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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) June 26, 1997
Prudential Securities Secured Financing Corporation
(Exact name of registrant as specified in its charter)
Delaware 333-27355 13-3526694
(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
c/o Prudential Securities
Secured Financing
Corporation
Attention: Norman Chaleff 10292
One New York Plaza, 12th Fl. (Zip Code)
New York, New York
(Address of Principal
Executive Offices)
Registrant's telephone number, including area code (212) 214-7435
No Change
(Former name or former address, if changed since last report)
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<PAGE>
Item 2. Acquisition or Disposition of Assets
Description of the Certificates and the Mortgage Loans
Prudential Securities Secured Financing Corporation, as
Depositor (the "Depositor"), has registered issuances of securities backed by
mortgage loans, on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, as amended (the "Act"), by a Registration Statement on
Form S-3 (Registration File No. 333-27355) (as amended, the "Registration
Statement"). The Depositor formed the Emergent Home Equity Loan Trust 1997-2
(the "Trust"), pursuant to a Pooling and Servicing Agreement, dated as of June
1, 1997 (the "Pooling and Servicing Agreement"), among the Depositor, Emergent
Mortgage Corp., as servicer (the "Servicer") and First Union National Bank, as
trustee (the "Trustee"). Pursuant to the Registration Statement, the Trust
issued $121,209,000 in aggregate principal amount of its Emergent Home Equity
Loan Pass-Through Certificates, Class A (the "Certificates"), on June 26, 1997.
This Current Report on Form 8-K is being filed to satisfy an undertaking to file
copies of certain agreements executed in connection with the issuance of the
Certificates, the forms of which are being filed as exhibits to the Pooling and
Servicing Agreement attached hereto as Exhibit 4.1.
The Certificates were issued pursuant to the Pooling and
Servicing Agreement attached hereto as Exhibit 4.1. The Certificates consist of
five senior classes, the Class A-1 Certificates, the Class A-2 Certificates, the
Class A-3 Certificates, the Class A-4 Certificates and the Class A-5
Certificates, together the "Class A Certificates" and the Class R Certificates.
Only the Class A Certificates were issued pursuant to the Registration
Statement.
The assets of the Trust consist of a segregated pool of
mortgage loans (the "Mortgage Loans"), together with the Mortgage Files relating
thereto, and together with all collections thereon or in respect thereof after
the Cut-off Date (including amounts due on or before the Cut-off Date but
received after the Cut-off Date), any REO Property, together with all
collections thereon and proceeds thereof, the Trustee's rights with respect to
the Mortgage Loans under the insurance policies required to be maintained
pursuant to the Pooling and Servicing Agreement and any proceeds thereof, the
Depositor's rights under the Unaffiliated Seller's Agreement (including any
security interest created thereby), 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 and the
Trustee's rights under the Policy, together with any and all income, proceeds
and payments with respect thereto (all such capitalized terms as defined in the
Pooling and Servicing Agreement). On and prior to June 26, 1997 (the "Closing
Date"), Emergent Mortgage Corp. (the "Originator")
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transferred the Mortgage Loans and the related assets to Emergent Mortgage
Holdings Corporation (the "Seller") pursuant to the Purchase Agreement and
Assignment, dated as of June 1, 1997, attached hereto as Exhibit 4.4, between
the Originator, the Seller and Emergent Group, Inc. On the Closing Date, the
Seller transferred the Mortgage Loans and the related assets to the Depositor
pursuant to the Unaffiliated Seller's Agreement, dated as of June 1, 1997,
attached hereto as Exhibit 4.3, among the Seller, Emergent Group, Inc. and the
Depositor. The Depositor, in turn, then transferred the Mortgage Loans and the
related assets to the Trust pursuant to the Pooling and Servicing Agreement,
attached hereto as Exhibit 4.1.
Interest payments on the Class A Certificates are based on the
outstanding Certificate Principal Balance for the related Class A Certificates
and the applicable Pass-Through Rate. The Class A-1 Pass-Through Rate will be
6.435% per annum; the Class A-2 Pass-Through Rate will be 6.745% per annum; the
Class A-3 Pass-Through Rate will be 7.020% per annum; the Class A-4 Pass-Through
Rate will be 7.390% per annum; and the Class A-5 Pass-Through Rate will be
6.980% per annum. The Class A-1 Certificates have an initial Class A-1
Certificate Principal Balance of $41,500,000; the Class A-2 Certificates have an
initial Class A-2 Certificate Principal Balance of $32,500,000; the Class A-3
Certificates have an initial Class A-3 Certificate Principal Balance of
$13,000,000; the Class A-4 Certificates have an initial Class A-4 Certificate
Principal Balance of $22,209,000; and the Class A-5 Certificates have an initial
Class A-5 Certificate Principal Balance of $12,000,000.
As of the Closing Date, the Mortgage Loans generally possessed
the characteristics described in the Prospectus dated June 10, 1997 and the
Prospectus Supplement dated June 17, 1997 filed pursuant to Rule 424(b) of the
Act on June 23, 1997.
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Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Not applicable
(b) Not applicable
(c) Exhibits:
1.1 Underwriting Agreement, dated June 17, 1997, between
Prudential Securities Secured Financing Corporation and Prudential Securities
Incorporated.
1.2 Indemnification Agreement, dated as of June 1, 1997 among
Financial Security Assurance Inc., Prudential Securities Secured Financing
Corporation, Emergent Group, Inc., Emergent Mortgage Holdings Corporation,
Emergent Mortage Corp. and Prudential Securities Incorporated.
4.1 Pooling and Servicing Agreement, dated as of June 1, 1997,
among Prudential Securities Secured Financing Corporation, as depositor,
Emergent Mortgage Corp., as servicer and First Union National Bank, as trustee.
4.2 Form of Certificate Insurance Policy and Endorsement No. 1
thereto dated June 26, 1997.
4.3 Unaffiliated Seller's Agreement, dated as of June 1, 1997,
among Prudential Securities Secured Financing Corporation, Emergent Group, Inc.
and Emergent Mortgage Holdings Corporation.
4.4 Purchase Agreement and Assignment, dated as of June 1,
1997, between the Originator, Emergent Mortgage Holdings Corporation and
Emergent Group, Inc.
23.1 Consent of Coopers & Lybrand dated June 24, 1997
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EXHIBIT INDEX
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Exhibit No. Description Page No.
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1.1 Underwriting Agreement, dated June
17, 1997 between Prudential
Securities Secured Financing
Corporation and Prudential
Securities Incorporated.
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1.2 Indemnification Agreement, dated as
of June 1, 1997 among Financial
Security Assurance Inc., Prudential
Securities Secured Financing
Corporation, Emergent Group, Inc.,
Emergent Mortgage Corp., Emergent
Mortgage Holdings Corporation. and
Prudential Securities Incorporated.
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4.1 Pooling and Servicing Agreement,
dated as of June 1, 1997, among
Prudential Securities Secured
Financing Corporation, as
depositor, Emergent Mortage Corp.,
as servicer, and First Union
National Bank, as trustee.
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4.2 Form of Certificate Insurance
Policy and Endorsement No. 1
thereto dated June 26, 1997.
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4.3 Unaffiliated Seller's Agreement,
dated as of June 1, 1997, among
Prudential Securities Secured
Financing Corporation, Emergent
Mortgage Holdings Corporation and
Emergent Group, Inc.
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4.4 Purchase Agreement and Assignment,
dated as of June 1, 1997, between
Emergent Mortgage Holdings
Corporation, Emergent Mortgage
Corp. and Emergent Group, Inc.
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23.1 Consent of Coopers & Lybrand dated
June 24, 1997
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
Prudential Securities Secured
Financing Corporation, as
Depositor
By:/s/ Norman Chaleff
--------------------------
Name: Norman Chaleff
Title:Vice President
Dated: July 11, 1997
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION
EMERGENT HOME EQUITY LOAN PASS-THROUGH CERTIFICATES
SERIES 1997-2
UNDERWRITING AGREEMENT
June 17, 1997
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UNDERWRITING AGREEMENT
PRUDENTIAL SECURITIES INCORPORATED
One New York Plaza, 17th Floor
New York, New York 10292
June 17, 1997
Dear Sirs:
Prudential Securities Secured Financing Corporation (the
"Depositor") proposes, subject to the terms and conditions stated herein and in
the attached Underwriting Agreement Standard Provisions, dated June 17, 1997
(the "Standard Provisions"), between the Depositor and Prudential Securities
Incorporated, to issue and sell to you (the "Underwriter") the Securities
specified in Schedule I hereto (the "Offered Securities"). The Depositor agrees
that each of the provisions of the Standard Provisions is incorporated herein by
reference in its entirety, and shall be deemed to be a part of this Agreement to
the same extent as if such provisions had been set forth in full herein; and
each of the representations and warranties set forth therein shall be deemed to
have been made at and as of the date of this Underwriting Agreement. Each
reference to the Representative herein and in the provisions of the Standard
Provisions so incorporated by reference shall be deemed to refer to you. Unless
otherwise defined herein, terms defined in the Standard Provisions are used
herein as therein defined. The Prospectus Supplement and the accompanying
Prospectus relating to the Offered Securities (together, the "Prospectus") are
incorporated by reference herein.
Subject to the terms and conditions set forth herein and in
the Standard Provisions incorporated herein by reference, the Depositor agrees
to issue and sell to the Underwriter, and the Underwriter agrees to purchase
from the Depositor, at the time and place and at the purchase price to the
Underwriter and in the manner set forth in Schedule I hereto, the entire
original principal balance of the Offered Securities.
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If the foregoing is in accordance with your understanding,
please sign and return to us two counterparts hereof, and upon acceptance hereof
by you, this letter and such acceptance hereof, including the provisions of the
Standard Provisions incorporated herein by reference, shall constitute a binding
agreement between the Underwriter and the Depositor.
Very truly yours,
PRUDENTIAL SECURITIES SECURED
FINANCING CORPORATION
By:_______________________
Name: Glen Stein
Title: Vice President
Accepted as of the date hereof:
PRUDENTIAL SECURITIES INCORPORATED
By:_______________________
Name:
Title:
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<PAGE>
SCHEDULE I
Title of Offered
Securities: Emergent Home Equity Loan Pass- Through
Certificates, Series 1997-2, Class A-1, Class
A-2, Class A-3, Class A-4 and Class A-5
(together, the "Class A Certificates.")
Terms of Offered
Securities: The Offered Securities shall have the terms
set forth in the Prospectus and shall conform
in all material respects to the descrip-
tions thereof contained therein, and shall be
issued pursuant to a Pooling and Servicing
Agreement to be dated as of the Closing Date
among the Depositor, Emergent Mortgage Corp.,
as servicer, and First Union National Bank,
as trustee.
Purchase Price: The purchase price for the Class A-1
Certificates shall be $41,354,750.00 plus
accrued interest at the rate of 6.435% per
annum from June 1, 1997 to the date of
payment thereof. The purchase price for the
Class A-2 Certificates shall be
$32,386,250.00 plus accrued interest at the
rate of 6.745% per annum from June 1, 1997 to
the date of payment thereof. The purchase
price for the Class A-3 Certificates shall be
$12,954,500.00 plus accrued interest at the
rate of 7.020% per annum from June 1, 1997 to
the date of payment thereof. The purchase
price for the Class A-4 Certificates shall be
$22,131,268.50 plus accrued interest at the
rate of 7.390% per annum from June 1, 1997 to
the date of payment thereof. The purchase
price for the Class A-5 Certificates shall be
$11,958,000.00 plus accrued interest at the
rate of 6.980% per annum from June 1, 1997 to
the date of payment thereof. Total accrued
interest on the Class A-1, Class A-2, Class
A-3, Class A-4 and Class A-5 Certificates is
$573,201.05.
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Specified funds for
payment of
Purchase Price: Federal Funds (immediately available funds).
Required Rating: Aaa by Moody's Investors Service, Inc.
AAA by Standard & Poor's Ratings Services, a
division of The McGraw-Hill Companies, Inc.
Closing Date: On or about June 26, 1997 at 12:00 noon
eastern standard time or at such other time
as the Depositor and the Underwriter shall
agree.
Closing Location: Offices of Dewey Ballantine, 1301 Avenue of
the Americas, New York, New York.
Name and address of
Representative: Designated Representative: Prudential
Securities Incorporated.
Address for Notices,
etc.: One New York Plaza, 17th Floor
New York, New York 10292
Attn: Glen Stein.
5
<PAGE>
STANDARD PROVISIONS TO UNDERWRITING AGREEMENT
June 17, 1997
From time to time, Prudential Securities Secured Financing
Corporation, a Delaware corporation (the "Depositor") may enter into one or more
underwriting agreements (each, an "Underwriting Agreement") that provide for the
sale of designated securities to the several underwriters named therein (such
underwriters constituting the "Underwriters" with respect to such Underwriting
Agreement and the securities specified therein). The several underwriters named
in an Underwriting Agreement will be represented by one or more representatives
as named in such Underwriting Agreement (collectively, the "Representative").
The term "Representative" also refers to a single firm acting as sole
representative of the Underwriters and to Underwriters who act without any firm
being designated as their representative. The standard provisions set forth
herein (the "Standard Provisions") may be incorporated by reference in any
Underwriting Agreement. This Agreement shall not be construed as an obligation
of the Depositor to sell any securities or as an obligation of any of the
Underwriters to purchase such securities. The obligation of the Depositor to
sell any securities and the obligation of any of the Underwriters to purchase
any of the securities shall be evidenced by the Underwriting Agreement with
respect to the securities specified therein. An Underwriting Agreement shall be
in the form of an executed writing (which may be in counterparts), and may be
evidenced by an exchange of telegraphic communications or any other rapid
transmission device designed to produce a written record of the communications
transmitted. The obligations of the underwriters under this Agreement and each
Underwriting Agreement shall be several and not joint. Unless otherwise defined
herein, the terms defined in the Underwriting Agreement are used herein as
defined in the Prospectus referred to below.
1. The Offered Securities. The Depositor proposes to sell
pursuant to the applicable Underwriting Agreement to the several Underwriters
named therein home equity loan pass-through certificates (the "Securities")
representing beneficial ownership interests in a trust, the trust property of
which consists of a pool of Mortgage Loans and certain related property. The
Securities will be issued pursuant to a pooling and servicing agreement dated as
of June 1, 1997 (the "Pooling and Servicing Agreement") by and among the
Depositor, Emergent Mortgage Corp. (the "Servicer") and First Union National
Bank, as trustee (the "Trustee").
The terms and rights of any particular issuance of Securities
shall be as specified in the Underwriting Agreement relating thereto and in or
pursuant to the Pooling and
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Servicing Agreement identified in such Underwriting Agreement. The Securities
which are the subject of any particular Underwriting Agreement into which this
Agreement is incorporated are herein referred to as the "Offered Securities."
The Depositor has filed with the Securities and Exchange
Commission (the "Commission") a registration statement on Form S-3 (File No.
333-27355), including a prospectus relating to the Securities under the
Securities Act of 1933, as amended (the "1933 Act"). The term "Registration
Statement" means such registration statement as amended to the date of the
Underwriting Agreement. The term "Basic Prospectus" means the prospectus
included in the Registration Statement. The term "Prospectus" means the Basic
Prospectus together with the prospectus supplement specifically relating to the
Offered Securities, as first filed with the Commission pursuant to Rule 424. The
term "Preliminary Prospectus" means a preliminary prospectus supplement
specifically relating to the Offered Securities together with the Basic
Prospectus.
2. Offering by the Underwriters. Upon the execution of the
Underwriting Agreement applicable to any Offered Securities and the
authorization by the Representative of the release of such Offered Securities,
the several Underwriters propose to offer for sale to the public the Offered
Securities at the prices and upon the terms set forth in the Prospectus.
3. Purchase, Sale and Delivery of the Offered Securities.
Unless otherwise specified in the Underwriting Agreement, payment for the
Offered Securities shall be made by certified or official bank check or checks
payable to the order of the Depositor in immediately available or next day
funds, at the time and place set forth in the Underwriting Agreement, upon
delivery to the Representative for the respective accounts of the several
Underwriters of the Offered Securities registered in definitive form and in such
names and in such denominations as the Representative shall request in writing
not less than five full business days prior to the date of delivery. The time
and date of such payment and delivery with respect to the Offered Securities are
herein referred to as the "Closing Date".
4. Conditions of the Underwriters' Obligations. The respective
obligations of the several Underwriters pursuant to the Underwriting Agreement
shall be subject, in the discretion of the Representative, to the accuracy in
all material respects of the representations and warranties of the Depositor
contained herein as of the date of the Underwriting Agreement and as of the
Closing Date as if made on and as of the Closing Date, to the accuracy in all
material respects of the statements of the officers of the Depositor and the
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<PAGE>
Servicer made in any certificates pursuant to the provisions hereof and of the
Underwriting Agreement, to the performance by the Depositor of its covenants and
agreements contained herein and to the following additional conditions
precedent:
(a) All actions required to be taken and all filings required
to be made by or on behalf of the Depositor under the 1933 Act
and the Securities Exchange Act of 1934, as amended (the "1934
Act") prior to the sale of the Offered Securities shall have
been duly taken or made.
(b) (i) No stop order suspending the effectiveness of the
Registration Statement shall be in effect; (ii) no proceedings
for such purpose shall be pending before or threatened by the
Commission, or by any authority administering any state
securities or "Blue Sky" laws; (iii) any requests for
additional information on the part of the Commission shall
have been complied with to the Representative's reasonable
satisfaction, (iv) since the respective dates as of which
information is given in the Registration Statement and the
Prospectus except as otherwise stated therein, there shall
have been no material adverse change in the condition,
financial or otherwise, earnings, affairs, regulatory
situation or business prospects of the Depositor; (v) there
are no material actions, suits or proceedings pending before
any court or governmental agency, authority or body or
threatened, affecting the Depositor or the transactions
contemplated by the Underwriting Agreement; (vi) the Depositor
is not in violation of its charter or its by-laws or in
default in the performance or observance of any obligation,
agreement, covenant or condition contained in any contract,
indenture, mortgage, loan agreement, note, lease or other
instrument to which it is a party or by which it or its
properties may be bound, which violations or defaults
separately or in the aggregate would have a material adverse
effect on the Depositor; and (vii) the Representative shall
have received, on the Closing Date a certificate, dated the
Closing Date and signed by an executive officer of the
Depositor, to the foregoing effect.
(c) Subsequent to the execution of the Underwriting Agreement,
there shall not have occurred any of the following: (i) if at
or prior to the Closing Date, trading in securities on the New
York Stock Exchange shall have been suspended or any material
limitation in trading in securities
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generally shall have been established on such exchange, or a
banking moratorium shall have been declared by New York or
United States authorities; (ii) if at or prior to the Closing
Date, there shall have been an outbreak or escalation of
hostilities between the United States and any foreign power,
or of any other insurrection or armed conflict involving the
United States which results in the declaration of a national
emergency or war, and, in the reasonable opinion of the
Representative, makes it impracticable or inadvisable to offer
or sell the Offered Securities or (iii) if at or prior to the
Closing Date, a general moratorium on commercial banking
activities in New York shall have been declared by either
Federal or New York State authorities.
(d) The Representative shall have received, on the Closing
Date, a certificate dated the Closing Date and signed by an
executive officer of the Depositor to the effect that attached
thereto is a true and correct copy of the letter from each
nationally recognized statistical rating organization (as that
term is defined by the Commission for purposes of Rule
436(g)(2) under the 1933 Act) that rated the Offered
Securities and confirming that, unless otherwise specified in
the Underwriting Agreement, the Offered Securities have been
rated in the highest rating categories by each such
organization and that each such rating has not been rescinded
since the date of the applicable letter.
(e) The Representative shall have received, on the Closing
Date, an opinion of Dewey Ballantine, special counsel for the
Depositor, dated the Closing Date, in form and substance
satisfactory to the Representative and containing opinions
substantially to the effect set forth in Exhibit A hereto.
(f) The Representative shall have received, on the Closing
Date, an opinion of counsel for the Servicer, dated the
Closing Date, in form and substance satisfactory to the
Representative and counsel for the Underwriters and containing
opinions substantially to the effect set forth in Exhibit B
hereto.
(g) The Representative shall have received, on the Closing
Date, an opinion of counsel for the Trustee, dated the Closing
Date, in form and substance satisfactory to the Representative
and counsel for the Underwriters and containing
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opinions substantially to the effect set forth in Exhibit C
hereto.
(h) The Representative shall have received, on the Closing
Date, an opinion of Dewey Ballantine, counsel for the
Underwriters, dated the Closing Date, with respect to the
incorporation of the Depositor, the validity of the Offered
Securities, the Registration Statement, the Prospectus and
other related matters as the Underwriters may reasonably
require, and the Depositor shall have furnished to such
counsel such documents as they request for the purpose of
enabling them to pass upon such matters.
(i) The Representative shall have received, on or prior to the
date of first use of the prospectus supplement relating to the
Offered Securities, and on the Closing Date if requested by
the Representative, letters of independent accountants of the
Depositor in the form and reflecting the performance of the
procedures previously requested by the Representative.
(j) The Depositor shall have furnished or caused to be
furnished to the Representative on the Closing Date a
certificate of an executive officer of the Depositor
satisfactory to the Representative as to the accuracy of the
representations and warranties of the Depositor herein at and
as of such Closing Date as if made as of such date, as to the
performance by the Depositor of all of its obligations
hereunder to be performed at or prior to such Closing Date,
and as to such other matters as the Representative may
reasonably request;
(k) The Servicer shall have furnished or caused to be
furnished to the Representative on the Closing Date a
certificate of officers of such Servicer in form and substance
reasonably satisfactory to the Representative;
(l) The Policy shall have been duly executed and issued at or
prior to the Closing Date and shall conform in all material
respects to the description thereof in the Prospectus
Supplement.
(m) The Representative shall have received, on the Closing
Date, an opinion of counsel to Financial Security Assurance
Inc. ("the Certificate Insurer"), dated the Closing Date, in
form and substance satisfactory to the Representative and
counsel for the Underwriters and containing
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<PAGE>
opinions substantially to the effect set forth in Exhibit D
hereto.
(n) On or prior to the Closing Date there shall not have
occurred any downgrading, nor shall any notice have been given
of (i) any intended or potential downgrading or (ii) any
review or possible change in rating the direction of which has
not been indicated, in the rating accorded the Certificate
Insurer's claims paying ability by any "nationally recognized
statistical rating organization," as such term is defined for
purposes of the 1933 Act.
(o) There shall not have occurred any change, or any
development involving a prospective change, in the condition,
financial or otherwise, or in the earnings, business or
operations, since December 31, 1994, of the Certificate
Insurer, that is in the Representative's judgment material and
adverse and that makes it in the Representative's judgment
impracticable to market the Offered Securities on the terms
and in the manner contemplated in the Prospectus.
(p) The Representative shall have been furnished such further
information, certificates, documents and opinions as the
Representative may reasonably request.
5. Covenants of the Depositor. In further consideration of the
agreements of the Underwriters contained in the Underwriting Agreement, the
Depositor covenants as follows:
(a) To furnish the Representative, without charge, copies of
the Registration Statement and any amendments thereto
including exhibits and as many copies of the Prospectus and
any supplements and amendments thereto as the Representative
may from time to time reasonably request.
(b) Immediately following the execution of the Underwriting
Agreement, the Depositor will prepare a prospectus supplement
setting forth the principal amount, notional amount or stated
amount, as applicable, of Offered Securities covered thereby,
the price at which the Offered Securities are to be purchased
by the Underwriters from the Depositor, either the initial
public offering price or prices or the method by which the
price or prices at which the Offered Securities are to be sold
will be determined, the selling concessions and
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<PAGE>
reallowances, if any, any delayed delivery arrangements, and
such other information as the Representative and the Depositor
deem appropriate in connection with the offering of the
Offered Securities, but the Depositor will not file any
amendment to the Registration Statement or any supplement to
the Prospectus of which the Representative shall not
previously have been advised and furnished with a copy a
reasonable time prior to the proposed filing or to which the
Representative shall have reasonably objected. The Depositor
will use its best efforts to cause any amendment to the
Registration Statement to become effective as promptly as
possible. During the time when a Prospectus is required to be
delivered under the 1933 Act, the Depositor will comply so far
as it is able with all requirements imposed upon it by the
1933 Act and the rules and regulations thereunder to the
extent necessary to permit the continuance of sales or of
dealings in the Offered Securities in accordance with the
provisions hereof and of the Prospectus, and the Depositor
will prepare and file with the Commission, promptly upon
request by the Representative, any amendments to the
Registration Statement or supplements to the Prospectus which
may be necessary or advisable in connection with the
distribution of the Offered Securities by the Underwriters,
and will use its best efforts to cause the same to become
effective as promptly as possible. The Depositor will advise
the Representative, promptly after it receives notice thereof,
of the time when any amendment to the Registration Statement
or any amended Registration Statement has become effective or
any supplement to the Prospectus or any amended Prospectus has
been filed. The Depositor will advise the Representative,
promptly after it receives notice or obtains knowledge
thereof, of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or
any order preventing or suspending the use of any Preliminary
Prospectus or the Prospectus, or the suspension of the
qualification of the Offered Securities for offering or sale
in any jurisdiction, or of the initiation or threatening of
any proceeding for any such purpose, or of any request made by
the Commission for the amending or supplementing of the
Registration Statement or the Prospectus or for additional
information, and the Depositor will use its best efforts to
prevent the issuance of any such stop order or any order
suspending any such
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<PAGE>
qualification, and if any such order is issued, to obtain the
lifting thereof as promptly as possible.
(c) If, at any time when a prospectus relating to the Offered
Securities is required to be delivered under the 1933 Act, any
event occurs as a result of which the Prospectus as then
amended or supplemented would include any untrue statement of
a material fact, or omit to state any 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, or if it is necessary for any other
reason to amend or supplement the Prospectus to comply with
the 1933 Act, to promptly notify the Representative thereof
and upon their request to prepare and file with the
Commission, at the Depositor's own expense, an amendment or
supplement which will correct such statement or omission or
any amendment which will effect such compliance.
(d) During the period when a prospectus is required by law to
be delivered in connection with the sale of the Offered
Securities pursuant to the Underwriting Agreement, the
Depositor will file, on a timely and complete basis, all
documents that are required to be filed by the Depositor with
the Commission pursuant to Sections 13, 14, or 15(d) of the
1934 Act.
(e) To qualify the Offered Securities for offer and sale under
the securities or "Blue Sky" laws of such jurisdictions as the
Representative shall reasonably request and to pay all
expenses (including fees and disbursements of counsel) in
connection with such qualification of the eligibility of the
Offered Securities for investment under the laws of such
jurisdictions as the Representative may designate provided
that in connection therewith the Depositor shall not be
required to qualify to do business or to file a general
consent to service of process in any jurisdiction.
(f) To make generally available to the Depositor's security
holders, as soon as practicable, but in any event not later
than eighteen months after the date on which the filing of the
Prospectus, as amended or supplemented, pursuant to Rule 424
under the 1933 Act first occurs, an earnings statement of the
Depositor covering a twelve-month period beginning after the
date of the Underwriting Agreement, which shall satisfy the
provisions of
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Section 11(a) of the 1933 Act and the applicable rules and
regulations of the Commission thereunder (including at the
option of the Depositor Rule 158).
(g) For so long as any of the Offered Securities remain
outstanding, to furnish to the Representative upon request in
writing copies of such financial statements and other periodic
and special reports as the Depositor may from time to time
distribute generally to its creditors or the holders of the
Offered Securities and to furnish to the Representative copies
of each annual or other report the Depositor shall be required
to file with the Commission.
(h) For so long as any of the Offered Securities remain
outstanding, the Depositor will, or will cause the Servicer
to, furnish to the Representative, as soon as available, a
copy of (i) the annual statement of compliance delivered by
the Servicer to the Trustee under the applicable Pooling and
Servicing Agreement, (ii) the annual independent public
accountants' servicing report furnished to the Trustee
pursuant to the applicable Pooling and Servicing Agreement,
(iii) each report regarding the Offered Securities mailed to
the holders of such Securities, and (iv) from time to time,
such other information concerning such Securities as the
Representative may reasonably request.
6. Representations and Warranties of the Depositor. The
Depositor represents and warrants to, and agrees with, each Underwriter, as of
the date of the Underwriting Agreement, as follows:
(a) The Registration Statement including a prospectus relating
to the Securities and the offering thereof from time to time
in accordance with Rule 415 under the 1933 Act has been filed
with the Commission and such Registration Statement, as
amended to the date of the Underwriting Agreement, has become
effective. No stop order suspending the effectiveness of such
Registration Statement has been issued and no proceeding for
that purpose has been initiated or threatened by the
Commission. A prospectus supplement specifically relating to
the Offered Securities will be filed with the Commission
pursuant to Rule 424 under the 1933 Act; provided, however,
that a supplement to the Prospectus prepared pursuant to
Section 5(b) hereof shall be
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deemed to have supplemented the Basic Prospectus only with
respect to the Offered Securities to which it relates. The
conditions to the use of a registration statement on Form S-3
under the 1933 Act, as set forth in the General Instructions
on Form S-3, and the conditions of Rule 415 under the 1933
Act, have been satisfied with respect to the Depositor and the
Registration Statement. There are no contracts or documents of
the Depositor that are required to be filed as exhibits to the
Registration Statement pursuant to the 1933 Act or the rules
and regulations thereunder that have not been so filed.
(b) On the effective date of the Registration Statement, the
Registration Statement and the Basic Prospectus conformed in
all material respects to the requirements of the 1933 Act and
the rules and regulations thereunder, and did not include any
untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to
make the statements therein not misleading; on the date of the
Underwriting Agreement and as of the Closing Date, the
Registration Statement and the Prospectus conform, and as
amended or supplemented, if applicable, will conform in all
material respects to the requirements of the 1933 Act and the
rules and regulations thereunder, and on the date of the
Underwriting Agreement and as of the Closing Date, neither of
such documents includes any untrue statement of a material
fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein not
misleading, and neither of such documents as amended or
supplemented, if applicable, will include any untrue statement
of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements
therein not misleading; provided, however, that the foregoing
does not apply to statements or omissions in any of such
documents based upon written information furnished to the
Depositor by any Underwriter specifically for use therein.
(c) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, except
as otherwise stated therein, there has been no material
adverse change in the condition, financial or otherwise,
earnings, affairs, regulatory situation or business prospects
of the Depositor, whether or not arising in the ordinary
course of the business of the Depositor.
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(d) The Depositor has been duly organized and is validly
existing as a corporation in good standing under the laws of
the State of Delaware.
(e) The Depositor has all requisite power and authority
(corporate and other) and all requisite authorizations,
approvals, order, licenses, certificates and permits of and
from all government or regulatory officials and bodies to own
its properties, to conduct its business as described in the
Registration Statement and the Prospectus and to execute,
deliver and perform this Agreement, the Underwriting
Agreement, the Pooling and Servicing Agreement and, if
applicable, the Custodial Agreement, except such as may be
required under state securities or Blue Sky laws in connection
with the purchase and distribution by the Underwriter of the
Offered Securities; all such authorizations, approvals,
orders, licenses, certificates are in full force and effect
and contain no unduly burdensome provisions; and, except as
set forth or contemplated in the Registration Statement or the
Prospectus, there are no legal or governmental proceedings
pending or, to the best knowledge of the Depositor, threatened
that would result in a material modification, suspension or
revocation thereof.
(f) The Offered Securities have been duly authorized, and when
the Offered Securities are issued and delivered pursuant to
the Underwriting Agreement, the Offered Securities will have
been duly executed, issued and delivered and will be entitled
to the benefits provided by the applicable Pooling and
Servicing Agreement, subject, as to the enforcement of
remedies, to applicable bankruptcy, reorganization,
insolvency, moratorium and other laws affecting the rights of
creditors generally, and to general principles of equity
(regardless of whether the entitlement to such benefits is
considered in a proceeding in equity or at law), and will
conform in substance to the description thereof contained in
the Registration Statement and the Prospectus, and will in all
material respects be in the form contemplated by the Pooling
and Servicing Agreement.
(g) The execution and delivery by the Depositor of this
Agreement, the Underwriting Agreement and the Pooling and
Servicing Agreement are within the corporate power of the
Depositor and neither the execution and delivery by the
Depositor of this Agreement, the Underwriting Agreement and
the
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Pooling and Servicing Agreement nor the consummation by the
Depositor of the transactions therein contemplated, nor the
compliance by the Depositor with the provisions thereof, will
conflict with or result in a breach of, or constitute a
default under, the charter or the by-laws of the Depositor or
any of the provisions of any law, governmental rule,
regulation, judgment, decree or order binding on the Depositor
or its properties, or any of the provisions of any indenture,
mortgage, contract or other instrument to which the Depositor
is a party or by which it is bound, or will result in the
creation or imposition of a lien, charge or encumbrance upon
any of its property pursuant to the terms of any such
indenture, mortgage, contract or other instrument, except such
as have been obtained under the 1933 Act and such consents,
approvals, authorizations, registrations or qualifications as
may be required under state securities or Blue Sky laws in
connection with the purchase and distribution of the Offered
Securities by the Underwriters.
(h) The Underwriting Agreement has been, and at the Closing
Date the Pooling and Servicing Agreement will have been, duly
authorized, executed and delivered by the Depositor.
(i) At the Closing Date, each of the Underwriting Agreement
and the Pooling and Servicing Agreement will constitute a
legal, valid and binding obligation of the Depositor,
enforceable against the Depositor, in accordance with its
terms, subject, as to the enforcement of remedies, to
applicable bankruptcy, reorganization, insolvency, moratorium
and other laws affecting the rights of creditors generally,
and to general principles of equity and the discretion of the
court (regardless of whether the enforcement of such remedies
is considered in a proceeding in equity or at law).
(j) No filing or registration with, notice to, or consent,
approval, non-disapproval, authorization or order or other
action of, any court or governmental authority or agency is
required for the consummation by the Depositor of the
transactions contemplated by the Underwriting Agreement or the
Pooling and Servicing Agreement, except such as have been
obtained and except such as may be required under the 1933
Act, the rules and regulations thereunder, or state securities
or "Blue Sky" laws, in connection with the purchase
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and distribution of the Offered Securities by the
Underwriters.
(k) The Depositor owns or possesses or has obtained all
material governmental licenses, permits, consents, orders,
approvals and other authorizations necessary to lease, own or
license, as the case may be, and to operate, its properties
and to carry on its business as presently conducted and has
received no notice of proceedings relating to the revocation
of any such license, permit, consent, order or approval, which
singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would materially adversely affect
the conduct of the business, results of operations, net worth
or condition (financial or otherwise) of the Depositor.
(l) Other than as set forth or contemplated in the Prospectus,
there are no legal or governmental proceedings pending to
which the Depositor is a party or of which any property of the
Depositor is the subject which, if determined adversely to the
Depositor would individually or in the aggregate have a
material adverse effect on the condition (financial or
otherwise), earnings, affairs, or business or business
prospects of the Depositor and, to the best of the Depositor's
knowledge, no such proceedings are threatened or contemplated
by governmental authorities or threatened by others.
(m) Each of the Offered Securities will, when issued, be a
"mortgage related security" as such term is defined in Section
3(a)(41) of the 1934 Act.
(n) At the Closing Date each of the Mortgage Loans which is a
subject of the Pooling and Servicing Agreement and all such
Mortgage Loans in the aggregate will meet the criteria for
selection described in the Prospectus, and at the Closing Date
the representations and warranties made by the Depositor in
such Pooling and Servicing Agreement will be true and correct
as of such date.
(o) At the time of execution and delivery of the Pooling and
Servicing Agreement, the Depositor will have good and
marketable title to the Mortgage Loans being transferred to
the Trustee pursuant to the Pooling and Servicing Agreement,
free and clear of any lien, mortgage, pledge, charge,
encumbrance, adverse claim or other security interest
(collectively "Liens"), and will not have assigned
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to any person any of its right, title or interest in such
Mortgage Loans or in such Pooling and Servicing Agreement or
the Offered Securities being issued pursuant thereto, the
Depositor will have the power and authority to transfer such
Mortgage Loans to the Trustee and to transfer the Offered
Securities to each of the Underwriters, and, upon execution
and delivery to the Trustee of the Pooling and Servicing
Agreement and delivery to each of the Underwriters of the
Offered Securities, the Trustee will have good and marketable
title to the Mortgage Loans and each of the Underwriters will
have good and marketable title to the Offered Securities, in
each case free and clear of any Liens.
(p) The Pooling and Servicing Agreement is not required to be
qualified under the Trust Indenture Act of 1939, as amended,
and the Trust Fund (as defined in the Pooling and Servicing
Agreement) is not required to be registered under the
Investment Company Act of 1940, as amended.
(q) Any taxes, fees and other governmental charges in
connection with the execution, delivery and issuance of the
Underwriting Agreement, this Agreement, the Pooling and
Servicing Agreement and the Offered Securities have been or
will be paid at
or prior to the Closing Date.
7. Indemnification and Contribution.
(a) The Depositor agrees to indemnify and hold harmless each
Underwriter (including Prudential Securities Incorporated
acting in its capacity as Representative and as one of the
Underwriters), and each person, if any, who controls any
Underwriter within the meaning of the 1933 Act, against any
losses, claims, damages or liabilities, joint or several, to
which such Underwriter or such controlling person may become
subject under the 1933 Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in
the Registration Statement, any Preliminary Prospectus, the
Prospectus, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and
will reimburse each Underwriter and each such
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controlling person for any legal or other expenses reasonably
incurred by such Underwriter or such controlling person in
connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that
the Depositor will not be liable in any such case to the
extent that any such loss, claim, damage or liability arises
out of or is based upon any untrue statement or alleged untrue
statement or omission or alleged omission made in the
Registration Statement, any Preliminary Prospectus, the
Prospectus or any amendment or supplement thereto in reliance
upon and in conformity with (1) written information furnished
to the Depositor by any Underwriter through the Representative
specifically for use therein or (2) information regarding the
Mortgage Loans except to the extent that the Depositor has
been indemnified by the Servicer. This indemnity agreement
will be in addition to any liability which the Depositor may
otherwise have.
(b) Each Underwriter will indemnify and hold harmless the
Depositor, each of the Depositor's directors, each of the
Depositor's officers who signed the Registration Statement and
each person, if any, who controls the Depositor, within the
meaning of the 1933 Act, against any losses, claims, damages
or liabilities to which the Depositor, or any such director,
officer or controlling person may become subject, under the
1933 Act or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue
statement of any material fact contained in the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any
amendment or supplement thereto, or any other prospectus
relating to the Offered Securities, or arise out of or are
based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to
make the statements therein not misleading, in each case to
the extent, but only to the extent, that such untrue
statements or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with
written information furnished to the Depositor by any
Underwriter through the Representative specifically for use
therein; and each Underwriter will reimburse any legal or
other expenses reasonably incurred by the Depositor or any
such director, officer or controlling person in connection
with investigating or defending any such
20
<PAGE>
loss, claim, damage, liability or action. This indemnity
agreement will be in addition to any liability which such
Underwriter may otherwise have. The Depositor acknowledges
that the statements set forth under the caption "Plan of
Distribution" in the Prospectus Supplement constitute the only
information furnished to the Depositor by or on behalf of any
Underwriter for use in the Registration Statement, any
Preliminary Prospectus or the Prospectus, and each of the
several Underwriters represents and warrants that such
statements are correct as to it.
(c) Promptly after receipt by an indemnified party under this
Section 7 of notice of the commencement of any action, such
indemnified party will, if a claim in respect thereof is to be
made against the indemnifying party under this Section 7,
notify the indemnifying party of the commencement thereof, but
the omission to so notify the indemnifying party will not
relieve the indemnifying party from any liability which the
indemnifying party may have to any indemnified party hereunder
except to the extent such indemnifying party has been
prejudiced thereby. In case any such action is brought against
any indemnified party, and it notifies the indemnifying party
of the commencement thereof, the indemnifying party will be
entitled to participate therein and, to the extent that it may
wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof with counsel
satisfactory to such indemnified party. After notice from the
indemnifying party to such indemnified party of its election
so to assume the defense thereof, the indemnifying party will
not be liable to such indemnified party under this Section 7
for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other
than reasonable costs of investigation; provided, however,
that the Representative shall have the right to employ
separate counsel to represent the Representative, those other
Underwriters and their respective controlling persons who may
be subject to liability arising out of any claim in respect of
which indemnity may be sought by the Underwriters against the
Depositor under this Section 7 if, in the reasonable judgment
of the Representative, it is advisable for the Representative
and those Underwriters and controlling persons to be
represented by separate counsel, and in that event the fees
and expenses of such separate counsel shall be paid by the
Depositor (it being
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understood, however, that the Depositor shall not, in
connection with any one such claim or separate but
substantially similar or related claim in the same
jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses
of more than one separate firm of attorneys at any time for
the Representative and those Underwriters and controlling
persons).
(d) In order to provide for just and equitable contribution in
circumstances in which the indemnity agreement provided for in
the preceding parts of this Section 7 is for any reason held
to be unavailable to or insufficient to hold harmless an
indemnified party under subsection (a) or (b) above in respect
of any losses, claims, damages or liabilities (or actions in
respect thereof) referred to therein, then the indemnifying
party shall contribute to the amount paid or payable by the
indemnified party as a result of such losses, claims, damages
or liabilities (or actions in respect thereof); provided,
however, that no person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the 1933 Act) shall be
entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. In determining the amount
of contribution to which the respective parties are entitled,
there shall be considered the relative benefits received by
the Depositor on the one hand, and the Underwriters on the
other, from the offering of the Offered Securities (taking
into account the portion of the proceeds of the offering
realized by each), the Depositor's and the Underwriters'
relative knowledge and access to information concerning the
matter with respect to which the claim was asserted, the
opportunity to correct and prevent any statement or omission,
and any other equitable considerations appropriate in the
circumstances. The Depositor and the Underwriters agree that
it would not be equitable if the amount of such contribution
were determined by pro rata or per capita allocation (even if
the Underwriters were treated as one entity for such purpose).
No Underwriter or person controlling such Underwriter shall be
obligated to make contribution hereunder which in the
aggregate exceeds the total public offering price of the
Offered Securities purchased by such Underwriter under the
Underwriting Agreement, less the aggregate amount of any
damages which such Underwriter and its controlling persons
have otherwise been required to pay in respect of
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the same or any substantially similar claim. The Underwriters'
obligation to contribute hereunder are several in proportion
to their respective underwriting obligations and not joint.
For purposes of this Section 7, each person, if any, who
controls an Underwriter within the meaning of Section 15 of
the 1933 Act shall have the same rights to contribution as
such Underwriter, and each director of the Depositor, each
officer of the Depositor who signed the Registration
Statement, and each person, if any, who controls the Depositor
within the meaning of Section 15 of the 1933 Act, shall have
the same rights to contribution as the Depositor.
(e) The parties hereto agree that the first sentence of
Section 5 of the Indemnification Agreement (the
"Indemnification Agreement") dated as of the Closing Date
among the Certificate Insurer, the Servicer, the Depositor and
the Underwriter shall not be construed as limiting the
Depositor's right to enforce its rights under Section 7 of
this Agreement. The parties further agree that, as between the
parties hereto, to the extent that the provisions of Section
4, 5 and 6 of the Indemnification Agreement conflict with
Section 7 hereof, the provisions of Section 7 hereof shall
govern.
(f) Each Underwriter agrees to provide the Depositor no later
the date on which the Prospectus Supplement is required to be
filed pursuant to Rule 424 with a copy of its Derived
Information (defined below) for filing with the Commission on
Form 8-K.
(g) Each Underwriter severally agrees, assuming all
Depositor-Provided Information (defined below) is accurate and
complete in all material respects, to indemnify and hold
harmless the Depositor, its respective officers and directors
and each person who controls the Depositor within the meaning
of the Securities Act or the Exchange Act against any and all
losses, claims, damages or liabilities, joint or several, to
which they may become subject under the Securities Act or the
Exchange Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise
out of or are based upon any untrue statement of a material
fact contained in the Derived Information provided by such
Underwriter, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to
be stated therein or necessary to make the
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statements therein, in the light of the circumstances under
which they were made, not misleading, and agrees to reimburse
each such indemnified party for any legal or other expenses
reasonably incurred by him, her or it in connection with
investigating or defending or preparing to defend any such
loss, claim, damage, liability or action as such expenses are
incurred. The obligations of an Underwriter under this Section
8(E) shall be in addition to any liability which such
Underwriter may otherwise have.
The procedures set forth in Section 8(C) shall be equally
applicable to this Section 8(E).
For purposes of this Section 8, the term "Derived Information"
means such portion, if any, of the information delivered to the Depositor
pursuant to Section 8(D) for filing with the Commission on Form 8-K as: (i) is
not contained in the Prospectus without taking into account information
incorporated therein by reference; and (ii) does not constitute
Depositor-Provided Information. "Depositor-Provided Information" means any
computer tape furnished to the Underwriter by the Depositor concerning the
assets comprising the Trust.
8. Survival of Certain Representations and Obligations. The
respective representations, warranties, agreements, covenants, indemnities and
other statements of the Depositor, its officers and the several Underwriters set
forth in, or made pursuant to, the Underwriting Agreement shall remain in full
force and effect, regardless of any investigation, or statement as to the result
thereof, made by or on behalf of any Underwriter, the Depositor, or any of the
officers or directors or any controlling person of any of the foregoing, and
shall survive the delivery of and payment for the Offered Securities.
9. Termination.
(a) The Underwriting Agreement may be terminated by the
Depositor by notice to the Representative in the event that a
stop order suspending the effectiveness of the Registration
Statement shall have been issued or proceedings for that
purpose shall have been instituted or threatened.
(b) The Underwriting Agreement may be terminated by the
Representative by notice to the Depositor in the event that
the Depositor shall have failed, refused or been unable to
perform all obligations and satisfy all conditions to be
performed or
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<PAGE>
satisfied hereunder by the Depositor at or prior to the
Closing Date.
(c) Termination of the Underwriting Agreement pursuant to this
Section 9 shall be without liability of any party to any other
party other than as provided in Sections 7 and 11 hereof.
10. Default of Underwriters. If any Underwriter or
Underwriters defaults or default in their obligation to purchase Offered
Securities which it or they have agreed to purchase under the Underwriting
Agreement and the aggregate principal amount of the Offered Securities which
such defaulting Underwriter or Underwriters agreed but failed to purchase is ten
percent or less of the aggregate principal amount, notional amount or stated
amount, as applicable, of the Offered Securities to be sold under the
Underwriting Agreement, as the case may be, the other Underwriters shall be
obligated severally in proportion to their respective commitments under the
Underwriting Agreement to purchase the Offered Securities which such defaulting
Underwriter or Underwriters agreed but failed to purchase. If any Underwriter or
Underwriters so defaults or default and the aggregate principal amount of the
Offered Securities with respect to which such default or defaults occurs or
occur is more than ten percent of the aggregate principal amount, notional
amount or stated amount, as applicable, of Offered Securities to be sold under
the Underwriting agreement, as the case may be, and arrangements satisfactory to
the Representative and the Depositor for the purchase of such Offered Securities
by other persons (who may include one or more of the non-defaulting Underwriters
including the Representative) are not made within 36 hours after any such
default, the Underwriting Agreement will terminate without liability on the part
of any non-defaulting Underwriters or the Depositor except for the expenses to
be paid or reimbursed by the Depositor pursuant to Section 11 hereof. As used in
the Underwriting Agreement, the term "Underwriter" includes any person
substituted for an Underwriter under this Section 10. Nothing herein shall
relieve a defaulting Underwriter from liability for its default.
11. Expenses. The Depositor agrees with the several
Underwriters that:
(a) whether or not the transactions contemplated in the
Underwriting Agreement are consummated or the Underwriting
Agreement is terminated, the Depositor will pay all fees and
expenses incident to the performance of its obligations under
the Underwriting Agreement, including but not limited to, (i)
the Commission's registration fee, (ii) the expenses of
printing and distributing the
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Underwriting Agreement and any related underwriting documents,
the Registration Statement, any Preliminary Prospectus, the
Prospectus, any amendments or supplements to the Registration
Statement or the Prospectus, and any Blue Sky memorandum or
legal investment survey and any supplements thereto, (iii)
fees and expenses of rating agencies, accountants and counsel
for the Depositor, (iv) the expenses referred to in Section
5(e) hereof, and (v) all miscellaneous expenses referred to in
Item 30 of the Registration Statement;
(b) all out-of-pocket expenses, including counsel fees,
disbursements and expenses, reasonably incurred by the
Underwriters in connection with investigating, preparing to
market and marketing the Offered Securities and proposing to
purchase and purchasing the Offered Securities under the
Underwriting Agreement will be borne and paid by the Depositor
if the Underwriting Agreement is terminated by the Depositor
pursuant to Section 9(a) hereof or by the Representative on
account of the failure, refusal or inability on the part of
the Depositor to perform all obligations and satisfy all
conditions on the part of the Depositor to be performed or
satisfied hereunder; and
(c) the Depositor will pay the cost of preparing
the certificates for the Offered Securities.
Except as otherwise provided in this Section 11, the
Underwriters agree to pay all of their expenses in connection with
investigating, preparing to market and marketing the Offered Securities and
proposing to purchase and purchasing the Offered Securities under the
Underwriting Agreement, including the fees and expenses of their counsel and any
advertising expenses incurred by them in making offers and sales of the Offered
Securities.
12. Notices. All communications under the Underwriting
Agreement shall be in writing and, if sent to the Underwriters, shall be mailed,
delivered or telegraphed and confirmed to the Representative at the address and
to the attention of the person specified in the Underwriting Agreement, and, if
sent to the Depositor, shall be mailed, delivered or telegraphed and confirmed
to Prudential Securities Secured Financing Corporation, 199 Water Street, 26th
Floor, New York, New York 10292, Attention: Director-Mortgage Finance Group;
provided, however, that any notice to any Underwriter pursuant to the
Underwriting Agreement shall be mailed, delivered or telegraphed and confirmed
to such Underwriter at the address furnished by it.
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13. Representative of Underwriters. Any Represen- tative
identified in the Underwriting Agreement will act for the Underwriters of the
Offered Securities and any action taken by the Representative under the
Underwriting Agreement will be binding upon all of such Underwriters.
