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): June 27, 1996
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.
(AS DEPOSITOR UNDER THE POOLING AND SERVICING AGREEMENT,
DATED AS OF JUNE 1, 1996, PROVIDING FOR THE ISSUANCE OF
ASSET-BACKED FIXED RATE AND FLOATING RATE CERTIFICATES, SERIES 1996-3)
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.
- ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 33-84924 13-3439681
(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification Number)
Seven World Trade Center
NEW YORK, NEW YORK 10048
(Address of Principal (Zip Code)
Executive Offices)
Registrant's telephone number, including area code: (212) 783-5659
<PAGE>
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Item 2. ACQUISITION OR DISPOSITION OF ASSETS
Description of the Certificates and the Mortgage Pools
On June 27, 1996, a single series of certificates, entitled Salomon
Brothers Mortgage Securities VII, Inc., Asset-Backed Fixed Rate and Floating
Rate Certificates, Series 1996-3 (the "Certificates"), were issued pursuant to a
pooling and servicing agreement, dated as of June 1, 1996 (the "Agreement"),
attached hereto as Exhibit 4.1, among Salomon Brothers Mortgage Securities VII,
Inc. as depositor (the "Depositor"), Berkeley Federal Bank & Trust FSB
("Berkeley") as master servicer (in such capacity, the "Master Servicer") and
The Bank of New York as trustee (the "Trustee"). The Certificates consist of six
classes of certificates (collectively, the "Certificates"), designated as: the
"Class A1-1 Certificates," the "Class A1-2 Certificates," the "Class A1-3
Certificates," the "Class A1-4 Certificates," the "Class A2-1 Certificates" and
the "Class R Certificates." The Certificates evidence in the aggregate the
entire beneficial ownership interest in a trust fund (the "Trust Fund"),
consisting primarily of a segregated pool (the "Mortgage Pool") of conventional,
one- to four- family, first lien mortgage loans having original terms to
maturity ranging from 15 years to 30 years (the "Mortgage Loans"). The Mortgage
Pool consists of two separate sub-pools (each a "Sub-Pool"), designated as
Sub-Pool 1, which consists of fixed-rate Mortgage Loans having an aggregate
principal balance of $52,519,446.18 as of June 1, 1996 (the "Cut-off Date"), and
Sub-Pool 2, which consists of adjustable-rate Mortgage Loans having an aggregate
principal balance of $77,542,350.74 as of the Cut-off Date. The Mortgage Loans
were purchased pursuant to a Mortgage Loan Purchase Agreement, dated June 25,
1996 (the "Mortgage Loan Purchase Agreement"), between Depositor as purchaser
and Berkeley as seller. The Certificates, other than the Class R Certificates,
were sold by the Depositor to Salomon Brothers Inc ("Salomon"), an affiliate of
the Depositor, pursuant to an underwriting agreement, dated June 25, 1996,
between the Depositor and Salomon. The Class R Certificates were delivered by
the Depositor to Berkeley as partial consideration for the Mortgage Loans.
The Mortgage Loans in Sub-Pool 1 have annualized rates at which such
Mortgage Loans bear interest ("Mortgage Rates") that are fixed and range from
7.990% per annum to 16.250% per annum, with a weighted average Mortgage Rate as
of the Cut-off Date of approximately 10.7363% per annum. As of the Cut-off Date,
the Mortgage Loans in Sub-Pool 1 will have a weighted average remaining term to
maturity of approximately 27 years and 5 months. Approximately 8.60% of the
Mortgage Loans by aggregate principal balance as of the Cut-off Date in Sub-Pool
1 are Buydown Mortgage Loans. Approximately 11.22% of the Mortgage Loans by
aggregate principal balance as of the Cut-off Date in Sub-Pool 1 are balloon
payment mortgage loans (each, a "Balloon Mortgage Loan").
Each Mortgage Loan in Sub-Pool 2 generally provides for semi-annual
adjustment to the Mortgage Rate thereon and for corresponding adjustments to the
monthly payment amount due thereon, in each case on each adjustment date
applicable thereto (each such date, an "Adjustment Date"). On each Adjustment
Date for each Mortgage Loan in Sub-Pool 2, the Mortgage Rate thereon will be
adjusted to equal the sum, rounded to the nearest multiple of
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0.125%, of the Index and a fixed percentage amount (the "Gross Margin"), subject
to periodic and lifetime limitations. None of the Mortgage Loans in Sub-Pool 2
permits the related mortgagor to convert the adjustable Mortgage Rate thereon to
a fixed Mortgage Rate. As of the Cut-off Date, the Mortgage Loans in Sub-Pool 2
have Mortgage Rates ranging from 5.750% per annum to 13.990% per annum, a
weighted average Mortgage Rate of approximately 10.2480% per annum, a weighted
average next Adjustment Date in November 1997, Gross Margins ranging from 3.000%
to 8.250% and a weighted average Gross Margin of approximately 6.2846%. As of
the Cut-off Date, the Mortgage Loans in Sub-Pool 2 will have a weighted average
remaining term to maturity of approximately 29 years and 7 months. None of the
Mortgage Loans in Sub-Pool 2 are Buydown Mortgage Loans. Approximately 0.43% of
the Mortgage Loans by aggregate principal balance as of the Cut-off Date in
Sub-Pool 2 are Balloon Mortgage Loans.
The Certificates have the following initial Certificate Balances and
initial PassThrough Rates:
Initial Certificate
CLASS PRINCIPAL BALANCE PASS-THROUGH RATE
----- ----------------- -----------------
A1-1 $24,000,000 6.85%
A1-2 $13,000,000 7.45%
A1-3 $6,700,000 7.80%
A1-4 $8,819,446 8.10%
A2-1 $77,542,350 Variable
R $0 N/A
The Certificates, other than the Class R Certificates, and the
Mortgage Loans are more particularly described in the Prospectus, dated June 17,
1996, and the Prospectus Supplement, dated June 25, 1996, as previously filed
with the Securities and Exchange Commission pursuant to Rule 424(b). The Class R
Certificates have not been and will not be publicly offered by the Depositor.
Capitalized terms used but not otherwise defined herein shall have the meanings
assigned to them in the Prospectus Supplement.
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Item 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Not applicable
(b) Not applicable
(c) Exhibits
EXHIBIT NO. DESCRIPTION
----------- -----------
4.1 Pooling and Servicing Agreement, dated as of June
1, 1996, by and among Salomon Brothers Mortgage
Securities VII, Inc. as Depositor, Berkeley
Federal Bank & Trust FSB as Master Servicer and
The Bank of New York as Trustee, relating to the
Series 1996-3 Certificates.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: June 27, 1996
SALOMON BROTHERS MORTGAGE
SECURITIES VII, INC.
By: /s/ Susan S. Woodbury
---------------------------
Name: Susan S. Woodbury
Title: Assistant Vice President
<PAGE>
INDEX TO EXHIBITS
Sequentially
EXHIBIT NO. DESCRIPTION NUMBERED PAGE
----------- ----------- -------------
4.1 Pooling and Servicing Agreement, dated as of 7
June 1, 1996, by and among Salomon Brothers
Mortgage Securities VII, Inc. as Depositor,
Berkeley Federal Bank & Trust FSB as Master
Servicer and The Bank of New York as
Trustee, relating to the Series 1996-3
Certificates.
Exhibit 4.1
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.,
Depositor
BERKELEY FEDERAL BANK & TRUST FSB,
Master Servicer
and
THE BANK OF NEW YORK,
Trustee
-----------------------------------
POOLING AND SERVICING AGREEMENT
Dated as of June 1, 1996
-----------------------------------
Asset-Backed Fixed Rate and Floating Rate Certificates
Series 1996-3
<PAGE>
TABLE OF CONTENTS
SECTION PAGE
ARTICLE I
DEFINITIONS
1.01. Defined Terms..................................................... 2
Accrued Certificate Interest...................................... 2
Adjustment Date................................................... 2
Affiliate......................................................... 2
Agreement......................................................... 2
Assignment........................................................ 2
Bankruptcy Amount................................................. 3
Bankruptcy Code................................................... 3
Bankruptcy Loss................................................... 3
Basis Risk Shortfall.............................................. 3
Book-Entry Certificate............................................ 3
Business Day...................................................... 3
Cash-Out Refinancing.............................................. 3
Certificate....................................................... 3
Certificate Factor................................................ 3
Certificate Insurer............................................... 4
Certificate Insurer Default....................................... 4
Certificate Insurer Premium....................................... 4
Certificate Insurer Premium Rate.................................. 5
Certificateholder" or "Holder..................................... 5
Certificate Owner................................................. 5
Certificate Principal Balance..................................... 5
Certificate Register" and "Certificate Registrar.................. 5
Class ............................................................ 5
Class A Certificate............................................... 5
Class A1-1 Certificate............................................ 5
Class A1-2 Certificate............................................ 6
Class A1-3 Certificate............................................ 6
Class A1-4 Certificate............................................ 6
Class A2-1 Certificate............................................ 6
Class R Certificate............................................... 6
Closing Date...................................................... 6
Code ............................................................ 6
Collection Account................................................ 6
Combined Loan-to-Value Ratio...................................... 6
Corporate Trust Office............................................ 7
Cumulative Insurance Payments..................................... 7
Cumulative Loss Percentage........................................ 7
Cut-off Date...................................................... 7
Debt Service Reduction............................................ 7
Deficiency Amount................................................. 7
Deficiency Event.................................................. 8
Deficient Valuation............................................... 8
Definitive Certificates........................................... 8
Deleted Mortgage Loan............................................. 8
Delinquency Percentage............................................ 8
Depositor......................................................... 8
Depository........................................................ 8
Depository Institution............................................ 8
Depository Participant............................................ 8
Determination Date................................................ 9
Directly Operate.................................................. 9
Disqualified Organization......................................... 9
Distribution Account.............................................. 9
Distribution Date................................................. 9
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Due Date.......................................................... 10
Due Period........................................................ 10
Eligible Account.................................................. 10
Estate in Real Property........................................... 10
Excess Bankruptcy Loss............................................ 10
Excess Extraordinary Loss......................................... 10
Excess Fraud Loss................................................. 10
Excess Special Hazard Loss........................................ 10
Excess Subordinated Amount........................................ 10
Expense Account................................................... 10
Expense Adjusted Mortgage Rate.................................... 11
Expense Adjusted Maximum Mortgage Rate............................ 11
Extraordinary Loss................................................ 11
Extraordinary Loss................................................ 12
FDIC ............................................................ 12
FHLMC ............................................................ 12
Final Recovery Determination...................................... 12
FNMA ............................................................ 12
Fraud Loss........................................................ 12
Fraud Loss Amount................................................. 12
Group ............................................................ 13
Group 1 Class A Certificate....................................... 13
Group 1 Class A Principal Distribution Amount..................... 13
Group 2 Class A Certificate....................................... 14
Group 2 Class A Principal Distribution Amount..................... 14
Gross Margin...................................................... 15
Guaranteed Distribution........................................... 15
Independent....................................................... 15
Independent Contractor............................................ 15
Index ............................................................ 15
Insurance Agreement............................................... 16
Insurance Payment................................................. 16
Insurance Proceeds................................................ 16
Interest Accrual Period........................................... 16
Interest Determination Date....................................... 16
Interest Distribution Amount...................................... 16
Late Collections.................................................. 16
Liquidation Event................................................. 16
Liquidation Proceeds.............................................. 17
Loan-to-Value Ratio............................................... 17
London Business Day............................................... 17
Lost Note Affidavit............................................... 17
Majority Class R Certificateholder................................ 17
Master Servicer................................................... 17
Master Servicer Event of Default.................................. 17
Master Servicer Remittance Date................................... 17
Maximum Group 2 Class A Pass-Through Rate......................... 17
Maximum Mortgage Rate............................................. 18
Minimum Mortgage Rate............................................. 18
Minimum Spread.................................................... 18
Monthly Payment................................................... 18
Moody's........................................................... 18
Mortgage.......................................................... 18
Mortgage File..................................................... 18
Mortgage Loan..................................................... 18
Mortgage Loan Purchase Agreement.................................. 18
Mortgage Loan Schedule............................................ 18
Mortgage Loan Seller.............................................. 20
Mortgage Note..................................................... 20
Mortgage Pool..................................................... 20
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Mortgage Rate.................................................... 20
Mortgaged Property............................................... 21
Mortgagor........................................................ 21
Net Monthly Excess Cashflow...................................... 21
Net Mortgage Rate................................................ 21
New Lease........................................................ 21
Nonrecoverable P&I Advance....................................... 21
Non-United States Person......................................... 21
Officers' Certificate............................................ 21
One-Month LIBOR.................................................. 21
One-Month LIBOR Pass-Through Rate................................ 22
Opinion of Counsel............................................... 22
Original Mortgage Loan........................................... 22
Ownership Interest............................................... 22
Pass-Through Rate................................................ 22
Percentage Interest.............................................. 22
Periodic Rate Cap................................................ 23
Permitted Investments............................................ 23
Permitted Transferee............................................. 24
Person........................................................... 24
P&I Advance...................................................... 24
Policy........................................................... 24
Policy Payments Account.......................................... 24
Prepayment Assumption............................................ 24
Prepayment Interest Shortfall.................................... 24
Prepayment Period................................................ 24
Principal Prepayment............................................. 24
Purchase Price................................................... 24
Qualified Substitute Mortgage Loan............................... 25
Rate/Term Refinancing............................................ 26
Rating Agency or Rating Agencies................................. 26
Realized Loss.................................................... 26
Record Date...................................................... 27
Reference Banks.................................................. 27
Refinanced Mortgage Loan......................................... 27
Regular Certificate.............................................. 27
Regular Interest................................................. 27
Relief Act....................................................... 27
Relief Act Interest Shortfall.................................... 27
REMIC ........................................................... 27
REMIC Provisions................................................. 27
Remittance Report................................................ 28
Rents from Real Property......................................... 28
REO Account...................................................... 28
REO Disposition.................................................. 28
REO Imputed Interest............................................. 28
REO Principal Amortization....................................... 28
REO Property..................................................... 28
Request for Release.............................................. 28
Required Subordinated Amount..................................... 28
Reserve Interest Rate............................................ 29
Residential Dwelling............................................. 29
Residual Certificate............................................. 29
Residual Interest................................................ 29
Responsible Officer.............................................. 29
Rolling Delinquency Percentage................................... 29
Rolling Loss Percentage.......................................... 29
Scheduled Principal Balance...................................... 30
Servicing Account................................................ 30
Servicing Advances............................................... 30
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SECTION PAGE
Servicing Fee..................................................... 30
Servicing Fee Rate................................................ 31
Servicing Officer................................................. 31
Single Certificate................................................ 31
Special Hazard Amount............................................. 31
Special Hazard Loss............................................... 31
S&P ............................................................ 31
Startup Day....................................................... 31
Stated Principal Balance.......................................... 31
Step Down Cumulative Loss Test.................................... 32
Step Down Rolling Delinquency Test................................ 32
Step Down Rolling Loss Test....................................... 32
Step Down Trigger................................................. 32
Stepped Down Required Subordinated Percentage..................... 33
Step Up Cumulative Loss Test...................................... 33
Step Up Rolling Delinquency Test.................................. 33
Step Up Rolling Loss Test......................................... 33
Step Up Trigger................................................... 33
Stayed Funds...................................................... 33
Subordinated Amount............................................... 33
Subordination Deficiency Amount................................... 34
Subordination Increase Amount..................................... 34
Subordination Reduction Amount.................................... 34
Sub-Pool.......................................................... 34
Sub-Pool Available Distribution Amount............................ 34
Sub-Pool Net Monthly Excess Cashflow.............................. 35
Sub-Pool 1........................................................ 35
Sub-Pool 2........................................................ 35
Sub-Pool 2 Available Funds Pass-Through Rate...................... 35
Sub-Servicer...................................................... 35
Sub-Servicing Account............................................. 36
Sub-Servicing Agreement........................................... 36
Tax Returns....................................................... 36
Termination Price................................................. 36
Terminator........................................................ 36
Transfer.......................................................... 36
Transferee........................................................ 36
Transferor........................................................ 36
Trust Fund........................................................ 36
Trustee........................................................... 36
Trustee's Fee..................................................... 36
Trustee's Fee Rate................................................ 37
Uninsured Cause................................................... 37
United States Person.............................................. 37
Unpaid Basis Risk Shortfalls...................................... 37
Value ............................................................ 37
Voting Rights..................................................... 37
1.02. Allocation of Certain Interest Shortfalls......................... 38
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS;
ORIGINAL ISSUANCE OF CERTIFICATES
2.01. Conveyance of Mortgage Loans...................................... 39
2.02. Acceptance by Trustee............................................. 41
2.03. Repurchase or Substitution of Mortgage Loans by the
Mortgage Loan Seller or the Depositor............................. 42
2.04. Representations and Warranties of the Depositor................... 45
2.05. Representations, Warranties and Covenants of the
Master Servicer................................................... 47
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<S> <C> <C>
2.06. Issuance of Certificates................................................... 48
ARTICLE III
ADMINISTRATION AND SERVICING
OF THE TRUST FUND
3.01. Master Servicer to Act as Master Servicer.................................. 50
3.02. Sub-Servicing Agreements Between Master Servicer and Sub-Servicers......... 51
3.03. Successor Sub-Servicers.................................................... 52
3.04. Liability of the Master Servicer........................................... 53
3.05. No Contractual Relationship Between Sub-Servicers and Trustee or
Certificateholders......................................................... 53
3.06. Assumption or Termination of Sub-Servicing Agreements by Trustee........... 53
3.07. Collection of Certain Mortgage Loan Payments............................... 54
3.08. Sub-Servicing Accounts..................................................... 54
3.09. Collection of Taxes, Assessments and Similar Items; Servicing
Accounts................................................................... 54
3.10. Collection Account and Distribution Account................................ 55
3.11. Withdrawals from the Collection Account and Distribution Account........... 57
3.12. Investment of Funds in the Collection Account, the Expense Account and
the Distribution Account................................................... 58
3.13. [intentionally omitted].................................................... 59
3.14. Maintenance of Hazard Insurance and Errors and Omissions and Fidelity
Coverage................................................................... 59
3.15. Enforcement of Due-On-Sale Clauses; Assumption Agreements.................. 60
3.16. Realization Upon Defaulted Mortgage Loans.................................. 61
3.17. Trustee to Cooperate; Release of Mortgage Files............................ 63
3.18. Servicing Compensation..................................................... 64
3.19. Reports to the Trustee; Collection Account Statements...................... 65
3.20. Statement as to Compliance................................................. 65
3.21. Independent Public Accountants' Servicing Report........................... 66
3.22. Access to Certain Documentation............................................ 66
3.23. Title, Management and Disposition of REO Property.......................... 66
3.24. Obligations of the Master Servicer in Respect of Prepayment Interest
Shortfalls................................................................. 69
3.25. Expense Account............................................................ 69
3.26. Obligations of the Master Servicer in Respect of Mortgage Rates and
Monthly Payments........................................................... 70
ARTICLE IV
PAYMENTS TO CERTIFICATEHOLDERS
4.01. Distributions.............................................................. 71
4.02. Statements to Certificateholders........................................... 75
4.03. Remittance Reports; P&I Advances........................................... 78
4.04. Allocation of Realized Losses.............................................. 79
4.05. Compliance with Withholding Requirements................................... 80
ARTICLE V
THE CERTIFICATES
5.01. The Certificates........................................................... 82
5.02. Registration of Transfer and Exchange of Certificates...................... 83
5.03. Mutilated, Destroyed, Lost or Stolen Certificates.......................... 88
5.04. Persons Deemed Owners...................................................... 88
</TABLE>
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<S> <C> <C>
5.05. Certain Available Information.............................................. 88
ARTICLE VI
THE DEPOSITOR AND THE MASTER SERVICER
6.01. Liability of the Depositor and the Master Servicer......................... 90
6.02. Merger or Consolidation of the Depositor or the Master Servicer............ 90
6.03. Limitation on Liability of the Depositor, the Master Servicer and
Others..................................................................... 90
6.04. Limitation on Resignation of the Master Servicer........................... 91
6.05. Rights of the Depositor in Respect of the Master Servicer.................. 91
ARTICLE VII
DEFAULT
7.01. Master Servicer Events of Default.......................................... 93
7.02. Trustee to Act; Appointment of Successor................................... 95
7.03. Notification to Certificateholders......................................... 96
7.04. Waiver of Master Servicer Events of Default................................ 97
ARTICLE VIII
CONCERNING THE TRUSTEE
8.01. Duties of Trustee.......................................................... 98
8.02. Certain Matters Affecting the Trustee...................................... 99
8.03. Trustee Not Liable for Certificates or Mortgage Loans...................... 100
8.04. Trustee May Own Certificates............................................... 100
8.05. Trustee's Fees and Expenses................................................ 100
8.06. Eligibility Requirements for Trustee....................................... 101
8.07. Resignation and Removal of the Trustee..................................... 101
8.08. Successor Trustee.......................................................... 102
8.09. Merger or Consolidation of Trustee......................................... 102
8.10. Appointment of Co-Trustee or Separate Trustee.............................. 103
8.11. Appointment of Office or Agency............................................ 104
8.12. Representations and Warranties of the Trustee.............................. 104
ARTICLE IX
CERTAIN MATTERS REGARDING THE CERTIFICATE INSURER
9.01. Rights of the Certificate Insurer To Exercise Rights of Class A
Certificateholders......................................................... 105
9.02. Trustee To Act Solely with Consent of the Certificate Insurer.............. 105
9.03. Trust Fund and Accounts Held for Benefit of the Certificate Insurer........ 105
9.04. Claims Upon the Policy; Policy Payments Account............................ 106
9.05 Effect of Payments by the Certificate Insurer; Subrogation................. 107
9.06. Notices to the Certificate Insurer......................................... 108
9.07. Third-Party Beneficiary.................................................... 108
9.08. Trustee to Hold the Policy................................................. 108
ARTICLE X
TERMINATION
10.01 Termination Upon Repurchase or Liquidation of All
Mortgage Loans............................................................ 109
................................................................... 109
</TABLE>
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SECTION PAGE
10.02 ................................................................. 110
Additional Termination Requirements.............................. 110
ARTICLE XI
REMIC PROVISIONS
11.01. REMIC Administration............................................. 112
11.02. Prohibited Transactions and Activities........................... 114
11.03. Master Servicer and Trustee Indemnification...................... 114
ARTICLE XII
MISCELLANEOUS PROVISIONS
12.01. Amendment........................................................ 116
12.02. Recordation of Agreement; Counterparts........................... 117
12.03. Limitation on Rights of Certificateholders....................... 117
12.04. Governing Law.................................................... 118
12.05. Notices.......................................................... 118
12.06. Severability of Provisions....................................... 119
12.07. Notice to Rating Agencies and Certificate Insurer................ 119
12.08. Article and Section References................................... 120
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<PAGE>
EXHIBITS
Exhibit A-1 Form of Class A1-1 Certificate
Exhibit A-2 Form of Class A1-2 Certificate
Exhibit A-3 Form of Class A1-3 Certificate
Exhibit A-4 Form of Class A1-4 Certificate
Exhibit A-5 Form of Class A2-1 Certificate
Exhibit A-6 Form of Class R Certificate
Exhibit B Form of Financial Guaranty Insurance Policy
Exhibit C-1 Form of Trustee's Initial Certification
Exhibit C-2 Form of Trustee's Final Certification
Exhibit D Form of Mortgage Loan Purchase Agreement
Exhibit E-1 Request for Release
Exhibit E-2 Request for Release Mortgage Loans paid in full
Exhibit F-1 Form of Transferor Representation Letter and Form of
Transferee Representation Letter in Connection with
Transfer of Class B Certificates and Class C Certificates
Pursuant to Rule 144A Under the 1933 Act
Exhibit F-2 Form of Transfer Affidavit and Agreement and Form of
Transferor Affidavit in Connection with Transfer of
Residual Certificates
Exhibit G [Intentionally Omitted]
Exhibit H Form of Lost Note Affidavit
Schedule 1 Mortgage Loan Schedule
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This Pooling and Servicing Agreement, is dated and effective as
of June 1, 1996, among SALOMON BROTHERS MORTGAGE SECURITIES VII, INC., as
Depositor, BERKELEY FEDERAL BANK & TRUST FSB, as Master Servicer, and THE BANK
OF NEW YORK, as Trustee.
PRELIMINARY STATEMENT:
The Depositor intends to sell pass-through certificates
(collectively, the "Certificates"), to be issued hereunder in multiple classes,
which in the aggregate will evidence the entire beneficial ownership interest in
the Trust Fund created hereunder.
As provided herein, the Trustee will elect to treat the
segregated pool of assets consisting of the Mortgage Loans and certain other
related assets subject to this Agreement as a real estate mortgage investment
conduit (a "REMIC") for federal income tax purposes. The Class R Certificates
will be the sole class of "residual interests" in the REMIC for purposes of the
REMIC Provisions. The Class A1-1 Certificates, the Class A1-2 Certificates, the
Class A1- 3 Certificates, the Class A1-4 Certificates and the Class A2-1
Certificates will be the "regular interests" in the REMIC.
The following table irrevocably sets forth the Pass-Through Rate,
initial Certificate Principal Balance and "latest possible maturity date" for
the respective Classes of Certificates.
<TABLE>
<CAPTION>
Initial Aggregate Latest Possible
DESCRIPTION PASS-THROUGH RATE CERTIFICATE PRINCIPAL BALANCE MATURITY DATE(1)
----------- ----------------- ----------------------------- ----------------
<S> <C> <C> <C>
Class A1-1 6.85% $24,000,000 July 25, 2026
Class A1-2 7.45% $13,000,000 July 25, 2026
Class A1-3 7.80% $6,700,000 July 25, 2026
Class A1-4 8.10% $8,819,446 July 25, 2026
Class A2-1 Variable(2) $77,542,350 July 25, 2026
Class R N/A $ 0 July 25, 2026
</TABLE>
(1) Solely for purposes of Section 1.860G-1(a)(4)(iii) of the Treasury
regulations, the Distribution Date immediately following the maturity
date for the Mortgage Loans with the latest maturity date has been
designated as the "latest possible maturity date" for each Class of
Certificates.
(2) Calculated in accordance with the definition of "Pass-Through Rate"
herein.
As of the Cut-off Date, the Original Mortgage Loans had an
aggregate Scheduled Principal Balance equal to $130,061,796.
In consideration of the mutual agreements herein contained, the
Depositor, the Master Servicer and the Trustee agree as follows:
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ARTICLE I
DEFINITIONS
SECTION 1.01. Defined Terms.
Whenever used in this Agreement, including, without limitation,
in the Preliminary Statement hereto, the following words and phrases, unless the
context otherwise requires, shall have the meanings specified in this Article.
Unless otherwise specified, all calculations described herein shall be made on
the basis of a 360-day year consisting of twelve 30-day months.
"Accrued Certificate Interest": With respect to each Distribution
Date, as to any Class A Certificate, one month's interest accrued during the
related Interest Accrual Period at the Pass-Through Rate for such Certificate
for such Distribution Date on the Certificate Principal Balance of such
Certificate immediately prior to such Distribution Date. All distributions of
interest on the Group 1 Class A Certificates will be calculated on the basis of
a 360-day year consisting of twelve 30-day months. All distributions of interest
on the Group 2 Class A Certificates will be calculated on the basis of a 360-day
year and the actual number of days in the applicable Interest Accrual Period.
Accrued Certificate Interest with respect to each Distribution Date, as to any
Class A Certificate, shall be reduced by an amount equal to the portion
allocable to such Certificate pursuant to Section 1.02 hereof of the sum of (a)
the aggregate Prepayment Interest Shortfall, if any, for such Distribution Date
to the extent not covered by payments pursuant to Section 3.24 and (b) the
aggregate amount of any Relief Act Shortfall, if any, for such Distribution
Date.
"Adjustment Date": With respect to each Mortgage Loan in Sub-Pool
2, each Adjustment Date, which is the first day of the month in which the
Mortgage Rate of a Mortgage Loan in Sub-Pool 2 changes pursuant to the related
Mortgage Note. The first Adjustment Date following the Cut-off Date as to each
Mortgage Loan in Sub-Pool 2 is set forth in the Mortgage Loan Schedule.
"Affiliate": With respect to any specified Person, any other
Person controlling or controlled by or under common control with such specified
Person. For the purposes of this definition, "control" when used with respect to
any specified Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Agreement": This Pooling and Servicing Agreement and all
amendments hereof and supplements hereto.
"Assignment": An assignment of Mortgage, notice of transfer or
equivalent instrument, in recordable form, which is sufficient under the laws of
the jurisdiction wherein the related Mortgaged Property is located to reflect of
record the sale of the Mortgage.
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"Bankruptcy Amount": As of any date of determination, $100,000
minus the aggregate amount of Bankruptcy Losses on the Mortgage Loans, if any,
previously allocated to the Residual Certificates in accordance with Section
4.04.
"Bankruptcy Code": The Bankruptcy Reform Act of 1978 (Title 11 of
the United States Code), as amended.
"Bankruptcy Loss": With respect to any Mortgage Loan, a Realized
Loss resulting from a Deficient Valuation or Debt Service Reduction.
"Basis Risk Shortfall": With respect to the Group 2 Class A
Certificates and any Distribution Date on which the Pass-Through Rate thereon is
calculated pursuant to the definition thereof using the Sub-Pool 2 Available
Funds Pass-Through Rate, an amount equal to interest accrued during the related
Interest Accrual Period on the Certificate Principal Balance of the Group 2
Class A Certificates immediately prior to such Distribution Date at a rate equal
to the excess of (a) the lesser of (i) the One-Month LIBOR Pass-Through Rate for
such Distribution Date and (ii) the Maximum Group 2 Class A Pass-Through Rate
over (b) the Sub-Pool 2 Available Funds Pass-Through Rate for such Distribution
Date.
"Book-Entry Certificate": The Class A Certificates of any Class
for so long as the Certificates of such Class shall be registered in the name of
the Depository or its nominee.
"Business Day": Any day other than a Saturday, a Sunday or a day
on which banking or savings and loan institutions in the State of Florida or the
State of New York, or in the city in which the Corporate Trust Office of the
Trustee is located, are authorized or obligated by law or executive order to be
closed.
"Cash-Out Refinancing": A Refinanced Mortgage Loan the proceeds
of which were more than $1000 in excess of the principal balance of any existing
first mortgage or subordinate mortgage on the related Mortgaged Property and
related closing costs.
"Certificate": Any one of the Depositor's Asset-Backed Fixed Rate
and Floating Rate Certificates, Series 1996-3, Class A1-1, Class A1-2, Class
A1-3, Class A1-4, Class A2-1 or Class R, issued under this Agreement.
"Certificate Factor": With respect to any Class of Regular
Certificates as of any Distribution Date, a fraction, expressed as a decimal
carried to six places, the numerator of which is the aggregate Certificate
Principal Balance of such Class of Certificates on such Distribution Date (after
giving effect to any distributions of principal, and allocations of Realized
Losses, in reduction of the Certificate Principal Balance of such Class of
Certificates to be made on such Distribution Date), and the denominator of which
is the initial aggregate Certificate Principal Balance of such Class of
Certificates as of the Closing Date.
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"Certificate Insurer": Financial Security Assurance Inc., a stock
insurance company organized and created under the laws of the State of New York,
and any successors thereto.
"Certificate Insurer Default": The existence and continuance of
any of the following:
(a) The Certificate Insurer fails to make a payment
required under the Policy in accordance with its terms; or
(b)(i) the entry by a court having jurisdiction in the
premises of (A) a decree or order for relief in respect of the
Certificate Insurer in an involuntary case or proceeding under
any applicable United States federal or state bankruptcy,
insolvency, rehabilitation, reorganization or other similar law
or (B) a decree or order adjudging the Certificate Insurer a
bankrupt or insolvent, or approving as properly filed a petition
seeking reorganizing, rehabilitation, arrangement, adjustment or
composition of or in respect of the Certificate Insurer under any
applicable United States federal or state law, or appointing a
custodian, receiver, liquidator, rehabilitator, assignee,
trustee, sequestrator or other similar official of the
Certificate Insurer or of any substantial part of its property,
or ordering the winding-up or liquidation of its affairs, and the
continuance of any such decree or order for relief or any such
other decree or order unstayed and in effect for a period of 60
consecutive days; or
(ii) the commencement by the Certificate Insurer of a
voluntary case or proceeding under any applicable United States
federal or state bankruptcy, insolvency, reorganization or other
similar law or of any other case or proceeding to be adjudicated
a bankrupt or insolvent, or the consent of the Certificate
Insurer to the entry of a decree or order for relief in respect
of the Certificate Insurer in an involuntary case or proceeding
under any applicable United States federal or state bankruptcy,
insolvency case or proceeding against the Certificate Insurer, or
the filing by the Certificate Insurer of a petition or answer or
consent seeking reorganization or relief under any applicable
United States federal or state law, or the consent by the
Certificate Insurer to the filing of such petition or to the
appointment of or the taking possession by a custodian, receiver,
liquidator, assignee, trustee, sequestrator or similar official
of the Certificate Insurer or of any substantial part of its
property, or the making by the Certificate Insurer to pay debts
generally as they become due, or the admission by the Certificate
Insurer in writing of its inability to pay its debts generally as
they become due, or the taking of corporate action by the
Certificate Insurer in furtherance of any such action.
"Certificate Insurer Premium": The Policy premium payable
pursuant to Section 3.25(b) hereof.
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"Certificate Insurer Premium Rate": 0.18% per annum.
"Certificateholder" or "Holder": The Person in whose name a
Certificate is registered in the Certificate Register, and the Certificate
Insurer to the extent of Cumulative Insurance Payments, except that a
"disqualified organization" (as defined in Section 860E(e)(5) of the Code) or a
Non-United States Person shall not be a Holder of a Residual Certificate for any
purposes hereof and, solely for the purposes of giving any consent pursuant to
this Agreement, any Certificate registered in the name of the Depositor or the
Master Servicer or any Affiliate thereof shall be deemed not to be outstanding
and the Voting Rights to which it is entitled shall not be taken into account in
determining whether the requisite percentage of Voting Rights necessary to
effect any such consent has been obtained, except as otherwise provided in
Section 12.01. The Trustee may conclusively rely upon a certificate of the
Depositor or the Master Servicer in determining whether a Certificate is held by
an Affiliate thereof. All references herein to "Holders" or "Certificateholders"
shall reflect the rights of Certificate Owners as they may indirectly exercise
such rights through the Depository and participating members thereof, except as
otherwise specified herein; provided, however, that the Trustee shall be
required to recognize as a "Holder" or "Certificateholder" only the Person in
whose name a Certificate is registered in the Certificate Register.
"Certificate Owner": With respect to a Book-Entry Certificate,
the Person who is the beneficial owner of such Certificate as reflected on the
books of the Depository or on the books of a Depository Participant or on the
books of an indirect participating brokerage firm for which a Depository
Participant acts as agent.
"Certificate Principal Balance": With respect to each Class A
Certificate as of any date of determination, the Certificate Principal Balance
of such Class A Certificate on the Distribution Date immediately prior to such
date of determination, minus all distributions allocable to principal made
thereon and Realized Losses allocated thereto on such immediately prior
Distribution Date (or, in the case of any date of determination up to and
including the first Distribution Date, the initial Certificate Principal Balance
of such Class A Certificate, as stated on the face thereof). With respect to
each Class R Certificate, on any date of determination, an amount equal to the
Percentage Interest evidenced by such Certificate times the excess, if any, of
(A) the then aggregate Stated Principal Balance of the Mortgage Loans over (B)
the then aggregate Certificate Principal Balance of all Class A Certificates
then outstanding.
"Certificate Register" and "Certificate Registrar": The register
maintained and the registrar appointed pursuant to Section 5.02.
"Class": Collectively, all of the Certificates bearing the same
class designation.
"Class A Certificate": Any Class A1-1 Certificate, Class A1-2
Certificate, Class A1-3 Certificate, Class A1-4 Certificate or Class A2-1
Certificate.
"Class A1-1 Certificate": Any one of the Class A1-1 Certificates
executed by the Trustee, and authenticated and delivered by the Certificate
Registrar, substantially in the form
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annexed hereto as Exhibit A-1 and evidencing a Regular Interest in the Trust
Fund for purposes of the REMIC Provisions.
"Class A1-2 Certificate": Any one of the Class A1-2 Certificates
executed by the Trustee, and authenticated and delivered by the Certificate
Registrar, substantially in the form annexed hereto as Exhibit A-2 and
evidencing a Regular Interest in the Trust Fund for purposes of the REMIC
Provisions.
"Class A1-3 Certificate": Any one of the Class A1-3 Certificates
executed by the Trustee, and authenticated and delivered by the Certificate
Registrar, substantially in the form annexed hereto as Exhibit A-3 and
evidencing a Regular Interest in the Trust Fund for purposes of the REMIC
Provisions.
"Class A1-4 Certificate": Any one of the Class A1-4 Certificates
executed by the Trustee, and authenticated and delivered by the Certificate
Registrar, substantially in the form annexed hereto as Exhibit A-4 and
evidencing a Regular Interest in the Trust Fund for purposes of the REMIC
Provisions.
"Class A2-1 Certificate": Any one of the Class A2-1 Certificates
executed by the Trustee, and authenticated and delivered by the Certificate
Registrar, substantially in the form annexed hereto as Exhibit A-5 and
evidencing a Regular Interest in the Trust Fund for purposes of the REMIC
Provisions.
"Class R Certificate": Any one of the Class R Certificates
executed by the Trustee, and authenticated and delivered by the Certificate
Registrar, substantially in the form annexed hereto as Exhibit A-6 and
evidencing the Residual Interest in the Trust Fund for purposes of the REMIC
Provisions.
"Closing Date": June 27, 1996.
"Code": The Internal Revenue Code of 1986.
"Collection Account": The account or accounts created and
maintained by the Master Servicer pursuant to Section 3.10(a), which shall be
entitled "Berkeley Federal Bank & Trust FSB, as Master Servicer for The Bank of
New York, as Trustee, in trust for (A) registered holders of Salomon Brothers
Mortgage Securities VII, Inc., Asset-Backed Fixed Rate and Floating Rate
Certificates, Series 1996-3, and (B) Financial Security Assurance Inc." and
which must be an Eligible Account.
"Combined Loan-to-Value Ratio": As of any date and Mortgage Loan
which is secured by a Mortgaged Property which also secures the repayment of a
subordinated second mortgage loan, the fraction, expressed as a percentage, the
numerator of which is the sum of (a) the original principal balance of the
Mortgage Loan, plus (b) the unpaid principal balance of any second mortgage loan
secured by the Mortgaged Property as of such date, and the denominator of which
is the Value of the related Mortgaged Property.
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"Corporate Trust Office": The principal corporate trust office of
the Trustee at which at any particular time its corporate trust business in
connection with this Agreement shall be administered, which office at the date
of the execution of this instrument is located at 101 Barclay Street, 12 East,
New York, New York 10286, Attention: Corporate Trust MBS, or at such other
address as the Trustee may designate from time to time by notice to the
Certificateholders, the Depositor, the Master Servicer and the Certificate
Insurer.
"Cumulative Insurance Payments": As of any time of determination,
the aggregate of all Insured Payments previously made by the Certificate Insurer
under the Policy plus interest thereon from the date such amount became due
until paid in full, at a rate of interest calculated as provided in the
Insurance Agreement minus the sum of (i) all payments previously made to the
Certificate Insurer pursuant to Section 4.01 hereof as reimbursement for such
amounts and (ii) any payments made by the Certificate Insurer attributable to
Excess Bankruptcy Losses, Excess Fraud Losses, Excess Special Hazard Losses and
Excess Extraordinary Losses.
"Cumulative Loss Percentage": For any Distribution Date, the
percentage equivalent of a fraction, the numerator of which is aggregate amount
of Realized Losses incurred from and including the first Prepayment Period to
and including the most recently ended Prepayment Period, and the denominator of
which is the aggregate Stated Principal Balance of the Mortgage Loans as of the
Cut-off Date.
"Cut-off Date": With respect to each Original Mortgage Loan, June
1, 1996. With respect to all Qualified Substitute Mortgage Loans, their
respective dates of substitution. References herein to the "Cut-off Date", when
used with respect to more than one Mortgage Loan, shall be to the respective
Cut-off Dates for such Mortgage Loans.
"Debt Service Reduction": With respect to any Mortgage Loan, a
reduction in the scheduled Monthly Payment for such Mortgage Loan by a court of
competent jurisdiction in a proceeding under the Bankruptcy Code, except such a
reduction resulting from a Deficient Valuation.
"Deficiency Amount": With respect to the Class A Certificates as
of any Distribution Date (i) any shortfall in amounts available in the
Distribution Account to pay interest on each Class of Class A Certificates for
the related Interest Accrual Period on the Certificate Principal Balance of such
Class at the then applicable Pass-Through Rate for such class, net of any
Prepayment Interest Shortfalls and Relief Act Interest Shortfalls allocated to
such Class, (ii) the principal portion of any Realized Loss allocated to the
Class A Certificates of any Class, and, without duplication, the excess, if any,
of (a) the aggregate Certificate Principal Balances of all the Class A
Certificates then outstanding over (b) the aggregate Stated Principal Balances
of the Mortgage Loans then outstanding, and (iii) without duplication of the
amount specified in clause (ii), the aggregate Certificate Principal Balance of
the Class A Certificates to the extent unpaid on the final Distribution Date or
earlier termination of the Trust Fund pursuant to the terms of this Agreement.
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"Deficiency Event": The inability of the Trustee to make the
Guaranteed Distribution on any Distribution Date due to a shortage of funds for
such purpose then held in the Distribution Account and the failure of the
Certificate Insurer to pay in full a claim made in accordance with Policy with
respect to such Distribution Date.
"Deficient Valuation": With respect to any Mortgage Loan, a
valuation of the related Mortgaged Property by a court of competent jurisdiction
in an amount less than the then outstanding principal balance of the Mortgage
Loan, which valuation results from a proceeding initiated under the Bankruptcy
Code.
"Definitive Certificates": As defined in Section 5.01(b).
"Deleted Mortgage Loan": A Mortgage Loan replaced or to be
replaced by a Qualified Substitute Mortgage Loan.
"Delinquency Percentage": As of the last day of any Due Period,
the percentage equivalent of a fraction, the numerator of which equals the
aggregate Stated Principal Balances of all Mortgage Loans that are 60 or more
days Delinquent, in foreclosure or converted to REO Properties as of such last
day of such Due Period, and the denominator of which is the aggregate Stated
Principal Balance of the Mortgage Loans as of the last day of such Due Period.
"Depositor": Salomon Brothers Mortgage Securities VII, Inc., a
Delaware corporation, or its successor in interest.
"Depository": The Depository Trust Company, or any successor
Depository hereafter named. The nominee of the initial Depository for purposes
of registering those Certificates that are to be Book-Entry Certificates, is
CEDE & Co. The Depository shall at all times be a "clearing corporation" as
defined in Section 8-102(3) of the Uniform Commercial Code of the State of New
York and a "clearing agency" registered pursuant to the provisions of Section
17A of the Securities Exchange Act of 1934, as amended.
"Depository Institution": Any depository institution or trust
company, including the Trustee, that (a) is incorporated under the laws of the
United States of America or any State thereof, (b) is subject to supervision and
examination by federal or state banking authorities and (c) has outstanding
unsecured commercial paper or other short-term unsecured debt obligations (or,
in the case of a depository institution that is the principal subsidiary of a
holding company, such holding company has unsecured commercial paper or other
short-term unsecured debt obligations) that are rated P-1 by Moody's and A-1 by
S&P (or comparable ratings if Moody's and S&P are not the Rating Agencies).
"Depository Participant": A broker, dealer, bank or other
financial institution or other Person for whom from time to time a Depository
effects book-entry transfers and pledges of securities deposited with the
Depository.
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"Determination Date": With respect to each Distribution Date, the
15th day of the calendar month in which such Distribution Date occurs or, if
such 15th day is not a Business Day, the Business Day immediately preceding such
15th day.
"Directly Operate": With respect to any REO Property, the
furnishing or rendering of services to the tenants thereof, the management or
operation of such REO Property, the holding of such REO Property primarily for
sale to customers, the performance of any construction work thereon or any use
of such REO Property in a trade or business conducted by the Trust Fund other
than through an Independent Contractor; provided, however, that the Trustee (or
the Master Servicer on behalf of the Trustee) shall not be considered to
Directly Operate an REO Property solely because the Trustee (or the Master
Servicer on behalf of the Trustee) establishes rental terms, chooses tenants,
enters into or renews leases, deals with taxes and insurance, or makes decisions
as to repairs or capital expenditures with respect to such REO Property.
"Disqualified Organization": Any of the following: (i) the United
States, any State or political subdivision thereof, any possession of the United
States, or any agency or instrumentality of any of the foregoing (other than an
instrumentality which is a corporation if all of its activities are subject to
tax and, except for 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 (including the tax imposed by Section 511 of the Code on
unrelated business taxable income), (iv) rural electric and telephone
cooperatives described in Section 1381(a)(2)(C) of the Code and (v) any other
Person so designated by the Trustee based upon an Opinion of Counsel 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 a liability for any federal tax
imposed under the Code that would not otherwise be imposed but for the Transfer
of an Ownership Interest in a Residual Certificate to such Person. The terms
"United States", "State" and "international organization" shall have the
meanings set forth in Section 7701 of the Code or successor provisions.
"Distribution Account": The trust account or accounts created and
maintained by the Trustee pursuant to Section 3.10(b) which shall be entitled
"The Bank of New York, as Trustee, in trust for (A) registered holders of
Salomon Brothers Mortgage Securities VII, Inc., Asset-Backed Fixed Rate and
Floating Rate Certificates, Series 1996-3, and (B) Financial Security Assurance
Inc." and which must be an Eligible Account.
"Distribution Date": The 25th day of any month, or if such 25th
day is not a Business Day, the Business Day immediately following such 25th day,
commencing in July 1996.
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"Due Date": With respect to each Distribution Date, the first day
of the calendar month in which such Distribution Date occurs, which is the day
of the month on which the Monthly Payment is due on a Mortgage Loan, exclusive
of any days of grace.
"Due Period": With respect to any Distribution Date, the period
commencing on the second day of the calendar month preceding the calendar month
in which such Distribution Date occurs and ending on the related Due Date.
"Eligible Account": Any of (i) an account or accounts maintained
with a federal or state chartered depository institution or trust company the
short-term unsecured debt obligations of which (or, in the case of a depository
institution or trust company that is the principal subsidiary of a holding
company, the short-term unsecured debt obligations of such holding company) are
rated P-1 by Moody's and A-1 by S&P (or comparable ratings if Moody's and S&P
are not the Rating Agencies) at the time any amounts are held on deposit
therein, (ii) an account or accounts the deposits in which are fully insured by
the FDIC or (iii) a trust account or accounts maintained with the trust
department of a federal or state chartered depository institution or trust
company acting in its fiduciary capacity. Eligible Accounts may bear interest.
"Estate in Real Property": A fee simple estate in a parcel of
land.
"Excess Bankruptcy Loss": Any Bankruptcy Loss, or portion
thereof, which exceeds the then applicable Bankruptcy Amount.
"Excess Extraordinary Loss": With respect to either Sub-Pool, any
Extraordinary Loss, or portion thereof, which exceeds the then applicable
Extraordinary Loss Amount for such Sub-Pool.
"Excess Fraud Loss": With respect to either Sub-Pool, any Fraud
Loss, or portion thereof, which exceeds the then applicable Fraud Loss Amount
for such Sub-Pool.
"Excess Special Hazard Loss": With respect to either Sub-Pool,
any Special Hazard Loss, or portion thereof, that exceeds the then applicable
Special Hazard Amount for such Sub-Pool.
"Excess Subordinated Amount": With respect to either Group of
Class A Certificates and any Distribution Date, the excess, if any, of (i) the
Subordinated Amount for such Group for such Distribution Date over (ii) the
Required Subordinated Amount for such Group for such Distribution Date.
"Expense Account": The account established and maintained
pursuant to Section 3.25.
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"Expense Adjusted Mortgage Rate": With respect to any Mortgage
Loan in Sub- Pool 2, the then applicable Mortgage Rate thereon minus the sum of
(i) the Minimum Spread, (ii) the Trustee's Fee Rate and (iii) the Servicing Fee
Rate.
"Expense Adjusted Maximum Mortgage Rate": With respect to any
Mortgage Loan in Sub-Pool 2, the Maximum Mortgage Rate thereon minus the sum of
(i) the Minimum Spread, (ii) the Trustee's Fee Rate and (iii) the Servicing Fee
Rate.
"Extraordinary Loss": Any Realized Loss or portion thereof caused
by or resulting from:
(i) wear and tear, deterioration, rust or corrosion, mold, wet or dry
rot; inherent vice or latent defect; animals, birds, vermin,
insects;
(ii) smog, smoke, vapor, liquid or dust discharge from agricultural or
industrial operations; pollution; contamination;
(iii) settling, subsidence, cracking, shrinkage, bulging or expansion
of pavements, foundations, walls, floors, roofs or ceilings;
(iv) errors in design, faulty workmanship or faulty materials, unless
the collapse of the property or a part thereof ensues and then
only for the ensuing loss;
(v) nuclear or chemical reaction or nuclear radiation or radioactive
or chemical contamination, all whether controlled or uncontrolled
and whether such loss be direct or indirect, proximate or remote
or be in whole or in part caused by, contributed to or aggravated
by a peril covered by the definition of the term "Special Hazard
Loss";
(vi) hostile or warlike action in time of peace or war, including
action in hindering, combating or defending against an actual,
impending or expected attack by any government or sovereign
power, DE JURE, or DE FACTO, or by any authority maintaining or
using military, naval or air forces, or by military, naval or air
forces, or by an agent of any such government, power, authority
or forces;
(vii) any weapon of war employing atomic fission or radioactive forces
whether in time of peace or war, and
(viii) insurrection, rebellion, revolution, civil war, usurped power or
action taken by governmental authority in hindering, combating or
defending against such an occurrence, seizure or destruction
under quarantine or customs regulations, confiscation by order of
any government or public authority, or risks of contraband or
illegal transactions or trade.
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"Extraordinary Loss Amount": With respect to Sub-Pool 1 or Sub-Pool
2 as of any date of determination, $52,685 or $78,617, respectively, in each
case minus the aggregate amount of Extraordinary Losses on the Mortgage Loans in
such Sub-Pool, if any, previously allocated to the Residual Certificates in
accordance with Section 4.04.
"FDIC": Federal Deposit Insurance Corporation or any successor
thereto.
"FHLMC": Federal Home Loan Mortgage Corporation or any successor
thereto.
"Final Recovery Determination": With respect to any defaulted
Mortgage Loan or any REO Property (other than a Mortgage Loan or REO Property
purchased by the Mortgage Loan Seller, the Depositor, the Master Servicer or the
Certificate Insurer pursuant to or as contemplated by Section 2.03, 3.16(c) or
10.01), a determination made by the Master Servicer that all Insurance Proceeds,
Liquidation Proceeds and other payments or recoveries which the Master Servicer,
in its reasonable good faith judgment, expects to be finally recoverable in
respect thereof have been so recovered. The Master Servicer shall maintain
records, prepared by a Servicing Officer, of each Final Recovery Determination
made thereby.
"FNMA": Federal National Mortgage Association or any successor
thereto.
"Fraud Loss": Any Realized Loss or portion thereof sustained by
reason of a default arising from intentional fraud, dishonesty or
misrepresentation in connection with the related Mortgage Loan.
"Fraud Loss Amount": With respect to Sub-Pool 1 or Sub-Pool 2 as of
any date of determination after the Cut-off Date, an amount equal to: (X) prior
to the first anniversary of the Cut-off Date, 3.00% (initially, $1,580,547 and
$2,358,512, respectively) of the aggregate outstanding principal balance of all
of the Mortgage Loans in such Sub-Pool as of the Cut-off Date minus the
aggregate amount of Fraud Losses on the Mortgage Loans in such Sub-Pool
allocated solely to the Residual Certificates in accordance with Section 4.04
since the Cut-off Date up to such date of determination, (Y) from the first to
the second anniversary of the Cut-off Date, (1) the lesser of (a) the Fraud Loss
Amount for such Sub-Pool as of the most recent anniversary of the Cut-off Date
and (b) 2.00% of the aggregate outstanding principal balance of all of the
Mortgage Loans in such Sub-Pool as of the most recent anniversary of the Cut-off
Date minus (2) the Fraud Losses on the Mortgage Loans in such Sub-Pool allocated
solely to the Residual Certificates in accordance with Section 4.04 since the
most recent anniversary of the Cut-off Date up to such date of determination and
(Z) from the second anniversary to the fifth anniversary of the Cut-off Date,
(1) the lesser of (a) the Fraud Loss Amount for such SubPool as of the most
recent anniversary of the Cut-off Date and (b) 1.00% of the aggregate
outstanding principal balance of all of the Mortgage Loans in such Sub-Pool as
of the most recent anniversary of the Cut-off Date minus (2) the Fraud Losses on
the Mortgage Loans in such Sub-Pool allocated solely to the Residual
Certificates in accordance with Section 4.04 since the most recent anniversary
of the Cut-off Date up to such date of determination. On and after the fifth
anniversary of the Cut-off Date, the Fraud Loss Amount for each Sub-Pool shall
be zero.
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"Group": With respect to the Class A Certificates, all such Class A
Certificates relating to the same Mortgage Pool.
"Group 1 Class A Certificate": Any Class A1-1 Certificate, Class
A1-2 Certificate, Class A1-3 Certificate or Class A1-4 Certificate.
"Group 1 Class A Principal Distribution Amount": With respect to any
Distribution Date, the lesser of:
(a)the excess of (x) the sum of (A) the related Sub-Pool Available
Distribution Amount and (B) any Net Monthly Excess Cashflow
payable to the Group 1 Class A Certificates to the extent not
included in the amount described in clause (A) above over (y) the
amount payable on the Group 1 Class A Certificates pursuant to
Section 4.01(a)(i); and
(b)THE SUM OF:
(i) the principal portion of each Monthly Payment due during the
related Due Period, to the extent received or advanced, on each
Mortgage Loan in Sub-Pool 1;
(ii) the Stated Principal Balance of any Mortgage Loan in
Sub-Pool 1 that was purchased during the related Prepayment
Period pursuant to or as contemplated by Section 2.03, 3.16(b),
3.26 or 10.01 and the amount of any shortfall deposited in the
Collection Account in connection with the substitution with
respect to SubPool 1 of a Deleted Mortgage Loan pursuant to
Section 2.03 during the related Prepayment Period;
(iii) the principal portion of all other unscheduled collections
from Sub-Pool 1 (including, without limitation, Principal
Prepayments, Insurance Proceeds, Liquidation Proceeds and REO
Principal Amortization) received during the related Prepayment
Period, net of any portion thereof that represents a recovery of
principal for which an advance was made by a Master Servicer
pursuant to Section 4.03 in respect of a preceding Distribution
Date; and
(iv) the principal portion of any Realized Losses incurred (or
deemed to have been occurred) on any Mortgage Loans in Sub-Pool 1
in the calendar month preceding such Distribution Date to the
extent covered by Net Monthly Excess Cashflow for such
Distribution Date; and
(v) the amount of any Subordination Increase Amount for the
Group 1 Class A Certificates for such Distribution Date;
MINUS:
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(vi) the amount of any Subordination Reduction Amount for the
Group 1 Class A Certificates for such Distribution Date.
"Group 2 Class A Certificate": Any Class A2-1 Certificate.
"Group 2 Class A Principal Distribution Amount": With respect to any
Distribution Date, the lesser of:
(a)the excess of (x) the sum of (A) the related Sub-Pool Available
Distribution Amount and (B) any Net Monthly Excess Cashflow
payable to the Group 2 Class A Certificates to the extent not
included in the amount described in clause (A) above over (y) the
amount payable on the Group 2 Class A Certificates pursuant to
Section 4.01(a)(i); and
(b)THE SUM OF:
(i) the principal portion of each Monthly Payment due during the
related Due Period, to the extent received or advanced, on each
Mortgage Loan in Sub-Pool 2;
(ii) the Stated Principal Balance of any Mortgage Loan in
Sub-Pool 2 that was purchased during the related Prepayment
Period pursuant to or as contemplated by Section 2.03, 3.16(b),
3.26 or 10.01 and the amount of any shortfall deposited in the
Collection Account in connection with the substitution with
respect to SubPool 2 of a Deleted Mortgage Loan pursuant to
Section 2.03 during the related Prepayment Period;
(iii) the principal portion of all other unscheduled collections
from Sub-Pool 2 (including, without limitation, Principal
Prepayments, Insurance Proceeds, Liquidation Proceeds and REO
Principal Amortization) received during the related Prepayment
Period, net of any portion thereof that represents a recovery of
principal for which an advance was made by a Master Servicer
pursuant to Section 4.03 in respect of a preceding Distribution
Date; and
(iv) the principal portion of any Realized Losses incurred (or
deemed to have been occurred) on any Mortgage Loans in Sub-Pool 2
in the calendar month preceding such Distribution Date to the
extent covered by Net Monthly Excess Cashflow for such
Distribution Date; and
(v) the amount of any Subordination Increase Amount for the
Group 2 Class A Certificates for such Distribution Date;
MINUS:
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(vi) the amount of any Subordination Reduction Amount for the
Group 2 Class A Certificates for such Distribution Date.
"Gross Margin": With respect to each Mortgage Loan in Sub-Pool 2,
the fixed percentage set forth in the related Mortgage Note that is added to the
Index on each Adjustment Date in accordance with the terms of the related
Mortgage Note used to determine the Mortgage Rate for such Mortgage Loan.
"Guaranteed Distribution": As defined in the Policy.
"Independent": When used with respect to any specified Person, any
such Person who (a) is in fact independent of the Depositor, the Master Servicer
and their respective Affiliates, (b) does not have any direct financial interest
in or any material indirect financial interest in the Depositor or the Master
Servicer or any Affiliate thereof, and (c) is not connected with the Depositor
or the Master Servicer or any Affiliate thereof as an officer, employee,
promoter, underwriter, trustee, partner, director or Person performing similar
functions; provided, however, that a Person shall not fail to be Independent of
the Depositor or the Master Servicer or any Affiliate thereof merely because
such Person is the beneficial owner of 1% or less of any class of securities
issued by the Depositor or the Master Servicer or any Affiliate thereof, as the
case may be.
"Independent Contractor": Either (i) any Person (other than the
Master Servicer) that would be an "independent contractor" with respect to the
Trust Fund within the meaning of Section 856(d)(3) of the Code if the Trust Fund
were a real estate investment trust (except that the ownership tests set forth
in that section shall be considered to be met by any Person that owns, directly
or indirectly, 35 percent or more of any Class of Certificates), so long as the
Trust Fund does not receive or derive any income from such Person and provided
that the relationship between such Person and the Trust Fund is at arm's length,
all within the meaning of Treasury Regulation Section 1.856-4(b)(5), or (ii) any
other Person (including the Master Servicer) if the Trustee has received an
Opinion of Counsel to the effect that the taking of any action in respect of any
REO Property by such Person, subject to any conditions therein specified, that
is otherwise herein contemplated to be taken by an Independent Contractor will
not cause such REO Property to cease to qualify as "foreclosure property" within
the meaning of Section 860G(a)(8) of the Code (determined without regard to the
exception applicable for purposes of Section 860D(a) of the Code), or cause any
income realized in respect of such REO Property to fail to qualify as Rents from
Real Property.
"Index": With respect to each Mortgage Loan in Sub-Pool 2 and each
related Adjustment Date the average of the interbank offered rates for six-month
United States dollar deposits in the London market as published in THE WALL
STREET JOURNAL and as most recently available either (i) as of the first
business day 45 days prior to such Adjustment Date or (ii) as of the first
business day of the month preceding the month of such Adjustment Date, as
specified in the related Mortgage Note.
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"Insurance Agreement": The Insurance and Indemnity Agreement, dated
as of June 1, 1996, among the Depositor, the Master Servicer and the Certificate
Insurer, as amended or supplemented in accordance with the provisions thereof.
"Insurance Payment": Any payment made by the Certificate Insurer
under the Policy with respect to the Senior Certificates.
"Insurance Proceeds": Proceeds of any title policy, hazard policy or
other insurance policy covering a Mortgage Loan, to the extent such proceeds are
not to be applied to the restoration of the related Mortgaged Property or
released to the Mortgagor in accordance with the procedures that the Master
Servicer would follow in servicing mortgage loans held for its own account,
subject to the terms and conditions of the related Mortgage Note and Mortgage.
"Interest Accrual Period": With respect to any Distribution Date and
any Group 1 Class A Certificate, the one-month period ending on the last day of
the calendar month preceding the month in which such Distribution Date occurs.
With respect to any Distribution Date and any Group 2 Class A Certificate, the
one-month period commencing on the 25th day of the month immediately preceding
the month in which such Distribution Date occurs (or in the case of the first
Interest Accrual Period, commencing on the Closing Date) and ending on the 24th
day of the month in which such Distribution Date occurs.
"Interest Determination Date": With respect to the Group 2 Class A
Certificates and any Interest Accrual Period therefor, the second London
Business Day preceding the commencement of such Interest Accrual Period.
"Interest Distribution Amount": With respect to any Distribution
Date and any Class of Class A Certificates, the aggregate Accrued Certificate
Interest on the Certificates of such Class for such Distribution Date.
"Late Collections": With respect to any Mortgage Loan, all amounts
received subsequent to the Determination Date immediately following any Due
Period, whether as late payments of Monthly Payments or as Insurance Proceeds,
Liquidation Proceeds or otherwise, which represent late payments or collections
of principal and/or interest due (without regard to any acceleration of payments
under the related Mortgage and Mortgage Note) but delinquent for such Due Period
and not previously recovered.
"Liquidation Event": With respect to any Mortgage Loan, any of the
following events: (i) such Mortgage Loan is paid in full; (ii) a Final Recovery
Determination is made as to such Mortgage Loan; or (iii) such Mortgage Loan is
removed from the Trust Fund by reason of its being purchased, sold or replaced
pursuant to or as contemplated by Section 2.03, Section 3.16(c) or Section
10.01. With respect to any REO Property, either of the following events: (i) a
Final Recovery Determination is made as to such REO Property; or (ii) such REO
Property is removed from the Trust Fund by reason of its being purchased
pursuant to Section 10.01.
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"Liquidation Proceeds": The amount (other than Insurance Proceeds or
amounts received in respect of the rental of any REO Property prior to REO
Disposition) received by the Master Servicer in connection with (i) the taking
of all or a part of a Mortgaged Property by exercise of the power of eminent
domain or condemnation, (ii) the liquidation of a defaulted Mortgage Loan
through a trustee's sale, foreclosure sale or otherwise, or (iii) the
repurchase, substitution or sale of a Mortgage Loan or an REO Property pursuant
to or as contemplated by Section 2.03, Section 3.16(c), Section 3.23 or Section
10.01.
"Loan-to-Value Ratio": As of any date of determination, the
fraction, expressed as a percentage, the numerator of which is the principal
balance of the related Mortgage Loan at such date and the denominator of which
is the Value of the related Mortgaged Property.
"London Business Day": Any day on which banks in the City of London
are open and conducting transactions in United States dollars.
"Lost Note Affidavit": With respect to any Mortgage Loan as to which
the original Mortgage Note has been permanently lost or destroyed and has not
been replaced, an affidavit from the Mortgage Loan Seller certifying that the
original Mortgage Note has been lost, misplaced or destroyed (together with a
copy of the related Mortgage Note) in the form of Exhibit H hereto.
"Majority Class R Certificateholder": Any single Holder of Class R
Certificates representing a greater than 50% Percentage Interest in such Class.
"Master Servicer": Berkeley Federal Bank & Trust FSB, a federal
savings bank, or any successor master servicer appointed as herein provided, in
its capacity as Master Servicer hereunder.
"Master Servicer Event of Default": One or more of the events
described in Section 7.01.
"Master Servicer Remittance Date": With respect to any Distribution
Date, 3:00 p.m. New York Time on the 18th day of the calendar month in which
such Distribution Date occurs or, if such 18th day is not a Business Day, the
Business Day immediately preceding such 18th day.
"Maximum Group 2 Class A Pass-Through Rate": With respect to the
Group 2 Class A Certificates and each Distribution Date, a per annum rate equal
to the fraction, expressed as a percentage, the numerator of which is (i) an
amount equal to (A) 1/12 of the aggregate Scheduled Principal Balance of the
then outstanding Mortgage Loans and REO Properties in Sub-Pool 2 times the
weighted average of the Expense Adjusted Maximum Mortgage Rates on the then
outstanding Mortgage Loans and REO Properties in Sub-Pool 2 minus (B) the amount
of the Certificate Insurer Premium with respect to the Group 2 Class A
Certificates payable to the Certificate Insurer with respect to the Policy for
such Distribution Date, and the denominator of which is (ii) an amount equal to
the aggregate Scheduled Principal
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Balance of the then outstanding Mortgage Loans and REO Properties in Sub-Pool 2
multiplied by (B) the actual number of days elapsed in the related Interest
Accrual Period divided by 360.
"Maximum Mortgage Rate": With respect to each Mortgage Loan in
Sub-Pool 2, the percentage set forth in the related Mortgage Note as the maximum
Mortgage Rate thereunder.
"Minimum Mortgage Rate": With respect to each Mortgage Loan in
Sub-Pool 2, the percentage set forth in the related Mortgage Note as the minimum
Mortgage Rate thereunder.
"Minimum Spread": 0.50% per annum.
