<PAGE>
- -------------------------------------------------------------------------------
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) March 27, 1997
Prudential Securities Secured Financing Corporation
(Exact name of registrant as specified in its charter)
Delaware 333-16511 13-3526694
(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
One New York Plaza New York, New York 10292
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (212) 778-1000
No Change
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
- --------------------------------------------------------------------------------
<PAGE>
Item 2. Acquisition or Disposition of Assets
Description of the Certificates and the Mortgage Loans
Prudential Securities Secured Financing Corporation registered
issuances of up to $750,000,000 principal amount of Mortgage Pass-Through
Certificates on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, as amended (the "Act"), by the Registration Statements
on Form S-3 (Registration File No. 333-16511) (as amended, the "Registration
Statement"). Pursuant to the Registration Statement, ABFS Mortgage Loan Trust
1997-1 (the "Trust") issued approximately $72,748,000 in aggregate principal
amount of its Mortgage Pass-Through Certificates, Series 1997-1 (the
"Certificates"), on March 17, 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 were filed
as Exhibits to the Registration Statement.
The Certificates were issued pursuant to a Pooling and
Servicing Agreement (the "Pooling and Servicing Agreement") attached hereto as
Exhibit 4.1, dated as of March 1, 1997, between Prudential Securities Secured
Financing Corporation, American Business Credit, Inc., in its capacity as
servicer (the "Servicer"), and The Chase Manhattan Bank, in its capacity as
trustee (the "Trustee"). The Certificates consist of three classes of senior
Certificates, the Class A-1 Certificates (the "Class A-1 Certificates"), the
Class A-2 Certificates (the "Class A-2 Certificates"), the Class A-3
Certificates (the "Class A-3 Certificates," and collectively with the Class A-1
Certificates and the Class A-2 Certificates, the "Class A Certificates") and one
class of subordinated Certificates (the "Class R Certificates"). Only the Class
A Certificates are being offered hereby. The Certificates initially evidence, in
the aggregate, 100% of the undivided beneficial ownership interests in the
Trust.
The assets of the Trust will be primarily fixed-rate,
closed-end, conventional, monthly pay, generally fully amortizing, business and
consumer purpose residential home equity loans (the "Mortgage Loans") secured by
first or second lien mortgages or deeds of trust (the "Mortgages") on real
properties (the "Mortgaged Properties"). The Mortgaged Properties securing the
Mortgage Loans consist primarily of single family residences (which may be
detached, part of a two-to four-family dwelling, a condominium unit or a unit in
a planned unit development).
Interest distributions on the Class A Certificates
are based on the Certificate Principal Balance thereof and
2
<PAGE>
the then applicable Pass-Through Rate thereof. The Pass- Through Rate for the
Class A-1 Certificates is 6.525% per annum. The Pass-Through Rate for the Class
A-2 Certificates is 6.925% per annum. The Pass-Through Rate for the Class A- 3
Certificates is 7.525% per annum, plus with respect to any Distributions Date
after the Clean-up Call Date, 0.75%.
The Class A-1 Certificates have an aggregate principal amount
of $32,100,000. The Class A-2 Certificates have an aggregate principal amount of
$20,600,000. The Class A-3 Certificates have an aggregate principal amount of
$20,048,000.
As of the Closing Date, the Mortgage Loans possessed the
characteristics described in the Prospectus dated December 4, 1996 and the
Prospectus Supplement dated March 24, 1997 filed pursuant to Rule 424(b)(5) of
the Act on March 31, 1997.
Item 7. Financial Statements, Pro Forma Financial
Information and Exhibits.
(a) Not applicable
(b) Not applicable
(c) Exhibits:
1.1 Underwriting Agreement, dated March 14, 1997 between
Prudential Securities Secured Financing Corporation and
Prudential Securities Incorporated.
4.1 Pooling and Servicing Agreement, dated as of March 1,
1997 between Prudential Securities Secured Financing
Corporation, American Business Credit, Inc., as
servicer, and The Chase Manhattan Bank, as trustee.
4.2 Unaffiliated Seller's Agreement, dated as of March 1,
1997, among American Business Credit, Inc., Home
American Credit, Inc. d/b/a Upland Mortgage, Prudential
Securities Secured Financing Corporation, and ABFS
1997-1, Inc.
23.1 Consent of Coopers & Lybrand L.L.P. regarding financial
statements of the Financial Security Assurance Inc. and
their report.
3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
PRUDENTIAL SECURITIES SECURED FINANCING
CORPORATION
As Depositor and on behalf of ABFS
Mortgage Loan Trust 1997-1
Registrant
By: /s/ Norman Chaleff
------------------------------------------
Name: Norman Chaleff
Title: Vice President
Dated: March 31, 1997
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
1.1 Underwriting Agreement, dated March 14, 1997, between
Prudential Securities Secured Financing Corporation and
Prudential Securities Incorporated.
4.1 Pooling and Servicing Agreement, dated as of March 1,
1997, between Prudential Securities Secured Financing
Corporation, American Business Credit, Inc., as
servicer, and The Chase Manhattan Bank, as trustee.
4.2 Unaffiliated Seller's Agreement, dated as of March 1,
1997, among American Business Credit, Inc., HomeAmerican
Credit, Inc. d/b/a Upland Mortgage, Prudential
Securities Secured Financing Corporation, and ABFS 1997-
1, Inc.
23.1 Consent of Coopers & Lybrand L.L.P. regarding financial
statements of the Financial Security Assurance Inc. and
their report.
<PAGE>
EXHIBIT 1.1
ABFS MORTGAGE LOAN TRUST 1997-1
MORTGAGE LOAN PASS-THROUGH CERTIFICATES
SERIES 1997-1
UNDERWRITING AGREEMENT
<PAGE>
UNDERWRITING AGREEMENT
PRUDENTIAL SECURITIES INCORPORATED
One New York Plaza
New York, New York 10292
March 14, 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 March 14, 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.
<PAGE>
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.
Yours truly,
PRUDENTIAL SECURITIES SECURED
FINANCING CORPORATION
By: /s/ Norman Chaleff
--------------------------------
Name: Norman Chaleff
Title: Vice President
Accepted as of the date hereof:
PRUDENTIAL SECURITIES INCORPORATED
By: /s/ Murray Weiss
----------------------------
Name: Murray Weiss
Title: Director
[Signature Page to Underwriting Agreement]
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE I
<S> <C>
Title of Offered
Securities: ABFS Mortgage Loan Trust 1997-1, Mortgage Loan Pass-
Through Certificates, Series 1997-1, Class A-1, Class A-2 and
Class A-3.
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
descriptions thereof contained therein, and shall be issued
pursuant to a Pooling and Servicing Agreement to be dated as of
March 1, 1997 among the Depositor, American Business Credit,
Inc., as servicer, and The Chase Manhattan Bank, as trustee.
Purchase Price: The purchase price for the Offered Securities shall be
99.484375%, 99.468750% and 99.453125% of the aggregate
principal balance of the Class A-1, Class A-2 and Class A-3
Certificates, respectively, as of the Closing Date, plus accrued
interest at the rate of 6.525%, 6.925% and 7.525% per annum,
respectively, from March 1, 1997 to, but not including, March
27, 1997.
Specified funds for
payment of Purchase Price: Federal Funds (immediately available funds).
Required Ratings: Aaa by Moody's Investors Service, Inc.
AAA by Standard & Poor's Ratings Services
Closing Date: On or about March 27, 1997 at 10:00 A.M. eastern standard time
or at such other time as the Depositor and the Underwriter shall
agree.
Closing Location: Offices of American Business Credit, Inc., Balapointe Office
Centre, 111 Presidential Boulevard, Suite 215, Bala Cynwyd,
Pennsylvania 19004.
Name and address of
Representative: Designated Representative: Prudential Securities Incorporated.
Address for Notices, etc.: One New York Plaza
New York, New York 10292
Attn: Len Blum
</TABLE>
<PAGE>
STANDARD PROVISIONS TO UNDERWRITING AGREEMENT
March 14, 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 certificates (the "Securities") representing
beneficial ownership interests in a trust, the trust property of which consists
of a pool of home equity loans (the "Mortgage Loans") and certain related
property. The Securities will be issued pursuant to a pooling and servicing
agreement (the "Pooling and Servicing Agreement") by and among the Depositor,
American Business Credit, Inc., as Servicer (the "Servicer") and The Chase
Manhattan 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 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.
333-16511), 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 "Base Prospectus" means the prospectus included
in the Registration Statement. The term "Prospectus" means the Base 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
<PAGE>
prospectus supplement specifically relating to the Offered Securities together
with the Base 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
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
2
<PAGE>
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 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 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
3
<PAGE>
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 Certificate Insurance 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 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 has not occurred any change, or any development
involving a prospective change, in the condition, financial or
otherwise, or in the earnings, business or operations, since
December 31, 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 received, on the Closing
Date, a certificate dated the Closing Date and signed by the
President, a senior vice president or a
4
<PAGE>
vice president of the Certificate Insurer to the effect that
the signer of such certificate has carefully examined the
Certificate Insurance Policy, the Insurance Agreement dated
the Closing Date (the "Insurance Agreement") among the
Servicer, the Underwriter, the Depositor and the Certificate
Insurer and the related documents and that, to the best of his
or her knowledge based on reasonable investigation:
(i) there are no actions, suits or proceedings pending or
threatened against or affecting the Certificate
Insurer which, if adversely determined, individually
or in the aggregate, would adversely affect the
Certificate Insurer's performance under the
Certificate Insurance Policy or the Insurance
Agreement;
(ii) each person who, as an officer or representative of
the Certificate Insurer, signed or signs the
Certificate Insurance Policy, the Insurance Agreement
or any other document delivered pursuant hereto, on
the date thereof, or on the Closing Date, in
connection with the transactions described in this
Agreement was, at the respective times of such
signing and delivery, and is now, duly elected or
appointed, qualified and acting as such officer or
representative, and the signatures of such persons
appearing on such documents are their genuine
signatures;
(iii) the information contained in the Prospectus under the
captions "THE CERTIFICATE INSURANCE POLICY" and "THE
CERTIFICATE INSURER" is true and correct in all
material respects and does not omit to state a
material fact with respect to the description of the
Certificate Insurance Policy or the ability of the
Certificate Insurer to meet its payment obligations
under the Certificate Insurance Policy;
(iv) the tables regarding the Certificate Insurer's
capitalization set forth under the heading "THE
CERTIFICATE INSURANCE POLICY" and THE CERTIFICATE
INSURER" present fairly the capitalization of the
Certificate Insurer as of December 31, 1996;
(v) on or prior to the Closing Date, there has been no
downgrading, nor has any notice been given of (i) any
intended or potential downgrading or (ii) any review
or possible changes in rating the direction of which
has not been indicated, in the rating accorded the
claims paying ability of the Certificate Insurer by
any "nationally recognized statistical rating
organization," as such term is defined for purposes
of the 1933 Act;
(vi) the audited balance sheet of the Certificate Insurer
as of December 31, 1996 and the related statement of
income and retained earnings for the fiscal year then
ended, and the accompanying footnotes, together with
an opinion thereon dated January 24, 1997 of Coopers
& Lybrand, independent certificated public
accountants, copies of which are incorporated by
reference in the Prospectus, fairly present in all
material respects the financial condition of the
Certificate Insurer as of such date
5
<PAGE>
and for the period covered by such statements in
accordance with generally accepted accounting
principles consistently applied.
(vii) to the best knowledge of such officer, since December
31, 1996 no material adverse change has occurred in
the financial position of the Certificate Insurer
other than as set forth in the Prospectus.
The officer of the Certificate Insurer certifying to items
(v)-(vii) shall be an officer in charge of a principal
financial function. The Certificate Insurer shall attach to
such certificate a true and correct copy of its certificate or
articles of incorporation, as appropriate, and its bylaws, all
of which are in full force and effect on the date of such
certificate.
(q) 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 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
6
<PAGE>
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 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
7
<PAGE>
Agreement, which shall satisfy the provisions of 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 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
8
<PAGE>
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.
(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, orders, 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
9
<PAGE>
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 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 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
10
<PAGE>
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 or any Subsequent Transfer Date, as
the case may be, 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 or any
Subsequent Transfer Date, as the case may be, 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 and on any Subsequent Transfer Date, as
the case may be, 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 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, and on any
Subsequent Transfer Date, as the case may be, 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,
11
<PAGE>
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 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 statements 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
12
<PAGE>
any legal or other expenses reasonably incurred by the
Depositor or any such director, officer or controlling person
in connection with investigating or defending any such loss,
claim, damage, liability or action. This indemnity agreement
will be in addition to any liability 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 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
13
<PAGE>
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 underwriting fee 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 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 5
of the Indemnification Agreement conflict with Section 7
hereof, the provisions of Section 7 hereof shall govern.
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.
14
<PAGE>
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 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 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
15
<PAGE>
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, One New York Plaza, New
York, New York 10292, Attention: Managing Director-Asset 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.
13. Representative of Underwriters. Any Representative
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
16
<PAGE>
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.
[Signature Page Follows]
17
<PAGE>
If the foregoing is in accordance with your understanding,
please sign and return two counterparts hereof.
Yours truly,
PRUDENTIAL SECURITIES SECURED
FINANCING CORPORATION
By: /s/ Norman Chaleff
----------------------------
Name: Norman Chaleff
Title: Vice President
Accepted as of the date hereof:
PRUDENTIAL SECURITIES INCORPORATED
By: /s/ Murray Weiss
-----------------------------
Name: Murray Weiss
Title: Director
[Signature Page to Underwriting Agreement Standard Provisions]
<PAGE>
Exhibit A
Opinions of Dewey Ballantine,
special counsel for the Depositor
(1) 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.
(2) 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.
(3) 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.
(4) 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 1933 Act 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.
(5) 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.
(6) 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
(1) The Servicer has been duly organized and is validly existing as a
corporation in good standing under the federal laws of the United States and is
duly qualified to transact business in the State of Pennsylvania.
(2) 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 and the Unaffiliated Seller's
Agreement dated as of the Closing Date (the "Unaffiliated Seller's Agreement")
between the Servicer, Upland, the Seller and the Depositor, together referred to
hereinafter as the "Servicer Agreements".
(3) The Servicer Agreements have been duly and validly authorized,
executed and delivered by the Servicer, all requisite corporate action having
been taken with respect thereto, and each constitutes the valid, legal and
binding agreement of the Servicer, and are enforceable against the Servicer in
accordance with their respective terms.
(4) Neither the transfer of the Mortgage Loans to the Depositor, nor
the execution, delivery or performance by the Servicer of the Servicer
Agreements (A) conflicts or will conflict with or results or will result in a
breach of, or constitutes or will constitute a default under or violates 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) results 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.
(5) The endorsement and delivery of each Mortgage Note, and the
preparation, delivery and recording of an Assignment of Mortgage with respect to
each Mortgage is sufficient fully to transfer to the Depositor and its assignees
all right, title and interest of the Servicer in the Mortgage Note and Mortgage,
as noteholder and mortgagee or assignee thereof.
(6) 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 Pennsylvania, for
the execution, delivery and performance of the Servicer Agreements or the
consummation of any other transaction contemplated thereby by the Servicer,
except such which have been obtained.
(7) 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
<PAGE>
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; (ii) the Servicer's ability to perform
its obligations under, or the validity or enforceability of, the Servicer
Agreements; (iii) any Mortgage Note or Mortgaged Property, or the title of any
Mortgagor to any Mortgaged Property; 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
(1) The Trustee is a New York banking corporation duly organized,
validly existing and in good standing under the laws of the New York and has the
power and authority to enter into and to take all actions required of it under
the Pooling and Servicing Agreement.
(2) The Pooling and Servicing Agreement has been duly authorized,
executed and delivered by 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.
(3) No consent, approval, authorization or other action by any
governmental agency or body or other tribunal is required on the part of the
Trustee in connection with its execution and delivery of the Pooling and
Servicing Agreement or the performance of its obligations thereunder.
(4) The Certificates have been duly executed, authenticated and
delivered by the Trustee.
(5) The execution and delivery of, and performance by 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.
C-1
<PAGE>
Exhibit D
Opinions of Counsel
to the Certificate Insurer
(1) 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 Certificate
Insurance Policy and perform its obligations under the Certificate Insurance
Policy in accordance with the terms thereof, under the laws of the State of New
York.
(2) The execution and delivery by the Certificate Insurer of the
Certificate Insurance Policy, and the Indemnification Agreement are within the
corporate power of the Certificate Insurer and have been authorized by all
necessary corporate action on the part of the Certificate Insurer; the
Certificate Insurance 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 Certificate Insurance 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.
(3) The Certificate Insurer is authorized to deliver the
Indemnification Agreement, and the Indemnification 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.
(4) No consent, approval, authorization or order of any state or
federal court or governmental agency or body is required on the part of the
Certificate Insurer, the lack of which would adversely affect the validity or
enforceability of the Certificate Insurance Policy; to the extent required by
applicable legal requirements that would adversely affect validity or
enforceability of the Certificate Insurance Policy, the form of each Certificate
Insurance Policy has been filed with, and approved by, all governmental
authorities having jurisdiction over the Certificate Insurer in connection with
such Certificate Insurance Policy.
(5) To the extent the Certificate Insurance 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.
(6) The information set forth under the captions "THE CERTIFICATE
INSURANCE POLICY" and "THE CERTIFICATE INSURER" in the Prospectus insofar as
such statements constitute a description of the Certificate Insurance Policy,
accurately summarizes the Certificate Insurance Policy.
D-1
<PAGE>
EXHIBIT 4.1
POOLING AND SERVICING AGREEMENT
Dated as of March 1, 1997
by and among
Prudential Securities Secured Financing Corporation
(Depositor)
and
American Business Credit, Inc.
(Servicer)
and
The Chase Manhattan Bank
(Trustee)
ABFS Mortgage Loan Trust 1997-1
Mortgage Pass-Through Certificates,
Series 1997-1
Class A-1, Class A-2, Class A-3 and Class R
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
ARTICLE I
DEFINITIONS................................................. 1
<S> <C> <C>
Section 1.01 Certain Defined Terms....................................................... 1
Section 1.02 Provisions of General Application........................................... 26
Section 1.03 Business Day Certificate.................................................... 27
ARTICLE II
ESTABLISHMENT OF THE TRUST
SALE AND CONVEYANCE OF THE TRUST FUND.................................... 27
Section 2.01 Establishment of the Trust.................................................. 27
Section 2.02 Purchase and Sale of Initial Mortgage Loans................................. 27
Section 2.03 Purchase and Sale of Subsequent Mortgage Loans.............................. 28
Section 2.04 Possession of Mortgage Files; Access to Mortgage Files...................... 29
Section 2.05 Delivery of Mortgage Loan Documents......................................... 30
Section 2.06 Acceptance by Trustee of the Trust Fund; Certain Substitutions;
Certification by Trustee.................................................... 32
Section 2.07 Designations under REMIC Provisions; Designation of Startup Day............. 34
Section 2.08 Execution of Certificates................................................... 34
Section 2.09 Application of Principal and Interest....................................... 34
Section 2.10 Grant of Security Interest.................................................. 34
Section 2.11 Further Action Evidencing Assignments....................................... 35
ARTICLE III
REPRESENTATIONS AND WARRANTIES........................................ 35
Section 3.01 Representations of the Servicer............................................. 35
Section 3.02 Representations, Warranties and Covenants of the Depositor.................. 37
Section 3.03 Purchase and Substitution................................................... 38
ARTICLE IV
THE CERTIFICATES............................................... 39
Section 4.01 The Certificates............................................................ 39
Section 4.02 Registration of Transfer and Exchange of Certificates....................... 39
Section 4.03 Mutilated, Destroyed, Lost or Stolen Certificates........................... 44
Section 4.04 Persons Deemed Owners....................................................... 44
i
<PAGE>
Page
ARTICLE V
ADMINISTRATION AND SERVICING OF THE MORTGAGE LOANS.................. 45
Section 5.01 REMIC Matters; The Servicer................................................. 45
Section 5.02 Collection of Certain Mortgage Loan Payments; Collection Account............ 46
Section 5.03 Permitted Withdrawals from the Collection Account........................... 47
Section 5.04 Hazard Insurance Policies; Property Protection Expenses..................... 48
Section 5.05 Assumption and Modification Agreements...................................... 49
Section 5.06 Realization Upon Defaulted Mortgage Loans................................... 49
Section 5.07 Trustee to Cooperate........................................................ 50
Section 5.08 Servicing Compensation; Payment of Certain Expenses by Servicer............. 51
Section 5.09 Annual Statement as to Compliance........................................... 51
Section 5.10 Annual Independent Public Accountants' Servicing Report..................... 51
Section 5.11 Access to Certain Documentation............................................. 51
Section 5.12 Maintenance of Fidelity Bond................................................ 52
Section 5.13 The Subservicer............................................................. 52
Section 5.14 Reports to the Trustee; Collection Account Statements....................... 52
Section 5.15 Optional Purchase of Defaulted Mortgage Loans............................... 52
Section 5.16 Reports to be Provided by the Servicer...................................... 53
Section 5.17 Adjustment of Servicing Compensation in Respect of Prepaid
Mortgage Loans.............................................................. 53
Section 5.18 Periodic Advances; Special Advance.......................................... 53
Section 5.19 Indemnification; Third Party Claims......................................... 54
Section 5.20 Maintenance of Corporate Existence and Licenses; Merger or
Consolidation of the Servicer............................................... 55
Section 5.21 Assignment of Agreement by Servicer; Servicer Not to Resign................. 55
Section 5.22 Periodic Filings with the Securities and Exchange Commission;
Additional Information...................................................... 55
ARTICLE VI
DISTRIBUTIONS AND PAYMENTS.......................................... 56
Section 6.01 Establishment of Accounts; Withdrawals from Accounts; Deposits to
the Certificate Account..................................................... 56
Section 6.02 Permitted Withdrawals From the Certificate Account.......................... 57
Section 6.03 Collection of Money......................................................... 57
Section 6.04 The Certificate Insurance Policy............................................ 58
Section 6.05 Distributions............................................................... 59
Section 6.06 Investment of Accounts...................................................... 60
Section 6.07 Reports by the Trustee...................................................... 60
Section 6.08 Additional Reports by Trustee............................................... 62
Section 6.09 Compensating Interest....................................................... 63
Section 6.10 Effect of Payments by the Certificate Insurer; Subrogation.................. 63
ARTICLE VII
ii
<PAGE>
Page
DEFAULT................................................... 63
Section 7.01 Events of Default........................................................... 63
Section 7.02 Trustee to Act; Appointment of Successor.................................... 65
Section 7.03 Waiver of Defaults.......................................................... 67
Section 7.04 Rights of the Certificate Insurer to Exercise Rights of Class A
Certificateholders.......................................................... 67
Section 7.05 Trustee To Act Solely with Consent of the Certificate Insurer............... 68
Section 7.06 Mortgage Loans, Trust Fund and Accounts Held for Benefit of the
Certificate Insurer......................................................... 68
Section 7.07 Certificate Insurer Default................................................. 68
ARTICLE VIII
TERMINATION................................................. 69
Section 8.01 Termination................................................................. 69
Section 8.02 Additional Termination Requirements......................................... 70
Section 8.03 Accounting Upon Termination of Servicer..................................... 70
Section 8.04 Retention and Termination of the Servicer................................... 71
ARTICLE IX
THE TRUSTEE................................................. 71
Section 9.01 Duties of Trustee........................................................... 71
Section 9.02 Certain Matters Affecting the Trustee....................................... 76
Section 9.03 Trustee Not Liable for Certificates or Mortgage Loans....................... 77
Section 9.04 Trustee May Own Certificates................................................ 77
Section 9.05 Trustee's Fees and Expenses; Indemnity...................................... 77
Section 9.06 Eligibility Requirements for Trustee........................................ 78
Section 9.07 Resignation and Removal of the Trustee...................................... 78
Section 9.08 Successor Trustee........................................................... 79
Section 9.09 Merger or Consolidation of Trustee.......................................... 79
Section 9.10 Appointment of Co-Trustee or Separate Trustee............................... 79
Section 9.11 Tax Returns................................................................. 80
Section 9.12 Retirement of Certificates.................................................. 80
ARTICLE X
MISCELLANEOUS PROVISIONS........................................... 80
Section 10.01 Limitation on Liability of the Depositor and the Servicer................... 80
Section 10.02 Acts of Certificateholders.................................................. 81
Section 10.03 Amendment................................................................... 81
Section 10.04 Recordation of Agreement.................................................... 82
Section 10.05 Duration of Agreement....................................................... 82
Section 10.06 Notices..................................................................... 82
iii
<PAGE>
Section 10.07 Severability of Provisions.................................................. 82
Section 10.08 No Partnership.............................................................. 83
Section 10.09 Counterparts................................................................ 83
Section 10.10 Successors and Assigns...................................................... 83
Section 10.11 Headings.................................................................... 83
Section 10.12 The Certificate Insurer Default............................................. 83
Section 10.13 Third Party Beneficiary..................................................... 83
Section 10.14 Intent of the Parties....................................................... 83
Section 10.15 Appointment of Tax Matters Person........................................... 83
Section 10.16 GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF
JURY TRIAL.................................................................. 83
EXHIBITS
EXHIBIT A-1 Class A-1 Certificate
EXHIBIT A-2 Class A-2 Certificate
EXHIBIT A-3 Class A-3 Certificate
EXHIBIT B Class R Certificate
EXHIBIT C Contents of the Mortgage File
EXHIBIT D Certificate Re: Prepaid Loans
EXHIBIT E Trustee's Acknowledgement of Receipt EXHIBIT F Initial Certification
of Trustee EXHIBIT G Final Certification of Trustee EXHIBIT H Request for
Release of Documents EXHIBIT I Transfer Affidavit and Agreement EXHIBIT J
Transferor's Certificate EXHIBIT K ERISA Investment Representation Letter
SCHEDULES
SCHEDULE I Mortgage Loan Schedule
</TABLE>
iv
<PAGE>
POOLING AND SERVICING AGREEMENT, relating to ABFS MORTGAGE
LOAN TRUST 1997-1, dated as of March 1, 1997, by and among PRUDENTIAL SECURITIES
SECURED FINANCING CORPORATION, a Delaware corporation, in its capacity as
Depositor (the "Depositor"), AMERICAN BUSINESS CREDIT, INC., a Pennsylvania
corporation, in its capacity as servicer (the "Servicer"), and THE CHASE
MANHATTAN BANK, a New York banking corporation, in its capacity as trustee (the
"Trustee").
WHEREAS, the Depositor wishes to establish a trust which
provides for the allocation and sale of the beneficial interests therein and the
maintenance and distribution of the trust estate;
WHEREAS, the Servicer has agreed to service the Mortgage
Loans, which constitute the principal assets of the trust estate;
WHEREAS, The Chase Manhattan Bank is willing to serve in the
capacity of Trustee hereunder; and
WHEREAS, Financial Security Assurance Inc. (the "Certificate
Insurer") is intended to be a third party beneficiary of this Agreement and is
hereby recognized by the parties hereto to be a third-party beneficiary of this
Agreement.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements herein contained, the Depositor, the Servicer and the Trustee
hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01 Certain Defined Terms. Whenever used herein, the
following words and phrases, unless the context otherwise requires, shall have
the following meanings.
ACCEPTED SERVICING PRACTICES: The Servicer's normal servicing
practices, which in general will conform to the mortgage servicing practices of
prudent mortgage lending institutions which service for their own account
mortgage loans of the same type as the Mortgage Loans in the jurisdictions in
which the related Mortgaged Properties are located.
ACCOUNT: Any of the Collection Account, the Certificate
Account, the Capitalized Interest Account, the Certificate Insurance Payment
Account or the Pre-Funding Account.
ADDITION NOTICE: A written notice from the Seller to the
Trustee, the Rating Agencies and the Certificate Insurer that the Seller desires
to make a Subsequent Transfer.
ADJUSTED PASS-THROUGH RATE: With respect to any Distribution
Date, the percentage equal to the sum of (i) the Weighted Average Class A
Pass-Through Rate, plus (ii) the Premium Percentage, minus (iii) the
Reinvestment Rate.
ADMINISTRATIVE COSTS: With respect to any Distribution Date,
the sum of the Trustee Fee, the Premium Amount and the Servicing Fee for such
Distribution Date.
<PAGE>
AFFILIATE: With respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
AGREEMENT: This Pooling and Servicing Agreement, including the
Exhibits hereto, and all amendments hereof and supplements hereto.
APPRAISED VALUE: As to any Mortgaged Property and time
referred to herein, the appraised value of the Mortgaged Property based upon the
appraisal made by or on behalf of the Originator at the time referred to herein
or, in the case of a Mortgage Loan that is a purchase money mortgage loan, the
sales price of the Mortgaged Property, if such sales price is less than such
appraised value.
ASSIGNMENT OF MORTGAGE: With respect to each Mortgage Loan, an
assignment of the Mortgage, notice of transfer or equivalent instrument
sufficient under the laws of the jurisdiction wherein the related Mortgaged
Property is located to reflect of record the sale of the Mortgage to the Trustee
for the benefit of the Certificateholders.
AUTHORIZED DENOMINATIONS: Each Class of the Class A
Certificates is issuable only in the minimum Percentage Interest corresponding
to a minimum denomination of $1,000 or integral multiples of $1,000 in excess
thereof; provided, however, that one Certificate of each Class is issuable in a
denomination equal to any such multiple plus an additional amount such that the
aggregate denomination of all Class A Certificates of such Class shall be equal
to the applicable Original Certificate Principal Balance.
AVAILABLE FUNDS: As defined in Section 6.04(a).
AVAILABLE FUNDS SHORTFALL: With respect to any Distribution
Date, an amount equal to the excess of the Insured Distribution Amount for such
Distribution Date over the Available Funds for such Distribution Date available
for distribution in respect of such Insured Distribution Amount.
BUSINESS DAY: Any day other than (a) a Saturday or Sunday, or
(b) a day on which banking institutions in the States of Pennsylvania or New
York are authorized or obligated by law or executive order to be closed.
CAPITALIZED INTEREST ACCOUNT: The Capitalized Interest Account
established in accordance with Section 6.01(a) hereof and maintained by the
Trustee.
CAPITALIZED INTEREST REQUIREMENT: With respect to the
Distribution Dates occurring in April 1997, May 1997 and June 1997, (A) the
product of (i) one-twelfth of the Adjusted Pass-Through Rate as calculated as of
such Distribution Date and (ii) the Pre-Funded Amount as of the first day of the
related Due Period, minus (B) 30 days' interest, at the related Mortgage
Interest Rate, on the Subsequent Mortgage Loans transferred to the Trust during
the related Due Period which had a Due Date after the related Subsequent Cut-Off
Date during the related Due Period, minus (C) the amount of any Pre-Funding
Earnings earned from the last Distribution Date (or the Closing Date with
respect to the April 1997 Distribution Date).
2
<PAGE>
CERCLA: The Comprehensive Environmental Response, Compensation
and Liability Act of 1980.
CERTIFICATE: Any Class A-1 Certificate, Class A-2 Certificate,
Class A-3 Certificate or Class R Certificate executed by the Trustee on behalf
of the Trust Fund and authenticated by the Trustee.
CERTIFICATE ACCOUNT: The Certificate Account established in
accordance with Section 6.01(a) hereof and maintained by the Trustee.
CERTIFICATEHOLDER or HOLDER: Except as provided in Article X,
each Person in whose name a Certificate is registered in the Certificate
Register, except that, solely for the purposes of giving any consent (except any
consent required to be obtained pursuant to Section 10.02), waiver, request or
demand pursuant to this Agreement, any Certificate registered in the name of the
Servicer or any Subservicer or the Seller, or any Affiliate of any of them,
shall be deemed not to be outstanding and the undivided Percentage Interest
evidenced thereby shall not be taken into account in determining whether the
requisite percentage of Certificates necessary to effect any such consent,
waiver, request or demand has been obtained. For purposes of any consent,
waiver, request or demand of Certificateholders pursuant to this Agreement, upon
the Trustee's request, the Servicer and the Seller shall provide to the Trustee
a notice identifying any of their respective Affiliates or the Affiliates of any
Subservicer that is a Certificateholder as of the date(s) specified by the
Trustee in such request. Any Certificates on which payments are made under the
Certificate Insurance Policy shall be deemed to be outstanding and held by the
Certificate Insurer to the extent of such payment.
CERTIFICATE INSURANCE PAYMENT ACCOUNT: The Certificate
Insurance Payment Account established in accordance with Section 6.04(c) hereof
and maintained by the Trustee.
CERTIFICATE INSURANCE POLICY: The Financial Guaranty Insurance
Policy No. 50575-N, and all endorsements thereto dated the Closing Date, issued
by the Certificate Insurer for the benefit of the Certificateholders.
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 shall have failed to make a
required payment when due under the Certificate Insurance Policy;
(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,
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
3
<PAGE>
(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 or of all or any material portion
of its property.
CERTIFICATE PRINCIPAL BALANCE: As to any particular Class A
Certificate and date of determination, the product of the Percentage Interest
evidenced thereby and the aggregate Certificate Principal Balance of all
Certificates of the same Class as of such date. The Class R Certificates do not
have a "Certificate Principal Balance".
CERTIFICATE REGISTER: As described in Section 4.02(a).
CIVIL RELIEF ACT: The Soldiers' and Sailors' Civil Relief Act
of 1940, as amended.
CIVIL RELIEF ACT INTEREST SHORTFALL: With respect to any
Distribution Date, for any Mortgage Loan as to which there has been a reduction
in the amount of interest collectible thereon for the most recently ended Due
Period as a result of the application of the Civil Relief Act, the amount, if
any, by which (a) interest collectible on such Mortgage Loan during the most
recently ended calendar month is less than (b) the sum of one month's interest
on the Principal Balance of such Mortgage Loan, calculated at a rate equal to
the Mortgage Interest Rate.
CLASS: Each class of Certificates designated as the Class A-1
Certificates, the Class A-2 Certificates, the Class A-3 Certificates or the
Class R Certificates.
CLASS A CERTIFICATE: Any one of the Class A-1 Certificates,
any one of the Class A-2 Certificates and any one of the Class A-3 Certificates,
as the case may be.
CLASS A CERTIFICATE PRINCIPAL BALANCE: The sum of the Class
A-1 Certificate Principal Balance, the Class A-2 Certificate Principal Balance
and the Class A-3 Certificate Principal Balance.
CLASS A DISTRIBUTION AMOUNT: The sum of the Class A-1
Distribution Amount, the Class A-2 Distribution Amount and the Class A-3
Distribution Amount.
CLASS A INTEREST DISTRIBUTION AMOUNT: The sum of the Class A-1
Interest Distribution Amount, the Class A-2 Interest Distribution Amount and the
Class A-3 Interest Distribution Amount.
CLASS A-1 CARRY-FORWARD AMOUNT: As of any Distribution Date,
the sum of (a) the amount, if any, by which (i) the Class A-1 Formula
Distribution Amount as of the immediately preceding Distribution Date exceeded
(ii) the Class A-1 Distribution Amount on such immediately preceding
Distribution Date and (b) 30 days' interest on the amount described in clause
(a), calculated at an interest rate equal to the Class A-1 Pass-Through Rate
applicable to such Distribution Date.
CLASS A-1 CERTIFICATE: Any Certificate designated as a "Class
A-1 Certificate" on the face thereof, in the form of Exhibit A-1 hereto. The
Class A-1 Certificates shall be issued with an initial aggregate Certificate
Principal Balance equal to the Original Certificate Principal Balance therefor.
4
<PAGE>
CLASS A-1 CERTIFICATE PRINCIPAL BALANCE: As of any time of
determination, the Original Certificate Principal Balance of the Class A-1
Certificates less any amounts actually distributed with respect to principal
thereon on all prior Distribution Dates for such Class.
CLASS A-1 CERTIFICATE TERMINATION DATE: The Distribution Date
on which the Class A-1 Certificate Principal Balance is reduced to zero.
CLASS A-1 CURRENT INTEREST: With respect to the Class A-1
Certificates for any Distribution Date, the product of (x) one-twelfth of the
Class A-1 Pass-Through Rate applicable to such Distribution Date and (y) the
Class A-1 Certificate Principal Balance as of such Distribution Date (and prior
to making any distributions on such Distribution Date).
CLASS A-1 DISTRIBUTION AMOUNT: With respect to the Class A-1
Certificates for any Distribution Date, the amount to be distributed to the
Holders of the Class A-1 Certificates on such Distribution Date, applied first
to interest and then to principal, which amount shall be the sum of (i) the pro
rata portion of any moneys released from the Pre-Funding Account as a prepayment
of principal on the Class A-1 Certificates pursuant to Section 6.01(g) hereof,
and (ii) the lesser of (x) the Class A-1 Formula Distribution Amount for such
Distribution Date and (y) the amount (including any applicable portion of any
Insured Payment) available for distribution on account of the Class A-1
Certificates for such Distribution Date.
CLASS A-1 FINAL SCHEDULED MATURITY DATE: The February 15, 2010
Distribution Date.
CLASS A-1 FORMULA DISTRIBUTION AMOUNT: With respect to the
Class A-1 Certificates for any Distribution Date, the sum of the Class A-1
Interest Distribution Amount and the Class A-1 Principal Distribution Amount.
CLASS A-1 INTEREST DISTRIBUTION AMOUNT: With respect to the
Class A-1 Certificates for any Distribution Date an amount equal to (a) the
related Class A-1 Current Interest, minus (b) the pro rata portion of any
Mortgage Loan Interest Shortfalls allocable to the Class A-1 Certificates, on
the basis of accrued interest thereon, plus (c) any Class A-1 Carry-Forward
Amount, minus (d) any amounts paid by the Certificate Insurer in respect of such
Class A-1 Carry-Forward Amount, in each case as of such Distribution Date.
CLASS A-1 PASS-THROUGH RATE: With respect to any Distribution
Date, the per annum rate equal to 6.525%.
CLASS A-1 PRINCIPAL DISTRIBUTION AMOUNT: With respect to the
Class A-1 Certificates for any Distribution Date, the lesser of (x) the
Principal Distribution Amount for such Distribution Date, and (y) the Class A-1
Certificate Principal Balance as of such Distribution Date.
On the Class A-1 Certificate Termination Date, any excess of
(a) the amount described in clause (x) of the preceding paragraph over (b) the
amount described in clause (y) of the preceding paragraph shall be distributed
as principal with respect to the Class A-2 Certificates, as elsewhere provided
herein.
CLASS A-2 CARRY-FORWARD AMOUNT: As of any Distribution Date,
the sum of (a) the amount, if any, by which (i) the Class A-2 Formula
Distribution Amount as of the immediately
5
<PAGE>
preceding Distribution Date exceeded (ii) the Class A-2 Distribution Amount on
such immediately preceding Distribution Date and (b) 30 days' interest on the
amount described in clause (a), calculated at an interest rate equal to the
Class A-2 Pass-Through Rate applicable to such Distribution Date.
CLASS A-2 CERTIFICATE: Any Certificate designated as a "Class
A-2 Certificate" on the face thereof, in the form of Exhibit A-2 hereto. The
Class A-2 Certificates shall be issued with an initial aggregate Certificate
Principal Balance equal to the Original Certificate Principal Balance therefor.
CLASS A-2 CERTIFICATE PRINCIPAL BALANCE: As of any time of
determination, the Original Certificate Principal Balance of the Class A-2
Certificates less any amounts actually distributed with respect to principal
thereon on all prior Distribution Dates for such Class.
CLASS A-2 CERTIFICATE TERMINATION DATE: The Distribution Date
on which the Class A-2 Certificate Principal Balance is reduced to zero.
CLASS A-2 CURRENT INTEREST: With respect to the Class A-2
Certificates for any Distribution Date, the product of (x) one-twelfth of the
Class A-2 Pass-Through Rate applicable to such Distribution Date and (y) the
Class A-2 Certificate Principal Balance as of such Distribution Date (and prior
to making any distributions on such Distribution Date).
CLASS A-2 DISTRIBUTION AMOUNT: With respect to the Class A-2
Certificates for any Distribution Date, the amount to be distributed to the
Holders of the Class A-2 Certificates on such Distribution Date, applied first
to interest and then to principal, which amount shall be the sum of (i) the pro
rata portion of any moneys released from the Pre-Funding Account as a prepayment
of principal on the Class A-2 Certificates pursuant to Section 6.01(g) hereof,
and (ii) the lesser of (x) the Class A-2 Formula Distribution Amount for such
Distribution Date and (y) the amount (including any applicable portion of any
Insured Payment) available for distribution on account of the Class A-2
Certificates for such Distribution Date.
CLASS A-2 FINAL SCHEDULED MATURITY DATE: The February 15, 2012
Distribution Date.
CLASS A-2 FORMULA DISTRIBUTION AMOUNT: With respect to the
Class A-2 Certificates for any Distribution Date, the sum of the Class A-2
Interest Distribution Amount and the Class A-2 Principal Distribution Amount.
CLASS A-2 INTEREST DISTRIBUTION AMOUNT: With respect to the
Class A-2 Certificates for any Distribution Date an amount equal to (a) the
related Class A-2 Current Interest, minus (b) the pro rata portion of any
Mortgage Loan Interest Shortfalls allocable to the Class A-2 Certificates, on
the basis of accrued interest thereon, plus (c) any Class A-2 Carry-Forward
Amount, minus (d) any amounts paid by the Certificate Insurer in respect of such
Class A-2 Carry-Forward Amount, in each case as of such Distribution Date.
CLASS A-2 PASS-THROUGH RATE: With respect to any Distribution
Date, the per annum rate equal to 6.925%.
CLASS A-2 PRINCIPAL DISTRIBUTION AMOUNT: With respect to the
Class A-2 Certificates for any Distribution Date prior to the Class A-1
Certificate Termination Date, zero.
6
<PAGE>
On the Class A-1 Certificate Termination Date, the lesser of
(i) the excess of (x) the Principal Distribution Amount as of the Class A-1
Certificate Termination Date over (y) the Class A-1 Certificate Principal
Balance on the Class A-1 Certificate Termination Date before making
distributions on such date and (ii) the Class A-2 Certificate Principal Balance.
With respect to the Class A-2 Certificates for any
Distribution Date following the Class A-1 Certificate Termination Date, the
lesser of (x) the Principal Distribution Amount for such Distribution Date and
(y) the Class A-2 Certificate Principal Balance as of such Distribution Date. On
the Class A-2 Certificate Termination Date any remaining portion of the
Principal Distribution Amount shall be distributed with respect to the Class A-3
Certificates.
CLASS A-3 CARRY-FORWARD AMOUNT: As of any Distribution Date,
the sum of (a) the amount, if any, by which (i) the Class A-3 Formula
Distribution Amount as of the immediately preceding Distribution Date exceeded
(ii) the Class A-3 Distribution Amount on such immediately preceding
Distribution Date and (b) 30 days' interest on the amount described in clause
(a), calculated at an interest rate equal to the Class A-3 Pass-Through Rate
applicable to such Distribution Date.
CLASS A-3 CERTIFICATE: Any Certificate designated as a "Class
A-3 Certificate" on the face thereof, in the form of Exhibit A-3 hereto. The
Class A-3 Certificates shall be issued with an initial aggregate Certificate
Principal Balance equal to the Original Certificate Principal Balance therefor.
CLASS A-3 CERTIFICATE PRINCIPAL BALANCE: As of any time of
determination, the Original Certificate Principal Balance of the Class A-3
Certificates less any amounts actually distributed with respect to principal
thereon on all prior Distribution Dates for such Class.
CLASS A-3 CERTIFICATE TERMINATION DATE: The Distribution Date
on which the Class A-3 Certificate Principal Balance is reduced to zero.
CLASS A-3 CURRENT INTEREST: With respect to the Class A-3
Certificates for any Distribution Date, the product of (x) one-twelfth of the
Class A-3 Pass-Through Rate applicable to such Distribution Date and (y) the
Class A-3 Certificate Principal Balance as of such Distribution Date (and prior
to making any distributions on such Distribution Date).
CLASS A-3 DISTRIBUTION AMOUNT: With respect to the Class A-3
Certificates for any Distribution Date, the amount to be distributed to the
Holders of the Class A-3 Certificates on such Distribution Date, applied first
to interest and then to principal, which amount shall be the sum of (i) the pro
rata portion of any moneys released from the Pre-Funding Account as a prepayment
of principal on the Class A-3 Certificates pursuant to Section 6.01(g) hereof
and (ii) the lesser of (x) the Class A-3 Formula Distribution Amount for such
Distribution Date and (y) the amount (including any applicable portion of any
Insured Payment) available for distribution on account of the Class A-3
Certificates for such Distribution Date.
CLASS A-3 FINAL SCHEDULED MATURITY DATE: The August 15, 2028
Distribution Date.
CLASS A-3 FORMULA DISTRIBUTION AMOUNT: With respect to the
Class A-3 Certificates for any Distribution Date, the sum of the Class A-3
Interest Distribution Amount and the Class A-3 Principal Distribution Amount.
7
<PAGE>
CLASS A-3 INTEREST DISTRIBUTION AMOUNT: With respect to the
Class A-3 Certificates for any Distribution Date an amount equal to (a) the
related Class A-3 Current Interest, minus (b) the pro rata portion of any
Mortgage Loan Interest Shortfalls allocable to the Class A-3 Certificates, on
the basis of accrued interest thereon, plus (c) any Class A-3 Carry-Forward
Amount, minus (d) any amounts paid by the Certificate Insurer in respect of such
Class A-3 Carry-Forward Amount, in each case as of such Distribution Date.
CLASS A-3 PASS-THROUGH RATE: With respect to any Distribution
Date, the per annum rate equal to 7.525% plus, with respect to any Distribution
Date occurring after the Clean-up Call Date, 0.75% per annum.
CLASS A-3 PRINCIPAL DISTRIBUTION AMOUNT: With respect to the
Class A-3 Certificates for any Distribution Date prior to the Class A-2
Certificate Termination Date, zero.
On the Class A-2 Certificate Termination Date, the lesser of
(i) the excess of (x) the Principal Distribution Amount as of the Class A-2
Certificate Termination Date over (y) the Class A-2 Certificate Principal
Balance on the Class A-2 Certificate Termination Date before making
distributions on such date and (ii) the Class A-3 Certificate Principal Balance.
With respect to the Class A-3 Certificates for any
Distribution Date following the Class A-2 Certificate Termination Date, the
lesser of (x) the Principal Distribution Amount as of such Distribution Date and
(y) the Class A-3 Certificate Principal Balance as of such Distribution Date. On
the Class A-3 Certificate Termination Date any remaining portion of the
Principal Distribution Amount shall be distributed with respect to the Class R
Certificates.
CLASS R CERTIFICATE: Any Certificate denominated as a Class R
Certificate and subordinate to the Class A Certificates in right of payment to
the extent set forth herein, which Certificate shall be in the form of Exhibit B
hereto.
CLASS R CERTIFICATEHOLDER: A Holder of a Class R Certificate.
CLOSING DATE: March 27, 1997.
CODE: The Internal Revenue Code of 1986, as amended.
COLLECTION ACCOUNT: The Eligible Account established and
maintained by the Servicer pursuant to Section 5.02(b).
COMMISSION: The Securities and Exchange Commission.
COMPENSATING INTEREST: As defined in Section 6.09 hereof.
CUMULATIVE LOSS PERCENTAGE: As of any date of determination
thereof, the aggregate of all Realized Losses since the Startup Date as a
percentage of the Maximum Collateral Amount.
CUMULATIVE LOSS TEST: The Cumulative Loss Test for each period
indicated below is satisfied if the Cumulative Loss Percentage for such period
does not exceed the percentage set out for such period below:
8
<PAGE>
Cumulative Loss
Period Percentage
------ ---------------
1st - 24th Distribution Date 1.00%
25th - 36th Distribution Date 1.50%
37th - 48th Distribution Date 1.75%
49th - 60th Distribution Date
and thereafter 2.00%
CURTAILMENT: With respect to a Mortgage Loan, any payment of
principal received during a Due Period as part of a payment that is in excess of
the amount of the Monthly Payment due for such Due Period and which is not
intended to satisfy the Mortgage Loan in full, nor is intended to cure a
delinquency.
CUSTODIAN: As defined in Section 2.04(c).
CUT-OFF DATE: With respect to the Initial Mortgage Loans, the
Initial Cut-Off Date, and with respect to the Subsequent Mortgage Loans, the
Subsequent Cut-Off Date.
DEBT SERVICE REDUCTION: With respect to any Mortgage Loan, a
reduction by a court of competent jurisdiction of the Monthly Payment due on
such Mortgage Loan in a proceeding under the United States Bankruptcy Code,
except such a reduction that constitutes a Deficient Valuation or a permanent
forgiveness of principal.
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 United
States Bankruptcy Code.
DELETED MORTGAGE LOAN: A Mortgage Loan replaced by or to be
replaced by a Qualified Substitute Mortgage Loan.
DELINQUENCY RATIO: With respect to any Distribution Date, the
percentage equivalent of a fraction (a) the numerator of which equals the
aggregate Principal Balances of all Mortgage Loans that are 60 or more days
Delinquent, in foreclosure or converted to REO Property as of the last day of
such Due Period and (b) the denominator of which is the aggregate Principal
Balance of the Mortgage Loans as of the last day of such Due Period.
DELINQUENT: A Mortgage Loan is "delinquent" if any payment due
thereon is not made by the close of business on the day such payment is
scheduled to be due. A Mortgage Loan is "30 days delinquent" if such payment has
not been received by the close of business on the corresponding day of the month
immediately succeeding the month in which such payment was due, or, if there is
no such corresponding day (e.g., as when a 30-day month follows a 31-day month
in which a payment was due on the 31st day of such month) then on the last day
of such immediately succeeding month. Similarly for "60 days delinquent," "90
days delinquent" and so on.
DEPOSITOR: Prudential Securities Secured Financing
Corporation, a Delaware corporation, and any successor thereto.
9
<PAGE>
DEPOSITORY: The Depository Trust Company, 55 Water Street, New
York, New York 10041 and any successor Depository hereafter named.
DIRECT PARTICIPANT: Any broker-dealer, bank or other financial
institution for which the Depository holds Class A Certificates from time to
time as a securities depositary.
DISTRIBUTION DATE: The 15th day of any month or if such 15th
day is not a Business Day, the first Business Day immediately following,
commencing on April 15, 1997.
DUE DATE: With respect to each Mortgage Loan and any
Distribution Date, the day of the calendar month preceding the calendar month in
which such Distribution Date occurs on which the Monthly Payment for such
Mortgage Loan was due.
DUE PERIOD: With respect to each Distribution Date, the
calendar month preceding the related Distribution Date.
ELIGIBLE ACCOUNT: Either (A) an account or accounts maintained
with an institution (which may include the Trustee, provided such institution
otherwise meets these requirements) whose deposits are insured by the FDIC, the
unsecured and uncollateralized debt obligations of which institution shall be
rated AA or better by S&P and Aa2 or better by Moody's and in the highest short
term rating category by S&P and Moody's, and which is (i) a federal savings and
loan association duly organized, validly existing and in good standing under the
federal banking laws, (ii) an institution (including the Trustee) duly
organized, validly existing and in good standing under the applicable banking
laws of any state, (iii) a national banking association duly organized, validly
existing and in good standing under the federal banking laws, (iv) a principal
subsidiary of a bank holding company, or (v) approved in writing by the
Certificate Insurer and the Rating Agencies or (B) a trust account or accounts
maintained with the trust department of a federal or state chartered depository
institution or trust company (which may include the Trustee, provided that the
Trustee otherwise meets these requirements), having capital and surplus of not
less than $50,000,000, acting in its fiduciary capacity.
ERISA: As defined in Section 4.02(m) hereof.
EVENT OF DEFAULT: As described in Section 7.01.
EXCESS SUBORDINATED AMOUNT: With respect to the Mortgage Loans
and any Distribution Date, the excess, if any, of (x) the Subordinated Amount
that would apply on such Distribution Date after taking into account the payment
of the related Class A Distribution Amount on such Distribution Date (except for
any distributions of related Subordination Reduction Amounts on such
Distribution Date) over (y) the related Specified Subordinated Amount for such
Distribution Date; provided, however, that the Excess Subordinated Amount for
the period beginning with the Distribution Date as to which clause (b)(i)(y)(A)
of "Specified Subordinated Amount" applies (the "Trigger Date") and ending on
the Distribution Date occurring in the month six months subsequent to the
Trigger Date (inclusive) shall be limited to the amount obtained using the
following formula.
n
--- X E.S.A.
6
10
<PAGE>
Where "n" is equal to the number of Distribution Dates that have occurred since
the Trigger Date and "E.S.A." is equal to the amount of Excess Subordinated
Amount that would otherwise be obtained for such Distribution Date without
regard to the provisions of this proviso.