14. Successors. The Underwriting Agreement shall inure to the
benefit of and shall be binding upon the several Underwriters and the Depositor
and their respective successors and legal representatives, and nothing expressed
or mentioned herein or in the Underwriting Agreement is intended or shall be
construed to give any other person any legal or equitable right, remedy or claim
under or in respect of the Underwriting Agreement, or any provisions herein
contained, the Underwriting Agreement and all conditions and provisions hereof
being intended to be and being for the sole and exclusive benefit of such
persons and for the benefit of no other person except that (i) the
representations and warranties of the Depositor contained herein or in the
Underwriting Agreement shall also be for the benefit of any person or persons
who controls or control any Underwriter within the meaning of Section 15 of the
1933 Act, and (ii) the indemnities by the several Underwriters shall also be for
the benefit of the directors of the Depositor, the officers of the Depositor who
have signed the Registration Statement and any person or persons who control the
Depositor within the meaning of Section 15 of the 1933 Act. No purchaser of the
Offered Securities from any Underwriter shall be deemed a successor because of
such purchase. This Agreement and each Underwriting Agreement may be executed in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
15. Time of the Essence. Time shall be of the essence of each
Underwriting Agreement.
16. Governing Law. This Agreement and each Underwriting
Agreement shall be governed by and construed in accordance with the laws of the
State of New York.
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Exhibit A
Opinions of Dewey Ballantine,
special counsel for the Depositor
(i) Each of the Documents constitutes the valid, legal and
binding agreement of the Depositor, and is enforceable against the Depositor in
accordance with its terms.
(ii) The Certificates, assuming the due execution by the
Trustee and due authentication by the Trustee and payment therefor pursuant to
the Underwriting Agreement, are validly issued and outstanding and are entitled
to the benefits of the Pooling and Servicing Agreement.
(iii) No consent, approval, authorization or order of,
registration or filing with, or notice to, any governmental authority or court
is required under federal laws or the laws of the State of New York for the
execution, delivery and performance of the Documents or the offer, issuance,
sale or delivery of the Certificates or the consummation of any other
transaction contemplated thereby by the Depositor, except such which have been
obtained.
(iv) The Registration Statement and the Prospectus (other than
the financial and statistical data included therein, as to which we are not
called upon to express any opinion), at the time the Registration Statement
became effective, as of the date of execution of the Underwriting Agreement and
as of the date hereof comply as to form in all material respects with the
requirements of the Securities Act of 1933, as amended, and the rules and
regulations thereunder, and the Exchange Act and the rules and regulations
thereunder, and we do not know of any amendment to the Registration Statement
required to be filed, or of any contracts, indentures or other documents of a
character required to be filed as an exhibit to the Registration Statement or
required to be described in the Registration Statement or the Prospectus, which
has not been filed or described as required.
(v) Neither the qualification of the Pooling and Servicing
Agreement under the Trust Indenture Act of 1939, as amended, nor the
registration of the Trust Fund created by the Pooling and Servicing Agreement
under the Investment Company Act of 1940 is required.
(vi) The statements in the Prospectus Supplement set forth
under the caption "DESCRIPTION OF THE CERTIFICATES," to the extent such
statements purport to summarize certain provisions of the Certificates or of the
Pooling and Servicing Agreement or of the Unaffiliated Seller's Agreement, are
fair and accurate in all material respects.
<PAGE>
Exhibit B
Opinions of Counsel to
the Servicer
(i) The Servicer has been duly organized and is
validly existing as a corporation in good standing under the laws of the State
of South Carolina and is qualified to transact business in the State of South
Carolina.
(ii) The Servicer has the requisite power and
authority to execute and deliver, engage in the transactions contemplated by,
and perform and observe the conditions of, the Pooling and Servicing Agreement.
(iii) The Pooling and Servicing Agreement has been
duly and validly authorized, executed and delivered by the Servicer, all
requisite corporate action having been taken with respect thereto, and
constitutes the valid, legal and binding agreement of the Servicer, and is
enforceable against the Servicer in accordance with its respective terms.
(iv) The execution, delivery or performance by the
Servicer of the Pooling and Servicing Agreement does not (A) conflict or will
not conflict with or result or will result in a breach of, or constitute or will
constitute a default under or violate or will violate, (i) any term or provision
of the Articles of Incorporation or By-laws of the Servicer; (ii) any term or
provision of any material agreement, contract, instrument or indenture, to which
the Servicer or any of its subsidiaries is a party or is bound; or (iii) any
order, judgment, writ, injunction or decree of any court or governmental agency
or body or other tribunal having jurisdiction over the Servicer or any of its
properties; or (B) result in, or will result in the creation or imposition of
any lien, charge or encumbrance upon the Trust Fund or upon the Certificates,
except as otherwise contemplated by the Pooling and Servicing Agreement.
(v) No consent, approval, authorization or order of,
registration or qualification of or with or notice to, any courts, governmental
agency or body or other tribunal is required under the laws of New York or South
Carolina, for the execution, delivery and performance of the Pooling and
Servicing Agreement or the consummation of any other transaction contemplated
thereby by the Servicer, except such which have been obtained.
<PAGE>
(vi) There are no legal or governmental suits,
proceedings or investigations pending or, to such counsel's knowledge,
threatened against the Servicer before any court, governmental agency or body or
other tribunal (A) which, if determined adversely to the Servicer, would
individually or in the aggregate have a material adverse effect on (i) the
consolidated financial position, business prospects, stockholders's equity or
results of operations of the Servicer; or (ii) the Servicer's ability to perform
its obligations under, or the validity or enforceability of the Pooling and
Servicing Agreement; or (B) which have not otherwise been disclosed in the
Registration Statement and to the best of such counsel's knowledge, no such
proceedings or investigations are threatened or contemplated by governmental
authorities or threatened by others.
B-2
<PAGE>
Exhibit C
Opinions of Counsel to
the Trustee
(i) The Trustee is a national banking association
duly organized, validly existing and in good standing under the laws of the
United States and has the power and authority to enter into and to take all
actions required of it under the Pooling and Servicing Agreement;
(ii) The Pooling and Servicing Agreement has been
duly authorized, executed and delivered by the Trustee and the Pooling and
Servicing Agreement constitutes the legal, valid and binding obligation of the
Trustee, enforceable against the Trustee in accordance with its terms, except as
enforceability thereof may be limited by (A) bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of creditors'
rights generally, as such laws would apply in the event of a bankruptcy,
insolvency or reorganization or similar occurrence affecting the Trustee, and
(B) general principles of equity regardless of whether such enforcement is
sought in a proceeding at law or in equity;
(iii) No consent, approval, authorization or other
action by any governmental agency or body or other tribunal is required on the
part of the Trustee in connection with its execution and delivery of the Pooling
and Servicing Agreement or the performance of its obligations thereunder;
(iv) The Certificates have been duly executed,
authenticated and delivered by the Trustee; and
(v) The execution and delivery of, and performance by
the Trustee of its obligations under, the Pooling and Servicing Agreement do not
conflict with or result in a violation of any statute or regulation applicable
to the Trustee, or the charter or bylaws of the Trustee, or to the best
knowledge of such counsel, any governmental authority having jurisdiction over
the Trustee or the terms of any indenture or other agreement or instrument to
which the Trustee is a party or by which it is bound.
<PAGE>
Exhibit D
Opinions of Counsel
to the Certificate Insurer
(i) The Certificate Insurer is a stock insurance
corporation, duly incorporated and validly existing under the laws of the State
of New York. The Certificate Insurer is validly licensed and authorized to issue
the Policy and perform its obligations under the Policy in accordance with the
terms thereof, under the laws of the State of New York.
(ii) The execution and delivery by the Certificate
Insurer of the Policy, the Insurance and Indemnity Agreement and the
Indemnification Agreement are within the corporate power of the Certificate
Insurer and has been authorized by all necessary corporate action on the part of
the Certificate Insurer; the Policy has been duly executed and is the valid and
binding obligation of the Certificate Insurer enforceable in accordance with its
terms except that the enforcement of the Policy may be limited by laws relating
to bankruptcy, insolvency, reorganization, moratorium, receivership and other
similar laws affecting creditors' rights generally and by general principles of
equity.
(iii) The Certificate Insurer is authorized to
deliver the Indemnification Agreement and the Insurance and Indemnity Agreement,
and each Agreement has been duly executed and is the valid and binding
obligation of the Certificate Insurer enforceable in accordance with its terms
except that the enforcement thereof may be limited by laws relating to
bankruptcy, insolvency, reorganization, moratorium, receivership and other
similar laws affecting creditors' rights generally and by general principles of
equity and by public policy considerations relating to indemnification for
securities law violations.
(iv) No consent, approval, authorization or order of
any state or federal court or governmental agency or body is required on the
part of the Certificate Insurer, the lack of which would adversely affect the
validity or enforceability of the Policy; to the extent required by applicable
legal requirements that would adversely affect validity or enforceability of the
Policy, the form of the Policy has been filed with, and approved by, all
governmental authorities having jurisdiction over the Certificate Insurer in
connection with such Policy.
D-1
<PAGE>
(v) To the extent the Policy constitutes a security
within the meaning of Section 2(1) of the 1933 Act, it is a security that is
exempt from the registration requirements of the Act.
(vi) The information set forth under the captions
"THE INSURER" in the Prospectus insofar as such statements constitute a
description of the Policy, accurately summarizes the Policy.
D-2
- --------------------------------------------------------------------------------
INDEMNIFICATION AGREEMENT
among
FINANCIAL SECURITY ASSURANCE INC.,
EMERGENT MORTGAGE HOLDINGS CORPORATION,
EMERGENT MORTGAGE CORP.,
EMERGENT GROUP, INC.,
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION
and
PRUDENTIAL SECURITIES INCORPORATED
Dated as of June 1, 1997
Emergent Home Equity Loan Pass-Through
Certificates, Series 1997-2
$121,209,000 Class A Certificates
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
Section 1. Definitions....................................................... 1
Section 2. Representations, Warranties and Agreements of
Financial Security............................................. 3
Section 3. Representations, Warranties and Agreements of
the Underwriter................................................ 5
Section 4. Indemnification................................................... 6
Section 5. Indemnification Procedures........................................ 6
Section 6. Contribution...................................................... 7
Section 7. Miscellaneous..................................................... 8
EXHIBIT
Exhibit A Opinion of General Counsel
<PAGE>
INDEMNIFICATION AGREEMENT
INDEMNIFICATION AGREEMENT dated as of June 1, 1997, among
FINANCIAL SECURITY ASSURANCE INC. ("Financial Security"), PRUDENTIAL SECURITIES
SECURED FINANCING CORPORATION (the "Depositor"), EMERGENT GROUP, INC. (the
"Company"), EMERGENT MORTGAGE HOLDINGS CORPORATION (the "Seller"), EMERGENT
MORTGAGE CORP. (the "Originator") and PRUDENTIAL SECURITIES INCORPORATED (the
"Underwriter"):
Section 1. Definitions. For purposes of this Agreement, the
following terms shall have the meanings provided below:
"Agreement" means this Indemnification Agreement, as amended
from time to time.
"Company Party" means any of the Company, its parent,
subsidiaries and affiliates and any shareholder, director, officer, employee,
agent or "controlling person" (as such term is used in the Securities Act) of
any of the foregoing.
"Depositor Party" means any of the Depositor, its parent,
subsidiaries and affiliates and any shareholder, director, officer, employee,
agent or "controlling person" (as such term is used in the Securities Act) of
any of the foregoing.
"Financial Security Agreements" means this Agreement and the
Insurance Agreement.
"Financial Security Information" has the meaning provided in
Section 2(g) hereof.
"Financial Security Party" means any of Financial Security,
its parent, subsidiaries and affiliates, and any shareholder, director, officer,
employee, agent or "controlling person" (as such term is used in the Securities
Act) of any of the foregoing.
"Indemnified Party" means any party entitled to any
indemnification pursuant to Section 4 hereof.
"Indemnifying Party" means any party required to provide
indemnification pursuant to Section 4 hereof.
"Insurance Agreement" means the Insurance and Indemnity
Agreement, dated as of June 1, 1997, by and among Financial Security, the
Depositor, the Company, the Originator and the Seller.
"Losses" means (a) any actual out-of-pocket damages incurred
by the party entitled to indemnification or contribution hereunder, (b) any
actual out-of-pocket costs or actual expenses
<PAGE>
-2-
reasonably incurred by such party, including reasonable fees or expenses of its
counsel and other expenses incurred in connection with investigating or
defending any claim, action or other proceeding which entitle such party to be
indemnified hereunder (subject to the limitations set forth in Section 5
hereof), to the extent not paid, satisfied or reimbursed from funds provided by
any other Person other than an affiliate of such party (provided that the
foregoing shall not create or imply any obligation to pursue recourse against
any such other Person), plus (c) interest on the amount paid by the party
entitled to indemnification or contribution from the date of such payment to the
date of payment by the party who is obligated to indemnify or contribute
hereunder at the statutory rate applicable to judgments for breach of contract.
"Offering Circular" means the Prospectus dated June 10, 1997,
including the Prospectus Supplement thereto dated June 17, 1997, relating to the
Securities, including, without limitation, Derived Information, as defined in
the Underwriting Agreement (which includes but is not limited to any
Computational Materials).
"Offering Document" means the Offering Circular and any
amendments or supplements thereto and any other material or documents delivered
by the Underwriter to any Person in connection with the offer or sale of the
Securities.
"Originator Party" means any of the Originator, its parent,
subsidiaries and affiliates and any shareholder, director, officer, employee,
agent or "controlling person" (as such term is used in the Securities Act) of
any of the foregoing.
"Person" means any individual, partnership, joint venture,
corporation, trust, unincorporated organization or other organization or entity
(whether governmental or private).
"Policy" means the financial guaranty insurance policy
delivered by Financial Security with respect to the Securities.
"Securities" means the Class A-1 Certificates, Class A-2
Certificates, Class A-3 Certificates, Class A-4 Certificates and the Class A-5
Certificates issued pursuant to a Pooling and Servicing Agreement, dated as of
June 1, 1997 by and among, the Depositor, the Originator and First Union
National Bank, as trustee.
"Securities Act" means the Securities Act of 1933, as amended
from time to time.
"Seller Party" means any of the Seller, its parent,
subsidiaries and affiliates, and any shareholder, director, officer, employee,
agent or "controlling person" (as such term is used in the Securities Act) of
any of the foregoing.
"Underwriting Agreement" means the Underwriting Agreement
dated as of June 17, 1997, between the Depositor and the Underwriter in respect
of the Securities.
<PAGE>
-3-
"Underwriter Information" has the meaning provided in
Section 3(c) hereof.
"Underwriter Party" means any of the Underwriter, its parent,
subsidiaries and affiliates and any shareholder, director, officer, employee,
agent or "controlling person" (as such term is used in the Securities Act) of
any of the foregoing.
Section 2. Representations, Warranties and Agreements of
Financial Security. Financial Security represents, warrants and agrees, as of
the date hereof and as of the Closing Date, as follows:
(a) Organization, Etc. Financial Security is a stock
insurance company duly organized, validly existing, in good standing and
authorized to transact financial guaranty insurance business under the laws of
the State of New York.
(b) Authorization, Etc. The Policy and the Financial
Security Agreements have been duly authorized, executed and delivered by
Financial Security.
(c) Validity, Etc. The Policy and the Financial Security
Agreements constitute legal, valid and binding obligations of Financial
Security, enforceable against Financial Security in accordance with their terms,
subject, as to the enforcement of remedies, to bankruptcy, insolvency,
reorganization, rehabilitation, moratorium and other similar laws affecting the
enforceability of creditors' rights generally applicable in the event of the
bankruptcy or insolvency of Financial Security and to the application of general
principles of equity and subject, in the case of this Agreement, to principles
of public policy limiting the right to enforce the indemnification provisions
contained herein.
(d) Exemption From Registration. The Policy is exempt from
registration under the Securities Act.
(e) No Conflicts. Neither the execution or delivery by
Financial Security of the Policy or the Financial Security Agreements, nor the
performance by Financial Security of its obligations thereunder, will conflict
with any provision of the certificate of incorporation or the bylaws of
Financial Security nor result in a breach of, or constitute a default under, any
material agreement or other instrument to which Financial Security is a party or
by which any of its property is bound nor violate any judgment, order or decree
applicable to Financial Security of any governmental or regulatory body,
administrative agency, court or arbitrator having jurisdiction over Financial
Security (except that, in the published opinion of the Securities and Exchange
Commission, the indemnification provisions of this Agreement, insofar as they
relate to indemnification for liabilities arising under the Securities Act, are
against public policy as expressed in the Securities Act and are therefore
unenforceable).
(f) Financial Information. The consolidated balance sheets
of Financial Security as of December 31, 1996 and December 31, 1995 and the
related consolidated statements of income,
<PAGE>
-4-
changes in shareholder's equity and cash flows for the fiscal years then ended
and the interim consolidated balance sheet of Financial Security as of March 31,
1997, and the related statements of income, changes in shareholder's equity and
cash flows for the interim period then ended, furnished by Financial Security
for use in the Offering Circular, fairly present in all material respects the
financial condition of Financial Security as of such dates and for such periods
in accordance with generally accepted accounting principles consistently applied
except as noted therein (subject as to interim statements to normal year-end
adjustments) and since the date of the most current interim consolidated balance
sheet referred to above there has been no change in the financial condition of
Financial Security which would materially and adversely affect its ability to
perform its obligations under the Policy.
(g) Financial Security Information. The information in the
Offering Circular set forth under the caption "The Insurer" (as revised from
time to time in accordance with the provisions hereof, the "Financial Security
Information") is limited and does not purport to provide the scope of disclosure
required to be included in a prospectus with respect to a registrant in
connection with the offer and sale of securities of such registrant registered
under the Securities Act. Within such limited scope of disclosure, however, as
of the date of the Offering Circular and as of the date hereof, the Financial
Security Information does not contain any untrue statement of a material fact,
or omit to state a material fact necessary to make the statements contained
therein, in light of the circumstances under which they were made, not
misleading.
(h) Additional Information. Financial Security will furnish
to the Underwriter, the Company, the Originator or the Depositor, upon request
of the Underwriter, the Company, the Originator or the Depositor, as the case
may be, copies of Financial Security's most recent financial statements (annual
or interim, as the case may be) which fairly present in all material respects
the financial condition of Financial Security as of the dates and for the
periods indicated, in accordance with generally accepted accounting principles
consistently applied except as noted therein (subject, as to interim statements,
to normal year-end adjustments); provided, however, that, if the Underwriter,
the Company, the Seller, the Originator or the Depositor shall require a
manually signed report or consent of Financial Security's auditors in connection
with such financial statements, such report or consent shall be at the expense
of the Underwriter, the Company, the Originator, the Seller or the Depositor, as
the case may be. In addition, if the delivery of an Offering Circular relating
to the Securities is required at any time prior to the expiration of nine months
after the time of issue of the Offering Circular in connection with the offering
or sale of the Securities, the Depositor or the Underwriter will notify
Financial Security of such requirement to deliver an Offering Circular and
Financial Security will promptly provide the Underwriter and the Depositor with
any revisions to the Financial Security Information that are in the judgment of
Financial Security necessary to prepare an amended Offering Circular or a
supplement to the Offering Circular which will correct such statement or
omission.
(i) Opinion of Counsel. Financial Security will furnish to
the Seller, the Originator, the Depositor, the Underwriter and the Company on
the closing date for the sale of the Securities an opinion of its Associate
General Counsel, to the effect set forth in Exhibit A attached hereto, dated
<PAGE>
-5-
such closing date and addressed to the Seller, the Originator, the Depositor,
the Underwriter and the Company.
(j) Consents and Reports of Independent Accountants.
Financial Security will furnish to the Underwriter, the Company, the Originator
and the Depositor, upon request, as comfort from its independent accountants in
respect of its financial condition, (i) at the expense of the Person specified
in the Insurance Agreement, a copy of the Offering Circular, including either a
manually signed consent or a manually signed report of Financial Security's
independent accountants and (ii) the quarterly review letter by Financial
Security's independent accountants in respect of the most recent interim
financial statements of Financial Security.
Nothing in this Agreement shall be construed as a
representation or warranty by Financial Security concerning the rating of its
claims-paying ability by Standard & Poor's Ratings Services or Moody's Investors
Service, Inc. or any other rating agency (collectively, the "Rating Agencies").
The Rating Agencies, in assigning such ratings, take into account facts and
assumptions not described in the Offering Circular and the facts and assumptions
which are considered by the Rating Agencies, and the ratings issued thereby, are
subject to change over time.
Section 3. Representations, Warranties and Agreements of the
Underwriter. The Underwriter represents, warrants and agrees, as of the date
hereof and as of the Closing Date, as follows:
(a) Compliance With Laws. The Underwriter will comply in all
material respects with all legal requirements in connection with offers and
sales of the Securities and make such offers and sales in the manner provided in
the Offering Circular.
(b) Offering Document. The Underwriter will not use, or
distribute to other broker-dealers for use, any Offering Document in connection
with the offer and sale of the Securities unless such Offering Document includes
such information as has been furnished by Financial Security for inclusion
therein and the information therein concerning Financial Security has been
approved by Financial Security in writing. Financial Security hereby consents to
the information in respect of Financial Security included in the Offering
Circular. Each Offering Document will include the following statement: "The
Policy is not covered by the property/casualty insurance security fund specified
in Article 76 of the New York Insurance Law".
(c) Underwriting Information. All material provided by the
Underwriter for inclusion in the Offering Documents, insofar as such information
relates to the Underwriter, and any Derived Information (as defined in the
Underwriting Agreement) (as revised from time to time, collectively the
"Underwriter Information") is true and correct in all material respects. In
respect of the Offering Documents, the Underwriter Information is limited to the
information set forth under the caption "Plan of Distribution" in the Offering
Documents.
<PAGE>
-6-
Section 4. Indemnification. (a) Financial Security agrees,
upon the terms and subject to the conditions provided herein, to indemnify,
defend and hold harmless each Depositor Party, each Company Party, each Seller
Party, each Originator Party and each Underwriter Party against (i) any and all
Losses incurred by them with respect to the offer and sale of the Securities and
resulting from Financial Security's breach of any of its representations,
warranties or agreements set forth in Section 2 hereof and (ii) any and all
Losses to which any Depositor Party, Company Party, Seller Party, Originator
Party or Underwriter Party may become subject, under the Securities Act or
otherwise, insofar as such Losses arise out of or result from an untrue
statement of a material fact contained in any Offering Document or the omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, in each case to the extent, but only
to the extent, that such untrue statement or omission was made in the Financial
Security Information included therein in accordance with the provisions hereof.
(b) The Underwriter agrees, upon the terms and subject to the
conditions provided herein, to indemnify, defend and hold harmless each
Financial Security Party against (i) any and all Losses incurred by them with
respect to the offer and sale of the Securities and resulting from the
Underwriter's breach of any of its representations, warranties or agreements set
forth in Section 3 hereof and (ii) any and all Losses to which any Financial
Security Party may become subject, under the Securities Act or otherwise,
insofar as such Losses arise out of or result from an untrue statement of a
material fact contained in any Offering Document or the omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent, but only to the
extent, that such untrue statement or omission was made in the Underwriter
Information included therein.
(c) Upon the incurrence of any Losses for which a party is
entitled to indemnification hereunder, the Indemnifying Party shall reimburse
the Indemnified Party promptly upon establishment by the Indemnified Party to
the Indemnifying Party of the Losses incurred.
Section 5. Indemnification Procedures. Except as provided
below in Section 6 with respect to contribution or in Section 7(e), the
indemnification provided herein by an Indemnifying Party shall be the exclusive
remedy of any and all Indemnified Parties for the breach of a representation,
warranty or agreement hereunder by an Indemnifying Party; provided, however,
that each Indemnified Party shall be entitled to pursue any other remedy at law
or in equity for any such breach so long as the damages sought to be recovered
shall not exceed the Losses incurred thereby resulting from such breach. In the
event that any action or regulatory proceeding shall be commenced or claim
asserted which may entitle an Indemnified Party to be indemnified under this
Agreement, such party shall give the Indemnifying Party written or telegraphic
notice of such action or claim reasonably promptly after receipt of written
notice thereof. The Indemnifying Party shall be entitled to participate in and,
upon notice to the Indemnified Party, assume the defense of any such action or
claim in reasonable cooperation with, and with the reasonable cooperation of,
the Indemnified Party. The Indemnified Party will have the right to employ its
own counsel in any such action in addition to the counsel of the Indemnifying
Party, but the fees and expenses of such counsel will be at the expense of such
Indemnified Party, unless (a) the employment of counsel by the Indemnified Party
at its expense has been authorized in writing by the Indemnifying Party, (b) the
<PAGE>
-7-
Indemnifying Party has not in fact employed counsel to assume the defense of
such action within a reasonable time after receiving notice of the commencement
of the action, or (c) the named parties to any such action or proceeding
(including any impleaded parties) include both the Indemnifying Party and one or
more Indemnified Parties, and the Indemnified Parties shall have been advised by
counsel that there may be one or more legal defenses available to them which are
different from or additional to those available to the Indemnifying Party (it
being understood, however, that the Indemnifying Party shall not, in connection
with any one such action or proceeding or separate but substantially similar or
related actions or proceedings in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the reasonable fees and
expenses of more than one separate firm of attorneys at any time for all
Depositor Parties, one such firm for all Underwriter Parties, one such firm for
all Company Parties, one such firm for all Seller Parties, one such firm for all
Originator Parties and one such firm for all Financial Security Parties, as the
case may be, which firm shall be designated in writing by the Depositor in
respect of the Depositor Parties, by the Underwriter in respect of the
Underwriter Parties, by the Company in respect of the Company Parties, by the
Seller in respect of the Seller Parties, by the Originator in respect of the
Originator Parties and by Financial Security in respect of the Financial
Security Parties), in each of which cases the fees and expenses of counsel will
be at the expense of the Indemnifying Party and all such fees and expenses will
be reimbursed promptly as they are incurred. The Indemnifying Party shall not be
liable for any settlement of any such claim or action unless the Indemnifying
Party shall have consented thereto or be in default in its obligations
hereunder. Any failure by an Indemnified Party to comply with the provisions of
this Section shall relieve the Indemnifying Party of liability only if such
failure is prejudicial to the position of the Indemnifying Party and then only
to the extent of such prejudice.
Section 6. Contribution. (a) To provide for just and
equitable contribution if the indemnification provided by any Indemnifying Party
is determined to be unavailable for any Indemnified Party (other than due to
application of this Section), each Indemnifying Party shall contribute to the
Losses arising from any breach of any of its representations, warranties or
agreements contained in this Agreement in such proportion as is appropriate to
reflect (i) the benefits received by such Indemnifying Party relative to the
benefits received by the Indemnified Party or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Indemnifying Party on the one hand and
the Indemnified Party on the other in connection with such Loss; provided,
however, that an Indemnifying Party shall in no event be required to contribute
to all Indemnified Parties an aggregate amount in excess of the Losses incurred
by such Indemnified Parties resulting from the breach of representations,
warranties or agreements contained in this Agreement.
(b) The relative fault of each Indemnifying Party, on the
one hand, and of each Indemnified Party, on the other, shall be determined by
reference to, among other things, whether the breach of, or alleged breach of,
any representations, warranties or agreements contained in this Agreement
relates to information supplied by, or action within the control of, the
Indemnifying Party
<PAGE>
-8-
or the Indemnified Party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such breach.
(c) The parties agree that Financial Security shall be solely
responsible for the Financial Security Information, the Underwriter shall be
solely responsible for the Underwriter Information and that, as and to the
extent provided in the Insurance Agreement, the balance of the Offering Document
shall be the responsibility of the Company, the Originator, the Seller and the
Depositor.
(d) Notwithstanding anything in this Section 6 to the
contrary, the Underwriter shall not be required to contribute an amount greater
than the excess, if any, of (x) the purchase prices paid by investors to the
Underwriter for the Certificates over (y) the purchase price paid by the
Underwriter for the Certificates.
(e) No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
(f) Upon the incurrence of any Losses entitled to
contribution hereunder, the contributor shall reimburse the party entitled to
contribution promptly upon establishment by the party entitled to contribution
to the contributor of the Losses incurred.
(g) The provisions relating to contribution set forth in this
Section 6 do not limit the rights of any party to indemnification under Section
4.
Section 7. Miscellaneous.
(a) Notices. All notices and other communications provided
for under this Agreement shall be delivered to the address set forth below or to
such other address as shall be designated by the recipient in a written notice
to the other party or parties hereto.
If to Financial Security:
Financial Security Assurance Inc.
350 Park Avenue
New York, NY 10022
Attention: Surveillance Department
Re: Emergent Home Equity Loan
Pass-Through Certificates, Series 1997-2
If to the Depositor: Prudential Securities Secured Financing Corporation
One New York Plaza, 15th Floor
Attention: Managing Director, Asset-Backed
Finance Group
<PAGE>
-9-
If to the Company: Emergent Group, Inc.
15 South Main Street, Suite 750
Greenville, South Carolina 29606
Attention: Kevin J. Mast
If to the Underwriter: Prudential Securities Incorporated
One New York Plaza, 15th Floor
New York, New York 10292
Attention: Manager-Asset Finance Group
If to the Seller: Emergent Mortgage Holdings Corporation
44 East Camperdown Way
Greenville, South Carolina 29601
Attention: William P. Crawford, Jr.
If to the Originator: Emergent Mortgage Corp.
50 Datastream Plaza, Suite 201
Greenville, South Carolina 29605
(b) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
(c) Assignments. This Agreement may not be assigned by any party
without the express written consent of each other party. Any
assignment made in violation of this Agreement shall be null and void.
(d) Amendments. Amendments of this Agreement shall be in writing
signed by each party hereto.
(e) Survival, Etc. The indemnity and contribution agreements
contained in this Agreement shall remain operative and in full force
and effect, regardless of (i) any investigation made by or on behalf
of any Indemnifying Party, (ii) the issuance of the Securities or
(iii) any termination of this Agreement or the Policy. The
indemnification provided in this Agreement will be in addition to any
liability which the parties may otherwise have and shall in no way
limit any obligations of the Company, the Depositor, the Seller, the
Originator, Financial Security or the Underwriter under the
Underwriting Agreement or the Insurance Agreement, as applicable.
(f) Counterparts. This Agreement may be executed in counterparts
by the parties hereto, and all such counterparts shall constitute one
and the same instrument.
<PAGE>
-10-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the date first above written.
FINANCIAL SECURITY ASSURANCE INC.
By___________________________
Name:________________________
Authorized Officer
EMERGENT MORTGAGE HOLDINGS
CORPORATION
By___________________________
Name:
Title:
EMERGENT GROUP, INC.
By___________________________
Name:
Title:
EMERGENT MORTGAGE CORP.
By___________________________
Name:
Title:
PRUDENTIAL SECURITIES SECURED
FINANCING CORPORATION
By___________________________
Name:
Title:
PRUDENTIAL SECURITIES
INCORPORATED
By___________________________
Name:
Title:
<PAGE>
EXHIBIT A
OPINION OF GENERAL COUNSEL
Based upon the foregoing, I am of the opinion that:
1. Financial Security is a stock insurance company duly
organized, validly existing and authorized to transact financial guaranty
insurance business under the laws of the State of New York.
2. The Policy and the Agreements have been duly authorized,
executed and delivered by Financial Security.
3. The Policy and the Agreements constitute valid and binding
obligations of Financial Security, enforceable against Financial Security in
accordance with their terms, subject, as to the enforcement of remedies, to
bankruptcy, insolvency, reorganization, rehabilitation, moratorium and other
similar laws affecting the enforceability of creditors' rights generally
applicable in the event of the bankruptcy or insolvency of Financial Security
and to the application of general principles of equity and subject, in the case
of the Indemnification Agreement, to principles of public policy limiting the
right to enforce the indemnification provisions contained therein insofar as
they relate to indemnification for liabilities arising under applicable
securities laws.
4. The Policy is exempt from registration under the Securities
Act of 1933, as amended (the "Act").
5. Neither the execution or delivery by Financial Security of the
Policy or the Agreements, nor the performance by Financial Security of its
obligations thereunder, will conflict with any provision of the certificate of
incorporation or the by-laws of Financial Security or, to the best of my
knowledge, result in a breach of, or constitute a default under, any agreement
or other instrument to which Financial Security is a party or by which it or any
of its property is bound or, to the best of my knowledge, violate any judgment,
order or decree applicable to Financial Security of any governmental or
regulatory body, administrative agency, court or arbitrator having jurisdiction
over Financial Security (except that in the published opinion of the Securities
and Exchange Commission the indemnification provisions of the Indemnification
Agreement, insofar as they relate to indemnification for liabilities arising
under the Act, are against public policy as expressed in the Act and are
therefore unenforceable).
In addition, please be advised that I have reviewed the
description of Financial Security under the caption "The Insurer" in the
Prospectus Supplement dated June 17, 1997 (the "Offering Document") of the
Depositor with respect to the Securities. The information provided in the
Offering Document with respect to Financial Security is limited and does not
purport to provide the scope of disclosure required to be included in a
prospectus with respect to a registrant under the Act in connection with a
public offering and sale of securities of such registrant. Within such limited
<PAGE>
scope of disclosure, however, there has not come to my attention any information
which would cause me to believe that the description of Financial Security
referred to above, as of the date of the Offering Document or as of the date of
this opinion, contained or contains any untrue statement of a material fact or
omitted or omits to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading (except that I express no opinion with respect to any financial
statements or other financial information contained or referred to therein).
EXHIBIT 4.1
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION,
Depositor
EMERGENT MORTGAGE CORP.
Servicer
and
FIRST UNION NATIONAL BANK,
Trustee
----------
POOLING AND SERVICING AGREEMENT
Dated as of June 1, 1997
----------
Emergent Home Equity Loan Pass-Through Certificates
Series 1997-2
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITIONS........................................................ 2
SECTION 1.01. Defined Terms................................................ 2
ARTICLE II CONVEYANCE OF MORTGAGE LOANS; ORIGINAL
ISSUANCE OF CERTIFICATES.......................................... 35
SECTION 2.01. Conveyance of Mortgage Loans................................ 35
SECTION 2.02. Acceptance by Trustee....................................... 37
SECTION 2.03. Repurchase or Substitution of Mortgage Loans................ 38
SECTION 2.04. Representations and Warranties of the Depositor............. 41
SECTION 2.05. Representations, Warranties and Covenants of the
Servicer.................................................... 42
SECTION 2.06. Issuance of Certificates.................................... 44
ARTICLE III ADMINISTRATION AND SERVICING OF THE TRUST FUND................... 45
SECTION 3.01. Servicer to Act as Servicer................................. 45
SECTION 3.02. Sub-Servicing Agreements Between Servicer and
Sub-Servicers............................................... 47
SECTION 3.03. Successor Sub-Servicers..................................... 48
SECTION 3.04. Liability of the Servicer................................... 48
SECTION 3.05. No Contractual Relationship Between Sub-Servicers and
Trustee or Certificateholders............................... 49
SECTION 3.06. Assumption or Termination of Sub-Servicing Agreements
by Trustee.................................................. 49
SECTION 3.07. Collection of Certain Mortgage Loan Payments................ 49
SECTION 3.08. Sub-Servicing Accounts...................................... 50
SECTION 3.09. Collection of Taxes, Assessments and Similar Items;
Servicing Accounts.......................................... 50
SECTION 3.10. Collection Account and Distribution Account................. 51
SECTION 3.11. Withdrawals from the Collection Account and
Distribution Account........................................ 54
SECTION 3.12. Investment of Funds in the Investment Accounts.............. 55
SECTION 3.13. [intentionally omitted]..................................... 56
SECTION 3.14. Maintenance of Hazard Insurance and Errors and
Omissions and Fidelity Coverage............................. 56
SECTION 3.15. Enforcement of Due-On-Sale Clauses, Assumption
Agreements.................................................. 58
i
<PAGE>
Page
----
SECTION 3.16. Realization Upon Defaulted Mortgage Loans................... 59
SECTION 3.17. Trustee to Cooperate; Release of Mortgage Files............. 61
SECTION 3.18. Servicing Compensation...................................... 63
SECTION 3.19. Reports to the Trustee; Collection Account Statements....... 63
SECTION 3.20. Statement as to Compliance.................................. 64
SECTION 3.21. Independent Public Accountants' Servicing Report............ 64
SECTION 3.22. Access to Certain Documentation............................. 65
SECTION 3.23. Title, Management and Disposition of REO Property........... 65
SECTION 3.24. Obligations of the Servicer in Respect of Prepayment
Interest Shortfalls......................................... 68
SECTION 3.25. Expense Account............................................. 69
SECTION 3.26. Obligations of the Servicer in Respect of Monthly
Payments.................................................... 69
SECTION 3.27. Interest Coverage Account; Redemption Account............... 70
ARTICLE IV PAYMENTS TO CERTIFICATEHOLDERS.................................... 70
SECTION 4.01. Distributions............................................... 70
SECTION 4.02. Statements to Certificateholders............................ 75
SECTION 4.03. [Reserved]; Monthly Advances................................ 79
SECTION 4.04. Determination of Realized Losses............................ 81
SECTION 4.05. Compliance with Withholding Requirements.................... 81
ARTICLE V THE CERTIFICATES................................................... 81
SECTION 5.01. The Certificates............................................ 81
SECTION 5.02. Registration of Transfer and Exchange of Certificates....... 83
SECTION 5.03. Mutilated, Destroyed, Lost or Stolen Certificates........... 88
SECTION 5.04. Persons Deemed Owners....................................... 89
SECTION 5.05. Certain Available Information............................... 89
ARTICLE VI THE DEPOSITOR AND THE SERVICER.................................... 89
SECTION 6.01. Liability of the Depositor and the Servicer................. 89
SECTION 6.02. Merger or Consolidation of the Depositor or the Servicer.... 90
SECTION 6.03. Limitation on Liability of the Depositor, the Servicer
and Others.................................................. 90
SECTION 6.04. Limitation on Resignation of the Servicer................... 91
SECTION 6.05. Rights of the Depositor and Others in Respect of the
Servicer.................................................... 92
ii
<PAGE>
Page
----
ARTICLE VII DEFAULT.......................................................... 93
SECTION 7.01. Servicer Events of Default.................................. 93
SECTION 7.02. Trustee to Act; Appointment of Successor.................... 96
SECTION 7.03. Notification to Certificateholders.......................... 97
SECTION 7.04. Waiver of Servicer Events of Default........................ 98
ARTICLE VIII CONCERNING THE TRUSTEE.......................................... 98
SECTION 8.01. Duties of Trustee........................................... 98
SECTION 8.02. Certain Matters Affecting the Trustee.......................100
SECTION 8.03. Trustee Not Liable for Certificates or Mortgage Loans.......101
SECTION 8.04. Trustee May Own Certificates................................102
SECTION 8.05. Trustee's Fees and Expenses.................................102
SECTION 8.06. Eligibility Requirements for Trustee........................103
SECTION 8.07. Resignation and Removal of the Trustee......................103
SECTION 8.08. Successor Trustee...........................................104
SECTION 8.09. Merger or Consolidation of Trustee..........................105
SECTION 8.10. Appointment of Co-Trustee or Separate Trustee...............105
SECTION 8.11. Appointment of Office or Agency.............................106
SECTION 8.12. Representations and Warranties of the Trustee...............106
ARTICLE IX CERTAIN MATTERS REGARDING THE CERTIFICATE
INSURER...........................................................107
SECTION 9.01. Rights of the Certificate Insurer To Exercise Rights of
Class A Certificateholders..................................107
SECTION 9.02. Trustee To Act Solely with Consent of the Certificate
Insurer.....................................................108
SECTION 9.03. Trust Fund and Accounts Held for Benefit of the
Certificate Insurer.........................................109
SECTION 9.04. Claims Upon the Policy; Policy Payments Account.............109
SECTION 9.05. Effect of Payments by the Certificate Insurer; Subrogation..111
SECTION 9.06. Notices to the Certificate Insurer..........................111
SECTION 9.07. Third-Party Beneficiary.....................................112
SECTION 9.08. Trustee to Hold the Policy..................................112
SECTION 9.09. Termination of the Servicer.................................112
ARTICLE X TERMINATION........................................................112
SECTION 10.01. Termination Upon Repurchase or Liquidation of All
Mortgage Loans..............................................112
SECTION 10.02. Additional Termination Requirements.........................115
iii
<PAGE>
Page
----
ARTICLE XI REMIC PROVISIONS..................................................115
SECTION 11.01. REMIC Administration........................................115
SECTION 11.02. Prohibited Transactions and Activities......................118
SECTION 11.03. Servicer and Trustee Indemnification........................119
ARTICLE XII MISCELLANEOUS PROVISIONS.........................................119
SECTION 12.01. Amendment...................................................119
SECTION 12.02. Recordation of Agreement; Counterparts......................121
SECTION 12.03. Limitation on Rights of Certificateholders..................122
SECTION 12.04. GOVERNING LAW...............................................123
SECTION 12.05. Notices.....................................................123
SECTION 12.06. Severability of Provisions..................................124
SECTION 12.07. Notice to Rating Agencies and Certificate Insurer...........124
SECTION 12.08. Article and Section References..............................125
SECTION 12.09. Confirmation of Intent......................................125
Exhibit A-1 Form of Class A-1 Certificate
Exhibit A-2 Form of Class A-2 Certificate
Exhibit A-3 Form of Class A-3 Certificate
Exhibit A-4 Form of Class A-4 Certificate
Exhibit A-5 Form of Class A-5 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 Unaffiliated Seller's Agreement
Exhibit E-1 Form of Temporary Request for Release of Mortgage File
Exhibit E-2 Form of Permanent Request for Release of Mortgage File
Exhibit F-1 Form of 144A Transfer Letter
Exhibit F-2 Form of Transfer Affidavit and Agreement
Schedule 1 Mortgage Loan Schedule
iv
<PAGE>
This Pooling and Servicing Agreement, is dated and effective as of June 1, 1997
among PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION, as Depositor,
EMERGENT MORTGAGE CORP., as Servicer, and FIRST UNION NATIONAL BANK, 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 A Certificates will be the "regular interests" in
the REMIC.
The following table irrevocably sets forth the Pass-Through
Rates, initial Certificate Principal Balance and "latest possible maturity date"
for the Certificates.
<TABLE>
<CAPTION>
Initial Certificate Latest Possible
Description Pass-Through Rate(1) Principal Balance Maturity Date(2)
- ----------- -------------------- ----------------- ----------------
<S> <C> <C> <C>
Class A-1 6.435% $41,500,000 8/15/2009
Class A-2 6.745% $32,500,000 5/15/2012
Class A-3 7.020% $13,000,000 5/15/2012
Class A-4 7.390% $22,209,000 7/15/2028
Class A-5 6.980% $12,000,000 5/15/2012
Class R N/A 0 N/A
</TABLE>
(1) Subject to Available Funds Cap Rate.
(2) Solely for purposes of Section 1.860G-1(a)(4)(iii) of the Treasury
regulations, the Distribution Date immediately following the maturity
date for the Mortgage Loan with the latest maturity date has been
designated as the "latest possible maturity date" for the Class A
Certificates.
As of the Cut-off Date, the Mortgage Loans had an aggregate
principal balance equal to $121,214,121.44.
<PAGE>
In consideration of the mutual agreements herein contained,
the Depositor, the Servicer and the Trustee agree as follows:
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 and any Class A Certificate, interest accrued during the
related Interest Accrual Period at the applicable Pass-Through Rate for such
Class A Certificate for such Distribution Date on the Certificate Principal
Balance of such Class A Certificate immediately prior to such Distribution Date.
All distributions of interest on the Class A Certificates will be calculated on
the basis of a 360-day year consisting of twelve 30-day months. Accrued
Certificate Interest with respect to each Distribution Date, as to any Class A
Certificate, shall be reduced by an amount equal to the portion allocable to
such Certificate of the aggregate amount of any Relief Act Interest Shortfall
and/or Prepayment Interest Shortfall, if any, for such Distribution Date.
"Additional Mortgage Loans": Any Mortgage Loans included in
the Mortgage Pool but not identified by the Originator before the opening of
business on June 1, 1997, but excluding any Qualified Substitute Mortgage Loans.
"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
2
<PAGE>
jurisdiction wherein the related Mortgaged Property is located to reflect of
record the sale of the Mortgage.
"Available Distribution Amount": With respect to any
Distribution Date, an amount equal to the excess of (i) the sum of (a) the
aggregate of the Monthly Payments, Liquidation Proceeds, Insurance Proceeds,
Principal Prepayments and other unscheduled recoveries of principal and interest
in respect of the Mortgage Loans received during or with respect to the related
Collection Period, (b) the aggregate of any amounts received in respect of an
REO Property withdrawn from any REO Account and deposited in the Distribution
Account for such Distribution Date pursuant to Section 3.23, (c) the aggregate
of any amounts deposited in the Distribution Account by the Servicer in respect
of Prepayment Interest Shortfalls for such Distribution Date pursuant to Section
3.24, (d) the aggregate of any Monthly Advances made by the Servicer for such
Distribution Date pursuant to Section 4.03, (e) the aggregate of any advances
made by the Trustee for such Distribution Date pursuant to Section 7.02, (f) the
Stated Principal Balance of any Mortgage Loan that was purchased during the
related Collection Period pursuant to or as contemplated by Sections 2.03,
3.16(c) or 10.01 and the amount of any shortfall deposited into the Collection
Account in connection with the substitution of a Deleted Mortgage Loan pursuant
to Section 2.03 during the related Collection Period and (g) the aggregate of
any amounts deposited into the Distribution Account by the Trustee from the
Interest Coverage Account and the Redemption Account over (ii) the sum of (a)
amounts reimbursable or payable to the Depositor, the Servicer, the Trustee, the
Seller or any Sub-Servicer pursuant to Section 3.11 or Section 3.12 or otherwise
payable in respect of extraordinary Trust Fund expenses, (b) Stayed Funds, (c)
amounts deposited in the Collection Account or the Distribution Account, as the
case may be, in error, (d) amounts 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, (e) the
Certificate Insurer Premium payable to the Certificate Insurer pursuant to
Section 3.25(b), and (f) the Trustee Fee payable from the Distribution Account
pursuant to Section 8.05.
"Available Funds Cap Rate": For any Distribution Date, an
amount, expressed as a per annum rate, equal to (a) the aggregate amount of
interest due and collected (or advanced) on the Mortgage Loans for the related
Collection Period, minus the amounts reimbursable or payable to the Servicer or
any Sub-Servicer pursuant to Section 3.11 or Section 3.12 and the Certificate
Insurer Premium payable to the Certificate Insurer pursuant to Section 3.25(b),
divided by (b) the Stated Principal Balance of the Mortgage Loans immediately
prior to such Distribution Date.
"Balloon Mortgage Loan": A Mortgage Loan that provides for the
payment of the unamortized principal balance of such Mortgage Loan in a single
payment at the maturity of such Mortgage Loan that is substantially greater than
the preceding monthly payment.
3
<PAGE>
"Balloon Payment": The final payment due on a Balloon Mortgage
Loan.
"Bankruptcy Code": The Bankruptcy Reform Act of 1978 (Title 11
of the United States Code), as amended.
"Book-Entry Certificate": The Class A Certificates for so long
as such Certificates 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 South
Carolina, or in the city in which the Certificate Insurer or 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 Emergent Home Equity Loan Pass-
Through Certificates, Series 1997-2, Class A 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 Class Certificate Balance
of such Class of Certificates on such Distribution Date (after giving effect to
any distributions of principal in reduction of the Class Certificate Balance of
such Class of Certificates to be made on such Distribution Date), and the
denominator of which is the initial Class Certificate Balance of such Class of
Certificates as of the Closing Date.
"Certificate Insurer": Financial Security Assurance, Inc. a
stock insurance company organized and created under the laws of the State of New
York, and any successors thereto.
"Certificate Insurer Default": The existence and continuance
of any of the following:
(a) The Certificate Insurer fails to make a payment required
under the Policy in accordance with its terms; or
(b) the Certificate Insurer shall have (i) filed a petition or
commenced any case or proceeding under any provision or chapter of the
United States Bankruptcy Code, the New York State Insurance Law or any
other similar federal or state law relating to insolvency, bankruptcy,
4
<PAGE>
rehabilitation, liquidation, or reorganization, (ii) made a general
assignment for the benefit of its creditors or (iii) had an order for
relief entered against it under the United States Bankruptcy Code, the
New York State Insurance Law or any other similar federal or state law
relating to insolvency, bankruptcy, rehabilitation, liquidation, or
reorganization that is final and nonappealable; or
(c) a court of competent jurisdiction, the New York Department
of Insurance or any other competent regulatory authority shall have
entered a final and nonappealable order, judgment or decree (i)
appointing a custodian, trustee, agent, or receiver for the Certificate
Insurer or for all or any material portion of its property or (ii)
authorizing the taking of possession by a custodian, trustee, agent, or
receiver of the Certificate Insurer of all or any material portion of
its property.
"Certificate Insurer Premium": The Policy premium payable
pursuant to Section 3.25(b) hereof.
"Certificate Insurer Premium Rate": 0.19% per annum.
"Certificateholder" or "Holder": The Person in whose name a
Certificate is registered in the Certificate Register, and the Certificate
Insurer to the extent of Cumulative Insurance Payments, except that a
"disqualified organization" (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 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 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 on such immediately prior
5
<PAGE>
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, as of any date of determination, an amount equal to
the Percentage Interest evidenced by such Certificate times the excess, if any,
of (A) the then aggregate 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 Certificateholder": Any Holder of a Class A-1, Class
A-2, Class A-3, Class A-4 or Class A-5 Certificate.
"Class A Certificate Principal Balance": The sum of the Class
A-1 Certificate Principal Balance, the Class A-2 Certificate Principal Balance,
the Class A-3 Certificate Principal Balance, the Class A-4 Certificate Principal
Balance and the Class A-5 Certificate Principal Balance.
"Class A-1 Certificate": Any one of the Class A-1 Certificates
executed by the Trustee, and authenticated and delivered by the Certificate
Registrar, substantially in the form annexed hereto as Exhibit A-1 and
evidencing a Regular Interest in the REMIC Trust for purposes of the REMIC
Provisions.
"Class A-1 Certificate Principal Balance": The Class
Certificate Balance for the Class A-1 Certificates.
"Class A-1 Interest Distribution Amount": On any Distribution
Date, the amount equal to the aggregate Accrued Certificate Interest on the
Class A-1 Certificates.
"Class A-1 Pass-Through Rate": For each Distribution Date, a
rate per annum equal to the lesser of 6.435% and the Available Funds Cap Rate
for such Distribution Date.
"Class A-2 Certificate": Any one of the Class A-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 REMIC Trust for purposes of the REMIC
Provisions.
