited transactions" of
such REMIC as defined in Section 860F of the Code or (ii) cause such Trust Fund
to fail to qualify as a REMIC at any time that any Class A Certificates are
outstanding:
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(i) Within 90 days prior to the final Distribution Date the Trustee
shall adopt and the Trustee shall sign, a plan of complete liquidation of
the Trust Fund meeting the requirements of a "Qualified Liquidation" under
Section 860F of the Code and any regulations thereunder;
(ii) At or after the time of adoption of such a plan of complete
liquidation, which plan shall include a description of the method for such
liquidation and the price to be conveyed for all of the assets of the Trust
Fund at the time of such liquidation, and at or prior to the final
Distribution Date, the Trustee shall sell all of the assets of the Trust
Fund to the Exercising Party for cash; and
(iii) At the time of the making of the final payment on the
Certificates, the Trustee shall distribute or credit, or cause to be
distributed or credited (A) to the Class A Certificateholders, the Class A
Principal Balance, plus one month's interest thereon at the Class A Pass-
Through Rate, (B) to the Certificate Insurer, all amounts due to it
hereunder and under the Certificate Insurance Agreement, (C) to the Class B
Certificateholders, the Class B Principal Balance and any Class B Accrued
Interest then remaining unpaid, (D) to the Class C Certificates, any funds
due to such Class C Certificateholders and (E) to the Residual
Certificateholders, all of such REMIC's cash on hand after such payment to
the Class A, Class B and Class C Certificateholders and the Certificate
Insurer, and the Trust Fund shall terminate at such time.
(b) By their acceptance of the Certificates, the Holders thereof
hereby agree to appoint the Trustee as their attorney in fact to: (i) adopt
such a plan of complete liquidation (and the Certificateholders hereby appoint
the Trustee as their attorney in fact to sign such plan) as appropriate or upon
the written request of the Certificate Insurer and (ii) to take such other
action in connection therewith as may be reasonably required to carry out such
plan of complete liquidation all in accordance with the terms hereof.
Section 8.3 Accounting Upon Termination of Servicer. Upon
---------------------------------------
termination of the Servicer, the Servicer shall, at its expense:
(a) deliver to its successor or, if none shall yet have been
appointed, to the Trustee, the funds in any Account;
(b) deliver to its successor or, if none shall yet have been
appointed, to the Trustee all Mortgage Files and related documents and
statements held by it hereunder and a Mortgage Loan portfolio computer tape;
(c) deliver to its successor or, if none shall yet have been
appointed, to the Trustee, the Certificate Insurer and, upon request, to the
Certificateholders a full accounting of all funds, including a statement showing
the Monthly Payments collected by it and a statement of monies held in trust by
it for the payments or charges with respect to the Mortgage Loans; and
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(d) execute and deliver such instruments and perform all acts
reasonably requested in order to effect the orderly and efficient transfer of
servicing of the Mortgage Loans to its successor and to more fully and
definitively vest in such successor all rights, powers, duties,
responsibilities, obligations and liabilities of the "Servicer" under this
Agreement.
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ARTICLE IX
The Trustee
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Section 9.1 Duties of Trustee. (a) The Trustee, prior to the
-----------------
occurrence of an Event of Default and after the curing of all Events of Default
which may have occurred, undertakes to perform such duties and only such duties
as are specifically set forth in this Agreement. If an Event of Default has
occurred and has not been cured or waived, the Trustee shall exercise such of
the rights and power vested in it by this Agreement, and use the same degree of
care and skill in its exercise as a prudent person would exercise or use under
the circumstances in the conduct of such person's own affairs.
(b) The Trustee, upon receipt of all resolutions, certificates,
statements, opinions, reports, documents, orders or other instruments furnished
to the Trustee which are specifically required to be furnished pursuant to any
provision of this Agreement, shall examine them to determine whether they
conform on their face to the requirements of this Agreement; provided, however,
-------- -------
that the Trustee shall not be responsible for the accuracy or content of any
resolution, certificate, statement, opinion, report, document, order or other
instrument furnished by the Servicer or the Seller hereunder. If any such
instrument is found not to conform on its face to the requirements of this
Agreement, the Trustee shall take action as it deems appropriate to have the
instrument corrected and, if the instrument is not corrected to the Trustee's
satisfaction, the Trustee will, at the expense of the Servicer, notify the
Certificate Insurer and request written instructions as to the action it deems
appropriate to have the instrument corrected, and if the instrument is not so
corrected, the Trustee will provide notice thereof to the Certificate Insurer
who shall then direct the Trustee as to the action, if any, to be taken.
(c) No provision of this Agreement shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act or its own willful misconduct; provided, however, that:
-------- -------
(i) Prior to the occurrence of an Event of Default, and after the
curing of all such Events of Default which may have occurred, the duties
and obligations of the Trustee shall be determined solely by the express
provisions of this Agreement, the Trustee shall not be liable except for
the performance of such duties and obligations as are specifically set
forth in this Agreement, no implied covenants or obligations shall be read
into this Agreement against the Trustee and, in the absence of bad faith on
the part of the Trustee, the Trustee may conclusively rely, as to the truth
of the statements and the correctness of the opinions expressed therein,
upon any certificates or opinions furnished to the Trustee and conforming
to the requirements of this Agreement;
(ii) The Trustee shall not be personally liable for an error of
judgment made in good faith by a Responsible Officer or other officers of
the Trustee, unless it shall be proved that the Trustee was negligent in
ascertaining the pertinent facts;
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(iii) The Trustee shall not be personally liable with respect to any
action taken, suffered or omitted to be taken by it in good faith in
accordance with the direction of the Certificate Insurer or with the
consent of the Certificate Insurer, the Class A Certificateholders holding
Class A Certificates evidencing Percentage Interests of at least 25%,
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;
(iv) The Trustee shall not be required to take notice or be deemed to
have notice or knowledge of any default or Event of Default (except an
Event of Default with respect to the nonpayment of any amount described in
Section 7.1(a)), unless a Responsible Officer of the Trustee shall have
received written notice thereof. In the absence of receipt of such notice,
the Trustee may conclusively assume that there is no default or Event of
Default (except a failure to make a Delinquency Interest Advance);
(v) 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 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; and
(vi) Subject to the other provisions of this Agreement and without
limiting the generality of this Section, the Trustee shall have no duty (A)
to see to 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, the Trust Fund, the
Certificateholders or the Mortgage Loans, (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.
Section 9.2 Certain Matters Affecting the Trustee. (a) Except as
-------------------------------------
otherwise provided in Section 9.1:
(i) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, Officers' Certificate, Opinion
of Counsel, certificate of auditors or any other certificate, statement,
instrument, opinion, report, notice,
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request, consent, order, appraisal, bond or other paper or document
believed by it to be genuine and to have been signed or presented by the
proper party or parties;
(ii) the Trustee may consult with counsel and any Opinion of Counsel
shall be full and complete authorization and protection in respect of any
action taken or suffered or omitted by it hereunder in good faith and in
accordance with such opinion of counsel;
(iii) the Trustee shall be under no obligation to exercise any of the
trusts or powers vested in it by this Agreement or to institute, conduct or
defend by litigation hereunder or in relation hereto at the request, or
direction of the Certificate Insurer or any of the Certificateholders,
pursuant to the provisions of this Agreement, unless such
Certificateholders or the Certificate Insurer, as applicable, shall have
offered to the Trustee reasonable security or indemnity against the costs,
expenses and liabilities which may be incurred therein or thereby; nothing
contained herein shall, however, relieve the Trustee of the obligation,
upon the occurrence of an Event of Default (which has not been cured), to
exercise such of the rights and powers vested in it by this Agreement, and
to use the same degree of care and skill in its exercise as a prudent
person would exercise or use under the circumstances in the conduct of such
person's own affairs;
(iv) the Trustee shall not be personally liable for any action taken,
suffered or omitted by it in good faith and believed by it to be authorized
or within the discretion or rights or powers conferred upon it by this
Agreement;
(v) prior to the occurrence of an Event of Default hereunder and after
the curing of all Events of Default which may have occurred, the Trustee
shall not be bound to make any investigation into the facts or matters
stated in any resolution, certificate, statement, instrument, opinion,
report, notice, request, consent, order, approval, bond or other paper or
document, unless requested in writing to do so by the Certificate Insurer
or Holders of Class A Certificates evidencing Percentage Interests
aggregating not less than 25%; 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 expense or liability as a
condition to taking any such action;
(vi) 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;
(vii) the Trustee shall not be required to give any bond or surety in
respect of the execution of the Trust Fund created hereby or the powers
granted hereunder; and
(viii) 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.
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(b) Following the Startup Date, the Trustee shall not knowingly accept
any contribution of assets to the Trust Fund, unless the Trustee and the
Certificate Insurer shall have received an Opinion of Counsel (at the expense of
the Servicer) to the effect that the inclusion of such assets in the Trust Fund
will not cause the Trust Fund to fail to qualify as a REMIC at any time that any
Certificates are outstanding or subject the Trust Fund to any tax under the
REMIC Provisions or other applicable provisions of federal, state and local law
or ordinances. The Trustee agrees to indemnify the Trust Fund, the Certificate
Insurer and the Servicer for any taxes and costs, including any attorney's fees,
imposed or incurred by the Trust Fund, the Certificate Insurer or the Servicer
as a result of the breach of the Trustee's covenants set forth within this
subsection (b).
Section 9.3 Not Liable for Certificates or Mortgage Loans. The
----------------------------------------------
recitals contained herein (other than the certificate of authentication on the
Certificates) shall be taken as the statements of the Seller and the Trustee
assumes no responsibility for their correctness. The Trustee makes no
representations as to the validity or sufficiency of this Agreement or of any
Mortgage Loan or related document. The Trustee shall not be accountable for the
use or application of any funds paid to the Servicer in respect of the Mortgage
Loans or deposited in or withdrawn from the Collection Account by the Servicer.
The Trustee shall not be responsible for the legality or validity of the
Agreement or the validity, priority, perfection or sufficiency of the security
for the Certificates issued or intended to be issued hereunder.
Section 9.4 Trustee May Own Certificates. The Trustee in its
----------------------------
individual or any other capacity may become the owner or pledgor of Certificates
with the same rights it would have if it were not Trustee, and may otherwise
deal with the parties hereto.
Section 9.5 Payment of Trustee Fees. The Trustee shall withdraw from
-----------------------
the Certificate Account on each Distribution Date and pay to itself the Trustee
Fee. Except as otherwise provided in this Agreement, the Trustee and any
director, officer, employee or agent of the Trustee shall be indemnified by the
Trust Fund and held harmless against any loss, liability or "unanticipated out-
of-pocket" expense incurred or paid to third parties (which expenses shall not
include salaries paid to employees, or allocable overhead, of the Trustee) in
connection with the acceptance or administration of its trusts hereunder, the
Certificate Insurance Agreement or the Certificates, other than any loss,
liability or expense incurred by reason of willful misfeasance, bad faith or
negligence in the performance of duties hereunder or by reason of reckless
disregard of obligations and duties hereunder. The provisions of this Section
9.5 shall survive the termination of this Agreement and the removal or
resignation of the Trustee.
The Servicer covenants and agrees to indemnify the Trustee and the
Certificate Insurer and any director, officer, employee or agent of either
against any losses, liabilities, damages, claims or expenses (including
reasonable legal fees and such related expenses) that may be sustained by the
Trustee in connection with this Agreement and the Certificate Insurance
Agreement related to the willful misfeasance, bad faith or negligence in the
performance of the Servicer's duties hereunder.
Section 9.6 Eligibility Requirements for Trustee. The Trustee
-------------------------------------
hereunder shall at all times be (a) a banking association organized and doing
business under the laws
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of any state or the United States of America subject to supervision or
examination by federal or state authority, (b) authorized under such laws to
exercise corporate trust powers, including taking title to the Trust Fund assets
on behalf of the Certificateholders (c) having a combined capital and surplus of
at least $50,000,000, (d) whose long-term deposits, if any, shall be rated at
least BBB by S&P and Baa3 by Moody's (except as provided herein) or such lower
long-term deposit rating as may be approved in writing by the Certificate
Insurer, (e) whose short-term deposits rating is rated A-1+ by S&P and P-1 by
Moody's, and (f) reasonably acceptable to the Certificate Insurer as evidenced
in writing. If such banking association 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 shall be deemed to be
its combined capital and surplus as set forth in its most recent report of
condition so published. In case at any time the Trustee shall cease to be
eligible in accordance with the provisions of this Section, the Trustee shall
resign immediately in the manner and with the effect specified in Section 9.7.
Section 9.7 Resignation and Removal of the Trustee. (a) The Trustee
--------------------------------------
may at any time resign and be discharged from the trusts hereby created by
giving at least 30 days' prior written notice thereof to the Servicer, the
Certificate Insurer and to all Certificateholders. Upon receiving such notice
of resignation, the Certificate Insurer may appoint a successor trustee and if
the Certificate Insurer fails to appoint a successor trustee, the Servicer shall
promptly appoint a successor trustee acceptable to the Certificate Insurer
(which acceptance shall not be unreasonably withheld) by written instrument, in
duplicate, which instrument shall be delivered to the resigning Trustee and to
the successor trustee. A copy of such instrument shall be delivered to the
Depositor, the Certificateholders, the Certificate Insurer and the Seller by the
Servicer. Unless a successor trustee shall have been so appointed and have
accepted appointment within 30 days after the giving of such notice of
resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor trustee.
(b) If at any time the Trustee shall cease to be eligible in
accordance with the provisions of Section 9.6 and shall fail to resign after
written request therefor by the Servicer or the Certificate Insurer, or if at
any time the Trustee shall become incapable of acting, or shall be adjudged
bankrupt or insolvent, or a receiver of the Trustee or of its property shall be
appointed, or any public officer shall take charge or control of the Trustee or
of its property or affairs for the purpose of rehabilitation, conservation or
liquidation, then the Certificate Insurer may appoint a successor trustee and if
the Certificate Insurer fails to appoint a successor trustee, the Servicer or
the Certificate Insurer may remove the Trustee and the Servicer shall, within 30
days after such removal, appoint, subject to the approval of the Certificate
Insurer, which approval shall not be unreasonably delayed, a successor trustee
by written instrument, in duplicate, which instrument shall be delivered to the
Trustee so removed and to the successor trustee. A copy of such instrument
shall be delivered to the Depositor, the Certificateholders, the Certificate
Insurer and the Seller by the Servicer.
(c) If the Trustee fails to perform in accordance with the terms of
this Agreement, the Majority Certificateholders (with the consent of the
Certificate Insurer, which consent shall not be unreasonably withheld) or the
Certificate Insurer may remove the Trustee and appoint a successor trustee
acceptable to the Certificate Insurer by written instrument or
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instruments, in triplicate, signed by such Holders or their attorneys-in-fact
duly authorized, one complete set of which instruments shall be delivered to the
Servicer and the Certificate Insurer, one complete set to the Trustee so removed
and one complete set to the successor Trustee so appointed.
(d) Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to any of the provisions of this Section shall become
effective upon acceptance of appointment by the successor trustee as provided in
Section 9.8.
(e) Upon any termination of, or appointment of any successor to the
Trustee hereunder, the Trustee shall promptly transfer all of the Residual
Interest (as defined under the Code) of the Trust Fund to the successor Trustee.
Section 9.8 Successor Trustee. Any successor trustee appointed as
-----------------
provided in Section 9.7 shall execute, acknowledge and deliver to the Depositor,
the Certificate Insurer, the Seller, the Servicer and to its predecessor trustee
an instrument accepting such appointment hereunder, and thereupon the
resignation or removal of the predecessor trustee shall become effective and
such successor trustee, without any further act, deed or conveyance, shall
become fully vested with all the rights, powers, duties and obligations of its
predecessor hereunder, with the like effect as if originally named as trustee
herein. The predecessor trustee shall deliver to the successor trustee all
Mortgage Files and related documents and statements held by it hereunder, and
the Servicer and the predecessor trustee shall execute and deliver such
instruments and do such other things as may reasonably be required for more
fully and certainly vesting and confirming in the successor trustee all such
rights, powers, duties and obligations. No successor trustee shall accept
appointment as provided in this Section unless at the time of such acceptance
such successor trustee shall be eligible under the provisions of Section 9.6.
Upon acceptance of appointment by a successor trustee as provided in this
Section, the Servicer shall mail notice of the succession of such trustee
hereunder to all Holders of Certificates at their addresses as shown in the
Certificate Register (such Certificate Register shall be provided to the
Servicer by the Successor Trustee) and to each of the Rating Agencies. If the
Servicer fails to mail such notice within 10 days after acceptance of
appointment by the successor trustee, the successor trustee shall cause such
notice to be mailed at the expense of the Servicer.
Section 9.9 Merger or Consolidation of Trustee. Any Person into
----------------------------------
which the Trustee may be merged or converted or with which it may be
consolidated or any corporation or national banking association resulting from
any merger, conversion or consolidation to which the Trustee shall be a party,
or any corporation or national banking association succeeding to the business of
the trustee, shall be the successor of the Trustee hereunder, provided such
corporation or national banking association shall be eligible under the
provisions of Section 9.6, without the execution or filing of any paper or any
further act on the part of any of the parties hereto, anything herein to the
contrary notwithstanding.
Section 9.10 Appointment of Co-Trustee or Separate Trustee. (a)
---------------------------------------------
Notwithstanding any other provisions hereof, at any time, for the purpose of
meeting any legal requirements of any jurisdiction in which any part of the
Trust Fund or property securing the same may at the time be located, the
Servicer and the Trustee acting jointly shall
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have the power and shall execute and deliver all instruments to appoint one or
more Persons approved by the Trustee to act as co-trustee or co-trustees,
jointly with the Trustee, or separate trustee or separate trustees, of all or
any part of the Trust Fund, and to vest in such Person or Persons, in such
capacity, such title to the Trust Fund, or any part thereof, and, subject to the
other provisions of this Section 9.10, 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 case an Event of Default shall
have occurred and be continuing, the Trustee alone shall have the power to make
such appointment. No co-trustee or separate trustee hereunder shall be required
to meet the terms of eligibility as a successor trustee under Section 9.6
hereunder and no notice to Holders of Certificates of the appointment of co-
trustee(s) or separate trustee(s) shall be required under Section 9.8 hereof.
(b) In the case of any appointment of a co-trustee or separate
trustee pursuant to this Section 9.10, all rights, powers, duties and
obligations conferred or imposed upon the Trustee shall be conferred or imposed
upon and exercised or performed by the Trustee and such separate trustee or co-
trustee jointly, except to the extent that under any law of any jurisdiction in
which any particular act or acts are to be performed (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 Fund or any portion thereof in any such jurisdiction) shall be exercised
and performed by such separate trustee or co-trustee at the direction of the
Trustee.
(c) Any notice, request or other writing given to the Trustee shall be
deemed to have been given to each of the then separate trustees and co-trustees,
as effectively as if given to each of them. Every instrument appointing any
separate trustee or co-trustee shall refer to this Agreement and the conditions
of this Article IX. Each separate trustee and co-trustee, upon its acceptance
of the trusts conferred, shall be vested with the estates or property specified
in its instrument of appointment, either jointly with the 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.
(d) 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. The Trustee shall not be
responsible for any action or inaction of any such separate trustee or co-
trustee, provided that the Trustee appointed such separate trustee or co-trustee
with due care. If any separate trustee or co-trustee shall die, become
incapable of acting, resign or be removed, all of its estates, properties,
rights, remedies and trusts shall vest in and be exercised by the Trustee, to
the extent permitted by law, without the appointment of a new or successor
trustee.
Section 9.11 Retirement of Certificates. The Trustee shall, upon the
---------------------------
retirement of the Certificates pursuant hereto or otherwise, furnish to the
Certificate Insurer
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a notice of such retirement, and, upon retirement of the Class A Certificates
shall surrender the Certificate Insurance Policy to the Certificate Insurer for
cancellation.
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ARTICLE X
REMIC Administration and Provisions
-----------------------------------
Section 10.1 REMIC Administration. (a) The Trust Fund shall elect
--------------------
that the Upper-Tier REMIC and the Lower-Tier REMIC shall be treated as REMICs
under Section 860D of the Code. Such elections will be made on Form 1066 or
other appropriate federal tax or information returns and any appropriate state
returns for the taxable year ending on the last day of the calendar year in
which the Certificates are issued. Any inconsistencies or ambiguities in this
Agreement or in the administration of the Trust Fund shall be resolved in a
manner that preserves the validity of such REMIC elections.
(b) The Class A Certificates, the Class B Certificates and the Class
C Certificates are hereby designated as "regular interests" with respect to the
Upper-Tier REMIC and the Class RU Certificates are hereby designated as the
single class of "residual interest" with respect to the Upper-Tier REMIC. The
Class LT-1, LT-2, LT-3, LT-4, LT-5, LT-6, LT-7, LT-8 and LT-9 Certificates are
hereby designated as "regular interests" with respect to the Lower-Tier REMIC
and the Class RL Certificates are hereby designated as the single class of
"residual interest" with respect to the Lower-Tier REMIC. The REMIC
Administrator shall not permit the creation of any "interests" in the Trust Fund
(within the meaning of Section 860G of the Code) other than the Upper-Tier and
Lower-Tier REMIC regular interests and the interests represented by the
Certificates.
(c) The beneficial ownership interest of the Lower-Tier REMIC shall
be evidenced by the interests (the "Lower-Tier Interests") having the
characteristics and terms as follows:
Original Final
Class Companion Principal Interest Distribution
Designation Classes Balance Rate Date
- ------------- --------- ------------ --------- ------------------
LT-1 A-1 $80,200,000 (1) May 25, 2003
LT-2 A-2 29,800,000 (1) March 25, 2005
LT-3 A-3 43,700,000 (1) April 25, 2007
LT-4 A-4 59,800,000 (1) September 25, 2009
LT-5 A-5 16,300,000 (1) April 25, 2010
LT-6 A-6 50,200,000 (1) February 25, 2018
LT-7 B $5,118,860.19 (1) February 25, 2018
LT-8 N/A 2,000 (2) February 25, 2018
LT-9 N/A 2,000 (3) February 25, 2018
RL N/A (4) (4) February 25, 2018
(1) The Weighted Average Mortgage Interest Rate, less 0.65%.
(2) The Weighted Average of the Class A-1, Class A-2, Class A-3, Class A-4,
Class A-5, Class A-6 and Class B Pass-Through Rates.
(3) The Net Weighted Average Coupon Rate.
(4) The RL Certificate has no principal balance and does not bear interest.
The Lower-Tier Interests LT-1, LT-2, LT-3, LT-4, LT-5, LT-6, LT-7, LT-8 and LT-9
shall be issued as non-certificated interests and recorded on the records of the
Lower-Tier REMIC
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as being issued to and held by the REMIC Administrator on behalf of the Upper-
Tier REMIC.
On each Distribution Date, the Lower Tier Distribution Amount shall be
applied as principal and interest of particular Lower Tier Interests, other than
the RL Certificate, in amounts corresponding to the aggregate respective amounts
required to be applied as principal and interest of their related Companion
Classes (as set forth above) and the Class C Certificates pursuant to the
priorities set forth in Section 6.5 hereof and with respect to the Lower Tier
Interests LT-8 and LT-9,
(i) the Lower Tier Distribution Amount shall be applied as interest to
LT-8 and LT-9 in an amount corresponding to the interest accrued on the class
principal balances of such classes at the interest rate for such class as stated
above; provided, however, that amounts payable as interest in respect of LT-9
shall be reduced (the "LT-9 Distribution Reduction Amount") when the Lower Tier
Subordinated Amount is less than the Lower Tier Required Subordinated Amount by
the lesser of (x) the amount of such difference and (y) the Maximum LT-9
Interest Deferral Amount. The LT-9 Distribution Reduction Amount will be
applied to proportionately reduce the principal balance of LT-8 in proportion to
the amount on such Distribution Date of any Subordination Deficiency Amount; and
(ii) the remainder of the Lower Tier Distribution Amount shall be
applied as principal to LT-8 and LT-9 in the following percentages:
(a) 50.00% to LT-9; and
(b) 50.00% to LT-8 provided that the Lower Tier Subordinated Amount is
less than or equal to the Lower Tier Required Subordinated Amount. If
not, 50.00% divided among LT-8 and LT-9 such that the Lower Tier
Subordinated Amount equals the Lower Tier Required Subordinated
Amount.
No distributions will be made on the Class RL Certificate, except that
any distribution of the proceeds of the final remaining assets of the Lower-Tier
REMIC shall be distributed to the Holder thereof upon presentation and surrender
of the Class RL Certificate.
(d) The Closing Date is hereby designated as the Startup Date of the
Trust Fund within the meaning of Section 860G(a)(9) of the Code.
(e) The REMIC Administrator shall pay out of its own funds, without
any right of reimbursement, any and all expenses relating to any tax audit of
the Trust Fund (including, but nor limited to, any professional fees or any
administrative or judicial proceedings with respect thereto that involved the
Internal Revenue Service or state tax authorities), other than the expense of
obtaining any tax related Opinion of Counsel not obtained in connection with
such an audit and other than taxes, in either case except as specified herein;
provided, however, that if such audit resulted from the negligence of the
- -------- -------
Servicer or the Depositor, then the Servicer or the Depositor, as the case may
be, shall pay such expenses. The REMIC Administrator, as agent for the tax
matters person, shall (i) act on behalf of the Trust Fund in relation to any tax
matter or controversy involving the Trust
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Fund and (ii) represent the Trust Fund in any administrative or judicial
proceeding relating to an examination or audit by any governmental taxing
authority with respect thereto. The Holder of the largest Percentage Interest
in the Residual Certificates of the related REMIC from time to time is hereby
designated as Tax Matters Person with respect to the Trust Fund and hereby
irrevocably appoints and authorizes the Trustee to act its agent to perform the
duties of the Tax Matters Person with respect to the Trust Fund. To the extent
authorized under the Code and the regulations promulgated thereunder, each
Holder of a Residual Certificate hereby irrevocably appoints and authorizes the
REMIC Administrator to be its attorney-in-fact for purposes of signing any Tax
Returns required to be filed on behalf of the Trust Fund.
(f) The REMIC Administrator shall prepare or cause to be prepared,
and the Trustee shall sign and file all of the Tax Returns in respect of the
Trust Fund created hereunder, other than Tax Returns required to be filed by the
Servicer pursuant to Section 5.24. The expenses of preparing and filing such
returns shall be borne by the REMIC Administrator without any right of
reimbursement therefor.
(g) The REMIC Administrator shall perform on behalf of the Trust Fund
all reporting and other compliance duties that are the responsibility of the
Trust Fund under the Code, the REMIC Provisions or other compliance guidance
issued by the Internal Revenue Service or any state or local taxing authority.
Among its other duties, as required by the Code, the REMIC Provisions or other
such compliance guidance, the REMIC Administrator shall provide (i) to any
Transferor of a Residual Certificate such information as is necessary for the
application of any tax relating to the transfer of a Residual Certificate to any
Person who is not a Disqualified Organization, (ii) to Certificateholders such
information or reports as are required by the Code or the REMIC Provisions
including reports relating to interest, original issue discount and market
discount or premium (using the Prepayment Assumption) and (iii) to the Internal
Revenue Service the name, title, address and telephone number of the person who
will serve as the representative of the Trust Fund. In addition, the Depositor
shall provide or cause to be provided to the REMIC Administrator, within ten
(10) days after the Closing Date, all information or data that the REMIC
Administrator reasonably determines to be relevant for tax purposes as to the
valuations and issue prices of the Certificates, including, without limitation,
the price, yield, prepayment assumption and projected cash flow of the
Certificates.
(h) The REMIC Administrator shall take such action and shall cause
the Trust Fund created hereunder to take such action as shall be necessary to
create or maintain the status of each of the Upper-Tier REMIC and the Lower-Tier
REMIC as a REMIC under the REMIC Provisions (and the Servicer shall assist it,
to the extent reasonably requested by the REMIC Administrator). Neither the
Trustee nor the REMIC Administrator shall take any action, cause the Trust Fund
to take any action or fail to take (or fail to cause to be taken) any action
that, under the REMIC Provisions, if taken or not taken, as the case may be,
could (i) endanger the status of the Upper-Tier REMIC or the Lower-Tier REMIC as
a REMIC or (ii) result in the imposition of a tax upon the Upper-Tier REMIC or
the Lower-Tier REMIC (including but not limited to the tax on prohibited
transactions as defined in Section 860F(a)(2) of the Code and the tax on
contributions to a REMIC set forth in Section 860G(d) of the Code or the tax on
net income from foreclosure property as defined in Section 860G(c)
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of the Code) (any such event, an "Adverse REMIC Event") unless the REMIC
Administrator and the Certificate Insurer received an Opinion of Counsel (at the
expense of the party seeking to take such action but in no event shall such
Opinion of Counsel be an expense of the Trustee) to the effect that the
contemplated action will not, with respect to the Upper-Tier REMIC or the Lower-
Tier REMIC, endanger such status or result in an Adverse REMIC Event. The
Servicer shall not take or fail to take any action (whether or not authorized
hereunder) as to which the REMIC Administrator has advised it in writing that it
has received an Opinion of Counsel (which such Opinion of Counsel shall not be
an expense of the REMIC Administrator) to the effect that an Adverse REMIC Event
could occur with respect to such action. In addition, prior to taking any
action with respect to the Trust Fund or its assets, or causing the Trust Fund
to take any action which is not expressly permitted under the terms of this
Agreement, the Servicer will consult with the Certificate Insurer and with the
REMIC Administrator or its designee, in writing, with respect to whether such
action could cause an Adverse REMIC Event to occur with respect to the Upper-
Tier REMIC or the Lower-Tier REMIC, and the Servicer shall not take any such
action or cause the Trust Fund to take any such action as to which the REMIC
Administrator or the Certificate Insurer has advised it in writing that an
Adverse REMIC Event could occur. The REMIC Administrator may consult with
counsel to make such written advice, and the cost of same shall be borne by the
party seeking to take the action not permitted by this Agreement (but in no
event shall such cost be an expense of the REMIC Administrator). At all times
as may be required by the Code, the REMIC Administrator and the Trustee will
ensure that substantially all of the assets of the Trust Fund will consist of
"qualified mortgages" as defined in Section 860G(a)(3) of the Code and
"permitted investments" as defined in Section 860G(a)(5) of the Code.
(i) In the event that any tax is imposed on "prohibited transactions"
of the Upper-Tier REMIC or the Lower-Tier REMIC as defined in Section 860F(a)(2)
of the Code, on "net income from foreclosure property" of the Upper-Tier REMIC
or the Lower-Tier REMIC as defined in Section 860G(c) of the Code, on any
contributions to the Upper-Tier REMIC or the Lower-Tier REMIC after the Startup
Date therefor pursuant to Section 860G(d) of the Code, or any other tax is
imposed by the Code or any applicable provisions of state or local tax laws,
such tax shall be charged (i) to the REMIC Administrator pursuant to Section
10.3 hereof, if such tax arises out of or results from a breach by the REMIC
Administrator of any of its obligations under this Article X, (ii) to the
Trustee pursuant to Section 10.3 hereof, if such tax arises out of or results
from a breach by the Trustee of any of its obligations under Article IX or this
Article X, (iii) to the Servicer pursuant to Section 10.3 hereof, if such tax
arises out of or results from a breach by the Servicer of any of its obligations
under Article V or this Article X, or otherwise (iv) against amounts on deposit
in the Certificate Account and shall be paid by withdrawal therefrom.
(j) On or before April 15 of each calendar year, commencing April 15,
1997, the REMIC Administrator shall deliver to the Servicer, the Certificate
Insurer and each Rating Agency a Certificate from a Responsible Officer of the
REMIC Administrator stating the REMIC Administrator's compliance with this
Article X.
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(k) The Servicer and the REMIC Administrator shall, for federal
income tax purposes, maintain books and records with respect to the Upper-Tier
REMIC or the Lower-Tier REMIC on a calendar year and on an accrual basis.
(l) Neither the Trustee nor the REMIC Administrator shall accept any
contributions of assets to the Trust Fund unless it and the Certificate Insurer
shall have received an Opinion of Counsel (which such Opinion of Counsel shall
not be an expense of the Trustee or the REMIC Administrator) to the effect that
the inclusion of such assets in the Trust Fund will not cause the Upper-Tier
REMIC or the Lower-Tier REMIC to fail to qualify as a REMIC at any time that any
Certificates are outstanding or subject the Upper-Tier REMIC or the Lower-Tier
REMIC to any tax under the REMIC Provisions or other applicable provisions of
federal, state and local law or ordinances.
(m) Neither the REMIC Administrator nor the Servicer shall enter into
any arrangement by which the Trust Fund will receive a fee or other compensation
for services nor permit either the Upper-Tier REMIC or the Lower-Tier REMIC to
receive any income from assets other than "qualified mortgages" as defined in
Section 860G(a)(3) of the Code or "permitted investments" as defined in Section
860G(a)(5) of the Code.
(n) Solely for purposes of satisfying Section 1.860G-1(a)(4)(iii) of
the Treasury Regulations, the "latest possible maturity date" by which the
certificate principal balances of each Class of Certificates representing a
regular interest in the Trust Fund would be reduced to zero is September 25,
2012, which is the Distribution Date one year following the latest scheduled
maturity of any Mortgage Loan.
(o) Upon filing with the Internal Revenue Service, the REMIC
Administrator shall furnish to the Holders of the Residual Certificates the Form
1066 and each Form 1066Q and shall respond promptly to written requests made not
more frequently than quarterly by any Holder of Residual Certificates with
respect to the following matters:
(A) the original projected principal and interest cash flows on the
Closing Date on the regular and residual interests created hereunder and on
the Mortgage Loans, based on the Prepayment Assumption;
(B) the projected remaining principal and interest cash flows as of
the end of any calendar quarter with respect to the regular and residual
interests created hereunder and the Mortgage Loans, based on the Prepayment
Assumption;
(C) the Prepayment Assumption and any interest rate assumptions used
in determining the projected principal and interest cash flows described
above;
(D) the original issue discount (or, in the case of the Mortgage
Loans, market discount) or premium accrued or amortized through the end of
such calendar quarter with respect to the regular or residual interests
created hereunder and with respect to the Mortgage Loans, together with
each constant yield to maturity used in computing the same;
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(E) the treatment of losses realized with respect to the Mortgage
Loans or the regular interests created hereunder, including the timing and
amount of any cancellation of indebtedness income of the REMIC with respect
to such regular interests or bad debt deductions claimed with respect to
the Mortgage Loans;
(F) the amount and timing of any non-interest expenses of the REMIC;
and
(G) any taxes (including penalties and interest) imposed on the
REMIC, including, without limitation, taxes on "prohibited transactions,"
"contributions" or "net income from foreclosure property" or state or local
income or franchise taxes.
Section 10.2 Prohibited Transactions and Activities. Neither the
--------------------------------------
Depositor, the Servicer, the REMIC Administrator nor the Trustee shall sell,
dispose of, or substitute for any of the Mortgage Loans, except in connection
with (i) the foreclosure of a Mortgage Loan, including but not limited to, the
acquisition or sale of a Mortgaged Property acquired by deed in lieu of
foreclosure, (ii) the bankruptcy of the Trust Fund, (iii) the termination of the
Trust Fund pursuant to Article VIII of this Agreement, or (iv) a purchase of
Mortgage Loans pursuant to Article II or III of this Agreement nor acquire any
assets for the Trust Fund, nor sell or dispose of any investments in the
Certificate Accounts for gain, nor accept any contributions to the Trust Fund
after the Closing Date unless it and the Certificate Insurer has received an
Opinion of Counsel (at the expense of the party seeking to cause such sale,
disposition, substitution or acquisition but in no event shall such Opinion of
Counsel be an expense of the Trustee or the REMIC Administrator) that such sale,
disposition, substitution or acquisition will not (a) affect adversely the
status of the Upper-Tier REMIC or the Lower-Tier REMIC as a REMIC or (b) cause
the Upper-Tier REMIC or the Lower-Tier REMIC to be subject to a tax on
"prohibited transactions" or "contributions" pursuant to the REMIC Provisions.