FDIC: The Federal Deposit Insurance Corporation and any
successor thereto.
FHLMC: The Federal Home Loan Mortgage Corporation, and any
successor thereto.
FNMA: The Federal National Mortgage Association, and any
successor thereto.
FORECLOSURE PROFITS: As to any Distribution Date, the excess,
if any, of (i) Net Liquidation Proceeds in respect of each Mortgage Loan that
became a Liquidated Mortgage Loan during the related Due Period over (ii) the
sum of the unpaid principal balance of each such Liquidated Mortgage Loan plus
accrued and unpaid interest at the applicable Mortgage Interest Rate on the
unpaid principal balance thereof from the Due Date to which interest was last
paid by the Mortgagor (or, in the case of a Liquidated Mortgage Loan that had
been an REO Mortgage Loan, from the Due Date to which interest was last deemed
to have been paid pursuant to Section 5.06 to the first day of the month
following the month in which such Mortgage Loan became a Liquidated Mortgage
Loan).
GAAP: Generally accepted accounting principles, consistently
applied.
I & I PAYMENTS: Payments due and owing under the Insurance and
Indemnity Agreement other than pursuant to Section 3.02(b) of such Agreement.
INDIRECT PARTICIPANT: Any financial institution for whom any
Direct Participant holds an interest in a Class A Certificate.
INITIAL CUT-OFF DATE: The close of business on February 28,
1997 (or with respect to any Initial Mortgage Loan originated or otherwise
acquired by an Originator after February 28, 1997, the date of origination or
acquisition of such Initial Mortgage Loan).
INITIAL MORTGAGE LOANS: The Mortgage Loans delivered by the
Depositor on the Startup Date.
INITIAL SUBORDINATED AMOUNT: An amount equal to 3.0% of the
Maximum Collateral Amount.
INSURANCE AND INDEMNITY AGREEMENT: The Insurance and Indemnity
Agreement dated as of March 1, 1997 among the Certificate Insurer, the
Depositor, the Servicer, the Seller and HomeAmerican Credit, Inc., d/b/a Upland
Mortgage, as such agreement may be amended or supplemented in accordance with
the provisions thereof.
INSURANCE PROCEEDS: Proceeds paid by any insurer pursuant to
any insurance policy covering a Mortgage Loan to the extent such proceeds are
not applied to the restoration of the related Mortgaged Property or released to
the related Mortgagor in accordance with Accepted Servicing Practices.
"Insurance Proceeds" do not include "Insured Payments."
INSURED DISTRIBUTION AMOUNT: With respect to any Distribution
Date, the sum of (a) the Class A Interest Distribution Amount with respect to
such Distribution Date, (b) the
11
<PAGE>
Subordination Deficit, if any, as of such Distribution Date and (c) (i) on the
Class A-1 Final Scheduled Maturity Date, the Class A-1 Certificate Principal
Balance, (ii) on the Class A-2 Final Scheduled Maturity Date, the Class A-2
Certificate Principal Balance, and (iii) on the Class A-3 Final Scheduled
Maturity Date, the Class A-3 Certificate Principal Balance.
INSURED PAYMENT: With respect to any Distribution Date, the
Available Funds Shortfall.
LATE PAYMENT RATE: Has the meaning ascribed thereto in the
Insurance and Indemnity Agreement.
LIQUIDATED MORTGAGE LOAN: A Mortgage Loan with respect to
which the related Mortgaged Property has been acquired, liquidated or foreclosed
and with respect to which the Servicer determines that all Liquidation Proceeds
which it expects to recover have been recovered.
LIQUIDATED LOAN LOSS: With respect to any Distribution Date,
the aggregate of the amount of losses with respect to each Mortgage Loan which
became a Liquidated Mortgage Loan prior to the Due Date preceding such
Distribution Date, equal to the excess of (i) the unpaid principal balance of
each such Liquidated Mortgage Loan, plus accrued interest thereon in accordance
with the amortization schedule at the time applicable thereto at the applicable
Mortgage Interest Rate from the Due Date as to which interest was last paid with
respect thereto through the last day of the month in which such Mortgage Loan
became a Liquidated Mortgage Loan, over (ii) Net Liquidation Proceeds with
respect to such Liquidated Mortgage Loan.
LIQUIDATION EXPENSES: Expenses incurred by the Servicer in
connection with the liquidation of any defaulted Mortgage Loan or property
acquired in respect thereof (including, without limitation, legal fees and
expenses, committee or referee fees, and, if applicable, brokerage commissions
and conveyance taxes), any unreimbursed amount expended by the Servicer pursuant
to Sections 5.04 and 5.06 respecting the related Mortgage Loan and any
unreimbursed expenditures for real property taxes or for property restoration or
preservation of the related Mortgaged Property. Liquidation Expenses shall not
include any previously incurred expenses in respect of an REO Mortgage Loan
which have been netted against related REO Proceeds.
LIQUIDATION PROCEEDS: The amount (other than Insurance
Proceeds) received by the Servicer in connection with (i) the taking of all or a
part of Mortgaged Property by exercise of the power of eminent domain or
condemnation, (ii) the liquidation of a defaulted Mortgage Loan through a
trustee's sale, foreclosure sale, REO Disposition or otherwise or (iii) the
liquidation of any other security for such Mortgage Loan, including, without
limitation, pledged equipment, inventory and working capital and assignments of
rights and interests made by the related mortgagor.
LOAN REPURCHASE PRICE: As defined in Section 2.06(b).
LOAN-TO-VALUE RATIO or LTV: As to any Mortgage Loan at any
time, the fraction, expressed as a percentage, the numerator of which is the sum
of (i) the Principal Balance thereof at such time and (ii) the unpaid principal
balance of the related first mortgage loan, if any, as of such time, and the
denominator of which is the Appraised Value of the related Mortgaged Property as
of the date of the appraisal used by or on behalf of the Seller to underwrite
such Mortgage Loan.
12
<PAGE>
MAJORITY CERTIFICATEHOLDERS: The Holder or Holders of Class A
Certificates evidencing Percentage Interests in excess of 51% in the aggregate.
MAXIMUM COLLATERAL AMOUNT: The Original Pool Principal Balance
plus the Original Pre-Funded Amount.
MONTHLY PAYMENT: As to any Mortgage Loan (including any REO
Mortgage Loan) and any Due Date, the payment of principal and interest due
thereon as specified for such Due Date in the related amortization schedule at
the time applicable thereto (after adjustment for any Curtailments and Deficient
Valuations occurring prior to such Due Date but before any adjustment to such
amortization schedule by reason of any bankruptcy, other than Deficient
Valuations or similar proceeding or any moratorium or similar waiver or grace
period).
MONTHLY SERVICING FEE: As defined in Section 5.08 hereof.
MOODY'S: Moody's Investors Service, Inc., a corporation
organized and existing under Delaware law, or any successor thereto and if such
corporation no longer for any reason performs the services of a securities
rating agency, "Moody's" shall be deemed to refer to any other nationally
recognized rating agency designated by the Certificate Insurer.
MORTGAGE: The mortgage, deed of trust or other instrument
creating a first or second lien on the Mortgaged Property.
MORTGAGE FILE: As described in Exhibit C.
MORTGAGE INTEREST RATE: As to any Mortgage Loan, the per annum
fixed rate at which interest accrues on the unpaid principal balance thereof.
MORTGAGE LOANS: The Initial Mortgage Loans and the Subsequent
Mortgage Loans, together with any Qualified Replacement Mortgages substituted
therefor in accordance with this Agreement, as from time to time are held as a
part of the Trust Fund, the Initial Mortgage Loans originally so held being
identified in the initial Mortgage Loan Schedule. When used in respect of any
Distribution Date, the term Mortgage Loans shall mean all Mortgage Loans
(including those in respect of which the Trustee has acquired the related
Mortgaged Property) which have not been repaid in full prior to the related Due
Period, did not become Liquidated Mortgage Loans prior to such related Due
Period or were not repurchased or replaced by the Seller prior to such related
Due Period.
MORTGAGE LOAN INTEREST SHORTFALL: With respect to any
Distribution Date, as to any Mortgage Loan, the sum of (a) any Prepayment
Interest Shortfall for which no payment of Compensating Interest is paid and (b)
any Civil Relief Act Interest Shortfall in respect of such Mortgage Loan for
such Distribution Date.
MORTGAGE LOAN SCHEDULE: The initial schedule of Initial
Mortgage Loans as of the Initial Cut-Off Date as attached hereto as Schedule I,
which will be deemed to be modified automatically upon any replacement, sale,
substitution, liquidation, transfer or addition of any Mortgage Loan, including
the addition of a Subsequent Mortgage Loan, pursuant to the terms hereof. The
initial Mortgage Loan Schedule sets forth as to each Initial Mortgage Loan, and
any subsequent Mortgage Loan Schedule provided in connection with the Subsequent
Mortgage Loans will set forth as to each Subsequent Mortgage Loan: (i) its
identifying number and the name of the related Mortgagor; (ii) the billing
address
13
<PAGE>
for the related Mortgaged Property including the state and zip code; (iii) its
date of origination; (iv) the original number of months to stated maturity; (v)
the original stated maturity; (vi) the original Principal Balance; (vii) its
Cut-Off Date Balance; (viii) the Mortgage Interest Rate; and (ix) the scheduled
monthly payment of principal and interest.
MORTGAGE NOTE: The original, executed note or other evidence
of indebtedness evidencing the indebtedness of a Mortgagor under a Mortgage
Loan.
MORTGAGE PORTFOLIO PERFORMANCE TEST: The Mortgage Portfolio
Performance Test is satisfied for any date of determination thereof if (i) the
Rolling Six Month Delinquency Rate is less than or equal to 11.00%, (ii) the
Subordination Loss Test is satisfied and (iii) if the 12 Month Loss Amount is
not greater than or equal to 1.25% of the Pool Principal Balance as of the first
day of the twelfth preceding calendar month.
MORTGAGED PROPERTY: The underlying property or properties
securing a Mortgage Loan, consisting of a fee simple estate in a one or more
parcels of land.
MORTGAGOR: The obligor on a Mortgage Note.
NET FORECLOSURE PROFITS: As to any Distribution Date, the
excess, if any, of (i) the aggregate Foreclosure Profits with respect to such
Distribution Date over (ii) Liquidated Loan Losses with respect to such
Distribution Date.
NET LIQUIDATION PROCEEDS: As to any Liquidated Mortgage Loan,
Liquidation Proceeds net of Liquidation Expenses and net of any unreimbursed
Periodic Advances made by the Servicer. For all purposes of this Agreement, Net
Liquidation Proceeds shall be allocated first to accrued and unpaid interest on
the related Mortgage Loan and then to the unpaid principal balance thereof.
NET MONTHLY EXCESS CASHFLOW: As of any Distribution Date, the
excess of (x) the Available Funds then on deposit in the Certificate Account
over (y) the sum of (i) Class A Distribution Amount, calculated for this purpose
without regard to any Subordination Increase Amount or portion thereof included
therein, (ii) the Reimbursement Amount, if any, for such Distribution Date,
(iii) the Premium Amount, and (iv) the Trustee Fees.
NET REO PROCEEDS: As to any REO Mortgage Loan, REO Proceeds
net of any related expenses of the Servicer.
NONRECOVERABLE ADVANCES: With respect to any Mortgage Loan,
(a) any Periodic Advance previously made and not reimbursed from late
collections pursuant to Section 5.04, or (b) a Periodic Advance proposed to be
made in respect of a Mortgage Loan or REO Property either of which, in the good
faith business judgment of the Servicer, as evidenced by an Officer's
Certificate delivered to the Certificate Insurer and the Trustee no later than
the Business Day following such determination, would not ultimately be
recoverable pursuant to Sections 5.04 and Section 6.04.
OFFICER'S CERTIFICATE: A certificate signed by the Chairman of
the Board, the President or a Vice President and the Treasurer, the Secretary or
one of the Assistant Treasurers or Assistant Secretaries of the Seller and/or
the Servicer, or the Depositor, as required by this Agreement.
14
<PAGE>
OPINION OF COUNSEL: A written opinion of counsel, who may,
without limitation, be counsel for the Seller, the Servicer, the Trustee, a
Certificateholder or a Certificateholder's prospective transferee or the
Certificate Insurer (including except as otherwise provided herein, in-house
counsel) reasonably acceptable to each addressee of such opinion and experienced
in matters relating to the subject of such opinion; except that any opinion of
counsel relating to (a) the qualification of the REMIC Trust as a REMIC or (b)
compliance with the REMIC Provisions must be an opinion of counsel who (i) is in
fact independent of the Seller, the Servicer and the Trustee, (ii) does not have
any direct financial interest or any material indirect financial interest in the
Seller or the Servicer or the Trustee or in an Affiliate thereof, (iii) is not
connected with the Seller or the Servicer or the Trustee as an officer,
employee, director or person performing similar functions and (iv) is reasonably
acceptable to the Certificate Insurer.
ORIGINAL CERTIFICATE PRINCIPAL BALANCE: As of the Startup Day
and as to: the Class A-1 Certificates, $32,100,000.00; the Class A-2
Certificates, $20,600,000.00; and the Class A-3 Certificates, $20,048,000.00.
The Class R Certificates do not have an Original Certificate Principal Balance.
ORIGINAL POOL PRINCIPAL BALANCE: The Pool Principal Balance as
of the Initial Cut-Off Date, which amount is equal to $47,156,361.69.
ORIGINAL PRE-FUNDED AMOUNT: $27,843,638.31.
ORIGINATORS: American Business Credit, Inc. and HomeAmerican
Credit, Inc., d/b/a Upland Mortgage.
OVERFUNDED INTEREST AMOUNT: With respect to each Subsequent
Transfer Date occurring in March 1997, the excess of (i) the amount on deposit
in the Capitalized Interest Account, over (ii) three-months' interest calculated
at the Adjusted Pass-Through Rate on the amount on deposit in the Pre-Funding
Account (net of any Pre-Funding Earnings) immediately following such Subsequent
Transfer Date (disregarding any amount applied from the Pre-Funding Account to a
Subsequent Mortgage Loan that does not have a Due Date in March 1997).
With respect to each Subsequent Transfer Date occurring in April 1997, the
excess of (i) Capitalized Interest Account, over (ii) two-months' interest
calculated at the Adjusted Pass-Through Rate on the amount on deposit in the
Pre-Funding Account (net of any Pre-Funding Earnings) immediately following such
Subsequent Transfer Date (disregarding any amount applied from the Pre-Funding
Account to a Subsequent Mortgage Loan that does not have a Due Date in April
1997).
With respect to each Subsequent Transfer Date occurring in May 1997, the excess
of (i) Capitalized Interest Account, over (ii) one-months' interest calculated
at the Adjusted Pass-Through Rate on the amount on deposit in the Pre-Funding
Account (net of any Pre-Funding Earnings) immediately following such Subsequent
Transfer Date (disregarding any amount applied from the Pre-Funding Account to a
Subsequent Mortgage Loan that does not have a Due Date in May 1997).
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.
15
<PAGE>
OWNER-OCCUPIED MORTGAGED PROPERTY: A Residential Dwelling as
to which (a) the related Mortgagor represented an intent to occupy as such
Mortgagor's primary, secondary or vacation residence at the origination of the
Mortgage Loan, and (b) the Seller has no actual knowledge that such Residential
Dwelling is not so occupied.
PERCENTAGE INTEREST: With respect to a Class A Certificate of
any Class, the portion evidenced by such Certificate, expressed as a percentage
rounded to four decimal places, equal to a fraction the numerator of which is
the denomination represented by such Certificate and the denominator of which is
the Original Certificate Principal Balance of such Class. With respect to a
Class R Certificate, the portion evidenced thereby as stated on the face of such
Certificate.
PERIODIC ADVANCE: The aggregate of the advances required to be
made by the Servicer on any Servicer Distribution Date pursuant to Section 5.18
hereof, the amount of any such advances being equal to the sum of:
(a) with respect to each Mortgage Loan that was Delinquent as
of the close of business on the last day of the Due Period preceding
the related Servicer Distribution Date, the product of (i) the
Principal Balance of such Mortgage Loan and (ii) one-twelfth of the
Mortgage Interest Rate for such Mortgage Loan net of the Servicing Fee,
and
(b) with respect to each REO Property which was acquired
during or prior to the related Due Period and as to which an REO
Disposition did not occur during the related Due Period, an amount
equal to the excess, if any, of (i) interest on the Principal Balance
of such REO Mortgage Loan at the Mortgage Interest Rate for such REO
Mortgage Loan net of the Servicing Fee, for the most recently ended Due
Period over (ii) the net income from the REO Property transferred to
the Certificate Account for such Distribution Date;
provided, however, that in each such case such advance has not been determined
by the Servicer to be a Nonrecoverable Advance.
PERMITTED INVESTMENTS: As used herein, Permitted Investments
shall include the following:
(i) obligations of, or guaranteed as to principal and interest
by, the United States or any agency or instrumentality thereof when
such obligations are backed by the full faith and credit of the United
States;
(ii) repurchase agreements on obligations specified in clause
(i) maturing not more than three months from the date of acquisition
thereof, provided that the unsecured obligations of the party agreeing
to repurchase such obligations are at the time rated in one of the two
highest rating categories by the Rating Agencies;
(iii) certificates of deposit, time deposits and bankers'
acceptances (which, in the case of bankers' acceptances, shall in no
event have an original maturity of more than 365 days) of any U.S.
depository institution or trust company, incorporated under the laws of
the United States or any state; provided, that the debt obligations of
such depository institution or trust company at the date of acquisition
thereof have been rated in one of the two highest rating categories by
the Rating Agencies;
16
<PAGE>
(iv) commercial paper (having original maturities of not more
than 270 days) of any corporation incorporated under the laws of the
United States or any state thereof which on the date of acquisition has
been rated in the highest short-term rating category by the Rating
Agencies;
(v) the VISTA U.S. Government Money Market Fund, the VISTA
Prime Money Market Fund and the VISTA Treasury Plus Fund, so long as
any such fund is rated in the highest rating category by Moody's or
S&P;
provided, that, each such Permitted Investment shall be a "permitted investment"
within the meaning of Section 860G(a)(5) of the Code and that no instrument
described hereunder shall evidence either the right to receive (x) only interest
with respect to the obligations underlying such instrument or (y) both principal
and interest payments derived from obligations underlying such instrument and
the interest and principal payments with respect to such instrument provided a
yield to maturity at par greater than 120% of the yield to maturity at par of
the underlying obligations; and provided, further, that no instrument described
hereunder may be purchased at a price greater than par if such instrument may be
prepaid or called at a price less than its purchase price prior to stated
maturity.
PERMITTED TRANSFEREE: Any Person other than (a) the United
States, any State or political subdivision thereof, or any agency or
instrumentality of any of the foregoing, (b) a foreign government, International
Organization or any agency or instrumentality of either of the foregoing, (c) an
organization (except certain farmers' cooperatives described in Section 521 of
the Code) which is exempt from tax imposed by Chapter I of the Code (including
the tax imposed by Section 511 of the Code on unrelated business taxable income)
on any excess inclusions (as defined in Section 860E(c)(1) of the Code) with
respect to any Class R Certificate, (d) rural electric and telephone
cooperatives described in Section 1381(a)(2)(C) of the Code and (e) any other
Person so designated by the Trustee based upon an Opinion of Counsel to the
Trustee and the Certificate Insurer that the transfer of an Ownership Interest
in a Class R Certificate to such Person may cause either (i) the REMIC Trust to
fail to qualify as a REMIC at any time that the Class A Certificates are
outstanding or (ii) 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 Class R Certificate to such Person.
The terms "United States," "State" and "International Organization" shall have
the meanings set forth in Section 7701 of the Code or successor provisions. A
corporation will not be treated as an instrumentality of the United States or of
any State or political subdivision thereof for these purposes if all of its
activities are subject to tax and, with the exception of FHLMC, a majority of
its board of directors is not selected by such governmental unit.
PERSON: Any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, national banking association,
unincorporated organization or government or any agency or political subdivision
thereof.
PLAN: As defined in Section 4.02(m).
POOL CUMULATIVE LOAN LOSSES: With respect to any period, the
sum of all Liquidated Loan Losses which occurred during such period.
POOL PRINCIPAL BALANCE: The aggregate Principal Balances as of
any date of determination.
17
<PAGE>
PREFERENCE AMOUNT: Any amounts distributed in respect of the
Class A Certificates which are recovered from any Holder of a Class A
Certificate as a voidable preference by a trustee in bankruptcy pursuant to the
United States Bankruptcy Code or other similar law in accordance with a final,
nonappealable order of a court having competent jurisdiction and which have not
theretofore been repaid to such Holder.
PREFERENCE CLAIM: As defined in Section 6.04(f).
PRE-FUNDING ACCOUNT: The Pre-Funding Account established in
accordance with Section 6.01(a) hereof and maintained by the Trustee.
PRE-FUNDING AMOUNT: With respect to any date, the amount on
deposit in the Pre- Funding Account.
PRE-FUNDING EARNINGS: The actual investment earnings realized
on amounts deposited in the Pre-Funding Account.
PRE-FUNDING PERIOD: The period commencing on the Startup Date
and ending on the earliest to occur of (i) the date on which the amount on
deposit in the Pre-Funding Account (exclusive of any investment earnings) is
less than $100,000, (ii) the date on which any Servicer Default occurs and (iii)
June 27, 1997.
PREMIUM AMOUNT: The product of the Premium Percentage and the
Class A Certificate Principal Balance for the related Distribution Date.
PREMIUM PERCENTAGE: 0.26% per annum; provided, however, that
if a Premium Supplement Event has occurred and is continuing, the Premium
Percentage shall be 0.46% per annum.
PREMIUM SUPPLEMENT EVENT: Means any Event of Default hereunder
or an "Event of Default" as defined in the Insurance and Indemnity Agreement.
PREPAYMENT ASSUMPTION: A constant prepayment rate of 23% HEP,
used solely for determining the accrual of original issue discount and market
discount on the Certificates for federal income tax purposes.
PREPAYMENT INTEREST SHORTFALL: With respect to any
Distribution Date, for each Mortgage Loan that was the subject during the
related Due Period of a Principal Prepayment, an amount equal to the excess, if
any, of (a) 30 days' interest on the Principal Balance of such Mortgage Loan at
a per annum rate equal to the Mortgage Interest Rate (or at such lower rate as
may be in effect for such Mortgage Loan pursuant to application of the Civil
Relief Act, any Deficient Valuation and/or any Debt Service Reduction) minus the
rate at which the Servicing Fee is calculated over (b) the amount of interest
actually remitted by the Mortgagor in connection with such Principal Prepayment
less the Servicing Fee for such Mortgage Loan in such month.
PRINCIPAL BALANCE: As to any Mortgage Loan and any date of
determination, the outstanding principal balance of such Mortgage Loan as of
such date of determination after giving effect to prepayments received prior to
the end of the related Due Period and Deficient Valuations incurred prior to
such Due Date. The Principal Balance of a Mortgage Loan which becomes a
Liquidated Mortgage Loan on or prior to such Due Date shall be zero.
18
<PAGE>
PRINCIPAL DISTRIBUTION AMOUNT: With respect to the Class A
Certificates for any Distribution Date, the lesser of:
(a) the excess of (i) the sum, as of such Distribution Date, of
(A) the Available Funds and (B) any Insured Payment over (ii)
the sum of (w) the Class A Interest Distribution Amount, (x)
the Trustee Fees, (y) the Reimbursement Amount, if any, and
(z) the Premium Amount; and
(b) the sum, without duplication, of:
(i) all principal in respect of the Mortgage Loans
actually collected during the related Due Period,
(ii) the Principal Balance of each Mortgage Loan that
either was repurchased by the Seller or by the
Depositor or purchased by the Servicer on the related
Servicer Distribution Date, to the extent such
Principal Balance is actually received by the
Trustee,
(iii) any Substitution Adjustments delivered by the
Depositor on the related Servicer Distribution Date
in connection with a substitution of a Mortgage Loan,
to the extent such Substitution Adjustments are
actually received by the Trustee,
(iv) the Net Liquidation Proceeds actually collected by
the Servicer of all Mortgage Loans during the related
Due Period (to the extent such Net Liquidation
Proceeds relates to principal),
(v) the amount of any Subordination Deficit for such
Distribution Date,
(vi) the proceeds received by the Trustee of any
termination of the Trust Fund (to the extent such
proceeds relates to principal), and
(vii) the amount of any Subordination Increase Amount for
such Distribution Date,
minus
-----
(viii) the amount of any Subordination Reduction Amount 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.
PRINCIPAL REMITTANCE AMOUNT: As of any Distribution Date, the
sum, without duplication of the amounts specified in clauses (b)(i) through
(b)(iv) and (b)(vi) of the definition of the Principal Distribution Amount.
PROSPECTUS SUPPLEMENT: The Prospectus Supplement dated March
24, 1997 relating to the Class A Certificates filed with the Commission in
connection with the Registration Statement heretofore filed or to be filed with
the Commission pursuant to Rule 424(b)(2) or 424(b)(5).
19
<PAGE>
PURCHASE AGREEMENT: The Unaffiliated Seller's Agreement, dated
as of the date hereof, among the Seller, the Originators and the Depositor
relating to the sale of the Mortgage Loans from the Originators to the Seller
and from the Seller to the Depositor.
QUALIFIED APPRAISER: An appraiser, duly appointed by the
Seller, who had no interest, direct or indirect, in the Mortgaged Property or in
any loan made on the security thereof, and whose compensation is not affected by
the approval or disapproval of the Mortgage Loan, and such appraiser and the
appraisal made by such appraiser both satisfy the requirements of Title XI of
the Federal Institutions Reform, Recovery and Enforcement Act of 1989 and the
regulations promulgated thereunder, all as in effect on the date the Mortgage
Loan was originated.
QUALIFIED MORTGAGE: "Qualified Mortgage" shall have the
meaning set forth from time to time in the definition thereof at Section
860G(a)(3) of the Code (or any successor statute thereto).
QUALIFIED SUBSTITUTE MORTGAGE LOAN: A mortgage loan or
mortgage loans substituted for a Deleted Mortgage Loan pursuant to Section 2.04
or 3.03 hereof, which (a) has or have an interest rate at least equal to those
applicable to the Deleted Mortgage Loan, (b) relates or relate to a detached
one-family residence or to the same type of Residential Dwelling as the Deleted
Mortgage Loan and in each case has or have the same or a better lien priority as
the Deleted Mortgage Loan and has the same occupancy status or is an Owner
Occupied Mortgaged Property, (c) matures or mature no later than (and not more
than one year earlier than) the Deleted Mortgage Loan, (d) has or have a
Loan-to-Value Ratio or Loan-to-Value Ratios at the time of such substitution no
higher than the Loan-to-Value Ratio of the Deleted Mortgage Loan, (e) has or
have a principal balance or principal balances (after application of all
payments received on or prior to the date of substitution) not substantially
less and not more than the Principal Balance of the Deleted Mortgage Loan as of
such date, (f) satisfies or satisfy the criteria set forth from time to time in
the definition of "qualified replacement mortgage" at Section 860G(a)(4) of the
Code (or any successor statute thereto), and (g) complies or comply as of the
date of substitution with each representation and warranty set forth in Sections
3.01 and 3.02 of the Purchase Agreement.
RATING AGENCY: S&P or Moody's.
RECORD DATE: The last Business Day of the month immediately
preceding a month in which a Distribution Date occurs.
REIMBURSEMENT AMOUNT: As of any Distribution Date, the sum of
(a)(i) all Insured Payments previously received by the Trustee and all
Preference Amounts previously paid by the Certificate Insurer and in each case
not previously repaid to the Certificate Insurer pursuant to Sections
6.05(a)(ii) hereof plus (ii) interest accrued on each such Insured Payment and
Preference Amounts not previously repaid calculated at the Late Payment Rate
from the date the Trustee received the related Insured Payment or Preference
Amounts were paid by the Certificate Insurer and (b)(i) any amounts then due and
owing to the Certificate Insurer under the Insurance and Indemnity Agreement
(excluding the Premium Amount due on such Distribution Date), as certified to
the Trustee by the Certificate Insurer plus (ii) interest on such amounts at the
rate specified in the Insurance and Indemnity Agreement. The Certificate Insurer
shall notify the Trustee and the Depositor of the amount of any Reimbursement
Amount.
REINVESTMENT RATE: 2.50%
20
<PAGE>
REMIC: A "real estate mortgage investment conduit" within the
meaning of Section 860D of the Code.
REMIC PROVISIONS: Provisions of the federal income tax law
relating to real estate mortgage investment conduits, which appear at Sections
860A through 860G of Subchapter M of Chapter I of the Code, and related
provisions, and temporary and final regulations promulgated thereunder and
published rulings, notices and announcements, as the foregoing may be in effect
from time to time.
REMIC TRUST: The segregated pool of assets consisting of the
Trust Fund. The Pre- Funding Account and the Capitalized Interest Account shall
not be part of the REMIC Trust.
REO DISPOSITION: The final sale by the Servicer of a Mortgaged
Property acquired by the Servicer in foreclosure or by deed in lieu of
foreclosure.
REO MORTGAGE LOAN: Any Mortgage Loan which is not a Liquidated
Mortgage Loan and as to which the indebtedness evidenced by the related Mortgage
Note is discharged and the related Mortgaged Property is held as part of the
Trust Fund.
REO PROCEEDS: Proceeds received in respect of any REO Mortgage
Loan (including, without limitation, proceeds from the rental of the related
Mortgaged Property).
REO PROPERTY: A Mortgaged Property acquired by the Servicer in
the name of the Trustee on behalf of the Certificateholders through foreclosure
or deed-in-lieu of foreclosure.
REPRESENTATION LETTER: Letters to, or agreements with, the
Depository to effectuate a book entry system with respect to the Class A
Certificates registered in the Certificate Register under the nominee name of
the Depository.
REQUEST FOR RELEASE: A request for release in substantially
the form attached as Exhibit H hereto.
RESIDENTIAL DWELLING: A one- to four-family dwelling, a unit
in a planned unit development, a unit in a condominium development, a townhouse
or a manufactured housing unit which is non-mobile.
RESPONSIBLE OFFICER: When used with respect to the Trustee,
any officer assigned to the Corporate Trust Division (or any successor thereto),
including any Vice President, Senior Trust Officer, Trust Officer, Assistant
Trust Officer, any Assistant Secretary, any trust officer or any other officer
of the Trustee customarily performing functions similar to those performed by
any of the above designated officers and to whom, with respect to a particular
matter, such matter is referred because of such officer's knowledge of and
familiarity with the particular subject. When used with respect to the Seller or
the Servicer, the President or any Vice President, Assistant Vice President, or
any Secretary or Assistant Secretary.
ROLLING SIX MONTH DELINQUENCY RATE: For any Distribution Date,
the fraction, expressed as a percentage, equal to the average of the Delinquency
Ratio for each of the six (1, 2, 3, 4 or 5 in the case of the first six
Distribution Dates, as the case may be) immediately preceding Due Periods.
21
<PAGE>
S&P: Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc. or any successor thereto and if such corporation no
longer for any reason performs the services of a securities rating agency, "S&P"
shall be deemed to refer to any other nationally recognized statistical rating
organization designated by the Certificate Insurer.
SELLER: ABFS 1997-1, Inc.
SERVICER: American Business Credit, Inc., a Pennsylvania
corporation, or any successor appointed as herein provided.
SERVICER DISTRIBUTION DATE: With respect to any Distribution
Date, the 10th day of the month in which such Distribution Date occurs, or if
such 10th day is not a Business Day, the Business Day preceding such 10th day.
SERVICER REMITTANCE AMOUNT: With respect to any Servicer
Distribution Date, an amount equal to the sum of (i) all collections of
principal and interest on the Mortgage Loans (including Principal Prepayments,
Net REO Proceeds and Net Liquidation Proceeds, if any) collected by the Servicer
during the related Due Period, (ii) all Periodic Advances made by the Servicer
with respect to interest payments due to be received on the Mortgage Loans on
the related Due Date and (iii) any other amounts required to be placed in the
Collection Account by the Servicer pursuant to this Agreement but excluding the
following:
(a) amounts received on particular Mortgage Loans as late
payments of interest and respecting which the Servicer has previously
made an unreimbursed Periodic Advance;
(b) those portions of each payment of interest on a particular
Mortgage Loan which represent the Servicing Fee;
(c) that portion of Liquidation Proceeds and REO Proceeds to
the extent of any unpaid Servicing Fee;
(d) all income from Permitted Investments that is held in the
Collection Account for the account of the Servicer;
(e) all amounts in respect of late fees, assumption fees,
prepayment fees and similar fees;
(f) certain other amounts which are reimbursable to the
Servicer, as provided in this Pooling and Servicing Agreement; and
(g) Net Foreclosure Profits.
SERVICING ADVANCES: All reasonable and customary
"out-of-pocket" costs and expenses incurred in the performance by the Servicer
of its servicing obligations, including, but not limited to, the cost of (a) the
preservation, restoration and protection of the Mortgaged Property, (b) any
enforcement or judicial proceedings, including foreclosures, (c) the management
and liquidation of the REO Property, including reasonable fees paid to any
independent contractor in connection therewith, (d) compliance with the
obligations under Section 5.22, all of which reasonable and customary
out-of-pocket costs and expenses are reimbursable to the Servicer to the extent
provided in Sections 5.03 and 5.22.
22
<PAGE>
SERVICING COMPENSATION: The Servicing Fee and other amounts to
which the Servicer is entitled pursuant to Section 5.08.
SERVICING FEE: As to each Mortgage Loan, the annual fee
payable to the Servicer, which is calculated as an amount equal to the product
of (a) 0.50% per annum, and (b) the Principal Balance thereof. Such fee shall be
calculated and payable monthly only from the amounts received in respect of
interest on such Mortgage Loan and shall be computed on the basis of the same
principal amount and for the period respecting which any related interest
payment on a Mortgage Loan is computed. The Servicing Fee includes any servicing
fees owed or payable to any Subservicer.
SERVICING OFFICER: Any officer of the Servicer involved in, or
responsible for, the administration and servicing of the Mortgage Loans whose
name and specimen signature appear on a list of servicing officers furnished to
the Trustee and the Certificateholders by the Servicer, as such list may from
time to time be amended.
SPECIAL ADVANCE: As defined in Section 5.18(b) hereof.
SPECIFIED SUBORDINATED AMOUNT: Means:
(a) With respect to a Distribution Date occurring on or prior
to the Stepdown Date, the amount which is equal to 8% of the Maximum
Collateral Amount;
(b) With respect to a Distribution Date after the Stepdown
Date, (i) if the Stepdown Requirement is satisfied, the lesser of (x)
the amount equal to 8% of the Maximum Collateral Value and (y) the
greater of (A) the amount equal to 16% of the then outstanding
aggregate Principal Balances of the Mortgage Loans or (B) 1% of the
Maximum Collateral Value or (ii) if the Stepdown Requirement is not
satisfied, the amount which is equal to 8% of the Maximum Collateral
Amount;
provided, however, that if on any Distribution Date, the Mortgage Portfolio
Performance Test is not satisfied, then the Specified Subordinated Amount will
be unlimited during the period that such Mortgage Portfolio Performance Test is
not satisfied.
STARTUP DAY: The day designated as such pursuant to Section
2.07(b) hereof.
STEP DOWN DATE: The Distribution Date occurring in September
1999.
STEP DOWN REQUIREMENT: The Stepdown Requirement is satisfied
for any date of determination thereof if as of such date of determination (x)
the Rolling Six Month Delinquency Rate is less than 9.75%, (y) the Cumulative
Loss Test is satisfied and (z) the 12 Month Loss Amount is not greater than or
equal to 0.75% of the Pool Principal Balance as of the first day of the twelfth
preceding calendar month.
SUBORDINATED AMOUNT: As of any Distribution Date, the
difference, if any, between (a) the sum of (i) the aggregate Principal Balances
of the Mortgage Loans as of the close of business on the last day of the related
Due Period and (ii) the amount on deposit in the Pre-Funding Account as of the
close of business on the last day of the immediately preceding Due Period and
(b) the Class A Certificate Principal Balance as of such Distribution Date
(after taking into account the payment
23
<PAGE>
of the Principal Distribution Amount on such Distribution Date except for any
portion thereof related to an Insured Payment); provided, however, that such
amount shall not be less than zero.
SUBORDINATION DEFICIENCY AMOUNT: With respect to any
Distribution Date, the difference, if greater than zero, between (a) the
Specified Subordinated Amount applicable to such Distribution Date and (b) the
Subordinated Amount applicable to such Distribution Date prior to taking into
account the payment of any related Subordination Increase Amounts on such
Distribution Date.
SUBORDINATION DEFICIT: As of any Distribution Date, the
amount, if any, by which (a) the Class A Certificate Principal Balance, after
taking into account the payment of the Principal Distribution Amount (except for
any amount in respect of the Subordination Deficit) on such date exceeds (b) the
sum of (i) the aggregate Principal Balance of the Mortgage Loans determined as
of the end of the immediately preceding Due Period and (ii) the amount, if any,
on deposit in the Pre-Funding Account as of the close of business on the last
day of the immediately preceding Due Period.
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 (except for any Subordination
Increase Amount)) and (b) the amount of Net Monthly Excess Cashflow on such
Distribution Date.
SUBORDINATION LOSS TEST: The Subordination Loss Test for any
period set out below is satisfied if the Cumulative Loss Percentage for such
period does not exceed the percentage set out for such period below:
Cumulative Loss
Period Percentage
------ ---------------
1st - 12th Distribution Date 0.75%
13th - 24th Distribution Date 1.25%
25th - 36th Distribution Date 1.75%
37th - 48th Distribution Date 2.00%
49th - 60th Distribution Date
and thereafter 2.50%
SUBORDINATION REDUCTION AMOUNT: With respect to any
Distribution Date, an amount equal to the lesser of (a) the Excess Subordinated
Amount for such Distribution Date and (b) the Principal Remittance Amount for
the prior Due Period.
SUBSEQUENT CUT-OFF DATE: As to any Subsequent Mortgage Loans,
the date specified in the Addition Notice delivered in connection therewith,
which date shall be the close of business on the last day of the month
immediately preceding the month in which such Subsequent Mortgage Loans will be
conveyed to the Trust.
SUBSEQUENT MORTGAGE LOANS: The Mortgage Loans hereafter
transferred and assigned to the Trust pursuant to Section 2.03.
SUBSEQUENT TRANSFER: The transfer and assignment by the
Depositor to the Trust of the Subsequent Mortgage Loans pursuant to the terms
hereof.
24
<PAGE>
SUBSEQUENT TRANSFER DATE: The Business Day on which a
Subsequent Transfer occurs.
SUBSERVICER: HomeAmerican Credit, Inc., d/b/a Upland Mortgage,
a Pennsylvania corporation, or its successor in interest.
SUBSERVICING AGREEMENT: The agreement between the Servicer and
the Subservicer relating to subservicing and/or administration of certain
Mortgage Loans as provided in Section 5.13, a copy of which shall be delivered,
along with any modifications thereto, to the Trustee and the Certificate
Insurer.
SUBSTITUTION ADJUSTMENT: As to any date on which a
substitution occurs pursuant to Sections 2.06 or 3.03, the amount (if any) by
which the aggregate principal balances (after application of principal payments
received on or before the date of substitution) of any Qualified Substitute
Mortgage Loans as of the date of substitution, are less than the aggregate of
the Principal Balances of the related Deleted Mortgage Loans together with 30
days' interest thereon at the Mortgage Interest Rate.
TAX MATTERS PERSON: The Person or Persons appointed pursuant
to Section 10.15 from time to time to act as the "tax matters person" (within
the meaning of the REMIC Provisions) of the REMIC Trust.
TAX RETURN: The federal income tax return on Internal Revenue
Service Form 1066, "U.S. Real Estate Mortgage Investment Conduit Income Tax
Return," including Schedule Q thereto, Quarterly Notice to Residual Interest
Holders of REMIC Taxable Income or Net Loss Allocation, or any successor forms,
to be filed on behalf of the Trust Fund due to its classification as a REMIC
under the REMIC Provisions, together with any and all other information reports
or returns that may be required to be furnished to the Certificateholders or
filed with the Internal Revenue Service or any other governmental taxing
authority under any applicable provision of federal, state or local tax laws.
TRANSFER: Any direct or indirect transfer, sale, pledge,
hypothecation or other form of assignment of any Ownership Interest in a
Certificate.
TRANSFER AFFIDAVIT AND AGREEMENT: As defined in Section
4.02(k)(ii).
TRANSFEREE: Any Person who is acquiring by Transfer any
Ownership Interest in a Certificate.
TRANSFEROR: Any Person who is disposing by Transfer any
Ownership Interest in a Certificate.
TRUST: ABFS Mortgage Loan Trust 1997-1, the trust created
hereunder.
TRUSTEE: The Chase Manhattan Bank, a New York banking
corporation, or its successor in interest, or any successor trustee appointed as
herein provided.
TRUSTEE FEE: As to any Distribution Date, the fee payable to
the Trustee in respect of its services as Trustee that accrues at a monthly rate
equal to one-twelfth of 0.04% on the Principal Balance of each Mortgage Loan as
of the immediately preceding Due Date.
25
<PAGE>
TRUSTEE'S MORTGAGE FILE: The documents delivered to the
Trustee or its designated agent pursuant to Section 2.05.
TRUSTEE'S REMITTANCE REPORT: As defined in Section 6.07.
TRUST FUND: The segregated pool of assets subject hereto,
constituting the 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; any other
security for such Mortgage Loan, including, without limitation, pledged
equipment, inventory and working capital and assignments of rights and interests
made by the related mortgagor; (v) the Certificate Insurance Policy; (vi) the
rights and remedies of the Trustee against any Person making any representation
or warranty to the Trustee hereunder, to the extent provided herein; and (vii)
each Account and such assets that are deposited therein from time to time and
any investments thereof, together with any and all income, proceeds and payments
with respect thereto.
12 MONTH LOSS AMOUNT: With respect to any Distribution Date,
an amount equal to the aggregate of all Liquidated Loan Losses on the Mortgage
Loans which became Liquidated Mortgage Loans during the 12 preceding Due
Periods.
UNDERWRITER: Prudential Securities Incorporated.
UNDERWRITING GUIDELINES: The underwriting guidelines of the
Seller and of the Servicer, a copy of which is attached as an exhibit to the
Purchase Agreement.
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 or a trust if a court within the United States can exercise
primary jurisdiction over its administration and at least one United States
fiduciary has the authority to control all substantial decisions of the trust.
WEIGHTED AVERAGE CLASS A PASS-THROUGH RATE: The weighted
average (weighted by the related Certificate Principal Balance) of the Class A-1
Pass-Through Rate, the Class A-2 Pass-Through Rate and the Class A-3
Pass-Through Rate.
Section 1.02 Provisions of General Application. (a) All
accounting terms not specifically defined herein shall be construed in
accordance with GAAP.
(b) The terms defined in this Article include the plural as
well as the singular.
(c) The words "herein," "hereof" and "hereunder" and other
words of similar import refer to this Agreement as a whole. All references to
Articles and Sections shall be deemed to refer to Articles and Sections of this
Agreement.
26
<PAGE>
(d) Reference to statutes are to be construed as including all
statutory provisions consolidating, amending or replacing the statute to which
reference is made and all regulations promulgated pursuant to such statutes.
(e) All calculations of interest (other than with respect to
the Mortgage Loans) provided for herein shall be made on the basis of a 360-day
year consisting of twelve 30-day months. All calculations of interest with
respect to any Mortgage Loan provided for herein shall be made in accordance
with the terms of the related Note and Mortgage or, if such documents do not
specify the basis upon which interest accrues thereon, on the basis of a 360-day
year consisting of twelve 30-day months, to the extent permitted by applicable
law.
(f) Any Mortgage Loan payment is deemed to be received on the
date such payment is actually received by the Servicer, provided, however, that
for purposes of calculating distributions on the Certificates prepayments with
respect to any Mortgage Loan are deemed to be received on the date they are
applied in accordance with customary servicing practices consistent with the
terms of the related Note and Mortgage to reduce the outstanding principal
balance of such Mortgage Loan on which interest accrues.
Section 1.03 Business Day Certificate. On the Closing Date
(with respect to the calendar year 1997) and thereafter, within 15 days prior to
the end of each calendar year while this Agreement remains in effect (with
respect to the succeeding calendar years), the Servicer shall provide to the
Trustee and the Depositor a certificate of a Servicing Officer specifying the
days on which banking institutions in the State of Pennsylvania are authorized
or obligated by law, executive order or governmental decree to be closed.
ARTICLE II
ESTABLISHMENT OF THE TRUST
SALE AND CONVEYANCE OF THE TRUST FUND
Section 2.01 Establishment of the Trust. The Depositor does
hereby establish, pursuant to the further provisions of this Agreement and the
laws of the State of New York, an express trust to be known, for convenience, as
"ABFS Mortgage Loan Trust 1997-1" and does hereby appoint The Chase Manhattan
Bank as Trustee in accordance with the provisions of this Agreement.
Section 2.02 Purchase and Sale of Initial Mortgage Loans. The
Depositor does hereby sell, transfer, assign, set over and convey to the Trustee
without recourse but subject to the terms and provisions of this Agreement, all
of the right, title and interest of the Depositor in and to the Initial Mortgage
Loans, including the outstanding principal of and interest due on such Initial
Mortgage Loans, and all other assets included or to be included in the Trust
Fund for the benefit of the Certificateholders and the Certificate Insurer. In
connection with such transfer and assignment, and pursuant to Section 2.07 of
the Purchase Agreement, the Depositor does hereby also irrevocably transfer,
assign, set over and otherwise convey to the Trustee all of its rights under the
Purchase Agreement including, without limitation, its right to exercise the
remedies created by Sections 2.05 and 3.05 of the Purchase Agreement for
defective documentation and for breaches of representations and warranties,
agreements and covenants of the Seller and the Originators contained in Sections
3.01, 3.02 and 3.03 of the Purchase Agreement.
27
<PAGE>
Section 2.03 Purchase and Sale of Subsequent Mortgage Loans.
(a) Subject to the satisfaction of the conditions set forth in paragraph (b)
below, in consideration of the Trustee's delivery on the related Subsequent
Transfer Dates to or upon the order of the Depositor of all or a portion of the
balance of funds in the Pre-Funding Account, the Depositor shall on any
Subsequent Transfer Date sell, transfer, assign, set over and convey to the
Trustee without recourse but subject to terms and provisions of this Agreement,
all of the right, title and interest of the Depositor in and to the Subsequent
Mortgage Loans, including the outstanding principal of and interest due on such
Subsequent Mortgage Loans, and all other assets included or to be included in
the Trust Fund for the benefit of the Certificateholders and the Certificate
Insurer. In connection with such transfer and assignment, and pursuant to
Section 2.07 of the Purchase Agreement, the Depositor does hereby also
irrevocably transfer, assign, set over and otherwise convey to the Trustee all
of its rights under the Purchase Agreement including, without limitation, its
right to exercise the remedies created by Sections 2.05 and 3.05 of the Purchase
Agreement for defective documentation and for breaches of representations and
warranties, agreements and covenants of the Seller contained in Sections 3.01,
3.02 and 3.03 of the Purchase Agreement.
The amount released from the Pre-Funding Account with respect
to a transfer of Subsequent Mortgage Loans shall be one-hundred percent (100%)
of the aggregate principal balances as of the related Subsequent Cut-Off Date of
the Subsequent Mortgage Loans so transferred.
(b) The Subsequent Mortgage Loans and the other property and
rights related thereto described in paragraph (a) above shall be transferred by
the Depositor to the Trust only upon the satisfaction of each of the following
conditions on or prior to the related Subsequent Transfer Date:
(i) the Seller shall have provided the Trustee, the Rating
Agencies and the Certificate Insurer with a timely Addition Notice,
which shall include a Mortgage Loan Schedule, listing the Subsequent
Mortgage Loans and shall have provided any other information reasonably
requested by any of the foregoing with respect to the Subsequent
Mortgage Loans;
(ii) the Seller shall have deposited in the Collection
Account all collections of (x) principal in respect of the Subsequent
Mortgage Loans received after the related Subsequent CutOff Date and
(y) interest due on the Subsequent Mortgage Loans after the related
Subsequent CutOff Date;
(iii) as of each Subsequent Transfer Date, the Depositor was
not insolvent nor will be made insolvent by such transfer nor is the
Depositor aware of any pending insolvency;
(iv) such addition will not result in a material adverse tax
consequence to the Trust or the Holders of the Certificates;
(v) the Pre-Funding Period shall not have terminated;
(vi) the Seller shall have delivered to the Trustee an
Officer's Certificate confirming the satisfaction of each condition
precedent specified in this paragraph (b) and that the Subsequent
Mortgage Loans comply with the provisions of this Section 2.02 and each
complies with the terms of the Purchase Agreement, including each of
the representations and warranties made with respect thereto; and
(vii) there shall have been delivered to the Certificate
Insurer, the Rating Agencies and the Trustee, Independent Opinions of
Counsel with respect to the transfer of the Subsequent
28
<PAGE>
Mortgage Loans substantially in the form of the Opinions of Counsel
delivered to the Certificate Insurer and the Trustee on the Startup
Date (bankruptcy, corporate and tax opinions).
(c) The obligation of the Trust to purchase the Subsequent
Mortgage Loans on a Subsequent Transfer Date is subject to the following
requirements: (i) such Subsequent Mortgage Loan may not be 30 or more days
contractually delinquent as of the related Subsequent Cut-Off Date; (ii) the
original term to maturity of such Subsequent Mortgage Loan may not exceed 360
months; (iii) such Subsequent Mortgage Loan shall have a Mortgage Rate of at
least 8.32%; (iv) the purchase of the Subsequent Mortgage Loans is consented to
by the Certificate Insurer and the Rating Agencies; (v) the principal balance of
any such Subsequent Mortgage Loan may not exceed $350,000.00; (vi) no more than
35% of such Subsequent Mortgage Loans may be second liens; (vii) no such
Subsequent Mortgage Loan shall have a CLTV of more than, (A) for consumer
purpose loans, 90%, and (B) for business purpose loans, 75%; (viii) no more than
27% of such Subsequent Mortgage Loans may be Balloon Loans; (ix) no more than
18% of such Subsequent Mortgage Loans may be secured by mixed-use properties,
commercial properties, or four or more unit multifamily properties; (x) no more
than 5% of such Subsequent Mortgage Loans can be secured by commercial
properties; and (xi) following the purchase of such Subsequent Mortgage Loans by
the Trust, the Mortgage Loans (including the Subsequent Mortgage Loans) (A) will
have a weighted average Mortgage Rate, (I) for consumer purpose loans, of at
least 11.30% and (II) for business purpose loans, of at least 15.50%; and (B)
will have a weighted average LTV of not more than 74%.
(d) In connection with the transfer and assignment of the
Subsequent Mortgage Loans, the Depositor shall satisfy the document delivery
requirements set forth in Section 2.05.
(e) On each Subsequent Transfer Date upon written instruction
from the Seller, the Trustee shall withdraw from the Capitalized Interest
Account and pay to the Seller on such Subsequent Transfer Date the Overfunded
Interest Amount for such Subsequent Transfer Date, as calculated by the Trustee
with the cooperation of the Seller and subject to the approval of the
Certificate Insurer.
Section 2.04 Possession of Mortgage Files; Access to Mortgage
Files. (a) Upon the issuance of the Certificates, the ownership of each Mortgage
Note, the Mortgage and the contents of the related Mortgage File related to each
Mortgage Loan is vested in the Trustee for the benefit of the Certificateholders
and the Certificate Insurer.
(b) Pursuant to Section 2.05 of the Purchase Agreement, the
Depositor has delivered or caused to be delivered the Trustee's Mortgage File
related to each Mortgage Loan to the Trustee.
(c) The Trustee will be the custodian or may enter into a
custodial agreement pursuant to which the Trustee will appoint a custodian (a
"Custodian") to hold the Mortgage Files in trust for the benefit of all present
and future Certificateholders and the Certificate Insurer; provided, however,
that the custodian so appointed shall in no event be the Depositor or the
Servicer or any Person known to a Responsible Officer of the Trustee to be an
Affiliate of any of them and shall be approved by the Certificate Insurer.
(d) The Custodian shall afford the Depositor, the Certificate
Insurer and the Servicer reasonable access to all records and documentation
regarding the Mortgage Loans relating to this Agreement, such access being
afforded at customary charges, upon reasonable request and during normal
business hours at the offices of the Custodian.