6
<PAGE>
"Class A-2 Certificate Principal Balance": The Class
Certificate Balance for the Class A-2 Certificates.
"Class A-2 Interest Distribution Amount": On any Distribution
Date, the amount equal to the aggregate Accrued Certificate Interest on the
Class A-2 Certificates.
"Class A-2 Pass-Through Rate": For each Distribution Date, a
rate per annum equal to the lesser of 6.745% and the Available Funds Cap Rate
for such Distribution Date.
"Class A-3 Certificate": Any one of the Class A-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 REMIC Trust for purposes of the REMIC
Provisions.
"Class A-3 Certificate Principal Balance": The Class
Certificate Balance for the Class A-3 Certificates.
"Class A-3 Interest Distribution Amount": On any Distribution
Date, the amount equal to the aggregate Accrued Certificate Interest on the
Class A-3 Certificates.
"Class A-3 Pass-Through Rate": For each Distribution Date, a
rate per annum equal to the lesser of 7.020% and the Available Funds Cap Rate
for such Distribution Date.
"Class A-4 Certificate": Any one of the Class A-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 REMIC Trust for purposes of the REMIC
Provisions.
"Class A-4 Certificate Principal Balance": The Class
Certificate Balance for the Class A-4 Certificates.
"Class A-4 Interest Distribution Amount": On any Distribution
Date, the amount equal to the aggregate Accrued Certificate Interest on the
Class A-4 Certificates.
"Class A-4 Pass-Through Rate": For each Distribution Date, a
rate per annum equal to the lesser of 7.390% and the Available Funds Cap Rate
for such Distribution Date.
"Class A-5 Certificate": Any one of the Class A-5 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 REMIC Trust for purposes of the REMIC
Provisions.
"Class A-5 Certificate Principal Balance": The Class
Certificate Balance for the Class A-5 Certificates.
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"Class A-5 Interest Distribution Amount": On any Distribution
Date, the amount equal to the aggregate Accrued Certificate Interest on the
Class A-5 Certificates.
"Class A-5 Lockout Distribution Amount": For any Distribution
Date, an amount equal to the product of (x) the applicable Class A-5 Lockout
Percentage for such Distribution Date and (y) the Class A-5 Lockout Pro-Rata
Distribution Amount for such Distribution Date.
"Class A-5 Lockout Percentage": For each Distribution Date,
the percentage specified below for the period in which such Distribution Date
occurs:
Distribution Date Lockout Percentage
----------------- ------------------
July 1997 - June 2000 0%
July 2000 - June 2002 45%
July 2002 - June 2003 80%
July 2003 - June 2004 100%
Subsequent to June 2004 300%
"Class A-5 Lockout Pro-Rata Distribution Amount": For any
Distribution Date, an amount equal to the product of (x) a fraction, the
numerator of which is the Class A-5 Certificate Principal Balance immediately
prior to such Distribution Date and the denominator of which is the Class A
Certificate Principal Balance immediately prior to such Distribution Date, and
(y) the Principal Distribution Amount for such Distribution Date.
"Class A-5 Pass-Through Rate": For each Distribution Date, a
rate per annum equal to the lesser of 6.980% and the Available Funds Cap Rate
for such Distribution Date.
"Class Certificate Balance": As to any Class of Certificates
and any date of determination, the aggregate of the Certificate Principal
Balances of all Certificates of such Class as of such date of determination.
"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 REMIC Trust for purposes of the REMIC
Provisions.
"Closing Date": June 26, 1997.
"Code": The Internal Revenue Code of 1986.
"Collection Account": The account or accounts created and
maintained by the Servicer pursuant to Section 3.10(a), which shall be entitled
"Emergent Mortgage
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Corp., as Servicer for First Union National Bank, as Trustee, in trust for (A)
registered holders of Emergent Home Equity Loan Pass-Through Certificates,
Series 1997-2, and (B) Financial Security Assurance, Inc." and which must be an
Eligible Account.
"Collection Period": With respect to any Distribution Date,
the calendar month preceding the calendar month in which such Distribution Date
occurs.
"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 230 South Tryon Street, 9th
Floor, Charlotte, North Carolina 28288-1179, Attention: Corporate Trust
Department, or at such other address as the Trustee may designate from time to
time by notice to the Certificateholders, the Depositor, the Servicer and the
Certificate Insurer.
"Cumulative Insurance Payments": As of any time of
determination, the aggregate of all Insurance Payments previously made by the
Certificate Insurer plus interest thereon from the date such amount became due
until paid in full, at a rate of interest calculated as provided in the
Insurance Agreement minus all payments previously made to the Certificate
Insurer pursuant to Section 4.01 hereof as reimbursement for such amounts.
"Cumulative Loss Percentage": 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 Collection Period to
and including the most recently ended Collection Period, and the denominator of
which is the Original Pool Balance.
"Cut-off Date": With respect to each Initial Mortgage Loan,
the opening of business on June 1, 1997 and with respect to each Additional
Mortgage Loan, the respective origination date. With respect to all Qualified
Substitute Mortgage Loans, A the first day of the calendar month in which the
substitution occurs. 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 the Interest Distribution Amount, net of any Relief
Act Interest Shortfalls and Prepayment Interest Shortfalls allocated to the
Class A Certificates, (ii) the Remaining Overcollateralization Deficit, if any,
for such Distribution Date and (iii) without
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duplication of the amount specified in clause (ii), the applicable Class A
Certificate Principal Balance to the extent unpaid on the final Distribution
Date for each Class of the Class A Certificates or the earlier termination of
the Trust Fund pursuant to the terms of this Agreement.
"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.
"Delinquent": A Mortgage Loan is Delinquent if the Monthly
Payment due on a Due Date is not paid on or before the next succeeding Due Date,
at which time, such Mortgage Loan is 30 days Delinquent. If the Monthly Payment
due on a Due Date is not paid on or before the second or third succeeding Due
Date, respectively, such Mortgage Loan is 60 or 90 days Delinquent, as the case
may be.
"Delinquency Percentage": As of the last day of any Collection
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 Collection Period, and the denominator of which is the
aggregate Stated Principal Balance of the Mortgage Loans as of the last day of
such Collection Period.
"Depositor": Prudential Securities Secured Financing
Corporation, 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.
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"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 at least P-1 by Moody's
and A-1 by S&P (or comparable ratings if Moody's and S&P are not the Rating
Agencies).
"Depository Participant": A broker, dealer, bank or other
financial institution or other Person for whom from time to time a Depository
effects book-entry transfers and pledges of securities deposited with the
Depository.
"Determination Date": With respect to each Distribution Date,
the fifth Business Day prior to such Distribution Date.
"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 Servicer on behalf of the Trustee) shall not be considered to Directly
Operate an REO Property solely because the Trustee (or the 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,"
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"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 "First Union National Bank, as Trustee, in trust for (A) registered
holders of Emergent Home Equity Loan Pass-Through Certificates, Series 1997-2,
and (B) Financial Security Assurance, Inc." and which must be an Eligible
Account.
"Distribution Date": The 15th day of any month, or if such
15th day is not a Business Day, the Business Day immediately following such 15th
day, commencing in July 1997.
"Due Date": With respect to each Distribution Date, the day of
the month on which the Monthly Payment is due on a Mortgage Loan during the
related Collection Period, exclusive of any days of grace.
"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 at least 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.
"Escrow Payments": As defined in Section 3.09.
"Estate in Real Property": A fee simple estate in a parcel of
land.
"Excess Subordinated Amount": With respect to the Class A
Certificates and any Distribution Date, the excess, if any, of (i) the
Subordinated Amount for such Distribution Date over (ii) the Required
Subordinated Amount for such Distribution Date.
"Expense Account": The account established and maintained
pursuant to Section 3.25.
"FDIC": Federal Deposit Insurance Corporation or any successor
thereto.
"FHLMC": Federal Home Loan Mortgage Corporation or any
successor thereto.
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<PAGE>
"Final Recovery Determination": With respect to any defaulted
Mortgage Loan or any REO Property (other than a Mortgage Loan or REO Property
purchased by the Seller, the Depositor, the 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 Servicer that all Insurance Proceeds, Liquidation
Proceeds and other payments or recoveries which the Servicer, in its reasonable
good faith judgment, expects to be finally recoverable in respect thereof have
been so recovered. The 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.
"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 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 Servicer
or any Affiliate thereof, and (c) is not connected with the Depositor or the
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 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 Servicer or any Affiliate thereof, as the case may be.
"Independent Contractor": Either (i) any Person (other than
the Servicer) that would be an "independent contractor" with respect to the
REMIC Trust within the meaning of Section 856(d)(3) of the Code if the REMIC
Trust 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 REMIC Trust 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 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.
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"Initial Mortgage Loan": Any Mortgage Loan identified by the
Originator as of the opening of business on June 1, 1997, which Mortgage Loans
will have a Cut-off Date of June 1, 1997.
"Insurance Agreement": The Insurance and Indemnity Agreement,
dated as of June 1, 1997, among the Depositor, the Servicer, the Seller,
Emergent Group, Inc. and the Certificate Insurer, as amended or supplemented in
accordance with the provisions thereof.
"Insurance Payment": Any payment made by the Certificate
Insurer under the Policy with respect to the Class A Certificates.
"Insurance Proceeds": Proceeds of any title policy, hazard
policy or other insurance policy covering a Mortgage Loan, to the extent such
proceeds are not to be applied to the restoration of the related Mortgaged
Property or released to the Mortgagor in accordance with the procedures that the
Servicer would follow in servicing mortgage loans held for its own account,
subject to the terms and conditions of the related Mortgage Note and Mortgage.
"Interest Accrual Period": With respect to any Distribution
Date and the Class A Certificates, the calendar month immediately preceding the
month in which such Distribution Date occurs.
"Interest Coverage Account": As defined in Section 3.27.
"Interest Distribution Amount": With respect to any
Distribution Date and the Class A Certificates, the aggregate Accrued
Certificate Interest on the Class A Certificates for such Distribution Date.
"Investment Account": As defined in Section 3.12.
"Late Collections": With respect to any Mortgage Loan, all
amounts received subsequent to the Determination Date immediately following any
Collection 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 Collection 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
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<PAGE>
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.
"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 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 and (ii) the liquidation of a defaulted Mortgage Loan by
means of a trustee's sale, foreclosure sale or otherwise.
"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.
"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 Seller certifying that the original
Mortgage Note has been lost, misplaced or destroyed (together with a copy of the
related Mortgage Note).
"Majority Class R Certificateholder": Any single Holder of
Class R Certificates representing a greater than 50% Percentage Interest in such
Class.
"Monthly Advance": As to any Mortgage Loan or REO Property,
any advance made by the Servicer in respect of any Distribution Date pursuant to
Section 4.03.
"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 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.
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"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 Schedule": As of any date, the list of Mortgage
Loans included in the Trust Fund on such date. The Mortgage Loan Schedule shall
set forth following information with respect to each Mortgage Loan:
1. the Seller's Mortgage Loan identifying number;
2. the Mortgagor's name;
3. the street address of the Mortgaged Property including the
state and zip code;
4. a code indicating whether the Mortgaged Property is
owner-occupied;
5. the type of Residential Dwelling constituting the Mortgaged
Property;
6. the original months to maturity;
7. the remaining months to stated maturity from the Cut-off
Date based on the original amortization schedule;
8. the Loan-to-Value Ratio at origination;
9. (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;
10. the stated maturity date;
11. the amount of the Monthly Payment due on the first Due
Date on or after the Cut-off Date;
12. the last Due Date on which a Monthly Payment was actually
applied to the unpaid Stated Principal Balance;
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<PAGE>
13. the original principal amount of the Mortgage Loan;
14. the outstanding principal balance of the Mortgage Loan as
of the close of business on the Cut-off Date;
15. a code indicating the purpose of the Mortgage Loan (i.e.,
purchase financing, Rate/Term Refinancing, Cash-Out Refinancing);
16. the Mortgage Rate;
17. a code indicating the documentation style program;
18. the risk grade;
19. the Value of the Mortgaged Property;
20. the sale price of the Mortgaged Property, if applicable;
21. whether the Mortgage Loan has a due-on-sale clause; and
22. 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 the
aggregate: (1) the number of Mortgage Loans; (2) the current principal balance
of the Mortgage Loans; (3) the weighted average Mortgage Rate of the Mortgage
Loans; and (4) the weighted average maturity of the Mortgage Loans. The Mortgage
Loan Schedule shall be amended from time to time by the Servicer in accordance
with the provisions of this 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, identified on the
Mortgage Loan Schedule 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 in accordance with
the provisions of the related Mortgage Note.
"Mortgaged Property": The underlying property securing a
Mortgage Loan, including any REO Property, consisting of an Estate in Real
Property.
"Mortgagor": The obligor on a Mortgage Note.
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"Net Monthly Excess Cashflow": With respect to any
Distribution Date, an amount equal to the excess of (x) the Available
Distribution Amount for such Distribution Date over (y) the sum for such
Distribution Date of (A) the amount described in Section 4.01(a)(i) hereof and
(B) the amount described in clauses (b)(i)-(iii) of the definition of Principal
Distribution Amount minus the amount of any Subordination Reduction Amount for
the Class A Certificates for such Distribution Date.
"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 Monthly Advance": Any Monthly Advance or
Servicing Advance previously made or proposed to be made in respect of a
Mortgage Loan or REO Property that, in the good faith business judgment of the
Servicer, will not or, in the case of a proposed Monthly 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), or by the Treasurer, the Secretary, or one of the
assistant treasurers or assistant secretaries of the Servicer, the Seller or the
Depositor, as applicable.
"Opinion of Counsel": A written opinion of counsel, who may,
without limitation, be salaried counsel for the Depositor or the 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 Pool Balance": An amount equal to the aggregate of
the Stated Principal Balances of the Mortgage Loans as of the Cut-off Date.
"Originator": Emergent Mortgage Corp.
"Overcollateralization Deficit": With respect to any
Distribution Date, the excess, if any, of (i) the Class A Certificate Principal
Balance, after taking into account the distribution of the Principal
Distribution Amount (other than any portion thereof
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<PAGE>
constituting the Overcollateralization Deficit or the Subordination Increase
Amount) over (ii) the sum of the aggregate Stated Principal Balances of the
Mortgage Loans then outstanding.
"Ownership Interest": As to any Certificate, any ownership or
security interest in such Certificate, including any interest in such
Certificate as the Holder thereof and any other interest therein, whether direct
or indirect, legal or beneficial, as owner or as pledgee.
"Pass-Through Rate": With respect to the Class A-1
Certificates, the Class A-1 Pass-Through Rate, with respect to the Class A-2
Certificates, the Class A-2 Pass-Through Rate, with respect to the Class A-3
Certificates, the Class A-3 Pass-Through Rate, with respect to the Class A-4
Certificates, the Class A-4 Pass-Through Rate, and, with respect to the Class
A-5 Certificates, the Class A-5 Pass-Through Rate.
"Percentage Interest": With respect to the Class A-1
Certificates, the Class A-2 Certificates, the Class A-3 Certificates, the Class
A-4 Certificates and the Class A-5 Certificates, the undivided percentage
ownership in the related 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 initial
aggregate Certificate Principal Balance 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 $1,000 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%.
"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 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;
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(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
(vii) 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 that have been rated "Aaa" by Moody's and "AAA" by
S&P;
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.
"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.
"Policy": The Financial Guaranty Insurance Policy (No.
50603-N) issued by the Certificate Insurer relating to the Class A Certificates,
including any endorsements thereto, attached hereto as Exhibit B.
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"Policy Payments Account": The account established pursuant to
Section 9.04 hereof.
"Prepayment Assumption": The Prepayment Assumption assumes
that the pool of loans prepays in the first month at a constant prepayment rate
of 1.8% and increases by an additional 1.8% each month thereafter until the
tenth month, where it remains at a constant prepayment rate equal to 18%.
"Prepayment Interest Shortfall": With respect to any
Distribution Date, for each Mortgage Loan that was during the related Collection
Period the subject of a Principal Prepayment in full or in part that was applied
by the Servicer to reduce the outstanding principal balance of such loan on a
date preceding the Due Date in the succeeding Collection Period, an amount equal
to the excess of (i) 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
Collection Period over (ii) the amount, if any, of the interest paid by the
Mortgagor in connection with such Principal Prepayment. The obligations of the
Servicer in respect of any Prepayment Interest Shortfall are set forth in
Section 3.24.
"Principal Distribution Amount": With respect to any
Distribution Date, the lesser of:
(a) the excess of the Available Distribution Amount over the
amount payable on the Class A Certificates pursuant to Section 4.01
(a)(i); and
(b) the sum of:
(i) the principal portion of each Monthly Payment due
during the related Collection Period, to the extent received, on each
Mortgage Loan;
(ii) the Stated Principal Balance of any Mortgage Loan
that was purchased during the related Collection Period pursuant to or
as contemplated by Section 2.03, 3.16(c) or 10.01 and the amount of any
shortfall deposited in the Collection Account in connection with the
substitution of a Deleted Mortgage Loan pursuant to Section 2.03 during
the related Collection Period;
(iii) the principal portion of all other unscheduled
collections (including, without limitation, Principal Prepayments,
Insurance Proceeds, Liquidation Proceeds, payments pursuant to Section
3.26 and REO Principal Amortization) received during the related
Collection Period, net of any portion thereof that represents a
recovery of principal for which an advance was made by the Servicer
pursuant to Section 4.03 in respect of a preceding Distribution Date,
and deposits into the Distribution Account from the Redemption Account
pursuant to Section 3.27, if any;
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(iv) the amount of any Overcollateralization Deficit
for such Distribution Date; and
(v) the amount of any Subordination Increase Amount for
the Class A Certificates for such Distribution Date; minus:
(vi) the amount of any Subordination Reduction Amount
for the Class A Certificates for such Distribution Date.
"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 and Assignment Agreement": The Agreement dated as of
March 1, 1997 between the Originator and the Seller providing for the sale of
the Mortgage Loans from the Originator to the Seller.
"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 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 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 Servicer, which payment or advance had as of the
date of purchase been distributed pursuant to Section 4.01, through the next
date corresponding to such Due Date which is on or after the date on which such
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 Servicer through the next
date corresponding to such Due Date which is on or after the date on which such
REO Property was acquired, plus (2) REO Imputed Interest for such REO Property
from such corresponding date through the next such corresponding date which is
on or after the date on which such purchase is to be effected, net of the total
of all net rental income, Insurance Proceeds, Liquidation Proceeds and Monthly
Advances that as of the date of purchase had been distributed as or to cover REO
Imputed Interest pursuant to Section 4.01, (iii) any unreimbursed Servicing
Advances and Monthly 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
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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 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 a Stated 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
outstanding 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 remaining term to
maturity not greater than (and not more than one year less than) that of the
Deleted Mortgage Loan, (iv) [intentionally left blank], (v) 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, (vi) have a risk grading
determined by the Seller, with the approval of the Certificate Insurer, at least
equal to the risk grading assigned on the Deleted Mortgage Loan, (vii) is a
"qualified mortgage" as defined in the REMIC Provisions and (viii) conform to
each representation and warranty set forth in the Unaffiliated Seller's
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 (vi) hereof shall be satisfied as to each such
mortgage loan, the terms described in clause (iii) hereof shall be determined on
the basis of weighted average remaining term to maturity, the Loan-to-Value
Ratios described in clause (v) 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 (viii) 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 Servicer.
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"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 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 Monthly Advances made by the Servicer in respect of such REO
Property or the related Mortgage Loan for which the Servicer has been or, in
connection with such Final Recovery Determination, will be reimbursed pursuant
to Section 3.23 out of rental income, Insurance Proceeds and Liquidation
Proceeds received in respect of such REO Property, minus (vi) the total of all
net rental income, Insurance Proceeds and Liquidation Proceeds received in
respect of such REO Property that has been, or in connection with such Final
Recovery Determination, will be transferred to the Distribution Account pursuant
to Section 3.23.
With respect to each Mortgage Loan which has become the
subject of a Deficient Valuation, the difference between the principal balance
of the Mortgage Loan outstanding immediately prior to such Deficient Valuation
and the principal balance of the Mortgage Loan as reduced by the Deficient
Valuation.
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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.
A Realized Loss within the meaning of the foregoing provisions
shall constitute a Realized Loss regardless of how such Realized Loss shall have
arisen (e.g., whether by virtue of any default, bankruptcy, fraud, special
hazard or any other reason).
"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.
"Redemption Account": As defined in Section 3.27.
"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)(l) 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.
"Remaining Overcollateralization Deficit": With respect to any
Distribution Date, the excess, if any, of (i) the Overcollateralization Deficit
for such Distribution Date over (ii) the Net Monthly Excess Cashflow for such
Distribution Date.
"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-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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"REMIC Trust": The segregated pool of assets comprising the
Trust Fund excluding the Policy.
"Remittance Report": As defined in Section 4.02.
"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
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 Servicer pursuant to Section 3.23(d) for unpaid Servicing
Fees in respect of the related Mortgage Loan and unreimbursed Servicing Advances
and Monthly 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 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 any
Distribution Date, an amount equal to 3.75% of the Original Pool Balance,
subject to the following: (i) if the Step Up Trigger has occurred with respect
to such Distribution Date, the Required
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Subordinated Amount for such Distribution Date will be an amount equal to the
entire aggregate Stated Principal Balance of the Mortgage Loans as of such
Distribution Date, (ii) if the Step Down Trigger has occurred, the Required
Subordinated Amount for such Distribution Date will be an amount equal to the
greater of (A) 0.50% of the Original Pool Balance and (B) the lesser of (x)
3.75%, of the Original Pool Balance and (y) the Stepped Down Required
Subordinated Percentage of the aggregate Stated Principal Balance of the
Mortgage Loans as of such Distribution Date.
"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, (iv) a
detached one-family dwelling in a planned unit development or (v) a manufactured
home treated as real property under local law, 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,
any officer of the Corporate Trust Department of the Trustee, including any
Senior Vice President, any Assistant Vice President, any Assistant Secretary,
any Trust Officer or any other officer of the Trustee customarily performing
functions similar to those performed by any of the above designated officers to
whom, with respect to a particular matter, such matter is referred.
"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 Collection 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 Collection
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 Collection
Period.
"Seller": Emergent Mortgage Holdings Corporation, or its
successor- in-interest, in its capacity as seller under the Unaffiliated
Seller's Agreement.
"Servicer": Emergent Mortgage Corp., a South Carolina
corporation, or any successor servicer appointed as herein provided, in its
capacity as Servicer hereunder.
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"Servicer Event of Default": One or more of the events
described in Section 7.01.
"Servicer Extension Notice": As described in Section 7.01.
"Servicer Remittance Date": With respect to any Distribution
Date, 12:00 noon New York time on the fourth Business Day prior to such
Distribution Date.
"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 Servicer in connection with a default, delinquency or
other unanticipated event by the 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 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 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 Servicing Fee Rate on the same
principal amount on which interest on such Mortgage Loan accrues for such
calendar month. A portion of such Servicing Fee may be retained by any
Sub-Servicer as its servicing compensation.
"Servicing Fee Rate": 0.50% per annum.
"Servicing Officer": Any officer of the 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 finished by
the 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 of $1,000. With respect to the Residual
Certificates, a hypothetical Certificate of such Class evidencing a 100%
Percentage Interest in such Class.
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"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 outstanding 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 included in a Monthly Advance and distributed pursuant to Section 4.01 on or
before such date of determination, (ii) all Principal Prepayments received after
the Cut-off Date, to the extent distributed pursuant to Section 4.01 on or
before such date of determination, (iii) all Liquidation Proceeds and Insurance
Proceeds applied by the 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 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 aggregate amount of REO Principal Amortization in
respect of such REO Property for all previously ended calendar months, to the
extent distributed pursuant to Section 4.01 on or before such date of
determination, and (b) as of any date of determination coinciding with or
subsequent to the Distribution Date on which the proceeds, if any, of a
Liquidation Event with respect to such REO Property would be distributed, zero.
"Stayed Funds": As defined in Section 7.02(b).
"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 30th through the 41st Distribution Dates, if the Cumulative Loss Percentage
for such Distribution Date is 2.00% or less, (ii) for the 42nd through the 53rd
Distribution Dates, if the Cumulative Loss Percentage for such Distribution Date
is 2.50% or less, (iii) for the 54th through the 65th Distribution Dates, if the
Cumulative Loss Percentage for such Distribution Date is 2.90% or less and (iv)
for 66th Distribution Date and any Distribution Date thereafter, if the
Cumulative Loss Percentage for such Distribution Date is 3.25% or less.
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"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 30th
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 30th Distribution Date or any preceding Distribution
Date.
"Stepped Down Required Subordinated Percentage": For any
Distribution Date for which the Step Down Trigger has occurred, a percentage
equal to (i) the percentage equivalent of a fraction, the numerator of which is
3.75% of the Original Pool Balance, and the denominator of which is the
aggregate Stated Principal Balance of the Mortgage Loans 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
7.50%, 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 six, for which
the Step Down Trigger has occurred, and the denominator of which is six.
"Step Up Cumulative Loss Test": The Step Up Cumulative Loss
Test will be met with respect to a Distribution Date as follows (i) for the 1st
through the 12th Distribution Dates, if the Cumulative Loss Percentage for such
Distribution Date is more than 1.00%, (ii) for the 13th through the 24th
Distribution Dates, if the Cumulative Loss Percentage for such Distribution Date
is more than 1.50%, (iii) for the 25th through the 36th Distribution Dates, if
the Cumulative Loss Percentage for such Distribution Date is more than 2.15%,
(iv) for the 37th through the 48th Distribution Dates, if the Cumulative Loss
Percentage for such Distribution Date is more than 2.65% and (v) for the 49th
Distribution Date and any Distribution Date thereafter, if the Cumulative Loss
Percentage for such Distribution Date is more than 3.25%.
"Step Up Rolling Delinquency Test": The Step Up Rolling
Delinquency Test will be met with respect to a Distribution Date if the Rolling
Delinquency Percentage for such Distribution Date is more than 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 is 1.50% or more.
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"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 with
respect to such Distribution Date.
"Subordinated Amount": With respect to any Distribution Date,
the excess, if any, of (a) the aggregate Stated Principal Balances of the
Mortgage Loans immediately following such Distribution Date over (b) the Class A
Certificate Principal Balance as of such Distribution Date (after taking into
account the payment of the amounts described in clauses (b)(i) through (iv) of
the definition of Principal Distribution Amount on such Distribution Date).
"Subordination Deficiency Amount": With respect to any
Distribution Date, the excess, if any, of (a) the Required Subordinated Amount
applicable to such Distribution Date over (b) the Subordinated Amount applicable
to such Distribution Date prior to taking into account the payment of any
Subordination Increase Amounts on such Distribution Date.
"Subordination Increase Amount": With respect to any
Distribution Date, the lesser of (a) the Subordination Deficiency Amount as of
such Distribution Date (after taking into account the payment of the Principal
Distribution Amount, on such Distribution Date, exclusive of the payment of any
Subordination Increase Amount) and (b) the amount of Net Monthly Excess Cashflow
on such Distribution Date as reduced by any Cumulative Insurance Payments or
payments allocated to the Overcollateralization Deficit.
"Subordination Reduction Amount": With respect to any
Distribution Date, an amount equal to the lesser of (a) the Excess Subordinated
Amount and (b) the sum of the amounts available for distribution specified in
clauses (b)(i) through (iii) of the definition of Principal Distribution Amount.
"Sub-Servicer": Any Person with which the 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 Servicer.
"Sub-Servicing Agreement": The written contract between the
Servicer and a Sub-Servicer relating to servicing and administration of certain
Mortgage Loans as provided in Section 3.02.
"Substitution Shortfall Amount": As defined in Section
2.03(d).
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"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,
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 Unaffiliated Seller's Agreement (including any
security interest created thereby), (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 and (vi) the
Trustee's rights under the Policy, together with any and all income, proceeds
and payments with respect thereto. Notwithstanding the foregoing, however, the
Trust Fund specifically excludes all payments and other collections of principal
and interest on the Mortgage Loans received on or before the Cut-off Date.
"Trustee": First Union National Bank, a national banking
association, 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
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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
Stated Principal Balance of the Mortgage Loans and any REO Properties as of the
preceding Distribution Date (or, in the case of the initial Distribution Date,
as of the Cut-off Date).
"Trustee's Fee Rate": 0.015% per annum.
"Unaffiliated Seller's Agreement": The agreement dated as of
June 1, 1997 between the Seller and the Depositor and providing for the transfer
of Mortgage Loans from the Seller to the Depositor.
"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.
"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 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, 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 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)(l) above.
"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
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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.
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS;
ORIGINAL ISSUANCE OF CERTIFICATES
SECTION 2.01. Conveyance of Mortgage Loans.
(a) 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 Unaffiliated Seller's 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 Servicer on or after the
Cut-off Date with respect to the Mortgage Loans.
In connection with such transfer and assignment, the Depositor
will cause the Seller to 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 First Union National Bank, as
Trustee for the registered holders of Emergent Home Equity Loan
Pass-Through Certificates, Series 1997-2, 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 or, if such Mortgage or power of attorney has been
submitted for recording but has not been returned form 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
Servicer to be a true and complete copy of the original submitted for
recording with the recorded original to be delivered by the Servicer to
the Trustee promptly after receipt thereof;
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(iii) an original Assignment of the Mortgage executed
in the following form: "First Union National Bank, as Trustee for the
registered holders of Emergent Home Equity Loan Pass-Through
Certificates, Series 1997-2";
(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) 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 Servicer to be a true and
complete copy of the original submitted for recording with the recorded
original to be delivered by the Servicer to the Trustee promptly after
receipt thereof;
(v) the original or copies of each assumption,
modification, written assurance or substitution agreement, if any; and
(vi) the original lender's title insurance policy,
together with all endorsements or riders that were issued with or
subsequent to the issuance of such policy, insuring the priority of the
Mortgage as a first lien on the Mortgaged Property represented therein
as a fee interest vested in the Mortgagor, 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.
(b) The Depositor shall cause the Seller to promptly (and in
no event later than thirty Business Days following the Closing Date) submit or
cause to be submitted for recording, at no expense to the 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(a)(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.
(c) If any original Mortgage Note referred to in Section
2.01(i) cannot be located, the obligations of the Depositor to cause the Seller
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(a)(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) such public recording office has retained the
original of such document, the obligations of the Depositor to cause the Seller
to deliver such documents shall be deemed to be satisfied upon (1) delivery to
the Trustee of a copy
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of each such document certified by the 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 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 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(a)(vi) above,
the Depositor shall cause the Seller to deliver to the Trustee, promptly after
receipt thereof, the original lender's title insurance policy. The Depositor
shall cause the Seller to deliver 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.
(d) 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
Seller, the Depositor or the 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 or the Seller 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 Servicer.
(e) The Depositor herewith delivers to the Trustee an executed
copy of the Unaffiliated Seller's 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.
SECTION 2.02. Acceptance by Trustee.
(a) The Trustee acknowledges receipt of the Policy and,
subject to the provisions of Section 2.01 and subject to the review described
below and 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(a)(v)) above and all other assets included
in the definition of "Trust Fund" (to the extent of amounts deposited into the
Collection 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.
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(b) The Trustee agrees, for the benefit of the
Certificateholders, to review each Mortgage File within 30 days after 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 which has been certified as having been 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 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 (1) through (3), (6),
(9)(A), (10), (13) and (16) 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(a).
(c) Prior to the first anniversary date of this Agreement the
Trustee shall deliver to the Depositor, the 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.
(d) 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 Servicer and the
Certificate Insurer. In addition, upon the discovery by the Depositor, the
Servicer or the Trustee of a breach of any of the representations and warranties
made by the Seller in the related Unaffiliated Seller's Agreement or by the
Originator in the Purchase and Assignment 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.
SECTION 2.03. Repurchase or Substitution of Mortgage Loans.
(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 Seller of any representation, warranty or covenant under the
Unaffiliated Seller's Agreement or by the Originator in the Purchase and
Assignment Agreement in respect of any Mortgage Loan which materially adversely
affects the value of such Mortgage Loan
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or the interest therein of the Certificateholders, the Trustee or the
Originator, as the case may be, shall promptly notify the Originator, the
Seller, the Servicer, the Depositor and the Certificate Insurer of such defect,
missing document or breach and request that the Seller and the Originator
deliver such missing document or cure such defect or breach within 60 days from
the date the Seller and the Originator were notified of such missing document,
defect or breach, and if the Seller or the Originator does not deliver such
missing document or cure such defect or breach in all material respects during
such period, the Trustee shall enforce the Seller's obligation under the
Unaffiliated Seller's Agreement and the Originator's obligation under the
Purchase and Assignment Agreement (i) in connection with any such breach that
could not reasonably have been cured within such 60 day period, if the Seller or
the Originator shall have commenced to cure such breach within such 60 day
period, to proceed thereafter diligently and expeditiously to cure the same
within the period provided under the Unaffiliated Seller's Agreement or the
Purchase and Assignment Agreement and (ii) in connection with any such breach
(subject to clause (i) above) or in connection with any missing document defect,
to repurchase such Mortgage Loan from the Trust Fund at the Purchase Price
within 60 days after the date on which it was notified (subject to Section
2.03(e)) of such missing document, defect or breach, if and to the extent that
the Seller is obligated to do so under the Unaffiliated Seller's Agreement and
the Originator is obligated to do so under the Purchase and Assignment
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 Servicer of such deposit, shall release the related
Mortgage File to the Seller or the Originator, as the case may be, and shall
execute and deliver such instruments of transfer or assignment, in each case
without recourse, as the Seller or the Originator shall furnish to it and as
shall be necessary to vest in the Seller or the Originator, as the case may be,
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 Purchase and
Assignment Agreement, the Originator 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 Seller and the Originator 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) [Reserved]
(c) [Reserved]
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(d) Any substitution of Qualified Substitute Mortgage Loans
for Deleted Mortgage Loans made pursuant to Section 2.03(a), 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 Originator
substitutes a Qualified Substitute Mortgage Loan or Loans, such substitution
shall be effected by the Originator 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 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 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 Originator. For the month of
substitution, distributions to Certificateholders will reflect the collections
and recoveries in respect of such Deleted Mortgage Loan in the Collection Period
preceding the month of substitution and the Originator shall thereafter be
entitled to retain all amounts subsequently received in respect of such Deleted
Mortgage Loan. The Servicer shall amend the Mortgage Loan Schedule to reflect
the removal of such Deleted Mortgage Loan from the terms of this Agreement and
the substitution of the Qualified Substitute Mortgage Loan or Loans and shall
deliver a copy of such amended Mortgage Loan Schedule to the Trustee. Upon such
substitution, such Qualified Substitute Mortgage Loan or Loans shall constitute
part of the Mortgage Pool and shall be subject in all respects to the terms of
this Agreement and, in the case of a substitution effected by the Originator,
the Purchase and Assignment Agreement, including, in the case of a substitution
effected by the Originator all applicable representations and warranties thereof
included in the Purchase and Assignment Agreement as of the date of
substitution.
For any month in which the Originator substitutes one or more
Qualified Substitute Mortgage Loans for one or more Deleted Mortgage Loans, the
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, as to each such Qualified Substitute Mortgage Loan, of
the Stated Principal Balance thereof as of the related Cut-Off Date, together
with one month's interest on such principal balance at the applicable Net
Mortgage Rate. On the date of such substitution, the Originator will
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deliver or cause to be delivered to the 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 Servicer of such deposit, shall release to the
Originator the related Mortgage File or Files and shall execute and deliver such
instruments of transfer or assignment, in each case without recourse, as the
Originator shall deliver to it and as shall be necessary to vest therein any
Deleted Mortgage Loan released pursuant hereto.
In addition, the Originator 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 REMIC Trust, including, without limitation, any federal tax
imposed on "prohibited transactions" under Section 860F(a)(l) of the Code or on
"contributions after the startup date" under Section 860G(d)(1) of the Code, or
(b) the REMIC Trust to fail to qualify as a REMIC at any time that any
Certificate is outstanding.
(e) Upon discovery by the Depositor, the Originator, the
Seller, the 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 Originator and the Seller
shall be obligated to 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. Any such repurchase
or substitution shall be made in the same manner as set forth in Section
2.03(a). The Trustee shall reconvey to the Seller or the Originator, 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 the assignment of the Depositor's rights, but none
of its obligations, under the Unaffiliated Seller's Agreement is valid,
enforceable and effective to permit the Trustee to enforce the obligations of
the Seller thereunder.
(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 Servicer
or the Trustee of a breach of any of the foregoing representations and
warranties which materially and adversely affects the value of any
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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.
(c) The Depositor is duly organized, validly existing and in
good standing as a corporation under the laws of the state of its incorporation.
(d) The Depositor 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 Depositor 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 Depositor, 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.
(e) The execution and delivery of this Agreement by the
Depositor and the performance of and compliance with the terms of this Agreement
will not (a) violate the Depositor's charter or by-laws or any law, rule,
regulation, order, judgment, award, administrative interpretation, injunction,
writ, decree or the like affecting the Depositor or by which the Depositor is
bound or (b) result in a breach of or constitute a default under any indenture
or other material agreement to which the Depositor is a party or by which the
Depositor is bound, which in the case of either clause (a) or (b) will have a
material adverse effect on the Depositor's ability to perform its obligations
under this Agreement.
(f) There are no actions or proceedings against,
investigations known to it of, the Depositor 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 Depositor of its obligations under, or validity or
enforceability of, this Agreement.
(g) No consent, approval, authorization or order of any court
or governmental agency or body is required for the execution, delivery and
performance by the Depositor of, or compliance by the Depositor 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.
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SECTION 2.05. Representations, Warranties and Covenants of the
Servicer.
The 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 Servicer is duly organized, validly existing
and in good standing as a corporation under the laws of the
state of its incorporation and is and will remain duly
licensed under and 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 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 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 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 Servicer and the performance of and compliance with the
terms of this Agreement will not (a) violate the Servicer's
charter or by-laws or any law, rule, regulation, order,
judgment, award, administrative interpretation, injunction,
writ, decree or the like affecting the Servicer or by which
the Servicer is bound or (b) result in a breach of or
constitute a default under any indenture or other material
agreement to which the Servicer is a party or by which the
Servicer is bound, which in the case of either clause (a) or
(b) will have a material adverse effect on the Servicer's
ability to perform its obligations under this Agreement;
(iv) [reserved];
(v) The Servicer does not believe, nor does it have
any reason or cause to believe, that it cannot perform each
and every covenant of it contained in this Agreement;
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(v) With respect to each Mortgage Loan, the Servicer
will deliver possession of a complete Mortgage File, except
for such documents as have been delivered to the Trustee;
(vi) There are no actions or proceedings against,
investigations known to it of, the 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 Servicer of its
obligations under, or validity or enforceability of, this
Agreement; and
(vii) No consent, approval, authorization or order of
any court or governmental agency or body is required for the
execution, delivery and performance by the Servicer of, or
compliance by the Servicer with, this Agreement or the
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 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.
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, 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. Servicer to Act as Servicer.
The Servicer shall service and administer the Mortgage Loans
on behalf of the Trustee and in the best interests of and for the benefit of the
Certificateholders and the Certificate Insurer (as determined by the 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 Servicer, any
Sub-Servicer or any Affiliate of the Servicer or any
Sub-Servicer may have with the related Mortgagor;
(ii) the ownership of any Certificate by the
Servicer or any Affiliate of the Servicer;
(iii) the Servicer's obligation to make Monthly
Advances or Servicing Advances; or
(iv) the 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 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 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 Servicer in its own name
or in the name of a Sub-Servicer is hereby authorized and empowered by the
Trustee when the Servicer believes it reasonably necessary in its best judgment
in order to comply with its servicing duties hereunder, 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
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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 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 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 Servicer, and furnish the Servicer and any Sub-Servicer any special or
limited powers of attorney and other documents necessary or appropriate to
enable the Servicer or any Sub-Servicer to carry out their servicing and
administrative duties hereunder and the Trustee shall not be liable for the
actions of the Servicer or any Sub-Servicers under such powers of attorney.
In accordance with the standards of the preceding paragraph,
the 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 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 the Stated
Principal Balance of a Mortgage Loan or 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 Servicer may not make any future advances with respect to a Mortgage Loan
and the Servicer shall not (unless the Mortgagor is in default with respect to
the Mortgage Loan or such default is, in the judgment of the 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 REMIC Trust 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 Servicer may delegate its responsibilities under this
Agreement; provided, however, that no such delegation shall release the Servicer
from the responsibilities or liabilities arising under this Agreement.
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SECTION 3.02. Sub-Servicing Agreements Between Servicer
and Sub-Servicers.
(a) The Servicer may enter into Sub-Servicing Agreements
(provided that the Servicer shall have obtained the consent of the Certificate
Insurer and provided such agreements would not result in a withdrawal or a
downgrading by any Rating Agency of the rating or any shadow rating on any Class
of Certificates) 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 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 Servicer and the Sub-Servicers may
enter into and make amendments to the Sub-Servicing Agreements or enter into
different forms of Sub-Servicing Agreements; provided, however, that any such
amendments or different forms shall be consistent with and not violate the
provisions of this Agreement, and that no such amendment or different form shall
be made or entered into which could be reasonably expected to be materially
adverse to the interests of the Certificateholders, without the consent of the
Certificate Insurer. Any variation without the consent of the Certificate
Insurer 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
Sub-Servicers to the Servicer, are conclusively deemed to be inconsistent with
this Agreement and therefore prohibited. The 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 Servicer's execution
and delivery of such instruments.
(b) As part of its servicing activities hereunder, the
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 Seller under the Unaffiliated
Seller's 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
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the pursuit of other appropriate remedies, shall be in such form and carried
out to such an extent and at such time as the Servicer, in its good faith
business judgment, would require were it the owner of the related Mortgage
Loans. The 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 Unaffiliated Seller's Agreement
against the Seller shall be effected by the Servicer to the extent it is not the
Seller, otherwise by the Trustee, in accordance with the foregoing provisions of
this paragraph.
SECTION 3.03. Successor Sub-Servicers.
The 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 but only with the prior consent of the Certificate
Insurer. In the event of termination of any Sub-Servicer, all servicing
obligations of such Sub-Servicer shall be assumed simultaneously by the Servicer
without any act or deed on the part of such Sub-Servicer or the Servicer, and
the 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
(i) such agreement may be immediately terminated by the Trustee without fee, in
accordance with the terms of this Agreement, in the event that the Servicer
shall, for any reason, no longer be the Servicer (including termination due to a
Servicer Event of Default) or (ii) clearly and unambiguously states that any
termination fee is the sole responsibility of the Servicer and none of the
Trustee, the Certificateholders or the Certificate Insurer, has any liability
therefor, regardless of the circumstances surrounding such termination.
SECTION 3.04. Liability of the Servicer.
Notwithstanding any Sub-Servicing Agreement, any of the
provisions of this Agreement relating to agreements or arrangements between the
Servicer and a Sub-Servicer or reference to actions taken through a Sub-Servicer
or otherwise, the Servicer shall remain obligated and primarily liable to the
Trustee, the Certificateholders and the Certificate Insurer for the servicing
and administering of the Mortgage Loans in accordance with the provisions of
Section 3.01 without diminution of such obligation or liability by virtue of
such Sub-Servicing Agreements or arrangements or by virtue of indemnification
from the Sub-Servicer and to the same extent and under the same terms and
conditions as if the Servicer alone were servicing and administering the
Mortgage Loans. The Servicer shall be entitled to enter into any agreement with
a Sub-Servicer for
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indemnification of the 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
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 Servicer shall be solely liable for all fees owed
by it to any Sub-Servicer, irrespective of whether the Servicer's compensation
pursuant to this Agreement is sufficient pay such fees.
SECTION 3.06. Assumption or Termination of Sub-Servicing
Agreements by Trustee.
In the event the original Servicer shall for any reason no
longer be the servicer (including by reason of the occurrence of a Servicer
Event of Default), the Trustee or its designee shall thereupon assume all of the
rights and obligations of the Servicer under each Sub-Servicing Agreement that
the 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 Servicer's interest therein and to have
replaced the Servicer as a party to each Sub-Servicing Agreement to the same
extent as if each Sub-Servicing Agreement had been assigned to the assuming
party, except that the Servicer shall not thereby be relieved of any liability
or obligations under any Sub-Servicing Agreement.
The 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.
SECTION 3.07. Collection of Certain Mortgage Loan Payments.
The 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 Servicer may in its discretion
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(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 Servicer provides prior
written notice to the Certificate Insurer to which the Certificate Insurer does
not object within two Business 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, and provided, further, that no more than two such extensions shall be
granted with respect to any single Mortgage Loan.
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 Sub-Servicing Agreement and to remit such proceeds
to the Servicer for deposit in the Collection Account not later than the first
Business Day thereafter. For purposes of this Agreement, the Servicer shall be
deemed to have received payments on the Mortgage Loans when the Sub-Servicer
receives such payments.
SECTION3.09. Collection of Taxes, Assessments and
Similar Items; Servicing Accounts.
The 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 Servicer shall deposit in the clearing
account in which it customarily deposits payments and collections on mortgage
loans in connection with its mortgage loan servicing activities on a daily
basis, and in no event more than one Business Day after the Servicer's receipt
thereof, all Escrow Payments collected on account of the Mortgage Loans and
shall thereafter deposit such Escrow Payments in the Servicing Account, in no
event more than one Business Day after the deposit of such Escrow Payments, 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
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
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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 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 Servicer or
Sub-Servicers shall pay to the Mortgagors interest on funds in Servicing
Accounts, to the extent required by law and, to the extent that interest earned
on funds in the Servicing Accounts is insufficient, to pay such interest from
its or their own funds, without any reimbursement therefor. Notwithstanding the
foregoing, neither the Servicer nor any Sub-Servicer shall be obligated to
collect Escrow Payments if the related Mortgage Loan does not require such
payments but the Servicer and each Sub-Servicer shall nevertheless be obligated
to make Servicing Advances as provided in Section 3.01.
SECTION 3.10. Collection Account and Distribution Account.
(a) On behalf of the Trust Fund, the 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 Servicer shall
deposit or cause to be deposited in the clearing account in which it customarily
deposits payments and collections on mortgage loans in connection with its
mortgage loan servicing activities on a daily basis, and in no event more than
one Business Day after the Servicer's receipt thereof, and shall thereafter
deposit in the Collection Account, in no event more than one Business Day after
the deposit of such payments into such clearing account, the following payments
and collections received or made by it on or subsequent to the Cut-off Date:
(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 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;
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(v) any amounts required to be deposited by the
Servicer pursuant to the second paragraph of Section 3.14(a)
in respect of any blanket policy deductibles; and
(vi) any Purchase Price or Substitution Shortfall
Amount delivered to the Servicer.
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 Servicer
in the Collection Account. In the event the 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 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 Servicer Remittance
Date, that portion of the Available Distribution Amount 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 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 Servicer, the Trustee, the Seller or any Sub-Servicer pursuant to Section
3.11 and shall pay such amounts to the Persons entitled thereto.
(c) Funds in the Collection Account and the Distribution
Account may be invested in Permitted Investments in accordance with the
provisions set forth in Section 3.12. The 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 Servicer, the Depositor and the Certificate Insurer of
the location of the Distribution Account when established and prior to any
change thereof.
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(d) Funds held in the Collection Account at any time may be
delivered by the Servicer to the Trustee for deposit in the Distribution
Account. In the event the 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 Servicer shall deliver to the Trustee from
time to time for deposit the amounts set forth in clauses (i) through (v) below,
and the Trustee shall deposit such amounts in the Distribution Account:
(i) any Monthly 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 Terminator 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; and
(v) any Stayed Funds, as soon as permitted by the
federal bankruptcy court having jurisdiction in such matters.
(e) Promptly upon receipt of any Stayed Funds, whether from
the 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 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.
(f) Notwithstanding any contrary provision of this Agreement
(including the provisions of this Section 3.10), (i) the Servicer shall be
deemed to be in compliance with the provisions of this Section 3.10 if amounts
in any clearing account referred to in Section 3.10(a) which the Servicer would
otherwise be required by this Section 3.10 to deposit or cause to be deposited
into the Collection Account are instead deposited or caused to be deposited into
the Distribution Account provided that such deposit into the Distribution
Account is made within the time period that such amount would otherwise have
been required to be deposited into the Collection Account (i.e., within one
Business Day of the Servicer's receipt thereof), (ii) amounts otherwise payable
or distributable from the Collection Account may be paid or distributed from the
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Distribution Account to the extent of any funds deposited into the Distribution
Account rather than the Collection Account pursuant to clause (i) (as certified
by the Servicer), and (iii) the provisions of this Agreement (including
references herein to the Collection Account and the Distribution Account) shall
be interpreted and construed to give effect to the foregoing.
SECTION 3.11. Withdrawals from the Collection Account and
Distribution Account.
The 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
Servicer for Monthly 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 Monthly Advances were made in
accordance with the provisions of Section 4.03;
(iii) subject to Section 3.16(d), to pay the Servicer
or any Sub-Servicer 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 Servicer as servicing compensation
(in addition to the Servicing Fee) on the Servicer Remittance
Date any interest or investment income earned on funds
deposited in the Collection Account;
(v) to pay to the Servicer, the Depositor or the
Seller, as the case may be, with respect to each Mortgage Loan
that has previously been purchased or replaced pursuant to
Section 2.03 or Section 3.16(c) all amounts received thereon
not included in the Purchase Price or the Substitution
Shortfall Amount;
(vi) to reimburse the Servicer for any Monthly
Advance or Servicing Advance previously made which the
Servicer has determined to be a Nonrecoverable Monthly Advance
in accordance with the provisions of Section 4.03;
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(vii) to reimburse the Servicer or the Depositor for
expenses incurred by or reimbursable to the Servicer or the
Depositor, as the case may be, pursuant to Section 6.03;
(viii) to reimburse the 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 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 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 and 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 as required pursuant to
Section 4.01. The 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
Servicer shall provide written notification to the Trustee, on or prior to the
next succeeding 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 Investment Accounts.