Section 10.3 Servicer, Trustee and REMIC Administrator
-----------------------------------------
Indemnification. (a) The Trustee agrees to indemnify the Trust Fund, the
- ---------------
Certificate Insurer, the Depositor and the Servicer for any taxes and costs
(including, without limitation, any reasonably attorneys' fees) including
without limitation, any reasonable attorneys' fees imposed on or incurred by the
Upper-Tier REMIC, the Lower Tier REMIC, the Certificate Insurer, the Depositor,
the Servicer or the REMIC Administrator, as a result of a breach of the
Trustee's covenants set forth in this Article X.
(b) The Servicer agrees to indemnify the Trust Fund, the Certificate
Insurer, the Depositor, the REMIC Administrator and the Trustee for any taxes
and costs (including, without limitation, any reasonable attorneys' fees)
imposed on or incurred by the Upper-Tier REMIC, the Lower-Tier REMIC, the
Certificate Insurer, the Depositor, the REMIC Administrator or the Trustee, as a
result of a breach of the Servicer's covenants set forth in this Article X or in
Article V with respect to compliance with the REMIC Provisions, including,
without limitation, any penalties arising from the Trustee's execution of Tax
Returns prepared by the Servicer pursuant to Section 5.24 that contain errors or
omissions.
(c) The REMIC Administrator agrees to indemnify the Trust Fund, the
Certificate Insurer, the Depositor, the Servicer and the Trustee for any taxes
and costs
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(including, without limitation, any reasonable attorneys' fees) imposed on or
incurred by the Upper-Tier REMIC, the Lower-Tier REMIC, the Certificate Insurer,
the Depositor, the Servicer or the Trustee, as a result of a breach of the REMIC
Administrator's covenants set forth in this Article X with respect to compliance
with the REMIC Provisions, including, without limitation, any penalties arising
from the Trustee's execution of Tax Returns prepared by the REMIC Administrator
pursuant to this Article X that contain errors or omissions.
[Remainder of this page intentionally left blank]
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ARTICLE XI
Miscellaneous Provisions
------------------------
Section 11.1 Limitation on Liability of the Depositor and the
------------------------------------------------
Servicer. Neither the Depositor nor the Servicer nor any of the directors,
- --------
officers, employees or agents of the Depositor or the Servicer shall be under
any liability to the Trust, the Certificateholders or the Certificate Insurer
for any action taken, or for refraining from the taking of any action, in good
faith pursuant to this Agreement, or for errors in judgment; provided, however,
-------- -------
that this provision shall not protect the Depositor or the Servicer or any such
Person against any breach of warranties or representations made herein, or
against any specific liability imposed on each such party pursuant to this
Agreement or against any liability which would otherwise be imposed by reason of
willful misfeasance, bad faith or negligence in the performance of duties or by
reason of reckless disregard of obligations or duties hereunder. The Depositor
or the Servicer and any director, officer, employee or agent of the Depositor or
the Servicer may rely in good faith on any document of any kind which, prima
-----
facie, is properly executed and submitted by any appropriate Person respecting
- -----
any matters arising hereunder. The Depositor, the Servicer and any director,
officer, employee or agent of the Depositor or the Servicer shall be indemnified
and held harmless by the Trust Fund against any loss, liability or expense
incurred in connection with any legal action relating to this Agreement or the
Certificates, with respect to the Servicer, other than any loss, liability or
expense related to Servicer's servicing obligations with respect to any specific
Mortgage Loan or Mortgage Loans (except as any such loss, liability or expense
shall be otherwise reimbursable pursuant to this Agreement) or related to the
Servicer's obligations under this Agreement, with respect to the Depositor, the
Seller, or Servicer, as the case may be, or any loss, liability or expense
incurred by reason of willful misfeasance, bad faith or negligence in the
performance of duties hereunder or by reason of reckless disregard of
obligations and duties hereunder. Neither the Depositor, nor the Servicer shall
be under any obligation to appear in, prosecute or defend any legal action which
is not incidental to its respective duties under this Agreement and which in its
opinion may involve it in any expense or liability; provided, however, that the
-------- -------
Depositor, or the Servicer may in its sole discretion undertake any such action
which it may deem necessary or desirable with respect to this Agreement and the
rights and duties of the parties hereto and the interests of the
Certificateholders hereunder. In the event the Depositor or the Servicer take
any action as described in the preceding sentence, the legal expenses and costs
of such action, if previously approved by the Certificate Insurer, which
approval shall not be unreasonably withheld, and any liability resulting
therefrom will be expenses, costs and liabilities of the Trust Fund, and the
Servicer or the Depositor, as the case may be, will be entitled to be reimbursed
therefor out of funds in the Collection Account.
Section 11.2 Acts of Certificateholders; Certificateholders' Rights.
-------------------------------------------------------
(a) Except as otherwise specifically provided herein, whenever Certificateholder
action, consent or approval is required under this Agreement, such action,
consent or approval shall be deemed to have been taken or given on behalf of,
and shall be binding upon, all Certificateholders if the Majority
Certificateholders (with the consent of the Certificate Insurer, which consent
shall not be unreasonably withheld) or the Certificate Insurer agrees to take
such action or give such consent or approval.
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(b) The death or incapacity of any Certificateholder shall not operate
to terminate this Agreement or the Trust Fund, nor entitle such
Certificateholder's legal representatives or heir to claim an accounting or to
take any action or proceeding in any court for a partition or winding up of the
Trust Fund, nor otherwise affect the rights, obligations and liabilities of the
parties hereto or any of them.
(c) No Certificateholder shall have any right to vote (except as
expressly provided for herein) or in any manner otherwise control the operation
and management of the Trust Fund, or the obligations of the parties hereto, nor
shall anything herein set forth, or contained in the terms of the Certificates,
be construed so as to constitute the Certificateholders from time to time as
partners or members of an association; nor shall any Certificateholder be under
any liability to any third person by reason of any action taken by the parties
to this Agreement pursuant to any provision hereof or thereof.
Section 11.3 Amendment. (a) This Agreement may be amended from time
---------
to time by the Servicer, the Depositor and the Trustee by written agreement,
upon the prior written consent of the Certificate Insurer (which consent shall
not be unreasonably withheld), without notice to or consent of the
Certificateholders to cure any ambiguity, to correct or supplement any
provisions herein, to comply with any changes in the Code, or to make any other
provisions with respect to matters or questions arising under this Agreement
which shall not be inconsistent with the provisions of this Agreement; provided,
--------
however, that such action shall not, as evidenced by an Opinion of Counsel, at
- -------
the expense of the party requesting the change, but in no event an expense of
the Trustee, delivered to the Trustee and the Certificate Insurer, adversely
affect in any material respect the interests of any Certificateholder; and
provided, further, 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 Holder
of such Certificate, or change the rights or obligations of any other party
hereto without the consent of such party. The Trustee shall give prompt written
notice to Moody's and S&P of any amendment made pursuant to this Section 11.3
and shall promptly send copies of any such amendment to Moody's and S&P.
(b) This Agreement may be amended from time to time by the Servicer,
the Depositor and the Trustee with the consent of the Certificate Insurer (which
consent shall not be withheld if, in the Opinion of Counsel addressed to the
Trustee and the Certificate Insurer, failure to amend would adversely affect the
interests of the Certificateholders unless such consent would adversely affect
the interests of the Certificate Insurer), the Majority Certificateholders for
the purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions of this Agreement or of modifying in any manner the rights
of the Holders; provided, however, that no such amendment shall be made unless
-------- -------
the Trustee and the Certificate Insurer receive an Opinion of Counsel, at the
expense of the party requesting the change, that such change will not adversely
affect the status of the Upper-Tier REMIC or the Lower-Tier REMIC as a REMIC or
cause a tax to be imposed on such Upper-Tier REMIC or Lower-Tier REMIC; and
provided, further, 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 Holder
of such Certificate or reduce the percentage for the Holders of which are
required to
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<PAGE>
consent to any such amendment without the consent of the Holders of 100% of
Certificates affected thereby.
(c) It shall not be necessary for the consent of Holders under this
Section to approve the particular form of any proposed amendment, but it shall
be sufficient if such consent shall approve the substance thereof.
Section 11.4 Recordation of Agreement. To the extent permitted by
------------------------
applicable law, this Agreement, or a memorandum thereof if permitted under
applicable law, is subject to recordation in all appropriate public offices for
real property records in all of the counties or other comparable jurisdictions
in which any or all of the properties subject to the Mortgages are situated, and
in any other appropriate public recording office or elsewhere, such recordation
to be effected by the Servicer at the Certificateholders' expense on direction
and at the expense of Majority Certificateholders requesting such recordation,
but only when accompanied by an Opinion of Counsel to the effect that such
recordation materially and beneficially affects the interests of the
Certificateholders or is necessary for the administration or servicing of the
Mortgage Loans.
Section 11.5 Duration of Agreement. This Agreement shall continue in
---------------------
existence and effect until terminated as herein provided.
Section 11.6 Notices. All demands, notices and communications
-------
hereunder shall be in writing and shall be deemed to have been duly given when
delivered to (i) in the case of the Depositor, CS First Boston Mortgage
Securities Corp., 11 Madison Avenue, New York, New York 10010, Attention: Nita
S. Cherry, Asset Finance Group, (ii) in the case of the Servicer, Advanta
Mortgage Corp. USA, 16875 West Bernardo Drive, San Diego, California 92127,
Attention: Senior Vice President Loan Servicing, (iii) in the case of the
Seller, T.A.R. Preferred Mortgage Corporation, 19782 MacArthur, Suite 260,
Irvine, California 92715, Attention: Walter Villaume, President, with an
additional copy of such notice simultaneously delivered to the Servicer, (iv) in
the case of the Trustee, Bankers Trust Company, 3 Park Plaza, 16th Floor,
Irvine, California 92714, Attention: Preferred Mortgage Asset-Backed
Certificates Series 1996-2, (v) in the case of the Certificateholders, as set
forth in the Certificate Register, (vi) in the case of Moody's, 99 Church
Street, New York, New York 10007 Attention: Home Equity Monitoring Department,
(vii) in the case of S&P, 26 Broadway, New York, New York 10004 Attention:
Residential Mortgage Surveillance Group, (viii) in the case of the Certificate
Insurer, MBIA Insurance Corporation, 113 King Street, Armonk, New York 10504,
Attention: Insured Portfolio Management - SF, (ix) in the case of the Fiscal
Agent, to State Street Bank and Trust Company, 61 Broadway, 15th Floor, New
York, New York 10006, Attention: Municipal Registrar and Paying Agency (or such
other address as the Fiscal Agent shall specify to the Trustee in writing) and
(x) in the case of the Underwriter, CS First Boston Corporation, 11 Madison
Avenue, New York, New York 10010. Any such notices shall be deemed to be
effective with respect to any party hereto upon the receipt of such notice by
such party, except that notices to the Certificateholders shall be effective
upon mailing or personal delivery.
The parties hereto without the consent of the Owners, but with the
consent of the Certificate Insurer may agree in writing that the notices and
reports required hereunder
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may be provided or delivered via electronic, computer or by any other means
acceptable to the parties hereunder and the Certificate Insurer.
Section 11.7 Severability of Provisions. If any one or more of the
--------------------------
covenants, agreements, provisions or terms of this Agreement shall be held
invalid for any reason whatsoever, then such covenants, agreements, provisions
or terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other covenants, agreements, provisions or terms of this
Agreement.
Section 11.8 No Partnership. Nothing herein contained shall be
--------------
deemed or construed to create a co-partnership or joint venture between the
parties hereto and the services of the Servicer shall be rendered as an
independent contractor and not as agent for the Certificateholders.
Section 11.9 Counterparts. This Agreement may be executed in one or
------------
more counterparts and by the different parties hereto on separate counterparts,
each of which, when so executed, shall be deemed to be an original; such
counterparts, together, shall constitute one and the same agreement.
Section 11.10 Successors and Assigns. This Agreement shall inure to
----------------------
the benefit of and be binding upon the parties hereto and the Certificateholders
and their respective successors and permitted assigns.
Section 11.11 Headings. The headings of the various sections of this
--------
Agreement have been inserted for convenience of reference only and shall not be
deemed to be part of this Agreement.
Section 11.12 The Certificate Insurer Default. Any right conferred
-------------------------------
to the Certificate Insurer shall be suspended during any period in which a
Certificate Insurer Default exists. At such time as the Certificates are no
longer outstanding hereunder, and no amounts owed to the Certificate Insurer
hereunder remain unpaid, the Certificate Insurer is no longer obligated under
the Policy, the Certificate Insurer's rights hereunder shall terminate.
Section 11.13 Third Party Beneficiary. The parties agree that the
-----------------------
Certificate Insurer is intended and shall have all rights of a third-party
beneficiary of this Agreement.
Section 11.14 Intent of the Parties. It is the intent of the
---------------------
Depositor and Certificateholders that, for federal income taxes, state and local
income or franchise taxes and other taxes imposed on or measured by income, the
Certificates will be treated as evidencing beneficial ownership interests in a
REMIC. The parties to this Agreement and the holder of each Certificate, by
acceptance of its Certificate, and each beneficial owner thereof, agree to
treat, and to take no action inconsistent with the treatment of, the
Certificates in accordance with the preceding sentence for purposes of federal
income taxes, state and local income and franchise taxes and other taxes imposed
on or measured by income.
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Section 11.15 GOVERNING LAW CONSENT TO JURISDICTION; WAIVER OF JURY
-----------------------------------------------------
TRIAL. (a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
- -----
WITH, THE INTERNAL LAWS (AS OPPOSED TO CONFLICT OF LAWS PROVISIONS) OF THE STATE
OF NEW YORK.
(b) THE SERVICER, THE DEPOSITOR, THE SELLER AND THE TRUSTEE HEREBY
SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK
AND THE UNITED STATES DISTRICT COURT LOCATED IN THE BOROUGH OF MANHATTAN IN NEW
YORK CITY, AND EACH WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND
CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE BY REGISTERED MAIL DIRECTED TO
THE ADDRESS SET FORTH IN SECTION 11.6 HEREOF AND SERVICE SO MADE SHALL BE DEEMED
TO BE COMPLETED FIVE DAYS AFTER THE SAME SHALL HAVE BEEN DEPOSITED IN THE U.S.
MAILS, POSTAGE PREPAID. THE DEPOSITOR, THE SERVICER, THE SELLER AND THE TRUSTEE
EACH HEREBY WAIVE ANY OBJECTION BASED ON FORUM NON CONVENIENS, AND ANY OBJECTION
--------------------
TO VENUE OF ANY ACTION INSTITUTED HEREUNDER AND CONSENTS TO THE GRANTING OF SUCH
LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY THE COURT. NOTHING IN
THIS SECTION SHALL AFFECT THE RIGHT OF THE DEPOSITOR, THE SERVICER OR THE
TRUSTEE TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT
ANY OF THEIR RIGHTS TO BRING ANY ACTION OR PROCEEDING IN THE COURTS OF ANY OTHER
JURISDICTION.
(c) THE DEPOSITOR, THE SERVICER, THE SELLER AND THE TRUSTEE EACH
HEREBY WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE,
WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE ARISING OUT OF, CONNECTED WITH,
RELATED TO, OR IN CONNECTION WITH THIS AGREEMENT. INSTEAD, ANY DISPUTE WILL BE
RESOLVED IN A BENCH TRIAL WITHOUT A JURY.
[End of Agreement.]
119
<PAGE>
IN WITNESS WHEREOF, the Servicer, the Trustee, the Seller and the Depositor
have caused their names to be signed hereto by their respective officers
thereunto duly authorized as of the day and year first above written.
CS FIRST BOSTON MORTGAGE SECURITIES
CORP., as Depositor
By: /s/ Joy Margolies
_______________________________________________
Name: Joy Margolies
Title: Vice President
T.A.R. PREFERRED MORTGAGE
CORPORATION, as Seller
By: /s/ Todd A. Rodriguez
_______________________________________________
Name: Todd A. Rodriquez
Title: Chief Executive Officer
ADVANTA MORTGAGE CORP. USA,
as Servicer
By: /s/ William P. Garland
_______________________________________________
Name: William P. Garland
Title: Senior Vice President
BANKERS TRUST COMPANY, as Trustee
By: /s/ Jennifer Cunningham
_______________________________________________
Name: Jennifer Cunningham
Title: Vice President
[Pooling and Servicing Agreement]
<PAGE>
EXHIBIT B-1
FORM OF CLASS A-1 CERTIFICATE
-----------------------------
Unless this certificate is presented by an authorized representative
of The Depository Trust Company, a New York corporation ("DTC"), to Issuer or
its agent for registration of transfer, exchange, or payment, and any
certificate issued is registered in the name of Cede & Co. or in such other name
as is requested by an authorized representative of DTC (and any payment is made
to Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
"REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT" AS THOSE TERMS
ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE
CODE.
THIS CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND,
NOTWITHSTANDING REFERENCES HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY
PERSON IS REPRESENTED HEREBY.
NEITHER THIS CERTIFICATE NOR THE UNDERLYING MORTGAGE LOANS ARE INSURED
OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE GOVERNMENT
NATIONAL MORTGAGE ASSOCIATION OR ANY OTHER GOVERNMENTAL AGENCY.
Class A-1 No. 1
Cut-off Date: Class A-1 Pass-Through Rate:
December 1, 1996 6.43%
Denomination:
$80,200,000
First Remittance Date: Aggregate Denomination of
January 28, 1997 All
Class A-1
Certificates:
$80,200,000
Servicer: Maturity Date:
Advanta Mortgage Corp. USA May 26, 2003
CUSIP: 126342 FG4
PREFERRED MORTGAGE ASSET-BACKED
CERTIFICATES, SERIES 1996-2, CLASS A-1
--------------------------------------
<PAGE>
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR AN INTEREST IN
THE DEPOSITOR, THE SELLER, THE SERVICER, THE TRUSTEE OR ANY OF THEIR RESPECTIVE
AFFILIATES THEREOF, EXCEPT TO THE EXTENT SET FORTH IN THE POOLING AND SERVICING
AGREEMENT.
This certifies that Cede & Co. is the registered owner of a fractional
interest in the Trust Fund (as defined below) relating to the Preferred Mortgage
Asset-Backed Certificates, Series 1996-2, which consists of (a) such Mortgage
Loans as from time to time are subject to the Pooling and Servicing Agreement
(as defined below), together with the Mortgage Files relating thereto and all
collections thereon and proceeds thereof on and after the Cut-Off Date (other
than Monthly Payments due on each Mortgage Loan up to and including any Due Date
prior to the Cut-Off Date), (b) such assets as from time to time are identified
as REO Property and collections thereon and proceeds thereof, (c) amounts
(including Permitted Investments as may be held from time to time, except as
otherwise provided herein) on deposit in each Account, (d) the Trustee's rights
with respect to the Mortgage Loans under the Certificate Insurance Policy and
all insurance policies required to be maintained pursuant to the Pooling and
Servicing Agreement (as defined herein) and any Insurance Proceeds, (e)
Liquidation Proceeds, (f) Released Mortgaged Property Proceeds, (g) amounts
(including Permitted Investments as may be held from time to time) on deposit in
the Capitalized Interest Account and the Pre-Funding Account, (h) all of the
income, payments and proceeds of each of the foregoing, except to the extent
provided in the Pooling and Servicing Agreement and (i) the rights and remedies
of the Trustee against any representation or warranty made to the Trustee hereby
(the "Trust Fund"). The Trust Fund has been created pursuant to a Pooling and
Servicing Agreement (the "Pooling and Servicing Agreement"), dated as of
-------------------------------
December 1, 1996, among CS First Boston Mortgage Securities Corp., as depositor
(the "Depositor"), T.A.R. Preferred Mortgage Corp., as seller (the "Seller"),
--------- ------
Advanta Mortgage Corp. USA, as servicer (the "Servicer"), and Bankers Trust
--------
Company, as trustee (the "Trustee"). This Certificate is one of the
-------
Certificates described in the Pooling and Servicing Agreement and is issued
pursuant and subject to the Pooling and Servicing Agreement. By acceptance of
this Certificate, the holder assents to and becomes bound by the Pooling and
Servicing Agreement. To the extent not defined herein, all capitalized terms
have the meanings assigned to such terms in the Pooling and Servicing Agreement.
Issued under the Pooling and Servicing Agreement are Certificates
designated as Preferred Mortgage Asset-Backed Certificates, Series 1996-2, Class
A-1 (the "Class A-1 Certificates"), Class A-2 (the "Class A-2 Certificates"),
Class A-3 (the "Class A-3 Certificates"), Class A-4 (the "Class A-4
Certificates"), Class A-5 (the "Class A-5 Certificates"), Class A-6 (the "Class
A-6 Certificates"), Class B (the "Class B
2
<PAGE>
Certificates"), Class C (the "Class C Certificates"), and Class RL and Class RU
(the "Residual Certificates"). The Class A-1 Certificates, the Class A-2
Certificates, the Class A-3 Certificates, the Class A-4 Certificates, the Class
A-5 Certificates, the Class A-6 Certificates (collectively, the "Class A
Certificates"), the Class B Certificates, the Class C Certificates and the
Residual Certificates are collectively referred to herein as the "Certificates."
The Pooling and Servicing Agreement contemplates, subject to its
terms, payment on the twenty-fifth day (or if such day is not a Business Day,
the next succeeding Business Day) (the "Remittance Date") of each calendar month
---------------
commencing in January 1997, so long as the Pooling and Servicing Agreement has
not been terminated, by check (or, if such Class A-1 Certificateholder having an
initial aggregate Class A-1 Principal Balance of at least $1,000,000 and so
desires, by wire transfer pursuant to instructions delivered to the Trustee at
least 5 days prior to such Record Date) to the registered Certificateholder at
the address appearing on the Certificate Register as of the last Business Day of
the calendar month immediately preceding the calendar month in which such
Remittance Date occurs, in an amount equal to the Certificateholder's Percentage
Interest of the portion of the Class A-1 Distribution Amount to be distributed
with respect to the Class A-1 Certificates. The Maturity Date of this
Certificate is May 26, 2003.
Each Certificateholder of record of a Class A-1 Certificate will be
entitled to receive such Certificateholder's Percentage Interest in the amounts
distributed on such Remittance Date to the Certificateholders of the Class A-1
Certificates. The Percentage Interest of each Class A-1 Certificate as of any
date of determination will be equal to the percentage obtained by dividing the
Original Principal Amount set forth on such Class A-1 Certificate by
$80,200,000.
The Class A Certificates have been tranched into six "sequential pay"
Classes, such that the Class A-6 Certificates are entitled to receive no
principal distributions until the Class A-5 Principal Balance has been reduced
to zero, the Class A-5 Certificates are entitled to receive no principal
distributions until the Class A-4 Principal Balance has been reduced to zero,
the Class A-4 Certificates are entitled to receive no principal distributions
until the Class A-3 Principal Balance has been reduced to zero, the Class A-3
Certificates are entitled to receive no principal distributions until the Class
A-2 Principal Balance has been reduced to zero and the Class A-2 Certificates
are entitled to receive no principal distributions until the Class A-1 Principal
Balance has been reduced to zero.
Pursuant to the Certificate Insurance Policy, the Certificate Insurer
is required, to the extent of any
3
<PAGE>
insufficiency in Available Funds, to make Insured Payments available to the
Trustee necessary to distribute the full amount of the Insured Distribution
Amount on each Remittance Date.
Upon receipt of amounts under the Certificate Insurance Policy on
behalf of the Class A Certificateholders, the Trustee shall distribute in
accordance with the Pooling and Servicing Agreement to the Class A
Certificateholders any portion thereof to which such Certificateholders may be
entitled.
The Certificateholder, by its acceptance of this Certificate, agrees
that it will look solely to the funds in the Certificate Account to the extent
available for distribution to the Certificateholder as provided in the Pooling
and Servicing Agreement for payment hereunder and that none of the Depositor,
the Seller, the Servicer or the Trustee in its individual capacity is not
personally liable to the Certificateholder for any amounts payable under this
Certificate or the Pooling and Servicing Agreement or, except as expressly
provided in the Pooling and Servicing Agreement, subject to any liability under
the Pooling and Servicing Agreement. By acceptance of this Certificate, the
Certificateholder agrees to disclosure of his, her or its name and address to
other Certificateholders under the conditions specified in the Pooling and
Servicing Agreement.
The Trustee is required to duly and punctually pay distributions with
respect to this Certificate in accordance with the terms hereof and the Pooling
and Servicing Agreement. Amounts properly withheld under the Code or applicable
to any Certificateholder shall be considered as having been paid by the Trustee
to such Certificateholder for all purposes of the Pooling and Servicing
Agreement.
The Mortgage Loans will be serviced by the Servicer pursuant to the
Pooling and Servicing Agreement. The Pooling and Servicing Agreement permits
the Servicer to enter into Sub-Servicing Agreements with certain institutions
eligible for appointment as Sub-Servicers for the servicing and administration
of certain Mortgage Loans. No appointment of any Sub-Servicer shall release the
Servicer from any of its obligations under the Pooling and Servicing Agreement.
This Certificate does not represent a deposit or other obligation of,
or an interest in, nor are the underlying Mortgage Loans insured or guaranteed
by, the Depositor, the Seller, the Servicer, the Trustee or any of their
subsidiaries and affiliates and are not insured or guaranteed by the Federal
Deposit Insurance Corporation, the Government National Mortgage Association, or
any other governmental agency. This Certificate is limited in right of payment
to certain collections and recoveries relating to the Mortgage Loans and amounts
on deposit in the Accounts (except as otherwise provided in the Pooling and
4
<PAGE>
Servicing Agreement) and payments received by the Trustee pursuant to the
Certificate Insurance Policy, all as more specifically set forth hereinabove and
in the Pooling and Servicing Agreement.
No Certificateholder shall have any right to institute any proceeding,
judicial or otherwise, with respect to the Pooling and Servicing Agreement, or
for the appointment of a receiver or trustee, or for any other remedy under the
Pooling and Servicing Agreement except in compliance with the terms hereof.
Notwithstanding any other provisions in the Pooling and Servicing
Agreement, the Certificateholder of any Certificate shall have the right which
is absolute and unconditional to receive distributions to the extent provided in
the Pooling and Servicing Agreement 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 Certificateholder.
Subject to the terms of the Pooling and Servicing Agreement, the
Pooling and Servicing Agreement provides that the obligations created thereby
will terminate upon notice to the Trustee and the Certificate Insurer of either:
(i) the later of the distribution to Certificateholders of the final payment or
collection with respect to the last Mortgage Loan (or Delinquency Interest
Advances of same by the Servicer), or the disposition of all funds with respect
to the last Mortgage Loan and the remittance of all funds due under the Pooling
and Servicing Agreement and the payment of all amounts due and payable to the
Certificate Insurer and the Trustee or (ii) mutual consent of the Servicer, the
Certificate Insurer and all Certificateholders in writing.
The Pooling and Servicing Agreement additionally provides that the
holder of a 50.01% Percentage Interest or greater of the Class RL Certificates
or the Servicer (or the Certificate Insurer, if the Servicer fails to exercise
such option) may, at its option and at its sole cost and expense, terminate the
Pooling and Servicing Agreement on any date on which the related Pool Principal
Balance is less than 10% of the Maximum Collateral Amount (if the holders of the
Class RL Certificates exercise this option) or is less than 5% of the Maximum
Collateral Amount (if the Servicer or the Certificate Insurer exercises this
option), of the Original Pool Principal Balance by purchasing, on the next
succeeding Remittance Date, all of the outstanding Mortgage Loans and REO
Properties at a price equal to the sum of (i) the greater of (x) 100% of the
Principal Balance of each Outstanding Mortgage Loan and each REO Property and
(y) the fair market value (disregarding accrued interest) of the Mortgage Loans
and REO Properties, determined as the average of three written bids (copies of
which are to be
5
<PAGE>
delivered to the Trustee and the Certificate Insurer by the Servicer and the
reasonable cost of which may be deducted from the final purchase price provided
such deduction shall not result in a draw on the Certificate Insurance Policy)
made by nationally recognized dealers acceptable to the Certificate Insurer and
based on a valuation process which would be used to value comparable mortgage
loans and REO property, (ii) the greater of (x) the aggregate amount of accrued
and unpaid interest on the Mortgage Loans through the related Collection Period
and (y) 30 days' accrued interest thereon at a rate equal to the Mortgage
Interest Rate, (iii) and in the event the Holders of the Class RL Certificates
or the Certificate Insurer exercises such option, plus any accrued and unpaid
Servicing Fees or in the event the Servicer exercises such option, net of the
Servicing Fee, and (iv) any unreimbursed amounts due to the Certificate Insurer
under the Pooling and Servicing Agreement or under the Insurance Agreement (the
"Termination Price"). Any such purchase shall be accomplished by deposit into
the related Certificate Account of the Termination Price. No such termination
is permitted without the prior written consent of the Certificate Insurer (i) if
it would result in a draw on the Certificate Insurance Policy or (ii) unless the
Servicer shall have delivered to the Certificate Insurer an opinion of counsel
reasonably satisfactory to the Certificate Insurer stating that no amounts paid
hereunder are subject to recapture as preferential transfers under the United
States Bankruptcy Code, 11 U.S.C. (S)(S) 101 et seq., as amended.
-- ---
The Trustee shall give written notice of termination of the Pooling
and Servicing Agreement to each Certificateholder in the manner set forth
therein.
The Certificateholders of a majority of the Percentage Interests
represented by the Class A Certificates, upon compliance with the requirements
set forth in the Pooling and Servicing Agreement, have the right, with the
consent of the Certificate Insurer, to exercise any trust or power set forth in
the Pooling and Servicing Agreement with respect to the Certificates or the
Trust Fund.
As provided in the Pooling and Servicing Agreement and subject to
certain limitations therein set forth and referred to on the face hereof, the
transfer of this Certificate is registrable in the Register upon surrender of
this Certificate for registration of transfer at the office designated as the
location of the Register, and thereupon one or more new Certificates of like
Class, tenor and a like Percentage Interest will be issued to the designated
transferee or transferees.
The Trustee is required to furnish certain information on each
Remittance Date to the Holder of this Certificate, as more fully described in
the Pooling and Servicing Agreement.
6
<PAGE>
The Class A Certificates are issuable only as registered Certificates
in denominations of $1,000,000.00 original principal amount and integral
multiples of $1,000.00. As provided in the Pooling and Servicing Agreement and
subject to certain limitations therein set forth, Class A Certificates are
exchangeable for new Class A Certificates of authorized denominations evidencing
the same aggregate principal amount.
The Trustee and any agent of the Trustee may treat the Person in whose
name this Certificate is registered as the owner hereof for all purposes, and
neither the Trustee or any such agent shall be affected by notice to the
contrary.
This Certificate does not purport to summarize the Pooling and
Servicing Agreement and reference is made to the Pooling and Servicing Agreement
for information with respect to the interests, rights, benefits, obligations,
proceeds and duties evidenced hereby and the rights, duties and immunities of
the Trustee. Copies of the Pooling and Servicing Agreement and all amendments
thereto will be provided to any Certificateholder free of charge upon a written
request to the Trustee.
As provided in the Pooling and Servicing Agreement and subject to the
limitations set forth therein, the transfer of this Certificate is registrable
in the Certificate Register of the Certificate Registrar upon surrender of this
Certificate for registration of transfer at the office or agency maintained by
the Trustee in New York, New York, accompanied by a written instrument of
transfer in form satisfactory to the Trustee duly executed by the holder thereof
or his or her attorney duly authorized in writing, and thereupon one or more new
Certificates evidencing the same aggregate Percentage Interest will be issued to
the designated transferee or transferees.
The Depositor, the Servicer, the Seller and the Trustee and any agent
of any of them may treat the person in whose name this Certificate is registered
as the owner hereof for all purposes, and none of them nor any such agent shall
be affected by any notice to the contrary.
7
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
authenticated by the manual signature of a duly authorized officer of the
Trustee.
Dated: December 17, 1996
BANKERS TRUST COMPANY,
as Trustee
By:______________________________
Name:
Title:
Trustee Authentication
BANKERS TRUST COMPANY,
as Trustee
By:________________________
Name:
Title:
8
<PAGE>
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto ___________ the attached Preferred Mortgage Asset-Backed Series
1996-2 Certificate and does hereby irrevocably constitute and appoint
__________________________ Attorney to transfer the said certificate on the
Certificate Register maintained by the Trustee, with full power of substitution
in the premises.
Dated:
By:_______________________________
Signature
9
<PAGE>
EXHIBIT B-2
FORM OF CLASS A-2 CERTIFICATE
-----------------------------
Unless this certificate is presented by an authorized representative
of The Depository Trust Company, a New York corporation ("DTC"), to Issuer or
its agent for registration of transfer, exchange, or payment, and any
certificate issued is registered in the name of Cede & Co. or in such other name
as is requested by an authorized representative of DTC (and any payment is made
to Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
"REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT" AS THOSE TERMS
ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE
CODE.
THIS CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND,
NOTWITHSTANDING REFERENCES HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY
PERSON IS REPRESENTED HEREBY.
NEITHER THIS CERTIFICATE NOR THE UNDERLYING MORTGAGE LOANS ARE INSURED
OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE GOVERNMENT
NATIONAL MORTGAGE ASSOCIATION OR ANY OTHER GOVERNMENTAL AGENCY.
Class A-2 No. 1
Cut-off Date: Class A-2 Pass-Through Rate:
December 1, 1996 6.32%
Denomination:
$29,800,000
First Remittance Date: Aggregate Denomination of
January 28, 1997 All
Class A-2
Certificates:
$29,800,000
Servicer: Maturity Date:
Advanta Mortgage Corp. USA March 25, 2005
CUSIP: 126342 FH2
PREFERRED MORTGAGE ASSET-BACKED
CERTIFICATES, SERIES 1996-2, CLASS A-2
--------------------------------------
1
<PAGE>
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR AN INTEREST IN
THE DEPOSITOR, THE SELLER, THE SERVICER, THE TRUSTEE OR ANY OF THEIR RESPECTIVE
AFFILIATES THEREOF, EXCEPT TO THE EXTENT SET FORTH IN THE POOLING AND SERVICING
AGREEMENT.
This certifies that Cede & Co. is the registered owner of a fractional
interest in the Trust Fund (as defined below) relating to the Preferred Mortgage
Asset-Backed Certificates, Series 1996-2, which consists of (a) such Mortgage
Loans as from time to time are subject to the Pooling and Servicing Agreement
(as defined below), together with the Mortgage Files relating thereto and all
collections thereon and proceeds thereof on and after the Cut-Off Date (other
than Monthly Payments due on each Mortgage Loan up to and including any Due Date
prior to the Cut-Off Date), (b) such assets as from time to time are identified
as REO Property and collections thereon and proceeds thereof, (c) amounts
(including Permitted Investments as may be held from time to time, except as
otherwise provided herein) on deposit in each Account, (d) the Trustee's rights
with respect to the Mortgage Loans under the Certificate Insurance Policy and
all insurance policies required to be maintained pursuant to the Pooling and
Servicing Agreement (as defined herein) and any Insurance Proceeds, (e)
Liquidation Proceeds, (f) Released Mortgaged Property Proceeds, (g) amounts
(including Permitted Investments as may be held from time to time) on deposit in
the Capitalized Interest Account and the Pre-Funding Account, (h) all of the
income, payments and proceeds of each of the foregoing, except to the extent
provided in the Pooling and Servicing Agreement and (i) the rights and remedies
of the Trustee against any representation or warranty made to the Trustee hereby
(the "Trust Fund"). The Trust Fund has been created pursuant to a Pooling and
Servicing Agreement (the "Pooling and Servicing Agreement"), dated as of
-------------------------------
December 1, 1996, among CS First Boston Mortgage Securities Corp., as depositor
(the "Depositor"), T.A.R. Preferred Mortgage Corp., as seller (the "Seller"),
--------- ------
Advanta Mortgage Corp. USA, as servicer (the "Servicer"), and Bankers Trust
--------
Company, as trustee (the "Trustee"). This Certificate is one of the
-------
Certificates described in the Pooling and Servicing Agreement and is issued
pursuant and subject to the Pooling and Servicing Agreement. By acceptance of
this Certificate, the holder assents to and becomes bound by the Pooling and
Servicing Agreement. To the extent not defined herein, all capitalized terms
have the meanings assigned to such terms in the Pooling and Servicing Agreement.