29
<PAGE>
Section 2.05 Delivery of Mortgage Loan Documents. (a) In
connection with the transfer and assignment of the Mortgage Loans, the Depositor
does hereby with respect to the Initial Mortgage Loans, and will on or before
the Subsequent Transfer Date with respect to Subsequent Mortgage Loans, deliver
or cause to be delivered to the Trustee the following documents or instruments
with respect to each Mortgage Loan so transferred or assigned:
(i) the original Mortgage Note, endorsed without
recourse in blank by the related Originator, including all intervening
endorsements showing a complete chain of endorsement;
(ii) the related Mortgage with evidence of recording
indicated thereon or a copy thereof certified by the applicable
recording office;
(iii) the recorded mortgage assignment, or copy thereof
certified by the applicable recording office, if any, showing a
complete chain of assignment from the originator of the related
Mortgage Loan to the related Originator (which assignment may, at such
Originator's option, be combined with the assignment referred to in
subpart (iv) hereof);
(iv) a mortgage assignment in recordable form (which, if
acceptable for recording in the relevant jurisdiction, may be included
in a blanket assignment or assignments) of each Mortgage from the
related Originator to the Trustee;
(v) originals of all assumption, modification and
substitution agreements in those instances where the terms or
provisions of a Mortgage or Mortgage Note have been modified or such
Mortgage or Mortgage Note has been assumed; and
(vi) an original title insurance policy (or (A) a copy
of the title insurance policy, or (B) a binder thereof or copy of such
binder together with a certificate from the related Originator that the
original Mortgage has been delivered to the title insurance company
that issued such binder for recordation).
In instances where the original recorded Mortgage and a
completed assignment thereof in recordable form cannot be delivered by the
Depositor to the Trustee prior to or concurrently with the execution and
delivery of this Agreement (or, with respect to Subsequent Mortgage Loans, prior
to or on the Subsequent Transfer Date), due to a delay in connection with
recording, the Depositor may:
(x) In lieu of delivering such original recorded
Mortgage, deliver to the Trustee a copy thereof provided that the
related Originator certifies that the original Mortgage has been
delivered to a title insurance company for recordation after receipt of
its policy of title insurance or binder therefor; and
(y) In lieu of delivering the completed assignment in
recordable form, deliver to the Trustee the assignment in recordable
form, otherwise complete except for recording information.
The Trustee shall promptly upon receipt thereof, with respect
to each Mortgage Note described in (i) above and each assignment described in
(iv) above, endorse such Mortgage Note and assignment as follows: "The Chase
Manhattan Bank, as Trustee under the Pooling and Servicing Agreement dated as of
March 1, 1997, ABFS Mortgage Loan Trust 1997-1."
30
<PAGE>
As promptly as practicable, but in any event within thirty
(30) days from the Closing Date or the Subsequent Transfer Date, as applicable,
the related Originator shall cause to be recorded, at the related Originator's
expense, in the appropriate public office for real property records, the
assignments of the Mortgages to the Trustee.
All original documents relating to the Mortgage Loans which
are not delivered to the Trustee, as permitted by Section 2.05(a) of the
Purchase Agreement and this Section 2.05(a), are and shall be held by the
related Originator, the Seller or the Servicer in trust for the benefit of the
Trustee on behalf of the Certificateholders.
(b) Within 30 days following delivery of the Mortgage Files to
the Trustee, the Trustee will review each Mortgage File to ascertain that all
required documents set forth in Section 2.01(a) have been executed and received,
and that such documents relate to the Mortgage Loans identified on the Mortgage
Loan Schedule, and in so doing the Trustee may rely on the purported due
execution and genuineness of any signature thereon. If within such 30-day period
(or, with respect to any Qualified Replacement Mortgage, within 30 days after
the assignment thereof) the Trustee finds any document constituting a part of a
Mortgage File not to have been executed or received or to be unrelated to the
Mortgage Loans identified in the Mortgage Loan Schedule, the Trustee shall (i)
promptly notify the Class A Certificateholders in writing with the details
thereof, and (ii) promptly notify the Servicer, which shall have a period of 60
days after such notice within which to correct or cure any such defect. Each
original recorded assignment of a Mortgage shall be delivered to the Trustee
within 10 days following the date on which it is returned to the Servicer by the
office with which such assignment was filed for recording and within 10 days
following receipt by the Trustee of the recorded assignment or the assignment in
recordable form, as the case may be, the Trustee shall review such assignment to
confirm the information specified above with respect to the documents
constituting the Mortgage File. Upon receipt by the Trustee of the recorded
assignment or the assignment in recordable form, as the case may be, such
recorded assignment or assignment in recordable form shall become part of the
Mortgage File. The Trustee shall notify the Servicer of any defect in such
assignment based on such review. The Servicer shall have a period of 60 days
following such notice to correct or cure such defect. In the event that the
Servicer fails to record an assignment of a Mortgage as herein provided the
Trustee shall, at the Servicer's expense, use reasonable efforts to prepare and,
if required hereunder, file such assignments for recordation in the appropriate
real property or other records and the Servicer hereby appoints the Trustee as
its attorney-in-fact with full power and authority acting in its stead for the
purpose of such preparation, execution and filing.
(c) It is intended that the conveyance of the Mortgage Loans
and other property by the Depositor to the Trustee as provided in this Section
2.05 and Sections 2.02 and 2.03 be, and be construed as, a sale of the Mortgage
Loans and such other property by the Depositor to the Trustee for the benefit of
the Certificateholders. It is, further, not intended that such conveyance be
deemed a pledge of the Mortgage Loans or such other property by the Depositor to
the Trustee to secure a debt or other obligation of the Depositor. However, in
the event that the Mortgage Loans or any of such other property are held to be
property of the Depositor, or if for any reason this Agreement is held or deemed
to create a security interest in the Mortgage Loans or any of such other
property, then it is intended that: (i) this Agreement shall also be deemed to
be a security agreement within the meaning of the Uniform Commercial Code; (ii)
the conveyance provided for in this Section 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 such other property and all
amounts payable to the holders of the Mortgage Loans in accordance with the
terms thereof and all proceeds of the conversion, voluntary or involuntary, of
the foregoing into cash, instruments, securities or other property, including
without limitation all amounts from time to time held
31
<PAGE>
or invested in the Certificate Account, whether in the form of cash,
instruments, securities or other property; (iii) the possession by the Trustee
or its agent of the Mortgage Notes and such other items of property as
constitute instruments, money, negotiable documents or chattel paper shall be
deemed to be "possession by the secured party" for purposes of perfecting the
security interest pursuant to the Uniform Commercial Code; and (iv)
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. The Depositor and the Trustee
shall, to the extent consistent with this Agreement, take such actions as may be
necessary to ensure that, if this Agreement were deemed to create a security
interest in the Mortgage Loans or any of such other property, such security
interest would be deemed to be a perfected security interest of first priority
under applicable law and will be maintained as such throughout the term of this
Agreement.
(d) Without diminution of the requirements of Sections 2.04(c)
and this Section 2.05, all original documents relating to the Mortgage Loans
that are not delivered to the Trustee are and shall be held by the Servicer 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 2.05 to be a part of a Mortgage File, such
document shall be delivered promptly to the Trustee pursuant to the Purchase
Agreement. In acting as custodian of any such original document, the Servicer
agrees further that it does not and will not have or assert any beneficial
ownership interest in the Mortgage Loans or the Mortgage Files. Promptly upon
the Depositor's and the Trust's acquisition thereof and the Servicer's receipt
thereof, the Servicer on behalf of the Trust shall mark conspicuously each
original document not delivered to the Trustee, and the Seller's master data
processing records evidencing each Mortgage Loan with a legend, acceptable to
the Trustee, evidencing that the Trust has purchased the Mortgage Loans and all
right and title thereto and interest therein pursuant to the Purchase Agreement
and this Agreement.
Section 2.06 Acceptance by Trustee of the Trust Fund; Certain
Substitutions; Certification by Trustee. (a) The Trustee agrees to execute and
deliver to the Depositor, the Certificate Insurer, the Servicer and the Seller
on or prior to the Closing Date an acknowledgment of receipt of the Certificate
Insurance Policy and, on or prior to the Closing Date or any Subsequent Transfer
Date, with respect to each Mortgage Loan transferred on such date, the original
Mortgage Note (with any exceptions noted), in the form attached as Exhibit E
hereto and declares that it will hold such documents and any amendments,
replacements or supplements thereto, as well as any other assets included in the
definition of Trust Fund and delivered to the Trustee, as Trustee in trust upon
and subject to the conditions set forth herein for the benefit of the
Certificateholders and the Certificate Insurer. The Trustee agrees, for the
benefit of the Certificateholders and the Certificate Insurer, to review (or
cause to be reviewed) each Trustee's Mortgage File within 30 days after the
Closing Date (with respect to the Initial Mortgage Loans) or any Subsequent
Transfer Date (with respect to the Subsequent Mortgage Loans), as applicable,
and to deliver to the Seller, the Servicer, the Depositor and the Certificate
Insurer a certification in the form attached hereto as Exhibit F to the effect
that, as to each Mortgage Loan listed in the related Mortgage Loan Schedule
(other than any Mortgage Loan paid in full or any Mortgage Loan specifically
identified in such certification as not covered by such certification), (i) all
documents required to be delivered to it pursuant to Section 2.05 are in its
possession, (ii) each such document has been reviewed by it and has not been
mutilated, damaged, torn or otherwise physically altered (handwritten additions,
changes or corrections shall not constitute physical alteration if initialled by
the Mortgagor), appears regular on its face and relates to such Mortgage Loan,
and (iii) based on its examination and only as to the foregoing documents, the
information set forth on the Mortgage Loan Schedule as to the information set
forth in (i), (ii), (v) and (vi) of the definition of "Mortgage Loan Schedule"
set forth herein accurately reflects the
32
<PAGE>
information set forth in the Trustee's Mortgage File delivered on such date. The
Trustee shall be under no duty or obligation to inspect, review or examine any
such documents, instruments, certificates or other papers to determine that they
are genuine, enforceable, or appropriate for the represented purpose or that
they are other than what they purport to be on their face.
By June 30, 1997, with respect to the Initial Mortgage Loans,
and within 90 days of any Subsequent Transfer Date, with respect to the
Subsequent Mortgage Loans transferred on such date, the Trustee shall deliver
(or cause to be delivered) to the Servicer, the Seller, the Depositor, the
Rating Agencies and the Certificate Insurer a final certification in the form
attached hereto as Exhibit G to the effect that, as to each Mortgage Loan listed
in the related Mortgage Loan Schedule (other than any Mortgage Loan paid in full
or any Mortgage Loan specifically identified in such certification as not
covered by such certification), (i) all documents required to be delivered to it
pursuant to Section 2.05 are in its possession, (ii) each such document has been
reviewed by it and has not been mutilated, damaged, torn or otherwise physically
altered (handwritten additions, changes or corrections shall not constitute
physical alteration if initialled by the Mortgagor), appears regular on its face
and relates to such Mortgage Loan, and (iii) based on its examination and only
as to the foregoing documents, the information set forth in (i), (ii), (v) and
(vi) of the definition of "Mortgage Loan Schedule" set forth herein accurately
reflects the information set forth in the Trustee's Mortgage File delivered on
such date.
(b) If the Trustee during the process of reviewing the
Trustee's Mortgage Files finds any document constituting a part of a Trustee's
Mortgage File which is not executed, has not been received, is unrelated to the
Mortgage Loan identified in the related Mortgage Loan Schedule, or does not
conform to the requirements of Section 2.05 or the description thereof as set
forth in the related Mortgage Loan Schedule, the Trustee or the Certificate
Insurer, as applicable, shall promptly so notify the Servicer, the Seller, the
Certificate Insurer and the Trustee. In performing any such review, the Trustee
may conclusively rely on the Seller as to the purported genuineness of any such
document and any signature thereon. It is understood that the scope of the
Trustee's review of the Mortgage Files is limited solely to confirming that the
documents listed in Section 2.05 have been executed and received and relate to
the Mortgage Files identified in the related Mortgage Loan Schedule. Pursuant to
the Purchase Agreement, the Seller and the Originators have agreed to use
reasonable efforts to cause to be remedied a material defect in a document
constituting part of a Mortgage File of which it is so notified by the Trustee.
If, however, within 60 days after the Trustee's notice to it respecting such
defect the Seller has not caused to be remedied the defect and the defect
materially and adversely affects the interest of the Certificateholders in the
related Mortgage Loan or the interests of the Certificate Insurer, the Seller
and the Originators will be obligated, pursuant to the Purchase Agreement, to
either (i) substitute in lieu of such Mortgage Loan a Qualified Substitute
Mortgage Loan in the manner and subject to the conditions set forth in Section
3.03 or (ii) purchase such Mortgage Loan at a purchase price equal to the
Principal Balance of such Mortgage Loan as of the date of purchase, plus all
accrued and unpaid interest on such Principal Balance computed at the Mortgage
Interest Rate, net of the Servicing Fee if the Seller or an Originator, as
applicable, is the Servicer, plus the amount of any unreimbursed Servicing
Advances made by the Servicer with respect to such Mortgage Loan, which purchase
price shall be deposited in the Collection Account on the next succeeding
Servicer Distribution Date, after deducting therefrom any amounts received in
respect of such repurchased Mortgage Loan or Loans and being held in the
Collection Account for future distribution to the extent such amounts have not
yet been applied to principal or interest on such Mortgage Loan (the "Loan
Repurchase Price"). For purposes of calculating the Available Funds, any Loan
Repurchase Price or Substitution Adjustment that is paid shall be deemed
deposited in the Certificate Account in the Due Period preceding such Servicer
Distribution Date.
33
<PAGE>
(c) Upon receipt by the Trustee of a certification of a
Servicing Officer of such substitution or purchase and, in the case of a
substitution, upon receipt of the related Trustee's Mortgage File, and the
deposit of the amounts described above in the Collection Account (which
certification shall be in the form of Exhibit H hereto), the Trustee shall
release to the Servicer for release to the Seller the related Trustee's Mortgage
File and shall execute, without recourse, and deliver such instruments of
transfer furnished by the Seller as may be necessary to transfer such Mortgage
Loan to the Seller. The Trustee shall notify the Certificate Insurer if the
Seller fails to repurchase or substitute for a Mortgage Loan in accordance with
the foregoing.
Section 2.07 Designations under REMIC Provisions; Designation
of Startup Day. (a) The Class A Certificates are hereby designated as the
"regular interests", and the Class R Certificates are designated the single
class of "residual interests" in the REMIC Trust for the purposes of the REMIC
Provisions.
(b) The Closing Date will be the "startup day" of the REMIC
Trust within the meaning of Section 860G(a)(9) of the Code.
Section 2.08 Execution of Certificates. The Trustee
acknowledges the assignment to it of the Mortgage Loans and the delivery of the
Trustee's Mortgage Files relating thereto to it and, concurrently with such
delivery, has executed, authenticated and delivered to or upon the order of the
Depositor, in exchange for the Mortgage Loans, the Trustee's Mortgage Files and
the other assets included in the definition of Trust Fund, Certificates duly
authenticated by the Trustee in Authorized Denominations evidencing the entire
ownership of the Trust Fund.
Section 2.09 Application of Principal and Interest. In the
event that Net Liquidation Proceeds on a Liquidated Mortgage Loan are less than
the Principal Balance of the related Mortgage Loan plus accrued interest
thereon, or any Mortgagor makes a partial payment of any Monthly Payment due on
a Mortgage Loan, such Net Liquidation Proceeds or partial payment shall be
applied to payment of the related Mortgage Note as provided therein, and if not
so provided, first to interest accrued at the Mortgage Interest Rate and then to
principal.
Section 2.10 Grant of Security Interest. (a) Except with
respect to the REMIC Provisions, it is the intention of the parties hereto that
the conveyance by the Depositor of the Trust Fund to the Trustee on behalf of
the Trust shall constitute a purchase and sale of such Trust Fund and not a
loan. In the event, however, that a court of competent jurisdiction were to hold
that the transaction evidenced hereby constitutes a loan and not a purchase and
sale, it is the intention of the parties hereto that this Agreement shall
constitute a security agreement under applicable law, and that the Depositor
shall be deemed to have granted to the Trustee, on behalf of the Trust, a first
priority perfected security interest in all of the Depositor's right, title and
interest in, to and under the Trust Fund. The conveyance by the Depositor of the
Trust Fund to the Trustee on behalf of the Trust shall not constitute and is not
intended to result in an assumption by the Trustee or any Certificateholder of
any obligation of the Seller or any other Person in connection with the Trust
Fund.
(b) The Depositor and the Servicer shall take no action
inconsistent with the Trust's ownership of the Trust Fund and each shall
indicate or shall cause to be indicated in its records and records held on its
behalf that ownership of each Mortgage Loan and the assets in the Trust Fund are
held by the Trustee on behalf of the Trust. In addition, the Depositor and the
Servicer shall respond to any inquiries from third parties with respect to
ownership of a Mortgage Loan or any other asset in the Trust
34
<PAGE>
Fund by stating that it is not the owner of such asset and that ownership of
such Mortgage Loan or other Trust Fund asset is held by the Trustee on behalf of
the Trust.
Section 2.11 Further Action Evidencing Assignments. (a) The
Servicer agrees that, from time to time, at its expense, it shall cause the
Seller (and the Depositor on behalf of itself also agrees that it shall),
promptly to execute and deliver all further instruments and documents, and take
all further action, that may be necessary or appropriate, or that the Servicer
or the Trustee may reasonably request, in order to perfect, protect or more
fully evidence the transfer of ownership of the Trust Fund or to enable the
Trustee to exercise or enforce any of its rights hereunder. Without limiting the
generality of the foregoing, the Servicer and the Depositor will, upon the
request of the Servicer or the Trustee execute and file (or cause to be executed
and filed) such real estate filings, financing or continuation statements, or
amendments thereto or assignments thereof, and such other instruments or
notices, as may be necessary or appropriate.
(b) The Depositor hereby grants to the Servicer and the
Trustee powers of attorney to execute all documents on its behalf under this
Agreement and the Purchase Agreement as may be necessary or desirable to
effectuate the foregoing.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01 Representations of the Servicer. The Servicer
hereby represents and warrants to the Trustee, the Depositor, the Certificate
Insurer and the Certificateholders as of the Closing Date and during the term of
this Agreement that:
(a) The Seller, the Servicer and the Subservicer each is a
corporation duly organized, validly existing and in good standing under
the laws of their respective states of incorporation and has the
corporate power to own its assets and to transact the business in which
it is currently engaged. The Seller, the Servicer and the Subservicer
each is duly qualified to do business as a foreign corporation and is
in good standing in each jurisdiction in which the character of the
business transacted by it or properties owned or leased by it or the
performance of its obligations hereunder requires such qualification
and in which the failure so to qualify could reasonably be expected to
have a material adverse effect on the business, properties, assets, or
condition (financial or other) of the Seller, the Servicer or the
Subservicer or the performance of their respective obligations
hereunder;
(b) The Seller and the Servicer each has the power and
authority to make, execute, deliver and perform this Agreement and all
of the transactions contemplated under this Agreement, and has taken
all necessary corporate action to authorize the execution, delivery and
performance of this Agreement. When executed and delivered, this
Agreement will constitute the legal, valid and binding obligation of
the Seller and the Servicer, enforceable in accordance with its terms,
except as enforcement of such terms may be limited by bankruptcy,
insolvency or similar laws affecting the enforcement of creditors'
rights generally and by the availability of equitable remedies;
(c) Neither the Seller nor the Servicer is required to obtain
the consent of any other party or any consent, license, approval or
authorization from, or registration or declaration with, any
35
<PAGE>
governmental authority, bureau or agency which consent already has not
been obtained in connection with the execution, delivery, performance,
validity or enforceability of this Agreement, except such as have been
obtained prior to the Closing Date;
(d) The execution, delivery and performance of this Agreement
by the Seller and the Servicer will not violate any provision of any
existing law or regulation or any order or decree of any court or the
Articles of Incorporation or Bylaws of the Seller or the Servicer,
respectively, or constitute a breach of any mortgage, indenture,
contract or other Agreement to which the Seller or the Servicer,
respectively, is a party or by which it may be bound;
(e) There is no action, suit, proceeding or investigation
pending or threatened against the Servicer, the Seller or the
Subservicer which, either in any one instance or in the aggregate, is,
in the Servicer's and the Seller's judgment, likely to result in any
material adverse change in the business, operations, financial
condition, properties, or assets of the Servicer, the Seller or the
Subservicer, or in any material impairment of the right or ability of
any of them to carry on its business substantially as now conducted, or
in any material liability on the part of any of them, or which would
draw into question the validity of this Agreement, the Certificates, or
the Mortgage Loans or of any action taken or to be taken in connection
with the obligations of the Seller or the Servicer contemplated herein
or therein, or which would be likely to impair materially the ability
of the Seller or the Servicer to perform its obligations hereunder;
(f) Neither this Agreement nor any statement, report, or other
document furnished or to be furnished pursuant to this Agreement or in
connection with the transactions contemplated hereby, including without
limitation the sale or placement of the Certificates, contains any
untrue statement of fact provided by or on behalf of the Seller or the
Servicer or omits to state a fact necessary to make the statements
provided by or on behalf of the Seller or the Servicer contained herein
or therein not misleading:
(g) Neither the Seller nor the Servicer believes, nor does
either have any reason or cause to believe, that it cannot perform each
and every covenant contained in this Agreement;
(h) The transfer, assignment, and conveyance of the Mortgage
Loans by the Seller pursuant to this Agreement is not subject to the
bulk transfer or any similar statutory provisions in effect in any
applicable jurisdiction;
(i) The Seller is solvent and will not as a result of this
Agreement and the undertakings of the Seller hereunder be rendered
insolvent; and
(j) None of the Seller, the Servicer or the Subservicer is an
"investment company" or a company "controlled by an investment
company," within the meaning of the Investment Company Act of 1940, as
amended.
It is understood and agreed that the representations,
warranties and covenants set forth in this Section 3.01 shall survive the
delivery of the respective Mortgage Files to the Trustee or to a custodian, as
the case may be, and inure to the benefit of the Trustee.
36
<PAGE>
Section 3.02 Representations, Warranties and Covenants of the
Depositor. The Depositor hereby represents, warrants and covenants to the
Trustee that as of the date of this Agreement or as of such date specifically
provided herein:
(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
convey the Mortgage Loans and to execute, deliver and perform, and to
enter into and consummate transactions contemplated by, this Agreement;
(c) This Agreement has been duly and validly authorized,
executed and delivered by the Depositor, all requisite corporate action
having been taken, and, assuming the due authorization, execution and
delivery hereof by the Servicer and the Trustee, constitutes or will
constitute the legal, valid and binding agreement of the Depositor,
enforceable against the Depositor in accordance with its terms, except
as such enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or
affecting the rights of creditors generally, and by general equity
principles (regardless of whether such enforcement is considered in a
proceeding in equity or at law);
(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 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 transactions contemplated hereby or thereby, or the
fulfillment of or compliance with the terms and conditions of this
Agreement, (i) 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 (A) the charter or
bylaws of the Depositor, or (B) of any term, condition or provision of
any material indenture, deed of trust, contract or other agreement or
instrument to which the Depositor or any of its subsidiaries is a party
or by which it or any of its subsidiaries is bound; (ii) results or
will result in a violation of any law, rule, regulation, order,
judgment or decree applicable to the Depositor of any court or
governmental authority having jurisdiction over the Depositor or its
subsidiaries; or (iii) results in the creation or imposition of any
lien, charge or encumbrance which would have a material adverse effect
upon the Mortgage Loans or any documents or instruments evidencing or
securing the Mortgage Loans;
(f) There are no actions, suits or proceedings before or
against or investigations of, the Depositor pending, or to the
knowledge of the Depositor, threatened, before any court,
administrative agency or other tribunal, and no notice of any such
action, which, in the Depositor's reasonable judgment, might materially
and adversely affect the performance by the Depositor of its
obligations under this Agreement, or the validity or enforceability of
this Agreement; and
(g) The Depositor is not in default with respect to any order
or decree of any court or any order, regulation or demand of any
federal, state, municipal or governmental agency that may materially
and adversely affect its performance hereunder.
37
<PAGE>
It is understood and agreed that the representations,
warranties and covenants set forth in this Section 3.02 shall survive delivery
of the respective Mortgage Files to the Trustee or to a custodian, as the case
may be, and shall inure to the benefit of the Trustee.
Section 3.03 Purchase and Substitution. (a) It is understood
and agreed that the representations and warranties set forth in Sections 3.01,
3.02 and 3.03 of the Purchase Agreement shall survive delivery of the
Certificates to the Certificateholders. Pursuant to the Purchase Agreement, with
respect to any representation or warranty contained in Sections 3.01, 3.02 or
3.03 of the Purchase Agreement that is made to the best of the Seller's
knowledge, if it is discovered by the Servicer, any Subservicer, the Trustee,
the Certificate Insurer or any Certificateholder that the substance of such
representation and warranty was inaccurate as of the Closing Date and such
inaccuracy materially and adversely affects the value of the related Mortgage
Loan, then notwithstanding the Seller's lack of knowledge with respect to the
inaccuracy at the time the representation or warranty was made, such inaccuracy
shall be deemed a breach of the applicable representation or warranty. Upon
discovery by the Seller, the Servicer, any Subservicer, the Trustee or the
Certificate Insurer of a breach of any of such representations and warranties
which materially and adversely affects the value of the Mortgage Loans or the
interest of the Certificateholders or the Certificate Insurer, or which
materially and adversely affects the interests of the Certificate Insurer or the
Certificateholders in the related Mortgage Loan in the case of a representation
and warranty relating to a particular Mortgage Loan (notwithstanding that such
representation and warranty was made to the Seller's best knowledge), the party
discovering such breach shall give prompt written notice to the others. Subject
to the last paragraph of this Section 3.03, within 60 days of the earlier of its
discovery or its receipt of notice of any breach of a representation or
warranty, pursuant to the Purchase Agreement, the Servicer shall, or shall cause
the Seller or an Originator to (a) promptly cure such breach in all material
respects, or (b) purchase such Mortgage Loan on the next succeeding Servicer
Distribution Date, in the manner and at the price specified in Section 2.06(b),
or (c) remove such Mortgage Loan from the Trust Fund (in which case it shall
become a Deleted Mortgage Loan) and substitute one or more Qualified Substitute
Mortgage Loans; provided, that, such substitution is effected not later than the
date which is two years after the Startup Day or at such later date, if the
Trustee and the Certificate Insurer receive an Opinion of Counsel to the effect
set forth below in this Section. In addition, pursuant to the Purchase
Agreement, the Seller and the related Originator shall be obligated to indemnify
the Trustee, the Certificateholders and the Certificate Insurer for any third
party claims arising out of a breach by the Seller of representations or
warranties regarding the Mortgage Loans. Pursuant to the Purchase Agreement any
such substitution shall be accompanied by payment by the Seller of the
Substitution Adjustment, if any, to be deposited in the Collection Account.
(b) As to any Deleted Mortgage Loan for which the Seller
substitutes a Qualified Substitute Mortgage Loan or Loans, the Servicer shall
cause the Seller or an Originator, as applicable, to effect such substitution by
delivering to the Trustee a certification in the form attached hereto as Exhibit
H, executed by a Servicing Officer and the documents described in Sections
2.05(a)(i)-(vi) for such Qualified Substitute Mortgage Loan or Loans.
(c) The Servicer shall deposit in the Collection Account all
payments received in connection with such Qualified Substitute Mortgage Loan or
Loans after the date of such substitution. Monthly Payments received with
respect to Qualified Substitute Mortgage Loans on or before the date of
substitution will be retained by the Seller. The Trust Fund will own all
payments received on the Deleted Mortgage Loan on or before the date of
substitution, and the Seller shall thereafter be entitled to retain all amounts
subsequently received in respect of such Deleted Mortgage Loan. The Servicer
shall give written notice to the Trustee and the Certificate Insurer that such
substitution has taken place and shall amend the Mortgage Loan Schedule to
reflect the removal of such Deleted Mortgage Loan from the terms
38
<PAGE>
of this Agreement and the substitution of the Qualified Substitute Mortgage
Loan. Upon such substitution, such Qualified Substitute Mortgage Loan or Loans
shall be subject to the terms of this Agreement in all respects.
(d) It is understood and agreed that the obligations of the
Seller and the related Originator set forth in Sections 2.05 and 3.05 of the
Purchase Agreement to, and the Servicer's obligation to cause the Seller and the
Originator to, cure, purchase or substitute for a defective Mortgage Loan, or to
indemnify as described in clause (a) above, constitute the sole remedies of the
Trustee, the Certificate Insurer and the Certificateholders respecting a breach
of the representations and warranties of the Seller set forth in Sections 3.01
and 3.02 of the Purchase Agreement. The Trustee shall give prompt written notice
to the Certificate Insurer and the Rating Agencies of any repurchase or
substitution made pursuant to this Section 3.03 or Section 2.06(b).
(e) Upon discovery by the Servicer, the Trustee, the
Certificate Insurer or any Certificateholder that any Mortgage Loan does not
constitute a Qualified Mortgage, the party discovering such fact shall promptly
(and in any event within 5 days of the discovery) give written notice thereof to
the other parties. In connection therewith, pursuant to the Purchase Agreement,
the Seller shall be required to repurchase or substitute a Qualified Substitute
Mortgage Loan for the affected Mortgage Loan within 60 days of the earlier of
such discovery by any of the foregoing parties, or the Trustee's or the Seller's
receipt of notice, in the same manner as it would a Mortgage Loan for a breach
of representation or warranty contained in Sections 3.01, 3.02 or 3.03 of the
Purchase Agreement. The Trustee shall reconvey to the Seller the Mortgage Loan
to be released pursuant hereto in the same manner, and on the same terms and
conditions, as it would a Mortgage Loan repurchased for breach of a
representation or warranty contained in Sections 3.01, 3.02 or 3.03 of the
Purchase Agreement.
ARTICLE IV
THE CERTIFICATES
Section 4.01 The Certificates. The Class A-1, Class A-2, Class
A-3 and Class R Certificates shall be substantially in the forms annexed hereto
as Exhibits A-1, A-2, A-3 and B, respectively. All Certificates shall be
executed by manual or facsimile signature on behalf of the Trustee by an
authorized officer and authenticated by the manual or facsimile signature of an
authorized officer. Certificates bearing the signatures of individuals who were
at the time of the execution of the Certificates the authorized officers of the
Trustee shall bind the Trustee, notwithstanding that such individuals or any of
them have ceased to hold such offices prior to the delivery of such Certificates
or did not hold such offices at the date of such Certificates. All Certificates
issued hereunder shall be dated the date of their authentication.
Section 4.02 Registration of Transfer and Exchange of
Certificates. (a) The Trustee, as registrar, shall cause to be kept a register
(the "Certificate Register") in which, subject to such reasonable regulations as
it may prescribe, the Trustee shall provide for the registration of Certificates
and the registration of transfer of Certificates. The Trustee is hereby
appointed registrar for the purpose of registering Certificates and transfers of
Certificates as herein provided. The Certificate Insurer shall be entitled to
inspect and copy the Certificate Register and the records of the Trustee
relating to the Certificates during normal business hours upon reasonable
notice.
39
<PAGE>
(b) All Certificates issued upon any registration of transfer
or exchange of Certificates shall be valid evidence of the same ownership
interests in the Trust and entitled to the same benefits under this Agreement as
the Certificates surrendered upon such registration of transfer or exchange.
(c) Every Certificate presented or surrendered for
registration of transfer or exchange shall be duly endorsed, or be accompanied
by a written instrument of transfer in form satisfactory to the Trustee duly
executed by the Holder thereof or his attorney duly authorized in writing.
(d) No service charge shall be made to a Holder for any
registration of transfer or exchange of Certificates, but the Trustee may
require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any registration of transfer or
exchange of Certificates; any other expenses in connection with such transfer or
exchange shall be an expense of the Trust.
(e) It is intended that the Class A Certificates be registered
so as to participate in a global book-entry system with the Depository, as set
forth herein. The Class A Certificates shall, except as otherwise provided in
the next paragraph, be initially issued in the form of a single fully registered
Certificate for each Class with a denomination equal to the Original Certificate
Principal Balance for such Class. Upon initial issuance, the ownership of each
such Class A Certificate shall be registered in the Certificate Register in the
name of Cede & Co., or any successor thereto, as nominee for the Depository. The
Depositor and the Trustee are hereby authorized to execute and deliver the
Representation Letter with the Depository. With respect to Class A Certificates
registered in the Certificate Register in the name of Cede & Co., as nominee of
the Depository, the Depositor, the Seller, the Servicer, the Trustee and the
Certificate Insurer shall have no responsibility or obligation to Direct or
Indirect Participants or beneficial owners for which the Depository holds Class
A Certificates from time to time as a Depository. Without limiting the
immediately preceding sentence, the Depositor, the Seller, the Servicer, the
Trustee and the Certificate Insurer shall have no responsibility or obligation
with respect to (i) the accuracy of the records of the Depository, Cede & Co.,
or any Direct or Indirect Participant with respect to any Ownership Interest,
(ii) the delivery to any Direct or Indirect Participant or any other Person,
other than a Certificateholder, of any notice with respect to the Class A
Certificates or (iii) the payment to any Direct or Indirect Participant or any
other Person, other than a Certificateholder, of any amount with respect to any
distribution of principal or interest on the Class A Certificates. No Person
other than a Certificateholder shall receive a certificate evidencing such Class
A Certificate. Upon delivery by the Depository to the Trustee of written notice
to the effect that the Depository has determined to substitute a new nominee in
place of Cede & Co., and subject to the provisions hereof with respect to the
payment of interest by the mailing of checks or drafts to the Certificateholders
appearing as Certificateholders at the close of business on a Record Date, the
name "Cede & Co." in this Agreement shall refer to such new nominee of the
Depository.
(f) In the event that (i) the Depository or the Servicer
advises the Trustee in writing that the Depository is no longer willing or able
to discharge properly its responsibilities as nominee and depository with
respect to the Class A Certificates and the Servicer or the Depository is unable
to locate a qualified successor or (ii) the Trustee at its sole option elects to
terminate the book-entry system through the Depository, the Class A Certificates
shall no longer be restricted to being registered in the Certificate Register in
the name of Cede & Co. (or a successor nominee) as nominee of the Depository. At
that time, the Servicer may determine that the Class A Certificates shall be
registered in the name of and deposited with a successor depository operating a
global book-entry system, as may be acceptable to the Servicer, or such
depository's agent or designee but, if the Servicer does not select such
alternative global book-entry system, then the Class A Certificates may be
registered in whatever name or names Certificate-
40
<PAGE>
holders transferring Class A Certificates shall designate, in accordance with
the provisions hereof; provided, however, that any such reregistration shall be
at the expense of the Servicer.
(g) Notwithstanding any other provision of this Agreement to
the contrary, so long as any Class A Certificate is registered in the name of
Cede & Co., as nominee of the Depository, all distributions of principal or
interest on such Class A Certificates as the case may be and all notices with
respect to such Class A Certificates as the case may be shall be made and given,
respectively, in the manner provided in the Representation Letter.
(h) No transfer, sale, pledge or other disposition of any
Class R Certificate shall be made unless such disposition is made pursuant to an
effective registration statement under the Securities Act of 1933, as amended
and effective registration or qualification under applicable state securities
laws or "Blue Sky" laws, or is made in a transaction that does not require such
registration or qualification. None of the Servicer, the Depositor, the Seller
or the Trustee is obligated under this Agreement to register Certificates under
the Securities Act of 1933, as amended or any other securities law or to take
any action not otherwise required under this Agreement to permit the transfer of
the Class R Certificates without such registration or qualification. Any such
Certificateholder desiring to effect such transfer shall, and does hereby agree
to, indemnify the Trustee, the Depositor, the Seller, the Servicer and the
Certificate Insurer against any liability that may result if the transfer is not
exempt or is not made in accordance with such applicable federal and state laws.
Promptly after receipt by an indemnified party under this paragraph 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
paragraph, notify the indemnifying party in writing of the commencement thereof;
but the omission so to notify the indemnifying party will not relieve it from
any liability which it may have to any indemnified party otherwise than under
this paragraph. 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 appoint counsel reasonably satisfactory
to such indemnified party to represent the indemnified party in such action;
provided, however, that 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
and/or other indemnified parties which 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 defend such action on behalf of such
indemnified party or parties. Upon receipt of notice from the indemnifying party
to such indemnified party of its election so to appoint counsel to defend such
action and approval by the indemnified party of such counsel, the indemnifying
party will not be liable to such indemnified party under this paragraph for any
legal or other expenses subsequently incurred by such indemnified party in
connection with the defense thereof unless (i) the indemnified party shall have
employed separate counsel in accordance with the proviso of the next preceding
sentence (it being understood, however, that the indemnifying party shall not be
liable for the expenses of more than one separate counsel for any indemnified
party), (ii) the indemnifying party shall not have employed counsel satisfactory
to the indemnified party to represent the indemnified party within a reasonable
time after notice of commencement of the action or (iii) the indemnifying party
has authorized the employment of counsel for the indemnified party at the
expense of the indemnifying party. Under no circumstances shall the indemnified
party enter into a settlement agreement with respect to any lawsuit, claim or
other proceeding without the prior written consent of the indemnifying party.
(i) Subject to the restrictions set forth in this Agreement,
upon surrender for registration of transfer of any Certificate at the office or
agency of the Trustee located in New York, New York, the Trustee shall execute,
authenticate and deliver in the name of the designated transferee or
transferees, a new Certificate of the same Class and Percentage Interest and
dated the date of authentication by the
41
<PAGE>
Trustee. At the option of the Certificateholders, Certificates may be exchanged
for other Certificates of Authorized Denominations of a like aggregate
Percentage Interest, upon surrender of the Certificates to be exchanged at such
office. Whenever any Certificates are so surrendered for exchange, the Trustee
shall execute, authenticate and deliver the Certificates which the
Certificateholder making the exchange is entitled to receive. No service charge
shall be made for any transfer or exchange of Certificates, but the Trustee may
require payment of a sum sufficient to cover any tax or governmental charge that
may be imposed in connection with any transfer or exchange of Certificates. All
Certificates surrendered for transfer and exchange shall be cancelled and
destroyed by the Trustee in accordance with the Trustee's standard procedures.
(j) No transfer of a Class A Certificate shall be made to the
Seller or, to the actual knowledge of a Responsible Officer of the Trustee, to
any of the Seller's Affiliates, successors or assigns.
(k) Each Person who has or who acquires any Ownership Interest
in a Class R Certificate shall be deemed by the acceptance or acquisition of
such Ownership Interest to have agreed to be bound by the following provisions
and to have irrevocably appointed the Servicer or its designee as its
attorney-in-fact to negotiate the terms of any mandatory sale under clause (8)
below and to execute all instruments of transfer and to do all other things
necessary in connection with any such sale, and the rights of each Person
acquiring any Ownership Interest in a Class R Certificate are expressly subject
to the following provisions:
(i) Each Person holding or acquiring any Ownership Interest in
a Class R Certificate shall be a Permitted Transferee and a United
States Person and shall promptly notify the Trustee of any change or
impending change in its status as either a United States Person or a
Permitted Transferee.
(ii) In connection with any proposed Transfer of any Ownership
Interest in a Class R Certificate, the Trustee shall require delivery
to it of, and shall not register the Transfer of any Class R
Certificate until its receipt of, an affidavit and agreement (a
"Transfer Affidavit and Agreement") attached hereto as Exhibit I 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 Class R 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 Class R Certificate, it will endeavor to remain
a Permitted Transferee, and that it has reviewed the provisions of this
Section 4.02(k) and agrees to be bound by them.
(iii) Notwithstanding the delivery of a Transfer Affidavit and
Agreement by a proposed Transferee under clause (ii) above, if the
Trustee has actual knowledge that the proposed Transferee is not a
Permitted Transferee, no Transfer of an Ownership Interest in a Class R
Certificate to such proposed Transferee shall be effected.
(iv) Each Person holding or acquiring any Ownership Interest
in a Class R Certificate shall agree (x) to require a Transfer
Affidavit and Agreement from any other Person to whom such Person
attempts to transfer its Ownership Interest in a Class R Certificate
and (y) not to transfer its Ownership Interest unless it provides a
certificate (attached hereto as Exhibit J) to the Trustee stating that,
among other things, it has no actual knowledge that such other Person
is not a Permitted Transferee.
42
<PAGE>
(v) Each Person holding or acquiring an Ownership Interest in
a Class R 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 Class R Certificate, if it is, or is holding an
Ownership Interest in a Class R Certificate on behalf of, a
"pass-through interest holder".
(vi) The Trustee will register the Transfer of any Class R
Certificate only if it shall have received the Transfer Affidavit and
Agreement and all of such other documents as shall have been reasonably
required by the Trustee as a condition to such registration. In
addition, no Transfer of a Class R 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 United
States Person and is not a "disqualified organization" (as defined in
Section 860E(e)(5) of the Code).
(vii) Any attempted or purported transfer of any Ownership
Interest in a Class R Certificate in violation of the provisions of
this Section 4.02 shall be absolutely null and void and shall vest no
rights in the purported transferee. If any purported transferee shall
become a Holder of a Class R Certificate in violation of the provisions
of this Section 4.02, then the last preceding Permitted Transferee
shall be restored to all rights as Holder thereof retroactive to the
date of registration of transfer of such Class R Certificate. The
Trustee shall notify the Servicer upon receipt of written notice or
discovery by a Responsible Officer that the registration of transfer of
a Class R Certificate was not in fact permitted by this Section 4.02.
Knowledge shall not be imputed to the Trustee with respect to an
impermissible transfer in the absence of such a written notice or
discovery by a Responsible Officer. The Trustee shall be under no
liability to any Person for any registration of transfer of a Class R
Certificate that is in fact not permitted by this Section 4.02 or for
making any payments due on such Certificate to the Holder thereof or
taking any other action with respect to such Holder under the
provisions of this Agreement so long as the transfer was registered
after receipt of the related Transfer Affidavit and Transfer
Certificate. The Trustee shall be entitled, but not obligated to,
recover from any Holder of a Class R Certificate that was in fact not a
Permitted Transferee at the time it became a Holder or, at such
subsequent time as it became other than a Permitted Transferee, all
payments made on such Class R Certificate at and after either such
time. Any such payments so recovered by the Trustee shall be paid and
delivered by the Trustee to the last preceding Holder of such
Certificate.
(viii) If any purported transferee shall become a Holder of a
Class R Certificate in violation of the restrictions in this Section
4.02, then the Servicer or its designee shall have the right, without
notice to the Holder or any prior Holder of such Class R Certificate,
to sell such Class R Certificate to a purchaser selected by the
Servicer or its designee on such reasonable terms as the Servicer or
its designee may choose. Such purchaser may be the Servicer itself or
any Affiliate of the Servicer. The proceeds of such sale, net of
commissions, expenses and taxes due, if any, will be remitted by the
Servicer to the last preceding purported transferee of such Class R
Certificate, except that in the event that the Servicer determines that
the Holder or any prior Holder of such Class R Certificate may be
liable for any amount due under this Section 4.02 or any other
provision of this Agreement, the Servicer may withhold a corresponding
amount from such remittance as security for such claim. The terms and
conditions of any sale under this clause (8) shall be determined in the
sole discretion of the Servicer or its designee, and it shall not be
liable to any Person having an Ownership Interest in a Class R
Certificate as a result of its exercise of such discretion.
43
<PAGE>
(l) The provisions of Section 4.02(k) may be modified, added
to or eliminated, provided that there shall have been delivered to the Trustee
and the Certificate Insurer an Opinion of Counsel to the effect that such
modification of, addition to or elimination of such provisions will not cause
the REMIC Trust to cease to qualify as a REMIC and will not cause (x) the REMIC
Trust to be subject to an entity-level tax caused by the Transfer of any
Ownership Interest in a Class R Certificate to a Person that is not a Permitted
Transferee or (y) a Person other than the prospective transferee to be subject
to a REMIC-related tax caused by the Transfer of an Ownership Interest in a
Class R Certificate to a Person that is not a Permitted Transferee.
(m) Before the earlier of (i) the date on which the
Pre-Funding Period expires and (ii) the date on which the Department of Labor
amends Prohibited Transaction Exemption 90-32 to permit the use of pre-funding
accounts thereunder, no sale or other transfer of record or beneficial ownership
of any Class A Certificate shall be made to any Person which is a pension or
benefit plan or individual retirement arrangement that is subject to the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or to
Section 4975 of the Code or an entity whose underlying assets are deemed to be
assets of such a plan or arrangement by reason of such plan's or arrangement's
investment in the entity, as determined under U.S. Department of Labor
Regulations 29 C.F.R. ss. 2510.3-101 or otherwise (collectively, a "Plan"). By
acceptance of a Class A Certificate during such period, each Person acquiring a
Class A Certificate shall be deemed to have represented that it is not a Plan.
Furthermore, the Trustee and the Servicer shall require the prospective
transferee of any Class R Certificate to certify (in the form of Exhibit K
hereto) that it is not a Plan.
Section 4.03 Mutilated, Destroyed, Lost or Stolen
Certificates. If (a) any mutilated Certificate is surrendered to the Trustee, or
the Trustee receives evidence to its satisfaction of the destruction, loss or
theft of any Certificate, and (b) there is delivered to the Servicer, the
Certificate Insurer and the Trustee such security or indemnity as may reasonably
be required by each of them to save each of them harmless, then, in the absence
of notice to the Servicer and the Trustee that such Certificate has been
acquired by a bona fide purchaser, the Trustee shall execute, authenticate and
deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or
stolen Certificate, a new Certificate of like tenor and Percentage Interest, but
bearing a number not contemporaneously outstanding. Upon the issuance of any new
Certificate under this Section 4.03, the Servicer and 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 their fees and expenses connected
therewith. Any duplicate Certificate issued pursuant to this Section 4.03 shall
constitute complete and indefeasible evidence of ownership in the Trust Fund, as
if originally issued, whether or not the mutilated, destroyed, lost or stolen
Certificate shall be found at any time.
Section 4.04 Persons Deemed Owners. Prior to due presentation
of a Certificate for registration of transfer and subject to the provisions of
Section 4.02 and Article X, the Servicer, the Depositor, the Seller, the
Certificate Insurer and the Trustee may treat the Person in whose name any
Certificate is registered as the owner of such Certificate for the purpose of
receiving remittances pursuant to Section 6.05 and for all other purposes
whatsoever, and the Servicer, the Depositor, the Seller, the Certificate Insurer
and the Trustee shall not be affected by notice to the contrary.
44
<PAGE>
ARTICLE V
ADMINISTRATION AND SERVICING OF THE MORTGAGE LOANS
Section 5.01 REMIC Matters; The Servicer. (a) The parties
intend that the Trust Fund formed hereunder shall, except for the Capitalized
Interest Account, constitute, and that the affairs of the Trust Fund shall be
conducted and this Agreement shall be construed so as to qualify the Trust Fund
as, a "real estate mortgage investment conduit" as defined in and in accordance
with the REMIC Provisions. In furtherance of such intention, the Trustee
covenants and agrees that it shall, to the extent permitted by applicable law,
act as agent (and the Trustee is hereby appointed to act as agent) on behalf of
the Trust Fund and that in such capacity it shall: (a) prepare and file, or
cause to be prepared and filed, all required federal, state and local tax
returns for the REMIC using a calendar year as the taxable year for the Trust
Fund when and as required by the REMIC Provisions and other applicable federal,
state and local income tax laws; (b) maintain or cause the maintenance of the
books of the Trust Fund on the accrual method of accounting; (c) make an
election, on behalf of the Trust Fund, to be treated as a REMIC on the federal
tax return of the Trust Fund for its first taxable year, in accordance with the
REMIC Provisions; provided, however, that such election shall not be made with
respect to the Capitalized Interest Account and shall specifically exclude the
Capitalized Interest Account from the assets for which a REMIC election is made;
(d) prepare and forward, or cause to be prepared and forwarded, to the
Certificateholders all information reports as and when required to be provided
to them in accordance with the REMIC Provisions; (e) conduct the affairs of the
Trust Fund at all times that any Certificates are outstanding so as to maintain
the status thereof as a REMIC under the REMIC Provisions; and (f) not knowingly
or intentionally take any action or omit to take any action that would cause the
termination of the REMIC status of the Trust Fund.
The Capitalized Interest Account is an "outside reserve fund"
within the meaning of Treasury Regulations Section 1.860G-2(h) and is not an
asset of the REMIC. The Seller is the owner of the Capitalized Interest Account
for purposes of Treasury Regulations Section 1.860G-2(h). For all federal income
tax purposes, amounts transferred by the REMIC to the Capitalized Interest
Account, if any, will be treated as amounts distributed by the REMIC to the
Seller.
In the event that any income tax (including any tax with
regard to "prohibited transactions" of the Trust Fund as defined in Section 860F
of the Code) is imposed on the Trust Fund, such tax shall be charged against
amounts otherwise distributable to the Holders of the Class R Certificates on a
pro rata basis to the extent hereinafter provided. In the event that any such
tax shall be due and owing at a time when amounts otherwise distributable to the
Holders of the Class R Certificates are not available, the Trustee shall pay
such tax from its own funds. In such event, the Trustee is hereby authorized to
retain from amounts otherwise distributable to the Holders of the Class R
Certificates on any Distribution Date sufficient funds to reimburse the Trustee
for the payment of such tax (to the extent that the Trustee has not been
previously reimbursed or indemnified therefor) (but such obligation shall not
prevent the Trustee or any other appropriate Person from contesting any such tax
in appropriate proceedings and shall prevent the Trustee from withholding
payment of such tax, if permitted by law, pending the outcome of such
proceedings).
(b) The Servicer shall service and administer the Mortgage
Loans in accordance with the Accepted Servicing Practices and shall have full
power and authority to do any and all things not inconsistent therewith in
connection with such servicing and administration which it may deem necessary or
desirable subject to the limitations set forth in this Agreement. The Trustee
shall furnish the Servicer
45
<PAGE>
with any powers of attorney and other documents necessary or appropriate to
enable the Servicer to carry out its servicing and administrative duties
hereunder. Without limiting the generality of the foregoing, the Servicer shall
continue, and is hereby authorized and empowered by the Trustee, to execute and
deliver, on behalf of itself, the Certificateholders and the Trustee or any of
them, any and all instruments of satisfaction or cancellation, or of partial or
full release or discharge and all other comparable instruments, and to effect
such modifications, waivers, indulgences and other like matters as are in its
judgment necessary or desirable, with respect to the Mortgage Loans and the
Mortgaged Properties and the servicing and administration thereof. The Servicer
shall notify the Trustee of any such waiver, release, discharge, modification,
indulgence or other such matter by delivering to the Trustee an Officer's
Certificate certifying that such agreement is in compliance with this Section
5.01(b) together with the original copy of any written agreement or other
document executed in connection therewith, all of which written agreements or
documents shall, for all purposes, be considered a part of the related Mortgage
File to the same extent as all other documents and instruments constituting a
part thereof. Notwithstanding anything in this Agreement to the contrary, the
Servicer shall not permit any modification with respect to any Mortgage Loan
that would change the Mortgage Interest Rate, reduce or increase the principal
balance, change the lien priority, or change the final maturity date on or of
such Mortgage Loan unless (i) the Mortgagor is in default with respect to the
Mortgage Loan or such default is, in the judgment of the Servicer, imminent and
(ii) the Certificate Insurer consents to such modifications in writing;
provided, however, that the Servicer shall be permitted to extend the final
maturity date on a Mortgage Loan by 180 days or less without the consent of the
Certificate Insurer.
The relationship of the Servicer (and of any successor to the
Servicer as servicer under this Agreement) to the Trustee under this Agreement
is intended by the parties to be that of an independent contractor and not that
of a joint venturer, partner or agent.
Section 5.02 Collection of Certain Mortgage Loan Payments;
Collection Account. (a) The Servicer shall make its 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 the Accepted Servicing Practices. Consistent with the
foregoing, the Servicer may in its discretion waive any assumption fees or other
fees which may be collected in the ordinary course of servicing such Mortgage
Loans.
(b) The Servicer shall establish and maintain in the name of
the Trustee the Collection Account, in trust for the benefit of the
Certificateholders and the Certificate Insurer. The Collection Account shall be
established and maintained as an Eligible Account.