(a) The 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 next Distribution
Date, if a Person other than the Trustee is the obligor thereon, and (ii) no
later than the next Distribution Date, 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 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
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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 at the direction
of the Servicer:
(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 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 Servicer or the Trustee, shall be for the
benefit of the Servicer and shall be subject to its withdrawal in accordance
with Section 3.11. The 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(a)(v), upon the request of the Certificate Insurer, 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 Servicer shall cause to be maintained for each
Mortgaged Property fire and hazard 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 Servicer shall also
cause to be maintained fire and hazard insurance with extended coverage on each
REO Property in an amount which is at least equal to the lesser of (i) the
maximum
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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 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 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 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 Servicer in maintaining any such insurance shall not, for the purpose of
calculating distributions to Certificateholders and the Certificate Insurer, be
added to the unpaid principal balance of the related Mortgage Loan,
notwithstanding that the terms of such Mortgage Loan so permit. It is understood
and agreed that no earthquake or other additional insurance is to be required of
any Mortgagor other than pursuant to such applicable laws and regulations as
shall at any time be in force and as shall require such additional insurance. If
the Mortgaged Property or REO Property is at any time in an area identified in
the Federal Register by the Federal Emergency Management Agency as having
special flood hazards, the 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 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
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 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.
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(b) The 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 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.
The Servicer shall also maintain a fidelity bond in the form and amount that
would meet the requirements of FNMA or FHLMC, unless the Servicer has obtained a
waiver of such requirements from FNMA or FHLMC. The Servicer shall be deemed to
have complied with this provision if an Affiliate of the 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 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 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 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 Servicer shall not exercise any such rights if prohibited by law from
doing so. If the Servicer reasonably believes it is unable under applicable law
to enforce such "due-on-sale" clause, or if any of the other conditions set
forth in the proviso to the preceding sentence apply, the 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 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 Servicer and has a credit risk
rating at least equal to that of the original Mortgagor. In connection with any
assumption or substitution, the 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 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 Servicer in respect of an assumption or substitution of liability agreement
will be retained by the Servicer as additional servicing
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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 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 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 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 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 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 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 Servicer shall not be required to expend its own funds
toward the restoration of such property unless it shall determine in its
discretion that such restoration will increase the proceeds of liquidation of
the related Mortgage Loan after reimbursement to itself for such expenses.
(b) Notwithstanding the foregoing provisions of this Section
3.16 or any other provision of this Agreement, with respect to any Mortgage Loan
as to which the 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 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
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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 Servicer has also previously determined, based
on its 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 3.16 shall be advanced by the Servicer, subject to the 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 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 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 Servicer, subject to the
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 Servicer may at its option purchase from the Trust
Fund any Mortgage Loan that is 90 days or more delinquent, which the Servicer
determines in good faith will otherwise become subject to foreclosure
proceedings (evidence of such
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determination to be delivered in writing to the Trustee and the Certificate
Insurer prior to 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 Servicer of such deposit, shall release or cause to be released to the
Servicer the related Mortgage File and shall execute and deliver such
instruments of transfer or assignment, in each case without recourse, as the
Servicer shall furnish and as shall be necessary to vest in the 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
Servicer or any Sub-Servicer for any related unreimbursed Servicing Advances and
Monthly 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 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 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 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 Servicer for any related
unreimbursed Monthly 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 Servicer of a notification that payment in full shall be escrowed in a
manner customary for such purposes, the 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 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.
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Subject to the following sentence 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 Servicer and delivery to the
Trustee of a Request for Release in the form of Exhibit E-1, release the related
Mortgage File to the Servicer, and the Trustee shall, at the direction of the
Servicer, execute such documents as shall be necessary to the prosecution of any
such proceedings. Such Request for Release shall obligate the Servicer to return
each and every document previously requested from the Mortgage File to the
Trustee when the need therefor by the Servicer no longer exists, unless the
Mortgage Loan has been liquidated and the Liquidation Proceeds no longer exist,
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 nonjudicially, and the 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 that 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
Servicer.
Upon written certification of a Servicing Officer, the Trustee
shall execute and deliver to the Servicer, with copies to the Certificate
Insurer to be delivered by the Servicer, 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 Servicer hereunder,
the 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 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
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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 Servicer's responsibilities and obligations under this Agreement; provided,
however, that the Servicer may pay any fee to a Sub-Servicer out of the
Servicing Fee.
Additional servicing compensation in the form of late payment
charges or otherwise shall be retained by the Servicer (subject to Section 3.24)
only to the extent such fees or charges are received by the Servicer. The
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 Servicer shall be
required to pay all expenses incurred by it in connection with its servicing
activities hereunder (including premiums for the insurance required by Section
3.14, to the extent such premiums are not paid by the related Mortgagors or by a
Sub-Servicer, servicing compensation of each Sub-Servicer, and to the extent
provided herein in Section 8.05, the fees and expenses of the Trustee) and 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
Servicer shall forward to the Trustee, the Certificate Insurer and the Depositor
a statement prepared by the 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 Servicer to the Trustee.
SECTION 3.20. Statement as to Compliance.
The 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 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 Servicer during the preceding year and of
performance under this Agreement has been made under such
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officers' supervision and (ii) to the best of such officers' knowledge, based on
such review, the 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 report 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 report is delivered by the
Servicer to the Trustee.
SECTION 3.21. Independent Public Accountants' Servicing
Report.
Not later than 90 days following the end of each fiscal year
of the Servicer, the Servicer, at its expense, shall cause a nationally
recognized firm of independent certified public accountants to furnish to the
Servicer a report stating that (i) it has obtained a letter of representation
regarding certain matters from the management of the Servicer which includes an
assertion that the Servicer has complied with certain minimum residential
mortgage loan servicing standards, identified in the Uniform Single Audit
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 Servicer shall
furnish a copy of such report to the Trustee, the Certificate Insurer and each
Rating Agency. Copies of such report shall be provided by the Trustee to any
Certificateholder upon request at the Servicer's expense, provided that such
report is delivered by the Servicer to the Trustee and such report does not
prohibit such delivery.
SECTION 3.22. Access to Certain Documentation.
The 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
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 Servicer as a
prospective transferee of a
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Certificate, upon reasonable request during normal business hours at the offices
of the 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 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 Servicer had delivered to the
Trustee an Opinion of Counsel, addressed to the Trustee, the Depositor 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 REMIC Trust of taxes on "prohibited transactions" thereof,
as defined in Section 860F of the Code, or cause the REMIC Trust to fail to
qualify as a REMIC under Federal law at any time that any Certificates are
outstanding. The 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 REMIC Trust of any "income from
non-permitted assets" within the meaning of Section 860F(a)(2)(B) of the Code,
or any "net income from foreclosure property" which is subject to taxation under
the REMIC Provisions.
(b) The 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 Servicer shall be permitted
to allow the Collection Account to serve as the REO Account, subject to separate
ledgers for each REO Property. The Servicer shall be entitled to retain or
withdraw any interest income paid on funds deposited in the REO Account.
(c) The 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 Servicer manages and operates similar property owned by the
Servicer or any of its Affiliates, on such terms and for such period as the
Servicer deems to be in the best interests of Certificateholders. In connection
therewith, the 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
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proper operation, management and maintenance of such REO Property including,
without limitation:
(i) all insurance premiums due and payable in
respect of such REO Property;
(ii) all real estate taxes and assessments in
respect of such REO Property that may result in the imposition
of a lien thereon; and
(iii) all costs and expenses necessary to maintain
such REO Property.
To the extent that amounts on deposit in the REO Account with respect to an REO
Property are insufficient for the purposes set forth in clauses (i) through
(iii) above with respect to such REO Property, the Servicer shall advance from
its own funds such amount as is necessary for such purposes if, but only if, the
Servicer would make such advances if the Servicer owned the REO Property and if
in the Servicer's judgment, the payment of such amounts will be recoverable from
the rental or sale of the REO Property.
Notwithstanding the foregoing, the 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;
(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 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
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860G(a)(8) of the Code at any time that it is held by the Trust Fund, in which
case the Servicer may take such actions as are specified in such Opinion of
Counsel.
The 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 Servicer 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
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 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 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 Servicer by such Independent Contractor,
and nothing in this Agreement shall be deemed to limit or modify such
indemnification. The Servicer shall be solely liable for all fees owed by it to
any such Independent Contractor, irrespective of whether the Servicer's
compensation pursuant to Section 3.18 is sufficient to pay such fees, subject to
the Servicer's rights under Section 3.23(c)(iii).
(d) In addition to the withdrawals permitted under Section
3.23(c), the 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 Monthly
Advances made in respect of such REO Property or the related Mortgage Loan. On
the Servicer Remittance Date, the 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
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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 Servicer at such price
and upon such terms and conditions as the 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 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 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 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 meet the reporting requirements imposed by such
Sections 6050H, 6050J and 6050P of the Code.
SECTION 3.24. Obligations of the Servicer in Respect of
Prepayment Interest Shortfalls.
The Servicer shall deliver to the Trustee for deposit into the
Distribution Account on or before 3:00 p.m. New York time on the 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 Collection
Period and (ii) the total amount of its Servicing Fee 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.
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(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 the product of (i) l/12 of
the Certificate Insurer Premium Rate and (ii) the Class A Certificate Principal
Balance after giving effect to distributions of principal on such Distribution
Date.
(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 Servicer as additional
servicing compensation, and the Servicer shall deposit in the Expense Account
the amount of any loss incurred in respect of any such Permitted Investments
made with funds in the Expense Account immediately upon the realization of such
loss. 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
Servicer as additional servicing compensation.
SECTION 3.26.Obligations of the Servicer in Respect of 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 Monthly Payments or Stated Principal Balances that were made by
the Servicer in a manner not consistent with the terms of the related Mortgage
Note and this Agreement, the 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 servicer in respect of any such
liability. Such indemnities shall survive the termination or discharge of this
Agreement.
SECTION 3.27. Interest Coverage Account; Redemption Account.
(a) On behalf of the Trust Fund, the Trustee shall establish
and maintain an account (the "Interest Coverage Account") into which cash will
be deposited by the Seller in the amount of $72,482.30 on the Closing Date. On
the initial Distribution Date, the Trustee shall deposit $72,482.30 (the amount
of interest accruing at the weighted average Pass-Through Rate of all Class A
Certificates on the amount by which the aggregate Class A Certificate Principal
Balance as of the Closing Date exceeds the
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aggregate Stated Principal Balance of the Initial Mortgage Loans as of the
Cut-off Date) from the Interest Coverage Account into the Distribution Account.
The Trustee shall invest amounts on deposit in the Interest Coverage Account in
Eligible Investments. The Trustee shall pay any amounts remaining in the
Interest Coverage Account after the initial Distribution Date to the Seller. The
Trustee shall terminate the Interest Coverage Account immediately following the
first Distribution Date.
The Interest Coverage Account will not be an asset of the
REMIC.
(b) On the Closing Date, $0 will be deposited by the Seller in
an account which will be in the name of, and maintained by, the Trustee on
behalf of the Trust Fund (the "Redemption Account"). On the initial Distribution
Date, the Trustee will transfer the amount (other than the reinvestment income
described below) on deposit in the Redemption Account into the Distribution
Account. The Trustee shall invest amounts on deposit in the Redemption Account
in Eligible Investments. The Trustee shall pay any reinvestment income earned on
amounts on deposit in the Redemption Account to the Seller. The Trustee shall
terminate the Redemption Account immediately after the first Distribution Date
and such account will not be an asset of the REMIC.
ARTICLE IV
PAYMENTS TO CERTIFICATEHOLDERS
SECTION 4.01. Distributions.
(a) On each Distribution Date, the Trustee shall, based solely
on information contained in the Remittance Report for such Distribution Date,
withdraw from the Distribution Account an amount equal to the Available
Distribution Amount and distribute to the following parties the following
amounts, in the following order of priority:
(i) concurrently: (1) the Holders of the Class
A-1 Certificates an amount equal to (A) the Class A-1
Interest Distribution Amount for such Distribution
Date, plus (B) any undistributed amount described in
the immediately preceding clause (A) from any
previous Distribution Date for which no Insurance
Payment has been previously paid to Holders of the
Class A-1 Certificates;
(2) the Holders of the Class A-2
Certificates an amount equal to (A) the Class A-2
Interest Distribution Amount for such Distribution
Date, plus (B) any undistributed amount described in
the immediately preceding clause (A) from any
previous
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Distribution Date for which no Insurance
Payment has been previously paid to Holders of the
Class A-2 Certificates;
(3) the Holders of the Class A-3
Certificates an amount equal to (A) the Class A-3
Interest Distribution Amount for such Distribution
Date, plus (B) any undistributed amount described in
the immediately preceding clause (A) from any
previous Distribution Date for which no Insurance
Payment has been previously paid to Holders of the
Class A-3 Certificates;
(4) the Holders of the Class A-4
Certificates an amount equal to (A) the Class A-4
Interest Distribution Amount for such Distribution
Date, plus (B) any undistributed amount described in
the immediately preceding clause (A) from any
previous Distribution Date for which no Insurance
Payment has been previously paid to Holders of the
Class A-4 Certificates; and
(5) the Holders of the Class A-5
Certificates an amount equal to (A) the Class A-5
Interest Distribution Amount for such Distribution
Date, plus (B) any undistributed amount described in
the immediately preceding clause (A) from any
previous Distribution Date for which no Insurance
Payment has been previously paid to Holders of the
Class A-5 Certificates;
(ii) to the Holders of the Class of Class A
Certificates then entitled to receive payment of principal, as
provided in paragraph (b) below, a distribution of principal
in an amount equal to the Principal Distribution Amount
(except for any portion thereof consisting of any related
Subordination Increase Amount);
(iii) to the Certificate Insurer, to reimburse
the Certificate Insurer for claims under the Policy, to the
extent of Cumulative Insurance Payments;
(iv) to the Holders of the Class of Class A
Certificates then entitled to receive payment of principal, as
provided in paragraph (b) below, a distribution of principal
in an amount equal to the portion of the Principal
Distribution Amount consisting of any Subordination Increase
Amount;
(v) to the Certificate Insurer, any amounts
remaining due to the Certificate Insurer under the terms of
the Insurance Agreement; and
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(vi) to the Holders of the Class A
Certificates, payable from the remaining Net Monthly Excess
Cashflow, an amount equal to any Relief Act Interest
Shortfalls and/or any Prepayment Interest Shortfalls that were
allocated to such holders and therefore not distributed
pursuant to clause (i) above or this clause (vi) for all prior
Distribution Dates;
(vii) to the Holders of the Class R
Certificates, the balance, if any, of the amount in the
Distribution Account for such Distribution Date;
provided, however, that if a Certificate Insurer Default shall
have occurred and be continuing, the distributions with
respect to clauses (ii) and (iv) above shall be made pro-rata
to the Class A-1 Certificate-holders, the Class A-2
Certificateholders, the Class A-3 Certificate-holders, the
Class A-4 Certificateholders and the Class A-5
Certificate-holders on such Distribution Date.
(b) 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. All principal distributed with respect to the Class A Certificates
pursuant to Sections 4.01(a)(ii), 4.01(a)(iv) and 4.01(a)(vi) shall be
distributed in the following order: first, to the Holders of the Class A-5
Certificates, to the extent of the least of (x) the Principal Distribution
Amount, (y) the Class A-5 Certificate Principal Balance and (z) the Class A-5
Lockout Distribution Amount; second, to the Holders of the Class A-1
Certificates, to reduce the Class A-1 Certificate Principal Balance to zero;
third, to the Holders of the Class A-2 Certificates, to reduce the Class A-2
Certificate Principal Balance to zero; fourth, to the Holders of the Class A-3
Certificates, to reduce the Class A-3 Principal Balance to zero; fifth, to the
Holders of the Class A-4 Certificates, to reduce the Class A-4 Certificate
Principal Balance to zero; and sixth, to the Holders of the Class A-5
Certificates, to reduce the Class A-5 Principal Balance to zero. 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 (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 any Remaining Overcollateralization Deficit 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) 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
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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.
(d) All distributions made with respect to each Class of
Certificates on each Distribution Date shall be allocated pro rata among the
outstanding Certificates in such Class based on their respective Percentage
Interests. Payments in respect of each Class of Certificates on each
Distribution Date will be made to the Holders of the respective Class of record
on the related Record Date (except as otherwise provided in Section 4.01(f) or
Section 10.01 respecting the final distribution on such Class), based on the
aggregate Percentage Interest represented by their respective Certificates. So
long as the Book-Entry Certificates are registered in the name of the Depository
or its nominee, the Trustee shall make all distributions on such Certificates by
wire transfers of immediately available funds to the Depository or its nominee.
In the case of Certificates issued in fully-registered, certificated form,
distributions 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 Class Certificate 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 Trustee may
deduct a reasonable wire transfer fee from any payment made by wire transfer.
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,
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the Depositor or the Servicer shall have any responsibility therefor except as
otherwise provided by this Agreement or applicable law.
(e) The rights of the Certificateholders to receive
distributions in respect of the Certificates, and all interests of the
Certificateholders in such distributions, shall be as set forth in this
Agreement. Neither the Holders of any Class of Certificates nor the Trustee nor
the Servicer shall in any way be responsible or liable to the Holders of any
other Class of Certificates in respect of amounts properly previously
distributed on the Certificates.
(f) Except as otherwise provided in Section 10.01, whenever
the 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 three (3) Business 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 Holder 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 Certificate as to which notice has been given pursuant to this Section
4.01(f) shall not have been surrendered for cancellation within six months after
the time specified in such notice, the 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 non-tendering Certificateholders concerning
surrender of their Certificates in the manner reasonably specified to the
Trustee by the 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 so held in trust for such Certificateholders. If in one year after
the second notice any such Certificates shall not have been surrendered for
cancellation, the Servicer shall pay to the Certificate Insurer any amount of
such funds that 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 Servicer for payment thereof, and all liability of the Certificate Insurer
with respect to such trust funds shall thereupon cease. No interest
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shall accrue or be payable to any Certificateholder on any amount held in trust
by the 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(f).
SECTION 4.02. Statements to Certificateholders.
On each Servicer Remittance Date, the Servicer shall deliver
to the Trustee, the Certificate Insurer and the Rating Agencies by telecopy (or
by such other means as the Servicer and the Trustee, the Certificate Insurer or
the Rating Agencies, as the case may be, may agree from time to time) a report
prepared by the Servicer as to the distributions to be made on the related
Distribution Date and shall forward to the Trustee by overnight mail a computer
readable magnetic tape or diskette of such report. Both reports (each a
"Remittance Report") shall contain the following information:
1. the amount of the distribution to be made on such
Distribution Date to the Holders of each class of Class A
Certificates allocable to principal;
2. the amount of the distribution to be made on such
Distribution Date to the Holders of each class of Class A
Certificates allocable to interest;
3. the aggregate amount of servicing compensation received by
the Servicer during the related Collection Period and such
other customary information within the knowledge of the
Trustee as the Trustee deems necessary or desirable, or which
a Certificateholder reasonably requests, to enable
Certificateholders to prepare their tax returns;
4. the Guaranteed Distribution for such Distribution Date and
the respective provisions thereof allocable to principal and
interest;
5. the Available Distribution Amount for such Distribution
Date;
6. the amount, if any, by which the Guaranteed Distribution
for such Distribution Date exceeds the Available Distribution
Amount expected to be on deposit in the Distribution Account
on such Distribution Date;
7. the amount of Monthly Advances to be made by the Servicer
in respect of the related Distribution Date, the aggregate
amount of Monthly Advances outstanding after giving effect to
such Monthly Advances, and the aggregate amount of
Nonrecoverable Monthly Advances in respect of such
Distribution Date;
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8. with respect to any reimbursement to be made to the
Certificate Insurer on such Distribution Date pursuant to
Section 4.01(a)(iv), (xi) and (xvi), the amount, if any,
allocable to principal and the amount allocable to interest;
9. Cumulative Insurance Payments after giving effect to the
distributions to be made on such Distribution Date;
10. the Delinquency Percentage for the related Collection
Period;
11. the Cumulative Loss Percentage for such Distribution Date;
12. the amount of any Insurance Payment to be made to Class A
Certificateholders on such Distribution Date, the amount of
any reimbursement payment to be made to the Certificate
Insurer on such Distribution Date pursuant to Section
4.01(a)(iii) 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;
13. the aggregate Stated Principal Balance of the Mortgage
Loans and any REO Properties at the close of business on such
Distribution Date;
14. the number, aggregate principal balance, weighted average
remaining term to maturity and weighted average Mortgage Rate
of the Mortgage Loans as of the related Due Date;
15. the number and aggregate unpaid principal balance of
Mortgage Loans (a) 30 days past due, (b) 60 days past due, (c)
90 or more days past due and (d) as to which foreclosure
proceedings have been commenced;
16. 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;
17. 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;
18. the aggregate amount of Principal Prepayments made during
the related Collection Period;
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19. the aggregate amount of Realized Losses incurred during
the related Collection Period;
20. the aggregate amount of extraordinary Trust Fund expenses
withdrawn from the Collection Account or the Distribution
Account for such Distribution Date;
21. the Class A-1 Certificate Principal Balance, Class A-2
Certificate Principal Balance, Class A-3 Certificate Principal
Balance, Class A-4 Certificate Principal Balance and Class A-5
Certificate Principal Balance, after giving effect to the
distributions to be made on such Distribution Date;
22. the Certificate Factor for each such Class of Certificates
applicable to such Distribution Date;
23. the Interest Distribution Amount in respect of the 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 to be made in respect of such Certificates on
such Distribution Date;
24. the aggregate amount of any Prepayment Interest Shortfalls
for such Distribution Date, to the extent not covered by
payments by the Servicer pursuant to Section 3.24;
25. the aggregate amount of Relief Act Interest Shortfalls for
such Distribution Date;
26. the Required Subordinated Amount for such Distribution
Date;
27. the Subordination Increase Amount, if any, for such
Distribution Date;
28. the Subordination Reduction Amount, if any, for such
Distribution Date; and
29. the amount of the distribution to be made on such
Distribution Date to the Holders of the Class R Certificates.
In the case of information furnished pursuant to clauses (1)
through (3) above, the amounts shall be expressed as a dollar amount per Single
Certificate of the relevant Class.
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The Trustee shall forward such Remittance Report to each
Holder of the Class A Certificates on each Distribution Date. To the extent that
there are inconsistencies between the telecopy of the Remittance Report and the
hard copy thereof and information set forth in the computer tape or other media
provided by the Servicer hereunder, the Trustee shall be entitled to rely upon
the telecopy.
Within a reasonable period of time after the end of each
calendar year, the Servicer shall furnish to the Trustee, and the Trustee shall
forward to each Person who at any time during the calendar year was a Holder of
a Regular Certificate (a) a statement containing the information set forth in
clauses (1) through (3) above, aggregated for such calendar year or applicable
portion thereof during which such person was a Certificateholder and (b) such
information contained in the Remittance Reports as required to enable the
Holders of the Regular Certificates to prepare their tax returns. Such
obligation of the Servicer shall be deemed to have been satisfied to the extent
that substantially comparable information shall be provided by the Servicer
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 Servicer, a copy of the reports forwarded to the Class A
Certificateholders on such Distribution Date and, if different from the amounts
stated in the Remittance Report, 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 Servicer shall furnish to the Trustee, and the Trustee shall
forward 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.
Upon request, the Servicer shall furnish to the Trustee, and
the Trustee shall forward 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 Servicer.
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SECTION 4.03. [Reserved]; Monthly Advances.
(a) [Reserved]
(b) The amount of Monthly Advances to be made by the Servicer
for any Distribution Date shall equal, subject to Section 4.03(d), the sum of
(i) the aggregate amount of Monthly Payments allocable to interest (with each
interest portion thereof net of the related Servicing Fee), due during the
related Collection Period 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 Collection Period and as to
which REO Property an REO Disposition did not occur during the related
Collection 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 interest
payment that would have been due on the related Due Date based on the original
principal amortization schedule for such Balloon Mortgage Loan.
On or before 3:00 p.m. New York time on the Servicer
Remittance Date, the Servicer shall remit in immediately available funds to the
Trustee for deposit in the Distribution Account an amount equal to the aggregate
amount of Monthly Advances, if any, to be made in respect of the Mortgage Loans
and REO Properties for the related Distribution Date either (i) from its own
funds or (ii) from the Collection Account, to the extent of funds held therein
for future distribution (in which case it will cause to be made an appropriate
entry in the records of the Collection Account that amounts held for future
distribution have been, as permitted by this Section 4.03, used by the Servicer
in discharge of any such Monthly Advance) or (iii) in the form of any
combination of (i) and (ii) aggregating the total amount of Monthly Advances to
be made by the 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 Servicer's records and replaced by the Servicer by deposit in
the Collection Account on or before any future Servicer Remittance Date to the
extent that the Available Distribution Amount for the related Distribution Date
(determined without regard to Monthly Advances to be made on the 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 Monthly Advances. The Trustee will provide notice to the Servicer
and the Certificate Insurer by telecopy by the close of business on any Servicer
Remittance Date in the event that the amount remitted by the Servicer to the
Trustee on such date is less than the Monthly Advances required to be made by
the Servicer for the related Distribution Date.
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(c) The obligation of the Servicer to make such Monthly
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
Monthly Advance or Servicing Advance shall be required to be made hereunder by
the Servicer if such Monthly Advance or Servicing Advance would, if made,
constitute a Nonrecoverable Monthly Advance or Servicing Advance. The
determination by the Servicer that it has made a Nonrecoverable Monthly Advance
or that any proposed Monthly Advance, if made, would constitute a Nonrecoverable
Monthly Advance, shall be evidenced by an Officers' Certificate of the 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
Policy, to the Certificate Insurer and the Fiscal Agent (as defined in the
Policy), if any, at or before 10:00 a.m., New York time, on the second Business
Day prior to such Distribution Date.
SECTION 4.04. Determination of Realized Losses.
(a) Prior to each Determination Date, the Servicer shall
determine as to each Mortgage Loan and REO Property, the total amount of
Realized Losses, if any, incurred in connection with any Final Recovery
Determinations made during the related Collection Period. Prior to each
Determination Date, the Servicer shall also determine as to each Mortgage Loan:
(i) the total amount of Realized Losses, if any, incurred in connection with any
Deficient Valuations made during the related Collection 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
Collection Period. Such information shall be evidenced by an Officers'
Certificate delivered to the Trustee and the Certificate Insurer by the Servicer
prior to the Determination Date immediately following the end of the Collection
Period during which any such Realized Loss was incurred.
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
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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 thereof to
any Certificateholder pursuant to federal withholding requirements, the Trustee
shall indicate the amount withheld to such Certificateholders.
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 Class A Certificate
Principal Balance will be equal to or less than the aggregate principal balance
of the 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 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 to the authentication and
delivery of such Certificates, notwithstanding that such individuals or any of
them have ceased to hold such offices 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
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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 Servicer, the Depositor and the Certificate
Insurer may for all purposes (including the making of payments due on the
Book-Entry Certificates) deal with the Depository as the authorized
representative of the Certificate Owners with respect to the Book-Entry
Certificates for the purposes of exercising the rights of Certificateholders
hereunder. The rights of Certificate Owners with respect to the Book-Entry
Certificates shall be limited to those established by law and agreements between
such Certificate Owners and the Depository Participants and brokerage firms
representing such Certificate Owners. Multiple requests and directions from, and
votes of, the Depository as Holder of the Book-Entry Certificates with respect
to any particular matter shall not be deemed inconsistent if they are made with
respect to different Certificate Owners. The 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 or the Depository 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 Servicer Event of Default,
Certificate Owners representing in the aggregate not less than 51% of the
Ownership Interests of the Book-Entry Certificates advise the 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. None of the Depositor, the 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
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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 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
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 that 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
under the 1933 Act (which Opinion of Counsel shall not be an expense of the
Trust Fund or of the Depositor, the Trustee or the 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 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.
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(c) No transfer of a Residual Certificate or any interest
therein shall be made unless the prospective transferee of any Residual
Certificate certifies that it is not (i) an 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) a 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.
(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 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
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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 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 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.
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(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 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
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(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 REMIC Trust to
cease to qualify as a REMIC and will not cause the
REMIC Trust 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 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.
(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 1998.
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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 Trust Fund 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 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 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.
The Trustee shall maintain at its Corporate Trust Office and
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: (A)
this Agreement and any amendments hereof entered into pursuant to Section 12.01,
(B) all monthly statements required to be delivered to Certificateholders of the
relevant Class pursuant to Section 4.02 since the Closing Date, and all other
notices, reports, statements and written communications delivered to the
Certificateholders of the relevant Class pursuant to this Agreement since the
Closing Date, (C) all certifications delivered by a Responsible Officer of the
Trustee since the Closing Date pursuant to Section 11.01(h), (D) any and all
Officers' Certificates delivered to the Trustee by the Servicer since the
Closing Date to evidence the Servicer's determination that any Monthly Advance
or Servicing Advance was, or if made, would be a Nonrecoverable Monthly Advance
and (E) any and all Officers' Certificates delivered to the Trustee by the
Servicer since the Closing Date
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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.
ARTICLE VI
THE DEPOSITOR AND THE SERVICER
SECTION 6.01. Liability of the Depositor and the Servicer.
The Depositor and the 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 Servicer
herein.
SECTION 6.02. Merger or Consolidation of the Depositor or the
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 Servicer will keep in full effect its existence, rights and franchises as a
corporation under the laws of the jurisdiction of its incorporation. The
Depositor and the 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 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 Servicer shall be a party, or any Person
succeeding to the business of the Depositor or the Servicer, shall be the
successor of the Depositor or the 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 (i) the successor or surviving Person to the Servicer
shall be qualified to service mortgage loans on behalf of FNMA or FHLMC, (ii)
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) and (iii) in the case of the Servicer, the
Certificate Insurer delivers its written consent to such successor.
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SECTION 6.03. Limitation on Liability of the Depositor, the
Servicer and Others.
None of the Depositor, the Servicer or any of the directors,
officers, employees or agents of the Depositor or the 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 Servicer or any such person against any
breach of warranties, representations or covenants made herein, or against any
specific liability imposed on the Servicer pursuant hereto, or against any
liability which would otherwise be imposed by reason of willful misfeasance, bad
faith or gross negligence in the case of the Depositor, and wilful misfeasance,
bad faith or negligence in the case of the Servicer, in the performance of
duties or by reason of reckless disregard of obligations and duties hereunder.
The Depositor, the Servicer and any director, officer, employee or agent of the
Depositor or the Servicer may rely in good faith on any document of any kind
which, prima facie, is properly executed and submitted by any Person respecting
any matters arising hereunder. The Depositor, the Servicer and any director,
officer, employee or agent of the Depositor or the Servicer shall be indemnified
and held harmless by the Trust Fund against any loss, liability or expense
incurred in connection with any legal action relating to this Agreement or the
Certificates, other than any loss, liability or expense relating to any specific
Mortgage Loan or Mortgage Loans (except as any such loss, liability or expense
shall be otherwise reimbursable pursuant to this Agreement) or any loss,
liability or expense incurred by reason of willful misfeasance, bad faith or
gross negligence in the case of the Depositor, and willful misfeasance, bad
faith or negligence in the case of the Servicer, in the performance of duties
hereunder or by reason of reckless disregard of obligations and duties
hereunder. Neither the Depositor nor the Servicer shall be under any obligation
to appear in, prosecute or defend any legal action unless such action is related
to its respective duties under this Agreement and, in its opinion, does not
involve it in any expense or liability; provided, however, that each of the
Depositor and the 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 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 case of the Depositor, and willful misfeasance, bad faith or
negligence in the case of the Servicer, 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
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
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being prior to the rights of the Certificateholders to receive any amount in the
Collection Account.
SECTION 6.04. Limitation on Resignation of the Servicer.
The 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 Servicer shall be evidenced
by an Opinion of Counsel to such effect obtained at the expense of the Servicer
and delivered to the Trustee. No resignation of the Servicer shall become
effective until the Trustee or a successor servicer shall have assumed the
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 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 Servicer hereunder. If, pursuant to any provision hereof, the
duties of the Servicer are transferred to a successor servicer, the entire
amount of the Servicing Fee and other compensation payable to the Servicer
pursuant hereto shall thereafter be payable to such successor servicer.
SECTION 6.05. Rights of the Depositor and Others in Respect of
the Servicer.
The 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 Servicer in respect of its rights and
obligations hereunder and access to officers of the Servicer responsible for
such obligations. Upon request, the 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 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 Servicer under this Agreement and may, but is not
obligated to, perform, or cause a
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designee to perform, any defaulted obligation of the Servicer under this
Agreement or exercise the rights of the Servicer under this Agreement; provided
that the 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 Servicer and is not obligated to supervise the performance
of the Servicer under this Agreement or otherwise.
ARTICLE VII
DEFAULT
SECTION 7.01. Servicer Events of Default.
"Servicer Event of Default," wherever used herein, means any
one of the following events:
(i) any failure by the Servicer to remit to
the Trustee for distribution to the Certificateholders any
payment (other than a Monthly Advance required to be made from
its own funds on any 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
the later of (x) 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 Servicer by the
Depositor, the Certificate Insurer or the Trustee (in which
case notice shall be provided by telecopy), or to the
Servicer, the Depositor, the Certificate Insurer and the
Trustee by the Holders of Certificates entitled to at least
25% of the Voting Rights or (y) 5 days; or
(ii) any failure (other than a failure
identified in clause (vi) below) on the part of the Servicer
duly to observe or perform in any material respect any other
of the covenants or agreements on the part of the Servicer
contained in the Certificates or in this Agreement which
continues unremedied for a period of 30 days (or 10 days in
the case of a failure to maintain any insurance policy on any
of the Mortgage Loans or Mortgaged Properties) 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 Servicer by the Depositor, the Certificate
Insurer or the Trustee, or to the 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 Servicer; or
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(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 Servicer and
such decree or order shall have remained in force undischarged
or unstayed for a period of 90 days; or
(iv) the Servicer shall consent to the
appointment of a conservator or receiver or liquidator in any
insolvency, readjustment of debt, marshalling of assets and
liabilities or similar proceedings of or relating to it or of
or relating to all or substantially all of its property; or
(v) the Servicer shall admit in writing its
inability to pay its debts generally as they become due, file
a petition to take advantage of any applicable insolvency or
reorganization statute, make an assignment for the benefit of
its creditors, or voluntarily suspend payment of its
obligations; or
(vi) any failure of the Servicer to make any
Monthly Advance on any Servicer Remittance Date required to be
made from its own funds pursuant to Section 4.03 or failure to
make any payment required pursuant to Section 3.24 which
continues unremedied until 3:00 p.m. New York time on the
Business Day immediately following the Servicer Remittance
Date; or
(vii) any breach of a representation or warranty
of the Servicer relating to such Servicer's authority to enter
into, and its ability to perform its obligations under, this
Pooling and Servicing Agreement; or
(viii) the occurrence of a Performance Test
Violation (as defined in the Insurance Agreement).
Subject to Article IX, if a Servicer Event of Default described in clauses (i)
through (v) and (vii) and (viii) of this Section shall occur, then, and in each
and every such case, so long as such 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 25% of
Voting Rights (with the consent of the Certificate Insurer to the extent there
is no Certificate Insurer Default), the Trustee shall, by notice in writing to
the 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 Servicer in its capacity as
Servicer under this Agreement, to the extent permitted by law, and in and to the
Mortgage Loans and the proceeds thereof. If a Servicer Event of Default
described in clause (vi) hereof shall occur, the Trustee shall, by notice in
writing to the Servicer, the Certificate Insurer and the Depositor, terminate
all of the rights and obligations of the Servicer in its capacity as Servicer
under this Agreement and in and to the Mortgage Loans and the
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proceeds thereof. On or after the receipt by the Servicer of such written
notice, all authority and power of the Servicer under this Agreement, whether
with respect to the Certificates (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 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 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 Servicer's functions under this Agreement, and to
cooperate with the Trustee in effecting the termination of the 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
Servicer to the Collection Account held by or on behalf of the Servicer, the
Distribution Account, the Policy Payments Account or any REO Account or
Servicing Account held by or on behalf of the Servicer or thereafter be received
with respect to the Mortgage Loans or any REO Property serviced by the Servicer
(provided, however, that the 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 Monthly 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 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 Servicer Event of Default is received by the Trustee and such
notice references the Certificates, the Trust Fund or this Agreement.
The Servicer hereby covenants and agrees to act as the
Servicer under this Agreement for an initial term, commencing on the Closing
Date and ending on September 26, 1997, 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 "Servicer Extension Notice") shall be delivered by the
Certificate Insurer to the Trustee and the Servicer. The Servicer hereby agrees
that, upon its receipt of any such Servicer Extension Notice, the Servicer shall
become bound for the duration of the term covered by such Servicer Extension
Notice to continue as the Servicer subject to and in accordance with the other
provisions of this Agreement. The Trustee agrees that if as of the fifteenth
(15th) day prior to the last day
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of any term of the Servicer the Trustee shall not have received any 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 Servicer. The failure of the Certificate Insurer to deliver a
Servicer Extension Notice by the end of a calendar term shall result in the
termination of the 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 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 servicer.
SECTION 7.02. Trustee to Act; Appointment of Successor.
(a) On and after the time the Servicer receives a notice of
termination or the Servicer's term is not extended pursuant to Section 7.01, the
Trustee shall be the successor in all respects to the Servicer in its capacity
as Servicer under this Agreement and the transactions set forth or provided for
herein and shall be subject to all the responsibilities, duties and liabilities
relating thereto and arising thereafter placed on the Servicer (except for any
representations or warranties of the Servicer under this Agreement 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 Servicer's
obligations to make Monthly 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 Monthly Advances pursuant to Section 4.03 or to
make payments in respect of Prepayment Interest Shortfalls pursuant to Section
3.24; and provided, further, that any failure to perform such duties or
responsibilities caused by the Servicer's failure to provide information
required by Section 7.01 shall not be considered a default by the Trustee as
successor to the 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 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 and which is a FNMA and FHLMC approved Seller/Servicer, as the
successor to the Servicer under this Agreement in the assumption of all or any
part of the responsibilities, duties or liabilities of the Servicer under this
Agreement. No appointment of a successor to the Servicer under this Agreement
shall be effective until the assumption by the successor of all of the
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
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Mortgage Loans as it and such successor shall agree; provided, however, that no
such compensation shall be in excess of that permitted the 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 Servicer under this
Agreement, the Trustee shall act in such capacity as hereinabove provided.
(b) If the 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 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
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 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; provided, however, that nothing in this Agreement shall be deemed to
affect the Trustee's rights to recover from the Servicer's own funds interest at
the prime rate (as set forth in the Wall Street Journal) as of the date of such
advance 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. The Servicer shall pay the
Trustee, from the Servicer's own funds, interest on any advance made by the
Trustee pursuant to this paragraph at a rate equal to the prime rate (as set
forth in the Wall Street Journal) as of the date of such advance.
SECTION 7.03. Notification to Certificateholders.
(a) Upon any termination of the Servicer pursuant to Section
7.01 above or any appointment of a successor to the Servicer pursuant to Section
7.02 above, the Trustee shall give prompt written notice thereof to
Certificateholders at their respective addresses appearing in the Certificate
Register.
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(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 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 Servicer Event of Default shall have
been cured or waived.
SECTION 7.04. Waiver of 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 Servicer
Event of Default hereunder, with the written consent of the Certificate Insurer,
may waive such default or Servicer Event of Default; provided, however, that a
default or 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
Servicer Event of Default, such default or 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 Servicer Event
of Default or impair any right consequent thereon except to the extent expressly
so waived.
ARTICLE VIII
CONCERNING THE TRUSTEE
SECTION 8.01. Duties of Trustee.
The Trustee, prior to the occurrence of a Servicer Event of
Default and after the curing of all 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 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 person 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.
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No provision of this Agreement shall be construed to relieve
the Trustee from liability for its own gross negligent action, its own gross
negligent failure to act or its own misconduct; provided, however, that:
(i) Prior to the occurrence of a Servicer
Event of Default, and after the curing of all such 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;
(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 (with the consent of the
Certificate Insurer) relating to the time, method and place of
conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred upon the
Trustee, under this Agreement;
(iv) In the absence of actual knowledge of a
Servicer Event of Default (which knowledge shall be presumed
in the case of Sections 7.01(i) and (vi)), the Trustee shall
not be required to take notice or be deemed to have notice or
knowledge of any default or Servicer Event of Default unless
the Trustee shall be specifically notified in writing by the
Servicer, the Certificate Insurer or any of the
Certificateholders. In the absence of actual knowledge or
receipt of such notice, the Trustee may conclusively assume
that there is no default or Servicer Event of Default;
(v) The Trustee shall not be required to
expend or risk its own funds or otherwise incur financial
liability for the performance of any of its duties hereunder
or the exercise of any of its rights or powers if there is
reasonable ground for believing that the repayment of such
funds or
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adequate indemnity against such risk or liability is not
reasonably assured to it; and
(vi) In the event the Trustee serves as
successor to the Servicer hereunder, no implied duties or
obligations shall be imposed on the Trustee as successor
Servicer and the terms and conditions of this Agreement and
the performance thereof by the Trustee in its conformity as
successor to the Servicer shall not create any additional
fiduciary duty on the Trustee to the Certificateholders, the
Certificate Insurer, the Servicer or any other person. In the
event the Trustee serves as successor to the Servicer
hereunder, the Trustee agrees to serve as Servicer pursuant to
the terms of the Agreement.
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 advice 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 advice 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 Servicer Event of Default (which has not
been cured or waived), to exercise such of the rights and
powers vested in it by this Agreement, and to use the same
degree of care and skill in their exercise as a prudent person
would exercise or use under the circumstances in the conduct
of such person's own affairs;
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(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 Servicer
Event of Default hereunder and after the curing of all
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 (with the consent of the Certificate
Insurer as long as there is no Certificate Insurer Default);
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
or the Certificate Insurer, the Trustee may require reasonable
indemnity against such expense, or liability from such
Certificateholders or the Certificate Insurer as a condition
to taking any such action;
(vi) 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
(vii) The Trustee shall not be personally liable
for any loss resulting from the investment of funds held in
any Investment Account at the direction of the 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
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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 Servicer in
respect of the Mortgage Loans or deposited in or withdrawn from the Collection
Account by the 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 pledges 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's Fee and, to the extent
that the funds therein are at anytime insufficient for such purpose, the
Servicer 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 Servicer's actions or
omissions in connection with the Agreement and the Mortgage Loans (but only to
the extent the Trustee is actually indemnified by the Servicer pursuant hereto),
(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 gross 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 Servicer agrees to indemnify the Trustee from, and hold it harmless against,
any loss, liability or expense arising in respect of such Servicer's acts or
omissions in connection with this Agreement and the Mortgage Loans serviced by
such Servicer. Such indemnity shall survive the termination or discharge of this
Agreement and the resignation or removal of the Trustee. Any indemnity payment
hereunder made by the Servicer to the Trustee shall be from the Servicer's own
funds, without reimbursement from the Trust Fund therefor.
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SECTION 8.06. Eligibility Requirements for Trustee.
The Trustee hereunder shall at all times be a corporation or
an association 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 Servicer and to the Certificateholders. Upon receiving
such notice of resignation, the Servicer 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 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 Servicer or the Certificate Insurer, or if at
any time the Trustee shall become incapable of acting, or shall be adjudged
bankrupt or insolvent, or a receiver of the Trustee or of its property shall be
appointed, or any public officer shall take charge or control of the Trustee or
of its property or affairs for the purpose of rehabilitation, conservation or
liquidation or to charge the situs of the Trust Fund for state-tax reasons, 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 Servicer by
the Depositor.
The Certificate Insurer or the Holders of Certificates
entitled to at least 51% of the Voting Rights (excluding any Certificates
registered in the name of the Depositor or the Servicer or any affiliate
thereof), with the written consent of the
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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 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 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 or withdrawal of the rating
of any Class of Class A Certificates (including any shadow rating thereof) 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, the Rating Agencies 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 has occurred and is continuing, 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.
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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.
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 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 Servicer and
the Trustee may consider necessary or desirable. If the Servicer shall not have
joined in such appointment within 15 days after the receipt by it of a request
so to do, or in case a 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 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
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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.
SECTION 8.11. Appointment of Office or Agency.
The Trustee will maintain or appoint an office or agency 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 Servicer,
the Depositor and the Certificate Insurer, as of the Closing Date, that:
(i) The Trustee is a national banking
association duly organized, validly existing and in good
standing under the laws of the United States.
(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.
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(iv) This Agreement, assuming due
authorization, execution and delivery by the 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.
ARTICLE IX
CERTAIN MATTERS REGARDING THE CERTIFICATE INSURER
SECTION 9.01. Rights of the Certificate Insurer To Exercise
Rights of Class A Certificateholders.
Each of the Depositor, the Servicer and the Trustee, and by
accepting its Certificate, each Class A Certificateholder, agrees that unless a
Certificate Insurer Default has occurred and is continuing, the Certificate
Insurer shall have the right to exercise all rights of the Class A
Certificateholders under this Agreement (including all Voting Rights) (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 Servicer to do so;
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(b) the right to require the Seller to repurchase, or
substitute for, Mortgage Loans pursuant to Section 2.03;
(c) the right to give notices of breach or to terminate the
rights and obligations of the Servicer as Servicer pursuant to Section
7.01;
(d) the right to direct the actions of the Trustee during the
continuance of a Servicer Event of Default pursuant to Sections 7.01
and 7.02;
(e) the right to consent to or direct any waivers of 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 has occurred and is continuing, the rights
specifically set forth above may be exercised by the Class A Certificateholders
only with the prior written consent of the Certificate Insurer.
SECTION 9.02. Trustee To Act Solely with Consent of the
Certificate Insurer.
Unless a Certificate Insurer Default has occurred and is
continuing, the Trustee shall not:
(a) agree to any amendment pursuant to Section 12.01;
(b) undertake any litigation pursuant to Section 8.02(a)(iii);
or
(c) terminate the Servicer pursuant to Section 7.01 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 of the Certificates
shall be deemed to include the
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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 Servicer hereby acknowledges and agrees that it shall
service and administer the Mortgage Loans and any REO Properties, and shall
maintain the Collection Account and any REO Account, for the benefit of the
Certificateholders and for the benefit of the Certificate Insurer, and all
references in this Agreement (including, without limitation, in Sections 3.01
and 3.10) to the benefit of or actions on behalf of the Certificateholders shall
be deemed to include the Certificate Insurer. Unless a Certificate Insurer
Default has occurred and is continuing, the Servicer shall not terminate any
Sub-Servicing Agreements without cause without the prior consent of the
Certificate Insurer. Unless a Certificate Insurer Default has occurred and is
continuing, neither the 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. The Trustee and the Servicer shall provide such information as may be
reasonably requested by, and shall otherwise cooperate with all reasonable
requests of the Certificate Insurer with respect to the Mortgage Loans or the
Certificates; provided that such information is within the control of or
reasonably accessible to such party without undue expense.
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, based on the Remittance
Report, 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
Policy to the Certificate Insurer and the Fiscal Agent (as defined in the
Policy), if any, at or before 10:00 a.m., New York time, on the second Business
Day prior to such Distribution Date. Following receipt by the Certificate
Insurer of such notice in such form, the Certificate Insurer will pay any amount
payable under the Policy on the later to occur of (i) 12:00 noon, New York time,
on the second Business Day following such receipt and (ii) 12:00 noon, New York
time, on the Distribution Date to which such deficiency relates, as provided in
Exhibit A 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
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liabilities of the 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.
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 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 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 Servicer and the Trustee hereby agree that the Certificate
Insurer (so long as no Certificate Insurer Default has occurred and is
continuing) may at any time during the continuation of any proceeding relating
to a Preference Claim direct all matters relating to such Preference Claim,
including, without limitation, (i) the direction of any appeal of any order
relating to such Preference Claim and (ii) the posting of any surety,
supersedeas or performance bond
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pending any such appeal. In addition and without limitation of the foregoing,
the Certificate Insurer shall be subrogated to the rights of the 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 Servicer and the Trustee acknowledge, and each Holder by its
acceptance of a Certificate agrees, that without the need for any further action
on the part of the Certificate Insurer, the Depositor, the Servicer, the Trustee
or the Certificate Registrar (a) to the extent the Certificate Insurer makes
payments, directly or indirectly, on account of principal of or interest on any
Class A Certificates to the Holders of such Certificates, the Certificate
Insurer will be fully subrogated to the rights of such Holders to receive such
principal and interest from the Trust Fund and (b) the Certificate Insurer shall
be paid such principal and interest but only from the sources and in the manner
provided herein for the payment of such principal and interest.
The Trustee and the Servicer shall cooperate in all respects
with any reasonable request by the Certificate Insurer for action to preserve or
enforce the Certificate Insurer's rights or interests under this Agreement
without limiting the rights or affecting the interests of the Holders as
otherwise set forth herein.
SECTION 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.
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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. The Policy, prior to any distributions
thereon deposited into the Policy Payments Account, will not constitute part of
the Trust Fund or assets of the REMIC Trust 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.
SECTION 9.09. Termination of the Servicer.
Notwithstanding anything this Agreement to the contrary, the
Certificate Insurer may terminate or refuse to renew the term of the Servicer at
such time as permitted under any separate agreements between them so long as no
Certificate Insurer Default has occurred and is continuing.
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 Servicer and the
Trustee (other than the obligations of the Servicer to the Trustee pursuant to
Section 8.05 and of the 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 the
Terminator and the Trustee in their reasonable discretion (and approved by the
Certificate Insurer in its reasonable discretion) and (B) the aggregate fair
market value of all of the assets of the Trust Fund (as determined by the
Terminator, the Certificate Insurer (to the extent the Certificate Insurer is
not the Terminator) and the Trustee, as of the close of business on the third
Business Day next preceding the date upon which notice of any such termination
is furnished to Certificateholders pursuant to the third paragraph of this
Section 10.01) (the "Termination Price") and (ii) the later of the final payment
or other liquidation (or any advance with
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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.
Subject to this Section 10.01, the Majority Class R
Certificateholder and the Certificate Insurer shall have the right (the
"Terminator"), to purchase all of the Mortgage Loans and each REO Property
remaining in the Trust Fund pursuant 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 equal to or less
than 10%, in the case of the Majority Class R Certificateholder, and 5% or less,
in the case of the Certificate Insurer, of the Original Pool Balance and
provided, further, that such purchase is evidenced by receipt of an Opinion of
Counsel that such purchase (x) will be part of a "qualified liquidation" or
other evidence as defined in Code Section 860F(a)(4)(A), (y) will not otherwise
subject the Trust Fund to tax and (z) will not cause the Trust Fund to fail to
qualify as a REMIC.
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
10th day and not later than the 15th 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 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. 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
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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 Holder 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 Certificate 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 non-tendering Certificateholders concerning
surrender of their Certificates in the manner reasonably specified to the
Trustee by the 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 so held in trust for such Certificateholders. If in one year after
the second notice any such Certificates shall not have been surrendered for
cancellation, the Servicer shall pay to the Certificate Insurer any amount of
such funds that 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 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
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.