Issued under the Pooling and Servicing Agreement are Certificates
designated as Preferred Mortgage Asset-Backed Certificates, Series 1996-2, Class
A-1 (the "Class A-1 Certificates"), Class A-2 (the "Class A-2 Certificates"),
Class A-3 (the "Class A-3 Certificates"), Class A-4 (the "Class A-4
Certificates"), Class A-5 (the "Class A-5 Certificates"), Class A-6 (the "Class
A-6 Certificates"), Class B (the "Class B
2
<PAGE>
Certificates"), Class C (the "Class C Certificates"), and Class RL and Class RU
(the "Residual Certificates"). The Class A-1 Certificates, the Class A-2
Certificates, the Class A-3 Certificates, the Class A-4 Certificates, the Class
A-5 Certificates, the Class A-6 Certificates (collectively, the "Class A
Certificates"), the Class B Certificates, the Class C Certificates and the
Residual Certificates are collectively referred to herein as the "Certificates."
The Pooling and Servicing Agreement contemplates, subject to its
terms, payment on the twenty-fifth day (or if such day is not a Business Day,
the next succeeding Business Day) (the "Remittance Date") of each calendar month
---------------
commencing in January 1997, so long as the Pooling and Servicing Agreement has
not been terminated, by check (or, if such Class A-2 Certificateholder having an
initial aggregate Class A-2 Principal Balance of at least $1,000,000 and so
desires, by wire transfer pursuant to instructions delivered to the Trustee at
least 5 days prior to such Record Date) to the registered Certificateholder at
the address appearing on the Certificate Register as of the last Business Day of
the calendar month immediately preceding the calendar month in which such
Remittance Date occurs, in an amount equal to the Certificateholder's Percentage
Interest of the portion of the Class A-2 Distribution Amount to be distributed
with respect to the Class A-2 Certificates. The Maturity Date of this
Certificate is March 25, 2005.
Each Certificateholder of record of a Class A-2 Certificate will be
entitled to receive such Certificateholder's Percentage Interest in the amounts
distributed on such Remittance Date to the Certificateholders of the Class A-2
Certificates. The Percentage Interest of each Class A-2 Certificate as of any
date of determination will be equal to the percentage obtained by dividing the
Original Principal Amount set forth on such Class A-2 Certificate by
$29,800,000.
The Class A Certificates have been tranched into six "sequential pay"
Classes, such that the Class A-6 Certificates are entitled to receive no
principal distributions until the Class A-5 Principal Balance has been reduced
to zero, the Class A-5 Certificates are entitled to receive no principal
distributions until the Class A-4 Principal Balance has been reduced to zero,
the Class A-4 Certificates are entitled to receive no principal distributions
until the Class A-3 Principal Balance has been reduced to zero, the Class A-3
Certificates are entitled to receive no principal distributions until the Class
A-2 Principal Balance has been reduced to zero and the Class A-2 Certificates
are entitled to receive no principal distributions until the Class A-1 Principal
Balance has been reduced to zero.
Pursuant to the Certificate Insurance Policy, the Certificate Insurer
is required, to the extent of any
3
<PAGE>
insufficiency in Available Funds, to make Insured Payments available to the
Trustee necessary to distribute the full amount of the Insured Distribution
Amount on each Remittance Date.
Upon receipt of amounts under the Certificate Insurance Policy on
behalf of the Class A Certificateholders, the Trustee shall distribute in
accordance with the Pooling and Servicing Agreement to the Class A
Certificateholders any portion thereof to which such Certificateholders may be
entitled.
The Certificateholder, by its acceptance of this Certificate, agrees
that it will look solely to the funds in the Certificate Account to the extent
available for distribution to the Certificateholder as provided in the Pooling
and Servicing Agreement for payment hereunder and that none of the Depositor,
the Seller, the Servicer or the Trustee in its individual capacity is not
personally liable to the Certificateholder for any amounts payable under this
Certificate or the Pooling and Servicing Agreement or, except as expressly
provided in the Pooling and Servicing Agreement, subject to any liability under
the Pooling and Servicing Agreement. By acceptance of this Certificate, the
Certificateholder agrees to disclosure of his, her or its name and address to
other Certificateholders under the conditions specified in the Pooling and
Servicing Agreement.
The Trustee is required to duly and punctually pay distributions with
respect to this Certificate in accordance with the terms hereof and the Pooling
and Servicing Agreement. Amounts properly withheld under the Code or applicable
to any Certificateholder shall be considered as having been paid by the Trustee
to such Certificateholder for all purposes of the Pooling and Servicing
Agreement.
The Mortgage Loans will be serviced by the Servicer pursuant to the
Pooling and Servicing Agreement. The Pooling and Servicing Agreement permits
the Servicer to enter into Sub-Servicing Agreements with certain institutions
eligible for appointment as Sub-Servicers for the servicing and administration
of certain Mortgage Loans. No appointment of any Sub-Servicer shall release the
Servicer from any of its obligations under the Pooling and Servicing Agreement.
This Certificate does not represent a deposit or other obligation of,
or an interest in, nor are the underlying Mortgage Loans insured or guaranteed
by, the Depositor, the Seller, the Servicer, the Trustee or any of their
subsidiaries and affiliates and are not insured or guaranteed by the Federal
Deposit Insurance Corporation, the Government National Mortgage Association, or
any other governmental agency. This Certificate is limited in right of payment
to certain collections and recoveries relating to the Mortgage Loans and amounts
on deposit in the Accounts (except as otherwise provided in the Pooling and
4
<PAGE>
Servicing Agreement) and payments received by the Trustee pursuant to the
Certificate Insurance Policy, all as more specifically set forth hereinabove and
in the Pooling and Servicing Agreement.
No Certificateholder shall have any right to institute any proceeding,
judicial or otherwise, with respect to the Pooling and Servicing Agreement, or
for the appointment of a receiver or trustee, or for any other remedy under the
Pooling and Servicing Agreement except in compliance with the terms hereof.
Notwithstanding any other provisions in the Pooling and Servicing
Agreement, the Certificateholder of any Certificate shall have the right which
is absolute and unconditional to receive distributions to the extent provided in
the Pooling and Servicing Agreement 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 Certificateholder.
Subject to the terms of the Pooling and Servicing Agreement, the
Pooling and Servicing Agreement provides that the obligations created thereby
will terminate upon notice to the Trustee and the Certificate Insurer of either:
(i) the later of the distribution to Certificateholders of the final payment or
collection with respect to the last Mortgage Loan (or Delinquency Interest
Advances of same by the Servicer), or the disposition of all funds with respect
to the last Mortgage Loan and the remittance of all funds due under the Pooling
and Servicing Agreement and the payment of all amounts due and payable to the
Certificate Insurer and the Trustee or (ii) mutual consent of the Servicer, the
Certificate Insurer and all Certificateholders in writing.
The Pooling and Servicing Agreement additionally provides that the
holder of a 50.01% Percentage Interest or greater of the Class RL Certificates
or the Servicer (or the Certificate Insurer, if the Servicer fails to exercise
such option) may, at its option and at its sole cost and expense, terminate the
Pooling and Servicing Agreement on any date on which the related Pool Principal
Balance is less than 10% of the Maximum Collateral Amount (if the holders of the
Class RL Certificates exercise this option) or is less than 5% of the Maximum
Collateral Amount (if the Servicer or the Certificate Insurer exercises this
option), of the Original Pool Principal Balance by purchasing, on the next
succeeding Remittance Date, all of the outstanding Mortgage Loans and REO
Properties at a price equal to the sum of (i) the greater of (x) 100% of the
Principal Balance of each Outstanding Mortgage Loan and each REO Property and
(y) the fair market value (disregarding accrued interest) of the Mortgage Loans
and REO Properties, determined as the average of three written bids (copies of
which are to be
5
<PAGE>
delivered to the Trustee and the Certificate Insurer by the Servicer and the
reasonable cost of which may be deducted from the final purchase price provided
such deduction shall not result in a draw on the Certificate Insurance Policy)
made by nationally recognized dealers acceptable to the Certificate Insurer and
based on a valuation process which would be used to value comparable mortgage
loans and REO property, (ii) the greater of (x) the aggregate amount of accrued
and unpaid interest on the Mortgage Loans through the related Collection Period
and (y) 30 days' accrued interest thereon at a rate equal to the Mortgage
Interest Rate, (iii) and in the event the Holders of the Class RL Certificates
or the Certificate Insurer exercises such option, plus any accrued and unpaid
Servicing Fees or in the event the Servicer exercises such option, net of the
Servicing Fee, and (iv) any unreimbursed amounts due to the Certificate Insurer
under the Pooling and Servicing Agreement or under the Insurance Agreement (the
"Termination Price"). Any such purchase shall be accomplished by deposit into
the related Certificate Account of the Termination Price. No such termination
is permitted without the prior written consent of the Certificate Insurer (i) if
it would result in a draw on the Certificate Insurance Policy or (ii) unless the
Servicer shall have delivered to the Certificate Insurer an opinion of counsel
reasonably satisfactory to the Certificate Insurer stating that no amounts paid
hereunder are subject to recapture as preferential transfers under the United
States Bankruptcy Code, 11 U.S.C. (S)(S) 101 et seq., as amended.
-- ---
The Trustee shall give written notice of termination of the Pooling
and Servicing Agreement to each Certificateholder in the manner set forth
therein.
The Certificateholders of a majority of the Percentage Interests
represented by the Class A Certificates, upon compliance with the requirements
set forth in the Pooling and Servicing Agreement, have the right, with the
consent of the Certificate Insurer, to exercise any trust or power set forth in
the Pooling and Servicing Agreement with respect to the Certificates or the
Trust Fund.
As provided in the Pooling and Servicing Agreement and subject to
certain limitations therein set forth and referred to on the face hereof, the
transfer of this Certificate is registrable in the Register upon surrender of
this Certificate for registration of transfer at the office designated as the
location of the Register, and thereupon one or more new Certificates of like
Class, tenor and a like Percentage Interest will be issued to the designated
transferee or transferees.
The Trustee is required to furnish certain information on each
Remittance Date to the Holder of this Certificate, as more fully described in
the Pooling and Servicing Agreement.
6
<PAGE>
The Class A Certificates are issuable only as registered Certificates
in denominations of $1,000,000.00 original principal amount and integral
multiples of $1,000.00. As provided in the Pooling and Servicing Agreement and
subject to certain limitations therein set forth, Class A Certificates are
exchangeable for new Class A Certificates of authorized denominations evidencing
the same aggregate principal amount.
The Trustee and any agent of the Trustee may treat the Person in whose
name this Certificate is registered as the owner hereof for all purposes, and
neither the Trustee or any such agent shall be affected by notice to the
contrary.
This Certificate does not purport to summarize the Pooling and
Servicing Agreement and reference is made to the Pooling and Servicing Agreement
for information with respect to the interests, rights, benefits, obligations,
proceeds and duties evidenced hereby and the rights, duties and immunities of
the Trustee. Copies of the Pooling and Servicing Agreement and all amendments
thereto will be provided to any Certificateholder free of charge upon a written
request to the Trustee.
As provided in the Pooling and Servicing Agreement and subject to the
limitations set forth therein, the transfer of this Certificate is registrable
in the Certificate Register of the Certificate Registrar upon surrender of this
Certificate for registration of transfer at the office or agency maintained by
the Trustee in New York, New York, accompanied by a written instrument of
transfer in form satisfactory to the Trustee duly executed by the holder thereof
or his or her attorney duly authorized in writing, and thereupon one or more new
Certificates evidencing the same aggregate Percentage Interest will be issued to
the designated transferee or transferees.
The Depositor, the Servicer, the Seller and the Trustee and any agent
of any of them may treat the person in whose name this Certificate is registered
as the owner hereof for all purposes, and none of them nor any such agent shall
be affected by any notice to the contrary.
7
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
authenticated by the manual signature of a duly authorized officer of the
Trustee.
Dated: December 17, 1996
BANKERS TRUST COMPANY,
as Trustee
By:_____________________________
Name:
Title:
Trustee Authentication
BANKERS TRUST COMPANY,
as Trustee
By:_____________________________
Name:
Title:
8
<PAGE>
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto ___________ the attached Preferred Mortgage Asset-Backed Series
1996-2 Certificate and does hereby irrevocably constitute and appoint
__________________________ Attorney to transfer the said certificate on the
Certificate Register maintained by the Trustee, with full power of substitution
in the premises.
Dated:
By:____________________________
Signature
9
<PAGE>
EXHIBIT B-3
FORM OF CLASS A-3 CERTIFICATE
-----------------------------
Unless this certificate is presented by an authorized representative
of The Depository Trust Company, a New York corporation ("DTC"), to Issuer or
its agent for registration of transfer, exchange, or payment, and any
certificate issued is registered in the name of Cede & Co. or in such other name
as is requested by an authorized representative of DTC (and any payment is made
to Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
"REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT" AS THOSE TERMS
ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE
CODE.
THIS CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND,
NOTWITHSTANDING REFERENCES HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY
PERSON IS REPRESENTED HEREBY.
NEITHER THIS CERTIFICATE NOR THE UNDERLYING MORTGAGE LOANS ARE INSURED
OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE GOVERNMENT
NATIONAL MORTGAGE ASSOCIATION OR ANY OTHER GOVERNMENTAL AGENCY.
Class A-3 No. 1
Cut-off Date: Class A-3 Pass-Through Rate:
December 1, 1996 6.39%
Denomination:
$43,700,000
First Remittance Date: Aggregate Denomination of
January 28, 1997 All
Class A-3
Certificates:
$43,700,000
Servicer: Maturity Date:
Advanta Mortgage Corp. USA April 25, 2007
CUSIP: 126342 FJ8
PREFERRED MORTGAGE ASSET-BACKED
CERTIFICATES, SERIES 1996-2, CLASS A-3
--------------------------------------
<PAGE>
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR AN INTEREST IN
THE DEPOSITOR, THE SELLER, THE SERVICER, THE TRUSTEE OR ANY OF THEIR RESPECTIVE
AFFILIATES THEREOF, EXCEPT TO THE EXTENT SET FORTH IN THE POOLING AND SERVICING
AGREEMENT.
This certifies that Cede & Co. is the registered owner of a fractional
interest in the Trust Fund (as defined below) relating to the Preferred Mortgage
Asset-Backed Certificates, Series 1996-2, which consists of (a) such Mortgage
Loans as from time to time are subject to the Pooling and Servicing Agreement
(as defined below), together with the Mortgage Files relating thereto and all
collections thereon and proceeds thereof on and after the Cut-Off Date (other
than Monthly Payments due on each Mortgage Loan up to and including any Due Date
prior to the Cut-Off Date), (b) such assets as from time to time are identified
as REO Property and collections thereon and proceeds thereof, (c) amounts
(including Permitted Investments as may be held from time to time, except as
otherwise provided herein) on deposit in each Account, (d) the Trustee's rights
with respect to the Mortgage Loans under the Certificate Insurance Policy and
all insurance policies required to be maintained pursuant to the Pooling and
Servicing Agreement (as defined herein) and any Insurance Proceeds, (e)
Liquidation Proceeds, (f) Released Mortgaged Property Proceeds, (g) amounts
(including Permitted Investments as may be held from time to time) on deposit in
the Capitalized Interest Account and the Pre-Funding Account, (h) all of the
income, payments and proceeds of each of the foregoing, except to the extent
provided in the Pooling and Servicing Agreement and (i) the rights and remedies
of the Trustee against any representation or warranty made to the Trustee hereby
(the "Trust Fund"). The Trust Fund has been created pursuant to a Pooling and
Servicing Agreement (the "Pooling and Servicing Agreement"), dated as of
-------------------------------
December 1, 1996, among CS First Boston Mortgage Securities Corp., as depositor
(the "Depositor"), T.A.R. Preferred Mortgage Corp., as seller (the "Seller"),
--------- ------
Advanta Mortgage Corp. USA, as servicer (the "Servicer"), and Bankers Trust
--------
Company, as trustee (the "Trustee"). This Certificate is one of the
-------
Certificates described in the Pooling and Servicing Agreement and is issued
pursuant and subject to the Pooling and Servicing Agreement. By acceptance of
this Certificate, the holder assents to and becomes bound by the Pooling and
Servicing Agreement. To the extent not defined herein, all capitalized terms
have the meanings assigned to such terms in the Pooling and Servicing Agreement.
Issued under the Pooling and Servicing Agreement are Certificates
designated as Preferred Mortgage Asset-Backed Certificates, Series 1996-2, Class
A-1 (the "Class A-1 Certificates"), Class A-2 (the "Class A-2 Certificates"),
Class A-3 (the "Class A-3 Certificates"), Class A-4 (the "Class A-4
Certificates"), Class A-5 (the "Class A-5 Certificates"), Class A-6 (the "Class
A-6 Certificates"), Class B (the "Class B
2
<PAGE>
Certificates"), Class C (the "Class C Certificates"), and Class RL and Class RU
(the "Residual Certificates"). The Class A-1 Certificates, the Class A-2
Certificates, the Class A-3 Certificates, the Class A-4 Certificates, the Class
A-5 Certificates, the Class A-6 Certificates (collectively, the "Class A
Certificates"), the Class B Certificates, the Class C Certificates and the
Residual Certificates are collectively referred to herein as the "Certificates."
The Pooling and Servicing Agreement contemplates, subject to its
terms, payment on the twenty-fifth day (or if such day is not a Business Day,
the next succeeding Business Day) (the "Remittance Date") of each calendar month
---------------
commencing in January 1997, so long as the Pooling and Servicing Agreement has
not been terminated, by check (or, if such Class A-3 Certificateholder having an
initial aggregate Class A-3 Principal Balance of at least $1,000,000 and so
desires, by wire transfer pursuant to instructions delivered to the Trustee at
least 5 days prior to such Record Date) to the registered Certificateholder at
the address appearing on the Certificate Register as of the last Business Day of
the calendar month immediately preceding the calendar month in which such
Remittance Date occurs, in an amount equal to the Certificateholder's Percentage
Interest of the portion of the Class A-3 Distribution Amount to be distributed
with respect to the Class A-3 Certificates. The Maturity Date of this
Certificate is April 25, 2007.
Each Certificateholder of record of a Class A-3 Certificate will be
entitled to receive such Certificateholder's Percentage Interest in the amounts
distributed on such Remittance Date to the Certificateholders of the Class A-3
Certificates. The Percentage Interest of each Class A-3 Certificate as of any
date of determination will be equal to the percentage obtained by dividing the
Original Principal Amount set forth on such Class A-3 Certificate by
$43,700,000.
The Class A Certificates have been tranched into six "sequential pay"
Classes, such that the Class A-6 Certificates are entitled to receive no
principal distributions until the Class A-5 Principal Balance has been reduced
to zero, the Class A-5 Certificates are entitled to receive no principal
distributions until the Class A-4 Principal Balance has been reduced to zero,
the Class A-4 Certificates are entitled to receive no principal distributions
until the Class A-3 Principal Balance has been reduced to zero, the Class A-3
Certificates are entitled to receive no principal distributions until the Class
A-2 Principal Balance has been reduced to zero and the Class A-2 Certificates
are entitled to receive no principal distributions until the Class A-1 Principal
Balance has been reduced to zero.
Pursuant to the Certificate Insurance Policy, the Certificate Insurer
is required, to the extent of any
3
<PAGE>
insufficiency in Available Funds, to make Insured Payments available to the
Trustee necessary to distribute the full amount of the Insured Distribution
Amount on each Remittance Date.
Upon receipt of amounts under the Certificate Insurance Policy on
behalf of the Class A Certificateholders, the Trustee shall distribute in
accordance with the Pooling and Servicing Agreement to the Class A
Certificateholders any portion thereof to which such Certificateholders may be
entitled.
The Certificateholder, by its acceptance of this Certificate, agrees
that it will look solely to the funds in the Certificate Account to the extent
available for distribution to the Certificateholder as provided in the Pooling
and Servicing Agreement for payment hereunder and that none of the Depositor,
the Seller, the Servicer or the Trustee in its individual capacity is not
personally liable to the Certificateholder for any amounts payable under this
Certificate or the Pooling and Servicing Agreement or, except as expressly
provided in the Pooling and Servicing Agreement, subject to any liability under
the Pooling and Servicing Agreement. By acceptance of this Certificate, the
Certificateholder agrees to disclosure of his, her or its name and address to
other Certificateholders under the conditions specified in the Pooling and
Servicing Agreement.
The Trustee is required to duly and punctually pay distributions with
respect to this Certificate in accordance with the terms hereof and the Pooling
and Servicing Agreement. Amounts properly withheld under the Code or applicable
to any Certificateholder shall be considered as having been paid by the Trustee
to such Certificateholder for all purposes of the Pooling and Servicing
Agreement.
The Mortgage Loans will be serviced by the Servicer pursuant to the
Pooling and Servicing Agreement. The Pooling and Servicing Agreement permits
the Servicer to enter into Sub-Servicing Agreements with certain institutions
eligible for appointment as Sub-Servicers for the servicing and administration
of certain Mortgage Loans. No appointment of any Sub-Servicer shall release the
Servicer from any of its obligations under the Pooling and Servicing Agreement.
This Certificate does not represent a deposit or other obligation of,
or an interest in, nor are the underlying Mortgage Loans insured or guaranteed
by, the Depositor, the Seller, the Servicer, the Trustee or any of their
subsidiaries and affiliates and are not insured or guaranteed by the Federal
Deposit Insurance Corporation, the Government National Mortgage Association, or
any other governmental agency. This Certificate is limited in right of payment
to certain collections and recoveries relating to the Mortgage Loans and amounts
on deposit in the Accounts (except as otherwise provided in the Pooling and
4
<PAGE>
Servicing Agreement) and payments received by the Trustee pursuant to the
Certificate Insurance Policy, all as more specifically set forth hereinabove and
in the Pooling and Servicing Agreement.
No Certificateholder shall have any right to institute any proceeding,
judicial or otherwise, with respect to the Pooling and Servicing Agreement, or
for the appointment of a receiver or trustee, or for any other remedy under the
Pooling and Servicing Agreement except in compliance with the terms hereof.
Notwithstanding any other provisions in the Pooling and Servicing
Agreement, the Certificateholder of any Certificate shall have the right which
is absolute and unconditional to receive distributions to the extent provided in
the Pooling and Servicing Agreement 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 Certificateholder.
Subject to the terms of the Pooling and Servicing Agreement, the
Pooling and Servicing Agreement provides that the obligations created thereby
will terminate upon notice to the Trustee and the Certificate Insurer of either:
(i) the later of the distribution to Certificateholders of the final payment or
collection with respect to the last Mortgage Loan (or Delinquency Interest
Advances of same by the Servicer), or the disposition of all funds with respect
to the last Mortgage Loan and the remittance of all funds due under the Pooling
and Servicing Agreement and the payment of all amounts due and payable to the
Certificate Insurer and the Trustee or (ii) mutual consent of the Servicer, the
Certificate Insurer and all Certificateholders in writing.
The Pooling and Servicing Agreement additionally provides that the
holder of a 50.01% Percentage Interest or greater of the Class RL Certificates
or the Servicer (or the Certificate Insurer, if the Servicer fails to exercise
such option) may, at its option and at its sole cost and expense, terminate the
Pooling and Servicing Agreement on any date on which the related Pool Principal
Balance is less than 10% of the Maximum Collateral Amount (if the holders of the
Class RL Certificates exercise this option) or is less than 5% of the Maximum
Collateral Amount (if the Servicer or the Certificate Insurer exercises this
option), of the Original Pool Principal Balance by purchasing, on the next
succeeding Remittance Date, all of the outstanding Mortgage Loans and REO
Properties at a price equal to the sum of (i) the greater of (x) 100% of the
Principal Balance of each Outstanding Mortgage Loan and each REO Property and
(y) the fair market value (disregarding accrued interest) of the Mortgage Loans
and REO Properties, determined as the average of three written bids (copies of
which are to be
5
<PAGE>
delivered to the Trustee and the Certificate Insurer by the Servicer and the
reasonable cost of which may be deducted from the final purchase price provided
such deduction shall not result in a draw on the Certificate Insurance Policy)
made by nationally recognized dealers acceptable to the Certificate Insurer and
based on a valuation process which would be used to value comparable mortgage
loans and REO property, (ii) the greater of (x) the aggregate amount of accrued
and unpaid interest on the Mortgage Loans through the related Collection Period
and (y) 30 days' accrued interest thereon at a rate equal to the Mortgage
Interest Rate, (iii) and in the event the Holders of the Class RL Certificates
or the Certificate Insurer exercises such option, plus any accrued and unpaid
Servicing Fees or in the event the Servicer exercises such option, net of the
Servicing Fee, and (iv) any unreimbursed amounts due to the Certificate Insurer
under the Pooling and Servicing Agreement or under the Insurance Agreement (the
"Termination Price"). Any such purchase shall be accomplished by deposit into
the related Certificate Account of the Termination Price. No such termination
is permitted without the prior written consent of the Certificate Insurer (i) if
it would result in a draw on the Certificate Insurance Policy or (ii) unless the
Servicer shall have delivered to the Certificate Insurer an opinion of counsel
reasonably satisfactory to the Certificate Insurer stating that no amounts paid
hereunder are subject to recapture as preferential transfers under the United
States Bankruptcy Code, 11 U.S.C. (S)(S) 101 et seq., as amended.
-- ---
The Trustee shall give written notice of termination of the Pooling
and Servicing Agreement to each Certificateholder in the manner set forth
therein.
The Certificateholders of a majority of the Percentage Interests
represented by the Class A Certificates, upon compliance with the requirements
set forth in the Pooling and Servicing Agreement, have the right, with the
consent of the Certificate Insurer, to exercise any trust or power set forth in
the Pooling and Servicing Agreement with respect to the Certificates or the
Trust Fund.
As provided in the Pooling and Servicing Agreement and subject to
certain limitations therein set forth and referred to on the face hereof, the
transfer of this Certificate is registrable in the Register upon surrender of
this Certificate for registration of transfer at the office designated as the
location of the Register, and thereupon one or more new Certificates of like
Class, tenor and a like Percentage Interest will be issued to the designated
transferee or transferees.
The Trustee is required to furnish certain information on each
Remittance Date to the Holder of this Certificate, as more fully described in
the Pooling and Servicing Agreement.
6
<PAGE>
The Class A Certificates are issuable only as registered Certificates
in denominations of $1,000,000.00 original principal amount and integral
multiples of $1,000.00. As provided in the Pooling and Servicing Agreement and
subject to certain limitations therein set forth, Class A Certificates are
exchangeable for new Class A Certificates of authorized denominations evidencing
the same aggregate principal amount.
The Trustee and any agent of the Trustee may treat the Person in whose
name this Certificate is registered as the owner hereof for all purposes, and
neither the Trustee or any such agent shall be affected by notice to the
contrary.
This Certificate does not purport to summarize the Pooling and
Servicing Agreement and reference is made to the Pooling and Servicing Agreement
for information with respect to the interests, rights, benefits, obligations,
proceeds and duties evidenced hereby and the rights, duties and immunities of
the Trustee. Copies of the Pooling and Servicing Agreement and all amendments
thereto will be provided to any Certificateholder free of charge upon a written
request to the Trustee.
As provided in the Pooling and Servicing Agreement and subject to the
limitations set forth therein, the transfer of this Certificate is registrable
in the Certificate Register of the Certificate Registrar upon surrender of this
Certificate for registration of transfer at the office or agency maintained by
the Trustee in New York, New York, accompanied by a written instrument of
transfer in form satisfactory to the Trustee duly executed by the holder thereof
or his or her attorney duly authorized in writing, and thereupon one or more new
Certificates evidencing the same aggregate Percentage Interest will be issued to
the designated transferee or transferees.
The Depositor, the Servicer, the Seller and the Trustee and any agent
of any of them may treat the person in whose name this Certificate is registered
as the owner hereof for all purposes, and none of them nor any such agent shall
be affected by any notice to the contrary.
7
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
authenticated by the manual signature of a duly authorized officer of the
Trustee.
Dated: December 17, 1996
BANKERS TRUST COMPANY,
as Trustee
By:_________________________________
Name:
Title:
Trustee Authentication
BANKERS TRUST COMPANY,
as Trustee
By:_____________________________
Name:
Title:
8
<PAGE>
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto ___________ the attached Preferred Mortgage Asset-Backed Series
1996-2 Certificate and does hereby irrevocably constitute and appoint
__________________________ Attorney to transfer the said certificate on the
Certificate Register maintained by the Trustee, with full power of substitution
in the premises.
Dated:
By:______________________________
Signature
9
<PAGE>
EXHIBIT B-4
FORM OF CLASS A-4 CERTIFICATE
-----------------------------
Unless this certificate is presented by an authorized representative
of The Depository Trust Company, a New York corporation ("DTC"), to Issuer or
its agent for registration of transfer, exchange, or payment, and any
certificate issued is registered in the name of Cede & Co. or in such other name
as is requested by an authorized representative of DTC (and any payment is made
to Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
"REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT" AS THOSE TERMS
ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE
CODE.
THIS CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND,
NOTWITHSTANDING REFERENCES HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY
PERSON IS REPRESENTED HEREBY.
NEITHER THIS CERTIFICATE NOR THE UNDERLYING MORTGAGE LOANS ARE INSURED
OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE GOVERNMENT
NATIONAL MORTGAGE ASSOCIATION OR ANY OTHER GOVERNMENTAL AGENCY.
Class A-4 No. 1
Cut-off Date: Class A-4 Pass-Through Rate:
December 1, 1996 6.62%
Denomination:
$59,800,000
First Remittance Date: Aggregate Denomination of
January 28, 1997 All
Class A-4
Certificates:
$59,800,000
Servicer: Maturity Date:
Advanta Mortgage Corp. USA September 25, 2009
CUSIP: 126342 FK5
PREFERRED MORTGAGE ASSET-BACKED
CERTIFICATES, SERIES 1996-2, CLASS A-4
--------------------------------------
<PAGE>
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR AN INTEREST IN
THE DEPOSITOR, THE SELLER, THE SERVICER, THE TRUSTEE OR ANY OF THEIR RESPECTIVE
AFFILIATES THEREOF, EXCEPT TO THE EXTENT SET FORTH IN THE POOLING AND SERVICING
AGREEMENT.
This certifies that Cede & Co. is the registered owner of a fractional
interest in the Trust Fund (as defined below) relating to the Preferred Mortgage
Asset-Backed Certificates, Series 1996-2, which consists of (a) such Mortgage
Loans as from time to time are subject to the Pooling and Servicing Agreement
(as defined below), together with the Mortgage Files relating thereto and all
collections thereon and proceeds thereof on and after the Cut-Off Date (other
than Monthly Payments due on each Mortgage Loan up to and including any Due Date
prior to the Cut-Off Date), (b) such assets as from time to time are identified
as REO Property and collections thereon and proceeds thereof, (c) amounts
(including Permitted Investments as may be held from time to time, except as
otherwise provided herein) on deposit in each Account, (d) the Trustee's rights
with respect to the Mortgage Loans under the Certificate Insurance Policy and
all insurance policies required to be maintained pursuant to the Pooling and
Servicing Agreement (as defined herein) and any Insurance Proceeds, (e)
Liquidation Proceeds, (f) Released Mortgaged Property Proceeds, (g) amounts
(including Permitted Investments as may be held from time to time) on deposit in
the Capitalized Interest Account and the Pre-Funding Account, (h) all of the
income, payments and proceeds of each of the foregoing, except to the extent
provided in the Pooling and Servicing Agreement and (i) the rights and remedies
of the Trustee against any representation or warranty made to the Trustee hereby
(the "Trust Fund"). The Trust Fund has been created pursuant to a Pooling and
Servicing Agreement (the "Pooling and Servicing Agreement"), dated as of
-------------------------------
December 1, 1996, among CS First Boston Mortgage Securities Corp., as depositor
(the "Depositor"), T.A.R. Preferred Mortgage Corp., as seller (the "Seller"),
--------- ------
Advanta Mortgage Corp. USA, as servicer (the "Servicer"), and Bankers Trust
--------
Company, as trustee (the "Trustee"). This Certificate is one of the
-------
Certificates described in the Pooling and Servicing Agreement and is issued
pursuant and subject to the Pooling and Servicing Agreement. By acceptance of
this Certificate, the holder assents to and becomes bound by the Pooling and
Servicing Agreement. To the extent not defined herein, all capitalized terms
have the meanings assigned to such terms in the Pooling and Servicing Agreement.
Issued under the Pooling and Servicing Agreement are Certificates
designated as Preferred Mortgage Asset-Backed Certificates, Series 1996-2, Class
A-1 (the "Class A-1 Certificates"), Class A-2 (the "Class A-2 Certificates"),
Class A-3 (the "Class A-3 Certificates"), Class A-4 (the "Class A-4
Certificates"), Class A-5 (the "Class A-5 Certificates"), Class A-6 (the "Class
A-6 Certificates"), Class B (the "Class B
2
<PAGE>
Certificates"), Class C (the "Class C Certificates"), and Class RL and Class RU
(the "Residual Certificates"). The Class A-1 Certificates, the Class A-2
Certificates, the Class A-3 Certificates, the Class A-4 Certificates, the Class
A-5 Certificates, the Class A-6 Certificates (collectively, the "Class A
Certificates"), the Class B Certificates, the Class C Certificates and the
Residual Certificates are collectively referred to herein as the "Certificates."
The Pooling and Servicing Agreement contemplates, subject to its
terms, payment on the twenty-fifth day (or if such day is not a Business Day,
the next succeeding Business Day) (the "Remittance Date") of each calendar month
---------------
commencing in January 1997, so long as the Pooling and Servicing Agreement has
not been terminated, by check (or, if such Class A-4 Certificateholder having an
initial aggregate Class A-4 Principal Balance of at least $1,000,000 and so
desires, by wire transfer pursuant to instructions delivered to the Trustee at
least 5 days prior to such Record Date) to the registered Certificateholder at
the address appearing on the Certificate Register as of the last Business Day of
the calendar month immediately preceding the calendar month in which such
Remittance Date occurs, in an amount equal to the Certificateholder's Percentage
Interest of the portion of the Class A-4 Distribution Amount to be distributed
with respect to the Class A-4 Certificates. The Maturity Date of this
Certificate is September 25, 2009.
Each Certificateholder of record of a Class A-4 Certificate will be
entitled to receive such Certificateholder's Percentage Interest in the amounts
distributed on such Remittance Date to the Certificateholders of the Class A-4
Certificates. The Percentage Interest of each Class A-4 Certificate as of any
date of determination will be equal to the percentage obtained by dividing the
Original Principal Amount set forth on such Class A-4 Certificate by
$59,800,000.
The Class A Certificates have been tranched into six "sequential pay"
Classes, such that the Class A-6 Certificates are entitled to receive no
principal distributions until the Class A-5 Principal Balance has been reduced
to zero, the Class A-5 Certificates are entitled to receive no principal
distributions until the Class A-4 Principal Balance has been reduced to zero,
the Class A-4 Certificates are entitled to receive no principal distributions
until the Class A-3 Principal Balance has been reduced to zero, the Class A-3
Certificates are entitled to receive no principal distributions until the Class
A-2 Principal Balance has been reduced to zero and the Class A-2 Certificates
are entitled to receive no principal distributions until the Class A-1 Principal
Balance has been reduced to zero.
Pursuant to the Certificate Insurance Policy, the Certificate Insurer
is required, to the extent of any
3
<PAGE>
insufficiency in Available Funds, to make Insured Payments available to the
Trustee necessary to distribute the full amount of the Insured Distribution
Amount on each Remittance Date.
Upon receipt of amounts under the Certificate Insurance Policy on
behalf of the Class A Certificateholders, the Trustee shall distribute in
accordance with the Pooling and Servicing Agreement to the Class A
Certificateholders any portion thereof to which such Certificateholders may be
entitled.
The Certificateholder, by its acceptance of this Certificate, agrees
that it will look solely to the funds in the Certificate Account to the extent
available for distribution to the Certificateholder as provided in the Pooling
and Servicing Agreement for payment hereunder and that none of the Depositor,
the Seller, the Servicer or the Trustee in its individual capacity is not
personally liable to the Certificateholder for any amounts payable under this
Certificate or the Pooling and Servicing Agreement or, except as expressly
provided in the Pooling and Servicing Agreement, subject to any liability under
the Pooling and Servicing Agreement. By acceptance of this Certificate, the
Certificateholder agrees to disclosure of his, her or its name and address to
other Certificateholders under the conditions specified in the Pooling and
Servicing Agreement.