(c) The Servicer shall deposit in the Collection Account any
amounts representing Monthly Payments on the Mortgage Loans due or to be applied
as of a date after the Cut-Off Date, and thereafter, on a daily basis (except as
otherwise permitted herein), the following payments and collections received or
made by it (other than in respect of principal collected and interest due on the
Mortgage Loans on or before the Cut-Off Date):
(i) Payments of interest on the Mortgage
Loans;
(ii) Payments of principal of the Mortgage
Loans;
(iii) The Loan Repurchase Price of Mortgage
Loans repurchased pursuant to Sections 2.06 or 5.05;
46
<PAGE>
(iv) The Substitution Adjustment received in
connection with Mortgage Loans for which Qualified Replacement
Mortgages are received pursuant to Sections 2.06 and 3.03;
(v) All Liquidation Proceeds; and
(vi) All Insurance Proceeds (including, for this purpose, any
amounts required to be deposited by the Servicer pursuant to the last
sentence of Section 5.04).
It is understood that the Servicer need not deposit amounts
representing fees, prepayment premiums, late payment charges or extension or
other administrative charges payable by Mortgagors, or amounts received by the
Servicer for the account of Mortgagors for application towards the payment of
taxes, insurance premiums, assessments and similar items.
(d) The Trustee shall invest any funds in the Collection
Account in Permitted Investments as directed by the Servicer, which shall mature
not later than the Business Day next preceding the Distribution Date next
following the date of such investment (except that any investment held by the
Trustee may mature on such Distribution Date) and shall not be sold or disposed
of prior to its maturity. All net income and gain realized from any such
investment shall be for the benefit of the Servicer and shall be subject to its
withdrawal or order on a Distribution Date. The Servicer shall deposit from its
own funds the amount of any loss, to the extent not offset by investment income
or earnings, in the Collection Account upon the realization of such loss.
Section 5.03 Permitted Withdrawals from the Collection
Account. The Trustee shall make withdrawals from the Collection Account, on any
Distribution Date, for the following purposes:
(a) to reimburse the Servicer for Liquidation Expenses
theretofore incurred in respect of any Mortgage Loan in an amount not
to exceed the amount of the sum of the related Insurance Proceeds and
Liquidation Proceeds deposited in the Collection Account pursuant to
Section 5.02(b)(v)-(vi);
(b) to reimburse the Servicer for amounts expended by
it pursuant to Section 5.04 in good faith in connection with the
restoration of damaged property, in an amount not to exceed the amount
of the related Insurance Proceeds and Liquidation Proceeds (net of
withdrawals pursuant to clause (i) above) and amounts representing
proceeds of other insurance policies covering the property subject to
the related Mortgage deposited in the Collection Account pursuant to
Section 5.02(b)(v)-(vi);
(c) to pay to the Seller amounts received in respect of
any Defective Mortgage Loan purchased or substituted for by the Seller
to the extent that the distribution of any such amounts on the
Distribution Date upon which the proceeds of such purchase are
distributed would make the total amount distributed in respect of any
such Mortgage Loan on such Distribution Date greater than the Loan
Repurchase Price or the Substitution Adjustment therefor;
(d) to reimburse the Servicer for unreimbursed
Servicing Advances, without interest, with respect to the Mortgage
Loans for which it has made a Servicing Advance, from subsequent
collections with respect to interest on such Mortgage Loans and from
Liquidation Proceeds, Insurance Proceeds and/or the Loan Repurchase
Price or Substitution Adjustment of or relating to such Mortgage Loans;
47
<PAGE>
(e) to reimburse the Servicer for any Periodic Advances
determined in good faith to have become Nonrecoverable Advances, such
reimbursement to be made from any funds in the Collection Account;
(f) to withdraw any amount received from a Mortgagor that
is recoverable and sought to be recovered as a voidable preference by a
trustee in bankruptcy pursuant to the United States Bankruptcy Code in
accordance with a final, nonappealable order of a court having
competent jurisdiction;
(g) to withdraw any funds deposited in the Collection
Account that were not required to be deposited therein; and
(h) to pay the Servicer Servicing Compensation pursuant
to Section 5.08 hereof to the extent not retained or paid.
The Servicer shall keep and maintain a separate accounting for
each Mortgage Loan for the purpose of accounting for withdrawals from the
Collection Account pursuant to subclause (a).
Section 5.04 Hazard Insurance Policies; Property Protection
Expenses. (a) The Servicer shall cause to be maintained for each Mortgage Loan a
hazard insurance policy with extended coverage which contains a standard
mortgagee's clause with an appropriate endorsement in an amount equal to the
lesser of (a) the maximum insurable value of the related Mortgaged Property or
(b) the sum of the Principal Balance of such Mortgage Loan plus the outstanding
balance of any mortgage loan senior to such Mortgage Loan, but in no event shall
such amount be less than is necessary to prevent the Mortgagor from becoming a
coinsurer thereunder. The Servicer shall also maintain on property acquired upon
foreclosure, or by deed in lieu of foreclosure, hazard insurance with extended
coverage in an amount which is at least equal to the lesser of (i) the maximum
insurable value from time to time of the improvements which are a part of such
property or (ii) the combined Principal Balance of such Mortgage Loan and the
principal balance of any mortgage loan senior to such Mortgage Loan at the time
of such foreclosure plus accrued interest and the good-faith estimate of the
Servicer of related Liquidation Expenses to be incurred in connection therewith.
Amounts collected by the Servicer under any such policies shall be deposited in
the Collection Account to the extent that they constitute Liquidation Proceeds
or Insurance Proceeds. Each hazard insurance policy shall contain a standard
mortgage clause naming the Originator, its successors and assigns, as mortgagee.
The Servicer shall be under no obligation to require that any Mortgagor maintain
earthquake or flood or other additional insurance and shall be under no
obligation itself to maintain any such additional insurance on property acquired
in respect of a Mortgage Loan, other than pursuant to such applicable laws and
regulations as shall at any time be in force and as shall require such
additional insurance.
(b) If the Servicer shall obtain and maintain a blanket policy
issued by an insurer acceptable to the Rating Agencies and the Certificate
Insurer insuring against hazard losses on all of the Mortgage Loans, it shall
conclusively be deemed to have satisfied its obligations as set forth in Section
5.04(a), 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 a policy
complying with Section 5.04(a), and there shall have been a loss which would
have been covered by such policy, deposit in the Collection Account the amount
not otherwise payable under the blanket policy because of such deductible
clause.
48
<PAGE>
(c) If the Mortgaged Property or REO Property is located at
the time of origination of the Mortgage Loan in a federally designated special
flood hazard area (and if the flood insurance policy referenced herein has been
made available), the Servicer will cause to be maintained flood insurance in
respect thereof. Such flood insurance shall be in an amount equal to the lesser
of (i) the Principal Balance of the related Mortgage Loan and the balance of the
related first lien, if any, (ii) the maximum insurable value of the related
Mortgaged Property, and (iii) 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).
Section 5.05 Assumption and Modification Agreements. In any
case in which a Mortgaged Property has been or is about to be conveyed by the
Mortgagor, the Servicer shall exercise its right to accelerate the maturity of
the related Mortgage Loan and require that the Principal Balance thereof be paid
in full on or prior to such conveyance by the Mortgagor under any "due-on-sale"
clause applicable thereto. If such "due-on-sale" clause, by its terms, is not
operable or the Servicer is prevented, as provided in the last paragraph of this
Section 5.05, from enforcing any such clause, the Servicer is authorized,
subject to the consent of the Certificate Insurer, to take or enter into an
assumption and modification agreement from or with the Person to whom such
property has been or is about to be conveyed, pursuant to which such Person
becomes liable under the Mortgage Note and the Mortgagor remains liable thereon
or, if the Servicer in its reasonable judgment finds it appropriate, is released
from liability thereon. The Servicer shall notify the Trustee that any
assumption and modification agreement has been completed by delivering to the
Trustee and the Certificate Insurer an Officer's Certificate certifying, that
such agreement is in compliance with this Section 5.05 together with the
original copy of such assumption and modification agreement. Any such assumption
and modification agreement shall, for all purposes, be considered a part of the
related Mortgage File to the same extent as all other documents and instruments
constituting a part thereof. In connection with any such agreement, the then
current Mortgage Interest Rate thereon shall not be increased or decreased. Any
fee collected by the Servicer for entering into any such agreement will be
retained by the Servicer as additional servicing compensation. At its sole
election, the Servicer may purchase from the Trust Fund any Mortgage Loan that
has been assumed in accordance with this Section 5.05 within one month after the
date of such assumption at a price equal to the greater of (i) the fair market
value of such Mortgage Loan (as determined by the Servicer in its good faith
judgment) and (ii) the Loan Repurchase Price. Such amount, if any, shall be
deposited into the Collection Account in the Due Period in which such repurchase
is made.
Notwithstanding the foregoing paragraph of this Section 5.05
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, or transfer of any Mortgaged Property
without the assumption thereof, by operation of law or any assumption or
transfer which the Servicer reasonably believes it may be restricted by law from
preventing for any reason whatsoever.
Section 5.06 Realization Upon Defaulted Mortgage Loans. (a)
The Servicer shall foreclose upon or otherwise comparably convert to ownership
Mortgaged 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 5.02(a). Prior to
conducting any sale in a foreclosure proceeding or accepting a deed-in-lieu of
foreclosure with respect to any Mortgaged Property, the Servicer shall cause an
environmental review to be performed, in accordance with Accepted Servicing
Practices on the Mortgaged Property by a company such as Equifax, Inc. or
Toxicheck. If such review reveals that the Mortgaged Property has on it, under
it or is near hazardous or toxic material or waste or reveals any other
environmental problem, the Servicer shall not foreclose or accept a deed-in-lieu
of foreclosure. In connection with such foreclosure or other conversion, the
Servicer shall follow such
49
<PAGE>
practices (including, in the case of any default on a related senior mortgage
loan, the advancing of funds to correct such default) and procedures which are
consistent with the Accepted Servicing Practices as it shall deem necessary or
advisable and as shall be normal and usual in its general first and second
mortgage loan servicing activities. The foregoing is subject to the proviso that
the Servicer shall not be required to expend its own funds in connection with
any foreclosure or towards the correction of any default on a related senior
mortgage loan or restoration of any property unless, in the reasonable judgment
of the Servicer, such expenses will be recoverable from Liquidation Proceeds.
(b) In the event that title to any Mortgaged Property is
acquired in foreclosure or by deed in lieu of foreclosure, the deed or
certificate of sale shall be issued to the Trustee, or to its nominee on behalf
of Certificateholders. In the event that the Trust Fund acquires any Mortgaged
Property as aforesaid or otherwise in connection with a default or imminent
default on a Mortgage Loan, such Mortgaged Property shall be disposed of by or
on behalf of the Trust Fund within two years after its acquisition by the Trust
Fund unless the Servicer shall have furnished the Trustee with an Opinion of
Counsel to the effect that the holding by the Trust Fund of such Mortgaged
Property subsequent to two years after its acquisition will not result in the
imposition of taxes on "prohibited transactions" of the Trust Fund as defined in
Section 860F of the Code or cause the Trust Fund to fail to qualify as a REMIC
at any time that any Certificates are outstanding.
(c) Any Insurance Proceeds or Liquidation Proceeds received
with respect to a Mortgage Loan or REO Property (other than received in
connection with a purchase by the Class R Certificateholders of all the Mortgage
Loans and REO Properties in the Trust Estate pursuant to Section 8.01(b)) will
be applied in the following order of priority, in each case to the extent of
available funds: first, to pay the Servicer any accrued and unpaid Servicing
Fees relating to such Mortgage Loan; second, to reimburse the Servicer or any
Subservicer for any related unreimbursed Servicing Advances, and any related
unreimbursed Periodic Advances theretofore funded by the Servicer or any
Subservicer from its own funds, in each case, with respect to the related
Mortgage Loan; third, to accrued and unpaid interest on the Mortgage Loan, at
the Mortgage Loan Rate (or at such lesser rate as may be in effect for such
Mortgage Loan pursuant to application of the Civil Relief Act) on the Principal
Balance of such Mortgage Loan, to the date such Mortgage Loan is determined to
be a Liquidated Mortgage Loan if it is a Liquidated Mortgage Loan, or to the Due
Date in the Due Period prior to the Distribution Date on which such amounts are
to be distributed if such determination has not yet been made, minus any unpaid
Servicing Fees with respect to such Mortgage Loan; fourth, to the extent of the
Principal Balance of the Mortgage Loan outstanding immediately prior to the
receipt of such proceeds, as a recovery of principal of the related Mortgage
Loan; and fifth, to any prepayment or late payment charges or penalty interest
payable in connection with the receipt of such proceeds and to all other fees
and charges due and payable with respect to such Mortgage Loan. The amount of
any gross Insurance Proceeds and Liquidation Proceeds received with respect to
any Mortgage Loan or REO Property minus the amount of any unreimbursed Servicing
Advances, unreimbursed Periodic Advances or unpaid Servicing Fees, in each case,
with respect to the related Mortgage Loan, are the "Net Recovery Proceeds" with
respect to such Mortgage Loan or REO Property.
Section 5.07 Trustee to Cooperate. Upon the payment in full of
the Principal Balance of any Mortgage Loan, the Servicer will notify the Trustee
by a certification (which certification shall include a statement to the effect
that all amounts received in connection with such payment which are required to
be deposited in the Collection Account pursuant to Section 5.02 have been so
deposited) of a Servicing Officer. Upon any such payment in full, the Servicer
is authorized to execute, pursuant to the authorization contained in Section
5.01, an instrument of satisfaction regarding the related Mortgage, which
instrument of satisfaction shall be recorded by the Servicer if required by
applicable law and be
50
<PAGE>
delivered to the Person entitled thereto, it being understood and agreed that no
expenses incurred in connection with such instrument of satisfaction shall be
reimbursed from the Collection Account. From time to time and as appropriate for
the servicing or foreclosure of any Mortgage Loan, the Trustee shall, upon
request of the Servicer and delivery to the Trustee of a trust receipt signed by
a Servicing Officer, release the related Mortgage File to the Servicer and shall
execute such documents as shall be necessary for the prosecution of any such
proceedings. Such trust receipt shall obligate the Servicer to return the
Mortgage File to the Trustee when the need therefor by the Servicer no longer
exists unless the Mortgage Loan shall be liquidated, in which case, upon receipt
of a certificate of a Servicing Officer similar to that hereinabove specified,
the trust receipt shall be released by the Trustee to the Servicer.
Section 5.08 Servicing Compensation; Payment of Certain
Expenses by Servicer. On each Distribution Date, the Servicer shall be entitled
to receive and the Trustee shall pay, out of collections on the Mortgage Loans
for the Due Period, as servicing compensation for such Due Period, an amount
(the "Monthly Servicing Fee") equal to the product of one-twelfth of the
Servicing Fee Rate and the Pool Balance as of the beginning of such Due Period.
Additional servicing compensation in the form of assumption fees, late payment
charges or extension and other administrative charges shall be retained by the
Servicer. The Servicer shall be required to pay all expenses incurred by it in
connection with its activities hereunder (including payment of all fees and
expenses of the Subservicer and payment of the Trustee Fee to the extent that
monies in the Collection Account are insufficient therefor, as provided in
Section 9.05 hereof, and all other fees and expenses not expressly stated
hereunder to be payable by or from another source) and shall not be entitled to
reimbursement therefor except as specifically provided herein.
Section 5.09 Annual Statement as to Compliance. The Servicer
will deliver to the Trustee, the Rating Agencies, the Certificate Insurer and
each Certificateholder, on or before April 30 of each year, beginning April 30,
1998, an Officer's Certificate of the Servicer stating that (a) a review of the
activities of the Servicer during the preceding calendar year and of its
performance under this Agreement has been made under such Officer's supervision
and (b) to the best of such officer's knowledge, based on such review, the
Servicer has fulfilled all its material 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.
Section 5.10 Annual Independent Public Accountants' Servicing
Report. On or before April 30 of each year, beginning April 30, 1998, the
Servicer at its expense shall cause a firm of independent public accountants
that is a member of the American Institute of Certified Public Accountants (who
may also render other services to the Servicer) to furnish a report to the
Trustee, the Rating Agencies and each Certificateholder to the effect that such
firm has examined certain documents and records relating to the servicing of
mortgage loans under pooling and servicing agreements (including this Agreement)
substantially similar to this Agreement, and that such examination, which has
been conducted substantially in compliance with the Uniform Single Attestation
Program for Mortgage Bankers (to the extent that the procedures in such audit
guide are applicable to the servicing obligations set forth in such agreements),
has disclosed no items of noncompliance with the provisions of this Agreement
which, in the opinion of such firm, are material, except for such items of
noncompliance as shall be set forth in such report.
Section 5.11 Access to Certain Documentation. Each of the
Servicer and the Seller shall permit the designated agents or representatives of
each Certificateholder, the Certificate Insurer and the Trustee (i) to examine
and make copies of and abstracts from all books, records and documents
(including computer tapes and disks) in the possession or under the control of
the Servicer or the Seller relating to
51
<PAGE>
the Mortgage Loans and (ii) to visit the offices and properties of the Servicer
and of the Seller for the purpose of examining such materials and to discuss
matters relating to the Mortgage Loans and the Servicer's and the Seller's
performance under this Agreement with any of the officers or employees of the
Servicer and the Seller having knowledge thereof and with the independent public
accountants of the Servicer (and by this provision the Servicer and the Seller
each authorize their respective accountants to discuss their respective finances
and affairs), all at such reasonable times, as often as may be reasonably
requested and without charge to such Certificateholder, the Certificate Insurer
or the Trustee.
Section 5.12 Maintenance of Fidelity Bond. The Servicer shall
during the term of its service as servicer maintain in force a fidelity bond and
errors and omissions insurance in respect of its officers, employees or agents.
Such bond and insurance shall comply with the requirements from time to time of
the FNMA for Persons performing servicing for mortgage loans purchased by such
association.
Section 5.13 The Subservicer. The parties acknowledge that the
Servicer intends to appoint the Subservicer as the Servicer's agent for the
purpose of servicing on the Servicer's behalf such of the Mortgage Loans as were
originated in the State of New Jersey. The Servicer agrees to cause the
Subservicer to service such Mortgage Loans in a manner consistent with the
Accepted Servicing Practices set forth in this Agreement, and agrees that
receipt by the Subservicer of any and all amounts which by the terms hereof are
required to be deposited in the Collection Account shall constitute receipt
thereof by the Servicer for all purposes hereof as of the date so received by
the Subservicer. Notwithstanding such designation of the Subservicer, the
Servicer agrees that it is, and it shall remain, fully obligated under the terms
hereof as Servicer with respect to all such Mortgage Loans, and nothing herein
shall relieve or release the Servicer from its obligations to the other parties
hereto to service such Mortgage Loans in the manner provided in this Agreement.
Section 5.14 Reports to the Trustee; Collection Account
Statements. Not later than 15 days after each Distribution Date, the Servicer
shall provide to the Trustee and the Certificate Insurer a statement, certified
by a Servicing Officer, setting forth the status of the Collection Account as of
the close of business on the related Distribution Date, stating that all
distributions required by this Agreement to be made by the Servicer on behalf of
the Trustee have been made (or if any required distribution has not been made by
the Servicer, specifying the nature and status thereof) and showing, for the
period covered by such statement, the aggregate of deposits into and withdrawals
from the Collection Account for each category of deposit specified in Section
5.02 and each category of withdrawal specified in Section 5.03 and the aggregate
of deposits into the Collection Account as specified in Section 6.01(c). Such
statement shall also state the aggregate unpaid principal balance of all the
Mortgage Loans as of the close of business on the last day of the month
preceding the month in which such Distribution Date occurs. Copies of such
statement shall be provided by the Trustee to any Certificateholder upon
request.
Section 5.15 Optional Purchase of Defaulted Mortgage Loans.
(a) The Seller or any Affiliate of the Seller, in its sole discretion, shall
have the right to elect (by written notice sent to the Servicer, the Trustee and
the Certificate Insurer), but shall not be obligated, to purchase for its own
account from the Trust Fund any Mortgage Loan which is 90 days or more
Delinquent in the manner and at the price specified in Section 2.06(b) except
that the amount described in clause (ii) of Section 2.06(b) shall in no case be
net of the Servicing Fee. The purchase price for any Mortgage Loan purchased
hereunder shall be deposited in the Collection Account and the Trustee, upon
receipt of such deposit, shall release or cause to be released to the purchaser
of such Mortgage Loan the related Trustee's Mortgage File and shall execute and
deliver such instruments of transfer or assignment prepared by the purchaser of
such Mortgage Loan, in each case without recourse, as shall be necessary to vest
in the purchaser of such Mortgage Loan any Mortgage Loan released pursuant
hereto and the purchaser of such Mortgage Loan
52
<PAGE>
shall succeed to all the Trustee's right, title and interest in and to such
Mortgage Loan and all security and documents related thereto. Such assignment
shall be an assignment outright and not for security. The purchaser of such
Mortgage Loan shall thereupon own such Mortgage Loan, and all security and
documents, free of any further obligation to the Trustee or the
Certificateholders with respect thereto.
(b) Notwithstanding the foregoing, unless the Certificate
Insurer consents, any such Affiliate of the Seller may only exercise its option
pursuant to this Section 5.15 with respect to the Mortgage Loan or Mortgage
Loans that have been Delinquent for the longest period at the time of such
repurchase. Any request by such Affiliate to the Certificate Insurer for consent
to repurchase Mortgage Loans that are not the most Delinquent shall be
accompanied by a description of the Mortgage Loans that have been Delinquent
longer than the Mortgage Loan or Mortgage Loans such Affiliate proposes to
repurchase. If the Certificate Insurer fails to respond to such request within
10 Business Days after receipt thereof, such Affiliate may repurchase the
Mortgage Loan or Mortgage Loans proposed to be repurchased without the consent
of, or any further action by, the Certificate Insurer. Notice to the Certificate
Insurer shall be delivered in accordance with the terms of the Insurance and
Indemnity Agreement.
Section 5.16 Reports to be Provided by the Servicer. (a) In
connection with the transfer of the Certificates, the Trustee on behalf of any
Certificateholder may request that the Servicer make available to any
prospective Certificateholder annual audited financial statements of the
Servicer for one or more of the most recently completed five fiscal years for
which such statements are available, which request shall not be unreasonably
denied or unreasonably delayed. Such annual audited financial statements also
shall be made available to the Certificate Insurer upon request.
(b) The Servicer also agrees to make available on a reasonable
basis to the Certificate Insurer or any prospective Certificateholder a
knowledgeable financial or accounting officer for the purpose of answering
reasonable questions respecting recent developments affecting the Servicer or
the financial statements of the Servicer and to permit the Certificate Insurer
or any prospective Certificateholder to inspect the Servicer's servicing
facilities during normal business hours for the purpose of satisfying the
Certificate Insurer or such prospective Certificateholder that the Servicer has
the ability to service the Mortgage Loans in accordance with this Agreement.
Section 5.17 Adjustment of Servicing Compensation in Respect
of Prepaid Mortgage Loans. The Monthly Servicing Fee that the Servicer shall be
entitled to receive with respect to all of the Mortgage Loans and each
Distribution Date shall be offset on such Distribution Date by an amount equal
to the aggregate Prepayment Interest Shortfall with respect to all Mortgage
Loans which were subjects of Principal Prepayments during the month preceding
the month of such Distribution Date. The amount of any offset against the
Monthly Servicing Fee with respect to any Distribution Date under this Section
5.17 shall be limited to the Monthly Servicing Fee otherwise payable to the
Servicer (without adjustment on account of Prepayment Interest Shortfalls) with
respect to such Distribution Date, and the rights of the Certificateholders to
the offset of the aggregate Prepayment Interest Shortfalls shall not be
cumulative.
Section 5.18 Periodic Advances; Special Advance. (a) If, on
any Servicer Distribution Date, the Servicer determines that any Monthly
Payments due on the Due Date immediately preceding such Servicer Distribution
Date have not been received as of the close of business on the Business Day
preceding such Servicer Distribution Date, the Servicer shall determine the
amount of any Periodic Advance required to be made with respect to the related
Distribution Date. The Servicer shall, one Business Day after such Servicer
Distribution Date, deliver a magnetic tape or diskette to the Trustee indicating
the payment status of each Mortgage Loan as of such Servicer Distribution Date.
The Servicer shall include in the amount to be deposited in the Collection
Account on such Servicer Distribution Date
53
<PAGE>
an amount equal to the Periodic Advance, if any, which deposit may be made in
whole or in part from funds in the Collection Account being held for future
distribution or withdrawal on or in connection with Distribution Dates in
subsequent months. Any funds being held for future distribution to
Certificateholders and so used shall be replaced by the Servicer from its own
funds by deposit in the Collection Account on or before the Business Day
preceding any such future Servicer Distribution Date to the extent that funds in
the Collection Account on such Servicer Distribution Date shall be less than
payments to Certificateholders required to be made on such date.
The Servicer shall designate on its records the specific
Mortgage Loans and related installments (or portions thereof) as to which such
Periodic Advance shall be deemed to have been made, such determination being
conclusive for purposes of withdrawals from the Collection Account pursuant to
Section 5.03.
(b) In addition to the Periodic Advances the Servicer shall
make a special advance (the "Special Advance") on the Servicer Distribution Date
occurring in April, 1997, of $98,645.98, with respect to interest on Mortgage
Loans not having their first payment due until April, 1997. The Special Advance
shall be made without regard to recoverability, and shall not be reimbursable.
In no event shall the Trustee, as successor Servicer, be liable for the payment
of the Special Advance.
Section 5.19 Indemnification; Third Party Claims. (a) The
Servicer agrees to indemnify and to hold each of the Depositor, the Trustee, the
Seller, 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 Seller, the Certificate Insurer and any Certificateholder may
sustain in any way related to the failure of the Servicer to perform its duties
and service the Mortgage Loans in compliance with the terms of this Agreement.
Each indemnified party and the Servicer shall immediately notify the other
indemnified parties if a claim is made by a third party with respect to this
Agreement, and the Servicer shall assume the defense of any such claim and pay
all expenses in connection therewith, including reasonable counsel fees, and
promptly pay, discharge and satisfy any judgment or decree which may be entered
against the Depositor, the Servicer, the Trustee, the Seller, the Certificate
Insurer and/or a Certificateholder in respect of such claim. The Trustee shall
reimburse the Servicer in accordance with Section 5.08 hereof for all amounts
advanced by it pursuant to the preceding sentence except when the claim relates
directly to the failure of the Servicer to service and administer the Mortgages
in compliance with the terms of this Agreement; provided, that the Servicer's
indemnity hereunder shall not be in any manner conditioned on the availability
of funds for such reimbursement.
(b) The Trustee may, if necessary, reimburse the Servicer from
amounts otherwise distributable on the Class R Certificates for all amounts
advanced by it pursuant to Section 4.04(a)(ii) of the Purchase Agreement, except
when the claim relates directly to the failure of the Servicer, if it is, or is
an Affiliate of, the Seller, to perform its obligations to service and
administer the Mortgages in compliance with the terms of the Purchase Agreement,
or the failure of the Seller to perform its duties in compliance with the terms
of this Agreement.
(c) The Trustee shall reimburse the Seller from amounts
otherwise distributable on the Class R Certificates for all amounts advanced by
the Seller pursuant to the second sentence of Section 4.04(a)(ii) of the
Purchase Agreement except when the relevant claim relates directly to the
failure of the Seller to perform its duties in compliance with the terms of the
Purchase Agreement.
54
<PAGE>
Section 5.20 Maintenance of Corporate Existence and Licenses;
Merger or Consolidation of the Servicer. (a) The Servicer will keep in full
effect its existence, rights and franchises as a corporation, will obtain and
preserve its qualification to do business as a foreign corporation in each
jurisdiction necessary to protect the validity and enforceability of this
Agreement or any of the Mortgage Loans and to perform its duties under this
Agreement and will otherwise operate its business so as to cause the
representations and warranties under Section 3.01 to be true and correct at all
times under this Agreement.
(b) Any Person into which the Servicer may be merged or
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Servicer shall be a party, or any Person succeeding
to the business of the Servicer, shall be an established mortgage loan servicing
institution that has a net worth of at least $15,000,000 and is a Permitted
Transferee, and in all events shall be the successor of the Servicer without the
execution or filing of any paper or any further act on the part of any of the
parties hereto, anything herein to the contrary notwithstanding. The Servicer
shall send notice of any such merger or consolidation to the Trustee and the
Certificate Insurer.
Section 5.21 Assignment of Agreement by Servicer; Servicer Not
to Resign. The Servicer shall not assign this Agreement nor resign from the
obligations and duties hereby imposed on it except by mutual consent of the
Servicer, the Seller, the Certificate Insurer and the Trustee or upon the
determination that the Servicer's duties hereunder are no longer permissible
under applicable law and that such incapacity cannot be cured by the Servicer
without incurring, in the reasonable judgment of the Certificate Insurer,
unreasonable expense. Any such determination that the Servicer's duties
hereunder are no longer permissible under applicable law permitting the
resignation of the Servicer shall be evidenced by a written Opinion of Counsel
(who may be counsel for the Servicer) to such effect delivered to the Trustee,
the Seller, the Depositor and the Certificate Insurer. No such resignation shall
become effective until the Trustee or a successor appointed in accordance with
the terms of this Agreement has assumed the Servicer's responsibilities and
obligations hereunder in accordance with Section 7.02. The Servicer shall
provide the Trustee, the Rating Agencies and the Certificate Insurer with 30
days prior written notice of its intention to resign pursuant to this Section
5.21.
Section 5.22 Periodic Filings with the Securities and Exchange
Commission; Additional Information. The Trustee shall prepare or cause to be
prepared for filing with the Commission (other than the initial Current Report
on Form 8-K to be filed by the Depositor in connection with the issuance of the
Certificates) any and all reports, statements and information respecting the
Trust and/or the Certificates required to be filed, and shall solicit any and
all proxies of the Certificateholders whenever such proxies are required to be
solicited, pursuant to the Securities Exchange Act of 1934, as amended. The
Depositor shall promptly file, and exercise its reasonable best efforts to
obtain a favorable response to, no-action requests with, or other appropriate
exemptive relief from, the Commission seeking the usual and customary exemption
from such reporting requirements granted to issuers of securities similar to the
Certificates. Fees and expenses incurred by the Trustee in connection with the
foregoing shall be reimbursed pursuant to Section 9.05 and shall not be paid by
the Trust.
The Servicer and the Depositor each agree to promptly furnish
to the Trustee, from time to time upon request, such further information,
reports and financial statements as the Trustee deems appropriate to prepare and
file all necessary reports with the Securities and Exchange Commission.
55
<PAGE>
ARTICLE VI
DISTRIBUTIONS AND PAYMENTS
Section 6.01 Establishment of Accounts; Withdrawals from
Accounts; Deposits to the Certificate Account. (a) The Trustee shall establish
and maintain the Certificate Account which shall be titled "Certificate Account,
The Chase Manhattan Bank, as trustee for the registered holders of ABFS Mortgage
Loan Trust 1997-1, Mortgage Pass-Through Certificates, Series 1997-1, Class A-1,
Class A-2, Class A-3 and Class R", the Pre-Funding Account which shall be titled
"Pre-Funding Account, The Chase Manhattan Bank, as trustee for the registered
holders of ABFS Mortgage Loan Trust 1997-1, Mortgage Pass-Through Certificates,
Series 1997-1, Class A-1, Class A-2, Class A-3 and Class R" and the Capitalized
Interest Account which shall be titled "Capitalized Interest Account, The Chase
Manhattan Bank, as trustee for the registered holders of ABFS Mortgage Loan
Trust 1997-1, Mortgage Pass-Through Certificates, Series 1997-1, Class A-1,
Class A-2, Class A-3 and Class R", each of which such Account shall be an
Eligible Account. Upon receipt of the proceeds of the sale of the Certificates,
on the Closing Date, the Trustee shall, upon the Seller's direction, from the
proceeds of the sale of the Certificates, deposit, on behalf of the
Certificateholders (i) in the Pre-Funding Account, the Original Pre-Funded
Amount and (ii) in the Capitalized Interest Account, an amount equal to
$363,011.43.
(b) The Servicer may direct the Trustee in writing to invest
the funds in the Certificate Account only in Permitted Investments. No Permitted
Investment shall be sold or disposed of at a gain prior to maturity unless the
Servicer has delivered to the Trustee an Opinion of Counsel (at the Servicer's
expense) that such sale or disposition will not cause the Trust Fund to be
subject to the tax on income from prohibited transactions imposed by Code
Section 860F(a)(1), otherwise subject the Trust Fund to tax or cause the Trust
Fund to fail to qualify as a REMIC and the Certificate Insurer consents to such
disposition. All income (other than any gain from a sale or disposition of the
type referred to in the preceding sentence) realized from any such Permitted
Investment shall be for the benefit of the Servicer as additional servicing
compensation. The amount of any losses incurred in respect of any such
investments shall be deposited in the Certificate Account by the Servicer out of
its own funds immediately as realized.
(c) On each Servicer Distribution Date, the Servicer shall
cause to be deposited in the Certificate Account, from funds on deposit in the
Collection Account, (a) an amount equal to the Servicer Remittance Amount and
(b) Net Foreclosure Profits, if any with respect to the related Distribution
Date, minus any portion thereof payable to the Servicer pursuant to Section
5.03. On each Servicer Distribution Date, the Servicer shall also deposit into
the Certificate Account any Periodic Advances with respect to the related
Distribution Date calculated in accordance with Section 5.18; on the Servicer
Distribution Date occurring on April, 1997 the Servicer also will deposit the
Special Advance in the Certificate Account.
(d) On the April 15, 1997, the May 15, 1997, the June 15, 1997
and the July 15, 1997 Distribution Dates, the Trustee shall transfer from the
Capitalized Interest Account to the Certificate Account the Capitalized Interest
Requirement, if any, for such Distribution Date.
(e) On the Distribution Date following the final Subsequent
Transfer Date, or the June 15, 1997 Distribution Date, whichever is earlier, any
amounts remaining in the Capitalized Interest Account, after taking into account
the transfers on such Distribution Date described in clause (d) above, shall be
paid to the Seller, and the Capitalized Interest Account shall be closed.
56
<PAGE>
(f) On any Subsequent Transfer Date, the Seller shall instruct
in writing the Trustee to withdraw from the Pre-Funding Account an amount equal
to 100% of the aggregate Principal Balances as of the related Subsequent Cut-Off
Date of the Subsequent Mortgage Loans sold to the Trust on such Subsequent
Transfer Date and pay such amount to or upon the order of the Seller upon
satisfaction of the conditions set forth in Section 2.03(b) and (c) hereof with
respect to such transfer. The Trustee may conclusively rely on such written
instructions from the Seller.
(g) If (x) the Pre-Funded Amount has not been reduced to zero
by June 15, 1997 or (y) the Pre-Funded Amount has been reduced to $100,000 or
less by the April 15, 1997 Distribution Date, or by the May 15, 1997
Distribution Date, or by the June 15, 1997 Distribution Date, in each case after
giving effect to any reductions in the Pre-Funded Amount on such date, the
Trustee shall withdraw from the Pre-Funding Account on such date and deposit in
the Certificate Account (for distribution as principal, pro rata, to the Holders
of the Class A Certificates) the amount on deposit in the Pre-Funding Account
other than any Pre-Funding Earnings; provided, that, with respect to clause (x),
if the Seller has delivered an Addition Notice indicating that the Pre-Funding
Account will be reduced to zero by June 27, 1997, no such withdrawal from the
Pre-Funding Account shall occur.
(h) On the April 15, 1997, the May 15, 1997 and the June 15,
1997 Distribution Dates the Trustee shall transfer from the Pre-Funding Account
to the Certificate Account the Pre-Funding Earnings, if any, applicable to each
such Distribution Date.
Section 6.02 Permitted Withdrawals From the Certificate
Account. The Trustee shall withdraw or cause to be withdrawn funds from the
Certificate Account for the following purposes:
(a) to effect the distributions described in Section 6.05;
(b) to pay to the Seller with respect to each Mortgage Loan or
property acquired in respect thereof that has been repurchased or
replaced pursuant to Section 2.04 or 2.05 or to pay to the Servicer
with respect to each Mortgage Loan or property acquired in respect
thereof that has been purchased all amounts received thereon and not
required to be distributed as of the date on which the related
repurchase or purchase price or Principal Balance was determined;
(c) to pay the Servicer any interest earned on or investment
income earned with respect to funds in the Certificate Account;
(d) to return to the Collection Account any amount deposited
in the Certificate Account that was not required to be deposited
therein; and
(e) to clear and terminate the Certificate Account upon
termination of the Trust Fund pursuant to Article VIII.
The Trustee shall keep and maintain a separate accounting for
withdrawals from the Certificate Account pursuant to each of subclauses (a)
through (f) listed above.
Section 6.03 Collection of Money. Except as otherwise
expressly provided herein, the Trustee may demand payment or delivery of all
money and other property payable to or receivable by the Trustee pursuant to
this Agreement, including (a) all payments due on the Mortgage Loans in
accordance with the respective terms and conditions of such Mortgage Loans and
required to be paid over to the Trustee by the Servicer or by any Sub-Servicer
and (b) Insured Payments. The Trustee shall hold all such
57
<PAGE>
money and property received by it, as part of the Trust Fund and shall apply it
as provided in this Agreement.
Section 6.04 The Certificate Insurance Policy. (a) Within two
(2) days of each Servicer Distribution Date, the Trustee shall determine with
respect to the immediately following Distribution Date, the amount to be on
deposit in the Certificate Account on such Distribution Date as a result of the
(i) Servicer's remittance of the Servicer Remittance Amount on the related
Servicer Distribution Date, and (ii) any transfers to the Certificate Account
made from the Capitalized Interest Account and/or the Pre- Funding Account
relating to such Distribution Date pursuant to Section 6.01 hereof, excluding
the amount of any Insured Payment and prior to the application of the amounts
described in clauses (a)(i) through (a)(iii) of Section 6.05 for the related
Distribution Date. The amounts described above in the preceding sentence with
respect to the Distribution Date are the "Available Funds".
(b) If on any Distribution Date there is an Available Funds
Shortfall, the Trustee shall complete a Notice in the form of Exhibit A to the
Certificate Insurance Policy and submit such notice to the Certificate Insurer
no later than 12:00 noon New York City time on the second Business Day preceding
such Distribution Date as a claim for an Insured Payment in an amount equal to
such Available Funds Shortfall.
(c) The Trustee shall establish a separate Eligible Account
for the benefit of Holders of the Certificates and the Certificate Insurer
referred to herein as the "Certificate Insurance Payment Account" over which the
Trustee shall have exclusive control and sole right of withdrawal. The Trustee
shall deposit upon receipt any amount paid under the Certificate Insurance
Policy in the Certificate Insurance Payment Account and distribute such amount
only for purposes of payment to the Certificateholders of the Insured
Distribution Amount for which a claim was made and such amount may not be
applied to satisfy any costs, expenses or liabilities of the Servicer, the
Trustee or the Trust Fund. Amounts paid under the Certificate Insurance Policy,
to the extent needed to pay the Insured Distribution Amount shall be transferred
to the Certificate Account on the related Distribution Date and disbursed by the
Trustee to the Certificateholders in accordance with Section 6.05. 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 Insured Distribution Amount
with other funds available to make such payment. However, the amount of any
payment of principal or of interest on the Certificates to be paid from funds
transferred from the Certificate Insurance Payment Account shall be noted as
provided in paragraph (d) below in the Certificate Register and in the statement
to be furnished to Holders of the Certificates pursuant to Section 6.07. Funds
held in the Certificate Insurance Payment Account shall not be invested. Any
funds remaining in the Certificate Insurance Payment Account on the first
Business Day following a Distribution Date shall be returned to the Certificate
Insurer pursuant to the written instructions of the Certificate Insurer by the
end of such Business Day.
(d) The Trustee shall keep a complete and accurate record of
the amount of interest and principal paid in respect of any Certificate from
moneys received under the Certificate Insurance Policy. The Certificate Insurer
shall have the right to inspect such records at reasonable times during normal
business hours upon one Business Day's prior notice to the Trustee.
(e) In the event that the Trustee has received a certified
copy of an order of the appropriate court that any Insured Payment has been
voided in whole or in part as a preference payment under applicable bankruptcy
law, the Trustee shall so notify the Certificate Insurer, shall comply with the
provisions of the Certificate Insurance Policy to obtain payment by the
Certificate Insurer of such voided Insured Payment, and shall, at the time it
provides notice to the Certificate Insurer, notify, by mail to the
58
<PAGE>
Certificateholders of the affected Certificates that, in the event any
Certificateholder's Insured Payment is so recovered, such Certificateholder will
be entitled to payment pursuant to the Certificate Insurance Policy, a copy of
which shall be made available through the Trustee, the Certificate Insurer or
the Certificate Insurer's fiscal agent, if any, and the Trustee shall furnish to
the Certificate Insurer or its fiscal agent, if any, its records evidencing the
payments which have been made by the Trustee and subsequently recovered from the
Certificateholders, and dates on which such payments were made.
(f) The Trustee shall promptly notify the Certificate Insurer
of any proceeding or the institution of any action, of which a Responsible
Officer of the Trustee has actual knowledge, seeking the avoidance as a
preferential transfer under applicable bankruptcy, insolvency, receivership or
similar law (a "Preference Claim") of any distribution made with respect to the
Certificates. Each Certificateholder, by its purchase of Certificates, the
Servicer and the Trustee agree that, the Certificate Insurer (so long as no
Certificate Insurer Default exists) may at any time during the continuation of
any proceeding relating to a Preference Claim direct all matters relating to
such Preference Claim, including, without limitation, (i) the direction of any
appeal of any order relating to such Preference Claim and (ii) the posting of
any surety, supersedeas or performance bond pending any such appeal. In addition
and without limitation of the foregoing, the Certificate Insurer shall be
subrogated to, and each Certificateholder, the Servicer and the Trustee hereby
delegate and assign to the Certificate Insurer, to the fullest extent permitted
by law, the rights of the Servicer, the Trustee and each Certificateholder in
the conduct of any such Preference Claim, including, without limitation, all
rights of any party to any adversary proceeding or action with respect to any
court order issued in connection with any such Preference Claim.
Section 6.05 Distributions. (a) No later than 12:00 noon
Pennsylvania time on the fourth Business Day following each Record Date, the
Servicer shall deliver to the Trustee a report in computer- readable form
containing such information as to each Mortgage Loan as of such Record Date and
such other information as the Trustee shall reasonably require. With respect to
the Certificate Account, on each Distribution Date, the Trustee shall make the
following allocations, disbursements and transfers in the following order of
priority, and each such allocation, transfer and disbursement shall be treated
as having occurred only after all preceding allocations, transfers and
disbursements have occurred:
(i) to the Trustee, an amount equal to the Trustee's Fees then
due to it;
(ii) from amounts then on deposit in the Certificate
Account (excluding any Insured Payments) to the Certificate Insurer the
lesser of (x) the excess of (i) the amount then on deposit in the
Certificate Account over (ii) the Insured Distribution Amount for such
Distribution Date and (y) the sum of (i) the amount of all
Reimbursement Amounts which have not been previously repaid as of such
Distribution Date and any other amounts then due to the Certificate
Insurer pursuant to the Insurance and Indemnity Agreement and (ii) the
Premium Amount;
(iii) from amounts then on deposit in the Certificate
Account, pro rata, (x) to the Owners of the Class A-1 Certificates, the
Class A-1 Distribution Amount for such Distribution Date; (y) to the
Owners of the Class A-2 Certificates, the Class A-2 Distribution Amount
for such Distribution Date; and (z) to the Owners of the Class A-3
Certificates, the Class A-3 Distribution Amount for such Distribution
Date; and
(iv) following the making by the Trustee of all
allocations, transfers and disbursements described above, from amounts
then on deposit in the Certificate Account, the Trustee shall
distribute to the Holders of the Class R Certificates, the amount
remaining in the Certificate Account on such Distribution Date, if any;
59
<PAGE>
provided, however, that if, on any Distribution Date, (x) the Certificate
Insurer is then in default under the Certificate Insurance Policy relating to
the Mortgage Loans and (y) a Subordination Deficit exists, then any distribution
of the Principal Distribution Amount on such Distribution Date shall be made pro
rata to the Owners of each of the Class A Certificates.
Notwithstanding the foregoing, the aggregate amounts
distributed on all Distribution Dates to the Holders of each Class of Class A
Certificates on account of principal shall not exceed the Original Certificate
Principal Balance for the related Class A Certificates.
Section 6.06 Investment of Accounts. (a) So long as no Event
of Default shall have occurred and be continuing, and consistent with any
requirements of the Code, all or a portion of any Account other than the
Certificate Insurance Payment Account held by the Trustee shall be invested and
reinvested by the Trustee, as directed in writing by the Servicer, in one or
more Permitted Investments bearing interest or sold at a discount. If an Event
of Default shall have occurred and be continuing or if the Servicer does not
provide investment directions, the Trustee shall invest all Accounts in
Permitted Investments described in paragraph (iv) of the definition of Permitted
Investments. No such investment in any Account shall mature later than the
Business Day immediately preceding the next Distribution Date (except that if
such Permitted Investment is an obligation of the Trustee, then such Permitted
Investment shall mature not later than such Distribution Date).
(b) Subject to Section 6.01(b), if any amounts are needed for
disbursement from any Account held by the Trustee and sufficient uninvested
funds are not available to make such disbursement, the Trustee shall cause to be
sold or otherwise converted to cash a sufficient amount of the investments in
such Account. The Trustee shall not be, and the Servicer shall be, liable for
any investment loss or other charge resulting therefrom unless the Trustee's
failure to perform in accordance with this Section 6.06 is the cause of such
loss or charge.
(c) Subject to Section 9.01 hereof, the Trustee shall not in
any way be held liable by reason of any insufficiency in any Account held by the
Trustee resulting from any investment loss on any Permitted Investment included
therein (except to the extent that the Trustee is the obligor and has defaulted
thereon or as provided in subsection (b) of this Section 6.06).
(d) So long as no Event of Default shall have occurred and be
continuing, all net income and gain realized from investment of, and all
earnings on, funds deposited in any Account (excluding the Certificate Insurance
Payment Account) shall be for the benefit of the Servicer as servicing
compensation (in addition to the Servicing Fee). The Servicer shall deposit in
the related Account the amount of any loss incurred in respect of any Permitted
Investment held therein which is in excess of the income and gain thereon
immediately upon realization of such loss, without any right to reimbursement
therefor from its own funds.
Section 6.07 Reports by the Trustee. (a) On each Distribution
Date the Trustee shall provide to each Holder, to the Servicer, to the
Certificate Insurer, to the Underwriter, to the Depositor and to the Rating
Agencies a written report (the "Trustee Remittance Report"), setting forth
information including, without limitation, the following information:
(i) the amount of the distribution with respect to the Class
A-1, Class A-2, Class A-3 and Class R Certificates;
60
<PAGE>
(ii) the amount of such distributions allocable to principal,
separately identifying the aggregate amount of any Prepayments or other
unscheduled recoveries of principal included therein and separately
identifying any Subordination Increase Amounts;
(iii) the amount of such distributions allocable to interest
and the calculation thereof;
(iv) the Certificate Principal Balance of the Class A-1, Class
A-2 and Class A-3 Certificates as of such Distribution Date, together
with the principal amount of the Class A-1, Class A-2 and Class A-3
Certificates (based on a Certificate in an original principal amount of
$1,000) then outstanding, in each case after giving effect to any
payment of principal on such Distribution Date;
(v) the amount of any Insured Payment included in the amounts
distributed to the Class A Certificateholders on such Distribution
Date;
(vi) the total of any Substitution Adjustments and any Loan
Repurchase Price amounts included in such distribution; and
(vii) the amounts, if any, of any Liquidation Loan Losses for
the related Due Period.
Items (i), (ii) and (iii) above shall, with respect to each
Class of Class A Certificates, be presented on the basis of a Certificate having
a $1,000 denomination. In addition, by January 31 of each calendar year
following any year during which the Certificates are outstanding, the Trustee
shall furnish a report to each Holder of record if so requested in writing at
any time during each calendar year as to the aggregate of amounts reported
pursuant to (i), (ii) and (iii) with respect to the Certificates for such
calendar year.
(b) All distributions made to each Class of Class A
Certificateholders and the Class R Certificateholders as a Class on each
Distribution Date will be made on a pro rata basis among the Certificateholders
of each Class on the next preceding Record Date based on the Percentage Interest
represented by their respective Certificates, and shall be made by wire transfer
of immediately available funds to the account of such Certificateholder at a
bank or other entity having appropriate facilities therefor, if, in the case of
a Class A Certificateholder, such Certificateholder shall own of record
Certificates of the same Class which have denominations aggregating at least
$5,000,000 appearing in the Certificate Register and shall have provided
complete wiring instructions at least five Business Days prior to the Record
Date, and otherwise by check mailed to the address of such Certificateholder
appearing in the Certificate Register.
(c) In addition, on each Distribution Date the Trustee will
distribute to each Holder, to the Certificate Insurer, to the Underwriter, to
the Servicer, to the Depositor and to the Rating Agencies, together with the
information described in subsection (a) preceding, the following information
with respect to the Mortgage Loans as of the close of business on the last
Business Day of the prior calendar month (except as otherwise provided in clause
(v) below), which is hereby required to be prepared by the Servicer and
furnished to the Trustee for such purpose on or prior to the related Servicer
Distribution Date:
(i) the total number of Mortgage Loans and the
aggregate Principal Balances thereof, together with the number,
aggregate principal balances of such Mortgage Loans and the percentage
(based on the aggregate Principal Balances of the Mortgage Loans) of
the aggregate
61
<PAGE>
Principal Balances of such Mortgage Loans to the aggregate Principal
Balance of all Mortgage Loans (A) 31-60 days Delinquent, (B) 61-90 days
Delinquent and (C) 91 or more days Delinquent;
(ii) the number, aggregate Principal Balances of all
Mortgage Loans and percentage (based on the aggregate Principal
Balances of the Mortgage Loans) of the aggregate Principal Balances of
such Mortgage Loans to the aggregate Principal Balance of all Mortgage
Loans in foreclosure proceedings and the number, aggregate Principal
Balances of all Mortgage Loans and percentage (based on the aggregate
Principal Balances of the Mortgage Loans) of any such Mortgage Loans
also included in any of the statistics described in the foregoing
clause (i);
(iii) the number, aggregate Principal Balances of all
Mortgage Loans and percentage (based on the aggregate Principal
Balances of the Mortgage Loans) of the aggregate Principal Balances of
such Mortgage Loans to the aggregate Principal Balance of all Mortgage
Loans relating to Mortgagors in bankruptcy proceedings and the number,
aggregate Principal Balances of all Mortgage Loans and percentage
(based on the aggregate Principal Balances of the Mortgage Loans) of
any such Mortgage Loans also included in any of the statistics
described in the foregoing clause (i);
(iv) the number, aggregate Principal Balances of all
Mortgage Loans and percentage (based on the aggregate Principal
Balances of the Mortgage Loans) of the aggregate Principal Balances of
such Mortgage Loans to the aggregate Principal Balance of all Mortgage
Loans relating to REO Properties and the number, aggregate Principal
Balances of all Mortgage Loans and percentage (based on the aggregate
Principal Balances of the Mortgage Loans) of any such Mortgage Loans
also included in any of the statistics described in the foregoing
clause (i);
(v) the weighted average Mortgage Interest Rate as of
the Due Date occurring in the Due Period related to such Distribution
Date;
(vi) the weighted average remaining term to stated
maturity of all Mortgage Loans; and
(vii) the book value of any REO Property.
Section 6.08 Additional Reports by Trustee. (a) The Trustee
shall report to the Depositor, the Servicer and the Certificate Insurer with
respect to the amount then held in each Account (including investment earnings
accrued or scheduled to accrue) held by the Trustee and the identity of the
investments included therein, as the Depositor, the Servicer or the Certificate
Insurer may from time to time request in writing.
(b) From time to time, at the request of the Certificate
Insurer, the Trustee shall report to the Certificate Insurer with respect to its
actual knowledge, without independent investigation, of any breach of any of the
representations or warranties relating to individual Mortgage Loans set forth in
any Purchase Agreement or in Section 3.01 or 3.02 hereof. The Trustee shall also
provide the Certificate Insurer such other information as may be reasonably
requested by it.
62
<PAGE>
Section 6.09 Compensating Interest. Not later than the close
of business on the third Business Day prior to the Distribution Date, the
Servicer shall remit to the Trustee (without right or reimbursement therefor)
for deposit into the Certificate Account an amount equal to the lesser of (a)
the aggregate of the Prepayment Interest Shortfalls for the related Distribution
Date resulting from Principal Prepayments during the related Due Period and (b)
its aggregate Monthly Servicing Fees received in the related Due Period and
shall not have the right to reimbursement therefor (the "Compensating
Interest").