No such termination shall be permitted without the prior
written consent of the Certificate Insurer if it would result in a draw under
the Policy or in any outstanding Cumulative Insurance Payment or other amounts
remaining due under the Insurance Agreement.
Immediately following the deposit of funds in trust hereunder
in respect of the Certificates, the Trust Fund shall terminate.
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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 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,
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) 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.
ARTICLE XI
REMIC PROVISIONS
SECTION 11.01. REMIC Administration.
(a) The Trustee shall elect to treat the REMIC Trust 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 REMIC
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Trust, 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 REMIC Trust 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 (not including taxes) 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 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 or within its control to obtain 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 premium
(using the Prepayment
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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 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 or
within its control to obtain 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
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
REMIC Trust as a REMIC or (ii) result in the imposition of a tax upon the REMIC
Trust (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 Trust created
hereunder, endanger such status or result in the imposition of such a tax, nor
shall the 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 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 REMIC Trust, and the 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, upon notice or discovery that
substantially all of the assets of the REMIC Trust created hereunder do not
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, the
Trustee shall take such action as shall be necessary to maintain the status of
the REMIC as a REMIC under the REMIC Provisions.
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(g) In the event that any tax is imposed on "prohibited
transactions" of the REMIC Trust created hereunder as defined in Section
860F(a)(2) of the Code, on the "net income from foreclosure property" of the
REMIC Trust as defined in Section 860G(c) of the Code, on any contributions to
the REMIC Trust 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 XI, (ii) to
the Servicer pursuant to Section 11.03 hereof, if such tax arises out of or
results from a breach by the 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, 1998, the Trustee shall deliver to the 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 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 Trust will not cause the REMIC Trust to
fail to qualify as a REMIC at any time that any Certificates are outstanding or
subject the REMIC Trust 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 Servicer shall enter into any
arrangement by which the Trust Fund will receive a fee or other compensation for
services nor permit the REMIC Trust 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 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
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pursuant to Article II or III of this Agreement), nor acquire any assets for the
Trust Fund (other than a 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 at the expense of the Trustee) that such sale,
disposition, substitution, acquisition or contribution will not (a) affect
adversely the status of the REMIC Trust as a REMIC or (b) cause the REMIC Trust
to be subject to a tax on "prohibited transactions" or "contributions" pursuant
to the REMIC Provisions.
SECTION 11.03. Servicer and Trustee Indemnification.
(a) The Trustee agrees to indemnify the Trust Fund, the
Depositor, the Certificate Insurer and the Servicer 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
Servicer, as a result of a breach of the Trustee's covenants set forth in this
Article XI.
(b) The 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 Servicer's covenants set forth in
Article III or this Article XI.
ARTICLE XII
MISCELLANEOUS PROVISIONS
SECTION 12.01. Amendment.
This Agreement may be amended from time to time by the
Depositor, the Servicer and the Trustee without the consent of any of the
Certificateholders, (i) to cure any ambiguity, to correct any defect or to give
effect to the expectations of Holders, (ii) to correct, modify or supplement any
provisions herein, to modify, eliminate or add to any of its provisions to such
extent as shall be necessary to maintain the qualification of the Trust Fund as
a REMIC at all times that any Certificates are outstanding or to avoid or lessen
the risk of the imposition of any tax on the Trust Fund pursuant to the Code
that would be a claim against the Trust Fund, provided that the Trustee has
received an Opinion of Counsel to the effect that such action is necessary or
desirable to maintain such qualification or to avoid or minimize the risk of the
imposition of any such tax and such action will not, as evidenced by such
Opinion of Counsel, adversely affect in any material respect the interests of
any Certificateholder, (iii) to change the timing and/or nature of deposits in
the Collection Account, provided that such change will not, as evidenced by an
Opinion of Counsel, adversely affect in any
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material respect the interests of any Certificateholder and that such change
will not adversely affect the then current rating or shadow rating assigned to
any Class A Certificates, as evidenced by a letter from each Rating Agency to
such effect, (iv) to add to, modify or eliminate any provisions therein
restricting transfers of certain Certificates, which are inserted in response to
Code provisions, or (v) 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,
provided, further, that if the Person requesting such amendment delivers to the
Trustee and the Certificate Insurer written confirmation from each Rating Agency
that such amendment will not cause such Rating Agency to revise or withdraw its
then current rating or shadow rating of the Class A Certificates, such amendment
will be deemed to not adversely affect in any material respect the interests of
the Certificateholders and no such Opinion of Counsel shall be required.
This Agreement may also be amended from time to time by the
Depositor, the 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 the foregoing, this Agreement may be amended by the Depositor,
the Servicer, where applicable, and the Trustee provided that such action is
approved by holders of Certificates evidencing 100% of the Percentage Interest
of each Class that, as evidenced by an Opinion of Counsel, is adversely affected
in any material respect by such action. For purposes of giving any such consent
(other than a consent to an action which would adversely affect in any material
respect the interests of the Certificateholders of any Class, while the Servicer
or any affiliate thereof is the holder of Certificates aggregating not less than
66% of the Percentage Interest of such Class), any Certificates registered in
the name of the Servicer or any affiliate thereof shall be deemed not to be
outstanding.
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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 REMIC Trust pursuant to the REMIC
Provisions or cause the REMIC Trust 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
has occurred and is continuing, and the 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 with the
consent of Holders the Trustee shall furnish a copy of such amendment to each
Certificateholder, the Rating Agencies and the Certificate Insurer.
It shall not be necessary for the consent of
Certificateholders under this Section 12.01 to approve the particular form of
any proposed amendment, but it shall be sufficient if such consent shall approve
the substance thereof. The manner of obtaining such consents and of evidencing
the authorization of the execution thereof by Certificateholders shall be
subject to such reasonable regulations as the Trustee 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 Servicer 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
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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
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.
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SECTION 12.04. GOVERNING LAW.
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS 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, One New York Plaza, New York, NY 10292, Attention:
Asset-Backed Finance Group (phone number (212) 778-1000), or such other address
or telecopy number as may hereafter be furnished to the Servicer, the
Certificate Insurer and the Trustee in writing by the Depositor, (b) in the case
of the Servicer, 15 South Main Street, Suite 750, Greenville, SC 29606,
Attention: Wade Hall (telecopy number: (864) 271-8374, or such other address or
telecopy number as may hereafter be furnished to the Trustee and the Depositor
in writing by the Servicer, (c) in the case of the Trustee, First Union National
Bank, 230 South Tryon Street, 9th Floor, Charlotte, NC 28288-1179, Attention:
Corporate Trust Department (telecopy number 704-383-7316, or such other address
or telecopy number as may hereafter be furnished to the 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, NY 10022,
Attention: Surveillance Department Re: Emergent Home Equity Loan Trust 1997-1
(telecopy number 212-888-5278) or such other address or telecopy number as may
hereafter be furnished to the Trustee, the Depositor and the Servicer in writing
by the Certificate Insurer. Any party hereto may change the address, telephone
number or telecopier number by notice to the other parties hereto in accordance
with the terms hereof. In each case in which a notice or other communication to
the Certificate Insurer refers to a Servicer Event of Default or a claim under
the Policy or with respect to which failure on the part of the Certificate
Insurer to respond shall be deemed to constitute consent or acceptance, then a
copy of such notice or other communication should also be sent to the attention
of the General Counsel and the Head-Financial Guaranty Group and shall be marked
to indicate "URGENT MATERIAL ENCLOSED". Any notice required or permitted to be
given to a Certificateholder shall be given by first class mail, postage
prepaid, at the address of such Holder as shown in the Certificate Register. Any
notice so mailed within the time prescribed in this Agreement shall be
conclusively presumed to have been duly given when mailed, whether or not the
Certificateholder receives such notice. A copy of any notice required to be
telecopied hereunder also shall be mailed to the appropriate party in the manner
set forth above.
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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 Servicer Event of Default that
has not been cured or waived;
3. The resignation or termination of the 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;
7. Any event that would result in the inability of the
Trustee to make advances regarding delinquent
mortgage loans; and
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 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
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2. Each annual independent public accountants' servicing
report described in Section 3.21.
Any such notice pursuant to this Section 12.07 shall be in
writing and shall be deemed to have been duly given if personally delivered at
or mailed by first class mail, postage prepaid, or by express delivery service
to Moody's Investors Service, Inc., 99 Church Street, New York, New York 10007,
and to Standard & Poor's Ratings Services, 25 Broadway, New York, New York
10004, or such other addresses as the Rating Agencies may designate in writing
to the parties hereto.
SECTION 12.08. Article and Section References.
All article and section references used in this Agreement,
unless otherwise provided, are to articles and sections in this Agreement.
SECTION 12.09. Confirmation of Intent.
It is the express intent of the parties hereto that the
conveyance of the Mortgage Loans and the other assets constituting the Trust
Fund by the Depositor to the Trustee as contemplated by this Agreement be, and
be treated for all purposes as, a sale by the Depositor to the Trustee of the
Mortgage Loans and the other assets constituting the Trust Fund. It is, further,
not the intention of the parties that such conveyance be deemed a pledge of the
Mortgage Loans and the other assets constituting the Trust Fund by the Depositor
to the Trustee to secure a debt or other obligation of the Depositor. However,
in the event that, notwithstanding the intent of the parties, the Mortgage Loans
and the other assets constituting the Trust Fund are held to continue to be
property of the Depositor then (a) this Agreement shall also be deemed to be a
security agreement within the meaning of Articles 8 and 9 of the Uniform
Commercial Code; (b) the transfer of the Mortgage Loans and the other assets
constituting the Trust Fund provided for herein shall be deemed to be a grant by
the Depositor to the Trustee of a security interest in all of the Depositor's
right, title and interest in and to the Mortgage Loans and the other assets
constituting the Trust Fund and all amounts payable on the Mortgage Loans in
accordance with the terms thereof and all proceeds of the conversion, voluntary
or involuntary, of the foregoing into cash, instruments, securities or other
property; (c) the possession by the Trustee of Mortgage Loans and such other
items of property as constitute instruments, money, negotiable documents or
chattel paper shall be deemed to be "possession by the secured party" for
purposes of perfecting the security interest pursuant to Section 9-305 of the
Uniform Commercial Code; and (d) notifications to persons holding such property,
and acknowledgments, receipts or confirmations from persons holding such
property, shall be deemed notifications to, or acknowledgments, receipts or
confirmations from, financial intermediaries, bailees or agents (as applicable)
of the Trustee for the purpose of perfecting such security interest under
applicable law. Any assignment of the interest of the Trustee pursuant to any
provision hereof shall also be deemed to be an assignment of any security
interest created hereby. The Servicer and the Depositor shall, to the extent
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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 and the other assets constituting the Trust Fund, such security
interest would be deemed to be a perfected security interest of first priority
under applicable law and would be maintained as such throughout the term of this
Agreement.
IN WITNESS WHEREOF, the Depositor, the 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.
PRUDENTIAL SECURITIES
SECURED FINANCING
CORPORATION,
as Depositor
By:________________________________________
Name: Glen Stein
Title: Vice President
EMERGENT MORTGAGE CORP.,
as Servicer
By:________________________________________
Name: J. Phil Cox
Title: Senior Executive Vice President
FIRST UNION NATIONAL BANK,
solely in its capacity as Trustee
and not in its individual capacity
By:________________________________________
Name: Shannon Stahel
Title: Corporate Trust Officer
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STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 26th day of June 1997, before me, a notary public in
and for said State, personally appeared Glen Stein, known to me to be a Vice
President of Prudential Securities Secured Financing Corporation, one of the
corporations that executed the within instrument, and also known to me to be the
person who executed it on behalf of said corporation, and acknowledged to me
that such corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
__________________________________________
Notary Public
[Notarial Seal]
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STATE OF )
) ss.:
COUNTY OF )
On the 26th day of June 1997, before me, a notary public in
and for said State, personally appeared J. Phil Cox, known to me to be a Senior
Executive Vice President of Emergent Mortgage Corp., one of the corporations
that executed the within instrument, and also known to me to be the person who
executed it on behalf of said corporation, and acknowledged to me that such
corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
_________________________________________
Notary Public
[Notarial Seal]
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STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 26th day of June 1997, before me, a notary public in
and for said State, personally appeared Shannon Stahel, known to me to be an
officer of First Union National Bank, a national banking association that
executed the within instrument, and also known to me to be the person who
executed it on behalf of said banking association, and acknowledged to me that
such banking association executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
________________________________________
Notary Public
[Notarial Seal]
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EXHIBIT A-1
FORM OF CLASS A-1 CERTIFICATE
Unless this certificate is presented by an authorized
representative of The Depository Trust Company, a New York corporation ("DTC"),
to the Trustee or its agent for registration of transfer, exchange or payment,
and any certificate issued is registered in the name of Cede & Co. or in such
other name as is requested by an authorized representative of DTC (and any
payment is made to Cede & Co. or to such other entity as is requested by an
authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered
owner hereof, Cede & Co., has an interest herein.
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
"REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS
THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE
INTERNAL REVENUE CODE OF 1986 (THE "CODE").
================================================================================
Series 1997-2, Class A-1 Class A-1 Certificate Principal Balance
as of the Issue Date:
- --------------------------------------------------------------------------------
Pass-Through Rate: _________% $_____________
- --------------------------------------------------------------------------------
Date of Pooling and Servicing Denomination: $____________
Agreement:
June 1, 1997
- --------------------------------------------------------------------------------
First Distribution Date: Servicer:
July 15, 1997 Emergent Mortgage Corp.
- --------------------------------------------------------------------------------
No. 1 Trustee: First Union National
Bank
- --------------------------------------------------------------------------------
Issue Date: June __, 1997
- --------------------------------------------------------------------------------
CUSIP: __________________
================================================================================
THE PASS-THROUGH RATE INDICATED ABOVE IS SUBJECT TO
THE AVAILABLE FUNDS CAP RATE SPECIFIED IN THE POOLING
AND SERVICING AGREEMENT.
DISTRIBUTIONS IN REDUCTION OF THE CERTIFICATE PRINCIPAL BALANCE OF THIS
CERTIFICATE MAY BE MADE MONTHLY AS SET FORTH HEREIN. ACCORDINGLY, THE
OUTSTANDING CERTIFICATE PRINCIPAL BALANCE HEREOF AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ABOVE.
A-1-1
<PAGE>
EMERGENT HOME EQUITY LOAN PASS-THROUGH CERTIFICATE
evidencing a beneficial ownership interest in a portion of a Trust Fund
consisting primarily of a pool of closed end, fixed rate home equity loans
secured by mortgages on single-family residences (which may be attached,
detached, part of a two- to four-family dwelling, a condominium, townhouse, or a
unit in a planned unit development) and manufactured housing (the "Mortgage
Loans") formed and sold by
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN THE
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 Cede & Co. is the registered owner of a
Percentage Interest (obtained by dividing the denomination of this Certificate
by the Class A-1 Certificate Principal Balance) in that certain beneficial
ownership interest evidenced by all the Class A-1 Certificates in the Trust Fund
created pursuant to a Pooling and Servicing Agreement, dated as specified above
(the "Agreement"), among Prudential Securities Secured Financing Corporation
(hereinafter called the "Depositor," which term includes any successor entity
under the Agreement), the 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 15th day of each month or, if such 15th 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 funds in the
Distribution Account in an amount equal to the product of the Percentage
Interest evidenced by this Certificate and the amount required to be distributed
to the Holders of Class A-1 Certificates on such Distribution Date pursuant to
the Agreement.
So long as this Certificate is registered in the name of a
Depository or its nominee, the Trustee will make payments of principal and
interest on this Certificate by wire transfers of immediately available funds to
the Depository or its nominee. Otherwise 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
A-1-2
<PAGE>
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 A-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 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 on the Class A-1 Certificates on each
Distribution Date will be a rate per annum equal to % per annum (subject to the
applicable Available Funds Cap Rate specified in the Agreement).
This Certificate is one of a duly authorized issue of
Certificates designated as Emergent Home Equity Loan Pass-Through Certificates
of the Series specified on the face hereof (herein called the "Certificates")
and representing a Percentage Interest in the Class A-1 Certificates.
The Class A-1 Certificates are limited in right of payment to
certain collections and recoveries respecting the Mortgage Loans and payments
under the Policy, all as more specifically set forth herein and in the Agreement
and the policy. 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 Servicer, the Trustee and the rights of the
Certificateholders under the Agreement at any time by the Depositor, the
Servicer, the Trustee 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 hereof 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.
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
A-1-3
<PAGE>
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 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 Servicer, the Trustee, the Certificate
Insurer and the Certificate Registrar and any agent of the Depositor, any
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 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 later of 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, 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 and each
REO Property at the time of purchase being 10% or less of the Original Pool
Balance.
The recitals contained herein shall be taken as statements of
the Depositor and the Trustee assumes no responsibility for their correctness.
A-1-4
<PAGE>
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.
IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed.
Dated:
FIRST UNION NATIONAL BANK, solely in its
capacity as Trustee and not in its individual capacity
By_________________________________
Authorized Officer
CERTIFICATE OF AUTHENTICATION
This is one of the Class A-1 Certificates referred to in the
within-mentioned Agreement.
FIRST UNION NATIONAL BANK, as Certificate
Registrar
BY:__________________________________
Authorized Signatory
A-1-5
<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
-----------
(Cuss) (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 Emergent Home
Equity Loan Pass-Through Certificate Series 1997-2, Class A-1 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
A-1-6
<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.
A-1-7
<PAGE>
EXHIBIT A-2
FORM OF CLASS A-2 CERTIFICATE
Unless this certificate is presented by an authorized
representative of The Depository of The Depository Trust Company, a New York
corporation ("DTC"), to the Trustee or its agent for registration of transfer,
exchange or payment, and any certificate issued is registered in the name of
Cede & Co. or in such other name as is requested by an authorized representative
of DTC (and any payment is made to Cede & Co. or to such other entity as is
requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as
the registered owner hereof, Cede & Co., has an interest herein.
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
"REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS
THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE
INTERNAL REVENUE CODE OF 1986 (THE "CODE").
================================================================================
Series 1997-2, Class A-2 Class A-2 Certificate Principal Balance
as of the Issue Date:
- --------------------------------------------------------------------------------
Pass-Through Rate: _________% $_____________
- --------------------------------------------------------------------------------
Date of Pooling and Servicing Denomination: $____________
Agreement:
June 1, 1997
- --------------------------------------------------------------------------------
First Distribution Date: Servicer:
July 15, 1997 Emergent Mortgage Corp.
- --------------------------------------------------------------------------------
No. 1 Trustee: First Union National
Bank
- --------------------------------------------------------------------------------
Issue Date: June __, 1997
- --------------------------------------------------------------------------------
CUSIP: __________________
================================================================================
THE PASS-THROUGH RATE INDICATED ABOVE IS SUBJECT TO
THE AVAILABLE FUNDS CAP RATE SPECIFIED IN THE POOLING
AND SERVICING AGREEMENT.
DISTRIBUTIONS IN REDUCTION OF THE CERTIFICATE PRINCIPAL BALANCE OF THIS
CERTIFICATE MAY BE MADE MONTHLY AS SET FORTH HEREIN. ACCORDINGLY, THE
OUTSTANDING CERTIFICATE PRINCIPAL BALANCE HEREOF AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ABOVE.
A-2-1
<PAGE>
EMERGENT HOME EQUITY LOAN PASS-THROUGH CERTIFICATE
evidencing a beneficial ownership interest in a portion of a Trust Fund
consisting primarily of a pool of closed end, fixed rate home equity loans
secured by mortgages on single-family residences (which may be attached,
detached, part of a two- to four-family dwelling, a condominium, townhouse, or a
unit in a planned unit development) and manufactured housing (the "Mortgage
Loans") formed and sold by
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN THE
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION, 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 Cede & Co. is the registered owner of a
Percentage Interest (obtained by dividing the denomination of this Certificate
by the Class A-2 Certificate Principal Balance) in that certain beneficial
ownership interest evidenced by all the Class A-2 Certificates in the Trust Fund
created pursuant to a Pooling and Servicing Agreement, dated as specified above
(the "Agreement"), among Prudential Securities Secured Financing Corporation
(hereinafter called the "Depositor," which term includes any successor entity
under the Agreement), the 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 15th day of each month or, if such 15th 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 funds in the
Distribution Account in an amount equal to the product of the Percentage
Interest evidenced by this Certificate and the amount required to be distributed
to the Holders of Class A-2 Certificates on such Distribution Date pursuant to
the Agreement.
So long as this Certificate is registered in the name of a
Depository or its nominee, the Trustee will make payments of a principal and
interest on this Certificate by wire transfer of immediately available funds to
the Depository or its nominee. Otherwise, all distributions to the Holder of
this Certificate under the Agreement will be made or
A-2-2
<PAGE>
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 A-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 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 on the Class A-2 Certificates on each
Distribution Date will be a rate per annum equal to ____% per annum (subject to
the Available Funds Cap Rate specified in the Agreement).
This Certificate is one of a duly authorized issue of
Certificates designated as Emergent Home Equity Loan Pass-Through Certificates
of the Series specified on the face hereof (herein called the "Certificates")
and representing a Percentage Interest in the Class A-2 Certificates.
The Class A-2 Certificates are limited in right of payment to
certain collections and recoveries respecting the Mortgage Loans and payments
under the Policy, all as more specifically set forth herein and in the Agreement
and the policy. 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 Servicer, the Trustee and the rights of the
Certificateholders under the Agreement at any time by the Depositor, the
Servicer, the Trustee 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.
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
A-2-3
<PAGE>
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 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 Servicer, the Trustee, the Certificate
Insurer and the Certificate Registrar and any agent of the Depositor, any
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 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 later of 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, 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 and each
REO Property at the time of purchase being 10% or less of the Original Pool
Balance.
The recitals contained herein shall be taken as statements of
the Depositor and the Trustee assumes no responsibility for their correctness.
A-2-4
<PAGE>
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.
IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed.
Dated:
FIRST UNION NATIONAL BANK, solely in its
capacity as Trustee and not in its individual
capacity
By___________________________________________
Authorized Officer
CERTIFICATE OF AUTHENTICATION
This is one of the Class A-2 Certificates referred to in the
within-mentioned Agreement.
FIRST UNION NATIONAL BANK, as
Certificate Registrar
BY:__________________________________________
Authorized Signatory
A-2-5
<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
-----------
(Cuss) (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 Emergent Home
Equity Loan Pass-Through Certificate Series 1997-2, Class A-2 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
A-2-6
<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.
A-2-7
<PAGE>
EXHIBIT A-3
FORM OF CLASS A-3 CERTIFICATE
Unless this certificate is presented by an authorized
representative of The Depository of The Depository Trust Company, a New York
corporation ("DTC"), to the Trustee or its agent for registration of transfer,
exchange or payment, and any certificate issued is registered in the name of
Cede & Co. or in such other name as is requested by an authorized representative
of DTC (and any payment is made to Cede & Co. or to such other entity as is
requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as
the registered owner hereof, Cede & Co., has an interest herein.
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
"REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS
THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE
INTERNAL REVENUE CODE OF 1986 (THE "CODE").
================================================================================
Series 1997-2, Class A-3 Class A-3 Certificate Principal Balance
as of the Issue Date:
- --------------------------------------------------------------------------------
Pass-Through Rate: _________% $_____________
- --------------------------------------------------------------------------------
Date of Pooling and Servicing Denomination: $____________
Agreement:
June 1, 1997
- --------------------------------------------------------------------------------
First Distribution Date: Servicer:
July 15, 1997 Emergent Mortgage Corp.
- --------------------------------------------------------------------------------
No. 1 Trustee: First Union National
Bank
- --------------------------------------------------------------------------------
Issue Date: June __, 1997
- --------------------------------------------------------------------------------
CUSIP: __________________
================================================================================
THE PASS-THROUGH RATE INDICATED ABOVE IS SUBJECT TO
THE AVAILABLE FUNDS CAP RATE SPECIFIED IN THE POOLING
AND SERVICING AGREEMENT.
DISTRIBUTIONS IN REDUCTION OF THE CERTIFICATE PRINCIPAL BALANCE OF THIS
CERTIFICATE MAY BE MADE MONTHLY AS SET FORTH HEREIN. ACCORDINGLY, THE
OUTSTANDING CERTIFICATE PRINCIPAL BALANCE HEREOF AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ABOVE.
A-3-1
<PAGE>
EMERGENT HOME EQUITY LOAN PASS-THROUGH CERTIFICATE
evidencing a beneficial ownership interest in a portion of a Trust Fund
consisting primarily of a pool of closed end fixed rate home equity loans
secured by mortgages on single-family residences (which may be attached,
detached, part of a two- to four-family dwelling, a condominium, townhouse, or a
unit in a planned unit development) and manufactured housing (the "Mortgage
Loans") formed and sold by
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN THE
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 Cede & Co. is the registered owner of a
Percentage Interest (obtained by dividing the denomination of this Certificate
by the Class A-3 Certificate Principal Balance) in that certain beneficial
ownership interest evidenced by all the Class A-3 Certificates in the Trust Fund
created pursuant to a Pooling and Servicing Agreement, dated as specified above
(the "Agreement"), among Prudential Securities Secured Financing Corporation
(hereinafter called the "Depositor," which term includes any successor entity
under the Agreement), the 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 15th day of each month or, if such 15th 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 funds in the
Distribution Account in an amount equal to the product of the Percentage
Interest evidenced by this Certificate and the amount required to be distributed
to the Holders of Class A-3 Certificates on such Distribution Date pursuant to
the Agreement.
So long as this Certificate is registered in the name of a
Depository or its nominee, the Trustee will make payments of a principal and
interest on this Certificate by wire transfer of immediately available funds to
the Depository or its nominee. Otherwise, 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
A-3-2
<PAGE>
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 A-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 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 on the Class A-3 Certificates on each
Distribution Date will be a rate per annum equal to ____% per annum (subject to
the applicable Available Funds Cap Rate specified in the Agreement).
This Certificate is one of a duly authorized issue of
Certificates designated as Emergent Home Equity Loan Pass-Through Certificates
of the Series specified on the face hereof (herein called the "Certificates")
and representing a Percentage Interest in the Class A-3 Certificates.
The Class A-3 Certificates are limited in right of payment to
certain collections and recoveries respecting the Mortgage Loans and payments
under the Policy, all as more specifically set forth herein and in the Agreement
and the policy. 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 Servicer, the Trustee and the rights of the
Certificateholders under the Agreement at any time by the Depositor, the
Servicer, the Trustee 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.
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
A-3-3
<PAGE>
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 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 Servicer, the Trustee, the Certificate
Insurer and the Certificate Registrar and any agent of the Depositor, any
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 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 later of 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, 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 and each
REO Property at the time of purchase being 10% or less of the Original Pool
Balance.
The recitals contained herein shall be taken as statements of
the Depositor and the Trustee assumes no responsibility for their correctness.
A-3-4
<PAGE>
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.
IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed.
Dated:
FIRST UNION NATIONAL BANK, solely in its
capacity as Trustee and not in its individual
capacity
By_________________________________
Authorized Officer
CERTIFICATE OF AUTHENTICATION
This is one of the Class A-3 Certificates referred to in the
within-mentioned Agreement.
FIRST UNION NATIONAL BANK, as Certificate
Registrar
BY:_________________________________
Authorized Signatory
A-3-5
<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
-----------
(Cuss) (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 Emergent Home
Equity Loan Pass-Through Certificate Series 1997-2, Class A-3 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
A-3-6
<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.
A-3-7
<PAGE>
EXHIBIT A-4
FORM OF CLASS A-4 CERTIFICATE
Unless this certificate is presented by an authorized
representative of The Depository Trust Company, a New York corporation ("DTC"),
to the Trustee or its agent for registration of transfer, exchange or payment,
and any certificate issued is registered in the name of Cede & Co. or in such
other name as is requested by an authorized representative of DTC (and any
payment is made to Cede & Co. or to such other entity as is requested by an
authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered
owner hereof, Cede & Co., has an interest herein.
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
"REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS
THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE
INTERNAL REVENUE CODE OF 1986 (THE "CODE").
================================================================================
Series 1997-2, Class A-4 Class A-4 Certificate Principal Balance
as of the Issue Date:
- --------------------------------------------------------------------------------
Pass-Through Rate: _________% $_____________
- --------------------------------------------------------------------------------
Date of Pooling and Servicing Denomination: $____________
Agreement:
June 1, 1997
- --------------------------------------------------------------------------------
First Distribution Date: Servicer:
July 15, 1997 Emergent Mortgage Corp.
- --------------------------------------------------------------------------------
No. 1 Trustee: First Union National
Bank
- --------------------------------------------------------------------------------
Issue Date: June __, 1997
- --------------------------------------------------------------------------------
CUSIP: __________________
================================================================================
THE PASS-THROUGH RATE INDICATED ABOVE IS SUBJECT TO
THE AVAILABLE FUNDS CAP RATE SPECIFIED IN THE POOLING
AND SERVICING AGREEMENT.
DISTRIBUTIONS IN REDUCTION OF THE CERTIFICATE PRINCIPAL BALANCE OF THIS
CERTIFICATE MAY BE MADE MONTHLY AS SET FORTH HEREIN. ACCORDINGLY, THE
OUTSTANDING CERTIFICATE PRINCIPAL BALANCE HEREOF AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ABOVE.
A-4-1
<PAGE>
EMERGENT HOME EQUITY LOAN PASS-THROUGH CERTIFICATE
evidencing a beneficial ownership interest in a portion of a Trust Fund
consisting primarily of a pool of closed end, fixed rate home equity loans
secured by mortgages on single-family residences (which may be attached,
detached, part of a two- to four-family dwelling, a condominium, townhouse, or a
unit in a planned unit development) and manufactured housing (the "Mortgage
Loans") formed and sold by
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN THE
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 Cede & Co. is the registered owner of a
Percentage Interest (obtained by dividing the denomination of this Certificate
by the Class A-4 Certificate Principal Balance) in that certain beneficial
ownership interest evidenced by all the Class A-4 Certificates in the Trust Fund
created pursuant to a Pooling and Servicing Agreement, dated as specified above
(the "Agreement"), among Prudential Securities Secured Financing Corporation
(hereinafter called the "Depositor," which term includes any successor entity
under the Agreement), the 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 15th day of each month or, if such 15th 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 funds in the
Distribution Account in an amount equal to the product of the Percentage
Interest evidenced by this Certificate and the amount required to be distributed
to the Holders of Class A-4 Certificates on such Distribution Date pursuant to
the Agreement.
So long as this Certificate is registered in the name of a
Depository or its nominee, the Trustee will make payments of principal and
interest on this Certificate by wire transfers of immediately available funds to
the Depository or its nominee. Otherwise 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
A-4-2
<PAGE>
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 A-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 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 on the Class A-4 Certificates on each
Distribution Date will be a rate per annum equal to % per annum (subject to the
applicable Available Funds Cap Rate specified in the Agreement).
This Certificate is one of a duly authorized issue of
Certificates designated as Emergent Home Equity Loan Pass-Through Certificates
of the Series specified on the face hereof (herein called the "Certificates")
and representing a Percentage Interest in the Class A-4 Certificates.
The Class A-4 Certificates are limited in right of payment to
certain collections and recoveries respecting the Mortgage Loans and payments
under the Policy, all as more specifically set forth herein and in the Agreement
and the policy. 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 Servicer, the Trustee and the rights of the
Certificateholders under the Agreement at any time by the Depositor, the
Servicer, the Trustee 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 hereof 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.
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
A-4-3
<PAGE>
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 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 Servicer, the Trustee, the Certificate
Insurer and the Certificate Registrar and any agent of the Depositor, any
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 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 later of 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, 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 and each
REO Property at the time of purchase being 10% or less of the Original Pool
Balance.
The recitals contained herein shall be taken as statements of
the Depositor and the Trustee assumes no responsibility for their correctness.
A-4-4
<PAGE>
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.
IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed.
Dated:
FIRST UNION NATIONAL BANK, solely in its
capacity as Trustee and not in its individual
capacity
By_________________________________
Authorized Officer
CERTIFICATE OF AUTHENTICATION
This is one of the Class A-4 Certificates referred to in the
within-mentioned Agreement.
FIRST UNION NATIONAL BANK, as
Certificate Registrar
BY:________________________________
Authorized Signatory
A-4-5
<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
-----------
(Cuss) (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 Emergent Home
Equity Loan Pass-Through Certificate Series 1997-2, Class A-4 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
A-4-6
<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.
A-4-7
<PAGE>
EXHIBIT A-5
FORM OF CLASS A-5 CERTIFICATE
Unless this certificate is presented by an authorized
representative of The Depository Trust Company, a New York corporation ("DTC"),
to the Trustee or its agent for registration of transfer, exchange or payment,
and any certificate issued is registered in the name of Cede & Co. or in such
other name as is requested by an authorized representative of DTC (and any
payment is made to Cede & Co. or to such other entity as is requested by an
authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered
owner hereof, Cede & Co., has an interest herein.
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
"REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS
THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE
INTERNAL REVENUE CODE OF 1986 (THE "CODE").
================================================================================
Series 1997-2, Class A-5 Class A-5 Certificate Principal Balance
as of the Issue Date:
- --------------------------------------------------------------------------------
Pass-Through Rate: _________% $_____________
- --------------------------------------------------------------------------------
Date of Pooling and Servicing Denomination: $____________
Agreement:
June 1, 1997
- --------------------------------------------------------------------------------
First Distribution Date: Servicer:
July 15, 1997 Emergent Mortgage Corp.
- --------------------------------------------------------------------------------
No. 1 Trustee: First Union National
Bank
- --------------------------------------------------------------------------------
Issue Date: June __, 1997
- --------------------------------------------------------------------------------
CUSIP: __________________
================================================================================
THE PASS-THROUGH RATE INDICATED ABOVE IS SUBJECT TO
THE AVAILABLE FUNDS CAP RATE SPECIFIED IN THE POOLING
AND SERVICING AGREEMENT.
DISTRIBUTIONS IN REDUCTION OF THE CERTIFICATE PRINCIPAL BALANCE OF THIS
CERTIFICATE MAY BE MADE MONTHLY AS SET FORTH HEREIN. ACCORDINGLY, THE
OUTSTANDING CERTIFICATE PRINCIPAL BALANCE HEREOF AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ABOVE.
A-5-1
<PAGE>
EMERGENT HOME EQUITY LOAN PASS-THROUGH CERTIFICATE
evidencing a beneficial ownership interest in a portion of a Trust Fund
consisting primarily of a pool of closed end, fixed rate home equity loans
secured by mortgages on single-family residences (which may be attached,
detached, part of a two- to four-family dwelling, a condominium, townhouse, or a
unit in a planned unit development) and manufactured housing (the "Mortgage
Loans") formed and sold by
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN THE
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 Cede & Co. is the registered owner of a
Percentage Interest (obtained by dividing the denomination of this Certificate
by the Class A-5 Certificate Principal Balance) in that certain beneficial
ownership interest evidenced by all the Class A-5 Certificates in the Trust Fund
created pursuant to a Pooling and Servicing Agreement, dated as specified above
(the "Agreement"), among Prudential Securities Secured Financing Corporation
(hereinafter called the "Depositor," which term includes any successor entity
under the Agreement), the 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 15th day of each month or, if such 15th 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 funds in the
Distribution Account in an amount equal to the product of the Percentage
Interest evidenced by this Certificate and the amount required to be distributed
to the Holders of Class A-5 Certificates on such Distribution Date pursuant to
the Agreement.
So long as this Certificate is registered in the name of a
Depository or its nominee, the Trustee will make payments of principal and
interest on this Certificate by wire transfers of immediately available funds to
the Depository or its nominee. Otherwise 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
A-5-2
<PAGE>
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 A-5 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 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 on the Class A-5 Certificates on each
Distribution Date will be a rate per annum equal to % per annum (subject to the
applicable Available Funds Cap Rate specified in the Agreement).
This Certificate is one of a duly authorized issue of
Certificates designated as Emergent Home Equity Loan Pass-Through Certificates
of the Series specified on the face hereof (herein called the "Certificates")
and representing a Percentage Interest in the Class A-5 Certificates.
The Class A-5 Certificates are limited in right of payment to
certain collections and recoveries respecting the Mortgage Loans and payments
under the Policy, all as more specifically set forth herein and in the Agreement
and the policy. 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 Servicer, the Trustee and the rights of the
Certificateholders under the Agreement at any time by the Depositor, the
Servicer, the Trustee 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 hereof 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.
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
A-5-3
<PAGE>
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 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 Servicer, the Trustee, the Certificate
Insurer and the Certificate Registrar and any agent of the Depositor, any
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 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 later of 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, 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 and each
REO Property at the time of purchase being 10% or less of the Original Pool
Balance.
The recitals contained herein shall be taken as statements of
the Depositor and the Trustee assumes no responsibility for their correctness.
A-5-4
<PAGE>
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.
IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed.
Dated:
FIRST UNION NATIONAL BANK, solely in its
capacity as Trustee and not in its individual
capacity
By_________________________________
Authorized Officer
CERTIFICATE OF AUTHENTICATION
This is one of the Class A-5 Certificates referred to in the
within-mentioned Agreement.
FIRST UNION NATIONAL BANK, as
Certificate Registrar
BY:__________________________________
Authorized Signatory
A-5-5
<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
-----------
(Cuss) (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 Emergent Home
Equity Loan Pass-Through Certificate Series 1997-2, Class A-5 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
A-5-6
<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.
A-5-7
<PAGE>
EXHIBIT A-6
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 A
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 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.
AS DESCRIBED HEREIN, NO TRANSFER OF THIS CERTIFICATE TO AN EMPLOYEE
BENEFIT PLAN OR OTHER RETIREMENT ARRANGEMENT (OR AN ENTITY USING THE
ASSETS OF SUCH A PLAN OR ARRANGEMENT) SUBJECT TO THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED, OR THE CODE WILL BE
REGISTERED.
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-6-1
<PAGE>
(A) THE UNITED STATES, ANY STATE OR POLITICAL SUBDIVISION THEREOF, ANY
FOREIGN GOVERNMENT, ANY INTERNATIONAL ORGANIZATION, OR ANY AGENCY OR
INSTRUMENTALITY OF ANY OF THE FOREGOING, (B) ANY ORGANIZATION (OTHER
THAN A COOPERATIVE DESCRIBED IN SECTION 521 OF THE CODE) WHICH IS
EXEMPT FROM THE TAX IMPOSED BY CHAPTER 1 OF THE CODE UNLESS SUCH
ORGANIZATION IS SUBJECT TO THE TAX IMPOSED BY SECTION 511 OF THE CODE,
(C) ANY ORGANIZATION DESCRIBED IN SECTION 1381(a)(2)(C) OF THE CODE
(ANY SUCH PERSON DESCRIBED IN THE FOREGOING CLAUSES (A), (B) OR (C)
BEING HEREINAFTER REFERRED TO AS A "DISQUALIFIED ORGANIZATION"), OR (D)
AN AGENT OF A DISQUALIFIED ORGANIZATION AND (2) NO PURPOSE OF SUCH
TRANSFER IS TO 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
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.
A-6-2
<PAGE>
================================================================================
Series 1997-2, Class R Certificate Principal Balance of the
Class R Certificates as of the Issue
Date: $0.00
- --------------------------------------------------------------------------------
Date of Pooling and Servicing
Agreement:
June 1, 1997
- --------------------------------------------------------------------------------
First Distribution Date: Servicer:
July 15, 1997 Emergent Mortgage Corp.
- --------------------------------------------------------------------------------
No. 1 Trustee: First Union National
Bank
- --------------------------------------------------------------------------------
Issue Date: June __, 1997
- --------------------------------------------------------------------------------
Percentage Interest: 100%
================================================================================
A-6-3
<PAGE>
EMERGENT HOME EQUITY LOAN PASS-THROUGH
evidencing a beneficial ownership interest in a portion of a Trust Fund
consisting primarily of a pool of closed end fixed rate home equity loans
secured by mortgages on single-family residences (which may be attached,
detached, part of a two- to four-family dwelling, a condominium, townhouse, or a
unit in a planned unit development) and manufactured housing (the "Mortgage
Loans") formed and sold by
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION, THE 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 Emergent Mortgage Corp. is the registered
owner of a Percentage Interest set forth above 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 Prudential Securities Secured Financing Corporation
(hereinafter called the "Depositor," which term includes any successor entity
under the Agreement), the 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 15th day of each month or, if such 15th 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 funds in the
Distribution Account 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
A-6-4
<PAGE>
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 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 Emergent Home Equity Loan Pass-Through 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 Account and the Distribution Account
may be made from time to time for purposes other than distributions to
Certificateholders, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Mortgage Loans.
The Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Depositor, the Servicer, the Trustee and the rights of the
Certificateholders under the Agreement at any time by the Depositor, the
Servicer, the Trustee 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.
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.
A-6-5
<PAGE>
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 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, (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, in the form
described by the Agreement certifying to the Trustee and the Certificate
Registrar the facts surrounding the transfer, or (ii) in all other cases, 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, 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 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, the
Servicer and the Certificate Insurer against any liability that may result if
the transfer is not so exempt or is not made in accordance with such federal and
state laws.
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.
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
A-6-6
<PAGE>
ensure that the transfer of this Certificate to any Person other than a
Permitted Transferee or any other Person will not cause the REMIC Trust to cease
to qualify as a REMIC or cause the imposition of a tax upon the REMIC Trust.
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 Servicer, the Trustee, the Certificate
Insurer and the Certificate Registrar and any agent of the Depositor, any
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 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 later of 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, 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 they Certificates; however, such right to purchase is
subject to the aggregate Stated Principal Balance of the Mortgage Loans and each
REO Property at the time of purchase being 10% or less of the Original Pool
Balance.
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.
A-6-7
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed.
Dated:
FIRST UNION NATIONAL BANK,
solely in its capacity as Trustee and
not in its individual capacity
By_______________________________________
Authorized Officer
CERTIFICATE OF AUTHENTICATION
This is one of the Class R Certificates referred to in the
within-mentioned Agreement.
FIRST UNION NATIONAL BANK,
as Certificate Registrar
BY:
Authorized Signatory
A-6-8
<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
-----------
(Cuss) (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 Emergent Home
Equity Loan Pass-Through Certificate Series 1997-2, Class R 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
_______________________________________
A-6-9
<PAGE>
Signature Guaranteed
A-6-10
<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.
A-6-11
<PAGE>
EXHIBIT B
FORM OF FINANCIAL GUARANTY INSURANCE POLICY
B-1
<PAGE>
EXHIBIT C-1
FORM OF TRUSTEE'S INITIAL CERTIFICATION
__________, 1997
Prudential Securities Secured
Financing Corporation
One New York Plaza
New York, New York 10292
Attn: Asset-Backed Finance Group
Emergent Mortgage Corp.
50 Datastream Plaza, Suite 201
Greenville, SC 29605
Re: Pooling and Servicing Agreement, dated as of June 1, 1997,
among Prudential Securities Secured Financing Corporation,
Emergent Mortgage Corp. and First Union National Bank
Ladies and Gentlemen:
Pursuant to Section 2.02 of the Agreement, we certify 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 hereto as not being covered by this certification), (i)
the Mortgage Note included in each Mortgage File required to be delivered to us
pursuant to the Agreement is in our possession and (ii) such Mortgage Note has
been reviewed by us and appears regular on its face and relates to such Mortgage
Loan.
Attached is the Trustee's preliminary exceptions in accordance
with Section 2.02 of the Agreement. Capitalized terms used but not otherwise
defined herein shall have the meanings ascribed to them in the 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 due authorization, recordability or genuineness of any of the
documents contained in the Mortgage File of any of the Mortgage Loans identified
on the Mortgage Loan
Schedule,
C-1-1
<PAGE>
or (ii) the collectability, insurability, effectiveness or suitability of any
such Mortgage Loan.
FIRST UNION NATIONAL BANK,
solely in its
capacity as Trustee and not in its
individual capacity
By:______________________________________
Name:____________________________________
Title:___________________________________
C-1-2
<PAGE>
EXHIBIT C-2
FORM OF TRUSTEE'S FINAL CERTIFICATION
_________, 1997
Prudential Securities Secured
Financing Corporation
One New York Plaza
New York, New York 10292
Attn: Asset-Backed Finance Group
Emergent Mortgage Corp.
50 Datastream Plaza, Suite 201
Greenville, SC 29605
Re: Pooling and Servicing Agreement, dated as of June 1, 1997,
among Prudential Securities Secured Financing Corporation,
Emergent Mortgage Corp. and First Union National Bank
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; and
(iii) the original lender's title insurance policy.
The Trustee has made no independent examination of any
documents contained in each Mortgage File beyond the review specifically
required in the
C-2-1
<PAGE>
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.
FIRST UNION NATIONAL BANK,
solely in its capacity as Trustee
and not in its individual capacity
By:________________________________________
Name:______________________________________
Title:_____________________________________
C-2-2
<PAGE>
EXHIBIT D
FORM OF UNAFFILIATED SELLER'S AGREEMENT
D-1
<PAGE>
Exhibit E-1
REQUEST FOR RELEASE
(for Trustee/Custodian)
Loan Information
Name of Mortgagor:
Servicer
Loan No.:
Trustee/Custodian
Name: First Union National Bank
Address: 230 S. Tryon Street, Charlotte, NC 28288
Trustee/Custodian
Mortgage File No.:
Depositor
Name: Prudential Securities Secured
Financing Corporation
Address: One New York Plaza, New York 10292
Certificates: Emergent Home Equity Loan Pass-Through
Certificates, Series 1997-2.
E-1-1
<PAGE>
The undersigned Servicer hereby acknowledges that it has
received from First Union National Bank, as Trustee for the Holders of Emergent
Home Equity Loan Pass-Through Certificates, Series 1997-2, the documents
referred to below (the "Documents"). All capitalized terms not otherwise in this
Request for Release shall have the meanings given them in the Pooling and
Servicing Agreement, dated as of June 1, 1997, among the Trustee, the Depositor
and the 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 Servicer hereby acknowledges and agrees as
follows:
(1) The 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.
E-1-2
<PAGE>
(2) The 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 Servicer assert or seek to assert any claims or rights of setoff to
or against the Documents or any proceeds thereof.
(3) The 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
Servicer shall at all times be earmarked for the account of the
Trustee, and the Servicer shall keep the Documents and any proceeds
separate and distinct from all other property in the Servicer's
possession, custody or control.
Dated:
EMERGENT MORTGAGE CORP.
By:______________________________________
Name:____________________________________
Title:___________________________________
E-1-3
<PAGE>
EXHIBIT E-2
REQUEST FOR RELEASE
[Mortgage Loans Paid in Full]
OFFICERS' CERTIFICATE AND TRUST RECEIPT
EMERGENT HOME EQUITY LOAN PASS-THROUGH CERTIFICATES
SERIES 1997-2
____________________________________________ HEREBY CERTIFIES THAT
HE/SHE IS AN OFFICER OF THE 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
E-2-1
<PAGE>
EXHIBIT F-1
FORM OF RULE 144A CERTIFICATE
FROM OWNER
First Union National Bank, as Trustee
230 South Tryon Street, 9th Floor
Charlotte, North Carolina 28288-1179
Attention: Corporate Trust Department
Re: Emergent Home Equity Loan Pass-Through
Certificates, Series 1997-2, Class R
Reference is hereby made to the Pooling and Servicing
Agreement dated as of June 1, 1997 (the "Pooling and Servicing Agreement") among
Prudential Securities Secured Financing Corporation, as Depositor, Emergent
Mortgage Corp., as Servicer, and First Union National Bank, as Trustee.
Capitalized terms used by not defined herein shall have the meanings given to
them in the Pooling and Servicing Agreement.
___________________, a ___________________ of
___________________ (the "Owner"), proposes to transfer to ___________________
(the "Transferee") $___________________ principal amount of Class R Certificates
(the "Certificates"). In connection with such transfer, the Owner hereby
represents, warrants and certifies as follows:
1. The Certificates are being transferred by the Owner to the
Transferee in accordance with (i) the provisions of the Pooling and Servicing
Agreement (including Section 5.02 thereof), and (ii) Rule 144A ("Rule 144A")
under the Securities Act of 1933, as amended, and (iii) any other applicable
securities laws of the United States, any State thereof and any other applicable
jurisdiction.
2. Without limitation of the foregoing, the Transferee is a
"qualified institutional buyer" within the meaning of Rule 144A purchasing for
its own account or for the account of a "qualified institutional buyer."
F-1-1
<PAGE>
3. The Transferee is aware that the transfer to it is being
made in reliance upon Rule 144A.
[Insert Name of Owner]
By:______________________________________
Name:____________________________________
Title:___________________________________
Date:___________, ___
F-1-2
<PAGE>
EXHIBIT F-1
FORM OF RULE 144A CERTIFICATE
FROM TRANSFEREE
First Union National Bank, as Trustee
230 South Tryon Street, 9th Floor
Charlotte, North Carolina 28288-1179
Attention: Corporate Trust Department
Re: Emergent Home Equity Loan Pass-Through
Certificates, Series 1997-2, Class R
Reference is hereby made to the Pooling and Servicing
Agreement dated as of June 1, 1997 (the "Pooling and Servicing Agreement") among
Prudential Securities Secured Financing Corporation, as Depositor, Emergent
Mortgage Corp., as Servicer, and First Union National Bank, as Trustee.
Capitalized terms used but not defined herein shall have the meanings given to
them in the Pooling and Servicing Agreement.
___________________, a ___________________ of
___________________ (the "Transferee"), proposes to acquire from
___________________ (the "Owner") $___________________ principal amount of
Class R Certificates (the "Certificates"). In connection with such acquisition,
the Transferee hereby represents, warrants and certifies as follows:
1. The Transferee's intention is to acquire the Certificates
(a) for investment for the Transferee's own account (or for the account of one
or more other institutional investors for which it is acting as duly authorized
fiduciary or agent, including, without limitation, an insurance company separate
account), or (b) for resale to "qualified institutional buyers" in transactions
under Rule 144A ("Rule 144A") promulgated under the Securities Act of 1933,as
amended (the "1933 Act") and not in any event with the view to, or for resale in
connection with, any distribution thereof. It understands that the Certificates
have not been registered under the 1933 Act, by reason of a specified exemption
from the registration provisions of the 1933 Act which depends upon, among other
things, the bona fide nature of the Transferee's investment intent (or intent to
resell only in Rule 144A transactions) as expressed herein.