The Trustee is required to duly and punctually pay distributions with
respect to this Certificate in accordance with the terms hereof and the Pooling
and Servicing Agreement. Amounts properly withheld under the Code or applicable
to any Certificateholder shall be considered as having been paid by the Trustee
to such Certificateholder for all purposes of the Pooling and Servicing
Agreement.
The Mortgage Loans will be serviced by the Servicer pursuant to the
Pooling and Servicing Agreement. The Pooling and Servicing Agreement permits
the Servicer to enter into Sub-Servicing Agreements with certain institutions
eligible for appointment as Sub-Servicers for the servicing and administration
of certain Mortgage Loans. No appointment of any Sub-Servicer shall release the
Servicer from any of its obligations under the Pooling and Servicing Agreement.
This Certificate does not represent a deposit or other obligation of,
or an interest in, nor are the underlying Mortgage Loans insured or guaranteed
by, the Depositor, the Seller, the Servicer, the Trustee or any of their
subsidiaries and affiliates and are not insured or guaranteed by the Federal
Deposit Insurance Corporation, the Government National Mortgage Association, or
any other governmental agency. This Certificate is limited in right of payment
to certain collections and recoveries relating to the Mortgage Loans and amounts
on deposit in the Accounts (except as otherwise provided in the Pooling and
4
<PAGE>
Servicing Agreement) and payments received by the Trustee pursuant to the
Certificate Insurance Policy, all as more specifically set forth hereinabove and
in the Pooling and Servicing Agreement.
No Certificateholder shall have any right to institute any proceeding,
judicial or otherwise, with respect to the Pooling and Servicing Agreement, or
for the appointment of a receiver or trustee, or for any other remedy under the
Pooling and Servicing Agreement except in compliance with the terms hereof.
Notwithstanding any other provisions in the Pooling and Servicing
Agreement, the Certificateholder of any Certificate shall have the right which
is absolute and unconditional to receive distributions to the extent provided in
the Pooling and Servicing Agreement 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 Certificateholder.
Subject to the terms of the Pooling and Servicing Agreement, the
Pooling and Servicing Agreement provides that the obligations created thereby
will terminate upon notice to the Trustee and the Certificate Insurer of either:
(i) the later of the distribution to Certificateholders of the final payment or
collection with respect to the last Mortgage Loan (or Delinquency Interest
Advances of same by the Servicer), or the disposition of all funds with respect
to the last Mortgage Loan and the remittance of all funds due under the Pooling
and Servicing Agreement and the payment of all amounts due and payable to the
Certificate Insurer and the Trustee or (ii) mutual consent of the Servicer, the
Certificate Insurer and all Certificateholders in writing.
The Pooling and Servicing Agreement additionally provides that the
holder of a 50.01% Percentage Interest or greater of the Class RL Certificates
or the Servicer (or the Certificate Insurer, if the Servicer fails to exercise
such option) may, at its option and at its sole cost and expense, terminate the
Pooling and Servicing Agreement on any date on which the related Pool Principal
Balance is less than 10% of the Maximum Collateral Amount (if the holders of the
Class RL Certificates exercise this option) or is less than 5% of the Maximum
Collateral Amount (if the Servicer or the Certificate Insurer exercises this
option), of the Original Pool Principal Balance by purchasing, on the next
succeeding Remittance Date, all of the outstanding Mortgage Loans and REO
Properties at a price equal to the sum of (i) the greater of (x) 100% of the
Principal Balance of each Outstanding Mortgage Loan and each REO Property and
(y) the fair market value (disregarding accrued interest) of the Mortgage Loans
and REO Properties, determined as the average of three written bids (copies of
which are to be
5
<PAGE>
delivered to the Trustee and the Certificate Insurer by the Servicer and the
reasonable cost of which may be deducted from the final purchase price provided
such deduction shall not result in a draw on the Certificate Insurance Policy)
made by nationally recognized dealers acceptable to the Certificate Insurer and
based on a valuation process which would be used to value comparable mortgage
loans and REO property, (ii) the greater of (x) the aggregate amount of accrued
and unpaid interest on the Mortgage Loans through the related Collection Period
and (y) 30 days' accrued interest thereon at a rate equal to the Mortgage
Interest Rate, (iii) and in the event the Holders of the Class RL Certificates
or the Certificate Insurer exercises such option, plus any accrued and unpaid
Servicing Fees or in the event the Servicer exercises such option, net of the
Servicing Fee, and (iv) any unreimbursed amounts due to the Certificate Insurer
under the Pooling and Servicing Agreement or under the Insurance Agreement (the
"Termination Price"). Any such purchase shall be accomplished by deposit into
the related Certificate Account of the Termination Price. No such termination
is permitted without the prior written consent of the Certificate Insurer (i) if
it would result in a draw on the Certificate Insurance Policy or (ii) unless the
Servicer shall have delivered to the Certificate Insurer an opinion of counsel
reasonably satisfactory to the Certificate Insurer stating that no amounts paid
hereunder are subject to recapture as preferential transfers under the United
States Bankruptcy Code, 11 U.S.C. (S)(S) 101 et seq., as amended.
-- ---
The Trustee shall give written notice of termination of the Pooling
and Servicing Agreement to each Certificateholder in the manner set forth
therein.
The Certificateholders of a majority of the Percentage Interests
represented by the Class A Certificates, upon compliance with the requirements
set forth in the Pooling and Servicing Agreement, have the right, with the
consent of the Certificate Insurer, to exercise any trust or power set forth in
the Pooling and Servicing Agreement with respect to the Certificates or the
Trust Fund.
As provided in the Pooling and Servicing Agreement and subject to
certain limitations therein set forth and referred to on the face hereof, the
transfer of this Certificate is registrable in the Register upon surrender of
this Certificate for registration of transfer at the office designated as the
location of the Register, and thereupon one or more new Certificates of like
Class, tenor and a like Percentage Interest will be issued to the designated
transferee or transferees.
The Trustee is required to furnish certain information on each
Remittance Date to the Holder of this Certificate, as more fully described in
the Pooling and Servicing Agreement.
6
<PAGE>
The Class A Certificates are issuable only as registered Certificates
in denominations of $1,000,000.00 original principal amount and integral
multiples of $1,000.00. As provided in the Pooling and Servicing Agreement and
subject to certain limitations therein set forth, Class A Certificates are
exchangeable for new Class A Certificates of authorized denominations evidencing
the same aggregate principal amount.
The Trustee and any agent of the Trustee may treat the Person in whose
name this Certificate is registered as the owner hereof for all purposes, and
neither the Trustee or any such agent shall be affected by notice to the
contrary.
This Certificate does not purport to summarize the Pooling and
Servicing Agreement and reference is made to the Pooling and Servicing Agreement
for information with respect to the interests, rights, benefits, obligations,
proceeds and duties evidenced hereby and the rights, duties and immunities of
the Trustee. Copies of the Pooling and Servicing Agreement and all amendments
thereto will be provided to any Certificateholder free of charge upon a written
request to the Trustee.
As provided in the Pooling and Servicing Agreement and subject to the
limitations set forth therein, the transfer of this Certificate is registrable
in the Certificate Register of the Certificate Registrar upon surrender of this
Certificate for registration of transfer at the office or agency maintained by
the Trustee in New York, New York, accompanied by a written instrument of
transfer in form satisfactory to the Trustee duly executed by the holder thereof
or his or her attorney duly authorized in writing, and thereupon one or more new
Certificates evidencing the same aggregate Percentage Interest will be issued to
the designated transferee or transferees.
The Depositor, the Servicer, the Seller and the Trustee and any agent
of any of them may treat the person in whose name this Certificate is registered
as the owner hereof for all purposes, and none of them nor any such agent shall
be affected by any notice to the contrary.
7
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
authenticated by the manual signature of a duly authorized officer of the
Trustee.
Dated: December 17, 1996
BANKERS TRUST COMPANY,
as Trustee
By:___________________________________
Name:
Title:
Trustee Authentication
BANKERS TRUST COMPANY,
as Trustee
By:______________________________
Name:
Title:
8
<PAGE>
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto ___________ the attached Preferred Mortgage Asset-Backed Series
1996-2 Certificate and does hereby irrevocably constitute and appoint
__________________________ Attorney to transfer the said certificate on the
Certificate Register maintained by the Trustee, with full power of substitution
in the premises.
Dated:
By:_______________________________
Signature
9
<PAGE>
EXHIBIT B-5
FORM OF CLASS A-5 CERTIFICATE
-----------------------------
Unless this certificate is presented by an authorized representative
of The Depository Trust Company, a New York corporation ("DTC"), to Issuer or
its agent for registration of transfer, exchange, or payment, and any
certificate issued is registered in the name of Cede & Co. or in such other name
as is requested by an authorized representative of DTC (and any payment is made
to Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
"REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT" AS THOSE TERMS
ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE
CODE.
THIS CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND,
NOTWITHSTANDING REFERENCES HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY
PERSON IS REPRESENTED HEREBY.
NEITHER THIS CERTIFICATE NOR THE UNDERLYING MORTGAGE LOANS ARE INSURED
OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE GOVERNMENT
NATIONAL MORTGAGE ASSOCIATION OR ANY OTHER GOVERNMENTAL AGENCY.
Class A-5 No. 1
Cut-off Date: Class A-5 Pass-Through Rate:
December 1, 1996 6.96%
Denomination:
$16,300,000
First Remittance Date: Aggregate Denomination of
January 28, 1997 All
Class A-5
Certificates:
$16,300,000
Servicer: Maturity Date:
Advanta Mortgage Corp. USA April 26, 2010
CUSIP: 126342 FL3
PREFERRED MORTGAGE ASSET-BACKED
CERTIFICATES, SERIES 1996-2, CLASS A-5
--------------------------------------
<PAGE>
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR AN INTEREST IN
THE DEPOSITOR, THE SELLER, THE SERVICER, THE TRUSTEE OR ANY OF THEIR RESPECTIVE
AFFILIATES THEREOF, EXCEPT TO THE EXTENT SET FORTH IN THE POOLING AND SERVICING
AGREEMENT.
This certifies that Cede & Co. is the registered owner of a fractional
interest in the Trust Fund (as defined below) relating to the Preferred Mortgage
Asset-Backed Certificates, Series 1996-2, which consists of (a) such Mortgage
Loans as from time to time are subject to the Pooling and Servicing Agreement
(as defined below), together with the Mortgage Files relating thereto and all
collections thereon and proceeds thereof on and after the Cut-Off Date (other
than Monthly Payments due on each Mortgage Loan up to and including any Due Date
prior to the Cut-Off Date), (b) such assets as from time to time are identified
as REO Property and collections thereon and proceeds thereof, (c) amounts
(including Permitted Investments as may be held from time to time, except as
otherwise provided herein) on deposit in each Account, (d) the Trustee's rights
with respect to the Mortgage Loans under the Certificate Insurance Policy and
all insurance policies required to be maintained pursuant to the Pooling and
Servicing Agreement (as defined herein) and any Insurance Proceeds, (e)
Liquidation Proceeds, (f) Released Mortgaged Property Proceeds, (g) amounts
(including Permitted Investments as may be held from time to time) on deposit in
the Capitalized Interest Account and the Pre-Funding Account, (h) all of the
income, payments and proceeds of each of the foregoing, except to the extent
provided in the Pooling and Servicing Agreement and (i) the rights and remedies
of the Trustee against any representation or warranty made to the Trustee hereby
(the "Trust Fund"). The Trust Fund has been created pursuant to a Pooling and
Servicing Agreement (the "Pooling and Servicing Agreement"), dated as of
-------------------------------
December 1, 1996, among CS First Boston Mortgage Securities Corp., as depositor
(the "Depositor"), T.A.R. Preferred Mortgage Corp., as seller (the "Seller"),
--------- ------
Advanta Mortgage Corp. USA, as servicer (the "Servicer"), and Bankers Trust
--------
Company, as trustee (the "Trustee"). This Certificate is one of the
-------
Certificates described in the Pooling and Servicing Agreement and is issued
pursuant and subject to the Pooling and Servicing Agreement. By acceptance of
this Certificate, the holder assents to and becomes bound by the Pooling and
Servicing Agreement. To the extent not defined herein, all capitalized terms
have the meanings assigned to such terms in the Pooling and Servicing Agreement.
Issued under the Pooling and Servicing Agreement are Certificates
designated as Preferred Mortgage Asset-Backed Certificates, Series 1996-2, Class
A-1 (the "Class A-1 Certificates"), Class A-2 (the "Class A-2 Certificates"),
Class A-3 (the "Class A-3 Certificates"), Class A-4 (the "Class A-4
Certificates"), Class A-5 (the "Class A-5 Certificates"), Class A-6 (the "Class
A-6 Certificates"), Class B (the "Class B
2
<PAGE>
Certificates"), Class C (the "Class C Certificates"), and Class RL and Class RU
(the "Residual Certificates"). The Class A-1 Certificates, the Class A-2
Certificates, the Class A-3 Certificates, the Class A-4 Certificates, the Class
A-5 Certificates, the Class A-6 Certificates (collectively, the "Class A
Certificates"), the Class B Certificates, the Class C Certificates and the
Residual Certificates are collectively referred to herein as the "Certificates."
The Pooling and Servicing Agreement contemplates, subject to its
terms, payment on the twenty-fifth day (or if such day is not a Business Day,
the next succeeding Business Day) (the "Remittance Date") of each calendar month
---------------
commencing in January 1997, so long as the Pooling and Servicing Agreement has
not been terminated, by check (or, if such Class A-5 Certificateholder having an
initial aggregate Class A-5 Principal Balance of at least $1,000,000 and so
desires, by wire transfer pursuant to instructions delivered to the Trustee at
least 5 days prior to such Record Date) to the registered Certificateholder at
the address appearing on the Certificate Register as of the last Business Day of
the calendar month immediately preceding the calendar month in which such
Remittance Date occurs, in an amount equal to the Certificateholder's Percentage
Interest of the portion of the Class A-5 Distribution Amount to be distributed
with respect to the Class A-5 Certificates. The Maturity Date of this
Certificate is April 26, 2010.
Each Certificateholder of record of a Class A-5 Certificate will be
entitled to receive such Certificateholder's Percentage Interest in the amounts
distributed on such Remittance Date to the Certificateholders of the Class A-5
Certificates. The Percentage Interest of each Class A-5 Certificate as of any
date of determination will be equal to the percentage obtained by dividing the
Original Principal Amount set forth on such Class A-5 Certificate by
$16,300,000.
The Class A Certificates have been tranched into six "sequential pay"
Classes, such that the Class A-6 Certificates are entitled to receive no
principal distributions until the Class A-5 Principal Balance has been reduced
to zero, the Class A-5 Certificates are entitled to receive no principal
distributions until the Class A-4 Principal Balance has been reduced to zero,
the Class A-4 Certificates are entitled to receive no principal distributions
until the Class A-3 Principal Balance has been reduced to zero, the Class A-3
Certificates are entitled to receive no principal distributions until the Class
A-2 Principal Balance has been reduced to zero and the Class A-2 Certificates
are entitled to receive no principal distributions until the Class A-1 Principal
Balance has been reduced to zero.
Pursuant to the Certificate Insurance Policy, the Certificate Insurer
is required, to the extent of any
3
<PAGE>
insufficiency in Available Funds, to make Insured Payments available to the
Trustee necessary to distribute the full amount of the Insured Distribution
Amount on each Remittance Date.
Upon receipt of amounts under the Certificate Insurance Policy on
behalf of the Class A Certificateholders, the Trustee shall distribute in
accordance with the Pooling and Servicing Agreement to the Class A
Certificateholders any portion thereof to which such Certificateholders may be
entitled.
The Certificateholder, by its acceptance of this Certificate, agrees
that it will look solely to the funds in the Certificate Account to the extent
available for distribution to the Certificateholder as provided in the Pooling
and Servicing Agreement for payment hereunder and that none of the Depositor,
the Seller, the Servicer or the Trustee in its individual capacity is not
personally liable to the Certificateholder for any amounts payable under this
Certificate or the Pooling and Servicing Agreement or, except as expressly
provided in the Pooling and Servicing Agreement, subject to any liability under
the Pooling and Servicing Agreement. By acceptance of this Certificate, the
Certificateholder agrees to disclosure of his, her or its name and address to
other Certificateholders under the conditions specified in the Pooling and
Servicing Agreement.
The Trustee is required to duly and punctually pay distributions with
respect to this Certificate in accordance with the terms hereof and the Pooling
and Servicing Agreement. Amounts properly withheld under the Code or applicable
to any Certificateholder shall be considered as having been paid by the Trustee
to such Certificateholder for all purposes of the Pooling and Servicing
Agreement.
The Mortgage Loans will be serviced by the Servicer pursuant to the
Pooling and Servicing Agreement. The Pooling and Servicing Agreement permits
the Servicer to enter into Sub-Servicing Agreements with certain institutions
eligible for appointment as Sub-Servicers for the servicing and administration
of certain Mortgage Loans. No appointment of any Sub-Servicer shall release the
Servicer from any of its obligations under the Pooling and Servicing Agreement.
This Certificate does not represent a deposit or other obligation of,
or an interest in, nor are the underlying Mortgage Loans insured or guaranteed
by, the Depositor, the Seller, the Servicer, the Trustee or any of their
subsidiaries and affiliates and are not insured or guaranteed by the Federal
Deposit Insurance Corporation, the Government National Mortgage Association, or
any other governmental agency. This Certificate is limited in right of payment
to certain collections and recoveries relating to the Mortgage Loans and amounts
on deposit in the Accounts (except as otherwise provided in the Pooling and
4
<PAGE>
Servicing Agreement) and payments received by the Trustee pursuant to the
Certificate Insurance Policy, all as more specifically set forth hereinabove and
in the Pooling and Servicing Agreement.
No Certificateholder shall have any right to institute any proceeding,
judicial or otherwise, with respect to the Pooling and Servicing Agreement, or
for the appointment of a receiver or trustee, or for any other remedy under the
Pooling and Servicing Agreement except in compliance with the terms hereof.
Notwithstanding any other provisions in the Pooling and Servicing
Agreement, the Certificateholder of any Certificate shall have the right which
is absolute and unconditional to receive distributions to the extent provided in
the Pooling and Servicing Agreement 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 Certificateholder.
Subject to the terms of the Pooling and Servicing Agreement, the
Pooling and Servicing Agreement provides that the obligations created thereby
will terminate upon notice to the Trustee and the Certificate Insurer of either:
(i) the later of the distribution to Certificateholders of the final payment or
collection with respect to the last Mortgage Loan (or Delinquency Interest
Advances of same by the Servicer), or the disposition of all funds with respect
to the last Mortgage Loan and the remittance of all funds due under the Pooling
and Servicing Agreement and the payment of all amounts due and payable to the
Certificate Insurer and the Trustee or (ii) mutual consent of the Servicer, the
Certificate Insurer and all Certificateholders in writing.
The Pooling and Servicing Agreement additionally provides that the
holder of a 50.01% Percentage Interest or greater of the Class RL Certificates
or the Servicer (or the Certificate Insurer, if the Servicer fails to exercise
such option) may, at its option and at its sole cost and expense, terminate the
Pooling and Servicing Agreement on any date on which the related Pool Principal
Balance is less than 10% of the Maximum Collateral Amount (if the holders of the
Class RL Certificates exercise this option) or is less than 5% of the Maximum
Collateral Amount (if the Servicer or the Certificate Insurer exercises this
option), of the Original Pool Principal Balance by purchasing, on the next
succeeding Remittance Date, all of the outstanding Mortgage Loans and REO
Properties at a price equal to the sum of (i) the greater of (x) 100% of the
Principal Balance of each Outstanding Mortgage Loan and each REO Property and
(y) the fair market value (disregarding accrued interest) of the Mortgage Loans
and REO Properties, determined as the average of three written bids (copies of
which are to be
5
<PAGE>
delivered to the Trustee and the Certificate Insurer by the Servicer and the
reasonable cost of which may be deducted from the final purchase price provided
such deduction shall not result in a draw on the Certificate Insurance Policy)
made by nationally recognized dealers acceptable to the Certificate Insurer and
based on a valuation process which would be used to value comparable mortgage
loans and REO property, (ii) the greater of (x) the aggregate amount of accrued
and unpaid interest on the Mortgage Loans through the related Collection Period
and (y) 30 days' accrued interest thereon at a rate equal to the Mortgage
Interest Rate, (iii) and in the event the Holders of the Class RL Certificates
or the Certificate Insurer exercises such option, plus any accrued and unpaid
Servicing Fees or in the event the Servicer exercises such option, net of the
Servicing Fee, and (iv) any unreimbursed amounts due to the Certificate Insurer
under the Pooling and Servicing Agreement or under the Insurance Agreement (the
"Termination Price"). Any such purchase shall be accomplished by deposit into
the related Certificate Account of the Termination Price. No such termination
is permitted without the prior written consent of the Certificate Insurer (i) if
it would result in a draw on the Certificate Insurance Policy or (ii) unless the
Servicer shall have delivered to the Certificate Insurer an opinion of counsel
reasonably satisfactory to the Certificate Insurer stating that no amounts paid
hereunder are subject to recapture as preferential transfers under the United
States Bankruptcy Code, 11 U.S.C. (S)(S) 101 et seq., as amended.
-- ---
The Trustee shall give written notice of termination of the Pooling
and Servicing Agreement to each Certificateholder in the manner set forth
therein.
The Certificateholders of a majority of the Percentage Interests
represented by the Class A Certificates, upon compliance with the requirements
set forth in the Pooling and Servicing Agreement, have the right, with the
consent of the Certificate Insurer, to exercise any trust or power set forth in
the Pooling and Servicing Agreement with respect to the Certificates or the
Trust Fund.
As provided in the Pooling and Servicing Agreement and subject to
certain limitations therein set forth and referred to on the face hereof, the
transfer of this Certificate is registrable in the Register upon surrender of
this Certificate for registration of transfer at the office designated as the
location of the Register, and thereupon one or more new Certificates of like
Class, tenor and a like Percentage Interest will be issued to the designated
transferee or transferees.
The Trustee is required to furnish certain information on each
Remittance Date to the Holder of this Certificate, as more fully described in
the Pooling and Servicing Agreement.
6
<PAGE>
The Class A Certificates are issuable only as registered Certificates
in denominations of $1,000,000.00 original principal amount and integral
multiples of $1,000.00. As provided in the Pooling and Servicing Agreement and
subject to certain limitations therein set forth, Class A Certificates are
exchangeable for new Class A Certificates of authorized denominations evidencing
the same aggregate principal amount.
The Trustee and any agent of the Trustee may treat the Person in whose
name this Certificate is registered as the owner hereof for all purposes, and
neither the Trustee or any such agent shall be affected by notice to the
contrary.
This Certificate does not purport to summarize the Pooling and
Servicing Agreement and reference is made to the Pooling and Servicing Agreement
for information with respect to the interests, rights, benefits, obligations,
proceeds and duties evidenced hereby and the rights, duties and immunities of
the Trustee. Copies of the Pooling and Servicing Agreement and all amendments
thereto will be provided to any Certificateholder free of charge upon a written
request to the Trustee.
As provided in the Pooling and Servicing Agreement and subject to the
limitations set forth therein, the transfer of this Certificate is registrable
in the Certificate Register of the Certificate Registrar upon surrender of this
Certificate for registration of transfer at the office or agency maintained by
the Trustee in New York, New York, accompanied by a written instrument of
transfer in form satisfactory to the Trustee duly executed by the holder thereof
or his or her attorney duly authorized in writing, and thereupon one or more new
Certificates evidencing the same aggregate Percentage Interest will be issued to
the designated transferee or transferees.
The Depositor, the Servicer, the Seller and the Trustee and any agent
of any of them may treat the person in whose name this Certificate is registered
as the owner hereof for all purposes, and none of them nor any such agent shall
be affected by any notice to the contrary.
7
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
authenticated by the manual signature of a duly authorized officer of the
Trustee.
Dated: December 17, 1996
BANKERS TRUST COMPANY,
as Trustee
By:________________________________
Name:
Title:
Trustee Authentication
BANKERS TRUST COMPANY,
as Trustee
By:_______________________________
Name:
Title:
8
<PAGE>
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto ___________ the attached Preferred Mortgage Asset-Backed Series
1996-2 Certificate and does hereby irrevocably constitute and appoint
__________________________ Attorney to transfer the said certificate on the
Certificate Register maintained by the Trustee, with full power of substitution
in the premises.
Dated:
By:_______________________________
Signature
9
<PAGE>
EXHIBIT B-6
FORM OF CLASS A-6 CERTIFICATE
-----------------------------
Unless this certificate is presented by an authorized representative
of The Depository Trust Company, a New York corporation ("DTC"), to Issuer or
its agent for registration of transfer, exchange, or payment, and any
certificate issued is registered in the name of Cede & Co. or in such other name
as is requested by an authorized representative of DTC (and any payment is made
to Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
"REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT" AS THOSE TERMS
ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE
CODE.
THIS CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND,
NOTWITHSTANDING REFERENCES HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY
PERSON IS REPRESENTED HEREBY.
NEITHER THIS CERTIFICATE NOR THE UNDERLYING MORTGAGE LOANS ARE INSURED
OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE GOVERNMENT
NATIONAL MORTGAGE ASSOCIATION OR ANY OTHER GOVERNMENTAL AGENCY.
Class A-6 No. 1
Cut-off Date: Class A-6 Pass-Through Rate:
December 1, 1996 7.18%
Denomination:
$50,200,000
First Remittance Date: Aggregate Denomination of
January 28, 1997 All
Class A-6
Certificates:
$50,200,000
Servicer: Maturity Date:
Advanta Mortgage Corp. USA February 26, 2018
CUSIP: 126342 FM1
PREFERRED MORTGAGE ASSET-BACKED
CERTIFICATES, SERIES 1996-2, CLASS A-6
--------------------------------------
<PAGE>
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR AN INTEREST IN
THE DEPOSITOR, THE SELLER, THE SERVICER, THE TRUSTEE OR ANY OF THEIR RESPECTIVE
AFFILIATES THEREOF, EXCEPT TO THE EXTENT SET FORTH IN THE POOLING AND SERVICING
AGREEMENT.
This certifies that Cede & Co. is the registered owner of a fractional
interest in the Trust Fund (as defined below) relating to the Preferred Mortgage
Asset-Backed Certificates, Series 1996-2, which consists of (a) such Mortgage
Loans as from time to time are subject to the Pooling and Servicing Agreement
(as defined below), together with the Mortgage Files relating thereto and all
collections thereon and proceeds thereof on and after the Cut-Off Date (other
than Monthly Payments due on each Mortgage Loan up to and including any Due Date
prior to the Cut-Off Date), (b) such assets as from time to time are identified
as REO Property and collections thereon and proceeds thereof, (c) amounts
(including Permitted Investments as may be held from time to time, except as
otherwise provided herein) on deposit in each Account, (d) the Trustee's rights
with respect to the Mortgage Loans under the Certificate Insurance Policy and
all insurance policies required to be maintained pursuant to the Pooling and
Servicing Agreement (as defined herein) and any Insurance Proceeds, (e)
Liquidation Proceeds, (f) Released Mortgaged Property Proceeds, (g) amounts
(including Permitted Investments as may be held from time to time) on deposit in
the Capitalized Interest Account and the Pre-Funding Account, (h) all of the
income, payments and proceeds of each of the foregoing, except to the extent
provided in the Pooling and Servicing Agreement and (i) the rights and remedies
of the Trustee against any representation or warranty made to the Trustee hereby
(the "Trust Fund"). The Trust Fund has been created pursuant to a Pooling and
Servicing Agreement (the "Pooling and Servicing Agreement"), dated as of
-------------------------------
December 1, 1996, among CS First Boston Mortgage Securities Corp., as depositor
(the "Depositor"), T.A.R. Preferred Mortgage Corp., as seller (the "Seller"),
--------- ------
Advanta Mortgage Corp. USA, as servicer (the "Servicer"), and Bankers Trust
--------
Company, as trustee (the "Trustee"). This Certificate is one of the
-------
Certificates described in the Pooling and Servicing Agreement and is issued
pursuant and subject to the Pooling and Servicing Agreement. By acceptance of
this Certificate, the holder assents to and becomes bound by the Pooling and
Servicing Agreement. To the extent not defined herein, all capitalized terms
have the meanings assigned to such terms in the Pooling and Servicing Agreement.
Issued under the Pooling and Servicing Agreement are Certificates
designated as Preferred Mortgage Asset-Backed Certificates, Series 1996-2, Class
A-1 (the "Class A-1 Certificates"), Class A-2 (the "Class A-2 Certificates"),
Class A-3 (the "Class A-3 Certificates"), Class A-4 (the "Class A-4
Certificates"), Class A-5 (the "Class A-5 Certificates"), Class A-6 (the "Class
A-6 Certificates"), Class B (the "Class B
2
<PAGE>
Certificates"), Class C (the "Class C Certificates"), and Class RL and Class RU
(the "Residual Certificates"). The Class A-1 Certificates, the Class A-2
Certificates, the Class A-3 Certificates, the Class A-4 Certificates, the Class
A-5 Certificates, the Class A-6 Certificates (collectively, the "Class A
Certificates"), the Class B Certificates, the Class C Certificates and the
Residual Certificates are collectively referred to herein as the "Certificates."
The Pooling and Servicing Agreement contemplates, subject to its
terms, payment on the twenty-fifth day (or if such day is not a Business Day,
the next succeeding Business Day) (the "Remittance Date") of each calendar month
---------------
commencing in January 1997, so long as the Pooling and Servicing Agreement has
not been terminated, by check (or, if such Class A-6 Certificateholder having an
initial aggregate Class A-6 Principal Balance of at least $1,000,000 and so
desires, by wire transfer pursuant to instructions delivered to the Trustee at
least 5 days prior to such Record Date) to the registered Certificateholder at
the address appearing on the Certificate Register as of the last Business Day of
the calendar month immediately preceding the calendar month in which such
Remittance Date occurs, in an amount equal to the Certificateholder's Percentage
Interest of the portion of the Class A-6 Distribution Amount to be distributed
with respect to the Class A-6 Certificates. The Maturity Date of this
Certificate is February 26, 2018.
Each Certificateholder of record of a Class A-6 Certificate will be
entitled to receive such Certificateholder's Percentage Interest in the amounts
distributed on such Remittance Date to the Certificateholders of the Class A-6
Certificates. The Percentage Interest of each Class A-6 Certificate as of any
date of determination will be equal to the percentage obtained by dividing the
Original Principal Amount set forth on such Class A-6 Certificate by
$50,200,000.
The Class A Certificates have been tranched into six "sequential pay"
Classes, such that the Class A-6 Certificates are entitled to receive no
principal distributions until the Class A-5 Principal Balance has been reduced
to zero, the Class A-5 Certificates are entitled to receive no principal
distributions until the Class A-4 Principal Balance has been reduced to zero,
the Class A-4 Certificates are entitled to receive no principal distributions
until the Class A-3 Principal Balance has been reduced to zero, the Class A-3
Certificates are entitled to receive no principal distributions until the Class
A-2 Principal Balance has been reduced to zero and the Class A-2 Certificates
are entitled to receive no principal distributions until the Class A-1 Principal
Balance has been reduced to zero.
Pursuant to the Certificate Insurance Policy, the Certificate Insurer
is required, to the extent of any
3
<PAGE>
insufficiency in Available Funds, to make Insured Payments available to the
Trustee necessary to distribute the full amount of the Insured Distribution
Amount on each Remittance Date.
Upon receipt of amounts under the Certificate Insurance Policy on
behalf of the Class A Certificateholders, the Trustee shall distribute in
accordance with the Pooling and Servicing Agreement to the Class A
Certificateholders any portion thereof to which such Certificateholders may be
entitled.
The Certificateholder, by its acceptance of this Certificate, agrees
that it will look solely to the funds in the Certificate Account to the extent
available for distribution to the Certificateholder as provided in the Pooling
and Servicing Agreement for payment hereunder and that none of the Depositor,
the Seller, the Servicer or the Trustee in its individual capacity is not
personally liable to the Certificateholder for any amounts payable under this
Certificate or the Pooling and Servicing Agreement or, except as expressly
provided in the Pooling and Servicing Agreement, subject to any liability under
the Pooling and Servicing Agreement. By acceptance of this Certificate, the
Certificateholder agrees to disclosure of his, her or its name and address to
other Certificateholders under the conditions specified in the Pooling and
Servicing Agreement.
The Trustee is required to duly and punctually pay distributions with
respect to this Certificate in accordance with the terms hereof and the Pooling
and Servicing Agreement. Amounts properly withheld under the Code or applicable
to any Certificateholder shall be considered as having been paid by the Trustee
to such Certificateholder for all purposes of the Pooling and Servicing
Agreement.
The Mortgage Loans will be serviced by the Servicer pursuant to the
Pooling and Servicing Agreement. The Pooling and Servicing Agreement permits
the Servicer to enter into Sub-Servicing Agreements with certain institutions
eligible for appointment as Sub-Servicers for the servicing and administration
of certain Mortgage Loans. No appointment of any Sub-Servicer shall release the
Servicer from any of its obligations under the Pooling and Servicing Agreement.
This Certificate does not represent a deposit or other obligation of,
or an interest in, nor are the underlying Mortgage Loans insured or guaranteed
by, the Depositor, the Seller, the Servicer, the Trustee or any of their
subsidiaries and affiliates and are not insured or guaranteed by the Federal
Deposit Insurance Corporation, the Government National Mortgage Association, or
any other governmental agency. This Certificate is limited in right of payment
to certain collections and recoveries relating to the Mortgage Loans and amounts
on deposit in the Accounts (except as otherwise provided in the Pooling and
4
<PAGE>
Servicing Agreement) and payments received by the Trustee pursuant to the
Certificate Insurance Policy, all as more specifically set forth hereinabove and
in the Pooling and Servicing Agreement.
No Certificateholder shall have any right to institute any proceeding,
judicial or otherwise, with respect to the Pooling and Servicing Agreement, or
for the appointment of a receiver or trustee, or for any other remedy under the
Pooling and Servicing Agreement except in compliance with the terms hereof.
Notwithstanding any other provisions in the Pooling and Servicing
Agreement, the Certificateholder of any Certificate shall have the right which
is absolute and unconditional to receive distributions to the extent provided in
the Pooling and Servicing Agreement 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 Certificateholder.
Subject to the terms of the Pooling and Servicing Agreement, the
Pooling and Servicing Agreement provides that the obligations created thereby
will terminate upon notice to the Trustee and the Certificate Insurer of either:
(i) the later of the distribution to Certificateholders of the final payment or
collection with respect to the last Mortgage Loan (or Delinquency Interest
Advances of same by the Servicer), or the disposition of all funds with respect
to the last Mortgage Loan and the remittance of all funds due under the Pooling
and Servicing Agreement and the payment of all amounts due and payable to the
Certificate Insurer and the Trustee or (ii) mutual consent of the Servicer, the
Certificate Insurer and all Certificateholders in writing.