"Monthly Payment": With respect to any Mortgage Loan, the scheduled
monthly payment of principal and interest on such Mortgage Loan which is payable
by the related Mortgagor from time to time under the related Mortgage Note,
determined: (a) after giving effect to (i) any Deficient Valuation and/or Debt
Service Reduction with respect to such Mortgage Loan and (ii) any reduction in
the amount of interest collectible from the related Mortgagor pursuant to the
Relief Act; (b) without giving effect to any extension granted or agreed to by
the Master Servicer pursuant to Section 3.07; and (c) on the assumption that all
other amounts, if any, due under such Mortgage Loan are paid when due.
"Moody's": Moody's Investors Service, Inc. or its successor in
interest.
"Mortgage": The mortgage, deed of trust or other instrument creating
a first lien on, or first priority security interest in, a Mortgaged Property
securing a Mortgage Note.
"Mortgage File": The mortgage documents listed in Section 2.01
pertaining to a particular Mortgage Loan and any additional documents required
to be added to the Mortgage File pursuant to this Agreement.
"Mortgage Loan": Each mortgage loan transferred and assigned to the
Trustee pursuant to Section 2.01 or Section 2.03(d) as from time to time held as
a part of the Trust Fund, the Mortgage Loans so held being identified in the
Mortgage Loan Schedule.
"Mortgage Loan Purchase Agreement": The agreement among the Mortgage
Loan Seller and the Depositor, regarding the transfer of the Mortgage Loans by
the Mortgage Loan Seller to or at the direction of the Depositor, substantially
in the form of Exhibit D annexed hereto.
"Mortgage Loan Schedule": As of any date, the list of Mortgage Loans
included in the Trust Fund on such date, separately identifying the Mortgage
Loans in each Sub-Pool, attached hereto as Schedule 1. The Mortgage Loan
Schedule shall set forth the following information with respect to each Mortgage
Loan:
(i) the Mortgage Loan Seller's Mortgage Loan identifying number;
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(ii) the Mortgagor's name;
(iii) the street address of the Mortgaged Property including the state
and zip code;
(iv) a code indicating whether the Mortgaged Property is
owner-occupied;
(v) the type of Residential Dwelling constituting the Mortgaged
Property;
(vi) the original months to maturity;
(vii) the stated remaining months to maturity from the Cut-off Date
based on the original amortization schedule;
(viii) the Loan-to-Value Ratio at origination;
(ix) the Mortgage Rate in effect immediately following the Cut-off
Date;
(x) (A) the date on which the first Monthly Payment was due on the
Mortgage Loan and, (B) if such date is not consistent with the
Due Date currently in effect, such Due Date;
(xi) the stated maturity date;
(xii) the amount of the Monthly Payment at origination;
(xiii) the amount of the Monthly Payment due on the first Due Date after
the Cut-off Date;
(xiv) the last Due Date on which a Monthly Payment was actually applied
to the unpaid Stated Principal Balance;
(xv) the original principal amount of the Mortgage Loan;
(xvi) the Scheduled Principal Balance of the Mortgage Loan as of the
close of business on the Cut-off Date;
(xvii) in the case of each Mortgage Loan in Sub-Pool 2, the Adjustment
Dates;
(xviii) in the case of each Mortgage Loan in Sub-Pool 2, the Gross
Margin;
(xix) a code indicating the purpose of the Mortgage Loan (i.e.,
purchase financing, Rate/Term Refinancing, Cash-Out Refinancing);
(xx) in the case of each Mortgage Loan in Sub-Pool 2, the Maximum
Mortgage Rate;
(xxi) in the case of each Mortgage Loan in Sub-Pool 2, the Minimum
Mortgage Rate;
(xxii) the Mortgage Rate at origination;
(xxiii) in the case of each Mortgage Loan in Sub-Pool 2, the Periodic
Rate Cap and the maximum first Adjustment Date Mortgage Rate
adjustment;
(xxiv) a code indicating the documentation style (I.E., Full
Documentation, Lite Documentation or Stated Income
Documentation);
(xxv) in the case of each Mortgage Loan in Sub-Pool 2, the Index;
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(xxvi) in the case of each Mortgage Loan in Sub-Pool 2, the first
Adjustment Date immediately following the Cut-off Date;
(xxvii) the risk grade;
(xxviii) [intentionally omitted];
(xxix) [intentionally omitted];
(xxx) [intentionally omitted];
(xxxi) the Value of the Mortgaged Property;
(xxxii) the sale price of the Mortgaged Property, if applicable;
(xxxiii) the actual unpaid principal balance of the Mortgage Loan as of
the Cut-off Date;
(xxxiv) the prepayment penalty term;
(xxxv) [intentionally omitted];
(xxxvi) [intentionally omitted];
(xxxvii) in the case of each Mortgage Loan in Sub-Pool 2, the rounding
code (nearest 0.125%);
(xxxviii) whether the Mortgage Loan is assumable;
(xxxix) whether the Mortgage Loan has a due-on-sale clause; and
(xl) the program code.
The Mortgage Loan Schedule shall set forth the following
information, as of the Cut-off Date with respect to the Mortgage Loans in each
Sub-Pool: (1) the number of Mortgage Loans in such Sub-Pool; (2) the current
principal balance of the Mortgage Loans in such SubPool; (3) the weighted
average Mortgage Rate of the Mortgage Loans in such Sub-Pool; and (4) the
weighted average maturity of the Mortgage Loans in such Sub-Pool. The Mortgage
Loan Schedule shall be amended from time to time by the Depositor in accordance
with the provisions of this Agreement. With respect to any Qualified Substitute
Mortgage Loan, Cut-off Date shall refer to the related Cut-off Date for such
Mortgage Loan, determined in accordance with the definition of Cut-off Date
herein.
"Mortgage Loan Seller": Berkeley Federal Bank & Trust FSB, or its
successor in interest, in its capacity as seller under the Mortgage Loan
Purchase Agreement.
"Mortgage Note": The original executed note or other evidence of
indebtedness evidencing the indebtedness of a Mortgagor under a Mortgage Loan.
"Mortgage Pool": The pool of Mortgage Loans, consisting of
Sub-Pool 1 and Sub-Pool 2, identified on Schedule 1 from time to time, and any
REO Properties acquired in respect thereof.
"Mortgage Rate": With respect to each Mortgage Loan, the annual
rate at which interest accrues on such Mortgage Loan from time to time in
accordance with the provisions of the related Mortgage Note, which rate (i) in
the case of each Mortgage Loan in Sub-Pool 1 shall remain constant at the rate
set forth in the Mortgage Loan Schedule as the Mortgage Rate in
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effect immediately following the Cut-off Date and (ii) in the case of each
Mortgage Loan in SubPool 2 (A) as of any date of determination until the first
Adjustment Date following the Cut-off Date shall be the rate set forth in the
Mortgage Loan Schedule as the Mortgage Rate in effect immediately following the
Cut-off Date and (B) as of any date of determination thereafter shall be the
rate as adjusted on the most recent Adjustment Date, to equal the sum, rounded
to the nearest 0.125% as provided in the Mortgage Note, of the Index, as most
recently available as of a date prior to the Adjustment Date as set forth in the
related Mortgage Note, plus the related Gross Margin; provided that the Mortgage
Rate on such Mortgage Loan on any Adjustment Date shall never be more than the
lesser of (i) the sum of the Mortgage Rate in effect immediately prior to the
Adjustment Date plus the related Periodic Rate Cap, if any, and (ii) the related
Maximum Mortgage Rate, and shall never be less than the greater of (i) the
Mortgage Rate in effect immediately prior to the Adjustment Date less the
Periodic Rate Cap, if any, and (ii) the related Minimum Mortgage Rate. With
respect to each Mortgage Loan that becomes an REO Property, as of any date of
determination, the annual rate determined in accordance with the immediately
preceding sentence as of the date such Mortgage Loan became an REO Property.
"Mortgaged Property": The underlying property securing a Mortgage
Loan, including any REO Property, consisting of an Estate in Real Property
improved by a Residential Dwelling.
"Mortgagor": The obligor on a Mortgage Note.
"Net Monthly Excess Cashflow": With respect to any Distribution
Date, an amount equal to the sum for such Distribution Date of the Sub-Pool Net
Monthly Excess Cashflow for Sub-Pool 1 and the Sub-Pool Net Monthly Excess
Cashflow for Sub-Pool 2.
"Net Mortgage Rate": With respect to any Mortgage Loan (or the
related REO Property), as of any date of determination, a per annum rate of
interest equal to the then applicable Mortgage Rate for such Mortgage Loan minus
the Servicing Fee Rate.
"New Lease": Any lease of REO Property entered into on behalf of
the Trust Fund, including any lease renewed or extended on behalf of the Trust
Fund if the Trust Fund has the right to renegotiate the terms of such lease.
"Nonrecoverable P&I Advance": Any P&I Advance previously made or
proposed to be made in respect of a Mortgage Loan or REO Property that, in the
good faith business judgment of the Master Servicer, will not or, in the case of
a proposed P&I Advance, would not be ultimately recoverable from related late
payments, Insurance Proceeds or Liquidation Proceeds on such Mortgage Loan or
REO Property as provided herein.
"Non-United States Person": Any Person other than a United States
Person.
"Officers' Certificate": A certificate signed by the Chairman of
the Board, the Vice Chairman of the Board, the President or a vice president
(however denominated), and by the Treasurer, the Secretary, or one of the
assistant treasurers or assistant secretaries of the Master Servicer, the
Mortgage Loan Seller or the Depositor, as applicable.
"One-Month LIBOR": With respect to the Group 2 Class A
Certificates and any Interest Accrual Period therefor, the rate determined by
the Trustee on the related Interest Determination Date on the basis of the
offered rates of the Reference Banks for one-month U.S. dollar deposits, as such
rates appear on the Reuters Screen LIBO Page, as of 11:00 A.M.
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(London time) on such Interest Determination Date. On each Interest
Determination Date, OneMonth LIBOR for the related Interest Accrual Period will
be established by the Trustee as follows:
(i) If on such Interest Determination Date two or more Reference
Banks provide such offered quotations, One-Month LIBOR for the
related Interest Accrual Period shall be the arithmetic mean of
such offered quotations (rounded upwards if necessary to the
nearest whole multiple of 1/16%).
(ii) If on such Interest Determination Date fewer than two Reference
Banks provide such offered quotations, One-Month LIBOR for the
related Interest Accrual Period shall be the higher of (i) LIBOR
as determined on the previous Interest Determination Date and
(ii) the Reserve Interest Rate.
"One-Month LIBOR Pass-Through Rate": With respect to the Group 2
Class A Certificates and any Distribution Date, a per annum rate equal to
One-Month LIBOR plus 0.38%, in the case of each Distribution Date through and
including the Distribution Date on which the aggregate Stated Principal Balance
of the Mortgage Loans is reduced to 10% or less of the aggregate Stated
Principal Balance of the Mortgage Loans as of the Cut-off Date, or OneMonth
LIBOR plus 1.38% per annum, in the case of any Distribution Date thereafter.
"Opinion of Counsel": A written opinion of counsel, who may,
without limitation, be salaried counsel for the Depositor or the Master Servicer
acceptable to the Trustee and the Certificate Insurer, 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 Independent counsel.
"Original Mortgage Loan": Any of the Mortgage Loans included in
the Trust Fund as of the Closing Date.
"Ownership Interest": As to any Certificate, any ownership or
security interest in such Certificate, including any interest in such
Certificate as the Holder thereof and any other interest therein, whether direct
or indirect, legal or beneficial, as owner or as pledgee.
"Pass-Through Rate": With respect to the Group 1 Class A
Certificates of each Class and any Distribution Date, the fixed rate per annum
set forth in the Preliminary Statement hereof. With respect to the Group 2 Class
A Certificates and any Distribution Date, a rate per annum equal to the lesser
of (i) the One-Month LIBOR Pass-Through Rate for such Distribution Date and (ii)
the Sub-Pool 2 Available Funds Pass-Through Rate for such Distribution Date.
"Percentage Interest": With respect to any Class A Certificate,
the undivided percentage ownership in such Class evidenced by such Certificate,
expressed as a percentage, the numerator of which is the initial Certificate
Principal Balance represented by such Certificate and the denominator of which
is the aggregate initial Certificate Principal Balance of all of the
Certificates of such Class. The Class A Certificates are issuable only in
minimum Percentage Interests corresponding to minimum initial Certificate
Principal Balances of $1,000 and increments of $1.00 in excess thereof. With
respect to any Class R Certificate, the undivided percentage ownership in such
Class evidenced by such Certificate, as set forth on the face of such Class R
Certificate. The Class R Certificates are issuable only in minimum Percentage
Interests of 25%.
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"Periodic Rate Cap": With respect to each Mortgage Loan in
Sub-Pool 2 and any Adjustment Date therefor, the fixed percentage set forth in
the related Mortgage Note, which is the maximum amount by which the Mortgage
Rate for such Mortgage Loan may increase or decrease (without regard to the
Maximum Mortgage Rate or the Minimum Mortgage Rate) on such Adjustment Date from
the Mortgage Rate in effect immediately prior to such Adjustment Date.
"Permitted Investments": Any one or more of the following
obligations or securities acquired at a purchase price of not greater than par,
regardless of whether issued by the Depositor, the Master Servicer, the Trustee
or any of their respective Affiliates:
(i) direct obligations of, or obligations fully guaranteed
as to timely payment of principal and interest by, the United States or
any agency or instrumentality thereof, provided such obligations are
backed by the full faith and credit of the United States, provided,
however, that any obligation of, or guaranteed by, FHLMC or FNMA, other
than a senior debt or a mortgage participation or pass-through
certificate guaranteed by FHLMC or FNMA shall be a Permitted Investment
only if, at the time of investment, such investment is acceptable to the
Certificate Insurer.
(ii) demand and time deposits in, certificates of
deposit of, or bankers'acceptances issued by, any Depository
Institution;
(iii) repurchase obligations with respect to any security
described in clause (i) above entered into with a Depository Institution
(acting as principal);
(iv) securities bearing interest or sold at a discount
that are issued by any corporation incorporated under the laws of the
United States of America or any State thereof and that are rated by each
Rating Agency in its highest long-term unsecured rating categories at
the time of such investment or contractual commitment providing for such
investment;
(v) commercial paper (including both non-interest-bearing
discount obligations and interest-bearing obligations payable on demand
or on a specified date not more than 30 days after the date of
acquisition thereof) that is rated by each Rating Agency in its highest
short-term unsecured debt rating available at the time of such
investment;
(vi) units of money market funds that have been rated
"Aaa" by Moody's and "AAA" by S&P; and
(viii) if previously confirmed in writing to the Trustee,
any other demand, money market or time deposit, or any other obligation,
security or investment, as may be acceptable to the Rating Agencies and
the Certificate Insurer as a permitted investment of funds backing
securities having ratings equivalent to its highest initial rating of
any Class of Senior Certificates;
provided that no instrument described hereunder shall evidence either the right
to receive (a) only interest with respect to the obligations underlying such
instrument or (b) both principal and interest payments derived from obligations
underlying such instrument and the interest and principal payments with respect
to such instrument provide a yield to maturity at par greater than 120% of the
yield to maturity at par of the underlying obligations.
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"Permitted Transferee": Any Transferee of a Residual Certificate
other than a Disqualified Organization or Non-United States Person.
"Person": Any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"P&I Advance": As to any Mortgage Loan or REO Property, any
advance made by the Master Servicer in respect of any Distribution Date pursuant
to Section 4.03.
"Policy": The Financial Guaranty Insurance Policy (No. 50481-N)
issued by the Certificate Insurer relating to the Class A Certificates,
including any endorsements thereto, attached hereto as Exhibit B.
"Policy Payments Account": The account established pursuant to
Section 9.04 hereof.
"Prepayment Assumption": A prepayment rate for the Mortgage Loans
in SubPool 1 of a 100% Prepayment Vector and a prepayment rate for the Mortgage
Loans in SubPool 2 of 20% CPR. The Prepayment Assumption is used solely for
determining the accrual of original issue discount on the Certificates for
federal income tax purposes. A 100% Prepayment Vector assumes that the
outstanding balance of a pool of mortgage loans prepays at a rate of 6.25% CPR
in the first month of the life of such pool, such rate increasing by an
additional approximate 1.70% CPR each month thereafter through the twelfth month
of the life of such pool, and such rate thereafter remaining at 25% CPR for the
remainder of the life of such pool. A CPR (or Constant Prepayment Rate)
represents an annualized constant assumed rate of prepayment each month of a
pool of mortgage loans relative to its outstanding principal balance for the
life of such pool.
"Prepayment Interest Shortfall": With respect to any Distribution
Date, for each Mortgage Loan that was during the related Prepayment Period the
subject of a Principal Prepayment in full or in part that was applied by the
Master Servicer to reduce the outstanding principal balance of such loan on a
date preceding the Due Date in the succeeding Prepayment Period, an amount equal
to interest at the applicable Net Mortgage Rate on the amount of such Principal
Prepayment for the number of days commencing on the date on which the prepayment
is applied and ending on the last day of the related Prepayment Period. The
obligations of the Master Servicer in respect of any Prepayment Interest
Shortfall are set forth in Section 3.24.
"Prepayment Period": With respect to any Distribution Date, the
calendar month preceding the calendar month in which such Distribution Date
occurs.
"Principal Prepayment": Any payment of principal made by the
Mortgagor on a Mortgage Loan which is received in advance of its scheduled Due
Date and which is not accompanied by an amount of interest representing the full
amount of scheduled interest due on any Due Date in any month or months
subsequent to the month of prepayment.
"Purchase Price": With respect to any Mortgage Loan or REO
Property to be purchased pursuant to or as contemplated by Section 2.03, 3.16(c)
or 10.01, and as confirmed by an Officers' Certificate from the Master Servicer
to the Trustee, an amount equal to the sum of (i) 100% of the Stated Principal
Balance thereof as of the date of purchase (or such other price as provided in
Section 10.01), (ii) in the case of (x) a Mortgage Loan, accrued interest on
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such Stated Principal Balance at the applicable Net Mortgage Rate in effect from
time to time from the Due Date as to which interest was last covered by a
payment by the Mortgagor or an advance by the Master Servicer, which payment or
advance had as of the date of purchase been distributed pursuant to Section
4.01, through the end of the calendar month in which the purchase is to be
effected, and (y) an REO Property, the sum of (1) accrued interest on such
Stated Principal Balance at the applicable Net Mortgage Rate in effect from time
to time from the Due Date as to which interest was last covered by a payment by
the Mortgagor or an advance by the Master Servicer through the end of the
calendar month immediately preceding the calendar month in which such REO
Property was acquired, plus (2) REO Imputed Interest for such REO Property for
each calendar month commencing with the calendar month in which such REO
Property was acquired and ending with the calendar month in which such purchase
is to be effected, net of the total of all net rental income, Insurance
Proceeds, Liquidation Proceeds and P&I Advances that had as of the date of
purchase been distributed as or to cover REO Imputed Interest pursuant to
Section 4.01, (iii) any unreimbursed Servicing Advances and P&I Advances and any
unpaid Servicing Fees allocable to such Mortgage Loan or REO Property, (iv) any
amounts previously withdrawn from the Collection Account in respect of such
Mortgage Loan or REO Property pursuant to Sections 3.11(ix) and 3.16(b), and (v)
in the case of a Mortgage Loan required to be purchased pursuant to Section
2.03, expenses reasonably incurred or to be incurred by the Master Servicer or
the Trustee in respect of the breach or defect giving rise to the purchase
obligation.
"Qualified Substitute Mortgage Loan": A mortgage loan substituted
for a Deleted Mortgage Loan pursuant to the terms of this Agreement which must,
on the date of such substitution, (i) have an outstanding principal balance,
after application of all scheduled payments of principal and interest due during
or prior to the month of substitution, not in excess of the Scheduled Principal
Balance of the Deleted Mortgage Loan as of the Due Date in the calendar month
during which the substitution occurs, (ii) have a Mortgage Rate not less than
(and not more than one percentage point in excess of) the Mortgage Rate of the
Deleted Mortgage Loan, (iii) have a Maximum Mortgage Rate not less than the
Maximum Mortgage Rate on the Deleted Mortgage Loan, (iv) have a Minimum Mortgage
Rate not less than the Minimum Mortgage Rate of the Deleted Mortgage Loan, (v)
have a Gross Margin equal to the Gross Margin of the Deleted Mortgage Loan, (vi)
have a next Adjustment Date not more than two months later than the next
Adjustment Date on the Deleted Mortgage Loan, (vii) have a remaining term to
maturity not greater than (and not more than one year less than) that of the
Deleted Mortgage Loan, (viii) have the same Due Date as the Due Date on the
Deleted Mortgage Loan, (ix) have a Loan-to-Value Ratio as of the date of
substitution equal to or lower than the Loan-to-Value Ratio of the Deleted
Mortgage Loan as of such date, (x) have a risk grading determined by the
Mortgage Loan Seller at least equal to the risk grading assigned on the Deleted
Mortgage Loan and (xi) conform to each representation and warranty set forth in
Section 6 of the Mortgage Loan Purchase Agreement applicable to the Deleted
Mortgage Loan. In the event that one or more mortgage loans are substituted for
one or more Deleted Mortgage Loans, the amounts described in clause (i) hereof
shall be determined on the basis of aggregate principal balances, the Mortgage
Rates described in clause (ii) hereof shall be determined on the basis of
weighted average Mortgage Rates, the risk gradings described in clause (x)
hereof shall be satisfied as to each such mortgage loan, the terms described in
clause (vii) hereof shall be determined on the basis of weighted average
remaining term to maturity, the Loan-to-Value Ratios described in clause (ix)
hereof shall be satisfied as to each such mortgage loan and, except to the
extent otherwise provided in this sentence, the representations and warranties
described in clause (xi)
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hereof must be satisfied as to each Qualified Substitute Mortgage Loan or in the
aggregate, as the case may be.
"Rate/Term Refinancing": A Refinanced Mortgage Loan, the proceeds
of which are not more than $1000 in excess of the existing first mortgage loan
and any subordinate mortgage loan on the related Mortgaged Property and related
closing costs, and were used exclusively (except for up to $1000) to satisfy the
then existing first mortgage loan and any subordinate mortgage loan of the
Mortgagor on the related Mortgaged Property and to pay related closing costs.
"Rating Agency or Rating Agencies": Moody's and S&P or their
successors. If such agencies or their successors are no longer in existence,
"Rating Agencies" shall be such nationally recognized statistical rating
agencies, or other comparable Persons, designated by the Depositor and the
Certificate Insurer, notice of which designation shall be given to the Trustee
and Master Servicer.
"Realized Loss": With respect to each Mortgage Loan as to which a
Final Recovery Determination has been made an amount (not less than zero) equal
to (i) the unpaid principal balance of such Mortgage Loan as of the commencement
of the calendar month in which the Final Recovery Determination was made, plus
(ii) accrued interest from the Due Date as to which interest was last paid by
the Mortgagor through the end of the calendar month in which such Final Recovery
Determination was made, calculated in the case of each calendar month during
such period (A) at an annual rate equal to the annual rate at which interest was
then accruing on such Mortgage Loan and (B) on a principal amount equal to the
Stated Principal Balance of such Mortgage Loan as of the close of business on
the Distribution Date during such calendar month, plus (iii) any amounts
previously withdrawn from the Collection Account in respect of such Mortgage
Loan pursuant to Sections 3.11(ix) and 3.16(b), minus (iv) the proceeds, if any,
received in respect of such Mortgage Loan during the calendar month in which
such Final Recovery Determination was made, net of amounts that are payable
therefrom to the Master Servicer with respect to such Mortgage Loan pursuant to
clause (iii) of Section 3.11.
With respect to any REO Property as to which a Final Recovery
Determination has been made an amount (not less than zero) equal to (i) the
unpaid principal balance of the related Mortgage Loan as of the date of
acquisition of such REO Property on behalf of the Trust Fund, plus (ii) accrued
interest from the Due Date as to which interest was last paid by the Mortgagor
in respect of the related Mortgage Loan through the end of the calendar month
immediately preceding the calendar month in which such REO Property was
acquired, calculated in the case of each calendar month during such period (A)
at an annual rate equal to the annual rate at which interest was then accruing
on the related Mortgage Loan and (B) on a principal amount equal to the Stated
Principal Balance of the related Mortgage Loan as of the close of business on
the Distribution Date during such calendar month, plus (iii) REO Imputed
Interest for such REO Property for each calendar month commencing with the
calendar month in which such REO Property was acquired and ending with the
calendar month in which such Final Recovery Determination was made, plus (iv)
any amounts previously withdrawn from the Collection Account in respect of the
related Mortgage Loan pursuant to Sections 3.11(ix) and 3.16(b), minus (v) the
aggregate of all P&I Advances made by the Master Servicer in respect of such REO
Property or the related Mortgage Loan for which the Master Servicer has been or,
in connection with such Final Recovery Determination, will be reimbursed
pursuant to Section
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3.23 out of rental income, Insurance Proceeds and Liquidation Proceeds received
in respect of such REO Property, minus (vi) the total of all net rental income,
Insurance Proceeds and Liquidation Proceeds received in respect of such REO
Property that has been, or in connection with such Final Recovery Determination,
will be transferred to the Distribution Account pursuant to Section 3.23.
With respect to each Mortgage Loan which has become the subject
of a Deficient Valuation, the difference between the principal balance of the
Mortgage Loan outstanding immediately prior to such Deficient Valuation and the
principal balance of the Mortgage Loan as reduced by the Deficient Valuation.
With respect to each Mortgage Loan which has become the subject
of a Debt Service Reduction, the portion, if any, of the reduction in each
affected Monthly Payment attributable to a reduction in the Mortgage Rate
imposed by a court of competent jurisdiction. Each such Realized Loss shall be
deemed to have been incurred on the Due Date for each affected Monthly Payment.
"Record Date": With respect to each Distribution Date, the last
Business Day of the month immediately preceding the month in which such
Distribution Date occurs.
"Reference Banks": Bankers Trust Company, Barclay's Bank PLC, The
Bank of Tokyo and National Westminster Bank PLC and their successors in
interest; PROVIDED that if any of the foregoing banks are not suitable to serve
as a Reference Bank, then any leading banks selected by the Trustee which are
engaged in transactions in Eurodollar deposits in the international Eurocurrency
market (i) with an established place of business in London, (ii) not
controlling, under the control of or under common control with the Depositor or
any Affiliate thereof, (iii) whose quotations appear on the Reuters Screen LIBO
Page on the relevant Interest Determination Date and (iv) which have been
designated as such by the Trustee.
"Refinanced Mortgage Loan": A Mortgage Loan the proceeds of which
were not used to purchase the related Mortgaged Property.
"Regular Certificate": Any Class A Certificate.
"Regular Interest": A "regular interest" in a REMIC within the
meaning of Section 860G(a)(1) of the Code.
"Relief Act": The Soldiers' and Sailors' Civil Relief Act of
1940, as amended.
"Relief Act Interest Shortfall": With respect to any Distribution
Date and any Mortgage Loan, any reduction in the amount of interest collectible
on such Mortgage Loan for the most recently ended calendar month as a result of
the application of the Relief Act.
"REMIC": A "real estate mortgage investment conduit" within the
meaning of Section 860D of the Code.
"REMIC Provisions": Provisions of the federal income tax law
relating to real estate mortgage investment conduits, which appear at Section
860A through 860G of the Code, and related provisions, and proposed, temporary
and final regulations and published rulings, notices and announcements
promulgated thereunder, as the foregoing may be in effect from time to time.
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"Remittance Report": A report in form and substance acceptable to
FNMA on a magnetic disk or tape prepared by the Master Servicer pursuant to
Section 4.03 with such additions, deletions and modifications as agreed to by
the Trustee and the Master Servicer.
"Rents from Real Property": With respect to any REO Property,
gross income of the character described in Section 856(d) of the Code as being
included in the term "rents from real property".
"REO Account": The account or accounts maintained by the Master
Servicer in respect of an REO Property pursuant to Section 3.23.
"REO Disposition": The sale or other disposition of an REO
Property on behalf of the Trust Fund.
"REO Imputed Interest": As to any REO Property, for any calendar
month during which such REO Property was at any time part of the Trust Fund, one
month's interest at the applicable Net Mortgage Rate on the Stated Principal
Balance of such REO Property (or, in the case of the first such calendar month,
of the related Mortgage Loan if appropriate) as of the close of business on the
Distribution Date in such calendar month.
"REO Principal Amortization": With respect to any REO Property,
for any calendar month, the excess, if any, of (a) the aggregate of all amounts
received in respect of such REO Property during such calendar month, whether in
the form of rental income, sale proceeds (including, without limitation, that
portion of the Termination Price paid in connection with a purchase of all of
the Mortgage Loans and REO Properties pursuant to Section 10.01 that is
allocable to such REO Property) or otherwise, net of any portion of such amounts
(i) payable pursuant to Section 3.23(c) in respect of the proper operation,
management and maintenance of such REO Property or (ii) payable or reimbursable
to the Master Servicer pursuant to Section 3.23(d) for unpaid Servicing Fees in
respect of the related Mortgage Loan and unreimbursed Servicing Advances and P&I
Advances in respect of such REO Property or the related Mortgage Loan, over (b)
the REO Imputed Interest in respect of such REO Property for such calendar
month.
"REO Property": A Mortgaged Property acquired by the Master
Servicer on behalf of the Trust Fund through foreclosure or deed-in-lieu of
foreclosure, as described in Section 3.23.
"Request for Release": A release signed by a Servicing Officer,
in the form of Exhibit E-1 or Exhibit E-2 attached hereto.
"Required Subordinated Amount": With respect to the Group 1 Class
A Certificates and any Distribution Date, an amount equal to 2.00% of the
aggregate Stated Principal Balance of the Mortgage Loans in Sub-Pool 1 as of the
Cut-off Date, and with respect to the Group 2 Class A Certificates and any
Distribution Date, an amount equal to 2.75% of the aggregate Stated Principal
Balance of the Mortgage Loans in Sub-Pool 2 as of the Cut-off Date, in each case
subject to the following: (i) if the Step Up Trigger has occurred, the Required
Subordinated Amount for either Group for such Distribution Date will be an
amount equal to the entire aggregate Stated Principal Balance of the Mortgage
Loans in the related Sub-Pool as of such Distribution Date, or (ii) if the Step
Up Trigger has not occurred but the Step Down Trigger has occurred, the Required
Subordinated Amount for either Group for such Distribution Date will be an
amount equal to the greater of (A) 0.50% of the aggregate Stated Principal
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Balance of the Mortgage Loans in the related Sub-Pool as of the Cut-off Date and
(B) the lesser of (x) 2.00%, in the case of the Group 1 Class A Certificates, or
2.75%, in the case of the Group 2 Class A Certificates, of the aggregate Stated
Principal Balance of the Mortgage Loans in the related Sub-Pool as of the
Cut-off Date and (y) Stepped Down Required Subordinated Percentage for such
Group of the aggregate Stated Principal Balance of the Mortgage Loans in the
related Sub-Pool as of such Distribution Date.
"Reserve Interest Rate": With respect to any Interest
Determination Date, the rate per annum that the Trustee determines to be either
(i) the arithmetic mean (rounded upwards if necessary to the nearest whole
multiple of 1/16%) of the one-month U.S. dollar lending rates which New York
City banks selected by the Trustee are quoting on the relevant Interest
Determination Date to the principal London offices of leading banks in the
London interbank market or (ii) in the event that the Trustee can determine no
such arithmetic mean, the lowest one-month U.S. dollar lending rate which New
York City banks selected by the Trustee are quoting on such Interest
Determination Date to leading European banks.
"Residential Dwelling": Any one of the following: (i) a detached
one-family dwelling, (ii) a detached two- to four-family dwelling, (iii) a
one-family dwelling unit in a FNMA eligible condominium project, or (iv) a
detached one-family dwelling in a planned unit development, none of which is a
co-operative, mobile or manufactured home (as defined in 42 United States Code,
Section 5402(6)).
"Residual Certificate": Any one of the Class R Certificates.
"Residual Interest": The sole class of "residual interests" in a
REMIC within the meaning of Section 860G(a)(2) of the Code.
"Responsible Officer": When used with respect to the Trustee, the
Chairman or Vice Chairman of the Board of Directors or Trustees, the Chairman or
Vice Chairman of the Executive or Standing Committee of the Board of Directors
or Trustees, the President, the Chairman of the Committee on Trust Matters, any
vice president, any assistant vice president, the Secretary, any assistant
secretary, the Treasurer, any assistant treasurer, the Cashier, any assistant
cashier, any trust officer or assistant trust officer, the Controller and any
assistant controller or any other officer of the Trustee customarily performing
functions similar to those performed by any of the above designated officers
and, with respect to a particular matter, to whom such matter is referred
because of such officer's knowledge of and familiarity with the particular
subject.
"Rolling Delinquency Percentage": For any Distribution Date, the
average of the Delinquency Percentages as of the last day of each of the three
(or one or two, in the case of the first and second Distribution Dates) most
recently ended Due Periods.
"Rolling Loss Percentage": As of any Distribution Date, the
percentage equivalent of a fraction, the numerator of which is the aggregate
amount of Realized Losses incurred during the preceding twelve Prepayment
Periods, and the denominator of which is the aggregate Stated Principal Balance
of the Mortgage Loans as of the first day of the twelfth preceding Prepayment
Period.
"Scheduled Principal Balance": With respect to any Mortgage Loan:
(a) as of the Cut-off Date, the outstanding principal balance of such Mortgage
Loan as of such date, net of the principal portion of all unpaid Monthly
Payments, if any, due on or before such date; (b)
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as of any Due Date subsequent to the Cut-off Date up to and including the Due
Date in the calendar month in which a Liquidation Event occurs with respect to
such Mortgage Loan, the Scheduled Principal Balance of such Mortgage Loan as of
the Cut-off Date, minus the sum of (i) the principal portion of each Monthly
Payment due on or before such Due Date but subsequent to the Cut-off Date,
whether or not received, (ii) all Principal Prepayments received before such Due
Date but after the Cut-off Date, (iii) the principal portion of all Liquidation
Proceeds and Insurance Proceeds received before such Due Date but after the
Cut-off Date, net of any portion thereof that represents principal due (without
regard to any acceleration of payments under the related Mortgage and Mortgage
Note) on a Due Date occurring on or before the date on which such proceeds were
received and (iv) any Realized Loss incurred with respect thereto as a result of
a Deficient Valuation occurring before such Due Date, but only to the extent
such Realized Loss represents a reduction in the portion of principal of such
Mortgage Loan not yet due (without regard to any acceleration of payments under
the related Mortgage and Mortgage Note) as of the date of such Deficient
Valuation; and (c) as of any Due Date subsequent to the occurrence of a
Liquidation Event with respect to such Mortgage Loan, zero. With respect to any
REO Property: (a) as of any Due Date subsequent to the date of its acquisition
on behalf of the Trust Fund up to and including the Due Date in the calendar
month in which a Liquidation Event occurs with respect to such REO Property, an
amount (not less than zero) equal to the Scheduled Principal Balance of the
related Mortgage Loan as of the Due Date in the calendar month in which such REO
Property was acquired, minus the aggregate amount of REO Principal Amortization,
if any, in respect of such REO Property for all previously ended calendar
months; and (b) as of any Due Date subsequent to the occurrence of a Liquidation
Event with respect to such REO Property, zero.
"Servicing Account": The account or accounts created and
maintained pursuant to Section 3.09.
"Servicing Advances": The reasonable "out-of-pocket" costs and
expenses incurred by the Master Servicer in connection with a default,
delinquency or other unanticipated event by the Master Servicer in the
performance of its servicing obligations, including, but not limited to, the
cost of (i) the preservation, restoration and protection of a Mortgaged
Property, (ii) any enforcement or judicial proceedings, including foreclosures,
in respect of a particular Mortgage Loan, (iii) the management (including
reasonable fees in connection therewith) and liquidation of any REO Property,
and (iv) the performance of its obligations under Sections 3.01, 3.09, 3.14,
3.16 and 3.23. The Master Servicer shall not be required to make any Servicing
Advance in respect of a Mortgage Loan or REO Property that, in the good faith
business judgment of the Master Servicer, would not be ultimately recoverable
from related Insurance Proceeds or Liquidation Proceeds on such Mortgage Loan or
REO Property as provided herein.
"Servicing Fee": With respect to each Mortgage Loan and for any
calendar month, an amount equal to one month's interest (or in the event of any
payment of interest which accompanies a Principal Prepayment in full made by the
Mortgagor during such calendar month, interest for the number of days covered by
such payment of interest) at the applicable Servicing Fee Rate on the same
principal amount on which interest on such Mortgage Loan accrues for such
calendar month. A portion of such Servicing Fee may be retained by any
SubServicer as its servicing compensation.
"Servicing Fee Rate": 0.50% per annum.
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"Servicing Officer": Any officer of the Master Servicer involved
in, or responsible for, the administration and servicing of Mortgage Loans,
whose name and specimen signature appear on a list of servicing officers
furnished by the Master Servicer to the Trustee and the Certificate Insurer and
the Depositor on the Closing Date, as such list may from time to time be
amended.
"Single Certificate": With respect to any Class of Certificates
(other than the Residual Certificates), a hypothetical Certificate of such Class
evidencing a Percentage Interest for such Class corresponding to an initial
Certificate Principal Balance or Notional Amount of $1,000. With respect to the
Residual Certificates, a hypothetical Certificate of such Class evidencing a
100% Percentage Interest in such Class.
"Special Hazard Amount": With respect to each Sub-Pool as of any
Distribution Date, an amount equal to $1,790,845 in the case of Sub-Pool 1 or
$1,957,960 in the case of Sub-Pool 2, in each case minus the sum of (i) the
aggregate amount of Special Hazard Losses on the Mortgage Loans in such Sub-Pool
allocated solely to the Class R Certificates in accordance with Section 4.04 and
(ii) the Adjustment Amount (as defined below) as most recently calculated for
such Sub-Pool. For each anniversary of the Cut-off Date, the Adjustment Amount
for each Sub-Pool shall be equal to the amount, if any, by which the amount
calculated in accordance with the preceding sentence (without giving effect to
the deduction of the Adjustment Amount for such anniversary) exceeds the
greatest of (i) twice the outstanding principal balance of the Mortgage Loan in
such Sub-Pool which has the largest outstanding principal balance on the
Distribution Date immediately preceding such anniversary, (ii) the product of
1.00% multiplied by the outstanding principal balance of all Mortgage Loans in
such Sub-Pool on the Distribution Date immediately preceding such anniversary
and (iii) the aggregate outstanding principal balance (as of the immediately
preceding Distribution Date) of the Mortgage Loans in such Sub-Pool in any
five-digit California zip code area with the largest amount of Mortgage Loans in
such Sub-Pool by aggregate principal balance as of such anniversary.
"Special Hazard Loss": Any Realized Loss or portion thereof not
in excess of the lesser of the cost of repair or replacement of a Mortgaged
Property suffered by such Mortgaged Property by reason of damage caused by
certain hazards (including earthquakes, mudflows, and, to a limited extent,
floods) not insured against under the hazard insurance policies or fire or flood
insurance policies required to be maintained in respect of such Mortgaged
Property pursuant to Section 3.14, or by reason of the application of any
co-insurance provision, in any event exclusive of any Extraordinary Loss.
"S&P": Standard & Poor's Ratings Services, a division of
McGraw-Hill Inc., or its successor in interest.
"Startup Day": The day designated as such pursuant to Section
11.01(b) hereof.
"Stated Principal Balance": With respect to any Mortgage Loan:
(a) as of any date of determination up to but not including the Distribution
Date on which the proceeds, if any, of a Liquidation Event with respect to such
Mortgage Loan would be distributed, the Scheduled Principal Balance of such
Mortgage Loan as of the Cut-off Date, as shown in the Mortgage Loan Schedule,
minus the sum of (i) the principal portion of each Monthly Payment due on a Due
Date subsequent to the Cut-off Date, to the extent received from the Mortgagor
or advanced by the Master Servicer and distributed pursuant to Section 4.01 on
or before such
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date of determination, (ii) all Principal Prepayments received after the Cut-off
Date, to the extent distributed pursuant to Section 4.01 on or before such date
of determination, (iii) all Liquidation Proceeds and Insurance Proceeds applied
by the Master Servicer as recoveries of principal in accordance with the
provisions of Section 3.16, to the extent distributed pursuant to Section 4.01
on or before such date of determination, and (iv) any Realized Loss incurred
with respect thereto as a result of a Deficient Valuation made during or prior
to the Prepayment Period for the most recent Distribution Date coinciding with
or preceding such date of determination; and (b) as of any date of determination
coinciding with or subsequent to the Distribution Date on which the proceeds, if
any, of a Liquidation Event with respect to such Mortgage Loan would be
distributed, zero. With respect to any REO Property: (a) as of any date of
determination up to but not including the Distribution Date on which the
proceeds, if any, of a Liquidation Event with respect to such REO Property would
be distributed, an amount (not less than zero) equal to the Stated Principal
Balance of the related Mortgage Loan as of the date on which such REO Property
was acquired on behalf of the Trust Fund, minus the sum (i) if such REO Property
was acquired before the Distribution Date in any calendar month, the principal
portion of the Monthly Payment due on the Due Date in the calendar month of
acquisition, to the extent advanced by the Master Servicer and distributed
pursuant to Section 4.01 on or before such date of determination, and (ii) the
aggregate amount of REO Principal Amortization in respect of such REO Property
for all previously ended calendar months, to the extent distributed pursuant to
Section 4.01 on or before such date of determination; and (b) as of any date of
determination coinciding with or subsequent to the Distribution Date on which
the proceeds, if any, of a Liquidation Event with respect to such REO Property
would be distributed, zero.
"Step Down Cumulative Loss Test": The Step Down Cumulative Loss
Test will be met with respect to a Distribution Date as follows: (i) for the
37th through the 47th Distribution Dates, if the Cumulative Loss Percentage for
such Distribution Date is 1.50% or less, (ii) for the 48th through the 59th
Distribution Dates, if the Cumulative Loss Percentage for such Distribution Date
is 2.00% or less, (iii) for the 60th through the 71st Distribution Dates, if the
Cumulative Loss Percentage for such Distribution Date is 2.40% or less and (iv)
for 72nd Distribution Date and any Distribution Date thereafter, if the
Cumulative Loss Percentage for such Distribution Date is 2.75% or less.
"Step Down Rolling Delinquency Test": The Step Down Rolling
Delinquency Test will be met with respect to a Distribution Date if the Rolling
Delinquency Percentage for such Distribution Date is 8.00% or less.
"Step Down Rolling Loss Test": The Step Down Rolling Loss Test
will be met with respect to a Distribution Date if the Rolling Loss Percentage
for such Distribution Date is less than 1.00%.
"Step Down Trigger": For any Distribution Date after the 36th
Distribution Date, the Step Down Trigger will have occurred if each of the Step
Down Cumulative Loss Test, the Step Down Rolling Delinquency Test and the Step
Down Rolling Loss Test is met. In no event will the Step Down Trigger be deemed
to have occurred for the 36th Distribution Date or any preceding Distribution
Date.
"Stepped Down Required Subordinated Percentage": For the Group 1
Class A Certificates and any Distribution Date for which the Step Down Trigger
has occurred, a percentage equal to (i) the percentage equivalent of a fraction,
the numerator of which is 2.00% of the aggregate Stated Principal Balance of the
Mortgage Loans in Sub-Pool 1 as of the Cut-off
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Date, and the denominator of which is the aggregate Stated Principal Balance of
the Mortgage Loans in Sub-Pool 1 as of such Distribution Date, minus (ii) the
percentage equivalent of a fraction, the numerator of which is the product of
(A) the percentage calculated under clause (i) above minus 4.00%, multiplied by
(B) the number of consecutive Distribution Dates through and including the
Distribution Date for which the Stepped Down Required Subordinated Percentage is
being calculated, up to a maximum of twelve, for which the Step Down Trigger has
occurred, and the denominator of which is twelve.
For the Group 2 Class A Certificates and any Distribution Date
for which the Step Down Trigger has occurred, a percentage equal to (i) the
percentage equivalent of a fraction, the numerator of which is 2.75% of the
aggregate Stated Principal Balance of the Mortgage Loans in Sub-Pool 2 as of the
Cut-off Date, and the denominator of which is the aggregate Stated Principal
Balance of the Mortgage Loans in Sub-Pool 2 as of such Distribution Date, minus
(ii) the percentage equivalent of a fraction, the numerator of which is the
product of (A) the percentage calculated under clause (i) above minus 5.50%,
multiplied by (B) the number of consecutive Distribution Dates through and
including the Distribution Date for which the Stepped Down Required Subordinated
Percentage is being calculated, up to a maximum of twelve, for which the Step
Down Trigger has occurred, and the denominator of which is twelve.
"Step Up Cumulative Loss Test": The Step Up Cumulative Loss Test
will be met with respect to a Distribution Date as follows: (i) for the 1st
through the 12th Distribution Dates, if the Cumulative Loss Percentage for such
Distribution Date is more than 0.75%, (ii) for the 13th through the 24th
Distribution Dates, if the Cumulative Loss Percentage for such Distribution Date
is more than 1.25%, (iii) for the 25th through the 36th Distribution Dates, if
the Cumulative Loss Percentage for such Distribution Date is more than 1.90%,
(iv) for the 37th through the 48th Distribution Dates, if the Cumulative Loss
Percentage for such Distribution Date is more than 2.40% and (v) for the 49th
Distribution Date and any Distribution Date thereafter, if the Cumulative Loss
Percentage for such Distribution Date is more than 3.00%.
"Step Up Rolling Delinquency Test": The Step Up Rolling
Delinquency Test will be met with respect to a Distribution Date if the Rolling
Delinquency Percentage for such Distribution Date is more than 10.00%.
"Step Up Rolling Loss Test": The Step Up Rolling Loss Test will
be met with respect to a Distribution Date if the Rolling Loss Percentage for
such Distribution Date 1.40% or more.
"Step Up Trigger": For any Distribution Date, the Step Up Trigger
will have occurred if any one of the Step Up Cumulative Loss Test, the Step Up
Rolling Delinquency Test or the Step Up Rolling Loss Test is met.
"Stayed Funds": As defined in Section 7.02(b).
"Subordinated Amount": With respect to the Group 1 Certificates
as of any Distribution Date, the excess, if any, of (a) the aggregate Stated
Principal Balances of the Mortgage Loans in Sub-Pool 1 immediately following
such Distribution Date over (b) the aggregate Certificate Principal Balance of
the Group 1 Class A Certificates as of such Distribution Date (after taking into
account the payment of the amounts described in clauses (b)(i)-(iv) of the
definition of Group 1 Class A Principal Distribution Amount on such Distribution
Date). With respect to the Group 2 Certificates as of any Distribution Date, the
excess, if any, of (a) the aggregate Stated Principal Balances of the Mortgage
Loans in Sub-Pool
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2 immediately following such Distribution Date over (b) the aggregate
Certificate Principal Balance of the Group 2 Class A Certificates as of such
Distribution Date (after taking into account the payment of the amounts
described in clauses (b)(i)-(iv) of the definition of Group 2 Class A Principal
Distribution Amount on such Distribution Date).
"Subordination Deficiency Amount": With respect to either Group
of Class A Certificates and any Distribution Date, the excess, if any, of (a)
the Required Subordinated Amount for such Group applicable to such Distribution
Date over (b) the Subordinated Amount for such Group applicable to such
Distribution Date prior to taking into account the payment of any Subordination
Increase Amounts for such Group on such Distribution Date.
"Subordination Increase Amount": With respect to either Group of
Class A Certificates and any Distribution Date, the lesser of (a) the
Subordination Deficiency Amount for such Group as of such Distribution Date
(after taking into account the payment of the Group 1 Class A Principal
Distribution Amount or Group 2 Class A Principal Distribution Amount, as
applicable, on such Distribution Date, in each case exclusive of the payment of
any Subordination Increase Amount for such Group) and (b) the amount of related
Sub-Pool Net Monthly Excess Cashflow on such Distribution Date as reduced by any
Cumulative Insurance Payments or Realized Losses allocated thereto with respect
to such Distribution Date pursuant to Section 4.04.
"Subordination Reduction Amount": With respect to either Group of
Class A Certificates and any Distribution Date, an amount equal to the lesser of
(a) the Excess Subordinated Amount for such Group and (b) the sum of the amounts
available for distribution specified in clauses (b)(i)-(iii) of the definition
of Group 1 Class A Principal Distribution Amount" or Group 2 Class A Principal
Distribution Amount, as applicable.
"Sub-Pool": Either Sub-Pool 1 or Sub-Pool 2.
"Sub-Pool Available Distribution Amount": With respect to either
Sub-Pool and any Distribution Date, an amount equal to (1) the sum of (a) the
aggregate of the amounts on deposit in the Collection Account and Distribution
Account as of the close of business on the related Determination Date allocable
to such Sub-Pool, (b) the aggregate of any amounts received in respect of an REO
Property in such Sub-Pool withdrawn from any REO Account and deposited in the
Distribution Account for such Distribution Date pursuant to Section 3.23, (c)
the aggregate of any amounts deposited in the Distribution Account by the Master
Servicer in respect of Prepayment Interest Shortfalls allocable to such Sub-Pool
for such Distribution Date pursuant to Section 3.24, (d) the aggregate of any
P&I Advances allocable to such Sub-Pool made by the Master Servicer for such
Distribution Date pursuant to Section 4.03 and (e) the aggregate of any advances
allocable to such Sub-Pool made by the Trustee for such Distribution Date
pursuant to Section 7.02, reduced (to not less than zero) by (2) the sum of (x)
the portion of the amount described in clause (1)(a) hereof that represents (i)
Monthly Payments on the related Mortgage Loans received from a Mortgagor on or
prior to the Determination Date but due during any Due Period subsequent to the
related Due Period, (ii) Principal Prepayments on the related Mortgage Loans
received after the related Prepayment Period (together with any interest
payments received with such Principal Prepayments to the extent they represent
the payment of interest accrued on the related Mortgage Loans during a period
subsequent to the related Prepayment Period), (iii) Liquidation Proceeds and
Insurance Proceeds received in respect of the Related Mortgage Loans after the
related Prepayment Period, (iv) amounts reimbursable or payable to the
Depositor, the Master Servicer, the Trustee, the Mortgage Loan
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Seller or any Sub-Servicer pursuant to Section 3.11 or Section 3.12 or otherwise
payable in respect of such Sub-Pool, (v) Stayed Funds in respect of such
Sub-Pool and/or (vi) amounts in respect of such Sub-Pool deposited in the
Collection Account or the Distribution Account, as the case may be, in error,
and (y) amounts in respect of such Sub-Pool reimbursable to the Trustee for an
advance made pursuant to Section 7.02(b) which advance the Trustee has
determined to be nonrecoverable from the Stayed Funds in respect of which it was
made.
"Sub-Pool Net Monthly Excess Cashflow": With respect to either
Sub-Pool and any Distribution Date, the excess of (x) the related Sub-Pool
Available Distribution Amount for such Distribution Date over (y) the sum for
such Distribution Date of (A) in the case of SubPool 1, the sum of the Interest
Distribution Amounts payable to the holders of Group 1 Class A Certificates, or
in the case of Sub-Pool 2, the Interest Distribution Amount payable to the
holders of the Group 2 Class A Certificates and (B) in the case of Sub-Pool 1,
the amount described in clauses (b)(i)-(iii) of the definition of Group 1 Class
A Principal Distribution Amount, or in the case of Sub-Pool 2, the amount
described in clauses (b)(i)-(iii) of the definition of Group 2 Class A Principal
amount for such Distribution Date.
"Sub-Pool 1": The Sub-Pool consisting of fixed-rate Mortgage
Loans and designated on the Mortgage Loan Schedule as Sub-Pool 1. With respect
to the Group 1 Class A Certificates, Sub-Pool 1 is sometimes referred to herein
as the related Sub-Pool and the Mortgage Loans in such Sub-Pool are sometimes
referred to herein as the related Mortgage Loans.
"Sub-Pool 2": The Sub-Pool consisting of adjustable-rate Mortgage
Loans and designated on the Mortgage Loan Schedule as Sub-Pool 2. With respect
to the Group 2 Class A Certificates, Sub-Pool 2 is sometimes referred to herein
as the related Sub-Pool and the Mortgage Loans in such Sub-Pool are sometimes
referred to herein as the related Mortgage Loans.
"Sub-Pool 2 Available Funds Pass-Through Rate": With respect to
the Group 2 Class A Certificates and each Distribution Date, a per annum rate
equal to the lesser of (x) the fraction, expressed as a percentage, the
numerator of which is (i) an amount equal to (A) 1/12 of the aggregate Scheduled
Principal Balance of the then outstanding Mortgage Loans and REO Properties in
Sub-Pool 2 times the weighted average of the Expense Adjusted Mortgage Rates on
the then outstanding Mortgage Loans and REO Properties in Sub-Pool 2 minus (B)
the amount of the Certificate Insurer Premium with respect to the Group 2 Class
A Certificates payable to the Certificate Insurer with respect to the Policy for
such Distribution Date, and the denominator of which is (ii) an amount equal to
(A) the then outstanding aggregate Certificate Principal Balance of the Group 2
Class A Certificates multiplied by (B) the actual number of days elapsed in the
related Interest Accrual Period divided by 360 and (y) the Maximum Group 2 Class
A Pass-Through Rate.
"Sub-Servicer": Any Person with which the Master Servicer has
entered into a Sub-Servicing Agreement and which meets the qualifications of a
Sub-Servicer pursuant to Section 3.02.
"Sub-Servicing Account": An account established by a Sub-Servicer
which meets the requirements set forth in Section 3.08 and is otherwise
acceptable to the Master Servicer.
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"Sub-Servicing Agreement": The written contract between the
Master Servicer and a Sub-Servicer relating to servicing and administration of
certain Mortgage Loans as provided in Section 3.02.
"Tax Returns": The federal income tax return on Internal Revenue
Service Form 1066, U.S. Real Estate Mortgage Investment Conduit Income Tax
Return, including Schedule Q thereto, Quarterly Notice to Residual Interest
Holders of REMIC Taxable Income or Net Loss Allocation, or any successor forms,
to be filed on behalf of the Trust Fund due to its classification as 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 provisions of federal, state or local tax laws.
"Termination Price": As defined in Section 10.01.
"Terminator": As defined in Section 10.01.
"Transfer": Any direct or indirect transfer, sale, pledge,
hypothecation, or other form of assignment of any Ownership Interest in a
Certificate.
"Transferee": Any Person who is acquiring by Transfer any
Ownership Interest in a Certificate.
"Transferor": Any Person who is disposing by Transfer of any
Ownership Interest in a Certificate.
"Trust Fund": The segregated pool of assets subject hereto,
constituting the primary trust created hereby and to be administered hereunder,
with respect to which a REMIC election is to be made, consisting of: (i) such
Mortgage Loans as from time to time are subject to this Agreement, together with
the Mortgage Files relating thereto, and together with all collections thereon
and proceeds thereof, (ii) any REO Property, together with all collections
thereon and proceeds thereof, (iii) the Trustee's rights with respect to the
Mortgage Loans under all insurance policies required to be maintained pursuant
to this Agreement and any proceeds thereof, (iv) the Depositor's rights under
the Mortgage Loan Purchase Agreement (including any security interest created
thereby) and (v) the Collection Account, the Distribution Account, any REO
Account and the Expense Account and such assets that are deposited therein from
time to time and any investments thereof, together with any and all income,
proceeds and payments with respect thereto. Notwithstanding the foregoing,
however, the Trust Fund specifically excludes the Policy and all payments and
other collections of principal and interest due on the Mortgage Loans on or
before the Cut-off Date.
"Trustee": The Bank of New York, a New York banking corporation,
or its successor in interest, or any successor trustee appointed as herein
provided.
"Trustee's Fee": The amount payable to the Trustee on each
Distribution Date pursuant to Section 8.05 as compensation for all services
rendered by it in the execution of the trust hereby created and in the exercise
and performance of any of the powers and duties of the Trustee hereunder, which
amount shall equal one twelfth of the product of (i) the Trustee's Fee Rate,
multiplied by (ii) the aggregate Scheduled Principal Balance of the Mortgage
Loans and any REO Properties as of the second preceding Due Date (or, in the
case of the initial Distribution Date, as of the Cut-off Date).
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"Trustee's Fee Rate": 0.00625% per annum.
"Uninsured Cause": Any cause of damage to a Mortgaged Property
such that the complete restoration of such property is not fully reimbursable by
the hazard insurance policies required to be maintained pursuant to Section
3.14.
"United States Person": A citizen or resident of the United
States, a corporation, partnership or other entity created or organized in, or
under the laws of, the United States or any political subdivision thereof, 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. The term "United States" shall have the meaning set forth in
Section 7701 of the Code.
"Unpaid Basis Risk Shortfalls": With respect to the Group 2 Class
A Certificates and any Distribution Date, the aggregate of all Basis Risk
Shortfalls for such Group for any previous Distribution Dates plus interest
accrued at the Pass-Through Rate on each such Basis Risk Shortfall less all
payments made in respect of such Basis Risk Shortfalls on or prior to such
Distribution Date pursuant to Section 4.01(a).
"Value": With respect to any Mortgaged Property, the lesser of
(i) the lesser of (a) the value thereof as determined by an appraisal made for
the originator of the Mortgage Loan at the time of origination of the Mortgage
Loan by an appraiser who met the minimum requirements of FNMA and FHLMC, and (b)
the value thereof as determined by a review appraisal conducted by the Mortgage
Loan Seller in the event any such review appraisal determines an appraised value
ten percent or more lower than the value thereof as determined by the appraisal
referred to in clause (i)(a) above and (ii) the purchase price paid for the
related Mortgaged Property by the Mortgagor with the proceeds of the Mortgage
Loan, provided, however, (A) in the case of a Refinanced Mortgage Loan, such
value of the Mortgaged Property is based solely upon the lesser of (1) the value
determined by an appraisal made for the originator of such Refinanced Mortgage
Loan at the time of origination of such Refinanced Mortgage Loan by an appraiser
who met the minimum requirements of FNMA and FHLMC and (2) the value thereof as
determined by a review appraisal conducted by the Mortgage Loan Seller in the
event any such review appraisal determines an appraised value ten percent or
more lower than the value thereof as determined by the appraisal referred to in
clause (ii)(A)(1) above and (B) in the case of a Mortgage Loan originated in
connection with a "lease-option purchase", such value of the Mortgaged Property
is based on the lower of the value determined by an appraisal made for the
originator of such Mortgage Loan at the time of origination or the sale price of
such Mortgaged Property if the "lease option purchase price" was set less than
12 months prior to origination, and is based on the value determined by an
appraisal made for the originator of such Mortgage Loan at the time of
origination if the "lease option purchase price" was set 12 months or more prior
to origination.
"Voting Rights": The portion of the voting rights of all of the
Certificates which is allocated to any Certificate. With respect to any date of
determination, the percentage of all the Voting Rights allocated among Holders
of each Class of Certificates shall be the fraction, expressed as a percentage,
the numerator of which is the aggregate Certificate Principal Balance of all the
Certificates of such Class then outstanding and the denominator of which is the
aggregate Stated Principal Balance of the Mortgage Loans then outstanding. The
Voting Rights allocated to each Class of Certificate shall be allocated among
Holders of each such Class in accordance with their respective Percentage
Interests as of the most recent Distribution Date.
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SECTION 1.02. Allocation of Certain Interest Shortfalls.
For purposes of calculating the amount of Accrued Certificate
Interest and the amount of the Interest Distribution Amount for each Class of
Class A Certificates for any Distribution Date, with respect to either Sub-Pool,
the aggregate amount of any Prepayment Interest Shortfalls (to the extent not
covered by payments by the Master Servicer pursuant to Section 3.24) and Relief
Act Interest Shortfalls incurred in respect of the Mortgage Loans in such
Sub-Pool for any Distribution Date shall be allocated among the Class A
Certificates of the related Group on a PRO RATA basis based on, and to the
extent of, one month's interest at the then applicable respective Pass-Through
Rate on the respective Certificate Principal Balance of each such Certificate.
Notwithstanding the foregoing, on any Distribution Date, the amount of any
Prepayment Interest Shortfalls or Relief Act Shortfalls so allocated to any of
the Class A Certificates shall be paid to the holders of such Class A
Certificates prior to any distributions on such Distribution Date to the holders
of the Residual Certificates.
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ARTICLE II
CONVEYANCE OF MORTGAGE LOANS;
ORIGINAL ISSUANCE OF CERTIFICATES
SECTION 2.01. Conveyance of Mortgage Loans.
The Depositor, concurrently with the execution and delivery
hereof, does hereby transfer, assign, set over and otherwise convey to the
Trustee without recourse for the benefit of the Certificateholders and the
Certificate Insurer all the right, title and interest of the Depositor,
including any security interest therein for the benefit of the Depositor, in and
to the Mortgage Loans identified on the Mortgage Loan Schedule, the rights of
the Depositor under the Mortgage Loan Purchase Agreement, and all other assets
included or to be included in the Trust Fund. Such assignment includes all
interest and principal received by the Depositor or the Master Servicer on or
with respect to the Mortgage Loans (other than payments of principal and
interest due on such Mortgage Loans on or before the Cut-off Date).
In connection with such transfer and assignment, the Depositor
does hereby deliver to, and deposit with, the Trustee the following documents or
instruments with respect to each Mortgage Loan (a "Mortgage File") so
transferred and assigned:
(i) the original Mortgage Note, endorsed in the following
form: "Pay to the order of The Bank of New York, as Trustee for
the registered holders of Salomon Brothers Mortgage Securities
VII, Inc., Series 1996-3, without recourse", with all prior and
intervening endorsements showing a complete chain of endorsement
from the originator to the Person so endorsing to the Trustee;
(ii) the original Mortgage with evidence of recording
thereon, and the original recorded power of attorney, if the
Mortgage was executed pursuant to a power of attorney, with
evidence of recording thereon;
(iii) an original Assignment of the Mortgage executed in the
following form: "The Bank of New York, as Trustee for the
registered holders of Salomon Brothers Mortgage Securities VII,
Inc., Series 1996-3";
(iv) the original recorded Assignment or Assignments of the
Mortgage showing a complete chain of assignment from the
originator to the Person assigning the Mortgage to the Trustee as
contemplated by the immediately preceding clause (iii);
(v) the original or copies of each assumption,
modification, written assurance or substitution agreement, if
any; and
(vi) the original lender's title insurance policy, together
with all endorsements or riders which were issued with or
subsequent to the issuance of such policy, insuring the priority
of the Mortgage as a first lien on the Mortgaged Property
represented therein as a fee interest vested in the Mortgagor, or
in the event such original title policy is unavailable, a written
commitment or uniform binder or preliminary report of title
issued by the title insurance or escrow company.
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The Depositor shall promptly (and in no event later than five
Business Days following the Closing Date) submit or cause to be submitted for
recording, at no expense to the related Trust Fund, the Trustee or the
Certificate Insurer, in the appropriate public office for real property records,
each Assignment referred to in Sections 2.01(iii) and (iv) above. In the event
that any such Assignment is lost or returned unrecorded because of a defect
therein, the Depositor shall promptly prepare or cause to be prepared a
substitute Assignment or cure or cause to be cured such defect, as the case may
be, and thereafter cause each such Assignment to be duly recorded.
If any original Mortgage Note referred to in Section 2.01(i)
cannot be located, the obligations of the Depositor to deliver such documents
shall be deemed to be satisfied upon delivery to the Trustee of a photocopy of
the original of such Mortgage Note, with a Lost Note Affidavit to follow within
one Business Day. If any of the documents referred to in Sections 2.01(ii),
(iii) or (iv) above has as of the Closing Date been submitted for recording but
either (x) has not been returned from the applicable public recording office or
(y) has been lost or such public recording office has retained the original of
such document, the obligations of the Depositor to deliver such documents shall
be deemed to be satisfied upon (1) delivery to the Trustee of a copy of each
such document certified by the Mortgage Loan Seller in the case of (x) above or
the applicable public recording office in the case of (y) above to be a true and
complete copy of the original that was submitted for recording and (2) if such
copy is certified by the Mortgage Loan Seller, delivery to the Trustee promptly
upon receipt thereof of either the original or a copy of such document certified
by the applicable public recording office to be a true and complete copy of the
original. Notice shall be provided to the Trustee, the Certificate Insurer and
the Rating Agencies by the Mortgage Loan Seller if delivery pursuant to clause
(2) above will be made more than 180 days after the Closing Date. If the
original lender's title insurance policy was not delivered pursuant to Section
2.01(vi) above, the Depositor shall deliver or cause to be delivered to the
Trustee, promptly after receipt thereof, the original lender's title insurance
policy. The Depositor shall deliver or cause to be delivered to the Trustee
promptly upon receipt thereof any other original documents constituting a part
of a Mortgage File received with respect to any Mortgage Loan, including, but
not limited to, any original documents evidencing an assumption or modification
of any Mortgage Loan.
All original documents relating to the Mortgage Loans that are
not delivered to the Trustee are and shall be held by or on behalf of the
Mortgage Loan Seller, the Depositor or the Master Servicer, as the case may be,
in trust for the benefit of the Trustee on behalf of the Certificateholders and
the Certificate Insurer. In the event that any such original document is
required pursuant to the terms of this Section to be a part of a Mortgage File,
such document shall be delivered promptly to the Trustee. Any such original
document delivered to or held by the Depositor that is not required pursuant to
the terms of this Section to be a part of a Mortgage File, shall be delivered
promptly to the Master Servicer.
The Depositor herewith delivers to the Trustee an executed copy
of the Mortgage Loan Purchase Agreement.