2. The Transferee (i) understands that the Owner is relying
upon the exemption from the provisions of Section 5 of the 1933 Act provided by
Rule 144A
F-1-3
<PAGE>
in connection with the transfer of the Certificates to the Transferee and (ii)
will take reasonable steps to ensure that any purchaser of the Certificates from
the Transferee is aware that the Transferee is relying on such exemption in
connection with any such resale.
3. The Transferee is a "qualified institutional buyer" within
the meaning of Rule 144A.
4. The Transferee acknowledges either (a) that it has not
requested from any person the information required to be received by the
Transferee, upon request, pursuant to Rule 144A(d)(4)(i) (the "Required
Information"), or (b) that it has requested and received the Required
Information from the Owner or the Trustee.
5. The Transferee will not sell or otherwise transfer any of
the Certificates, except in compliance with the provisions of the Pooling and
Servicing Agreement (including Section 5.02 thereof) and unless either such
Certificates are registered or qualified under the 1933 Act and the applicable
law any state or other applicable jurisdiction or an exemption from such
registration or qualification is available. The Purchaser understands and
acknowledges that the Certificates bear a legend to such effect.
Very truly yours,
[TRANSFEREE]
By:
Name:
Title:
F-1-4
<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 Emergent Home Equity Loan Pass-Through
Certificates, Series 1997-2, Class R (the "Class R Certificates"), on behalf of
whom I have the authority to make this affidavit and agreement. Capitalized
terms used but not defined herein have the respective meanings assigned thereto
in the Pooling and Servicing Agreement, dated as of June 1, 1997, among
Prudential Securities Secured Financing Corporation, Depositor, Emergent
Mortgage Corp., Servicer, and First Union National Bank, Trustee (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, in the
initial principal amount of $0.00 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
F-2-1
<PAGE>
transferee is a Permitted Transferee and, at the time of transfer, such person
does not have actual knowledge that the affidavit is false; and (iv) that each
of the Class R Certificates may be a "noneconomic residual interest" within the
meaning of proposed Treasury regulations promulgated under the Code and that the
transferor of a "noneconomic residual interest" will remain liable for any taxes
due with respect to the 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 substantially
in 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
F-2-2
<PAGE>
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.
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 funds 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.
F-2-3
<PAGE>
IN WITNESS WHEREOF, the Owner has caused this instrument to be
executed on its behalf, pursuant to the authority of its Board of Directors, by
its [Vice] President, attested by its [Assistant] Secretary, this ____ day of
________, 199_.
[OWNER]
By:______________________________________
Name:____________________________________
Title: [Vice] President
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:
F-2-4
<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. The Owner does not know or believe
that any representation contained therein is false.
5. The Owner has no knowledge that the Purchaser is not both a
United States Person and a Permitted Transferee.
6. 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.
7. Capitalized terms not otherwise defined herein shall have
the meanings ascribed to them in the Pooling and Servicing Agreement.
F-2-5
<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
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:
F-2-6
<PAGE>
Schedule 1
MORTGAGE LOAN SCHEDULE
1-1
FINANCIAL GUARANTY
INSURANCE POLICY
Trust: As described in Endorsement No. 1 Policy No.: 50603-N
Certificates: $121,209,000 Emergent Home Equity Date of Issuance: 6/26/97
Loan Pass-Through Certificates,
Series 1997-2, Class A-1, Class A-2,
Class A-3, Class A-4 and
Class A-5 Certificates
FINANCIAL SECURITY ASSURANCE INC. ("Financial Security"), for
consideration received, hereby UNCONDITIONALLY AND IRREVOCABLY GUARANTEES to the
Trustee for the benefit of each Holder, subject only to the terms of this Policy
(which includes each endorsement hereto), the full and complete payment of
Guaranteed Distributions with respect to the Certificates of the Trust referred
to above.
For the further protection of each Holder, Financial Security
irrevocably and unconditionally guarantees payment of the amount of any
distribution of principal or interest with respect to the Certificates made
during the Term of this Policy to such Holder that is subsequently avoided in
whole or in part as a preference payment under applicable law.
Payment of any amount required to be paid under this Policy will be
made following receipt by Financial Security of notice as described in
Endorsement No. 1 hereto.
Financial Security shall be subrogated to the rights of each Holder to
receive distributions with respect to each Certificate held by such Holder to
the extent of any payment by Financial Security hereunder.
Except to the extent expressly modified by Endorsement No. 1 hereto,
the following terms shall have the meanings specified for all purposes of this
Policy. "Holder" means the registered owner of any Certificate as indicated on
the registration books maintained by or on behalf of the Trustee for such
purpose or, if the Certificate is in bearer form, the holder of the Certificate.
"Trustee", "Guaranteed Distributions" and "Term of this Policy" shall have the
meanings set forth in Endorsement No. 1 hereto.
This Policy sets forth in full the undertaking of Financial Security,
and shall not be modified, altered or affected by any other agreement or
instrument, including any modification or amendment thereto. Except to the
extent expressly modified by an endorsement hereto, the premiums paid in respect
of this Policy are nonrefundable for any reason whatsoever. This Policy may not
be canceled or revoked during the Term of this Policy. An acceleration payment
shall not be due under this Policy unless such acceleration is at the sole
option of Financial Security. THIS POLICY IS NOT COVERED BY THE
PROPERTY/CASUALTY INSURANCE SECURITY FUND SPECIFIED IN ARTICLE 76 OF THE NEW
YORK INSURANCE LAW.
In witness whereof, FINANCIAL SECURITY ASSURANCE INC. has caused this
Policy to be executed on its behalf by its Authorized Officer.
FINANCIAL SECURITY ASSURANCE INC.
By_______________________________
AUTHORIZED OFFICER
A subsidiary of Financial Security Assurance Holdings Ltd.
350 Park Avenue, New York, N.Y. 10022-6022 (212) 826-0100
Form 101NY (5/89)
<PAGE>
ENDORSEMENT NO. 1 TO
FINANCIAL GUARANTY INSURANCE POLICY
FINANCIAL SECURITY ASSURANCE INC.
TRUST: Established pursuant to the Pooling and Servicing
Agreement, dated as of June 1, 1997, among
Emergent Mortgage Corp. as servicer, Prudential
Securities Secured Financing Corporation as
depositor and First Union National Bank as
trustee.
POLICY NO.: 50603-N
SECURITIES: Emergent Home Equity Loan Pass-Through
Certificates, Series 1997-2, Class A-1, Class A-2,
Class A-3, Class A-4 and Class A-5 Certificates
(collectively, the "Class A Certificates") having
an aggregate original Certificate Principal
Balance of $121,209,000.
DATE OF ISSUANCE: June 26, 1997
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 New York are authorized or obligated
by law or executive order to be closed.
"Guaranteed Distributions" means, with respect to the Class A
Certificates and any Distribution Date, the sum of (i) the Interest Distribution
Amount for the Class A Certificates on such Distribution Date, (ii) any
Remaining Overcollateralization Deficit and (iii) without duplication of the
amount specified in clause (ii), on the final Distribution Date for any Class of
Class A Certificates, the outstanding Certificate Principal Balance of such
Class A Certificates, if any, in each case in accordance with the original terms
of the Securities without regard to any amendment or modification of the
Securities or the Pooling and Servicing Agreement except amendments or
modifications to which Financial Security has given its prior written consent.
Guaranteed Distributions shall not include, nor shall coverage be provided under
this Policy in respect of shortfalls, if any, attributable to the application of
the Relief Act, Prepayment Interest Shortfalls or any taxes, withholding or
other charge imposed by any governmental authority due in connection with the
payment of any Guaranteed Distribution to a Holder.
"Policy" means this Financial Guaranty Insurance Policy and includes
each endorsement thereto.
<PAGE>
Policy No.: 50603-N Date of Issuance: June 26, 1997
"Pooling and Servicing Agreement" means the Pooling and Servicing
Agreement, dated as of June 1, 1997, among Emergent Mortgage Corp. as servicer,
Prudential Securities Secured Financing Corporation as depositor and First Union
National Bank as trustee, as amended from time to time as required by the
Pooling and Servicing Agreement in accordance with the terms of the Pooling and
Servicing Agreement and with the consent of Financial Security.
"Receipt" and "Received" mean actual delivery to Financial Security
and to the Fiscal Agent (as defined below), if any, at or prior to 12:00 noon,
New York City time, on a Business Day; delivery either on a day that is not a
Business Day, or after 12:00 noon, New York City time, shall be deemed to be
Received on 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 aggregate Certificate
Principal Balance of the Securities is zero, (ii) any period during which any
payment on the Securities 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 non-appealable order in resolution of each such proceeding has
been entered.
"Trustee" means First Union National Bank, 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 second 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 Policy Payments Account established pursuant to the
Pooling and Servicing Agreement or, if no such Policy Payments Account has been
established, to the Trustee.
Financial Security shall be entitled to pay any amount hereunder in
respect of Guaranteed Distributions, including any acceleration payment, 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
-2-
<PAGE>
Policy No.: 50603-N Date of Issuance: June 26, 1997
accruing from after the date of such payment of 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. Notices and Conditions to Payment in Respect of Guaranteed
Distributions Avoided as Preference Payments. If any amount previously
distributed on the Class A Certificates is avoided as a preference payment under
applicable bankruptcy, insolvency, receivership or similar law, Financial
Security will pay such amount out of the funds of Financial Security on the
later of (a) the date when due to be paid pursuant to the Order referred to
below or (b) the first to occur of (i) the fourth Business Day following Receipt
by Financial Security from the Trustee of (A) a certified copy of the order of
the court or other governmental body which exercised jurisdiction to the effect
that the relevant Holder is required to return principal or interest distributed
with respect to the Class A Certificate during the Term of this Policy because
such distributions were avoidable as preference payments under applicable
bankruptcy law (the "Order"), (B) a certificate of the relevant Holder that the
Order has been entered and is not subject to any stay and (C) an assignment duly
executed and delivered by the relevant Holder, in such form as is reasonably
required by Financial Security and provided to the relevant Holder by Financial
Security, irrevocably assigning to Financial Security all rights and claims of
the relevant Holder relating to or arising under the Class A Certificate against
the debtor which made such preference payment or otherwise with respect to such
preference payment or (ii) the date of Receipt by Financial Security from the
Trustee of the items referred to in clauses (A), (B) and (C) above if, at least
four Business Days prior to such date of Receipt, Financial Security shall have
Received written notice from the Trustee that such items were to be delivered on
such date and such date was specified in such notice. Such payment shall be
disbursed to the receiver, conservator, debtor-in-possession or trustee in
bankruptcy named in the Order and not to the Trustee or any Holder directly
(unless a Holder has previously paid such amount to the receiver, conservator,
debtor-in-possession or trustee in bankruptcy named in the Order, in which case
such payment shall be disbursed to the Trustee for distribution to such Holder
upon proof of such payment reasonably satisfactory to Financial Security). In
connection with the foregoing, Financial Security shall have the rights provided
pursuant to Section 9.04(d) of the Pooling and Servicing Agreement.
4. Governing Law. This Policy shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to the
conflict of laws principles thereof.
5. Fiscal Agent. At any time during the Term of This Policy, Financial
Security may appoint a fiscal agent (the "Fiscal Agent") for purposes of this
Policy by written notice to the 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
-3-
<PAGE>
Policy No.: 50603-N Date of Issuance: June 26, 1997
Security and shall not be deemed Received until Received by both and (ii) all
payments required to be made by Financial Security under this Policy may be made
directly by Financial Security or by the Fiscal Agent on behalf of Financial
Security. The Fiscal Agent is the agent of Financial Security only and the
Fiscal Agent shall in no event be liable to any Holder for any acts of the
Fiscal Agent or any failure of Financial Security to deposit, or cause to be
deposited, sufficient funds to make payments due under this Policy.
6. Waiver of Defenses. To the fullest extent permitted by applicable
law, Financial Security agrees not to assert, and hereby waives, for the benefit
of each Holder, all rights (whether by counterclaim, setoff or otherwise) and
defenses (including, without limitation, the defense of fraud), whether acquired
by subrogation, assignment or otherwise, to the extent that such rights and
defenses may be available to Financial Security to avoid payment of its
obligations under this Policy in accordance with the express provisions of this
Policy.
7. Notices. All notices to be given hereunder shall be in writing
(except as otherwise specifically provided herein) and shall be mailed by
registered mail or personally delivered or telecopied to
Financial Security as follows:
Financial Security Assurance Inc.
350 Park Avenue
New York, NY 10022
Attention: Senior Vice President
- Surveillance Department
Re: Emergent Home Equity Loan
Pass-Through Certificates,
Series 1997-2
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.
8. Priorities. In the event any term or provision of the face of this
Policy is inconsistent with the provisions of this Endorsement, the provisions
of this Endorsement shall take precedence and shall be binding.
9. Exclusions From Insurance Guaranty Funds. This Policy is not
covered by the Property/Casualty Insurance Security Fund specified in Article 76
of the New York Insurance Law. This Policy is not covered by the Florida
Insurance Guaranty Association created under Part II of Chapter 631 of the
Florida Insurance Code. In the event Financial Security were to become
insolvent, any claims arising under this Policy are excluded from coverage by
the California
-4-
<PAGE>
Policy No.: 50603-N Date of Issuance: June 26, 1997
Insurance Guaranty Association, established pursuant to Article 14.2 of Chapter
1 of Part 2 of Division 1 of the California Insurance Code.
10. Surrender of Policy. The Trustee shall surrender this Policy to
Financial Security for cancellation upon expiration of the Term of this Policy.
IN WITNESS WHEREOF, FINANCIAL SECURITY ASSURANCE INC. has caused this
Endorsement No. 1 to be executed by its Authorized Officer.
FINANCIAL SECURITY ASSURANCE INC.
By:___________________________
Authorized Officer
-5-
<PAGE>
Policy No.: 50603-N Date of Issuance: June 26, 1997
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 First Union National Bank
(the "Trustee"), hereby certifies to Financial Security Assurance Inc. ("FSA"),
with reference to Financial Guaranty Insurance Policy No. 50603-N, dated June
26, 1997 (the "Policy") issued by FSA in respect of Emergent Home Equity Loan
Pass-Through Certificates, Series 1997-2, Class A-1, Class A-2, Class A-3, Class
A-4 and Class A-5 Certificates (collectively, the "Class A 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 Distribution Account and available for distribution to
the Holders of the Class A Certificates (the "Securities") pursuant to
the Pooling and Servicing Agreement will be $______________ (the
"Shortfall") less than the Guaranteed Distributions with respect to
the Distribution Date.
iii) The Trustee is making a claim under the Policy for the
Shortfall to be applied to distributions of principal or interest or
both with respect to the Securities.
iv) The Trustee agrees that, following receipt of funds from FSA,
it shall (a) such amounts in trust and apply the same directly to the
payment of Guaranteed Distributions on the Securities when due; (b)
not apply such funds for any other purpose; (c) not commingle such
funds with other funds held by the Trustee and (d) maintain an
accurate record of such payments with respect to each Security and the
corresponding claim on the Policy and proceeds thereof and, if the
Security is required to be surrendered for such payment, shall stamp
on each such Security the legend "$[insert applicable amount] paid by
FSA and the balance hereof has been cancelled and reissued" and then
shall deliver such Security to FSA.
v) The Trustee, on behalf of the Holders, hereby assigns to FSA
the rights of the Holders with respect to the Trust Fund to the extent
of any payments under the Policy,
A-1
<PAGE>
Policy No.: 50603-N Date of Issuance: June 26, 1997
including, without limitation, any amounts due to the Holders in
respect of securities law violations arising from the offer and sale
of the Trust Fund. The foregoing assignment is in addition to, and not
in limitation of, rights of subrogation otherwise available to FSA in
respect of such payments. The Trustee shall take such action and
deliver such instruments as may be reasonably requested or required by
FSA to effectuate the purpose or provisions of this clause (v).
vi) The Trustee, on its behalf and on behalf of the Holders,
hereby appoints FSA as agent and attorney-in-fact for the Trustee and
each such Holder in any legal proceeding with respect to the Trust
Fund. The Trustee hereby agrees that FSA may at any time during the
continuation of any proceeding by or against any debtor 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, including without limitation, (A) all matters
relating to any claim in connection with an Insolvency Proceeding
seeking the avoidance as a preferential transfer of any payment with
respect to the Trust Fund (a "Preference Claim"), (B) the direction of
any appeal of any order relating to any Preference Claim at the
expense of FSA but subject to reimbursement as provided in the
Insurance Agreement and (C) the posting of any surety, supersedeas or
performance bond pending any such appeal. In addition, the Trustee
hereby agrees that FSA 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 the
[SPECIFY 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.
A-2
<PAGE>
Policy No.: 50603-N Date of Issuance: June 26, 1997
IN WITNESS WHEREOF, the Trustee has executed and delivered this Notice
of Claim and Certificate as of the _______ day of _____________________, _____.
FIRST UNION NATIONAL BANK,
as Trustee
By:_____________________
Title:__________________
- --------------------------------------------------------------------------------
For FSA or Fiscal Agent Use Only
Wire transfer sent _____________ by _____________________________________
Confirmation Number _____________________________________________________
A-3
EXECUTION COPY
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION
Depositor
EMERGENT MORTGAGE HOLDINGS CORPORATION
Unaffiliated Seller
and
EMERGENT GROUP, INC.
---------------------------
UNAFFILIATED SELLER'S AGREEMENT
Dated as of June 1, 1997
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE ONE
DEFINITIONS
Section 1.01. Definitions.................................................. 1
ARTICLE TWO
PURCHASE, SALE AND CONVEYANCE OF THE MORTGAGE LOANS
Section 2.01. Agreement to Purchase......................................... 4
Section 2.02. Purchase Price................................................ 5
Section 2.03. Delivery of Mortgage Loan Files............................... 5
Section 2.04. Transfer of Mortgage Loans; Assignment of
Agreement..................................................... 5
Section 2.05. Examination of Mortgage Loan File............................. 5
Section 2.06. Books and Records............................................. 6
ARTICLE THREE
REPRESENTATIONS AND WARRANTIES
Section 3.01. Representations and Warranties as to the
Unaffiliated Seller.......................................... 6
Section 3.02. Representations and Warranties Relating to
the Mortgage Loans........................................... 8
Section 3.03. Covenants of the Unaffiliated Seller......................... 15
Section 3.04. Representations and Warranties of the
Depositor.................................................... 16
Section 3.05. Repurchase Obligation for Breach of a
Representation or Warranty................................... 17
Section 3.06. Reassignment of Purchased Mortgage Loans..................... 18
Section 3.07. Waivers...................................................... 19
Section 3.08. Representations and Warranties of Emergent
Group........................................................ 19
ARTICLE FOUR
THE UNAFFILIATED SELLER
Section 4.01. Liability of the Unaffiliated Seller......................... 20
Section 4.02. Merger or Consolidation...................................... 20
Section 4.03. Costs........................................................ 21
Section 4.04. Servicing.................................................... 22
i
<PAGE>
Page
----
Section 4.05. Mandatory Delivery........................................... 22
Section 4.06. Indemnification.............................................. 22
ARTICLE FIVE
CONDITIONS OF CLOSING
Section 5.01. Conditions of Depositor's Obligations........................ 26
Section 5.02. Conditions of Unaffiliated Seller's
Obligations.................................................. 28
Section 5.03. Termination of Depositor's Obligations....................... 28
ARTICLE SIX
MISCELLANEOUS
Section 6.01. Notices...................................................... 29
Section 6.02. Severability of Provisions................................... 29
Section 6.03. Agreement of Unaffiliated Seller............................. 30
Section 6.04. Survival..................................................... 30
Section 6.05. Effect of Headings and Table of Contents..................... 30
Section 6.06. Successors and Assigns....................................... 30
Section 6.07. Governing Law................................................ 30
Section 6.08. Confirmation of Intent....................................... 30
Section 6.09. Execution in Counterparts.................................... 31
Section 6.10. Amendments................................................... 31
Section 6.11. Miscellaneous................................................ 33
EXHIBITS
Exhibit A - Schedule of Mortgage Loans
Exhibit B - Officer's Certificate
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This Unaffiliated Seller's Agreement, dated as of June 1,
1997, among PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION, a Delaware
corporation (the "Depositor"), EMERGENT MORTGAGE HOLDINGS CORPORATION, a
Delaware corporation (the "Unaffiliated Seller"), and EMERGENT GROUP, INC., a
South Carolina corporation ("Emergent Group").
W I T N E S S E T H:
WHEREAS, the Depositor has agreed to purchase from the
Unaffiliated Seller and the Unaffiliated Seller, pursuant to this Agreement, is
selling to the Depositor the Mortgage Loans and Other Conveyed Property;
WHEREAS, it is the intention of the Unaffiliated Seller and
the Depositor that simultaneously with the Unaffiliated Seller's conveyance of
the Mortgage Loans and Other Conveyed Property to the Depositor (a) the
Depositor shall deposit the Mortgage Loans and Other Conveyed Property in a
trust pursuant to a Pooling and Servicing Agreement to be dated as of June 1,
1997 (the "Pooling and Servicing Agreement"), to be entered into by and among
the Depositor, as depositor, Emergent Mortgage Corp., as servicer, and First
Union National Bank, as trustee (the "Trustee") and (b) the Trustee shall issue
certificates (the "Certificates") evidencing beneficial ownership interests in
the property of the trust fund formed by the Pooling and Servicing Agreement
(the "Trust Fund") to the Depositor;
NOW, THEREFORE, in consideration of the premises and the
mutual agreements hereinafter set forth, the parties hereto agree as follows:
ARTICLE ONE
DEFINITIONS
Section 1.01. Definitions. Whenever used herein, the following
words and phrases, unless the context otherwise requires, shall have the
meanings specified in this Article:
"Agreement" means this Unaffiliated Seller's Agreement, as
amended or supplemented in accordance with the provisions hereof.
"Certificate Insurer" means Financial Security Assurance Inc.,
a stock insurance company organized and created under the laws of the State of
New York, and any successors thereto.
"Closing Date" shall be June 26, 1997.
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"Commission" means the Securities and Exchange Commission and
its successors.
"Cut-Off Date Principal Balance" means as to each Mortgage
Loan, its unpaid principal balance as of the Cut-Off Date.
"Depositor Information" shall have the meaning given to such
term in Section 4.06(b).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"FSA Information" means any information furnished by the
Certificate Insurer in writing expressly for the use in the Offering Document,
it being understood that in respect of the initial Offering Document, the FSA
Information is limited to the information included under the caption "The
Insurer" and the financial statements of the Certificate Insurer incorporated by
reference therein.
"Lien" means a security interest, lien, charge, pledge, equity
or encumbrance of any kind other than tax liens, mechanics liens and any liens
that attach to a Mortgaged Property by operation of law.
"Original Pool Balance" means the aggregate unpaid principal
balance of the Mortgage Loans as of the Cut-Off Date. The Original Pool Balance
is $109,634,678.61.
"Originator" means Emergent Mortgage Corp., a South Carolina
corporation.
"Other Conveyed Property" means all monies at any time paid or
payable on the Mortgage Loans or in respect thereof after the Cut-Off Date
(including amounts due on or before the Cut-Off Date but received by the
Originator, the Unaffiliated Seller or the Depositor after the Cut-Off Date),
the insurance policies relating to the Mortgage Loans and all Insurance
Proceeds, rights of the Unaffiliated Seller against the Originator under the
Purchase Agreement and Assignment, all items contained in the Mortgage Files,
and any REO Property, together with all collections thereon and proceeds
thereof.
"Prospectus" means the Prospectus dated December 4, 1996
relating to the offering by the Depositor from time to time of its pass-through
certificates (issuable in series) in the form in which it was or will be filed
with the Securities and Exchange Commission pursuant to Rule 424(b) under the
Securities Act with respect to the offer and sale of the Certificates.
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June 17, 1997, relating to the offering of the Certificates in the form in which
it was or will be filed with the Commission pursuant to Rule 424(b) under the
Securities Act with respect to the offer and sale of the Certificates.
"Purchase Agreement and Assignment" means the Agreement dated
as of June 1, 1997 among the Originator, the Unaffiliated Seller and Emergent
Group, Inc.
"Registration Statement" means that certain registration
statement on Form S-3, as amended (Registration No. 333-16511) relating to the
offering by the Depositor from time to time of its pass-through certificates
(issuable in series) as heretofore declared effective by the Commission.
"Related Documents" means the Insurance Agreement and the
Indemnification Agreement dated as of June 1, 1997 among the Originator, the
Unaffiliated Seller, Emergent Group, the Depositor, Prudential Securities
Incorporated and Financial Security Assurance Inc.
"Schedule of Mortgage Loans" means the schedule of all
Mortgages and Mortgage notes sold and transferred pursuant to this Agreement
which is attached hereto as Schedule A.
"Securities Act" means the Securities Act of 1933, as amended.
"Termination Event" means the existence of any one or more of
the following conditions:
(a) A stop order suspending the effectiveness of the
Registration Statement shall have been issued or a proceeding for that purpose
shall have been initiated or threatened by the Commission; or
(b) Subsequent to the execution and delivery of this
Agreement, a downgrading, or public notification of a possible change, without
indication of direction, shall have occurred in the rating accorded any of the
debt securities or claims paying ability of any person providing any form of
credit enhancement for any of the Certificates, by any "nationally recognized
statistical rating organization," as that term is defined by the Commission for
purposes of Rule 436(g)(2) under the Securities Act; or
(c) Subsequent to the execution and delivery of this
Agreement, there shall have occurred an adverse change in the condition,
financial or otherwise, earnings, affairs, regulatory situation or business
prospects of the Certificate
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Insurer or the Unaffiliated Seller reasonably determined by the Depositor to be
material; or
(d) Subsequent to the date of this Agreement there shall have
occurred any of the following: (i) a suspension or material limitation in
trading in securities substantially similar to the Certificates; (ii) a general
moratorium on commercial banking activities in New York declared by either
Federal or New York State authorities; or (iii) the engagement by the United
States in hostilities, or the escalation of such hostilities, or any calamity or
crisis, if the effect of any such event specified in this clause (iii) in the
reasonable judgment of the Depositor makes it impracticable or inadvisable to
proceed with the public offering or the delivery of the Certificates on the
terms and in the manner contemplated in the Prospectus Supplement.
"Unaffiliated Seller" means Emergent Mortgage Holdings
Corporation, in its capacity as Unaffiliated Seller of the Mortgage Loans under
this Agreement and any successor to Emergent Mortgage Holdings Corporation,
whether through merger, consolidation, purchase and assumption of Emergent
Mortgage Holdings Corporation or all or substantially all of its assets or
otherwise.
"Unaffiliated Seller Repurchase Event" means the occurrence of
a breach of any of the Unaffiliated Seller's representations and warranties
under Section 3.02 herein.
Capitalized terms used herein that are not otherwise defined
shall have the respective meanings ascribed thereto in the Pooling and Servicing
Agreement.
ARTICLE TWO
PURCHASE, SALE AND CONVEYANCE OF THE MORTGAGE LOANS
Section 2.01. Agreement to Purchase. (a) Subject to the terms
and conditions of this Agreement, the Unaffiliated Seller hereby sells,
transfers, assigns, and otherwise conveys to the Depositor without recourse (but
without limitation of its obligations and representations in this Agreement),
and the Depositor hereby purchases, all right, title and interest of the
Unaffiliated Seller in and to the Mortgage Loans and the Other Conveyed
Property. It is the intention of the Unaffiliated Seller and the Depositor that
the transfer and assignment contemplated by this Agreement shall constitute a
sale of the Mortgage Loans and the Other Conveyed Property from the Unaffiliated
Seller to the Depositor, conveying good title thereto free and clear of any
Liens, and the Mortgage Loans and the Other Conveyed Property shall not be part
of the Unaffiliated Seller's estate in the
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event of the filing of a bankruptcy petition by or against the Unaffiliated
Seller under any bankruptcy or similar law.
Section 2.02. Purchase Price. On the Closing Date, as full
consideration for the Unaffiliated Seller's sale of the Mortgage Loans to the
Depositor, the Depositor will deliver to the Unaffiliated Seller (i) an amount
in cash equal to $121,357,969.55 (which amount includes accrued interest of
$573,201.05), less certain expenses and (ii) the Residual Certificate to be
issued pursuant to the Pooling and Servicing Agreement.
Section 2.03. Delivery of Mortgage Loan Files. On or prior to
the Closing Date, the Unaffiliated Seller shall deliver or shall cause to be
delivered to the Trustee (as assignee of the Depositor pursuant to the Pooling
and Servicing Agreement), the documents with respect to each Mortgage Loan
listed in Section 2.01(a) of the Pooling and Servicing Agreement.
Section 2.04. Transfer of Mortgage Loans; Assignment of
Agreement. The Depositor has the right to assign its interest under this
Agreement to the Trustee as may be required to effect the purposes of the
Pooling and Servicing Agreement, without further notice to, or consent of, the
Unaffiliated Seller, and the Trustee shall succeed to such of the rights and
obligations of the Depositor hereunder as shall be so assigned. The Depositor
shall, pursuant to the Pooling and Servicing Agreement, assign all of its right,
title and interest in and to the Mortgage Loans and its right to exercise the
remedies created by this Section 2.04 and Section 3.05 hereof to the Trustee for
the benefit of the Certificateholders. The Unaffiliated Seller agrees that, upon
such assignment to the Trustee, such representations, warranties, agreements and
covenants will run to and be for the benefit of the Trustee and the Trustee may
enforce diligently, without joinder of the Depositor, the repurchase obligations
of the Unaffiliated Seller set forth herein with respect to breaches of such
representations, warranties, agreements and covenants.
Section 2.05. Examination of Mortgage Loan File. Prior to the
Closing Date, the Unaffiliated Seller shall make the Mortgage Files available to
the Depositor or its designee for examination at the Unaffiliated Seller's
offices or at such other place as the Unaffiliated Seller shall reasonably
specify. Such examination may be made by the Depositor or its designee at any
time on or before the Closing Date. If the Depositor or its designee makes such
examination prior to the Closing Date and identifies any Mortgage Loans that do
not conform to the requirements of the Depositor as described in this Agreement,
such Mortgage Loans shall be deleted from the Schedule of Mortgage Loans. The
Depositor may, at its option
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and without notice to the Unaffiliated Seller, purchase all or part of the
Mortgage Loans without conducting any partial or complete examination. The fact
that the Depositor or the Trustee has conducted or has failed to conduct any
partial or complete examination of the Mortgage Files shall not affect the
rights of the Depositor or the Trustee to demand repurchase or other relief as
provided in this Agreement.
Section 2.06. Books and Records. The sale of each Mortgage
Loan shall be reflected on the Unaffiliated Seller's balance sheet and other
financial statements as a sale of assets by the Unaffiliated Seller. The
Unaffiliated Seller shall be responsible for maintaining, and shall maintain, a
complete set of books and records for each Mortgage Loan which shall be clearly
marked to reflect the ownership of each Mortgage Loan by the Trustee for the
benefit of the Certificateholders and the Certificate Insurer.
ARTICLE THREE
REPRESENTATIONS AND WARRANTIES
Section 3.01. Representations and Warranties as to the
Unaffiliated Seller. The Unaffiliated Seller hereby represents and warrants to
the Depositor, as of the Closing Date, that:
(a) Organization and Good Standing. The Unaffiliated Seller
has been duly organized and is validly existing as a corporation in
good standing under the laws of the State of Delaware, with power and
authority to own its properties and to conduct its business as such
properties are currently owned and such business is currently
conducted, and had at all relevant times, and now has, power, authority
and legal right to acquire, own and sell the Mortgage Loans and the
Other Conveyed Property transferred to the Depositor.
(b) Due Qualification. The Unaffiliated Seller is duly
qualified to do business as a foreign corporation in good standing, and
has obtained all necessary licenses and approvals, in all jurisdictions
in which the ownership or lease of its property or the conduct of its
business requires such qualification.
(c) Power and Authority. The Unaffiliated Seller has the power
and authority to execute and deliver this Agreement and to carry out
its terms; the Unaffiliated Seller has full power and authority to sell
and assign the Mortgage Loans and the Other Conveyed Property to be
sold and assigned to and deposited with the Depositor by it and has
duly authorized such sale and assignment to
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the Depositor by all necessary corporate action; and the execution,
delivery and performance of this Agreement and the Related Documents to
which it is a party have been duly authorized by the Unaffiliated
Seller by all necessary corporate action.
(d) Valid Sale; Binding Obligations. This Agreement, when duly
executed and delivered, shall effect a valid sale, transfer and
assignment of the Mortgage Loans and the Other Conveyed Property,
enforceable against the Unaffiliated Seller and creditors of and
purchasers from the Unaffiliated Seller; and this Agreement, when duly
executed and delivered, shall constitute legal, valid and binding
obligations of the Unaffiliated Seller enforceable in accordance with
its terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization or other similar laws affecting the
enforcement of creditors' rights generally and by equitable limitations
on the availability of specific remedies, regardless of whether such
enforceability is considered in a proceeding in equity or at law.
(e) No Violation. The consummation of the transactions
contemplated by this Agreement and the fulfillment of the terms of this
Agreement shall not conflict with, result in any breach of any of the
terms and provisions of or constitute (with or without notice, lapse of
time or both) a default under, the certificate of incorporation or
by-laws of the Unaffiliated Seller, or any material indenture,
agreement, mortgage, deed of trust or other instrument to which the
Unaffiliated Seller is a party or by which it is bound, or result in
the creation or imposition of any Lien upon any of its properties
pursuant to the terms of any such indenture, agreement, mortgage, deed
of trust or other instrument, other than this Agreement, or violate any
law, order, rule or regulation applicable to the Unaffiliated Seller of
any court or of any federal or state regulatory body, administrative
agency or other governmental instrumentality having jurisdiction over
the Unaffiliated Seller or any of its properties.
(f) No Proceedings. There are no material proceedings or
investigations pending or, to the Unaffiliated Seller's knowledge,
threatened against the Unaffiliated Seller, before any court,
regulatory body, administrative agency or other tribunal or
governmental instrumentality having jurisdiction over the Unaffiliated
Seller or its properties (i) asserting the invalidity of this
Agreement, (ii) seeking to prevent the issuance of the Certificates or
the consummation of any of the transactions contemplated by this
Agreement,
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(iii) seeking any determination or ruling that might materially and
adversely affect the performance by the Unaffiliated Seller of its
obligations under, or the validity or enforceability of, this
Agreement, (iv) involving the Unaffiliated Seller and which might
adversely affect the federal income tax or other federal, state or
local tax attributes of the Certificates, or (v) that could have a
material adverse effect on the Mortgage Loans.
(g) Approvals. All approvals, authorizations, consents, orders
or other actions of any person, corporation or other organization, or
of any court, governmental agency or body or official, required in
connection with the execution and delivery by the Unaffiliated Seller
of this Agreement and the consummation of the transactions contemplated
hereby have been or will be taken or obtained on or prior to the
Closing Date.
(h) Chief Executive Office. The chief executive office of the
Unaffiliated Seller is at 44 East Camperdown Way, Greenville, South
Carolina 29601, Attention: William P. Crawford.
Section 3.02. Representations and Warranties Relating to the
Mortgage Loans. The Unaffiliated Seller represents and warrants to the
Depositor, as of the Closing Date, that as to each Mortgage Loan, immediately
prior to the sale and transfer of the Mortgage Loans by the Unaffiliated Seller
to the Depositor:
(a) The information with respect to each Mortgage Loan set
forth in the Schedule of Mortgage Loans is true and correct as of the
Cut-off Date;
(b) All of the original or certified documentation required to
be delivered to the Trustee pursuant to the Pooling and Servicing
Agreement (including all material documents related thereto) with
respect to each Mortgage Loan has been or will be delivered to the
Trustee in accordance with the terms of such Pooling and Servicing
Agreement. Each of the documents and instruments specified to be
included therein has been duly executed and in due and proper form, and
each such document or instrument is in a form generally acceptable to
prudent mortgage lenders that regularly originate or purchase mortgage
loans comparable to the Mortgage Loans for sale to prudent investors in
the secondary market that invest in mortgage loans such as the Mortgage
Loans.
(c) Each Mortgaged Property is improved by a single
(one-to-four) family residential dwelling, which may
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include condominiums, townhouses and units in planned unit
developments, or manufactured housing, but shall not include
cooperatives;
(d) No Mortgage Loan had a Loan-to-Value Ratio in excess of
95%;
(e) Each Mortgage is a valid and subsisting first lien of
record on the Mortgaged Property subject in all cases to the exceptions
to title set forth in the title insurance policy, with respect to the
related Mortgage Loan, which exceptions are generally acceptable to
banking institutions in connection with their regular mortgage lending
activities, and such other exceptions to which similar properties are
commonly subject and which do not individually, or in the aggregate,
materially and adversely affect the benefits of the security intended
to be provided by such Mortgage;
(f) Immediately prior to the transfer and assignment herein
contemplated, the Unaffiliated Seller held good and indefeasible title
to, and was the sole owner of, each Mortgage Loan conveyed by it
subject to no Liens, except Liens which will be released simultaneously
with such transfer and assignment and subordinate Liens on the related
Mortgaged Property;
(g) As of the related Cut-off Date, no Mortgage Loan is 30 or
more days delinquent;
(h) There is no delinquent tax or assessment lien on any
Mortgaged Property, and each Mortgaged Property is free of substantial
damage and is in good repair;
(i) There is no valid and enforceable right of rescission,
offset, defense or counterclaim to any Mortgage Note or Mortgage,
including the obligation of the related Mortgagor to pay the unpaid
principal of or interest on such Mortgage Note or the defense of usury,
nor will the operation of any of the terms of the Mortgage Note or the
Mortgage, or the exercise of any right thereunder, render either the
Mortgage Note or the Mortgage unenforceable in whole or in part, or
subject to any right of rescission, set-off, counterclaim or defense,
including the defense of usury, and no such right of rescission,
set-off, counterclaim or defense has been asserted with respect
thereto;
(j) There is no mechanics' lien or claim for work, labor or
material affecting any Mortgaged Property which is or may be a lien
prior to, or equal with, the lien of the related Mortgage except those
which are insured
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against by any title insurance policy referred to in paragraph (l)
below;
(k) Each Mortgage Loan at the time it was made complied in all
material respects with all applicable state and federal laws and
regulations, including, without limitation, the federal
Truth-in-Lending Act and other consumer protection laws, real estate
settlement procedure, usury, equal credit opportunity, disclosure and
recording laws;
(l) With respect to each Mortgage Loan, a lender's title
insurance policy, issued in standard American Land Title Association
form, or other form acceptable in a particular jurisdiction by a title
insurance company authorized to transact business in the state in which
the related Mortgaged Property is situated, in an amount at least equal
to the initial Stated Principal Balance of such Mortgage Loan insuring
the mortgagee's interest under the related Mortgage Loan as the holder
of a valid first mortgage lien of record on the real property described
in the related Mortgage, as the case may be, subject only to exceptions
of the character referred to in paragraph (e) above, was effective on
the date of the origination of such Mortgage Loan, and, as of the
Cut-off Date such policy will be valid and thereafter such policy shall
continue in full force and effect;
(m) The improvements upon each Mortgaged Property are covered
by a valid and existing hazard insurance policy (which may be a blanket
policy of the type described in the related Pooling and Servicing
Agreement) with a generally acceptable carrier that provides for fire
and extended coverage representing coverage not less than the least of
(A) the outstanding principal balance of the related Mortgage Loan and
(B) the minimum amount required to compensate for damage or loss on a
replacement cost basis;
(n) If any Mortgaged Property is in an area identified in the
Federal Register by the Federal Emergency Management Agency as having
special flood hazards, a flood insurance policy (which may be a blanket
policy of the type described in the Pooling and Servicing Agreement) in
a form meeting the requirements of the current guidelines of the
Federal Insurance Administration is in effect with respect to such
Mortgaged Property with a generally acceptable carrier in an amount
representing coverage not less than the least of (A) the outstanding
principal balance of the related Mortgage Loan and (B) the maximum
amount of insurance that is available under the Flood Disaster
Protection Act of 1973;
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(o) Each Mortgage and Mortgage Note is the legal, valid and
binding obligation of the maker thereof and is enforceable in
accordance with its terms, except only as such enforcement may be
limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the enforcement of creditors' rights generally
and by general principles of equity (whether considered in a proceeding
or action in equity or at law), and all parties to each Mortgage Loan
had full legal capacity to execute all documents relating to such
Mortgage Loan and convey the estate therein purported to be conveyed;
(p) The Unaffiliated Seller has caused and will cause to be
performed any and all acts required to be performed to preserve the
rights and remedies of the servicer in any insurance policies
applicable to any Mortgage Loans delivered by such Unaffiliated Seller
including, to the extent such Mortgage Loan is not covered by a blanket
policy described in the Pooling and Servicing Agreement, any necessary
notifications of insurers, assignments of policies or interests
therein, and establishments of co-insured, joint loss payee and
mortgagee rights in favor of the servicer;
(q) Each original Mortgage was recorded or is in the process
of being recorded, and all subsequent assignments of the original
Mortgage have been recorded or are in the process of being recorded in
the appropriate jurisdictions wherein such recordation is necessary to
perfect the lien thereof for the benefit of the Trustee, subject to the
provisions of Section 2.01 of the Pooling and Servicing Agreement;
(r) The terms of each Mortgage Note and each Mortgage have not
been impaired, altered or modified in any respect, except by a written
instrument which has been recorded, if necessary, to protect the
interest of the owners and which has been delivered to the Trustee;
(s) The proceeds of each Mortgage Loan have been fully
disbursed, and there is no obligation on the part of the mortgagee to
make future advances thereunder. Any and all requirements as to
completion of any on-site or off-site improvements and as to
disbursements of any escrow funds therefor have been complied with. All
costs, fees and expenses incurred in making or closing or recording
such Mortgage Loans have been paid;
(t) Except as otherwise required by law or pursuant to the
statute under which the related Mortgage Loan was made, the related
Mortgage Note is not and has not been
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secured by any collateral, pledged account or other security except the
lien of the corresponding Mortgage;
(u) No Mortgage Loan was originated under a buydown plan;
(v) No Mortgage Loan provides for negative amortization, has a
shared appreciation feature, or other contingent interest feature;
(w) Each Mortgaged Property is located in the state identified
in the Schedule of Mortgage Loans;
(x) Each Mortgage contains a provision for the acceleration of
the payment of the unpaid principal balance of the related Mortgage
Loan in the event the related Mortgaged Property is sold without the
prior consent of the mortgagee thereunder;
(y) Any advances made after the date of origination of a
Mortgage Loan but prior to the Cut-off Date, have been consolidated
with the outstanding principal amount secured by the related Mortgage,
and the secured principal amount, as consolidated, bears a single
interest rate and single repayment term reflected on the Schedule of
Mortgage Loans. The consolidated principal amount does not exceed the
original principal amount of the related Mortgage Loan. No Mortgage
Note permits or obligates the Originator to make future advances to the
related Mortgagor at the option of the Mortgagor;
(z) There is no proceeding pending or threatened for the total
or partial condemnation of any Mortgaged Property, nor is such a
proceeding currently occurring, and each Mortgaged Property is
undamaged by waste, fire, earthquake or earth movement, flood, tornado
or other casualty, so as to affect adversely the value of the Mortgaged
Property as security for the Mortgage Loan or the use for which the
premises were intended;
(aa) All of the improvements of any Mortgaged Property lie
wholly within the boundaries and building restriction lines of such
Mortgaged Property, and no improvements on adjoining properties
encroach upon such Mortgaged Property, and, if a title insurance policy
exists with respect to such Mortgaged Property, are stated in such
title insurance policy and affirmatively insured;
(ab) No improvement located on or being part of any Mortgaged
Property is in violation of any applicable zoning law or regulation.
All inspections, licenses and certificates required to be made or
issued with respect
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to all occupied portions of each Mortgaged Property and, with respect
to the use and occupancy of the same, including, but not limited to,
certificates of occupancy and fire underwriting certificates, have been
made or obtained from the appropriate authorities and such Mortgaged
Property is lawfully occupied under the applicable law;
(ac) With respect to each Mortgage constituting a deed of
trust, a trustee, duly qualified under applicable law to serve as such,
has been properly designated and currently so serves and is named in
such Mortgage, and no fees or expenses are or will become payable by
the Originator or the Trust Fund to the trustee under the deed of
trust, except in connection with a trustee's sale after default by the
related Mortgagor;
(ad) Each Mortgage contains customary and enforceable
provisions which render the rights and remedies of the holder thereof
adequate for the realization against the related Mortgaged Property of
the benefits of the security, including (A) in the case of a Mortgage
designated as a deed of trust, by trustee's sale and (B) otherwise by
judicial foreclosure. There is no homestead or other exemption
available which materially interferes with the right to sell the
related Mortgaged Property at a trustee's sale or the right to
foreclose the related Mortgage;
(ae) There is no default, breach, violation or event of
acceleration existing under any 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 default,
breach, violation or event of acceleration; and neither the Originator
or the Unaffiliated Seller has waived any default, breach, violation or
event of acceleration;
(af) No instrument of release or waiver has been executed in
connection with any Mortgage Loan, and no Mortgagor has been released,
in whole or in part;
(ag) The credit underwriting guidelines applicable to each
Mortgage Loan conform in all material respects to the Originator's
underwriting guidelines;
(ah) All parties to the Mortgage Note and the Mortgage had
legal capacity to execute the Mortgage Note and the Mortgage and each
Mortgage Note and Mortgage have been duly and properly executed by such
parties;
(ai) The Unaffiliated Seller has no actual knowledge that
there exist on any Mortgaged Property any hazardous
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substances, hazardous wastes or solid wastes, as such terms are defined
in the Comprehensive Environmental Response Compensation and Liability
Act, the Resource Conservation and Recovery Act of 1976, or other
federal, state or local environmental legislation;
(aj) None of the Mortgage Loans shall be due from the United
States of America or any State or from any agency, department,
subdivision or instrumentality thereof;
(ak) At the Cut-Off Date, no Mortgagor had been identified on
the records of the Originator as being the subject of a current
bankruptcy proceeding;
(al) By the Closing Date, the Unaffiliated Seller will have
caused the portions of the Unaffiliated Seller's records relating to
the Mortgage Loans to be clearly and unambiguously marked to show that
the Mortgage Loans constitute part of the Trust Fund and are owned by
the Trust Fund in accordance with the terms of the Pooling and
Servicing Agreement;
(am) No Mortgage Loan was originated in, or is subject to the
laws of, any jurisdiction the laws of which would make unlawful, void
or voidable the sale, transfer and assignment of such Mortgage Loan
under this Agreement or pursuant to transfers of the Certificates. The
Unaffiliated Seller has not entered into any agreement with any account
debtor that prohibits, restricts or conditions the assignment of any
portion of the Mortgage Loans;
(an) All filings (including, without limitation, UCC filings)
required to be made by any Person and actions required to be taken or
performed by any Person in any jurisdiction to give the Trustee a first
priority perfected lien on, or ownership interest in, the Mortgage
Loans and the proceeds thereof and the other property of the Trust Fund
have been made, taken or performed;
(ao) The Unaffiliated Seller has not done anything to convey
any right to any Person that would result in such Person having a right
to payments due under the Mortgage Loan or otherwise to impair the
rights of the Trust Fund and the Certificateholders in any Mortgage
Loan or the proceeds thereof;
(ap) No Mortgage Loan is assumable (without the consent of the
Originator which consent has not been given) by another Person in a
manner which would release the Mortgagor thereof from such Mortgagor's
obligations
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to the Unaffiliated Seller with respect to such Mortgage Loan;
(aq) With respect to the Initial Mortgage Loans as of the
Cut-off Date: the aggregated Stated Principal Balance was
$109,634,678.61; each of the Stated Principal Balances was at least
$10,000 but no more than $492,000; the average Stated Principal Balance
was $63,190.02; the Mortgage Rates were at least 7.750% but no more
than 15.990%; the weighted average Mortgage Rate was 10.800%; the
original Loan-to-Value Ratios were at least 13.9% but no more than
90.4%; the weighted average original Loan-to-Value Ratio was 75.941%;
the remaining terms to stated maturity were at least 47 months but no
more than 360 months; the weighted average remaining term to stated
maturity was 199 months; the original terms to stated maturity were at
least 49 months but no more than 361 months; the weighted average
original term to stated maturity was 200 months; and no more than 0.67%
of the Mortgage Loans are secured by Mortgaged Properties located in
any one postal zip code area;
(ar) No selection procedures adverse to the Certificateholders
or to the Certificate Insurer have been utilized in selecting such
Mortgage Loan from all other similar Mortgage Loans originated by the
Originator;
(as) The related Mortgaged Property has not been subject to
any foreclosure proceeding or litigation;
(at) There was no fraud involved in the origination of the
Mortgage Loan by the mortgagee or the Mortgagor, any appraiser or any
other party involved in the origination of the Mortgage Loan; and
(au) Each Mortgage File contains an appraisal of the Mortgaged
Property indicating an appraised value equal to the appraised value of
such Mortgaged Property on the Mortgage Loan Schedule. Each appraisal
has been performed in accordance with the requirements of FNMA or
FHLMC.
(av) Each Mortgage Loan is a "qualified mortgage" as defined
in Section 860G(a)(3) of the Code.
Section 3.03. Covenants of the Unaffiliated Seller. The
Unaffiliated Seller covenants to the Depositor as follows:
(a) The Unaffiliated Seller shall cooperate with the Depositor
and the firm of independent certified public accountants retained with respect
to the issuance of the Certificates in making available all information and
taking
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all steps reasonably necessary to permit the accountants' letters required
hereunder to be delivered within the times set for delivery herein.
(b) The Unaffiliated Seller agrees to satisfy or cause to be
satisfied on or prior to the Closing Date all of the conditions to the
Depositor's obligations set forth in Section 5.01 hereof that are within the
Unaffiliated Seller's (or its agents') control.
(c) The Unaffiliated Seller hereby agrees to do all acts,
transactions, and things and to execute and deliver all agreements, documents,
instruments, and papers by and on behalf of the Unaffiliated Seller as the
Depositor or its counsel may reasonably request in order to consummate the
transfer of the Mortgage Loans to the Depositor and the subsequent transfer
thereof to the Trustee, and the rating, issuance and sale of the Certificates.