The Pooling and Servicing Agreement additionally provides that the
holder of a 50.01% Percentage Interest or greater of the Class RL Certificates
or the Servicer (or the Certificate Insurer, if the Servicer fails to exercise
such option) may, at its option and at its sole cost and expense, terminate the
Pooling and Servicing Agreement on any date on which the related Pool Principal
Balance is less than 10% of the Maximum Collateral Amount (if the holders of the
Class RL Certificates exercise this option) or is less than 5% of the Maximum
Collateral Amount (if the Servicer or the Certificate Insurer exercises this
option), of the Original Pool Principal Balance by purchasing, on the next
succeeding Remittance Date, all of the outstanding Mortgage Loans and REO
Properties at a price equal to the sum of (i) the greater of (x) 100% of the
Principal Balance of each Outstanding Mortgage Loan and each REO Property and
(y) the fair market value (disregarding accrued interest) of the Mortgage Loans
and REO Properties, determined as the average of three written bids (copies of
which are to be
5
<PAGE>
delivered to the Trustee and the Certificate Insurer by the Servicer and the
reasonable cost of which may be deducted from the final purchase price provided
such deduction shall not result in a draw on the Certificate Insurance Policy)
made by nationally recognized dealers acceptable to the Certificate Insurer and
based on a valuation process which would be used to value comparable mortgage
loans and REO property, (ii) the greater of (x) the aggregate amount of accrued
and unpaid interest on the Mortgage Loans through the related Collection Period
and (y) 30 days' accrued interest thereon at a rate equal to the Mortgage
Interest Rate, (iii) and in the event the Holders of the Class RL Certificates
or the Certificate Insurer exercises such option, plus any accrued and unpaid
Servicing Fees or in the event the Servicer exercises such option, net of the
Servicing Fee, and (iv) any unreimbursed amounts due to the Certificate Insurer
under the Pooling and Servicing Agreement or under the Insurance Agreement (the
"Termination Price"). Any such purchase shall be accomplished by deposit into
the related Certificate Account of the Termination Price. No such termination
is permitted without the prior written consent of the Certificate Insurer (i) if
it would result in a draw on the Certificate Insurance Policy or (ii) unless the
Servicer shall have delivered to the Certificate Insurer an opinion of counsel
reasonably satisfactory to the Certificate Insurer stating that no amounts paid
hereunder are subject to recapture as preferential transfers under the United
States Bankruptcy Code, 11 U.S.C. (S)(S) 101 et seq., as amended.
-- ---
The Trustee shall give written notice of termination of the Pooling
and Servicing Agreement to each Certificateholder in the manner set forth
therein.
The Certificateholders of a majority of the Percentage Interests
represented by the Class A Certificates, upon compliance with the requirements
set forth in the Pooling and Servicing Agreement, have the right, with the
consent of the Certificate Insurer, to exercise any trust or power set forth in
the Pooling and Servicing Agreement with respect to the Certificates or the
Trust Fund.
As provided in the Pooling and Servicing Agreement and subject to
certain limitations therein set forth and referred to on the face hereof, the
transfer of this Certificate is registrable in the Register upon surrender of
this Certificate for registration of transfer at the office designated as the
location of the Register, and thereupon one or more new Certificates of like
Class, tenor and a like Percentage Interest will be issued to the designated
transferee or transferees.
The Trustee is required to furnish certain information on each
Remittance Date to the Holder of this Certificate, as more fully described in
the Pooling and Servicing Agreement.
6
<PAGE>
The Class A Certificates are issuable only as registered Certificates
in denominations of $1,000,000.00 original principal amount and integral
multiples of $1,000.00. As provided in the Pooling and Servicing Agreement and
subject to certain limitations therein set forth, Class A Certificates are
exchangeable for new Class A Certificates of authorized denominations evidencing
the same aggregate principal amount.
The Trustee and any agent of the Trustee may treat the Person in whose
name this Certificate is registered as the owner hereof for all purposes, and
neither the Trustee or any such agent shall be affected by notice to the
contrary.
This Certificate does not purport to summarize the Pooling and
Servicing Agreement and reference is made to the Pooling and Servicing Agreement
for information with respect to the interests, rights, benefits, obligations,
proceeds and duties evidenced hereby and the rights, duties and immunities of
the Trustee. Copies of the Pooling and Servicing Agreement and all amendments
thereto will be provided to any Certificateholder free of charge upon a written
request to the Trustee.
As provided in the Pooling and Servicing Agreement and subject to the
limitations set forth therein, the transfer of this Certificate is registrable
in the Certificate Register of the Certificate Registrar upon surrender of this
Certificate for registration of transfer at the office or agency maintained by
the Trustee in New York, New York, accompanied by a written instrument of
transfer in form satisfactory to the Trustee duly executed by the holder thereof
or his or her attorney duly authorized in writing, and thereupon one or more new
Certificates evidencing the same aggregate Percentage Interest will be issued to
the designated transferee or transferees.
The Depositor, the Servicer, the Seller and the Trustee and any agent
of any of them may treat the person in whose name this Certificate is registered
as the owner hereof for all purposes, and none of them nor any such agent shall
be affected by any notice to the contrary.
7
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
authenticated by the manual signature of a duly authorized officer of the
Trustee.
Dated: December 17, 1996
BANKERS TRUST COMPANY,
as Trustee
By:_____________________________
Name:
Title:
Trustee Authentication
BANKERS TRUST COMPANY,
as Trustee
By:_____________________________
Name:
Title:
8
<PAGE>
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto ___________ the attached Preferred Mortgage Asset-Backed Series
1996-2 Certificate and does hereby irrevocably constitute and appoint
__________________________ Attorney to transfer the said certificate on the
Certificate Register maintained by the Trustee, with full power of substitution
in the premises.
Dated:
By:_______________________________
Signature
9
<PAGE>
EXHIBIT B-7
FORM OF CLASS B CERTIFICATE
---------------------------
THIS CERTIFICATE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR THE SECURITIES LAW OF
--------
ANY STATE. ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CERTIFICATE
WITHOUT SUCH REGISTRATION OR QUALIFICATION MAY BE MADE ONLY IN A TRANSACTION
WHICH DOES NOT REQUIRE SUCH REGISTRATION OR QUALIFICATION AND IN ACCORDANCE WITH
THE PROVISIONS OF SECTION 4.02 OF THE POOLING AND SERVICING AGREEMENT REFERRED
TO HEREIN.
NO RESALE OR OTHER TRANSFER OF THIS CERTIFICATE SHALL BE MADE UNLESS
THE TRUSTEE SHALL HAVE RECEIVED A REPRESENTATION LETTER FROM THE TRANSFEREE OF
THIS CERTIFICATE TO THE EFFECT THAT SUCH TRANSFEREE WILL NOT ACQUIRE THIS
CERTIFICATE WITH THE ASSETS OF ANY (A) EMPLOYEE BENEFITS PLANS (AS DEFINED IN
SECTION 3(3) OF ERISA) SUBJECT TO THE PROVISIONS OF TITLE I OF ERISA, (B) PLANS
DESCRIBED IN SECTION 4975(E)(1) OF THE CODE, INCLUDING INDIVIDUAL RETIREMENT
ACCOUNTS OR KEOGH PLANS, OR (C) ANY ENTITIES WHOSE UNDERLYING ASSETS INCLUDE
ASSETS OF A PLAN DESCRIBED IN (A) OR (B) ABOVE BY REASON OF SUCH A PLAN'S
INVESTMENT IN SUCH ENTITIES.
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
"REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT" AS THOSE TERMS
ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE
CODE.
THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE CLASS A
CERTIFICATES AS DESCRIBED IN THE POOLING AND SERVICING AGREEMENT REFERRED TO
HEREIN.
Class B (Subordinate) No. 1
Cut-off Date: Denomination:
December 1, 1996 100% Percentage Interest
First Remittance Date: Aggregate Denomination of
January 28, 1997 all
Class B Certificates:
100% Percentage Interest
Servicer: Maturity Date:
Advanta Mortgage Corp. USA February 26, 2018
PREFERRED MORTGAGE ASSET-BACKED CERTIFICATES,
SERIES 1996-2, CLASS B (SUBORDINATE)
--------------------------------------------
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR AN INTEREST IN
THE DEPOSITOR, THE SELLER, THE SERVICER, THE TRUSTEE OR ANY OF THEIR RESPECTIVE
AFFILIATES THEREOF, EXCEPT TO THE EXTENT SET FORTH IN THE POOLING AND SERVICING
AGREEMENT.
<PAGE>
This certifies that Preferred Mortgage SPC Funding Corp. is the
registered owner of a fractional interest in the Trust Fund (as defined below)
relating to the Preferred Mortgage Asset-Backed Certificates, Series 1996-2,
which consists of (a) such Mortgage Loans as from time to time are subject to
the Pooling and Servicing Agreement (defined below), together with the Mortgage
Files relating thereto and all collections thereon and proceeds thereof on and
after the Cut-Off Date (other than Monthly Payments due on each Mortgage Loan up
to and including any Due Date prior to the Cut-Off Date), (b) such assets as
from time to time are identified as REO Property and collections thereon and
proceeds thereof, (c) amounts (including Permitted Investments as may be held
from time to time, except as otherwise provided in the Pooling and Servicing
Agreement) on deposit in each Account, (d) the Trustee's rights with respect to
the Mortgage Loans under the Certificate Insurance Policy and all insurance
policies required to be maintained pursuant to the Pooling and Servicing
Agreement and any Insurance Proceeds, (e) Liquidation Proceeds, (f) Released
Mortgaged Property Proceeds, (g) amounts (including Permitted Investments as may
be held from time to time) on deposit in the Capitalized Interest Account and
the Pre-Funding Account, (h) all of the income, payments and proceeds of each of
the foregoing, except to the extent provided in the Pooling and Servicing
Agreement and (i) the rights and remedies of the Trustee against any
representation or warranty made to the Trustee hereby (the "Trust Fund"). The
----------
Trust Fund has been created pursuant to a Pooling and Servicing Agreement (the
"the Pooling and Servicing Agreement"), dated as of December 1, 1996, among CS
- ------------------------------------
First Boston Mortgage Securities Corp., as depositor (the "Depositor"), T.A.R.
---------
Preferred Mortgage Corp., as seller (the "Seller"), Advanta Mortgage Corp. USA,
------
as servicer (the "Servicer"), and Bankers Trust Company, as trustee (the
--------
"Trustee"). This Certificate is one of the Certificates described in the
- --------
Pooling and Servicing Agreement and is issued pursuant and subject to the
Pooling and Servicing Agreement. By acceptance of this Certificate, the holder
assents to and becomes bound by the Pooling and Servicing Agreement. To the
extent not defined herein, all capitalized terms have the meanings assigned to
such terms in the Pooling and Servicing Agreement.
The Pooling and Servicing Agreement contemplates, subject to its
terms, payment on the twenty-fifth day (or if such day is not a Business Day,
the next succeeding Business Day) (the "Remittance Date") of each calendar month
---------------
commencing in January 1997, so long as the Pooling and Servicing Agreement has
not been terminated, by check to the registered Certificateholder at the address
appearing on the Certificate Register as of the last Business Day of the
calendar month immediately preceding the calendar month in which such Remittance
Date occurs, in an amount equal to the product of the Percentage Interest
evidenced by this Certificate and the amount (of interest and principal, if any)
required to be distributed to
2
<PAGE>
the holders of Class B Certificates on such Remittance Date. The Maturity Date
of this Certificate is February 26, 2018.
No transfer of this Class B Certificate, or any interest therein shall
be made to any (a) employee benefit plans (as defined in Section 3(3) of ERISA)
subject to the provisions of Title I of ERISA, (b) plans described in Section
4975(e)(1) of the Code, including individual retirement accounts or Keogh plans,
(c) any entities whose underlying assets include assets of a plan described in
(a) or (b) above by reason of such a plan's investment in such entities (each a
"Plan"). The Certificateholder, by its acceptance of this Certificate,
----
represents and warrants it is not a Plan.
The Certificateholder, by its acceptance of this Certificate, agrees
that it will look solely to the funds in the Certificate Account to the extent
available for distribution to the Certificateholder as provided in the Pooling
and Servicing Agreement for payment hereunder and that none of the Depositor,
the Seller, the Servicer or the Trustee in its individual capacity is not
personally liable to the Certificateholder for any amounts payable under this
Certificate or the Pooling and Servicing Agreement or, except as expressly
provided in the Pooling and Servicing Agreement, subject to any liability under
the Pooling and Servicing Agreement. By acceptance of this Certificate, the
Certificateholder agrees to disclosure of his, her or its name and address to
other Certificateholders under the conditions specified in the Pooling and
Servicing Agreement.
The Trustee is required to duly and punctually pay distributions with
respect to this Certificate in accordance with the terms hereof and the Pooling
and Servicing Agreement. Amounts properly withheld under the Code or applicable
to any Certificateholder shall be considered as having been paid by the Trustee
to such Certificateholder for all purposes of the Pooling and Servicing
Agreement.
The Mortgage Loans will be serviced by the Servicer pursuant to the
Pooling and Servicing Agreement. The Pooling and Servicing Agreement permits
the Servicer to enter into Sub-Servicing Agreements with certain institutions
eligible for appointment as Sub-Servicers for the servicing and administration
of certain Mortgage Loans. No appointment of any Sub-Servicer shall release the
Servicer from any of its obligations under the Pooling and Servicing Agreement.
This Certificate does not represent a deposit or other obligation of,
or an interest in, nor are the underlying
Mortgage Loans insured or guaranteed by, the Depositor, the Seller, the
Servicer, the Trustee or any of their subsidiaries and affiliates and are not
insured or guaranteed by the Federal Deposit Insurance Corporation, the
Government National Mortgage Association, or other governmental agency. This
Certificate is
3
<PAGE>
limited in right of payment to certain collections and recoveries relating to
the Mortgage Loans and amounts on deposit in the Accounts (except as otherwise
provided in the Pooling and Servicing Agreement), all as more specifically set
forth hereinabove and in the Pooling and Servicing Agreement.
No Certificateholder shall have any right to institute any proceeding,
judicial or otherwise, with respect to the Pooling and Servicing Agreement, or
for the appointment of a receiver or trustee, or for any other remedy under the
Pooling and Servicing Agreement except in the compliance with the terms hereof.
Notwithstanding any other provisions in the Pooling and Servicing
Agreement, the Certificateholder of any Certificate shall have the right which
is absolute and unconditional to receive distributions to the extent provided in
the Pooling and Servicing Agreement 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 Certificateholder.
Subject to the terms of the Pooling and Servicing Agreement, the
Pooling and Servicing Agreement provides that the obligations created thereby
will terminate upon notice to the Trustee and the Certificate Insurer of either:
(i) the later of the distribution to Certificateholders of the final payment or
collection with respect to the last Mortgage Loan (or Delinquency Interest
Advances of same by the Servicer), or the disposition of all funds with respect
to the last Mortgage Loan and the remittance of all funds due under the Pooling
and Servicing Agreement and the payment of all amounts due and payable to the
Certificate Insurer and the Trustee or (ii) mutual consent of the Servicer, the
Certificate Insurer and all Certificateholders in writing.
The Pooling and Servicing Agreement additionally provides that the
holder of a 50.01% Percentage Interest of greater of the Class RL Certificates
or the Servicer (or the Certificate Insurer, if the Servicer fails to exercise
such option) may, at its option and at is sole cost and expense, terminate the
Pooling and Servicing Agreement on any date on which the related Pool Principal
Balance is less than 10% of the Maximum Collateral Amount (if the holders of the
Class RL Certificates exercise this option) or is less than 5% of the Maximum
Collateral Amount (if the Servicer or the Certificate Insurer exercises this
option), of the Original Pool Principal Balance by purchasing, on the next
succeeding Remittance Date, all of the outstanding Mortgage Loans and REO
Properties at a price equal to the sum of (i) the greater of (x) 100% of the
Principal Balance of each Outstanding Mortgage Loan and each REO Property and
(y) the fair market value (disregarding accrued interest) of the Mortgage Loans
and REO Properties, determined
4
<PAGE>
as the average of three written bids (copies of which are to be delivered to the
Trustee and the Certificate Insurer by the Servicer and the reasonable cost of
which may be deducted from the final purchase price provided such deduction
shall not result in a draw on the Certificate Insurance Policy) made by
nationally recognized dealers acceptable to the Certificate Insurer and based on
a valuation process which would be used to value comparable mortgage loans and
REO property, (ii) the greater of (x) aggregate amounts of accrued and unpaid
interest on the Mortgage Loans through the related Collection Period and (y) 30
days' accrued interest thereon at a rate equal to the Mortgage Interest Rate,
(iii) and in the event the Holders of the Class RL Certificates or the
Certificate Insurer exercises such option, plus any accrued and unpaid Servicing
Fees or in the event the Servicer exercises such option, net of the Servicing
Fee, and (iv) any unreimbursed amounts due to the Certificate Insurer under the
Pooling and Servicing Agreement or under the Insurance Agreement (the
"Termination Price"). Any such purchase shall be accomplished by deposit into
- ------------------
the related Certificate Account of the Termination Price. No such termination
is permitted without the prior written consent of the Certificate Insurer (i) if
it would result in a draw on the Certificate Insurance Policy or (ii) unless the
Servicer shall have delivered to the Certificate Insurer stating that no amounts
paid hereunder are subject to recapture as preferential transfers under the
United States Bankruptcy Code, 11 U.S.C. (S)(S) 101 et seq., as amended.
-- ---
The Trustee shall give written notice of termination of the Pooling
and Servicing Agreement to each Certificateholder in the manner set forth
therein.
The Certificateholders of a majority of the percentage Interests
represented by the Class A Certificates, upon compliance with the requirements
set forth in the Pooling and Servicing Agreement, have the right, with the
consent of the Certificate Insurer, to exercise any trust or power set forth in
the Pooling and Servicing Agreement with respect to the Certificates or the
Trust Fund.
As provided in the Pooling and Servicing Agreement and subject to
certain limitations therein set forth and referred to on the face hereof, the
transfer of this Certificate is registrable in the Register upon surrender of
this Certificate for registration of transfer at the office designated as the
location of the Register, and thereupon one or more new Certificates of like
Class, tenor and a like Percentage Interest will be issued to the designated
transferee or transferees.
The Trustee is required to furnish certain information on each
Remittance Date to the Holder of this Certificate, as more fully described in
the Pooling and Servicing Agreement.
5
<PAGE>
The Class B Certificates are made issuable only as registered
Certificates in a minimum Percentage Interest of 10% and integral multiples of
0.01% in excess thereof. As provided in the Pooling and Servicing Agreement and
subject to certain limitations therein set forth, the Class B Certificates are
exchangeable for new Class B Certificates of authorized denominations evidencing
the same aggregate principal amount.
The Trustee and any agent of the Trustee may treat the Person in whose
name this Certificate is registered as the owner hereof for all purposes, and
neither the Trustee or any such agent shall be affected by notice to the
contrary.
This Certificate does not purport to summarize the Agreement and
reference is made to the Pooling and Servicing Agreement for information with
respect to the interests, rights, benefits, obligations, proceeds and duties
evidenced hereby and the rights, duties and immunities of the Trustee.
As provided in the Pooling and Servicing Agreement and subject to the
limitations set forth therein, the transfer of this Certificate is registrable
in the Certificate Register of the Trustee upon surrender of this Certificate
for registration of transfer at the office or agency maintained by the Trustee
in New York, New York, accompanied by a written instrument of transfer in form
satisfactory to the Trustee duly executed by the holder thereof or his or her
attorney duly authorized in writing, and thereupon one or more new Certificates
evidencing the same aggregate Percentage Interest will be issued to the
designated transferee or transferees.
The Depositor, the Servicer, the Seller and the Trustee and any agent
of any of them may treat the person in whose name this Certificate is registered
as the owner hereof for all purposes, and none of them nor any such agent shall
be affected by any notice to the contrary.
6
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed by the manual signature of a duly authorized officer of the Trustee.
Dated: December 17, 1996
BANKERS TRUST COMPANY, as Trustee
By:______________________________________
Name:
Title:
Trustee Authentication
BANKERS TRUST COMPANY,
as Trustee
By:___________________________________
Name:
Title:
7
<PAGE>
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto _______________________________ the within Preferred Mortgage
Asset-Backed Certificate, Series 1996-2 and does hereby irrevocably constitute
and appoint ______________________________ Attorney to transfer the said
certificate on the Certificate Register maintained by the Trustee, with full
power of substitution in the premises.
Dated:
By:_______________________________
Signature
8
<PAGE>
EXHIBIT B-8
FORM OF CLASS C CERTIFICATE
---------------------------
THIS CERTIFICATE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR THE SECURITIES LAW OF
ANY STATE. ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CERTIFICATE
WITHOUT SUCH REGISTRATION OR QUALIFICATION MAY BE MADE ONLY IN A TRANSACTION
WHICH DOES NOT REQUIRE SUCH REGISTRATION OR QUALIFICATION AND IN ACCORDANCE WITH
THE PROVISIONS OF SECTION 4.02 OF THE POOLING AND SERVICING AGREEMENT REFERRED
TO HEREIN.
NO RESALE OR OTHER TRANSFER OF THIS CERTIFICATE SHALL BE MADE UNLESS
THE TRUSTEE SHALL HAVE RECEIVED A REPRESENTATION LETTER FROM THE TRANSFEREE OF
THIS CERTIFICATE TO THE EFFECT THAT SUCH TRANSFEREE WILL NOT ACQUIRE THIS
CERTIFICATE WITH THE ASSETS OF ANY (A) EMPLOYEE BENEFIT PLANS (AS DEFINED IN
SECTION 3(3) OF ERISA) SUBJECT TO THE PROVISIONS OF TITLE I OF ERISA, (B) PLANS
DESCRIBED IN SECTION 4975(E)(1) OF THE CODE, INCLUDING INDIVIDUAL RETIREMENT
ACCOUNTS OR KEOGH PLANS, OR (C) ANY ENTITIES WHOSE UNDERLYING ASSETS INCLUDE
ASSETS OF A PLAN DESCRIBED IN (A) OR (B) ABOVE BY REASON OF SUCH A PLAN'S
INVESTMENT IN SUCH ENTITIES.
THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE CLASS A
CERTIFICATES AND THE CLASS B CERTIFICATES AS DESCRIBED IN THE POOLING AND
SERVICING AGREEMENT REFERRED TO HEREIN.
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
"REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT" AS THOSE TERMS
ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE
CODE.
Class C No. 1
(Subordinate)
Cut-off Date: Denomination: 100% Percentage
December 1, 1996 Interest
First Remittance Date:
January 28, 1997
Servicer: Aggregate Denomination of All
Advanta Mortgage Corp. USA Class C Certificates: 100%
Percentage Interest
Maturity Date:
February 26, 2018
1
<PAGE>
PREFERRED MORTGAGE ASSET-BACKED CERTIFICATES,
SERIES 1996-2, CLASS C (SUBORDINATE)
------------------------------------
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR AN INTEREST IN
THE DEPOSITOR, THE SELLER, THE SERVICER, THE TRUSTEE OR ANY OF THEIR RESPECTIVE
AFFILIATES THEREOF, EXCEPT TO THE EXTENT SET FORTH IN THE POOLING AND SERVICING
AGREEMENT.
This certifies that Preferred Mortgage SPC Funding Corp. is the
registered owner of a fractional interest in the Trust Fund (as defined below)
relating to the Preferred Mortgage Asset-Backed Certificates, Series 1996-2,
which consists of (a) such Mortgage Loans as from time to time are subject to
the Pooling and Servicing Agreement (as defined below), together with the
Mortgage Files relating thereto and all collections thereon and proceeds thereof
on and after the Cut-Off Date (other than Monthly Payments due on each Mortgage
Loan up to and including any Due Date prior to the Cut-Off Date), (b) such
assets as from time to time are identified as REO Property and collections
thereon and proceeds thereof, (c) amounts (including Permitted Investments as
may be held from time to time, except as otherwise provided in the Pooling and
Servicing Agreement) on deposit in each Account, (d) the Trustee's rights with
respect to the Mortgage Loans under the Certificate Insurance Policy and all
insurance policies required to be maintained pursuant to the Pooling and
Servicing Agreement and any Insurance Proceeds, (e) Liquidation Proceeds, (f)
Released Mortgaged Property Proceeds, (g) amounts (including Permitted
Investments as may be held from time to time) on deposit in the Capitalized
Interest Account and the Pre-Funding Account, (h) all of the income, payments
and proceeds of each of the foregoing, except to the extent provided in the
Pooling and Servicing Agreement and (i) the rights and remedies of the Trustee
against any representation or warranty made to the Trustee hereby (the "Trust
Fund"). The Trust Fund has been created pursuant to a Pooling and Servicing
Agreement (the "Pooling and Servicing Agreement"), dated as of December 1, 1996,
-------------------------------
among CS First Boston Mortgage Securities Corp., as depositor (the "Depositor"),
---------
T.A.R. Preferred Mortgage Corp., as seller (the "Seller"), Advanta Mortgage
------
Corp. USA, as servicer (the "Servicer"), and Bankers Trust Company, as trustee
--------
(the "Trustee"). This Certificate is one of the Certificates described in the
-------
Pooling and Servicing Agreement and is issued pursuant and subject to the
Pooling and Servicing Agreement. By acceptance of this Certificate, the holder
assents to and becomes bound by the Pooling and Servicing Agreement. To the
extent not defined herein, all capitalized terms have the meanings assigned to
such terms in the Pooling and Servicing Agreement.
The Pooling and Servicing Agreement contemplates, subject to its
terms, payment on the twenty-fifth day (or if such day is not a Business Day,
the next succeeding Business
2
<PAGE>
Day) (the "Remittance Date") of each calendar month commencing in January 1997,
so long as the Pooling and Servicing Agreement has not been terminated, by check
to the registered Certificateholder at the address appearing on the Certificate
Register as of the Business Day immediately preceding such Remittance Date, in
an amount equal to the Certificateholder's Percentage Interest of the portion of
the Class C Distribution Amount. The Maturity Date of this Certificate is
February 18, 2026.
No transfer of this Class C Certificate or any interest therein shall
be made to any (a) employee benefit plans (as defined in Section 3(3) of ERISA)
subject to the provisions of Title I of ERISA, (b) plans described in section
4975(e)(1) of the Code, including individual retirement accounts or Keogh plans,
(c) any entities whose underlying assets include assets of a plan described in
(a) or (b) above by reason of such a plan's investment in such entities (each a
"Plan"). The Certificateholder, by its acceptance of this Certificate,
represents and warrants it is not a Plan.
The Certificateholder, by its acceptance of this Certificate, agrees
that it will look solely to the funds in the Certificate Account to the extent
available for distribution to the Certificateholder as provided in the Pooling
and Servicing Agreement for payment hereunder and that the Trustee in its
individual capacity is not personally liable to the Certificateholder for any
amounts payable under this Certificate or the Pooling and Servicing Agreement
or, except as expressly provided in the Pooling and Servicing Agreement, subject
to any liability under the Pooling and Servicing Agreement. By acceptance of
this Certificate, the Certificateholder agrees to disclosure of his, her or its
name and address to other Certificateholders under the conditions specified in
the Pooling and Servicing Agreement.
The Trustee is required to duly and punctually pay distributions with
respect to this Certificate in accordance with the terms hereof and the Pooling
and Servicing Agreement. Amounts properly withheld under the Code or applicable
to any Certificateholder shall be considered as having been paid by the Trustee
to such Certificateholder for all purposes of the Pooling and Servicing
Agreement.
The Mortgage Loans will be serviced by the Servicer pursuant to the
Pooling and Servicing Agreement. The Pooling and Servicing Agreement permits
the Servicer to enter into Sub-Servicing Agreements with certain institutions
eligible for appointment as Sub-Servicers for the servicing and administration
of certain Mortgage Loans. No appointment of any Sub-Servicer shall release the
Servicer from any of its obligations under the Pooling and Servicing Agreement.
3
<PAGE>
This Certificate does not represent a deposit or other obligation of,
or an interest in, nor are the underlying Mortgage Loans insured or guaranteed
by, the Depositor, the Seller, the Servicer, the Trustee or any of their
subsidiaries and affiliates and are not insured or guaranteed by the Federal
Deposit Insurance Corporation, the Government National Mortgage Association, or
any other governmental agency. This Certificate is limited in right of payment
to certain collections and recoveries relating to the Mortgage Loans and amounts
on deposit in the Accounts (except as otherwise provided in the Pooling and
Servicing Agreement), all as more specifically set forth hereinabove and in the
Pooling and Servicing Agreement.
No Certificateholder shall have any right to institute any proceeding,
judicial or otherwise, with respect to the Pooling and Servicing Agreement, or
for the appointment of a receiver or trustee, or for any other remedy under the
Pooling and Servicing Agreement except in compliance with the terms hereof.
Notwithstanding any other provisions in the Pooling and Servicing
Agreement, the Certificateholder of any Certificate shall have the right which
is absolute and unconditional to receive distributions to the extent provided in
the Pooling and Servicing Agreement 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 Certificateholder.
Subject to the terms of the Pooling and Servicing Agreement, the
Pooling and Servicing Agreement provides that the obligations created thereby
will terminate upon notice to the Trustee and the Certificate Insurer of either:
(i) the later of the distribution to Certificateholders of the final payment or
collection with respect to the last Mortgage Loan (or Delinquency Interest
Advances of same by the Servicer), or the disposition of all funds with respect
to the last Mortgage Loan and the remittance of all funds due under the Pooling
and Servicing Agreement and the payment of all amounts due and payable to the
Certificate Insurer and the Trustee or (ii) mutual consent of the Servicer, the
Certificate Insurer and all Certificateholders in writing.
The Pooling and Servicing Agreement additionally provides that the
holder of a 50.01% Percentage Interest or greater of the Class RL Certificates
or the Servicer (or the Certificate Insurer, if the Servicer fails to exercise
such option) may, at its option and at its sole cost and expense, terminate the
Pooling and Servicing Agreement on any date on which the related Pool Principal
Balance is less than 10% of the Maximum Collateral Amount (if the holders of the
Class RL Certificates exercise this option) or is less than 5% of the Maximum
Collateral Amount (if the Servicer or the Certificate
4
<PAGE>
Insurer exercises this option), of the Original Pool Principal Balance by
purchasing, on the next succeeding Remittance Date, all of the outstanding
Mortgage Loans and REO Properties at a price equal to the sum of (i) the greater
of (x) 100% of the Principal Balance of each Outstanding Mortgage Loan and each
REO Property and (y) the fair market value (disregarding accrued interest) of
the Mortgage Loans and REO Properties, determined as the average of three
written bids (copies of which are to be delivered to the Trustee and the
Certificate Insurer by the Servicer and the reasonable cost of which may be
deducted from the final purchase price provided such deduction shall not result
in a draw on the Certificate Insurance Policy) made by nationally recognized
dealers acceptable to the Certificate Insurer and based on a valuation process
which would be used to value comparable mortgage loans and REO property, (ii)
the greater of (x) the aggregate amount of accrued and unpaid interest on the
Mortgage Loans through the related Collection Period and (y) 30 days' accrued
interest thereon at a rate equal to the Mortgage Interest Rate, (iii) and in the
event the Holders of the Class RL Certificates or the Certificate Insurer
exercises such option, plus any accrued and unpaid Servicing Fees or in the
event the Servicer exercises such option, net of the Servicing Fee, and (iv) any
unreimbursed amounts due to the Certificate Insurer under the Pooling and
Servicing Agreement or under the Insurance Agreement (the "Termination Price").
Any such purchase shall be accomplished by deposit into the related Certificate
Account of the Termination Price. No such termination is permitted without the
prior written consent of the Certificate Insurer (i) if it would result in a
draw on the Certificate Insurance Policy or (ii) unless the Servicer shall have
delivered to the Certificate Insurer an opinion of counsel reasonably
satisfactory to the Certificate Insurer stating that no amounts paid hereunder
are subject to recapture as preferential transfers under the United States
Bankruptcy Code, 11 U.S.C. (S)(S) 101 et seq., as amended.
-- ---
The Trustee shall give written notice of termination of the Pooling
and Servicing Agreement to each Certificateholder in the manner set forth
therein.
The Certificateholders of a majority of the Percentage Interests
represented by the Class A Certificates, upon compliance with the requirements
set forth in the Pooling and Servicing Agreement, have the right, with the
consent of the Certificate Insurer, to exercise any trust or power set forth in
the Pooling and Servicing Agreement with respect to the Certificates or the
Trust Fund.
As provided in the Pooling and Servicing Agreement and subject to
certain limitations therein set forth and referred to on the face hereof, the
transfer of this Certificate is registrable in the Register upon surrender of
this Certificate for registration of transfer at the office designated as the
5
<PAGE>
location of the Register, and thereupon one or more new Certificates of like
Class, tenor and a like Percentage Interest will be issued to the designated
transferee or transferees.
The Trustee is required to furnish certain information on each
Remittance Date to the Holder of this Certificate, as more fully described in
the Pooling and Servicing Agreement.
The Class C Certificates are issuable only as registered Certificates
in a minimum Percentage Interest of 10% and integral multiples of 0.01% in
excess thereof. As provided in the Pooling and Servicing Agreement and subject
to certain limitations therein set forth, Class C Certificates are exchangeable
for new Class C Certificates of authorized denominations evidencing the same
aggregate principal amount.
The Trustee and any agent of the Trustee may treat the Person in whose
name this Certificate is registered as the owner hereof for all purposes, and
neither the Trustee or any such agent shall be affected by notice to the
contrary.
This Certificate does not purport to summarize the Pooling and
Servicing Agreement and reference is made to the Pooling and Servicing Agreement
for information with respect to the interests, rights, benefits, obligations,
proceeds and duties evidenced hereby and the rights, duties and immunities of
the Trustee. Copies of the Pooling and Servicing Agreement and all amendments
thereto will be provided to any Certificateholder free of charge upon a written
request to the Trustee.
As provided in the Pooling and Servicing Agreement and subject to the
limitations set forth therein, the transfer of this Certificate is registrable
in the Certificate Register of the Trustee upon surrender of the Certificate for
registration of transfer at the office or agency maintained by the Trustee in
New York, New York, accompanied by a written instrument of transfer in form
satisfactory to the Trustee duly executed by the holder thereof or his or her
attorney duly authorized in writing, and thereupon one or more new certificates
evidencing the same aggregate Percentage Interest will be issued to the
designated transferee or transferees.
The Depositor, the Servicer, the Seller and the Trustee and any agent
of any of them may treat the person in whose name this Certificate is registered
as the owner hereof for all purposes, and none of them nor any such agent shall
be affected by any notice to the contrary.
6
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed by the manual signature of a duly authorized officer of the Trustee.
Dated: December 17, 1996
BANKERS TRUST COMPANY,
as Trustee
By:________________________________________
Name:
Title:
Trustee Authentication
BANKERS TRUST COMPANY,
as Trustee
By:_______________
Name:
Title:
7
<PAGE>
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto ____________________________ the within Preferred Mortgage Asset-
Backed Certificate, Series 1996-2 and does hereby irrevocably constitute and
appoint __________________________ Attorney to transfer the said certificate on
the Certificate Register maintained by the Trustee, with full power of
substitution in the premises.
Dated:
By:_________________________________
Signature
8
<PAGE>
EXHIBIT B-9
FORM OF CLASS RL CERTIFICATE
----------------------------
THIS CERTIFICATE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR THE SECURITIES LAW OF
ANY STATE. ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CERTIFICATE
WITHOUT SUCH REGISTRATION OR QUALIFICATION MAY BE MADE ONLY IN A TRANSACTION
WHICH DOES NOT REQUIRE SUCH REGISTRATION OR QUALIFICATION AND IN ACCORDANCE WITH
THE PROVISIONS OF SECTION 4.02 OF THE POOLING AND SERVICING AGREEMENT REFERRED
TO HEREIN.
NO RESALE OR OTHER TRANSFER OF THIS CERTIFICATE SHALL BE MADE UNLESS
THE TRUSTEE SHALL HAVE RECEIVED A REPRESENTATION LETTER FROM THE TRANSFEREE OF
THIS CERTIFICATE TO THE EFFECT THAT SUCH TRANSFEREE WILL NOT ACQUIRE THIS
CERTIFICATE WITH THE ASSETS OF ANY (A) EMPLOYEE BENEFIT PLANS (AS DEFINED IN
SECTION 3(3) OF ERISA) SUBJECT TO THE PROVISIONS OF TITLE I OF ERISA, (B) PLANS
DESCRIBED IN SECTION 4975(E)(1) OF THE CODE, INCLUDING INDIVIDUAL RETIREMENT
ACCOUNTS OR KEOGH PLANS, OR (C) ANY ENTITIES WHOSE UNDERLYING ASSETS INCLUDE
ASSETS OF A PLAN DESCRIBED IN (A) OR (B) ABOVE BY REASON OF SUCH A PLAN'S
INVESTMENT IN SUCH ENTITIES.