In addition to the foregoing, the Depositor shall cause the
Certificate Insurer to deliver the Policy to the Trustee for the benefit of the
Certificateholders.
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SECTION 2.02. Acceptance by Trustee.
The Trustee acknowledges receipt of the Policy and, subject to
the provisions of Section 2.01 and subject to any exceptions noted on the
exception report described in the next paragraph below, the documents referred
to in Section 2.01 (other than such documents described in Section 2.01(v))
above and all other assets included in the definition of "Trust Fund" under
clauses (i), (iii), (iv) and (v) (to the extent of amounts deposited into the
Distribution Account) and declares that it holds and will hold such documents
and the other documents delivered to it constituting a Mortgage File, and that
it holds or will hold all such assets and such other assets included in the
definition of "Trust Fund" in trust for the exclusive use and benefit of all
present and future Certificateholders and the Certificate Insurer.
The Trustee agrees, for the benefit of the Certificateholders, to
review each Mortgage File on or before the Closing Date and to certify in
substantially the form attached hereto as Exhibit C-1 that, as to each Mortgage
Loan listed in the Mortgage Loan Schedule (other than any Mortgage Loan paid in
full or any Mortgage Loan specifically identified in the exception report
annexed thereto as not being covered by such certification), (i) all documents
constituting part of such Mortgage File (other than such documents described in
Section 2.01(v)) required to be delivered to it pursuant to this Agreement are
in its possession, (ii) such documents have been reviewed by it and appear
regular on their face and relate to such Mortgage Loan, (iii) based on its
examination and only as to the foregoing, the information set forth in the
Mortgage Loan Schedule that corresponds to items (i)-(iii), (vi), (x)(A), (xi),
(xii), (xv), (xvii), (xviii), (xx)-(xxiii) and (xxv) of the definition of
"Mortgage Loan Schedule" accurately reflects information set forth in the
Mortgage File. It is herein acknowledged that, in conducting such review, the
Trustee was under no duty or obligation (i) to inspect, review or examine any
such documents, instruments, certificates or other papers to determine that they
are genuine, enforceable, or appropriate for the represented purpose or that
they have actually been recorded or that they are other than what they purport
to be on their face, or (ii) to determine whether any Mortgage File should
include any of the documents specified in clause (v) of Section 2.01.
Prior to the first anniversary date of this Agreement the Trustee
shall deliver to the Depositor, the Master Servicer and the Certificate Insurer
a final certification in the form annexed hereto as Exhibit C-2 evidencing the
completeness of the Mortgage Files, with any applicable exceptions noted
thereon.
If in the process of reviewing the Mortgage Files and making or
preparing, as the case may be, the certifications referred to above, the Trustee
finds any document or documents constituting a part of a Mortgage File to be
missing or defective in any material respect, at the conclusion of its review
the Trustee shall so notify the Depositor, the Master Servicer and the
Certificate Insurer. In addition, upon the discovery by the Depositor, the
Master Servicer or the Trustee of a breach of any of the representations and
warranties made by the Mortgage Loan Seller in the related Mortgage Loan
Purchase Agreement in respect of any Mortgage Loan which materially adversely
affects such Mortgage Loan or the interests of the related Certificateholders in
such Mortgage Loan, the party discovering such breach shall give prompt written
notice to the other parties and the Certificate Insurer.
The Trustee shall, at the written request and expense of any
Certificateholder, provide a written report to such Certificateholder of all
Mortgage Files released to the Master Servicer for servicing purposes.
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SECTION 2.03. Repurchase or Substitution of Mortgage Loans
by the Mortgage Loan Seller or the
Depositor.
(a) Upon discovery or receipt of notice of any materially
defective document in, or that a document is missing from, a Mortgage File or of
the breach by the Mortgage Loan Seller of any representation, warranty or
covenant under the Mortgage Loan Purchase Agreement in respect of any Mortgage
Loan which materially adversely affects the value of such Mortgage Loan or the
interest therein of the Certificateholders, the Trustee shall promptly notify
the Mortgage Loan Seller, the Master Servicer and the Certificate Insurer of
such defect, missing document or breach and request that the Mortgage Loan
Seller deliver such missing document or cure such defect or breach within 60
days from the date the Mortgage Loan Seller was notified of such missing
document, defect or breach, and if the Mortgage Loan Seller does not deliver
such missing document or cure such defect or breach in all material respects
during such period, the Master Servicer (or, pursuant to Section 3.03(b) if the
Mortgage Loan Seller is the Master Servicer, the Trustee) shall enforce the
Mortgage Loan Seller's obligation under the Mortgage Loan Purchase Agreement (i)
in connection with any such breach that could not reasonably have been cured
within such 60 day period, if the Mortgage Loan Seller shall have commenced to
cure such breach within such 60 day period, to proceed thereafter diligently and
expeditiously to cure the same within the additional period provided under the
Mortgage Loan Purchase Agreement and (ii) in connection with any such breach
(subject to clause (i) above) or in connection with any missing document or
defect, to repurchase such Mortgage Loan from the Trust Fund at the Purchase
Price within 120 days after the date on which the Mortgage Loan Seller was
notified (subject to Section 2.03(e)) of such missing document, defect or
breach, if and to the extent that the Mortgage Loan Seller is obligated to do so
under the Mortgage Loan Purchase Agreement. The Purchase Price for the
repurchased Mortgage Loan shall be deposited in the Collection Account and the
Trustee, upon receipt of written certification from the Master Servicer of such
deposit, shall release to the Mortgage Loan Seller the related Mortgage File and
shall execute and deliver such instruments of transfer or assignment, in each
case without recourse, as the Mortgage Loan Seller shall furnish to it and as
shall be necessary to vest in the Mortgage Loan Seller any Mortgage Loan
released pursuant hereto and the Trustee shall have no further responsibility
with regard to such Mortgage File. In lieu of repurchasing any such Mortgage
Loan as provided above, if so provided in the Mortgage Loan Purchase Agreement,
the Mortgage Loan Seller may cause such Mortgage Loan to be removed from the
Trust Fund (in which case it shall become a Deleted Mortgage Loan) and
substitute one or more Qualified Substitute Mortgage Loans in the manner and
subject to the limitations set forth in Section 2.03(d). It is understood and
agreed that the obligation of the Mortgage Loan Seller to cure or to repurchase
(or to substitute for) any Mortgage Loan as to which a document is missing, a
material defect in a constituent document exists or as to which such a breach
has occurred and is continuing shall constitute the sole remedy respecting such
omission, defect or breach available to the Trustee on behalf of the
Certificateholders and the Certificate Insurer.
(b) Subject to Section 2.03(e), within 90 days of the earlier of
discovery by the Depositor or receipt of notice by the Depositor of the breach
of any representation or warranty of the Depositor set forth in Section 2.04
with respect to any Mortgage Loan, which materially adversely affects the value
of such Mortgage Loan or the interest therein of the Certificateholders, the
Depositor shall (i) cure such breach in all material respects, (ii) repurchase
the Mortgage Loan from the Trust Fund at the Purchase Price or (iii) remove such
Mortgage Loan from the Trust Fund (in which case it shall become a Deleted
Mortgage Loan)
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and substitute one or more Qualified Substitute Mortgage Loans in the manner and
subject to the limitations set forth in Section 2.03(d). If any such breach is a
breach of any of the representations and warranties included in Section
2.04(a)(iv), and the Depositor is unable to cure such breach, the Depositor
shall repurchase or substitute the smallest number of Mortgage Loans as shall be
required to make such representation or warranty true and correct. The Purchase
Price for any repurchased Mortgage Loan shall be delivered to the Master
Servicer for deposit in the Collection Account, and the Trustee, upon receipt of
written certification from the Master Servicer of such deposit, shall at the
Depositor's direction release to the Depositor the related Mortgage File and
shall execute and deliver such instruments of transfer or assignment furnished
by the Depositor, in each case without recourse, as the Depositor shall furnish
to it and as shall be necessary to vest in the Depositor any Mortgage Loan
released pursuant hereto.
(c) Within 90 days of the earlier of discovery by the Master
Servicer or receipt of notice by the Master Servicer of the breach of any
representation, warranty or covenant of the Master Servicer set forth in Section
2.05 which materially and adversely affects the interests of the
Certificateholders in any Mortgage Loan, the Master Servicer shall cure such
breach in all material respects.
(d) Any substitution of Qualified Substitute Mortgage Loans for
Deleted Mortgage Loans made pursuant to Section 2.03(a), in the case of the
Mortgage Loan Seller, or Section 2.03(b), in the case of the Depositor, must be
effected prior to the date which is two years after the Startup Day for the
Trust Fund.
As to any Deleted Mortgage Loan for which the Mortgage Loan
Seller or the Depositor substitutes a Qualified Substitute Mortgage Loan or
Loans, such substitution shall be effected by the Mortgage Loan Seller or the
Depositor, as the case may be, delivering to the Trustee, for such Qualified
Substitute Mortgage Loan or Loans, the Mortgage Note, the Mortgage, the
Assignment to the Trustee, and such other documents and agreements, with all
necessary endorsements thereon, as are required by Section 2.01, together with
an Officers' Certificate providing that each such Qualified Substitute Mortgage
Loan satisfies the definition thereof and specifying the Substitution Shortfall
Amount (as described below), if any, in connection with such substitution. The
Trustee shall acknowledge receipt for such Qualified Substitute Mortgage Loan or
Loans and, within ten Business Days thereafter, review such documents as
specified in Section 2.02 and deliver to the Depositor, the Master Servicer and
the Certificate Insurer, with respect to such Qualified Substitute Mortgage Loan
or Loans, a certification substantially in the form attached hereto as Exhibit
C-1, with any applicable exceptions noted thereon. Within one year of the date
of substitution, the Trustee shall deliver to the Depositor, the Master Servicer
and the Certificate Insurer a certification substantially in the form of Exhibit
C-2 hereto with respect to such Qualified Substitute Mortgage Loan or Loans,
with any applicable exceptions noted thereon. Monthly Payments due with respect
to Qualified Substitute Mortgage Loans in the month of substitution are not part
of the Trust Fund and will be retained by the Depositor or the Mortgage Loan
Seller, as the case may be. For the month of substitution, distributions to
Certificateholders will reflect the Monthly Payment due on such Deleted Mortgage
Loan on or before the Due Date in the month of substitution, and the Depositor
or the Mortgage Loan Seller, as the case may be, shall thereafter be entitled to
retain all amounts subsequently received in respect of such Deleted Mortgage
Loan. The Depositor shall give or cause to be given written notice to the
Certificateholders that such substitution has taken place, shall amend the
Mortgage Loan Schedule to reflect the removal of such Deleted Mortgage Loan from
the terms of this Agreement and the substitution of the Qualified Substitute
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Mortgage Loan or Loans and shall deliver a copy of such amended Mortgage Loan
Schedule to the Trustee. Upon such substitution, such Qualified Substitute
Mortgage Loan or Loans shall constitute part of the Mortgage Pool and shall be
subject in all respects to the terms of this Agreement and, in the case of a
substitution effected by the Mortgage Loan Seller, the Mortgage Loan Purchase
Agreement, including, in the case of a substitution effected by the Mortgage
Loan Seller all applicable representations and warranties thereof included in
the Mortgage Loan Purchase Agreement, and in the case of a substitution effected
by the Depositor, all applicable representations and warranties thereof set
forth in Section 2.04, in each case as of the date of substitution.
For any month in which the Depositor or the Mortgage Loan Seller
substitutes one or more Qualified Substitute Mortgage Loans for one or more
Deleted Mortgage Loans, the Master Servicer will determine the amount (the
"Substitution Shortfall Amount"), if any, by which the aggregate Purchase Price
of all such Deleted Mortgage Loans exceeds the aggregate of, as to each such
Qualified Substitute Mortgage Loan, the Scheduled Principal Balance thereof as
of the date of substitution, together with one month's interest on such
Scheduled Principal Balance at the applicable Net Mortgage Rate. On the date of
such substitution, the Depositor or the Mortgage Loan Seller, as the case may
be, will deliver or cause to be delivered to the Master Servicer for deposit in
the Collection Account an amount equal to the Substitution Shortfall Amount, if
any, and the Trustee, upon receipt of the related Qualified Substitute Mortgage
Loan or Loans and certification by the Master Servicer of such deposit, shall
release to the Depositor or the Mortgage Loan Seller, as the case may be, the
related Mortgage File or Files and shall execute and deliver such instruments of
transfer or assignment, in each case without recourse, as the Depositor or the
Mortgage Loan Seller, as the case may be, shall deliver to it and as shall be
necessary to vest therein any Deleted Mortgage Loan released pursuant hereto.
In addition, the Depositor or the Mortgage Loan Seller, as the
case may be, shall obtain at its own expense and deliver to the Trustee and the
Certificate Insurer an Opinion of Counsel to the effect that such substitution
will not cause (a) any federal tax to be imposed on the Trust Fund, including
without limitation, any federal tax imposed on "prohibited transactions" under
Section 860F(a)(1) of the Code or on "contributions after the startup date"
under Section 860G(d)(1) of the Code, or (b) the Trust Fund to fail to qualify
as a REMIC at any time that any Certificate is outstanding.
(e) Upon discovery by the Depositor, the Mortgage Loan Seller,
the Master Servicer, the Trustee or the Certificate Insurer that any Mortgage
Loan does not constitute a "qualified mortgage" within the meaning of Section
860G(a)(3) of the Code, the party discovering such fact shall within two
Business Days give written notice thereof to the other parties and the
Certificate Insurer. In connection therewith, the Mortgage Loan Seller or the
Depositor shall repurchase or, subject to the limitations set forth in Section
2.03(d), substitute one or more Qualified Substitute Mortgage Loans for the
affected Mortgage Loan within 90 days of the earlier of discovery or receipt of
such notice with respect to such affected Mortgage Loan. Such repurchase or
substitution shall be made by (i) the Mortgage Loan Seller, if the affected
Mortgage Loan's status as a non-qualified mortgage is or results from a breach
of any representation, warranty or covenant made by the Mortgage Loan Seller
under the Mortgage Loan Purchase Agreement, or (ii) the Depositor, if the
affected Mortgage Loan's status as a non-qualified mortgage is a breach of any
representation or warranty of the Depositor set forth in Section 2.04. Any such
repurchase or substitution shall be made in the same manner as set forth
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in Sections 2.03(a), if made by the Mortgage Loan Seller, or 2.03(b), if made by
the Depositor. The Trustee shall reconvey to the Depositor or the Mortgage Loan
Seller, as the case may be, the Mortgage Loan to be released pursuant hereto in
the same manner, and on the same terms and conditions, as it would a Mortgage
Loan repurchased for breach of a representation or warranty.
SECTION 2.04. Representations and Warranties of the Depositor.
(a) The Depositor hereby represents and warrants to the Trustee
for the benefit of the Certificateholders and the Certificate Insurer that as of
the Closing Date or as of such other date specifically provided herein:
(i) The information set forth in the Mortgage Loan Schedule
for the Original Mortgage Loans is complete, true and correct in
all material respects at the date or dates respecting which such
information is furnished;
(ii) As of the Cut-off Date, the Monthly Payment due under
each Original Mortgage Loan is not 30 or more days delinquent in
payment and has not been 30 or more days delinquent in payment
more than once in the twelve month period prior to the Cut-off
Date (assuming that a "rolling" 30 day delinquency is considered
to be one time delinquent);
(iii) Each Original Mortgage Loan had an original term to
maturity of between 15 and 30 years; each Original Mortgage Loan
in Sub-Pool 1 is a fixed-rate mortgage loan with level payments
due on the first day of each month, and each such Mortgage Loan
is fully amortizing or is a Balloon Mortgage Loan; each Original
Mortgage Loan in Sub-Pool 2 is an adjustable-rate mortgage loan
with payments due on the first day of each month and each such
Mortgage Loan is fully amortizing or is a Balloon Mortgage Loan;
effective with the first payment due after each Adjustment Date,
the monthly payment amount for each Original Mortgage Loan in
Sub-Pool 2 will be adjusted to an amount which would amortize
fully the outstanding principal balance of such Mortgage Loan
over its remaining term (or, in the case of a Balloon Mortgage
Loan, over its remaining hypothetical amortizing term) and pay
interest at the Mortgage Rate so adjusted; on the first
Adjustment Date and on each Adjustment Date thereafter the
Mortgage Rate on each Original Mortgage Loan in Sub-Pool 2 will
be adjusted to equal the sum of the Index and the related Gross
Margin, rounded to the nearest multiple of 0.125%, subject to the
Periodic Rate Cap, the Maximum Mortgage Rate and the Minimum
Mortgage Rate applicable to such Mortgage Loan;
(iv) (A) no more than approximately 53.83%, approximately
8.16%, approximately 6.17%, approximately 5.10%, approximately
4.71%, approximately 4.56% and approximately 4.16%, respectively,
of the Original Mortgage Loans in Sub-Pool 1, by outstanding
principal balance of the Original Mortgage Loans in Sub-Pool 1 as
of the Cut-off Date, will be secured by Mortgaged Properties
located in California, Florida, Oregon, Utah, Washington,
Colorado and Arizona, respectively, and no more than
approximately 3.00% of the Original Mortgage Loans in Sub-Pool 1,
by outstanding principal balance of the Original Mortgage Loans
in Sub-Pool 1 as of the Cut-off Date, will be
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secured by Mortgaged Properties located in any other state; no
more than approximately 47.09%, approximately 11.12%,
approximately 10.09%, approximately 9.11%, approximately 5.18%,
approximately 4.68% and approximately 3.69%, respectively, of the
Original Mortgage Loans in Sub-Pool 2, by outstanding principal
balance of the Original Mortgage Loans in Sub-Pool 2 as of the
Cut-off Date, will be secured by Mortgaged Properties located in
California, Washington, Oregon, Utah, Florida, Colorado and
Arizona, respectively, and no more than approximately 3.00% of
the Original Mortgage Loans in Sub-Pool 2, by outstanding
principal balance of the Original Mortgage Loans in Sub-Pool 2 as
of the Cut-off Date, will be secured by Mortgaged Properties
located in any other state; (B) as of the Cut-off Date, no more
than approximately 1.44% of the Original Mortgage Loans in
Sub-Pool 1 and no more than approximately 1.95% of the Original
Mortgage Loans in Sub-Pool 2, in each case by outstanding
principal balance of the related Original Mortgage Loans as of
the Cut-off Date, are secured by Mortgaged Properties located in
any one California zip code area, and no more than approximately
12.36% of the Original Mortgage Loans in Sub-Pool 1 and no more
than approximately 12.82% of the Original Mortgage Loans in
Sub-Pool 2, in each case by outstanding principal balance of the
related Original Mortgage Loans as of the Cut-off Date, are
secured by units in two- to four-family dwellings, condominiums
or planned unit developments and (C) at least approximately
87.64% of the Original Mortgage Loans in Sub-Pool 1 and at least
approximately 87.18% of the Original Mortgage Loans in Sub-Pool
2, in each case by outstanding principal balance of the related
Original Mortgage Loans as of the Cut-off Date, are secured by
real property with a single family residence erected thereon;
(v) If the Mortgaged Property securing an Original Mortgage
Loan is identified in the Federal Register by the Federal
Emergency Management Agency ("FEMA") as having special flood
hazards, a flood insurance policy is in effect at the Closing
Date which met the requirements of FEMA at the time such policy
was issued;
(vi) With respect to each Original Mortgage Loan, the
Loan-to-Value Ratio was less than or equal to 85.00% at the
origination of such Original Mortgage Loan;
(vii) With respect to at least approximately 90.76% of the
Original Mortgage Loans in Sub-Pool 1 and at least approximately
92.45% of the Original Mortgage Loans in Sub-Pool 2, in each case
by outstanding principal balance as of the Cut-off Date, at the
time that the Mortgage Loan was made, the Mortgagor represented
that the Mortgagor would occupy the Mortgaged Property as the
Mortgagor's primary residence. With respect to approximately
9.24% of the Original Mortgage Loans in Sub-Pool 1 and
approximately 7.55% of the Original Mortgage Loans in Sub-Pool 2,
in each case by outstanding principal balance as of the Cut-off
Date, at the time that the Mortgage Loan was made, the Mortgagor
represented that the Mortgagor would occupy the Mortgaged
Property as the Mortgagor's secondary residence or that the
Mortgaged Property would be an investor property.
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(b) It is understood and agreed that the representations and
warranties set forth in this Section 2.04 shall survive delivery of the Mortgage
Files to the Trustee and shall inure to the benefit of the Certificateholders
and the Certificate Insurer notwithstanding any restrictive or qualified
endorsement or assignment. Upon discovery by any of the Depositor, the Master
Servicer or the Trustee of a breach of any of the foregoing representations and
warranties which materially and adversely affects the value of any Mortgage Loan
or the interests therein of the Certificateholders and the Certificate Insurer,
the party discovering such breach shall give prompt written notice to the other
parties, and in no event later than two Business Days from the date of such
discovery. It is understood and agreed that the obligations of the Depositor set
forth in Section 2.03(b) to cure, substitute for or repurchase a Mortgage Loan
constitute the sole remedies available to the Certificateholders or to the
Trustee on their behalf respecting a breach of the representations and
warranties contained in this Section 2.04.
SECTION 2.05. Representations, Warranties and Covenants of the
Master Servicer.
The Master Servicer hereby represents, warrants and covenants to
the Trustee, for the benefit of each of the Trustee, the Certificateholders, the
Certificate Insurer and to the Depositor that as of the Closing Date or as of
such date specifically provided herein:
(i) The Master Servicer is duly organized, validly existing
and in good standing as a federal savings bank under the laws of
the United States and is and will remain in compliance with the
laws of each state in which any Mortgaged Property is located to
the extent necessary to ensure the enforceability of each
Mortgage Loan and the servicing of the Mortgage Loan in
accordance with the terms of this Agreement;
(ii) The Master Servicer has the full power and authority to
conduct its business as presently conducted by it and to execute,
deliver and perform, and to enter into and consummate, all
transactions contemplated by this Agreement. The Master Servicer
has duly authorized the execution, delivery and performance of
this Agreement, has duly executed and delivered this Agreement,
and this Agreement, assuming due authorization, execution and
delivery by the Depositor and the Trustee, constitutes a legal,
valid and binding obligation of the Master Servicer, enforceable
against it in accordance with its terms except as the
enforceability thereof may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity;
(iii) The execution and delivery of this Agreement by the
Master Servicer and the performance of and compliance with the
terms of this Agreement will not violate the Master Servicer's
charter or by-laws or any law, rule, regulation, order, judgment,
award, administrative interpretation, injunction, writ, decree or
the like affecting the Master Servicer or by which the Master
Servicer is bound or (ii) result in a breach of or constitute a
default under any indenture or other material agreement to which
the Master Servicer is a party or by which the Master Servicer is
bound, which in the case of either clause (i) or (ii) will have a
material adverse effect on the Seller's ability to perform its
obligations under this Agreement;
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(iv) The Master Servicer is an approved seller/servicer for
FHLMC in good standing and is a HUD approved mortgagee pursuant
to Section 203 of the National Housing Act; no event has
occurred, including but not limited to a change in insurance
coverage, which would make the Master Servicer unable to comply
with FHLMC or HUD eligibility requirements or which would require
notification to FHLMC or HUD;
(v) The Master Servicer does not believe, nor does it have
any reason or cause to believe, that it cannot perform each and
every covenant contained in this Agreement;
(vi) With respect to each Mortgage Loan, the Master Servicer
is in possession of a complete Mortgage File, except for such
documents as have been delivered to the Trustee;
(vii) There are no actions or proceedings against,
investigations known to it of, the Master Servicer before any
court, administrative or other tribunal (A) that might prohibit
its entering into this Agreement, (B) seeking to prevent the
consummation of the transactions contemplated by this Agreement
or (C) that might prohibit or materially and adversely affect the
performance by the Master Servicer of its obligations under, or
validity or enforceability of, this Agreement; and
(viii) No consent, approval, authorization or order of any
court or governmental agency or body is required for the
execution, delivery and performance by the Master Servicer of, or
compliance by the Master Servicer with, this Agreement or the
consummation of the transactions contemplated by this Agreement,
except for such consents, approvals, authorizations or orders, if
any, that have been obtained prior to the Closing Date.
It is understood and agreed that the representations, warranties
and covenants set forth in this Section 2.05 shall survive delivery of the
Mortgage Files to the Trustee and shall inure to the benefit of the Trustee, the
Depositor, the Certificateholders and the Certificate Insurer. Upon discovery by
any of the Depositor, the Master Servicer or the Trustee of a breach of any of
the foregoing representations, warranties and covenants which materially and
adversely affects the value of any Mortgage Loan or the interests therein of the
Certificateholders and the Certificate Insurer, the party discovering such
breach shall give prompt written notice (but in no event later than two Business
Days following such discovery) to the Trustee and the Certificate Insurer. The
obligation of the Master Servicer set forth in Section 2.03(c) to cure breaches
shall constitute the sole remedies available to the Certificateholders, the
Depositor or the Trustee on behalf of the Certificateholders respecting a breach
of the representations, warranties and covenants contained in this Section 2.05.
SECTION 2.06. Issuance of Certificates.
The Trustee acknowledges the assignment to it of the Mortgage
Loans and the delivery to it of the Mortgage Files, subject to the provisions of
Sections 2.01 and 2.02, together with the assignment to it of all other assets
included in the Trust Fund, receipt of which is hereby acknowledged.
Concurrently with such assignment and delivery and in exchange therefor, the
Trustee, pursuant to the written request of the Depositor executed by an officer
of the Depositor, has executed, authenticated and delivered to or upon the order
of the Depositor,
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the Certificates in authorized denominations. The interests evidenced by the
Certificates, constitute the entire beneficial ownership interest in the Trust
Fund.
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ARTICLE III
ADMINISTRATION AND SERVICING
OF THE TRUST FUND
SECTION 3.01. Master Servicer to Act as Master Servicer.
The Master Servicer shall service and administer the Mortgage
Loans on behalf of the Trustee and in the best interests of and for the benefit
of the Certificateholders (as determined by the Master Servicer in its
reasonable judgment) in accordance with the terms of this Agreement and the
respective Mortgage Loans and, to the extent consistent with such terms, in the
same manner in which it services and administers similar mortgage loans for its
own portfolio, giving due consideration to customary and usual standards of
practice of prudent mortgage lenders and loan servicers administering similar
mortgage loans but without regard to:
(i) any relationship that the Master Servicer, any
Sub-Servicer or any Affiliate of the Master Servicer or any
Sub-Servicer may have with the related Mortgagor;
(ii) the ownership of any Certificate by the Master
Servicer or any Affiliate of the Master Servicer;
(iii) the Master Servicer's obligation to make P&I
Advances or Servicing Advances; or
(iv) the Master Servicer's or any Sub-Servicer's right to
receive compensation for its services hereunder or with respect
to any particular transaction.
To the extent consistent with the foregoing, the Master Servicer shall also seek
to maximize the timely and complete recovery of principal and interest on the
Mortgage Notes. Subject only to the above-described servicing standards and the
terms of this Agreement and of the respective Mortgage Loans, the Master
Servicer shall have full power and authority, acting alone or through
Sub-Servicers as provided in Section 3.02, to do or cause to be done any and all
things in connection with such servicing and administration which it may deem
necessary or desirable. Without limiting the generality of the foregoing, the
Master Servicer in its own name or in the name of a Sub-Servicer is hereby
authorized and empowered by the Trustee when the Master Servicer believes it
appropriate in its best judgment, to execute and deliver, on behalf of the
Certificateholders and the Trustee or any of them, and upon notice to the
Trustee, any and all instruments of satisfaction or cancellation, or of partial
or full release or discharge, and all other comparable instruments, with respect
to the Mortgage Loans and the Mortgaged Properties and to institute foreclosure
proceedings or obtain a deed-in-lieu of foreclosure so as to convert the
ownership of such properties, and to hold or cause to be held title to such
properties, on behalf of the Trustee and Certificateholders. The Master Servicer
shall service and administer the Mortgage Loans in accordance with applicable
state and federal law and shall provide to the Mortgagors any reports required
to be provided to them thereby. The Master Servicer shall also comply in the
performance of this Agreement with all reasonable rules and requirements of each
insurer under any standard hazard insurance policy. Subject to Section 3.17, the
Trustee shall execute, at the written request of the Master Servicer, and
furnish to the Master Servicer and any Sub-Servicer any special or limited
powers of attorney and other documents necessary or appropriate to enable the
Master Servicer or any Sub-Servicer to carry out their servicing and
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administrative duties hereunder and the Trustee shall not be liable for the
actions of the Master Servicer or any Sub-Servicers under such powers of
attorney.
In accordance with the standards of the preceding paragraph, the
Master Servicer shall advance or cause to be advanced funds as necessary for the
purpose of effecting the timely payment of taxes and assessments on the
Mortgaged Properties, which advances shall be reimbursable in the first instance
from related collections from the Mortgagors pursuant to Section 3.09, and
further as provided in Section 3.11. Any cost incurred by the Master Servicer or
by Sub-Servicers in effecting the timely payment of taxes and assessments on a
Mortgaged Property shall not, for the purpose of calculating distributions to
Certificateholders, be added to the unpaid principal balance of the related
Mortgage Loan, notwithstanding that the terms of such Mortgage Loan so permit.
Notwithstanding anything in this Agreement to the contrary, the
Master Servicer may not make any future advances with respect to a Mortgage Loan
and the Master Servicer shall not (unless the Mortgagor is in default with
respect to the Mortgage Loan or such default is, in the judgment of the Master
Servicer, reasonably foreseeable) permit any modification with respect to any
Mortgage Loan that would change the Mortgage Rate, reduce or increase the
principal balance (except for reductions resulting from actual payments of
principal) or change the final maturity date on such Mortgage Loan or any
modification, waiver or amendment of any term of any Mortgage Loan that would
both (A) effect an exchange or reissuance of such Mortgage Loan under Section
1001 of the Code (or final, temporary or proposed Treasury regulations
promulgated thereunder) and (B) cause the Trust Fund to fail to qualify as a
REMIC under the Code or the imposition of any tax on "prohibited transactions"
or "contributions after the startup date" under the REMIC Provisions.
The Master Servicer may delegate its responsibilities under this
Agreement; provided, however, that no such delegation shall release the Master
Servicer from the responsibilities or liabilities arising under this Agreement.
SECTION 3.02. Sub-Servicing Agreements Between Master Servicer
and Sub-Servicers.
(a) The Master Servicer may enter into Sub-Servicing Agreements
(provided that the Master Servicer shall have obtained the consent of the
Insurer and provided such agreements would not result in a withdrawal or a
downgrading by any Rating Agency of the rating or any shadow rating on any Class
of Certificates) with Sub-Servicers, for the servicing and administration of the
Mortgage Loans.
Each Sub-Servicer shall be (i) authorized to transact business in
the state or states where the related Mortgaged Properties it is to service are
situated, if and to the extent required by applicable law to enable the
Sub-Servicer to perform its obligations hereunder and under the Sub-Servicing
Agreement, (ii) an institution approved as a mortgage loan originator by the
Federal Housing Administration or an institution the deposit accounts in which
are insured by the FDIC and (iii) a FHLMC or FNMA approved mortgage servicer.
Each Sub-Servicing Agreement must impose on the Sub-Servicer requirements
conforming to the provisions set forth in Section 3.08 and provide for servicing
of the Mortgage Loans consistent with the terms of this Agreement. The Master
Servicer will examine each Sub-Servicing Agreement and will be familiar with the
terms thereof. The terms of any Sub-Servicing Agreement will not be inconsistent
with any of the provisions of this Agreement. The Master Servicer and the Sub-
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Servicers may enter into and make amendments to the Sub-Servicing Agreements or
enter into different forms of Sub-Servicing Agreements; provided, however, that
any such amendments or different forms shall be consistent with and not violate
the provisions of this Agreement, and that no such amendment or different form
shall be made or entered into which could be reasonably expected to be
materially adverse to the interests of the Certificateholders, without the
consent of the Certificate Insurer and the Holders of Certificates entitled to
at least 66% of the Voting Rights. Any variation without the consent of the
Certificate Insurer and the Holders of Certificates entitled to at least 66% of
the Voting Rights from the provisions set forth in Section 3.08 relating to
insurance or priority requirements of Sub-Servicing Accounts, or credits and
charges to the Sub-Servicing Accounts or the timing and amount of remittances by
the SubServicers to the Master Servicer, are conclusively deemed to be
inconsistent with this Agreement and therefore prohibited. The Master Servicer
shall deliver to the Trustee and the Certificate Insurer copies of all
Sub-Servicing Agreements, and any amendments or modifications thereof, promptly
upon the Master Servicer's execution and delivery of such instruments.
(b) As part of its servicing activities hereunder, the Master
Servicer, for the benefit of the Trustee, the Certificateholders and the
Certificate Insurer, shall enforce the obligations of each Sub-Servicer under
the related Sub-Servicing Agreement and of the Mortgage Loan Seller under the
Mortgage Loan Purchase Agreement, including, without limitation, any obligation
to make advances in respect of delinquent payments as required by a
Sub-Servicing Agreement, or to purchase a Mortgage Loan on account of missing or
defective documentation or on account of a breach of a representation, warranty
or covenant, as described in Section 2.03(a). Such enforcement, including,
without limitation, the legal prosecution of claims, termination of
Sub-Servicing Agreements, and the pursuit of other appropriate remedies, shall
be in such form and carried out to such an extent and at such time as the Master
Servicer, in its good faith business judgment, would require were it the owner
of the related Mortgage Loans. The Master Servicer shall pay the costs of such
enforcement at its own expense, and shall be reimbursed therefor only (i) from a
general recovery resulting from such enforcement, to the extent, if any, that
such recovery exceeds all amounts due in respect of the related Mortgage Loans,
or (ii) from a specific recovery of costs, expenses or attorneys' fees against
the party against whom such enforcement is directed. Enforcement of the Mortgage
Loan Purchase Agreement against the Mortgage Loan Seller shall be effected by
the Master Servicer to the extent it is not the Mortgage Loan Seller, otherwise
by the Trustee, in accordance with the foregoing provisions of this paragraph.
SECTION 3.03. Successor Sub-Servicers.
The Master Servicer shall be entitled to terminate any
Sub-Servicing Agreement and the rights and obligations of any Sub-Servicer
pursuant to any Sub-Servicing Agreement in accordance with the terms and
conditions of such Sub-Servicing Agreement. In the event of termination of any
Sub-Servicer, all servicing obligations of such Sub-Servicer shall be assumed
simultaneously by the Master Servicer without any act or deed on the part of
such Sub-Servicer or the Master Servicer, and the Master Servicer either shall
service directly the related Mortgage Loans or shall enter into a Sub-Servicing
Agreement with a successor Sub-Servicer which qualifies under Section 3.02.
Any Sub-Servicing Agreement shall include the provision that such
agreement may be immediately terminated by the Trustee without fee, in
accordance with the terms of this
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Agreement, in the event that the Master Servicer shall, for any reason, no
longer be the Master Servicer (including termination due to a Master Servicer
Event of Default).
SECTION 3.04. Liability of the Master Servicer.
Notwithstanding any Sub-Servicing Agreement, any of the
provisions of this Agreement relating to agreements or arrangements between the
Master Servicer and a SubServicer or reference to actions taken through a
Sub-Servicer or otherwise, the Master Servicer shall remain obligated and
primarily liable to the Trustee, the Certificateholders and the Certificate
Insurer for the servicing and administering of the Mortgage Loans in accordance
with the provisions of Section 3.01 without diminution of such obligation or
liability by virtue of such Sub-Servicing Agreements or arrangements or by
virtue of indemnification from the SubServicer and to the same extent and under
the same terms and conditions as if the Master Servicer alone were servicing and
administering the Mortgage Loans. The Master Servicer shall be entitled to enter
into any agreement with a Sub-Servicer for indemnification of the Master
Servicer by such Sub-Servicer and nothing contained in this Agreement shall be
deemed to limit or modify such indemnification.
SECTION 3.05. No Contractual Relationship Between
Sub-Servicers and Trustee or
Certificateholders.
Any Sub-Servicing Agreement that may be entered into and any
transactions or services relating to the Mortgage Loans involving a Sub-Servicer
in its capacity as such shall be deemed to be between the Sub-Servicer and the
Master Servicer alone, and the Trustee and Certificateholders or the Certificate
Insurer shall not be deemed parties thereto and shall have no claims, rights,
obligations, duties or liabilities with respect to the Sub-Servicer except as
set forth in Section 3.06. The Master Servicer shall be solely liable for all
fees owed by it to any Sub-Servicer, irrespective of whether the Master
Servicer's compensation pursuant to this Agreement is sufficient to pay such
fees.
SECTION 3.06. Assumption or Termination of Sub-Servicing
Agreements by Trustee.
In the event the Master Servicer shall for any reason no longer
be the master servicer (including by reason of the occurrence of a Master
Servicer Event of Default), the Trustee or its designee shall thereupon assume
all of the rights and obligations of the Master Servicer under each
Sub-Servicing Agreement that the Master Servicer may have entered into, unless
the Trustee elects to terminate any Sub-Servicing Agreement in accordance with
its terms as provided in Section 3.03. Upon such assumption, the Trustee, its
designee or the successor servicer for the Trustee appointed pursuant to Section
7.02 shall be deemed, subject to Section 3.03, to have assumed all of the Master
Servicer's interest therein and to have replaced the Master Servicer as a party
to each Sub-Servicing Agreement to the same extent as if each SubServicing
Agreement had been assigned to the assuming party, except that the Master
Servicer shall not thereby be relieved of any liability or obligations under any
Sub-Servicing Agreement.
The Master Servicer at its expense shall, upon request of the
Trustee, deliver to the assuming party all documents and records relating to
each Sub-Servicing Agreement and the Mortgage Loans then being serviced and an
accounting of amounts collected and held by or on behalf of it, and otherwise
use its best efforts to effect the orderly and efficient transfer of the
Sub-Servicing Agreements to the assuming party.
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SECTION 3.07. Collection of Certain Mortgage Loan Payments.
The Master Servicer shall make reasonable efforts to collect all
payments called for under the terms and provisions of the Mortgage Loans, and
shall, to the extent such procedures shall be consistent with this Agreement,
follow such collection procedures as it would follow with respect to mortgage
loans comparable to the Mortgage Loans and held for its own account. Consistent
with the foregoing, the Master Servicer may in its discretion (i) waive any late
payment charge or, if applicable, penalty interest, (ii) extend the due dates
for the Monthly Payments due on a Mortgage Note for a period of not greater than
90 days or (iii) if the Master Servicer provides prior written notice to the
Certificate Insurer to which the Certificate Insurer does not object within two
days, extend the due dates for Monthly Payments due on a Mortgage Loan for a
period of not greater than 180 days; provided that any extension pursuant to
clause (ii) or clause (iii) above shall not affect the amortization schedule of
any Mortgage Loan for purposes of any computation hereunder.
SECTION 3.08. Sub-Servicing Accounts.
In those cases where a Sub-Servicer is servicing a Mortgage Loan
pursuant to a Sub-Servicing Agreement, the Sub-Servicer will be required to
establish and maintain one or more accounts (collectively, the "Sub-Servicing
Account"). The Sub-Servicing Account shall be an Eligible Account and shall
comply with all requirements of this Agreement relating to the Collection
Account. The Sub-Servicer will be required to deposit into the Sub-Servicing
Account no later than the first Business Day after receipt all proceeds of
Mortgage Loans received by the Sub-Servicer, less its servicing compensation to
the extent permitted by the SubServicing Agreement and to remit such proceeds to
the Master Servicer for deposit in the Collection Account not later than the
first Business Day thereafter. For purposes of this Agreement, the Master
Servicer shall be deemed to have received payments on the Mortgage Loans when
the Sub-Servicer receives such payments.
SECTION 3.09. Collection of Taxes, Assessments and
Similar Items; Servicing Accounts.
The Master Servicer shall, establish and maintain one or more
accounts (the "Servicing Accounts"), into which all collections from the
Mortgagors (or related advances from Sub-Servicers) for the payment of taxes,
assessments, hazard insurance premiums, and comparable items for the account of
the Mortgagors ("Escrow Payments") shall be deposited and retained. Servicing
Accounts shall be Eligible Accounts. The Master Servicer shall deposit in the
Servicing Accounts on a daily basis, and retain therein, all Escrow Payments
collected on account of the Mortgage Loans, for the purpose of effecting the
timely payment of any such items as required under the terms of this Agreement.
Withdrawals of amounts from a Servicing Account may be made only to (i) effect
timely payment of taxes, assessments, hazard insurance premiums, and comparable
items; (ii) reimburse the Master Servicer (or a Sub-Servicer to the extent
provided in the related Sub-Servicing Agreement) out of related collections for
any advances made pursuant to Section 3.01 (with respect to taxes and
assessments) and Section 3.14 (with respect to hazard insurance); (iii) refund
to Mortgagors any sums as may be determined to be overages; (iv) pay interest,
if required and as described below, to Mortgagors on balances in the Servicing
Account; or (v) clear and terminate the Servicing Account at the termination of
the Master Servicer's obligations and responsibilities in respect of the
Mortgage Loans under this Agreement in accordance with Article X. As part of its
servicing duties, the Master Servicer or Sub-Servicers shall pay to the
Mortgagors interest on funds in Servicing Accounts, to the
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extent required by law and, to the extent that interest earned on funds in the
Servicing Accounts is insufficient, to pay such interest from its or their own
funds, without any reimbursement therefor.
SECTION 3.10. Collection Account and Distribution Account.
(a) On behalf of the Trust Fund, the Master Servicer shall
establish and maintain one or more accounts (such account or accounts, the
"Collection Account"), held in trust for the benefit of the Trustee, the
Certificateholders and the Certificate Insurer. On behalf of the Trust Fund, the
Master Servicer shall deposit or cause to be deposited in the Collection Account
on a daily basis, as and when received or as otherwise required hereunder, the
following payments and collections received or made by it subsequent to the
Cut-off Date (other than in respect of principal or interest on the related
Mortgage Loans due on or before the Cutoff Date), or payments (other than
Principal Prepayments) received by it on or prior to the Cutoff Date but
allocable to a Due Period subsequent thereto:
(i) all payments on account of principal, including
Principal Prepayments, on the Mortgage Loans;
(ii) all payments on account of interest (net of the
related Servicing Fee) on each Mortgage Loan;
(iii) all Insurance Proceeds and Liquidation Proceeds
(other than proceeds collected in respect of any particular REO
Property and amounts paid by the Master Servicer in connection
with a purchase of Mortgage Loans and REO Properties pursuant to
Section 10.01);
(iv) any amounts required to be deposited pursuant to Section
3.12 in connection with any losses realized on Permitted
Investments with respect to funds held in the Collection Account;
and
(v) any amounts required to be deposited by the Master
Servicer pursuant to the second paragraph of Section 3.14(a) in
respect of any blanket policy deductibles.
For purposes of the immediately preceding sentence, the Cut-off Date with
respect to any Qualified Substitute Mortgage Loan shall be deemed to be the date
of substitution.
The foregoing requirements for deposit in the Collection Accounts
shall be exclusive, it being understood and agreed that, without limiting the
generality of the foregoing, payments in the nature of prepayment or late
payment charges or assumption fees need not be deposited by the Master Servicer
in the Collection Account. In the event the Master Servicer shall deposit in the
Collection Account any amount not required to be deposited therein, it may at
any time withdraw such amount from the Collection Account, any provision herein
to the contrary notwithstanding.
(b) On behalf of the Trust Fund, the Trustee shall establish and
maintain one or more accounts (such account or accounts, the "Distribution
Account"), held in trust for the benefit of the Certificateholders and the
Certificate Insurer. On behalf of the Trust Fund, the Master Servicer shall
deliver to the Trustee in immediately available funds for deposit in the
Distribution Account on or before 3:00 p.m. New York time (i) on the Master
Servicer Remittance Date, that portion of Sub-Pool Available Distribution Amount
for each Sub-Pool
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(calculated without regard to the references in clause (2) of the definition
thereof to amounts that may be withdrawn from the Distribution Account) for the
related Distribution Date then on deposit in the Collection Account, and (ii) on
each Business Day as of the commencement of which the balance on deposit in the
Collection Account exceeds $75,000 following any withdrawals pursuant to the
next succeeding sentence, the amount of such excess, but only if the Collection
Account constitutes an Eligible Account solely pursuant to clause (ii) of the
definition of "Eligible Account". If the balance on deposit in the Collection
Account exceeds $75,000 as of the commencement of business on any Business Day
and the Collection Account constitutes an Eligible Account solely pursuant to
clause (ii) of the definition of "Eligible Account", the Master Servicer shall,
on or before 3:00 p.m. New York time on such Business Day, withdraw from the
Collection Account any and all amounts payable or reimbursable to the Depositor,
the Master Servicer, the Trustee, the Mortgage Loan Seller or any Sub-Servicer
pursuant to Section 3.11 and shall pay such amounts to the Persons entitled
thereto.
(c) Funds in the Collection Account and the Distribution Account
may be invested in Permitted Investments in accordance with the provisions set
forth in Section 3.12. The Master Servicer shall give notice to the Trustee and
the Certificate Insurer of the location of the Collection Account maintained by
it when established and prior to any change thereof. The Trustee shall give
notice to the Master Servicer, the Depositor and the Certificate Insurer of the
location of the Distribution Account when established and prior to any change
thereof.
(d) Funds held in the Collection Account at any time may be
delivered by the Master Servicer to the Trustee for deposit in an account (which
may be the Distribution Account and must satisfy the standards for the
Distribution Account as set forth in the definition thereof) and for all
purposes of this Agreement shall be deemed to be a part of the Collection
Account; provided, however, that the Trustee shall have the sole authority to
withdraw any funds held pursuant to this subsection (d). In the event the Master
Servicer shall deliver to the Trustee for deposit in the Distribution Account
any amount not required to be deposited therein, it may at any time request that
the Trustee withdraw such amount from the Distribution Account and remit to it
any such amount, any provision herein to the contrary notwithstanding. In
addition, the Master Servicer shall deliver to the Trustee from time to time for
deposit, and the Trustee shall so deposit, in the Distribution Account:
(i) any P&I Advances, as required pursuant to Section
4.03;
(ii) any amounts required to be deposited pursuant to
Section 3.23(d) or (f) in connection with any REO Property;
(iii) any amounts to be paid by the Master Servicer in
connection with a purchase of Mortgage Loans and REO Properties
` pursuant to Section 10.01;
(iv) any amounts required to be deposited pursuant to
Section 3.24 in connection with any Prepayment Interest
Shortfalls;
(v) any Stayed Funds, as soon as permitted by the
federal bankruptcy court having jurisdiction in such matters; and
(vi) any amounts required to be transferred from the
Policy Payments Account pursuant to Section 9.04(b) on any
Distribution Date.
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(e) Promptly upon receipt of any Stayed Funds, whether from the
Master Servicer, a trustee in bankruptcy, or federal bankruptcy court or other
source, the Trustee shall deposit such funds in the Distribution Account,
subject to withdrawal thereof pursuant to Section 7.02(b) or as otherwise
permitted hereunder. In addition, the Master Servicer shall deposit in the
Distribution Account any amounts required to be deposited pursuant to Section
3.12 in connection with losses realized on Permitted Investments with respect to
funds held in the Distribution Account.
SECTION 3.11. Withdrawals from the Collection Account and
Distribution Account.
The Master Servicer shall, from time to time, make withdrawals
from the Collection Account for any of the following purposes or as described in
Section 4.03:
(i) to remit to the Trustee for deposit in the Distribution
Account the amounts required to be so remitted pursuant to
Section 3.10(b) or permitted to be so remitted pursuant to the
first sentence of Section 3.10(d);
(ii) subject to Section 3.16(d), to reimburse the Master
Servicer for P&I Advances, but only to the extent of amounts
received which represent Late Collections (net of the related
Servicing Fees) of Monthly Payments on Mortgage Loans with
respect to which such P&I Advances were made in accordance with
the provisions of Section 4.03;
(iii) subject to Section 3.16(d), to pay the Master Servicer
or any SubServicer any unpaid Servicing Fees and reimburse any
unreimbursed Servicing Advances with respect to each Mortgage
Loan, but only to the extent of any Liquidation Proceeds and
Insurance Proceeds received with respect to such Mortgage Loan;
(iv) to pay to the Master Servicer as servicing compensation
(in addition to the Servicing Fee) on the Master Servicer
Remittance Date any interest or investment income earned on funds
deposited in the Collection Account;
(v) to pay to the Master Servicer, the Depositor or the
Mortgage Loan Seller, as the case may be, with respect to each
Mortgage Loan that has previously been purchased or replaced
pursuant to Section 2.03 or Section 3.16(c) all amounts received
thereon subsequent to the date of purchase or substitution, as
the case may be;
(vi) to reimburse the Master Servicer for any P&I Advance
previously made which the Master Servicer has determined to be a
Nonrecoverable P&I Advance in accordance with the provisions of
Section 4.03;
(vii) to reimburse the Master Servicer or the Depositor for
expenses incurred by or reimbursable to the Master Servicer or
the Depositor, as the case may be, pursuant to Section 6.03;
(viii) to reimburse the Master Servicer or the Trustee, as the
case may be, for expenses reasonably incurred in respect of the
breach or defect giving rise to the purchase obligation under
Section 2.03 or Section 2.04 of this Agreement
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that were included in the Purchase Price of the Mortgage Loan,
including any expenses arising out of the enforcement of the
purchase obligation;
(ix) to pay, or to reimburse the Master Servicer for
advances in respect of, expenses incurred in connection with any
Mortgage Loan pursuant to Section 3.16(b); and
(x) to clear and terminate the Collection Account
pursuant to Section 10.01.
In addition to the foregoing, the Trustee shall be entitled to
withdraw amounts from the Distribution Account to transfer funds to the Expense
Account on the Business Day immediately preceding each Distribution Date
pursuant to Section 3.25(b) prior to any payments to Certificateholders and the
Certificate Insurer pursuant to Section 4.01. The Master Servicer shall keep and
maintain separate accounting, on a Mortgage Loan by Mortgage Loan basis, for the
purpose of justifying any withdrawal from the Collection Account, to the extent
held by or on behalf of it, pursuant to subclauses (ii), (iii), (v), (vi),
(viii) and (ix) above. The Master Servicer shall provide written notification to
the Trustee, on or prior to the next succeeding Master Servicer Remittance Date,
upon making any withdrawals from the Collection Account pursuant to subclauses
(vi) and (vii) above.
SECTION 3.12. Investment of Funds in the Collection
Account, the Expense Account and the
Distribution Account.
(a) The Master Servicer may direct any depository institution
maintaining the Collection Account, the Expense Account and the Distribution
Account (each, for purposes of this Section 3.12, an "Investment Account"), to
invest the funds in such Investment Account in one or more Permitted Investments
bearing interest or sold at a discount, and maturing, unless payable on demand,
(i) no later than the Business Day immediately preceding the date on which such
funds are required to be withdrawn from such account pursuant to this Agreement,
if a Person other than the Trustee is the obligor thereon, and (ii) no later
than the date on which such funds are required to be withdrawn from such account
pursuant to this Agreement, if the Trustee is the obligor thereon. All such
Permitted Investments shall be held to maturity, unless payable on demand. Any
investment of funds in an Investment Account shall be made in the name of the
Trustee (in its capacity as such) or in the name of a nominee of the Trustee.
The Trustee shall be entitled to sole possession (except with respect to
investment direction of funds held in the Collection Account, the Expense
Account and the Distribution Account) over each such investment and the income
thereon, and any certificate or other instrument evidencing any such investment
shall be delivered directly to the Trustee or its agent, together with any
document of transfer necessary to transfer title to such investment to the
Trustee or its nominee. In the event amounts on deposit in an Investment Account
are at any time invested in a Permitted Investment payable on demand, the
Trustee shall:
(x) consistent with any notice required to be given
thereunder, demand that payment thereon be made on the
last day such Permitted Investment may otherwise mature
hereunder in an amount equal to the lesser of (1) all
amounts then payable thereunder and (2) the amount
required to be withdrawn on such date; and
(y) demand payment of all amounts due thereunder promptly upon
determination by a Responsible Officer of the Trustee that
such Permitted
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Investment would not constitute a Permitted Investment in
respect of funds thereafter on deposit in the Investment
Account.
(b) All income and gain realized from the investment of funds
deposited in the Collection Account, the Expense Account and the Distribution
Account held by or on behalf of the Master Servicer or the Trustee, shall be for
the benefit of the Master Servicer and shall be subject to its withdrawal in
accordance with Section 3.11. The Master Servicer shall deposit in the
Collection Account, the Expense Account or the Distribution Account, as
applicable, the amount of any loss incurred in respect of any such Permitted
Investment made with funds in such accounts immediately upon realization of such
loss.
(c) Except as otherwise expressly provided in this Agreement, if
any default occurs in the making of a payment due under any Permitted
Investment, or if a default occurs in any other performance required under any
Permitted Investment, the Trustee may and, subject to Section 8.01 and Section
8.02(v), upon the request of the Certificate Insurer or the Holders of
Certificates representing more than 50% of the Voting Rights allocated to any
Class of Certificates, shall take such action as may be appropriate to enforce
such payment or performance, including the institution and prosecution of
appropriate proceedings.
SECTION 3.13. [intentionally omitted]
SECTION 3.14. Maintenance of Hazard Insurance and Errors
and Omissions and Fidelity Coverage.
(a) The Master Servicer shall cause to be maintained for each
Mortgage Loan fire insurance with extended coverage on the related Mortgaged
Property in an amount which is at least equal to the lesser of the current
principal balance of such Mortgage Loan and the amount necessary to fully
compensate for any damage or loss to the improvements which are a part of such
property on a replacement cost basis, in each case in an amount not less than
such amount as is necessary to avoid the application of any coinsurance clause
contained in the related hazard insurance policy. The Master Servicer shall also
cause to be maintained fire insurance with extended coverage on each REO
Property in an amount which is at least equal to the lesser of (i) the maximum
insurable value of the improvements which are a part of such property and (ii)
the outstanding principal balance of the related Mortgage Loan at the time it
became an REO Property, plus accrued interest at the Mortgage Rate and related
Servicing Advances. The Master Servicer will comply in the performance of this
Agreement with all reasonable rules and requirements of each insurer under any
such hazard policies. Any amounts to be collected by the Master Servicer under
any such policies (other than amounts to be applied to the restoration or repair
of the property subject to the related Mortgage or amounts to be released to the
Mortgagor in accordance with the procedures that the Master Servicer would
follow in servicing loans held for its own account, subject to the terms and
conditions of the related Mortgage and Mortgage Note) shall be deposited in the
Collection Account, subject to withdrawal pursuant to Section 3.11, if received
in respect of a Mortgage Loan, or in the REO Account, subject to withdrawal
pursuant to Section 3.23, if received in respect of an REO Property. Any cost
incurred by the Master Servicer in maintaining any such insurance shall not, for
the purpose of calculating distributions to Certificateholders and the
Certificate Insurer, be added to the unpaid principal balance of the related
Mortgage Loan, notwithstanding that the terms of such Mortgage Loan so permit.
It is understood and agreed that no earthquake or other additional insurance is
to be required of any Mortgagor other than pursuant to such applicable laws and
regulations as shall at any time be in force and as shall require such
additional insurance. If the Mortgaged
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Property or REO Property is at any time in an area identified in the Federal
Register by the Federal Emergency Management Agency as having special flood
hazards, the Master Servicer will cause to be maintained a flood insurance
policy in respect thereof. Such flood insurance shall be in an amount equal to
the lesser of (i) the unpaid principal balance of the related Mortgage Loan and
(ii) the maximum amount of such insurance available for the related Mortgaged
Property under the national flood insurance program (assuming that the area in
which such Mortgaged Property is located is participating in such program).
In the event that the Master Servicer shall obtain and maintain a
blanket policy with an insurer having a General Policy Rating of A:X or better
in Best's Key Rating Guide insuring against hazard losses on all of the Mortgage
Loans, it shall conclusively be deemed to have satisfied its obligations as set
forth in the first two sentences of this Section 3.14, it being understood and
agreed that such policy may contain a deductible clause, in which case the
Master Servicer shall, in the event that there shall not have been maintained on
the related Mortgaged Property or REO Property a policy complying with the first
two sentences of this Section 3.14, and there shall have been one or more losses
which would have been covered by such policy, deposit to the Collection Account
from its own funds the amount not otherwise payable under the blanket policy
because of such deductible clause. In connection with its activities as
administrator and servicer of the Mortgage Loans, the Master Servicer agrees to
prepare and present, on behalf of itself, the Trustee, Certificateholders and
the Certificate Insurer, claims under any such blanket policy in a timely
fashion in accordance with the terms of such policy.
(b) The Master Servicer shall keep in force during the term of
this Agreement a policy or policies of insurance covering errors and omissions
for failure in the performance of the Master Servicer's obligations under this
Agreement, which policy or policies shall be in such form and amount that would
meet the requirements of FNMA or FHLMC if it were the purchaser of the Mortgage
Loans, unless the Master Servicer has obtained a waiver of such requirements
from FNMA or FHLMC. The Master Servicer shall also maintain a fidelity bond in
the form and amount that would meet the requirements of FNMA or FHLMC, unless
the Master Servicer has obtained a waiver of such requirements from FNMA or
FHLMC. The Master Servicer shall be deemed to have complied with this provision
if an Affiliate of the Master Servicer has such errors and omissions and
fidelity bond coverage and, by the terms of such insurance policy or fidelity
bond, the coverage afforded thereunder extends to the Master Servicer. Any such
errors and omissions policy and fidelity bond shall by its terms not be
cancelable without thirty days' prior written notice to the Trustee. The Master
Servicer shall also cause each Sub-Servicer to maintain a policy of insurance
covering errors and omissions and a fidelity bond which would meet such
requirements.
SECTION 3.15. Enforcement of Due-On-Sale Clauses;
Assumption Agreements.
The Master Servicer will, to the extent it has knowledge of any
conveyance or prospective conveyance of any Mortgaged Property by any Mortgagor
(whether by absolute conveyance or by contract of sale, and whether or not the
Mortgagor remains or is to remain liable under the Mortgage Note and/or the
Mortgage), exercise its rights to accelerate the maturity of such Mortgage Loan
under the "due-on-sale" clause, if any, applicable thereto; provided, however,
that the Master Servicer shall not exercise any such rights if prohibited by law
from doing so. If the Master Servicer reasonably believes it is unable under
applicable law to enforce such "due-on-sale" clause, or if any of the other
conditions set forth in the proviso
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to the preceding sentence apply, the Master Servicer will enter into an
assumption and modification agreement from or with the person to whom such
property has been conveyed or is proposed to be conveyed, pursuant to which such
person becomes liable under the Mortgage Note and, to the extent permitted by
applicable state law, the Mortgagor remains liable thereon. The Master Servicer
is also authorized to enter into a substitution of liability agreement with such
person, pursuant to which the original Mortgagor is released from liability and
such person is substituted as the Mortgagor and becomes liable under the
Mortgage Note, provided that no such substitution shall be effective unless such
person satisfies the underwriting criteria of the Master Servicer and has a
credit risk rating at least equal to that of the original Mortgagor. In
connection with any assumption or substitution, the Master Servicer shall apply
such underwriting standards and follow such practices and procedures as shall be
normal and usual in its general mortgage servicing activities and as it applies
to other mortgage loans owned solely by it. The Master Servicer shall not take
or enter into any assumption and modification agreement, however, unless (to the
extent practicable in the circumstances) it shall have received confirmation, in
writing, of the continued effectiveness of any applicable hazard insurance
policy. Any fee collected by the Master Servicer in respect of an assumption or
substitution of liability agreement will be retained by the Master Servicer as
additional servicing compensation. In connection with any such assumption, no
material term of the Mortgage Note (including but not limited to the related
Mortgage Rate and the amount of the Monthly Payment) may be amended or modified,
except as otherwise required pursuant to the terms thereof. The Master Servicer
shall notify the Trustee that any such substitution or assumption agreement has
been completed by forwarding to the Trustee the executed original of such
substitution or assumption agreement, which document shall be added to the
related Mortgage File and shall, for all purposes, be considered a part of such
Mortgage File to the same extent as all other documents and instruments
constituting a part thereof.
Notwithstanding the foregoing paragraph or any other provision of
this Agreement, the Master Servicer shall not be deemed to be in default, breach
or any other violation of its obligations hereunder by reason of any assumption
of a Mortgage Loan by operation of law or by the terms of the Mortgage Note or
any assumption which the Master Servicer may be restricted by law from
preventing, for any reason whatever. For purposes of this Section 3.15, the term
"assumption" is deemed to also include a sale (of the Mortgaged Property)
subject to the Mortgage that is not accompanied by an assumption or substitution
of liability agreement.
SECTION 3.16. Realization Upon Defaulted Mortgage Loans.
(a) The Master Servicer shall use its best efforts, consistent
with the servicing standard set forth in Section 3.01, to foreclose upon or
otherwise comparably convert the ownership of properties securing such of the
Mortgage Loans as come into and continue in default and as to which no
satisfactory arrangements can be made for collection of delinquent payments
pursuant to Section 3.07. The Master Servicer shall be responsible for all costs
and expenses incurred by it in any such proceedings; provided, however, that
such costs and expenses will be recoverable as Servicing Advances by the Master
Servicer as contemplated in Section 3.11 and 3.23. The foregoing is subject to
the provision that, in any case in which Mortgaged Property shall have suffered
damage from an Uninsured Cause, the Master Servicer shall not be required to
expend its own funds toward the restoration of such property unless it shall
determine in its discretion that such restoration will increase the proceeds of
liquidation of the related Mortgage Loan after reimbursement to itself for such
expenses.
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(b) Notwithstanding the foregoing provisions of this Section 3.16
or any other provision of this Agreement, with respect to any Mortgage Loan as
to which the Master Servicer has received actual notice of, or has actual
knowledge of, the presence of any toxic or hazardous substance on the related
Mortgaged Property, the Master Servicer shall not, on behalf of the Trustee,
either (i) obtain title to such Mortgaged Property as a result of or in lieu of
foreclosure or otherwise, or (ii) otherwise acquire possession of, or take any
other action, with respect to, such Mortgaged Property, if, as a result of any
such action, the Trustee, the Certificateholders or the Certificate Insurer
would be considered to hold title to, to be a "mortgagee-in-possession" of, or
to be an "owner" or "operator" of such Mortgaged Property within the meaning of
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended from time to time, or any comparable law, unless the Master
Servicer has also previously determined, based on his reasonable judgment and a
prudent report prepared by a Person who regularly conducts environmental audits
using customary industry standards, that:
(1) such Mortgaged Property is in compliance with applicable
environmental laws or, if not, that it would be in the best
economic interest of the Trust Fund to take such actions as are
necessary to bring the Mortgaged Property into compliance
therewith; and
(2) there are no circumstances present at such Mortgaged
Property relating to the use, management or disposal of any
hazardous substances, hazardous materials, hazardous wastes, or
petroleum-based materials for which investigation, testing,
monitoring, containment, clean-up or remediation could be
required under any federal, state or local law or regulation, or
that if any such materials are present for which such action
could be required, that it would be in the best economic interest
of the Trust Fund to take such actions with respect to the
affected Mortgaged Property.
The cost of the environmental audit report contemplated by this
Section 3.23 shall be advanced by the Master Servicer, subject to the Master
Servicer's right to be reimbursed therefor from the Collection Account as
provided in Section 3.11(ix), such right of reimbursement being prior to the
rights of Certificateholders to receive any amount in the Collection Account
received in respect of the affected Mortgage Loan or other Mortgage Loans.
If the Master Servicer determines, as described above, that it is
in the best economic interest of the Trust Fund to take such actions as are
necessary to bring any such Mortgaged Property into compliance with applicable
environmental laws, or to take such action with respect to the containment,
clean-up or remediation of hazardous substances, hazardous materials, hazardous
wastes, or petroleum-based materials affecting any such Mortgaged Property, then
the Master Servicer shall take such action as it deems to be in the best
economic interest of such Trust Fund. The cost of any such compliance,
containment, cleanup or remediation shall be advanced by the Master Servicer,
subject to the Master Servicer's right to be reimbursed therefor from the
Collection Account as provided in Section 3.11(ix), such right of reimbursement
being prior to the rights of Certificateholders to receive any amount in the
Collection Account received in respect of the affected Mortgage Loan or other
Mortgage Loans.
(c) The Master Servicer may at its option purchase from the Trust
Fund any Mortgage Loan which is 90 days or more delinquent and which the Master
Servicer determines in good faith will otherwise become subject to foreclosure
proceedings (evidence of such determination to be delivered in writing to the
Trustee and the Certificate Insurer prior to
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purchase), at a price equal to the Purchase Price. The Purchase Price for any
Mortgage Loan purchased hereunder shall be deposited in the Collection Account,
and the Trustee, upon receipt of written certification from the Master Servicer
of such deposit, shall release or cause to be released to the Master Servicer
the related Mortgage File and shall execute and deliver such instruments of
transfer or assignment, in each case without recourse, as the Master Servicer
shall furnish and as shall be necessary to vest in the Master Servicer title to
any Mortgage Loan released pursuant hereto.