Section 6.10 Effect of Payments by the Certificate Insurer;
Subrogation. Anything herein to the contrary notwithstanding, any payment with
respect to principal of or interest on the Certificates which is made with
moneys received pursuant to the terms of the Certificate Insurance Policy shall
not be considered payment of the Certificates from the Trust Fund. The
Depositor, the Servicer and the Trustee acknowledge, and each Holder by its
acceptance of a Certificate agrees, that without the need for any further action
on the part of the Certificate Insurer, the Depositor, the Servicer, the Trustee
or the Certificate Registrar (a) to the extent the Certificate Insurer makes
payments, directly or indirectly, on account of principal of or interest on the
Certificates to the Holders of such Certificates, the Certificate Insurer will
be fully subrogated to, and each Certificateholder, the Servicer and the Trustee
hereby delegate and assign to the Certificate Insurer, to the fullest extent
permitted by law, the rights of such Holders to receive such principal and
interest from the Trust Fund, including, without limitation, any amounts due to
the Certificateholders in respect of securities law violations arising from the
offer and sale of the Certificates, and (b) the Certificate Insurer shall be
paid such amounts from the sources and in the manner provided herein for the
payment of such amounts and as provided in the Insurance and Indemnity
Agreement. 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.
ARTICLE VII
DEFAULT
Section 7.01 Events of Default. (a) In case one or more of the
following Events of Default by the Servicer shall occur and be continuing, that
is to say:
(i) any failure by the Servicer to remit to the
Trustee any payment required to be made by the Servicer under the terms
of this Agreement which continues unremedied for one (1) 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 and the
Certificate Insurer by the Trustee or to the Servicer and the Trustee
by the Certificate Insurer or Certificateholders of Class A
Certificates evidencing Percentage Interests of at least 25%;
(ii) the failure by the Servicer to make any required
Servicing Advance which failure continues unremedied for a period of 30
days after the date on which written notice of such failure, requiring
the same to be remedied, shall have been given to the Servicer by the
Trustee or to the Servicer and the Trustee by any Certificateholder or
the Certificate Insurer;
(iii) any failure on the part of the Servicer duly to
observe or perform in any material respect any other of the covenants
or agreements on the part of the Servicer contained in this Agreement,
or the failure of any representation and warranty made pursuant to
Section 3.01
63
<PAGE>
to be true and correct which continues unremedied for a period of 30
days after the date on which written notice of such failure, requiring
the same to be remedied, shall have been given to the Servicer, as the
case may be, by the Depositor or the Trustee or to the Servicer and the
Trustee by any Certificateholder or the Certificate Insurer;
(iv) a decree or order of a court or agency or
supervisory authority having jurisdiction in an involuntary case under
any present or future federal or state bankruptcy, insolvency or
similar law or for the appointment of a conservator or receiver or
liquidator in any insolvency, readjustment of debt, marshalling of
assets and liabilities or similar proceedings, or for the winding-up or
liquidation of its affairs, shall have been entered against the
Servicer and such decree or order shall have remained in force,
undischarged or unstayed for a period of 30 days;
(v) the Servicer shall consent to the appointment of a
conservator or receiver or liquidator in any insolvency, readjustment
of debt, marshalling of assets and liabilities or similar proceedings
of or relating to the Servicer or of or relating to all or
substantially all of the Servicer's property;
(vi) the Servicer shall admit in writing its inability
to pay its debts as they become due, file a petition to take advantage
of any applicable insolvency or reorganization statute, make an
assignment for the benefit of its creditors, or voluntarily suspend
payment of its obligations;
(vii) the Certificate Insurer shall notify the Trustee
of any event of default under the Insurance and Indemnity Agreement;
(viii) if on any Distribution Date the Rolling Six
Month Delinquency Rate exceeds 12.75%;
(ix) if on any Distribution Date occurring in
September of any year, commencing in March 1998, the 12 Month Loss
Amount exceeds 1.75% of the Pool Principal Balance as of the close of
business on the first day of the twelfth preceding calendar month;
(x) if (a) on any Distribution Date occurring before
April 1, 1998, the aggregate Pool Cumulative Loan Losses since the
Cut-Off Date exceed 1.00% of the Original Pool Principal Balance, (b)
on any Distribution Date on or after April 1, 1998 and before April 1,
1999, the aggregate Pool Cumulative Loan Losses since the Cut-Off Date
exceed 1.50% of the Original Pool Principal Balance, (c) on any
Distribution Date on or after April 1, 1999 and before April 1, 2000,
the aggregate Pool Cumulative Loan Losses since the Cut-Off Date exceed
2.25% of the Original Pool Principal Balance, (d) on any Distribution
Date on or after April 1, 2000 and before April 1, 2001, the aggregate
Pool Cumulative Loan Losses since the Cut-Off Date exceed 3.00% of the
Original Pool Principal Balance, or (e) on any Distribution Date on or
after April 1, 2001, the aggregate Pool Cumulative Loan Losses since
the Cut-Off Date exceed 3.75% of the Original Pool Principal Balance.
(b) then, and in each and every such case, so long as an Event
of Default shall not have been remedied: (x) with respect solely to clause (i)
above, if such payment is in respect of Periodic Advances or Compensating
Interest owing by the Servicer and such payment is not made by 12:00 Noon New
York time on the second Business Day prior to the applicable Distribution Date,
the Trustee, upon receipt of written notice or discovery by a Responsible
Officer of such failure, shall give immediate
64
<PAGE>
telephonic notice of such failure to a Servicing Officer of the Servicer and to
the Certificate Insurer and the Trustee shall, with the consent of the
Certificate Insurer, terminate all of the rights and obligations of the Servicer
under this Agreement and the Trustee, or a successor servicer appointed in
accordance with Section 7.02, shall immediately make such Periodic Advance or
payment of Compensating Interest and assume, pursuant to Section 7.02 hereof,
the duties of a successor Servicer; (y) with respect to that portion of clause
(i) above not referred to in the preceding clause (x) and clauses (ii), (iii),
(iv), (v), (vi) and (vii) above, the Trustee shall, but only at the direction of
the Certificate Insurer or the Majority Certificateholders, by notice in writing
to the Servicer and a Responsible Officer of the Trustee and subject to the
prior written consent of the Certificate Insurer, in the case of any removal at
the direction of the Majority Certificateholders, and in addition to whatever
rights such Certificateholders may have at law or equity to damages, including
injunctive relief and specific performance, terminate all the rights and
obligations of the Servicer under this Agreement and in and to the Mortgage
Loans and the proceeds thereof, as servicer; and (z) with respect to clause
(viii)-(x) above, the Trustee shall, but only at the direction of the
Certificate Insurer, after notice in writing to the Servicer and a Responsible
Officer of the Trustee, terminate all the rights and obligations of the Servicer
under this Agreement and in and to the Mortgage Loans and the proceeds thereof,
as Servicer. Upon receipt by the Servicer of such written notice, all authority
and power of the Servicer under this Agreement, whether with respect to the
Mortgage Loans or otherwise, shall, subject to Section 7.02, pass to and be
vested in the Trustee or its designee approved by the Certificate Insurer and
the Trustee is hereby authorized and empowered to execute and deliver, on behalf
of the Servicer, as attorney-in-fact or otherwise, at the expense of the
Servicer, any and all documents and other instruments and do or cause to be done
all other acts or things necessary or appropriate to effect the purposes of such
notice of termination, including, but not limited to, the transfer and
endorsement or assignment of the Mortgage Loans and related documents. The
Servicer agrees to cooperate (and pay any related costs and expenses) with the
Trustee in effecting the termination of the Servicer's responsibilities and
rights hereunder, including, without limitation, the transfer to the Trustee or
its designee for administration by it of all amounts which shall at the time be
credited by the Servicer to the Collection Account or thereafter received with
respect to the Mortgage Loans. The Trustee shall promptly notify the Certificate
Insurer and the Rating Agencies of the occurrence of an Event of Default.
Section 7.02 Trustee to Act; Appointment of Successor. (a) On
and after the time the Servicer receives a notice of termination pursuant to
Section 7.01, or the Trustee receives the resignation of the Servicer evidenced
by an Opinion of Counsel pursuant to Section 5.21, or the Servicer is removed as
Servicer pursuant to Article VII, in which event the Trustee shall promptly
notify the Rating Agencies, except as otherwise provided in 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 placed on the Servicer by the terms and provisions hereof
arising on or after the date of succession; provided, however, that the Trustee
shall not be liable for any actions or the representations and warranties of any
servicer prior to it and including, without limitation, the obligations of the
Servicer set forth in Sections 2.06 and 3.03. The Trustee, as successor
servicer, shall be obligated to pay Compensating Interest pursuant to Section
6.09 in any event and to make advances pursuant to Section 5.18 unless, and only
to the extent the Trustee determines reasonably and in good faith that such
advances would not be recoverable pursuant to Section 5.04, such determination
to be evidenced by a certification of a Responsible Officer of the Trustee
delivered to the Certificate Insurer.
(b) Notwithstanding the above, the Trustee may, if it shall be
unwilling to so act, or shall, if it is unable to so act or if the Majority
Certificateholders with the consent of the Certificate Insurer or the
Certificate Insurer so requests in writing to the Trustee, appoint, pursuant to
the provisions set forth in paragraph (c) below, or petition a court of
competent jurisdiction to appoint, any established
65
<PAGE>
mortgage loan servicing institution acceptable to the Certificate Insurer that
has a net worth of not less than $15,000,000 as the successor to the Servicer
hereunder in the assumption of all or any part of the responsibilities, duties
or liabilities of the Servicer hereunder.
(c) In the event the Trustee is the successor servicer, it
shall be entitled to the same Servicing Compensation (including the Servicing
Fee as adjusted pursuant to the definition thereof) and other funds pursuant to
Section 5.08 hereof as the Servicer if the Servicer had continued to act as
servicer hereunder. In the event the Trustee is unable or unwilling to act as
successor servicer, the Trustee shall solicit, by public announcement, bids from
housing and home finance institutions, banks and mortgage servicing institutions
meeting the qualifications set forth above. Such public announcement shall
specify that the successor servicer shall be entitled to the full amount of the
aggregate Servicing Fees hereunder as servicing compensation, together with the
other Servicing Compensation. Within thirty days after any such public
announcement, the Trustee shall negotiate and effect the sale, transfer and
assignment of the servicing rights and responsibilities hereunder to the
qualified party submitting the highest qualifying bid. The Trustee shall deduct
from any sum received by the Trustee from the successor to the Servicer in
respect of such sale, transfer and assignment all costs and expenses of any
public announcement and of any sale, transfer and assignment of the servicing
rights and responsibilities hereunder and the amount of any unreimbursed
Servicing Advances and Periodic Advances owed to the Trustee. After such
deductions, the remainder of such sum shall be paid by the Trustee to the
Servicer at the time of such sale, transfer and assignment to the Servicer's
successor.
(d) The Trustee and such successor shall take such action,
consistent with this Agreement, as shall be necessary to effectuate any such
succession. The Servicer agrees to cooperate with the Trustee and any successor
servicer in effecting the termination of the Servicer's servicing
responsibilities and rights hereunder and shall promptly provide the Trustee or
such successor servicer, as applicable, at the Servicer's cost and expense, all
documents and records reasonably requested by it to enable it to assume the
Servicer's functions hereunder and shall promptly also transfer to the Trustee
or such successor servicer, as applicable, all amounts that then have been or
should have been deposited in the Collection Account by the Servicer or that are
thereafter received with respect to the Mortgage Loans. Any collections received
by the Servicer after such removal or resignation shall be endorsed by it to the
Trustee and remitted directly to the Trustee or, at the direction of the
Trustee, to the successor servicer. Neither the Trustee nor any other successor
servicer shall be held liable by reason of any failure to make, or any delay in
making, any distribution hereunder or any portion thereof caused by (i) the
failure of the Servicer to deliver, or any delay in delivering, cash, documents
or records to it, or (ii) restrictions imposed by any regulatory authority
having jurisdiction over the Servicer hereunder. Notwithstanding anything to the
contrary herein, no appointment of a successor to the Servicer under this
Agreement shall be effective until the Trustee and the Certificate Insurer shall
have consented thereto, and written notice of such proposed appointment shall
have been provided by the Trustee to the Certificate Insurer and to each
Certificateholder. The Trustee shall not resign as servicer until a successor
servicer reasonably acceptable to the Certificate Insurer has been appointed.
The Certificate Insurer shall have the right to remove the Trustee as successor
Servicer under this Section 7.02 without cause, and the Trustee shall appoint
such other successor Servicer as directed by the Certificate Insurer.
(e) Pending appointment of a successor to the Servicer
hereunder, the Trustee shall act in such capacity as hereinabove provided. In
connection with such appointment and assumption, the Trustee may make such
arrangements for the compensation of such successor out of payments on Mortgage
Loans as it and such successor shall agree; provided, however, that no such
compensation shall be in excess of that permitted the Servicer pursuant to
Section 5.08, together with other Servicing
66
<PAGE>
Compensation. The Servicer, the Trustee and such successor shall take such
action, consistent with this Agreement, as shall be necessary to effectuate any
such succession.
Section 7.03 Waiver of Defaults. The Majority
Certificateholders may, on behalf of all Certificateholders, and subject to the
consent of the Certificate Insurer, waive any events permitting removal of the
Servicer as servicer pursuant to this Article VII; provided, however, that the
Majority Certificateholders may not waive a default in making a required
distribution on a Certificate without the consent of the holder of such
Certificate. Upon any waiver of a past default, such default shall cease to
exist, and any Event of Default arising therefrom shall be deemed to have been
remedied for every purpose of this Agreement. No such waiver shall extend to any
subsequent or other default or impair any right consequent thereto except to the
extent expressly so waived. Notice of any such waiver shall be given by the
Trustee to the Rating Agencies and the Certificate Insurer.
Section 7.04 Rights of the Certificate Insurer to Exercise
Rights of Class A Certificateholders. By accepting its Certificate, each Class A
Certificateholder agrees that unless a Certificate Insurer Default exists, the
Certificate Insurer shall be deemed to be the Certificateholders for all
purposes (other than with respect to the receipt of payment on the Certificates)
and shall have the right to exercise all rights of the Class A
Certificateholders under this Agreement and under the Class A Certificates
without any further consent of the Class A Certificateholders, including,
without limitation:
(a) the right to require the Seller to repurchase Mortgage
Loans pursuant to Section 2.06 or 3.03 hereof to the extent set forth
in such Sections;
(b) the right to give notices of breach or to terminate the
rights and obligations of the Servicer as servicer pursuant to Section
7.01 hereof and to consent to or direct waivers of Servicer defaults
pursuant to Section 7.03 hereof;
(c) the right to direct the actions of the Trustee during the
continuance of a Servicer default pursuant to Sections 7.01 and 7.02
hereof;
(d) the right to institute proceedings against the Servicer
pursuant to Section 7.01 hereof;
(e) the right to direct the Trustee to investigate certain
matters pursuant to Section 9.02(a)(v) hereof;
(f) the right to remove the Trustee pursuant to Section 9.07
hereof;
(g) the right to direct foreclosures upon the failure of the
Servicer to do so in accordance with the provisions of Section 5.06 of
this Agreement; and
(h) any rights or remedies expressly given the Majority
Certificateholders.
In addition, each Certificateholder agrees that, subject to
Section 10.02, unless a Certificate Insurer Default exists, the rights
specifically enumerated above may only be exercised by the Certificateholders
with the prior written consent of the Certificate Insurer.
67
<PAGE>
Section 7.05 Trustee To Act Solely with Consent of the
Certificate Insurer. Unless a Certificate Insurer Default exists, the Trustee
shall not, without the Certificate Insurer's consent or unless directed by the
Certificate Insurer:
(a) terminate the rights and obligations of the Servicer as
Servicer pursuant to Section 7.01 hereof;
(b) agree to any amendment pursuant to Section 10.03 hereof;
or
(c) undertake any litigation.
The Certificate Insurer may, in writing and in its sole
discretion renounce all or any of its rights under Sections 7.04, 7.05 or 7.06
or any requirement for the Certificate Insurer's consent for any period of time.
Section 7.06 Mortgage Loans, Trust Fund and Accounts Held for
Benefit of the Certificate Insurer. (a) The Trustee shall hold the Trust Fund
and the Mortgage Files for the benefit of the Certificateholders and the
Certificate Insurer and all references in this Agreement and in the Certificates
to the benefit of Holders of the Certificates shall be deemed to include the
Certificate Insurer. The Trustee shall cooperate in all reasonable respects with
any reasonable request by the Certificate Insurer for action to preserve or
enforce the Certificate Insurer's rights or interests under this Agreement and
the Certificates unless, as stated in an Opinion of Counsel addressed to the
Trustee and the Certificate Insurer, such action is adverse to the interests of
the Certificateholders or diminishes the rights of the Certificateholders or
imposes additional burdens or restrictions on the Certificateholders.
(b) The Servicer hereby acknowledges and agrees that it shall
service the Mortgage Loans for the benefit of the Certificateholders and for the
benefit of the Certificate Insurer, and all references in this Agreement to the
benefit of or actions on behalf of the Certificateholders shall be deemed to
include the Certificate Insurer.
Section 7.07 Certificate Insurer Default. Notwithstanding
anything elsewhere in this Agreement or in the Certificates to the contrary, if
a Certificate Insurer Default exists, or if and to the extent the Certificate
Insurer has delivered its written renunciation of all of its rights under this
Agreement, the provisions of this Article VII and all other provisions of this
Agreement which (a) permit the Certificate Insurer to exercise rights of the
Certificateholders, (b) restrict the ability of the Certificateholders, the
Servicer or the Trustee to act without the consent or approval of the
Certificate Insurer, (c) provide that a particular act or thing must be
acceptable to the Certificate Insurer, (d) permit the Certificate Insurer to
direct (or otherwise to require) the actions of the Trustee, the Servicer or the
Certificateholders, (e) provide that any action or omission taken with the
consent, approval or authorization of the Certificate Insurer shall be
authorized hereunder or shall not subject the party taking or omitting to take
such action to any liability hereunder or (f) which have a similar effect, shall
be of no further force and effect and the Trustee shall administer the Trust
Fund and perform its obligations hereunder solely for the benefit of the Holders
of the Certificates. Nothing in the foregoing sentence, nor any action taken
pursuant thereto or in compliance therewith, shall be deemed to have released
the Certificate Insurer from any obligation or liability it may have to any
party or to the Certificateholders hereunder, under any other agreement,
instrument or document (including, without limitation, the Certificate Insurance
Policy) or under applicable law.
68
<PAGE>
ARTICLE VIII
TERMINATION
Section 8.01 Termination. (a) Subject to Section 8.02, this
Agreement shall terminate upon notice to the Trustee of either: (i) the later of
the distribution to Certificateholders of the final payment or collection with
respect to the last Mortgage Loan (or Periodic Advances of same by the
Servicer), or the disposition of all funds with respect to the last Mortgage
Loan and the remittance of all funds due hereunder and the payment of all
amounts due and payable to the Certificate Insurer and the Trustee or (ii)
mutual consent of the Servicer, the Certificate Insurer and all
Certificateholders in writing; provided, however, that in no event shall the
Trust established by this Agreement terminate later than twenty-one years after
the death of the last surviving lineal descendant of Joseph P. Kennedy, late
Ambassador of the United States to the Court of St. James, alive as of the date
hereof.
(b) In addition, subject to Section 8.02, the Servicer may, at
its option and at its sole cost and expense, terminate this Agreement on any
date on which the Pool Principal Balance is less than 10% of the Maximum
Collateral Amount by purchasing, on the next succeeding Distribution Date, all
of the outstanding Mortgage Loans and REO Properties at a price equal to the sum
of (i) 100% of the aggregate Principal Balance of each outstanding Mortgage Loan
and each REO Property and (ii) the greater of (1) the aggregate amount of
accrued and unpaid interest on the Mortgage Loans through the related Due Period
and (2) 30 days' accrued interest thereon computed at a rate equal to the
related Mortgage Interest Rate, in each case net of the Servicing Fee, and (iii)
any unreimbursed amounts due to the Certificate Insurer under this Agreement and
any I&I Payments (the "Termination Price"). Any such purchase shall be
accomplished by deposit into the Certificate Account of the Termination Price.
No such termination is permitted without the prior written consent of the
Certificate Insurer if it would result in a draw on the Certificate Insurance
Policy.
(c) If on any Distribution Date, the Servicer determines that
there are no outstanding Mortgage Loans and no other funds or assets in the
Trust Fund other than funds in the Certificate Account, the Servicer shall send
a final distribution notice promptly to each such Certificateholder in
accordance with paragraph (d) below.
(d) Notice of any termination, specifying the Distribution
Date upon which the Trust Fund will terminate and the Certificateholders shall
surrender their Certificates to the Trustee for payment of the final
distribution and cancellation, shall be given promptly by the Servicer by letter
to Certificateholders mailed during the month of such final distribution before
the Servicer Distribution Date in such month, specifying (i) the Distribution
Date upon which final payment of the Certificates will be made upon presentation
and surrender of Certificates at the office of the Trustee therein designated,
(ii) the amount of any such final payment and (iii) that the Record Date
otherwise applicable to such Distribution Date is not applicable, payments being
made only upon presentation and surrender of the Certificates at the office of
the Trustee therein specified. The Servicer shall give such notice to the
Trustee therein specified. The Servicer shall give such notice to the Trustee at
the time such notice is given to Certificateholders. The obligations of the
Certificate Insurer hereunder shall terminate upon the deposit by the Servicer
with the Trustee of a sum sufficient to purchase all of the Mortgage Loans and
REO Properties as set forth above or when the Class A Principal Balance has been
reduced to zero.
(e) In the event that all of the Certificateholders shall not
surrender their Certificates for cancellation within six months after the time
specified in the above-mentioned written notice, the Servicer shall give a
second written notice to the remaining Certificateholders to surrender their
Certificates for
69
<PAGE>
cancellation and receive the final distribution with respect thereto. If within
six months after the second notice, all of the Certificates shall not have been
surrendered for cancellation, the Trustee may take appropriate steps, or may
appoint an agent to take appropriate steps, to contact the remaining
Certificateholders concerning surrender of their Certificates and the cost
thereof shall be paid out of the funds and other assets which remain subject
hereto. If within nine months after the second notice all the Certificates shall
not have been surrendered for cancellation, the Class R Certificateholders shall
be entitled to all unclaimed funds and other assets which remain subject hereto
and the Trustee upon transfer of such funds shall be discharged of any
responsibility for such funds and the Certificateholders shall look only to the
Class R Certificateholders for payment and not to the Certificate Insurer. Such
funds shall remain uninvested.
Section 8.02 Additional Termination Requirements. (a) In the
event that the Servicer exercises its purchase option as provided in Section
8.01, the Trust Fund shall be terminated in accordance with the following
additional requirements, unless the Trustee has been furnished with an Opinion
of Counsel to the effect that the failure of the REMIC Trust to comply with the
requirements of this Section 8.02 will not (i) result in the imposition of taxes
on "prohibited transactions" of the REMIC Trust as defined in Section 860F of
the Code or (ii) cause the REMIC Trust to fail to qualify as a REMIC at any time
that any Class A Certificates are outstanding:
(i) Within 90 days prior to the final Distribution Date
the Servicer shall adopt and the Trustee shall sign, a plan of complete
liquidation of the REMIC Trust meeting the requirements of a "Qualified
Liquidation" under Section 860F of the Code and any regulations
thereunder;
(ii) At or after the time of adoption of such a plan of
complete liquidation and at or prior to the final Distribution Date,
the Trustee shall sell all of the assets of the Trust Fund to the
Servicer for cash; and
(iii) At the time of the making of the final payment on
the Certificates, the Trustee shall distribute or credit, or cause to
be distributed or credited (A) to the Class A Certificateholders the
Class A Principal Balance, plus one month's interest thereon at the
Class A Pass-Through Rate, (B) to the Certificate Insurer any amounts
due the Certificate Insurer under this Agreement and unpaid, including
unreimbursed Insured Payments and I&I Payments and (C) to the Class R
Certificateholders, all cash on hand after such payment to the Class A
Certificateholders (other than cash retained to meet claims) and the
Trust Fund shall terminate at such time.
(b) By their acceptance of the Certificates, the Holders
thereof hereby agree to appoint the Servicer as their attorney in fact to: (i)
adopt such a plan of complete liquidation (and the Certificateholders hereby
appoint the Trustee as their attorney in fact to sign such plan) as appropriate
or upon the written request of the Certificate Insurer and (ii) to take such
other action in connection therewith as may be reasonably required to carry out
such plan of complete liquidation all in accordance with the terms hereof.
Section 8.03 Accounting Upon Termination of Servicer. Upon
termination of the Servicer, the Servicer shall, at its expense:
(a) deliver to its successor or, if none shall yet have been
appointed, to the Trustee, the funds in any Account;
70
<PAGE>
(b) deliver to its successor or, if none shall yet have been
appointed, to the Trustee all Mortgage Files and related documents and
statements held by it hereunder and a Mortgage Loan portfolio computer
tape;
(c) deliver to its successor or, if none shall yet have been
appointed, to the Trustee and, upon request, to the Certificateholders
a full accounting of all funds, including a statement showing the
Monthly Payments collected by it and a statement of monies held in
trust by it for the payments or charges with respect to the Mortgage
Loans; and
(d) execute and deliver such instruments and perform all acts
reasonably requested in order to effect the orderly and efficient
transfer of servicing of the Mortgage Loans to its successor and to
more fully and definitively vest in such successor all rights, powers,
duties, responsibilities, obligations and liabilities of the "Servicer"
under this Agreement.
Section 8.04 Retention and Termination of the Servicer. The
Servicer hereby covenants and agrees to act as servicer under this Agreement for
an initial term commencing on the Closing Date and expiring on June 30, 1997,
which term shall be extendable by the Certificate Insurer for successive terms
thereafter of one calendar quarter each (ending on March 31st, June 30th,
September 30th or December 31st (or, as specified in a writing delivered by the
Certificate Insurer from time to time to the Servicer and the Trustee, such
other term-by-term basis)), until the Final Scheduled Maturity Date of the Class
A-3 Certificates. Each such notice (including each notice pursuant to standing
instructions, which shall be deemed delivered at successive calendar quarter
intervals for so long as such instructions are in effect) (a "Servicer Extension
Notice") delivered by the Certificate Insurer to the Trustee shall be promptly
delivered by the Trustee to 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 day
prior to the last day of any term of the Servicer the Trustee shall not have
received a Servicer Extension Notice from the Certificate Insurer, the Trustee
will, within 5 days thereafter, give written notice of such nonreceipt to the
Certificate Insurer and the Servicer.
ARTICLE IX
THE TRUSTEE
Section 9.01 Duties of Trustee. (a) The Trustee, prior to the
occurrence of an Event of Default and after the curing of all Events of Default
which may have occurred, undertakes to perform such duties and only such duties
as are specifically set forth in this Agreement. If an Event of Default has
occurred and has not been cured or waived, the Trustee shall exercise such of
the rights and powers vested in it by this Agreement, and use the same degree of
care and skill in its exercise as a prudent person would exercise or use under
the circumstances in the conduct of such person's own affairs.
(b) The Trustee, upon receipt of all resolutions,
certificates, statements, opinions, reports, documents, orders or other
instruments furnished to the Trustee which are specifically required to be
furnished pursuant to any provision of this Agreement, shall examine them to
determine whether they conform on their face to the requirements of this
Agreement; provided, however, that the Trustee shall not be responsible for the
accuracy or content of any resolution, certificate, statement, opinion, report,
document, order or other instrument furnished by the Servicer or the Seller
hereunder. If any such
71
<PAGE>
instrument is found not to conform on its face to the requirements of this
Agreement, the Trustee shall take action as it deems appropriate to have the
instrument corrected and, if the instrument is not corrected to the Trustee's
satisfaction, the Trustee will, at the expense of the Servicer notify the
Certificate Insurer and request written instructions as to the action it deems
appropriate to have the instrument corrected, and if the instrument is not so
corrected, the Trustee will provide notice thereof to the Certificate Insurer
who shall then direct the Trustee as to the action, if any, to be taken.
(c) No provision of this Agreement shall be construed to
relieve the Trustee from liability for its own negligent action, its own
negligent failure to act or its own willful misconduct; provided, however, that:
(i) prior to the occurrence of an Event of Default, and
after the curing of all such Events of Default which may have occurred,
the duties and obligations of the Trustee shall be determined solely by
the express provisions of this Agreement, the Trustee shall not be
liable except for the performance of such duties and obligations as are
specifically set forth in this Agreement, no implied covenants or
obligations shall be read into this Agreement against the Trustee and,
in the absence of bad faith on the part of the Trustee, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon any certificates or
opinions furnished to the Trustee and conforming to the requirements of
this Agreement;
(ii) the Trustee shall not be personally liable for an
error of judgment made in good faith by a Responsible Officer or other
officers of the Trustee, unless it shall be proved that the Trustee was
negligent in ascertaining the pertinent facts;
(iii) the Trustee shall not be personally liable with
respect to any action taken, suffered or omitted to be taken by it in
good faith in accordance with the direction of the Certificate Insurer
or with the consent of the Certificate Insurer, the Class A
Certificateholders holding Class A Certificates evidencing Percentage
Interests of at least 25%, relating to the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred upon the Trustee, under this
Agreement;
(iv) the Trustee shall not be required to take notice or
be deemed to have notice or knowledge of any default or Event of
Default (except an Event of Default with respect to the nonpayment of
any amount described in Section 7.01(a)), unless a Responsible Officer
of the Trustee shall have received written notice thereof. In the
absence of receipt of such notice, the Trustee may conclusively assume
that there is no default or Event of Default (except a failure to make
a Periodic Advance);
(v) the Trustee shall not be required to expend or risk
its own funds or otherwise incur financial liability for the
performance of any of its duties hereunder or the exercise of any of
its rights or powers if there is reasonable ground for believing that
the repayment of such funds or adequate indemnity against such risk or
liability is not reasonably assured to it and none of the provisions
contained in this Agreement shall in any event require the Trustee to
perform, or be responsible for the manner of performance of, any of the
obligations of the Servicer under this Agreement except during such
time, if any, as the Trustee shall be the successor to, and be vested
with the rights, duties, powers and privileges of, the Servicer in
accordance with the terms of this Agreement; and
72
<PAGE>
(vi) subject to the other provisions of this Agreement
(and except in its capacity as successor Servicer) and without limiting
the generality of this Section, the Trustee shall have no duty (A) to
see to any recording, filing, or depositing of this Agreement or any
agreement referred to herein or any financing statement or continuation
statement evidencing a security interest, or to see to the maintenance
of any such recording or filing or depositing or to any rerecording,
refiling or redepositing of any thereof, (B) to see to any insurance,
(C) to see to the payment or discharge of any tax, assessment, or other
governmental charge or any lien or encumbrance of any kind owing with
respect to, assessed or levied against, any part of the Trust, the
Trust Fund, the Certificateholders or the Mortgage Loans, (D) to
confirm or verify the contents of any reports or certificates of the
Servicer delivered to the Trustee pursuant to this Agreement believed
by the Trustee to be genuine and to have been signed or presented by
the proper party or parties.
(d) It is intended that the REMIC Trust formed hereunder shall
constitute, and that the affairs of the REMIC Trust shall be conducted so as to
qualify it as, a REMIC as defined in and in accordance with the REMIC
Provisions. In furtherance of such intention, the Seller, as Class R
Certificateholder, covenants and agrees that it shall act as agent (and the
Seller, as Class R Certificateholder, is hereby appointed to act as agent) and
as Class R Certificateholder Tax Matters Person on behalf of the REMIC Trust,
and that in such capacities it shall:
(i) prepare, sign and file, or cause to be prepared and
filed, in a timely manner, a U.S. Real Estate Mortgage Investment
Conduit Income Tax Return (Form 1066) and any other Tax Return required
to be filed by the REMIC Trust, using a calendar year as the taxable
year for the REMIC Trust;
(ii) make, or cause to be made, an election, on behalf
of the REMIC Trust, to be treated as a REMIC on the federal tax return
of the REMIC Trust for its first taxable year;
(iii) prepare and forward, or cause to be prepared and
forwarded, to the Trustee, the Certificateholders and to the Internal
Revenue Service and any other relevant governmental taxing authority
all information returns or reports as and when required to be provided
to them in accordance with the REMIC Provisions;
(iv) to the extent that the affairs of the REMIC Trust
are within its control, conduct such affairs of the REMIC Trust at all
times that any Certificates are outstanding so as to maintain the
status of the REMIC Trust as a REMIC under the REMIC Provisions and any
other applicable federal, state and local laws, including, without
limitation, information reports relating to "original issue discount,"
as defined in the Code, based upon the Prepayment Assumption and
calculated by using the issue price of the Certificates;
(v) not knowingly or intentionally take any action or
omit to take any action that would cause the termination of the REMIC
status of the REMIC Trust;
(vi) pay the amount of any and all federal, state, and
local taxes, including, without limitation, any minimum tax imposed by
Section 23151(a) and 23153(a) of the Pennsylvania Revenue and Taxation
Code upon the Trustee or the Certificateholders in connection with the
Trust, the Trust Fund or the Mortgage Loans, prohibited transaction
taxes as defined in Section 860F of the Code, other than any amount due
as a result of a transfer or attempted or purported transfer in
violation of Section 4.02, imposed on the Trust Fund when and as the
same shall be due and payable (but such obligation shall not prevent
the Trustee or any other appropriate Person
73
<PAGE>
from contesting any such tax in appropriate proceedings and shall not
prevent the Trustee from withholding payment of such tax, if permitted
by law, pending the outcome of such proceedings). The Trustee shall be
entitled to reimbursement in accordance with Sections 9.01(c) and 9.05
hereof;
(vii) ensure that any such returns or reports filed on
behalf of the Trust Fund by the Trustee are properly executed by the
appropriate person and submitted in a timely manner;
(viii) represent the Trust Fund in any administrative or
judicial proceedings relating to an examination or audit by any
governmental taxing authority, request an administrative adjustment as
to any taxable year of the Trust Fund, enter into settlement agreements
with any governmental taxing agency, extend any statute of limitations
relating to any item of the Trust Fund and otherwise act on behalf of
the Trust Fund in relation to any tax matter involving the Trust Fund;
(ix) as provided in Section 5.12 hereof, make available
information necessary for the computation of any tax imposed (1) on
transferrors of residual interests to transferees that are not
Permitted Transferees or (2) on pass-through entities, any interest in
which is held by an entity which is not a Permitted Transferee. The
Trustee covenants and agrees that it will cooperate with the Servicer
in the foregoing matters and that it will sign, as Trustee, any and all
Tax Returns required to be filed by the Trust Fund. Notwithstanding the
foregoing, at such time as the Trustee becomes the successor Servicer,
the holder of the largest percentage of the Class R Certificates shall
serve as Tax Matters Person until such time as an entity is appointed
to succeed the Trustee as Servicer;
(x) 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 Class R Certificate to any Person who is not
a Permitted Transferee, 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 Class R 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 Class
R Certificate having as among its record holders at any time any Person
that is not a Permitted Transferee. Reasonable compensation for
providing such information may be accepted by the Trustee;
(xi) pay out of its own funds, without any right of
reimbursement, any and all tax related expenses of the Trust Fund
(including, but not limited to, tax return preparation and filing
expenses and any professional fees or expenses related to audits 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 Opinion of Counsel required
pursuant to Sections 3.03, 5.10 and 8.02 and other than taxes except as
specified herein;
(xii) upon filing with the Internal Revenue Service, the
Trustee shall furnish to the Holders of the Class R Certificates the
Form 1066 and each Form 1066Q and shall respond promptly to written
requests made not more frequently than quarterly by any Holder of Class
R Certificates with respect to the following matters:
74
<PAGE>
(A) the original projected principal and interest
cash flows on the Closing Date on the regular and residual
interests created hereunder and on the Mortgage Loans, based
on the Prepayment Assumption;
(B) the projected remaining principal and interest
cash flows as of the end of any calendar quarter with respect
to the regular and residual interests created hereunder and
the Mortgage Loans, based on the Prepayment Assumption;
(C) the Prepayment Assumption and any interest rate
assumptions used in determining the projected principal and
interest cash flows described above;
(D) the original issue discount (or, in the case of
the Mortgage Loans, market discount) or premium accrued or
amortized through the end of such calendar quarter with
respect to the regular or residual interests created hereunder
and with respect to the Mortgage Loans, together with each
constant yield to maturity used in computing the same;
(E) the treatment of losses realized with respect to
the Mortgage Loans or the regular interests created hereunder,
including the timing and amount of any cancellation of
indebtedness income of the REMIC with respect to such regular
interests or bad debt deductions claimed with respect to the
Mortgage Loans;
(F) the amount and timing of any non-interest
expenses of the REMIC; and
(G) any taxes (including penalties and interest)
imposed on the REMIC, including, without limitation, taxes on
"prohibited transactions," "contributions" or "net income from
foreclosure property" or state or local income or franchise
taxes; and
(xiii) make any other required reports in respect of
interest payments in respect of the Mortgage Loans and acquisitions and
abandonments of Mortgaged Property to the Internal Revenue Service
and/or the borrowers, as applicable.
(e) In the event that any tax is imposed on "prohibited
transactions" of the REMIC as defined in Section 860F(a)(2) of the Code, on the
"net income from foreclosure property" of the REMIC as defined in Section
860G(c) of the Code, on any contribution to the REMIC after the Startup Day
pursuant to Section 860G(d) of the Code, or any other tax (other than any
minimum tax imposed by Sections 23151(a) or 23153(a) of the Pennsylvania Revenue
and Taxation Code) is imposed, such tax shall be paid by (i) the Trustee, if
such tax arises out of or results from a breach by the Trustee of any of its
obligations under this Agreement, (ii) the Servicer, if such tax arises out of
or results from a breach by the Servicer of any of its obligations under this
Agreement, or otherwise (iii) the holders of the Class R Certificates in
proportion to their Percentage Interests. To the extent such tax is chargeable
against the holders of the Class R Certificates, notwithstanding anything to the
contrary contained herein, the Trustee is hereby authorized to retain from
amounts otherwise distributable to the Holders of the Class R Certificates on
any Distribution Date sufficient funds to reimburse the Trustee for the payment
of such tax (to the extent that the Trustee has not been previously reimbursed
or indemnified therefor).
75
<PAGE>
Section 9.02 Certain Matters Affecting the Trustee. (a) Except
as otherwise provided in Section 9.01:
(i) the Trustee may rely and shall be protected in
acting or refraining from acting upon any resolution, Officer's
Certificate, Opinion of Counsel, certificate of auditors or any other
certificate, statement, instrument, opinion, report, notice, request,
consent, order, appraisal, bond or other paper or document believed by
it to be genuine and to have been signed or presented by the proper
party or parties;
(ii) the Trustee may consult with counsel and any
Opinion of Counsel shall be full and complete authorization and
protection in respect of any action taken or suffered or omitted by it
hereunder in good faith and in accordance with such opinion of counsel;
(iii) the Trustee shall be under no obligation to
exercise any of the trusts or powers vested in it by this Agreement or
to institute, conduct or defend by litigation hereunder or in relation
hereto at the request, order or direction of the Certificate Insurer or
any of the Certificateholders, pursuant to the provisions of this
Agreement, unless such Certificateholders or the Certificate Insurer,
as applicable, shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which may be
incurred therein by the Trustee or thereby; nothing contained herein
shall, however, relieve the Trustee of the obligation, upon the
occurrence of an Event of Default (which has not been cured), to
exercise such of the rights and powers vested in it by this Agreement,
and to use the same degree of care and skill in its exercise as a
prudent person would exercise or use under the circumstances in the
conduct of such person's own affairs;
(iv) the Trustee shall not be personally liable for any
action taken, suffered or omitted by it in good faith and believed by
it to be authorized or within the discretion or rights or powers
conferred upon it by this Agreement;
(v) prior to the occurrence of an Event of Default
hereunder and after the curing of all Events of Default which may have
occurred, the Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, approval,
bond or other paper or document, unless requested in writing to do so
by the Certificate Insurer or Holders of Class A Certificates
evidencing Percentage Interests aggregating not less than 25%;
provided, however, that if the payment within a reasonable time to the
Trustee of the costs, expenses or liabilities likely to be incurred by
it in the making of such investigation is, in the opinion of the
Trustee, not reasonably assured to the Trustee by the security afforded
to it by the terms of this Agreement, the Trustee may require
reasonable indemnity against such expense or liability as a condition
to taking any such action. The reasonable expense of every such
examination shall be paid by the Servicer or, if paid by the Trustee,
shall be repaid by the Servicer upon demand from the Servicer's own
funds;
(vi) the right of the Trustee to perform any
discretionary act enumerated in this Agreement shall not be construed
as a duty, and the Trustee shall not be answerable for other than its
negligence or willful misconduct in the performance of such act;
(vii) the Trustee shall not be required to give any bond
or surety in respect of the execution of the Trust created hereby or
the powers granted hereunder; and
76
<PAGE>
(viii) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents or attorneys.
(b) Following the Startup Day, the Trustee shall not knowingly
accept any contribution of assets to the Trust Fund, unless the Trustee shall
have received an Opinion of Counsel (at the expense of the Servicer) to the
effect that the inclusion of such assets in the Trust Fund will not cause the
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. The
Trustee agrees to indemnify the Trust Fund and the Servicer for any taxes and
costs, including any attorney's fees, imposed or incurred by the Trust Fund or
the Servicer as a result of the breach of the Trustee's covenants set forth
within this subsection (b).
Section 9.03 Trustee Not Liable for Certificates or Mortgage
Loans. The recitals contained herein (other than the certificate of
authentication on the Certificates) shall be taken as the statements of the
Seller or the Servicer as the case may be, and the Trustee assumes no
responsibility for their correctness. The Trustee makes no representations as to
the validity or sufficiency of this Agreement or of any Mortgage Loan or related
document. The Trustee shall not be accountable for the use or application of any
funds paid to the Servicer in respect of the Mortgage Loans or deposited in or
withdrawn from the Collection Account by the Servicer. The Trustee shall not be
responsible for the legality or validity of the Agreement or the validity,
priority, perfection or sufficiency of the security for the Certificates issued
or intended to be issued hereunder.
Section 9.04 Trustee May Own Certificates. The Trustee in its
individual or any other capacity may become the owner or pledgor of Certificates
with the same rights it would have if it were not Trustee, and may otherwise
deal with the parties hereto.
Section 9.05 Trustee's Fees and Expenses; Indemnity. (a) The
Trustee acknowledges that in consideration of the performance of its duties
hereunder it is entitled to receive the Trustee's Fee in accordance with the
provision of Section 6.04(a). Additionally, the Trustee hereby covenants, for
the benefit of the Depositor, that the Trustee has arranged separately with the
Servicer for the payment to the Trustee of all of the Trustee's expenses in
connection with this Agreement, including, without limitation, all of the
Trustee's fees and expenses in connection with any actions taken by the Trustee
pursuant to Section 9.12 hereof. For the avoidance of doubt, the parties hereto
acknowledge that it is the intent of the parties that the Depositor and the
Certificate Insurer shall not pay any of the Trustee's fees and expenses in
connection with this transaction. The Trustee shall not be entitled to
compensation for any expense, disbursement or advance as may arise from its
negligence or bad faith, and the Trustee shall have no lien on the Trust Fund
for the payment of its fees and expenses.
(b) The Trust Fund, the Trustee and any director, officer,
employee or agent of the Trustee shall be indemnified by the Servicer and held
harmless against any loss, liability, claim, damage or expense arising out of,
or imposed upon the Trust or the Trustee through the Servicer's acts or
omissions in violation of this Agreement, other than any loss, liability or
expense incurred by reason of willful misfeasance, bad faith or negligence of
the Trustee in the performance of its duties hereunder or by reason of the
Trustee's reckless disregard of obligations and duties hereunder. The
obligations of the Servicer under this Section 9.05 arising prior to any
resignation or termination of the Servicer hereunder shall survive termination
of the Servicer and payment of the Certificates, and shall extend to any
co-trustee appointed pursuant to this Article IX.
77
<PAGE>
Section 9.06 Eligibility Requirements for Trustee. The Trustee
hereunder shall at all times be a banking entity (a) organized and doing
business under the laws of any state or the United States of America subject to
supervision or examination by federal or state authority, (b) authorized under
such laws to exercise corporate trust powers, including taking title to the
Trust Fund assets on behalf of the Certificateholders, (c) having a combined
capital and surplus of at least $50,000,000, (d) whose long-term deposits, if
any, shall be rated at least BBB- by S&P and Baa3 by Moody's (except as provided
herein) or such lower long-term deposit rating as may be approved in writing by
the Certificate Insurer, and (e) reasonably acceptable to the Certificate
Insurer as evidenced in writing. If such banking entity publishes reports of
condition at least annually, pursuant to law or to the requirements of the
aforesaid supervising or examining authority, then for the purposes of
determining an entity's combined capital and surplus for clause (c) of this
Section, the amount set forth in its most recent report of condition so
published shall be deemed to be its combined capital and surplus. In case at any
time the Trustee shall cease to be eligible in accordance with the provisions of
this Section, the Trustee shall resign immediately in the manner and with the
effect specified in Section 9.07.
Section 9.07 Resignation and Removal of the Trustee. (a) The
Trustee may at any time resign and be discharged from the trusts hereby created
by giving written notice thereof to the Servicer, the Certificate Insurer and
all Certificateholders. Upon receiving such notice of resignation, the Servicer
at the direction of the Certificate Insurer shall 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 Depositor, the Certificateholders, the Certificate
Insurer and the Seller by the Servicer. Unless a successor trustee shall have
been so appointed and shall have accepted appointment within 30 days after the
giving of such notice of resignation, the resigning Trustee may petition any
court of competent jurisdiction for the appointment of a successor trustee.
(b) If at any time the Trustee shall cease to be eligible in
accordance with the provisions of Section 9.06 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, then the Servicer (with the consent of the Certificate Insurer) or
the Certificate Insurer may remove the Trustee and the Servicer shall, within 30
days after such removal, appoint, at the direction of the Certificate Insurer, a
successor trustee by written instrument, in duplicate, which instrument shall be
delivered to the Trustee so removed and to the successor trustee. A copy of such
instrument shall be delivered to the Depositor, the Certificateholders, the
Certificate Insurer and the Seller by the Servicer.
(c) If the Trustee fails to perform in accordance with the
terms of this Agreement, the Majority Certificateholders or the Certificate
Insurer may remove the Trustee and appoint a successor trustee by written
instrument or instruments, in triplicate, signed by such Holders or their
attorneys-in-fact duly authorized, one complete set of which instruments shall
be delivered to the Servicer, one complete set to the Trustee so removed and one
complete set to the successor Trustee so appointed.
(d) Any resignation or removal of the Trustee and appointment
of a successor trustee pursuant to any of the provisions of this Section shall
not become effective until acceptance of appointment by the successor trustee as
provided in Section 9.08.
78
<PAGE>
Section 9.08 Successor Trustee. Any successor trustee
appointed as provided in Section 9.07 shall execute, acknowledge and deliver to
the Depositor, the Certificate Insurer, the Seller, the Servicer and to its
predecessor trustee an instrument accepting such appointment hereunder, and
thereupon the resignation or removal of the predecessor trustee shall become
effective and such successor trustee, without any further act, deed or
conveyance, shall become fully vested with all the rights, powers, duties and
obligations of its predecessor hereunder, with the like effect as if originally
named as trustee herein. The predecessor trustee shall deliver to the successor
trustee all Mortgage Files and related documents and statements held by it
hereunder, and the Servicer and the predecessor trustee shall execute and
deliver such instruments and do such other things as may reasonably be required
for more fully and certainly vesting and confirming in the successor trustee all
such rights, powers, duties and obligations. No successor trustee shall accept
appointment as provided in this Section unless at the time of such acceptance
such successor trustee shall be eligible under the provisions of Section 9.06.
Upon acceptance of appointment by a successor trustee as provided in this
Section, the Servicer shall mail notice of the succession of such trustee
hereunder to all Holders of Certificates at their addresses as shown in the
Certificate Register and to the Rating Agencies. If the Servicer fails to mail
such notice within 10 days after acceptance of appointment by the successor
trustee, the successor trustee shall cause such notice to be mailed at the
expense of the Servicer.
Section 9.09 Merger or Consolidation of Trustee. Any Person
into which the Trustee may be merged or converted or with which it may be
consolidated or any corporation or national banking association resulting from
any merger, conversion or consolidation to which the Trustee shall be a party,
or any corporation or national banking association succeeding to the business of
the trustee, shall be the successor of the Trustee hereunder, provided such
corporation or national banking association shall be eligible under the
provisions of Section 9.06, 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 9.10 Appointment of Co-Trustee or Separate Trustee.
(a) Notwithstanding any other provisions hereof, at any time, for the purpose of
meeting any legal requirements of any jurisdiction in which any part of the
Trust Fund or property securing the same may at the time be located, the
Servicer and the Trustee acting jointly shall have the power and shall execute
and deliver all instruments to appoint one or more Persons approved by the
Trustee to act as co-trustee or co-trustees, jointly with the Trustee, or
separate trustee or separate trustees, of all or any part of the Trust Fund, and
to vest in such Person or Persons, in such capacity, such title to the Trust
Fund, or any part thereof, and, subject to the other provisions of this Section
9.10 and the consent of the Certificate Insurer, such powers, duties,
obligations, rights and trusts as the Servicer and the Trustee may consider
necessary or desirable. If the Servicer shall not have joined in such
appointment within 15 days after the receipt by it of a request so to do, or in
case an Event of Default shall have occurred and be continuing, the Trustee
alone shall have the power to make such appointment. No co-trustee or separate
trustee hereunder shall be required to meet the terms of eligibility as a
successor trustee under Section 9.06 hereunder and no notice to Holders of
Certificates of the appointment of co-trustee(s) or separate trustee(s) shall be
required under Section 9.08 hereof.
(b) In the case of any appointment of a co-trustee or separate
trustee pursuant to this Section 9.10, all rights, powers, duties and
obligations conferred or imposed upon the Trustee shall be conferred or imposed
upon and exercised or performed by the Trustee and such separate trustee or
co-trustee jointly, except to the extent that under any law of any jurisdiction
in which any particular act or acts are to be performed (whether as Trustee
hereunder or as successor to the Servicer hereunder), the Trustee shall be
incompetent or unqualified to perform such act or acts, in which event such
rights, powers, duties and obligations (including the holding of title to the
Trust Fund or any portion thereof in
79
<PAGE>
any such jurisdiction) shall be exercised and performed by such separate trustee
or co-trustee at the direction of the Trustee.
(c) Any notice, request or other writing given to the Trustee
shall be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement and
the conditions of this Article IX. Each separate trustee and co-trustee, upon
its acceptance of the trusts conferred, shall be vested with the estates or
property specified in its instrument of appointment, either jointly with the
Trustee or separately, as may be provided therein, subject to all the provisions
of this Agreement, specifically including every provision of this Agreement
relating to the conduct of, affecting the liability of, or affording protection
to, the Trustee. Every such instrument shall be filed with the Trustee.
(d) Any separate trustee or co-trustee may, at any time,
constitute the Trustee, its agent or attorney-in-fact, with full power and
authority, to the extent not prohibited by law, to do any lawful act under or in
respect of this Agreement on its behalf and in its name. The Trustee shall not
be responsible for any action or inaction of any such separate trustee or
co-trustee, provided that the Trustee appointed such separate trustee or
co-trustee with due care. If any separate trustee or co-trustee shall die,
become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Trustee, to the extent permitted by law, without the appointment of a new or
successor trustee.
Section 9.11 Tax Returns. The Servicer and the Depositor, as
applicable, upon request, will promptly furnish the Trustee with all such
information as may be reasonably required in connection with the Trustee's
preparation of all Tax Returns of the Trust Fund or for the purpose of the
Trustee responding to reasonable requests for information made by
Certificateholders in connection with tax matters and, upon request within five
(5) Business Days after its receipt thereof, the Servicer shall (a) sign on
behalf of the Trust Fund any Tax Return that the Servicer is required to sign
pursuant to applicable federal, state or local tax laws, and (b) cause such Tax
Return to be returned to the Trustee for filing and for distribution to
Certificateholders if required.
Section 9.12 Retirement of Certificates. The Trustee shall,
upon the retirement of the Certificates pursuant hereto or otherwise, furnish to
the Certificate Insurer a notice of such retirement, and, upon retirement of the
Certificates and the expiration of the term of the Certificate Insurance Policy,
shall surrender the Certificate Insurance Policy to the Certificate Insurer for
cancellation.