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
"RESIDUAL INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT" AS THOSE
TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 86G AND 860D OF THE INTERNAL
REVENUE CODE. THIS CERTIFICATE MAY ONLY BE TRANSFERRED TO A PERMITTED
TRANSFEREE (AS DEFINED IN THE POOLING AND SERVICING AGREEMENT REFERRED TO
HEREIN); ANY SUCH TRANSFER MUST ALSO SATISFY THE OTHER REQUIREMENTS OF SECTION
4.02 OF SUCH POOLING AND SERVICING AGREEMENT.
Class RL No. 1
(Subordinate)
Cut-off Date: Percentage Interest: 100%
December 1, 1996
First Remittance Date: Maturity Date:
January 28, 1997 February 26, 2018
PREFERRED MORTGAGE ASSET-BACKED
CERTIFICATE SERIES 1996-2, CLASS RL INTEREST
--------------------------------------------
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR AN INTEREST IN
THE DEPOSITOR, THE SELLER, THE SERVICER, THE TRUSTEE OR ANY OF THEIR RESPECTIVE
AFFILIATES THEREOF, EXCEPT TO THE EXTENT SET FORTH IN THE POOLING AND SERVICING
AGREEMENT.
<PAGE>
This certifies that Preferred Mortgage SPC Funding Corp. is the
registered owner of the Residual Interest represented by this Certificate, and
entitled to certain distributions out of the Trust Fund (as defined below)
relating to the Preferred Mortgage Asset-Backed Certificates, Series 1996-2,
which consists of (a) such Mortgage Loans as from time to time are subject to
the Pooling and Servicing Agreement (as defined below), together with the
Mortgage Files relating thereto and all collections thereon and proceeds thereof
on and after the Cut-Off Date (other than Monthly Payments due on each Mortgage
Loan up to and including any Due Date prior to the Cut-Off Date), (b) such
assets as from time to time are identified as REO Property and collections
thereon and proceeds thereof, (c) amounts (including Permitted Investments as
may be held from time to time, except as otherwise provided in the Pooling and
Servicing Agreement) on deposit in each Account, (d) the Trustee's rights with
respect to the Mortgage Loans under the Certificate Insurance Policy and all
insurance policies required to be maintained pursuant to the Pooling and
Servicing Agreement and any Insurance Proceeds, (e) Liquidation Proceeds, (f)
Released Mortgaged Property Proceeds, (g) amounts (including Permitted
Investments as may be held from time to time) on deposit in the Capitalized
Interest Account and the Pre-Funding Account, (h) all of the income, payments
and proceeds of each of the foregoing, except to the extent provided in the
Pooling and Servicing Agreement and (i) the rights and remedies of the Trustee
against any representation or warranty made to the Trustee hereby (the "Trust
Fund"). The Trust Fund has been created pursuant to a Pooling and Servicing
Agreement (the "Pooling and Servicing Agreement"), dated as of December 1, 1996,
-------------------------------
among CS First Boston Mortgage Securities Corp., as depositor (the "Depositor"),
---------
T.A.R. Preferred Mortgage Corp., as seller (the "Seller"), Advanta Mortgage
------
Corp. USA, as servicer (the "Servicer"), and Bankers Trust Company, as trustee
--------
(the "Trustee"). This Class RL Certificate is one of the Class RL Certificates
-------
described in the Pooling and Servicing Agreement and is issued pursuant and
subject to the Pooling and Servicing Agreement. By acceptance of this Class RL
Certificate the holder assents to and becomes bound by the Pooling and Servicing
Agreement. To the extent not defined herein, all capitalized terms have the
meanings assigned to such terms in the Pooling and Servicing Agreement.
The Pooling and Servicing Agreement contemplates, subject to its
terms, payment on the twenty-fifth day (or if such day is not a Business Day,
the next succeeding Business Day) (the "Remittance Date") of each calendar month
---------------
commencing in January 1997, so long as the Agreement has not been terminated, by
check to the registered Class RL Certificateholder at the address appearing on
the Certificate Register as of the Business Day immediately preceding such
Remittance Date, in an amount equal to the Percentage Interest
2
<PAGE>
specified above in all amounts available to be distributed with respect to the
Class RL Certificates on such Remittance Date. Pursuant to the Pooling and
Servicing Agreement, only miscellaneous amounts may be so distributed.
The Class RL Certificateholder, by its acceptance of this Certificate,
agrees that it will look solely to the funds in the Certificate Account to the
extent available for distribution to the Class RL Certificateholder as provided
in the Pooling and Servicing Agreement for payment hereunder and that the
Trustee in its individual capacity is not personally liable to the Class RL
Certificateholder for any amounts payable under this Certificate or the Pooling
and Servicing Agreement or, except as expressly provided in the Pooling and
Servicing Agreement, subject to any liability under the Pooling and Servicing
Agreement. By acceptance of this Certificate, the Certificateholder agrees to
disclosure of his, her or its name and address to other Certificateholders under
the conditions specified in the Pooling and Servicing Agreement.
No transfer of this Class RL Certificate or any interest therein shall
be made to any (a) employee benefit plans (as defined in Section 3(3) of ERISA)
subject to the provisions of Title I of ERISA, (b) plans described in section
4975(e)(1) of the Code, including individual retirement accounts or Keogh plans,
(c) any entities whose underlying assets include assets of a plan described in
(a) or (b) above by reason of such a plan's investment in such entities (each a
"Plan"). The Certificateholder, by its acceptance of this Certificate,
represents and warrants it is not a Plan.
The Trustee is required to duly and punctually pay distributions with
respect to this Certificate in accordance with the terms hereof and the Pooling
and Servicing Agreement. Amounts properly withheld under the Code or applicable
to any Certificateholder shall be considered as having been paid by the Trustee
to such Certificateholder for all purposes of the Pooling and Servicing
Agreement.
The Mortgage Loans will be serviced by the Servicer pursuant to the
Pooling and Servicing Agreement. The Pooling and Servicing Agreement permits
the Servicer to enter into Sub-Servicing Agreements with certain institutions
eligible for appointment as Sub-Servicers for the servicing and administration
of certain Mortgage Loans. No appointment of any Sub-Servicer shall release the
Servicer from any of its obligations under the Pooling and Servicing Agreement.
This Certificate does not represent a deposit or other obligation of,
or an interest in, nor are the underlying Mortgage Loans insured or guaranteed
by, the Depositor, the Seller, the Servicer, the Trustee or any of their
subsidiaries
3
<PAGE>
and affiliates and are not insured or guaranteed by the Federal Deposit
Insurance Corporation, the Government National Mortgage Association, or any
other governmental agency. This Certificate is limited in right of payment to
certain collections and recoveries relating to the Mortgage Loans and amounts on
deposit in the Accounts (except as otherwise provided in the Pooling and
Servicing Agreement), all as more specifically set forth hereinabove and in the
Pooling and Servicing Agreement.
No Certificateholder shall have any right to institute any proceeding,
judicial or otherwise, with respect to the Pooling and Servicing Agreement, or
for the appointment of a receiver or trustee, or for any other remedy under the
Pooling and Servicing Agreement except in compliance with the terms hereof.
Notwithstanding any other provisions in the Pooling and Servicing
Agreement, the Certificateholder of any Certificate shall have the right which
is absolute and unconditional to receive distributions to the extent provided in
the Pooling and Servicing Agreement 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 Certificateholder.
Subject to the terms of the Pooling and Servicing Agreement, the
Pooling and Servicing Agreement provides that the obligations created thereby
will terminate upon notice to the Trustee and the Certificate Insurer of either:
(i) the later of the distribution to Certificateholders of the final payment or
collection with respect to the last Mortgage Loan (or Delinquency Interest
Advances of same by the Servicer), or the disposition of all funds with respect
to the last Mortgage Loan and the remittance of all funds due under the Pooling
and Servicing Agreement and the payment of all amounts due and payable to the
Certificate Insurer and the Trustee or (ii) mutual consent of the Servicer, the
Certificate Insurer and all Certificateholders in writing.
The Pooling and Servicing Agreement additionally provides that the
holder of a 50.01% Percentage Interest or greater of the Class RL Certificates
or the Servicer (or the Certificate Insurer, if the Servicer fails to exercise
such option) may, at its option and at its sole cost and expense, terminate the
Pooling and Servicing Agreement on any date on which the related Pool Principal
Balance is less than 10% of the Maximum Collateral Amount (if the holders of the
Class RL Certificates exercise this option) or is less than 5% of the Maximum
Collateral Amount (if the Servicer or the Certificate Insurer exercises this
option), of the Original Pool Principal Balance by purchasing, on the next
succeeding Remittance Date, all of the outstanding Mortgage Loans and REO
Properties at a
4
<PAGE>
price equal to the sum of (i) the greater of (x) 100% of the Principal Balance
of each Outstanding Mortgage Loan and each REO Property and (y) the fair market
value (disregarding accrued interest) of the Mortgage Loans and REO Properties,
determined as the average of three written bids (copies of which are to be
delivered to the Trustee and the Certificate Insurer by the Servicer and the
reasonable cost of which may be deducted from the final purchase price provided
such deduction shall not result in a draw on the Certificate Insurance Policy)
made by nationally recognized dealers acceptable to the Certificate Insurer and
based on a valuation process which would be used to value comparable mortgage
loans and REO property, (ii) the greater of (x) the aggregate amount of accrued
and unpaid interest on the Mortgage Loans through the related Collection Period
and (y) 30 days' accrued interest thereon at a rate equal to the Mortgage
Interest Rate, (iii) and in the event the Holders of the Class RL Certificates
or the Certificate Insurer exercises such option, plus any accrued and unpaid
Servicing Fees or in the event the Servicer exercises such option, net of the
Servicing Fee, and (iv) any unreimbursed amounts due to the Certificate Insurer
under the Pooling and Servicing Agreement or under the Insurance Agreement (the
"Termination Price"). Any such purchase shall be accomplished by deposit into
the related Certificate Account of the Termination Price. No such termination
is permitted without the prior written consent of the Certificate Insurer (i) if
it would result in a draw on the Certificate Insurance Policy or (ii) unless the
Servicer shall have delivered to the Certificate Insurer an opinion of counsel
reasonably satisfactory to the Certificate Insurer stating that no amounts paid
hereunder are subject to recapture as preferential transfers under the United
States Bankruptcy Code, 11 U.S.C. (S)(S) 101 et seq., as amended.
-- ---
The Trustee shall give written notice of termination of the Pooling
and Servicing Agreement to each Certificateholder in the manner set forth
therein.
The Certificateholders of a majority of the Percentage Interests
represented by the Class A Certificates, upon compliance with the requirements
set forth in the Pooling and Servicing Agreement, have the right, with the
consent of the Certificate Insurer, to exercise any trust or power set forth in
the Pooling and Servicing Agreement with respect to the Certificates or the
Trust Fund.
As provided in the Pooling and Servicing Agreement and subject to
certain limitations therein set forth and referred to on the face hereof, the
transfer of this Certificate is registrable in the Register upon surrender of
this Certificate for registration of transfer at the office designated as the
location of the Register, and thereupon one or more new Certificates of like
Class, tenor and a like
5
<PAGE>
Percentage Interest will be issued to the designated transferee or transferees.
The Trustee is required to furnish certain information on each
Remittance Date to the Holder of this Certificate, as more fully described in
the Pooling and Servicing Agreement.
The Class RL Certificates are issuable only as registered Certificates
in a minimum Percentage Interest of 10% and integral multiples of 0.01% in
excess thereof. As provided in the Pooling and Servicing Agreement and subject
to certain limitations therein set forth, Class RL Certificates are exchangeable
for new Class RL Certificates of authorized denominations evidencing the same
aggregate principal amount.
The Trustee and any agent of the Trustee may treat the Person in whose
name this Certificate is registered as the owner hereof for all purposes, and
neither the Trustee or any such agent shall be affected by notice to the
contrary.
This Class RL Certificate does not purport to summarize the Pooling
and Servicing Agreement and reference is made to the Pooling and Servicing
Agreement for information with respect to the interests, rights, benefits,
obligations, proceeds and duties evidenced hereby and the rights, duties and
immunities of the Trustee.
As provided in the Pooling and Servicing Agreement and subject to the
limitations set forth therein, the transfer of this Class RL Certificate is
registrable in the Certificate Register of the Trustee upon surrender of this
Class RL Certificate for registration of transfer at the office or agency
maintained by the Trustee in New York, New York, accompanied by a written
instrument of transfer in form satisfactory to the Trustee duly executed by the
holder thereof or his or her attorney duly authorized in writing, and thereupon
one or more new Class RL Certificates evidencing the same aggregate amount of
Class RL Certificates will be issued to the designated transferee or
transferees.
As provided in the Pooling and Servicing Agreement and subject to
certain limitations therein set forth, this Class RL Certificate is exchangeable
for new Class RL Certificates of authorized denominations evidencing the same
aggregate Percentage Interest as requested by the holder surrendering the same.
The Depositor, the Servicer, the Seller and the Trustee and any agent
of any of them may treat the person in whose name this Class RL Certificate is
registered as the owner hereof for all purposes, and none of them nor any such
agent shall be affected by any notice to the contrary.
6
<PAGE>
The holder of this Class RL Certificate, by acceptance hereof, agrees
that, in accordance with the requirements of Section 860D(b)(1) of the Code, the
federal tax return of the Lower-Tier REMIC held by the Trust Fund for its first
taxable year shall provide that the Lower-Tier REMIC held by the Trust Fund
elects to be treated as a "real estate mortgage investment conduit" (a "REMIC")
-----
under the Code for such taxable year and all subsequent taxable years. The
Class RL Certificates shall be the "residual interest" in the REMIC. In
addition, the holder of this Class RL Certificate, by acceptance hereof, (i)
agrees to file tax returns consistent with and in accordance with any elections,
decisions or other reports made or filed with regard to federal, state or local
taxes on behalf of the Trust Fund, and (ii) agrees to cooperate with the
Depositor in connection with examinations of the Trust Fund's affairs by tax
authorities, including administrative and judicial proceedings, and (iii) makes
the additional agreements, designations and appointments, and undertakes the
responsibilities, set forth in Section 4.02 and Article 10 of the Pooling and
Servicing Agreement.
7
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed by the manual signature of a duly authorized officer of the Trustee.
Dated: December 17, 1996
BANKERS TRUST COMPANY,
as Trustee
By:_________________________________
Name:
Title:
Trustee Authentication
BANKERS TRUST COMPANY,
as Trustee
By:____________________
Name:
Title:
8
<PAGE>
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto _______________________________ the within Preferred Mortgage
Asset-Backed Certificate, Series 1996-2 and does hereby irrevocably constitute
and appoint ______________________________ Attorney to transfer the said
certificate on the Certificate Register maintained by the Trustee, with full
power of substitution in the premises.
Dated:
By:____________________________
Signature
9
<PAGE>
EXHIBIT B-10
FORM OF CLASS RU CERTIFICATE
----------------------------
THIS CERTIFICATE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR THE SECURITIES LAW OF
--------
ANY STATE. ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CERTIFICATE
WITHOUT SUCH REGISTRATION OR QUALIFICATION MAY BE MADE ONLY IN A TRANSACTION
WHICH DOES NOT REQUIRE SUCH REGISTRATION OR QUALIFICATION AND IN ACCORDANCE WITH
THE PROVISIONS OF SECTION 4.02 OF THE POOLING AND SERVICING AGREEMENT REFERRED
TO HEREIN.
NO RESALE OR OTHER TRANSFER OF THIS CERTIFICATE SHALL BE MADE UNLESS
THE TRUSTEE SHALL HAVE RECEIVED A REPRESENTATION LETTER FROM THE TRANSFEREE OF
THIS CERTIFICATE TO THE EFFECT THAT SUCH TRANSFEREE WILL NOT ACQUIRE THIS
CERTIFICATE WITH THE ASSETS OF ANY (A) EMPLOYEE BENEFITS PLANS (AS DEFINED IN
SECTION 3(3) OF ERISA) SUBJECT TO THE PROVISIONS OF TITLE I OF ERISA, (B) PLANS
DESCRIBED IN SECTION 4975(E)(1) OF THE CODE, INCLUDING INDIVIDUAL RETIREMENT
ACCOUNTS OR KEOGH PLANS, OR (C) ANY ENTITIES WHOSE UNDERLYING ASSETS INCLUDE
ASSETS OF A PLAN DESCRIBED IN (A) OR (B) ABOVE BY REASON OF SUCH A PLAN'S
INVESTMENT IN SUCH ENTITIES.
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
"RESIDUAL INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT" AS THOSE
TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL
REVENUE CODE. THIS CERTIFICATE MAY ONLY BE TRANSFERRED TO A PERMITTED
TRANSFEREE (AS DEFINED IN THE POOLING AND SERVICING AGREEMENT REFERRED TO
HEREIN); ANY SUCH TRANSFER MUST ALSO SATISFY THE OTHER REQUIREMENTS OF SECTION
4.02 OF SUCH POOLING AND SERVICING AGREEMENT.
Class RU No. 1
(Subordinate)
Cut-off Date: Percentage Interest: 100%
December 1, 1996
First Remittance Date: Maturity Date:
January 28, 1997 February 26, 2018
PREFERRED MORTGAGE ASSET-BACKED
CERTIFICATE SERIES 1996-2, CLASS RU INTEREST
--------------------------------------------
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR AN INTEREST IN
THE DEPOSITOR, THE SELLER, THE SERVICER, THE TRUSTEE OR ANY OF THEIR RESPECTIVE
AFFILIATES THEREOF, EXCEPT TO THE EXTENT SET FORTH IN THE POOLING AND SERVICING
AGREEMENT.
1
<PAGE>
This certifies that Preferred Mortgage SPC Funding Corp. is the
registered owner of the Residual Interest represented by this Certificate, and
entitled to certain distributions out of the Trust Fund (as defined below)
relating to the Preferred Mortgage Asset-Backed Certificates, Series 1996-2,
which consists of (a) such Mortgage Loans as from time to time are subject to
the Pooling and Servicing Agreement (as defined below), together with the
Mortgage Files relating thereto and all collections thereon and proceeds thereof
on and after the Cut-Off Date (other than Monthly Payments due on each Mortgage
Loan up to and including any Due Date prior to the Cut-Off Date), (b) such
assets as from time to time are identified as REO Property and collections
thereon and proceeds thereof, (c) amounts (including Permitted Investments as
may be held from time to time, except as otherwise provided in the Pooling and
Servicing Agreement) on deposit in each Account, (d) the Trustee's rights with
respect to the Mortgage Loans under the Certificate Insurance Policy and all
insurance policies required to be maintained pursuant to the Pooling and
Servicing Agreement and any Insurance Proceeds, (e) Liquidation Proceeds, (f)
Released Mortgaged Property Proceeds, (g) amounts (including Permitted
Investments as may be held from time to time) on deposit in the Capitalized
Interest Account and the Pre-Funding Account, (h) all of the income, payments
and proceeds of each of the foregoing, except to the extent provided in the
Pooling and Servicing Agreement and (i) the rights and remedies of the Trustee
against any representation or warranty made to the Trustee hereby (the "Trust
-----
Fund"). The Trust Fund has been created pursuant to a Pooling and Servicing
- ----
Agreement (the "Pooling and Servicing Agreement"), dated as of December 1, 1996,
-------------------------------
among CS First Boston Mortgage Securities Corp., as depositor (the "Depositor"),
---------
T.A.R. Preferred Mortgage Corp., as seller (the "Seller"), Advanta Mortgage
------
Corp. USA, as servicer (the "Servicer"), and Bankers Trust Company, as trustee
--------
(the "Trustee"). This Class RU Certificate is one of the Class RU Certificates
-------
described in the Pooling and Servicing Agreement and is issued pursuant and
subject to the Pooling and Servicing Agreement. By acceptance of this Class RU
Certificate the holder assents to and becomes bound by the Pooling and Servicing
Agreement. To the extent not defined herein, all capitalized terms have the
meanings assigned to such terms in the Pooling and Servicing Agreement.
The Pooling and Servicing Agreement contemplates, subject to its
terms, payment on the twenty-fifth day (or if such day is not a Business Day,
the next succeeding Business Day) (the "Remittance Date") of each calendar month
---------------
commencing in January 1997, so long as the Pooling and Servicing Agreement has
not been terminated, by check to the registered Class RU Certificateholder at
the address appearing on the Certificate Register as of the Business Day
immediately preceding such Remittance Date, in an amount equal to the
<PAGE>
Percentage Interest specified above in all amounts available to be distributed
with respect to the Class RU Certificates on such Remittance Date. Pursuant to
the Pooling and Servicing Agreement, only miscellaneous amounts may be so
distributed.
The Class RU Certificateholder, by its acceptance of this Certificate,
agrees that it will look solely to the funds in the Certificate Account to the
extent available for distribution to the Class RU Certificateholder as provided
in the Pooling and Servicing Agreement for payment hereunder and that the
Trustee in its individual capacity is not personally liable to the Class RU
Certificateholder for any amounts payable under this Certificate or the Pooling
and Servicing Agreement or, except as expressly provided in the Pooling and
Servicing Agreement, subject to any liability under the Pooling and Servicing
Agreement. By acceptance of this Certificate, the Certificateholder agrees to
disclosure of his, her or its name and address to other Certificateholders under
the conditions specified in the Pooling and Servicing Agreement.
No transfer of this Class RU Certificate, or any interest therein
shall be made to any (a) employee benefit plans (as defined in Section 3(3) of
ERISA) subject to the provisions of Title I of ERISA, (b) plans described in
Section 4975(e)(1) of the Code, including individual retirement accounts or
Keogh plans, (c) any entities whose underlying assets include assets of a plan
described in (a) or (b) above by reason of such a plan's investment in such
entities (each a "Plan"). The Certificateholder, by its acceptance of this
----
Certificate, represents and warrants it is not a Plan.
The Trustee is required to duly and punctually pay distributions with
respect to this Certificate in accordance with the terms hereof and the Pooling
and Servicing Agreement. Amounts properly withheld under the Code or applicable
to any Certificateholder shall be considered as having been paid by the Trustee
to such Certificateholder for all purposes of the Pooling and Servicing
Agreement.
The Mortgage Loans will be serviced by the Servicer pursuant to the
Pooling and Servicing Agreement. The Pooling and Servicing Agreement permits
the Servicer to enter into Sub-Servicing Agreements with certain institutions
eligible for appointment as Sub-Servicers for the servicing and administration
of certain Mortgage Loans. No appointment of any Sub-Servicer shall release the
Servicer from any of its obligations under the Pooling and Servicing Agreement.
This Certificate does not represent a deposit or other obligation of,
or an interest in, nor are the underlying Mortgage Loans insured or guaranteed
by, the Depositor, the Seller, the Servicer, the Trustee or any of their
subsidiaries
3
<PAGE>
and affiliates and are not insured or guaranteed by the Federal Deposit
Insurance Corporation, the Government National Mortgage Association, or other
governmental agency. This Certificate is limited in right of payment to certain
collections and recoveries relating to the Mortgage Loans and amounts on deposit
in the Accounts (except as otherwise provided in the Pooling and Servicing
Agreement), all as more specifically set forth hereinabove and in the Pooling
and Servicing Agreement.
No Certificateholder shall have any right to institute any proceeding,
judicial or otherwise, with respect to the Pooling and Servicing Agreement, or
for the appointment of a receiver or trustee, or for any other remedy under the
Pooling and Servicing Agreement except in the compliance with the terms hereof.
Notwithstanding any other provisions in the Pooling and Servicing
Agreement, the Certificateholder of any Certificate shall have the right which
is absolute and unconditional to receive distributions to the extent provided in
the Pooling and Servicing Agreement 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 Certificateholder.
Subject to the terms of the Pooling and Servicing Agreement, the
Pooling and Servicing Agreement provides that the obligations created thereby
will terminate upon notice to the Trustee and the Certificate Insurer of either:
(i) the later of the distribution to Certificateholders of the final payment or
collection with respect to the last Mortgage Loan (or Delinquency Interest
Advances of same by the Servicer), or the disposition of all funds with respect
to the last Mortgage Loan and the remittance of all funds due under the Pooling
and Servicing Agreement and the payment of all amounts due and payable to the
Certificate Insurer and the Trustee or (ii) mutual consent of the Servicer, the
Certificate Insurer and all Certificateholders in writing.
The Pooling and Servicing Agreement additionally provides that the
holder of a 50.01% Percentage Interest of greater of the Class RL Certificates
of the Servicer (or the Certificate Insurer, if the Servicer fails to exercise
such option) may, at its option and at is sole cost and expense, terminate the
Pooling and Servicing Agreement on any date on which the related Pool Principal
Balance is less than 10% of the Maximum Collateral Amount (if the holders of the
Class RL Certificates exercise this option) or is less than 5% of the Maximum
Collateral Amount (if the Servicer or the Certificate Insurer exercises this
option), of the Original Pool Principal Balance by purchasing, on the next
succeeding Remittance Date, all of the outstanding Mortgage Loans and REO
Properties at a
4
<PAGE>
price equal to the sum of (i) the greater of (x) 100% of the Principal Balance
of each Outstanding Mortgage Loan and each REO Property and (y) the fair market
value (disregarding accrued interest) of the Mortgage Loans and REO Properties,
determined as the average of three written bids (copies of which are to be
delivered to the Trustee and the Certificate Insurer by the Servicer and the
reasonable cost of which may be deducted from the final purchase price provided
such deduction shall not result in a draw on the Certificate Insurance Policy)
made by nationally recognized dealers acceptable to the Certificate Insurer and
based on a valuation process which would be used to value comparable mortgage
loans and REO property, (ii) the greater of (x) aggregate amounts of accrued and
unpaid interest on the Mortgage Loans through the related Collection Period and
(y) 30 days' accrued interest thereon at a rate equal to the Mortgage Interest
Rate, (iii) and in the event the Holders of the Class RL Certificates or the
Certificate Insurer exercises such option, plus any accrued and unpaid Servicing
Fees or in the event the Servicer exercises such option, net of the Servicing
Fee, and (iv) any unreimbursed amounts due to the Certificate Insurer under the
Pooling and Servicing Agreement or under the Insurance Agreement (the
"Termination Price"). Any such purchase shall be accomplished by deposit into
- ------------------
the related Certificate Account of the Termination Price. No such termination
is permitted without the prior written consent of the Certificate Insurer (i) if
it would result in a draw on the Certificate Insurance Policy or (ii) unless the
Servicer shall have delivered to the Certificate Insurer stating that no amounts
paid hereunder are subject to recapture as preferential transfers under the
United States Bankruptcy Code, 11 U.S.C. (S)(S) 101 et seq., as amended.
-- ---
The Trustee shall give written notice of termination of the Pooling
and Servicing Agreement to each Certificateholder in the manner set forth
therein.
The Certificateholders of a majority of the percentage Interests
represented by the Class A Certificates, upon compliance with the requirements
set forth in the Pooling and Servicing Agreement, have the right, with the
consent of the Certificate Insurer, to exercise any trust or power set forth in
the Pooling and Servicing Agreement with respect to the Certificates or the
Trust Fund.
As provided in the Pooling and Servicing Agreement and subject to
certain limitations therein set forth and referred to on the face hereof, the
transfer of this Certificate is registrable in the Register upon surrender of
this Certificate for registration of transfer at the office designated as the
location of the Register, and thereupon one or more new Certificates of like
Class, tenor and a like
5
<PAGE>
Percentage Interest will be issued to the designated transferee or transferees.
The Trustee is required to furnish certain information on each
Remittance Date to the Holder of this Certificate, as more fully described in
the Pooling and Servicing Agreement.
The Class RU Certificates are made issuable only as registered
Certificates in a minimum Percentage Interest of 10% and integral multiples of
0.01% in excess thereof. As provided in the Pooling and Servicing Agreement and
subject to certain limitations therein set forth, the Class RU Certificates are
exchangeable for new Class RU Certificates of authorized denominations
evidencing the same aggregate principal amount.
The Trustee and any agent of the Trustee may treat the Person in whose
name this Certificate is registered as the owner hereof for all purposes, and
neither the Trustee or any such agent shall be affected by notice to the
contrary.
This Class RU Certificate does not purport to summarize the Pooling
and Servicing Agreement and reference is made to the Pooling and Servicing
Agreement for information with respect to the interests, rights, benefits,
obligations, proceeds and duties evidenced hereby and the rights, duties and
immunities of the Trustee.
As provided in the Pooling and Servicing Agreement and subject to the
limitations set forth therein, the transfer of this Class RU Certificate is
registrable in the Certificate Register of the Trustee upon surrender of this
Class RU Certificate for registration of transfer at the office or agency
maintained by the Trustee in New York, New York, accompanied by a written
instrument of transfer in form satisfactory to the Trustee duly executed by the
holder thereof or his or her attorney duly authorized in writing, and thereupon
one or more new Class RU Certificates evidencing the same aggregate amount of
Class RU Certificates will be issued to the designated transferee or
transferees.
As provided in the Pooling and Servicing Agreement and subject to
certain limitations therein set forth, this Class RU Certificate is exchangeable
for new Class RU Certificates of authorized denominations evidencing the same
aggregate Percentage Interest as requested by the holder surrendering the same.
The Depositor, the Servicer, the Seller and the Trustee and any agent
of any of them may treat the person in whose name this Class RU Certificate is
registered as the
6
<PAGE>
owner hereof for all purposes, and none of them nor any such agent shall be
affected by any notice to the contrary.
The holder of this Class RU Certificate, by acceptance hereof, agrees
that, in accordance with the requirements of Section 860D(b)(1) of the Code, the
federal tax return of the Upper-Tier REMIC held by the Trust Fund for its first
taxable year shall provide that the Upper-Tier REMIC held by the Trust Fund
elects to be treated as a "real estate mortgage investment conduit" (a "REMIC")
-----
under the Code for such taxable year and all subsequent taxable years. The
Class RU Certificates shall be the "residual interest" in the REMIC. In
addition, the holder of this Class RU Certificate, by acceptance hereof, (i)
agrees to file tax returns consistent with and in accordance with any elections,
decisions or other reports made or filed with regard to federal, state or local
taxes on behalf of the Trust Fund, and (ii) agrees to cooperate with the
Depositor in connection with examinations of the Trust Fund's affairs by tax
authorities, including administrative and judicial proceedings, and (iii) makes
the additional agreements, designations and appointments, and undertakes the
responsibilities, set forth in Section 4.02 and Article 10 of the Pooling and
Servicing Agreement.
7
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed by the manual signature of a duly authorized officer of the Trustee.
Dated: December 17, 1996
BANKERS TRUST COMPANY, as Trustee
By:_____________________________________
Name:
Title:
Trustee Authentication
BANKERS TRUST COMPANY,
as Trustee
By:___________________
Name:
Title:
8
<PAGE>
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto _______________________________ the within Preferred Mortgage
Asset-Backed Certificate, Series 1996-2 and does hereby irrevocably constitute
and appoint ______________________________ Attorney to transfer the said
certificate on the Certificate Register maintained by the Trustee, with full
power of substitution in the premises.
Dated:
By:___________________________
Signature
9
<PAGE>
EXHIBIT C
MORTGAGE LOAN SCHEDULE
----------------------
<PAGE>
EXHIBIT D
TRUSTEE'S ACKNOWLEDGMENT OF RECEIPT
-----------------------------------
[Date]
CS First Boston Mortgage Securities Corp.
Park Avenue Plaza
55 East 52nd Street
New York, New York 10055
T.A.R. Preferred Mortgage Corporation
19782 MacArthur, Suite 260
Irvine, California 92715
Advanta Mortgage Corp. USA
16875 West Bernardo Drive
San Diego, California 92127
MBIA Insurance Corporation
113 King Street
Armonk, New York 10564
Re: Pooling and Servicing Agreement, dated as of December 1, 1996,
among CS First Boston Mortgage Securities Corp., as Depositor,
T.A.R. Preferred Mortgage Corporation, as Seller, Advanta
Mortgage Corp. USA, as Servicer, and Bankers Trust Company, as
Trustee, Preferred Mortgage Asset-Backed Certificates, Series
1996-2.
Ladies and Gentlemen:
In accordance with Section 2.4 of the above-captioned Pooling and
Servicing Agreement, the undersigned, as Trustee, hereby certifies: (1) except
as noted on the attachment hereto, if any (the "Loan Exception Report"), it has
received the original Mortgage Note (item (i) in Section 2.3(a)) with respect to
each Mortgage Loan listed in the Mortgage Loan Schedule and each Mortgage Note
appears to bear original signatures, and (2) it has received the Certificate
Insurance Policy.
The Trustee has made no independent examination of any such documents
beyond the review specifically required in the above-referenced Pooling and
Servicing Agreement. The Trustee makes no representations or warranties as to:
(i) the validity, legality, sufficiency, enforceability or genuineness of any
such documents or any of the Mortgage Loans identified on the Mortgage Loan
Schedule, or (ii) the collectability,
<PAGE>
insurability, effectiveness or suitability of any such Mortgage Loan.
Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the above-captioned Pooling and Servicing
Agreement.
BANKERS TRUST COMPANY, as
Trustee
By:_______________________________
Name:_____________________________
Title:____________________________
2
<PAGE>
EXHIBIT E
INITIAL CERTIFICATION OF TRUSTEE
--------------------------------
December 17, 1996
CS First Boston Mortgage Securities Corp.
Park Avenue Plaza
55 East 52nd Street
New York, New York 10055
T.A.R. Preferred Mortgage Corporation
19782 MacArthur, Suite 260
Irvine, California 92715
Advanta Mortgage Corp. USA
16875 West Bernardo Drive
San Diego, California 92127
MBIA Insurance Corporation
113 King Street
Armonk, New York 10564
Re: Pooling and Servicing Agreement, dated as of December 1, 1996
among CS First Boston Mortgage Securities Corp., as Depositor,
T.A.R. Preferred Mortgage Corporation, as Seller, Advanta
Mortgage Corp. USA, as Servicer, and Bankers Trust Company, as
Trustee, Preferred Mortgage Asset-Backed Certificates, Series
1996-2.
Ladies and Gentlemen:
In accordance with the provisions of Section 2.4 of the above-
referenced Pooling and Servicing Agreement, the undersigned, as Trustee, hereby
certifies that as to each Mortgage Loan Listed in the Mortgage Loan Schedule
(other than any Mortgage Loan paid in full or any Mortgage Loan listed on the
attachment hereto), it has reviewed the documents delivered to it pursuant to
Section 2.3 of the Pooling and Servicing Agreement and has determined that (i)
all Mortgages Notes required to be delivered to it pursuant to the above-
referenced Pooling and Servicing Agreement are in its possession and (ii) such
Mortgage Notes have been reviewed by it and appear regular on their face and
have not been mutilated, damaged, torn or otherwise physically altered and
relate to such Mortgage Loan. The Trustee has made no independent examination
of such documents beyond the review specifically required in the above-
referenced Pooling and Servicing Agreement. The Trustee makes no
representations or
<PAGE>
warranties as to: (i) the validity, legality, enforceability or genuineness of
any such documents contained in each or any of the Mortgage Loans identified on
the Mortgage Loan Schedule, or (ii) the collectability, insurability,
effectiveness or suitability of any such Mortgage Loan.
Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the above-captioned Pooling and Servicing
Agreement.
BANKERS TRUST COMPANY, as Trustee
By:______________________________
Name:
Title:
2
<PAGE>
EXHIBIT F
FINAL CERTIFICATION OF THE TRUSTEE
----------------------------------
________, 19__
CS First Boston Mortgage Securities Corp.
Park Avenue Plaza
55 East 52nd Street
New York, New York 10055
T.A.R. Preferred Mortgage Corporation
19782 MacArthur, Suite 260
Irvine, California 92715
Advanta Mortgage Corp. USA
16875 West Bernardo Drive
San Diego, California 92127
MBIA Insurance Corporation
113 King Street
Armonk, New York 10564
Re: Pooling and Servicing Agreement, dated as of December 1, 1996
among CS First Boston Mortgage Securities Corp., as Depositor,
T.A.R. Preferred Mortgage Corporation, as Seller, Advanta
Mortgage Corp. USA, as Servicer, and Bankers Trust Company, as
Trustee, Preferred Mortgage Asset-Backed Certificates, Series
1996-2.