(d) Proceeds received in connection with any Final Recovery
Determination, as well as any recovery resulting from a partial collection of
Insurance Proceeds or Liquidation Proceeds, in respect of any Mortgage Loan,
will be applied in the following order of priority: FIRST, to reimburse the
Master Servicer or any Sub-Servicer for any related unreimbursed Servicing
Advances and P&I Advances, pursuant to Section 3.11(ii) or (iii); SECOND, to
accrued and unpaid interest on the Mortgage Loan, to the date of the Final
Recovery Determination, or to the Due Date prior to the Distribution Date on
which such amounts are to be distributed if not in connection with a Final
Recovery Determination; and THIRD, as a recovery of principal of the Mortgage
Loan. If the amount of the recovery so allocated to interest is less than the
full amount of accrued and unpaid interest due on such Mortgage Loan, the amount
of such recovery will be allocated by the Master Servicer as follows: FIRST, to
unpaid Servicing Fees; and SECOND, to the balance of the interest then due and
owing. The portion of the recovery so allocated to unpaid Servicing Fees shall
be reimbursed to the Master Servicer or any Sub-Servicer pursuant to Section
3.11(iii). The portion of the recovery allocated to interest (net of unpaid
Servicing Fees) and the portion of the recovery allocated to principal of the
Mortgage Loan shall be applied as follows: FIRST, to reimburse the Master
Servicer for any related unreimbursed P&I Advances in accordance with Section
3.11(ii), and SECOND, as part of the amounts to be transferred to the
Distribution Account in accordance with Section 3.10(b).
SECTION 3.17. Trustee to Cooperate; Release of Mortgage
Files.
Upon the payment in full of any Mortgage Loan, or the receipt by
the Master Servicer of a notification that payment in full shall be escrowed in
a manner customary for such purposes, the Master Servicer will immediately
notify the Trustee and the Certificate Insurer by a certification in the form of
Exhibit E-2 (which certification shall include a statement to the effect that
all amounts received or to be received in connection with such payment which are
required to be deposited in the Collection Account pursuant to Section 3.10 have
been or will be so deposited) of a Servicing Officer and shall request delivery
to it of the Mortgage File. Upon receipt of such certification and request, the
Trustee shall promptly release the related Mortgage File to the Master Servicer.
No expenses incurred in connection with any instrument of satisfaction or deed
of reconveyance shall be chargeable to the Collection Account or the
Distribution Account.
From time to time and as appropriate for the servicing or
foreclosure of any Mortgage Loan, including, for this purpose, collection under
any insurance policy relating to the Mortgage Loans, the Trustee shall, upon
request of the Master Servicer and delivery to the Trustee of a Request for
Release in the form of Exhibit E-l, release the related Mortgage File to the
Master Servicer, and the Trustee shall, at the direction of the Master Servicer,
execute such documents as shall be necessary to the prosecution of any such
proceedings. Such Request for Release shall obligate the Master Servicer to
return each and every document previously requested from the Mortgage File to
the Trustee when the need therefor by the Master Servicer
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no longer exists, unless the Mortgage Loan has been liquidated and the
Liquidation Proceeds relating to the Mortgage Loan have been deposited in the
Collection Account or the Mortgage File or such document has been delivered to
an attorney, or to a public trustee or other public official as required by law,
for purposes of initiating or pursuing legal action or other proceedings for the
foreclosure of the Mortgaged Property either judicially or non-judicially, and
the Master Servicer has delivered to the Trustee a certificate of a Servicing
Officer certifying as to the name and address of the Person to which such
Mortgage File or such document was delivered and the purpose or purposes of such
delivery. Upon receipt of a certificate of a Servicing Officer stating that such
Mortgage Loan was liquidated and that all amounts received or to be received in
connection with such liquidation which are required to be deposited into the
Collection Account have been so deposited, or that such Mortgage Loan has become
an REO Property, a copy of the Request for Release shall be released by the
Trustee to the Master Servicer.
Upon written certification of a Servicing Officer, the Trustee
shall execute and deliver to the Master Servicer, with copies to the Certificate
Insurer, any court pleadings, requests for trustee's sale or other documents
necessary to the foreclosure or trustee's sale in respect of a Mortgaged
Property or to any legal action brought to obtain judgment against any Mortgagor
on the Mortgage Note or Mortgage or to obtain a deficiency judgment, or to
enforce any other remedies or rights provided by the Mortgage Note or Mortgage
or otherwise available at law or in equity. Each such certification shall
include a request that such pleadings or documents be executed by the Trustee
and a statement as to the reason such documents or pleadings are required and
that the execution and delivery thereof by the Trustee will not invalidate or
otherwise affect the lien of the Mortgage, except for the termination of such a
lien upon completion of the foreclosure or trustee's sale.
SECTION 3.18. Servicing Compensation.
As compensation for the activities of the Master Servicer
hereunder, the Master Servicer shall be entitled to the Servicing Fee with
respect to each Mortgage Loan payable solely from payments of interest in
respect of such Mortgage Loan, subject to Section 3.24. In addition, the Master
Servicer shall be entitled to recover unpaid Servicing Fees out of Insurance
Proceeds or Liquidation Proceeds to the extent permitted by Section 3.11(iii)
and out of amounts derived from the operation and sale of an REO Property to the
extent permitted by Section 3.23. The right to receive the Servicing Fee may not
be transferred in whole or in part except in connection with the transfer of all
of the Master Servicer's responsibilities and obligations under this Agreement.
Additional servicing compensation in the form of prepayment
charges, assumption fees, late payment charges or otherwise shall be retained by
the Master Servicer (subject to Section 3.24) only to the extent such fees or
charges are received by the Master Servicer. The Master Servicer shall also be
entitled pursuant to Section 3.11(iv) to withdraw from the Collection Account,
pursuant to Section 3.25 to withdraw from the Expense Account, and pursuant to
Section 3.23(b) to withdraw from any REO Account, as additional servicing
compensation, interest or other income earned on deposits therein, subject to
Section 3.12 and Section 3.24. The Master Servicer shall be required to pay all
expenses incurred by it in connection with its servicing activities hereunder
(including premiums for the insurance required by Section 3.14, to the extent
such premiums are not paid by the related Mortgagors or by a Sub-Servicer,
servicing compensation of each Sub-Servicer, and to the extent provided herein
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in Section 8.05, the fees and expenses of the Trustee) and shall not be entitled
to reimbursement therefor except as specifically provided herein.
SECTION 3.19. Reports to the Trustee; Collection Account
Statements.
Not later than fifteen days after each Distribution Date, the
Master Servicer shall forward to the Trustee, the Certificate Insurer and the
Depositor a statement prepared by the Master Servicer setting forth the status
of the Collection Account as of the close of business on such Distribution Date
and showing, for the period covered by such statement, the aggregate amount of
deposits into and withdrawals from the Collection Account of each category of
deposit specified in Section 3.10(a) and each category of withdrawal specified
in Section 3.11. Such statement may be in the form of the then current FNMA
Monthly Accounting Report for its Guaranteed Mortgage Pass-Through Program with
appropriate additions and changes, and shall also include information as to the
aggregate of the outstanding principal balances of all of the Mortgage Loans as
of the last day of the calendar month immediately preceding such Distribution
Date. Copies of such statement shall be provided by the Trustee to any
Certificateholder and to any Person identified to the Trustee as a prospective
transferee of a Certificate, upon request at the expense of the requesting
party, provided such statement is delivered by the Master Servicer to the
Trustee.
SECTION 3.20. Statement as to Compliance.
The Master Servicer will deliver to the Trustee, the Certificate
Insurer and the Depositor not later than 90 days following the end of the fiscal
year of the Master Servicer, which as of the Closing Date ends on the last day
in December, an Officers' Certificate stating, as to each signatory thereof,
that (i) a review of the activities of the Master Servicer during the preceding
year and of performance under this Agreement has been made under such officers'
supervision and (ii) to the best of such officers' knowledge, based on such
review, the Master Servicer has fulfilled all of its obligations under this
Agreement throughout such year, or, if there has been a default in the
fulfillment of any such obligation, specifying each such default known to such
officer and the nature and status thereof. Copies of any such statement shall be
provided by the Trustee to any Certificateholder and to any Person identified to
the Trustee as a prospective transferee of a Certificate, upon request at the
expense of the requesting party, provided such statement is delivered by the
Master Servicer to the Trustee.
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SECTION 3.21. Independent Public Accountants' Servicing
Report.
Not later than 90 days following the end of each fiscal year of
the Master Servicer, the Master Servicer, at its expense, shall cause a
nationally recognized firm of independent certified public accountants to
furnish to the Master Servicer a report stating that (i) it has obtained a
letter of representation regarding certain matters from the management of the
Master Servicer which includes an assertion that the Master Servicer has
complied with certain minimum residential mortgage loan servicing standards,
identified in the Uniform Single Attestation Program for Mortgage Bankers
established by the Mortgage Bankers Association of America, with respect to the
servicing of residential mortgage loans during the most recently completed
fiscal year and (ii) on the basis of an examination conducted by such firm in
accordance with standards established by the American Institute of Certified
Public Accountants, such representation is fairly stated in all material
respects, subject to such exceptions and other qualifications that may be
appropriate. In rendering its report such firm may rely, as to matters relating
to the direct servicing of residential mortgage loans by Sub-Servicers, upon
comparable reports of firms of independent certified public accountants rendered
on the basis of examinations conducted in accordance with the same standards
(rendered within one year of such report) with respect to those Sub-Servicers.
Immediately upon receipt of such report, the Master Servicer shall furnish a
copy of such report to the Trustee, the Certificate Insurer and each Rating
Agency. Copies of such statement shall be provided by the Trustee to any
Certificateholder upon request at the Master Servicer's expense, provided that
such statement is delivered by the Master Servicer to the Trustee.
SECTION 3.22. Access to Certain Documentation.
The Master Servicer shall provide to the Office of Thrift
Supervision, the FDIC, and any other federal or state banking or insurance
regulatory authority that may exercise authority over any Certificateholder,
access to the documentation regarding the Mortgage Loans required by applicable
laws and regulations. Such access shall be afforded without charge, but only
upon reasonable request and during normal business hours at the offices of the
Master Servicer designated by it. In addition, access to the documentation
regarding the Mortgage Loans will be provided to any Certificateholder, the
Certificate Insurer, the Trustee and to any Person identified to the Master
Servicer as a prospective transferee of a Certificate, upon reasonable request
during normal business hours at the offices of the Master Servicer designated by
it at the expense of the Person requesting such access.
SECTION 3.23. Title, Management and Disposition of REO
Property.
(a) The deed or certificate of sale of any REO Property shall be
taken in the name of the Trustee, or its nominee, on behalf of the
Certificateholders and the Certificate Insurer. The Master Servicer, on behalf
of the Trust Fund, shall either sell any REO Property within two years after the
Trust Fund acquires ownership of such REO Property for purposes of Section
860(a)(8) of the Code or request from the Internal Revenue Service, more than 60
days before the day on which the two-year grace period would otherwise expire an
extension of the two-year grace period, unless the Master Servicer had delivered
to the Trustee an Opinion of Counsel, addressed to the Trustee, the Master
Servicer and the Certificate Insurer, to the effect that the holding by the
Trust Fund of such REO Property subsequent to two years after its acquisition
will not result in the imposition on the Trust Fund of taxes on "prohibited
transactions" thereof, as defined in Section 860F of the Code, or cause the
Trust Fund to fail to qualify as a REMIC under Federal law at any time that any
Certificates are outstanding. The
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Master Servicer shall manage, conserve, protect and operate each REO Property
for the Certificateholders solely for the purpose of its prompt disposition and
sale in a manner which does not cause such REO Property to fail to qualify as
"foreclosure property" within the meaning of Section 860G(a)(8) of the Code or
result in the receipt by the Trust Fund of any "income from non-permitted
assets" within the meaning of Section 860F(a)(2)(B) of the Code, or any "net
income from foreclosure property" which is subject to taxation under the REMIC
Provisions.
(b) The Master Servicer shall segregate and hold all funds
collected and received in connection with the operation of any REO Property
separate and apart from its own funds and general assets and shall establish and
maintain with respect to REO Properties an account held in trust for the Trustee
for the benefit of the Certificateholders and the Certificate Insurer (the "REO
Account"), which shall be an Eligible Account. The Master Servicer shall be
permitted to allow the Collection Account to serve as the REO Account, subject
to separate ledgers for each REO Property. The Master Servicer shall be entitled
to retain or withdraw any interest income paid on funds deposited in the REO
Account.
(c) The Master Servicer shall have full power and authority,
subject only to the specific requirements and prohibitions of this Agreement, to
do any and all things in connection with any REO Property as are consistent with
the manner in which the Master Servicer manages and operates similar property
owned by the Master Servicer or any of its Affiliates, all on such terms and for
such period as the Master Servicer deems to be in the best interests of
Certificateholders. In connection therewith, the Master Servicer shall deposit,
or cause to be deposited, on a daily basis in the REO Account all revenues
received by it with respect to an REO Property and shall withdraw therefrom
funds necessary for the proper operation, management and maintenance of such REO
Property including, without limitation:
(i) all insurance premiums due and payable in respect
of such REO Property;
(ii) all real estate taxes and assessments in respect of
such REO Property that may result in the imposition of a lien
thereon; and
(iii) all costs and expenses necessary to maintain such
REO Property.
To the extent that amounts on deposit in the REO Account with respect to an REO
Property are insufficient for the purposes set forth in clauses (i)-(iii) above
with respect to such REO Property, the Master Servicer shall advance from its
own funds such amount as is necessary for such purposes if, but only if, the
Master Servicer would make such advances if the Master Servicer owned the REO
Property and if in the Master Servicer's judgment, the payment of such amounts
will be recoverable from the rental or sale of the REO Property.
Notwithstanding the foregoing, the Master Servicer shall not:
(i) permit the Trust Fund to enter into, renew or extend any
New Lease with respect to any REO Property, if the New Lease by
its terms will give rise to any income that does not constitute
Rents from Real Property;
(ii) permit any amount to be received or accrued under any
New Lease other than amounts that will constitute Rents from Real
Property;
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(iii) authorize or permit any construction on any REO
Property, other than the completion of a building or other
improvement thereon, and then only if more than ten percent of
the construction of such building or other improvement was
completed before default on the related Mortgage Loan became
imminent, all within the meaning of Section 856(e)(4)(B) of the
Code; or
(iv) allow any Person to Directly Operate any REO Property on
any date more than 90 days after its date of acquisition by the
Trust Fund;
unless, in any such case, the Master Servicer has obtained an Opinion of
Counsel, provided to the Trustee and the Certificate Insurer, to the effect that
such action will not cause such REO Property to fail to qualify as "foreclosure
property" within the meaning of Section 860G(a)(8) of the Code at any time that
it is held by the Trust Fund, in which case the Master Servicer may take such
actions as are specified in such Opinion of Counsel.
The Master Servicer may contract with any Independent Contractor
for the operation and management of any REO Property, provided that:
(i) the terms and conditions of any such contract shall not
be inconsistent herewith;
(ii) any such contract shall require, or shall be
administered to require, that the Independent Contractor pay all
costs and expenses incurred in connection with the operation and
management of such REO Property, including those listed above and
remit all related revenues (net of such costs and expenses) to
the Master Servicer as soon as practicable, but in no event later
than thirty days following the receipt thereof by such
Independent Contractor;
(iii) none of the provisions of this Section 3.23(c) relating
to any such contract or to actions taken through any such
Independent Contractor shall be deemed to relieve the Master
Servicer of any of its duties and obligations to the Trustee on
behalf of the Certificateholders and the Certificate Insurer with
respect to the operation and management of any such REO Property;
and
(iv) the Master Servicer shall be obligated with respect
thereto to the same extent as if it alone were performing all
duties and obligations in connection with the operation and
management of such REO Property.
The Master Servicer shall be entitled to enter into any agreement with any
Independent Contractor performing services for it related to its duties and
obligations hereunder for indemnification of the Master Servicer by such
Independent Contractor, and nothing in this Agreement shall be deemed to limit
or modify such indemnification. The Master Servicer shall be solely liable for
all fees owed by it to any such Independent Contractor, irrespective of whether
the Master Servicer's compensation pursuant to Section 3.18 is sufficient to pay
such fees.
(d) In addition to the withdrawals permitted under Section
3.23(c), the Master Servicer may from time to time make withdrawals from the REO
Account for any REO Property: (i) to pay itself or any Sub-Servicer unpaid
Servicing Fees in respect of the related Mortgage Loan; and (ii) to reimburse
itself or any Sub-Servicer for unreimbursed Servicing Advances and P&I Advances
made in respect of such REO Property or the related Mortgage
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Loan. On the Master Servicer Remittance Date, the Master Servicer shall withdraw
from each REO Account maintained by it and deposit into the Distribution Account
in accordance with Section 3.10(d)(ii), for distribution on the related
Distribution Date in accordance with Section 4.01, the income from the related
REO Property received during the prior calendar month, net of any withdrawals
made pursuant to Section 3.23(c) or this Section 3.23(d).
(e) Subject to the time constraints set forth in Section 3.23(a),
each REO Disposition shall be carried out by the Master Servicer at such price
and upon such terms and conditions as the Master Servicer shall deem necessary
or advisable, as shall be normal and usual in its general servicing activities
and as are in accordance with general FNMA guidelines.
(f) The proceeds from the REO Disposition, net of any amount
required by law to be remitted to the Mortgagor under the related Mortgage Loan
and net of any payment or reimbursement to the Master Servicer or any
Sub-Servicer as provided above, shall be deposited in the Distribution Account
in accordance with Section 3.10(d)(ii) on the Master Servicer Remittance Date in
the month following the receipt thereof for distribution on the related
Distribution Date in accordance with Section 4.01. Any REO Disposition shall be
for cash only (unless changes in the REMIC Provisions made subsequent to the
Startup Day allow a sale for other consideration).
(g) The Master Servicer shall file information returns with
respect to the receipt of mortgage interest received in a trade or business,
reports of foreclosures and abandonments of any Mortgaged Property and
cancellation of indebtedness income with respect to any Mortgaged Property as
required by Sections 6050H, 6050J and 6050P of the Code, respectively. Such
reports shall be in form and substance sufficient to meet the reporting
requirements imposed by such Sections 6050H, 6050J and 6050P of the Code.
SECTION 3.24. Obligations of the Master Servicer in Respect of
Prepayment Interest Shortfalls.
The Master Servicer shall deliver to the Trustee for deposit into
the Distribution Account on or before 3:00 p.m. New York time on the Master
Servicer Remittance Date from its own funds an amount equal to the lesser of (i)
the aggregate of the Prepayment Interest Shortfalls for the related Distribution
Date resulting solely from Principal Prepayments during the related Prepayment
Period and (ii) the total amount of its servicing compensation for the most
recently ended calendar month.
SECTION 3.25. Expense Account.
(a) The Trustee shall establish and maintain in its name, for the
benefit of the Trustee in trust for (1) the Certificateholders and (2) the
Certificate Insurer, the Expense Account. The Expense Account shall be an
Eligible Account, and funds on deposit therein shall be held separate and apart
from, and shall not be commingled with, any other moneys, including, without
limitation, other moneys of the Trustee held pursuant to this Agreement.
(b) On the Business Day immediately preceding each Distribution
Date, the Trustee shall withdraw from the Distribution Account and deposit into
the Expense Account an amount equal to 1/12 of the Certificate Insurer Premium
Rate on the Certificate Principal Balance of the Class A Certificates for such
Distribution Date.
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(c) The Trustee shall make withdrawals from the Expense Account
to pay the Certificate Insurer Premium on each Distribution Date.
(d) Funds in the Expense Account may be invested in Permitted
Investments in accordance with the provisions set forth in Section 3.12. Any
earnings on such amounts shall be payable to the Master Servicer as additional
servicing compensation. The Trustee shall give notice to the Depositor and the
Certificate Insurer of the location of the Expense Account on the Closing Date
and prior to any change thereof.
(e) Upon termination of the Trust Fund in accordance with Section
10.01, any amounts remaining in the Expense Account following the payment of all
unpaid Certificate Insurer Premiums shall be released to the Master Servicer as
additional servicing compensation.
SECTION 3.26. Obligations of the Master Servicer in Respect of
Mortgage Rates and Monthly Payments.
In the event that a shortfall in any collection on or liability
with respect to any Mortgage Loan results from or is attributable to adjustments
to Mortgage Rates, Monthly Payments or Stated Principal Balances that were made
by the Master Servicer in a manner not consistent with the terms of the related
Mortgage Note and this Agreement, the Master Servicer, upon discovery or receipt
of notice thereof, immediately shall deliver to the Trustee for deposit in the
Distribution Account from its own funds the amount of any such shortfall and
shall indemnify and hold harmless the Trust Fund, the Trustee, the Certificate
Insurer, the Depositor and any successor master servicer in respect of any such
liability. Such indemnities shall survive the termination or discharge of this
Agreement.
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ARTICLE IV
PAYMENTS TO CERTIFICATEHOLDERS
SECTION 4.01. Distributions.
(a) On each Distribution Date, the Trustee shall withdraw from
the Distribution Account an amount equal to the sum of the Sub-Pool Available
Distribution Amounts for Sub-Pool 1 and the Sub-Pool Available Distribution
Amount for Sub-Pool 2 (other than any amount in the Distribution Account that
was transferred from the Policy Payments Account to the Distribution Account
pursuant to Section 9.04) and distribute to the Certificateholders the following
amounts, in the following order of priority:
(i) concurrently, to the Holders of the Group 1 Class A
Certificates and the Holders of the Group 2 Class A Certificates,
in each case payable from related Sub-Pool Available Funds and in
each case in an amount equal to (A) the aggregate of the Interest
Distribution Amounts for such Group for such Distribution Date,
plus (B) any undistributed amount with respect to such Group
described in the immediately preceding clause (i)(A) from any
previous Distribution Date for which no Insurance Payment has
been previously paid to Holders of the Class A Certificates of
such Group;
(ii) concurrently, to the Holders of the Group 1 Class A
Certificates in an amount equal to the Group 1 Class A Principal
Distribution Amount and to the Holders of the Group 2 Class A
Certificates in an amount equal to the Group 2 Class A Principal
Distribution Amount, in each case except for any portion thereof
consisting of any related Subordination Increase Amount and in
each case applied to reduce the Certificate Principal Balances of
the Class A Certificates of such Group until the aggregate
Certificate Principal Balance of such Group is reduced to zero;
(iii) concurrently, to the Holders of the Group 1 Class A
Certificates and the Holders of the Group 2 Class A Certificates,
in each case payable from related Sub-Pool Net Monthly Excess
Cashflow and in each case in an amount equal to the principal
portion of any Realized Losses incurrred or deemed to have been
incurred on the Mortgage Loans in the related Sub-Pool;
(iv) to the Holders of the Group 1 Class A Certificates or
the Holders of the Group 2 Class A Certificates, as applicable,
payable from nonrelated SubPool Net Monthly Excess Cashflow, in
an amount equal to any amounts described in clause (iii) above
not paid pursuant to such clause (iii) from related Sub-Pool Net
Monthly Excess Cashflow;
(v) to the Certificate Insurer, to reimburse the Certificate
Insurer for claims under the Policy, to the extent of Cumulative
Insurance Payments (any such Cumulative Insurance Payments with
respect to any Class of Class A Certificates being deemed paid
first from related Sub-Pool Net Monthly Excess Cashflow and then
from nonrelated Sub-Pool Net Monthly Excess Cashflow remaining
after any such payments from related Sub-Pool Net Monthly Excess
Cashflow);
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(vi) concurrently, to the Holders of the Group 1 Class A
Certificates and the Holders of the Group 2 Class A Certificates,
in each case payable from related Sub-Pool Net Monthly Excess
Cashflow and in each case in an amount equal to the portion of
the Group 1 Class A Principal Distribution Amount or Group 2
Class A Principal Distribution Amount, as applicable, consisting
of any Subordination Increase Amount such Group;
(vii) to the Holders of the Group 1 Class A Certificates or
the Holders of the Group 2 Class A Certificates, as applicable,
payable from nonrelated SubPool Net Monthly Excess Cashflow, in
an amount equal to any Subordination Increase Amount for such
Group not paid pursuant to clause (vi) above from related
Sub-Pool Net Monthly Excess Cashflow;
(viii) concurrently, to the Holders of the Group 1 Class A
Certificates and the Holders of the Group 2 Class A Certificates,
in each case payable from related Sub-Pool Net Monthly Excess
Cashflow and in each case in an amount equal to any Prepayment
Interest Shortfalls and any Relief Act Shortfalls that were
allocated to such Group pursuant to Section 1.02 and therefore
not distributed pursuant to clause (i) above;
(ix) to the Holders of the Group 1 Class A Certificates or
the Holders of the Group 2 Class A Certificates, as applicable,
payable from nonrelated SubPool Net Monthly Excess Cashflow, in
an amount equal to any amounts described in clause (viii) above
not paid pursuant to such clause (viii) from related Sub-Pool Net
Monthly Excess Cashflow;
(x) to the Holders of the Group 2 Class A Certificates,
payable from remaining Net Monthly Excess Cashflow, in an amount
equal to any Basis Risk Shortfall for such Distribution Date;
(xi) to the Holders of the Group 2 Class A Certificates,
payable from remaining Net Monthly Excess Cashflow, in an amount
equal to any Unpaid Basis Risk Shortfall on such Distribution
Date;
(xii) to the Certificate Insurer, any amounts remaining due to
the Insurer under the terms of the Insurance Agreement (other
than those attributable to Excess Bankruptcy Losses, Excess Fraud
Losses, Excess Special Hazard Losses and Excess Extraordinary
Losses); and
(xiii) to the Holders of the Class R Certificates, the balance,
if any, of the amount so withdrawn from the Distribution Account
for such Distribution Date.
All Realized Losses to be allocated to the Certificate Principal
Balances of all Classes on any Distribution Date shall be so allocated after the
actual distributions to be made on such date as provided above. All references
above to the Certificate Principal Balance of any Class of Certificates shall be
to the Certificate Principal Balance of such Class immediately prior to the
relevant Distribution Date, before reduction thereof) by any Realized Losses, in
each case to be allocated to such Class of Certificates, on such Distribution
Date pursuant to Section 4.04.
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(b) In addition to making the distributions required pursuant to
Section 4.01(a), on each Distribution Date for which there exists a Deficiency
Amount, the Trustee shall withdraw from the Distribution Account any amount
therein that was transferred from the Policy Payments Account to the
Distribution Account pursuant to Section 9.04 and distribute to the Holders of
the Class A Certificates of each Class (i) an amount equal to any amount
required to be paid to such Class pursuant to Section 4.01(a)(i) for such
Distribution Date remaining unpaid after giving effect to all distributions made
pursuant to Section 4.01(a) for such Distribution Date, (ii) an amount equal to
the principal portion of any Realized Losses allocated to such Class on such
Distribution Date after giving effect to all distributions made pursuant to
Section 4.01(a) for such Distribution Date and (iii) without duplication, any
other amount constituting a Deficiency Amount.
(c) On each Distribution Date, the aggregate distributions of
principal made on such date in respect of the Group 1 Class A Certificates
pursuant to Section 4.01(a) above shall be applied among the various Classes
thereof in the following order of priority:
FIRST, to the Class A1-1 Certificates until the
Certificate Principal Balances thereof are reduced to
zero;
SECOND, to the Class A1-2 Certificates until the
Certificate Principal Balances thereof are reduced to
zero;
THIRD, to the Class A1-3 Certificates until the
Certificate Principal Balances thereof are reduced to
zero; and
FOURTH, to the Class A1-4 Certificates until the
Certificate Principal Balances thereof are reduced to
zero.
Notwithstanding the foregoing, if on any Distribution Date a
Certificate Insurer Default exists and the Subordinated Amount has been reduced
to zero, the sequential priorities for principal distributions on the Group 1
Class A Certificates will be disregarded and all amounts distributable in
respect of principal on such Distribution Date on the Group 1 Class A
Certificates will be allocated among the Classes thereof on a PRO RATA basis.
(d) Each Holder of a Certificate, by its acceptance of such
Certificate, hereby agrees that, in the event any distribution is made to any
Holder of a Class A Certificate from amounts paid under the Policy, (i) the
Certificate Insurer shall be subrogated in the manner herein provided to the
rights of the Holder of such Class A Certificate to receive from amounts on
deposit in the Distribution Account the distributions allocable to principal and
interest that would have been distributable to such Holder if no such
distribution to such Holder had been made from amounts paid under the Policy;
and (ii) in addition to the rights of the Class A Certificateholders that the
Certificate Insurer may exercise in accordance with the provisions of Section
9.01, the Certificate Insurer may exercise any option, vote, right, power or the
like with respect to each Class A Certificate for which Cumulative Insurance
Payments are outstanding.
(e) All distributions made with respect to each Class of
Certificates on each Distribution Date shall be allocated PRO RATA among the
outstanding Certificates in such Class based on their respective Percentage
Interests. Payments in respect of each Class of Certificates on each
Distribution Date will be made to the Holders of the respective Class of record
on the related Record Date (except as otherwise provided in Section 4.01(g) or
Section 10.01 respecting the final distribution on such Class), based on the
aggregate Percentage Interest represented by
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their respective Certificates, and shall be made by wire transfer of immediately
available funds to the account of any such Holder at a bank or other entity
having appropriate facilities therefor, if such Holder shall have so notified
the Trustee in writing at least five Business Days prior to the Record Date
immediately prior to such Distribution Date and is the registered owner of
Certificates having an initial aggregate Certificate Principal Balance that is
in excess of the lesser of (i) $5,000,000 or (ii) two-thirds of the initial
Certificate Principal Balance (or, in the case of the Class R Certificates, a
66% Percentage Interest) of such Class of Certificates, or otherwise by check
mailed by first class mail to the address of such Holder appearing in the
Certificate Register. The final distribution on each Certificate will be made in
like manner, but only upon presentment and surrender of such Certificate at the
Corporate Trust Office or such other location specified in the notice to
Certificateholders of such final distribution. Payments to the Certificate
Insurer on any Distribution Date will be made by wire transfer of immediately
available funds to the account designated by the Certificate Insurer.
Each distribution with respect to a Book-Entry Certificate shall
be paid to the Depository, as Holder thereof, and the Depository shall be
responsible for crediting the amount of such distribution to the accounts of its
Depository Participants in accordance with its normal procedures. Each
Depository Participant shall be responsible for disbursing such distribution to
the Certificate Owners that it represents and to each indirect participating
brokerage firm (a "brokerage firm" or "indirect participating firm") for which
it acts as agent. Each brokerage firm shall be responsible for disbursing funds
to the Certificate Owners that it represents. None of the Trustee, the
Certificate Registrar, the Depositor or the Master Servicer shall have any
responsibility therefor except as otherwise provided by this Agreement or
applicable law.
(f) The rights of the Certificateholders to receive distributions
in respect of the Certificates, and all interests of the Certificateholders in
such distributions, shall be as set forth in this Agreement. Neither the Holders
of any Class of Certificates nor the Trustee nor the Master Servicer shall in
any way be responsible or liable to the Holders of any other Class of
Certificates in respect of amounts properly previously distributed on the
Certificates.
(g) Except as otherwise provided in Section 10.01, whenever the
Trustee expects that the final distribution with respect to any Class of
Certificates will be made on the next Distribution Date, the Trustee shall, no
later than five (5) days after the related Determination Date, mail to each
Holder on such date of such Class of Certificates and to the Certificate Insurer
a notice to the effect that:
(i) the Trustee expects that the final distribution with respect to
such Class of Certificates will be made on such Distribution Date but
only upon presentation and surrender of such Certificates at the office
of the Trustee therein specified, and
(ii) no interest shall accrue on such Certificates from and after
the end of the related Interest Accrual Period.
Any funds not distributed to any Holder or Holders of Certificates of such Class
on such Distribution Date because of the failure of such Holder or Holders to
tender their Certificates shall, on such date, be set aside and held in trust
and credited to the account of the appropriate non-tendering Holder or Holders.
If any Certificates as to which notice has been given pursuant to this Section
4.01(g) shall not have been surrendered for cancellation within six months after
the time specified in such notice, the Trustee shall mail a second notice to the
remaining nontendering Certificateholders to surrender their Certificates for
cancellation in order to receive
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the final distribution with respect thereto. If within one year after the second
notice all such Certificates shall not have been surrendered for cancellation,
the Trustee shall, directly or through an agent, contact the remaining
non-tendering Certificateholders concerning surrender of their Certificates in
the manner reasonably specified to the Trustee by the Master Servicer in
writing. The costs and expenses of maintaining the funds in trust and of
contacting such Certificateholders shall be paid out of the assets remaining in
the trust fund. If within one year after the second notice any such Certificates
shall not have been surrendered for cancellation, the Master Servicer shall pay
to the Certificate Insurer any amount of such funds which were paid by the
Certificate Insurer under the Policy but shall continue to hold any remaining
funds for the benefit of the non-tendering Certificateholders, and such
Certificateholders shall thereafter look solely to the Master Servicer for
payment thereof, and all liability of the Certificate Insurer with respect to
such trust funds shall thereupon cease. No interest shall accrue or be payable
to any Certificateholder on any amount held in trust by the Master Servicer as a
result of such Certificateholder's failure to surrender its Certificate(s) for
final payment thereof in accordance with this Section 4.01(g).
SECTION 4.02. Statements to Certificateholders.
On each Distribution Date, the Trustee shall prepare and forward
by mail to each Holder of the Regular Certificates, a statement as to the
distributions made on such Distribution Date setting forth:
(i) the amount of the distribution made on such
Distribution Date to the Holders of Certificates of each such
Class allocable to principal;
(ii) the amount of the distribution made on such
Distribution Date to the Holders of Certificates of each such
Class allocable to interest;
(iii) the aggregate amount of servicing compensation received
by the Master Servicer during the related Due Period and such
other customary information as the Trustee deems necessary or
desirable, or which a Certificateholder reasonably requests, to
enable Certificateholders to prepare their tax returns;
(iv) the Guaranteed Distribution for such Distribution
Date and the respective portions thereof allocable to principal
and interest;
(v) the amount of any Insurance Payment made to Class A
Certificateholders of each Class on such Distribution Date, the
amount of any reimbursement payment made to the Certificate
Insurer on such Distribution Date pursuant to Section 4.01(a)(v)
and the amount of Cumulative Insurance Payments after giving
effect to any such Insurance Payment to Class A
Certificateholders or any such reimbursement payment to the
Certificate Insurer;
(vi) the aggregate amount of P&I Advances for such
Distribution Date;
(vii) the aggregate Stated Principal Balance of the
Mortgage Loans and any REO Properties at the close of business
on such Distribution Date;
(viii) the number, aggregate principal balance, weighted
average remaining term to maturity and weighted average Mortgage
Rate of the Mortgage Loans in each Sub-Pool as of the related Due
Date;
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(ix) the number and aggregate unpaid principal balance of
Mortgage Loans in each Sub-Pool (a) delinquent 30 days, (b)
delinquent 60 days, (c) delinquent 90 or more days and (d) as to
which foreclosure proceedings have been commenced;
(x) with respect to any Mortgage Loan that became an REO
Property during the preceding calendar month, the loan number of
such Mortgage Loan, the unpaid principal balance and the Stated
Principal Balance of such Mortgage Loan as of the date it became
an REO Property;
(xi) the book value of any REO Property as of the close of
business on the last Business Day of the calendar month preceding
the Distribution Date;
(xii) the aggregate amount of Principal Prepayments made
during the related Prepayment Period;
(xiii) the aggregate amount of Realized Losses incurred during
the related Prepayment Period (or, in the case of Bankruptcy
Losses allocable to interest, during the related Due Period),
separately identifying whether such Realized Losses constituted
Extraordinary Losses, Fraud Losses, Special Hazard
Losses or Bankruptcy Losses;
(xiv) the aggregate amount of extraordinary Trust Fund
expenses withdrawn from the Collection Account or the
Distribution Account for such Distribution Date;
(xv) the aggregate Certificate Principal Balance of each such
Class of Certificates, after giving effect to the distributions,
and allocations of Realized Losses, made on such Distribution
Date, separately identifying any reduction thereof due to
allocations of Realized Losses;
(xvi) the Certificate Factor for each such Class of
Certificates applicable to such Distribution Date;
(xvii) the Interest Distribution Amount in respect of each such
Class of Class A Certificates for such Distribution Date and the
respective portions thereof, if any, paid under the Policy or (in
the event of a Deficiency Event) remaining unpaid following the
distributions made in respect of such Certificates on such
Distribution Date;
(xviii) the aggregate amount of any Prepayment Interest
Shortfalls for such Distribution Date, to the extent not covered
by payments by the Master Servicer pursuant to Section 3.24;
(xix) the aggregate amount of Relief Act Interest
Shortfalls for such Distribution Date;
(xx) the then-applicable Bankruptcy Amount, Fraud Loss
Amount and Special Hazard Amount;
(xxi) the Basis Risk Shortfall, if any, for such
Distribution Date;
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(xxii) the Unpaid Basis Risk Shortfalls, if any,
outstanding after reimbursements therefor on such Distribution
Date;
(xxiii) the Required Subordinated Amount for each Group for
such Distribution Date;
(xxiv) the Subordination Increase Amount for each Group,
if any, for such Distribution Date;
(xxv) the Subordination Reduction Amount for each Group,
if any, for such Distribution Date; and
(xxvi) the Pass-Through Rate applicable to the Group 2
Class A Certificates for such Distribution Date and the
immediately succeeding Distribution Date
In the case of information furnished pursuant to subclauses
(i)-(iii) above, the amounts shall be expressed as a dollar amount per Single
Certificate of the relevant Class.
Within a reasonable period of time after the end of each calendar
year, the Trustee shall furnish to each Person who at any time during the
calendar year was a Holder of a Regular Certificate a statement containing the
information set forth in subclauses (i)-(iii) above, aggregated for such
calendar year or applicable portion thereof during which such person was a
Certificateholder. Such obligation of the Trustee shall be deemed to have been
satisfied to the extent that substantially comparable information shall be
provided by the Trustee pursuant to any requirements of the Code as from time to
time are in force.
On each Distribution Date the Trustee shall forward to the
Depositor, to each Holder of a Residual Certificate, to the Certificate Insurer
and to the Master Servicer, a copy of the reports forwarded to the Regular
Certificateholders on such Distribution Date and a statement setting forth the
amounts, if any, actually distributed with respect to the Residual Certificates,
respectively, on such Distribution Date.
Within a reasonable period of time after the end of each calendar
year, the Trustee shall furnish to each Person who at any time during the
calendar year was a Holder of a Residual Certificate a statement setting forth
the amount, if any, actually distributed with respect to the Residual
Certificates, as appropriate, aggregated for such calendar year or applicable
portion thereof during which such Person was a Certificateholder.
The Trustee shall, upon request, furnish to each
Certificateholder, during the term of this Agreement, such periodic, special, or
other reports or information, whether or not provided for herein, as shall be
reasonable with respect to the Certificateholder, or otherwise with respect to
the purposes of this Agreement, all such reports or information to be provided
at the expense of the Certificateholder in accordance with such reasonable and
explicit instructions and directions as the Certificateholder may provide. For
purposes of this Section 4.02, the Trustee's duties are limited to the extent
that the Trustee receives timely reports as required from the Master Servicer.
On each Distribution Date the Trustee shall provide Bloomberg
Financial Markets, L.P. ("Bloomberg") Cusip Level Factors for each class of
Certificates as of such Distribution Date, using a format and media mutually
acceptable to the Trustee and Bloomberg. In connection with providing the
information specified in this Section 4.02 to Bloomberg, the
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Trustee and any director, officer, employee or agent of the Trustee shall be
indemnified and held harmless by the Master Servicer, to the extent and in the
manner provided in Section 8.05.
SECTION 4.03. Remittance Reports; P&I Advances.
(a) On the Business Day following each Determination Date, the
Master Servicer shall deliver to the Trustee and the Certificate Insurer by
telecopy (or by such other means as the Master Servicer and the Trustee may
agree from time to time) a Remittance Report with respect to the related
Distribution Date. On the same date, the Master Servicer shall forward to the
Trustee by overnight mail a computer readable magnetic tape containing the
information set forth in such Remittance Report with respect to the related
Distribution Date. Not later than the close of business New York Time on the
Master Servicer Remittance Date, the Trustee shall deliver or cause to be
delivered to the Certificate Insurer and the Master Servicer in addition to the
information provided on the Remittance Report, (i) the Guaranteed Distribution
for such Distribution Date, separately identifying the portions thereof
allocable to principal and interest; (ii) the Sub-Pool Available Distribution
Amounts for such Distribution Date; (iii) whether the Sub-Pool Available
Distribution Amounts expected to be on deposit in the Distribution Account on
such Distribution Date will be sufficient to cover the Guaranteed Distribution
and, if not, the amount of the shortfall; (iv) the amount of P&I Advances to be
made by the Master Servicer in respect of the related Distribution Date, the
aggregate amount of P&I Advances outstanding after giving effect to such P&I
Advances, and the aggregate amount of Nonrecoverable P&I Advances in respect of
such Distribution Date; (v) with respect to any reimbursement to be made to the
Certificate Insurer on such Distribution Date pursuant to Section 4.01(a)(v),
the amount, if any, allocable to principal and the amount allocable to interest;
(vi) Cumulative Insurance Payments after giving effect to the distributions to
be made on such Distribution Date; and (vii) such other information with respect
to the Mortgage Loans as the Trustee may reasonably require to perform the
calculations necessary to make the distributions contemplated by Section 4.01
and to prepare the statements to Certificateholders contemplated by Section
4.02. The Trustee shall not be responsible to recompute, recalculate or verify
any information provided to it by the Master Servicer.
(b) The amount of P&I Advances to be made by the Master Servicer
for any Distribution Date shall equal, subject to Section 4.03(d), the sum of
(i) the aggregate amount of Monthly Payments (with each interest portion thereof
net of the related Servicing Fee), due on the related Due Date in respect of the
Mortgage Loans, which Monthly Payments were delinquent as of the close of
business on the related Determination Date and (ii) with respect to each REO
Property, which REO Property was acquired during or prior to the related
Prepayment Period and as to which REO Property an REO Disposition did not occur
during the related Prepayment Period, an amount equal to the excess, if any, of
the REO Imputed Interest on such REO Property for the most recently ended
calendar month, over the net income from such REO Property transferred to the
Distribution Account pursuant to Section 3.23 for distribution on such
Distribution Date. For purposes of the preceding sentence, the Monthly Payment
on each Balloon Mortgage Loan with a delinquent Balloon Payment is equal to the
assumed monthly principal and interest payment that would have been due on the
related Due Date based on the original principal amortization schedule for the
such Balloon Mortgage Loan.
On or before 3:00 p.m. New York time on the Master Servicer
Remittance Date, the Master Servicer shall remit in immediately available funds
to the Trustee for deposit in the Distribution Account an amount equal to the
aggregate amount of P&I Advances, if any, to be
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made in respect of the Mortgage Loans and REO Properties for the related
Distribution Date either (i) from its own funds or (ii) from the Collection
Account, to the extent of funds held therein for future distribution (in which
case it will cause to be made an appropriate entry in the records of Collection
Account that amounts held for future distribution have been, as permitted by
this Section 4.03, used by the Master Servicer in discharge of any such P&I
Advance) or (iii) in the form of any combination of (i) and (ii) aggregating the
total amount of P&I Advances to be made by the Master Servicer with respect to
the Mortgage Loans and REO Properties. Any amounts held for future distribution
and so used shall be appropriately reflected in the Master Servicer's records
and replaced by the Master Servicer by deposit in the Collection Account on or
before any future Master Servicer Remittance Date to the extent that the
Available Distribution Amount for the related Distribution Date (determined
without regard to P&I Advances to be made on the Master Servicer Remittance
Date) shall be less than the total amount that would be distributed to the
Classes of Certificateholders pursuant to Section 4.01 on such Distribution Date
if such amounts held for future distributions had not been so used to make P&I
Advances. The Trustee will provide notice to the Master Servicer and the
Certificate Insurer by telecopy by the close of business on any Master Servicer
Remittance Date in the event that the amount remitted by the Master Servicer to
the Trustee on such date is less than the P&I Advances required to be made by
the Master Servicer for the related Distribution Date.
(c) The obligation of the Master Servicer to make such P&I
Advances is mandatory, notwithstanding any other provision of this Agreement but
subject to (d) below, and, with respect to any Mortgage Loan or REO Property,
shall continue until a Final Recovery Determination in connection therewith or
the removal thereof from the Trust Fund pursuant to any applicable provision of
this Agreement, except as otherwise provided in this Section.
(d) Notwithstanding anything herein to the contrary, no P&I
Advance shall be required to be made hereunder by the Master Servicer if such
P&I Advance would, if made, constitute a Nonrecoverable P&I Advance. The
determination by the Master Servicer that it has made a Nonrecoverable P&I
Advance or that any proposed P&I Advance, if made, would constitute a
Nonrecoverable P&I Advance, shall be evidenced by an Officers' Certificate of
the Master Servicer delivered to the Depositor, the Trustee and the Certificate
Insurer.
(e) If, at the close of business on the third Business Day prior
to any Distribution Date, the funds on deposit in the Distribution Account are
less than the Guaranteed Distribution for such Distribution Date, the Trustee
shall give notice by telephone or telecopy of the amount of such deficiency,
confirmed in writing in the form set forth as Exhibit A to the Endorsement of
the Policy, to the Certificate Insurer and the Fiscal Agent (as defined in the
Policy), if any, at or before 10:00 a.m., New York City time, on the second
Business Day prior to such Distribution Date.
SECTION 4.04. Allocation of Realized Losses.
(a) Prior to each Determination Date, the Master Servicer shall
determine as to each Mortgage Loan and REO Property: (i) the total amount of
Realized Losses, if any, incurred in connection with any Final Recovery
Determinations made during the related Prepayment Period; (ii) whether and the
extent to which such Realized Losses constituted Fraud Losses, Special Hazard
Losses or Extraordinary Losses; and (iii) the respective portions of such
Realized Losses allocable to interest and allocable to principal. Prior to each
Determination Date, the Master Servicer shall also determine as to each Mortgage
Loan: (i) the total amount of Realized Losses, if any, incurred in connection
with any Deficient Valuations made during
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the related Prepayment Period; and (ii) the total amount of Realized Losses, if
any, incurred in connection with Debt Service Reductions in respect of Monthly
Payments due during the related Due Period. The information described in the two
preceding sentences that is to be supplied by the Master Servicer shall be
evidenced by an Officers' Certificate delivered to the Trustee and the
Certificate Insurer by the Master Servicer prior to the Determination Date
immediately following the end of (i) in the case of Bankruptcy Losses allocable
to interest, the Due Period during which any such Realized Loss was incurred,
and (ii) in the case of all other Realized Losses, the Prepayment Period during
which any such Realized Loss was incurred.
(b) All Realized Losses on the Mortgage Loans, other than Excess
Special Hazard Losses, Excess Fraud Losses, Excess Extraordinary Losses and
Excess Bankruptcy Losses on the Mortgage Loans shall be allocated on each
Distribution Date as follows: first, to the related Sub-Pool Net Monthly Excess
Cashflow; second, to the nonrelated Sub-Pool Net Monthly Excess Cashflow; third
to the Class R Certificates, until the Certificate Principal Balance thereof has
been reduced to zero; and, fourth, to the related Group of Class A Certificates.
Any Excess Special Hazard Losses, Excess Bankruptcy Losses, Excess Fraud Losses
and Excess Extraordinary Losses will be allocated between the related Group of
Class A Certificates and the Class R Certificates on a PRO RATA basis. Unless a
Certificate Insurer Default exists and the Subordinated Amount has been reduced
to zero, any Realized Losses allocated on any Distribution Date to the Group 1
Class A Certificates shall be allocated to the Class or Classes of Group 1 Class
A Certificates then entitled to distributions in respect of principal. However,
on any Distribution Date on which a Certificate Insurer Default exists and the
Subordinated Amount has been reduced to zero, any Realized Losses allocated to
the Group 1 Class A Certificates shall be allocated among the Classes of Group 1
Class A Certificates on a PRO RATA basis. Any Realized Losses allocable to the
Group 1 Class A Certificates shall be allocated among the Classes of such Class
A Certificates on a PRO RATA basis. No allocations of Realized Losses pursuant
to this Section 4.04 shall affect any liability of the Certificate Insurer with
respect to such amounts under the Policy. Any allocation of Realized Losses to a
Class A Certificate or a Class R Certificate on any Distribution Date shall be
made by reducing the Certificate Principal Balance thereof by the amount so
allocated. All Realized Losses allocated to a Class of Certificates hereunder
will be allocated among the Certificates of such Class in proportion to the
Percentage Interests evidenced thereby.
As used herein, an allocation of a Realized Loss on a "PRO RATA
basis" among two or more specified Classes of Certificates means an allocation
on a PRO RATA basis, among the various Classes so specified, to each such Class
of Certificates on the basis of their then outstanding Certificate Principal
Balances prior to giving effect to distributions to be made on such Distribution
Date. All Realized Losses and all other losses allocated to a Class of
Certificates hereunder will be allocated among the Certificates of such Class in
proportion to the Percentage Interests evidenced thereby.
SECTION 4.05. Compliance with Withholding Requirements.
Notwithstanding any other provision of this Agreement, the
Trustee shall comply with all federal withholding requirements respecting
payments to Certificateholders of interest or original issue discount that the
Trustee reasonably believes are applicable under the Code. The consent of
Certificateholders shall not be required for such withholding. In the event the
Trustee does withhold any amount from interest or original issue discount
payments or advances
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thereof to any Certificateholder pursuant to federal withholding requirements,
the Trustee shall indicate the amount withheld to such Certificateholders.
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ARTICLE V
THE CERTIFICATES
SECTION 5.01. The Certificates.
(a) The Certificates in the aggregate will represent the entire
beneficial ownership interest in the Mortgage Loans and all other assets
included in the Trust Fund. At the Closing Date, the aggregate Certificate
Principal Balance of the Class A Certificates will equal the aggregate Scheduled
Principal Balance of the Original Mortgage Loans in the Mortgage Pool as of the
Cut-off Date.
The Certificates will be substantially in the forms annexed
hereto as Exhibits A-1 through A-6. The Certificates of each Class will be
issuable in registered form only, in denominations of authorized Percentage
Interests as described in the definition thereof. Each Certificate will share
ratably in all rights of the related Class.
Upon original issue, the Certificates shall be executed and
delivered by the Trustee and the Trustee shall cause the Certificates to be
authenticated by the Certificate Registrar to or upon the order of the
Depositor. The Certificates shall be executed and attested by manual or
facsimile signature on behalf of the Trustee by an authorized signatory.
Certificates bearing the manual or facsimile signatures of individuals who were
at any time the proper officers of the Trustee shall bind the Trustee,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Certificates or did not
hold such offices at the date of such Certificates. No Certificate shall be
entitled to any benefit under this Agreement or be valid for any purpose, unless
there appears on such Certificate a certificate of authentication substantially
in the form provided herein executed by the Certificate Registrar by manual
signature, and such certificate of authentication shall be conclusive evidence,
and the only evidence, that such Certificate has been duly authenticated and
delivered hereunder. All Certificates shall be dated the date of their
authentication.
(b) The Class A Certificates shall initially be issued as one or
more Certificates registered in the name of the Depository or its nominee and,
except as provided below, registration of such Certificates may not be
transferred by the Trustee except to another Depository that agrees to hold such
Certificates for the respective Certificate Owners with Ownership Interests
therein. The Certificate Owners shall hold their respective Ownership Interests
in and to such Certificates through the book-entry facilities of the Depository
and, except as provided below, shall not be entitled to definitive, fully
registered Certificates ("Definitive Certificates") in respect of such Ownership
Interests. All transfers by Certificate Owners of their respective Ownership
Interests in the Book-Entry Certificates shall be made in accordance with the
procedures established by the Depository Participant or brokerage firm
representing such Certificate Owner. Each Depository Participant shall only
transfer the Ownership Interests in the Book-Entry Certificates of Certificate
Owners it represents or of brokerage firms for which it acts as agent in
accordance with the Depository's normal procedures.
The Trustee, the Master Servicer and the Depositor may for all
purposes (including the making of payments due on the respective Classes of
Book-Entry Certificates) deal with the Depository as the authorized
representative of the Certificate Owners with respect to the respective Classes
of Book-Entry Certificates for the purposes of exercising the rights of
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Certificateholders hereunder. The rights of Certificate Owners with respect to
the respective Classes of Book-Entry Certificates shall be limited to those
established by law and agreements between such Certificate Owners and the
Depository Participants and brokerage firms representing such Certificate
Owners. Multiple requests and directions from, and votes of, the Depository as
Holder of any Class of Book-Entry Certificates with respect to any particular
matter shall not be deemed inconsistent if they are made with respect to
different Certificate Owners. The Trustee may establish a reasonable record date
in connection with solicitations of consents from or voting by
Certificateholders and shall give notice to the Depository of such record date.
If (i)(A) the Depositor advises the Trustee in writing that the
Depository is no longer willing or able to properly discharge its
responsibilities as Depository, and (B) the Depositor is unable to locate a
qualified successor, (ii) the Depositor at its option advises the Trustee in
writing that it elects to terminate the book-entry system through the Depository
or (iii) after the occurrence of a Master Servicer Event of Default, Certificate
Owners representing in the aggregate not less than 51% of the Ownership
Interests of each of the Classes of the BookEntry Certificates advise the
Trustee through the Depository, in writing, that the continuation of a
book-entry system through the Depository is no longer in the best interests of
the Certificate Owners, the Trustee shall notify all Certificate Owners, through
the Depository, of the occurrence of any such event and of the availability of
Definitive Certificates to Certificate Owners requesting the same. Upon
surrender to the Trustee of the Book-Entry Certificates by the Depository,
accompanied by registration instructions from the Depository for registration of
transfer, the Trustee shall issue the Definitive Certificates. Such Definitive
Certificates will be issued in minimum denominations of $1,000, except that any
beneficial ownership that was represented by a Book-Entry Certificate in an
amount less than $1,000 immediately prior to the issuance of a Definitive
Certificate shall be issued in a minimum denomination equal to the amount
represented by such Book-Entry Certificate. None of the Depositor, the Master
Servicer or the Trustee shall be liable for any delay in the delivery of such
instructions and may conclusively rely on, and shall be protected in relying on,
such instructions. Upon the issuance of Definitive Certificates all references
herein to obligations imposed upon or to be performed by the Depository shall be
deemed to be imposed upon and performed by the Trustee, to the extent applicable
with respect to such Definitive Certificates, and the Trustee shall recognize
the Holders of the Definitive Certificates as Certificateholders hereunder.
SECTION 5.02. Registration of Transfer and Exchange of
Certificates.
(a) The Trustee shall cause to be kept at one of the offices or
agencies to be appointed by the Trustee in accordance with the provisions of
Section 8.11 a Certificate Register for the Certificates in which, subject to
such reasonable regulations as it may prescribe, the Trustee shall provide for
the registration of Certificates and of transfers and exchanges of Certificates
as herein provided. The Trustee will initially serve as Certificate Registrar
for the purpose of registering Certificates and transfers and exchanges of
Certificates as herein provided. The Certificate Registrar may appoint, by a
written instrument delivered to the Master Servicer and the Depositor, any other
bank or trust company to act as Certificate Registrar under such conditions as
the predecessor Certificate Registrar may prescribe, provided that the
predecessor Certificate Registrar shall not be relieved of any of its duties or
responsibilities hereunder by reason of such appointment. If the Trustee shall
at any time not be the Certificate Registrar, the Trustee shall have and
maintain the right to inspect the Certificate Register or to obtain a copy
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thereof at all reasonable times, and to rely conclusively upon a certificate of
the Certificate Registrar as to the information set forth in the Certificate
Register.
(b) No transfer of any Residual Certificate shall be made unless
that transfer is made pursuant to an effective registration statement under the
Securities Act of 1933, as amended (the "1933 Act"), and effective registration
or qualification under applicable state securities laws, or is made in a
transaction which does not require such registration or qualification. In the
event that such a transfer of a Residual Certificate is to be made without
registration or qualification, the Trustee and the Certificate Registrar shall
each require receipt of: (i) if such transfer is purportedly being made in
reliance upon Rule 144A under the 1933 Act, written certifications from the
Certificateholder desiring to effect the transfer, and from such
Certificateholder's prospective transferee, substantially in the forms attached
hereto as Exhibit F-1; and (ii) in all other cases, an Opinion of Counsel
satisfactory to it that such transfer may be made without such registration or
qualification (which Opinion of Counsel shall not be an expense of the Trust
Fund or of the Depositor, the Trustee or the Master Servicer in its capacity as
such), together with copies of the written certification(s) of the
Certificateholder desiring to effect the transfer and/or such
Certificateholder's prospective transferee upon which such Opinion of Counsel is
based, if any. None of the Depositor, the Certificate Registrar or the Trustee
is obligated to register or qualify the Residual Certificates under the 1933 Act
or any other securities laws or to take any action not otherwise required under
this Agreement to permit the transfer of such Certificates without registration
or qualification. Any Certificateholder desiring to effect the transfer of a
Residual Certificate shall, and does hereby agree to, indemnify the Trustee, the
Depositor, the Certificate Registrar, the Master Servicer and the Certificate
Insurer against any liability that may result if the transfer is not so exempt
or is not made in accordance with such federal and state laws.
(c) No transfer of a Residual Certificate or any interest therein
shall be made to (i) any employee benefit plan or other retirement arrangement,
including individual retirement accounts and annuities, Keogh plans and
collective investment funds and separate accounts in which such plans, accounts
or arrangements are invested, that is subject to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or the Code (each, a "Plan") or (ii)
any Person who is directly or indirectly purchasing the Residual Certificate or
interest therein on behalf of, as named fiduciary of, as trustee of, or with
assets of a Plan, unless the Trustee and the Certificate Registrar are provided
with a certification of facts or an Opinion of Counsel which establishes to the
satisfaction of each that such transfer will not result in a violation of
Section 406 of ERISA or Section 4975 of the Code or cause any of the Trustee,
the Certificate Registrar or the Master Servicer to be deemed a fiduciary of
such Plan or result in the imposition of an excise tax under Section 4975 of the
Code. In the absence of its having received the certification of facts or
Opinion of Counsel contemplated by the preceding sentence, the Trustee and the
Certificate Registrar shall require the prospective transferee of any Residual
Certificate to certify either (a) it is not a Plan, (b) that it is neither (i) a
Plan nor (ii) a Person who is directly or indirectly purchasing the Residual
Certificate on behalf of, as named fiduciary of, as trustee of, or with assets
of a Plan (including any insurance company using funds in its general or
separate accounts that may constitute "plan assets") or (c) that (i) it is an
insurance company and (ii) all of the funds to be used by it to purchase the
Certificates to be purchased by it are held in its general account and virtually
all of the assets in such general account are from the receipt of premiums for
the purchase of annuity contracts that provide in part: (A) for a benefit that
is guaranteed throughout the term of the contract, and (B) for a benefit that is
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guaranteed for successive periods of at least twelve months; however, benefits
from premiums received during any twelve month period may be guaranteed only to
the end of such twelve month period, and thereafter for periods of twelve months
or more.
(d) (i) Each Person who has or who acquires any Ownership
Interest in a Residual Certificate shall be deemed by the acceptance or
acquisition of such Ownership Interest to have agreed to be bound by the
following provisions and to have irrevocably authorized the Trustee or its
designee under clause (iii)(A) below to deliver payments to a Person other than
such Person and to negotiate the terms of any mandatory sale under clause
(iii)(B) below and to execute all instruments of Transfer and to do all other
things necessary in connection with any such sale. The rights of each Person
acquiring any Ownership Interest in a Residual Certificate are expressly subject
to the following provisions:
(A) Each Person holding or acquiring any Ownership
Interest in a Residual Certificate shall be a Permitted
Transferee and shall promptly notify the Trustee of any
change or impending change in its status as a Permitted
Transferee.
(B) In connection with any proposed Transfer of any
Ownership Interest in 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 F-2) from the
proposed Transferee, in form and substance satisfactory to
the Trustee, 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
5.02(d) and agrees to be bound by them.
(C) Notwithstanding the delivery of a Transfer
Affidavit and Agreement by a proposed Transferee under
clause (B) above, if a Responsible Officer of the Trustee
who is assigned to this transaction has actual knowledge
that the proposed Transferee is not a Permitted
Transferee, no Transfer of an Ownership Interest in a
Residual Certificate to such proposed Transferee shall be
effected.
(D) Each Person holding or acquiring any Ownership
Interest in a Residual Certificate shall agree (x) to
require a Transfer Affidavit and Agreement (in the form
attached hereto as Exhibit F-2) from any other Person to
whom such Person attempts to transfer its Ownership
Interest in a Residual Certificate and (y) not to transfer
its Ownership Interest unless it provides a Transferor
Affidavit (in the form attached hereto as Exhibit F-2) to
the Trustee stating that, among other things, it has no
actual knowledge that such other Person is not a Permitted
Transferee.
(E) Each Person holding or acquiring an Ownership
Interest in a Residual Certificate, by purchasing an
Ownership Interest in such
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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".
(ii) The Trustee will register the Transfer of any Residual
Certificate only if it shall have received the Transfer Affidavit
and Agreement and all of such other documents as shall have been
reasonably required by the Trustee as a condition to such
registration. 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.
(iii) (A) If any purported Transferee shall become a Holder of
a Residual Certificate in violation of the provisions of this
Section 5.02(d), then the last preceding Permitted Transferee
shall be restored, to the extent permitted by law, to all rights
as holder thereof retroactive to the date of registration of such
Transfer of such Residual Certificate. The 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 5.02(d) or for making any payments due on such
Certificate to the holder thereof or for taking any other action
with respect to such holder under the provisions of this
Agreement.
(B) If any purported Transferee shall become a
holder of a Residual Certificate in violation of the restrictions
in this Section 5.02(d) and to the extent that the retroactive
restoration of the rights of the holder of such Residual
Certificate as described in clause (iii)(A) above shall be
invalid, illegal or unenforceable, then the Trustee 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 on such terms as the Trustee
may choose. Such purported Transferee shall promptly endorse and
deliver each Residual Certificate in accordance with the
instructions of the Trustee. Such purchaser may be the Trustee
itself or any Affiliate of the Trustee. The proceeds of such
sale, net of the commissions (which may include commissions
payable to the Trustee or its Affiliates), expenses and taxes
due, if any, will be remitted by the Trustee to such purported
Transferee. The terms and conditions of any sale under this
clause (iii)(B) shall be determined in the sole discretion of the
Trustee, and the Trustee shall not be liable to any Person having
an Ownership Interest in a Residual Certificate as a result of
its exercise of such discretion.
(iv) The 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 described in Treasury regulations
sections 1.860D-1(b)(5) and 1.860E-2(a)(5)with respect to the
"excess inclusions" of such Residual Certificate and (B) as a
result of any regulated investment company, real
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estate investment trust, common trust fund, partnership, trust,
estate or organization described in Section 1381 of the Code that
holds an Ownership Interest in a Residual Certificate having as
among its record holders at any time any Person which is a
Disqualified Organization. Reasonable compensation for providing
such information may be accepted by the Trustee.
(v) The provisions of this Section 5.02(d) set forth prior
to this subsection (v) may be modified, added to or eliminated,
provided that there shall have been delivered to the Trustee at
the expense of the party seeking to modify, add to or eliminate
any such provision the following:
(A) written notification from each Rating Agency to
the effect that the modification, addition to or
elimination of such provisions will not cause such Rating
Agency to downgrade its then-current ratings of any Class
of Certificates; and
(B) an Opinion of Counsel, in form and substance
satisfactory to the Trustee, 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 the Trust Fund to be
subject to an entity-level tax caused by the Transfer of
any Residual Certificate to a Person that is not a
Permitted Transferee or (y) a Person other than the
prospective transferee to be subject to a REMIC-tax caused
by the Transfer of a Residual Certificate to a Person that
is not a Permitted Transferee.
(e) Subject to the preceding subsections, upon surrender for
registration of transfer of any Certificate at any office or agency of the
Trustee maintained for such purpose pursuant to Section 8.11, the Trustee shall
execute and the Certificate Registrar shall authenticate and deliver, in the
name of the designated Transferee or Transferees, one or more new Certificates
of the same Class of a like aggregate Percentage Interest.
(f) At the option of the Holder thereof, any Certificate may be
exchanged for other Certificates of the same Class with authorized denominations
and a like aggregate Percentage Interest, upon surrender of such Certificate to
be exchanged at any office or agency of the Trustee maintained for such purpose
pursuant to Section 8.11. Whenever any Certificates are so surrendered for
exchange the Trustee shall execute and cause the Certificate Registrar to
authenticate and deliver the Certificates which the Certificateholder making the
exchange is entitled to receive. Every Certificate presented or surrendered for
transfer or exchange shall (if so required by the Trustee) be duly endorsed by,
or be accompanied by a written instrument of transfer in the form satisfactory
to the Trustee and the Certificate Registrar duly executed by, the Holder
thereof or his attorney duly authorized in writing.
(g) No service charge to the Certificateholders shall be made for
any transfer or exchange of Certificates, but the 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.
(h) All Certificates surrendered for transfer and exchange shall
be canceled and destroyed by the Certificate Registrar in accordance with its
customary procedures.
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(i) The Trustee will cause the Certificate Registrar (unless the
Trustee is acting as Certificate Registrar) to provide notice to the Trustee of
each transfer of a Certificate and to provide the Trustee with an updated copy
of the Certificate Register on the first Business Day in January and June of
each year, commencing January 1997.
SECTION 5.03. Mutilated, Destroyed, Lost or Stolen
Certificates.