ARTICLE X
MISCELLANEOUS PROVISIONS
Section 10.01 Limitation on Liability of the Depositor and the
Servicer. Neither the Depositor nor the Servicer nor any of the directors,
officers, employees or agents of the Depositor or the Servicer shall be under
any liability to the Trust, the Certificateholders or the Certificate Insurer
for any action taken, or for refraining from the taking of any action, in good
faith pursuant to this Agreement, or for errors in judgment; provided, however,
that this provision shall not protect the Depositor or the Servicer or any such
Person against any breach of warranties or representations made herein, or
against any specific liability imposed on each such party pursuant to this
Agreement or against any liability which would otherwise be imposed by reason of
willful misfeasance, bad faith or gross negligence in the
80
<PAGE>
performance of duties or by reason of reckless disregard of obligations or
duties hereunder. The Depositor or the Servicer and any director, officer,
employee or agent of the Depositor or the Servicer may rely in good faith on any
document of any kind which, prima facie, is properly executed and submitted by
any appropriate Person respecting any matters arising hereunder.
Section 10.02 Acts of Certificateholders. (a) Except as
otherwise specifically provided herein, whenever Certificateholder action,
consent or approval is required under this Agreement, such action, consent or
approval shall be deemed to have been taken or given on behalf of, and shall be
binding upon, all Certificateholders if the Majority Certificateholders or the
Certificate Insurer agrees to take such action or give such consent or approval.
(b) The death or incapacity of any Certificateholder shall not
operate to terminate this Agreement or the Trust Fund, nor entitle such
Certificateholder's legal representatives or heir to claim an accounting or to
take any action or proceeding in any court for a partition or winding up of the
Trust Fund, nor otherwise affect the rights, obligations and liabilities of the
parties hereto or any of them.
(c) No Certificateholder shall have any right to vote (except
as expressly provided for herein) or in any manner otherwise control the
operation and management of the Trust Fund, or the obligations of the parties
hereto, nor shall anything herein set forth, or contained in the terms of the
Certificates, be construed so as to constitute the Certificateholders from time
to time as partners or members of an association; nor shall any
Certificateholder be under any liability to any third person by reason of any
action taken by the parties to this Agreement pursuant to any provision hereof.
Section 10.03 Amendment. (a) This Agreement may be amended
from time to time by the Servicer, the Depositor and the Trustee by written
agreement, upon the prior written consent of the Certificate Insurer, without
notice to or consent of the Certificateholders to cure any ambiguity, to correct
or supplement any provisions herein, to comply with any changes in the Code, or
to make any other provisions with respect to matters or questions arising under
this Agreement which shall not be inconsistent with the provisions of this
Agreement; provided, however, that such action shall not, as evidenced by an
Opinion of Counsel, at the expense of the party requesting the change, delivered
to the Trustee, adversely affect in any material respect the interests of any
Certificateholder; and provided further, that no such amendment shall reduce in
any manner the amount of, or delay the timing of, payments received on Mortgage
Loans which are required to be distributed on any Certificate without the
consent of the Holder of such Certificate, or change the rights or obligations
of any other party hereto without the consent of such party. The Trustee shall
give prompt written notice to the Rating Agencies of any amendment made pursuant
to this Section 10.03 or pursuant to Section 6.09 of the Purchase Agreement.
(b) This Agreement may be amended from time to time by the
Servicer, the Depositor and the Trustee with the consent of the Certificate
Insurer, the Majority Certificateholders and the Holders of the majority of the
Percentage Interest in the Class R Certificates for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Agreement or of modifying in any manner the rights of the Holders;
provided, however, that no such amendment shall be made unless the Trustee
receives an Opinion of Counsel, at the expense of the party requesting the
change, that such change will not adversely affect the status of the REMIC Trust
as a REMIC or cause a tax to be imposed on the REMIC, and provided further, that
no such amendment shall reduce in any manner the amount of, or delay the timing
of, payments received on Mortgage Loans which are required to be distributed on
any Certificate without the consent of the Holder of such Certificate or reduce
the
81
<PAGE>
percentage for the Holders of which are required to consent to any such
amendment without the consent of the Holders of 100% of Certificates affected
thereby.
(c) It shall not be necessary for the consent of Holders under
this Section to approve the particular form of any proposed amendment, but it
shall be sufficient if such consent shall approve the substance thereof.
Section 10.04 Recordation of Agreement. To the extent
permitted by applicable law, this Agreement, or a memorandum thereof if
permitted under applicable law, is subject to recordation in all appropriate
public offices for real property records in all of the counties or other
comparable jurisdictions in which any or all of the properties subject to the
Mortgages are situated, and in any other appropriate public recording office or
elsewhere, such recordation to be effected by the Servicer at the
Certificateholders' expense on direction and at the expense of Majority
Certificateholders requesting such recordation, but only when accompanied by an
Opinion of Counsel to the effect that such recordation materially and
beneficially affects the interests of the Certificateholders or is necessary for
the administration or servicing of the Mortgage Loans.
Section 10.05 Duration of Agreement. This Agreement shall
continue in existence and effect until terminated as herein provided.
Section 10.06 Notices. All demands, notices and communications
hereunder shall be in writing and shall be deemed to have been duly given when
delivered to (i) in the case of the Servicer, American Business Credit, Inc.,
Balapointe Office Centre, 111 Presidential Boulevard, Suite 215, Bala Cynwyd, PA
19004, Attention: Mr. Anthony Santilli, Jr., (ii) in the case of the Seller,
ABFS 1997-1, Inc., Balapointe Office Centre, 111 Presidential Boulevard, Suite
215, Bala Cynwyd, PA 19004, Attention: Mr. Anthony Santilli, Jr., (iii) in the
case of the Trustee, The Chase Manhattan Bank, Global Trust Services, 450 West
33rd Street, New York, NY 10001 Attention: MBS, (iv) in the case of the
Certificateholders, as set forth in the Certificate Register, (v) in the case of
Moody's Investors Service, Inc., 99 Church Street, New York, New York 10007
Attention: Home Equity Monitoring Group, (vi) in the case of Standard & Poor's
Rating Services, 26 Broadway, New York, New York 10004 Attention: Residential
Mortgage Surveillance Group, (vii) in the case of the Certificate Insurer,
Financial Security Assurance Inc., 350 Park Avenue, New York, New York 10022
Attention: Surveillance Department (in each case in which notice or other
communication to the Certificate Insurer refers to an Event of Default, a claim
on the Certificate Insurance 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 each of the General Counsel and the Head -- Financial
Guaranty Group and shall be marked to indicate "URGENT MATERIAL ENCLOSED") and
(viii) in the case of the Depositor or the Underwriter, Prudential Securities
Secured Financing Corporation or Prudential Securities Incorporated, One New
York Plaza, New York, New York 10292, Attention: Len Blum. Any such notices
shall be deemed to be effective with respect to any party hereto upon the
receipt of such notice by such party, except that notices to the
Certificateholders shall be effective upon mailing or personal delivery.
Section 10.07 Severability of Provisions. If any one or more
of the covenants, agreements, provisions or terms of this Agreement shall be
held invalid for any reason whatsoever, then such covenants, agreements,
provisions or terms shall be deemed severable from the remaining covenants,
agreements, provisions or terms of this Agreement and shall in no way affect the
validity or enforceability of the other covenants, agreements, provisions or
terms of this Agreement.
82
<PAGE>
Section 10.08 No Partnership. Nothing herein contained shall
be deemed or construed to create a co-partnership or joint venture between the
parties hereto and the services of the Servicer shall be rendered as an
independent contractor and not as agent for the Certificateholders.
Section 10.09 Counterparts. This Agreement may be executed in
one or more counterparts and by the different parties hereto on separate
counterparts, each of which, when so executed, shall be deemed to be an
original; such counterparts, together, shall constitute one and the same
agreement.
Section 10.10 Successors and Assigns. This Agreement shall
inure to the benefit of and be binding upon the Servicer, the Depositor, the
Trustee and the Certificateholders and their respective successors and permitted
assigns.
Section 10.11 Headings. The headings of the various sections
of this Agreement have been inserted for convenience of reference only and shall
not be deemed to be part of this Agreement.
Section 10.12 The Certificate Insurer Default. Any right
conferred to the Certificate Insurer shall be suspended during any period in
which a Certificate Insurer Default exists. At such time as the Certificates are
no longer outstanding hereunder, and no amounts owed to the Certificate Insurer
hereunder remain unpaid, the Certificate Insurer's rights hereunder shall
terminate.
Section 10.13 Third Party Beneficiary. The parties agree that
each of the Seller and the Certificate Insurer is intended and shall have all
rights of a third-party beneficiary of this Agreement.
Section 10.14 Intent of the Parties. It is the intent of the
Depositor and Certificateholders that, for federal income taxes, state and local
income or franchise taxes and other taxes imposed on or measured by income, the
Certificates will be treated as evidencing beneficial ownership interests in a
REMIC. The parties to this Agreement and the holder of each Certificate, by
acceptance of its Certificate, and each beneficial owner thereof, agree to
treat, and to take no action inconsistent with the treatment of, the
Certificates in accordance with the preceding sentence for purposes of federal
income taxes, state and local income and franchise taxes and other taxes imposed
on or measured by income.
Section 10.15 Appointment of Tax Matters Person. The Holders
of the Class R Certificates hereby appoint the Seller to act, as their agent, as
the Tax Matters Person for the REMIC Trust for all purposes of the Code. The Tax
Matters Person will perform, or cause to be performed, such duties and take, or
cause to be taken, such actions as are required to be performed or taken by the
Tax Matters Person under the code. The Holders of the Class R Certificates may
hereafter appoint a different entity as their agent, or may appoint one of the
Class R Certificateholders to be the Tax Matters Person.
Section 10.16 GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER
OF JURY TRIAL. (a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE INTERNAL LAWS (AS OPPOSED TO CONFLICT OF LAWS PROVISIONS)
OF THE STATE OF NEW YORK.
(b) THE SERVICER AND THE TRUSTEE HEREBY SUBMIT TO THE
NONEXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND THE UNITED
STATES DISTRICT COURT LOCATED IN THE BOROUGH OF MANHATTAN IN NEW YORK CITY, AND
EACH WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT
ALL SUCH SERVICE OF PROCESS BE MADE BY REGISTERED MAIL
83
<PAGE>
DIRECTED TO THE ADDRESS SET FORTH IN SECTION 10.06 HEREOF AND SERVICE SO MADE
SHALL BE DEEMED TO BE COMPLETED FIVE DAYS AFTER THE SAME SHALL HAVE BEEN
DEPOSITED IN THE U.S. MAILS, POSTAGE PREPAID. THE DEPOSITOR, THE SERVICER AND
THE TRUSTEE EACH HEREBY WAIVE ANY OBJECTION BASED ON FORUM NON CONVENIENS, AND
ANY OBJECTION TO VENUE OF ANY ACTION INSTITUTED HEREUNDER AND CONSENTS TO THE
GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY THE
COURT. NOTHING IN THIS SECTION SHALL AFFECT THE RIGHT OF THE DEPOSITOR, THE
SERVICER OR THE TRUSTEE TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY
LAW OR AFFECT ANY OF THEIR RIGHTS TO BRING ANY ACTION OR PROCEEDING IN THE
COURTS OF ANY OTHER JURISDICTION.
(c) THE DEPOSITOR, THE SERVICER AND THE TRUSTEE EACH HEREBY
WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER
SOUNDING IN CONTRACT, TORT, OR OTHERWISE ARISING OUT OF, CONNECTED WITH, RELATED
TO, OR IN CONNECTION WITH THIS AGREEMENT. INSTEAD, ANY DISPUTE WILL BE RESOLVED
IN A BENCH TRIAL WITHOUT A JURY.
[Remainder of Page Intentionally Left Blank]
84
<PAGE>
IN WITNESS WHEREOF, the Servicer, the Trustee and the
Depositor have caused their names to be signed hereto by their respective
officers thereunto duly authorized as of the day and year first above written.
PRUDENTIAL SECURITIES SECURED
FINANCING CORPORATION, as
Depositor
By: /s/ Norman Chaleff
-------------------------------
Name: Norman Chaleff
Title: Vice President
AMERICAN BUSINESS CREDIT, INC., as Servicer
By: /s/ Beverly Santilli
-------------------------------
Name: Beverly Santilli
Title: President
THE CHASE MANHATTAN BANK, as Trustee
By: /s/ John Mynttinen
-------------------------------
Name: John Mynttinen
Title: Second Vice President
[Signature Page to Pooling and Servicing Agreement]
<PAGE>
State of New York )
) ss.:
County of New York )
On the 27th day of March, 1997 before me, a Notary Public in
and for the State of New York, personally appeared Beverly Santilli, known to me
to be President of American Business Credit, Inc., the corporation that executed
the within instrument and also known to me to be the person who executed it on
behalf of said corporation, and acknowledged to me that such corporation
executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
/s/ Mary Jane Constant
-----------------------------------
Notary Public
My Commission expires: January 2, 1998
<PAGE>
State of New York )
) ss.:
County of New York )
On the 27th day of March, 1997, before me, a Notary Public in
and for the State of New York, personally appeared John Mynttinen, to me to be a
Second Vice President of The Chase Manhattan Bank, the bank that executed the
within instrument and also known to me to be the person who executed it on
behalf of said bank, and acknowledged to me that such bank executed the within
instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
/s/ Mary Jane Constant
-----------------------------------
Notary Public
My Commission expires: January 2, 1998
<PAGE>
State of New York )
) ss.:
County of New York )
On the 27th day of March, 1997, before me, a Notary Public in
and for the State of New York, personally appeared Norman Chaleff, known to me
to be a Vice President of Prudential Securities Secured Financing Corporation,
the corporation 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 hereunder to set my hand and
affixed my official seal the day and year in this certificate first above
written.
/s/ Mary Jane Constant
-----------------------------------
Notary Public
My Commission expires: January 2, 1998
<PAGE>
EXHIBIT A-1
FORM OF CLASS A-1 CERTIFICATE
ABFS MORTGAGE LOAN TRUST 1997-1
MORTGAGE PASS-THROUGH CERTIFICATES
CLASS A-1 CERTIFICATE
<TABLE>
<CAPTION>
<S> <C>
Series 1997-1 Pass-Through Rate: 6.525%
No. A-1-1
Original Certificate Principal Original Dollar Amount of Initial
Balance: $32,100,000.00 Mortgage Loans as of the Cut-Off Date
Represented by this Certificate:
$47,249,549.46
CUSIP: 000759 AB6 Percentage Interest of this Certificate:
100%
Cut-Off Date: Date of Pooling and Servicing
Close of business February 28, 1997 Agreement: As of March 1, 1997
Closing Date: March 27, 1997
First Distribution Date: April 15, 1997 Latest Maturity Date: February 15, 2010
Servicer: American Business Credit, Inc. Trustee: The Chase Manhattan Bank
</TABLE>
Unless this Certificate is presented by an authorized
representative of the Depository Trust Company, a New York corporation ("DTC"),
to the Depositor 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.
This certifies that CEDE & CO. is the registered owner of a
Class A-1 Certificate percentage interest (the "Percentage Interest") in certain
first and second lien mortgage loans (the "Mortgage Loans") serviced by American
Business Credit, Inc. (hereinafter called the "Servicer"), in its capacity as
servicer under that certain Pooling and Servicing Agreement (the "Agreement")
dated as of March 1, 1997 among American Business Credit, Inc., as servicer,
Prudential Securities Secured Financing Corporation, as depositor (the
"Depositor") and The Chase Manhattan Bank, as trustee
A-1-1
<PAGE>
(the "Trustee"). The Mortgage Loans were originated or acquired by American
Business Credit, Inc. ("ABC") or HomeAmerican Credit, Inc. d/b/a Upland Mortgage
("Upland", and together with ABC, the "Originators") and sold to ABFS 1997-1,
Inc. (the "Seller"), which in turn sold the Mortgage Loans to the Depositor
pursuant to that certain Unaffiliated Seller's Agreement, dated as of March 1,
1997, among the Depositor, the Originators and the Seller. The Mortgage Loans
will be serviced by the Servicer pursuant to the terms and conditions of the
Agreement, certain of the pertinent provisions of which are set forth herein. 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. The Initial Mortgage Loans have
aggregate outstanding principal balances, at the close of business on the
Cut-Off Date herein referred to, after application of payments received by the
Seller on or before such date, of approximately $47,249,549.46.
On each Distribution Date, commencing on April 15, 1997, the
Trustee shall distribute to the Person in whose name this Certificate is
registered on the last day of the month next preceding the month of such
distribution (the "Record Date"), an amount equal to the product of the
Percentage Interest evidenced by this Certificate and the amount required to be
distributed to Holders of the Class A-1 Certificates on such Distribution Date
pursuant to Section 6.05 of the Agreement.
Distributions on this Certificate will be made by the Trustee
by wire transfer of immediately available funds to the account of the Person
entitled thereto as shall appear on the Certificate Register without the
presentation or surrender of this Certificate (except for the final distribution
as described below) or the making of any notation thereon, at a bank or other
entity having appropriate facilities therefor, if such Person shall own of
record Certificates of the same Class which have denominations aggregating at
least $5,000,000 appearing in the Certificate Register and shall have so
notified the Trustee at least five business days prior to the related Record
Date, or by check mailed to the address of such Person appearing in the
Certificate Register. Notwithstanding the above, the final distribution on this
Certificate will be made after due notice by the Trustee of the pendency of such
distribution and only upon presentation and surrender of this Certificate at the
office or agency maintained for that purpose by the Trustee in New York, New
York.
This Certificate is one of a duly authorized issue of
Certificates designated as ABFS Mortgage Loan Trust 1997-1, Mortgage
Pass-Through Certificates, Series 1997-1, Class A-1, Class A-2, Class A-3 and
Class R (herein called the "Certificates") and representing undivided ownership
of (i) such Mortgage Loans as from time to time are subject to the Agreement,
together with the Mortgage Files relating thereto and all collections thereon
and proceeds thereof (other than payments of interest that accrued on each
Mortgage Loan up to the Cut-Off Date), (ii) such assets as from time to time are
identified as REO Property and collections thereon and proceeds thereof, assets
that are deposited in the Accounts, including amounts on deposit in such
Accounts and invested in Permitted Investments, (iii) the Trustee's
A-1-2
<PAGE>
rights with respect to the Mortgage Loans under all insurance policies required
to be maintained pursuant to the Agreement and any Insurance Proceeds, (iv) the
Certificate Insurance Policy, (v) Liquidation Proceeds and (vi) Released
Mortgaged Property Proceeds.
The Certificates do not represent an obligation of, or an
interest in, the Depositor, the Seller, the Servicer, the Originators, the
Certificate Insurer or the Trustee and are not insured or guaranteed by the
Federal Deposit Insurance Corporation, the Government National Mortgage
Association, the Federal Housing Administration or the Veterans Administration
or any other governmental agency. The Certificates are limited in right of
payment to certain collections and recoveries respecting the Mortgage Loans and,
with respect to the Class A Certificates, Insured Payments under the Certificate
Insurance Policy, all as more specifically set forth herein and in the
Agreement. In the event Servicer funds are advanced with respect to any Mortgage
Loan, such advance is reimbursable to the Servicer from related recoveries on
such Mortgage Loan.
Financial Security Assurance Inc. (the "Certificate Insurer")
has issued a surety bond with respect to the Class A Certificates, which
guarantees certain payments on the Class A Certificates, as described in the
Agreement.
Subject to certain restrictions, the Agreement permits the
amendment thereof by the Depositor, the Servicer and the Trustee. Subject to the
rights of the Certificate Insurer, the Agreement permits the Majority
Certificateholders to waive, on behalf of all Certificateholders, any default by
the Servicer in the performance of its obligations under the Agreement and its
consequences, except in a default in making any required distribution on a
Certificate. Any such consent or waiver by the Majority Certificateholders shall
be conclusive and binding on the holder of this Certificate 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.
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 maintained by the Trustee in New York,
New York, duly endorsed by, or accompanied by a written instrument of transfer
in form satisfactory to, the Trustee, duly executed by the holder hereof or such
holder's attorney duly authorized in writing, and thereupon one or more new
Certificates of authorized denominations evidencing the same aggregate undivided
Percentage Interest will be issued to the designated transferee or transferees.
The Certificates are issuable only in fully-registered form.
As provided in the Agreement and subject to certain limitations therein set
forth, a Certificate is exchangeable for a new Certificate evidencing the same
undivided ownership interest, as requested by the holder surrendering the same.
A-1-3
<PAGE>
No service charge will be made for any such registration of
transfer or exchange, but the Trustee may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith.
The Servicer, the Depositor, the Seller, the Originators and
the Trustee and any agent of any of the foregoing, may treat the person in whose
name this Certificate is registered as the owner hereof for all purposes, and
none of the foregoing shall be affected by notice to the contrary.
The obligations created by the Agreement shall terminate upon
notice to the Trustee of: (i) the later of (a) the distribution to
Certificateholders of the final payment or collection with respect to the last
Mortgage Loan (or Periodic Advances of same by the Servicer), or the disposition
of all funds with respect to the last Mortgage Loan and the remittance of all
funds due under the Agreement and the payment of all amounts due and payable to
the Certificate Insurer and the Trustee or (b) mutual consent of the Servicer,
the Certificate Insurer and all Certificateholders, or (ii) the purchase by the
Servicer of all outstanding Mortgage Loans and REO Properties at a price
determined as provided in the Agreement (the exercise of the right of the
Servicer to purchase all the Mortgage Loans and property in respect of Mortgage
Loans will result in early retirement of the Certificates), the right of the
Servicer to purchase being subject to the Pool Principal Balance of the Mortgage
Loans and REO Properties at the time of purchase being less than ten percent
(10%) of the Maximum Collateral Amount. Unless this Certificate has been
authenticated by the Trustee, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
Before the earlier of (i) the date on which the Pre-Funding
Period expires and (ii) the date on which the Department of Labor amends
Prohibited Transaction Exemption 90-32 to permit the use of pre-funding accounts
thereunder, no sale or other transfer of record or beneficial ownership of any
Class A Certificate shall be made to any Person which is a pension or benefit
plan or individual retirement arrangement that is subject to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or to Section 4975
of the Code or an entity whose underlying assets are deemed to be assets of such
a plan or arrangement by reason of such plan's or arrangement's investment in
the entity, as determined under U.S. Department of Labor Regulations 29 C.F.R.
ss. 2510.3-101 or otherwise (collectively, a "Plan"). By acceptance of a Class A
Certificate during such period, each Person acquiring a Class A Certificate
shall be deemed to have represented that it is not a Plan.
A-1-4
<PAGE>
Unless this Certificate has been countersigned by the Trustee, 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 by its authorized officer.
THE CHASE MANHATTAN BANK,
not in its individual capacity, but solely
as Trustee
By:
----------------------------------------
Authorized Officer
Attest:
By:
-----------------------
Authorized Officer
CERTIFICATE OF AUTHENTICATION
This is a Class A-1 Certificate referred to in the
within-mentioned Agreement, which Certificate is issued to Cede & Co. in the
initial denomination of $32,100,000.00.
THE CHASE MANHATTAN BANK,
not in its individual capacity, but solely
as Trustee
By:
------------------------------------------
Authorized Signatory
Dated: March 27, 1997
A-1-5
<PAGE>
EXHIBIT A-2
FORM OF CLASS A-2 CERTIFICATE
ABFS MORTGAGE LOAN TRUST 1997-1
MORTGAGE PASS-THROUGH CERTIFICATES
CLASS A-2 CERTIFICATE
<TABLE>
<CAPTION>
<S> <C>
Series 1997-1 Pass-Through Rate: 6.925%
No. A-2-1
Original Certificate Principal Original Dollar Amount of Initial
Balance: $20,600,000.00 Mortgage Loans as of the Cut-Off Date
Represented by this Certificate:
$47,249,549.46
CUSIP: 000759 AC4 Percentage Interest of this Certificate:
100%
Cut-Off Date: Date of Pooling and Servicing
Close of business February 28, 1997 Agreement: As of March 1, 1997
Closing Date: March 27, 1997
First Distribution Date: April 15, 1997 Latest Maturity Date: February 15, 2012
Servicer: American Business Credit, Inc. Trustee: The Chase Manhattan Bank
</TABLE>
Unless this Certificate is presented by an authorized
representative of the Depository Trust Company, a New York corporation ("DTC"),
to the Depositor 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.
This certifies that CEDE & CO. is the registered owner of a
Class A-2 Certificate percentage interest (the "Percentage Interest") in certain
first and second lien mortgage loans (the "Mortgage Loans") serviced by American
Business Credit, Inc. (hereinafter called the "Servicer"), in its capacity as
servicer under that certain Pooling and Servicing Agreement (the "Agreement")
dated as of March 1, 1997 among American Business Credit, Inc., as servicer,
Prudential Securities Secured Financing Corporation, as depositor (the
"Depositor") and The Chase Manhattan Bank, as trustee (the "Trustee"). The
Mortgage Loans were originated or acquired by American Business Credit, Inc.
("ABC") or HomeAmerican Credit, Inc. d/b/a Upland Mortgage
A-2-1
<PAGE>
("Upland", and together with ABC, the "Originators") and sold to ABFS 1997-1,
Inc. (the "Seller"), which in turn sold the Mortgage Loans to the Depositor
pursuant to that certain Unaffiliated Seller's Agreement, dated as of March 1,
1997, among the Depositor, the Originators and the Seller. The Mortgage Loans
will be serviced by the Servicer pursuant to the terms and conditions of the
Agreement, certain of the pertinent provisions of which are set forth herein. 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. The Initial Mortgage Loans have
aggregate outstanding principal balances, at the close of business on the
Cut-Off Date herein referred to, after application of payments received by the
Seller on or before such date, of approximately $47,249,549.46.
On each Distribution Date, commencing on April 15, 1997, the
Trustee shall distribute to the Person in whose name this Certificate is
registered on the last day of the month next preceding the month of such
distribution (the "Record Date"), an amount equal to the product of the
Percentage Interest evidenced by this Certificate and the amount required to be
distributed to Holders of the Class A-2 Certificates on such Distribution Date
pursuant to Section 6.05 of the Agreement.
Distributions on this Certificate will be made by the Trustee
by wire transfer of immediately available funds to the account of the Person
entitled thereto as shall appear on the Certificate Register without the
presentation or surrender of this Certificate (except for the final distribution
as described below) or the making of any notation thereon, at a bank or other
entity having appropriate facilities therefor, if such Person shall own of
record Certificates of the same Class which have denominations aggregating at
least $5,000,000 appearing in the Certificate Register and shall have so
notified the Trustee at least five business days prior to the related Record
Date, or by check mailed to the address of such Person appearing in the
Certificate Register. Notwithstanding the above, the final distribution on this
Certificate will be made after due notice by the Trustee of the pendency of such
distribution and only upon presentation and surrender of this Certificate at the
office or agency maintained for that purpose by the Trustee in New York, New
York.
This Certificate is one of a duly authorized issue of
Certificates designated as ABFS Mortgage Loan Trust 1997-1, Mortgage
Pass-Through Certificates, Series 1997-1, Class A-1, Class A-2, Class A-3 and
Class R (herein called the "Certificates") and representing undivided ownership
of (i) such Mortgage Loans as from time to time are subject to the Agreement,
together with the Mortgage Files relating thereto and all collections thereon
and proceeds thereof (other than payments of interest that accrued on each
Mortgage Loan up to the Cut-Off Date), (ii) such assets as from time to time are
identified as REO Property and collections thereon and proceeds thereof, assets
that are deposited in the Accounts, including amounts on deposit in such
Accounts and invested in Permitted Investments, (iii) the Trustee's rights with
respect to the Mortgage Loans under all insurance policies required to be
maintained pursuant to the Agreement and any Insurance Proceeds, (iv) the
Certificate Insurance Policy, (v) Liquidation Proceeds and (vi) Released
Mortgaged Property Proceeds.
A-2-2
<PAGE>
The Certificates do not represent an obligation of, or an
interest in, the Depositor, the Seller, the Servicer, the Originators, the
Certificate Insurer or the Trustee and are not insured or guaranteed by the
Federal Deposit Insurance Corporation, the Government National Mortgage
Association, the Federal Housing Administration or the Veterans Administration
or any other governmental agency. The Certificates are limited in right of
payment to certain collections and recoveries respecting the Mortgage Loans and,
with respect to the Class A Certificates, Insured Payments under the Certificate
Insurance Policy, all as more specifically set forth herein and in the
Agreement. In the event Servicer funds are advanced with respect to any Mortgage
Loan, such advance is reimbursable to the Servicer from related recoveries on
such Mortgage Loan.
Financial Security Assurance Inc. (the "Certificate Insurer")
has issued a surety bond with respect to the Class A Certificates, which
guarantees certain payments on the Class A Certificates, as described in the
Agreement.
Subject to certain restrictions, the Agreement permits the
amendment thereof by the Depositor, the Servicer and the Trustee. Subject to the
rights of the Certificate Insurer, the Agreement permits the Majority
Certificateholders to waive, on behalf of all Certificateholders, any default by
the Servicer in the performance of its obligations under the Agreement and its
consequences, except in a default in making any required distribution on a
Certificate. Any such consent or waiver by the Majority Certificateholders shall
be conclusive and binding on the holder of this Certificate 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.
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 maintained by the Trustee in New York,
New York, duly endorsed by, or accompanied by a written instrument of transfer
in form satisfactory to, the Trustee, duly executed by the holder hereof or such
holder's attorney duly authorized in writing, and thereupon one or more new
Certificates of authorized denominations evidencing the same aggregate undivided
Percentage Interest will be issued to the designated transferee or transferees.
The Certificates are issuable only in fully-registered form.
As provided in the Agreement and subject to certain limitations therein set
forth, a Certificate is exchangeable for a new Certificate evidencing the same
undivided ownership interest, as requested by the holder surrendering the same.
No service charge will be made for any such registration of
transfer or exchange, but the Trustee may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith.
The Servicer, the Depositor, the Seller, the Originators and
the Trustee and any agent of any of the foregoing, may treat the person in whose
name this Certificate is registered as the owner hereof for all purposes, and
none of the foregoing shall be affected by notice to the contrary.
A-2-3
<PAGE>
The obligations created by the Agreement shall terminate upon
notice to the Trustee of: (i) the later of (a) the distribution to
Certificateholders of the final payment or collection with respect to the last
Mortgage Loan (or Periodic Advances of same by the Servicer), or the disposition
of all funds with respect to the last Mortgage Loan and the remittance of all
funds due under the Agreement and the payment of all amounts due and payable to
the Certificate Insurer and the Trustee or (b) mutual consent of the Servicer,
the Certificate Insurer and all Certificateholders, or (ii) the purchase by the
Servicer of all outstanding Mortgage Loans and REO Properties at a price
determined as provided in the Agreement (the exercise of the right of the
Servicer to purchase all the Mortgage Loans and property in respect of Mortgage
Loans will result in early retirement of the Certificates), the right of the
Servicer to purchase being subject to the Pool Principal Balance of the Mortgage
Loans and REO Properties at the time of purchase being less than ten percent
(10%) of the Maximum Collateral Amount. Unless this Certificate has been
authenticated by the Trustee, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
Before the earlier of (i) the date on which the Pre-Funding
Period expires and (ii) the date on which the Department of Labor amends
Prohibited Transaction Exemption 90-32 to permit the use of pre-funding accounts
thereunder, no sale or other transfer of record or beneficial ownership of any
Class A Certificate shall be made to any Person which is a pension or benefit
plan or individual retirement arrangement that is subject to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or to Section 4975
of the Code or an entity whose underlying assets are deemed to be assets of such
a plan or arrangement by reason of such plan's or arrangement's investment in
the entity, as determined under U.S. Department of Labor Regulations 29 C.F.R.
ss. 2510.3-101 or otherwise (collectively, a "Plan"). By acceptance of a Class A
Certificate during such period, each Person acquiring a Class A Certificate
shall be deemed to have represented that it is not a Plan.
A-2-4
<PAGE>
Unless this Certificate has been countersigned by the Trustee, 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 by its authorized officer.
THE CHASE MANHATTAN BANK,
in its individual capacity, but solely
as Trustee
By:
--------------------------------------
Authorized Officer
Attest:
By:
----------------------------
Authorized Officer
CERTIFICATE OF AUTHENTICATION
This is a Class A-2 Certificate referred to in the
within-mentioned Agreement, which Certificate is issued to Cede & Co. in the
initial denomination of $20,600,000.00.
THE CHASE MANHATTAN BANK,
not in its individual capacity, but solely
as Trustee
By:
---------------------------------------
Authorized Signatory
Dated: March 27, 1997
A-2-5
<PAGE>
EXHIBIT A-3
FORM OF CLASS A-3 CERTIFICATE
ABFS MORTGAGE LOAN TRUST 1997-1
MORTGAGE PASS-THROUGH CERTIFICATES
CLASS A-3 CERTIFICATE
<TABLE>
<CAPTION>
<S> <C>
Series 1997-1 Pass-Through Rate: 7.525%
No. A-3-1
Original Certificate Principal Original Dollar Amount of Initial
Balance: $20,048,000.00 Mortgage Loans as of the Cut-Off Date
Represented by this Certificate:
$47,249,549.46
CUSIP: 000759 AD2 Percentage Interest of this Certificate:
100%
Cut-Off Date: Date of Pooling and Servicing
Close of business February 28, 1997 Agreement: As of March 1, 1997
Closing Date: March 27, 1997
First Distribution Date: April 15, 1997 Latest Maturity Date: August 15, 2028
Servicer: American Business Credit, Inc. Trustee: The Chase Manhattan Bank
</TABLE>
Unless this Certificate is presented by an authorized
representative of the Depository Trust Company, a New York corporation ("DTC"),
to the Depositor 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.
This certifies that CEDE & CO. is the registered owner of a
Class A-3 Certificate percentage interest (the "Percentage Interest") in certain
first and second lien mortgage loans (the "Mortgage Loans") serviced by American
Business Credit, Inc. (hereinafter called the "Servicer"), in its capacity as
servicer under that certain Pooling and Servicing Agreement (the "Agreement")
dated as of March 1, 1997 among American Business Credit, Inc., as servicer,
Prudential Securities Secured Financing Corporation, as depositor (the
"Depositor") and The Chase Manhattan Bank, as trustee (the "Trustee"). The
Mortgage Loans were originated or acquired by
A-3-1
<PAGE>
American Business Credit, Inc. ("ABC") or HomeAmerican Credit, Inc. d/b/a Upland
Mortgage ("Upland", and together with ABC, the "Originators") and sold to ABFS
1997-1, Inc. (the "Seller"), which in turn sold the Mortgage Loans to the
Depositor pursuant to that certain Unaffiliated Seller's Agreement, dated as of
March 1, 1997, among the Depositor, the Originators and the Seller. The Mortgage
Loans will be serviced by the Servicer pursuant to the terms and conditions of
the Agreement, certain of the pertinent provisions of which are set forth
herein. 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. The Initial Mortgage Loans have
aggregate outstanding principal balances, at the close of business on the
Cut-Off Date herein referred to, after application of payments received by the
Seller on or before such date, of approximately $47,249,549.46
On each Distribution Date, commencing on April 15, 1997, the
Trustee shall distribute to the Person in whose name this Certificate is
registered on the last day of the month next preceding the month of such
distribution (the "Record Date"), an amount equal to the product of the
Percentage Interest evidenced by this Certificate and the amount required to be
distributed to Holders of Class A-3 Certificates on such Distribution Date
pursuant to Section 6.05 of the Agreement.
Distributions on this Certificate will be made by the Trustee
by wire transfer of immediately available funds to the account of the Person
entitled thereto as shall appear on the Certificate Register without the
presentation or surrender of this Certificate (except for the final distribution
as described below) or the making of any notation thereon, at a bank or other
entity having appropriate facilities therefor, if such Person shall own of
record Certificates of the same Class which have denominations aggregating at
least $5,000,000 appearing in the Certificate Register and shall have so
notified the Trustee at least five business days prior to the related Record
Date, or by check mailed to the address of such Person appearing in the
Certificate Register. Notwithstanding the above, the final distribution on this
Certificate will be made after due notice by the Trustee of the pendency of such
distribution and only upon presentation and surrender of this Certificate at the
office or agency maintained for that purpose by the Trustee in New York, New
York.
This Certificate is one of a duly authorized issue of
Certificates designated as ABFS Mortgage Loan Trust 1997-1, Mortgage
Pass-Through Certificates, Series 1997-1, Class A-1, Class A-2, Class A-3 and
Class R (herein called the "Certificates") and representing undivided ownership
of (i) such Mortgage Loans as from time to time are subject to the Agreement,
together with the Mortgage Files relating thereto and all collections thereon
and proceeds thereof (other than payments of interest that accrued on each
Mortgage Loan up to the Cut-Off Date), (ii) such assets as from time to time are
identified as REO Property and collections thereon and proceeds thereof, assets
that are deposited in the Accounts, including amounts on deposit in such
Accounts and invested in Permitted Investments, (iii) the Trustee's rights with
respect to the Mortgage Loans under all insurance policies required to be
maintained pursuant to the Agreement and any Insurance Proceeds, (iv) the
Certificate Insurance Policy, (v) Liquidation Proceeds and (vi) Released
Mortgaged Property Proceeds.
A-3-2
<PAGE>
The Certificates do not represent an obligation of, or an
interest in, the Depositor, the Seller, the Servicer, the Originators, the
Certificate Insurer or the Trustee and are not insured or guaranteed by the
Federal Deposit Insurance Corporation, the Government National Mortgage
Association, the Federal Housing Administration or the Veterans Administration
or any other governmental agency. The Certificates are limited in right of
payment to certain collections and recoveries respecting the Mortgage Loans and,
with respect to the Class A Certificates, Insured Payments under the Certificate
Insurance Policy, all as more specifically set forth herein and in the
Agreement. In the event Servicer funds are advanced with respect to any Mortgage
Loan, such advance is reimbursable to the Servicer from related recoveries on
such Mortgage Loan.
Financial Security Assurance Inc. (the "Certificate Insurer")
has issued a surety bond with respect to the Class A Certificates, which
guarantees certain payments on the Class A Certificates, as described in the
Agreement.
Subject to certain restrictions, the Agreement permits the
amendment thereof by the Depositor, the Servicer and the Trustee. Subject to the
rights of the Certificate Insurer, the Agreement permits the Majority
Certificateholders to waive, on behalf of all Certificateholders, any default by
the Servicer in the performance of its obligations under the Agreement and its
consequences, except in a default in making any required distribution on a
Certificate. Any such consent or waiver by the Majority Certificateholders shall
be conclusive and binding on the holder of this Certificate 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.
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 maintained by the Trustee in New York,
New York, duly endorsed by, or accompanied by a written instrument of transfer
in form satisfactory to, the Trustee, duly executed by the holder hereof or such
holder's attorney duly authorized in writing, and thereupon one or more new
Certificates of authorized denominations evidencing the same aggregate undivided
Percentage Interest will be issued to the designated transferee or transferees.
The Certificates are issuable only in fully-registered form.
As provided in the Agreement and subject to certain limitations therein set
forth, a Certificate is exchangeable for a new Certificate evidencing the same
undivided ownership interest, as requested by the holder surrendering the same.
No service charge will be made for any such registration of
transfer or exchange, but the Trustee may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith.
The Servicer, the Depositor, the Seller, the Originators and
the Trustee and any agent of any of the foregoing, may treat the person in whose
name this Certificate is registered as the owner hereof for all purposes, and
none of the foregoing shall be affected by notice to the contrary.
A-3-3
<PAGE>
The obligations created by the Agreement shall terminate upon
notice to the Trustee of: (i) the later of (a) the distribution to
Certificateholders of the final payment or collection with respect to the last
Mortgage Loan (or Periodic Advances of same by the Servicer), or the disposition
of all funds with respect to the last Mortgage Loan and the remittance of all
funds due under the Agreement and the payment of all amounts due and payable to
the Certificate Insurer and the Trustee or (b) mutual consent of the Servicer,
the Certificate Insurer and all Certificateholders, or (ii) the purchase by the
Servicer of all outstanding Mortgage Loans and REO Properties at a price
determined as provided in the Agreement (the exercise of the right of the
Servicer to purchase all the Mortgage Loans and property in respect of Mortgage
Loans will result in early retirement of the Certificates), the right of the
Servicer to purchase being subject to the Pool Principal Balance of the Mortgage
Loans and REO Properties at the time of purchase being less than ten percent
(10%) of the Maximum Collateral Amount. Unless this Certificate has been
authenticated by the Trustee, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
Before the earlier of (i) the date on which the Pre-Funding
Period expires and (ii) the date on which the Department of Labor amends
Prohibited Transaction Exemption 90-32 to permit the use of pre-funding accounts
thereunder, no sale or other transfer of record or beneficial ownership of any
Class A Certificate shall be made to any Person which is a pension or benefit
plan or individual retirement arrangement that is subject to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or to Section 4975
of the Code or an entity whose underlying assets are deemed to be assets of such
a plan or arrangement by reason of such plan's or arrangement's investment in
the entity, as determined under U.S. Department of Labor Regulations 29 C.F.R.
ss. 2510.3-101 or otherwise (collectively, a "Plan"). By acceptance of a Class A
Certificate during such period, each Person acquiring a Class A Certificate
shall be deemed to have represented that it is not a Plan.
A-3-4
<PAGE>
Unless this Certificate has been countersigned by the Trustee, 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 by its authorized officer.
THE CHASE MANHATTAN BANK,
not in its individual capacity, but solely
as Trustee
By:
--------------------------------------
Authorized Officer
Attest:
By:
---------------------------
Authorized Officer
CERTIFICATE OF AUTHENTICATION
This is a Class A-3 Certificate referred to in the
within-mentioned Agreement, which Certificate is issued to Cede & Co. in the
initial denomination of $20,048,000.00.
THE CHASE MANHATTAN BANK,
not in its individual capacity, but solely
as Trustee
By:
--------------------------------------
Authorized Signatory
Dated: March 27, 1997
A-3-5
<PAGE>
EXHIBIT B
FORM OF CLASS R CERTIFICATE
THIS CERTIFICATE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "1933 ACT"), OR THE SECURITIES LAW OF ANY STATE. ANY
RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CERTIFICATE WITHOUT SUCH
REGISTRATION OR QUALIFICATION MAY BE MADE ONLY IN A TRANSACTION WHICH DOES NOT
REQUIRE SUCH REGISTRATION OR QUALIFICATION AND IN ACCORDANCE WITH THE PROVISIONS
OF SECTION 4.02 OF THE AGREEMENT REFERRED TO HEREIN.
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A "RESIDUAL
INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS THOSE TERMS ARE
DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF
1986, AS AMENDED (THE "CODE").
ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CLASS R CERTIFICATE MAY BE
MADE ONLY IF THE PROPOSED TRANSFEREE PROVIDES (1) AN OPINION OF COUNSEL TO THE
TRUSTEE AND (2) AN AFFIDAVIT TO THE TRUSTEE THAT SUCH TRANSFEREE IS A PERMITTED
TRANSFEREE (AS DEFINED IN THE POOLING AND SERVICING AGREEMENT) OR AN AGENT OF A
PERMITTED TRANSFEREE. NOTWITHSTANDING THE REGISTRATION IN THE CERTIFICATE
REGISTER OF ANY TRANSFER OF THIS CLASS R CERTIFICATE TO A PERSON OTHER THAN A
PERMITTED TRANSFEREE OR AN AGENT OF A PERMITTED TRANSFEREE 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.
NO TRANSFER OF THIS CERTIFICATE OR ANY INTEREST THEREIN SHALL BE MADE TO ANY
EMPLOYEE BENEFIT PLAN OR OTHER RETIREMENT ARRANGEMENT, INCLUDING INDIVIDUAL
RETIREMENT ACCOUNTS AND ANNUITIES, KEOGH PLANS AND COLLECTIVE INVESTMENT FUNDS
AND SEPARATE ACCOUNTS IN WHICH SUCH PLANS, ACCOUNTS OR ARRANGEMENTS ARE INVESTED
THAT IS SUBJECT TO THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS
AMENDED ("ERISA"), OR THE CODE, NOR TO AN ENTITY WHOSE UNDERLYING ASSETS ARE
DEEMED TO BE ASSETS OF SUCH A PLAN, ACCOUNT OR ARRANGEMENT BY REASON OF SUCH
PLAN'S, ACCOUNT'S OR ARRANGEMENT'S INVESTMENT IN THE ENTITY, AS DETERMINED UNDER
U.S. DEPARTMENT OF LABOR REGULATIONS 29 C.F.R. ss. 2510.3-101 OR OTHERWISE.
B-1
<PAGE>
ABFS MORTGAGE LOAN TRUST 1997-1
MORTGAGE PASS-THROUGH CERTIFICATES
CLASS R CERTIFICATE
<TABLE>
<CAPTION>
<S> <C>
Series 1997-1 Percentage Interest of this Certificate:
No. R-1 100%
Cut-Off Date: Date of Pooling and Servicing
Close of business February 28, 1997 Agreement: As of March 1, 1997
Closing Date: March 27, 1997
First Distribution Date: April 15, 1997 Latest Maturity Date: August 15, 2028
Servicer: American Business Credit, Inc. Trustee: The Chase Manhattan Bank
</TABLE>
This certifies that ABFS 1997-1, Inc. is the registered owner
of a Class R percentage interest (the "Percentage Interest") in certain first or
second lien mortgage loans (the "Mortgage Loans") serviced by American Business
Credit, Inc. (hereinafter called the "Servicer"), in its capacity as servicer
under that certain Pooling and Servicing Agreement (the "Agreement") dated as of
March 1, 1997 among American Business Credit, Inc., as servicer, Prudential
Securities Secured Financing Corporation, as depositor (the "Depositor") and The
Chase Manhattan Bank, as trustee (the "Trustee"). The Mortgage Loans were
originated or acquired by American Business Credit, Inc. ("ABC") or HomeAmerican
Credit, Inc. d/b/a Upland Mortgage ("Upland", and together with ABC, the
"Originators") and sold to ABFS 1997-1, Inc. (the "Seller"), which in turn sold
the Mortgage Loans to the Depositor pursuant to that certain Unaffiliated
Seller's Agreement, dated as of March 1, 1997, among the Depositor, the
Originators and the Seller. The Mortgage Loans will be serviced by the Servicer
pursuant to the terms and conditions of the Agreement, certain of the pertinent
provisions of which are set forth herein. 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.
The Initial Mortgage Loans have aggregate outstanding principal balances, at the
close of business on the Cut-Off Date herein referred to, after application of
payments received by the Seller on or before such date, of approximately
$47,249,549.46.
On each Distribution Date, commencing on April 15, 1997, the
Trustee shall distribute to the Person in whose name this Certificate is
registered on the last day of the month next preceding the month of such
distribution (the "Record Date"), an amount equal to the product of the
Percentage Interest evidenced by this Certificate and the amount required to be
distributed to Holders of the Class R Certificates on such Distribution Date
pursuant to Section 6.05 of the Agreement.
B-2
<PAGE>
Distributions on this Certificate will be made by the Trustee
by wire transfer of immediately available funds to the account of the Person
entitled thereto as shall appear on the Certificate Register without the
presentation or surrender of this Certificate (except for the final distribution
as described below) or the making of any notation thereon, at a bank or other
entity having appropriate facilities therefor, if such Person shall own of
record Certificates of the same Class which have at least a 10% Percentage
Interest appearing in the Certificate Register and shall have so notified the
Trustee at least five business days prior to the related Record Date, or by
check mailed to the address of such Person appearing in the Certificate
Register. Notwithstanding the above, the final distribution on this Certificate
will be made after due notice by the Trustee of the pendency of such
distribution and only upon presentation and surrender of this Certificate at the
office or agency maintained for that purpose by the Trustee in New York, New
York.
This Certificate is one of a duly authorized issue of
Certificates designated as ABFS Mortgage Loan Trust 1997-1, Mortgage
Pass-Through Certificates, Series 1997-1, Class A-1, Class A-2, Class A-3 and
Class R (herein called the "Certificates") and representing undivided ownership
of (i) such Mortgage Loans as from time to time are subject to the Agreement,
together with the Mortgage Files relating thereto and all collections thereon
and proceeds thereof (other than payments of interest that accrued on each
Mortgage Loan up to the Cut-Off Date), (ii) such assets as from time to time are
identified as REO Property and collections thereon and proceeds thereof, assets
that are deposited in the Accounts, including amounts on deposit in such
Accounts and invested in Permitted Investments, (iii) the Trustee's rights with
respect to the Mortgage Loans under all insurance policies required to be
maintained pursuant to the Agreement and any Insurance Proceeds, (iv) the
Certificate Insurance Policy, (v) Liquidation Proceeds and (vi) Released
Mortgaged Property Proceeds.
The Certificates do not represent an obligation of, or an
interest in, the Depositor, the Seller, the Servicer, the Originators, Financial
Security Assurance Inc. (the "Certificate Insurer") or the Trustee and are not
insured or guaranteed by the Federal Deposit Insurance Corporation, the
Government National Mortgage Association, the Federal Housing Administration or
the Veterans Administration or any other governmental agency. The Certificates
are limited in right of payment to certain collections and recoveries respecting
the Mortgage Loans and, with respect to the Class A Certificates, Insured
Payments under the Certificate Insurance Policy, all as more specifically set
forth herein and in the Agreement. In the event Servicer funds are advanced with
respect to any Mortgage Loan, such advance is reimbursable to the Servicer from
related recoveries on such Mortgage Loan.
Subject to certain restrictions, the Agreement permits the
amendment thereof by the Depositor, the Servicer and the Trustee. Subject to the
rights of the Certificate Insurer, the Agreement permits the Majority
Certificateholders to waive, on behalf of all Certificateholders, any default by
the Servicer in the performance of its obligations under the Agreement and its
consequences, except in a default in making any required distribution on a
Certificate. Any such consent or waiver by the Majority Certificateholders shall
be conclusive and binding on the holder of this Certificate 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.
B-3
<PAGE>
As provided in the Agreement and subject to certain
limitations therein set forth, including, without limitation, with respect to
the Class R Certificates, execution and delivery as appropriate of the Transfer
Affidavit and Agreement (attached as an exhibit to the Agreement) and the
Transfer Certificate (attached as an exhibit to the Agreement) described in
Section 4.02(i) of the Agreement, 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 maintained by the Trustee in
New York, New York, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to, the Trustee, duly executed by the holder
hereof or such holder's attorney duly authorized in writing, and thereupon one
or more new Certificates of authorized denominations evidencing the same
aggregate undivided Percentage Interest will be issued to the designated
transferee or transferees.
No transfer of a Class R Certificate or any interest therein
shall be made to any employee benefit plan or other retirement arrangement,
including individual retirement accounts and annuities, Keogh plans and
collective investment funds and separate accounts in which such plans, accounts
or arrangements are invested, that is subject to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or the Code (each, a "Plan"), nor to
an entity whose underlying assets are deemed to be assets of such a plan,
account or arrangement by reason of such plan's, account's or arrangement's
investment in the entity, as determined under U.S. Department of Labor
Regulations 29 C.F.R. ss. 2510.3-101 or otherwise.
The Certificates are issuable only in fully-registered form.
As provided in the Agreement and subject to certain limitations therein set
forth, a Certificate is exchangeable for a new Certificate evidencing the same
undivided ownership interest, as requested by the holder surrendering the same.
No service charge will be made for any such registration of
transfer or exchange, but the Trustee may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith.
The Servicer, the Depositor, the Seller, the Originators and
the Trustee and any agent of any of the foregoing, may treat the person in whose
name this Certificate is registered as the owner hereof for all purposes, and
none of the foregoing shall be affected by notice to the contrary.
The obligations created by the Agreement shall terminate upon
notice to the Trustee of: (i) the later of (a) the distribution to
Certificateholders of the final payment or collection with respect to the last
Mortgage Loan (or Periodic Advances of same by the Servicer), or the disposition
of all funds with respect to the last Mortgage Loan and the remittance of all
funds due under the Agreement and the payment of all amounts due and payable to
the Certificate Insurer and the Trustee or (b) mutual consent of the Servicer,
the Certificate Insurer and all Certificateholders, or (ii) the purchase by the
Servicer of all outstanding Mortgage Loans and REO Properties at a price
determined as provided in the Agreement (the exercise of the right of the
Servicer to purchase all the Mortgage Loans and property in respect of Mortgage
Loans will result in early retirement of the Certificates), the right of the
Servicer to purchase being subject to the Pool Principal Balance of the Mortgage
Loans and REO Properties at the time of purchase being less than ten percent
(10%) of the Maximum Collateral Amount. By its acceptance of this
B-4
<PAGE>
Certificate, the Certificateholder hereby appoints the Servicer as its
attorney-in-fact to negotiate the sale and effect the transfer of a Class R
Certificate in accordance with Section 4.02(i) of the Agreement and to adopt a
plan of liquidation of the Trust Fund in accordance with Section 8.02 of the
Agreement. Unless this Certificate has been countersigned by the Trustee, by
manual signature, this Certificate shall not be entitled to any benefit under
the Agreement or be valid for any purpose.