Ladies and Gentlemen:
In accordance with Section 2.4 of the above-captioned Pooling and
Servicing Agreement, the undersigned, as Trustee, hereby certifies that, except
as noted on the attachment hereto, as to each Mortgage Loan Listed in the
Mortgage Loan Schedule (other than any Mortgage Loan paid in full or listed on
the attachment hereto) it has reviewed the documents delivered to it pursuant to
Section 2.3 of the Pooling and Servicing Agreement and has determined that (i)
all documents required to be delivered to it pursuant to the above-referenced
Pooling and Servicing Agreement are in its possession and (ii) such documents
have been reviewed by it and appear regular on their face and have not been
mutilated, damaged, torn or otherwise physically altered and relate to such
Mortgage Loan. The Trustee has made no independent examination of such
documents beyond the review specifically required in the above-referenced
Pooling and Servicing Agreement. The Trustee makes no representations or
warranties
<PAGE>
as to: (i) the validity, legality, enforceability or genuineness of any such
documents contained in each or any of the Mortgage Loans identified on the
Mortgage Loan Schedule, or (ii) the collectability, insurability, effectiveness
or suitability of any such Mortgage Loan.
Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the above-captioned Pooling and Servicing
Agreement.
BANKERS TRUST COMPANY,
as Trustee
By:_______________________________
Name:_____________________________
Title:____________________________
2
<PAGE>
EXHIBIT G
REQUEST FOR RELEASE OF DOCUMENTS
--------------------------------
________, 19__
To: Bankers Trust Company
Four Albany Street
New York, New York 10006
Re: CS First Boston Mortgage Securities Corp.,
Preferred Mortgage Asset-Backed Certificates, Series 1996-2
In connection with the administration of the pool of Mortgage Loans
held by you as Trustee for the Certificateholders, we request the release, and
acknowledge receipt, of the Trustee's Mortgage File/[specify document]) for the
Mortgage Loan described below, for the reason indicated.
Mortgagor's Name, Address & Zip Code:
- ------------------------------------
Mortgage Loan Number:
- --------------------
Reason for Requesting Documents (check one)
- -------------------------------
________ (1) Mortgage Loan Paid in Full (Servicer hereby certifies that all
amounts received in connection therewith have been credited to
the Collection Account.)
________ (2) Mortgage Loan Liquidated (Servicer hereby certifies that all
proceeds of foreclosure, insurance or other liquidation have been
finally received and credited to the Collection Account.)
________ (3) Mortgage Loan in Foreclosure
________ (4) Mortgage Loan Repurchased or Substituted pursuant to Article II
or III of the Pooling and Servicing Agreement (Servicer hereby
certifies that the repurchase price or Substitution Adjustment
has been credited to the Certificate Account and that the
<PAGE>
substituted mortgage loan is a Qualified Substitute Mortgage
Loan.)
________ (5) Other
(explain)___________________________________________________
If box 1 or 2 above is checked, and if all or part of the Trustee's
Mortgage File was previously released to us, please release to us our previous
receipt on file with you, as well as any additional documents in your possession
relating to the above specified Mortgage Loan.
If box 3, 4, or 5 above is checked, upon our return of all of the
above documents to you as Trustee, please acknowledge your receipt by signing in
the space indicated below, and returning this form.
[Servicer]
By:_________________________________________
Name:_______________________________________
Title:______________________________________
Documents returned to Trustee:
BANKERS TRUST COMPANY,
- ----------------------
as Trustee
By:___________________
Date:______________________
2
<PAGE>
EXHIBIT H
FORM OF INVESTOR REPRESENTATION LETTER
--------------------------------------
[Date]
Bankers Trust Company
Four Albany Street
New York, New York 10006
Re: Preferred Mortgage Asset-Backed
Certificates, Series 1996-2
------------------------------------
Ladies and Gentlemen:
_________________ (the "Purchaser") intends to purchase from
___________ (the "Seller"), a _____% Percentage Interest of Preferred Mortgage
Asset-Backed Series 1996-2, Class __ (the "Certificates"), issued pursuant to
the Pooling and Servicing Agreement (the "Pooling and Servicing Agreement"),
dated as of December 1, 1996 among CS First Boston Mortgage Securities Corp., as
depositor (the "Depositor"), T.A.R. Preferred Mortgage Corporation, as seller
(the "Seller"), Advanta Mortgage Corp. USA, as servicer (the "Servicer"), and
Bankers Trust Company, as trustee (the "Trustee"). All terms used herein and
not otherwise defined shall have the meanings set forth in the Pooling and
Servicing Agreement. The Purchaser hereby certifies, represents and warrants
to, and covenants with, the Depositor and the Trustee that:
1. The Purchaser understands that (a) the Certificates have not been
and will not be registered or qualified under the Securities Act of 1933, as
amended (the "Act") or any state securities law, (b) the Depositor is not
required to so register or qualify the Certificates, (c) the Certificates may be
resold only if registered and qualified pursuant to the provisions of the Act or
any state securities law, or if an exemption from such registration and
qualification is available, (d) the Pooling and Servicing Agreement contains
restrictions regarding the transfer of the Certificates and (e) the Certificates
will bear a legend to the foregoing effect.
2. The Purchaser is acquiring the Certificates for its own account for
investment only and not with a view to or for sale in connection with any
distribution thereof in any manner that would violate the Act or any applicable
state securities laws.
<PAGE>
3. The Purchaser is (a) a substantial, sophisticated institutional
investor having such knowledge and experience in financial and business matters,
and, in particular, in such matters related to securities similar to the
Certificates, such that it is capable of evaluating the merits and risks of
investment in the Certificates, (b) able to bear the economic risks of such an
investment and (c) an "accredited investor" within the meaning of Rule 501(a)
promulgated pursuant to the Act.
4. The Purchaser has been furnished with, and has had an opportunity
to review a copy of the Pooling and Servicing Agreement and such other
information concerning the Certificates, the Mortgage Loans and the Depositor as
has been requested by the Purchaser from the Depositor or the Seller and is
relevant to the Purchaser's decision to purchase the Certificates. The
Purchaser has had any questions arising from such review answered by the
Depositor or the Seller to the satisfaction of the Purchaser. If the Purchaser
did not purchase the Certificates from the Seller in connection with the initial
distribution of the Certificates and was provided with a copy of the Private
Placement Memorandum (the "Memorandum") relating to the original sale (the
"Original Sale") of the Certificates by the Depositor, the Purchaser
acknowledges that such Memorandum was provided to it by the Seller, that the
Memorandum was prepared by the Depositor solely for use in connection with the
Original Sale and the Depositor did not participate in or facilitate in any way
the purchase of the Certificates by the Purchaser from the Seller, and the
Purchaser agrees that it will look solely to the Seller and not to the Depositor
with respect to any damage, liability, claim or expense arising out of,
resulting from or in connection with (a) error or omission, or alleged error or
omission, contained in the Memorandum, or (b) any information, development or
event arising after the date of the Memorandum.
5. The Purchaser has not and will not nor has it authorized or will it
authorize any person to (a) offer, pledge, sell, dispose of or otherwise
transfer any Certificate, any interest in any Certificate or any other similar
security to any person in any manner, (b) solicit any offer to buy or to accept
a pledge, disposition of other transfer of any Certificate, any interest in any
Certificate or any other similar security from any person in any manner, (c)
otherwise approach or negotiate with respect to any Certificate, any interest in
any Certificate or any other similar security with any person in any manner, (d)
make any general solicitation by means of general advertising or in any other
manner or (e) take any other action, that (as to any of (a) through (e) above)
would constitute a distribution of any Certificate under the Act, that would
render the disposition of any Certificate a violation of Section 5 of the Act or
any state securities law, or that would require registration or
2
<PAGE>
qualification pursuant thereto. The Purchaser will not sell or otherwise
transfer any of the Certificates, except in compliance with the provisions of
the Pooling and Servicing Agreement.
Very truly yours,
_______________________________________
By:____________________________________
Name:__________________________________
Title:_________________________________
3
<PAGE>
EXHIBIT I
FORM OF TRANSFEROR REPRESENTATION LETTER
----------------------------------------
[Date]
Bankers Trust Company
Four Albany Street
New York, New York 10006
Re: Preferred Mortgage Asset-Backed
Certificates, Series 1996-2
------------------------------------
Ladies and Gentlemen:
In connection with the sale by ______________ (the "Seller") to
_____________ (the "Purchaser") of $________ initial certificate principal
balance of Preferred Mortgage Asset-Backed Certificates, Series 1996-2, Class __
(the "Certificates"), issued pursuant to the Pooling and Servicing Agreement
(the "Pooling and Servicing Agreement"), dated as of December 1, 1996 among CS
First Boston Mortgage Securities Corp., as depositor (the "Depositor"), T.A.R.
Preferred Mortgage Corporation, as seller, Advanta Mortgage Corp. USA, as
servicer, and Bankers Trust Company, as trustee (the "Trustee"). The Seller
hereby certifies, represents and warrants to, and covenants with, the Depositor
and the Trustee that:
Neither the Seller nor anyone acting on its behalf has (a) offered,
pledged, sold, disposed of or otherwise transferred any Certificate, any
interest in any Certificate or any other similar security to any person in any
manner, (b) has solicited any offer to buy or to accept a pledge, disposition or
other transfer of any Certificate, any interest in any Certificate or any other
similar security from any person in any manner, (c) has otherwise approached or
negotiated with respect to any Certificate, any interest in any Certificate or
any other similar security with any person in any manner, (d) has made any
general solicitation by means of general advertising or in any other manner, or
(e) has taken any other action, that (as to any of (a) through (e) above) would
constitute a distribution of the Certificates under the Securities Act of 1933
(the "Act"), that would render the disposition of any Certificate a violation of
1
<PAGE>
Section 5 of the Act or any state securities law, or that would require
registration or qualification pursuant thereto. The Seller will not act in any
manner set forth in the foregoing sentence with respect to any Certificate. The
Seller has not and will not sell or otherwise transfer any of the Certificates,
except in compliance with the provisions of the Pooling and Servicing Agreement.
Very truly yours,
_______________________________________
(Seller)
By:____________________________________
Name:__________________________________
Title:_________________________________
2
<PAGE>
EXHIBIT J
FORM OF RULE 144A INVESTMENT REPRESENTATION
-------------------------------------------
Description of Rule 144A Securities, including numbers:
Preferred Mortgage Asset-Backed Certificates
Series 1996-2, Class ___, No. ___
The undersigned seller, as registered holder (the "Transferor"), intends to
transfer the Rule 144A Securities described above to the undersigned buyer (the
"Buyer").
1. In connection with such transfer and in accordance with the
agreements pursuant to which the Rule 144A Securities were issued, the
Transferor hereby certifies the following facts: Neither the Transferor nor
anyone acting on its behalf has offered, transferred, pledged, sold or otherwise
disposed of the Rule 144A Securities, any interest in the Rule 144A Securities
or any other similar security to, or solicited any offer to buy or accept a
transfer, pledge or other disposition of the Rule 144A Securities, or otherwise
approached or negotiated with respect to the Rule 144A Securities, any interest
in the Rule 144A Securities or any other similar security with, any person in
any manner, or made any general solicitation by means of general advertising or
in any other manner, or taken any other action, which would constitute a
distribution of the Rule 144A Securities under the Securities Act of 1933, as
amended (the "1933 Act"), or which would render the disposition of the Rule 144A
Securities a violation of Section 5 of the 1933 Act or require registration
pursuant thereto, and that the Transferor has not offered the Rule 144A
Securities to any person other than the Buyer or another "qualified
institutional buyer" as defined in Rule 144A under the 1933 Act.
2. The Buyer warrants and represents to, and covenants with, the
Transferor, the Trustee and the Servicer pursuant to Section 4.02 of the Pooling
and Servicing Agreement as follows:
a. The Buyer understands that the Rule 144A Securities have not
been registered under the 1933 Act or the securities laws of any state.
b. The Buyer considers itself a substantial, sophisticated
institutional investor having such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks of
investment in the Rule 144A Securities.
<PAGE>
c. The Buyer has been furnished with all information regarding the
Rule 144A Securities that it has requested from the Transferor, the Trustee
or the Servicer.
d. Neither the Buyer nor anyone acting on its behalf has offered,
transferred, pledged, sold or otherwise disposed of the Rule 144A
Securities, any interest in the Rule 144A Securities or any other similar
security to, or solicited any offer to buy or accept a transfer, pledge or
other disposition of the Rule 144A Securities, any interest in the Rule 144A
Securities or any other similar security from, or otherwise approached or
negotiated with respect to the Rule 144A Securities, any interest in the
Rule 144A Securities or any other similar security with, any person in any
manner, or made any general solicitation by means of general advertising or
in any other manner, or taken any other action, that would constitute a
distribution of the Rule 144A Securities under the 1933 Act or that would
render the disposition of the Rule 144A Securities a violation of Section 5
of the 1933 Act or require registration pursuant thereto, nor will it act,
nor has it authorized or will it authorize any person to act, in such manner
with respect to the Rule 144A Securities.
e. The Buyer is a "qualified institutional buyer" as that term is
defined in Rule 144A under the 1933 Act and has completed either of the
forms of certification to that effect attached hereto as Annex 1 or Annex 2.
The Buyer is aware that the sale to it is being made in reliance on Rule
144A. The Buyer is acquiring the Rule 144A Securities for its own account
or the account of other qualified institutional buyers, understands that
such Rule 144A Securities may be resold, pledged or transferred only (i) to
a person reasonably believed to be a qualified institutional buyer that
purchases for its own account or for the account of a qualified
institutional buyer to whom notice is given that the resale, pledge or
transfer is being made in reliance on Rule 144A, or (ii) pursuant to another
exemption from registration under the 1933 Act.
4. This document may be executed in one or more counterparts and by
the different parties hereto on separate counterparts, each of which, when so
executed, shall be deemed to be an original; such counterparts, together, shall
constitute one and the same document.
2
<PAGE>
IN WITNESS WHEREOF, each of the parties has executed this document as
of the date set forth below.
- ----------------------------------- --------------------------------------
Print Name of Transferor Print Name of Buyer
By: By:
------------------------------- ----------------------------------
Name: Name:
Title: Title:
Taxpayer Identification: Taxpayer Identification:
No. No.
------------------------------- ----------------------------------
Date: Date:
------------------------------- ----------------------------------
3
<PAGE>
ANNEX 1 TO EXHIBIT J
--------------------
QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
--------------------------------------------------------
[For Buyers Other Than Registered Investment Companies]
The undersigned hereby certifies as follows in connection with the Rule 144A
Investment Representation to which this Certification is attached:
1. As indicated below, the undersigned is the President, Chief Financial
Officer, Senior Vice President or other executive officer of the Buyer.
2. In connection with purchases by the Buyer, the Buyer is a "qualified
institutional buyer" as that term is defined in Rule 144A under the Securities
Act of 1933 ("Rule 144A") because (i) the Buyer owned and/or invested on a
discretionary basis $_______________/1/ in securities (except for the excluded
securities referred to below) as of the end of the Buyer's most recent fiscal
year (such amount being calculated in accordance with Rule 144A) and (ii) the
Buyer satisfies the criteria in the category marked below.
_____ Corporation, etc. The Buyer is a corporation (other than a bank,
----------------
savings and loan association or similar institution), Massachusetts or
similar business trust, partnership, or charitable organization
described in Section 501(c)(3) of the Internal Revenue Code.
_____ Bank. The Buyer (a) is a national bank or banking institution
-----
organized under the laws of any State, territory or the District of
Columbia, the business of which is substantially confined to banking
and is supervised by the State or territorial banking commission or
similar official or is a foreign bank or equivalent institution, and
(b) has an audited net worth of at least $25,000,000 as demonstrated
in its latest annual financial statements.
_____ Savings and Loan. The Buyer (a) is a savings and loan
----------------
association, building and loan association, cooperative bank,
homestead association or similar institution, which is supervised and
examined by a State or Federal authority having supervision over
___________________________
/1/ Buyer must own and/or invest on a discretionary basis at least
$100,000,000 in securities unless Buyer is a dealer, and, in that case, Buyer
must own and/or invest on a discretionary basis at least $10,000,000 in
securities.
<PAGE>
any such institutions or is a foreign savings and loan association or
equivalent institution and (b) has an audited net worth of at least
$25,000,000 as demonstrated in its latest annual financial statements.
_____ Broker-dealer. The Buyer is a dealer registered pursuant to
-------------
Section 15 of the Securities Exchange Act of 1934.
_____ Insurance Company. The Buyer is an insurance company whose
-----------------
primary and predominant business activity is the writing of insurance
or the reinsuring of risks underwritten by insurance companies and
which is subject to supervision by the insurance commissioner or a
similar official or agency of a State, territory or the District of
Columbia.
_____ State or Local Plan. The Buyer is a plan established and
-------------------
maintained by a State, its political subdivisions, or any agency or
instrumentality of the State or its political subdivisions, for the
benefit of its employees.
_____ ERISA Plan. The Buyer is an employee benefit plan within the
----------
meaning of Title I of the Employee Retirement Income Security Act of
1974.
_____ Investment Adviser. The Buyer is an investment adviser registered
----- ------------
under the Investment Advisers Act of 1940.
_____ SBIC. The Buyer is a Small Business Investment Company licensed
-----
by the U.S. Small Business Administration under Section 301(c) or (d)
of the Small Business Investment Act of 1958.
_____ Business Development Company. The Buyer is a business development
----------------------------
company as defined in Section 202(a)(22) of the Investment Advisers
Act of 1940.
_____ Trust Fund. The Buyer is a trust fund whose trustee is a bank or
----------
trust company and whose participants are exclusively (a) plans
established and maintained by a State, its political subdivisions, or
any agency or instrumentality of the State or its political
subdivisions, for the benefit of its employees, or (b) employee
benefit plans within the meaning of Title I of the Employee Retirement
Income Security Act of 1974, but is not a trust fund that includes as
participants individual retirement accounts or H.R. 10 plans.
2
<PAGE>
3. The term "securities" as used herein does not include (i) securities of
---------- ----------------
issuers that are affiliated with the Buyer, (ii) securities that are part of an
unsold allotment to or subscription by the Buyer, if the Buyer is a dealer,
(iii) bank deposit notes and certificates of deposit, (iv) loan participations,
(v) repurchase agreements, (vi) securities owned but subject to a repurchase
agreement and (vii) currency, interest rate and commodity swaps.
4. For purposes of determining the aggregate amount of securities owned
and/or invested on a discretionary basis by the Buyer, the Buyer used the cost
of such securities to the Buyer and did not include any of the securities
referred to in the preceding paragraph. Further, in determining such aggregate
amount, the Buyer may have included securities owned by subsidiaries of the
Buyer, but only if such subsidiaries are consolidated with the Buyer in its
financial statements prepared in accordance with generally accepted accounting
principles and if the investments of such subsidiaries are managed under the
Buyer's direction. However, such securities were not included if the Buyer is a
majority-owned, consolidated subsidiary of another enterprise and the Buyer is
not itself a reporting company under the Securities Exchange Act of 1934.
5. The Buyer acknowledges that it is familiar with Rule 144A and understands
that the seller to it and other parties related to the Certificates are relying
and will continue to rely on the statements made herein because one or more
sales to the Buyer may be in reliance on Rule 144A.
_____ _____ Will the Buyer be
purchasing the
ule 144A
Yes No Securities only for the Buyer's own account?
6. If the answer to the foregoing question is "no", the Buyer agrees that,
in connection with any purchase of securities sold to the Buyer for the account
of a third party (including any separate account) in reliance on Rule 144A, the
Buyer will only purchase for the account of a third party that at the time is a
"qualified institutional buyer" within the meaning of Rule 144A. In addition,
the Buyer agrees that the Buyer will not purchase securities for a third party
unless the Buyer has obtained a current representation letter from such third
party or taken other appropriate steps contemplated by Rule 144A to conclude
that such third party independently meets the definition of "qualified
institutional buyer" set forth in Rule 144A.
7. The Buyer will notify each of the parties to which this certification is
made of any changes in the information and conclusions herein. Until such
notice is given, the
3
<PAGE>
Buyer's purchase of Rule 144A Securities will constitute a reaffirmation of this
certification as of the date of such purchase.
____________________________________
Print Name of Buyer
By:_________________________________
Name:
Title:
Date:_______________________________
4
<PAGE>
ANNEX 2 TO EXHIBIT J
--------------------
QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
--------------------------------------------------------
[For Buyers That Are Registered Investment Companies]
The undersigned hereby certifies as follows in connection with the Rule 144A
Investment Representation to which this Certification is attached:
1. As indicated below, the undersigned is the President, Chief Financial
Officer or Senior Vice President of the Buyer or, if the Buyer is a "qualified
institutional buyer" as that term is defined in Rule 144A under the Securities
Act of 1933 ("Rule 144A") because Buyer is part of a Family of Investment
Companies (as defined below), is such an officer of the Adviser.
2. In connection with purchases by Buyer, the Buyer is a "qualified
institutional buyer" as defined in SEC Rule 144A because (i) the Buyer is an
investment company registered under the Investment Company Act of 1940, and (ii)
as marked below, the Buyer alone, or the Buyer's Family of Investment Companies,
owned at least $100,000,000 in securities (other than the excluded securities
referred to below) as of the end of the Buyer's most recent fiscal year. For
purposes of determining the amount of securities owned by the Buyer or the
Buyer's Family of Investment Companies, the cost of such securities was used.
_____ The Buyer owned $____________ in securities (other than the
excluded securities referred to below) as of the end of the Buyer's
most recent fiscal year (such amount being calculated in accordance
with Rule 144A).
_____ The Buyer is part of a Family of Investment Companies which owned
in the aggregate $____________ in securities (other than the excluded
securities referred to below) as of the end of the Buyer's most recent
fiscal year (such amount being calculated in accordance with Rule
144A).
3. The term "Family of Investment Companies" as used herein means two or
------------------------------
more registered investment companies (or series thereof) that have the same
investment adviser or investment advisers that are affiliated (by virtue of
being majority owned subsidiaries of the same parent or because one investment
adviser is a majority owned subsidiary of the other).
<PAGE>
4. The term "securities" as used herein does not include (i) securities of
----------
issuers that are affiliated with the Buyer or are part of the Buyer's Family of
Investment Companies, (ii) bank deposit notes and certificates of deposit, (iii)
loan participations, (iv) repurchase agreements, (v) securities owned but
subject to a repurchase agreement and (vi) currency, interest rate and commodity
swaps.
5. The Buyer is familiar with Rule 144A and understands that each of the
parties to which this certification is made are relying and will continue to
rely on the statements made herein because one or more sales to the Buyer will
be in reliance on Rule 144A. In addition, the Buyer will only purchase for the
Buyer's own account.
6. The undersigned will notify each of the parties to which this
certification is made of any changes in the information and conclusions herein.
Until such notice, the Buyer's purchase of Rule 144A Securities will constitute
a reaffirmation of this certification by the undersigned as of the date of such
purchase.
______________________________________
Print Name of Buyer
By:___________________________________
Name:_________________________________
Title:________________________________
IF AN ADVISER:
______________________________________
Print Name of Buyer
Date:_________________________________
2
<PAGE>
EXHIBIT K
FORM OF TRANSFER AFFIDAVIT AND AGREEMENT
----------------------------------------
STATE OF )
: ss.:
COUNTY OF )
[NAME OF OFFICER], being first duly sworn, deposes and says:
1. That he is [Title of Officer] of [Name of Owner] (record or
beneficial owner of the Preferred Mortgage Asset-Backed Certificates, Series
1996-2, Class [RU] [RL] (the "Owner")), a [savings institution] [corporation]
duly organized and existing under the laws of [the State of
____________________] [the United States], on behalf of which he makes this
affidavit and agreement.
2. That the Owner (i) is not and will not be a "disqualified
organization" as of [date of transfer] within the meaning of Section 860E(e)(5)
of the Internal Revenue Code of 1986, as amended (the "Code"), (ii) will
endeavor to remain other than a disqualified organization for so long as it
retains its ownership interest in the Class [RU] [RL] Certificates, and (iii) is
acquiring the Class [RU] [RL] Certificates for its own account or for the
account of another Owner from which it has received an affidavit and agreement
in substantially the same form as this affidavit and agreement. (For this
purpose, a "disqualified organization" means the United States, any state or
political subdivision thereof, any agency or instrumentality of any of the
foregoing (other than an instrumentality all of the activities of which are
subject to tax and, except for the Federal Home Loan Mortgage Corporation, a
majority of whose board of directors is not selected by any such governmental
entity) or any foreign government, international organization or any agency or
instrumentality of such foreign government or organization, any rural electric
or telephone cooperative, or any organization (other than certain farmers'
cooperatives) that is generally exempt from federal income tax unless such
organization is subject to the tax on unrelated business taxable income).
3. That the Owner is aware (i) of the tax that would be imposed on
transfers of Class [RU] [RL] Certificates to disqualified organizations under
the Code, that applies to all transfers of Class [RU] [RL] Certificates after
March 31, 1988; (ii) that such tax would be on the transferor, or, if such
transfer is through an agent (which person includes a broker, nominee or
middleman) for a disqualified organization, on the agent; (iii) that the person
otherwise liable for the
1
<PAGE>
tax shall be relieved of liability for the tax if the transferee furnishes to
such person an affidavit that the transferee is not a disqualified organization
and, at the time of transfer, such person does not have actual knowledge that
the affidavit is false; and (iv) that the Class [RU] [RL] Certificates may be
"noneconomic residual interests" within the meaning of Treasury regulations
promulgated pursuant to the Code and that the transferor of a noneconomic
residual interest will remain liable for any taxes due with respect to the
income on such residual interest, unless no significant purpose of the transfer
was to impede the assessment or collection of tax.
4. That the Owner is aware of the tax imposed on a "pass-through
entity" holding Class [RU] [RL] Certificates if at any time during the taxable
year of the pass-through entity a disqualified organization is the record holder
of an interest in such entity. (For this purpose, a "pass through entity"
includes a regulated investment company, a real estate investment trust or
common trust fund, a partnership, trust or estate, and certain cooperatives.)
5. That the Owner is aware that the Trustee will not register the
transfer of any Class [RU] [RL] Certificates unless the transferee, or the
transferee's agent, delivers to it an affidavit and agreement, among other
things, in substantially the same form as this affidavit and agreement. The
Owner expressly agrees that it will not consummate any such transfer if it knows
or believes that any of the representations contained in such affidavit and
agreement are false.
6. That the Owner has reviewed the restrictions set forth on the face
of the Class [RU] [RL] Certificates and the provisions of Section 4.02(f) of the
Pooling and Servicing Agreement under which the Class [RU] [RL] Certificates
were issued (in particular, clause (vii) and (viii) of Section 4.02(f) which
authorize the Trustee to deliver payments to a person other than the Owner and
negotiate a mandatory sale by the Trustee in the event the Owner holds such
Certificates in violation of Section 4.02(f)). The Owner expressly agrees to be
bound by and to comply with such restrictions and provisions.
7. That the Owner consents to any additional restrictions or
arrangements that shall be deemed necessary upon advice of counsel to constitute
a reasonable arrangement to ensure that the Class [RU] [RL] Certificates will
only be owned, directly or indirectly, by an Owner that is not a disqualified
organization.
8. The Owner's Taxpayer Identification Number is
_______________.
2
<PAGE>
9. This affidavit and agreement relates only to the Class [RU] [RL]
Certificates held by the Owner and not to any other holder of the Class [RU]
[RL] Certificates. The Owner understands that the liabilities described herein
relate only to the Class [RU] [RL] Certificates.
10. That no purpose of the Owner relating to the transfer of any of
the Class [RU] [RL] Certificates by the Owner is or will be to impede the
assessment or collection of any tax.
11. That the Owner has no present knowledge or expectation that it
will be unable to pay any United States taxes owed by it so long as any of the
Certificates remain outstanding. In this regard, the Owner hereby represents to
and for the benefit of the person from whom it acquired the Class [RU] [RL]
Certificate that the Owner intends to pay taxes associated with holding such
Class [RU] [RL] Certificate as they become due, fully understanding that it may
incur tax liabilities in excess of any cash flows generated by the Class [RU]
[RL] Certificate.
12. That the Owner has no present knowledge or expectation that it
will become insolvent or subject to a bankruptcy proceeding for so long as any
of the Class [RU] [RL] Certificates remain outstanding.
13. The Owner is a citizen or resident of the United States, a
corporation, partnership or other entity created or organized in, or under the
laws of, the United States or any political subdivision thereof, or an estate or
trust whose income from sources without the United States is includible in gross
income for United States federal income tax purposes regardless of its
connection with the conduct of a trade or business within the United States.
3
<PAGE>
IN WITNESS WHEREOF, the Owner has caused this instrument to be
executed on its behalf, pursuant to the authority of its Board of Directors, by
its [Title of Officer] and its corporate seal to be hereunto attached, attested
by its [Assistant] Secretary, this _____ day of
____________, 199_.
[NAME OF OWNER]
By:_________________________________
[Name of Officer]
[Title of Officer]
[Corporate Seal]
ATTEST:
__________________________
[Assistant] Secretary
Personally appeared before me the above-named [Name of Officer], known or
proved to me to be the same person who executed the foregoing instrument and to
be the [Title of Officer] of the Owner, and acknowledged to me that he executed
the same as his free act and deed and the free act and deed of the Owner.
Subscribed and sworn before me this day of _____________, 199_.
__________________________________________
NOTARY PUBLIC
COUNTY OF_________________________________
STATE OF__________________________________
My Commission expires the _____ day
of __________, 19_.
4
<PAGE>
EXHIBIT L
FORM OF TRANSFEROR CERTIFICATE
------------------------------
__________, 19__
CS First Boston Mortgage Securities Corp.
Park Avenue Plaza
55 East 52nd Street
New York, New York 10055
Bankers Trust Company
Four Albany Street
New York, New York 10006
Re: Preferred Mortgage Asset-Backed Certificates, Series 1996-2
Ladies and Gentlemen:
This letter is delivered to you in connection with the transfer by
______________________________ (the "Seller") to ______________________________
(the "Purchaser") of a _____% Percentage Interest of Preferred Mortgage Asset-
Backed Certificates, Series 1996-2, Class [RU] [RL] Certificates (a
"Certificate"), pursuant to Section 4.02 of the Pooling and Servicing Agreement
(the "Pooling and Servicing Agreement"), dated as of December 1, 1996, among CS
First Boston Mortgage Securities Corp., as depositor (the "Depositor"), T.A.R.
Preferred Mortgage Corporation, as seller, Advanta Mortgage Corp. USA, as
Servicer, and Bankers Trust Company, N.A., as trustee (the "Trustee"). All
terms used herein and not otherwise defined shall have the meanings set forth in
the Pooling and Servicing Agreement. The Seller hereby certifies, represents
and warrants to, and covenants with, the Depositor and the Trustee that:
1. No purpose of the Seller relating to the transfer of the
Certificates by the Seller to the Purchaser is or will be to impede the
assessment or collection of any tax.
2. The Seller understands that the Purchaser has delivered to the
Trustee and the Servicer a transfer affidavit and agreement in the form attached
to the Pooling and Servicing Agreement as Exhibit K. The Seller does not know
or believe that any representation contained therein is false.
3. The Seller has at the time of the transfer conducted a reasonable
investigation of the financial condition of the Purchaser as contemplated by
Treasury
1
<PAGE>
Regulations Section 1.860E-l(c)(4)(i) and, as a result of that investigation,
the Seller has determined that the Purchaser has historically paid its debts as
they become due and has found no significant evidence to indicate that the
Purchaser will not continue to pay its debts as they become due in the future.
The Seller understands that the transfer of a Class [RU] [RL] Certificate may
not be respected for United States income tax purposes (and the Seller may
continue to be liable for United States income taxes associated therewith)
unless the Seller has conducted such an investigation.
4. The Seller has no actual knowledge that the proposed Transferee
is not both a United States Person and a Permitted Transferee.
Very truly yours,
________________________________________
(Seller)
By:_____________________________________
Name:___________________________________
Title:__________________________________
2
<PAGE>
EXHIBIT M-1
The Purchaser represents that it is not (i) an employee benefit plan
(as defined in section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")) subject to the provisions of Title I of ERISA, (ii)
a plan described in section 4975(e)(1) of the Internal Revenue Code of 1986, or
(iii) an entity whose underlying assets are deemed to be assets of a plan
described in (i) or (ii) above by reason of such plan's investment in the
entity.
___________________________________
Print Name of Purchaser
By:________________________________
Name:
Title:
Taxpayer Identification:
No.________________________________
Date: ____________________________
1
<PAGE>
EXHIBIT M-2
The Purchaser represents that either (a) it is not (i) an employee
benefit plan (as defined in section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")) subject to the provisions of Title I
of ERISA, (ii) a plan described in section 4975(e)(1) of the Internal Revenue
Code of 1986, or (iii) an entity whose underlying assets are deemed to be assets
of a plan described in (i) or (ii) above by reason of such plan's investment in
the entity (any such entity described in clauses (i) through (iii), a "Plan")
/1/ or (b) it is an insurance company general account and, pursuant to Section I
of Prohibited Transaction Class Exemption 95-60 ("PTCE 95-60"), the acquisition
and holding of the Class A Certificates and, pursuant to Section III of PTCE 95-
60, the servicing, management and operation of the Trust are with respect to
such Purchaser exempt from the "prohibited transaction" provisions of ERISA and
the Code or (c) if the Purchaser is a Plan the following:
(i) the Purchaser is not a Plan with respect to an employee benefit
plan sponsored by any member of the Restricted Group (as defined in the Private
Placement Memorandum);
(ii) either (A) the person who has discretionary authority or renders
investment advice to the Purchaser with respect to the investment of plan assets
in the Class A Certificates is not an Obligor (or an affiliate) with respect to
the Receivables (as defined in the Private Placement Memorandum), or (B) the
person who has such discretionary authority or renders such investment advice is
an Obligor (or an affiliate) with respect to less than 5 percent of the
Receivables; and, immediately after the acquisition of the Class A Certificates,
no more than 25 percent of the assets of the Purchaser are invested in
certificates representing an interest in a trust containing assets sold or
serviced by the same entity ; and
_____________________________
/1/ Do not include option (c) for transfers of Class A Certificates
that occur at any time during which the Certificates being transferred are not
rated in one of the top three rating categories of any rating agency that
satisfies the requirements of Prohibited Transaction Exemption 90-32 and that
(a) is rating the Certificates as of the date hereof and (b) has been requested
by the issuer of the Certificates to rate the Certificates.
1
<PAGE>
(iii) the Purchaser is an "accredited investor" as defined in Rule
501(a) of Regulation D pursuant to the 1933 Act.
___________________________________
Print Name of Purchaser
By: ______________________________
Name:
Title:
Taxpayer Identification:
No. ______________________________
Date: ____________________________
2
<PAGE>
EXHIBIT N
CERTIFICATE RE: PREPAID LOANS
------------------------------
I, Todd A. Rodriguez, President of T.A.R. Preferred Mortgage
Corporation, as Seller, hereby certify that between the "Cut-Off Date" (as
defined in the Pooling and Servicing Agreement dated as of December 1, 1996
among CS First Boston Mortgage Securities Corp., T.A.R. Preferred Mortgage
Corporation, Advanta Mortgage Corp. USA and Bankers Trust Company, as trustee)
and the "Startup Day", the following schedule of "Mortgage Loans" (each as
defined in the Pooling and Servicing Agreement) have been prepaid in full.
Dated: December 17, 1996
By:________________________________
Name: Todd A. Rodriguez
Title: President
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<PAGE>
EXHIBIT O
ADDITION NOTICE
---------------
___________, 1997
Bankers Trust Company
Four Albany Street
New York, New York 10006
Re: Pooling and Servicing Agreement, dated as of December 1, 1996, among
CS First Boston Mortgage Securities Corp., as depositor (the
"Depositor"), T.A.R. Preferred Mortgage Corporation, as seller (the
"Seller"), Advanta Mortgage Corp. USA, as servicer (the "Servicer")
and Bankers Trust Company, as trustee (the "Trustee"), relating to
Preferred Mortgage Asset-Backed Certificates, Series 1996-2
Ladies and Gentlemen:
Pursuant to Section 2.09 of the above-captioned Pooling and Servicing
Agreement, the Depositor has designated Subsequent Mortgage Loans to be sold to
the Trust Fund on ________, 1997, with an aggregate principal balance of
$________. Capitalized terms not otherwise defined herein have the meaning set
forth in the Pooling and Servicing Agreement.
Please acknowledge your receipt of this notice by countersigning the
enclosed copy in the space indicated below and returning it to the attention of
the undersigned.