If (i) any mutilated Certificate is surrendered to the Trustee or
the Certificate Registrar, or the Trustee and the Certificate Registrar receive
evidence to their satisfaction of the destruction, loss or theft of any
Certificate, and (ii) there is delivered to the Trustee and the Certificate
Registrar such security or indemnity as may be required by them to save each of
them harmless, then, in the absence of actual knowledge by the Trustee or the
Certificate Registrar that such Certificate has been acquired by a bona fide
purchaser, the Trustee shall execute and deliver, in exchange for or in lieu of
any such mutilated, destroyed, lost or stolen Certificate, a new Certificate of
the same Class and of like denomination and Percentage Interest. Upon the
issuance of any new Certificate under this Section, the Trustee may require the
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in relation thereto and any other expenses (including the fees
and expenses of the Certificate Registrar) connected therewith. Any replacement
Certificate issued pursuant to this Section shall constitute complete and
indefeasible evidence of ownership in the applicable REMIC created hereunder, as
if originally issued, whether or not the lost, stolen or destroyed Certificate
shall be found at any time.
SECTION 5.04. Persons Deemed Owners.
The Depositor, the Master Servicer, the Trustee, the Certificate
Registrar, the Certificate Insurer and any agent of any of them may treat the
Person in whose name any Certificate is registered as the owner of such
Certificate for the purpose of receiving distributions pursuant to Section 4.01
and for all other purposes whatsoever, and none of the Depositor, the Master
Servicer, the Trustee, the Certificate Registrar or any agent of any of them
shall be affected by notice to the contrary.
SECTION 5.05. Certain Available Information.
On or prior to the date of the first sale of any Residual
Certificate to an Independent third party, the Depositor shall provide to the
Trustee 10 copies of any private placement memorandum or other disclosure
document used by the Depositor in connection with the offer and sale of the
Residual Certificates. In addition, if any such private placement memorandum or
disclosure document is revised, amended or supplemented at any time following
the delivery thereof to the Trustee, the Depositor promptly shall inform the
Trustee of such event and shall deliver to the Trustee 10 copies of the private
placement memorandum or disclosure document, as revised, amended or
supplemented. The Trustee shall maintain at its Corporate Trust Office and shall
make available free of charge during normal business hours for review by any
Holder of a Certificate or any Person identified to the Trustee as a prospective
transferee of a Certificate, originals or copies of the following items: (i) in
the case of a Holder or prospective transferee of a Residual Certificate, the
private placement memorandum or other disclosure document relating to the
Residual Certificates, in the form most recently provided to the Trustee; and
(ii) in all cases, (A) this Agreement and any amendments hereof entered into
pursuant to Section 12.01, (B) all monthly statements required to be delivered
to Certificateholders of the relevant Class pursuant to Section 4.02 since the
Closing Date, and all
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other notices, reports, statements and written communications delivered to the
Certificateholders of the relevant Class pursuant to this Agreement since the
Closing Date, (C) all certifications delivered by a Responsible Officer of the
Trustee since the Closing Date pursuant to Section 11.01(h), (D) any and all
Officers' Certificates delivered to the Trustee by the Master Servicer since the
Closing Date to evidence the Master Servicer's determination that any P&I
Advance was, or if made, would be a Nonrecoverable P&I Advance and (E) any and
all Officers' Certificates delivered to the Trustee by the Master Servicer since
the Closing Date pursuant to Section 4.04(a). Copies and mailing of any and all
of the foregoing items will be available from the Trustee upon request at the
expense of the person requesting the same.
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ARTICLE VI
THE DEPOSITOR AND THE MASTER SERVICER
SECTION 6.01. Liability of the Depositor and the Master
Servicer.
The Depositor and the Master Servicer each shall be liable in
accordance herewith only to the extent of the obligations specifically imposed
by this Agreement and undertaken hereunder by the Depositor and the Master
Servicer herein.
SECTION 6.02. Merger or Consolidation of the Depositor or
the Master Servicer.
Subject to the following paragraph, the Depositor will keep in
full effect its existence, rights and franchises as a corporation under the laws
of the jurisdiction of its incorporation. Subject to the following paragraph,
the Master Servicer will keep in full effect its existence, rights and
franchises as a corporation under the laws of the jurisdiction of its
incorporation and its qualification as an approved conventional seller/servicer
for FNMA or FHLMC in good standing. The Depositor and the Master Servicer each
will obtain and preserve its qualification to do business as a foreign
corporation in each jurisdiction in which such qualification is or shall be
necessary to protect the validity and enforceability of this Agreement, the
Certificates or any of the Mortgage Loans and to perform its respective duties
under this Agreement.
The Depositor or the Master Servicer may be merged or
consolidated with or into any Person, or transfer all or substantially all of
its assets to any Person, in which case any Person resulting from any merger or
consolidation to which the Depositor or the Master Servicer shall be a party, or
any Person succeeding to the business of the Depositor or the Master Servicer,
shall be the successor of the Depositor or the Master Servicer, as the case may
be, hereunder, without the execution or filing of any paper or any further act
on the part of any of the parties hereto, anything herein to the contrary
notwithstanding; provided, however, that the successor or surviving Person to
the Master Servicer shall be qualified to service mortgage loans on behalf of
FNMA or FHLMC; and provided further that the Rating Agencies' ratings and shadow
ratings of the Class A Certificates in effect immediately prior to such merger
or consolidation will not be qualified, reduced or withdrawn as a result thereof
(as evidenced by a letter to such effect from the Rating Agencies).
SECTION 6.03. Limitation on Liability of the Depositor,
the Master Servicer and Others.
None of the Depositor, the Master Servicer or any of the
directors, officers, employees or agents of the Depositor or the Master Servicer
shall be under any liability to the Trust Fund or the Certificateholders for any
action taken or for refraining from the taking of any action in good faith
pursuant to this Agreement, or for errors in judgment; provided, however, that
this provision shall not protect the Depositor, the Master Servicer or any such
person against any breach of warranties, representations or covenants made
herein, or against any specific liability imposed on the Master Servicer
pursuant hereto, or against any liability which would otherwise be imposed by
reason of willful misfeasance, bad faith or gross negligence in the performance
of duties or by reason of reckless disregard of obligations and duties
hereunder. The Depositor, the Master Servicer and any director, officer,
employee or agent of the Depositor or the Master Servicer may rely in good faith
on any document of any kind which, PRIMA FACIE,
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is properly executed and submitted by any Person respecting any matters arising
hereunder. The Depositor, the Master Servicer and any director, officer,
employee or agent of the Depositor or the Master Servicer shall be indemnified
and held harmless by the Trust Fund against any loss, liability or expense
incurred in connection with any legal action relating to this Agreement or the
Certificates, other than any loss, liability or expense to any specific Mortgage
Loan or Mortgage Loans (except as any such loss, liability or expense shall be
otherwise reimbursable pursuant to this Agreement) or any loss, liability or
expense incurred by reason of willful misfeasance, bad faith or gross negligence
in the performance of duties hereunder or by reason of reckless disregard of
obligations and duties hereunder. Neither the Depositor nor the Master Servicer
shall be under any obligation to appear in, prosecute or defend any legal action
unless such action is to its respective duties under this Agreement and, in its
opinion, does not involve it in any expense or liability; provided, however,
that each of the Depositor and the Master Servicer may in its discretion
undertake any such action which it may deem necessary or desirable with respect
to this Agreement and the rights and duties of the parties hereto and the
interests of the Certificateholders hereunder. In such event, unless the
Depositor or the Master Servicer acts without the consent of the Certificate
Insurer prior to a Certificate Insurer Default or without the consent of Holders
of Certificates entitled to at least 51% of the Voting Rights after a
Certificate Insurer Default, the legal expenses and costs of such action and any
liability resulting therefrom (except any loss, liability or expense incurred by
reason of willful misfeasance, bad faith or gross negligence in the performance
of duties hereunder or by reason of reckless disregard of obligations and duties
hereunder) shall be expenses, costs and liabilities of the Trust Fund, and the
Depositor and the Master Servicer shall be entitled to be reimbursed therefor
from the Collection Account as and to the extent provided in Section 3.11, any
such right of reimbursement being prior to the rights of the Certificateholders
to receive any amount in the Collection Account.
SECTION 6.04. Limitation on Resignation of the Master
Servicer.
The Master Servicer shall not resign from the obligations and
duties hereby imposed on it except upon determination that its duties hereunder
are no longer permissible under applicable law. Any such determination pursuant
to the preceding sentence permitting the resignation of the Master Servicer
shall be evidenced by an Opinion of Counsel to such effect obtained at the
expense of the Master Servicer and delivered to the Trustee. No resignation of
the Master Servicer shall become effective until the Trustee or a successor
servicer shall have assumed the Master Servicer's responsibilities, duties,
liabilities (other than those liabilities arising prior to the appointment of
such successor) and obligations under this Agreement.
Except as expressly provided herein, the Master Servicer shall
not assign or transfer any of its rights, benefits or privileges hereunder to
any other Person, or delegate to or subcontract with, or authorize or appoint
any other Person to perform any of the duties, covenants or obligations to be
performed by the Master Servicer hereunder. If, pursuant to any provision
hereof, the duties of the Master Servicer are transferred to a successor master
servicer, the entire amount of the Servicing Fee and other compensation payable
to the Master Servicer pursuant hereto shall thereafter be payable to such
successor master servicer.
SECTION 6.05. Rights of the Depositor in Respect of the
Master Servicer.
The Master Servicer shall afford the Depositor, the Trustee and
the Certificate Insurer, upon reasonable notice, during normal business hours,
access to all records maintained by the Master Servicer in respect of its rights
and obligations hereunder and access to officers
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of the Master Servicer responsible for such obligations. Upon request, the
Master Servicer shall furnish to the Depositor, the Trustee and the Certificate
Insurer its most recent financial statements and such other information relating
to its capacity to perform its obligations under this Agreement it possesses. To
the extent such information is not otherwise available to the public, the
Depositor, the Trustee and the Certificate Insurer shall not disseminate any
information obtained pursuant to the preceding two sentences without the Master
Servicer's written consent, except as required pursuant to this Agreement or to
the extent that it is appropriate to do so (i) in working with legal counsel,
auditors, taxing authorities or other governmental agencies or (ii) pursuant to
any law, rule, regulation, order, judgment, writ, injunction or decree of any
court or governmental authority having jurisdiction over the Depositor, the
Trustee, the Certificate Insurer or the Trust Fund, and in either case, the
Depositor, the Certificate Insurer or the Trustee, as the case may be, shall use
its best efforts to assure the confidentiality of any such disseminated
non-public information. The Depositor may, but is not obligated to, enforce the
obligations of the Master Servicer under this Agreement and may, but is not
obligated to, perform, or cause a designee to perform, any defaulted obligation
of the Master Servicer under this Agreement or exercise the rights of the Master
Servicer under this Agreement; provided that the Master Servicer shall not be
relieved of any of its obligations under this Agreement by virtue of such
performance by the Depositor or its designee. The Depositor shall not have any
responsibility or liability for any action or failure to act by the Master
Servicer and is not obligated to supervise the performance of the Master
Servicer under this Agreement or otherwise.
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ARTICLE VII
DEFAULT
SECTION 7.01. Master Servicer Events of Default.
"Master Servicer Event of Default", wherever used herein, means
any one of the following events:
(i) any failure by the Master Servicer to remit to the
Trustee for distribution to the Certificateholders any payment
(other than a P&I Advance required to be made from its own funds
on any Master Servicer Remittance Date pursuant to Section 4.03)
required to be made under the terms of the Certificates and this
Agreement which continues unremedied for a period of one Business
Day after the date upon which written notice of such failure,
requiring the same to be remedied, shall have been given to the
Master Servicer by the Depositor, the Certificate Insurer or the
Trustee (in which case notice shall be provided by telecopy), or
to the Master Servicer, the Depositor, the Certificate Insurer
and the Trustee by the Holders of Certificates entitled to at
least 25% of the Voting Rights; or
(ii) any failure on the part of the Master Servicer duly to
observe or perform in any material respect any other of the
covenants or agreements on the part of the Master Servicer
contained in the Certificates or in this Agreement which
continues unremedied for a period of 30 days after the earlier of
(i) the date on which written notice of such failure, requiring
the same to be remedied, shall have been given to the Master
Servicer by the Depositor, the Certificate Insurer or the
Trustee, or to the Master Servicer, the Depositor, the
Certificate Insurer and the Trustee by the Holders of
Certificates entitled to at least 25% of the Voting Rights and
(ii) actual knowledge of such failure by a Servicing Officer of
the Master Servicer; or
(iii) a decree or order of a court or agency or supervisory
authority having jurisdiction in the premises in an involuntary
case under any present or future federal or state bankruptcy,
insolvency or similar law or the appointment of a conservator or
receiver or liquidator in any insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceeding, or
for the winding-up or liquidation of its affairs, shall have been
entered against the Master Servicer and such decree or order
shall have remained in force undischarged or unstayed for a
period of 90 days; or
(iv) the Master Servicer shall consent to the appointment of
a conservator or receiver or liquidator in any insolvency,
readjustment of debt, marshalling of assets and liabilities or
similar proceedings of or relating to it or of or relating to all
or substantially all of its property; or
(v) the Master Servicer shall admit in writing its inability
to pay its debts generally as they become due, file a petition to
take advantage of any applicable insolvency or reorganization
statute, make an assignment for the benefit of its creditors, or
voluntarily suspend payment of its obligations; or
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(vi) any failure of the Master Servicer to make any P&I
Advance on any Master Servicer Remittance Date required to be
made from its own funds pursuant to Section 4.03 which continues
unremedied until 12:00 noon New York time on the Business Day
immediately following the Master Servicer Remittance Date.
Subject to Article IX, if a Master Servicer Event of Default described in
clauses (i)-(v) of this Section shall occur, then, and in each and every such
case, so long as such Master Servicer Event of Default shall not have been
remedied, the Depositor, the Certificate Insurer or the Trustee may, and at the
written direction of the Holders of Certificates entitled to at least 51% of
Voting Rights, the Trustee shall, by notice in writing to the Master Servicer
(and to the Depositor and the Certificate Insurer if given by the Trustee or to
the Trustee if given by the Depositor or the Certificate Insurer), terminate all
of the rights and obligations of the Master Servicer in its capacity as Master
Servicer under this Agreement, to the extent permitted by law, and in and to the
Mortgage Loans and the proceeds thereof. If a Master Servicer Event of Default
described in clause (vi) hereof shall occur, the Trustee shall, by notice in
writing to the Master Servicer, the Certificate Insurer and the Depositor,
terminate all of the rights and obligations of the Master Servicer in its
capacity as Master Servicer under this Agreement and in and to the Mortgage
Loans and the proceeds thereof. On or after the receipt by the Master Servicer
of such written notice, all authority and power of the Master Servicer under
this Agreement, whether with respect to the Certificates (other than as a Holder
of any Certificate) or the Mortgage Loans or the Policy or otherwise, shall pass
to and be vested in the Trustee pursuant to and under this Section, and, without
limitation, the Trustee is hereby authorized and empowered, as attorney-in-fact
or otherwise, to execute and deliver, on behalf of and at the expense of the
Master Servicer, any and all documents and other instruments and to do or
accomplish all other acts or things necessary or appropriate to effect the
purposes of such notice of termination, whether to complete the transfer and
endorsement or assignment of the Mortgage Loans and related documents, or
otherwise. The Master Servicer agrees promptly (and in any event no later than
ten Business Days subsequent to such notice) to provide the Trustee with all
documents and records requested by it to enable it to assume the Master
Servicer's functions under this Agreement, and to cooperate with the Trustee in
effecting the termination of the Master Servicer's responsibilities and rights
under this Agreement, including, without limitation, the transfer within one
Business Day to the Trustee for administration by it of all cash amounts which
at the time shall be or should have been credited by the Master Servicer to the
Collection Account held by or on behalf of the Master Servicer, the Distribution
Account, the Policy Payments Account or any REO Account or Servicing Account
held by or on behalf of the Master Servicer or thereafter be received with
respect to the Mortgage Loans or any REO Property serviced by the Master
Servicer (provided, however, that the Master Servicer shall continue to be
entitled to receive all amounts accrued or owing to it under this Agreement on
or prior to the date of such termination, whether in respect of P&I Advances or
otherwise, and shall continue to be entitled to the benefits of Section 6.03
notwithstanding any such termination). For purposes of this Section 7.01, the
Trustee shall not be deemed to have knowledge of a Master Servicer Event of
Default unless a Responsible Officer of the Trustee assigned to and working in
the Trustee's Corporate Trust Office has actual knowledge thereof or unless
written notice of any event which is in fact such a Master Servicer Event of
Default is received by the Trustee and such notice references the Certificates,
the Trust Fund or this Agreement.
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The Master Servicer hereby covenants and agrees to act as the
Master Servicer under this Agreement for an initial term, commencing on the
Closing Date and ending on September 30, 1996, which term shall be extendable by
the Certificate Insurer for successive terms of three calendar months
thereafter, until the termination of the Trust Fund pursuant to Article X. Each
such notice of extension (a "Master Servicer Extension Notice") shall be
delivered by the Certificate Insurer to the Trustee and the Master Servicer. The
Master Servicer hereby agrees that, upon its receipt of any such Master Servicer
Extension Notice, the Master Servicer shall become bound for the duration of the
term covered by such Master Servicer Extension Notice to continue as the Master
Servicer subject to and in accordance with the other provisions of this
Agreement. The Trustee agrees that if as of the fifteenth (15) day prior to the
last day of any term of the Master Servicer the Trustee shall not have received
any Master Servicer Extension Notice from the Certificate Insurer, the Trustee
will within five (5) days thereafter, give written notice of such non-receipt to
the Certificate Insurer and the Master Servicer. The failure of the Certificate
Insurer to deliver a Master Servicer Extension Notice by the end of a calendar
term shall result in the termination of the Master Servicer. The foregoing
provisions of this paragraph shall not apply to the Trustee in the event the
Trustee succeeds to the rights and obligations of the Master Servicer and the
Trustee shall continue in such capacity until the earlier of the termination of
this Agreement pursuant to Article X or the appointment of a successor master
servicer.
SECTION 7.02. Trustee to Act; Appointment of Successor.
(a) On and after the time the Master Servicer receives a notice
of termination or the Master Servicer's term is not extended pursuant to Section
7.01, the Trustee shall be the successor in all respects to the Master Servicer
in its capacity as Master Servicer under this Agreement and the transactions set
forth or provided for herein and shall be subject to all the responsibilities,
duties and liabilities relating thereto and arising thereafter placed on the
Master Servicer (except for any representations or warranties of the Master
Servicer under this Agreement, the responsibilities, duties and liabilities
contained in Section 2.03(c) and its obligation to deposit amounts in respect of
losses pursuant to Section 3.12) by the terms and provisions hereof including,
without limitation, the Master Servicer's obligations to make P&I Advances
pursuant to Section 4.03; provided, however, that if the Trustee is prohibited
by law or regulation from obligating itself to make advances regarding
delinquent mortgage loans, then the Trustee shall not be obligated to make P&I
Advances pursuant to Section 4.03; and provided further, that any failure to
perform such duties or responsibilities caused by the Master Servicer's failure
to provide information required by Section 7.01 shall not be considered a
default by the Trustee as successor to the Master Servicer hereunder. As
compensation therefor, the Trustee shall be entitled to the Servicing Fees and
all funds relating to the Mortgage Loans to which the Master Servicer would have
been entitled if it had continued to act hereunder. Notwithstanding the above,
the Trustee may, if it shall be unwilling to so act, or shall, if it is unable
to so act or if it is prohibited by law from making advances regarding
delinquent mortgage loans or if the Certificate Insurer or if the Holders of
Certificates entitled to at least 51% of the Voting Rights so request in writing
to the Trustee, promptly appoint, with the consent of the Certificate Insurer,
or petition a court of competent jurisdiction to appoint, an established
mortgage loan servicing institution acceptable to each Rating Agency and the
Certificate Insurer and having a net worth of not less than $15,000,000, as the
successor to the Master Servicer under this Agreement in the assumption of all
or any part of the responsibilities, duties or liabilities of the Master
Servicer under this Agreement. No appointment of a successor
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to the Master Servicer under this Agreement shall be effective until the
assumption by the successor of all of the Master Servicer's responsibilities,
duties and liabilities hereunder. In connection with such appointment and
assumption described herein, the 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 Master Servicer as such hereunder. The Depositor,
the Trustee and such successor shall take such action, consistent with this
Agreement, as shall be necessary to effectuate any such succession. Pending
appointment of a successor to the Master Servicer under this Agreement, the
Trustee shall act in such capacity as hereinabove provided.
(b) If the Master Servicer fails to remit to the Trustee for
distribution to the Certificateholders any payment required to be made under the
terms of the Certificates and this Agreement (for purposes of this Section
7.02(b), a "Remittance") because the Master Servicer is the subject of a
proceeding under the federal Bankruptcy Code and the making of such Remittance
is prohibited by Section 362 of the federal Bankruptcy Code, the Trustee shall
upon notice of such prohibition, regardless of whether it has received a notice
of termination under Section 7.01, advance the amount of such Remittance by
depositing such amount in the Distribution Account on the related Distribution
Date. The Trustee shall be obligated to make such advance only if (i) such
advance, in the good faith judgment of the Trustee, can reasonably be expected
to be ultimately recoverable from funds which are in the custody of the Master
Servicer, a trustee in bankruptcy or a federal bankruptcy court and should have
been the subject of such Remittance absent such prohibition (the "Stayed Funds")
and (ii) the Trustee is not prohibited by law from making such advance or
obligating itself to do so. Upon remittance of the Stayed Funds to the Trustee
or the deposit thereof in the Distribution Account by the Master Servicer, a
trustee in bankruptcy or a federal bankruptcy court, the Trustee may recover the
amount so advanced, without interest, by withdrawing such amount from the
Distribution Account; however, nothing in this Agreement shall be deemed to
affect the Trustee's rights to recover from the Master Servicer's own funds
interest on the amount of any such advance. If the Trustee at any time makes an
advance under this Subsection which it later determines in its good faith
judgment will not be ultimately recoverable from the Stayed Funds with respect
to which such advance was made, the Trustee shall be entitled to reimburse
itself for such advance, without interest, by withdrawing from the Distribution
Account, out of amounts on deposit therein, an amount equal to the portion of
such advance attributable to the Stayed Funds.
SECTION 7.03. Notification to Certificateholders.
(a) Upon any termination of the Master Servicer pursuant to
Section 7.01 above or any appointment of a successor to the Master Servicer
pursuant to Section 7.02 above, the Trustee shall give prompt written notice
thereof to Certificate-holders at their respective addresses appearing in the
Certificate Register.
(b) Not later than the later of 60 days after the occurrence of
any event, which constitutes or which, with notice or lapse of time or both,
would constitute a Master Servicer Event of Default or five days after a
Responsible Officer of the Trustee becomes aware of the occurrence of such an
event, the Trustee shall transmit by mail to all Holders of Certificates notice
of each such occurrence, unless such default or Master Servicer Event of Default
shall have been cured or waived.
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SECTION 7.04. Waiver of Master Servicer Events of Default.
The Holders representing at least 66% of the Voting Rights
evidenced by all Classes of Certificates affected by any default or Master
Servicer Event of Default hereunder, with the written consent of the Certificate
Insurer, may waive such default or Master Servicer Event of Default; PROVIDED,
HOWEVER, that a default or Master Servicer Event of Default under clause (i) or
(vi) of Section 7.01 may be waived only by all of the Holders of the Regular
Certificates with the written consent of the Certificate Insurer. Upon any such
waiver of a default or Master Servicer Event of Default, such default or Master
Servicer Event of Default shall cease to exist and shall be deemed to have been
remedied for every purpose hereunder. No such waiver shall extend to any
subsequent or other default or Master Servicer Event of Default or impair any
right consequent thereon except to the extent expressly so waived.
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ARTICLE VIII
CONCERNING THE TRUSTEE
SECTION 8.01. Duties of Trustee.
The Trustee, prior to the occurrence of a Master Servicer Event
of Default and after the curing of all Master Servicer Events of Default which
may have occurred, undertakes to perform such duties and only such duties as are
specifically set forth in this Agreement. During a Master Servicer Event of
Default, the Trustee shall exercise such of the rights and powers vested in it
by this Agreement, and use the same degree of care and skill in their exercise
as a prudent man would exercise or use under the circumstances in the conduct of
such person's own affairs. Any permissive right of the Trustee enumerated in
this Agreement shall not be construed as a duty.
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 to the requirements of this Agreement. If any such instrument is found
not to conform to the requirements of this Agreement in a material manner, the
Trustee shall take such 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 provide notice thereof to the Certificateholders and the
Certificate Insurer.
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 misconduct; provided, however, that:
(i) Prior to the occurrence of a Master Servicer Event of
Default, and after the curing of all such Master Servicer Events
of Default which may have occurred, the duties and obligations of
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 that conform 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
Responsible Officers of the Trustee, unless it shall be proved
that the Trustee was negligent in ascertaining the pertinent
facts; and
(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 Holders of Certificates entitled to at least 25% of
the Voting Rights relating to the time, method and place of
conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred upon the
Trustee, under this Agreement.
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SECTION 8.02. Certain Matters Affecting the Trustee.
(a) Except as otherwise provided in Section 8.01:
(i) The Trustee may request and rely upon and shall be
protected in acting or refraining from acting upon any
resolution, Officers' Certificate, certificate of auditors or any
other certificate, statement, instrument, opinion, report,
notice, request, consent, order, appraisal, bond or other paper
or document reasonably believed by it to be genuine and to have
been signed or presented by the proper party or parties;
(ii) 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 any litigation hereunder or in
relation hereto at the request, order or direction of any of the
Certificateholders, pursuant to the provisions of this Agreement,
unless such Certificateholders shall have offered to the Trustee
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 a Master Servicer Event of
Default (which has not been cured or waived), to exercise such of
the rights and powers vested in it by this Agreement, and to use
the same degree of care and skill in their exercise as a prudent
man 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 a Master Servicer Event of
Default hereunder and after the curing of all Master Servicer
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 by Holders of Certificates entitled
to at least 25% of the Voting Rights; provided, however, that if
the payment within a reasonable time to the Trustee 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 such Certificateholders, the
Trustee may require reasonable indemnity against such expense, or
liability from such Certificateholders as a condition to taking
any such action;
(vi) The Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by
or through agents or attorneys; and
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(vii) The Trustee shall not be personally liable for any loss
resulting from the investment of funds held in the Collection
Account at the direction of the Master Servicer pursuant to
Section 3.12.
(b) All rights of action under this Agreement or under any of the
Certificates, enforceable by the Trustee, may be enforced by it without the
possession of any of the Certificates, or the production thereof at the trial or
other proceeding relating thereto, and any such suit, action or proceeding
instituted by the Trustee shall be brought in its name for the benefit of all
the Holders of such Certificates, subject to the provisions of this Agreement.
SECTION 8.03. Trustee Not Liable for Certificates or
Mortgage Loans.
The recitals contained herein and in the Certificates (other than
the signature of the Trustee, the authentication of the Certificate Registrar on
the Certificates, the acknowledgments of the Trustee contained in Article II and
the representations and warranties of the Trustee in Section 8.12) shall be
taken as the statements of the Depositor and the Trustee assumes no
responsibility for their correctness. The Trustee makes no representations or
warranties as to the validity or sufficiency of this Agreement (other than as
specifically set forth in Section 8.12) or of the Certificates (other than the
signature of the Trustee and authentication of the Certificate Registrar on the
Certificates) or of any Mortgage Loan or related document. The Trustee shall not
be accountable for the use or application by the Depositor of any of the
Certificates or of the proceeds of such Certificates, or for the use or
application of any funds paid to the Depositor or the Master Servicer in respect
of the Mortgage Loans or deposited in or withdrawn from the Collection Account
by the Master Servicer, other than any funds held by or on behalf of the Trustee
in accordance with Section 3.10.
SECTION 8.04. Trustee May Own Certificates.
The Trustee in its individual capacity or any other capacity may
become the owner or pledgee of Certificates with the same rights it would have
if it were not Trustee.
SECTION 8.05. Trustee's Fees and Expenses.
The Trustee shall withdraw from the Distribution Account on each
Distribution Date and pay to itself the Trustee Fee and, to the extent that the
funds therein are at anytime insufficient for such purpose, the Depositor shall
pay such fees. 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 expense (not including expenses, disbursements and advances
incurred or made by the Trustee, including the compensation and the expenses and
disbursements of its agents and counsel, in the ordinary course of the Trustee's
performance in accordance with the provisions of this Agreement) incurred by the
Trustee arising out of or in connection with the acceptance or administration of
its obligations and duties under this Agreement, other than any loss, liability
or expense (i) resulting from the Master Servicer's actions or omissions in
connection with this Agreement and the Mortgage Loans, (ii) that constitutes a
specific liability of the Trustee pursuant to Section 11.01(c) or (iii) any
loss, liability or expense incurred by reason of willful misfeasance, bad faith
or negligence in the performance of duties hereunder or by reason of reckless
disregard of obligations and duties hereunder or as a result of a breach of the
Trustee's obligations under Article XI hereof. The Master Servicer agrees to
indemnify the Trustee from, and hold it harmless against, any loss, liability or
expense arising in respect of such Master Servicer's acts or omissions in
connection with this Agreement and the Mortgage Loans serviced by such Master
Servicer. Such indemnity
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shall survive the termination or discharge of this Agreement and the resignation
or removal of the Trustee. Any payment hereunder made by the Master Servicer to
the Trustee shall be from the Master Servicer's own funds, without reimbursement
from the related Trust Fund therefor.
The Trustee shall pay any annual rating agency fees of Moody's
and S&P from its own funds without right of reimbursement.
SECTION 8.06. Eligibility Requirements for Trustee.
The Trustee hereunder shall at all times be a corporation or an
association (other than the Depositor, the Mortgage Loan Seller, the Master
Servicer or any Affiliate of the foregoing) organized and doing business under
the laws of any state or the United States of America, authorized under such
laws to exercise corporate trust powers, having a combined capital and surplus
of at least $50,000,000 and subject to supervision or examination by federal or
state authority. If such corporation or association publishes reports of
conditions at least annually, pursuant to law or to the requirements of the
aforesaid supervising or examining authority, then for the purposes of this
Section the combined capital and surplus of such corporation or association
shall be deemed to be its combined capital and surplus as set forth in its most
recent report of conditions so published. In case at any time the Trustee 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 8.07.
SECTION 8.07. Resignation and Removal of the Trustee.
The Trustee may at any time resign and be discharged from the
trust hereby created by giving written notice thereof to the Depositor, the
Certificate Insurer, the Master Servicer and to the Certificateholders. Upon
receiving such notice of resignation, the Depositor shall, with the written
consent of the Certificate Insurer, promptly appoint a successor trustee 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 Certificateholders, the Certificate Insurer, and the Master
Servicer by the Depositor. If no 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.
If at any time the Trustee shall cease to be eligible in
accordance with the provisions of Section 8.06 and shall fail to resign after
written request therefor by the Depositor 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 Depositor may remove the Trustee and appoint 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 Certificateholders, the Certificate Insurer
and the Master Servicer by the Depositor.
The Certificate Insurer or the Holders of Certificates entitled
to at least 51% of the Voting Rights, with the written consent of the
Certificate Insurer, may at any time remove the Trustee and appoint a successor
trustee by written instrument or instruments, in triplicate, signed by the
Certificate Insurer or such Holders or their attorneys-in-fact duly authorized,
one complete set of which instruments shall be delivered to the Depositor, one
complete set to the
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Trustee so removed and one complete set to the successor so appointed. A copy of
such instrument shall be delivered to the Certificateholders, the Certificate
Insurer and the Master Servicer by the Depositor.
Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to any of the provisions of this Section shall not
become effective until acceptance of appointment by the successor trustee as
provided in Section 8.08.
SECTION 8.08. Successor Trustee.
Any successor trustee appointed as provided in Section 8.07 shall
execute, acknowledge and deliver to the Depositor, the Certificate Insurer 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, as well as all
moneys, held by it hereunder, and the Depositor 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 8.06 and the appointment of such
successor trustee shall not result in a downgrading of any Class of Certificates
by either Rating Agency, as evidenced by a letter from each Rating Agency.
Upon acceptance of appointment by a successor trustee as provided
in this Section, the Depositor shall mail notice of the succession of such
trustee hereunder to the Certificate Insurer and to all Holders of Certificates
at their addresses as shown in the Certificate Register. If the Depositor fails
to mail such notice within 10 days after acceptance of appointment by the
successor trustee, the successor trustee shall cause such notice to be mailed at
the expense of the Depositor.
Notwithstanding anything to the contrary contained herein, so
long as no Certificate Insurer Default exists, the appointment of any successor
trustee pursuant to any provision of this Agreement will be subject to the prior
written consent of the Certificate Insurer.
SECTION 8.09. Merger or Consolidation of Trustee.
Any corporation or association into which the Trustee may be
merged or converted or with which it may be consolidated or any corporation or
association resulting from any merger, conversion or consolidation to which the
Trustee shall be a party, or any corporation or association succeeding to the
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation or association shall be eligible under the provisions
of Section 8.06, without the execution or filing of any paper or any further act
on the part of any of the parties hereto, anything herein to the contrary
notwithstanding.
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SECTION 8.10. Appointment of Co-Trustee or Separate
Trustee.
Notwithstanding any other provisions hereof, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any part
of the Trust Fund or property securing the same may at the time be located, the
Master Servicer and the Trustee acting jointly shall have the power and shall
execute and deliver all instruments to appoint one or more Persons approved by
the Trustee to act as co-trustee or co-trustees, jointly with the Trustee, or
separate trustee or separate trustees, of all or any part of the Trust Fund, and
to vest in such Person or Persons, in such capacity, such title to the Trust
Fund, or any part thereof, and, subject to the other provisions of this Section
8.10, such powers, duties, obligations, rights and trusts as the Master Servicer
and the Trustee may consider necessary or desirable. If the Master Servicer
shall not have joined in such appointment within 15 days after the receipt by it
of a request so to do, or in case a Master Servicer 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 8.06
hereunder and no notice to Holders of Certificates of the appointment of
co-trustee(s) or separate trustee(s) shall be required under Section 8.08
hereof.
In the case of any appointment of a co-trustee or separate
trustee pursuant to this Section 8.10 all rights, powers, duties and obligations
conferred or imposed upon the Trustee shall be conferred or imposed upon and
exercised or performed by the Trustee and such separate trustee or co-trustee
jointly, except to the extent that under any law of any jurisdiction in which
any particular act or acts are to be performed by the Trustee (whether as
Trustee hereunder or as successor to a defaulting Master Servicer hereunder),
the Trustee shall be incompetent or unqualified to perform such act or acts, in
which event such rights, powers, duties and obligations (including the holding
of title to the Trust Fund or any portion thereof in any such jurisdiction)
shall be exercised and performed by such separate trustee or co-trustee at the
direction of the Trustee.
Any notice, request or other writing given to the Trustee shall
be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement and
the conditions of this Article VIII. Each separate trustee and co-trustee, upon
its acceptance of the trust conferred, shall be vested with the estates or
property specified in its instrument of appointment, either jointly with the
Trustee or separately, as may be provided therein, subject to all the provisions
of this Agreement, specifically including every provision of this Agreement
relating to the conduct of, affecting the liability of, or affording protection
to, the Trustee. Every such instrument shall be filed with the Trustee.
Any separate trustee or co-trustee may, at any time, constitute
the Trustee, its agent or attorney-in-fact, with full power and authority, to
the extent not prohibited by law, to do any lawful act under or in respect of
this Agreement on its behalf and in its name. If any separate trustee or
co-trustee shall die, become incapable of acting, resign or be removed, all of
its estates, properties, rights, remedies and trusts shall vest in and be
exercised by the Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.
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SECTION 8.11. Appointment of Office or Agency.
The Trustee will appoint an office or agency in the City of New
York where the Certificates may be surrendered for registration of transfer or
exchange, and presented for final distribution, and where notices and demands to
or upon the Trustee in respect of the Certificates and this Agreement may be
served.
SECTION 8.12. Representations and Warranties of the
Trustee.
The Trustee hereby represents and warrants to the Master
Servicer, the Depositor and the Certificate Insurer, as of the Closing Date,
that:
(i) The Trustee is a banking corporation duly organized, validly
existing and in good standing under the laws of the State of New York.
(ii) The execution and delivery of this Agreement by the Trustee,
and the performance and compliance with the terms of this Agreement by
the Trustee, will not violate the Trustee's charter or bylaws or
constitute a default (or an event which, with notice or lapse of time,
or both, would constitute a default) under, or result in the breach of,
any material agreement or other instrument to which it is a party or
which is applicable to it or any of its assets.
(iii) The Trustee has the full power and authority to enter into
and consummate all transactions contemplated by this Agreement, has duly
authorized the execution, delivery and performance of this Agreement,
and has duly executed and delivered this Agreement.
(iv) This Agreement, assuming due authorization, execution and
delivery by the Master Servicer and the Depositor, constitutes a valid,
legal and binding obligation of the Trustee, enforceable against the
Trustee in accordance with the terms hereof, subject to (A) applicable
bankruptcy, insolvency, receivership, reorganization, moratorium and
other laws affecting the enforcement of creditors' rights generally, and
(B) general principles of equity, regardless of whether such enforcement
is considered in a proceeding in equity or at law.
(v) The Trustee is not in violation of, and its execution and
delivery of this Agreement and its performance and compliance with the
terms of this Agreement will not constitute a violation of, any law, any
order or decree of any court or arbiter, or any order, regulation or
demand of any federal, state or local governmental or regulatory
authority, which violation, in the Trustee's good faith and reasonable
judgment, is likely to affect materially and adversely either the
ability of the Trustee to perform its obligations under this Agreement
or the financial condition of the Trustee.
(vi) No litigation is pending or, to the best of the Trustee's
knowledge, threatened against the Trustee which would prohibit the
Trustee from entering into this Agreement or, in the Trustee's good
faith reasonable judgment, is likely to materially and adversely affect
either the ability of the Trustee to perform its obligations under this
Agreement or the financial condition of the Trustee.
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ARTICLE IX
CERTAIN MATTERS REGARDING THE CERTIFICATE INSURER
SECTION 9.01. Rights of the Certificate Insurer To Exercise
Rights of Class A Certificateholders.
By accepting its Certificate, each Class A Certificateholder
agrees that unless a Certificate Insurer Default exists, the Certificate Insurer
shall have the right to exercise all rights of the Class A Certificateholders
under this Agreement (except as provided in clause (i) of the second paragraph
of Section 12.01) without any further consent of the Class A Certificateholders,
including, without limitation:
(a) the right to direct foreclosures upon Mortgage Loans upon
failure of the Master Servicer to do so;
(b) the right to require the Depositor to repurchase or
substitute for, or to require the Master Servicer to purchase, Mortgage
Loans pursuant to Section 2.03;
(c) the right to give notices of breach or to terminate the
rights and obligations of the Master Servicer as Master Servicer
pursuant to Section 7.01;
(d) the right to direct the actions of the Trustee during the
continuance of a Master Servicer Event of Default pursuant to Sections
7.01 and 7.02;
(e) the right to consent to or direct any waivers of Master
Servicer Event of Defaults pursuant to Section 7.04;
(f) the right to direct the Trustee to investigate certain
matters pursuant to Section 8.02(a)(v); and
(g) the right to remove the Trustee pursuant to Section 8.07
hereof.
In addition, each Class A Certificateholder agrees that, unless a
Certificate Insurer Default exists, the rights specifically set forth above may
be exercised by the Class A Certificateholders only with the prior written
consent of the Certificate Insurer.
SECTION 9.02. Trustee To Act Solely with Consent of the
Certificate Insurer.
Unless a Certificate Insurer Default exists, the Trustee shall
not:
(a) agree to any amendment pursuant to Section 12.01; or
(b) undertake any litigation pursuant to Section 8.02(a)(iii);
without the prior written consent of the Certificate Insurer which consent shall
not be unreasonably withheld.
SECTION 9.03. Trust Fund and Accounts Held for Benefit of the
Certificate Insurer.
The Trustee shall hold the Trust Fund and the Mortgage Files for
the benefit of the Certificateholders and the Certificate Insurer and all
references in this Agreement (including, without limitation, in Sections 2.01
and 2.02) and in the Certificates to the benefit of Holders
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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.
The Master Servicer hereby acknowledges and agrees that it shall
service and administer the Mortgage Loans and any REO Properties, and shall
maintain the Collection Account and any REO Account, for the benefit of the
Certificateholders and for the benefit of the Certificate Insurer, and all
references in this Agreement (including, without limitation, in Sections 3.01
and 3.10) to the benefit of or actions on behalf of the Certificateholders shall
be deemed to include the Certificate Insurer. Unless a Certificate Insurer
Default exists, the Master Servicer shall not terminate any Sub-Servicing
Agreements without cause without the prior consent of the Certificate Insurer.
Unless a Certificate Insurer Default exists, neither the Master Servicer nor the
Depositor shall undertake any litigation pursuant to Section 6.03 (other than
litigation to enforce their respective rights hereunder) without the prior
consent of the Certificate Insurer.
SECTION 9.04. Claims Upon the Policy; Policy Payments Account.
(a) If, by the close of business on the third Business Day prior
to a Distribution Date, the Trustee determines that a Deficiency Amount for any
Distribution Date is greater than zero, then the Trustee shall give notice to
the Certificate Insurer by telephone or telecopy of the amount of such
Deficiency Amount. Such notice of such Deficiency Amount shall be confirmed in
writing in the form set forth as Exhibit A to the Endorsement of the Policy, to
the Certificate Insurer and the Fiscal Agent (as defined in the Policy), if any,
at or before 10:00 a.m., New York City time, on the second Business Day prior to
such Distribution Date. Following receipt by the Certificate Insurer of such
notice in such form, the Certificate Insurer or the Fiscal Agent will pay any
amount payable under the Policy on the later to occur of (i) 12:00 noon, New
York City time, on the second Business Day following such receipt and (ii) 12:00
noon, New York City time, on the Distribution Date to which such deficiency
relates, as provided in the Endorsement to the Policy.
(b) The Trustee shall establish a separate special purpose trust
account for the benefit of Holders of the Class A Certificates and the
Certificate Insurer referred to herein as the "Policy Payments Account" over
which the Trustee shall have exclusive control and sole right of withdrawal. The
Trustee shall deposit any amount paid under the Policy in the Policy Payments
Account and distribute such amount only for purposes of payment to Holders of
Class A Certificates of the Guaranteed Distribution for which a claim was made
and such amount may not be applied to satisfy any costs, expenses or liabilities
of the Master Servicer, the Trustee or the Trust Fund. Amounts paid under the
Policy shall be transferred to the Distribution Account in accordance with the
next succeeding paragraph and disbursed by the Trustee to Holders of Class A
Certificates in accordance with Section 4.01(b) or Section 10.01, as applicable.
It shall not be necessary for such payments to be made by checks or wire
transfers separate from the checks or wire transfers used to pay the Guaranteed
Distribution with other funds available to make such payment. However, the
amount of any payment of principal of or interest on the Class A Certificates to
be paid from funds transferred from the Policy Payments Account shall be noted
as provided in paragraph (c) below in the Certificate Register and in the
statement to be furnished to Holders of the Class A Certificates and Residual
Certificates pursuant to Section 4.02. Funds held in the Policy Payments Account
shall not be invested by the Master Servicer.
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On any Distribution Date with respect to which a claim has been
made under the Policy, the amount of any funds received by the Trustee as a
result of any claim under the Policy, to the extent required to make the
Guaranteed Distribution on such Distribution Date shall be withdrawn from the
Policy Payments Account and deposited in the Distribution Account and applied by
the Trustee, together with the other funds to be withdrawn from the Distribution
Account pursuant to Section 4.01(b) or Section 10.01, as applicable, directly to
the payment in full of the Guaranteed Distribution due on the Class A
Certificates. Funds received by the Trustee as a result of any claim under the
Policy shall be deposited by the Trustee in the Policy Payments Account and used
solely for payment to the Holders of the Class A Certificates and may not be
applied to satisfy any costs, expenses or liabilities of the Master Servicer,
the Trustee or the Trust Fund. Any funds remaining in the Policy Payments
Account on the first Business Day following a Distribution Date shall be
remitted to the Certificate Insurer, pursuant to the instructions of the
Certificate Insurer, by the end of such Business Day.
(c) The 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 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.
(d) The Trustee shall promptly notify the Certificate Insurer and
Fiscal Agent of any proceeding or the institution of any action, of which a
Responsible Officer of the Trustee 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 Class A Certificates. Each Class A Certificateholder, by its purchase of
Class A Certificates, the Master Servicer and the Trustee hereby 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 the rights of the
Master Servicer, the Trustee and each Class A Certificateholder in the conduct
of any such Preference Claim, including, without limitation, all rights of any
party to an adversary proceeding action with respect to any court order issued
in connection with any such Preference Claim.
SECTION 9.05 Effect of Payments by the Certificate Insurer;
Subrogation.
Anything herein to the contrary notwithstanding, any payment with
respect to principal of or interest on any of the Class A Certificates which is
made with moneys received pursuant to the terms of the Policy shall not be
considered payment of such Class A Certificates from the Trust Fund and shall
not result in the payment of or the provision for the payment of the principal
of or interest on such Class A Certificates within the meaning of Section 4.01.
The Depositor, the Master 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 Master
Servicer, the Trustee or the Certificate Registrar (a) to the extent the
Certificate Insurer makes payments, directly or indirectly, on account of
principal of or interest on any Class A Certificates to the Holders of such
Certificates, the Certificate Insurer will be fully subrogated to the rights of
such Holders to receive such principal and interest from the Trust Fund and (b)
the Certificate Insurer shall be paid such principal and interest but only
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from the sources and in the manner provided herein for the payment of such
principal and interest.
The Trustee and the Master Servicer shall cooperate in all
respects with any reasonable request by the Certificate Insurer for action to
preserve or enforce the Certificate Insurer's rights or interests under this
Agreement without limiting the rights or affecting the interests of the Holders
as otherwise set forth herein.
SECTION 9.06. Notices to the Certificate Insurer.
All notices, statements, reports, certificates or opinions
required by this Agreement to be sent to any other party hereto or to any of the
Certificateholders shall also be sent to the Certificate Insurer.
SECTION 9.07. Third-Party Beneficiary.
The Certificate Insurer shall be a third-party beneficiary of
this Agreement, entitled to enforce the provisions hereof as if a party hereto.
SECTION 9.08. Trustee to Hold the Policy.
The Trustee will hold the Policy in trust as agent for the
Holders of the Class A Certificates for the purpose of making claims thereon and
distributing the proceeds thereof. Neither the Policy nor the amounts paid on
the Policy will constitute part of the Trust Fund or assets of the REMIC created
by this Agreement. Each Holder of Class A Certificates, by accepting its Class A
Certificates, appoints the Trustee as attorney-in-fact for the purpose of making
claims on the Policy.
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ARTICLE X
TERMINATION
SECTION 10.01 Termination Upon Repurchase or Liquidation of All
Mortgage Loans.
Subject to Section 10.02, the respective obligations and
responsibilities under this Agreement of the Depositor, the Master Servicer and
the Trustee (other than the obligations of the Master Servicer to the Trustee
pursuant to Section 8.05 and of the Master Servicer to provide for and the
Trustee to make payments to Certificateholders as hereafter set forth) shall
terminate upon payment to the Certificateholders and the deposit of all amounts
held by or on behalf of the Trustee and required hereunder to be so paid or
deposited on the Distribution Date coinciding with or following the earlier to
occur (i) the purchase by the Terminator (as defined below) of all Mortgage
Loans and each REO Property remaining in the Trust Fund at a price equal to the
greater of (A) the aggregate Purchase Price of all the Mortgage Loans included
in the Trust Fund, plus the appraised value of each REO Property, if any,
included in the Trust Fund, such appraisal to be conducted by an appraiser
mutually agreed upon by such Holder and the Trustee in their reasonable
discretion (and approved by the Certificate Insurer in its reasonable
discretion) and (B) the aggregate fair market value of all of the assets of the
Trust Fund (as determined by such the Terminator, the Certificate Insurer (to
the extent the Certificate Insurer is not the Terminator) and the Trustee, as of
the close of business on the third Business Day next preceding the date upon
which notice of any such termination is furnished to Certificateholders pursuant
to the third paragraph of this Section 10.01) and (ii) the final payment or
other liquidation (or any advance with respect thereto) of the last Mortgage
Loan or REO Property remaining in the Trust Fund; provided, however, that in no
event shall the trust created hereby continue beyond the expiration of 21 years
from the death of the last survivor of the descendants of Joseph P. Kennedy, the
late ambassador of the United States to the Court of St. James, living on the
date hereof.
The Majority Class R Certificateholder shall have the right and,
to the extent the Majority Class R Certificateholder fails to exercise such
right, the Certificate Insurer shall have the right and, to the extent neither
the Majority Class R Certificateholder nor the Certificate Insurer exercises
such right, the Master Servicer shall have the right (the party exercising such
right, the "Terminator"), to purchase all of the Mortgage Loans and each REO
Property remaining in the Trust Fund pursuant to clause (i) of the preceding
paragraph no later than the Determination Date in the month immediately
preceding the Distribution Date on which the Certificates will be retired;
provided, however, that the Terminator may elect to purchase all of the Mortgage
Loans and each REO Property remaining in the Trust Fund pursuant to clause (i)
above only if the aggregate Stated Principal Balance of the Mortgage Loans and
each REO Property remaining in the Trust Fund at the time of such election is
less than 10% of the aggregate Stated Principal Balance of the Mortgage Loans at
the Cut-off Date.
Notice of any termination shall be given promptly by the Trustee
by letter to Certificateholders and the Certificate Insurer mailed (a) in the
event such notice is given in connection with the purchase of the Mortgage Loans
and each REO Property by the Terminator, not earlier than the 15th day and not
later than the 25th day of the month next preceding the month of the final
distribution on the Certificates or (b) otherwise during the month of such final
distribution on or before the Determination Date in such month, in each case
specifying (i) the Distribution Date upon which the Trust Fund will terminate
and final payment of the Certificates
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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, (iii)
that no interest shall accrue in respect of the Certificates from and after the
Interest Accrual Period relating to the final Distribution Date therefor and
(iv) that the Record Date otherwise applicable to such Distribution Date is not
applicable, payments being made only upon presentation and surrender of the
Certificates at the office of the Trustee. The Trustee shall give such notice to
the Certificate Registrar at the time such notice is given to
Certificateholders. In the event such notice is given in connection with the
purchase of all of the Mortgage Loans and each REO Property remaining in the
Trust Fund by the Terminator, the Terminator shall deliver to the Trustee for
deposit in the Distribution Account not later than the last Business Day of the
month next preceding the month of the final distribution on the Certificates an
amount in immediately available funds equal to the above-described purchase
price. Upon certification to the Trustee by a Servicing Officer (a copy of which
certification shall be delivered to the Certificate Insurer) of the making of
such final deposit the Trustee shall promptly release to the Terminator the
Mortgage Files for the remaining Mortgage Loans, and the Trustee shall execute
all assignments, endorsements and other instruments necessary to effectuate such
transfer.
Upon presentation of the Certificates by the Certificateholders
on the final Distribution Date, the Trustee shall distribute to each
Certificateholder so presenting and surrendering its Certificates the amount
otherwise distributable on such Distribution Date in accordance with Section
4.01 in respect of the Certificates so presented and surrendered. Any funds not
distributed to any Holder or Holders of Certificates being retired on such
Distribution Date because of the failure of such Holder or Holders to tender
their Certificates shall, on such date, be set aside and held in trust and
credited to the account of the appropriate non-tendering Holder or Holders. If
any Certificates as to which notice has been given pursuant to this Section
10.01 shall not have been surrendered for cancellation within six months after
the time specified in such notice, the Trustee shall mail a second notice to the
remaining non-tendering Certificateholders to surrender their Certificates for
cancellation in order to receive the final distribution with respect thereto. If
within one year after the second notice all such Certificates shall not have
been surrendered for cancellation, the Trustee shall, directly or through an
agent, contact the remaining related non-tendering Certificateholders concerning
surrender of their Certificates in the manner reasonably specified to the
Trustee by the Master Servicer in writing. The costs and expenses of maintaining
the funds in trust and of contacting such Certificateholders shall be paid out
of the assets remaining in the trust funds. If within two years after the second
notice any such Certificates shall not have been surrendered for cancellation,
the Trustee shall pay to the Master Servicer all amounts distributable to the
Holders thereof and the Master Servicer shall thereafter hold such amounts for
the benefit of such Holders. No interest shall accrue or be payable to any
Certificateholder on any amount held in trust or by the Master Servicer as a
result of such Certificateholder's failure to surrender its Certificate(s) for
final payment thereof in accordance with this Section 10.01.
Immediately following the deposit of funds in trust hereunder in
respect of the Certificates, the Trust Fund shall terminate.
SECTION 10.02 Additional Termination Requirements.
(a) In the event that the Terminator purchases all the Mortgage
Loans and each REO Property or the final payment on or other liquidation of the
last Mortgage Loan or REO
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Property remaining in the Trust Fund pursuant to Section 10.01, the Trust Fund
shall be terminated in accordance with the following additional requirements:
(i) The Trustee shall specify the first day in the 90-day
liquidation period in a statement attached to the Trust Fund's
final Tax Return pursuant to Treasury regulation Section 1.860F-1
and shall satisfy all requirements of a qualified liquidation
under Section 860F of the Code and any regulations thereunder, as
evidenced by an Opinion of Counsel obtained at the expense of the
Terminator;
(ii) During such 90-day liquidation period, and at or prior
to the time of making of the final payment on the Certificates,
the Trustee shall sell all of the assets of the Trust Fund to the
Terminator 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, to the Holders of the Residual
Certificates all cash on hand in the Trust Fund (other than cash
retained to meet claims), and the Trust Fund shall terminate at
that time.
(b) At the requesting parties expense, the Majority Class R
Certificateholder shall prepare the documentation required in connection with
the adoption of a plan of liquidation of a Trust Fund pursuant to this Section
10.02.
(c) By their acceptance of Certificates, the Holders thereof
hereby agree to authorize the Trustee to specify the 90-day liquidation period
for the Trust Fund, which authorization shall be binding upon all successor
Certificateholders.
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ARTICLE XI
REMIC PROVISIONS
SECTION 11.01. REMIC Administration.
(a) The Trustee shall elect to treat the Trust Fund as a REMIC
under the Code and, if necessary, under applicable state law. Such election will
be made on Form 1066 or other appropriate federal tax or information return or
any appropriate state return for the taxable year ending on the last day of the
calendar year in which the Certificates are issued. For the purposes of the
REMIC election in respect of the Trust Fund, the Class A Certificates shall be
designated as the Regular Interests in the REMIC and the Residual Certificates
shall be designated as the single class of Residual Interest in the REMIC. The
Trustee shall not permit the creation of any "interests" in the REMIC (within
the meaning of Section 860G of the Code) other than the interests represented by
the Certificates.
(b) The Closing Date is hereby designated as the "Startup Day" of
the Trust Fund within the meaning of Section 860G(a)(9) of the Code.
(c) The Trustee shall pay out of its own funds, without any right
of reimbursement, any and all expenses relating to any tax audit of the Trust
Fund (including, but not limited to, any professional fees or any administrative
or judicial proceedings with respect to the Trust Fund that involve the Internal
Revenue Service or state tax authorities), other than the expense of obtaining
any tax related Opinion of Counsel except as specified herein. The Trustee, as
agent for the Trust Fund's tax matters person, shall (i) act on behalf of the
Trust Fund in relation to any tax matter or controversy involving the Trust 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 of the Residual
Certificates shall be designated, in the manner provided under Treasury
regulations section 1.860F-4(d) and temporary Treasury regulations section
301.6231(a)(7)-IT, as the tax matters person of the Trust Fund. By their
acceptance thereof, the holder of the largest Percentage Interest of the
Residual Certificates hereby agrees to irrevocably appoint the Trustee or an
Affiliate as its agent to perform all of the duties of the tax matters person
for the Trust Fund.
(d) The Trustee shall prepare, sign and file all of the Tax
Returns in respect of the REMIC created hereunder. The expenses of preparing and
filing such returns shall be borne by the Trustee without any right of
reimbursement therefor. The Master Servicer shall provide on a timely basis to
the Trustee or its designee such information with respect to the assets of the
Trust Fund as is in its possession and reasonably required by the Trustee to
enable it to perform its obligations under this Article.
(e) The Trustee shall perform on behalf of the Trust Fund all
reporting and other tax compliance duties that are the responsibility of the
REMIC under the Code, the REMIC Provisions or other compliance guidance issued
by the Internal Revenue Service or any state or local taxing authority. Among
its other duties, as required by the Code, the REMIC Provisions or other such
compliance guidance, the Trustee shall provide (i) to any Transferor of a
Residual Certificate such information as is necessary for the application of any
tax relating to the transfer of a Residual Certificate to any Person who is not
a Permitted Transferee, (ii) to the Certificateholders such information or
reports as are required by the Code or the REMIC Provisions including reports
relating to interest, original issue discount and market discount or
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premium (using the Prepayment Assumption as required) and (iii) to the Internal
Revenue Service the name, title, address and telephone number of the person who
will serve as the representative of the Trust Fund. The Master Servicer shall
provide on a timely basis to the Trustee such information with respect to the
assets of the Trust Fund, including, without limitation, the Mortgage Loans, as
is in its possession and reasonably required by the Trustee to enable it to
perform its obligations under this subsection. In addition, the Depositor shall
provide or cause to be provided to the Trustee, within ten (10) days after the
Closing Date, all information or data that the Trustee reasonably determines to
be relevant for tax purposes as to the valuations and issue prices of the
Certificates, including, without limitation, the price, yield, prepayment
assumption and projected cash flow of the Certificates.
(f) The Trustee shall take such action and shall cause the REMIC
created hereunder to take such action as shall be necessary to create or
maintain the status thereof as a REMIC under the REMIC Provisions (and the
Master Servicer shall assist it, to the extent reasonably requested by it). The
Trustee shall not take any action, cause the Trust Fund to take any action or
fail to take (or fail to cause to be taken) any action that, under the REMIC
Provisions, if taken or not taken, as the case may be, could (i) endanger the
status of the Trust Fund as a REMIC or (ii) result in the imposition of a tax
upon the Trust Fund (including but not limited to the tax on prohibited
transactions as defined in Section 860F(a)(2) of the Code and the tax on
contributions to a REMIC set forth in Section 860G(d) of the Code) (either such
event, an "Adverse REMIC Event") unless the Trustee has received an Opinion of
Counsel, addressed to the Trustee and the Certificate Insurer (at the expense of
the party seeking to take such action but in no event at the expense of the
Trustee) to the effect that the contemplated action will not, with respect to
the REMIC created hereunder, endanger such status or result in the imposition of
such a tax, nor shall the Master Servicer take or fail to take any action
(whether or not authorized hereunder) as to which the Trustee has advised it in
writing that it has received an Opinion of Counsel to the effect that an Adverse
REMIC Event could occur with respect to such action. In addition, prior to
taking any action with respect to the Trust Fund or the assets of the Trust
Fund, or causing the Trust Fund to take any action, which is not expressly
permitted under the terms of this Agreement, the Master Servicer will consult
with the Trustee or its designee, in writing, with respect to whether such
action could cause an Adverse REMIC Event to occur with respect to the Trust
Fund, and the Master Servicer shall not take any such action or cause the Trust
Fund to take any such action as to which the Trustee has advised it in writing
that an Adverse REMIC Event could occur. The Trustee may consult with counsel to
make such written advice, and the cost of same shall be borne by the party
seeking to take the action not permitted by this Agreement, but in no event
shall such cost be an expense of the Trustee. At all times as may be required by
the Code, the Trustee will ensure that substantially all of the assets of the
REMIC created hereunder 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.
(g) In the event that any tax is imposed on "prohibited
transactions" of the REMIC created hereunder as defined in Section 860F(a)(2) of
the Code, on the "net income from foreclosure property" of the REMIC as defined
in Section 860G(c) of the Code, on any contributions to the REMIC after the
Startup Day therefor pursuant to Section 860G(d) of the Code, or any other tax
is imposed by the Code or any applicable provisions of state or local tax laws,
such tax shall be charged (i) to the Trustee pursuant to Section 11.03 hereof,
if such tax arises out of or results from a breach by the Trustee of any of its
obligations under this Article
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XI, (ii) to the Master Servicer pursuant to Section 11.03 hereof, if such tax
arises out of or results from a breach by the Master Servicer of any of its
obligations under Article III or this Article XI, or otherwise (iii) against
amounts on deposit in the Distribution Account and shall be paid by withdrawal
therefrom.
(h) On or before April 15 of each calendar year, commencing April
15, 1997, the Trustee shall deliver to the Master Servicer and each Rating
Agency a Certificate from a Responsible Officer of the Trustee stating the
Trustee's compliance with this Article XI.
(i) The Trustee and the Master Servicer shall, for federal income
tax purposes, maintain books and records with respect to the Trust Fund on a
calendar year and on an accrual basis.
(j) Following the Startup Day, the Trustee shall not accept any
contributions of assets to the Trust Fund other than in connection with any
Qualified Substitute Mortgage Loan delivered in accordance with Section 2.03
unless it shall have received an Opinion of Counsel to the effect that the
inclusion of such assets in the REMIC will not cause the REMIC to fail to
qualify as a REMIC at any time that any Certificates are outstanding or subject
the REMIC to any tax under the REMIC Provisions or other applicable provisions
of federal, state and local law or ordinances.
(k) Neither the Trustee nor the Master Servicer shall enter into
any arrangement by which the Trust Fund will receive a fee or other compensation
for services nor permit the REMIC to receive any income from assets other than
"qualified mortgages" as defined in Section 860G(a)(3) of the Code or "permitted
investments" as defined in Section 860G(a)(5) of the Code.
SECTION 11.02. Prohibited Transactions and Activities.
None of the Depositor, the Master Servicer or the Trustee shall
sell, dispose of or substitute for any of the Mortgage Loans (except in
connection with (i) the foreclosure of a Mortgage Loan, including but not
limited to, the acquisition or sale of a Mortgaged Property acquired by deed in
lieu of foreclosure, (ii) the bankruptcy of the Trust Fund (iii) the termination
of the Trust Fund pursuant to Article X of this Agreement, (iv) a substitution
pursuant to Article II of this Agreement or (v) a purchase of Mortgage Loans
pursuant to Article II or III of this Agreement), nor acquire any assets for the
Trust Fund (other than REO Property acquired in respect of a defaulted Mortgage
Loan), nor sell or dispose of any investments in the Collection Account or the
Distribution Account for gain, nor accept any contributions to the Trust Fund
after the Closing Date (other than a Qualified Substitute Mortgage Loan
delivered in accordance with Section 2.03), unless it has received an Opinion of
Counsel, addressed to the Certificate Insurer and the Trustee (at the expense of
the party seeking to cause such sale, disposition, substitution, acquisition or
contribution but in no event an expense of the Trustee) that such sale,
disposition, substitution, acquisition or contribution will not (a) affect
adversely the status of the Trust Fund as a REMIC or (b) cause the Trust Fund to
be subject to a tax on "prohibited transactions" or "contributions" pursuant to
the REMIC Provisions.
SECTION 11.03. Master Servicer and Trustee Indemnification.
(a) The Trustee agrees to indemnify the Trust Fund, the
Depositor, the Certificate Insurer and the Master Servicer for any taxes and
costs including, without limitation, any reasonable attorneys fees imposed on or
incurred by the Trust Fund, the Depositor, the
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Certificate Insurer or the Master Servicer, as a result of a breach of the
Trustee's covenants set forth in this Article XI.
(b) The Master Servicer agrees to indemnify the Trust Fund, the
Depositor, the Certificate Insurer and the Trustee for any taxes and costs
including, without limitation, any reasonable attorneys' fees imposed on or
incurred by the Trust Fund, the Depositor, the Certificate Insurer or the
Trustee, as a result of a breach of the Master Servicer's covenants set forth in
Article III or this Article XI.
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ARTICLE XII
MISCELLANEOUS PROVISIONS
SECTION 12.01. Amendment.
This Agreement may be amended from time to time by the
Depositor, the Master Servicer and the Trustee without the consent of any of the
Certificateholders, (i) to cure any ambiguity, (ii) to correct, modify or
supplement any provisions herein, or (iii) to make any other provisions with
respect to matters or questions arising under this Agreement which shall not be
inconsistent with the provisions of this Agreement, provided that such action
shall not, as evidenced by an Opinion of Counsel delivered to the Trustee and
the Certificate Insurer, adversely affect in any material respect the interests
of any Certificateholder or the Certificate Insurer.
This Agreement may also be amended from time to time by the
Depositor, the Master Servicer and the Trustee with the consent of the
Certificate Insurer and the Holders of Certificates entitled to at least 66% of
the Voting Rights for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of this Agreement or of modifying in
any manner the rights of the Holders of Certificates; provided, however, that no
such amendment shall (i) reduce in any manner the amount of, or delay the timing
of, payments received on Mortgage Loans which are required to be distributed on
any Certificate without the consent of the Holder of such Certificate, (ii)
adversely affect in any material respect the interests of the Holders of any
Class of Certificates in a manner other than as described in (i), without the
consent of the Holders of Certificates of such Class evidencing at least 66% of
the Voting Rights allocated to such Class, or (iii) modify the consents required
by the immediately preceding clauses (i) and (ii) without the consent of the
Certificate Insurer and the Holders of all Certificates then outstanding.
Notwithstanding any other provision of this Agreement, for purposes of the
giving or withholding of consents pursuant to this Section 12.01, Certificates
registered in the name of the Depositor or the Master Servicer or any Affiliate
thereof shall be entitled to Voting Rights with respect to matters affecting
such Certificates.