B-5
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed by its authorized officer.
THE CHASE MANHATTAN BANK,
ot in its individual capacity, but solely
as Trustee
By:
--------------------------------------
Authorized Officer
Attest:
By:
---------------------------
Authorized Officer
CERTIFICATE OF AUTHENTICATION
This is a Class R Certificate referred to in the
within-mentioned Agreement.
THE CHASE MANHATTAN BANK,
not in its individual capacity, but solely
as Trustee
By:
--------------------------------------
Authorized Signatory
Dated: March 27, 1997
B-6
<PAGE>
EXHIBIT C
CONTENTS OF THE MORTGAGE FILE
With respect to each Mortgage Loan, the Mortgage File shall
include each of the following items (copies to the extent the originals have
been delivered to the Trustee pursuant to Section 2.03 of the Agreement), all of
which shall be available for inspection by the Certificateholders, to the extent
required by applicable laws:
1. The original Mortgage Note, with all prior and intervening
endorsements showing a complete chain of endorsements from the
originator of the Mortgage Loan to the Person so endorsing the
Mortgage Loan to the Trustee, endorsed by such Person "Pay to
the order of ________________ without recourse" and signed, by
facsimile or manual signature, in the name of the Seller by a
Responsible Officer.
2. Either: (i) the original Mortgage, and related power of
attorney, if any, with evidence of recording thereon, or (ii)
a copy of the Mortgage and related power of attorney, if any,
certified as a true copy of the original Mortgage or power of
attorney by a Responsible Officer of the Seller on the face of
such copy substantially as follows: "certified true and
correct copy of original which has been transmitted for
recordation."
3. Either: (i) The original Assignment of Mortgage in recordable
form in blank or (ii) a copy of the Assignment certified as a
true copy of the original Assignment by a Responsible Officer
of the Seller on the face of such copy substantially as
follows: "certified true and correct copy of original which
has been transmitted for recordation." Any such Assignments of
Mortgage may be made by blanket assignments for Mortgage Loans
secured by the Mortgaged Properties located in the same
county, if permitted by applicable law.
4. The original lender's policy of title insurance or a true copy
thereof, or if such original lender's title insurance policy
has been lost, a copy thereof certified by the appropriate
title insurer to be true and complete, or if such lender's
title insurance policy has not been issued as of the Closing
Date, a marked up commitment (binder) to issue such policy.
5. All original intervening assignments, if any, showing a
complete chain of assignments from the originator to the
related Originator, including any recorded warehousing
assignments, with evidence of recording thereon, certified by
a Responsible Officer of the related Originator by facsimile
or manual signature as a true copy of the original of such
intervening assignments.
6. Originals of all assumption, written assurance, substitution
and modification agreements, if any.
C-1
<PAGE>
EXHIBIT D
CERTIFICATE RE: PREPAID LOANS
I, ______________, ____________ of ABFS 1997-1, INC., as
Seller, hereby certify that between the "Cut-Off Date" (as defined in the
Pooling and Servicing Agreement dated as of March 1, 1997 among Prudential
Securities Secured Financing Corporation, American Business Credit, Inc. and The
Chase Manhattan Bank, as trustee) and the "Startup Day" the following schedule
of "Mortgage Loans" (each as defined in the Pooling and Servicing Agreement)
have been prepaid in full.
Dated: March 27, 1997
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
D-1
<PAGE>
EXHIBIT E
TRUSTEE'S ACKNOWLEDGMENT OF RECEIPT
March 27, 1997
ABFS 1997-1, Inc.
BalaPointe Office Centre
111 Presidential Boulevard
Suite 215
Bala Cynwyd, PA 19004
Prudential Securities Secured
Financing Corporation
One New York Plaza
New York, NY 10292
American Business Credit, Inc.
BalaPointe Office Centre
111 Presidential Boulevard
Suite 215
Bala Cynwyd, PA 19004
Financial Security Assurance Inc.
350 Park Avenue
New York, NY 10022
Re: Pooling and Servicing Agreement, dated as of March 1, 1997
(the "Pooling and Servicing Agreement"), among Prudential
Securities Secured Financing Corporation, as Depositor,
American Business Credit, Inc., as Servicer, and The Chase
Manhattan Bank, as Trustee, ABFS Mortgage Loan Trust 1997-1
,Mortgage Pass-Through Certificates, Series 1997-1, Class A-1,
Class A-2, Class A-3 and Class R
Ladies and Gentlemen:
In accordance with Section 2.06 of the above-captioned Pooling
and Servicing Agreement, the undersigned, as Trustee, hereby acknowledges
receipt by it in good faith without notice of adverse claims, subject to the
provisions of Sections 2.05 and 2.06 of the Pooling and Servicing Agreement (as
such provisions relate to the Initial Mortgage Loans), of (x) the
E-1
<PAGE>
documents relating to the Initial Mortgage Loans referred to in Section 2.05(a)
of the Pooling and Servicing Agreement, except with respect to the list of
exceptions attached hereto, and based on its examination and only as to the
foregoing, the information set forth in the Mortgage Loan Schedule accurately
reflects information set forth in the Mortgage File as well as the assignment to
it of all other assets included in clauses (i) and (iii) of the definition of
"Trust Fund", (y) the Certificate Account, the Pre-Funding Account and the
Capitalized Interest Account and (z) the Certificate Insurance Policy and
declares that it holds and will hold the Certificate Insurance Policy and such
documents and the other documents delivered to it constituting the Mortgage
Files, and that it holds or will hold all such assets and such other assets
included in the definition of "Trust Fund" that are delivered to it, in trust
for the exclusive use and benefit of all present and future Certificateholders.
The Trustee has made no independent examination of any such
documents beyond the review specifically required in the above-referenced
Pooling and Servicing Agreement. The Trustee makes no representations as to: (i)
the validity, legality, sufficiency, enforceability or genuineness of any such
documents or any of the Mortgage Loans identified on the Mortgage Loan Schedule,
or (ii) the collectability, insurability, effectiveness or suitability of any
such Mortgage Loan.
The Schedule of Mortgage Loans is attached to this Receipt.
Capitalized words and phrases used herein shall have the
respective meanings assigned to them in the above-captioned Pooling and
Servicing Agreement.
THE CHASE MANHATTAN BANK,
as Trustee
By:
----------------------------------
Name:
----------------------------------
Title:
----------------------------------
E-2
<PAGE>
EXHIBIT F
INITIAL CERTIFICATION OF TRUSTEE
, 1997
ABFS 1997-1, Inc.
BalaPoint Office Centre
111 Presidential Boulevard
Suite 215
Bala Cynwyd, PA 19004
Prudential Securities Secured
Financing Corporation
One New York Plaza
New York, NY 10292
American Business Credit, Inc.
BalaPoint Office Centre
111 Presidential Boulevard
Suite 215
Bala Cynwyd, PA 19004
Financial Security Assurance Inc.
350 Park Avenue
New York, NY 10022
Re: Pooling and Servicing Agreement, dated as of March 1, 1997
(the "Pooling and Servicing Agreement") among Prudential
Securities Secured Financing Corporation, as Depositor,
American Business Credit, Inc., as Servicer, and The Chase
Manhattan Bank, as Trustee, ABFS Mortgage Loan Trust 1997-1,
Mortgage Pass-Through Certificates, Series 1997-1, Class A-1,
Class A-2, Class A-3 and Class R
Ladies and Gentlemen:
In accordance with the provisions of Section 2.06 of the
above-referenced Pooling and Servicing Agreement, the undersigned, as Trustee,
hereby certifies that as to each Mortgage Loan listed in the Mortgage Loan
Schedule (other than any Mortgage Loan paid in full or any
F-1
<PAGE>
Mortgage Loan listed on the attachment hereto), it has reviewed the documents
delivered to it pursuant to Section 2.03 of the Pooling and Servicing Agreement
and has determined that (i) all documents required to be delivered to it
pursuant to the above-referenced Pooling and Servicing Agreement are in its
possession, (ii) such documents have been reviewed by it and appear regular on
their face and have not been mutilated, damaged, torn or otherwise physically
altered and relate to such Mortgage Loan, (iii) based on its examination and
only as to the foregoing documents, the information set forth in the Mortgage
Loan Schedule respecting such Mortgage Loan accurately reflects the information
set forth in the Trustee's Mortgage File and (iv) each Mortgage Note has been
endorsed as provided in Section 2.03 of the Pooling and Servicing Agreement. The
Trustee has made no independent examination of such documents beyond the review
specifically required in the above-referenced Pooling and Servicing Agreement.
The Trustee makes no representations as to: (i) the validity, legality,
enforceability or genuineness of any such documents contained in each or any of
the Mortgage Loans identified on the Mortgage Loan Schedule, or (ii) the
collectability, insurability, effectiveness or suitability of any such Mortgage
Loan.
Capitalized words and phrases used herein shall have the
respective meanings assigned to them in the above-captioned Pooling and
Servicing Agreement.
THE CHASE MANHATTAN BANK,
as Trustee
By:
----------------------------------
Name:
----------------------------------
Title:
----------------------------------
F-2
<PAGE>
EXHIBIT G
FINAL CERTIFICATION OF TRUSTEE
, 1997
ABFS 1997-1, Inc.
BalaPoint Office Centre
111 Presidential Boulevard
Suite 215
Bala Cynwyd, PA 19004
Prudential Securities Secured
Financing Corporation
One New York Plaza
New York, NY 10292
American Business Credit, Inc.
BalaPoint Office Centre
111 Presidential Boulevard
Suite 215
Bala Cynwyd, PA 19004
Financial Security Assurance, Inc.
350 Park Avenue
New York, NY 10022
Re: Pooling and Servicing Agreement, dated as of March 1, 1997
(the "Pooling and Servicing Agreement") among Prudential
Securities Secured Financing Corporation, as Depositor,
American Business Credit, Inc., as Servicer, and The Chase
Manhattan Bank, as Trustee, ABFS Mortgage Loan Trust 1997-1,
Mortgage Pass-Through Certificates, Series 1997-1, Class A-1,
Class A-2, Class A-3 and Class R
Ladies and Gentlemen:
In accordance with Section 2.06 of the above-captioned Pooling
and Servicing Agreement, the undersigned, as Trustee, hereby certifies that,
except as noted on the attachment hereto, as to each Mortgage Loan listed in the
Mortgage Loan Schedule (other than any Mortgage Loan paid in full or listed on
the attachment hereto) it has reviewed the documents delivered to it pursuant to
Section 2.03 of the Pooling and Servicing Agreement and has determined that (i)
G-1
<PAGE>
all documents required to be delivered to it pursuant to the above-referenced
Pooling and Servicing Agreement are in its possession, (ii) such documents have
been reviewed by it and appear regular on their face and have not been
mutilated, damaged, torn or otherwise physically altered and relate to such
Mortgage Loan, and (iii) based on its examination, and only as to the foregoing
documents, the information set forth in the Mortgage Loan Schedule respecting
such Mortgage Loan accurately reflects the information set forth in the
Trustee's Mortgage File. The Trustee has made no independent examination of such
documents beyond the review specifically required in the above-referenced
Pooling and Servicing Agreement. The Trustee makes no representations as to: (i)
the validity, legality, enforceability or genuineness of any such documents
contained in each or any of the Mortgage Loans identified on the Mortgage Loan
Schedule, or (ii) the collectability, insurability, effectiveness or suitability
of any such Mortgage Loan.
Capitalized words and phrases used herein shall have the
respective meanings assigned to them in the above-captioned Pooling and
Servicing Agreement.
THE CHASE MANHATTAN BANK,
as Trustee
By:
----------------------------------
Name:
----------------------------------
Title:
----------------------------------
G-2
<PAGE>
EXHIBIT H
REQUEST FOR RELEASE OF DOCUMENTS
, 1997
To: The Chase Manhattan Bank
450 West 33rd Street
New York, New York 10001
Re: ABFS Mortgage Loan Trust 1997-1, Mortgage Pass-Through
Certificates, Series 1997-1, Class A-1, Class A-2, Class A-3 and Class R
In connection with the administration of the pool of Mortgage
Loans held by you as Trustee for the Certificateholders, we request the release,
and acknowledge receipt, of the (Trustee's Mortgage File/[specify document]) for
the Mortgage Loan described below, for the reason indicated.
Mortgagor's Name, Address & Zip Code:
Mortgage Loan Number:
Reason for Requesting Documents (check one)
____ 1. Mortgage Loan Paid in Full
(Servicer hereby certifies that all amounts received
in connection therewith have been credited to the
Collection Account.)
____ 2. Mortgage Loan Liquidated
(Servicer hereby certifies that all proceeds of
foreclosure, insurance or other liquidation have been
finally received and credited to the Collection
Account.)
____ 3. Mortgage Loan in Foreclosure
H-1
<PAGE>
____ 4. Mortgage Loan Repurchased Pursuant to Section 5.18 of the
Pooling and Servicing Agreement.
____ 5. Mortgage Loan Repurchased or Substituted pursuant to Article
II or III of the Pooling and Servicing Agreement (Servicer
hereby certifies that the repurchase price or Substitution
Adjustment has been credited to the Certificate Account and
that the substituted mortgage loan is a Qualified Substitute
Mortgage Loan.)
____ 6. Other
(explain)______________________________________________________
If box 1 or 2 above is checked, and if all or part of the
Trustee's Mortgage File was previously released to us, please release to us our
previous receipt on file with you, as well as any additional documents in your
possession relating to the above specified Mortgage Loan.
If box 3, 4, 5 or 6 above is checked, upon our return of all
of the above documents to you as Trustee, please acknowledge your receipt by
signing in the space indicated below, and returning this form.
By: ______________________________
Name: ____________________________
Title: ___________________________
Documents returned to Trustee:
THE CHASE MANHATTAN BANK, as
Trustee
By: __________________________
Date: ________________________
H-2
<PAGE>
EXHIBIT I
TRANSFER AFFIDAVIT AND AGREEMENT
STATE OF )
: ss.:
COUNTY OF )
[NAME OF OFFICER], being first duly sworn, deposes and says:
1. That he is [Title of Officer] of [Name of Owner] (record or
beneficial owner of ABFS Mortgage Loan Trust 1997-1, Mortgage Pass-Through
Certificates, Series 1997-1, Class R (the "Owner")), a [savings institution]
[corporation] duly organized and existing under the laws of [the State of
______] [the United States], on behalf of which he makes this affidavit and
agreement.
2. That the Owner (i) is not and will not be a "disqualified
organization" as of [date of transfer] within the meaning of Section 860E(e)(5)
of the Internal Revenue Code of 1986 (the "Code"), (ii) will endeavor to remain
other than a disqualified organization for so long as it retains its ownership
interest in the Class R Certificates, and (iii) is acquiring the Class R
Certificates for its own account or for the account of another Owner from which
it has received an affidavit and agreement in substantially the same form as
this affidavit and agreement. 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 generally is exempt from federal income tax unless such
organization is subject to the tax on unrelated business taxable income).
3. That the Owner is aware (i) of the tax that would be
imposed on transfers of Class R Certificates to disqualified organizations under
the Code, that applies to all transfers of 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
disqualified organization, on the agent; (iii) that the person otherwise liable
for the tax shall be relieved of liability for the tax if the transferee
furnishes to such person an affidavit that the transferee is not a disqualified
organization and, at the time of transfer, such person does not have actual
knowledge that the affidavit is false; and (iv) that the Class R Certificates
may be "noneconomic residual interests" within the meaning of proposed Treasury
regulations promulgated pursuant to the Code and that the transferor of a
noneconomic residual interest will remain liable for any taxes due with respect
to the income on such residual interest, unless no significant purpose of the
transfer was to impede the assessment or collection of tax.
I-1
<PAGE>
4. That the Owner is aware of the tax imposed on a
"pass-through entity" holding Class R Certificates if at any time during the
taxable year of the pass-through entity a disqualified organization is the
record holder of an interest in such entity. (For this purpose, a "pass through
entity" includes a regulated investment company, a real estate investment trust
or common trust fund, a partnership, trust or estate, and certain cooperatives.)
5. That the Owner is aware that the Trustee will not register
the transfer of any Class R Certificates unless the transferee, or the
transferee's agent, delivers to it an affidavit and agreement, among other
things, in substantially the same form as this affidavit and agreement. The
Owner expressly agrees that it will not consummate any such transfer if it knows
or believes that any of the representations contained in such affidavit and
agreement are false.
6. That the Owner has reviewed the restrictions set forth on
the face of the Class R Certificates and the provisions of Section 4.02(i) of
the Pooling and Servicing Agreement under which the Class R Certificates were
issued (in particular, clauses (g) and (h) of Section 4.02(i) 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
Certificates in violation of Section 4.02(i)). The Owner expressly agrees to be
bound by and to comply with such restrictions and provisions.
7. That the Owner consents to any additional restrictions or
arrangements that shall be deemed necessary upon advice of counsel to constitute
a reasonable arrangement to ensure that the Class R Certificates will only be
owned, directly or indirectly, by an Owner that is not a disqualified
organization.
8. That the Owner's Taxpayer Identification
Number is ____________.
9. This affidavit and agreement relates only to the Class
R Certificates held by the Owner and not to any other holder of the Class
R Certificates. The Owner understands that the liabilities described herein
relate only to the Class R Certificates.
10. That no purpose of the Owner relating to the transfer
of any of the Class R Certificates by the Owner is or will be to impede the
assessment or collection of any tax.
11. That the Owner has no present knowledge or expectation
that it will be unable to pay any United States taxes owed by it so long as any
of the Certificates remain outstanding.
12. That the Owner has no present knowledge or expectation
that it will become insolvent or subject to a bankruptcy proceeding for so long
as any of the Class R Certificates remain outstanding.
13. That the Owner is a citizen or resident of the United
States, a corporation, partnership or other entity created or organized in, or
under the laws of, the United States or any political subdivision thereof, or an
estate or trust whose income from sources without the United States is
includable 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.
I-2
<PAGE>
14. That the Owner will, in connection with any transfer that
it makes of the Class R Certificates, deliver to the Trustee an affidavit in
form and substance satisfactory to the Trustee, representing and warranting 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 owned 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.
15. That the Owner agrees to require a Transfer Affidavit and
Agreement from any person to whom the Owner attempts to transfer a percentage
interest in the Class R Certificates, and in connection with any transfer by a
person for whom the Owner is acting as nominee, trustee or agent, and the Owner
will not transfer its percentage interest or cause any percentage interest to be
transferred to any person that the Owner knows is not a Permitted Transferee. In
connection with any such transfer by the Owner, the Owner agrees to deliver to
the Trustee a transfer certificate in the form attached to the Pooling and
Servicing Agreement as Exhibit J to the effect that the Owner has no actual
knowledge that the person to which the transfer is to be made is not a Permitted
Transferee.
I-3
<PAGE>
IN WITNESS WHEREOF, the Owner has caused this instrument to be
executed on its behalf, pursuant to the authority of its Board of Directors, by
its [Title of Officer] and its corporate seal to be hereunto attached, attested
by its [Assistant] Secretary, this _ day of .
[NAME OF OWNER]
By: ____________________________
[Name of Officer]
[Title of Officer]
[Corporate Seal]
ATTEST:
- -------------------------------
[Assistant] Secretary
Personally appeared before me the above-named [Name of
Officer], known or proved to me to be the same person who executed the foregoing
instrument and to be the [Title of Officer] of the Owner, and acknowledged to me
that he executed the same as his free act and deed and the free act and deed of
the Owner.
Subscribed and sworn before me this ____ day of _______________ .
--------------------------------
NOTARY PUBLIC
COUNTY OF
--------------------------------
STATE OF
--------------------------------
My Commission expires the ____ day of
_________________, .
I-4
<PAGE>
EXHIBIT J
TRANSFEROR'S CERTIFICATE
________________, 19__
The Chase Manhattan Bank
450 West 33rd Street
New York, New York 10001
Attention: Corporate Trust Administration
Re: ABFS Mortgage Loan Trust 1997-1, Mortgage Pass-Through
Certificates, Series 1997-1, Class R Certificates
Ladies and Gentlemen:
This letter is delivered to you in connection with the
transfer by _____________________ (the "Seller") to ______________________ (the
"Purchaser") of a ___% Percentage Interest of ABFS Mortgage Loan Trust 1997-1,
Mortgage Pass-Through Certificates, Series 1997-1, Class R (the "Certificates"),
pursuant to Section 4.02 of the Pooling and Servicing Agreement (the "Pooling
and Servicing Agreement"), dated as of March 1, 1997 among American Business
Credit, Inc., as servicer (the "Company"), Prudential Securities Secured
Financing Corporation, as depositor, and The Chase Manhattan Bank, as trustee
(the "Trustee"). All terms used herein and not otherwise defined shall have the
meanings set forth in the Pooling and Servicing Agreement. The Seller hereby
certifies, represents and warrants to, and covenants with, the Company and the
Trustee that:
1. No purpose of the Seller relating to the transfer of the
Certificates by the Seller to the Purchaser is or will be to impede the
assessment or collection of any tax.
2. The Seller understands that the Purchaser has delivered to
the Trustee and the Company a transfer affidavit and agreement in the form
attached to the Pooling and Servicing Agreement as Exhibit I. The Seller does
not know or believe that any representation contained therein is false.
J-1
<PAGE>
3. The Seller has no actual knowledge that the proposed
Transferee is not both a United States Person and a Permitted Transferee.
Very truly yours,
--------------------------------
(Seller)
By:_______________________________
Name:
Title:
J-2
<PAGE>
EXHIBIT K
ERISA INVESTMENT REPRESENTATION LETTER
Prudential Securities Secured
Financing Corporation
One New York Plaza
New York, NY 10292
American Business Credit, Inc.
BalaPointe Office Centre
111 Presidential Boulevard
Suite 215
Bala Cynwyd, PA 19004
The Chase Manhattan Bank
450 West 33rd Street
New York, NY 10001
Re: ABFS Mortgage Loan Trust 1997-1, Mortgage Pass-Through
Certificates, Series 1997-1, Class R Certificates
The undersigned (the "Purchaser") proposes to purchase certain
Class R Certificates (the "Certificates"). In doing so, the Purchaser hereby
acknowledges and agrees as follows:
Section 1. Definitions. Each capitalized term used herein and
not otherwise defined shall have the meaning given it in the Pooling and
Servicing Agreement, dated as of March 1, 1997 (the "Agreement"), among
Prudential Securities Secured Financing Corporation, as Depositor (the
"Depositor"), American Business Credit, Inc., as Servicer (the "Servicer") and
The Chase Manhattan Bank, as Trustee (the "Trustee") relating to the
Certificates.
Section 2. Representations and Warranties of the Purchaser. In
connection with the proposed transfer, the Purchaser represents and warrants to
the Depositor and the Trustee that the Purchaser is not a pension or benefit
plan or individual retirement arrangement that is subject to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") or to Section 4975
of the Code or an entity whose underlying assets are deemed to be assets of such
a plan or arrangement by reason of such plan's or arrangement's investment in
the entity, as determined under U.S. Department of Labor Regulations 29 C.F.R.
ss. 2510.3-101 or otherwise.
K-1
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this ERISA
Investment Representation Letter to be validly executed by its duly authorized
representative as of the date first above written.
[NAME OF PURCHASER]
By:
----------------------------------
Name:
----------------------------------
Title:
----------------------------------
K-2
<PAGE>
SCHEDULE I
MORTGAGE LOAN SCHEDULE
[See Schedule A to Unaffiliated Seller's Agreement]
<PAGE>
EXHIBIT 4.2
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION,
Depositor,
ABFS 1997-1, INC.,
Unaffiliated Seller
and
AMERICAN BUSINESS CREDIT, INC. AND
HOMEAMERICAN CREDIT, INC., D/B/A UPLAND MORTGAGE,
Originators
---------------------------
UNAFFILIATED SELLER'S AGREEMENT
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE ONE DEFINITIONS................................................................. 1
Section 1.01. Definitions................................................................. 1
ARTICLE TWO PURCHASE, SALE AND CONVEYANCE OF MORTGAGE
LOANS....................................................................... 5
Section 2.01. Agreement to Purchase the Initial Mortgage Loans............................ 5
Section 2.02. Agreement to Purchase the Subsequent Mortgage Loans......................... 5
Section 2.03. Purchase Price.............................................................. 6
Section 2.04. Conveyance of Mortgage Loans; Possession of Mortgage Files.................. 7
Section 2.05. Delivery of Mortgage Loan Documents......................................... 8
Section 2.06. Acceptance of Mortgage Loans................................................ 10
Section 2.07. Transfer of Mortgage Loans; Assignment of Agreement......................... 11
Section 2.08. Examination of Mortgage Files............................................... 11
Section 2.09. Books and Records........................................................... 12
Section 2.10. Cost of Delivery and Recordation of Documents............................... 12
ARTICLE THREE REPRESENTATIONS AND WARRANTIES.............................................. 12
Section 3.01. Representations and Warranties as to the Originators........................ 12
Section 3.02. Representations and Warranties as to the Unaffiliated Seller................ 14
Section 3.03. Representations and Warranties Relating to the Mortgage
Loans....................................................................... 16
Section 3.04. Representations and Warranties of the Depositor............................. 24
Section 3.05. Repurchase Obligation for Defective Documentation and for
Breach of a Representation or Warranty...................................... 24
ARTICLE FOUR THE UNAFFILIATED SELLER..................................................... 27
Section 4.01. Covenants of the Originators and the Unaffiliated Seller.................... 27
Section 4.02. Merger or Consolidation..................................................... 28
Section 4.03. Costs....................................................................... 28
Section 4.04. Indemnification............................................................. 28
ARTICLE FIVE CONDITIONS OF CLOSING....................................................... 31
Section 5.01. Conditions of Depositor's Obligations....................................... 31
Section 5.02. Conditions of Unaffiliated Seller's Obligations............................. 32
Section 5.03. Termination of Depositor's Obligations...................................... 33
ARTICLE SIX MISCELLANEOUS........................................................................ 33
Section 6.01. Notices..................................................................... 33
Section 6.02. Severability of Provisions.................................................. 34
Section 6.03. Agreement of Unaffiliated Seller............................................ 34
i
<PAGE>
Page
Section 6.04. Survival.................................................................... 34
Section 6.05. Effect of Headings and Table of Contents.................................... 34
Section 6.06. Successors and Assigns...................................................... 34
Section 6.07. Confirmation of Intent; Grant of Security Interest.......................... 34
Section 6.08. Miscellaneous............................................................... 35
Section 6.09. Amendments.................................................................. 35
Section 6.10. Third-Party Beneficiaries................................................... 36
Section 6.11. GOVERNING LAW; CONSENT TO JURISDICTION;
WAIVER OF JURY TRIAL........................................................ 36
Section 6.12. Execution in Counterparts................................................... 37
Exhibit A - Mortgage Loan Schedule
</TABLE>
ii
<PAGE>
THIS UNAFFILIATED SELLER'S AGREEMENT, dated as of March 1,
1997, by and among PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION, a
Delaware corporation, its successors and assigns (the "Depositor"), ABFS 1997-1,
INC., a Delaware corporation and its successors (the "Unaffiliated Seller"),
AMERICAN BUSINESS CREDIT, INC., a Pennsylvania corporation ("ABC") and
HOMEAMERICAN CREDIT, INC. D/B/A UPLAND MORTGAGE, a Pennsylvania corporation
("Upland", and together with ABC, the "Originators").
WHEREAS, Exhibit A attached hereto and made a part hereof
lists certain fixed rate business and consumer purpose first and second lien
mortgage loans (the "Mortgage Loans") owned by the Originators that the
Originators desire to sell to the Unaffiliated Seller and the Unaffiliated
Seller desires to sell to the Depositor and that the Depositor desires to
purchase;
WHEREAS, it is the intention of the Originators, the
Unaffiliated Seller and the Depositor that simultaneously with the Originators'
conveyance of the Mortgage Loans to the Unaffiliated Seller and the Unaffiliated
Seller's conveyance of the Mortgage Loans to the Depositor on the Closing Date,
(a) the Depositor shall deposit the Mortgage Loans in a trust pursuant to a
Pooling and Servicing Agreement to be dated as of March 1, 1997 (the "Pooling
and Servicing Agreement"), to be entered into by and among the Depositor, as
depositor, American Business Credit, Inc., as servicer (in such capacity, the
"Servicer") and The Chase Manhattan Bank, as trustee (the "Trustee") and (b) the
Trustee shall issue certificates evidencing beneficial ownership interests in
the property of the trust fund formed by the Pooling and Servicing Agreement to
the Depositor;
NOW, THEREFORE, in consideration of the premises and the
mutual agreements hereinafter set forth, the parties hereto agree as follows:
ARTICLE ONE
DEFINITIONS
Section 1.01. Definitions. Whenever used herein, the following
words and phrases, unless the context otherwise requires, shall have the
meanings specified in this Article:
"Accepted Servicing Practices" means the Servicer's normal
servicing practices, which in general will conform to the mortgage servicing
practices of prudent mortgage lending institutions which service for their own
account mortgage loans of the same type as the Mortgage Loans in the
jurisdictions in which the related Mortgaged Properties are located.
"Agreement" means this Unaffiliated Seller's Agreement, as
amended or supplemented in accordance with the provisions hereof.
"Appraised Value" means the appraised value of the Mortgaged
Property based upon the appraisal made by or on behalf of the Originators.
<PAGE>
"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 have the meaning ascribed thereto in
Section 2.01(c).
"Commission" means the Securities and Exchange Commission.
"Cut-Off Date" means, with respect to the Initial Mortgage
Loans, the Initial Cut-Off Date, and with respect to the Subsequent Mortgage
Loans, the Subsequent Cut-Off Date.
"Cut-Off Date Aggregate Principal Balance" means the aggregate
unpaid principal balance of the Initial Mortgage Loans as of the Cut-Off Date
(or, with respect to Initial Mortgage Loans which were originated after the
Cut-Off Date as of the date of origination). The Cut-Off Date Aggregate
Principal Balance is $47,156,358.69.
"Cut-Off Date Principal Balance" means as to each Mortgage
Loan, its unpaid principal balance as of the Cut-Off Date (or, with respect to
Initial Mortgage Loans which were originated after the Cut-Off Date as of the
date of origination).
"Deleted Mortgage Loan" means a Mortgage Loan replaced by or
to be replaced by a Qualified Substitute Mortgage Loan pursuant to the terms of
the Pooling and Servicing Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Initial Cut-Off Date" means the close of business on February
28, 1997.
"Initial Mortgage Loans" means the Mortgage Loans transferred
and assigned to the Depositor on the Closing Date.
"Monthly Payment" means, as to any Mortgage Loan (including
any REO Mortgage Loan) and any Due Date, the payment of principal and interest
due thereon in accordance with the amortization schedule at the time applicable
thereto (after adjustment for any Curtailments and Deficient Valuations
occurring prior to such Due Date but before any adjustment to such amortization
schedule by reason of any bankruptcy, other than Deficient Valuations or similar
proceeding or any moratorium or similar waiver or grace period).
"Mortgage" means the mortgage or deed of trust creating a
first or second lien on an estate in fee simple in real property, and securing a
Mortgage Note, as amended or modified.
"Mortgage Interest Rate" means, as to any Mortgage Loan, the
fixed per annum rate at which interest accrues on the unpaid principal balance
thereof.
"Mortgage Loans" means such of the mortgage loans to be sold,
transferred and assigned to the Depositor on the Closing Date and each
Subsequent Transfer Date pursuant to Article Two hereof (including the related
Mortgage Notes and related Mortgages), all as identified in the Mortgage Loan
Schedule, and including any mortgage loan substituting or replacing a Mortgage
Loan pursuant to the terms of the Pooling and Servicing Agreement.
2
<PAGE>
"Mortgage Loan Schedule" shall have the meaning ascribed
thereto in Section 2.01(b).
"Mortgage Note" means the note or other evidence of
indebtedness evidencing the indebtedness of a Mortgagor under a Mortgage Loan,
as amended or modified.
"Mortgaged Property" means the property subject to a Mortgage.
"Mortgagor" means the obligor on a Mortgage Note.
"Pooling and Servicing Agreement" shall have the meaning
ascribed thereto in the recitals hereof.
"Prospectus" means the Prospectus dated 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 Exchange Commission pursuant to Rule 424(b) under the
Securities Act with respect to the offer and sale of the Certificates.
"Prospectus Supplement" means the Prospectus Supplement dated
March 24, 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.
"Qualified Appraiser" means an appraiser, duly appointed by
the Unaffiliated Seller, who had no interest, direct or indirect, in the
Mortgaged Property or in any loan made on the security thereof, and whose
compensation is not affected by the approval or disapproval of the Mortgage
Loan, and such appraiser and the appraisal made by such appraiser both satisfy
the requirements of Title XI of the Federal Institutions Reform, Recovery and
Enforcement Act of 1989 and the regulations promulgated thereunder, all as in
effect on the date the Mortgage Loan was originated.
"Registration Statement" means that certain registration
statement on Form S-3, as amended (Registration No. 333-16511) 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.
"Securities Act" means the Securities Act of 1933, as amended.
"Subsequent Cut-Off Date" means the date specified in the
Addition Notice relating to Subsequent Mortgage Loans.
"Subsequent Mortgage Loans" means the Mortgage Loans hereafter
transferred and assigned to the Depositor on a Subsequent Transfer Date.
"Termination Event" means the existence of any one or more of
the following conditions:
3
<PAGE>
(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
afforded 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 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 ABFS 1997-1, Inc., in its capacity
as Unaffiliated Seller of the Mortgage Loans under this Agreement and any
successor to ABFS 1997-1, Inc., whether through merger, consolidation, purchase
and assumption of ABFS 1997-1, Inc. or all or substantially all of its assets or
otherwise.
Capitalized terms used herein that are not otherwise defined
shall have the respective meanings ascribed thereto in the Pooling and Servicing
Agreement.
4
<PAGE>
ARTICLE TWO
PURCHASE, SALE AND CONVEYANCE OF MORTGAGE LOANS
Section 2.01. Agreement to Purchase the Initial Mortgage
Loans. (a) Subject to the terms and conditions of this Agreement, the
Originators agree to sell, and the Unaffiliated Seller agrees to purchase on the
Closing Date and immediately subsequent thereto, the Unaffiliated Seller agrees
to sell, and the Depositor agrees to purchase, the Mortgage Loans having the
Cut-Off Date Aggregate Principal Balance or, in accordance with Section 2.08
hereof, such other balance as is evidenced by the actual Cut-Off Date Aggregate
Principal Balance of the Mortgage Loans accepted by the Depositor on the Closing
Date and listed in the Mortgage Loan Schedule.
(b) Subject to Section 2.08 hereof, the Depositor and the
Unaffiliated Seller have agreed upon which of the Unaffiliated Seller's Mortgage
Loans are to be purchased by the Depositor on the Closing Date pursuant to this
Agreement, and the Unaffiliated Seller has prepared a schedule describing the
Mortgage Loans (the "Mortgage Loan Schedule") setting forth all of the Mortgage
Loans to be purchased under this Agreement, which schedule is attached hereto as
Exhibit A. The Mortgage Loan Schedule shall conform to the requirements of the
Depositor and to the definition of "Mortgage Loan Schedule" under the Pooling
and Servicing Agreement.
(c) The closing for the purchase and sale of the Mortgage
Loans shall take place at the offices of American Business Credit, Inc., Bala
Cynwyd, Pennsylvania, at 10:00 a.m., Pennsylvania time, on March 27, 1997 or
such other place and time as the parties shall agree (such time being herein
referred to as the "Closing Date").
Section 2.02. Agreement to Purchase the Subsequent Mortgage
Loans. (a) Subject to the terms and conditions of this Agreement, the
Originators agree to sell, and the Unaffiliated Seller agrees to purchase on the
each Subsequent Transfer Date and immediately subsequent thereto, the
Unaffiliated Seller agrees to sell, and the Depositor agrees to purchase,
Subsequent Mortgage Loans, having an Aggregate Principal Balance of up to
$27,843,641.31 as listed in the Mortgage Loan Schedule attached to the related
Addition Notice.
(b) Subject to Section 2.08 herein, the Mortgage Loans that
are to be purchased by the Depositor on a Subsequent Transfer Date pursuant to
this Agreement will be set forth on a Mortgage Loan Schedule to be attached to
the related Addition Notice.
(c) Subject to the satisfaction of the conditions set forth in
paragraph (d) below, (i) in consideration of the Unaffiliated Seller's delivery
on the related Subsequent Transfer Dates to or upon the order of the Originators
of the purchase price, the Originators shall on any Subsequent Transfer Date
sell, transfer, assign, set over and convey to the Trustee without recourse but
subject to terms and provisions of this Agreement, all of the right, title and
interest of the Originators in and to the Subsequent Mortgage Loans, including
all principal outstanding as of, and all interest due after, the Subsequent
Cut-Off Date, and all other assets included or to be included in the Trust Fund
for the benefit of the Certificateholders and the Certificate Insurer and (ii)
in consideration of the Depositor's delivery on the related Subsequent Transfer
Dates to or upon the order of the Unaffiliated Seller of the purchase price, the
Unaffiliated Seller shall on any Subsequent Transfer Date sell, transfer,
assign, set over and convey to the Trustee without recourse but subject to terms
and provisions of this Agreement, all of the right, title and interest
5
<PAGE>
of the Originators in and to the Subsequent Mortgage Loans, including all
principal outstanding as of, and all interest due after, the Subsequent Cut-Off
Date, and all other assets included or to be included in the Trust Fund for the
benefit of the Certificateholders.
(d) The Subsequent Mortgage Loans and the other property and
rights related thereto described in paragraph (c) above shall be transferred by
the Depositor to the Trust only upon the satisfaction of each of the following
conditions on or prior to the related Subsequent Transfer Date:
(i) the Unaffiliated Seller shall have provided the Trustee,
the Rating Agencies and the Certificate Insurer with a timely Addition
Notice, which shall include a Mortgage Loan Schedule listing the
Subsequent Mortgage Loans and shall have provided any other information
reasonably requested by any of the foregoing with respect to the
Subsequent Mortgage Loans;
(ii) the Unaffiliated Seller shall have deposited in the
Collection Account all collections of (x) principal in respect of the
Subsequent Mortgage Loans received after the related Subsequent Cut-Off
Date and (y) interest due on the Subsequent Mortgage Loans after the
related Subsequent Cut-Off Date;
(iii) as of each Subsequent Transfer Date, the Depositor was
not insolvent nor will be made insolvent by such transfer nor is the
Depositor aware of any pending insolvency;
(iv) such addition will not result in a material adverse
tax consequence to the Trust or the Holders of the Certificates;
(v) the Pre-Funding Period shall not have terminated;
(vi) the Unaffiliated Seller shall have delivered to the
Trustee an Officer's Certificate confirming the satisfaction of each
condition precedent specified in this paragraph (d) and that the
Subsequent Mortgage Loans comply with the provisions of Section
3.03(af) hereof and Section 2.03(c) of the Pooling and Servicing
Agreement; and
(vii) there shall have been delivered to the Certificate
Insurer, the Rating Agencies and the Trustee, independent Opinions of
Counsel with respect to the transfer of the Subsequent Mortgage Loans
substantially in the form of the Opinions of Counsel delivered to the
Certificate Insurer and the Trustee on the Startup Date (bankruptcy,
corporate and tax opinions).
(e) The obligation of the Depositor to purchase a Subsequent
Mortgage Loan on any Subsequent Transfer Date is subject to the requirements set
forth in Section 2.03(c) of the Pooling and Servicing Agreement.
Section 2.03. Purchase Price. (a) On the Closing Date, as full
consideration for the Unaffiliated Seller's sale of the Initial Mortgage Loans
to the Depositor, the Depositor will deliver to the Unaffiliated Seller (i) an
amount in cash equal to the sum of (A) 99.484375%, 99.468750% and 99.453125% of
the aggregate principal balance as of the Closing Date of the Class A-1, Class
A-2 and Class A-3 Certificates, respectively, and (B) accrued interest on such
6
<PAGE>
principal balance at the rate of 6.525%, 6.925% and 7.525% per annum,
respectively, from (and including) March 1, 1997 to (but not including) March
27, 1997, payable by wire transfer of same day funds and (ii) the Class R
Certificates to be issued pursuant to the Pooling and Servicing Agreement.
On the Closing Date, as full consideration for the
Originators' sale of the Initial Mortgage Loans to the Unaffiliated Seller, the
Unaffiliated Seller will deliver to the Originators an amount in cash equal to
the sum of (A) 99.484375%, 99.468750% and 99.453125% of the aggregate principal
balance as of the Closing Date of the Class A-1, Class A-2 and Class A-3
Certificates, respectively, and (B) accrued interest on such principal balance
at the rate of 6.525%, 6.925% and 7.525%, respectively, per annum from (and
including) March 1, 1997 to (but not including) March 27, 1997, payable by wire
transfer of same day funds.
(b) On each Subsequent Transfer Date, as full consideration
for Originators' sale to the Unaffiliated Seller and the Unaffiliated Seller's
sale of the Subsequent Mortgage Loans to the Depositor, the Depositor will
deliver to the Unaffiliated Seller and the Unaffiliated Seller will deliver to
the Originators an amount in cash equal to the sum of 100% of the aggregate
Principal Balance of the Subsequent Mortgage Loans as of the related Subsequent
Cut-Off Date.
Section 2.04. Conveyance of Mortgage Loans; Possession of
Mortgage Files. (a) On the Closing Date and on each Subsequent Transfer Date,
the Originators shall sell, transfer, assign, set over and convey to the
Unaffiliated Seller, without recourse but subject to the terms of this
Agreement, all right, title and interest in and to the applicable Mortgage
Loans, including all principal outstanding as of, and all interest due after,
the Subsequent Cut-Off Date, the insurance policies relating to each such
Mortgage Loan and all right, title and interest in and to the proceeds of such
insurance policies from and after the Closing Date and the Unaffiliated Seller
shall sell, transfer, assign, set over and convey to the Depositor, without
recourse but subject to the terms of this Agreement, all right, title and
interest in and to the applicable Mortgage Loans, including all principal
outstanding as of, and all interest due after, the Subsequent Cut-Off Date, the
insurance policies relating to each such Mortgage Loan, all right, title and
interest in and to the proceeds of such insurance policies and all of its rights
under this Agreement with respect to the Mortgage Loans from and after the
Closing Date. Upon payment of the purchase price for such Mortgage Loans as
provided in Section 2.03 of this Agreement, the Originators and the Unaffiliated
Seller shall have hereby, and shall be deemed to have, sold, transferred,
assigned, set over and conveyed such Mortgage Loans, the insurance policies
relating to each such Mortgage Loan, all right, title and interest in and to the
proceeds of such insurance policies and all of its rights under this Agreement
with respect to the Mortgage Loans from and after the Closing Date.
(b) Upon the sale of such Mortgage Loans, the ownership of
each related Mortgage Note, each related Mortgage and the contents of the
related Mortgage File shall immediately vest in the Depositor and the ownership
of all related records and documents with respect to each Mortgage Loan prepared
by or which come into the possession of the Originators or the Unaffiliated
Seller shall immediately vest in the Depositor. The contents of any Mortgage
File in the possession of the Originators or the Unaffiliated Seller at any time
after such sale, and any principal collected and interest due on the Mortgage
Loans after the Cut-Off Date and received by the Originators or the Unaffiliated
Seller, shall be held in trust by the Originators or the Unaffiliated Seller for
the benefit of the Depositor as the owner thereof, and shall be promptly
delivered by the Originators or the Unaffiliated Seller to or upon the order of
the Depositor.
7
<PAGE>
(c) Pursuant to the Pooling and Servicing Agreement, the
Depositor shall, on the Closing Date, assign all of its right, title and
interest in and to the applicable Mortgage Loans to the Trustee for the benefit
of the Certificateholders and the Certificate Insurer.
Section 2.05. Delivery of Mortgage Loan Documents. (a) On or
prior to the Closing Date or Subsequent Transfer Date, as applicable, the
related Originator shall deliver to the Unaffiliated Seller, and the
Unaffiliated Seller shall deliver to the Trustee (as assignee of the Depositor
pursuant to the Pooling and Servicing Agreement), each of the following
documents for each applicable Mortgage Loan:
(i) The original Mortgage Note, endorsed without recourse in
blank by the related Originator, including all intervening endorsements
showing a complete chain of endorsement;
(ii) The related original Mortgage with evidence of recording
indicated thereon or a copy thereof certified by the applicable
recording office;
(iii) The recorded mortgage assignment, or copy thereof
certified by the applicable recording office, if any, showing a
complete chain of assignment from the originator of the related
Mortgage Loan to the related Originator (which assignment may, at the
related Originator's option, be combined with the assignment referred
to in subpart (iv) hereof);
(iv) A mortgage assignment in recordable form (which, if
acceptable for recording in the relevant jurisdiction, may be included
in a blanket assignment or assignments) of each Mortgage from the
related Originator to the Trustee;
(v) Originals of all assumption, modification and
substitution agreements in those instances where the terms or
provisions of a Mortgage or Mortgage Note have been modified or such
Mortgage or Mortgage Note has been assumed; and
(vi) An original policy of title insurance (or (A) a copy of
the title insurance policy, or (B) a binder thereof or copy of such
binder, together with a certificate from the related Originator that
the original Mortgage has been delivered to the title insurance company
that issued such binder for recordation).
In instances where the original recorded Mortgage and a completed
assignment thereof in recordable form cannot be delivered by the related
Originator to the Unaffiliated Seller, and by the Unaffiliated Seller to the
Trustee prior to or concurrently with the execution and delivery of this
Agreement (or, with respect to Subsequent Mortgage Loans, prior to or on the
Subsequent Transfer Date), due to a delay in connection with recording, the
related Originator may:
(x) In lieu of delivering such original recorded Mortgage,
deliver to the Trustee a copy thereof provided that the related
Originator certifies that the original Mortgage has been delivered to a
title insurance company for recordation after receipt of its policy of
title insurance or binder therefor; and
8
<PAGE>
(y) In lieu of delivering the completed assignment in
recordable form, deliver to the Trustee the assignment in recordable
form, otherwise complete except for recording information.
(b) Pursuant to the Pooling and Servicing Agreement, the
Unaffiliated Seller shall be required to promptly submit, or cause to be
submitted by the related Originator, for recording in the appropriate public
office for real property records, each assignment referred to in (a) above. The
Trustee shall be required to retain a copy of each assignment submitted for
recording. In the event that any such assignment is lost or returned unrecorded
because of a defect therein, the Unaffiliated Seller or such Originator shall
promptly prepare a substitute assignment or cure such defect, as the case may
be, and thereafter the Unaffiliated Seller or such Originator shall be required
to submit each such assignment for recording.
(c) The Unaffiliated Seller or the related Originator shall,
within five Business Days after the receipt thereof, deliver or cause to be
delivered to the Trustee (as assignee of the Depositor pursuant to the Pooling
and Servicing Agreement): (i) the original recorded Mortgage and related power
of attorney, if any, in those instances where a copy thereof certified by the
related Originator was delivered to the Trustee (as assignee of the Depositor
pursuant to the Pooling and Servicing Agreement); (ii) the original recorded
assignment of Mortgage from the related Originator to the Trustee (as assignee
of the Depositor pursuant to the Pooling and Servicing Agreement), which,
together with any intervening assignments of Mortgage, evidences a complete
chain of assignment from the originator of the Mortgage Loan to the Trustee in
those instances where copies of such assignments certified by the related
Originator were delivered to the Trustee (as assignee of the Depositor pursuant
to the Pooling and Servicing Agreement); and (iii) the title insurance policy or
title opinion required in clause (a)(vi) above. Notwithstanding anything to the
contrary contained in this Section 2.05, in those instances where the public
recording office retains the original Mortgage, power of attorney, if any,
assignment or assignment of Mortgage after it has been recorded or such original
has been lost, the Unaffiliated Seller or the related Originator shall be deemed
to have satisfied its obligations hereunder upon delivery to the Trustee (as
assignee of the Depositor pursuant to the Pooling and Servicing Agreement) of a
copy of such Mortgage, power of attorney, if any, assignment or assignment of
Mortgage certified by the public recording office to be a true copy of the
recorded original thereof. From time to time the Unaffiliated Seller or the
related Originator may forward or cause to be forwarded to the Trustee (as
assignee of the Depositor pursuant to the Pooling and Servicing Agreement)
additional original documents evidencing an assumption or modification of a
Mortgage Loan.
(d) All original documents relating to the Mortgage Loans that
are not delivered to the Trustee (as assignee of the Depositor pursuant to the
Pooling and Servicing Agreement) as permitted by Section 2.05 (a) are and shall
be held by the Unaffiliated Seller or the related Originator 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 2.05 to be a part of a Mortgage File, such document
shall be delivered promptly to the Trustee (as assignee of the Depositor
pursuant to the Pooling and Servicing Agreement). From and after the sale of the
Mortgage Loans to the Depositor pursuant hereto, to the extent that the
Unaffiliated Seller or the related Originator retains legal title of record to
any Mortgage Loans prior to the vesting of legal title in the Trustee (as
assignee of the Depositor pursuant to the Pooling and Servicing Agreement), such
title shall be retained in trust for the Depositor as the owner of the Mortgage
Loans and the Trustee, as the Depositor's assignee.
9
<PAGE>
Section 2.06. Acceptance of Mortgage Loans. (a) Pursuant to
the Pooling and Servicing Agreement, the Trustee has agreed to execute and
deliver on or prior to the Closing Date, or any Subsequent Transfer Date, an
acknowledgment of receipt of, for each Mortgage Loan, the original Mortgage Note
with respect to each Mortgage Loan (with any exceptions noted), in the form
attached as Exhibit E to the Pooling and Servicing Agreement and declares that
it will hold such documents and any amendments, replacements or supplements
thereto, as well as any other assets included in the definition of Trust Fund in
the Pooling and Servicing Agreement and delivered to the Trustee, as Trustee in
trust upon and subject to the conditions set forth in the Pooling and Servicing
Agreement for the benefit of the Certificateholders and the Certificate Insurer.
Pursuant to the Pooling and Servicing Agreement, the Trustee has agreed, for the
benefit of the Certificateholders and the Certificate Insurer, to review (or
cause to be reviewed) each Trustee's Mortgage File within 30 days after the
Closing Date or the Subsequent Transfer Date, as applicable (or, with respect to
any Qualified Substitute Mortgage Loan, within 30 days after the receipt by the
Trustee thereof), and to deliver to the Unaffiliated Seller, the Servicer and
the Certificate Insurer a certification in the form attached to the Pooling and
Servicing Agreement as Exhibit F to the effect that, as to each Mortgage Loan
listed in the Mortgage Loan Schedule (other than any Mortgage Loan paid in full
or any Mortgage Loan specifically identified in such certification as not
covered by such certification), (i) all documents required to be delivered to it
pursuant to the Pooling and Servicing Agreement are in its possession, (ii) each
such document has been reviewed by it and has not been mutilated, damaged, torn
or otherwise physically altered (handwritten additions, changes or corrections
shall not constitute physical alteration if initialled by the Mortgagor),
appears regular on its face and relates to such Mortgage Loan, and (iii) based
on its examination and only as to the foregoing documents, the information set
forth on the Mortgage Loan Schedule accurately reflects the information set
forth in the Trustee's Mortgage File delivered on such date. Pursuant to the
Pooling and Servicing Agreement, the Trustee shall be under no duty or
obligation to inspect, review or examine any such documents, instruments,
certificates or other papers to determine that they are genuine, enforceable, or
appropriate for the represented purpose or that they are other than what they
purport to be on their face. Pursuant to the Pooling and Servicing Agreement, by
June 30, 1997, with respect to the Initial Mortgage Loans, and within 90 days of
the Subsequent Transfer Date, with respect to any related Subsequent Transfer
Date, the Trustee shall be required to deliver (or cause to be delivered) to the
Servicer, the Unaffiliated Seller, the initial Certificate- holders and the
Certificate Insurer a final certification in the form attached to the Pooling
and Servicing Agreement as Exhibit G to the effect that, as to each Mortgage
Loan listed in the Mortgage Loan Schedule (other than any Mortgage Loan paid in
full or any Mortgage Loan specifically identified in such certification as not
covered by such certification), (i) all documents required to be delivered to it
pursuant to the Pooling and Servicing Agreement are in its possession, (ii) each
such document has been reviewed by it and has not been mutilated, damaged, torn
or otherwise physically altered (handwritten additions, changes or corrections
shall not constitute physical alteration if initialled by the Mortgagor),
appears regular on its face and relates to such Mortgage Loan, and (iii) based
on its examination and only as to the foregoing documents, the information set
forth on the Mortgage Loan Schedule accurately reflects the information set
forth in the Trustee's Mortgage File delivered on such date.