Very truly yours,
PREFERRED MORTGAGE SPC FUNDING CORP.
By:_________________________________
Name:
Title:
ACKNOWLEDGED AND AGREED:
BANKERS TRUST COMPANY
By:_______________
Name:_____________
Title:____________
Date:_____________
<PAGE>
SUBSEQUENT TRANSFER INSTRUMENT
Pursuant to this Subsequent Transfer Instrument (the "Instrument"), dated
________, 1997, among T.A.R. Preferred Mortgage Corporation, as seller (the
"Seller"), CS First Boston Mortgage Securities Corp., as depositor (the
"Depositor") and Bankers Trust Company, as Trustee (the "Trustee") of the
Preferred Mortgage Asset-Backed Certificates, Series 1996-2, as purchaser (the
"Purchaser"), and pursuant to the Pooling and Servicing Agreement, dated as of
December 1, 1996, among the Depositor, the Seller, Advanta Mortgage Corp. USA,
as Servicer, and the Trustee (the "Pooling and Servicing Agreement"), the
Seller, the Depositor and the Purchaser agree to the sale by the seller to the
Depositor and to the sale by the Depositor and the purchase by the Purchaser of
the Mortgage Loans listed on the attached Schedule of Mortgage Loans (the
"Subsequent Mortgage Loans").
Capitalized terms used and not defined herein have their respective
meanings as set forth in the Pooling and Servicing Agreement.
Section 1. Conveyance of Subsequent Mortgage Loans.
---------------------------------------
(a) The Seller does hereby sell, transfer, assign, set over and convey to
the Depositor, without recourse, all of its right, title and interest in and to
the Subsequent Mortgage Loans, and including all principal received and interest
accruing on the Subsequent Mortgage Loans on and after the related Subsequent
Cut-Off Date, and all items with respect to the Subsequent Mortgage Loans to be
delivered pursuant to Section 2.3 of the Pooling and Servicing Agreement;
provided, however, that the Seller reserves and retains all right, title and
- -------- -------
interest in and to principal (including Prepayments and Curtailments) received
and interest accruing on the Subsequent Mortgage prior to the related
Subsequent Cut-Off Date. The Seller, contemporaneously with the delivery of the
Agreement, has delivered or caused to be delivered to the Depositor each item
set forth in Section 2.3 of the Pooling and Servicing Agreement. The transfer
to the Depositor by the Seller of the Subsequent Mortgage Loans identified on
the Mortgage Loan Schedule shall be absolute and is intended by the Seller,
Depositor, the Servicer, the Trustee and the Certificateholders to constitute
and to be treated as a sale by the Seller.
(b) The Depositor does hereby sell, transfer, assign, set over and convey
to the Purchaser, without recourse, all of its right, title and interest in and
to the Subsequent Mortgage Loans, and including all principal received and
interest accruing on the Subsequent Mortgage Loans on and after the related
Subsequent Cut-Off Date, and all items with respect to the Subsequent Mortgage
Loans to be delivered pursuant to Section 2.3 of the Pooling and
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Servicing Agreement; provided, however, that the Depositor reserves and retains
-------- -------
all right, title and interest in and to principal (including Prepayments and
Curtailments) received and interest accruing on the Subsequent Mortgage Loans
prior to the related Subsequent Cut-off Date. The Depositor, contemporaneously
with the delivery of this Agreement, has delivered or caused to be delivered to
the Trustee each item set forth in Section 2.3 of the Pooling and Servicing
Agreement. The transfer to the Trustee by the Depositor of the Subsequent
Mortgage Loans identified on the Mortgage Loan Schedule shall be absolute and is
intended by the Depositor, the Servicer, the Trustee and the Certificateholders
to constitute and to be treated as a sale by the Depositor.
(c) The expenses and costs relating to the delivery of the Subsequent
Mortgage Loans, this Instrument and the Pooling and Servicing Agreement shall be
borne by the Depositor.
(d) Additional terms of the sale are set forth on Attachment A hereto.
Section 2. Representations and Warranties; Conditions Precedent.
----------------------------------------------------
(a) The Seller hereby affirms the representations and warranties set
forth in Section 3.3 of the Pooling and Servicing Agreement that relate to the
Subsequent Mortgage Loans as of the date hereof. The Seller hereby affirms that
each of the conditions set forth in Section 2.9(b) of the Pooling and Servicing
Agreement are satisfied as of the date hereby.
(b) The Depositor hereby affirms the representations and warranties set
forth in Section 3.3 of the Pooling and Servicing Agreement that relate to the
Subsequent Mortgage Loans as of the date hereof. The Depositor hereby confirms
that each of the conditions set forth in Section 2.9(b) of the Pooling and
Servicing Agreement are satisfied as of the date hereof.
(c) All terms and conditions of the Pooling and Servicing Agreement are
hereby ratified and confirmed; provided, however, that in the event of any
-------- -------
conflict the provisions of this Instrument shall control over the conflicting
provisions of the Pooling and Servicing Agreement.
Section 3. Recordation of Instrument.
-------------------------
To the extent permitted by applicable law, this Instrument, or a
memorandum thereof if permitted under applicable law, is subject to recordation
in all appropriate public offices for real property records in all of the
counties or other comparable jurisdictions in which any or all of the properties
subject to the Mortgages are situated, and in any other appropriate public
recording office or elsewhere, such recordation to be
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<PAGE>
effected by the Servicer at the Certificateholders' expense on direction of the
Majority Certificateholders, but only when accompanied by an Opinion of Counsel
to the effect that such recordation materially and beneficially affects the
interests of the Certificateholders or is necessary for the administration or
servicing of the Mortgage Loans.
Section 4. Governing Law.
-------------
This Instrument shall be construed in accordance with the laws of the
State of New York and the obligations, rights and remedies of the parties
hereunder shall be determined in accordance with such laws, without giving
effect to principles of conflicts of law.
Section 5. Counterparts.
------------
This Instrument may be executed in one or more counterparts and by the
different parties hereto on separate counterparts, each of which, when so
executed, shall be deemed to be an original; such counterparts, together, shall
constitute one and the same instrument.
Section 6. Successors and Assigns.
----------------------
This Instrument shall inure to the benefit of and be binding upon the
Depositor and the Purchaser and their respective successors and assigns.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this agreement to be
duly executed by their respective officers, all as of the day and year first
above written.
T.A.R. PREFERRED
MORTGAGE CORPORATION
By:_______________________________________
Name:_____________________________________
Title:____________________________________
CS FIRST BOSTON MORTGAGE SECURITIES CORP.
By:_______________________________________
Name:_____________________________________
Title:____________________________________
PREFERRED MORTGAGE ASSET-BACKED CERTIFICATES,
SERIES 1996-2
By: BANKERS TRUST COMPANY,
as Trustee
By:_______________________________________
Name:_____________________________________
Title:____________________________________
Attachments
- -----------
A. Additional terms of the sale.
B. Schedule of Subsequent Mortgage Loans.
C. Opinions of Seller's counsel (bankruptcy, corporate).
D. Seller's Officer's Certificate.
E. Opinions of Depositor's counsel (bankruptcy, corporate)
F. Depositor's Officer's Certificate.
G. Trustee's Certificate
H. Opinion of Trustee's Counsel.
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<PAGE>
PREFERRED MORTGAGE ASSET-BACKED
CERTIFICATES, SERIES 1996-2
ATTACHMENT A TO SUBSEQUENT TRANSFER INSTRUMENT
Series 1996-2
________, 199_
A.
1. Subsequent Cut-off Date:
2. Pricing Date:
3. Subsequent Transfer Date:
4. Aggregate Principal Balance of the Subsequent Mortgage Loans as of the
Subsequent Cut-off Date:
5. Purchase Price: 96.5%
B.
As to all the Subsequent Mortgage Loans the subject of this Instrument:
6
<PAGE>
Exhibit 10.1
EXECUTION COPY
================================================================================
MBIA INSURANCE CORPORATION,
as Insurer
T.A.R. PREFERRED MORTGAGE CORPORATION,
as the Company
and
CS FIRST BOSTON CORPORATION ,
as Underwriter
INDEMNIFICATION AGREEMENT
$280,000,000
PREFERRED MORTGAGE ASSET BACKED CERTIFICATES,
SERIES 1996-2, CLASS A-1, A-2, A-3, A-4, A-5, and A-6 CERTIFICATES
Dated as of December 9, 1996
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
Section 1. Definitions........................................................1
Section 2. Representations and Warranties of the Insurer......................2
Section 3. Agreements, Representations and Warranties of the Underwriter......3
Section 4. Agreements, Representations and Warranties of the Company..........4
Section 5. Indemnification....................................................5
Section 6. Insurer Undertaking................................................5
Section 7. Notice To Be Given Insurer.........................................5
Section 8. Notice To Be Given to the Underwriter..............................7
Section 9. Notice To Be Given the Company.....................................8
Section 10. Contribution.......................................................9
Section 11. Notices...........................................................10
Section 12. Governing Law, Etc................................................10
Section 13. Insurance Agreement; Underwriting Agreement; Pooling and
Servicing Agreement...............................................10
Section 14. Limitations.......................................................11
Section 15. Counterparts......................................................11
TESTIMONIUM.......................................................SIGNATURE PAGE
SIGNATURES AND SEALS..............................................SIGNATURE PAGE
<PAGE>
INDEMNIFICATION AGREEMENT
This Agreement, dated as of December 9, 1996, is by and among MBIA
Insurance Corporation (the "Insurer"), as the Insurer under the Certificate
Guaranty Insurance Policy (the "Policy") issued in connection with the Offered
Certificates described below, T.A.R. Preferred Mortgage Corporation (the
"Company") and CS First Boston Corporation (the "Underwriter").
Section 1. DEFINITIONS. As used in this Agreement, the following terms
shall have the respective meanings stated herein, unless the context clearly
requires otherwise, in both singular and plural form, as appropriate.
Capitalized terms used in this Agreement but not otherwise defined herein will
have the meanings ascribed to such terms in the Pooling and Servicing Agreement
(as described below).
"Act" means the Securities Act of 1933, as amended, together with all
related rules and regulations.
"Agreement" means this Indemnification Agreement by and among the Insurer,
the , the Company and the Underwriter.
"Company Party" means the Company, each of its parents, subsidiaries and
affiliates and any shareholder, director, officer, employee, agent or any
"controlling person" (as such term is used in the Act) of any of the foregoing.
"Indemnified Party" means any party entitled to any indemnification
pursuant to Section 5 below, as the context requires.
"Indemnifying Party" means any party required to provide indemnification
pursuant to Section 5 below, as the context requires.
"Insurance Agreement" means the Insurance Agreement, dated as of December
1, 1996, by and among the Insurer, the Servicer, the Company, the Depositor and
the Trustee.
"Insurer Party" means the Insurer and its respective parents, subsidiaries
and affiliates and any shareholder, director, officer, employee, agent or any
"controlling person" (as such term is used in the Act) of any of the foregoing.
"Losses" means (i) any actual out-of-pocket loss paid by the party entitled
to indemnification or contribution hereunder and (ii) any actual out-of-pocket
costs and expenses paid by such party, including reasonable fees and expenses of
its counsel, to the extent not paid, satisfied or reimbursed from funds provided
by any other Person (provided that the foregoing shall not create or imply any
obligation to pursue recourse against any such other Person).
<PAGE>
"Offered Certificates" means the Preferred Mortgage Asset-Backed
Certificates, Series 1996-2, Class A-1, Class A-2, Class A-3, Class A-4, Class
A-5, and Class A-6 Certificates, issued pursuant to the Pooling and Servicing
Agreement.
"Person" means any individual, partnership, joint venture, corporation,
trust or unincorporated organization or any government or agency or political
subdivision thereof.
"Pooling and Servicing Agreement" means the Pooling and Servicing Agreement
dated as of December 1, 1996 by and among the Company, the Depositor, the
Servicer and the Trustee.
"Prospectus" means the form of final Prospectus included in the
Registration Statement on each date that the Registration Statement and any post
effective amendment or amendments thereto became effective.
"Prospectus Supplement" means the form of final Prospectus Supplement dated
December 9, 1996, and filed with the Securities and Exchange Commission on
December 17, 1996.
"Registration Statement" means the registration statement on Form S-3
relating to the Offered Certificates.
"Servicer" means Advanta Mortgage Corp. USA, as Servicer.
"Underwriter Party" means the Underwriter and its parent, subsidiaries and
affiliates and any shareholder, director, officer, employee, agent or
"controlling person" (as such term is used in the Act) of any of the foregoing.
"Underwriting Agreement" means the Underwriting Agreement by and between
the Company and the Underwriter, dated December 9, 1996.
Section 2. REPRESENTATIONS AND WARRANTIES OF THE INSURER. The Insurer
represents and warrants to the Underwriter and the Company as follows:
(a) Organization and Licensing. The Insurer is a duly incorporated
and existing New York stock insurance company licensed to do business in
the State of New York and is in good standing under the laws of such state.
(b) Corporate Power. The Insurer has the corporate power and
authority to issue the Policy and execute and deliver this Agreement and
the Insurance Agreement and to perform all of its obligations hereunder and
thereunder.
(c) Authorization; Approvals. The issuance of the Policy and the
execution, delivery and performance of this Agreement and 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 of or further filings with any governmental agency or
other governmental authority, or any approval of the Insurer's board of
directors or
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<PAGE>
stockholders, are necessary for the Policy, this Agreement and the
Insurance Agreement to constitute the legal, valid and binding obligations
of the Insurer.
(d) Enforceability. The Policy, when issued, and this Agreement and
the Insurance Agreement will each constitute a legal, valid and binding
obligation of the Insurer, enforceable in accordance with its terms,
subject to applicable laws affecting the enforceability of creditors'
rights generally.
(e) Financial Information. The consolidated financial statements of
the Insurer as of December 31, 1995 and December 31, 1994 and for the three
years ended December 31, 1995 incorporated by reference in the Prospectus
Supplement (the "Insurer Audited Financial Statements"), fairly present in
all material respects the financial condition of the Insurer as of such
date and for the period covered by such statements in accordance with
generally accepted accounting principles consistently applied. The
consolidated financial statements of the Insurer and its subsidiaries for
the nine months ended September 30, 1996 incorporated by reference in the
Prospectus Supplement (the "Insurer Unaudited Financial Statements")
present fairly in all material respects the financial condition of the
Insurer as of such date and for the period covered by such statements in
accordance with generally accepted accounting principles applied in a
manner consistent with the accounting principles used in preparing the
Insurer Audited Financial Statements, and, since September 30, 1996 there
has been no material change in such financial condition of the Insurer
which would materially and adversely affect its ability to perform its
obligations under the Policy.
(f) Insurer Information. The information in the Prospectus Supplement
as of the date hereof under the caption "The Certificate Insurance Policy
and the Certificate Insurer" (the "Insurer Information") is limited and
does not purport to provide the scope of disclosure required to be included
in a prospectus for a registrant under the Securities Act of 1933, in
connection with the public offer and sale of securities of such registrant.
Within such limited scope of disclosure, the Insurer Information does not
contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(g) No Litigation. 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 of it or would materially and
adversely affect its ability to perform its obligations under this
Agreement, the Policy or the Insurance Agreement.
Section 3. AGREEMENTS, REPRESENTATIONS AND WARRANTIES OF THE UNDERWRITER.
The Underwriter represents and warrants to and agrees with the Company and the
Insurer that the statements in the Prospectus Supplement made in reliance upon
and in conformity with written information relating to the Underwriter furnished
to the Company specifically for use in the preparation
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<PAGE>
of the Prospectus Supplement, and acknowledged in writing (referred to herein as
the "Underwriter Information"), are true and correct in all material respects.
Section 4. AGREEMENTS, REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The
Company represents and warrants to and agrees with the Insurer and the
Underwriter as follows:
(a) Registration Statement. The information in the Registration
Statement, the Prospectus and the Prospectus Supplement, other than the
Insurer Information and the Underwriter Information, is true and correct in
all material respects and does not contain any untrue statement of a fact
that is material or omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading.
(b) Organization. The Company is duly incorporated and existing 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, makes such qualification necessary.
(c) Corporate Power. The Company has the corporate power and
authority to execute and deliver this Agreement, the Underwriting
Agreement, the Pooling and Servicing Agreement and the Insurance Agreement
and to perform all of its obligations hereunder and thereunder in all
material respects.
(d) Authorization; Approvals. The execution, delivery and performance
of this Agreement, the Underwriting Agreement, the Pooling and Servicing
Agreement, the Insurance Agreement, the Custodial Agreement and the
Assignment Agreement by the Company have been duly authorized by all
necessary corporate proceedings. No further approvals or filings of any
kind, including, without limitation, any further approvals of or further
filing with any governmental agency or other governmental authority, or any
approval of the Company's board of directors or stockholders, are necessary
for this Agreement, the Underwriting Agreement, the Pooling and Servicing
Agreement and the Insurance Agreement to constitute the legal, valid and
binding obligations of the Company.
(e) Enforceability. This Agreement, the Underwriting Agreement, the
Pooling and Servicing Agreement and the Insurance Agreement will each
constitute a legal, valid and binding obligation of the Company, each
enforceable in accordance with its terms, subject, as to the enforcement of
remedies, to bankruptcy, insolvency, reorganization, moratorium and other
similar laws affecting the enforceability of creditors' rights generally
applicable in the event of the bankruptcy, insolvency or reorganization of
the Company and to general principles of equity.
(f) No Litigation. There are no actions, suits, proceedings or
investigations pending or, to the best of the Company's knowledge,
threatened against it at law or in equity or before any court, governmental
agency, board or commission or any arbitrator which, if decided adversely,
would materially and adversely affect its condition (financial or
otherwise)
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<PAGE>
or its operations or would materially and adversely affect its ability to
perform its obligations under this Agreement, the Underwriting Agreement,
the Pooling and Servicing Agreement or the Insurance Agreement.
Section 5. INDEMNIFICATION. (a) The Insurer hereby agrees, upon the terms
and subject to the conditions of this Agreement, to indemnify, defend and hold
harmless each Company Party and each Underwriter Party against any and all
Losses incurred by them with respect to the offer and sale of any of the Offered
Certificates and resulting from the Insurer's breach of any of its
representations and warranties set forth in Section 2 of this Agreement.
(b) The Underwriter hereby agrees, upon the terms and subject to the
conditions of this Agreement, to indemnify, defend and hold harmless each
Insurer Party against any and all Losses incurred by it with respect to the
offer and sale of any of the Offered Certificates and resulting from the
Underwriter's breach of any of its representations and warranties set forth in
Section 3 of this Agreement.
(c) The Company hereby agrees, upon the terms and subject to the conditions
of this Agreement, to indemnify, defend and hold harmless each Insurer Party
against any and all Losses incurred by it with respect to the offer and sale of
any of the Offered Certificates and resulting from the Company's breach of any
of its representations and warranties set forth in Section 4 of this Agreement.
(d) Upon the incurrence of any Losses entitled to indemnification
hereunder, the Indemnifying Party shall reimburse the Indemnified Party promptly
upon establishment by the Indemnified Party to the Indemnifying Party of the
Losses incurred.
Section 6. INSURER UNDERTAKING. The Insurer hereby agrees that, for so
long as the Underwriter is required under the Act to deliver a Prospectus
Supplement in connection with the sale of any of the Offered Certificates, the
Insurer will furnish to either the Underwriter or the Company, or both, upon
written request of such party or parties and at the expense of the Underwriter
or the Company, as the case may be, copies of the Insurer's most recent
financial statements (annual or interim, as the case may be) prepared in
accordance with generally accepted accounting principles (subject, as to interim
statements, to normal year-end adjustments) within a reasonable time after they
are available.
Section 7. NOTICE TO BE GIVEN INSURER. Except as provided in Section 10
below with respect to contribution, the indemnification provided herein by the
Insurer shall be the exclusive remedy of each Underwriter Party or Company Party
for the Losses resulting from the Insurer's breach of a representation, warranty
or agreement hereunder; provided, however, that each Underwriter Party or
Company Party shall be entitled to pursue any other remedy at law or in equity
for any such breach so long as the damages sought to be recovered shall not
exceed the Losses incurred thereby resulting from such breach. In the event
that any action or regulatory proceeding shall be commenced or claim asserted
which may entitle each Underwriter Party or Company Party to be indemnified
under this Agreement, such party shall give the Insurer written or telegraphic
notice of such action or claim reasonably promptly after receipt of written
notice thereof and the Insurer, upon request of the
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<PAGE>
Indemnified Party, shall retain counsel reasonably satisfactory to the
Indemnified Party to represent the Indemnified Party and any others the Insurer
may designate in such proceeding and shall pay the fees and disbursements of
such counsel related to such proceeding. The Insurer may, at its option, at any
time upon written notice to the Indemnified Party, assume the defense of any
proceeding and may designate counsel reasonably satisfactory to the Indemnified
Party in connection therewith provided that the counsel so designated would have
no actual or potential conflict of interest in connection with such
representation. Unless it shall assume the defense of any proceeding the Insurer
shall not be liable for any settlement of any proceeding, effected without its
written consent, but if settled with such consent or if there be a final
judgment for the plaintiff, the Insurer agrees to indemnify the Indemnified
Party from and against any loss or liability by reason of such settlement or
judgment. The Insurer shall be entitled to participate in the defense of any
such action or claim in reasonable cooperation with, and with the reasonable
cooperation of, each Company Party or each Underwriter Party, as the case may
be. The Indemnified Party will have the right to employ its own counsel in any
such action, but the fees and expenses of such counsel will be at the expense of
such Indemnified Party unless (1) the employment of counsel by the Indemnified
Party at the Insurer's expense has been authorized in writing by the Insurer,
(2) the Insurer has not in fact employed counsel to assume the defense of such
action within a reasonable time after receiving notice of the commencement of
the action or (3) the named parties to any such action include the Insurer on
the one hand and, on the other hand, the Indemnified Party, and representation
of both parties by the same counsel would be inappropriate due to actual or
potential differing interests between them (in which case, if such Indemnified
Party notifies the Insurer in writing that it elects to employ separate counsel
at the expense of the Insurer, the Insurer shall not have the right to assume
the defense of such action or proceeding on such Indemnified Party's behalf), in
each of which cases the reasonable fees and expenses of counsel (including local
counsel) will be at the expense of the Insurer, and all such fees and expenses
will be reimbursed promptly as they are incurred. In the event that any expenses
so paid by the Insurer are subsequently determined to not be required to be
borne by the Insurer hereunder, the party which received such payment shall
promptly refund the amount so paid to the party which made such payment.
Notwithstanding the foregoing, in connection with any one action or separate but
substantially similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances, the Insurer shall not be liable
for the fees and expenses of more than one counsel for all Company Parties and
more than one counsel for all Underwriter Parties. The Underwriter Parties and
Company Parties shall cooperate with the Insurer Parties in resolving any event
which would give rise to an indemnity obligation pursuant to Section 5(a) hereof
in the most efficient manner. No settlement of any such claim or action shall be
entered into without the consent of each Company Party or each Underwriter
Party, as the case may be, who is subject to such claim or action, on the one
hand, and each Insurer Party who is subject to such claim or action, on the
other hand; provided, however, that the consent of such Company Party or such
Underwriter Party, as applicable, shall not be required if such settlement fully
discharges, with prejudice against the plaintiff, the claim or action against
such Company Party or Underwriter Party. Any failure by a Company Party or
Underwriter Party, as the case may be, to comply with the provisions of this
Section shall relieve the Insurer of liability only if such failure is
materially prejudicial to any legal pleadings, grounds, defenses or remedies in
respect thereof or the Insurer's financial liability hereunder, and then only to
the extent of such prejudice.
6
<PAGE>
Section 8. NOTICE TO BE GIVEN TO THE UNDERWRITER. Except as provided
below in Section 10 with respect to contribution, the indemnification provided
herein by the Underwriter shall be the exclusive remedy of any Insurer Party for
the Losses resulting from the Underwriter's breach of a representation, warranty
or agreement hereunder; provided, however, that each Insurer Party shall be
entitled to pursue any other remedy at law or in equity for any such breach so
long as the damages sought to be recovered shall not exceed the Losses incurred
thereby resulting from such breach. In the event that any action or regulatory
proceeding shall be commenced or claim asserted which may entitle each Insurer
Party to be indemnified under this Agreement, such party shall give the
Underwriter written or telegraphic notice of such action or claim reasonably
promptly after receipt of written notice thereof and the Underwriter, upon
request of the Indemnified Party, shall retain counsel reasonably satisfactory
to the Indemnified Party to represent the Indemnified Party and any others the
Underwriter may designate in such proceeding and shall pay the fees and
disbursements of such counsel related to such proceeding. The Underwriter may,
at its option, at any time upon written notice to the Indemnified Party, assume
the defense of any proceeding and may designate counsel reasonably satisfactory
to the Indemnified Party in connection therewith provided that the counsel so
designated would have no actual or potential conflict of interest in connection
with such representation. Unless it shall assume the defense of any proceeding
the Underwriter shall not be liable for any settlement of any proceeding,
effected without its written consent, but if settled with such consent or if
there be a final judgment for the plaintiff, the Underwriter agrees to indemnify
the Indemnified Party from and against any loss or liability by reason of such
settlement or judgment. The Underwriter shall be entitled to participate in the
defense of any such action or claim in reasonable cooperation with, and with the
reasonable cooperation of, the Insurer Party. The Indemnified Party will have
the right to employ its own counsel in any such action, but the fees and
expenses of such counsel will be at the expense of such Indemnified Party unless
(1) the employment of counsel by the Indemnified Party at its expense has been
authorized in writing by the Underwriter, (2) the Underwriter has not in fact
employed counsel to assume the defense of such action within a reasonable time
after receiving notice of the commencement of the action or (3) the named
parties to any such action include the Underwriter on the one hand and, on the
other hand, the Indemnified Party, and representation of both parties by the
same counsel would be inappropriate due to actual or potential differing
interests between them (in which case, if such Indemnified Party notifies the
Underwriter in writing that it elects to employ separate counsel at the expense
of the Underwriter, the Underwriter shall not have the right to assume the
defense of such action or proceeding on such Indemnified Party's behalf), in
each of which cases the reasonable fees and expenses of counsel (including local
counsel) will be at the expense of the Underwriter, and all such fees and
expenses will be reimbursed promptly as they are incurred. In the event that
any expenses so paid by the Underwriter are subsequently determined to not be
required to be borne by the Underwriter hereunder, the party which received such
payment shall promptly refund the amount so paid to the party which made such
payment. Notwithstanding the foregoing, in connection with any one action or
separate but substantially similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances, the Underwriter
shall not be liable for the fees and expenses of more than one counsel for all
Insurer Parties. The Insurer Party shall cooperate with each Underwriter Party
and the Company Party in resolving any event which would give rise to an
indemnification obligation pursuant to Section 5(b) hereof in the most efficient
manner. No settlement of any such claim or action shall be entered into without
the consent of the Insurer Party
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who is subject to such claim or action, on the one hand, and each Underwriter
Party who is subject to such claim or action, on the other hand; provided,
however, that the consent of such Insurer Party shall not be required if such
settlement fully discharges, with prejudice against the plaintiff, the claim or
action against such Insurer Party. Any failure by an Insurer Party to comply
with the provisions of this Section shall relieve the Underwriter of liability
only if such failure is materially prejudicial to any legal pleadings, grounds,
defenses or remedies in respect thereof or the Underwriter's financial liability
hereunder, and then only to the extent of such prejudice.
Section 9. NOTICE TO BE GIVEN THE COMPANY. Except as provided below in
Section 10 with respect to contribution, the indemnification provided herein by
the Company shall be the exclusive remedy of any Insurer Party for the Losses
resulting from the Company's breach of a representation, warranty or agreement
hereunder; provided, however, that the Insurer Party shall be entitled to pursue
any other remedy at law or in equity for any such breach so long as the damages
sought to be recovered shall not exceed the Losses incurred thereby resulting
from such breach. In the event that any action or regulatory proceeding shall
be commenced or claim asserted which may entitle an Insurer Party to be
indemnified under this Agreement, such party shall give the Company written or
telegraphic notice of such action or claim reasonably promptly after receipt of
written notice thereof and the Company, upon request of the Indemnified Party,
shall retain counsel reasonably satisfactory to the Indemnified Party to
represent the Indemnified Party and any others the Company may designate in such
proceeding and shall pay the fees and disbursements of such counsel related to
such proceeding. The Company may, at its option, at any time upon written
notice to the Indemnified Party, assume the defense of any proceeding and may
designate counsel reasonably satisfactory to the Indemnified Party in connection
therewith provided that the counsel so designated would have no actual or
potential conflict of interest in connection with such representation. Unless
it shall assume the defense of any proceeding the Company shall not be liable
for any settlement of any proceeding, effected without its written consent, but
if settled with such consent or if there be a final judgment for the plaintiff,
the Company agrees to indemnify the Indemnified Party from and against any loss
or liability by reason of such settlement or judgment. The Company shall be
entitled to participate in the defense of any such action or claim in reasonable
cooperation with, and with the reasonable cooperation of, the Insurer. The
Indemnified Party will have the right to employ its own counsel in any such
action, but the fees and expenses of such counsel will be at the expense of such
Indemnified Party unless (1) the employment of counsel by the Indemnified Party
at its expense has been authorized in writing by the Company, (2) the Company
has not in fact employed counsel to assume the defense of such action within a
reasonable time after receiving notice of the commencement of the action or (3)
the named parties to any such action include the Company, on the one hand, and,
on the other hand, the Indemnified Party, and representation of both parties by
the same counsel would be inappropriate due to actual or potential differing
interests between them (in which case, if such Indemnified Party notifies the
Company in writing that it elects to employ separate counsel at the expense of
the Company, the Company shall not have the right to assume the defense of such
action or proceeding on such Indemnified Party's behalf), in each of which cases
the reasonable fees and expenses of counsel (including local counsel) will be at
the expense of the Company, and all such fees and expenses will be reimbursed
promptly as they are incurred. In the event that any expenses so paid by the
Company are subsequently determined to not be required to be borne by the
Company hereunder, the party which received such payment shall promptly refund
the amount so paid to the party which made such payment. Notwithstanding the
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foregoing, in connection with any one action or separate but substantially
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances, the Company shall not be liable for the
fees and expenses of more than one counsel for all Insurer Parties. Each
Insurer Party shall cooperate with each Company Party and each Underwriter Party
in resolving any event which would give rise to an indemnification obligation
pursuant to Section 5(c) hereof in the most efficient manner. No settlement of
any such claim or action shall be entered into without the consent of each
Insurer Party who is subject to such claim or action, on the one hand, and the
Company Party, on the other hand; provided, however, that the consent of such
Insurer Party shall not be required if such settlement fully discharges, with
prejudice against the plaintiff, the claim or action against such Insurer Party.
Any failure by an Insurer Party to comply with the provisions of this Section
shall relieve the Company of liability only if such failure is materially
prejudicial to any legal pleadings, grounds, defenses or remedies in respect
thereof or the Company's financial liability hereunder, and then only to the
extent of such prejudice.
Section 10. CONTRIBUTION. (a) To provide for just and equitable
contribution if the indemnification provided by the Insurer is determined to be
unavailable for any Underwriter Party (other than pursuant to Section 5 or 7 of
this Agreement), or if the indemnification provided by the Underwriter is
determined to be unavailable for any Insurer Party (other than pursuant to
Section 5 or 8 of this Agreement), the Insurer and the Underwriter shall
contribute to the aggregate costs of liabilities arising from any breach of
their respective representations and warranties set forth in this Agreement on
the basis of the relative fault of all Insurer Parties and all Underwriter
Parties.
(b) To provide for just and equitable contribution if the indemnification
provided by the Insurer is determined to be unavailable for any Company Party
(other than pursuant to Section 5 or 7 of this Agreement), or if the
indemnification provided by the Company is determined to be unavailable for any
Insurer Party (other than pursuant to Section 5 or 9 of this Agreement), the
Insurer and the Company shall contribute to the aggregate cost of liabilities
arising from any breach of their respective representations and warranties set
forth in this Agreement on the basis of the relative fault of all Insurer
Parties and all Company Parties.
(c) Reserved.
(d) The relative fault of each Indemnifying Party, on the one hand, and of
each Indemnified Party, on the other hand, shall be determined by reference to,
among other things, whether the breach of, or alleged breach of, any of its
representations and warranties set forth in Section 2, 3 or 4 of this Agreement
relates to information supplied by, or action within the control of, the
Indemnifying Party or the Indemnified Party and the Parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
breach.
(e) The Parties agree that the Insurer shall be solely responsible for the
Insurer information and for the Insurer Financial Statements, that the
Underwriter shall be solely responsible for the Underwriter information provided
by the Underwriter in writing for use in the Prospectus Supplement and that the
Company shall be responsible for all other information in the Registration
Statement and in the Prospectus Supplement.
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(f) 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.
(g) The indemnity and contribution agreements contained in this Agreement
shall remain operative and in full force and effect, regardless of (i) any
investigation made by or on behalf of any Underwriter Party, any Company Party
or any Insurer Party, (ii) the issuance of any Offered Certificates or the
Policy or (iii) any termination of this Agreement.
(h) Upon the incurrence of any Losses entitled to contribution hereunder,
the contributor shall reimburse the party entitled to contribution promptly upon
establishment by the party entitled to contribution to the contributor of the
Losses incurred.
Section 11. NOTICES. All notices and other communications provided for
under this Agreement shall be addressed to the address set forth below as to
each party or at such other address as shall be designated by a party in a
written notice to the other party.
If to the Insurer: MBIA Insurance Corporation
113 King Street
Armonk, NY 10504
Attention: Insured Portfolio Management-
Structured Finance (IPM-SF)
If to the Company: T.A.R. Preferred Mortgage Corporation
19782 MacArthur, Suite 260
Irvine, CA 92715
Attention: President
If to the Underwriter: CS First Boston Corporation
11 Madison Avenue
New York, NY 10010
Attention: Nita S. Cherry, Asset Finance Group
Section 12. GOVERNING LAW, ETC. This Agreement shall be deemed to be a
contract under the laws of the State of New York and shall be governed by and
construed in accordance with the laws of the State of New York without regard to
its conflicts of laws provisions. This Agreement may not be assigned by any
party without the express written consent of each other party. Amendments of
this Agreement shall be in writing signed by each party. This Agreement shall
not be effective until executed by each of the Insurer, the Company and the
Underwriter.
Section 13. INSURANCE AGREEMENT; UNDERWRITING AGREEMENT; POOLING AND
SERVICING AGREEMENT. This Agreement in no way limits or otherwise affects the
indemnification obligations of the Company under (a) the Insurance Agreement,
(b) the Underwriting Agreement or (c) the Pooling and Servicing Agreement. To
the extent that this Agreement conflicts with or does not address the
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relative rights of the Underwriter and Company as between themselves as set
forth in the Underwriting Agreement, the Underwriting Agreement shall govern.
Section 14. LIMITATIONS. Nothing in this Agreement shall be construed as
a representation or undertaking by the Insurer concerning maintenance of the
rating currently assigned to its claims-paying ability by Moody's Investors
Service, Inc. ("Moody's") and/or Standard & Poor's Ratings Group, a division of
McGraw-Hill, Inc. ("S&P") or any other rating agency (collectively, the "Rating
Agencies").
Section 15. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall together constitute but one and the same
instrument.
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IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
duly executed and delivered by their respective officers thereunto duly
authorized, all as of the date first above written.
MBIA INSURANCE CORPORATION
By /s/ Lisa A.
-------------------------------
Title
----------------------------
T.A.R. PREFERRED MORTGAGE
CORPORATION
By /s/ Todd A. Rodriguez
-------------------------------
Title Chief Executive Officer
----------------------------
CS FIRST BOSTON CORPORATION
By /s/ Fiachra O'Driscoll
-------------------------------
Title Vice President
----------------------------
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EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Prospectus Supplement of
our report dated January 22, 1996, on our audits of the consolidated financial
statements of MBIA Insurance Corporation and Subsidiaries as of December 31,
1995 and 1994 and for the three years ended December 31, 1995. We also consent
to the reference to our firm under the caption "Report of Experts".
/s/ Coopers & Lybrand L.L.P.
December 5, 1996
New York, New York