Notwithstanding any contrary provision of this Agreement, the
Trustee shall not consent to any amendment to this Agreement unless it shall
have first received an Opinion of Counsel to the effect that such amendment will
not result in the imposition of any tax on the Trust Fund pursuant to the REMIC
Provisions or cause the Trust Fund to fail to qualify as a REMIC at any time
that any Certificates are outstanding. Any such amendment pursuant to the first
paragraph of this Section 12.01 shall not be deemed to adversely affect in any
material respect the interests of any Certificateholder if such change is
required by the Certificate Insurer, so long as no Certificate Insurer Default
exists, and the Master Servicer receives written confirmation from each Rating
Agency that such amendment will not cause such Rating Agency to reduce the then
current rating or any shadow rating of the affected Certificates.
Promptly after the execution of any such amendment the Trustee
shall furnish a copy of such amendment to each Certificateholder and the
Certificate Insurer.
It shall not be necessary for the consent of Certificateholders
under this Section 12.01 to approve the particular form of any proposed
amendment, but it shall be sufficient if such consent shall approve the
substance thereof. The manner of obtaining such consents and
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of evidencing the authorization of the execution thereof by Certificateholders
shall be subject to such reasonable regulations as the Trustee may prescribe.
The cost of any Opinion of Counsel to be delivered pursuant to
this Section 12.01 shall be borne by the Person seeking the related amendment,
but in no event shall such Opinion of Counsel be an expense of the Trustee.
The Trustee may, but shall not be obligated to enter into any
amendment pursuant to this Section that affects its rights, duties and
immunities under this Agreement or otherwise.
SECTION 12.02. Recordation of Agreement; Counterparts.
To the extent permitted by applicable law, this Agreement is
subject to recordation in all appropriate public offices for real property
records in all the counties or other comparable jurisdictions in which any or
all of the properties subject to the Mortgages are situated, and in any other
appropriate public recording office or elsewhere, such recordation to be
effected by the Master Servicer servicing the larger aggregate principal amount
of Mortgage Loans and at the expense of the Certificateholders, but only upon
direction of the Trustee accompanied by an Opinion of Counsel to the effect that
such recordation materially and beneficially affects the interests of the
Certificateholders.
For the purpose of facilitating the recordation of this Agreement
as herein provided and for other purposes, this Agreement may be executed
simultaneously in any number of counterparts, each of which counterparts shall
be deemed to be an original, and such counterparts shall constitute but one and
the same instrument.
SECTION 12.03. Limitation on Rights of Certificateholders.
The death or incapacity of any Certificateholder shall not
operate to terminate this Agreement or the Trust Fund, nor entitle such
Certificateholder's legal representatives or heirs to claim an accounting or to
take any action or proceeding in any court for a partition or winding up of the
Trust Fund, nor otherwise affect the rights, obligations and liabilities of the
parties hereto or any of them.
No Certificateholder shall have any right to vote (except as
expressly provided for herein) or in any manner otherwise control the operation
and management of the Trust Fund, or the obligations of the parties hereto, nor
shall anything herein set forth, or contained in the terms of any of the
Certificates, be construed so as to constitute the Certificateholders from time
to time as partners or members of an association; nor shall any
Certificateholder be under any liability to any third person by reason of any
action taken by the parties to this Agreement pursuant to any provision hereof.
No Certificateholder shall have any right by virtue of any
provision of this Agreement to institute any suit, action or proceeding in
equity or at law upon or under or with respect to this Agreement, unless such
Holder previously shall have given to the Trustee a written notice of default
and of the continuance thereof, as hereinbefore provided, and unless also the
Holders of Certificates entitled to at least 25% of the Voting Rights shall have
made written request upon the Trustee to institute such action, suit or
proceeding in its own name as Trustee hereunder and shall have offered to the
Trustee such reasonable indemnity as it may require against the costs, expenses
and liabilities to be incurred therein or thereby, and the Trustee, for 15 days
after its receipt of such notice, request and offer of indemnity, shall have
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neglected or refused to institute any such action, suit or proceeding. It is
understood and intended, and expressly covenanted by each Certificateholder with
every other Certificateholder and the Trustee, that no one or more Holders of
Certificates shall have any right in any manner whatsoever by virtue of any
provision of this Agreement to affect, disturb or prejudice the rights of the
Holders of any other of such Certificates, or to obtain or seek to obtain
priority over or preference to any other such Holder, or to enforce any right
under this Agreement, except in the manner herein provided and for the equal,
ratable and common benefit of all Certificateholders. For the protection and
enforcement of the provisions of this Section, each and every Certificateholder
and the Trustee shall be entitled to such relief as can be given either at law
or in equity.
SECTION 12.04. Governing Law.
This Agreement shall be construed in accordance with the laws of
the State of New York and the obligations, rights and remedies of the parties
hereunder shall be determined in accordance with such laws.
SECTION 12.05. Notices.
All directions, demands and notices hereunder shall be in writing
and shall be deemed to have been duly given when received if personally
delivered at or mailed by first class mail, postage prepaid, or by express
delivery service or delivered in any other manner specified herein, to (a) in
the case of the Depositor, Seven World Trade Center, New York, New York 10048,
Attention: Mortgage Finance Group (telecopy number (212) 783-3895), or such
other address or telecopy number as may hereafter be furnished to the Master
Servicer, the Certificate Insurer and the Trustee in writing by the Depositor,
(b) in the case of the Master Servicer, 1675 Palm Beach Lakes Blvd., West Palm
Beach, Florida 33410, Attention: David A. Holt (telecopy number: (561) 681-8186,
or such other address or telecopy number as may hereafter be furnished to the
Trustee and the Depositor in writing by the Master Servicer, (c) in the case of
the Trustee, The Bank of New York, 101 Barclay Street, 12 East, New York, New
York 10286, Attention: Corporate Trust MBS (telecopy number (212) 815-5309), or
such other address or telecopy number as may hereafter be furnished to the
Master Servicer and the Depositor in writing by the Trustee and (d) in the Case
of the Certificate Insurer, Financial Security Assurance Inc., 350 Park Avenue,
New York, New York 10022, Attention: Surveillance Department (telecopy number
(212) 339-3518 or (212) 339-3529) or such other address or telecopy number as
may hereafter be furnished to the Trustee, the Depositor and the Master Servicer
in writing by the Certificate Insurer. In each case in which a notice or other
communication to the Certificate Insurer refers to a Master Servicer Event of
Default or a claim under the Policy or with respect to which failure on the part
of the Certificate Insurer to respond shall be deemed to constitute consent or
acceptance, then a copy of such notice or other communication should also be
sent to the attention of the General Counsel and the HeadFinancial Guaranty
Group and shall be marked to indicate "URGENT MATERIAL ENCLOSED". Any notice
required or permitted to be given to a Certificateholder shall be given by first
class mail, postage prepaid, at the address of such Holder as shown in the
Certificate Register. Any notice so mailed within the time prescribed in this
Agreement shall be conclusively presumed to have been duly given when mailed,
whether or not the Certificateholder receives such notice. A copy of any notice
required to be telecopied hereunder also shall be mailed to the appropriate
party in the manner set forth above.
<PAGE>
-119-
SECTION 12.06. Severability of Provisions.
If any one or more of the covenants, agreements, provisions or
terms of this Agreement shall be for any reason whatsoever held invalid, then
such covenants, agreements, provisions or terms shall be deemed severable from
the remaining covenants, agreements, provisions or terms of this Agreement and
shall in no way affect the validity or enforceability of the other provisions of
this Agreement or of the Certificates or the rights of the Holders thereof.
SECTION 12.07. Notice to Rating Agencies and Certificate
Insurer.
The Trustee shall use its best efforts promptly to provide notice
to the Rating Agencies and the Certificate Insurer with respect to each of the
following of which it has actual knowledge:
1. Any material change or amendment to this Agreement;
2. The occurrence of any Master Servicer Event of Default
that has not been cured or waived;
3. The resignation or termination of the Master Servicer or
the Trustee;
4. The repurchase or substitution of Mortgage Loans pursuant
to or as contemplated by Section 2.03;
5. The final payment to the Holders of any Class of
Certificates;
6. Any change in the location of the Collection Account or
the Distribution Account; and
7. Any event that would result in the inability of the
Trustee to make advances regarding delinquent mortgage
loans.
8. Any Certificate Insurer Default that has not been cured.
In addition, the Trustee shall promptly furnish to each Rating
Agency and the Certificate Insurer copies of each report to Certificateholders
described in Section 4.02 and the Master Servicer shall promptly furnish to each
Rating Agency copies of the following:
1. Each annual statement as to compliance described in
Section 3.20; and
2. Each annual independent public accountants' servicing
report described in Section 3.21.
Any such notice pursuant to this Section 12.07 shall be in
writing and shall be deemed to have been duly given if personally delivered at
or mailed by first class mail, postage prepaid, or by express delivery service
to Moody's Investors Service, Inc., 99 Church Street, New York, New York 10007,
and to Standard & Poor's Ratings Services, 25 Broadway, New York, New York
10004, or such other addresses as the Rating Agencies may designate in writing
to the parties hereto.
<PAGE>
-120-
SECTION 12.08. Article and Section References.
All article and section references used in this Agreement, unless
otherwise provided, are to articles and sections in this Agreement.
<PAGE>
IN WITNESS WHEREOF, the Depositor, the Master Servicer and the
Trustee have caused their names to be signed hereto by their respective officers
thereunto duly authorized, in each case as of the day and year first above
written.
SALOMON BROTHERS MORTGAGE
SECURITIES VII, INC.,
as Depositor
By: /s/ Susan S. Woodbury
--------------------------
Name: Susan S. Woodbury
Title: Assistant Vice President
BERKELEY FEDERAL BANK & TRUST
FSB
as Master Servicer
By: /s/ Trevor Rozowsky
-------------------------
Name: Trevor Rozowsky
Title: Senior Vice President
THE BANK OF NEW YORK
as Trustee
By: /s/ Franklin B. Austin
-------------------------
Name: Franklin B. Austin
Title: Assistant Treasurer
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 27th day of June 1996, before me, a notary public in and
for said State, personally appeared Susan S. Woodbury, known to me to be an
Assistant Vice President of Salomon Brothers Mortgage Securities VII, Inc., one
of the corporations that executed the within instrument, and also known to me to
be the person who executed it on behalf of said corporation, and acknowledged to
me that such corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
/s/ Clark Huang
----------------------------
Clark Huang
Notary Public
[Notarial Seal]
<PAGE>
STATE OF )
) ss.:
COUNTY OF )
On the 27th day of June 1996, before me, a notary public in and
for said State, personally appeared Trevor Rozowsky, known to me to be a
Senior Vice President of Berkeley Federal Bank & Trust FSB, one of the
corporations that executed the within instrument, and also known to me to be the
person who executed it on behalf of said corporation, and acknowledged to me
that such corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
/s/ Barbara L. Miller
-----------------------
Barbara L. Miller
Notary Public
[Notarial Seal]
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 27th day of June 1996, before me, a notary public in and
for said State, personally appeared Franklin B. Austin, known to me to be an
Assistant Treasurer of The Bank of New York, one of the corporations that
executed the within instrument, and also known to me to be the person who
executed it on behalf of said corporation, and acknowledged to me that such
corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
/s/ Clark Huang
----------------------------
Clark Huang
Notary Public
[Notarial Seal]
<PAGE>
EXHIBIT A-1
FORM OF CLASS A1-1 CERTIFICATE
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
"REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS
THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE
INTERNAL REVENUE CODE OF 1986 (THE "CODE").
Series 1996-3, Class A1-1
Pass-Through Rate: 6.850% per annum
Date of Pooling and Servicing Agreement
and Cut-off Date: June 1, 1996
First Distribution Date: July 25, 1996
No. __
Aggregate Certificate Principal Balance of
the Class A1-1 Certificates as of the Issue
Date: $24,000,000.00
Denomination: $______________
Master Servicer: Berkeley Federal Bank &
Trust FSB
Trustee: The Bank of New York
Issue Date: June 27, 1996
CUSIP: 79548K QZ 4
DISTRIBUTIONS IN REDUCTION OF THE CERTIFICATE PRINCIPAL
BALANCE OF THIS CERTIFICATE MAY BE MADE MONTHLY AS SET
FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING CERTIFICATE
PRINCIPAL BALANCE HEREOF AT ANY TIME MAY BE LESS THAN
THE AMOUNT SHOWN BELOW.
<PAGE>
ASSET-BACKED FIXED RATE AND FLOATING RATE CERTIFICATE
evidencing a beneficial ownership interest in a portion of a Trust Fund
consisting primarily of a pool of conventional one- to four-family first
mortgage loans formed and sold by
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC., THE MASTER SERVICER, THE
TRUSTEE OR ANY OF THEIR AFFILIATES. NEITHER THIS CERTIFICATE NOR THE
UNDERLYING MORTGAGE LOANS ARE GUARANTEED BY ANY AGENCY OR
INSTRUMENTALITY OF THE UNITED STATES.
This certifies that _____________ is the registered owner of a
Percentage Interest (obtained by dividing the denomination of this Certificate
by the aggregate Certificate Principal Balance of the Class A1-1 Certificates)
in that certain beneficial ownership interest evidenced by all the Class A1-1
Certificates in the Trust Fund created pursuant to a Pooling and Servicing
Agreement, dated as specified above (the "Agreement"), among Salomon Brothers
Mortgage Securities VII, Inc. (hereinafter called the "Depositor," which term
includes any successor entity under the Agreement), the Master Servicer and the
Trustee, a summary of certain of the pertinent provisions of which is set forth
hereafter. To the extent not defined herein, the capitalized terms used herein
have the meanings assigned in the Agreement. This Certificate is issued under
and is subject to the terms, provisions and conditions of the Agreement, to
which Agreement the Holder of this Certificate by virtue of the acceptance
hereof assents and by which such Holder is bound.
Pursuant to the terms of the Agreement, distributions will be
made on the 25th day of each month or, if such 25th day is not a Business Day,
the Business Day immediately following (a "Distribution Date"), commencing on
the First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the last Business Day of the month immediately
preceding the month of such distribution (the "Record Date"), from the Available
Distribution Amount in an amount equal to the product of the Percentage Interest
evidenced by this Certificate and the amount required to be distributed to the
Holders of Class A1-1 Certificates on such Distribution Date pursuant to the
Agreement.
All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by or on behalf of the Trustee by
wire transfer in immediately available funds to the account of the Person
entitled thereto if such Person shall have so notified the Trustee in writing at
least five Business Days prior to the Record Date immediately prior to such
Distribution Date and is the registered owner of Class A1-1 Certificates the
aggregate initial Certificate Principal Balance of which is in excess of
$5,000,000, or by check mailed by first class mail to the address of the Person
entitled thereto, as such name and address shall appear on the Certificate
Register, provided that the Trustee may deduct a reasonable wire transfer fee
from any payment made by wire transfer. Notwithstanding the above, the final
distribution on this Certificate will be made after due notice by the Trustee of
the pendency of such distribution
<PAGE>
-2-
and only upon presentation and surrender of this Certificate at the office or
agency appointed by the Trustee for that purpose as provided in the Agreement.
This Certificate is one of a duly authorized issue of
Certificates designated as Asset-Backed Fixed Rate and Floating Rate
Certificates of the Series specified on the face hereof (herein called the
"Certificates") and representing a Percentage Interest in the Class A1-1
Certificates specified on the face hereof equal to the denomination specified on
the face hereof divided by the aggregate Certificate Principal Balance of the
Class of Certificates specified on the face hereof.
The Class A1-1 Certificates are limited in right of payment to
certain collections and recoveries respecting the Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Accounts and the Distribution Account
may be made from time to time for purposes other than distributions to
Certificateholders, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Mortgage Loans.
The Agreement permits, with certain exceptions therein provided,
the amendment thereof and the modification of the rights and obligations of the
Depositor, the Master Servicer, the Trustee and the rights of the
Certificateholders under the Agreement at any time by the Depositor, the Master
Servicer, the Trustee and the Certificate Insurer with the consent of the
Holders of Certificates entitled to at least 66% of the Voting Rights and the
Certificate Insurer. Any such consent by the Holder of this Certificate shall be
conclusive and binding on such Holder and upon all future Holders of this
Certificate and of any Certificate issued upon the transfer hereof or in
exchange herefor or in lieu hereof whether or not notation of such consent is
made upon this Certificate. The Agreement also permits the amendment thereof, in
certain limited circumstances, without the consent of the Holders of any of the
Certificates but with the consent of the Certificate Insurer.
As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies appointed by the Trustee as provided in the
Agreement, duly endorsed by, or accompanied by an assignment in the form below
or other written instrument of transfer in form satisfactory to the Trustee and
the Certificate Registrar duly executed by, the Holder hereof or such Holder's
attorney duly authorized in writing, and thereupon one or more new Certificates
of the same Class in authorized denominations evidencing the same aggregate
Percentage Interest will be issued to the designated transferee or transferees.
The Certificates are issuable in fully registered form only
without coupons in Classes and denominations representing Percentage Interests
specified in the Agreement. As provided in the Agreement and subject to certain
limitations therein set forth, Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.
<PAGE>
-3-
No service charge will be made for any such 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 transfer or exchange of Certificates.
The Depositor, the Master Servicer, the Trustee, the Certificate
Insurer and the Certificate Registrar and any agent of the Depositor, any Master
Servicer, the Trustee, the Certificate Insurer or the Certificate Registrar may
treat the Person in whose name this Certificate is registered as the owner
hereof for all purposes, and none of the Depositor, the Master Servicer, the
Trustee, the Certificate Insurer, the Certificate Registrar nor any such agent
shall be affected by notice to the contrary.
The obligations created by the Agreement and the Trust Fund
created thereby shall terminate upon payment to the Certificateholders of all
amounts held by or on behalf of the Trustee and required to be paid to them
pursuant to the Agreement following the earlier of (i) the final payment or
other liquidation (or any advance with respect thereto) of the last Mortgage
Loan remaining in the Trust Fund, and (ii) the purchase by the party designated
in the Agreement at a price determined as provided in the Agreement from the
Trust Fund of all Mortgage Loans and all property acquired in respect of such
Mortgage Loans. The Agreement permits, but does not require, the party
designated in the Agreement to purchase from the Trust Fund all Mortgage Loans
and all property acquired in respect of any Mortgage Loan at a price determined
as provided in the Agreement. The exercise of such right will effect early
retirement of the Certificates; however, such right to purchase is subject to
the aggregate Stated Principal Balance of the Mortgage Loans at the time of
purchase being 10% or less of the aggregate Stated Principal Balance of the
Mortgage Loans at the Cut-off Date.
The recitals contained herein shall be taken as statements of the
Depositor and the Trustee assumes no responsibility for their correctness.
Unless the certificate of authentication hereon has been executed
by the Certificate Registrar, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be
duly executed under its official seal.
Dated:
THE BANK OF NEW YORK
[SEAL] as Trustee
By:
--------------------------------
Authorized Officer
CERTIFICATE OF AUTHENTICATION
This is one of the Class A1-1 Certificates referred to in the
within-mentioned Agreement.
THE BANK OF NEW YORK
as Certificate Registrar
By:
--------------------------------
Authorized Signatory
<PAGE>
ABBREVIATIONS
The following abbreviations, when used in the inscription on the
face of this instrument, shall be construed as though they were written out in
full according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT - CUSTODIAN
-------------
(Cust) (Minor)
TEN ENT - as tenants by the entireties under Uniform Gifts
to Minors Act
JT TEN - as joint tenants with right _________________
if survivorship and not as (State)
tenants in common
Additional abbreviations may also be used though not in the above
list.
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto
(Please print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee)
a Percentage Interest equal to ____% evidenced by the within Asset-Backed Fixed
Rate and Floating Rate Certificate and hereby authorize(s) the registration of
transfer of such interest to assignee on the Certificate Register of the Trust
Fund.
I (we) further direct the Certificate Registrar to issue a new
Certificate of a like Percentage Interest and Class to the above named assignee
and deliver such Certificate to the following address:
.
Dated:
-------------------------------------
Signature by or on behalf of assignor
------------------------------------
Signature Guaranteed
<PAGE>
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for purposes of
distribution:
Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to
for the account of _______________________________, account number ,
or, if mailed by check, to
.
Applicable statements should be mailed to
.
This information is provided by , the assignee named above, or
________________________________________, as its agent.
<PAGE>
EXHIBIT A-2
FORM OF CLASS A1-2 CERTIFICATE
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
"REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS
THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE
INTERNAL REVENUE CODE OF 1986 (THE "CODE").
Series 1996-3, Class A1-2
Pass-Through Rate: 7.450% per annum
Date of Pooling and Servicing Agreement
and Cut-off Date: June 1, 1996
First Distribution Date: July 25, 1996
No. ___
Aggregate Certificate Principal Balance of
the Class A1-2 Certificates as of the Issue
Date: $13,000,000.00
Denomination: $_____________
Master Servicer: Berkeley Federal Bank
& Trust FSB
Trustee: The Bank of New York
Issue Date: June 27, 1996
CUSIP: 79548K RA 8
DISTRIBUTIONS IN REDUCTION OF THE CERTIFICATE PRINCIPAL BALANCE OF THIS
CERTIFICATE MAY BE MADE MONTHLY AS SET FORTH HEREIN. ACCORDINGLY, THE
OUTSTANDING CERTIFICATE PRINCIPAL BALANCE HEREOF AT ANY TIME MAY BE LESS
THAN THE AMOUNT SHOWN BELOW.
<PAGE>
ASSET-BACKED FIXED RATE AND FLOATING RATE CERTIFICATE
evidencing a beneficial ownership interest in a portion of a Trust Fund
consisting primarily of a pool of conventional one- to four-family first
mortgage loans formed and sold by
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC., THE MASTER SERVICER, THE
TRUSTEE OR ANY OF THEIR AFFILIATES. NEITHER THIS CERTIFICATE NOR THE
UNDERLYING MORTGAGE LOANS ARE GUARANTEED BY ANY AGENCY OR
INSTRUMENTALITY OF THE UNITED STATES.
This certifies that _____________ is the registered owner of a
Percentage Interest (obtained by dividing the denomination of this Certificate
by the aggregate Certificate Principal Balance of the Class A1-2 Certificates)
in that certain beneficial ownership interest evidenced by all the Class A1-2
Certificates in the Trust Fund created pursuant to a Pooling and Servicing
Agreement, dated as specified above (the "Agreement"), among Salomon Brothers
Mortgage Securities VII, Inc. (hereinafter called the "Depositor," which term
includes any successor entity under the Agreement), the Master Servicer and the
Trustee, a summary of certain of the pertinent provisions of which is set forth
hereafter. To the extent not defined herein, the capitalized terms used herein
have the meanings assigned in the Agreement. This Certificate is issued under
and is subject to the terms, provisions and conditions of the Agreement, to
which Agreement the Holder of this Certificate by virtue of the acceptance
hereof assents and by which such Holder is bound.
Pursuant to the terms of the Agreement, distributions will be
made on the 25th day of each month or, if such 25th day is not a Business Day,
the Business Day immediately following (a "Distribution Date"), commencing on
the First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the last Business Day of the month immediately
preceding the month of such distribution (the "Record Date"), from the Available
Distribution Amount in an amount equal to the product of the Percentage Interest
evidenced by this Certificate and the amount required to be distributed to the
Holders of Class A1-2 Certificates on such Distribution Date pursuant to the
Agreement.
All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by or on behalf of the Trustee by
wire transfer in immediately available funds to the account of the Person
entitled thereto if such Person shall have so notified the Trustee in writing at
least five Business Days prior to the Record Date immediately prior to such
Distribution Date and is the registered owner of Class A1-2 Certificates the
aggregate initial Certificate Principal Balance of which is in excess of
$5,000,000, or by check mailed by first class mail to the address of the Person
entitled thereto, as such name and address shall appear on the Certificate
Register, provided that the Trustee may deduct a reasonable wire transfer fee
from any payment made by wire transfer. Notwithstanding the above, the final
distribution on this Certificate will be made after due notice by the Trustee of
the pendency of such distribution and only upon presentation and
<PAGE>
-2-
surrender of this Certificate at the office or agency appointed by the Trustee
for that purpose as provided in the Agreement.
This Certificate is one of a duly authorized issue of
Certificates designated as Asset-Backed Fixed Rate and Floating Rate
Certificates of the Series specified on the face hereof (herein called the
"Certificates") and representing a Percentage Interest in the Class A1-2
Certificates specified on the face hereof equal to the denomination specified on
the face hereof divided by the aggregate Certificate Principal Balance of the
Class of Certificates specified on the face hereof.
The Class A1-2 Certificates are limited in right of payment to
certain collections and recoveries respecting the Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Accounts and the Distribution Account
may be made from time to time for purposes other than distributions to
Certificateholders, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Mortgage Loans.
The Agreement permits, with certain exceptions therein provided,
the amendment thereof and the modification of the rights and obligations of the
Depositor, the Master Servicer, the Trustee and the rights of the
Certificateholders under the Agreement at any time by the Depositor, the Master
Servicer, the Trustee and the Certificate Insurer with the consent of the
Holders of Certificates entitled to at least 66% of the Voting Rights and the
Certificate Insurer. Any such consent by the Holder of this Certificate shall be
conclusive and binding on such Holder and upon all future Holders of this
Certificate and of any Certificate issued upon the transfer hereof or in
exchange herefor or in lieu hereof whether or not notation of such consent is
made upon this Certificate. The Agreement also permits the amendment thereof, in
certain limited circumstances, without the consent of the Holders of any of the
Certificates but with the consent of the Certificate Insurer.
As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies appointed by the Trustee as provided in the
Agreement, duly endorsed by, or accompanied by an assignment in the form below
or other written instrument of transfer in form satisfactory to the Trustee and
the Certificate Registrar duly executed by, the Holder hereof or such Holder's
attorney duly authorized in writing, and thereupon one or more new Certificates
of the same Class in authorized denominations evidencing the same aggregate
Percentage Interest will be issued to the designated transferee or transferees.
The Certificates are issuable in fully registered form only
without coupons in Classes and denominations representing Percentage Interests
specified in the Agreement. As provided in the Agreement and subject to certain
limitations therein set forth, Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.
<PAGE>
-3-
No service charge will be made for any such 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 transfer or exchange of Certificates.
The Depositor, the Master Servicer, the Trustee, the Certificate
Insurer and the Certificate Registrar and any agent of the Depositor, any Master
Servicer, the Trustee, the Certificate Insurer or the Certificate Registrar may
treat the Person in whose name this Certificate is registered as the owner
hereof for all purposes, and none of the Depositor, the Master Servicer, the
Trustee, the Certificate Insurer, the Certificate Registrar nor any such agent
shall be affected by notice to the contrary.
The obligations created by the Agreement and the Trust Fund
created thereby shall terminate upon payment to the Certificateholders of all
amounts held by or on behalf of the Trustee and required to be paid to them
pursuant to the Agreement following the earlier of (i) the final payment or
other liquidation (or any advance with respect thereto) of the last Mortgage
Loan remaining in the Trust Fund, and (ii) the purchase by the party designated
in the Agreement at a price determined as provided in the Agreement from the
Trust Fund of all Mortgage Loans and all property acquired in respect of such
Mortgage Loans. The Agreement permits, but does not require, the party
designated in the Agreement to purchase from the Trust Fund all Mortgage Loans
and all property acquired in respect of any Mortgage Loan at a price determined
as provided in the Agreement. The exercise of such right will effect early
retirement of the Certificates; however, such right to purchase is subject to
the aggregate Stated Principal Balance of the Mortgage Loans at the time of
purchase being 10% or less of the aggregate Stated Principal Balance of the
Mortgage Loans at the Cut-off Date.
The recitals contained herein shall be taken as statements of the
Depositor and the Trustee assumes no responsibility for their correctness.
Unless the certificate of authentication hereon has been executed
by the Certificate Registrar, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be
duly executed under its official seal.
Dated:
THE BANK OF NEW YORK
[SEAL] as Trustee
By:
--------------------------------
Authorized Officer
CERTIFICATE OF AUTHENTICATION
This is one of the Class A1-2 Certificates referred to in the
within-mentioned Agreement.
THE BANK OF NEW YORK
as Certificate Registrar
By:
---------------------------------
Authorized Signatory
<PAGE>
ABBREVIATIONS
The following abbreviations, when used in the inscription on the
face of this instrument, shall be construed as though they were written out in
full according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT - CUSTODIAN
-------------
(Cust) (Minor)
TEN ENT - as tenants by the entireties under Uniform Gifts
to Minors Act
JT TEN - as joint tenants with right _________________
if survivorship and not as (State)
tenants in common
Additional abbreviations may also be used though not in the above
list.
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto
(Please print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee)
a Percentage Interest equal to ____% evidenced by the within Asset-Backed Fixed
Rate and Floating Rate Certificate and hereby authorize(s) the registration of
transfer of such interest to assignee on the Certificate Register of the Trust
Fund.
I (we) further direct the Certificate Registrar to issue a new
Certificate of a like Percentage Interest and Class to the above named assignee
and deliver such Certificate to the following address:
.
Dated:
-------------------------------------
Signature by or on behalf of assignor
------------------------------------
Signature Guaranteed
<PAGE>
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for purposes of
distribution:
Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to
for the account of _______________________________, account number ,
or, if mailed by check, to
.
Applicable statements should be mailed to
.
This information is provided by , the assignee named above, or
________________________________________, as its agent.
<PAGE>
EXHIBIT A-3
FORM OF CLASS A1-3 CERTIFICATE
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
"REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS
THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE
INTERNAL REVENUE CODE OF 1986 (THE "CODE").
Series 1996-3, Class A1-3
Pass-Through Rate: 7.800% per annum
Date of Pooling and Servicing Agreement
and Cut-off Date: June 1, 1996
First Distribution Date: July 25, 1996
No. ___
Aggregate Certificate Principal Balance of
the Class A1-3 Certificates as of the Issue
Date: $6,700,000.00
Denomination: $____________
Master Servicer: Berkeley Federal Bank
& Trust FSB
Trustee: The Bank of New York
Issue Date: June 27, 1996
CUSIP: 79548K RB 6
DISTRIBUTIONS IN REDUCTION OF THE CERTIFICATE PRINCIPAL BALANCE OF THIS
CERTIFICATE MAY BE MADE MONTHLY AS SET FORTH HEREIN. ACCORDINGLY, THE
OUTSTANDING CERTIFICATE PRINCIPAL BALANCE HEREOF AT ANY TIME MAY BE LESS
THAN THE AMOUNT SHOWN BELOW.
<PAGE>
ASSET-BACKED FIXED RATE AND FLOATING RATE CERTIFICATE
evidencing a beneficial ownership interest in a portion of a Trust Fund
consisting primarily of a pool of conventional one- to four-family first
mortgage loans formed and sold by
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC., THE MASTER SERVICER, THE
TRUSTEE OR ANY OF THEIR AFFILIATES. NEITHER THIS CERTIFICATE NOR THE
UNDERLYING MORTGAGE LOANS ARE GUARANTEED BY ANY AGENCY OR
INSTRUMENTALITY OF THE UNITED STATES.
This certifies that _____________ is the registered owner of a
Percentage Interest (obtained by dividing the denomination of this Certificate
by the aggregate Certificate Principal Balance of the Class A1-3 Certificates)
in that certain beneficial ownership interest evidenced by all the Class A1-3
Certificates in the Trust Fund created pursuant to a Pooling and Servicing
Agreement, dated as specified above (the "Agreement"), among Salomon Brothers
Mortgage Securities VII, Inc. (hereinafter called the "Depositor," which term
includes any successor entity under the Agreement), the Master Servicer and the
Trustee, a summary of certain of the pertinent provisions of which is set forth
hereafter. To the extent not defined herein, the capitalized terms used herein
have the meanings assigned in the Agreement. This Certificate is issued under
and is subject to the terms, provisions and conditions of the Agreement, to
which Agreement the Holder of this Certificate by virtue of the acceptance
hereof assents and by which such Holder is bound.
Pursuant to the terms of the Agreement, distributions will be
made on the 25th day of each month or, if such 25th day is not a Business Day,
the Business Day immediately following (a "Distribution Date"), commencing on
the First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the last Business Day of the month immediately
preceding the month of such distribution (the "Record Date"), from the Available
Distribution Amount in an amount equal to the product of the Percentage Interest
evidenced by this Certificate and the amount required to be distributed to the
Holders of Class A1-3 Certificates on such Distribution Date pursuant to the
Agreement.
All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by or on behalf of the Trustee by
wire transfer in immediately available funds to the account of the Person
entitled thereto if such Person shall have so notified the Trustee in writing at
least five Business Days prior to the Record Date immediately prior to such
Distribution Date and is the registered owner of Class A1-3 Certificates the
aggregate initial Certificate Principal Balance of which is in excess of
$5,000,000, or by check mailed by first class mail to the address of the Person
entitled thereto, as such name and address shall appear on the Certificate
Register, provided that the Trustee may deduct a reasonable wire transfer fee
from any payment made by wire transfer. Notwithstanding the above, the final
distribution on this Certificate will be made after due notice by the Trustee of
the pendency of such distribution and only upon presentation and
<PAGE>
-2-
surrender of this Certificate at the office or agency appointed by the Trustee
for that purpose as provided in the Agreement.
This Certificate is one of a duly authorized issue of
Certificates designated as Asset-Backed Fixed Rate and Floating Rate
Certificates of the Series specified on the face hereof (herein called the
"Certificates") and representing a Percentage Interest in the Class A1-3
Certificates specified on the face hereof equal to the denomination specified on
the face hereof divided by the aggregate Certificate Principal Balance of the
Class of Certificates specified on the face hereof.
The Class A1-3 Certificates are limited in right of payment to
certain collections and recoveries respecting the Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Accounts and the Distribution Account
may be made from time to time for purposes other than distributions to
Certificateholders, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Mortgage Loans.
The Agreement permits, with certain exceptions therein provided,
the amendment thereof and the modification of the rights and obligations of the
Depositor, the Master Servicer, the Trustee and the rights of the
Certificateholders under the Agreement at any time by the Depositor, the Master
Servicer, the Trustee and the Certificate Insurer with the consent of the
Holders of Certificates entitled to at least 66% of the Voting Rights and the
Certificate Insurer. Any such consent by the Holder of this Certificate shall be
conclusive and binding on such Holder and upon all future Holders of this
Certificate and of any Certificate issued upon the transfer hereof or in
exchange herefor or in lieu hereof whether or not notation of such consent is
made upon this Certificate. The Agreement also permits the amendment thereof, in
certain limited circumstances, without the consent of the Holders of any of the
Certificates but with the consent of the Certificate Insurer.
As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies appointed by the Trustee as provided in the
Agreement, duly endorsed by, or accompanied by an assignment in the form below
or other written instrument of transfer in form satisfactory to the Trustee and
the Certificate Registrar duly executed by, the Holder hereof or such Holder's
attorney duly authorized in writing, and thereupon one or more new Certificates
of the same Class in authorized denominations evidencing the same aggregate
Percentage Interest will be issued to the designated transferee or transferees.
The Certificates are issuable in fully registered form only
without coupons in Classes and denominations representing Percentage Interests
specified in the Agreement. As provided in the Agreement and subject to certain
limitations therein set forth, Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.
<PAGE>
-3-
No service charge will be made for any such 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 transfer or exchange of Certificates.
The Depositor, the Master Servicer, the Trustee, the Certificate
Insurer and the Certificate Registrar and any agent of the Depositor, any Master
Servicer, the Trustee, the Certificate Insurer or the Certificate Registrar may
treat the Person in whose name this Certificate is registered as the owner
hereof for all purposes, and none of the Depositor, the Master Servicer, the
Trustee, the Certificate Insurer, the Certificate Registrar nor any such agent
shall be affected by notice to the contrary.
The obligations created by the Agreement and the Trust Fund
created thereby shall terminate upon payment to the Certificateholders of all
amounts held by or on behalf of the Trustee and required to be paid to them
pursuant to the Agreement following the earlier of (i) the final payment or
other liquidation (or any advance with respect thereto) of the last Mortgage
Loan remaining in the Trust Fund, and (ii) the purchase by the party designated
in the Agreement at a price determined as provided in the Agreement from the
Trust Fund of all Mortgage Loans and all property acquired in respect of such
Mortgage Loans. The Agreement permits, but does not require, the party
designated in the Agreement to purchase from the Trust Fund all Mortgage Loans
and all property acquired in respect of any Mortgage Loan at a price determined
as provided in the Agreement. The exercise of such right will effect early
retirement of the Certificates; however, such right to purchase is subject to
the aggregate Stated Principal Balance of the Mortgage Loans at the time of
purchase being 10% or less of the aggregate Stated Principal Balance of the
Mortgage Loans at the Cut-off Date.
The recitals contained herein shall be taken as statements of the
Depositor and the Trustee assumes no responsibility for their correctness.
Unless the certificate of authentication hereon has been executed
by the Certificate Registrar, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be
duly executed under its official seal.
Dated:
THE BANK OF NEW YORK
[SEAL] as Trustee
By:
--------------------------------
Authorized Officer
CERTIFICATE OF AUTHENTICATION
This is one of the Class A1-3 Certificates referred to in the
within-mentioned Agreement.
THE BANK OF NEW YORK
as Certificate Registrar
By:
--------------------------------
Authorized Signatory
<PAGE>
ABBREVIATIONS
The following abbreviations, when used in the inscription on the
face of this instrument, shall be construed as though they were written out in
full according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT - CUSTODIAN
-------------
(Cust) (Minor)
TEN ENT - as tenants by the entireties under Uniform Gifts
to Minors Act
JT TEN - as joint tenants with right _________________
if survivorship and not as (State)
tenants in common
Additional abbreviations may also be used though not in the above
list.
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto
(Please print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee)
a Percentage Interest equal to ____% evidenced by the within Asset-Backed Fixed
Rate and Floating Rate Certificate and hereby authorize(s) the registration of
transfer of such interest to assignee on the Certificate Register of the Trust
Fund.
I (we) further direct the Certificate Registrar to issue a new
Certificate of a like Percentage Interest and Class to the above named assignee
and deliver such Certificate to the following address:
.
Dated:
-------------------------------------
Signature by or on behalf of assignor
------------------------------------
Signature Guaranteed
<PAGE>
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for purposes of
distribution:
Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to
for the account of _______________________________, account number ,
or, if mailed by check, to
.
Applicable statements should be mailed to
.
This information is provided by , the assignee named above, or
________________________________________, as its agent.
<PAGE>
EXHIBIT A-4
FORM OF CLASS A1-4 CERTIFICATE
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
"REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS
THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE
INTERNAL REVENUE CODE OF 1986 (THE "CODE").
Series 1996-3, Class A1-4
Pass-Through Rate: 8.100% per annum
Date of Pooling and Servicing Agreement
and Cut-off Date: June 1, 1996
First Distribution Date: July 25, 1996
No. ___
Aggregate Certificate Principal Balance of
the Class A1-4 Certificates as of the Issue
Date: $8,819,446.00
Denomination: $____________
Master Servicer: Berkeley Federal Bank
& Trust FSB
Trustee: The Bank of New York
Issue Date: June 27, 1996
CUSIP: 79548K RC 4
DISTRIBUTIONS IN REDUCTION OF THE CERTIFICATE PRINCIPAL BALANCE OF THIS
CERTIFICATE MAY BE MADE MONTHLY AS SET FORTH HEREIN. ACCORDINGLY, THE
OUTSTANDING CERTIFICATE PRINCIPAL BALANCE HEREOF AT ANY TIME MAY BE LESS
THAN THE AMOUNT SHOWN BELOW.
<PAGE>
ASSET-BACKED FIXED RATE AND FLOATING RATE CERTIFICATE
evidencing a beneficial ownership interest in a portion of a Trust Fund
consisting primarily of a pool of conventional one- to four-family first
mortgage loans formed and sold by
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC., THE MASTER SERVICER, THE
TRUSTEE OR ANY OF THEIR AFFILIATES. NEITHER THIS CERTIFICATE NOR THE
UNDERLYING MORTGAGE LOANS ARE GUARANTEED BY ANY AGENCY OR
INSTRUMENTALITY OF THE UNITED STATES.
This certifies that _____________ is the registered owner of a
Percentage Interest (obtained by dividing the denomination of this Certificate
by the aggregate Certificate Principal Balance of the Class A1-4 Certificates)
in that certain beneficial ownership interest evidenced by all the Class A1-4
Certificates in the Trust Fund created pursuant to a Pooling and Servicing
Agreement, dated as specified above (the "Agreement"), among Salomon Brothers
Mortgage Securities VII, Inc. (hereinafter called the "Depositor," which term
includes any successor entity under the Agreement), the Master Servicer and the
Trustee, a summary of certain of the pertinent provisions of which is set forth
hereafter. To the extent not defined herein, the capitalized terms used herein
have the meanings assigned in the Agreement. This Certificate is issued under
and is subject to the terms, provisions and conditions of the Agreement, to
which Agreement the Holder of this Certificate by virtue of the acceptance
hereof assents and by which such Holder is bound.
Pursuant to the terms of the Agreement, distributions will be
made on the 25th day of each month or, if such 25th day is not a Business Day,
the Business Day immediately following (a "Distribution Date"), commencing on
the First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the last Business Day of the month immediately
preceding the month of such distribution (the "Record Date"), from the Available
Distribution Amount in an amount equal to the product of the Percentage Interest
evidenced by this Certificate and the amount required to be distributed to the
Holders of Class A1-4 Certificates on such Distribution Date pursuant to the
Agreement.
All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by or on behalf of the Trustee by
wire transfer in immediately available funds to the account of the Person
entitled thereto if such Person shall have so notified the Trustee in writing at
least five Business Days prior to the Record Date immediately prior to such
Distribution Date and is the registered owner of Class A1-4 Certificates the
aggregate initial Certificate Principal Balance of which is in excess of
$5,000,000, or by check mailed by first class mail to the address of the Person
entitled thereto, as such name and address shall appear on the Certificate
Register, provided that the Trustee may deduct a reasonable wire transfer fee
from any payment made by wire transfer. Notwithstanding the above, the final
distribution on this Certificate will be made after due notice by the Trustee of
the pendency of such distribution and only upon presentation and
<PAGE>
-2-
surrender of this Certificate at the office or agency appointed by the Trustee
for that purpose as provided in the Agreement.
This Certificate is one of a duly authorized issue of
Certificates designated as Asset-Backed Fixed Rate and Floating Rate
Certificates of the Series specified on the face hereof (herein called the
"Certificates") and representing a Percentage Interest in the Class A1-4
Certificates specified on the face hereof equal to the denomination specified on
the face hereof divided by the aggregate Certificate Principal Balance of the
Class of Certificates specified on the face hereof.
The Class A1-4 Certificates are limited in right of payment to
certain collections and recoveries respecting the Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Accounts and the Distribution Account
may be made from time to time for purposes other than distributions to
Certificateholders, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Mortgage Loans.
The Agreement permits, with certain exceptions therein provided,
the amendment thereof and the modification of the rights and obligations of the
Depositor, the Master Servicer, the Trustee and the rights of the
Certificateholders under the Agreement at any time by the Depositor, the Master
Servicer, the Trustee and the Certificate Insurer with the consent of the
Holders of Certificates entitled to at least 66% of the Voting Rights and the
Certificate Insurer. Any such consent by the Holder of this Certificate shall be
conclusive and binding on such Holder and upon all future Holders of this
Certificate and of any Certificate issued upon the transfer hereof or in
exchange herefor or in lieu hereof whether or not notation of such consent is
made upon this Certificate. The Agreement also permits the amendment thereof, in
certain limited circumstances, without the consent of the Holders of any of the
Certificates but with the consent of the Certificate Insurer.
As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies appointed by the Trustee as provided in the
Agreement, duly endorsed by, or accompanied by an assignment in the form below
or other written instrument of transfer in form satisfactory to the Trustee and
the Certificate Registrar duly executed by, the Holder hereof or such Holder's
attorney duly authorized in writing, and thereupon one or more new Certificates
of the same Class in authorized denominations evidencing the same aggregate
Percentage Interest will be issued to the designated transferee or transferees.
The Certificates are issuable in fully registered form only
without coupons in Classes and denominations representing Percentage Interests
specified in the Agreement. As provided in the Agreement and subject to certain
limitations therein set forth, Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.
<PAGE>
-3-
No service charge will be made for any such 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 transfer or exchange of Certificates.
The Depositor, the Master Servicer, the Trustee, the Certificate
Insurer and the Certificate Registrar and any agent of the Depositor, any Master
Servicer, the Trustee, the Certificate Insurer or the Certificate Registrar may
treat the Person in whose name this Certificate is registered as the owner
hereof for all purposes, and none of the Depositor, the Master Servicer, the
Trustee, the Certificate Insurer, the Certificate Registrar nor any such agent
shall be affected by notice to the contrary.
The obligations created by the Agreement and the Trust Fund
created thereby shall terminate upon payment to the Certificateholders of all
amounts held by or on behalf of the Trustee and required to be paid to them
pursuant to the Agreement following the earlier of (i) the final payment or
other liquidation (or any advance with respect thereto) of the last Mortgage
Loan remaining in the Trust Fund, and (ii) the purchase by the party designated
in the Agreement at a price determined as provided in the Agreement from the
Trust Fund of all Mortgage Loans and all property acquired in respect of such
Mortgage Loans. The Agreement permits, but does not require, the party
designated in the Agreement to purchase from the Trust Fund all Mortgage Loans
and all property acquired in respect of any Mortgage Loan at a price determined
as provided in the Agreement. The exercise of such right will effect early
retirement of the Certificates; however, such right to purchase is subject to
the aggregate Stated Principal Balance of the Mortgage Loans at the time of
purchase being 10% or less of the aggregate Stated Principal Balance of the
Mortgage Loans at the Cut-off Date.
The recitals contained herein shall be taken as statements of the
Depositor and the Trustee assumes no responsibility for their correctness.
Unless the certificate of authentication hereon has been executed
by the Certificate Registrar, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be
duly executed under its official seal.
Dated:
THE BANK OF NEW YORK
[SEAL] as Trustee
By:
--------------------------------
Authorized Officer
CERTIFICATE OF AUTHENTICATION
This is one of the Class A1-4 Certificates referred to in the
within-mentioned Agreement.
THE BANK OF NEW YORK
as Certificate Registrar
By:
--------------------------------
Authorized Signatory
<PAGE>
ABBREVIATIONS
The following abbreviations, when used in the inscription on the
face of this instrument, shall be construed as though they were written out in
full according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT - CUSTODIAN
-------------
(Cust) (Minor)
TEN ENT - as tenants by the entireties under Uniform Gifts
to Minors Act
JT TEN - as joint tenants with right _________________
if survivorship and not as (State)
tenants in common
Additional abbreviations may also be used though not in the above
list.
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto
(Please print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee)
a Percentage Interest equal to ____% evidenced by the within Asset-Backed Fixed
Rate and Floating Rate Certificate and hereby authorize(s) the registration of
transfer of such interest to assignee on the Certificate Register of the Trust
Fund.
I (we) further direct the Certificate Registrar to issue a new
Certificate of a like Percentage Interest and Class to the above named assignee
and deliver such Certificate to the following address:
.
Dated:
-------------------------------------
Signature by or on behalf of assignor
------------------------------------
Signature Guaranteed
<PAGE>
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for purposes of
distribution:
Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to
for the account of _______________________________, account number ,
or, if mailed by check, to
.
Applicable statements should be mailed to
.
This information is provided by , the assignee named above, or
________________________________________, as its agent.
<PAGE>
EXHIBIT A-5
FORM OF CLASS A2-1 CERTIFICATE
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
"REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS
THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE
INTERNAL REVENUE CODE OF 1986 (THE "CODE").
Series 1996-3, Class A2-1
Variable Pass-Through Rate
Date of Pooling and Servicing Agreement
and Cut-off Date: June 1, 1996
First Distribution Date: July 25, 1996
No. ___
Aggregate Certificate Principal Balance of
the Class A2-1 Certificates as of the Issue
Date: $77,542,350.00
Denomination: $_____________
Master Servicer: Berkeley Federal Bank
& Trust FSB
Trustee: The Bank of New York
Issue Date: June 27, 1996
CUSIP: 79548K RD 2
DISTRIBUTIONS IN REDUCTION OF THE CERTIFICATE PRINCIPAL BALANCE OF THIS
CERTIFICATE MAY BE MADE MONTHLY AS SET FORTH HEREIN. ACCORDINGLY, THE
OUTSTANDING CERTIFICATE PRINCIPAL BALANCE HEREOF AT ANY TIME MAY BE LESS
THAN THE AMOUNT SHOWN BELOW.
<PAGE>
ASSET-BACKED FIXED RATE AND FLOATING RATE CERTIFICATE
evidencing a beneficial ownership interest in a portion of a Trust Fund
consisting primarily of a pool of conventional one- to four-family first
mortgage loans formed and sold by
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC., THE MASTER SERVICER, THE
TRUSTEE OR ANY OF THEIR AFFILIATES. NEITHER THIS CERTIFICATE NOR THE
UNDERLYING MORTGAGE LOANS ARE GUARANTEED BY ANY AGENCY OR
INSTRUMENTALITY OF THE UNITED STATES.
This certifies that _____________ is the registered owner of a
Percentage Interest (obtained by dividing the denomination of this Certificate
by the aggregate Certificate Principal Balance of the Class A2-1 Certificates)
in that certain beneficial ownership interest evidenced by all the Class A2-1
Certificates in the Trust Fund created pursuant to a Pooling and Servicing
Agreement, dated as specified above (the "Agreement"), among Salomon Brothers
Mortgage Securities VII, Inc. (hereinafter called the "Depositor," which term
includes any successor entity under the Agreement), the Master Servicer and the
Trustee, a summary of certain of the pertinent provisions of which is set forth
hereafter. To the extent not defined herein, the capitalized terms used herein
have the meanings assigned in the Agreement. This Certificate is issued under
and is subject to the terms, provisions and conditions of the Agreement, to
which Agreement the Holder of this Certificate by virtue of the acceptance
hereof assents and by which such Holder is bound.
Pursuant to the terms of the Agreement, distributions will be
made on the 25th day of each month or, if such 25th day is not a Business Day,
the Business Day immediately following (a "Distribution Date"), commencing on
the First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the last Business Day of the month immediately
preceding the month of such distribution (the "Record Date"), from the Available
Distribution Amount in an amount equal to the product of the Percentage Interest
evidenced by this Certificate and the amount required to be distributed to the
Holders of Class A2-1 Certificates on such Distribution Date pursuant to the
Agreement.
All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by or on behalf of the Trustee by
wire transfer in immediately available funds to the account of the Person
entitled thereto if such Person shall have so notified the Trustee in writing at
least five Business Days prior to the Record Date immediately prior to such
Distribution Date and is the registered owner of Class A2-1 Certificates the
aggregate initial Certificate Principal Balance of which is in excess of
$5,000,000, or by check mailed by first class mail to the address of the Person
entitled thereto, as such name and address shall appear on the Certificate
Register, provided that the Trustee may deduct a reasonable wire transfer fee
from any payment made by wire transfer. Notwithstanding the above, the final
distribution on this Certificate will be made after due notice by the Trustee of
the pendency of such distribution and only upon presentation and
<PAGE>
-2-
surrender of this Certificate at the office or agency appointed by the Trustee
for that purpose as provided in the Agreement.
The Pass-Through Rate applicable to the calculation of interest
payable with respect to this Certificate on any Distribution Date shall equal a
rate per annum equal to the lesser of (i) the One-Month LIBOR plus 0.38%, in the
case of each Distribution Date through and including the Distribution Date on
which the aggregate principal balance of the Mortgage Loans is reduced to 10% or
less of the aggregate principal balance of the Mortgage Loans as of the Cut-off
Date, or One-Month LIBOR plus 1.38% per annum, in the case of any Distribution
Date thereafter, and (ii) the Sub-Pool 2 Available Funds PassThrough Rate for
such Distribution Date.
This Certificate is one of a duly authorized issue of
Certificates designated as Asset-Backed Fixed Rate and Floating Rate
Certificates of the Series specified on the face hereof (herein called the
"Certificates") and representing a Percentage Interest in the Class A2-1
Certificates specified on the face hereof equal to the denomination specified on
the face hereof divided by the aggregate Certificate Principal Balance of the
Class of Certificates specified on the face hereof.
The Class A2-1 Certificates are limited in right of payment to
certain collections and recoveries respecting the Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Accounts and the Distribution Account
may be made from time to time for purposes other than distributions to
Certificateholders, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Mortgage Loans.
The Agreement permits, with certain exceptions therein provided,
the amendment thereof and the modification of the rights and obligations of the
Depositor, the Master Servicer, the Trustee and the rights of the
Certificateholders under the Agreement at any time by the Depositor, the Master
Servicer, the Trustee and the Certificate Insurer with the consent of the
Holders of Certificates entitled to at least 66% of the Voting Rights and the
Certificate Insurer. Any such consent by the Holder of this Certificate shall be
conclusive and binding on such Holder and upon all future Holders of this
Certificate and of any Certificate issued upon the transfer hereof or in
exchange herefor or in lieu hereof whether or not notation of such consent is
made upon this Certificate. The Agreement also permits the amendment thereof, in
certain limited circumstances, without the consent of the Holders of any of the
Certificates but with the consent of the Certificate Insurer.
As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies appointed by the Trustee as provided in the
Agreement, duly endorsed by, or accompanied by an assignment in the form below
or other written instrument of transfer in form satisfactory to the Trustee and
the Certificate Registrar duly executed by, the Holder hereof or such Holder's
attorney
<PAGE>
-3-
duly authorized in writing, and thereupon one or more new Certificates of the
same Class in authorized denominations evidencing the same aggregate Percentage
Interest will be issued to the designated transferee or transferees.
The Certificates are issuable in fully registered form only
without coupons in Classes and denominations representing Percentage Interests
specified in the Agreement. As provided in the Agreement and subject to certain
limitations therein set forth, Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.
No service charge will be made for any such registration of
transfer or exchange of Certificates, but the Trustee may require payment of a
sum sufficient to cover any tax or other governmental charge that may be imposed
in connection with any transfer or exchange of Certificates.
The Depositor, the Master Servicer, the Trustee, the Certificate
Insurer and the Certificate Registrar and any agent of the Depositor, any Master
Servicer, the Trustee, the Certificate Insurer or the Certificate Registrar may
treat the Person in whose name this Certificate is registered as the owner
hereof for all purposes, and none of the Depositor, the Master Servicer, the
Trustee, the Certificate Insurer, the Certificate Registrar nor any such agent
shall be affected by notice to the contrary.
The obligations created by the Agreement and the Trust Fund
created thereby shall terminate upon payment to the Certificateholders of all
amounts held by or on behalf of the Trustee and required to be paid to them
pursuant to the Agreement following the earlier of (i) the final payment or
other liquidation (or any advance with respect thereto) of the last Mortgage
Loan remaining in the Trust Fund, and (ii) the purchase by the party designated
in the Agreement at a price determined as provided in the Agreement from the
Trust Fund of all Mortgage Loans and all property acquired in respect of such
Mortgage Loans. The Agreement permits, but does not require, the party
designated in the Agreement to purchase from the Trust Fund all Mortgage Loans
and all property acquired in respect of any Mortgage Loan at a price determined
as provided in the Agreement. The exercise of such right will effect early
retirement of the Certificates; however, such right to purchase is subject to
the aggregate Stated Principal Balance of the Mortgage Loans at the time of
purchase being 10% or less of the aggregate Stated Principal Balance of the
Mortgage Loans at the Cut-off Date.
The recitals contained herein shall be taken as statements of the
Depositor and the Trustee assumes no responsibility for their correctness.
Unless the certificate of authentication hereon has been executed
by the Certificate Registrar, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be
duly executed under its official seal.
Dated:
THE BANK OF NEW YORK
[SEAL] as Trustee
By:
--------------------------------
Authorized Officer
CERTIFICATE OF AUTHENTICATION
This is one of the Class A2-1 Certificates referred to in the
within-mentioned Agreement.
THE BANK OF NEW YORK
as Certificate Registrar
By:
--------------------------------
Authorized Signatory
<PAGE>
ABBREVIATIONS
The following abbreviations, when used in the inscription on the
face of this instrument, shall be construed as though they were written out in
full according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT - CUSTODIAN
-------------
(Cust) (Minor)
TEN ENT - as tenants by the entireties under Uniform Gifts
to Minors Act
JT TEN - as joint tenants with right _________________
if survivorship and not as (State)
tenants in common
Additional abbreviations may also be used though not in the above
list.
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto
(Please print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee)
a Percentage Interest equal to ____% evidenced by the within Asset-Backed Fixed
Rate and Floating Rate Certificate and hereby authorize(s) the registration of
transfer of such interest to assignee on the Certificate Register of the Trust
Fund.
I (we) further direct the Certificate Registrar to issue a new
Certificate of a like Percentage Interest and Class to the above named assignee
and deliver such Certificate to the following address:
.
Dated:
-------------------------------------
Signature by or on behalf of assignor
------------------------------------
Signature Guaranteed
<PAGE>
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for purposes of
distribution:
Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to
for the account of _______________________________, account number ,
or, if mailed by check, to
.
Applicable statements should be mailed to
.
This information is provided by , the assignee named above, or
________________________________________, as its agent.
<PAGE>
EXHIBIT A-6
FORM OF CLASS R CERTIFICATE
THIS CERTIFICATE MAY NOT BE TRANSFERRED TO A NON-
UNITED STATES PERSON.
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
"RESIDUAL INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT"
("REMIC"), AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G
AND 860D OF THE INTERNAL REVENUE CODE OF 1986 (THE "CODE").
THIS CLASS R CERTIFICATE IS SUBORDINATE TO THE CLASS A1-1, THE CLASS
A1-2, THE CLASS A1-3, THE CLASS A1-4 AND THE CLASS A2- 2 CERTIFICATES OF
THIS SERIES TO THE EXTENT DESCRIBED HEREIN AND IN THE POOLING AND
SERVICING AGREEMENT REFERRED TO HEREIN.
THIS CLASS R CERTIFICATE WILL NOT BE ENTITLED TO PAYMENTS
CONSTITUTING THE AVAILABLE DISTRIBUTION AMOUNT UNTIL SUCH
TIME AS DESCRIBED IN THE POOLING AND SERVICING AGREEMENT
REFERRED TO HEREIN.
THIS CLASS R CERTIFICATE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR THE SECURITIES
LAWS OF ANY STATE. ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS
CERTIFICATE WITHOUT SUCH REGISTRATION OR QUALIFICATION MAY BE MADE ONLY
IN A TRANSACTION THAT DOES NOT REQUIRE SUCH REGISTRATION OR
QUALIFICATION AND IN ACCORDANCE WITH THE PROVISIONS OF SECTION 5.02 OF
THE POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN.
NO TRANSFER OF THIS CERTIFICATE TO AN EMPLOYEE BENEFIT
PLAN OR OTHER RETIREMENT ARRANGEMENT SUBJECT TO THE
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS
AMENDED, OR THE CODE WILL BE REGISTERED EXCEPT IN
COMPLIANCE WITH THE PROCEDURES DESCRIBED HEREIN.
ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CLASS R CERTIFICATE
MAY BE MADE ONLY IF THE PROPOSED TRANSFEREE PROVIDES (1) AN AFFIDAVIT TO
THE CERTIFICATE REGISTRAR AND THE TRUSTEE THAT SUCH TRANSFEREE IS NOT
(A) THE UNITED STATES, ANY STATE OR POLITICAL SUBDIVISION THEREOF, ANY
FOREIGN GOVERNMENT, ANY INTERNATIONAL ORGANIZATION, OR ANY AGENCY OR
INSTRUMENTALITY OF ANY OF THE FOREGOING, (B)
<PAGE>
ANY ORGANIZATION (OTHER THAN A COOPERATIVE DESCRIBED IN SECTION 521 OF
THE CODE) WHICH IS EXEMPT FROM THE TAX IMPOSED BY CHAPTER 1 OF THE CODE
UNLESS SUCH ORGANIZATION IS SUBJECT TO THE TAX IMPOSED BY SECTION 511 OF
THE CODE, (C) ANY ORGANIZATION DESCRIBED IN SECTION 1381(A)(2)(C) OF THE
CODE (ANY SUCH PERSON DESCRIBED IN THE FOREGOING CLAUSES (A), (B) OR (C)
BEING HEREINAFTER REFERRED TO AS A "DISQUALIFIED ORGANIZATION"), OR (D)
AN AGENT OF A DISQUALIFIED ORGANIZATION AND (2) NO PURPOSE OF SUCH
TRANSFER IS TO IMPEDE THE ASSESSMENT OR COLLECTION OF TAX, AND (3) SUCH
TRANSFEREE SATISFIES CERTAIN ADDITIONAL CONDITIONS RELATING TO THE
FINANCIAL CONDITION OF THE PROPOSED TRANSFEREE. NOTWITHSTANDING THE
REGISTRATION IN THE CERTIFICATE REGISTER OR ANY TRANSFER, SALE OR OTHER
DISPOSITION OF THIS CLASS R CERTIFICATE TO A DISQUALIFIED ORGANIZATION
OR AN AGENT OF A DISQUALIFIED ORGANIZATION, SUCH REGISTRATION SHALL BE
DEEMED TO BE OF NO LEGAL FORCE OR EFFECT WHATSOEVER AND SUCH PERSON
SHALL NOT BE DEEMED TO BE A CERTIFICATEHOLDER FOR ANY PURPOSE HEREUNDER,
INCLUDING, BUT NOT LIMITED TO, THE RECEIPT OF DISTRIBUTIONS ON THIS
CERTIFICATE. EACH HOLDER OF A CLASS R CERTIFICATE BY ACCEPTANCE OF THIS
CERTIFICATE SHALL BE DEEMED TO HAVE CONSENTED TO THE PROVISIONS OF THIS
PARAGRAPH AND THE PROVISIONS OF SECTION 5.02(D) OF THE POOLING AND
SERVICING AGREEMENT REFERRED TO HEREIN. ANY PERSON THAT IS A
DISQUALIFIED ORGANIZATION IS PROHIBITED FROM ACQUIRING BENEFICIAL
OWNERSHIP OF THIS CLASS R CERTIFICATE.
Series 1996-3, Class R
Date of Pooling and Servicing Agreement
and Cut-off Date: June 1, 1996
First Distribution Date: July 25, 1996
No. ___
Percentage Interest: ____%
Aggregate Certificate Principal Balance of
the Class R Certificates as of the Issue
Date: $0
Master Servicer: Berkeley Federal Bank
& Trust FSB
Trustee: The Bank of New York
Issue Date: June 27, 1996
<PAGE>
ASSET-BACKED FIXED RATE AND FLOATING RATE CERTIFICATE
evidencing a beneficial ownership interest in a portion of a Trust Fund
consisting primarily of a pool of conventional one- to four-family first
mortgage loans formed and sold by
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC., THE MASTER SERVICER, THE
TRUSTEE OR ANY OF THEIR AFFILIATES. NEITHER THIS CERTIFICATE NOR THE
UNDERLYING MORTGAGE LOANS ARE GUARANTEED BY ANY AGENCY OR
INSTRUMENTALITY OF THE UNITED STATES.
This certifies that ________________ is the registered owner of a
Percentage Interest (obtained by dividing the denomination of this Certificate
by the aggregate Certificate Principal Balance of the Class R Certificates) in
that certain beneficial ownership interest evidenced by all the Class R
Certificates in the Trust Fund created pursuant to a Pooling and Servicing
Agreement, dated as specified above (the "Agreement"), among Salomon Brothers
Mortgage Securities VII, Inc. (hereinafter called the "Depositor," which term
includes any successor entity under the Agreement), the Master Servicer and the
Trustee, a summary of certain of the pertinent provisions of which is set forth
hereafter. To the extent not defined herein, the capitalized terms used herein
have the meanings assigned in the Agreement. This Certificate is issued under
and is subject to the terms, provisions and conditions of the Agreement, to
which Agreement the Holder of this Certificate by virtue of the acceptance
hereof assents and by which such Holder is bound.
Pursuant to the terms of the Agreement, distributions will be
made on the 25th day of each month or, if such 25th day is not a Business Day,
the Business Day immediately following (a "Distribution Date"), commencing on
the First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the last Business Day of the month immediately
preceding the month of such distribution (the "Record Date"), from the Available
Distribution Amount in an amount equal to the product of the Percentage Interest
evidenced by this Certificate and the amount required to be distributed to the
Holders of Class R Certificates on such Distribution Date pursuant to the
Agreement.
All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by or on behalf of the Trustee by
wire transfer in immediately available funds to the account of the Person
entitled thereto if such Person shall have so notified the Trustee in writing at
least five Business Days prior to the Record Date immediately prior to such
Distribution Date and is the registered owner of Class R Certificates the
aggregate Percentage Interest of which is in excess of a 66% Percentage Interest
of the Class R Certificates, or by check mailed by first class mail to the
address of the Person entitled thereto, as such name and address shall appear on
the Certificate Register, provided that the Trustee may deduct a reasonable wire
transfer fee from any payment made by wire transfer. Notwithstanding the above,
the final distribution on this Certificate will be made after due notice by the
Trustee of the pendency of such distribution
<PAGE>
-2-
and only upon presentation and surrender of this Certificate at the office or
agency appointed by the Trustee for that purpose as provided in the Agreement.
This Certificate is one of a duly authorized issue of
Certificates designated as Asset-Backed Fixed Rate and Floating Rate
Certificates of the Series specified on the face hereof (herein called the
"Certificates") and representing the Percentage Interest specified on the face
hereof.
The Class R Certificates are limited in right of payment to
certain collections and recoveries respecting the Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Accounts and the Distribution Account
may be made from time to time for purposes other than distributions to
Certificateholders, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Mortgage Loans.