(d) The Unaffiliated Seller hereby agrees to arrange
separately to pay to the Trustee all of the Trustee's fees and expenses in
connection with the transactions contemplated by the Pooling and Servicing
Agreement, including, without limitation, all of the Trustee's fees and expenses
in connection with any actions taken by the Trustee pursuant to Section 8.10
thereof. For the avoidance of doubt, the parties hereto acknowledge that it is
the intention of the parties that the Depositor shall not pay any of the
Trustee's fees and expenses in connection with the transactions contemplated by
the Pooling and Servicing Agreement.
Section 3.04. Representations and Warranties of the Depositor.
The Depositor hereby represents, warrants and covenants to the Unaffiliated
Seller, as of the date of execution of this Agreement and the Closing Date,
that:
(a) The Depositor is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware;
(b) The Depositor has the corporate power and authority to
purchase each Mortgage Loan and to execute, deliver and perform, and to enter
into and consummate all the transactions contemplated by this Agreement;
(c) This Agreement has been duly and validly authorized,
executed and delivered by the Depositor, and, assuming the due authorization,
execution and delivery hereof by the Unaffiliated Seller, constitutes the legal,
valid and binding agreement of the Depositor, enforceable against the Depositor
in accordance with its terms, except as such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to
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or affecting the rights of creditors generally, and by general equity principles
(regardless of whether such enforcement is considered in a proceeding in equity
or at law);
(d) No consent, approval, authorization or order of or
registration or filing with, or notice to, any governmental authority or court
is required for the execution, delivery and performance of or compliance by the
Depositor with this Agreement or the consummation by the Depositor of any of the
transactions contemplated hereby, except such as have been made on or prior to
the Closing Date;
(e) The Depositor has filed or will file the Prospectus and
Prospectus Supplement with the Commission in accordance with Rule 424(b) under
the Securities Act;
(f) None of the execution and delivery of this Agreement, the
purchase of the Mortgage Loans from the Unaffiliated Seller, the consummation of
the other transactions contemplated hereby, or the fulfillment of or compliance
with the terms and conditions of this Agreement, (i) conflicts or will conflict
with the charter or bylaws of the Depositor or conflicts or will conflict with
or results or will result in a breach of, or constitutes or will constitute a
default or results or will result in an acceleration under, any term, condition
or provision of any indenture, deed of trust, contract or other agreement or
other instrument to which the Depositor is a party or by which it is bound and
which is material to the Depositor, or (ii) results or will result in a
violation of any law, rule, regulation, order, judgment or decree of any court
or governmental authority having jurisdiction over the Depositor.
Section 3.05. Repurchase Obligation for Breach of a
Representation or Warranty. Each of the representations and warranties contained
in Sections 3.01 and 3.02 shall survive the purchase by the Depositor of the
Mortgage Loans and the subsequent transfer thereof by the Depositor to the
Trustee and shall continue in full force and effect, notwithstanding any
restrictive or qualified endorsement on the Mortgage Loans and notwithstanding
subsequent termination of this Agreement or the Pooling and Servicing Agreement.
(a) Upon the occurrence of a breach of any of the Unaffiliated
Seller's representations and warranties under Section 3.02 hereof that
materially and adversely affects the related Mortgage Loan, the Unaffiliated
Seller shall, unless such breach shall have been cured in all material respects
or unless the Originator shall have repurchased such Mortgage Loan directly from
the Trustee, repurchase the related Mortgage Loan from the Trustee within 60
days following discovery by or notice to the Unaffiliated Seller of such breach
pursuant to Section 2.03 of the Pooling and Servicing
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Agreement, and, the Unaffiliated Seller shall pay the Purchase Price to the
Trustee pursuant to the Pooling and Servicing Agreement. To the extent such
Unaffiliated Seller fails to effect its repurchase obligation, Emergent Group
shall repurchase the related Mortgage Loans and pay the Purchase Price to the
Trustee on such date. The provisions of this Section 3.05 are intended to grant
the Trustee a direct right against the Unaffiliated Seller and the Emergent
Group to demand performance hereunder, and in connection therewith, the
Unaffiliated Seller and Emergent Group waive any requirement of prior demand
against the Depositor with respect to such repurchase obligation. Any such
purchase resulting from the Unaffiliated Seller Repurchase Event shall take
place in the manner specified in Section 2.03 of the Pooling and Servicing
Agreement. Notwithstanding any other provision of this Agreement or the Pooling
and Servicing Agreement to the contrary, the obligation of the Unaffiliated
Seller and Emergent Group under this Section shall be performed in accordance
with the terms hereof notwithstanding the failure of the Depositor or the
Servicer to perform any of their respective obligations with respect to such
Mortgage Loan under this Agreement or under the Pooling and Servicing Agreement.
(b) In addition to the foregoing and notwithstanding whether
the related Mortgage Loan shall have been purchased by the Unaffiliated Seller
or Emergent Group, the Unaffiliated Seller shall indemnify the Depositor, the
Trustee, the Certificate Insurer, Emergent Group and the Certificateholders
against all costs, expenses, losses, damages, claims and liabilities, including
reasonable fees and expenses of counsel, which may be asserted against or
incurred by any of them as a result of third party claims arising out of the
events or facts giving rise to Unaffiliated Seller Repurchase Events.
Section 3.06. Reassignment of Purchased Mortgage Loans. Upon
deposit in the Collection Account of the Purchase Price of any Mortgage Loan
repurchased by the Unaffiliated Seller under Section 3.05 hereof, the Depositor
and the Trustee shall take such steps as may be reasonably requested by the
Unaffiliated Seller in order to assign to the Unaffiliated Seller all of the
Depositor's and the Trust Fund's right, title and interest in and to such
Mortgage Loan and all security and documents and all Other Conveyed Property
conveyed to the Depositor and the Trust Fund directly relating thereto, without
recourse, representation or warranty, except as to the absence of Liens created
by or arising as a result of actions of the Depositor or the Trustee. Such
assignment shall be a sale and assignment outright, and not for security. If,
following the reassignment of a Purchased Mortgage Loan, in any enforcement suit
or legal proceeding, it is held that the Unaffiliated Seller may not enforce any
such Mortgage Loan
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on the ground that it shall not be a real party in interest or a holder entitled
to enforce the Mortgage Loan, the Depositor and the Trustee shall, at the
expense of the Unaffiliated Seller, take such steps as the Unaffiliated Seller
deems reasonably necessary to enforce the Mortgage Loan, including bringing suit
in the Depositor's or the Trustee's name or the names of the Certificateholders.
Section 3.07. Waivers. No failure or delay on the part of the
Depositor or the Trustee as assignee of the Depositor, in exercising any power,
right or remedy under this Agreement shall operate as a waiver thereof, nor
shall any single or partial exercise of any such power, right or remedy preclude
any other or future exercise thereof or the exercise of any other power, right
or remedy.
Section 3.08. Representations and Warranties of Emergent
Group. Emergent Group hereby represents and warrants to the Depositor as of the
date of execution of this Agreement and as of the Closing Date, that:
(a) Emergent Group is a corporation duly organized, validly
existing and in good standing under the laws of the State of South Carolina;
(b) Emergent Group has the corporate power and authority to
execute, deliver and perform, and to enter into and consummate all the
transactions contemplated by this Agreement;
(c) This Agreement has been duly and validly authorized,
executed and delivered by Emergent Group, and constitutes the legal, valid and
binding agreement of Emergent Group, enforceable against Emergent Group in
accordance with its terms, except as such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting the rights of creditors generally, and by general
equity principles (regardless of whether such enforcement is considered in a
proceeding in equity or at law);
(d) No consent, approval, authorization or order of or
registration or filing with, or notice to, any governmental authority or court
is required for the execution, delivery and performance of or compliance by
Emergent Group with this Agreement or the consummation by Emergent Group of any
of the transactions contemplated hereby or thereby, except such as have been
made on or prior to the Closing Date;
(e) None of the execution and delivery of this Agreement, the
consummation of the other transactions contemplated hereby, or the fulfillment
of or compliance with the terms and conditions of this Agreement, (i) conflicts
or
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will conflict with the charter or bylaws of Emergent Group or conflicts or will
conflict with or results or will result in a breach of, or constitutes or will
constitute a default or results or will result in an acceleration under, any
term, condition or provision of any material indenture, deed of trust, contract
or other agreement or other instrument to which Emergent Group is a party or by
which it is bound and which is material to Emergent Group, or (ii) results or
will result in a violation of any law, rule, regulation, order, judgment or
decree of any court or governmental authority having jurisdiction over Emergent
Group.
ARTICLE FOUR
THE UNAFFILIATED SELLER
Section 4.01. Liability of the Unaffiliated Seller. The
Unaffiliated Seller shall be liable in accordance herewith only to the extent of
the obligations in this Agreement specifically undertaken by such Unaffiliated
Seller and its representations and warranties.
Section 4.02. Merger or Consolidation. The Unaffiliated Seller
will keep in full effect its existence, rights and franchises as a corporation
and will obtain and preserve its qualification to do business as a foreign
corporation, in each jurisdiction necessary to protect the validity and
enforceability of this Agreement or any of the Mortgage Loans and to perform its
duties under this Agreement.
Any corporation or other entity (i) into which the
Unaffiliated Seller or Emergent Group may be merged or consolidated, (ii)
resulting from any merger or consolidation to which the Unaffiliated Seller or
Emergent Group is a party or (iii) succeeding to the business of the
Unaffiliated Seller or Emergent Group, which corporation has a certificate of
incorporation containing provisions relating to limitations on business and
other matters substantively identical to those contained in the Unaffiliated
Seller's certificate of incorporation, shall execute an agreement of assumption
to perform every obligation of the Unaffiliated Seller or Emergent Group, as the
case may be, under this Agreement and, whether or not such assumption agreement
is executed, shall be the successor to the Unaffiliated Seller or Emergent
Group, as the case may be, hereunder (without relieving the Unaffiliated Seller
or Emergent Group, as the case may be, of its responsibilities hereunder, if it
survives such merger or consolidation) without the execution or filing of any
document or any further act by any of the parties to this Agreement.
Notwithstanding the foregoing, so long as a Certificate Insurer Default shall
not have occurred and be continuing, the Unaffiliated Seller shall not merge or
consolidate with any
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other Person or permit any other Person to become the successor to the
Unaffiliated Seller's business without the prior written consent of the
Certificate Insurer. The Unaffiliated Seller or Emergent Group, as the case may
be, shall promptly inform the other party, the Trustee and, so long as a
Certificate Insurer Default shall not have occurred and be continuing, the
Certificate Insurer of such merger, consolidation or purchase and assumption.
Notwithstanding the foregoing, as a condition to the consummation of the
transactions referred to in clauses (i), (ii) and (iii) above, (x) immediately
after giving effect to such transaction, no representation or warranty made
pursuant to Sections 3.01, 3.02 and 3.08 or covenant made pursuant to Section
3.03, shall have been breached (for purposes hereof, such representations and
warranties shall speak as of the date of the consummation of such transaction)
and no event that, after notice or lapse of time, or both, would become an event
of default under the Insurance Agreement, shall have occurred and be continuing,
(y) the Unaffiliated Seller or Emergent Group, as the case may be, shall have
delivered to the Trustee an Officer's Certificate and an Opinion of Counsel each
stating that such consolidation, merger or succession and such agreement of
assumption comply with this Section 4.02 and that all conditions precedent, if
any, provided for in this Agreement relating to such transaction have been
complied with, and (z) the Unaffiliated Seller shall have delivered to the
Trustee an Opinion of Counsel, stating, in the opinion of such counsel, either
(A) all financing statements and continuation statements and amendments thereto
have been executed and filed that are necessary to preserve and protect the
interest of the Trustee in the Trust Fund and reciting the details of the
filings or (B) no such action shall be necessary to preserve and protect such
interest.
Section 4.03. Costs. In connection with the transactions
contemplated under this Agreement and the Pooling and Servicing Agreement, the
Unaffiliated Seller shall promptly pay (or shall promptly reimburse the
Depositor to the extent that the Depositor shall have paid or otherwise
incurred): (i) the fees and disbursements of the Unaffiliated Seller's counsel;
(ii) the fees of the Depositor's counsel, not to exceed $175,000; (iii) the fees
and disbursements of Ernst & Young, the Unaffiliated Seller's independent
certified public accountants, in rendering a comfort letter in connection with
the Prospectus Supplement and in comforting the Derived Information; (iv) the
fees of Standard & Poor's Ratings Group and Moody's Investors Service, Inc.; (v)
the fees of the Trustee, the fees and disbursements of the Trustee's counsel, if
any and the fees of the Trustee for custodial acceptance and loan deposit; (vi)
expenses incurred in connection with printing the Prospectus, the Prospectus
Supplement, any amendment or supplement thereto, any preliminary prospectus and
the Certificates; (vii) fees and
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expenses relating to the filing of documents with the Securities and Exchange
Commission (including without limitation periodic reports under the Exchange
Act); (viii) the shelf registration amortization fee paid in connection with the
issuance of Certificates; and (ix) to the extent not covered above, all of the
initial upfront expenses of the Depositor and the Underwriter including, without
limitation, legal fees and expenses, accountant fees and expenses and expenses
in connection with due diligence conducted on the Mortgage Loan File. The
Unaffiliated Seller also will promptly pay (or shall promptly reimburse the
Depositor to the extent that the Depositor shall have paid or otherwise
incurred) all of the initial upfront expenses of the Certificate Insurer
including, without limitation, legal fees and expenses, accountant fees and
expenses and expenses in connection with due diligence conducted on the Mortgage
Loan File. All other costs and expenses in connection with the transactions
contemplated hereunder shall be borne by the party incurring such expenses.
Section 4.04. Servicing. The Mortgage Loans shall be serviced
by the Servicer in accordance with the Pooling and Servicing Agreement.
Section 4.05. Mandatory Delivery. Each document specified in
Section 2.01 of the Pooling and Servicing Agreement for each Mortgage Loan shall
be delivered to the Depositor on or before the Closing Date (except as otherwise
provided in such Section 2.03).
Section 4.06. Indemnification. (a)(i) Emergent Group agrees to
indemnify and hold harmless the Depositor, each of its directors, each of its
officers who have signed the Registration Statement, Prudential Securities
Incorporated and each of its directors and each person or entity who controls
the Depositor or Prudential Securities Incorporated or any such person, within
the meaning of Section 15 of the Securities Act, against any and all losses,
claims, damages or liabilities, joint and several, to which the Depositor,
Prudential Securities Incorporated or any such person or entity may become
subject, under the Securities Act or otherwise, and will reimburse the
Depositor, Prudential Securities Incorporated and each such controlling person
for any legal or other expenses incurred by the Depositor, Prudential Securities
Incorporated or such controlling person in connection with investigating or
defending any such loss, claim, damage, liability or action, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement of any
material fact contained in the Prospectus Supplement or any amendment or
supplement to the Prospectus Supplement or the omission or the alleged omission
to state therein a material fact required to be stated therein
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or necessary to make the statements in the Prospectus Supplement or any
amendment or supplement to the Prospectus Supplement, in light of the
circumstances under which they were made, not misleading, except insofar as such
claims arise out of or are based upon any untrue statement or omission in the
FSA Information or the Depositor Information. This indemnity agreement will be
in addition to any liability which Emergent Group may otherwise have.
(ii) Emergent Group agrees to indemnify and to hold each of
the Depositor, the Trustee, the Certificate Insurer and each Certificateholder
harmless against any and all claims, losses, penalties, fines, forfeitures,
legal fees and related costs, judgments, and any other costs, fees and expenses
that the Depositor, the Trustee, the Certificate Insurer and any
Certificateholder may sustain in any way related to (i) the failure of the
Unaffiliated Seller or Emergent Group to perform its duties in compliance with
the terms of this Agreement or (ii) the breach by either the Unaffiliated Seller
or Emergent Group of any of the representations or warranties made by it in this
Agreement.
(b) The Depositor agrees to indemnify and hold harmless the
Unaffiliated Seller, each of its directors and each person or entity who
controls the Unaffiliated Seller or any such person, within the meaning of
Section 15 of the Securities Act, against any and all losses, claims, damages or
liabilities, joint and several, to which the Unaffiliated Seller or any such
person or entity may become subject, under the Securities Act or otherwise, and
will reimburse the Unaffiliated Seller and any such director or controlling
person for any legal or other expenses incurred by the Unaffiliated Seller or
any such director or controlling person in connection with investigating or
defending any such loss, claim, damage, liability or action, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement, the Prospectus, the
Prospectus Supplement, any amendment or supplement to the Prospectus or the
Prospectus Supplement or the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, but with respect to the Prospectus Supplement, only to the extent
that such untrue statement or alleged untrue statement or omission or alleged
omission relates to the information contained in the Prospectus Supplement under
the caption "Plan of Distribution" (the information contained under the caption
"Plan of Distribution" the "Depositor Information"). This indemnity agreement
will be in addition to any liability which the Depositor may otherwise have.
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(c) Promptly after receipt by an indemnified party under this
Section 4.06 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 4.06, notify the indemnifying party in writing of the
commencement thereof, but the omission to so notify the indemnifying party will
not relieve the indemnifying party from any liability which the indemnifying
party may have to any indemnified party hereunder except to the extent such
indemnifying party has been prejudiced thereby. In case any such action is
brought against any indemnified party, and it notifies the indemnifying party of
the commencement thereof, the indemnifying party will be entitled to participate
therein and, to the extent that it may elect by written notice delivered to the
indemnified party promptly after receiving the aforesaid notice from such
indemnified party, to assume the defense thereof with counsel reasonably
satisfactory to such indemnified party. After notice from the indemnifying party
to such indemnified party of its election to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under this
Section 4.06 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation; provided, however, if the defendants in any such action
include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be legal
defenses available to it that are different from or additional to those
available to the indemnifying party, the indemnified party or parties shall have
the right to select separate counsel to assert such legal defenses and to
otherwise participate in the defense of such action on behalf of such
indemnified party or parties. The indemnifying party shall not be liable for the
expenses of more than one separate counsel.
(d) The Depositor agrees, assuming all Emergent Group-Provided
Information (defined below) is accurate and complete in all material respects,
to indemnify and hold harmless Emergent Group, its respective officers and
directors and each person who controls Emergent Group within the meaning of the
Securities Act or the Exchange Act against any and all losses, claims, damages
or liabilities, joint or several, to which they may become subject under the
Securities Act or the Exchange Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement of a material fact contained in the Derived
Information provided by the Depositor, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and agrees to
reimburse each such indemnified
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party for any legal or other expenses reasonably incurred by him, her or it in
connection with investigating or defending or preparing to defend any such loss,
claim, damage, liability or action as such expenses are incurred. The
obligations of the Depositor under this Section 4.06(d) shall be in addition to
any liability which the Depositor may otherwise have.
The procedures set forth in Section 4.06(c) shall be equally
applicable to this Section 4.06(d).
(e) For purposes of this Section 4.06, the term "Derived
Information" means such portion, if any, of the information used by the
Depositor for filing with the Commission on Form 8-K as: (i) is not contained in
the Prospectus without taking into account information incorporated therein by
reference; and (ii) does not constitute Emergent Group-Provided Information.
"Emergent Group-Provided Information" means any computer tape furnished to the
Depositor by Emergent Group or the Originator concerning the assets comprising
the Trust Fund.
(f) In order to provide for just and equitable contribution in
circumstances in which the indemnity agreement provided for in the preceding
parts of this Section 4.06 is for any reason held to be unavailable to or
insufficient to hold harmless an indemnified party under subsection (a) or
subsection (b) of this Section 4.06 in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, the
indemnifying party shall contribute to the amount paid or payable by the
indemnified party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof); provided, however, that no person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. In determining the amount of
contribution to which the respective parties are entitled, there shall be
considered the relative benefits received by Emergent Group and the Unaffiliated
Seller on the one hand, and the Depositor on the other, Emergent Group and the
Unaffiliated Seller's, Emergent Group's and the Depositor's relative knowledge
and access to information concerning the matter with respect to which the claim
was asserted, the opportunity to correct and prevent any statement or omission,
and any other equitable considerations appropriate in the circumstances.
Emergent Group and the Unaffiliated Seller and the Depositor agree that it would
not be equitable if the amount of such contribution were determined by pro rata
or per capita allocation. For purposes of this Section 4.06, each director of
the Depositor, each officer of the Depositor who signed the Registration
Statement, and each person, if any who controls the Depositor within the meaning
of Section 15 of the Securities Act, shall have the same rights to contribution
as
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the Depositor, and each director of the Unaffiliated Seller, and each person, if
any who controls the Unaffiliated Seller within the meaning of Section 15 of the
Securities Act, shall have the same rights to contribution as the Unaffiliated
Seller.
ARTICLE FIVE
CONDITIONS OF CLOSING
Section 5.01. Conditions of Depositor's Obligations. The
obligations of the Depositor to purchase the Mortgage Loans will be subject to
the satisfaction, on the Closing Date, of the following conditions. Upon payment
of the purchase price for the Mortgage Loans, such conditions shall be deemed
satisfied or waived.
(a) Each of the obligations of the Unaffiliated Seller
required to be performed by it on or prior to the Closing Date pursuant to the
terms of this Agreement shall have been duly performed and complied with and all
of the representations and warranties of the Unaffiliated Seller and Emergent
Group under this Agreement shall be true and correct as of the Closing Date and
no event shall have occurred which, with notice or the passage of time, would
constitute a default under this Agreement, and the Depositor shall have received
a certificate to the effect of the foregoing signed by an authorized officer of
the Unaffiliated Seller.
(b) The Depositor shall have received a letter dated the date
of this Agreement, in form and substance acceptable to the Depositor and its
counsel, prepared by Ernst & Young, independent certified public accountants,
regarding the numerical information contained in the Prospectus Supplement under
the caption "The Mortgage Pool."
(c) [This subsection is reserved.]
(d) The Depositor shall have received the following additional
closing documents, in form and substance satisfactory to the Depositor and its
counsel:
(i) the Schedule of Mortgage Loans;
(ii) the Pooling and Servicing Agreement and the Underwriting
Agreement dated as of June 1, 1997 between the Depositor and Prudential
Securities Incorporated and all documents required thereunder, duly
executed and delivered by each of the parties thereto other than the
Depositor;
(iii) an officer's certificate, dated as of the Closing Date,
in the form of Exhibit B hereto, and
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attached thereto resolutions of the board of directors of the
Unaffiliated Seller and a copy of the by-laws of the Unaffiliated
Seller;
(iv) copy of the Unaffiliated Seller's and Emergent Group's
charter and all amendments, revisions, and supplements thereof,
certified as of a recent date by the Secretary of State of the State of
Delaware and the State of South Carolina, respectively;
(v) an opinion of the counsel for the Unaffiliated Seller and
Emergent Group as to various corporate matters (it being agreed that
the opinion shall expressly provide that the Trustee shall be entitled
to rely on the opinion);
(vi) opinions of counsel for the Unaffiliated Seller, in forms
acceptable to the Depositor, its counsel, Standard & Poor's Ratings
Group and Moody's Investors Service, Inc. as to such matters as shall
be required for the assignment of a rating to the Class A Certificates
of "AAA" by Standard & Poor's Ratings Group, and "Aaa" by Moody's
Investors Service, Inc. (it being agreed that such opinions shall
expressly provide that the Trustee shall be entitled to rely on such
opinions);
(vii) a letter from Moody's Investors Service, Inc. that it
has assigned a rating of "Aaa" to the Class A Certificates;
(viii) a letter from Standard & Poor's Ratings Group that it
has assigned a rating of "AAA" to the Class A Certificates;
(ix) an opinion of counsel for the Trustee in form and
substance acceptable to the Depositor, its counsel, Moody's Investors
Service, Inc. and Standard & Poor's Ratings Group (it being agreed that
the opinion shall expressly provide that the Unaffiliated Seller shall
be entitled to rely on the opinion);
(x) an opinion or opinions of counsel for the Certificate
Insurer, in each case in form and substance acceptable to the
Depositor, its counsel, Moody's Investors Service, Inc. and Standard &
Poor's Ratings Group (it being agreed that the opinion shall expressly
provide that the Unaffiliated Seller shall be entitled to rely on the
opinion); and
(e) The Policy shall have been duly executed, delivered and
issued with respect to the Certificates.
27
<PAGE>
contemplated by this Agreement and all documents incident hereto shall be
satisfactory in form and substance to the Depositor and its counsel.
(g) The Unaffiliated Seller shall have furnished the Depositor
with such other certificates of its officers or others and such other documents
or opinions as the Depositor or its counsel may reasonably request.
Section 5.02. Conditions of Unaffiliated Seller's Obligations.
The obligations of the Unaffiliated Seller under this Agreement shall be subject
to the satisfaction, on the Closing Date, of the following conditions:
(a) Each of the obligations of the Depositor required to be
performed by it at or prior to the Closing Date pursuant to the terms of this
Agreement shall have been duly performed and complied with and all of the
representations and warranties of the Depositor contained in this Agreement
shall be true and correct as of the Closing Date, and the Unaffiliated Seller
shall have received a certificate to that effect signed by an authorized officer
of the Depositor.
(b) The Unaffiliated Seller shall have received the following
additional documents:
(i) the Pooling and Servicing Agreement, and all documents
required thereunder, in each case executed by the Depositor as
applicable; and
(ii) a copy of a letter from Moody's Investors Service, Inc.
to the Depositor to the effect that it has assigned a rating of "Aaa"
to the Class A Certificates and a copy of a letter from Standard &
Poor's Ratings Group to the Depositor to the effect that it has
assigned a rating of "AAA" to the Class A Certificates.
(c) The Depositor shall have furnished the Unaffiliated Seller
with such other certificates of its officers or others and such other documents
to evidence fulfillment of the conditions set forth in this Agreement as the
Unaffiliated Seller may reasonably request.
Section 5.03. Termination of Depositor's Obligations. The
Depositor may terminate its obligations hereunder by notice to the Unaffiliated
Seller at any time before delivery of and payment of the Purchase Price for the
Mortgage Loans if: (i) any of the conditions set forth in Section 5.01 are not
satisfied when and as provided therein; (ii) there shall have been the entry of
a decree or order by a court or agency or supervisory authority having
jurisdiction in the premises for the appointment of a conservator, receiver
28
<PAGE>
or liquidator in any insolvency, readjustment of debt, marshalling of assets and
liabilities or similar proceedings of or relating to the Unaffiliated Seller or
Emergent Group, or for the winding up or liquidation of the affairs of the
Unaffiliated Seller; (iii) there shall have been the consent by the Unaffiliated
Seller or Emergent Group to the appointment of a conservator or receiver or
liquidator in any insolvency, readjustment of debt, marshalling of assets and
liabilities or similar proceedings of or relating to the Unaffiliated Seller or
Emergent Group or of or relating to substantially all of the property of the
Unaffiliated Seller or Emergent Group; (iv) any purchase and assumption
agreement with respect to the Unaffiliated Seller or Emergent Group or the
assets and properties of the Unaffiliated Seller or Emergent Group shall have
been entered into; or (v) a Termination Event shall have occurred. The
termination of the Depositor's obligations hereunder shall not terminate the
Depositor's rights hereunder or its right to exercise any remedy available to it
at law or in equity.
ARTICLE SIX
MISCELLANEOUS
Section 6.01. Notices. All demands, notices and communications
hereunder shall be in writing and shall be deemed to have been duly given if
personally delivered to or mailed by registered mail, postage prepaid, or
transmitted by telex or telegraph and confirmed by a similar mailed writing, if
to the Depositor, addressed to the Depositor at Prudential Securities Secured
Financing Corporation, One New York Plaza, New York, New York 10292, if to the
Unaffiliated Seller, addressed to the Unaffiliated Seller at Emergent Mortgage
Holdings Corporation, 44 E. Camperdown Way, Greenville, South Carolina 29601,
Attention: William P. Crawford or to such other address as the Unaffiliated
Seller may designate in writing to the Depositor and if to Emergent Group,
addressed to Emergent Group, Inc., 15 South Main Street, Suite 750, Greenville,
South Carolina 29601.
Section 6.02. Severability of Provisions. Any part, provision,
representation, warranty or covenant of this Agreement which is prohibited or
which is held to be void or unenforceable shall be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof. Any part, provision, representation, warranty or covenant of
this Agreement which is prohibited or unenforceable or is held to be void or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction as to any Mortgage Loan
29
<PAGE>
shall not invalidate or render unenforceable such provision in any other
jurisdiction. To the extent permitted by applicable law, the parties hereto
waive any provision of law which prohibits or renders void or unenforceable any
provision hereof.
Section 6.03. Agreement of Unaffiliated Seller. The
Unaffiliated Seller agrees to execute and deliver such instruments and take such
actions as the Depositor may, from time to time, reasonably request in order to
effectuate the purpose and to carry out the terms of this Agreement.
Section 6.04. Survival. The parties to this Agreement agree
that the representations, warranties and agreements made by each of them herein
and in any certificate or other instrument delivered pursuant hereto shall be
deemed to be relied upon by the other party hereto, notwithstanding any
investigation heretofore or hereafter made by such other party or on such other
party's behalf, and that the representations, warranties and agreements made by
the parties hereto in this Agreement or in any such certificate or other
instrument shall survive the delivery of and payment for the Mortgage Loans.
Section 6.05. Effect of Headings and Table of Contents. The
Article and Section headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.
Section 6.06. Successors and Assigns. This Agreement shall
inure to the benefit of and be binding upon the parties hereto and their
respective successors and permitted assigns. Except as expressly permitted by
the terms hereof, this Agreement may not be assigned, pledged or hypothecated by
any party hereto to a third party without the written consent of the other party
to this Agreement and the Certificate Insurer; provided, however, that the
Depositor may assign its rights hereunder without the consent of the
Unaffiliated Seller and Emergent Group.
Section 6.07. Governing Law. This Agreement shall be construed
in accordance with and governed by the laws of the State of New York (without
regard to conflicts of laws principles), and the obligations, rights and
remedies of the parties hereunder shall be determined in accordance with such
laws.
Section 6.08. Confirmation of Intent. It is the express intent
of the parties hereto that the conveyance of the Mortgage Loans by the
Unaffiliated Seller to the Depositor as contemplated by this Unaffiliated
Seller's Agreement be, and be treated for all purposes as, a sale by the
Unaffiliated Seller to the Depositor of the Mortgage Loans. It is,
30
<PAGE>
pledge of the Mortgage Loans by the Unaffiliated Seller to the Depositor to
secure a debt or other obligation of the Unaffiliated Seller. However, in the
event that, notwithstanding the intent of the parties, the Mortgage Loans are
held to continue to be property of the Unaffiliated Seller then (a) this
Unaffiliated Seller's Agreement shall also be deemed to be a security agreement
within the meaning of Articles 8 and 9 of the Uniform Commercial Code; (b) the
transfer of the Mortgage Loans provided for herein shall be deemed to be a grant
by the Unaffiliated Seller to the Depositor of a security interest in all of the
Unaffiliated Seller's right, title and interest in and to the Mortgage Loans and
all amounts payable on the Mortgage Loans in accordance with the terms thereof
and all proceeds of the conversion, voluntary or involuntary, of the foregoing
into cash, instruments, securities or other property; (c) the possession by the
Depositor of Mortgage Loans and such other items of property as constitute
instruments, money, negotiable documents or chattel paper shall be deemed to be
"possession by the secured party" for purposes of perfecting the security
interest pursuant to Section 9-305 of the Uniform Commercial Code; and (d)
notifications to persons holding such property, and acknowledgments, receipts or
confirmations from persons holding such property, shall be deemed notifications
to, or acknowledgments, receipts or confirmations from, financial
intermediaries, bailees or agents (as applicable) of the Depositor for the
purpose of perfecting such security interest under applicable law. Any
assignment of the interest of the Depositor pursuant to any provision hereof
shall also be deemed to be an assignment of any security interest created
hereby. The Unaffiliated Seller and the Depositor shall, to the extent
consistent with this Unaffiliated Seller's Agreement, take such actions as may
be necessary to ensure that, if this Unaffiliated Seller's Agreement were deemed
to create a security interest in the Mortgage Loans, such security interest
would be deemed to be a perfected security interest of first priority under
applicable law and would be maintained as such throughout the term of this
Agreement.
Section 6.09. Execution in Counterparts. This Agreement may be
executed in any number of counterparts, each of which so executed shall be
deemed to be an original, but all such counterparts shall together constitute
but one and the same instrument.
Section 6.10. Amendments. This Agreement super- sedes all
prior agreements and understandings relating to the subject matter hereof.
(a) This Agreement may be amended by the Unaffiliated Seller,
the Depositor and Emergent Group, with the prior written consent of the
Certificate Insurer (so long
31
<PAGE>
as a Certificate Insurer Default shall not have occurred and be continuing) but
without the consent of the Trustee or any of the Certificateholders (unless a
Certificate Insurer Default shall have occurred, in which event the consent of
the Certificateholders with Voting Rights equal to or in excess of 50% shall be
obtained) (i) to cure any ambiguity or (ii) to correct any provisions in this
Agreement; provided, however, that such action shall not, as evidenced by an
Opinion of Counsel delivered to the Trustee, adversely affect in any material
respect the interests of any Certificateholder.
(b) This Agreement may also be amended from time to time by
the Unaffiliated Seller, the Depositor and Emergent Group with the prior written
consent of the Certificate Insurer (so long as a Certificate Insurer Default
shall not have occurred and be continuing) and with the consent of the Trustee
and Certificateholders having Voting Rights equal to or in excess of 50%, for
the purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions of this Agreement, or of modifying in any manner the
rights of the Certificateholders; provided, however, that no such amendment
shall (i) increase or reduce in any manner the amount of, or accelerate or delay
the timing of, collections of payments on Mortgage Loans or distributions that
shall be required to be made on any Certificate or the Pass-Through Rates or
(ii) reduce the aforesaid percentage required to consent to any such amendment
or any waiver hereunder, without the consent of the Holders of all Certificates
then outstanding.
(c) Prior to the execution of any such amendment or consent,
Emergent Group shall have furnished written notification of the substance of
such amendment or consent to each Rating Agency.
(d) Promptly after the execution of any such amendment or
consent, the Trustee shall furnish written notification of the substance of such
amendment or consent to each Certificateholder.
(e) It shall not be necessary for the consent of
Certificateholders pursuant to this Section to approve the particular form of
any proposed amendment or consent, but it shall be sufficient if such consent
shall approve the substance thereof. The manner of obtaining such consents and
of evidencing the authorization of the execution thereof by Certificateholders
shall be subject to such reasonable requirements as the Trustee may prescribe,
including the establishment of record dates. The consent of any Holder of a
Certificate given pursuant to this Section or pursuant to any other provision of
this Agreement shall be conclusive and binding on such Holder and on all future
Holders of such Certificate and of any Certificate issued upon the transfer
32
<PAGE>
thereof or in exchange thereof or in lieu thereof whether or not notation of
such consent is made upon the Certificate.
Section 6.11. Miscellaneous. (a) The parties agree that each
of the Certificate Insurer and the Trustee is an intended third-party
beneficiary of this Agreement to the extent necessary to enforce the rights and
to obtain the benefit of the remedies of the Depositor under this Agreement
which are assigned to the Trustee for the benefit of the Certificateholders
pursuant to the Pooling and Servicing Agreement and to the extent necessary to
obtain the benefit of the enforcement of the obligations and covenants of the
Unaffiliated Seller under Section 3.05 and 4.06 of this Agreement. The parties
further agree that Prudential Securities Incorporated and each of its directors
and each person or entity who controls Prudential Securities Incorporated or any
such person, within the meaning of Section 15 of the Securities Act (each, an
"Underwriter Entity") is an intended third-party beneficiary of this Agreement
to the extent necessary to obtain the benefit of the enforcement of the
obligations and covenants of the Unaffiliated Seller with respect to each
Underwriter Entity under Section 4.06 of this Agreement.
(b) The Depositor, Emergent Group and the Unaffiliated Seller
intend the conveyance by the Unaffiliated Seller to the Depositor of all of its
right, title and interest in and to the Mortgage Loans pursuant to this
Agreement to constitute a purchase and sale and not a loan.
[Signatures Commence on Following Page]
33
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their names
to be signed by their respective officers thereunto duly authorized as of the
date first above written.
PRUDENTIAL SECURITIES SECURED
FINANCING CORPORATION
By:_______________________________
Name: Glen Stein
Title: Vice President
EMERGENT MORTGAGE HOLDINGS
CORPORATION
By:________________________________
Name: Kevin J. Mast
Title:Vice President
EMERGENT GROUP, INC.
By:_________________________________
Name: Kevin J. Mast
Title: Vice President, CFO
and Treasurer
<PAGE>
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
On June 26, 1997 before me, the undersigned, a Notary Public
in and for said County and State, personally appeared Glen Stein, personally
known to me (or proved to me on the basis of satisfactory evidence) to be Glen
Stein of Prudential Securities Secured Financing Corporation, a Delaware
corporation, the corporation that executed the within Unaffiliated Seller's
Agreement on behalf of said corporation, and acknowledged to me that said
corporation executed it.
_______________________________
Notary Public
My Commission expires:
<PAGE>
STATE OF ____________ )
) ss.
COUNTY OF ___________ )
On June 26, 1997 before me, the undersigned, a Notary Public
in and for said County and State, personally appeared Kevin J. Mast, personally
known to me (or proved to me on the basis of satisfactory evidence) to be Kevin
J. Mast of Emergent Group, Inc., the corporation that executed the within
Unaffiliated Seller's Agreement on behalf of said corporation, and acknowledged
to me that said corporation executed it.
_______________________________
Notary Public
My Commission expires:
<PAGE>
STATE OF ____________ )
) ss.
COUNTY OF ___________ )
On June 26, 1997 before me, the undersigned, a Notary Public
in and for said County and State, personally appeared Kevin J. Mast, personally
known to me (or proved to me on the basis of satisfactory evidence) to be Kevin
J. Mast of Emergent Mortgage Holdings Corporation, the corporation that executed
the within Unaffiliated Seller's Agreement on behalf of said corporation, and
acknowledged to me that said corporation executed it.
_______________________________
Notary Public
My Commission expires:
<PAGE>
EXHIBIT A
SCHEDULE OF MORTGAGE LOANS
A-1
<PAGE>
EXHIBIT B
OFFICER'S CERTIFICATE
I, Kevin J. Mast, Vice President of EMERGENT MORTGAGE HOLDINGS
CORPORATION (the "Company") do hereby certify as follows:
(1) No financing statements or other filings have been filed
naming the Company as debtor or seller in any State of the United States of
America to perfect a sale, transfer or assignment of or lien, encumbrance,
security interest or other interest in, or which otherwise pertains to, the
Mortgage Loans other than those filed in connection with the Unaffiliated
Seller's Agreement and the Pooling and Servicing Agreement.
(2) The Company's chief executive office is located at 44 East
Camperdown Way, Greenville, South Carolina 29601.
Capitalized terms used herein and not otherwise defined shall
have the meanings ascribed to such terms in the Pooling and Servicing Agreement
dated as of June 1, 1997, among Prudential Securities Secured Financing
Corporation, as Depositor, Emergent Mortgage Corp., as Servicer, and First Union
National Bank, as Trustee.
IN WITNESS WHEREOF, I have set my hand this 26th day of June,
1997.
EMERGENT MORTGAGE HOLDINGS
CORPORATION
By:_____________________________
Name: Kevin J. Mast
Title: Vice President
B-1
EXECUTION COPY
PURCHASE AGREEMENT AND ASSIGNMENT
among
EMERGENT MORTGAGE HOLDINGS CORPORATION
as Purchaser
EMERGENT MORTGAGE CORP.
as Seller
and
EMERGENT GROUP, INC.
dated as of
June 1, 1997
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS
SECTION 1.1 General........................................................ 1
SECTION 1.2 Specific Terms................................................. 1
SECTION 1.3 Usage of Terms................................................. 2
SECTION 1.4 Certain References............................................. 2
SECTION 1.5 No Recourse.................................................... 3
SECTION 1.6 Action by or Consent of Certificateholders..................... 3
SECTION 1.7 Material Adverse Effect........................................ 3
ARTICLE II
CONVEYANCE OF THE MORTGAGE LOANS
AND THE OTHER CONVEYED PROPERTY
SECTION 2.1 Conveyance of the Mortgage Loans and the Other
Conveyed Property..................................... 3
SECTION 2.2 Purchase Price................................................. 4
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 Representations and Warranties of the Seller................... 4
SECTION 3.2 Representations and Warranties of Purchaser.................... 6
SECTION 3.3 Indemnification................................................ 8
SECTION 3.4 Representations and Warranties of Emergent Group............... 10
ARTICLE IV
COVENANTS OF THE SELLER
SECTION 4.1 Protection of Title of Purchaser, the Depositor
and the Trust......................................... 11
SECTION 4.2 Other Liens or Interests....................................... 12
SECTION 4.3 Costs and Expenses............................................. 13
-i-
<PAGE>
ARTICLE V
REPURCHASES
SECTION 5.1 Repurchase of Mortgage Loans Upon Breach of
Warranty.............................................. 13
SECTION 5.2 Reassignment of Purchased Mortgage Loans....................... 14
SECTION 5.3 Waivers........................................................ 14
ARTICLE VI
MISCELLANEOUS
SECTION 6.1 Liability of the Seller........................................ 14
SECTION 6.2 Merger or Consolidation of any Seller or Purchaser............. 14
SECTION 6.3 Limitation on Liability of the Seller and Others............... 15
SECTION 6.4 Amendment...................................................... 16
SECTION 6.5 Notices........................................................ 17
SECTION 6.6 Merger and Integration......................................... 17
SECTION 6.7 Severability of Provisions..................................... 17
SECTION 6.8 Intention of the Parties....................................... 17
SECTION 6.9 Governing Law.................................................. 17
SECTION 6.10 Counterparts................................................... 18
SECTION 6.11 Conveyance of the Mortgage Loans and the Other
Conveyed Property to the Trust........................ 18
SECTION 6.12 Nonpetition Covenant........................................... 18
SECTION 6.13 Miscellaneous.................................................. 18
SCHEDULE A -- Schedule of Mortgage Loans Conveyed
SCHEDULE B -- Representations and Warranties of Seller
-ii-
<PAGE>
PURCHASE AGREEMENT AND ASSIGNMENT
THIS PURCHASE AGREEMENT AND ASSIGNMENT, dated as of June 1,
1997, executed among Emergent Mortgage Holdings Corporation, a Delaware
corporation (the "Purchaser"), Emergent Mortgage Corp., a South Carolina
corporation (the "Seller") and Emergent Group, Inc., a South Carolina
corporation ("Emergent
Group").
W I T N E S S E T H:
WHEREAS, Purchaser has agreed to purchase from Seller, and
Seller, pursuant to this Agreement, is transferring to Purchaser the Mortgage
Loans and Other Conveyed Property.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements hereinafter contained, and for other good and valuable
consideration, the receipt of which is acknowledged, Purchaser and Seller,
intending to be legally bound, hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 General. The specific terms defined in this
Article include the plural as well as the singular. The words "herein", "hereof"
and "hereunder" and other words of similar import refer to this Agreement as a
whole and not to any particular Article, Section or other subdivision, and
Article, Section, Schedule and Exhibit references, unless otherwise specified,
refer to Articles and Sections of and Schedules and Exhibits to this Agreement.
Capitalized terms used herein without definition shall have the respective
meanings assigned to such terms in the Pooling and Servicing Agreement (defined
herein).
SECTION 1.2 Specific Terms. Whenever used in this Agreement,
the following words and phrases, unless the context otherwise requires, shall
have the following meanings:
"Agreement" shall mean this Purchase Agreement and Assignment
and all amendments hereof and supplements hereto.
"Lien" means a security interest, lien, charge, pledge, equity
or encumbrance of any kind other than tax liens, mechanics liens and liens that
attach to a Mortgaged Property by operation of law.
<PAGE>
"Other Conveyed Property" means all monies at any time paid or
payable on the Mortgage Loans or in respect thereof after the Cut-Off Date
(including amounts due on or before the Cut-Off Date but received by the Seller
after the Cut-Off Date), the insurance policies relating to the Mortgage Loans
and all Insurance Proceeds, the Mortgage Files, and any REO Property, together
with all collections thereon and proceeds thereof.
"Pooling and Servicing Agreement" means the Pooling and
Servicing Agreement, dated as of June 1, 1997, among Prudential Securities
Secured Financing Corporation, as Depositor, Emergent Mortgage Corp. as
Servicer, and First Union National Bank, as Trustee, as the same may be amended,
modified or supplemented from time to time.
"Purchaser" means Emergent Mortgage Holdings Corporation.
"Related Documents" means the Unaffiliated Seller's Agreement,
the Insurance Agreement and the Indemnification Agreement dated as of June 1,
1997 among the Seller, the Purchaser, Prudential Securities Incorporated, the
Depositor, Emergent Group and Financial Securities Assurance Corporation.
"Schedule of Mortgage Loans Conveyed" means the schedule of
all mortgages and mortgage notes sold and transferred pursuant to this Agreement
which is attached hereto as Schedule A.
"Schedule of Representations" means the Schedule of
Representations and Warranties attached hereto as Schedule B.
"Seller Repurchase Event" means with respect to the Seller,
the occurrence of a breach of any of Seller's representations and warranties
under Schedule B hereto.
"Seller" means Emergent Mortgage Corp.
SECTION 1.3 Usage of Terms. With respect to all terms used in
this Agreement, the singular includes the plural and the plural the singular;
words importing any gender include the other genders; references to "writing"
include printing, typing, lithography, and other means of reproducing words in a
visible form; references to agreements and other contractual instruments include
all subsequent amendments thereto or changes therein entered into in accordance
with their respective terms and not prohibited by this Agreement or the Pooling
and Servicing Agreement; references to Persons include their permitted
successors and assigns; and the terms "include" or "including" mean "include
without limitation" or "including without limitation."
SECTION 1.4 Certain References. All references to the Stated
Principal Balance of a Mortgage Loan as of a Record Date shall refer to the
close of business on such day, or as of the first day of a Collection Period
shall refer to the opening of business on such
2
<PAGE>
day. All references to the last day of a Collection Period shall refer to the
close of business on such day.
SECTION 1.5 No Recourse. Without limiting the obligations of
Seller hereunder, no recourse may be taken, directly or indirectly, under this
Agreement or any certificate or other writing delivered in connection herewith
or therewith, against any stockholder, officer or director, as such, of the
Seller, or of any predecessor or successor of any of the Seller.
SECTION 1.6 Action by or Consent of Certificateholders.
Whenever any provision of this Agreement refers to action to be taken, or
consented to, by Certificateholders, such provision shall be deemed to refer to
Certificateholders of record as of the Record Date immediately preceding the
date on which such action is to be taken, or consent given, by
Certificateholders. Solely for the purposes of any action to be taken, or
consented to, by Certificateholders, any Certificate registered in the name of
the Seller or any Affiliate thereof shall be deemed not to be outstanding and
the Percentage Interest evidenced thereby shall not be taken into account in
determining whether the requisite Percentage Interest necessary to effect any
such action or consent has been obtained; provided, however, that, solely for
the purpose of determining whether the Trustee is entitled to rely upon any such
action or consent, only Certificates which the Trustee knows to be so owned
shall be so disregarded.
SECTION 1.7 Material Adverse Effect. Whenever a determination
is to be made under this Agreement as to whether a given event, action, course
of conduct or set of facts or circumstances could or would have a material
adverse effect on the Trust Fund or the Certificateholders (or any similar or
analogous determination), such determination shall be made without taking into
account the funds available from claims under the Policy.
ARTICLE II
CONVEYANCE OF THE MORTGAGE LOANS
AND THE OTHER CONVEYED PROPERTY
SECTION 2.1 Conveyance of the Mortgage Loans and the Other
Conveyed Property. Subject to the terms and conditions of this Agreement, the
Seller hereby sells, transfers, assigns, and otherwise conveys to Purchaser
without recourse (but without limitation of its obligations in this Agreement),
and Purchaser hereby purchases, all right, title and interest of the Seller in
and to the Mortgage Loans and the Other Conveyed Property. It is the intention
of the Seller and Purchaser that the transfer and assignment contemplated by
this Agreement shall constitute a sale of the Mortgage Loans and the Other
Conveyed Property from the Seller to Purchaser, conveying good title thereto
free and clear of any liens, and the Mortgage Loans and the Other Conveyed
Property shall not be part of
3
<PAGE>
the Seller's estate in the event of the filing of a bankruptcy petition by or
against the Seller under any bankruptcy or similar law.
SECTION 2.2 Purchase Price. Simultaneously with the conveyance
of the Mortgage Loans and the Other Conveyed Property to Purchaser, Purchaser
has paid or caused to be paid to or upon the order of Seller $121,357,969.55
(which amount includes accrued interest of $573,201.05), less certain expenses,
by wire transfer of immediately available funds (representing the proceeds to
Purchaser from the sale of the Mortgage Loans to the Depositor).
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 Representations and Warranties of the Seller.
Seller makes the following representations and warranties, on which Purchaser
relies in purchasing the Mortgage Loans and the Other Conveyed Property and in
transferring the Mortgage Loans and the Other Conveyed Property to the Depositor
under the Unaffiliated Seller's Agreement, on which the Depositor will rely in
transferring the Mortgage Loans and the Other Conveyed Property to the Trustee
under the Pooling and Servicing Agreement and on which the Certificate Insurer
will rely in issuing the Policy. Such representations are made as of the
execution and delivery of this Agreement or other time specified in the Schedule
of Representations, but shall survive the sale, transfer and assignment of the
Mortgage Loans and the Other Conveyed Property hereunder, the sale, transfer and
assignment thereof by the Seller to the Depositor under the Unaffiliated
Seller's Agreement and the sale, transfer and assignment thereof by the
Depositor to the Trustee under the Pooling and Servicing Agreement. Seller and
Purchaser agree that Purchaser will assign to the Depositor all of Purchaser's
rights under this Agreement, the Depositor will assign to the Trustee all of
Purchaser's rights under this Agreement and that the Trustee will thereafter be
entitled to enforce this Agreement directly against the Seller in the Trustee's
own name on behalf of the Certificateholders and the Certificate Insurer.
(a) Schedule of Representations. The representations and
warranties made by the Seller and set forth on the Schedule of
Representations are true and correct.
(b) Organization and Good Standing. The Seller has been duly
organized and is validly existing as a corporation in good standing
under the laws of the State of South Carolina, with power and authority
to own its properties and to conduct its business as such properties
are currently owned and such business is currently conducted, and had
at all relevant times and now has, power, authority and legal right to
enter into and perform its obligations under this Agreement.
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(c) Due Qualification. The Seller is duly qualified to do
business as a foreign corporation in good standing, and has obtained
all necessary licenses and approvals, in all jurisdictions in which the
ownership or lease of its property or the conduct of its business
requires such qualification.
(d) Power and Authority. The Seller has the power and
authority to execute and deliver this Agreement and to carry out its
terms; the Seller has full power and authority to sell and assign the
Mortgage Loans and Other Conveyed Property to be sold and assigned to
and deposited with Purchaser hereunder and has duly authorized such
sale and assignment to Purchaser by all necessary corporate action and
the execution, delivery and performance of this Agreement has been duly
authorized by the Seller by all necessary corporate action.
(e) No False Statement. Neither this Agreement nor the
information contained in the Prospectus Supplement, other than under
the captions "The Insurer" and "Plan of Distribution," nor any
statement, report or other document prepared by the Seller and
furnished or to be furnished pursuant to this Agreement or in
connection with the transactions contemplated hereby contains any
untrue statement or alleged untrue statement of any material fact or
omits to state a material fact necessary to make the statements
contained herein or therein, in light of the circumstances under which
they were made, not misleading.
(f) Valid Sale; Binding Obligations. This Agreement has been
duly executed and delivered, shall effect a valid sale, transfer and
assignment of the Mortgage Loans and the Other Conveyed Property,
enforceable against the Seller and creditors of and purchasers from the
Seller, and this Agreement constitutes the legal, valid and binding
obligation of the Seller enforceable in accordance with its respective
terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization or other similar laws affecting the
enforcement of creditors' rights generally and by equitable limitations
on the availability of specific remedies, regardless of whether such
enforceability is considered in a proceeding in equity or at law.
(g) No Violation. The consummation of the transactions
contemplated by this Agreement and the fulfillment of the terms of this
Agreement does not conflict with, result in any breach of any of the
terms and provisions of, or constitute (with or without notice or lapse
of time) a default under, the articles of incorporation or bylaws of
the Seller, or any material indenture, agreement, mortgage, deed of
trust or other instrument to which the Seller is a party or by which it
is bound or any of its properties are subject, or result in the
creation or imposition of any lien upon any of its properties pursuant
to the terms of any such indenture, agreement, mortgage, deed of trust
or other instrument, other than this Agreement or violate any law,
order, rule or regulation applicable to the Seller of any court or of
any federal or state regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over the Seller or any
of its properties, or in any way materially adversely
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affect the interest of the Certificateholders or the Trustee in any
Mortgage Loan, or affect the Seller's ability to perform its
obligations under this Agreement;
(h) No Proceedings. There are no proceedings or investigations
pending or, to the Seller's knowledge, threatened against the Seller,
before any court, regulatory body, administrative agency or other
tribunal or governmental instrumentality having jurisdiction over the
Seller or its properties (i) asserting the invalidity of this
Agreement, (ii) seeking to prevent the issuance of the Certificates or
the consummation of any of the transactions contemplated by this
Agreement, (iii) seeking any determination or ruling that might
materially and adversely affect the performance by the Seller of its
obligations under, or the validity or enforceability of, this
Agreement, (iv) involving the Seller or which might adversely affect
the federal income tax or other federal, state or local tax attributes
of the Certificates or (v) that could have a material adverse effect on
the Mortgage Loans. To the Seller's knowledge, there are no proceedings
or investigations pending or threatened against the Seller, before any
court, regulatory body, administrative agency or other tribunal or
governmental instrumentality having jurisdiction over the Seller or its
properties relating to the Seller which might adversely affect the
federal income tax or other federal, state or local tax attributes of
the Certificates;
(i) No Consents. The Seller is not required to obtain the
consent of any other party or any consent, license, approval or
authorization, or registration or declaration with, any governmental
authority, bureau or agency in connection with the execution, delivery,
performance, validity or enforceability of this Agreement except such
consents as have been obtained;
(j) Approvals. All approvals, authorizations, orders or other
actions of any person, corporation or other organization, or of any
court, governmental agency or body or official, required in connection
with the execution and delivery by the Seller of this Agreement and the
consummation of the transactions contemplated hereby have been or will
be taken or obtained on or prior to the Closing Date.
(k) Chief Executive Office. The chief executive office of
Emergent Mortgage Corp. is located at 50 Datastream Plaza, Suite 201,
Greenville, South Carolina 29605.
SECTION 3.2 Representations and Warranties of Purchaser.
Purchaser makes the following representations and warranties, on which Seller
relies in selling, assigning, transferring and conveying the Mortgage Loans and
the Other Conveyed Property to Purchaser hereunder. Such representations are
made as of the execution and delivery of this Agreement, but shall survive the
sale, transfer and assignment of the Mortgage Loans and the Other Conveyed
Property hereunder, the sale, transfer and assignment thereof by Purchaser to
the Depositor under the Unaffiliated Seller's Agreement and the sale, transfer
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and assignment thereof by the Depositor to the Trustee under the Pooling and
Servicing Agreement.
(a) Organization and Good Standing. Purchaser has been duly
organized and is validly existing and in good standing as a corporation
under the laws of the State of Delaware, with the power and authority
to own its properties and to conduct its business as such properties
are currently owned and such business is currently conducted, and had
at all relevant times, and has, full power, authority and legal right
to acquire and own the Mortgage Loans and the Other Conveyed Property,
and to transfer the Mortgage Loans and the Other Conveyed Property to
the Depositor pursuant to the Unaffiliated Seller's Agreement.
(b) Due Qualification. Purchaser is duly qualified to do
business as a foreign corporation in good standing, and has obtained
all necessary licenses and approvals in all jurisdictions where the
failure to do so would materially and adversely affect Purchaser's
ability to acquire the Mortgage Loans or the Other Conveyed Property or
the validity or enforceability of the Mortgage Loans and the Other
Conveyed Property or to perform Purchaser's obligations hereunder and
under the Related Documents.
(c) Power and Authority. Purchaser has the power, authority
and legal right to execute and deliver this Agreement and to carry out
the terms hereof and to acquire the Mortgage Loans and the Other
Conveyed Property hereunder; and the execution, delivery and
performance of this Agreement and all of the documents required
pursuant hereto have been duly authorized by Purchaser by all necessary
action.
(d) No Consent Required. Purchaser is not required to obtain
the consent of any other Person, or any consent, license, approval or
authorization or registration or declaration with, any governmental
authority, bureau or agency in connection with the execution, delivery
or performance of this Agreement and the Related Documents, except for
such as have been obtained, effected or made.
(e) Binding Obligation. This Agreement constitutes a legal,
valid and binding obligation of Purchaser, enforceable against
Purchaser in accordance with its terms, subject, as to enforceability,
to applicable bankruptcy, insolvency, reorganization, conservatorship,
receivership, liquidation and other similar laws and to general
equitable principles.
(f) No Violation. The execution, delivery and performance by
Purchaser of this Agreement, the consummation of the transactions
contemplated by this Agreement and the Related Documents and the
fulfillment of the terms of this Agreement and the Related Documents do
not and will not conflict with, result in any breach of any of the
terms and provisions of, or constitute (with or without notice or lapse
of time) a default under, the certificate of incorporation or bylaws of
Purchaser,
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or conflict with or breach any of the terms or provisions of, or
constitute (with or without notice or lapse of time) a default under,
any indenture, agreement, mortgage, deed of trust or other instrument
to which Purchaser is a party or by which Purchaser is bound or to
which any of its properties are subject, or result in the creation or
imposition of any lien upon any of its properties pursuant to the terms
of any such indenture, agreement, mortgage, deed of trust or other
instrument (other than the Unaffiliated Seller's Agreement, or violate
any law, order, rule or regulation, applicable to Purchaser or its
properties, of any federal or state regulatory body, any court,
administrative agency, or other governmental instrumentality having
jurisdiction over Purchaser or any of its properties.
(g) No Proceedings. There are no proceedings or investigations
pending, or, to the knowledge of Purchaser, threatened against
Purchaser, before any court, regulatory body, administrative agency, or
other tribunal or governmental instrumentality having jurisdiction over
Purchaser or its properties: (i) asserting the invalidity of this
Agreement or any of the Related Documents, (ii) seeking to prevent the
consummation of any of the transactions contemplated by this Agreement
or any of the Related Documents, (iii) seeking any determination or
ruling that might materially and adversely affect the performance by
Purchaser of its obligations under, or the validity or enforceability
of, this Agreement or any of the Related Documents or (iv) that may
adversely affect the federal or state income tax attributes of, or
seeking to impose any excise, franchise, transfer or similar tax upon,
the transfer and acquisition of the Mortgage Loans and the Other
Conveyed Property hereunder or the transfer by Purchaser of the
Mortgage Loans and the Other Conveyed Property to the Depositor
pursuant to the Unaffiliated Seller's Agreement.
In the event of any breach of a representation and warranty made by Purchaser
hereunder, the Seller covenants and agrees that it will take any action to
pursue any remedy that it may have hereunder, in law, in equity or otherwise,
until a year and a day have passed since the date on which all pass-through
certificates or other similar securities issued by the Trust Fund, or a trust or
similar vehicle formed by Purchaser, have been paid in full. The Seller and
Purchaser agree that damages will not be an adequate remedy for such breach and
that this covenant may be specifically enforced by Purchaser or by the Trustee
on behalf of the Trust Fund.
SECTION 3.3 Indemnification.
(a) The Seller shall defend, indemnify and hold harmless
Purchaser, the Depositor, the Trustee, the Certificateholders and the
Certificate Insurer from and against any and all costs, expenses, losses,
damages, claims, and liabilities, arising out of or resulting from any breach of
any of the Seller's representations and warranties contained herein.
(b) The Seller shall defend, indemnify and hold harmless
Purchaser, the Depositor, the Trustee, the Certificateholders and the
Certificate Insurer from and against any
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and all costs, expenses, losses, damages, claims, and liabilities, arising out
of or resulting, from the use, ownership or operation by the Seller or any
affiliate thereof of a Mortgaged Property.
(c) The Seller will defend and indemnify Purchaser, the
Depositor, the Trustee, the Certificate Insurer and the Certificateholders
against any and all costs, expenses, losses, damages, claims and liabilities
arising out of or resulting from any action taken, or any action failed to be
taken that is required to be taken under this Agreement, by it in respect of any
portion of the Trust Fund other than in accordance with this Agreement.
(d) The Seller agrees to pay, and shall defend, indemnify and
hold harmless Purchaser, the Depositor, the Trustee, the Certificateholders and
the Certificate Insurer from and against any taxes that may at any time be
asserted against Purchaser, the Depositor, the Trustee, the Certificateholders
or the Certificate Insurer with respect to the transactions contemplated in this
Agreement, including, without limitation, any sales, gross receipts, general
corporation, tangible or intangible personal property, privilege, or license
taxes (but, not including any taxes asserted with respect to, and as of the date
of, the sale, transfer and assignment of the Mortgage Loans and the Other
Conveyed Property to Purchaser, the conveyance of the Mortgage Loans or Other
Conveyed Property under the Unaffiliated Seller's Agreement and the conveyance
of the Trust Fund to the Trustee or the issuance and original sale of the
Certificates, or asserted with respect to ownership of the Mortgage Loans and
Other Conveyed Property or the Trust Fund which shall be indemnified by each
Seller pursuant to clause (e) below, or federal, state or other income taxes,
arising out of distributions on the Certificates or transfer taxes arising in
connection with the transfer of Certificates) and costs and expenses in
defending against the same, arising by reason of the acts to be performed by the
Seller under this Agreement or imposed against such Persons.
(e) The Seller agrees to pay, and to indemnify, defend and
hold harmless Purchaser, the Depositor, the Trustee, the Certificateholders and
the Certificate Insurer from, any taxes which may at any time be asserted
against such Persons with respect to, and as of the date of, the conveyance or
ownership of the Mortgage Loans or the Other Conveyed Property hereunder, the
conveyance or ownership of the Mortgage Loans or Other Conveyed Property under
the Unaffiliated Seller's Agreement and the conveyance or ownership of the Trust
Fund under the Pooling and Servicing Agreement or the issuance and original sale
of the Certificates, including, without limitation, any sales, gross receipts,
personal property, tangible or intangible personal property, privilege or
license taxes (but not including any federal or other income taxes, including
franchise taxes, arising out of the transactions contemplated hereby or transfer
taxes arising in connection with the transfer of Certificates) and costs and
expenses in defending against the same, arising by reason of the acts to be
performed by each Seller under this Agreement or imposed against such Persons.
(f) The Seller shall defend, indemnify, and hold harmless
Purchaser, the Depositor, the Trustee, the Certificateholders and the
Certificate Insurer from and against any and all costs, expenses, losses,
claims, damages, and liabilities to the extent that such cost,
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expense, loss, claim, damage, or liability arose out of, or was imposed upon
Purchaser, the Depositor, the Trustee, the Certificateholders and the
Certificate Insurer through, the negligence, willful misfeasance, or bad faith
of the Seller in the performance of its duties under this Agreement or by reason
of reckless disregard of each Seller's obligations and duties under this
Agreement.
(g) The Seller shall indemnify, defend and hold harmless
Purchaser, the Depositor, the Trustee, the Certificate Insurer and the
Certificateholders from and against any loss, liability or expense incurred by
reason of the violation by the Seller of federal or state securities laws in
connection with the registration or the sale of the Certificates.
(h) The Seller shall indemnify, defend and hold harmless
Purchaser, the Depositor, the Trustee, the Certificate Insurer and the
Certificateholders from and against any loss, liability or expense imposed upon,
or incurred by, Purchaser, the Depositor, the Trustee, the Certificate Insurer
or the Certificateholders as a result of the failure of any Mortgage Loan, or
the sale of the related Mortgage Property to comply with all requirements of
applicable law.
Indemnification under this Section 3.3 shall include
reasonable fees and expenses of counsel and expenses of litigation and shall
survive termination of the Trust Fund. The indemnity obligations hereunder shall
be in addition to any obligation that the Seller may otherwise have.
SECTION 3.4 Representations and Warranties of Emergent Group.
Emergent Group hereby represents and warrants to the Purchaser as of the date of
execution of this Agreement and as of the Closing Date, that:
(a) Emergent Group is a corporation duly organized, validly
existing and in good standing under the laws of the State of South Carolina;
(b) Emergent Group has the corporate power and authority to
execute, deliver and perform, and to enter into and consummate all the
transactions contemplated by this Agreement;
(c) This Agreement has been duly and validly authorized,
executed and delivered by Emergent Group, and constitutes the legal, valid and
binding agreement of Emergent Group, enforceable against Emergent Group in
accordance with its terms, except as such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting the rights of creditors generally, and by general
equity principles (regardless of whether such enforcement is considered in a
proceeding in equity or at law);
(d) No consent, approval, authorization or order of or
registration or filing with, or notice to, any governmental authority or court
is required for the execution, delivery
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and performance of or compliance by Emergent Group with this Agreement or the
consummation by it of any of the transactions contemplated hereby or thereby,
except such as have been made on or prior to the Closing Date;
(e) None of the execution and delivery of this Agreement, the
consummation of the other transactions contemplated hereby, or the fulfillment
of or compliance with the terms and conditions of this Agreement, (i) conflicts
or will conflict with the charter or bylaws of Emergent Group or conflicts or
will conflict with or results or will result in a breach of, or constitutes or
will constitute a default or results or will result in an acceleration under,
any term, condition or provision of any material indenture, deed of trust,
contract or other agreement or other instrument to which Emergent Group is a
party or by which it is bound and which is material to Emergent Group, or (ii)
results or will result in a violation of any law, rule, regulation, order,
judgment or decree of any court or governmental authority having jurisdiction
over Emergent Group.
ARTICLE IV
COVENANTS OF THE SELLER
SECTION 4.1 Protection of Title of Purchaser, the Depositor
and the Trust.
(a) At or prior to the Closing Date, the Seller shall have
filed or caused to be filed a UCC-1 financing statement, executed by the Seller
as seller or debtor, naming Purchaser as purchaser or secured party and
describing the Mortgage Loans and the Other Conveyed Property being sold by it
to Purchaser as collateral, with the office of the Secretary of State of the
State of South Carolina and in such other locations as Purchaser shall have
required. From time to time thereafter, the Seller shall execute and file such
financing statements and cause to be executed and filed such continuation
statements, all in such manner and in such places as may be required by law
fully to preserve, maintain and protect the interest of Purchaser under this
Agreement, of the Depositor under the Unaffiliated Seller's Agreement and of the
Trustee under the Pooling and Servicing Agreement in the Mortgage Loans and the
Other Conveyed Property, as the case may be, and in the proceeds thereof. The
Seller shall deliver (or cause to be delivered) to Purchaser, the Depositor, the
Trustee, and the Certificate Insurer file-stamped copies of, or filing receipts
for, any document filed as provided above, as soon as available following such
filing. In the event that each Seller fails to perform its obligations under
this subsection, Purchaser, the Depositor or the Trustee may do so, at the
expense of the Seller.
(b) The Seller shall not change its name, identity, or
corporate structure in any manner that would, could or might make any financing
statement or continuation statement filed by the Seller (or by Purchaser or the
Trustee on behalf of the Seller) in accordance with paragraph (a) above
seriously misleading within the meaning of ss. 9-402(7) of the UCC, unless the
Seller shall have given Purchaser, the Depositor, the Trustee and the
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Certificate Insurer at least 60 days prior written notice thereof, and shall
promptly file appropriate amendments to all previously filed financing
statements and continuation statements.
(c) The Seller shall give Purchaser, the Depositor, the
Certificate Insurer (so long as an Insurer Default shall not have occurred and
be continuing) and the Trustee at least 60 days prior written notice of any
relocation of its principal executive office if, as a result of such relocation,
the applicable provisions of the UCC would require the filing of any amendment
of any previously filed financing or continuation statement or of any new
financing statement. The Seller shall at all times maintain each office from
which it services Mortgage Loans and its principal executive office within the
United States of America.
(d) The Seller shall maintain its computer systems so that,
from and after the time of sale under this Agreement of the Mortgage Loans to
Purchaser, the conveyance of the Mortgage Loans by Purchaser to the Depositor
and the conveyance of the Mortgage Loans by the Depositor to the Trustee on
behalf of the Certificateholders and the Certificate Insurer, the Seller's
master computer records (including archives) that shall refer to a Mortgage Loan
indicate clearly that such Mortgage Loan has been sold to Purchaser and has been
conveyed by Purchaser to the Depositor and by the Depositor to the Trustee on
behalf of the Certificateholders and the Certificate Insurer. Indication of the
Trustee's ownership of a Mortgage Loan shall be deleted from or modified on each
Seller's computer systems when, and only when, the Mortgage Loan shall become a
Deleted Mortgage Loan, shall have been repurchased or shall have been paid in
full.
(e) If at any time the Seller shall propose to sell, grant a
security interest in, or otherwise transfer any interest in mortgage loans to
any prospective purchaser, lender or other transferee, the Seller shall give to
such prospective purchaser, lender, or other transferee computer tapes, records,
or print-outs (including any restored from archives) that, if they shall refer
in any manner whatsoever to any Mortgage Loan shall indicate clearly that such
Mortgage Loan has been sold to Purchaser, sold by Purchaser to the Depositor,
and is owned by the Trust Fund.
SECTION 4.2 Other Liens or Interests. Except for the
conveyances hereunder, the Seller will not sell, pledge, assign or transfer to
any other Person, or grant, create, incur, assume or suffer to exist any Lien on
the Mortgage Loans or the Other Conveyed Property or any interest therein, and
the Seller shall defend the right, title, and interest of Purchaser, the
Depositor and the Trustee in and to the Mortgage Loans and the Other Conveyed
Property against all claims of third parties claiming through or under the
Seller.
SECTION 4.3 Costs and Expenses. The Seller shall pay all
reasonable costs and disbursements in connection with the performance of its
obligations hereunder and its Related Documents.
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ARTICLE V
REPURCHASES
SECTION 5.1 Repurchase of Mortgage Loans Upon Breach of
Warranty. (a) Upon the occurrence of a Seller Repurchase Event, the Seller
shall, unless such breach shall have been cured in all material respects,
repurchase the related Mortgage Loan from the Trustee within 60 days following
discovery or notice to the Seller of such breach pursuant to Section 2.03 of the
Pooling and Servicing Agreement and the Seller shall pay the Purchase Price to
the Trustee as provided in the Pooling and Servicing Agreement. In lieu of
repurchasing any such Mortgage Loan, the Seller may cause such Mortgage Loan to
be removed from the Trust Fund and substitute one or more Qualified Substitute
Mortgage Loans in the manner provided in Section 2.03 of the Pooling and
Servicing Agreement. To the extent the Seller fails to effect its repurchase
obligation, Emergent Group shall repurchase the related Mortgage Loan and pay
the Purchase Price to the Trustee on such date. The provisions of this Section
5.1 are intended to grant the Trustee a direct right against the Seller to
demand performance hereunder, and in connection therewith the Seller and
Emergent Group waive any requirement of prior demand against the Depositor or
Purchaser with respect to such repurchase or substitution obligation. Any such
purchase or substitution resulting from a Seller Repurchase Event shall take
place in the manner specified in Section 2.03 of the Pooling and Servicing
Agreement. Notwithstanding any other provision of this Agreement or the Pooling
and Servicing Agreement to the contrary, the obligation of the Seller and
Emergent Group under this Section shall be performed in accordance with the
terms hereof notwithstanding the failure of the Servicer, the Unaffiliated
Seller and the Depositor to perform any of their respective obligations with
respect to such Mortgage Loan under the Pooling and Servicing Agreement.
(b) In addition to the foregoing, the Seller shall promptly
purchase from Purchaser (or provide for the substitution of a Qualified
Substitute Mortgage Loan) any Mortgage Loan repurchased by Purchaser (in its
capacity as Seller under the Unaffiliated Seller's Agreement) upon the
occurrence of an Unaffiliated Seller Repurchase Event (as defined therein)
involving a breach by Purchaser (in its capacity as Seller under the
Unaffiliated Seller's Agreement) pursuant to Section 3.05 of the Unaffiliated
Seller's Agreement.
(c) In addition to the foregoing and notwithstanding whether
the related Mortgage Loan shall have been purchased by the Seller or Emergent
Group, the Seller shall indemnify the Trustee, the Depositor, the Certificate
Insurer and the Certificateholders against all costs, expenses, losses, damages,
claims and liabilities, including reasonable fees and expenses of counsel, which
may be asserted against or incurred by any of them as a result of third party
claims arising out of the events or facts giving rise to a repurchase or
substitution under Section 2.03 of the Pooling and Security, Section 3.05 of the
Unaffiliated Seller's Agreement or this Section 5.1 hereof.
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SECTION 5.2 Reassignment of Purchased Mortgage Loans. Upon
deposit in the Collection Account of the Purchase Price of any Mortgage Loan
repurchased by the Seller or the substitution of a Qualified Substitute Mortgage
Loan under Section 5.1 hereof, the Servicer and the Trustee shall take such
steps as may be reasonably requested by the Seller in order to assign to the
Seller all of Purchaser's, the Depositor's and the Trustee's right, title and
interest in and to such repurchased Mortgage Loan or Mortgage Loan for which
substitution was made and all security and documents and all Other Conveyed
Property conveyed to Purchaser, the Depositor and the Trustee directly relating
thereto, without recourse, representation or warranty, except as to the absence
of liens, charges or encumbrances created by or arising as a result of actions
of Purchaser, the Depositor or the Trustee. Such assignment shall be a sale and
assignment outright, and not for security. If, following the reassignment of a
Mortgage Loan, in any enforcement suit or legal proceeding, it is held that the
Seller may not enforce any such Mortgage Loan on the ground that it shall not be
a real party in interest or a holder entitled to enforce the Mortgage Loan, the
Servicer and the Trustee shall, at the expense of the Seller, take such steps as
the Seller deems reasonably necessary to enforce the Mortgage Loan, including
bringing suit in Purchaser's or the Trustee's name or the names of the
Certificateholders.
SECTION 5.3 Waivers. No failure or delay on the part of
Purchaser, the Depositor or the Trustee as assignee of Purchaser, in exercising
any power, right or remedy under this Agreement shall operate as a waiver
thereof, nor shall any single or partial exercise of any such power, right or
remedy preclude any other or future exercise thereof or the exercise of any
other power, right or remedy.
ARTICLE VI
MISCELLANEOUS
SECTION 6.1 Liability of the Seller. The Seller shall be
liable in accordance herewith only to the extent of the obligations in this
Agreement specifically undertaken by the Seller and its representations and
warranties.
SECTION 6.2 Merger or Consolidation of any Seller or
Purchaser. Any corporation or other entity (i) into which the Seller, Purchaser
or Emergent Group may be merged or consolidated, (ii) resulting from any merger
or consolidation to which the Seller, Purchaser or Emergent Group is a party or
(iii) succeeding to the business of the Seller, Purchaser or Emergent Group, in
the case of Purchaser, which corporation has a certificate of incorporation
containing provisions relating to limitations on business and other matters
substantively identical to those contained in Purchaser's certificate of
incorporation, and in each of the foregoing cases such corporation shall execute
an agreement of assumption to perform every obligation of the Seller, Purchaser
or Emergent Group, as the case may be,
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under this Agreement, provided that, whether or not such assumption agreement is
executed, shall be the successor to the Seller, Purchaser or Emergent Group, as
the case may be, hereunder (without relieving the Seller, Purchaser or Emergent
Group of its responsibilities hereunder, if it survives such merger or
consolidation) without the execution or filing of any document or any further
act by any of the parties to this Agreement. Notwithstanding the foregoing, so
long as a Certificate Insurer Default shall not have occurred and be continuing,
Purchaser shall not merge or consolidate with any other Person or permit any
other Person to become the successor to Purchaser's business without the prior
written consent of the Certificate Insurer. The Seller, Purchaser or Emergent
Group shall promptly inform the other party, the Trustee and, so long as a
Certificate Insurer Default shall not have occurred and be continuing, the
Certificate Insurer of such merger, consolidation or purchase and assumption.
Notwithstanding the foregoing, as a condition to the consummation of the
transactions referred to in clauses (i), (ii) and (iii) above, (x) immediately
after giving effect to such transaction, no representation or warranty made
pursuant to Sections 3.1, 3.2 and 3.4 or covenant made pursuant to Section 3.3,
shall have been breached (for purposes hereof, such representations and
warranties shall speak as of the date of the consummation of such transaction)
and no event that, after notice or lapse of time, or both, would become an event
of default under the Insurance Agreement, shall have occurred and be continuing,
(y) the Seller, Purchaser or Emergent Group, as applicable, shall have delivered
to the Trustee an Officer's Certificate and an Opinion of Counsel each stating
that such consolidation, merger or succession and such agreement of assumption
comply with this Section 6.2 and that all conditions precedent, if any, provided
for in this Agreement relating to such transaction have been complied with, and
(z) the Seller, Purchaser or Emergent Group, as applicable, shall have delivered
to the Trustee an Opinion of Counsel, stating, in the opinion of such counsel,
either (A) all financing statements and continuation statements and amendments
thereto have been executed and filed that are necessary to preserve and protect
the interest of the Trustee in the Trust Fund and reciting the details of the
filings or (B) no such action shall be necessary to preserve and protect such
interest.
SECTION 6.3 Limitation on Liability of the Seller and Others.
The Seller and any director, officer, employee or agent of the Seller may rely
in good faith on the advice of counsel or on any document of any kind prima
facie properly executed and submitted by any Person respecting any matters
arising under this Agreement. The Seller shall not be under any obligation to
appear in, prosecute or defend any legal action that is not incidental to its
obligations under this Agreement or its Related Documents and that in its
opinion may involve it in any expense or liability.
SECTION 6.4 Amendment.
(a) This Agreement may be amended by the Seller, Purchaser and
Emergent Group, with the prior written consent of the Certificate Insurer (so
long as a Certificate Insurer Default shall not have occurred and be continuing)
but without the consent of the Trustee or any of the Certificateholders (unless
a Certificate Insurer Default shall have occurred, in which event the consent of
the Certificateholders with Voting Rights equal to or in excess of 50% of the
Voting Rights shall be obtained) (i) to cure any ambiguity or (ii) to correct
any provisions in this Agreement; provided, however, that such action shall not,
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as evidenced by an Opinion of Counsel delivered to the Trustee, adversely affect
in any material respect the interests of any Certificateholder.
(b) This Agreement may also be amended from time to time by
the Seller, Purchaser and Emergent Group with the prior written consent of the
Certificate Insurer (so long as a Certificate Insurer Default shall not have
occurred and be continuing) and with the consent of the Trustee and
Certificateholders having Voting Rights equal to or in excess of 50%, for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of this Agreement, or of modifying in any manner the rights of
the Certificateholders; provided, however, that no such amendment shall (i)
increase or reduce in any manner the amount of, or accelerate or delay the
timing of, collections of payments on Mortgage Loans or distributions that shall
be required to be made on any Certificate or the Pass-Through Rates or (ii)
reduce the aforesaid percentage required to consent to any such amendment or any
waiver hereunder, without the consent of the Holders of all Certificates then
outstanding.
(c) Prior to the execution of any such amendment or consent,
Emergent Group shall have furnished written notification of the substance of
such amendment or consent to each Rating Agency.
(d) Promptly after the execution of any such amendment or
consent, the Trustee shall furnish written notification of the substance of such
amendment or consent to each Certificateholder.
(e) It shall not be necessary for the consent of
Certificateholders pursuant to this Section to approve the particular form of
any proposed amendment or consent, but it shall be sufficient if such consent
shall approve the substance thereof. The manner of obtaining such consents and
of evidencing the authorization of the execution thereof by Certificateholders
shall be subject to such reasonable requirements as the Trustee may prescribe,
including the establishment of record dates. The consent of any Holder of a
Certificate given pursuant to this Section or pursuant to any other provision of
this Agreement shall be conclusive and binding on such Holder and on all future
Holders of such Certificate and of any Certificate issued upon the transfer
thereof or in exchange thereof or in lieu thereof whether or not notation of
such consent is made upon the Certificate.
SECTION 6.5 Notices. All demands, notices and communications
to any of the Seller, Purchaser or Emergent Group hereunder shall be in writing,
personally delivered, or sent by telecopier (subsequently confirmed in writing),
reputable overnight courier or mailed by certified mail, return receipt
requested, and shall be deemed to have been given upon receipt (a) in the case
of the Seller, to Emergent Mortgage Corp., 50 Datastream Plaza, Suite 201,
Greenville, South Carolina 29605, (b) in the case of Emergent Group, to Emergent
Group, Inc., 15 South Main Street, Suite 750, Greenville, South Carolina 29601
or (c) in the case of Purchaser, to Emergent Mortgage Holdings Corporation, 44
East Camperdown Way, Greenville, South Carolina 29601, Attention:
William P. Crawford, Jr.
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SECTION 6.6 Merger and Integration. Except as specifically
stated otherwise herein, this Agreement, the Pooling and Servicing Agreement and
the Related Documents set forth the entire understanding of the parties relating
to the subject matter hereof, and all prior understandings, written or oral, are
superseded by this Agreement, the Pooling and Servicing Agreement and the
Related Documents. This Agreement may not be modified, amended, waived or
supplemented except as provided herein.
SECTION 6.7 Severability of Provisions. If any one or more of
the covenants, provisions or terms of this Agreement shall be for any reason
whatsoever held invalid, then such covenants, provisions or terms shall be
deemed severable from the remaining covenants, provisions or terms of this
Agreement and shall in no way affect the validity or enforceability of the other
provisions of this Agreement.
SECTION 6.8 Intention of the Parties. The execution and
delivery of this Agreement shall constitute an acknowledgment by the Seller and
Purchaser that they intend that the assignment and transfer herein contemplated
constitute a sale and assignment outright, and not for security, of the Mortgage
Loans and the Other Conveyed Property conveying good title thereto free and
clear of any Liens, from the Seller to Purchaser, and that none of the Mortgage
Loans and the Other Conveyed Property shall be a part of the Seller's estate in
the event of the bankruptcy, reorganization, arrangement, insolvency or
liquidation proceeding, or other proceeding under any federal or state
bankruptcy or similar law, or the occurrence of another similar event, of, or
with respect to, the Seller. In the event that such conveyance is determined to
be made as security for a loan made by Purchaser, the Depositor, the Trustee or
the Certificateholders to the Seller, as applicable, the parties intend that the
Seller shall have granted to Purchaser a security interest in all right, title
and interest in and to the Mortgage Loans and the Other Conveyed Property
conveyed pursuant to Section 2.1 hereof, and that this Agreement shall
constitute a security agreement under applicable law.
SECTION 6.9 Governing Law. This Agreement shall be construed
in accordance with, the laws of the State of New York without regard to the
principles of conflicts of laws thereof and the obligations, rights and remedies
of the parties under this Agreement shall be determined in accordance with such
laws.
SECTION 6.10 Counterparts. For the purpose of facilitating the
execution of this Agreement 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 all of which counterparts
shall constitute but one and the same instrument.
SECTION 6.11 Conveyance of the Mortgage Loans and the Other
Conveyed Property to the Trust. The Seller acknowledges that Purchaser intends,
pursuant to the Unaffiliated Seller's Agreement, to convey the Mortgage Loans
and the Other Conveyed Property, together with its respective rights under this
Agreement, to the Depositor on the date hereof and that the Depositor intends,
pursuant to the Pooling and Servicing Agreement,
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to convey the Mortgage Loans and the Other Conveyed Property, together with its
respective rights under this Agreement, to the Trustee on the date hereof. The
Seller acknowledges and consents to such conveyance and waives any further
notice thereof and covenants and agrees that the representations and warranties
of the Seller contained in this Agreement and the rights of Purchaser hereunder
are intended to benefit the Depositor, the Certificate Insurer, the Trustee and
the Certificateholders. In furtherance of the foregoing, the Seller covenants
and agrees to perform its duties and obligations hereunder, in accordance with
the terms hereof for the benefit of the Depositor, the Certificate Insurer, the
Trustee and the Certificateholders and that, notwithstanding anything to the
contrary in this Agreement, the Seller shall be directly liable to the Trustee,
the Certificate Insurer and the Certificateholders (notwithstanding any failure
by the Servicer or Purchaser to perform its duties and obligations hereunder or
under the Pooling and Servicing Agreement) and that the Trustee may enforce the
duties and obligations of the Seller under this Agreement against the Seller for
the benefit of the Certificate Insurer, the Trustee and the Certificateholders.
SECTION 6.12 Nonpetition Covenant. Until one year and one day
after the termination of the Trust Fund, neither the Seller, nor Emergent Group
nor the Purchaser shall petition or otherwise invoke the process of any court or
government authority for the purpose of commencing or sustaining a case against
the Trust Fund (or, in the case of the Seller and Emergent Group, against
Purchaser) under any federal or state bankruptcy, insolvency or similar law or
appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or
other similar official of the Trust Fund (or Purchaser) or any substantial part
of its property, or ordering the winding up or liquidation of the affairs of the
Trust Fund (or Purchaser).
SECTION 6.13 Miscellaneous. The parties agree that each of the
Certificate Insurer, the Depositor and the Trustee is an intended third-party
beneficiary of this Agreement to the extent necessary to enforce the rights and
to obtain the benefit of the remedies of the Purchaser under this Agreement
which are assigned to the Depositor pursuant to the Unaffiliated Seller's
Agreement and to the Trustee for the benefit of the Certificateholders pursuant
to the Pooling and Servicing Agreement and to the extent necessary to obtain the
benefit of the enforcement of the obligations and covenants of the Seller under
Section 3.3 and 5.1 of this Agreement.
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IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed by their respective officers as of the day and year first above
written.
EMERGENT MORTGAGE HOLDINGS
CORPORATION, as Purchaser
By:______________________________
Name: Kevin J. Mast
Title:Vice President, CFO
and Treasurer
EMERGENT MORTGAGE CORP., as Seller
By:_______________________________
Name: J. Phil Cox
Title:Executive Senior
Vice President
EMERGENT GROUP, INC.
By:_______________________________
Name: Kevin J. Mast
Title:Vice President,
CFO and Treasurer
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SCHEDULE OF MORTGAGE LOANS CONVEYED
SCHEDULE A
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SCHEDULE B
SCHEDULE OF REPRESENTATIONS
1. The information with respect to each Mortgage Loan set
forth in the Schedule of Mortgage Loans is true and correct as of the Cut-off
Date;
2. All of the original or certified documentation required to
be delivered to the Trustee pursuant to the Pooling and Servicing Agreement
(including all material documents related thereto) with respect to each Mortgage
Loan has been or will be delivered to the Trustee in accordance with the terms
of such Pooling and Servicing Agreement. Each of the documents and instruments
specified to be included therein has been duly executed and in due and proper
form, and each such document or instrument is in a form generally acceptable to
prudent mortgage lenders that regularly originate or purchase mortgage loans
comparable to the Mortgage Loans for sale to prudent investors in the secondary
market that invest in mortgage loans such as the Mortgage Loans.
3. Each Mortgaged Property is improved by a single
(one-to-four) family residential dwelling, which may include condominiums,
townhouses and units in planned unit developments, or manufactured housing, but
shall not include cooperatives;
4. No Mortgage Loan had a Loan-to-Value Ratio in excess of
95%;
5. Each Mortgage is a valid and subsisting first lien of
record on the Mortgaged Property subject in all cases to the exceptions to title
set forth in the title insurance policy, with respect to the related Mortgage
Loan, which exceptions are generally acceptable to banking institutions in
connection with their regular mortgage lending activities, and such other
exceptions to which similar properties are commonly subject and which do not
individually, or in the aggregate, materially and adversely affect the benefits
of the security intended to be provided by such Mortgage;
6. Immediately prior to the transfer and assignment herein
contemplated, the Seller held good and indefeasible title to, and was the sole
owner of, each Mortgage Loan conveyed by it subject to no liens, charges,
mortgages, encumbrances or rights of others except liens which will be released
simultaneously with such transfer and assignment; and immediately upon the
transfer and assignment herein contemplated, the Purchaser will hold good and
indefeasible title to, and be the sole owner of, each Mortgage Loan subject to
no Liens, except Liens which will be released simultaneously with such transfer
and assignment and subordinate Liens on the related Mortgaged Property;
7. As of the related Cut-off Date, no Mortgage Loan is 30 or
more days delinquent;
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8. There is no delinquent tax or assessment lien on any
Mortgaged Property, and each Mortgaged Property is free of substantial damage
and is in good repair;
9. There is no valid and enforceable right of rescission,
offset, defense or counterclaim to any Mortgage Note or Mortgage, including the
obligation of the related Mortgagor to pay the unpaid principal of or interest
on such Mortgage Note or the defense of usury, nor will the operation of any of
the terms of the Mortgage Note or the Mortgage, or the exercise of any right
thereunder, render either the Mortgage Note or the Mortgage unenforceable in
whole or in part, or subject to any right of rescission, set-off, counterclaim
or defense, including the defense of usury, and no such right of rescission,
set-off, counterclaim or defense has been asserted with respect thereto;
10. There is no mechanics' lien or claim for work, labor or
material affecting any Mortgaged Property which is or may be a lien prior to, or
equal with, the lien of the related Mortgage except those which are insured
against by any title insurance policy referred to in paragraph 12 below;
11. Each Mortgage Loan at the time it was made complied in all
material respects with all applicable state and federal laws and regulations,
including, without limitation, the federal Truth-in-Lending Act and other
consumer protection laws, real estate settlement procedure, usury, equal credit
opportunity, disclosure and recording laws;
12. With respect to each Mortgage Loan, a lender's title
insurance policy, issued in standard American Land Title Association form, or
other form acceptable in a particular jurisdiction by a title insurance company
authorized to transact business in the state in which the related Mortgaged
Property is situated, in an amount at least equal to the initial Stated
Principal Balance of such Mortgage Loan insuring the mortgagee's interest under
the related Mortgage Loan as the holder of a valid first mortgage lien of record
on the real property described in the related Mortgage, as the case may be,
subject only to exceptions of the character referred to in paragraph 5 above,
was effective on the date of the origination of such Mortgage Loan, and, as of
the Cut-off Date such policy will be valid and thereafter such policy shall
continue in full force and effect;
13. The improvements upon each Mortgaged Property are covered
by a valid and existing hazard insurance policy (which may be a blanket policy
of the type described in the related Pooling and Servicing Agreement) with a
generally acceptable carrier that provides for fire and extended coverage
representing coverage not less than the least of (A) the outstanding principal
balance of the related Mortgage Loan and (B) the minimum amount required to
compensate for damage or loss on a replacement cost basis;
14. If any Mortgaged Property is in an area identified in the
Federal Register by the Federal Emergency Management Agency as having special
flood hazards, a flood insurance policy (which may be a blanket policy of the
type described in the Pooling and Servicing Agreement) in a form meeting the
requirements of the current guidelines of
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the Federal Insurance Administration is in effect with respect to such Mortgaged
Property with a generally acceptable carrier in an amount representing coverage
not less than the least of (A) the outstanding principal balance of the related
Mortgage Loan and (B) the maximum amount of insurance that is available under
the Flood Disaster Protection Act of 1973;
15. Each Mortgage and Mortgage Note is the legal, valid and
binding obligation of the maker thereof and is enforceable in accordance with
its terms, except only as such enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and by general principles of equity
(whether considered in a proceeding or action in equity or at law), and all
parties to each Mortgage Loan had full legal capacity to execute all documents
relating to such Mortgage Loan and convey the estate therein purported to be
conveyed;
16. The Seller has caused and will cause to be performed any
and all acts required to be performed to preserve the rights and remedies of the
servicer in any insurance policies applicable to any Mortgage Loans delivered by
the Seller including, to the extent such Mortgage Loan is not covered by a
blanket policy described in the Pooling and Servicing Agreement, any necessary
notifications of insurers, assignments of policies or interests therein, and
establishments of co-insured, joint loss payee and mortgagee rights in favor of
the servicer;
17. Each original Mortgage was recorded or is in the process
of being recorded, and all subsequent assignments of the original Mortgage have
been recorded (or are in the process of being recorded) in the appropriate
jurisdictions wherein such recordation is necessary to perfect the lien thereof
for the benefit of the Trustee, subject to the provisions of Section 2.01 of the
Pooling and Servicing Agreement;
18. The terms of each Mortgage Note and each Mortgage have not
been impaired, altered or modified in any respect, except by a written
instrument which has been recorded, if necessary, to protect the interest of the
owners and which has been delivered to the Trustee;
19. The proceeds of each Mortgage Loan have been fully
disbursed, and there is no obligation on the part of the mortgagee to make
future advances thereunder. Any and all requirements as to completion of any
on-site or off-site improvements and as to disbursements of any escrow funds
therefor have been complied with. All costs, fees and expenses incurred in
making or closing or recording such Mortgage Loans have been paid;
20. Except as otherwise required by law or pursuant to the
statute under which the related Mortgage Loan was made, the related Mortgage
Note is not and has not been secured by any collateral, pledged account or other
security except the lien of the corresponding Mortgage;
21. No Mortgage Loan was originated under a buydown plan;
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22. No Mortgage Loan provides for negative amortization, has a
shared appreciation feature, or other contingent interest feature;
23. Each Mortgaged Property is located in the state identified
in the Schedule of Mortgage Loans and consists of one or more parcels of real
property with a residential dwelling erected thereon;
24. Each Mortgage contains a provision for the acceleration of
the payment of the unpaid principal balance of the related Mortgage Loan in the
event the related Mortgaged Property is sold without the prior consent of the
mortgagee thereunder;
25. Any advances made after the date of origination of a
Mortgage Loan but prior to the Cut-off Date, have been consolidated with the
outstanding principal amount secured by the related Mortgage, and the secured
principal amount, as consolidated, bears a single interest rate and single
repayment term reflected on the Schedule of Mortgage Loans. The consolidated
principal amount does not exceed the original principal amount of the related
Mortgage Loan. No Mortgage Note permits or obligates the Seller to make future
advances to the related Mortgagor at the option of the Mortgagor;
26. There is no proceeding pending or threatened for the total
or partial condemnation of any Mortgaged Property, nor is such a proceeding
currently occurring, and each Mortgaged Property is undamaged by waste, fire,
earthquake or earth movement, flood, tornado or other casualty, so as to affect
adversely the value of the Mortgaged Property as security for the Mortgage Loan
or the use for which the premises were intended;
27. All of the improvements of any Mortgaged Property lie
wholly within the boundaries and building restriction lines of such Mortgaged
Property, and no improvements on adjoining properties encroach upon such
Mortgaged Property, and, if a title insurance policy exists with respect to such
Mortgaged Property, are stated in such title insurance policy and affirmatively
insured;
28. No improvement located on or being part of any Mortgaged
Property is in violation of any applicable zoning law or regulation. All
inspections, licenses and certificates required to be made or issued with
respect to all occupied portions of each Mortgaged Property and, with respect to
the use and occupancy of the same, including but not limited to certificates of
occupancy and fire underwriting certificates, have been made or obtained from
the appropriate authorities and such Mortgaged Property is lawfully occupied
under the applicable law;
29. With respect to each Mortgage constituting a deed of
trust, a trustee, duly qualified under applicable law to serve as such, has been
properly designated and currently so serves and is named in such Mortgage, and
no fees or expenses are or will
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<PAGE>
become payable by the Seller or the Trust Fund to the trustee under the deed of
trust, except in connection with a trustee's sale after default by the related
Mortgagor;
30. Each Mortgage contains customary and enforceable
provisions which render the rights and remedies of the holder thereof adequate
for the realization against the related Mortgaged Property of the benefits of
the security, including (A) in the case of a Mortgage designated as a deed of
trust, by trustee's sale and (B) otherwise by judicial foreclosure. There is no
homestead or other exemption available which materially interferes with the
right to sell the related Mortgaged Property at a trustee's sale or the right to
foreclose the related Mortgage;
31. There is no default, breach, violation or event of
acceleration existing under any 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 default, breach, violation or event of
acceleration; and neither the Seller or the Purchaser has waived any default,
breach, violation or event of acceleration;
32. No instrument of release or waiver has been executed in
connection with any Mortgage Loan, and no Mortgagor has been released, in whole
or in part;
33. The credit underwriting guidelines applicable to each
Mortgage Loan conform in all material respects to the Seller's underwriting
guidelines;
34. All parties to the Mortgage Note and the Mortgage had
legal capacity to execute the Mortgage Note and the Mortgage and each Mortgage
Note and Mortgage have been duly and properly executed by such parties;
35. The Seller has no actual knowledge that there exist on any
Mortgaged Property any hazardous substances, hazardous wastes or solid wastes,
as such terms are defined in the Comprehensive Environmental Response
Compensation and Liability Act, the Resource Conservation and Recovery Act of
1976, or other federal, state or local environmental legislation;
36. None of the Mortgage Loans shall be due from the United
States of America or any State or from any agency, department, subdivision or
instrumentality thereof;
37. At the Cut-Off Date, no Mortgagor had been identified by
the Seller as being the subject of a current bankruptcy proceeding;
38. By the Closing Date, the Seller will have caused the
portions of the Seller's servicing records relating to the Mortgage Loans to be
clearly and unambiguously
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marked to show that the Mortgage Loans have been sold to the Trust Fund and are
owned by the Trust Fund in accordance with the terms of the Pooling and
Servicing Agreement;
39. No Mortgage Loan was originated in, or is subject to the
laws of, any jurisdiction the laws of which would make unlawful, void or
voidable the sale, transfer and assignment of such Mortgage Loan under this
Agreement or pursuant to transfers of the Certificates. The Seller has not
entered into any agreement with any account debtor that prohibits, restricts or
conditions the assignment of any portion of the Mortgage Loans;
40. All filings (including, without limitation, UCC filings)
required to be made by any Person and actions required to be taken or performed
by any Person in any jurisdiction to give the Trustee a first priority perfected
lien on, or ownership interest in, the Mortgage Loans and the proceeds thereof
and the other property of the Trust Fund have been made, taken or performed;
41. The Seller has not done anything to convey any right to
any Person that would result in such Person having a right to payments due under
the Mortgage Loan or otherwise to impair the rights of the Trust Fund and the
Certificate-holders in any Mortgage Loan or the proceeds thereof;
42. No Mortgage Loan is assumable (without the Seller's
consent which consent has not been given) by another Person in a manner which
would release the Mortgagor thereof from such Mortgagor's obligations to the
Seller with respect to such Mortgage Loan;
43. With respect to the Mortgage Loans as of the Cut-off Date:
the aggregated Stated Principal Balance was $121,213,941.36; each of the Stated
Principal Balances was at least $9,600.00 but no more than $492,000.00: the
average Stated Principal Balance was $63,099.40; the Mortgage Rates were at
least 7.750% but no more than 15.990%; the weighted average Mortgage Rate was
10.838%; the original Loan-to-Value Ratios were at least 13.9% but no more than
90.4%; the weighted average original Loan-to-Value Ratio was 75.910%; the
remaining terms to stated maturity were at least 47 months but no more than 360
months; the weighted average remaining term to stated maturity was 199 months;
the original terms to stated maturity were at least 49 months but no more than
361 months; the weighted average original term to stated maturity was 200
months; and no more than 0.67% of the Mortgage Loans are secured by Mortgaged
Properties located in any one postal zip code area; and
44. No selection procedures adverse to the Certificateholders
or to the Certificate Insurer have been utilized in selecting such Mortgage Loan
from all other similar Mortgage Loans originated by the Seller;
45. The related Mortgaged Property has not been subject to any
foreclosure proceeding or litigation;
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46. There was no fraud involved in the origination of the
Mortgage Loan by the mortgagee or by the Mortgagor, any appraiser or any other
party involved in the origination of the Mortgage Loan; and
47. Each Mortgage File contains an appraisal of the Mortgaged
Property indicating an appraised value equal to the appraised value of such
Mortgaged Property on the Mortgage Loan Schedule. Each appraisal has been
performed in accordance with the requirements of FNMA or FHLMC.
48. Each Mortgage Loan is a "qualified mortgage" as defined in
Section 860G(a)(3) of the Code.
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[Letterhead of Coopers & Lybrand]
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Prospectus Supplement dated
June 17, 1997 (to Prospectus dated June 10, 1997) of Emergent Mortgage Corp.
relating to Emergent Home Equity Loan Trust 1997-2 of our report dated January
24, 1997 on our audits of the consolidated financial statements of Financial
Security Assurance Inc. and Subsidiaries as of December 31, 1996 and 1995 and
for each of the three years in the period ended December 31, 1996. We also
consent to the reference to our Firm under the caption "Experts."
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
New York, New York
June 24, 1997