The Agreement permits, with certain exceptions therein provided,
the amendment thereof and the modification of the rights and obligations of the
Depositor, the Master Servicer, the Trustee and the rights of the
Certificateholders under the Agreement at any time by the Depositor, the Master
Servicer, the Trustee and the Certificate Insurer with the consent of the
Holders of Certificates entitled to at least 66% of the Voting Rights and the
Certificate Insurer. Any such consent by the Holder of this Certificate shall be
conclusive and binding on such Holder and upon all future Holders of this
Certificate and of any Certificate issued upon the transfer hereof or in
exchange herefor or in lieu hereof whether or not notation of such consent is
made upon this Certificate. The Agreement also permits the amendment thereof, in
certain limited circumstances, without the consent of the Holders of any of the
Certificates but with the consent of the Certificate Insurer.
As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies appointed by the Trustee as provided in the
Agreement, duly endorsed by, or accompanied by an assignment in the form below
or other written instrument of transfer in form satisfactory to the Trustee and
the Certificate Registrar duly executed by, the Holder hereof or such Holder's
attorney duly authorized in writing, and thereupon one or more new Certificates
of the same Class in authorized denominations evidencing the same aggregate
Percentage Interest will be issued to the designated transferee or transferees.
The Certificates are issuable in fully registered form only
without coupons in Classes and denominations representing Percentage Interests
specified in the Agreement. As provided in the Agreement and subject to certain
limitations therein set forth, Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.
No transfer of this Certificate shall be made unless that
transfer is made pursuant to an effective registration statement under the 1933
Act and effective registration
<PAGE>
-3-
or qualification under applicable state securities laws, or is made in a
transaction that does not require such registration or qualification. In the
event that a transfer is to be made without registration or qualification, the
Trustee and the Certificate Registrar shall require, in order to assure
compliance with such laws, either (i) that the Certificateholder desiring to
effect the transfer and such Certificateholder's prospective transferee each
execute a representation letter in the form described by the Agreement
certifying to the Trustee and the Certificate Registrar the facts surrounding
the transfer, or (ii) that the Trustee and the Certificate Registrar shall
require an Opinion of Counsel satisfactory to them that such transfer may be
made without such registration or qualification, which Opinion of Counsel shall
not be an expense of the Depositor, the Trustee or the Certificate Registrar, in
their respective capacities as such. None of the Depositor, the Certificate
Registrar nor the Trustee is obligated to register or qualify the Class of
Certificates specified on the face hereof under the 1933 Act or any other
securities law or to take any action not otherwise required under the Agreement
to permit the transfer of such Certificates without registration or
qualification. Any such Certificateholder desiring to effect such transfer
shall, and does hereby agree to, indemnify the Trustee, the Depositor, the
Certificate Registrar and any Master Servicer against any liability that may
result if the transfer is not so exempt or is not made in accordance with such
federal and state laws.
Except as otherwise set forth in the next succeeding paragraph,
no transfer of a Certificate or any interest therein may be made to employee
benefit plans and certain other retirement plans and arrangements, including
individual retirement accounts and annuities, Keogh plans and collective
investment funds and separate accounts in which such plans, accounts or
arrangements are invested that are subject to the fiduciary responsibility
provisions of ERISA and Section 4975 of the Code ("Plans") or any person who is
directly or indirectly purchasing the Certificate or interest therein on behalf
of, as named fiduciary of, as trustee of, or with assets of a Plan, unless the
prospective transferee provides the Trustee with a certification of facts and an
opinion of counsel which establish to the satisfaction of the Trustee that such
transfer will not result in a violation of Section 406 of ERISA or Section 4975
of the Code or cause the Master Servicer or Trustee to be deemed a fiduciary of
such Plan or result in the imposition of an excise tax under Section 4975 of the
Code. In the absence of its having received the certification of facts and
opinion of counsel contemplated by the preceding sentence, the Trustee shall
(unless the next succeeding paragraph applies) require the prospective
transferee of any Certificate to certify that it is neither a Plan nor a Person
who is directly or indirectly purchasing such Certificate on behalf of, as named
fiduciary of, as trustee of, or with assets of a Plan.
The Holder of this Certificate, by its acceptance hereof, shall
be deemed for all purposes to have consented to the provisions of Section 5.02
of the Agreement and to any amendment of the Agreement deemed necessary by
counsel of the Depositor to ensure that the transfer of this Certificate to any
Person other than a Permitted Transferee or any other Person will not cause the
Trust Fund to cease to qualify as a REMIC or cause the imposition of a tax upon
the REMIC.
<PAGE>
-4-
No service charge will be made for any such 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 transfer or exchange of Certificates.
The Depositor, the Master Servicer, the Trustee, the Certificate
Insurer and the Certificate Registrar and any agent of the Depositor, any Master
Servicer, the Trustee, the Certificate Insurer or the Certificate Registrar may
treat the Person in whose name this Certificate is registered as the owner
hereof for all purposes, and none of the Depositor, the Master Servicer, the
Trustee, the Certificate Insurer, the Certificate Registrar nor any such agent
shall be affected by notice to the contrary.
The obligations created by the Agreement and the Trust Fund
created thereby shall terminate upon payment to the Certificateholders of all
amounts held by or on behalf of the Trustee and required to be paid to them
pursuant to the Agreement following the earlier of (i) the final payment or
other liquidation (or any advance with respect thereto) of the last Mortgage
Loan remaining in the Trust Fund, and (ii) the purchase by the party designated
in the Agreement at a price determined as provided in the Agreement from the
Trust Fund of all Mortgage Loans and all property acquired in respect of such
Mortgage Loans. The Agreement permits, but does not require, the party
designated in the Agreement to purchase from the Trust Fund all Mortgage Loans
and all property acquired in respect of any Mortgage Loan at a price determined
as provided in the Agreement. The exercise of such right will effect early
retirement of the Certificates; however, such right to purchase is subject to
the aggregate Stated Principal Balance of the Mortgage Loans at the time of
purchase being 10% or less of the aggregate Stated Principal Balance of the
Mortgage Loans at the Cut-off Date.
The recitals contained herein shall be taken as statements of the
Depositor and the Trustee assumes no responsibility for their correctness.
Unless the certificate of authentication hereon has been executed
by the Certificate Registrar, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be
duly executed under its official seal.
Dated:
THE BANK OF NEW YORK
[SEAL] as Trustee
By:
--------------------------------
Authorized Officer
CERTIFICATE OF AUTHENTICATION
This is one of the Class R Certificates referred to in the
within-mentioned Agreement.
THE BANK OF NEW YORK
as Certificate Registrar
By:
--------------------------------
Authorized Signatory
<PAGE>
ABBREVIATIONS
The following abbreviations, when used in the inscription on the
face of this instrument, shall be construed as though they were written out in
full according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT - CUSTODIAN
-------------
(Cust) (Minor)
TEN ENT - as tenants by the entireties under Uniform Gifts
to Minors Act
JT TEN - as joint tenants with right _________________
if survivorship and not as (State)
tenants in common
Additional abbreviations may also be used though not in the above
list.
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto
(Please print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee)
a Percentage Interest equal to ____% evidenced by the within Asset-Backed Fixed
Rate and Floating Rate Certificate and hereby authorize(s) the registration of
transfer of such interest to assignee on the Certificate Register of the Trust
Fund.
I (we) further direct the Certificate Registrar to issue a new
Certificate of a like Percentage Interest and Class to the above named assignee
and deliver such Certificate to the following address:
.
Dated:
-------------------------------------
Signature by or on behalf of assignor
------------------------------------
Signature Guaranteed
<PAGE>
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for purposes of
distribution:
Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to
for the account of _______________________________, account number ,
or, if mailed by check, to
.
Applicable statements should be mailed to
.
This information is provided by , the assignee named above, or
________________________________________, as its agent.
<PAGE>
EXHIBIT B
FORM OF FINANCIAL GUARANTY INSURANCE POLICY
Trust: As described in Endorsement No. 1
Certificates: $130,061,796 Salomon Brothers Mortgage Securities VII, Inc.,
Asset-Backed Fixed Rate and Floating Rate Certificates,
Series 1996-3, Class A1-1, Class A1-2, Class A1-3,
Class A1-4 and Class A2-1
Policy No.: 50481-N
Date of Issuance: 6/27/96
FINANCIAL SECURITY ASSURANCE INC. ("Financial Security"), for
consideration received, hereby UNCONDITIONALLY AND IRREVOCABLY GUARANTEES to the
Trustee for the benefit of each Holder, subject only to the terms of this Policy
(which includes each endorsement hereto), the full and complete payment of
Guaranteed Distributions with respect to the Certificates of the Trust referred
to above.
For the further protection of each Holder, Financial Security irrevocably
and unconditionally guarantees payment of the amount of any distribution of
principal or interest with respect to the Certificates made during the Term of
this Policy to such Holder that is subsequently avoided in whole or in part as a
preference payment under applicable law.
Payment of any amount required to be paid under this Policy will be made
following receipt by Financial Security of notice as described in Endorsement
No. 1 hereto.
Financial Security shall be subrogated to the rights of each Holder to
receive distributions with respect to each Certificate held by such Holder to
the extent of any payment by Financial Security hereunder.
Except to the extent expressly modified by Endorsement No. 1 hereto, the
following terms shall have the meanings specified for all purposes of this
Policy. "Holder" means the registered owner of any Certificate as indicated on
the registration books maintained by or on behalf of the Trustee for such
purpose or, if the Certificate is in bearer form, the holder of the Certificate.
"Trustee", "Guaranteed Distributions" and "Term of this Policy" shall have the
meanings set forth in Endorsement No. 1 hereto.
This Policy sets forth in full the undertaking of Financial Security, and
shall not be modified, altered or affected by any other agreement or instrument,
including any modification or amendment thereto. Except to the extent expressly
modified by an endorsement hereto, the premiums paid in respect of this Policy
are nonrefundable for any reason whatsoever. This Policy may not be canceled or
revoked during the Term of this Policy. An acceleration payment shall not be due
under this Policy unless such acceleration is at the sole option of Financial
Security. THIS POLICY IS NOT COVERED BY THE PROPERTY/CASUALTY
<PAGE>
INSURANCE SECURITY FUND SPECIFIED IN ARTICLE 76 OF THE NEW YORK
INSURANCE LAW.
In witness whereof, FINANCIAL SECURITY ASSURANCE INC. has caused this
Policy to be executed on its behalf by its Authorized Officer.
FINANCIAL SECURITY ASSURANCE INC.
By
AUTHORIZED OFFICER
A subsidiary of Financial Security Assurance Holdings Ltd.
350 Park Avenue, New York, N.Y. 10022-6022 (212) 826-0100
Form 101NY (5/89)
<PAGE>
ENDORSEMENT NO. 1 TO
FINANCIAL GUARANTY INSURANCE POLICY
FINANCIAL SECURITY ASSURANCE INC.
TRUST: Established pursuant to the Pooling and Servicing Agreement dated as
of June 1, 1996 among Salomon Brothers Mortgage Securities VII,
Inc., as Depositor, Berkeley Federal Bank & Trust FSB, as Master
Servicer, and The Bank of New York, as Trustee
CERTIFICATES: $130,061,796 Salomon Brothers Mortgage Securities VII, Inc.,
Asset- Backed Fixed Rate and Floating Rate Certificates,
Series 1996-3, Class A1-1, Class A1-2, Class A1-3, Class A1-4
and Class A2-1
POLICY NO.: 50481-N
DATE OF ISSUANCE: June 27, 1996
1. DEFINITIONS. For all purposes of this Policy, the terms specified below
shall have the meanings or constructions provided below. Capitalized terms used
herein and not otherwise defined herein shall have the meanings provided in the
Pooling and Servicing Agreement unless the context shall otherwise require.
"BUSINESS DAY" means any day other than (i) a Saturday or Sunday, or (ii)
a day on which banking institutions in the State of New York are authorized or
obligated by law or executive order to be closed.
"GUARANTEED DISTRIBUTIONS" means, with respect to each Distribution Date,
the distribution to be made to the Holders of the Certificates on such
Distribution Date, in an aggregate amount equal to the sum of (i) the Accrued
Certificate Interest on the Certificates, less the amount of any Prepayment
Interest Shortfalls and any shortfalls resulting from the application of the
Relief Act, (ii) the principal portion of any Realized Losses allocated to the
Certificates and, without duplication, the excess, if any, of (a) the aggregate
Certificate Principal Balance of all of the Class A Certificates then
outstanding over (b) the aggregate principal balances of the Mortgage Loans then
outstanding and (iii) if (but only if) such Distribution Date is the earlier of
the Maturity Date or the Final Distribution Date for the Certificates, the
outstanding Certificate Principal Balance of the Certificates of such Class
(without duplication of amounts included pursuant to clause (ii)), in each case
in accordance with the original terms of the Certificates when issued and
without regard to any amendment or modification of the Certificates or the
Pooling and Servicing Agreement which has not been consented to by Financial
Security. Guaranteed Distributions shall not include, nor shall coverage be
provided under this Policy in respect of, Basis Risk Shortfalls, Unpaid Basis
Risk Shortfalls or any taxes, withholding or other
1
<PAGE>
Policy No.: 50481-N Date of Issuance: June 27, 1996
charge imposed by any governmental authority.
"POLICY" means this Financial Guaranty Insurance Policy and includes each
endorsement thereto.
"POOLING AND SERVICING AGREEMENT" means the Pooling and Servicing
Agreement dated as of June 1, 1996 among Salomon Brothers Mortgage Securities
VII, Inc., Berkeley Federal Bank & Trust FSB, and The Bank of New York.
"RECEIPT" and "RECEIVED" mean actual delivery to Financial Security and to
the Fiscal Agent (as defined below), if any, at or prior to 12:00 noon, New York
City time, on a Business Day; delivery either on a day that is not a Business
Day, or after 12:00 noon, New York City time, shall be deemed to be Received on
the next succeeding Business Day. If any notice or certificate given hereunder
by the Trustee is not in proper form or is not properly completed, executed or
delivered, it shall be deemed not to have been Received, and Financial Security
or its Fiscal Agent shall promptly so advise the Trustee and the Trustee may
submit an amended notice.
"TERM OF THIS POLICY" means the period from and including the Date of
Issuance to and including the date on which (i) the Certificate Principal
Balance of all of the Certificates is zero, (ii) any period during which any
payment on the Certificates could have been avoided in whole or in part as a
preference payment under applicable bankruptcy, insolvency, receivership or
similar law has expired, and (iii) if any proceedings requisite to avoidance as
a preference payment have been commenced prior to the occurrence of (i) and
(ii), a final and nonappealable order in resolution of each such proceeding has
been entered.
"TRUSTEE" means The Bank of New York, in its capacity as Trustee under the
Pooling and Servicing Agreement and any successor in such capacity.
2. NOTICES AND CONDITIONS TO PAYMENT IN RESPECT OF GUARANTEED
DISTRIBUTIONS. Following Receipt by Financial Security of a notice and
certificate from the Trustee in the form attached as Exhibit A to this
Endorsement, Financial Security will pay any amount payable hereunder in respect
of Guaranteed Distributions out of the funds of Financial Security on the later
to occur of (a) 12:00 noon, New York City time, on the Business Day following
such Receipt; and (b) 12:00 noon, New York City time, on the Distribution Date
to which such claim relates. Payments due hereunder in respect of Guaranteed
Distributions will be disbursed by wire transfer of immediately available funds
to the Certificate Insurance Payments Account established pursuant to the
Pooling and Servicing Agreement or, if no such Certificate Insurance Payments
Account has been established, to the Trustee.
Financial Security shall be entitled to pay any amount hereunder in
respect of Guaranteed
2
<PAGE>
Policy No.: 50481-N Date of Issuance: June 27, 1996
Distributions whether or not any notice and certificate shall have been Received
by Financial Security as provided above. Guaranteed Distributions insured
hereunder shall not include interest, in respect of principal paid hereunder on
an accelerated basis, accruing from after the date of payment of such principal.
Financial Security's obligations hereunder in respect of Guaranteed
Distributions shall be discharged to the extent funds are disbursed by Financial
Security as provided herein whether or not such funds are properly applied by
the Trustee.
3. GOVERNING LAW. This Policy shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to the
conflict of laws principles thereof.
4. FISCAL AGENT. At any time during the Term of this Policy, Financial
Security may appoint a fiscal agent (the "Fiscal Agent") for purposes of this
Policy by written notice to the Trustee at the notice address specified in the
Pooling and Servicing Agreement specifying the name and notice address of the
Fiscal Agent. From and after the date of receipt of such notice by the Trustee,
(i) copies of all notices and documents required to be delivered to Financial
Security pursuant to this Policy shall be simultaneously delivered to the Fiscal
Agent and to Financial Security and shall not be deemed Received until Received
by both and (ii) all payments required to be made by Financial Security under
this Policy may be made directly by Financial Security or by the Fiscal Agent on
behalf of Financial Security. The Fiscal Agent is the agent of Financial
Security only and the Fiscal Agent shall in no event be liable to any Holder for
any acts of the Fiscal Agent or any failure of Financial Security to deposit, or
cause to be deposited, sufficient funds to make payments due under this Policy.
5. WAIVER OF DEFENSES. To the fullest extent permitted by applicable law,
Financial Security agrees not to assert, and hereby waives, for the benefit of
each Holder, all rights (whether by counterclaim, setoff or otherwise) and
defenses (including, without limitation, the defense of fraud), whether acquired
by subrogation, assignment or otherwise, to the extent that such rights and
defenses may be available to Financial Security to avoid payment of its
obligations under this Policy in accordance with the Express Provisions of this
Policy.
6. NOTICES. All notices to be given hereunder shall be in writing
(except as otherwise specifically provided herein) and shall be mailed by
registered mail or personally delivered or telecopied to Financial Security as
follows:
3
<PAGE>
Policy No.: 50481-N Date of Issuance: June 27, 1996
Financial Security Assurance Inc.
350 Park Avenue
New York, NY 10022
Attention: Senior Vice President
- Surveillance
Re: Salomon Brothers Mortgage Securities VII, Inc.,
Asset-Backed Fixed and Floating Rate Certificates,
Series 1996-3
Telecopy No.: (212) 339-3518
Confirmation: (212) 826-0100
Financial Security may specify a different address or addresses by writing
mailed or delivered to the Trustee.
7. PRIORITIES. In the event any term or provisions of the face of this
Policy is inconsistent with the provisions of this Endorsement, the provisions
of this Endorsement shall take precedence and shall be binding.
8. EXCLUSIONS FROM INSURANCE GUARANTY FUNDS. This Policy is not covered by
the Property/Casualty Insurance Security Fund specified in Article 76 of the New
York Insurance Law. This Policy is not covered by the Florida Insurance Guaranty
Association created under Part II of Chapter 631 of the Florida Insurance Code.
In the event Financial Security were to become insolvent, any claims arising
under this Policy are excluded from coverage by the California Insurance
Guaranty Association, established pursuant to Article 14.2 of Chapter 1 of Part
2 of Division 1 of the California Insurance Code.
9. SURRENDER OF POLICY. The Holder shall surrender this Policy to
Financial Security for cancellation upon expiration of the Term of this Policy.
IN WITNESS WHEREOF, FINANCIAL SECURITY ASSURANCE INC. has caused
this Endorsement No. 1 to be executed by its Authorized Officer.
FINANCIAL SECURITY ASSURANCE INC.
By:
Authorized Officer
4
<PAGE>
Policy No.: 50481-N Date of Issuance: June 27, 1996
Exhibit A
To Endorsement 1
NOTICE OF CLAIM AND CERTIFICATE
Financial Security Assurance Inc.
350 Park Avenue
New York, NY 10022
The undersigned, a duly authorized officer of The Bank of New York (the
"Trustee"), hereby certifies to Financial Security Assurance Inc. ("Financial
Security"), with reference to Financial Guaranty Insurance Policy No. 50481-N
dated June 27, 1996 (the "Policy") issued by Financial Security in respect of
the Salomon Brothers Mortgage Securities VII, Inc., AssetBacked Fixed and
Floating Rate Certificates, Series 1996-3, Class A1-1, Class A1-2, Class A1- 3,
Class A1-4 and Class A2-1 (the "Certificates"), that:
(i) The Trustee is the Trustee under the Pooling and Servicing
Agreement for the Holders.
(ii) The sum of all amounts on deposit (or scheduled to be on
deposit) in the Certificate Account and available for distribution to the
Holders of the Guaranteed Distributions pursuant to the Pooling and
Servicing Agreement will be $____________ (the "Shortfall") less than the
Guaranteed Distributions with respect to the Remittance Date occurring on
________________________.
(iii) The Trustee is making a claim under the Policy for the
Shortfall to be applied to distributions of principal or interest or both
with respect to the Certificates.
(iv) The Trustee agrees that, following receipt of funds from
Financial Security, it shall (a) hold such amounts in trust and apply the
same directly to the payment of Guaranteed Distributions on the
Certificates when due; (b) not apply such funds for any other purpose; (c)
not commingle such funds with other funds held by the Trustee and (d)
maintain an accurate record of such payments with respect to each
Certificate and the corresponding claim on the Policy and proceeds thereof
and, if the Certificate is required to be surrendered for such payment,
shall stamp on each such Certificate the legend "$[INSERT APPLICABLE
AMOUNT] paid by Financial Security and the balance hereof has been
canceled and reissued" and then shall deliver such Certificate to
Financial Security.
A-1
<PAGE>
Policy No.: 50481-N Date of Issuance: June 27, 1996
(v) The Trustee, on behalf of the Holders, hereby assigns to
Financial Security the rights of the Holders with respect to the
Certificates to the extent of any payments under the Policy, including,
without limitation, any amounts due to the Holders in respect of
securities law violations arising from the offer and sale of the
Certificates. The foregoing assignment is in addition to, and not in
limitation of, rights of subrogation otherwise available to Financial
Security in respect of such payments. The Trustee shall take such action
and deliver such instruments as may be reasonably requested or required by
Financial Security to effectuate the purpose or provisions of this clause
(v).
(vi) The Trustee, on its behalf and on behalf of the Holders, hereby
appoints Financial Security as agent and attorney-in-fact for the Trustee
and each such Holder in any legal proceeding with respect to the
Certificates. The Trustee hereby agrees that, so long as a Financial
Security Default (as defined in the Pooling and Servicing Agreement) shall
not exist, Financial Security may at any time during the continuation of
any proceeding by or against the Depositor under the United States
Bankruptcy Code or any other applicable bankruptcy, insolvency,
receivership, rehabilitation or similar law (an "Insolvency Proceeding")
direct all matters relating to such Insolvency Proceeding. In addition,
the Trustee hereby agrees that Financial Security shall be subrogated to,
and the Trustee on its behalf and on behalf of each Holder, hereby
delegates and assigns, to the fullest extent permitted by law, the rights
of the Trustee, and each Holder in the conduct of any Insolvency
Proceeding, including, without limitation all rights of any party to an
adversary proceeding or action with respect to any court order issued in
connection with any such Insolvency Proceeding.
(vii) Payment should be made by wire transfer directed to Policy
Payments Account.
Unless the context otherwise requires, capitalized terms used in this
Notice of Claim and Certificate and not defined herein shall have the meanings
provided in the Policy.
IN WITNESS WHEREOF, the Trustee has executed and delivered this Notice of
Claim and Certificate as of the ______ day of _________________, _____.
By:
Title:
A-2
<PAGE>
Policy No.: 50481-N Date of Issuance: June 27, 1996
- --------------------------------------------------
For Financial Security or Fiscal Agent Use Only
Wire transfer sent on ___________________ by ___________________________
Confirmation Number _________________________________________________
A-3
<PAGE>
EXHIBIT C-1
FORM OF TRUSTEE'S INITIAL CERTIFICATION
[Date]
Salomon Brothers Mortgage
Securities VII, Inc.
Seven World Trade Center
New York, New York 10048
[Master Servicer]
===========================
Re: Pooling and Servicing Agreement, dated as of June 1, 1996,
among Salomon Brothers Mortgage Securities VII, Inc.,
Berkeley Federal Bank & Trust FSB and The Bank of New York
ASSET-BACKED FIXED RATE AND FLOATING RATE CERTIFICATES,
SERIES 1996-3
Ladies and Gentlemen:
Attached is the Trustee's preliminary exceptions in accordance with
Section 2.02 of the referenced Pooling and Servicing Agreement (the "Pooling and
Servicing Agreement"). Capitalized terms used but not otherwise defined herein
shall have the meanings ascribed to them in the Pooling and Servicing Agreement.
The Trustee has made no independent examination of any documents
contained in each Mortgage File beyond the review specifically required in the
above-referenced Pooling and Servicing Agreement. The Trustee makes no
representations as to: (i) the validity, legality, sufficiency, enforceability
or genuineness of any of the documents contained in the Mortgage File of any of
the Mortgage Loans identified on the Mortgage Loan Schedule, (ii) the
collectability, insurability, effectiveness or suitability of any such Mortgage
Loan, or (iii) whether any Mortgage File included any of the documents specified
in clause (v) of Section 2.01 of the Pooling and Servicing Agreement.
THE BANK OF NEW YORK
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
<PAGE>
EXHIBIT C-2
FORM OF TRUSTEE FINAL CERTIFICATION
[Date]
Salomon Brothers Mortgage
Securities VII, Inc.
Seven World Trade Center
New York, New York 10048
[Master Servicer]
===========================
Re: Pooling and Servicing Agreement, dated as of June 1, 1996,
among Salomon Brothers Mortgage Securities VII, Inc.,
Berkeley Federal Bank & Trust FSB and The Bank of New York
ASSET-BACKED FIXED RATE AND FLOATING RATE CERTIFICATES,
SERIES 1996-3
Ladies and Gentlemen:
In accordance with Section 2.02 of the above-captioned 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 listed on the attachment hereto), it or a Custodian on its
behalf has received:
(i) the original recorded Mortgage, and the original recorded power
of attorney, if the Mortgage was executed pursuant to a power of
attorney, or a certified copy thereof in those instances where the
public recording office retains the original or where the original has
been lost; and
(ii) an original recorded Assignment of the Mortgage to the Trustee
together with the original recorded Assignment or Assignments of the
Mortgage showing a complete chain of assignment from the originator, or
a certified copy of such Assignments in those instances where the public
recording retains the original or where original has been lost;
(iii) the original lender's title insurance policy; and
(iv) the original Primary Insurance Policy for each Mortgage Loan
indicated on the Mortgage Loan Schedule as having a Loan-to-Value Ratio
at origination in excess of 80%.
<PAGE>
The Trustee has made no independent examination of any documents
contained in each Mortgage File beyond the review specifically required in the
above-referenced Pooling and Servicing Agreement. The Trustee makes no
representations as to: (i) the validity, legality, sufficiency, enforceability
or genuineness of any of the documents contained in the Mortgage File of any of
the Mortgage Loans identified on the Mortgage Loan Schedule, or (ii) the
collectability, insurability, effectiveness or suitability of any such Mortgage
Loan.
Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the above-captioned Pooling and Servicing
Agreement.
THE BANK OF NEW YORK
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
<PAGE>
EXHIBIT D
FORM OF MORTGAGE LOAN PURCHASE AGREEMENT
AGREEMENT, dated June 25, 1996, between Salomon Brothers Mortgage
Securities VII, Inc., a Delaware corporation (the "Purchaser"), and Berkeley
Federal Bank & Trust FSB, a federal savings bank (the "Seller").
PRELIMINARY STATEMENT
The Seller intends to sell certain fixed rate and adjustable rate
conventional residential mortgage loans, including balloon payment loans and
buydown loans (the "Mortgage Loans") to the Purchaser on the terms and subject
to the conditions set forth in this Agreement. The Purchaser intends to deposit
the Mortgage Loans into a mortgage pool comprising the trust fund. The trust
fund will be evidenced by a single series of mortgage pass-through certificates
designated as Series 1996-3 (the "Certificates"). The Certificates shall consist
of two or more classes of certificates: (i) a senior class or classes
(collectively, the "Senior Certificates") to be rated in the highest rating
category by rating agencies mutually acceptable to SBMS VII and the certificate
insurer and fully insured as to payments of principal and interest by the
certificate insurer and (ii) a single residual class (the "Residual
Certificates") to be subordinated to the Senior Certificates and the certificate
insurer, such Residual Certificates to be unrated and delivered to the Seller as
partial consideration for the Mortgage Loans as further described below. The
Certificates will be issued pursuant to a Pooling and Servicing Agreement, dated
as of June 1, 1996 (the "Pooling and Servicing Agreement"), among the Purchaser,
as depositor, The Bank of New York, as trustee (the "Trustee"), and the Seller,
in its capacity as Master Servicer. Capitalized terms used but not defined
herein shall have the meanings set forth in the Pooling and Servicing Agreement.
The parties hereto agree as follows:
SECTION 1. AGREEMENT TO PURCHASE. The Seller agrees to sell, and
the Purchaser agrees to purchase, on or before June 27, 1996 (the "Closing
Date"), the Mortgage Loans having an aggregate principal balance as of the close
of business on June 1, 1996 (the "Cut-off Date"), after giving effect to
payments due on or before the Cut-off Date, whether or not received, of
approximately $131,300,000 (plus or minus five percent (5%)), as evidenced by
the actual aggregate principal balance of the Mortgage Loans accepted by the
Purchaser on the Closing Date (the "Closing Balance").
SECTION 2. MORTGAGE LOAN SCHEDULE. The Purchaser and the Seller
have agreed upon which of the mortgage loans owned by the Seller are to be
purchased by the Purchaser pursuant to this Agreement and the Seller will
prepare on or prior to the Closing Date a final schedule describing such
Mortgage Loans (the "Closing Schedule") setting forth all of the Mortgage Loans
to be purchased under this Agreement. The Closing Schedule will conform to the
requirements of the Purchaser as set forth in this Agreement and to the
definition of "Mortgage Loan Schedule" under the Pooling and Servicing
Agreement. The Closing Schedule shall be used as the Mortgage Loan Schedule
under the Pooling and Servicing Agreement.
SECTION 3. CONSIDERATION.
<PAGE>
-2-
(i) In consideration for the Mortgage Loans to be purchased
hereunder, the Purchaser shall, as described in Section 8, pay to the Seller an
amount (the "Purchase Price") equal to the price obtained by Salomon Brothers
Inc for the Senior Certificates. The Purchase Price for any Senior Certificates
backed by fixed rate mortgage loans shall include accrued interest and the
Purchase Price for any Senior Certificates backed by adjustable rate mortgage
loans shall not include accrued interest. In addition, the Purchaser shall
deliver the Residual Certificates to the Seller.
(ii) The Purchaser or any assignee, transferee or designee of the
Purchaser shall be entitled to all scheduled payments of principal due after the
Cut-off Date, all other payments of principal due and collected after the
Cut-off Date, and all payments of interest on the Mortgage Loans allocable to
the period after the Cut-off Date. All scheduled payments of principal and
interest due on or before the Cut-off Date and collected after the Cut-off Date
shall belong to the Seller.
(iii) Pursuant to the Pooling and Servicing Agreement, the Purchaser
will assign all of its right, title and interest in and to the Mortgage Loans,
together with its rights under this Agreement, to the Trustee for the benefit of
the Certificateholders.
SECTION 4. TRANSFER OF THE MORTGAGE LOANS.
(i) POSSESSION OF MORTGAGE FILES. The Seller does hereby sell,
transfer, assign, set over and convey to the Purchaser, without recourse but
subject to the terms of this Agreement, all of its right, title and interest in,
to and under the Mortgage Loans. The contents of each Mortgage File not
delivered to the Purchaser or to any assignee, transferee or designee of the
Purchaser on or prior to the Closing Date are and shall be held in trust by the
Seller for the benefit of the Purchaser or any assignee, transferee or designee
of the Purchaser. Upon the sale of the Mortgage Loans, the ownership of each
Mortgage Note, the related Mortgage and the other contents of the related
Mortgage File is vested in the Purchaser and the ownership of all records and
documents with respect to the related Mortgage Loan prepared by or that come
into the possession of the Seller on or after the Closing Date shall immediately
vest in the Purchaser and shall be delivered immediately to the Purchaser or as
otherwise directed by the Purchaser. The Seller's records will accurately
reflect the sale of each Mortgage Loan to the Purchaser. The Seller shall
release its custody of the contents of any Mortgage File only in accordance with
written instructions from the Purchaser or any assignee, transferee or designee
of the Purchaser, except that where such release is required as incidental to
the Seller's servicing of the Mortgage Loans pursuant to the Pooling and
Servicing Agreement or is in connection with a repurchase of any such Mortgage
Loan pursuant to Section 7 hereof, such written instructions shall not be
required.
(ii) DELIVERY OF MORTGAGE LOAN DOCUMENTS. The Seller will, at least
five (5) Business Days prior to the Closing Date, deliver or cause to be
delivered to the Purchaser or any assignee, transferee or designee of the
Purchaser each of the following documents for each Mortgage Loan:
<PAGE>
-3-
(a) the original Mortgage Note, endorsed by the Seller in the
following form: "Pay to the order of The Bank of New York, as Trustee
for the registered holders of Salomon Brothers Mortgage Securities VII,
Inc., Series 1996-3, without recourse", with all prior and intervening
endorsements showing a complete chain of endorsement from the originator
to the Seller;
(b) the original Mortgage with evidence of recording thereon, and
the original recorded power of attorney, if the Mortgage was executed
pursuant to a power of attorney, with evidence of recording thereon or,
if such Mortgage or power of attorney has been submitted for recording
but has not been returned from the applicable public recording office or
is not otherwise available, a copy of such Mortgage or power of
attorney, as the case may be, certified by the Seller to be a true and
complete copy of the original submitted for recording with the recorded
original to be delivered by the Seller to the Purchaser or any assignee,
transferee or designee of the Purchaser within 90 days of the Closing
Date;
(c) an original Assignment of Mortgage executed by the Seller in
the following form: "The Bank of New York, as Trustee for the registered
holders of Salomon Brothers Mortgage Securities VII, Inc., Series
1996-3";
(d) the original recorded Assignment or Assignments of the Mortgage
showing a complete chain of assignment from the originator to the Seller
or, if any such Assignment has been submitted for recording but has not
been returned from the applicable public recording office or is not
otherwise available, a copy of such Assignment certified by the Seller
to be a true and complete copy of the original submitted for recording
with the recorded original to be delivered by the Seller to the
Purchaser or any assignee, transferee or designee of the Purchaser
within 90 days of the Closing Date;
(e) the original or copies of each assumption, modification,
written assurance or substitution agreement, if any; and
(f) the original lender's title insurance policy, together with all
endorsements or riders which were issued with or subsequent to the
issuance of such policy, insuring the priority of the Mortgage as a
first lien on the Mortgaged Property represented therein as a fee
interest vested in the mortgagor, or in the event such original title
policy is unavailable, a written commitment or uniform binder or
preliminary report of title issued by the title insurance or escrow
company with the original to be delivered by the Seller to the Purchaser
or any assignee, transferee or designee of the Purchaser within 90 days
of the Closing Date.
With respect to any Mortgage Loan as to which the original Mortgage Note has
been permanently lost or destroyed and has not been replaced, the obligations of
the Mortgage Loan Seller to deliver the original Mortgage Note pursuant to
clause (a) above shall be deemed to be
<PAGE>
-4-
satisfied upon delivery to to the Purchaser or any assignee, transferee or
designee of the Purchaser of a photocopy of the original of such Mortgage Note,
with an affidavit from the Mortgage Loan Seller to follow within one Business
Day certifying that the original Mortgage Note has been lost, misplaced or
destroyed, in the form of Exhibit 7 hereto.
The Seller shall be responsible for recording each of the above
documents requiring recordation. Notwithstanding anything to the contrary
contained in this Section 4, in those instances where the public recording
office has not yet returned or retains the original Mortgage, power of attorney
or Assignment after it has been recorded, the obligations of the Seller
hereunder shall be deemed to have been satisfied upon delivery not later than 90
days after the Closing Date by the Seller to the Purchaser or any assignee,
transferee or designee of the Purchaser of a copy of such Mortgage, power of
attorney or Assignment certified by the public recording office to be a true and
complete copy of the recorded original thereof. Upon delivery to the Seller (x)
by the public recording office of any recorded original Mortgage, power of
attorney or Assignment, or (y) by a title insurance or escrow company of any
lender's title insurance policy, the Seller promptly shall (and in no event
later than five Business Days following such receipt) deliver such document to
the Purchaser or any assignee, transferee or designee of the Purchaser. The
Seller promptly shall (and in no event later than five Business Days following
the Closing Date) submit for recording, at no expense to the Trust Fund or the
Trustee, in the appropriate public office for real property records, each
Assignment referred to in clauses (c) of this Section 4(ii). In the event that
any such Assignment is lost or returned unrecorded because of a defect therein,
the Seller promptly shall prepare a substitute Assignment or cure such defect,
as the case may be, and thereafter cause each such Assignment to be duly
recorded.
(iii) ACCEPTANCE OF MORTGAGE LOANS. The documents delivered pursuant
to Section 4(ii) hereof shall be reviewed by the Purchaser or any assignee,
transferee or designee of the Purchaser at any time before or after the Closing
Date (and each document permitted to be delivered after the Closing Date within
seven days of its delivery) to ascertain that all required documents have been
executed and received and that such documents relate to the Mortgage Loans
identified on the Mortgage Loan Schedule. If the Purchaser or any assignee,
transferee or designee of the Purchaser discovers that any material document is
missing or is defective in any material respect, the Seller shall correct or
cure any such omission or defect or shall repurchase or substitute for the
affected Mortgage Loan in accordance with the terms of Section 7(i) hereof and
Section 2.03 of the Pooling and Servicing Agreement. At the time of such
repurchase, the Purchaser shall, in exchange for a written receipt therefor,
release such documents relating to such Mortgage Loan as are then in its
possession to the Seller.
(iv) TRANSFER OF INTEREST IN THE AGREEMENT. The Purchaser has the
right to assign its interest under this Agreement, in whole or in part, to the
Trustee, as may be required to effect the purposes of the Pooling and Servicing
Agreement without the consent of the Seller, and the assignee shall succeed to
the rights and obligations hereunder of the Purchaser. Any expense reasonably
incurred by or on behalf of the Purchaser or the Trustee in connection with
<PAGE>
-5-
enforcing any obligations of the Seller under this Agreement will be promptly
reimbursed by the Seller.
(v) EXAMINATION OF MORTGAGE FILES. Not later than five (5) Business
Days prior to the Closing Date, the Seller shall either (a) deliver to the
Purchaser or to any assignee, transferee or designee of the Purchaser in escrow,
for examination, the Mortgage File pertaining to each Mortgage Loan, or (b) make
such Mortgage Files available to the Purchaser or to any assignee, transferee or
designee of the Purchaser for examination at the Seller's offices. Such
examination may be made by the Purchaser or any assignee, transferee or designee
of the Purchaser at any time before or after the Closing Date. If any such
person makes such examination prior to the Closing Date and identifies any
Mortgage Loans which do not conform to the requirements of the Purchaser as
described in this Agreement, such Mortgage Loans shall be deleted from the
Closing Schedule, and may be replaced, prior to the Closing Date, by substitute
Mortgage Loans acceptable to the Purchaser. The Purchaser may, at its option and
without notice to the Seller, purchase all or part of the Mortgage Loans without
conducting any partial or complete examination. The fact that the Purchaser or
any assignee, transferee or designee of the Purchaser has conducted or has
failed to conduct any partial or complete examination of the Mortgage Files
shall not affect the rights of the Purchaser or any assignee, transferee or
designee of the Purchaser to demand repurchase or other relief as provided
herein or under the Pooling and Servicing Agreement.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE SELLER. The
Seller hereby represents and warrants to the Purchaser that as of the Closing
Date:
(a) The Seller is a federal savings bank duly organized, validly
existing and in good standing under the laws of the United States of
America and has full power and authority (i) to conduct its business as
presently conducted by it and (ii) to execute and deliver this Agreement
and perform its obligations under this Agreement. The Seller is and will
remain in compliance with the laws of each state in which any Mortgaged
Property is located to the extent necessary to perform its obligations
in respect of this Agreement.
(b) The execution and delivery of this Agreement, the performance
by the Seller of its obligations hereunder and the consummation of the
transactions contemplated hereby have been duly authorized by all
necessary action on the part of the Seller. This Agreement has been duly
executed and delivered by the Seller and constitutes a legal, valid and
binding obligation of the Seller, enforceable in accordance with its
respective terms subject to (1) bankruptcy, insolvency, reorganization
or similar laws affecting the enforcement of creditors' rights generally
and to general principles of equity and (2) public policy considerations
underlying the securities laws, to the extent that such public policy
considerations limit the enforceability of the provisions of this
Agreement which purport to provide indemnification from securities laws
liabilities.
<PAGE>
-6-
(c) The execution, delivery and performance of this Agreement by
the Seller, and the consummation of the transactions contemplated
hereby, will not (i) violate or conflict with any provision of the
charter or bylaws of the Seller or any law, rule, regulation, order,
judgment, award, administrative interpretation, injunction, writ, decree
or the like affecting the Seller or by which the Seller is bound or (ii)
result in a breach of or constitute a default under any indenture or
other material agreement to which the Seller is a party or by which the
Seller is bound, which in the case of either clause (i) or (ii) will
have a material adverse effect on the Seller's ability to perform its
obligations under this Agreement.
(d) No authorization, consent, approval, license, exemption or
other action by or notice to or registration or filing with any
governmental authority or administrative or regulatory body is required
for either the execution, delivery or performance of this Agreement by
the Seller or the consummation of the transactions contemplated hereby,
except such as shall have been made or obtained on or prior to the
Closing Date.
(e) There are no pending or, to the best of the Seller's
knowledge, threatened actions, proceedings or investigations against the
Seller before any court, governmental arbitrator or instrumentality
which (i) if determined adversely to the Seller may reasonably be
expected, individually or in the aggregate, to have a material affect on
the Seller's ability to perform its obligations under this Agreement or
(ii) to affect the legality, validity or enforceability of this
Agreement.
(f) The Seller is solvent and the sale of the Mortgage Loans will
not cause the Seller to become insolvent. The sale of the Mortgage Loans
is not undertaken with the intent to hinder, delay or defraud any of the
Seller's creditors.
(g) The Seller is an approved seller/servicer of residential
mortgage loans for FHLMC in good standing and is a HUD approved
mortgagee pursuant to Section 203 of the National Housing Act. No event
has occurred, including but not limited to a change in insurance
coverage, which would make the Seller unable to comply with FHLMC or HUD
eligibility requirements or which would require notification to FHLMC or
HUD.
(h) The information prepared, furnished and delivered by the
Seller to the Purchaser with respect to the Seller's loan loss,
foreclosure and delinquency experience on mortgage loans underwritten to
the same standards as the Mortgage Loans and covering mortgaged
properties similar to the Mortgaged Properties, is true and correct in
all material respects and includes adjustments for payments that are
timely received but are not honored due to insufficient funds or for any
other reason.
(i) The transfer of the Mortgage Loans to the Purchaser at the
Closing Date will be treated by the Seller for financial accounting and
reporting purposes as a sale of assets.
<PAGE>
-7-
(j) This Agreement does not contain any untrue statement of
material fact or omit to state a material fact necessary to make the
statements contained herein not misleading. The written statements,
reports and other documents prepared and furnished by the Seller, or by
third parties based on information provided by the Seller, pursuant to
this Agreement or in connection with the transactions contemplated
hereby taken in the aggregate do not contain any untrue statement of
material fact or omit to state a material fact necessary to make the
statements contained therein not misleading. No certificate of an
officer, statement or other information furnished in writing or report
prepared, furnished and delivered by the Seller to the Purchaser, any
affiliate of the Purchaser or the Trustee for use in connection with the
purchase of the Mortgage Loans and the transactions contemplated
hereunder and under the Pooling and Servicing Agreement will contain any
untrue statement of a material fact, or omit a material fact necessary
to make the information, certificate, statement or report not misleading
in any material respect.
(k) The Mortgage Loans were selected from among the outstanding
mortgage loans in the Seller's portfolio as of the Closing Date
underwritten to the same standards as the Mortgage Loans and covering
mortgaged properties similar to the Mortgaged Properties and as to which
the representations and warranties set forth in this Agreement and the
Pooling and Servicing Agreement could be made and such selection was not
made in a manner so as to adversely affect the interests of the
Purchaser.
(l) The Seller has not dealt with any broker or agent or other
Person who might be entitled to a fee, commission or compensation in
connection with the transaction contemplated by this Agreement other
than the Purchaser and its affiliates.
The representations and warranties set forth in this Section 5
survive the Closing Date.
SECTION 6. REPRESENTATIONS, WARRANTIES AND COVENANTS. The Seller
represents and warrants to the Purchaser, as to each Mortgage Loan sold
hereunder, as of the date hereinbelow specified or, if no such date is
specified, then as of the Closing Date, that:
(a) The Seller has good title to and is the sole owner and holder
of the Mortgage Loan;
(b) The Seller has full right and authority to sell and assign
the Mortgage Loan.
(c) The Seller is transferring such Mortgage Loan free and clear
of any and all liens, pledges, charges or security interests of any
nature encumbering the Mortgage Loans.
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(d) The information set forth on the Mortgage Loan Schedule is
true and correct in all material respects as of the Cut-off Date or such
other date as may be indicated in such schedule.
(e) Seller has acquired, serviced, collected and otherwise dealt
with each Mortgage Loan in compliance with all applicable federal, state
and local laws and regulations and the terms of the related Mortgage
Note and Mortgage.
(f) The related Mortgage Note and Mortgage are genuine and each
is the legal, valid and binding obligation of the maker thereof,
enforceable in accordance with its terms except as such enforcement may
be limited by bankruptcy, insolvency, reorganization or other similar
laws affecting the enforcement of creditors' rights generally and by
general equity principles (regardless of whether such enforcement is
considered in a proceeding in equity or at law).
(g) The related Mortgage is a valid and enforceable first lien on
the related Mortgaged Property, which Mortgaged Property is free and
clear of all encumbrances and liens (including mechanics liens) having
priority over the first lien of the Mortgage except for: (i) liens for
real estate taxes and assessments not yet due and payable; (ii)
covenants, conditions and restrictions, rights of way, easements and
other matters of public record as of the date of recording of such
Mortgage, such exceptions appearing of record being acceptable to
mortgage lending institutions generally or specifically reflected in the
appraisal made in connection with the origination of the related
Mortgage Loan and (iii) 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 such Mortgage.
(h) Any security agreement, chattel mortgage or equivalent
document related to such Mortgage Loan establishes and creates a valid
and enforceable lien on the property described herein.
(i) As of the Closing Date, each Monthly Payment required to be
made prior to June 1, 1996 has been paid. No Mortgage Loan has been
thirty or more days delinquent more than one time in the twelve months
preceding the Closing Date (assuming that a "rolling" thirty day
delinquency is considered to be one time delinquent). In the event that
a Mortgage Loan identified on Exhibit 6 has a first Due Date on July 1,
1996, the Monthly Payment due on July 1, 1996 will be made on or before
August 31, 1996.
(j) 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.
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(k) Except as otherwise disclosed on EXHIBIT 5 attached hereto
and included in the related Mortgage File, Seller has not impaired,
waived, altered or modified the related Mortgage or Mortgage Note in any
material respect, or satisfied, canceled, rescinded or subordinated such
Mortgage or Mortgage Note in whole or in part or released all or any
material portion of the Mortgaged Property from the lien of the
Mortgage, or executed any instrument of release, cancellation,
rescission or satisfaction of the Mortgage Note or Mortgage.
(l) No condition exists which could given rise to any right of
rescission, set off, counterclaim, or defense including, without
limitation, the defense of usury, and no such right has been asserted.
(m) There is no proceeding pending for the total or partial
condemnation and no eminent domain proceedings pending affecting any
Mortgaged Property.
(n) Each Mortgage loan is covered by either (i) a mortgage title
insurance policy or other generally acceptable form of insurance policy
customary in the jurisdiction where the Mortgaged Property is located or
(ii) if generally acceptable in the jurisdiction where the Mortgaged
Property is located, an attorney's opinion of title given by an attorney
licensed to practice law in the jurisdiction where the Mortgaged
Property is located. All of Seller's rights under such policies,
opinions or other instruments shall be deemed to be transferred and
assigned to Purchaser upon sale and assignment of the Mortgage Loans
hereunder. The title insurance policy has been issued by a title insurer
licensed to do business in the jurisdiction where the Mortgaged Property
is located, insuring the original lender, its successor and assigns, as
to the first priority lien of the Mortgage in the original principal
amount of the Mortgage Loan, subject to the exceptions contained in such
policy. Seller is the sole insured of such mortgagee title insurance
policy, and such mortgagee 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. Seller has not made and has
no knowledge of any claims made under such mortgagee title insurance
policy. Seller has not done, by act or omission, anything which could
impair the coverage or enforceability of such mortgagee title insurance
policy or the accuracy of such attorney's opinion of title.
(o) There is no material default, breach, violation or event of
acceleration existing under the related Mortgage or the related 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 material
default, breach, violation or event of acceleration.
(p) With respect to any Mortgage Loan which provides for an
adjustable interest rate, all rate adjustments made by Seller have been
performed in accordance with the terms of the related Mortgage Note or
subsequent modifications, if any.
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(q) There are no delinquent taxes, ground rents, water charges,
sewer rents, assessments, insurance premiums, leasehold payments,
including assessments payable in future installments or other
outstanding charges, affecting the related Mortgaged Property.
(r) (i) No foreclosure proceedings are pending against the
Mortgaged Property, and to the Seller's best knowledge, (ii) no material
litigation or lawsuit relating to the Mortgage Loan is pending and (iii)
the Mortgage Loan is not subject to any pending bankruptcy or insolvency
proceeding.
(s) The Mortgage Loan obligates the mortgagor thereunder to
maintain a hazard insurance policy ("Hazard Insurance") in an amount at
least equal to the lesser of (i) the maximum insurable value of such
improvements or (ii) the principal balance of the Mortgage Loan with a
standard mortgagee clause, in either case in an amount sufficient to
avoid the application of any "co-insurance provisions", and, if it was
in place at origination of the Mortgage Loan, flood insurance, at the
mortgagor's cost and expense. If the Mortgaged Property is in an area
identified in the Federal Register by the Federal Emergency Management
Agency ("FEMA") as having special flood hazards, a flood insurance
policy is in effect which met the requirements of FEMA at the time such
policy was issued. The Mortgage obligates the Mortgagor to maintain the
Hazard and, if applicable, flood 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 the
Mortgagor's cost and expense, and to seek reimbursement therefor from
the Mortgagor. The Mortgaged Property is covered by Hazard Insurance.
(t) The Mortgage Note is not and has not been secured by any
collateral except the lien on the corresponding Mortgage and the
security interest of any applicable security agreement or chattel
mortgage.
(u) Subject to any applicable laws, the Mortgage contains an
enforceable 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. 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. Since the date of origination of the
Mortgage Loan, the Mortgaged Property has not been subject to any
bankruptcy proceeding or foreclosure proceeding and the Mortgagor has
not filed for protection under applicable bankruptcy laws. There is no
homestead or other exemption available to the Mortgagor that would
interfere with the right to sell the Mortgaged Property at a trustee's
sale or the right to foreclose the Mortgage. In the event the Mortgage
constitutes a deed of trust, a trustee, duly qualified under applicable
law to serve as such, as been properly designated and currently so
serves and is named in the
<PAGE>
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Mortgage, and no fees or expenses are or will become payable by
Purchaser to the trustee under the deed of trust, except in connection
with a trustee's sale after default by the related Mortgagor. 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.
(v) Except as set forth in the appraisal which forms part of the
related Mortgage File, the Mortgaged Property, normal wear and tear
excepted, is undamaged by waste, fire, earthquake or earth movement,
windstorm, flood, tornado or other casualty so as to affect materially
and adversely the value of the Mortgaged Property as security for the
Mortgage Loan or the use for which the premises were intended.
(w) There was no fraud involved in the origination of the
Mortgage Loan by the mortgagee or, to the Seller's knowledge, by the
Mortgagor, any appraiser or any other party involved in the origination
of the Mortgage Loan.
(x) Each Mortgage File contains an appraisal of the Mortgaged
Property indicating an appraised value equal to the appraised value
identified for such Mortgaged Property on the Mortgage Loan Schedule.
Each appraisal has been performed in accordance with the provisions of
the Financial Institutions Reform, Recovery and Enforcement Act of 1989.
(y) All parties which have had any interest in the Mortgage Loan,
whether as mortgagee, assignee, pledgee or otherwise, are (or, during
the period in which they held and disposed of such interest, were) in
compliance with any and all applicable "doing business" and licensing
requirements of the laws of the state wherein the Mortgaged Property is
located.
(z) No improvements on the related Mortgaged Property encroach on
adjoining properties, and no improvements on adjoining properties
encroach upon the Mortgaged Property unless there exists in the Mortgage
File a title policy with endorsements which insure against losses
sustained by the insured as a result of such encroachments.
(aa) Each Mortgage Loan was either (1) originated by the Seller
or by a savings and loan association, a savings bank, a commercial bank
or similar banking institution which is supervised and examined by a
federal or state authority, or by a mortgagee approved by the Secretary
of HUD or (2) acquired by the Seller within one month of its
origination, in substantially all cases and in no event later than two
months thereafter, and before being acquired by the Seller, was
re-underwritten according to the Seller's underwriting guidelines.
(ab) Except as otherwise set forth on EXHIBIT 5 attached hereto:
(i) principal payments on the Mortgage Loan commenced no more than sixty
days after the proceeds
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of the Mortgage Loan were disbursed and (ii) the Mortgage note is
payable on the first day of each month.
(ac) Other than with respect to approximately 0.4% of the
adjustable rate mortgage loans and 11% of the fixed rate mortgage loans,
in each case by principal balance as of the Cut-off Date, which are
"balloon payment" mortgage loans, each Mortgage Loan is fully
amortizing.
(ad) The Mortgage Loan bears interest at the Mortgage Interest
Rate and the Mortgage Note does not permit negative amortization.
(ae) With respect to escrow deposits, if any, all such payments
are in the possession of, or under the control of, the Seller and there
exist no deficiencies in connection therewith for which customary
arrangements for repayment thereof have not been made. No escrow
deposits or escrow advances or other charges or payments due the Seller
have been capitalized under any Mortgage or the related Mortgage Note.
(af) No Mortgage Loan contains provisions pursuant to which
Monthly Payments are: (i) paid or partially paid with funds deposited in
any separate account established by the Seller, the Mortgagor, or anyone
on behalf of the Mortgagor; (ii) paid by any source other than the
Mortgagor or (iii) except as otherwise set forth on EXHIBIT 5 attached
hereto, contains any other similar provisions which may constitute a
"buydown" provision. The Mortgage Loan is not a graduated payment
mortgage loan and the Mortgage Loan does not have a shared appreciation
or other contingent interest feature.
(ag) To the Seller's best knowledge, the Mortgaged Property is
lawfully occupied under applicable law.
(ah) Each Mortgage Loan has been underwritten in accordance with
the underwriting guidelines of the Seller in effect at the time the
Mortgage Loan was originated or purchased by the Seller with exceptions
from the underwriting guidelines exercised in a prudent manner.
(ai) No law relating to servicing, collection or notification
practices and, to the Seller's best knowledge no law relating to
origination practices, has been violated in connection with any Mortgage
Loan transferred to the Purchaser pursuant to this Agreement, including,
without limitation, usury, truth in lending, real estate settlement
procedures, consumer credit protection, equal credit opportunity or
disclosure laws. The Mortgage Loan has been serviced by the Seller and
any predecessor servicer in accordance with the terms of the Mortgage
Note.
<PAGE>
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(aj) No Mortgage Loan was made in connection with (a) the
construction or rehabilitation of a Mortgaged Property or (b)
facilitating the trade-in or exchange of a Mortgaged Property.
(ak) The Seller hereby covenants that it will not directly
solicit any Mortgagor hereunder to refinance the related Mortgage Loan.
(al) The proceeds of the Mortgage Loan have been fully disbursed
to or for the account of the Mortgagor and there is no obligation for
the Mortgagee to advance additional funds thereunder, and any and all
requirements as to completion of any on-site or off-site improvement and
as to disbursements of any escrow funds therefor have been complied
with. All costs, fees and expenses incurred in making or closing the
Mortgage Loan and the recording of the Mortgage have been paid, and the
Mortgagor is not entitled to any refund of any amounts paid or due to
the Mortgagee pursuant to the Mortgage Note or Mortgage.
(am) There are no mechanics' or similar liens or claims that have
been filed for work, labor or material (and no rights are outstanding
that under law could give rise to such lien) affecting the related
Mortgaged Property that are or may be liens prior to, or equal or
coordinate with, the lien of the related Mortgage.
(an) Interest is calculated on the Mortgage Note on the basis of
twelve 30 day months and a 360 day year.
(ao) The Mortgaged Property consists of a parcel of real property
with a detached single family residence erected thereon, or a two- to
four-family dwelling, or an individual condominium unit in a low-rise or
high-rise condominium project, or an individual unit in a planned unit
development or a townhouse, provided, however, that any condominium
project or planned unit development shall conform with the applicable
FHLMC type II or type III requirements regarding such dwellings, and no
residence or dwelling is a mobile home or a manufactured dwelling. No
Mortgage Loan is secured by a leasehold estate. If the Residential
Dwelling on the Mortgaged Property is a condominium unit or a unit in a
planned unit development (other than a de minimis planned unit
development) such condominium or planned unit development project meets
the FHLMC's eligibility requirements.
The representations, warranties and covenants, set forth in
Section 6 shall survive the Closing.
SECTION 7. REPURCHASE OBLIGATION FOR DEFECTIVE DOCUMENTATION AND
FOR BREACH OF REPRESENTATION AND WARRANTY.
(i) The representations and warranties contained in Sections 5 and
6 shall not be impaired by any review and examination of loan files or other
documents evidencing or
<PAGE>
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relating to the Mortgage Loans or any failure on the part of the Purchaser to
review or examine such documents and shall inure to the benefit of any assignee,
transferee or designee of the Purchaser, including the Trustee for the benefit
of holders of mortgage pass-through certificates evidencing an interest in all
or a portion of the Mortgage Loans.
With respect to the representations and warranties contained herein that
are made to the knowledge or the best of knowledge of the Seller or as to which
the Seller has no knowledge (other than Section 5(e), the penultimate sentence
of Section 6(n), and the last sentence of Section 6(u)), if it is discovered
that the substance of any such representation and warranty was inaccurate as of
the date such representation and warranty was made or deemed to be made, and
such inaccuracy materially and adversely affects the value of the related
Mortgage Loan or the interest therein of the Purchaser or the Purchaser's
assignee, transferee or designee, then notwithstanding the Seller's lack of
knowledge with respect to the substance of such representation and warranty
being inaccurate at the time the representation and warranty was made, the
Seller shall take such action described in the following paragraph in respect of
such Mortgage Loan.
Upon discovery by the Seller, the Purchaser or any assignee,
transferee or designee of the Purchaser of any materially defective document in,
or that any material document is missing from, any Mortgage File or of a breach
of any of the representations and warranties contained in Section 5 or 6 that
materially and adversely affects the value of any Mortgage Loan or the interest
therein of the Purchaser or the Purchaser's assignee, transferee or designee,
the party discovering the breach shall give prompt written notice to the others.
Within sixty (60) days of its discovery or its receipt of notice of any such
missing or materially defective documentation or any such breach of a
representation and warranty, the Seller promptly shall deliver such missing
document or cure such defect or breach in all material respects, or in the event
such defect or breach cannot be cured, the Seller shall, within 120 days of its
discovery or receipt of notice, either (i) repurchase the affected Mortgage Loan
at the Purchase Price (as such term is defined in the Pooling and Servicing
Agreement) or (ii) subject to the approval of the Purchaser, cause the removal
of such Mortgage Loan from the Trust Fund and substitute one or more Qualified
Substitute Mortgage Loans. Notwithstanding the preceding sentence, if a breach
of representation or warranty cannot reasonably be cured within 60 days after
written notice thereof, and the Seller shall have commenced to cure such breach
within such 60 day period and thereafter diligently and expeditiously proceeds
to cure the same, such 60 day period shall be extended for so long as it shall
require the Seller in the exercise of due diligence to cure such breach, it
being agreed that no such extension shall be for a period in excess of the
lesser of 60 days or the period of time during which the Seller is required to
cure or repurchase an affected Mortgage Loan because of the REMIC Provisions or
pursuant to any sale and/or securitization agreement or arrangement it may enter
into. The Seller shall amend the Closing Schedule to reflect the withdrawal of
such Mortgage Loan from the terms of this Agreement and the Pooling and
Servicing Agreement and the addition, if any, of a Qualified Substitute Mortgage
Loan. The Seller shall deliver to the Purchaser such amended Closing Schedule
and shall deliver such other documents as are required by this Agreement or the
Pooling and Servicing Agreement within five (5) days of any such amendment. Any
repurchase pursuant to this Section 7(i) shall
<PAGE>
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be accomplished by transfer to an account designated by the Purchaser of the
amount of the Purchase Price in accordance with Section 2.03 of the Pooling and
Servicing Agreement. Any repurchase or substitution required by this Section
shall be made in a manner consistent with Section 2.03 of the Pooling and
Servicing Agreement.
(ii) It is understood and agreed that the obligations of the Seller
set forth in this Section 7 to cure, repurchase or substitute for a defective
Mortgage Loan and to indemnify the Purchaser as provided in Section 17
constitute the sole remedies of the Purchaser respecting a missing or defective
document or a breach of the representations and warranties contained in Sections
5 and 6.
SECTION 8. CLOSING; PAYMENT FOR THE MORTGAGE LOANS. The closing
of the purchase and sale of the Mortgage Loans shall be held at the New York
City office of Thacher Proffitt & Wood at 10:00 a.m. Eastern Standard Time on
the Closing Date.
The closing shall be subject to each of the following conditions:
a) All of the representations and warranties of the Seller
under this Agreement and under the Pooling and Servicing
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 or an Event of Default under the Pooling and
Servicing Agreement;
b) The Purchaser shall have received, or the Purchaser's
attorneys shall have received, in escrow (to be released
from escrow at the time of closing), all Closing Documents
as specified in Section 9 of this Agreement, in such forms
as are agreed upon and acceptable to the Purchaser, duly
executed by all signatories other than the Purchaser as
required pursuant to the respective terms thereof;
c) The Seller shall have delivered and released to the
Purchaser or to its assignee, transferee or designee, all
documents (including without limitation, the Mortgage
Loans) required to be so delivered by the Seller pursuant
to Section 2.01 of the Pooling and Servicing Agreement;
and
d) All other terms and conditions of this Agreement shall
have been complied with.
Subject to the foregoing conditions, the Purchaser shall deliver
or cause to be delivered to the Seller on the Closing Date, against delivery and
release by the Seller to the Trustee of all documents required pursuant to the
Pooling and Servicing Agreement, the consideration for the Mortgage Loans as
specified in Section 3 of this Agreement, by delivery to the Seller of the
Purchase Price in immediately available funds.
<PAGE>
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SECTION 9. CLOSING DOCUMENTS. The Closing Documents shall consist
of the following:
a) The Pooling and Servicing Agreement, dated as of the
Cut-off Date, substantially in the form of Exhibit 1
hereto and with such further changes therein as the Seller
and the Purchaser shall mutually agree to, together with
all documents required to be delivered thereunder; and
b) With respect to the Mortgage Loans:
1. An Officers' Certificate of the Seller, dated the
Closing Date, upon which the Purchaser, the
certificate insurer and Salomon Brothers Inc (the
"Underwriter") may rely, in the form of Exhibit 2
hereto, and attached thereto resolutions of the
board of directors of the Seller, together with
copies of the charter, by-laws and certificate of
good standing of the Seller from the Office of
Thrift Supervision;
2. An Officers' Certificate of the Seller, dated the
Closing Date, upon which the Purchaser, the
certificate insurer and the Underwriter may rely,
in the form of Exhibit 3 hereto, with respect to
certain facts regarding the sale of the Mortgage
Loans by the Seller to the Purchaser;
3. An Opinion of Counsel of the Seller, dated the
Closing Date and addressed to the Purchaser, the
certificate insurer and the Underwriter,
substantially in the form attached hereto as
Exhibit 4;
4. A letter from Price Waterhouse LLP, dated the date
hereof, to the effect that they have performed
certain specified procedures as a result of which
they determined that certain information of an
accounting, financial or statistical nature set
forth in the Purchaser's Prospectus Supplement,
dated June 25, 1996 under the captions "The
Mortgage Pool" and "Pooling and Servicing
Agreement -The Mortgage Loan Seller and Master
Servicer", "-Real Estate Owned" and "-Delinquency
and Foreclosures" agrees with the records of the
Seller and that the information under the captions
"Summary of Prospectus Supplement," "The Mortgage
Pool," "Yield on the Certificates" and
"Description of the Certificates" agrees with the
records of the Seller;
5. Such opinions of counsel as the Rating Agencies,
the certificate insurer or the Trustee may request
in connection with the sale of
<PAGE>
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the Mortgage Loans by the Seller to the Purchaser
or the Seller's execution and delivery of, or
performance under, this Agreement or the Pooling
and Servicing Agreement; and
6. Such further information, certificates, opinions
and documents as the Purchaser, the certificate
insurer or Underwriter may reasonably request.
SECTION 10. COSTS. The Seller shall pay (or shall reimburse the
Purchaser or any other Person to the extent that the Purchaser or such other
Person shall pay) all costs and expenses incurred in connection with the
transfer and delivery of the Mortgage Loans, including without limitation
recording fees, fees for title policy endorsements and continuations, fees for
recording Assignments of Mortgage, the fees and expenses of the Seller's
accountants for delivery of the letter specified in Section 9(b)(4) above and
the Seller's attorneys, the fees, expenses and disbursements of the Trustee
under the Pooling and Servicing Agreement (other than the annual fee paid out of
the Trust Fund) and the fees, expenses and disbursements of the certificate
insurer (other than to the extent paid out of the Trust Fund as provided in the
Pooling and Servicing Agreement), any related insurance agreement or related
documents. The Seller shall pay the costs and expenses of printing (or otherwise
reproducing) and delivering the prospectus, prospectus supplement, and private
placement memorandum relating to the Certificates, the Pooling and Servicing
Agreement, any related insurance agreement and related documents including the
costs of printing any of the Certificates, the initial fees, costs and expenses
of the certificate insurer, the fees and expenses of the Purchaser's counsel in
connection with the preparation of all documents relating to the securitization
of the Mortgage Loans, the filing fee charged by the Securities and Exchange
Commission for registration of the Certificates and the fees charged by any
rating agency to rate the Certificates.
SECTION 11. SERVICING. The Seller has represented to the
Purchaser that the Mortgage Loans are serviced by the Seller, in its capacity as
Master Servicer, and are not subject to sub-servicing agreements with third
parties, and it is understood and agreed between the Seller and the Purchaser
that the Mortgage Loans are to be delivered free and clear of any sub-servicing
agreements with third party servicers. The Seller, without reimbursement from
the Purchaser, shall pay any fees or penalties required by any third party
servicer for releasing the Mortgage Loans from any such sub-servicing agreement
and shall arrange for the orderly transfer, as of the Cut-off Date, of such
sub-servicing from any such third party servicer to the Seller. The Mortgage
Loans shall be serviced by the Seller, in its capacity as Master Servicer, in
accordance with the terms of the Pooling and Servicing Agreement. For so long as
the Seller services the Mortgage Loans, the Seller shall be entitled to the
Servicing Fee and such other payments as provided for under the terms of the
Pooling and Servicing Agreement.
SECTION 12. MANDATORY DELIVERY; GRANT OF SECURITY INTEREST. The
sale and delivery on the Closing Date of the Mortgage Loans described on the
Mortgage Loan Schedule in accordance with the terms and conditions of this
Agreement is mandatory. It is specifically understood and agreed that each
Mortgage Loan is unique and identifiable on the date hereof and
<PAGE>
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that an award of money damages would be insufficient to compensate the Purchaser
for the losses and damages incurred by the Purchaser in the event of the
Seller's failure to deliver the Mortgage Loans on or before the Closing Date.
The Seller hereby grants to the Purchaser a lien on and a continuing security
interest in the Seller's interest in each Mortgage Loan and each document and
instrument evidencing each such Mortgage Loan to secure the performance by the
Seller of its obligation hereunder, and the Seller agrees that it holds such
Mortgage Loans in custody for the Purchaser, subject to the Purchaser's (i)
right, prior to the Closing Date, to reject any Mortgage Loan to the extent
permitted by this Agreement and to require another Mortgage Loan to be
substituted therefor pursuant to Section 4 hereof, and (ii) obligation to
deliver or cause to be delivered the consideration for the Mortgage Loans
pursuant to Section 8 hereof. Any Mortgage Loans rejected by the Purchaser shall
concurrently therewith be released from the security interest created hereby.
All rights and remedies of the Purchaser under this Agreement are distinct from,
and cumulative with, any other rights or remedies under this Agreement or,
subject to Section 7(ii) hereof, afforded by law or equity and all such rights
and remedies may be exercised concurrently, independently or successively.
Notwithstanding the foregoing, if on the Closing Date, each of
the conditions set forth in Section 8 hereof shall have been satisfied and the
Purchaser shall not have paid or caused to be paid the Purchase Price, or any
such condition shall not have been waived or satisfied and the Purchaser
determines not to pay or cause to be paid the Purchase Price, the Purchaser
shall immediately effect the redelivery of the Mortgage Loans, if delivery to
the Purchaser has occurred, and the security interest created by this Section 12
shall be deemed to have been released.
SECTION 13. NOTICES. All demands, notices and communications
hereunder shall be in writing and shall be deemed to have been duly given if
personally delivered to or mailed by registered mail, postage prepaid, or
transmitted by telex, telegraph or facsimile and confirmed by a similar mailed
writing, if to the Purchaser, addressed to the Purchaser, at Seven World Trade
Center, New York, New York 10048, Attention: Secretary, or to such other address
as the Purchaser may designate in writing to the Seller; and if to the Seller,
addressed to the Seller at 1675 Palm Beach Lakes Boulevard, West Palm Beach,
Florida 33401, Attention: Secretary, or to such other address as the Seller may
designate in writing to the Purchaser.
SECTION 14. SEVERABILITY OF PROVISIONS. Any part, provision,
representation or warranty 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 or warranty of this Agreement that
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.
<PAGE>
-19-
SECTION 15. AGREEMENT OF PARTIES. The Seller and the Purchaser
each agree to execute and deliver such instruments and take such actions as the
other may, from time to time, reasonably request in order to effectuate the
purpose and to carry out the terms of this Agreement and the Pooling and
Servicing Agreement.
SECTION 16. SURVIVAL. The Seller agrees that the representations,
warranties and agreements made by it herein and in any certificate or other
instrument delivered pursuant hereto shall be deemed to be relied upon by the
Purchaser, notwithstanding any investigation heretofore or hereafter made by the
Purchaser or on the Purchaser's behalf, and that the representations, warranties
and agreements made by the Seller herein or in any such certificate or other
instrument shall survive the delivery of and payment for the Mortgage Loans and
shall continue in full force and effect, notwithstanding any restrictive or
qualified endorsement on the Mortgage Notes and notwithstanding subsequent
termination of this Agreement, the Pooling and Servicing Agreement or the Trust
Fund.
SECTION 17. INDEMNIFICATION.
(i) The Seller agrees to indemnify and hold harmless the Purchaser
and each person, if any, who controls the Purchaser within the meaning of
Section 15 of the 1933 Act (collectively, the "Indemnified Party") against any
and all losses, claims, expenses, damages or liabilities to which the
Indemnified Party may become subject, under the 1933 Act or otherwise, insofar
as such losses, claims, expenses, damages or liabilities (or actions in respect
thereof) arise out of or are based upon (a) any untrue statement or alleged
untrue statement of any material fact contained in the Prospectus or in the
Prospectus Supplement (or in the private placement memorandum relating to the
Residual Certificates) or the omission or the alleged omission to state therein
a material fact necessary in order 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 information furnished in writing to the
Purchaser by the Seller specifically for use therein, which shall include the
information set forth in the Prospectus Supplement on the front cover, in the
summary under the subheading "The Mortgage Pool" and under the captions "The
Mortgage Pool" and "Pooling and Servicing Agreement -The Mortgage Loan Seller
and Master Servicer", "-Real Estate Owned" and "-Delinquency and Foreclosures"
(and substantially identical information set forth in the private placement
memorandum relating to the Residual Certificates), or (b) any representation,
warranty or covenant made by the Seller in this Agreement or in the Pooling and
Servicing Agreement, on which the Purchaser has relied, being, or alleged to be,
untrue or incorrect in any material respects; provided, however, that to the
extent that any such losses, claims, expenses, damages or liabilities to which
the Indemnified Party may become subject arise out of or are based upon both (1)
statements, omissions, representations, warranties or covenants of the Seller
described in clause (a) or (b) above and (2) any other factual basis, the Seller
shall indemnify and hold harmless the Indemnified Party only to the extent that
the losses, claims, expenses, damages or liabilities of the person or persons
asserting the claim are determined to arise from or be based upon matters set
forth in
<PAGE>
-20-
clause (1) above. This indemnity agreement will be in addition to any liability
which the Seller may otherwise have.
(ii) Promptly after receipt by the Indemnified Party of notice of
the commencement of any such action, the Indemnified Party will, if a claim in
respect thereof is to be made against the Seller under this Section 17, promptly
notify the Seller in writing of the commencement thereof. In case any such
action is brought against the Indemnified Party, and it notifies the Seller of
the commencement thereof, the Seller shall be entitled to appoint counsel of the
Seller's choice at the Seller's expense to represent the Indemnified Party in
any action for which indemnification is sought (in which case the Seller shall
not thereafter be responsible for the fees and expenses of any separate counsel
retained by the Indemnified Party except as set forth below); PROVIDED, HOWEVER,
that such counsel shall be satisfactory to the Indemnified Party.
Notwithstanding the Seller's election to appoint counsel to represent the
Indemnified Party in an action, the Indemnified Party shall have the right to
employ separate counsel (including local counsel), and the Seller shall bear the
reasonable fees, costs and expenses of such separate counsel if (i) the use of
counsel chosen by the Seller to represent the Indemnified Party would present
such counsel with a conflict of interest, (ii) the actual or potential
defendants in, or targets of, any such action include both the Indemnified Party
and the Seller 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 Seller, (iii) the Seller shall not have
employed counsel satisfactory to the Indemnified Party to represent the
Indemnified Party within a reasonable time after notice of the institution of
such action or (iv) the Seller shall authorize the Indemnified Party to employ
separate counsel at the expense of the Seller. The Seller will not, without the
prior written consent of the Indemnified Party, settle or compromise or consent
to the entry of any judgment with respect to any pending or threatened claim,
action, suit or proceeding in respect of which indemnification or contribution
may be sought hereunder (whether or not the Indemnified Party is an actual or
potential party to such claim or action) unless such settlement, compromise or
consent includes an unconditional release of each Indemnified Party from all
liability arising out of such claim, action, suit or proceeding. In addition,
for so long as the Seller is covering all costs and expenses of the Indemnified
Party as provided herein, no Indemnified Party will settle or compromise or
consent to the entry of any judgment with respect to any pending or threatened
claim, action, suit or proceeding in respect of which indemnification or
contribution may be sought hereunder without the consent of the Seller, which
consent shall not be unreasonably withheld.
(iii) Nothing in this Agreement shall be construed to allow an
Indemnified Party to recover punitive damages or consequential damages from the
Seller, provided however, that this Section shall not limit indemnification of
any Indemnified Party for damages (however construed) actually recovered from an
Indemnified Party by third parties.
SECTION 18. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS, DUTIES,
OBLIGATIONS AND RESPONSIBILITIES OF THE PARTIES HERETO SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS (INCLUDING THE CHOICE OF LAW PROVISIONS)
AND DECISIONS OF THE STATE
<PAGE>
-21-
OF NEW YORK. THE PARTIES HERETO INTEND THAT THE PROVISIONS OF SECTION 5-1401 OF
THE NEW YORK GENERAL OBLIGATIONS LAW SHALL APPLY TO THIS AGREEMENT.
SECTION 19. MISCELLANEOUS. This Agreement may be executed in two
or more counterparts, each of which when so executed and delivered shall be an
original, but all of which together shall constitute one and the same
instrument. This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective successors and assigns. This Agreement
supersedes all prior agreements and understandings relating to the subject
matter hereof. Neither this Agreement nor any term hereof may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against whom enforcement of the change, waiver, discharge or
termination is sought. The headings in this Agreement are for purposes of
reference only and shall not limit or otherwise affect the meaning hereof.
It is the express intent of the parties hereto that the
conveyance of the Mortgage Loans by the Seller to the Purchaser as provided in
Section 4 hereof be, and be construed as, a sale of the Mortgage Loans by the
Seller to the Purchaser and not as a pledge of the Mortgage Loans by the Seller
to the Purchaser to secure a debt or other obligation of the Seller. However, in
the event that, notwithstanding the aforementioned intent of the parties, the
Mortgage Loans are held to be property of the Seller, then, (a) it is the
express intent of the parties that such conveyance be deemed a pledge of the
Mortgage Loans by the Seller to the Purchaser to secure a debt or other
obligation of the Seller and (b) (1) this Agreement shall also be deemed to be a
security agreement within the meaning of Articles 8 and 9 of the New York
Uniform Commercial Code; (2) the conveyance provided for in Section 4 hereof
shall be deemed to be a grant by the Seller to the Purchaser of a security
interest in all of the Seller's right, title and interest in and to the Mortgage
Loans and all amounts payable to the holders of the Mortgage Loans in accordance
with the terms thereof and all proceeds of the conversion, voluntary or
involuntary, of the foregoing into cash, instruments, securities or other
property, including without limitation all amounts, other than investment
earnings, from time to time held or invested in the Collection Account whether
in the form of cash, instruments, securities or other property; (3) the
possession by the Purchaser or its agent of Mortgage Notes, the related
Mortgages and such other items of property that constitute instruments, money,
negotiable documents or chattel paper shall be deemed to be "possession by the
secured party" for purposes of perfecting the security interest pursuant to
Section 9-305 of the New York Uniform Commercial Code; and (4) notifications to
persons holding such property, and acknowledgments, receipts or confirmations
from persons holding such property, shall be deemed notifications to, or
acknowledgments, receipts or confirmations from, financial intermediaries,
bailees or agents (as applicable) of the Purchaser for the purpose of perfecting
such security interest under applicable law. Any assignment of the interest of
the Purchaser pursuant to Section 4(d) hereof shall also be deemed to be an
assignment of any security interest created hereby. The Seller and the Purchaser
shall, to the extent consistent with this Agreement, take such actions as may be
necessary to ensure that, if this Agreement were deemed to create a security
interest in the Mortgage Loans, such security interest would be deemed to be a
perfected security interest of
<PAGE>
-22-
first priority under applicable law and will be maintained as such throughout
the term of this Agreement and the Pooling and Servicing Agreement.
<PAGE>
IN WITNESS WHEREOF, the Purchaser and the Seller have caused
their names to be signed by their respective officers thereunto duly authorized
as of the date first above written.
SALOMON BROTHERS MORTGAGE
SECURITIES VII, INC.
By:
Name:
Title:
BERKELEY FEDERAL BANK & TRUST
FSB
By:
Name:
Title:
<PAGE>
EXHIBIT 1
FORM OF POOLING AND SERVICING AGREEMENT
<PAGE>
EXHIBIT 2
OFFICER'S CERTIFICATE
I, ________________, hereby certify that I am the duly elected
_____________ of Berkeley Federal Bank & Trust FSB, a federal savings bank (the
"Seller"), and further certify, on behalf of the Seller, as follows:
1. Attached hereto is a true and correct copy of the Certificate
of Incorporation and By-laws of the Seller, all of which are in full
force and effect on the date hereof. There has been no amendment or
other document filed affecting the Certificate of Incorporation of the
Seller since ___________, 19__, and no such amendment has been
authorized. There has been no amendment or other document filed
affecting the By-laws of the Seller since ____________, 19__, and no
such amendment has been authorized. Attached hereto is a good standing
certificate issued by the Office of Thrift Supervision with respect to
the Seller. No event has occurred since the date thereof that has
affected the good standing of the Seller under the laws of the United
States.
2. There are no actions, suits or proceedings pending or, to the
best of my knowledge, threatened against or affecting the Seller that,
if adversely determined, individually or in the aggregate, would
adversely affect the Seller's ability to perform its obligations under
the Mortgage Loan Purchase Agreement (the "Mortgage Loan Purchase
Agreement"), dated June 25, 1996, between the Seller and Salomon
Brothers Mortgage Securities VII, Inc. (the "Purchaser") or the Pooling
and Servicing Agreement (the "Pooling and Servicing Agreement"), dated
as of June 1, 1996, among the Purchaser as Depositor, the Seller as
Master Servicer and The Bank of New York as Trustee. No proceedings
looking toward merger, consolidation or liquidation, dissolution or
bankruptcy of the Seller are pending or contemplated.
3. Each person who, as an officer or representative of the
Seller, signed the Mortgage Loan Purchase Agreement, the Pooling and
Servicing Agreement and any other document delivered prior hereto or on
the date hereof in connection with the purchase described in the
Mortgage Loan Purchase Agreement was, at the respective times of such
signing and delivery, and is now, duly elected or appointed, qualified
and acting as such officer or representative, and the signatures of such
persons appearing on such documents are their genuine signatures.
4. Each of the Mortgage Loans referred to in the Mortgage Loan
Purchase Agreement and the Pooling and Servicing Agreement was
originated by the Seller or by an entity described in Section 6(aa) of
the Mortgage Loan Purchase Agreement.
5. Attached hereto is a certified true copy of the resolutions of
the Board of Directors of the Seller with respect to the sale of the
Mortgage Loans subject to the Mortgage Loan Purchase Agreement and the
Pooling and Servicing Agreement.
<PAGE>
-2-
6. All of the representations and warranties of the Seller under
the Mortgage Loan Purchase Agreement and under the Pooling and Servicing
Agreement are true and correct in all material respects as of the
Closing Date (subject, in the case of the Closing Schedule delivered
pursuant to the Mortgage Loan Purchase Agreement, to such amendments
thereto as were duly made on or before the date hereof) and no event has
occurred which, with notice or the passage of time or both, would
constitute a default under the Mortgage Loan Purchase Agreement or an
Event of Default under the Pooling and Servicing Agreement.
7. The information set forth in the Mortgage Loan Schedule
attached as an exhibit to the Pooling and Servicing Agreement is true
and correct in all material respects.
8. The transactions contemplated in the Mortgage Loan Purchase
Agreement will be reported as a sale in the Seller's financial reports.
9. The information contained in the Purchaser's Prospectus,
dated June 17, 1996, under the caption "The Mortgage Pools" and in the
Purchaser's Prospectus Supplement, dated June 25, 1996, relating to the
Mortgage Loans and the Seller, its financial condition and its loan
portfolio, specifically the information on the front cover, in the
summary under the subheading "The Mortgage Pool" and under the captions
"The Mortgage Pool" and "Pooling and Servicing Agreement -The Mortgage
Loan Seller and Master Servicer", "-Real Estate Owned", "-Loan Loss
Experience" and "-Delinquency and Foreclosures", is true and accurate
and does not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they
were made, not misleading.
10. With respect to its sale of the Mortgage Loans and the
transactions and undertakings contemplated by the Mortgage Loan Purchase
Agreement, the Seller has complied with all the obligations by which it
is bound and has satisfied all the conditions on its part to be
performed or satisfied prior to the Closing Date.
11. Capitalized terms used but not defined herein shall have the
meanings assigned in the Mortgage Loan Purchase Agreement.
<PAGE>
-3-
IN WITNESS WHEREOF, I have hereunto signed my name and affixed
the seal of the Seller.
Dated:
Name:
[Seal] Title: [Vice] President
I, __________________, a [Assistant] Secretary of Berkeley
Federal Bank & Trust FSB, hereby certify that ________________ is the duly
elected, qualified and acting [Vice] President of the Seller and that the
signature appearing above is [her] [his] genuine signature.
IN WITNESS WHEREOF, I have hereunto signed my name.
Dated:
Name:
Title: [Assistant] Secretary
<PAGE>
FORM OF RESOLUTION
RESOLVED, that Berkeley Federal Bank & Trust FSB (the "Company")
is hereby authorized to (a) sell to Salomon Brothers Mortgage Securities VII,
Inc. (the "Purchaser") certain conventional one- to four-family residential
mortgage loans (the "Mortgage Loans"), having an aggregate principal balance of
approximately $131,300,000, on the terms and subject to the conditions set forth
in the Mortgage Loan Purchase Agreement, dated June 25, 1996, between the Seller
and the Purchaser, and (b) enter into a Pooling and Servicing Agreement, dated
as of June 1, 1996, among the Purchaser as depositor, the Company as master
servicer and The Bank of New York as trustee.
RESOLVED, that each of the President, and each Senior Vice
President, Vice President, and Assistant Secretary of the Company hereby is
authorized, for and on behalf of the Company, to execute and deliver each of the
foregoing agreements, as well as such other agreements, instruments, and
certificates, and to take such other action, as any of them may deem necessary
or advisable to carry out the purposes of the foregoing resolutions.
<PAGE>
EXHIBIT 3
OFFICERS' CERTIFICATE OF THE SELLER
WITH RESPECT TO CERTAIN FACTS
REGARDING THE SALE OF THE MORTGAGE LOANS
Salomon Brothers Mortgage Securities VII, Inc.
Mortgage Pass-Through Certificates
Series 1996-3
Certificate of
Berkeley Federal Bank & Trust FSB
Reference is made to the sale of mortgage loans (the "Mortgage
Loans") by Berkeley Federal Bank & Trust FSB ("Berkeley") to Salomon Brothers
Mortgage Securities VII, Inc. (the "Depositor") pursuant to a Mortgage Loan
Purchase Agreement, dated June 25, 1996 (the "Purchase Agreement"), and the
simultaneous issuance of Mortgage Pass-Through Certificates, Series 1996-3,
Class A1-1, Class A1-2, Class A1-3, Class A1-4, Class A2-1 and Class R (the
"Certificates"), pursuant to a Pooling and Servicing Agreement, dated as of June
1, 1996 (the "Pooling and Servicing Agreement"), among the Depositor, as
depositor, Berkeley Federal Bank & Trust FSB, as master servicer (the "Master
Servicer"), and The Bank of New York, as trustee (the "Trustee"). In
consideration for its purchase of the Mortgage Loans, the Depositor will deliver
to Berkeley immediately available funds and the Class R Certificates. The
Depositor will sell the Certificates to Salomon Brothers Inc (the "Underwriter")
for offer and sale pursuant to the terms of an Underwriting Agreement, dated
June 25, 1996 (the "Underwriting Agreement"), between the Depositor and the
Underwriter. The Purchase Agreement, the Pooling and Servicing Agreement and the
Underwriting Agreement together, are hereinafter referred to as the
"Agreements". Capitalized terms not otherwise defined herein have the meanings
set forth in the Agreements.
The undersigned is a duly appointed ________________ of Berkeley
Federal Bank & Trust FSB.
The undersigned hereby certifies after reasonable investigation
that:
1. The price to be paid to Berkeley for the Mortgage Loans will
have been paid in full at the closing of the sales pursuant to the Mortgage Loan
Purchase Agreement, and no agreement or arrangement exists or will exist that
permits the modification of the consideration for the Mortgage Loans subsequent
to those sales. Berkeley will not have any right or obligation to repurchase any
Mortgage Loan, except as provided in the Mortgage Loan Purchase Agreement.
2. Each Mortgage Note and each related Mortgage has been
appropriately prepared and duly executed and delivered by the related Mortgagor,
and each Mortgage has been appropriately recorded in the applicable jurisdiction
and any intervening endorsement of any
<PAGE>
-2-
Mortgage Note, and any intervening assignment of any Mortgage, which was
required in order to transfer to Berkeley ownership of the Mortgage Loans, was
obtained and completed.
3. Each Mortgage Note has been endorsed or assigned in a manner
that satisfies any requirement necessary to transfer to the Trustee all right,
title and interest of the party so endorsing or assigning, as noteholder or
transferee thereof, in and to that Mortgage Note, as provided in the Purchase
Agreement and the Pooling and Servicing Agreement. Each Assignment to the
Trustee is in recordable form and is sufficient to effect the assignment and
transfer to the Depositor of the benefits of the assignor, as original mortgagee
or assignee thereof, under each Mortgage to which that Assignment relates, as
provided in the Purchase Agreement and the Pooling and Servicing Agreement. Each
Assignment to the Trustee has been or will be appropriately recorded to the
extent required under applicable law, as provided in the Pooling and Servicing
Agreement.
4. Each original Mortgage Note, each original recorded Mortgage,
each original recorded intervening Assignment and each Assignment to the Trustee
has been delivered to the Trustee at the direction of the Depositor, and the
Trustee will maintain continuous actual possession of each of the foregoing in
the State of New York. Neither the Trustee nor any agent of the Trustee that has
or will have possession of any Mortgage Note, Mortgage or Assignment is, or will
be, at any time during the term of the Pooling and Servicing Agreement, an
affiliate of Berkeley or otherwise under the direct or indirect control of
Berkeley.
5. Immediately prior to the transfer of the Mortgage Loans by
Berkeley to the Depositor, Berkeley was the sole owner of each Mortgage Loan,
free and clear of any and all prior liens, mortgages, security interests,
pledges, participation interests, adverse claims, charges or other equities or
encumbrances of any nature (collectively, the "Other Liens"), and had full right
and authority to sell, assign and transfer the Mortgage Loans.
6. No Mortgage Note, Mortgage or other document constituting part
of the Mortgage File reflects or will reflect on its face any interest that is
inconsistent with the ownership interest of Berkeley in and to the Mortgage
Loans or the transfer of the Mortgage Loans by Berkeley to the Depositor.
7. The transfer of the Mortgage Loans by Berkeley to the
Depositor as provided in the Purchase Agreement, is intended by Berkeley to be,
and is in fact, a contemporaneous exchange in which Berkeley receives new value.
8. Berkeley was solvent at all relevant times prior to, and will
not be rendered insolvent by, the transfer of the Mortgage Loans to the
Depositor.
9. Berkeley did not transfer the Mortgage Loans to the Depositor
with any intent to hinder, delay or defraud any of Berkeley's creditors.
<PAGE>
-3-
10. Neither Berkeley nor any agent acting on behalf of any of
them, has been or will become a party to any fraud or illegality affecting any
Mortgage Loan or Certificate.
11. No breach of the Agreements by Berkeley, misrepresentation or
failure by Berkeley to perform all acts required to be performed prior to the
Closing Date, or fraud or mistake on the part of Berkeley in connection with the
transactions contemplated by the Agreements, has occurred or will occur.
12. Berkeley has not taken nor will take any action that is
unreasonable, arbitrary or capricious, or that is not taken in good faith or in
a commercially reasonable manner, affecting the Mortgage Loans in connection
with the transactions contemplated by the Agreements.
13. There is not and will not be any other agreement among the
parties to the Agreements that modifies or otherwise supplements the agreement
of the parties as expressed in the Agreements.
14. Berkeley does not have and will not have any right to modify
or alter the terms of the transfer of the Mortgage Loans by Berkeley to the
Depositor, or to substitute or add any mortgage loan thereafter, except as
provided in the Agreements.
15. Berkeley will not take any action that is inconsistent with
the ownership interest in the Mortgage Loans evidenced by the Certificates.
Berkeley will promptly indicate to other persons or entities, when a response is
appropriate, that the Mortgage Loans were transferred by Berkeley to the
Depositor. Berkeley will not claim any ownership interest directly in the
Mortgage Loans other than that represented by Certificates in which it may have
an ownership interest from time to time.
16. Under generally accepted accounting principles ("GAAP") and
for federal income tax purposes, Berkeley will report the transfer of the
Mortgage Loans to the Depositor, as provided in the Purchase Agreement as a sale
of all of its interest in the Mortgage Loans. Berkeley has been advised by or
has confirmed with its independent public accountants for similar transactions
that the sale will be so classified under GAAP in accordance with Statement No.
77 of the Financial Accounting Standards Board (December 1983).
<PAGE>
-4-
IN WITNESS WHEREOF, the undersigned has executed this Certificate
as of June __, 1996.
BERKELEY FEDERAL BANK & TRUST
FSB
By:
Name:
Title:
<PAGE>
EXHIBIT 4
FORM OF OPINION OF COUNSEL OF THE SELLER
[Closing Date]
Salomon Brothers Mortgage
Securities VII, Inc.
Seven World Trade Center
New York, New York 10048
Salomon Brothers Inc
Seven World Trade Center
New York, New York 10048
Ladies and Gentlemen:
I have acted as counsel for Berkeley Federal Bank & Trust FSB, a
federal savings bank (the "Seller"), in connection with the sale of certain
mortgage loans by the Seller to Salomon Brothers Mortgage Securities VII, Inc.
(the "Purchaser") pursuant to a Mortgage Loan Purchase Agreement, dated June 25,
1996, by and between the Purchaser and the Seller (the "Seller's Agreement") and
in connection with a Pooling and Servicing Agreement, dated as of June 1, 1996,
by and among the Purchaser as Depositor, the Seller as Master Servicer and The
Bank of New York as trustee (the "Trustee") (the "Pooling and Servicing
Agreement"; together with the Seller's Agreement, the "Agreements"). I am
delivering this opinion to you pursuant to Section 9(b)(3) of the Seller's
Agreement. Capitalized terms used but not defined in this letter have the
meanings ascribed to them in the Agreements or in agreements referred to
therein.
In connection with my opinions set forth herein, I have reviewed
executed copies of the Agreements. I also have examined the originals or copies,
certified or otherwise identified to my satisfaction, of corporate records of
the Seller, and other agreements, instruments, certificates and documents as I
have deemed necessary or appropriate as a basis for the opinions set forth
herein. I have assumed the due authorization, execution and delivery of the
instruments and documents referred to herein by the parties thereto other than
the Seller, and have relied as to factual matters on the representations and
warranties made by, and on certificates or other documents furnished by officers
of, the parties to the Agreements. Except as otherwise specifically stated in
this opinion, I have not examined the Mortgage Notes, the Mortgages or other
documents in the Mortgage Files (such documents, collectively, the "Mortgage
Documents"), and I express no opinion concerning the conformity of any of the
Mortgage Documents to the requirements of the Agreements.
In rendering the opinions set forth below, I do not express any
independent opinion concerning law other than the law of the State of Florida
and the federal law of the United States of America.
<PAGE>
-2-
Based upon the foregoing, I am of the following opinions:
1. The Seller is a federal savings bank duly organized and validly
existing and in good standing under the laws of the United States
with full power and authority to own its properties and carry on
its business as presently conducted by it. The Seller has the
full power and authority to own the Mortgage Loans and to
transfer and convey the Mortgage Loans to the Purchaser and has
the full power and authority to execute and deliver, engage in
the transactions contemplated by, and perform its obligations
under and observe the terms and conditions of, the Agreements.
2. Each of the Agreements has been duly and validly authorized,
executed and delivered by the Seller, and (assuming the due
authorization, execution and delivery thereof by the other
parties thereto) constitutes the valid, legal and binding
agreement of the Seller, enforceable against the Seller in
accordance with its terms, except as enforceability may be
limited by (i) bankruptcy, insolvency, liquidation, receivership,
moratorium, reorganization or other similar laws relating to or
affecting the rights of creditors generally, (ii) general
principles of equity whether such enforcement is considered in a
proceeding in equity or at law, and (iii) public policy
considerations underlying the securities laws, to the extent that
such public policy considerations limit the enforceability of the
provisions, if any, of the Agreements which purport to provide
indemnification from securities law liabilities.
3. No consent, approval, authorization or order of the State of New
York or any federal court or governmental agency or body is
required for the execution, delivery and performance by the
Seller of or compliance by the Seller with the Agreements or the
consummation of the transactions contemplated by the Agreements
except for those consents, approvals, authorizations or orders
which previously have been obtained; except that I express no
opinion as to the registration or qualification of the
Certificates under applicable federal or state securities laws.
4. To the best of my knowledge, the Seller is not in default under
any material provisions of any agreement, contract, instrument or
indenture to which the Seller is a party or by which it is bound,
nor has any event occurred which, with notice or lapse of time or
both, would constitute a default under any such agreement,
contract, instrument or indenture, which event of default could
have a material adverse effect on the Mortgage Loans or the
performance by the Seller of its obligations under the
Agreements.
5. Neither the transfer of the Mortgage Loans as provided in the
Agreements, nor the fulfillment of the terms of or the
consummation of any other of the transactions contemplated in the
Agreements, will result in a breach of any term
<PAGE>
-3-
or provision of the charter or by-laws of the Seller, or, to the
best of my knowledge, will conflict with, result in a breach,
violation or acceleration of or constitute a default under, the
terms of any indenture or other agreement or instrument to which
the Seller is a party or by which it is bound, or any State of
Florida or federal statute, or any order or regulation of any
State of Florida or federal court, regulatory body,
administrative agency or governmental body having jurisdiction
over the Seller.
6. To the best of my knowledge, after due inquiry, there are no
actions, proceedings or investigations pending or threatened
against the Seller before any court, administrative agency or
other tribunal (i) asserting the invalidity of the Agreements,
(ii) seeking to prevent the consummation of any of the
transactions contemplated in the Agreements, or (iii) which might
materially and adversely affect the performance by the Seller of
its obligations under, or the validity or enforceability of, the
Agreements.
7. Nothing has come to my attention that would lead me to believe
that the information contained in the Purchaser's Prospectus
Supplement, dated June 25, 1996, relating to the Mortgage Loans
and the Seller, its financial condition and its loan portfolio,
specifically the information on the front cover, in the summary
under the subheading "The Mortgage Pool" and under the captions
"The Mortgage Pool" and "Pooling and Servicing Agreement - The
Master Servicer", "-Loan Production" and "-Delinquency and
Foreclosure Experience", contains any untrue statement of a
material fact or omits to state 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.
Very truly yours,
<PAGE>
EXHIBIT 5
EXCEPTIONS TO REPRESENTATIONS AND WARRANTIES IN SECTION 6
<PAGE>
EXHIBIT 6
SCHEDULE OF MORTGAGE LOANS FOR JULY 1, 1996 DELINQUENCY
REPRESENTATION
<PAGE>
EXHIBIT 7
FORM OF LOST NOTE AFFIDAVIT
Berkeley Federal Bank & Trust FSB, a federal savings bank (the
"Mortgage Loan Seller"), by its undersigned authorized representative, hereby
certifies:
(i) Pursuant to the Mortgage Loan Purchase Agreement, dated June
25, 1996, between the Mortgage Loan Seller and Salomon Brothers Mortgage
Securities VII, Inc. (the "Depositor"), the Mortgage Loan Seller is granting all
of its right, title and interest in and to the Mortgage Loan identified below to
the Depositor. Terms used but not defined herein have the respective meanings
assigned to them in the Mortgage Loan Purchase Agreement.
Mortgage Loan Number:
Maker:
Original Principal Amount:
Original Mortgage Note Date:
Maturity Date:
(ii) The Mortgage Loan Seller is the current owner and holder of
the indebtedness evidenced by the original Mortgage Note.
(iii) After diligent search, the Mortgage Loan Seller has been
unable to locate the original Mortgage Note and believes it to be lost or
misplaced.
(iv) A true, complete and correct photocopy of the original
Mortgage Note is attached hereto.
(v) If at any time the Mortgage Loan Seller locates the
original Mortgage Note, the Mortgage Loan Seller shall endorse such original
Mortgage Note in the following form: "Pay to the order of The Bank of New York,
as Trustee for the registered holders of Salomon Brothers Mortgage Securities
VII, Inc., Series 1996-3, without recourse", and shall promptly deliver to the
Trustee the original Mortgage Note so endorsed, with all prior and intervening
endorsements showing a complete chain of endorsement from the originator to the
Mortgage Loan Seller.
(vi) The Mortgage Loan Seller hereby indemnifies the Depositor,
the Trustee, the Certificateholders and the Certificate Insurer from and against
any and all losses, liabilities, damages, claims or expenses of whatever kind
(including without limitation attorneys' fees and disbursements) arising from or
in connection with the Mortgage Loan Seller's failure to have delivered the
original Mortgage Note (as required under the Mortgage Loan Purchase Agreement)
to the Trustee as designee of the Depositor, including without limitation any
such losses, liabilities, damages, claims or expenses arising from or in
connection with any claim by any third party who is the holder of such
indebtedness by virtue of its possession of such original Mortgage Note.
<PAGE>
-7-
(vii) This Lost Note Affidavit shall inure to the benefit of the
Depositor, the Trustee, the Certificateholders and the Certificate Insurer and
their respective successors and permitted assigns.
Dated: June 27, 1995
BERKELEY FEDERAL BANK & TRUST FSB
By:
Name:
Title:
<PAGE>
EXHIBIT E-1
REQUEST FOR RELEASE
(for Trustee/Custodian)
LOAN INFORMATION
- ----------------
Name of Mortgagor:
Master Servicer
Loan No.:
TRUSTEE/CUSTODIAN
- -----------------
Name:
Address:
Trustee/Custodian
Mortgage File No.:
DEPOSITOR
- ---------
Name: SALOMON BROTHERS MORTGAGE
SECURITIES VII, INC.
Address:
Certificates: Asset-Backed Fixed Rate and Floating Rate
Certificates, Series 1996-3.
<PAGE>
The undersigned Master Servicer hereby acknowledges that it has
received from _______________________, as Trustee for the Holders of
Asset-Backed Fixed Rate and Floating Rate Certificates, Series 1996-3, the
documents referred to below (the "Documents"). All capitalized terms not
otherwise defined in this Request for Release shall have the meanings given them
in the Pooling and Servicing Agreement, dated as of June 1, 1996, among the
Trustee, the Depositor and the Master Servicer (the "Pooling and Servicing
Agreement").
( ) Promissory Note dated _______________, 19__, in the original principal
sum of $__________, made by _____________________, payable to, or
endorsed to the order of, the Trustee.
( ) Mortgage recorded on _________________________ as instrument no.
____________________ in the County Recorder's Office of the County of
_________________, State of __________________ in book/reel/docket
_________________ of official records at page/image _____________.
( ) Deed of Trust recorded on ___________________ as instrument no.
________________ in the County Recorder's Office of the County of
_________________, State of ____________________ in book/reel/docket
_________________ of official records at page/image ______________.
( ) Assignment of Mortgage or Deed of Trust to the Trustee, recorded on
___________________ as instrument no. _________ in the County Recorder's
Office of the County of _______________, State of
_______________________ in book/reel/docket ____________ of official
records at page/image ____________.
( ) Other documents, including any amendments, assignments or other
assumptions of the Mortgage Note or Mortgage.
( ) ---------------------------------------------
( ) ---------------------------------------------
( ) ---------------------------------------------
( ) ---------------------------------------------
The undersigned Master Servicer hereby acknowledges and agrees as
follows:
(1) The Master Servicer shall hold and retain possession of the
Documents in trust for the benefit of the Trustee, solely for the
purposes provided in the Agreement.
(2) The Master Servicer shall not cause or permit the Documents
to become subject to, or encumbered by, any claim, liens, security
interest, charges, writs of attachment or other impositions nor shall
the Master Servicer assert or seek
<PAGE>
to assert any claims or rights of setoff to or against the Documents or
any proceeds thereof.
(3) The Master Servicer shall return each and every Document
previously requested from the Mortgage File to the Trustee when the need
therefor no longer exists, unless the Mortgage Loan relating to the
Documents has been liquidated and the proceeds thereof have been
remitted to the Collection Account and except as expressly provided in
the Agreement.
(4) The Documents and any proceeds thereof, including any
proceeds of proceeds, coming into the possession or control of the
Master Servicer shall at all times be earmarked for the account of the
Trustee, and the Master Servicer shall keep the Documents and any
proceeds separate and distinct from all other property in the Master
Servicer's possession, custody or control.
Dated:
BERKELEY FEDERAL BANK & TRUST FSB
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
<PAGE>
EXHIBIT E-2
REQUEST FOR RELEASE
[Mortgage Loans Paid in Full]
OFFICERS' CERTIFICATE AND TRUST RECEIPT
ASSET-BACKED FIXED RATE AND FLOATING RATE CERTIFICATES
SERIES 1996-3
____________________________________________________ HEREBY CERTIFIES THAT
HE/SHE IS AN OFFICER OF THE MASTER SERVICER, HOLDING THE OFFICE SET
FORTH BENEATH HIS/HER SIGNATURE, AND HEREBY FURTHER CERTIFIES AS
FOLLOWS:
WITH RESPECT TO THE MORTGAGE LOANS, AS THE TERM IS DEFINED IN THE
POOLING AND SERVICING AGREEMENT DESCRIBED IN THE ATTACHED
SCHEDULE:
ALL PAYMENTS OF PRINCIPAL, PREMIUM (IF ANY), AND INTEREST HAVE BEEN
MADE.
LOAN NUMBER: BORROWER'S NAME:
COUNTY:
WE HEREBY CERTIFY THAT ALL AMOUNTS RECEIVED IN CONNECTION WITH SUCH PAYMENTS,
WHICH ARE REQUIRED TO BE DEPOSITED IN THE COLLECTION ACCOUNT PURSUANT TO SECTION
3.10 OF THE POOLING AND SERVICING AGREEMENT, HAVE BEEN OR WILL BE CREDITED.
DATED:
- ------------------------------ ------------------------------
/ / VICE PRESIDENT
/ / ASSISTANT VICE PRESIDENT
<PAGE>
EXHIBIT F-1
FORM OF TRANSFEROR REPRESENTATION LETTER
[Date]
[Trustee]
[Certificate Registrar]
Re: Salomon Brothers Mortgage Securities VII, Inc.,
Asset-Backed Fixed Rate and Floating Rate Certificates,
Series 1996-3, CLASS ___, REPRESENTING A ___% CLASS ___
PERCENTAGE INTEREST
Ladies and Gentlemen:
In connection with the transfer by ________________ (the
"Transferor") to ________________ (the "Transferee") of the captioned
asset-backed certificates (the "Certificates"), the Transferor hereby certifies
as follows:
Neither the Transferor nor anyone acting on its behalf has (a)
offered, pledged, sold, disposed of or otherwise transferred any Certificate,
any interest in any Certificate or any other similar security to any person in
any manner, (b) has solicited any offer to buy or to accept a pledge,
disposition or other transfer of any Certificate, any interest in any
Certificate or any other similar security from any person in any manner, (c) has
otherwise approached or negotiated with respect to any Certificate, any interest
in any Certificate or any other similar security with any person in any manner,
(d) has made any general solicitation by means of general advertising or in any
other manner, (e) has taken any other action, that (in the case of each of
subclauses (a) through (e) above) would constitute a distribution of the
Certificates under the Securities Act of 1933, as amended (the "1933 Act"), or
would render the disposition of any Certificate a violation of Section 5 of the
1933 Act or any state securities law or would require registration or
qualification pursuant thereto. The Transferor will not act, nor has it
authorized or will it authorize any person to act, in any manner set forth in
the foregoing sentence with respect to any Certificate. The Transferor will not
sell or otherwise transfer any of the Certificates, except in compliance with
the provisions of that certain Pooling and Servicing Agreement, dated as of June
1, 1996, among Salomon Brothers Mortgage Securities VII, Inc. as Depositor,
Berkeley Federal Bank & Trust FSB as Master Servicer and The Bank of New York as
Trustee (the "Pooling
<PAGE>
and Servicing Agreement"), pursuant to which Pooling and Servicing Agreement the
Certificates were issued.
Capitalized terms used but not defined herein shall have the
meanings assigned thereto in the Pooling and Servicing Agreement.
Very truly yours,
[Transferor]
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
<PAGE>
FORM OF TRANSFEREE REPRESENTATION LETTER
[Date]
[Trustee]
[Certificate Registrar]
Re: Salomon Brothers Mortgage Securities VII, Inc.,
Asset-Backed Fixed Rate and Floating Rate Certificates,
Series 1996-3, CLASS ___, REPRESENTING A ___% CLASS ___
PERCENTAGE INTEREST
Ladies and Gentlemen:
In connection with the purchase from ______________________ (the
"Transferor") on the date hereof of the captioned trust certificates (the
"Certificates"), _______________ (the "Transferee") hereby certifies as follows:
1. The Transferee is a "qualified institutional buyer" as that
term is defined in Rule 144A ("Rule 144A") under the Securities Act of
1933 (the "1933 Act") and has completed either of the forms of
certification to that effect attached hereto as Annex 1 or Annex 2. The
Transferee is aware that the sale to it is being made in reliance on
Rule 144A. The Transferee is acquiring the Certificates for its own
account or for the account of a qualified institutional buyer, and
understands that such Certificate may be resold, pledged or transferred
only (i) to a person reasonably believed to be a qualified institutional
buyer that purchases for its own account or for the account of a
qualified institutional buyer to whom notice is given that the resale,
pledge or transfer is being made in reliance on Rule 144A, or (ii)
pursuant to another exemption from registration under the 1933 Act.
2. The Transferee has been furnished with all information
regarding (a) the Certificates and distributions thereon, (b) the
nature, performance and servicing of the Mortgage Loans, (c) the Pooling
and Servicing Agreement referred to below, and (d) any credit
enhancement mechanism associated with the Certificates, that it has
requested.
<PAGE>
All capitalized terms used but not otherwise defined herein have
the respective meanings assigned thereto in the Pooling and Servicing Agreement,
dated as of June 1, 1996, among Salomon Brothers Mortgage Securities VII, Inc.
as Depositor, Berkeley Federal Bank & Trust FSB as Master Servicer and The Bank
of New York as Trustee, pursuant to which the Certificates were issued.
[TRANSFEREE]
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
<PAGE>
ANNEX 1 TO EXHIBIT F-1
QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
[For Transferees Other Than Registered Investment Companies]
The undersigned hereby certifies as follows to [name of
Transferor] (the "Transferor") and The Bank of New York, as Trustee and
Certificate Registrar, with respect to the asset-backed certificates (the
"Certificates") described in the Transferee Certificate to which this
certification relates and to which this certification is an Annex:
1. As indicated below, the undersigned is the President, Chief
Financial Officer, Senior Vice President or other executive officer of the
entity purchasing the Certificates (the "Transferee").
2. In connection with purchases by the Transferee, the Transferee
is a "qualified institutional buyer" as that term is defined in Rule 144A under
the Securities Act of 1933 ("Rule 144A") because (i) the Transferee owned and/or
invested on a discretionary basis $______________________1 in securities (except
for the excluded securities referred to below) as of the end of the Transferee's
most recent fiscal year (such amount being calculated in accordance with Rule
144A) and (ii) the Transferee satisfies the criteria in the category marked
below.
___ CORPORATION, ETC. The Transferee is a corporation (other than a
bank, savings and loan association or similar institution),
Massachusetts or similar business trust, partnership, or any
organization described in Section 501(c)(3) of the Internal
Revenue Code of 1986.
___ BANK. The Transferee (a) is a national bank or banking
institution organized under the laws of any State, territory or
the District of Columbia, the business of which is substantially
confined to banking and is supervised by the State or territorial
banking commission or similar official or is a foreign bank or
equivalent institution, and (b) has an audited net worth of at
least $25,000,000 as demonstrated in its latest annual financial
statements, A COPY OF WHICH IS ATTACHED HERETO.
___ SAVINGS AND LOAN. The Transferee (a) is a savings and loan
association, building and loan association, cooperative bank,
homestead association or similar institution, which is supervised
and examined by a State or Federal authority having supervision
over any such institutions or is a foreign savings and loan
association or equivalent institution and (b) has an audited net
worth
- --------
1 Transferee must own and/or invest on a discretionary basis at least
$100,000,000 in securities unless Transferee is a dealer, and, in that case,
Transferee must own and/or invest on a discretionary basis at least $10,000,000
in securities.
<PAGE>
of at least $25,000,000 as demonstrated in its latest annual
financial statements, A COPY OF WHICH IS ATTACHED HERETO.
___ BROKER-DEALER. The Transferee is a dealer registered pursuant to
Section 15 of the Securities Exchange Act of 1934.
___ INSURANCE COMPANY. The Transferee is an insurance company whose
primary and predominant business activity is the writing of
insurance or the reinsuring of risks underwritten by insurance
companies and which is subject to supervision by the insurance
commissioner or a similar official or agency of a State,
territory or the District of Columbia.
___ STATE OR LOCAL PLAN. The Transferee is a plan established and
maintained by a State, its political subdivisions, or any agency
or instrumentality of the State or its political subdivisions,
for the benefit of its employees.
___ ERISA PLAN. The Transferee is an employee benefit plan within the
meaning of Title I of the Employee Retirement Income Security Act
of 1974.
___ INVESTMENT ADVISOR. The Transferee is an investment advisor
registered under the Investment Advisers Act of 1940.
3. The term "SECURITIES" as used herein DOES NOT INCLUDE (i)
securities of issuers that are affiliated with the Transferee, (ii) securities
that are part of an unsold allotment to or subscription by the Transferee, if
the Transferee is a dealer, (iii) securities issued or guaranteed by the U.S. or
any instrumentality thereof, (iv) bank deposit notes and certificates of
deposit, (v) loan participations, (vi) repurchase agreements, (vii) securities
owned but subject to a repurchase agreement and (viii) currency, interest rate
and commodity swaps.
4. For purposes of determining the aggregate amount of securities
owned and/or invested on a discretionary basis by the Transferee, the Transferee
used the cost of such securities to the Transferee and did not include any of
the securities referred to in the preceding paragraph. Further, in determining
such aggregate amount, the Transferee may have included securities owned by
subsidiaries of the Transferee, but only if such subsidiaries are consolidated
with the Transferee in its financial statements prepared in accordance with
generally accepted accounting principles and if the investments of such
subsidiaries are managed under the Transferee's direction. However, such
securities were not included if the Transferee is a majority-owned, consolidated
subsidiary of another enterprise and the Transferee is not itself a reporting
company under the Securities Exchange Act of 1934.
5. The Transferee acknowledges that it is familiar with Rule 144A
and understands that the Transferor and other parties related to the
Certificates are relying and will continue to rely on the statements made herein
because one or more sales to the Transferee may be in reliance on Rule 144A.
<PAGE>
___ ___ Will the Transferee be purchasing the Certificates
Yes No only for the Transferee's own account?
6. If the answer to the foregoing question is "no", the
Transferee agrees that, in connection with any purchase of securities sold to
the Transferee for the account of a third party (including any separate account)
in reliance on Rule 144A, the Transferee will only purchase for the account of a
third party that at the time is a "qualified institutional buyer" within the
meaning of Rule 144A. In addition, the Transferee agrees that the Transferee
will not purchase securities for a third party unless the Transferee has
obtained a current representation letter from such third party or taken other
appropriate steps contemplated by Rule 144A to conclude that such third party
independently meets the definition of "qualified institutional buyer" set forth
in Rule 144A.
7. The Transferee will notify each of the parties to which this
certification is made of any changes in the information and conclusions herein.
Until such notice is given, the Transferee's purchase of the Certificates will
constitute a reaffirmation of this certification as of the date of such
purchase. In addition, if the Transferee is a bank or savings and loan as
provided above, the Transferee agrees that it will furnish to such parties
updated annual financial statements promptly after they become available.
Dated:
------------------------------
Print Name of Transferee
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
<PAGE>
ANNEX 2 TO EXHIBIT F-1
QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
[For Transferees That Are Registered Investment Companies]
The undersigned hereby certifies as follows to [name of
Transferor] (the "Transferor") and The Bank of New York, as Trustee and
Certificate Registrar, with respect to the asset-backed certificates (the
"Certificates") described in the Transferee Certificate to which this
certification relates and to which this certification is an Annex:
1. As indicated below, the undersigned is the President, Chief
Financial Officer or Senior Vice President of the entity purchasing the
Certificates (the "Transferee") or, if the Transferee is a "qualified
institutional buyer" as that term is defined in Rule 144A under the Securities
Act of 1933 ("Rule 144A") because the Transferee is part of a Family of
Investment Companies (as defined below), is such an officer of the investment
adviser (the "Adviser").
2. In connection with purchases by the Transferee, the Transferee
is a "qualified institutional buyer" as defined in Rule 144A because (i) the
Transferee is an investment company registered under the Investment Company Act
of 1940, and (ii) as marked below, the Transferee alone, or the Transferee's
Family of Investment Companies, owned at least $100,000,000 in securities (other
than the excluded securities referred to below) as of the end of the
Transferee's most recent fiscal year. For purposes of determining the amount of
securities owned by the Transferee or the Transferee's Family of Investment
Companies, the cost of such securities was used.
____ The Transferee owned $___________________ in securities (other
than the excluded securities referred to below) as of the end of
the Transferee's most recent fiscal year (such amount being
calculated in accordance with Rule 144A).
____ The Transferee is part of a Family of Investment Companies which
owned in the aggregate $______________ in securities (other than
the excluded securities referred to below) as of the end of the
Transferee's most recent fiscal year (such amount being
calculated in accordance with Rule 144A).
3. The term "FAMILY OF INVESTMENT COMPANIES" as used herein means
two or more registered investment companies (or series thereof) that have the
same investment adviser or investment advisers that are affiliated (by virtue of
being majority owned subsidiaries of the same parent or because one investment
adviser is a majority owned subsidiary of the other).
4. The term "SECURITIES" as used herein does not include (i)
securities of issuers that are affiliated with the Transferee or are part of the
Transferee's Family of
<PAGE>
Investment Companies, (ii) securities issued or guaranteed by the U.S. or any
instrumentality thereof, (iii) bank deposit notes and certificates of deposit,
(iv) loan participations, (v) repurchase agreements, (vi) securities owned but
subject to a repurchase agreement and (vii) currency, interest rate and
commodity swaps.
5. The Transferee is familiar with Rule 144A and understands that
the parties to which this certification is being made are relying and will
continue to rely on the statements made herein because one or more sales to the
Transferee will be in reliance on Rule 144A. In addition, the Transferee will
only purchase for the Transferee's own account.
6. The undersigned will notify the parties to which this
certification is made of any changes in the information and conclusions herein.
Until such notice, the Transferee's purchase of the Certificates will constitute
a reaffirmation of this certification by the undersigned as of the date of such
purchase.
Dated:
-----------------------------------
Print Name of Transferee or Advisor
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
IF AN ADVISER:
--------------------------------
Print Name of Transferee
<PAGE>
FORM OF TRANSFEREE REPRESENTATION LETTER
The undersigned hereby certifies on behalf of the purchaser named
below (the "Purchaser") as follows:
1. I am an executive officer of the Purchaser.
2. The Purchaser is a "qualified institutional buyer", as
defined in Rule 144A, ("Rule 144A") under the Securities Act of 1933, as
amended.
3. As of the date specified below (which is not earlier than the
last day of the Purchaser's most recent fiscal year), the amount of
"securities", computed for purposes of Rule 144A, owned and invested on
a discretionary basis by the Purchaser was in excess of $100,000,000.
Name of Purchaser
By: (Signature)
Name of Signatory
Title
Date of this certificate
Date of information provided in paragraph 3
<PAGE>
EXHIBIT F-2
FORM OF TRANSFER AFFIDAVIT AND AGREEMENT
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
, being duly sworn, deposes, represents and
warrants as follows:
1. I am a ______________________ of ____________________________
(the "Owner") a corporation duly organized and existing under the laws of
______________, the record owner of Salomon Brothers Mortgage Securities VII,
Inc., Asset-Backed Fixed Rate and Floating Rate Certificates, Series 1996-3,
Class R (the "Class R Certificates"), on behalf of whom I make this affidavit
and agreement. Capitalized terms used but not defined herein have the respective
meanings assigned thereto in the Pooling and Servicing Agreement pursuant to
which the Class R Certificates were issued.
2. The Owner (i) is and will be a "Permitted Transferee" as of
____________________, 199___ and (ii) is acquiring the Class R Certificates for
its own account or for the account of another Owner from which it has received
an affidavit in substantially the same form as this affidavit. A "Permitted
Transferee" is any person other than a "disqualified organization" or a
possession of the United States. For this purpose, a "disqualified organization"
means the United States, any state or political subdivision thereof, any agency
or instrumentality of any of the foregoing (other than an instrumentality all of
the activities of which are subject to tax and, except for the Federal Home Loan
Mortgage Corporation, a majority of whose board of directors is not selected by
any such governmental entity) or any foreign government, international
organization or any agency or instrumentality of such foreign government or
organization, any rural electric or telephone cooperative, or any organization
(other than certain farmers' cooperatives) that is generally exempt from federal
income tax unless such organization is subject to the tax on unrelated business
taxable income.
3. The Owner is aware (i) of the tax that would be imposed on
transfers of the Class R Certificates to disqualified organizations under the
Internal Revenue Code of 1986 that applies to all transfers of the Class R
Certificates after March 31, 1988; (ii) that such tax would be on the transferor
or, if such transfer is through an agent (which person includes a broker,
nominee or middleman) for a non-Permitted Transferee, on the agent; (iii) that
the person otherwise liable for the tax shall be relieved of liability for the
tax if the transferee furnishes to such person an affidavit that the transferee
is a Permitted Transferee and, at the time of transfer, such person does not
have actual knowledge that the affidavit is false; and (iv) that each of the
Class R Certificates may be a "noneconomic residual interest" within the meaning
of proposed Treasury regulations promulgated under the Code and that the
transferor of a "noneconomic residual interest" will remain liable for any taxes
due with
<PAGE>
respect to the income on such residual interest, unless no significant purpose
of the transfer is to impede the assessment or collection of tax.
4. The Owner is aware of the tax imposed on a "pass-through
entity" holding the Class R Certificates if, at any time during the taxable year
of the pass-through entity, a non-Permitted Transferee is the record holder of
an interest in such entity. (For this purpose, a "pass-through entity" includes
a regulated investment company, a real estate investment trust or common trust
fund, a partnership, trust or estate, and certain cooperatives.)
5. The Owner is aware that the Trustee will not register the
transfer of any Class R Certificate unless the transferee, or the transferee's
agent, delivers to the Trustee, among other things, an affidavit in
substantially the same form as this affidavit. The Owner expressly agrees that
it will not consummate any such transfer if it knows or believes that any of the
representations contained in such affidavit and agreement are false.
6. The Owner consents to any additional restrictions or
arrangements that shall be deemed necessary upon advice of counsel to constitute
a reasonable arrangement to ensure that the Class R Certificates will only be
owned, directly or indirectly, by an Owner that is a Permitted Transferee.
7. The Owner's taxpayer identification number is _______________.
8. The Owner has reviewed the restrictions set forth on the face
of the Class R Certificates and the provisions of Section 5.02(d) of the Pooling
and Servicing Agreement under which the Class R Certificates were issued (in
particular, clauses (iii)(A) and (iii)(B) of Section 5.02(d) which authorize the
Trustee to deliver payments to a person other than the Owner and negotiate a
mandatory sale by the Trustee in the event that the Owner holds such Certificate
in violation of Section 5.02(d)); and that the Owner expressly agrees to be
bound by and to comply with such restrictions and provisions.
9. The Owner is not acquiring and will not transfer the Class R
Certificates in order to impede the assessment or collection of any tax.
10. The Owner anticipates that it will, so long as it holds the
Class R Certificates, have sufficient assets to pay any taxes owed by the holder
of such Class R Certificates, and hereby represents to and for the benefit of
the person from whom it acquired the Class R Certificates that the Owner intends
to pay taxes associated with holding such Class R Certificates as they become
due, fully understanding that it may incur tax liabilities in excess of any cash
flows generated by the Class R Certificates.
11. The Owner has no present knowledge that it may become
insolvent or subject to a bankruptcy proceeding for so long as it holds the
Class R Certificates.
12. The Owner has no present knowledge or expectation that it
will be unable to pay any United States taxes owed by it so long as any of the
Certificates remain outstanding.
<PAGE>
13. The Owner is not acquiring the Class R Certificates with the
intent to transfer the Class R Certificates to any person or entity that will
not have sufficient assets to pay any taxes owed by the holder of such Class R
Certificates, or that may become insolvent or subject to a bankruptcy
proceeding, for so long as the Class R Certificates remain outstanding.
14. The Owner will, in connection with any transfer that it makes
of the Class R Certificates, obtain from its transferee the representations
required by Section 5.02(d) of the Pooling and Servicing Agreement under which
the Class R Certificate were issued and will not consummate any such transfer if
it knows, or knows facts that should lead it to believe, that any such
representations are false.
15. The Owner will, in connection with any transfer that it makes
of the Class R Certificates, deliver to the Trustee an affidavit, which
represents and warrants that it is not transferring the Class R Certificates to
impede the assessment or collection of any tax and that it has no actual
knowledge that the proposed transferee: (i) has insufficient assets to pay any
taxes owed by such transferee as holder of the Class R Certificates; (ii) may
become insolvent or subject to a bankruptcy proceeding for so long as the Class
R Certificates remains outstanding; and (iii) is not a "Permitted Transferee".
16. The Owner is a citizen or resident of the United States, a
corporation, partnership or other entity created or organized in, or under the
laws of, the United States or any political subdivision thereof, or an estate or
trust whose income from sources without the United States may be included in
gross income for United States federal income tax purposes regardless of its
connection with the conduct of a trade or business within the United States.
<PAGE>
IN WITNESS WHEREOF, the Owner has caused this instrument to be
executed on its behalf, pursuant to the authority of its Board of Directors, by
its [Vice] President, attested by its [Assistant] Secretary, this ____ day of
__________, 199___.
[OWNER]
By:
------------------------------
Name:
------------------------------
Title: [Vice] President
ATTEST:
By:
- ------------------------------
Name:
- ------------------------------
Title: [Assistant] Secretary
Personally appeared before me the above-named , known or proved
to me to be the same person who executed the foregoing instrument and to be a
[Vice] President of the Owner, and acknowledged to me that [he/she] executed the
same as [his/her] free act and deed and the free act and deed of the Owner.
Subscribed and sworn before me this ____ day of __________,
199___.
Notary Public
County of
State of
My Commission expires:
<PAGE>
FORM OF TRANSFEROR AFFIDAVIT
STATE OF NEW YORK )
: ss. :
COUNTY OF NEW YORK )
, being duly sworn, deposes, represents and
warrants as follows:
1. I am a ____________________ of _____________________________
(the "Owner"), a corporation duly organized and existing under the laws of
______________, on behalf of whom I make this affidavit.
2. The Owner is not transferring the Residual Certificates to
impede the assessment or collection of any tax.
3. The Owner has no actual knowledge that the Person that is the
proposed transferee (the "Purchaser") of the Class R Certificates: (i) has
insufficient assets to pay any taxes owed by such proposed transferee as holder
of the Class R Certificates; (ii) may become insolvent or subject to a
bankruptcy proceeding for so long as the Class R Certificates remain outstanding
and (iii) is not a Permitted Transferee.
4. The Owner understands that the Purchaser has delivered to the
Trustee a transfer affidavit and agreement in the form attached to the Pooling
and Servicing Agreement as Exhibit F-2. The Owner does not know or believe that
any representation contained therein is false.
5. At the time of transfer, the Owner has conducted a reasonable
investigation of the financial condition of the Purchaser as contemplated by
Treasury Regulations Section 1.860E-1(c)(4)(i) and, as a result of that
investigation, the Owner has determined that the Purchaser has historically paid
its debts as they became due and has found no significant evidence to indicate
that the Purchaser will not continue to pay its debts as they become due in the
future. The Owner understands that the transfer of a Residual Certificate may
not be respected for United States income tax purposes (and the Owner may
continue to be liable for United States income taxes associated therewith)
unless the Owner has conducted such an investigation.
6. Capitalized terms not otherwise defined herein shall have the
meanings ascribed to them in the Pooling and Servicing Agreement
<PAGE>
IN WITNESS WHEREOF, the Owner has caused this instrument to be
executed on its behalf, pursuant to the authority of its Board of Directors, by
its [Vice] President, attested by its [Assistant] Secretary, this ____ day of
___________, 199___.
[OWNER]
By:
------------------------------
Name:
------------------------------
Title: [Vice] President
ATTEST:
By:
- ------------------------------
Name:
- ------------------------------
Title: [Assistant] Secretary
Personally appeared before me the above-named , known or proved
to me to be the same person who executed the foregoing instrument and to be a
[Vice] President of the Owner, and acknowledged to me that [he/she] executed the
same as [his/her] free act and deed and the free act and deed of the Owner.
Subscribed and sworn before me this ____ day of __________,
199___.
Notary Public
County of
State of
My Commission expires:
<PAGE>
EXHIBIT G
INTENTIONALLY OMITTED
<PAGE>
EXHIBIT H
FORM OF LOST NOTE AFFIDAVIT
Berkeley Federal Bank & Trust FSB, a federal savings bank (the
"Mortgage Loan Seller"), by its undersigned authorized representative, hereby
certifies:
(i) Pursuant to the Mortgage Loan Purchase Agreement, dated June
25, 1996, between the Mortgage Loan Seller and Salomon Brothers Mortgage
Securities VII, Inc. (the "Depositor"), the Mortgage Loan Seller is granting all
of its right, title and interest in and to the Mortgage Loan identified below to
the Depositor. Terms used but not defined herein have the respective meanings
assigned to them in the Mortgage Loan Purchase Agreement.
Mortgage Loan Number:
Maker:
Original Principal Amount:
Original Mortgage Note Date:
Maturity Date:
(ii) The Mortgage Loan Seller is the current owner and holder of
the indebtedness evidenced by the original Mortgage Note.
(iii) After diligent search, the Mortgage Loan Seller has been
unable to locate the original Mortgage Note and believes it to be lost or
misplaced.
(iv) A true, complete and correct photocopy of the original
Mortgage Note is attached hereto.
(v) If at any time the Mortgage Loan Seller locates the
original Mortgage Note, the Mortgage Loan Seller shall endorse such original
Mortgage Note in the following form: "Pay to the order of The Bank of New York,
as Trustee for the registered holders of Salomon Brothers Mortgage Securities
VII, Inc., Series 1996-3, without recourse", and shall promptly deliver to the
Trustee the original Mortgage Note so endorsed, with all prior and intervening
endorsements showing a complete chain of endorsement from the originator to the
Mortgage Loan Seller.
(vi) The Mortgage Loan Seller hereby indemnifies the Depositor,
the Trustee, the Certificateholders and the Certificate Insurer from and against
any and all losses, liabilities, damages, claims or expenses of whatever kind
(including without limitation attorneys' fees and disbursements) arising from or
in connection with the Mortgage Loan Seller's failure to have delivered the
original Mortgage Note (as required under the Mortgage Loan Purchase Agreement)
to the Trustee as designee of the Depositor, including without limitation any
such losses, liabilities, damages, claims or expenses arising from or in
<PAGE>
connection with any claim by any third party who is the holder of such
indebtedness by virtue of its possession of such original Mortgage Note.
(vii) This Lost Note Affidavit shall inure to the benefit of the
Depositor, the Trustee, the Certificateholders and the Certificate Insurer and
their respective successors and permitted assigns.
Dated: June 27, 1995
BERKELEY FEDERAL BANK & TRUST FSB
By:
------------------------------
Name:
Title:
<PAGE>
SCHEDULE 1
MORTGAGE LOAN SCHEDULE