(b) The Pooling and Servicing Agreement provides that, if the
Trustee during the process of reviewing the Trustee's Mortgage Files finds any
document constituting a part of a Trustee's Mortgage File which is not executed,
has not been received, is unrelated to the Mortgage Loan identified in the
Mortgage Loan Schedule, or does not conform to the requirements of Section 2.05
or the description thereof as set forth in the Mortgage Loan
10
<PAGE>
Schedule, the Trustee shall promptly so notify the Servicer, the Unaffiliated
Seller, the related Originator, the Certificate Insurer and the Trustee. The
Unaffiliated Seller agrees that in performing any such review, the Trustee may
conclusively rely on the Unaffiliated Seller as to the purported genuineness of
any such document and any signature thereon. Each of the Originators and the
Unaffiliated Seller agrees to use reasonable efforts to remedy a material defect
in a document constituting part of a Mortgage File of which it is notified. If,
however, within 60 days after such notice neither the Unaffiliated Seller nor
either Originator has remedied the defect and the defect materially and
adversely affects the interest of the Certificateholders in the related Mortgage
Loan or the interests of the Certificate Insurer, then the Unaffiliated Seller
and the Originators shall be obligated to either substitute in lieu of such
Mortgage Loan a Qualified Substitute Mortgage Loan or purchase such Mortgage
Loan in the manner and subject to the conditions set forth in Section 3.05.
(c) The failure of the Trustee or the Certificate Insurer to
give any notice contemplated herein within the time periods specified above
shall not affect or relieve the Unaffiliated Seller's obligation to repurchase
for any Mortgage Loan pursuant to this Section 2.06 or Section 3.05 of this
Agreement.
Section 2.07. Transfer of Mortgage Loans; Assignment of
Agreement. The Originators and the Unaffiliated Seller each hereby acknowledges
and agrees that the Depositor may assign its interest under this Agreement to
the Trustee as may be required to effect the purposes of the Pooling and
Servicing Agreement, without further notice to, or consent of, the Unaffiliated
Seller or the Originators, and the Trustee shall succeed to such of the rights
and obligations of the Depositor hereunder as shall be so assigned. The
Depositor shall, pursuant to the Pooling and Servicing Agreement, assign all of
its right, title and interest in and to the Mortgage Loans and its right to
exercise the remedies created by Sections 2.06 and 3.05 hereof for breaches of
the representations, warranties, agreements and covenants of the Unaffiliated
Seller or the Originators contained in Sections 2.05, 2.06, 3.02 and 3.03 hereof
to the Trustee for the benefit of the Certificateholders and the Certificate
Insurer. Each of the Originators and the Unaffiliated Seller agrees that, upon
such assignment to the Trustee, such representations, warranties, agreements and
covenants will run to and be for the benefit of the Trustee and the Trustee may
enforce, without joinder of the Depositor, the repurchase obligations of the
Unaffiliated Seller and the Originators set forth herein with respect to
breaches of such representations, warranties, agreements and covenants.
Section 2.08. Examination of Mortgage Files. Prior to the
Closing Date and each Subsequent Transfer Date, as applicable, the Unaffiliated
Seller shall make the Mortgage Files available to the Depositor or its designee
for examination at the Unaffiliated Seller's offices or at such other place as
the Unaffiliated Seller shall reasonably specify. Such examination may be made
by the Depositor or its designee at any time on or before the Closing Date or
Subsequent Transfer Date, as the case may be. If the Depositor or its designee
makes such examination prior to the Closing Date or Subsequent Transfer Date, as
the case may be, and identifies any Mortgage Loans that do not conform to the
requirements of the Depositor as described in this Agreement, such Mortgage
Loans shall be deleted from the Mortgage Loan Schedule and may be replaced,
prior to the Closing Date or Subsequent Transfer Date, as the case may be, by
substitute Mortgage Loans acceptable to the Depositor. The Depositor may, at its
option and without notice to the Unaffiliated Seller, purchase all or part of
the Mortgage Loans without conducting any partial or complete examination. The
fact that the Depositor or the Trustee has conducted or has failed to
11
<PAGE>
conduct any partial or complete examination of the Mortgage Files shall not
affect the rights of the Depositor or the Trustee to demand repurchase or other
relief as provided in this Agreement.
Section 2.09. Books and Records. The sale of each Mortgage
Loan shall be reflected on each of the Originators' and the Unaffiliated
Seller's accounting and other records, balance sheet and other financial
statements as a sale of assets by the Originators to the Unaffiliated Seller and
by the Unaffiliated Seller to the Depositor. Each of the Originators and the
Unaffiliated Seller shall be responsible for maintaining, and shall maintain, a
complete set of books and records for each Mortgage Loan which shall be clearly
marked to reflect the ownership of each Mortgage Loan by the Trustee for the
benefit of the Certificateholders and the Certificate Insurer.
Section 2.10. Cost of Delivery and Recordation of Documents.
The costs relating to the delivery and recordation of the documents specified in
this Article Two in connection with the Mortgage Loans shall be borne by the
Unaffiliated Seller.
ARTICLE THREE
REPRESENTATIONS AND WARRANTIES
Section 3.01. Representations and Warranties as to the
Originators. Each of the Originators hereby represents and warrants to the
Unaffiliated Seller and the Depositor, as of the Closing Date, that:
(a) The Originator is a corporation duly organized, validly
existing and in good standing under the laws of the State of Pennsylvania and
has all licenses necessary to carry on its business as now being conducted and
is licensed, qualified and in good standing in each state where a Mortgaged
Property is located if the laws of such state require licensing or qualification
in order to conduct business of the type conducted by the Originator and to
perform its obligations as the Originator hereunder, and in any event the
Originator is in compliance with the laws of any such state to the extent
necessary to ensure the enforceability of the related Mortgage Loan; the
Originator has the full power and authority, corporate and otherwise, to execute
and deliver this Agreement and to perform in accordance herewith; the execution,
delivery and performance of this Agreement (including all instruments of
transfer to be delivered pursuant to this Agreement) by the Originator and the
consummation of the transactions contemplated hereby have been duly and validly
authorized; this Agreement evidences the valid, binding and enforceable
obligation of the Originator; and all requisite corporate action has been taken
by the Originator to make this Agreement valid and binding upon the Originator
in accordance with its terms;
(b) No consent, approval, authorization or order of any court
or governmental agency or body is required for the execution, delivery and
performance by the Originator of, or compliance by the Originator with, this
Agreement or the sale of the Mortgage Loans pursuant to the terms of this
Agreement or the consummation of the transactions contemplated by this
Agreement, or if required, such approval has been obtained prior to the Closing
Date;
(c) Neither the execution and delivery of this Agreement, the
acquisition or origination of the Mortgage Loans by the Originator or the
transactions contemplated hereby, nor the fulfillment of or compliance with the
terms and conditions of this Agreement, has or will
12
<PAGE>
conflict with or result in a breach of any of the terms, conditions or
provisions of the Originator's charter or by-laws or any legal restriction or
any agreement or instrument to which the Originator is now a party or by which
it is bound or to which its property is subject, or constitute a default or
result in an acceleration under any of the foregoing, or result in the violation
of any law, rule, regulation, order, judgment or decree to which the Originator
or its property is subject, or impair the ability of the Trustee (or the
Servicer as the agent of the Trustee) to realize on the Mortgage Loans, or
impair the value of the Mortgage Loans;
(d) Neither this Agreement nor the information contained in
the Prospectus Supplement under the captions "The Mortgage Pool", "The
Originators, the Seller and the Servicer" and "Servicing of the Mortgage Loans"
nor any statement, report or other document prepared by the Originator 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;
(e) There is no action, suit, proceeding or investigation
pending or, to the knowledge of the Originator, threatened before a court,
administrative agency or government tribunal against the Originator which,
either in any one instance or in the aggregate, may result in any material
adverse change in the business, operations, financial condition, properties or
assets of the Originator, or in any material impairment of the right or ability
of the Originator to carry on its business substantially as now conducted, or in
any material liability on the part of the Originator, or which would draw into
question the validity of this Agreement, the Mortgage Loans, or of any action
taken or to be taken in connection with the obligations of the Originator
contemplated herein, or which would impair materially the ability of the
Originator to perform under the terms of this Agreement or that might prohibit
its entering into this Agreement or the consummation of any of the transactions
contemplated hereby;
(f) The Originator is not in violation of or in default with
respect to, and the execution and delivery of this Agreement by the Originator
and its performance of and compliance with the terms hereof will not constitute
a violation or default with respect to, any order or decree of any court or any
order, regulation or demand of any federal, state, municipal or governmental
agency, which violation or default might have consequences that would materially
and adversely affect the condition (financial or other) or operations of the
Originator or its properties or might have consequences that would materially
and adversely affect its performance hereunder or under any Subservicing
Agreement;
(g) Upon the receipt of each Trustee's Mortgage File by the
Depositor under this Agreement, the Depositor will have good title on behalf of
the Trust Fund to each related Mortgage Loan and such other items comprising the
corpus of the Trust Fund free and clear of any lien created by the Originator
(other than liens which will be simultaneously released);
(h) The consummation of the transactions contemplated by this
Agreement are in the ordinary course of business of the Originator, and the
transfer, assignment and conveyance of the Mortgage Notes and the Mortgages by
the Originator pursuant to this Agreement are not subject to the bulk transfer
or any similar statutory provisions in effect in any applicable jurisdiction;
13
<PAGE>
(i) With respect to any Mortgage Loan purchased by the
Originator, the Originator acquired title to the Mortgage Loan in good faith,
without notice of any adverse claim;
(j) The Originator does not believe, nor does it have any
reason or cause to believe, that it cannot perform each and every covenant
contained in this Agreement. The Originator is solvent and the sale of the
Mortgage Loans by the Originator pursuant to the terms of this Agreement will
not cause the Originator to become insolvent. The sale of the Mortgage Loans by
the Originator pursuant to the terms of this Agreement was not undertaken with
the intent to hinder, delay or defraud any of the Originator's creditors;
(k) The Mortgage Loans are not intentionally selected in a
manner so as to affect adversely the interests of the Depositor or of any
transferee of the Depositor (including the Trustee);
(l) The Originator has determined that it will treat the
disposition of the Mortgage Loans pursuant to this Agreement as a sale for
accounting and tax purposes;
(m) The Originator has not dealt with any broker or agent or
anyone else that may be entitled to any commission or compensation in connection
with the sale of the Mortgage Loans to the Depositor other than to the Depositor
or an affiliate thereof; and
(n) The consideration received by the Originator upon the sale
of the Mortgage Loans under this Agreement constitutes fair consideration and
reasonably equivalent value for the Mortgage Loans.
Section 3.02. Representations and Warranties as to the
Unaffiliated Seller. The Unaffiliated Seller hereby represents and warrants to
the Depositor, as of the Closing Date, that:
(a) The Unaffiliated Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has all licenses necessary to carry on its business as now being conducted
and is licensed, qualified and in good standing in each state where a Mortgaged
Property is located if the laws of such state require licensing or qualification
in order to conduct business of the type conducted by the Unaffiliated Seller
and to perform its obligations as the Unaffiliated Seller hereunder, and in any
event the Unaffiliated Seller is in compliance with the laws of any such state
to the extent necessary to ensure the enforceability of the related Mortgage
Loan; the Unaffiliated Seller has the full power and authority, corporate and
otherwise, to execute and deliver this Agreement and to perform in accordance
herewith; the execution, delivery and performance of this Agreement (including
all instruments of transfer to be delivered pursuant to this Agreement) by the
Unaffiliated Seller and the consummation of the transactions contemplated hereby
have been duly and validly authorized; this Agreement evidences the valid,
binding and enforceable obligation of the Unaffiliated Seller; and all requisite
corporate action has been taken by the Unaffiliated Seller to make this
Agreement valid and binding upon the Unaffiliated Seller in accordance with its
terms;
(b) No consent, approval, authorization or order of any court
or governmental agency or body is required for the execution, delivery and
performance by the Unaffiliated Seller of or compliance by the Unaffiliated
Seller with this Agreement or the sale of the Mortgage Loans pursuant to the
terms of this Agreement or the consummation of the transactions contemplated by
this Agreement, or if required, such approval has been obtained prior to the
Closing Date;
14
<PAGE>
(c) Neither the execution and delivery of this Agreement, the
acquisition or origination of the Mortgage Loans by the Unaffiliated Seller or
the transactions contemplated hereby, nor the fulfillment of or compliance with
the terms and conditions of this Agreement, has or will conflict with or result
in a breach of any of the terms, conditions or provisions of the Unaffiliated
Seller's charter or by-laws or any legal restriction or any agreement or
instrument to which the Unaffiliated Seller is now a party or by which it is
bound or to which its property is subject, or constitute a default or result in
an acceleration under any of the foregoing, or result in the violation of any
law, rule, regulation, order, judgment or decree to which the Unaffiliated
Seller or its property is subject, or impair the ability of the Trustee (or the
Servicer as the agent of the Trustee) to realize on the Mortgage Loans, or
impair the value of the Mortgage Loans;
(d) Neither this Agreement nor the information contained in
the Prospectus Supplement under the captions "The Mortgage Pool", "The
Originators, the Seller and the Servicer" and "Servicing of the Mortgage Loans"
nor any statement, report or other document prepared by the Unaffiliated 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;
(e) There is no action, suit, proceeding or investigation
pending or, to the knowledge of the Unaffiliated Seller, threatened before a
court, administrative agency or government tribunal against the Unaffiliated
Seller which, either in any one instance or in the aggregate, may result in any
material adverse change in the business, operations, financial condition,
properties or assets of the Unaffiliated Seller, or in any material impairment
of the right or ability of the Unaffiliated Seller to carry on its business
substantially as now conducted, or in any material liability on the part of the
Unaffiliated Seller, or which would draw into question the validity of this
Agreement, the Mortgage Loans, or of any action taken or to be taken in
connection with the obligations of the Unaffiliated Seller contemplated herein,
or which would impair materially the ability of the Unaffiliated Seller to
perform under the terms of this Agreement or that might prohibit its entering
into this Agreement or the consummation of any of the transactions contemplated
hereby;
(f) The Unaffiliated Seller is not in violation of or in
default with respect to, and the execution and delivery of this Agreement by the
Unaffiliated Seller and its performance of and compliance with the terms hereof
will not constitute a violation or default with respect to, any order or decree
of any court or any order, regulation or demand of any federal, state, municipal
or governmental agency, which violation or default might have consequences that
would materially and adversely affect the condition (financial or other) or
operations of the Unaffiliated Seller or its properties or might have
consequences that would materially and adversely affect its performance
hereunder or under any Subservicing Agreement;
(g) Upon the receipt of each Trustee's Mortgage File by the
Depositor under this Agreement, the Depositor will have good title on behalf of
the Trust Fund to each related Mortgage Loan and such other items comprising the
corpus of the Trust Fund free and clear of any lien created by the Unaffiliated
Seller (other than liens which will be simultaneously released);
(h) The consummation of the transactions contemplated by this
Agreement are in the ordinary course of business of the Unaffiliated Seller, and
the transfer, assignment and
15
<PAGE>
conveyance of the Mortgage Notes and the Mortgages by the Unaffiliated Seller
pursuant to this Agreement are not subject to the bulk transfer or any similar
statutory provisions in effect in any applicable jurisdiction;
(i) With respect to any Mortgage Loan purchased by the
Unaffiliated Seller, the Unaffiliated Seller acquired title to the Mortgage Loan
in good faith, without notice of any adverse claim;
(j) The Unaffiliated Seller does not believe, nor does it have
any reason or cause to believe, that it cannot perform each and every covenant
contained in this Agreement. The Unaffiliated Seller is solvent and the sale of
the Mortgage Loans by the Unaffiliated Seller pursuant to the terms of this
Agreement will not cause the Unaffiliated Seller to become insolvent. The sale
of the Mortgage Loans by the Unaffiliated Seller pursuant to the terms of this
Agreement was not undertaken with the intent to hinder, delay or defraud any of
the Unaffiliated Seller's creditors;
(k) The Mortgage Loans are not intentionally selected in a
manner so as to affect adversely the interests of the Depositor or of any
transferee of the Depositor (including the Trustee);
(l) The Unaffiliated Seller has determined that it will treat
the disposition of the Mortgage Loans pursuant to this Agreement as a sale for
accounting and tax purposes;
(m) The Unaffiliated Seller has not dealt with any broker or
agent or anyone else that may be entitled to any commission or compensation in
connection with the sale of the Mortgage Loans to the Depositor other than to
the Depositor or an affiliate thereof; and
(n) The consideration received by the Unaffiliated Seller upon
the sale of the Mortgage Loans under this Agreement constitutes fair
consideration and reasonably equivalent value for the Mortgage Loans.
Section 3.03. Representations and Warranties Relating to the
Mortgage Loans. The Originators represent and warrant to the Unaffiliated Seller
and the Unaffiliated Seller represents to the Depositor that, as of the Closing
Date, as to each Initial Mortgage Loan, and as of the Subsequent Transfer Date,
as to each Subsequent Mortgage Loan, immediately prior to the sale and transfer
of such Mortgage Loan by the Unaffiliated Seller to the Depositor:
(a) The information set forth in each Mortgage Loan Schedule
is complete, true and correct;
(b) The information to be provided by the Unaffiliated Seller
or the Originators, directly or indirectly, to the Depositor in connection with
a Subsequent Mortgage Loan will be true and correct in all material respects at
the date or dates respecting which such information is furnished;
(c) Each Mortgage is a valid first or second lien on a fee
simple (or its equivalent under applicable state law) estate in the real
property securing the amount owed by the Mortgagor under the Mortgage Note
subject only to (i) the lien of current real property taxes and assessments
which are not delinquent, (ii) with respect to any Mortgage Loan identified on
the
16
<PAGE>
Mortgage Loan Schedule as secured by a second lien, the related first mortgage
loan, (iii) covenants, conditions and restrictions, rights of way, easements and
other matters of public record as of the date of recording of such Mortgage,
such exceptions appearing of record being acceptable to mortgage lending
institutions generally in the area wherein the property subject to the Mortgage
is located or specifically reflected in the appraisal obtained in connection
with the origination of the related Mortgage Loan obtained by the Unaffiliated
Seller and (iv) other matters to which like properties are commonly subject
which do not materially interfere with the benefits of the security intended to
be provided by such Mortgage;
(d) Immediately prior to the transfer and assignment by the
related Originator to the Unaffiliated Seller and by the Unaffiliated Seller to
the Trustee, the Unaffiliated Seller and such Originator, as applicable, had
good title to, and was the sole owner of each Mortgage Loan, free of any
interest of any other Person, and the Unaffiliated Seller and such Originator
has transferred all right, title and interest in each Mortgage Loan to the
Trustee and the Unaffiliated Seller, as applicable;
(e) As of the Cut-Off Date, no payment of principal or
interest on or in respect of any Mortgage Loan remains unpaid for 30 or more
days past the date the same was due in accordance with the related Mortgage Note
without regard to applicable grace periods;
(f) No Mortgage Loan has a Loan Rate less than 8.99% per annum
and the weighted average interest rate of the Mortgage Loans is 12.69%;
(g) At origination, no Mortgage Loan had an original term to
maturity of greater than 360 months;
(h) As of the Cut-Off Date, the weighted average maturity of
the Mortgage Loans is 197 months;
(i) To the best knowledge of the Unaffiliated Seller and each
of the Originators, there is no mechanics' lien or claim for work, labor or
material (and no rights are outstanding that under law could give rise to such
lien) affecting the premises subject to any Mortgage which is or may be a lien
prior to, or equal or coordinate with, the lien of such Mortgage, except those
which are insured against by the title insurance policy referred to in (af)
below;
(j) To the best knowledge of the Unaffiliated Seller and each
of the Originators, there is no delinquent tax or assessment lien against any
Mortgaged Property;
(k) Such Mortgage Loan, the Mortgage, and the Mortgage Note,
including, without limitation, the obligation of the Mortgagor to pay the unpaid
principal of and interest on the Mortgage Note, are each not subject to any
right of rescission (or any such rescission right has expired in accordance with
applicable law), set-off, counterclaim, or defense, including 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;
17
<PAGE>
(l) To the best knowledge of the Unaffiliated Seller and each
of the Originators, the Mortgaged Property is free of material damage and is in
good repair, and there is no pending or threatened proceeding for the total or
partial condemnation of the Mortgaged Property;
(m) Neither the Originators nor the Unaffiliated Seller has
received a notice of default of any first mortgage loan secured by the Mortgaged
Property which has not been cured by a party other than the Unaffiliated Seller;
(n) Each Mortgage Note and Mortgage are in substantially the
forms previously provided to the Trustee on behalf of the Unaffiliated Seller;
(o) No Mortgage Loan had, at the date of origination, a
Loan-to-Value Ratio in excess of 93.83%, and the weighted average Loan-to-Value
ratio of all Mortgage Loans is 70.48%;
(p) The Mortgage Loan was not originated in a program in which
the amount of documentation in the underwriting process was limited in
comparison to the originator's normal documentation requirements;
(q) No more than the following percentages of the Mortgage
Loans by Principal Balance as of the Cut-Off Date are secured by Mortgaged
Properties located in the following states;
Percent of
State Principal Balance
- ------------------------------ ------------------------------
Connecticut 1.15%
Delaware 4.79
Florida 0.49
Georgia 3.93
Maryland 3.67
New Jersey 28.91
New York 6.34
North Carolina 5.11
Pennsylvania 41.19
Virginia 4.41
-------
100.00%
(r) The Mortgage Loans were not selected by the Unaffiliated
Seller or the Originators for sale hereunder or inclusion in the Trust Fund on
any basis adverse to the Trust Fund relative to the portfolio of similar
mortgage loans of the Unaffiliated Seller or the Originators;
(s) None of the Mortgage Loans constitutes a lien on leasehold
interests;
(t) 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. To the best
of the Unaffiliated Seller's and the Originators' knowledge, there is no
homestead or other
18
<PAGE>
exemption available to the related Mortgagor which would materially interfere
with the right to sell the related Mortgaged Property at a trustee's sale or the
right to foreclose the related Mortgage. The Mortgage contains customary and
enforceable provisions for the acceleration of the payment of the Principal
Balance of such Mortgage Loan in the event all or any part of the related
Mortgaged Property is sold or otherwise transferred without the prior written
consent of the holder thereof;
(u) The proceeds of such Mortgage Loan have been fully
disbursed, including reserves set aside by the Unaffiliated Seller or the
Originators, there is no requirement for, and neither the Unaffiliated Seller
nor the Originators shall make any, future advances thereunder. Any future
advances made prior to the Cut-Off Date have been consolidated with the
principal balance secured by the Mortgage, and such principal balance, as
consolidated, bears a single interest rate and single repayment term reflected
on the applicable Mortgage Loan Schedule. The Principal Balance as of the
Cut-Off Date does not exceed the original principal amount of such Mortgage
Loan. Except with respect to approximately $188,425.75 of escrow funds, 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 recording such Mortgage Loan
have been paid;
(v) All Mortgage Loans were originated in compliance with the
Originators' Underwriting Guidelines;
(w) The terms of the Mortgage and Mortgage Note have not been
impaired, waived, altered, or modified in any respect, except by a written
instrument which has been recorded, if necessary, to protect the interest of the
Trustee and which has been delivered to the Trustee. The substance of any such
alteration or modification is or as to Subsequent Mortgage Loans will be
reflected on the applicable Mortgage Loan Schedule and, to the extent necessary,
has been or will be approved by (i) the insurer under the applicable mortgage
title insurance policy, and (ii) the insurer under any other insurance policy
required hereunder for such Mortgage Loan where such insurance policy requires
approval and the failure to procure approval would impair coverage under such
policy;
(x) No instrument of release, waiver, alteration, or
modification has been executed in connection with such Mortgage Loan, and no
Mortgagor has been released, in whole or in part, except in connection with an
assumption agreement which has been approved by the insurer under any insurance
policy required hereunder for such Mortgage Loan where such policy requires
approval and the failure to procure approval would impair coverage under such
policy, and which is part of the Mortgage File and has been delivered to the
Trustee, and the terms of which are reflected in the applicable Mortgage Loan
Schedule;
(y) Other than delinquencies described in clause (e) above,
there is no default, breach, violation, or event of acceleration existing under
the Mortgage or the Mortgage Note and no event which, with the passage of time
or with notice and the expiration of any grace or cure period, would constitute
such a default, breach, violation or event of acceleration, and neither the
Originators nor the Unaffiliated Seller has waived any such default, breach,
violation or event of acceleration. All taxes, governmental assessments
(including assessments payable in future installments), insurance premiums,
water, sewer, and municipal charges, leaseholder payments, or ground rents which
previously became due and owing in respect of or affecting the related Mortgaged
Property have been paid. Neither the Originators nor the Unaffiliated Seller has
19
<PAGE>
advanced funds, or induced, solicited, or knowingly received any advance of
funds by a party other than the Mortgagor, directly or indirectly, for the
payment of any amount required by the Mortgage or the Mortgage Note;
(z) All of the improvements which were included for the
purposes of determining the Appraised Value of the Mortgaged Property were
completed at the time that such Mortgage Loan was originated and lie wholly
within the boundaries and building restriction lines of such Mortgaged Property.
Except for de minimis encroachments, no improvements on adjoining properties
encroach upon the Mortgaged Property. To the best of the Unaffiliated Seller's
and the Originators' knowledge, no improvement located on or being part of the
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 the Mortgaged Property (including all such
improvements which were included for the purpose of determining such Appraised
Value) and, with respect to the use and occupancy of the same, including but not
limited to certificates of occupancy and fire underwriters certificates, have
been made or obtained from the appropriate authorities and the Mortgaged
Property is lawfully occupied under applicable law;
(aa) To the best of the Unaffiliated Seller's and the
Originators' knowledge, there do not exist any circumstances or conditions with
respect to the Mortgage, the Mortgaged Property, the Mortgagor, or the
Mortgagor's credit standing that can be reasonably expected to cause such
Mortgage Loan to become delinquent or adversely affect the value or
marketability of such Mortgage Loan, other than any such circumstances or
conditions permitted under the Originator's Underwriting Guidelines;
(ab) All parties which have had any interest in the Mortgage,
whether as mortgagee, assignee, pledgee or otherwise, are (or, during the period
in which they held and disposed of such interest, were) (i) in compliance with
any and all applicable licensing requirements of the laws of the state wherein
the Mortgaged Property is located and (ii) (A) organized under the laws of such
state, (B) qualified to do business in such state, (C) federal savings and loan
associations or national banks having principal offices in such state, (D) not
doing business in such state, or (E) not required to qualify to do business in
such state;
(ac) The Mortgage Note and the Mortgage are genuine, and each
is the legal, valid and binding obligation of the maker thereof, enforceable in
accordance with its terms, except as such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium, or other similar laws
affecting the enforcement of creditors' rights generally and except that the
equitable remedy of specific performance and other equitable remedies are
subject to the discretion of the courts. All parties to the Mortgage Note and
the Mortgage had legal capacity to execute the Mortgage Note and the Mortgage
and convey the estate therein purported to be conveyed, and the Mortgage Note
and the Mortgage have been duly and properly executed by such parties or
pursuant to a valid power-of-attorney that has been recorded with the Mortgage;
(ad) The transfer of the Mortgage Note and the Mortgage as and
in the manner contemplated by this Agreement is sufficient either (i) fully to
transfer to the Depositor all right, title, and interest of the Unaffiliated
Seller and the Originators thereto as note holder and mortgagee or (ii) to grant
to the Depositor the security interest referred to in Section 6.07 hereof. The
Mortgage has been duly assigned and the Mortgage Note has been duly endorsed.
The assignment of Mortgage delivered to the Trustee pursuant to Section
2.04(a)(iv) is in recordable
20
<PAGE>
form and is acceptable for recording under the laws of the applicable
jurisdiction. The endorsement of the Mortgage Note, the delivery to the Trustee
of the endorsed Mortgage Note, and such assignment of Mortgage, and the delivery
of such assignment of Mortgage for recording to, and the due recording of such
assignment of Mortgage in, the appropriate public recording office in the
jurisdiction in which the Mortgaged Property is located are sufficient to permit
the Trustee to avail itself of all protection available under applicable law
against the claims of any present or future creditors of the Unaffiliated Seller
and the Originators, and are sufficient to prevent any other sale, transfer,
assignment, pledge, or hypothecation of the Mortgage Note and Mortgage by the
Unaffiliated Seller or the Originators from being enforceable;
(ae) Any and all requirements of any federal, state, or local
law including, without limitation, usury, truth-in-lending, real estate
settlement procedures, consumer credit protection, equal credit opportunity, or
disclosure laws applicable to such Mortgage Loan have been complied with, and
the Servicer shall maintain in its possession, available for the Trustee's
inspection, and shall deliver to the Trustee or its designee upon demand,
evidence of compliance with all such requirements. The consummation of the
transactions contemplated by this Agreement will not cause the violation of any
such laws;
(af) Such Mortgage Loan is covered by an ALTA mortgage title
insurance policy or such other generally used and acceptable form of policy,
issued by and the valid and binding obligation of a title insurer qualified to
do business in the jurisdiction where the Mortgaged Property is located,
insuring the Unaffiliated Seller, and its successors and assigns, as to the
first or second priority lien, as applicable, of the Mortgage in the original
principal amount of such Mortgage Loan. The assignment to the Trustee of the
Unaffiliated Seller's interest in such mortgage title insurance policy does not
require the consent of or notification to the insurer. Such mortgage title
insurance policy is in full force and effect and will be in full force and
effect and inure to the benefit of the Trustee upon the consummation of the
transactions contemplated by this Agreement. No claims have been made under such
mortgage title insurance policy and neither the Unaffiliated Seller nor any
prior holder of the Mortgage has done, by act or omission, anything which would
impair the coverage of such mortgage title insurance policy;
(ag) All improvements upon the Mortgaged Property are insured
against loss by fire, hazards of extended coverage, and such other hazards as
are customary in the area where the Mortgaged Property is located pursuant to
insurance policies conforming to the requirements of Section 3.05 hereof. If the
Mortgaged Property at origination was located in an area identified on a flood
hazard boundary map or flood insurance rate map issued by the Federal Emergency
Management Agency as having special flood hazards (and such flood insurance has
been made available), such Mortgaged Property was covered by flood insurance at
origination. Each individual insurance policy is the valid and binding
obligation of the insurer, is in full force and effect, and will be in full
force and effect and inure to the benefit of the Trustee upon the consummation
of the transactions contemplated by this Agreement, and contain a standard
mortgage clause naming the originator of such Mortgage Loan, and its successors
and assigns, as mortgagee and loss payee. All premiums thereon have been paid.
The Mortgage obligates the Mortgagor to maintain all such insurance at the
Mortgagor's cost and expense, and upon the Mortgagor's failure to do so,
authorizes the holder of the Mortgage to obtain and maintain such insurance at
the Mortgagor's cost and expense and to seek reimbursement therefor from the
Mortgagor, and none of the Unaffiliated Seller, the related Originator or any
prior holder of the Mortgage has acted or failed to act so as to impair the
coverage of any such insurance policy or the validity, binding effect, and
enforceability thereof;
21
<PAGE>
(ah) If the Mortgage constitutes 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, as no fees or
expenses are or will become payable by the Trustee or the Certificateholders to
the trustee under the deed of trust, except in connection with a trustee's sale
after default by the Mortgagor;
(ai) The Mortgaged Property consists of one or more parcels of
real property separately assessed for tax purposes. To the extent there is
erected thereon a detached or an attached one-family residence or a detached
two-to six-family dwelling, or an individual condominium unit in a low-rise
condominium, or an individual unit in a planned unit development, or a
commercial property, or a mixed use or multiple purpose property, such
residence, dwelling or unit is not (i) a unit in a cooperative apartment, (ii) a
property constituting part of a syndication, (iii) a time share unit, (iv) a
property held in trust, (v) a mobile home, (vi) a manufactured dwelling, (vii) a
log-constructed home, or (viii) a recreational vehicle;
(aj) There exist no material deficiencies with respect to
escrow deposits and payments, if such are required, for which customary
arrangements for repayment thereof have not been made or which the Unaffiliated
Seller or the related Originator expects not to be cured, and no escrow deposits
or payments of other charges or payments due the Unaffiliated Seller have been
capitalized under the Mortgage or the Mortgage Note;
(ak) Such Mortgage Loan was not originated at a below market
interest rate. Such Mortgage Loan does not have a shared appreciation feature,
or other contingent interest feature;
(al) The origination and collection practices used by the
Unaffiliated Seller, the Originators or the Servicer with respect to such
Mortgage Loan have been in all respects legal, proper, prudent, and customary in
the mortgage origination and servicing business;
(am) The Mortgagor has, to the extent required by applicable
law, executed a statement to the effect that the Mortgagor has received all
disclosure materials, if any, required by applicable law with respect to the
making of fixed-rate mortgage loans. The Servicer shall maintain or cause to be
maintained such statement in the Mortgage File;
(an) All amounts received by the Unaffiliated Seller or the
Originators with respect to such Mortgage Loan after the Cut-Off Date and
required to be deposited in the Certificate Account have been so deposited in
the Certificate Account and are, as of the Closing Date, or will be as of the
Subsequent Transfer Date, as applicable, in the Certificate Account;
(ao) The appraisal report with respect to the Mortgaged
Property contained in the Mortgage File was signed prior to the approval of the
application for such Mortgage Loan by a qualified appraiser, duly appointed by
the originator of such Mortgage Loan, who had no interest, direct or indirect,
in the Mortgaged Property or in any loan made on the security thereof and whose
compensation is not affected by the approval or disapproval of such application;
(ap) When measured by the Cut-Off Date Balances as of the
Cut-Off Date, the Mortgagors with respect to at least 85.76% of the Mortgage
Loans represented at the time of origination that the Mortgagor would occupy the
Mortgaged Property as the Mortgagor's primary residence;
22
<PAGE>
(aq) Each of the Originators and the Unaffiliated Seller has
no knowledge with respect to the Mortgaged Property of any governmental or
regulatory action or third party claim made, instituted or threatened in writing
relating to a violation of any applicable federal, state or local environmental
law, statute, ordinance, regulation, order, decree or standard;
(ar) Each Mortgage Loan is a "qualified mortgage" within the
meaning of Section 860G(a)(3) of the Code;
(as) With respect to second lien Mortgage Loans:
(i) the Unaffiliated Seller has no knowledge that the
Mortgagor has received notice from the holder of the prior mortgage
that such prior mortgage is in default,
(ii) no consent from the holder of the prior mortgage is
needed for the creation of the second lien Mortgage or, if required,
has been obtained and is in the related Mortgage File,
(iii) if the prior mortgage has a negative amortization, the
Loan-to-Value Ratio was determined using the maximum loan amount of
such prior mortgage, and
(iv) the related first mortgage loan encumbering the related
Mortgaged Property does not have a mandatory future advance provision,
(v) the Mortgage Loans conform in all material respects to
the description thereof in the Prospectus Supplement.
(at) Each of the Originators and the Unaffiliated Seller
further represents and warrants to the Trustee and the Certificateholders that
as of the Subsequent Cut-Off Date all representations and warranties set forth
in clauses (a) through (as) above will be correct in all material respects as to
each Subsequent Mortgage Loan, and the representations so made in this
subsection (at) as to the following matters will be deemed to be correct if: (i)
each Subsequent Mortgage Loan is not 30 or more days contractually delinquent as
of the related Subsequent CutOff Date; (ii) the original term to maturity of
each Subsequent Mortgage Loan does not exceed 360 months; (iii) each Subsequent
Mortgage Loan has a Mortgage Rate of at least 8.32%; (iv) the purchase of the
Subsequent Mortgage Loans is consented to by the Certificate Insurer and the
Rating Agencies; (v) the principal balance of any Subsequent Mortgage Loan does
not exceed $350,000.00; (vi) no more than 35% of the Subsequent Mortgage Loans
are second liens; (vii) no Subsequent Mortgage Loan has a CLTV of more than, (A)
for consumer purpose loans, 90%, and (B) for business purpose loans, 75%; (viii)
no more than 27% of the Subsequent Mortgage Loans are Balloon Loans; (ix) no
more than 18% of the Subsequent Mortgage Loans are secured by mixed-use
properties, commercial properties, or four or more unit multifamily properties;
(x) no more than 5% of the Subsequent Mortgage Loans are secured by commercial
properties; and (xi) following the purchase of the Subsequent Mortgage Loans by
the Trust, the Mortgage Loans (including the Subsequent Mortgage Loans) (A) will
have a weighted average Mortgage Rate, (I) for consumer purpose loans, of at
least 11.30% and (II) for business purpose loans, of at least 15.50%; and (B)
will have a weighted average LTV of not more than 74%;
(au) to the best of the Unaffiliated Seller's and the
Originators' knowledge, no error, omission, misrepresentation, negligence, fraud
or similar occurrence with respect to a
23
<PAGE>
Mortgage Loan has taken place on the part of any person, including without
limitation the Mortgagor, any appraiser, an builder or developer, or an other
party involved in the origination of the Mortgage Loan or in the application of
any insurance in relation to such Mortgage Loan.
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 or affecting the rights of creditors generally, and by general
equity principles (regardless of whether such enforcement is considered in a
proceeding in equity or at law);
(d) No consent, approval, authorization or order of or
registration or filing with, or notice to, any governmental authority or court
is required for the execution, delivery and performance of or compliance by the
Depositor with this Agreement or the consummation by the Depositor of any of the
transactions contemplated hereby, except such as have been made on or prior to
the Closing Date;
(e) The Depositor has filed or will file the Prospectus and
Prospectus Supplement with the Commission in accordance with Rule 424(b) under
the Securities Act; and
(f) None of the execution and delivery of this Agreement, the
purchase of the Mortgage Loans from the Unaffiliated Seller, the consummation of
the other transactions contemplated hereby, or the fulfillment of or compliance
with the terms and conditions of this Agreement, (i) conflicts or will conflict
with the charter or bylaws of the Depositor or conflicts or will conflict with
or results or will result in a breach of, or constitutes or will constitute a
default or results or will result in an acceleration under, any term, condition
or provision of any indenture, deed of trust, contract or other agreement or
other instrument to which the Depositor is a party or by which it is bound and
which is material to the Depositor, or (ii) results or will result in a
violation of any law, rule, regulation, order, judgment or decree of any court
or governmental authority having jurisdiction over the Depositor.
Section 3.05. Repurchase Obligation for Defective
Documentation and for Breach of a Representation or Warranty. (a) Each of the
representations and warranties contained in Sections 3.01, 3.02 and 3.03 shall
survive the purchase by the Depositor of the Mortgage Loans and the subsequent
transfer thereof by the Depositor to the Trustee and shall continue in full
force and effect, notwithstanding any restrictive or qualified endorsement on
the Mortgage Notes and
24
<PAGE>
notwithstanding subsequent termination of this Agreement or the Pooling and
Servicing Agreement.
(b) With respect to any representation or warranty contained
in Section 3.01 that is made to the best of the Originators' knowledge or
contained in Sections 3.02 or 3.03 hereof that is made to the best of the
Unaffiliated Seller's and the Originators' knowledge, if it is discovered by the
Servicer, any Subservicer, the Trustee, the Certificate Insurer or any
Certificateholder that the substance of such representation and warranty was
inaccurate as of the Closing Date and such inaccuracy materially and adversely
affects the value of the related Mortgage Loan, then notwithstanding the
Originators' or the Unaffiliated Seller's lack of knowledge with respect to the
inaccuracy at the time the representation or warranty was made, such inaccuracy
shall be deemed a breach of the applicable representation or warranty. Upon
discovery by the Originators, the Unaffiliated Seller, the Servicer, any
Subservicer, the Trustee, the Certificate Insurer or any Certificateholder of a
breach of any of such representations and warranties which materially and
adversely affects the value of Mortgage Loans or the interest of the
Certificateholders, or which materially and adversely affects the interests of
the Certificate Insurer or the Certificateholders in the related Mortgage Loan
in the case of a representation and warranty relating to a particular Mortgage
Loan (notwithstanding that such representation and warranty was made to the
Originators' or the Unaffiliated Seller's best knowledge), the party discovering
such breach shall give pursuant to Section 3.03 of the Pooling and Servicing
Agreement prompt written notice to the others. Subject to the next to last
paragraph of this Section 3.05, within 60 days of the earlier of its discovery
or its receipt of notice of any breach of a representation or warranty, the
Unaffiliated Seller and the Originators shall (a) promptly cure such breach in
all material respects, or (b) purchase such Mortgage Loan at a purchase price
equal to the Principal Balance of such Mortgage Loan as of the date of purchase,
plus the greater of (i) all accrued and unpaid interest on such Principal
Balance and (ii) 30 days' interest on such Principal Balance, computed at the
Mortgage Interest Rate, net of the Servicing Fee if the Unaffiliated Seller is
the Servicer, plus the amount of any unreimbursed Servicing Advances made by the
Servicer with respect to such Mortgage Loan, or (c) remove such Mortgage Loan
from the Trust Fund (in which case it shall become a Deleted Mortgage Loan) and
substitute one or more Qualified Substitute Mortgage Loans; provided, that, such
substitution is effected not later than the date which is 2 years after the
Startup Day or at such later date, if the Trustee and the Certificate Insurer
receive an Opinion of Counsel to the effect set forth below in this Section. Any
such substitution shall be accompanied by payment by the Unaffiliated Seller of
the Substitution Adjustment, if any, to be deposited in the Certificate Account
pursuant to the Pooling and Servicing Agreement. The Originators shall cooperate
with the Unaffiliated Seller to cure any breach and shall reimburse the
Unaffiliated Seller for the costs and expenses related to any cure, substitution
(including any Substitution Adjustment) or repurchase incurred by the
Unaffiliated Seller pursuant to this Section 3.05.
(c) As to any Deleted Mortgage Loan for which the Unaffiliated
Seller or an Originator substitutes a Qualified Substitute Mortgage Loan or
Loans, the Unaffiliated Seller or such Originator shall effect such substitution
by delivering to the Trustee a certification in the form attached to the Pooling
and Servicing Agreement as Exhibit H, executed by a Servicing Officer and the
documents described in Section 2.06(a) for such Qualified Substitute Mortgage
Loan or Loans. Pursuant to the Pooling and Servicing Agreement, upon receipt by
the Trustee of a certification of a Servicing Officer of such substitution or
purchase and, in the case of a substitution, upon receipt of the related
Trustee's Mortgage File, and the deposit of certain amounts in the Certificate
Account pursuant to Section 2.07(b) of the Pooling and Servicing
25
<PAGE>
Agreement (which certification shall be in the form of Exhibit H to the Pooling
and Servicing Agreement), the Trustee shall be required to release to the
Servicer for release to the Unaffiliated Seller the related Trustee's Mortgage
File and shall be required to execute, without recourse, and deliver such
instruments of transfer furnished by the Unaffiliated Seller as may be necessary
to transfer such Mortgage Loan to the Unaffiliated Seller or such Originator.
(d) Pursuant to the Pooling and Servicing Agreement, the
Servicer shall deposit in the Certificate Account all payments received in
connection with such Qualified Substitute Mortgage Loan or Loans after the date
of such substitution. Monthly Payments received with respect to Qualified
Substitute Mortgage Loans on or before the date of substitution will be retained
by the Unaffiliated Seller. The Trust Fund will own all payments received on the
Deleted Mortgage Loan on or before the date of substitution, and the
Unaffiliated Seller shall thereafter be entitled to retain all amounts
subsequently received in respect of such Deleted Mortgage Loan. Pursuant to the
Pooling and Servicing Agreement, the Servicer shall be required to give written
notice to the Trustee and the Certificate Insurer that such substitution has
taken place and shall amend the Mortgage Loan Schedule to reflect the removal of
such Deleted Mortgage Loan from the terms of the Pooling and Servicing Agreement
and the substitution of the Qualified Substitute Mortgage Loan. The parties
hereto agree to amend the Mortgage Loan Schedule accordingly. Upon such
substitution, such Qualified Substitute Mortgage Loan or Loans shall be subject
to the terms of the Pooling and Servicing Agreement and this Agreement in all
respects, and the Unaffiliated Seller shall be deemed to have made with respect
to such Qualified Substitute Mortgage Loan or Loans, as of the date of
substitution, the representations and warranties set forth in Sections 3.02 and
3.03 herein. On the date of such substitution, the Unaffiliated Seller will
remit to the Servicer and pursuant to the Pooling and Servicing Agreement the
Servicer will deposit into the Certificate Account an amount equal to the
Substitution Adjustment, if any.
(e) It is understood and agreed that the obligations of the
Unaffiliated Seller and the Originator set forth in Section 2.06 and this
Section 3.05 to cure, purchase or substitute for a defective Mortgage Loan as
provided in Section 2.06 and this Section 3.05 constitute the sole remedies of
the Depositor, the Trustee, the Certificate Insurer and the Certificateholders
respecting a breach of the foregoing representations and warranties.
(f) Any cause of action against the Unaffiliated Seller or an
Originator relating to or arising out of the breach of any representations and
warranties or covenants made in Sections 2.06, 3.02 or 3.03 shall accrue as to
any Mortgage Loan upon (i) discovery of such breach by any party and notice
thereof to the Unaffiliated Seller or such Originator, (ii) failure by the
Unaffiliated Seller or such Originator to cure such breach or purchase or
substitute such Mortgage Loan as specified above, and (iii) demand upon the
Unaffiliated Seller or such Originator by the Trustee for all amounts payable in
respect of such Mortgage Loan.
(g) Notwithstanding any contrary provision of this Agreement,
with respect to any Mortgage Loan which is not in default or as to which no
default is imminent, no purchase, or substitution pursuant to Section 2.06(b) or
this Section 3.05 shall be made unless the Unaffiliated Seller provides to the
Trustee and the Certificate Insurer an Opinion of Counsel to the effect that
such purchase or substitution would not (i) result in the imposition of taxes on
"prohibited transactions" of the REMIC Trust, as defined in Section 860F of the
Code or a tax on contributions to the REMIC Trust under the REMIC Provisions, or
(ii) cause the REMIC Fund to fail to qualify as a REMIC at any time that any
Certificates are outstanding. Any Mortgage Loan as to which purchase or
substitution was delayed pursuant to this paragraph shall be
26
<PAGE>
purchased or substituted (subject to compliance with Section 2.06 and this
Section 3.05) upon the earlier of (a) the occurrence of a default or imminent
default with respect to such loan and (b) receipt by the Trustee and the
Certificate Insurer of an Opinion of Counsel to the effect that such purchase or
substitution will not result in the events described in clauses (i) and (ii) of
the preceding sentence.
(h) Pursuant to the Pooling and Servicing Agreement, upon
discovery by the Unaffiliated Seller, the Servicer, the Trustee, the Certificate
Insurer or any Certificateholder that any Mortgage Loan does not constitute a
Qualified Mortgage, the party discovering such fact shall promptly (and in any
event within 5 days of the discovery) give written notice thereof to the other
parties. In connection therewith, the Unaffiliated Seller or the related
Originator shall repurchase or substitute a Qualified Substitute Mortgage Loan
for the affected Mortgage Loan within 90 days of the earlier of such discovery
by any of the foregoing parties, or the Trustee's or the Unaffiliated Seller's
receipt of notice, in the same manner as it would a Mortgage Loan for a breach
of representation or warranty contained in Sections 3.02 or 3.03. Pursuant to
the Pooling and Servicing Agreement the Trustee shall reconvey to the
Unaffiliated Seller or the related Originator the Mortgage Loan to be released
pursuant hereto in the same manner, and on the same terms and conditions, as it
would a Mortgage Loan repurchased for breach of a representation or warranty
contained in Sections 3.02 or 3.03.
(i) Notwithstanding anything in this Agreement or the Pooling
and Servicing Agreement to the contrary, the Unaffiliated Seller's repurchase
obligations hereunder shall not include failure of the Trustee to record
assignments of the Mortgage Loans referenced in clause (a)(iii) in Section 2.05.
All parties hereto acknowledge and agree that the Trustee has the responsibility
to record all such assignments of the Mortgage Loans to the Trustee.
(j) Each of the Originators and the Unaffiliated Seller shall
be jointly and severally responsible for any repurchase, cure or substitution
obligation of any of the Originators or the Unaffiliated Seller under this
Agreement and the Pooling and Servicing Agreement.
ARTICLE FOUR
THE UNAFFILIATED SELLER
Section 4.01. Covenants of the Originators and the
Unaffiliated Seller. Each of the Originators and the Unaffiliated Seller
covenants to the Depositor as follows:
(a) The Originators and the Unaffiliated Seller shall
cooperate with the Depositor and the firm of independent certified public
accountants retained with respect to the issuance of the Certificates in making
available all information and taking all steps reasonably necessary to permit
the accountants' letters required hereunder to be delivered within the times set
for delivery herein.
(b) The Unaffiliated Seller agrees to satisfy or cause to be
satisfied on or prior to the Closing Date, all of the conditions to the
Depositor's obligations set forth in Section 5.01 hereof that are within the
Unaffiliated Seller's (or its agents') control.
27
<PAGE>
(c) The Originators and the Unaffiliated Seller hereby agree
to do all acts, transactions, and things and to execute and deliver all
agreements, documents, instruments, and papers by and on behalf of the
Originators or the Unaffiliated Seller as the Depositor or its counsel may
reasonably request in order to consummate the transfer of the Mortgage Loans to
the Depositor and the subsequent transfer thereof to the Trustee, and the
rating, issuance and sale of the Certificates.
Section 4.02. Merger or Consolidation. Each of the Originators
and the Unaffiliated Seller will keep in full effect its existence, rights and
franchises as a corporation and will obtain and preserve its qualification to do
business as a foreign corporation, in each jurisdiction necessary to protect the
validity and enforceability of this Agreement or any of the Mortgage Loans and
to perform its duties under this Agreement. Any Person into which the any of the
Originators or the Unaffiliated Seller may be merged or consolidated, or any
corporation resulting from any merger, conversion or consolidation to which the
Originators or the Unaffiliated Seller shall be a party, or any Person
succeeding to the business of the Originators or the Unaffiliated Seller, shall
be approved by the Certificate Insurer which approval shall not be unreasonably
withheld. If the approval of the Certificate Insurer is not required, the
successor shall be an established mortgage loan servicing institution that is a
Permitted Transferee and in all events shall be the successor of the Originators
or the Unaffiliated Seller without the execution or filing of any paper or any
further act on the part of any of the parties hereto, anything herein to the
contrary notwithstanding. The Originators and the Unaffiliated Seller shall send
notice of any such merger or consolidation to the Trustee and the Certificate
Insurer.
Section 4.03. Costs. In connection with the transactions
contemplated under this Agreement and the Pooling and Servicing Agreement, the
Unaffiliated Seller shall promptly pay (or shall promptly reimburse the
Depositor to the extent that the Depositor shall have paid or otherwise
incurred): (a) 50% of the fees and disbursements of the Depositor's counsel; (b)
the fees of S&P and Moody's; (c) any of the fees of the Trustee and the fees and
disbursements of the Trustee's counsel; (d) expenses incurred in connection with
printing the Prospectus, the Prospectus Supplement, any amendment or supplement
thereto, any preliminary prospectus and the Certificates; (e) fees and expenses
relating to the filing of documents with the Securities and Exchange Commission
(including without limitation periodic reports under the Exchange Act); (f) the
shelf registration amortization fee (which fee shall equal 1/33rd of 1% of the
amount of the Certificates plus $7,500) paid in connection with the issuance of
Certificates; and (g) all of the initial expenses (not to exceed $40,000) of the
Certificate Insurer including, without limitation, legal fees and expenses,
accountant fees and expenses and expenses in connection with due diligence
conducted on the Mortgage Files. For the avoidance of doubt, the parties hereto
acknowledge that it is the intention of the parties that the Depositor shall not
pay any of the Trustee's fees and expenses in connection with the transactions
contemplated by the Pooling and Servicing Agreement. All other costs and
expenses in connection with the transactions contemplated hereunder shall be
borne by the party incurring such expenses.
Section 4.04. Indemnification. (a) (i) The Originators and the
Unaffiliated Seller, jointly and severally, agree to indemnify and hold harmless
the Depositor, each of its directors, each of its officers who have signed the
Registration Statement, and each of its directors and each person or entity who
controls the Depositor or any such person, within the meaning of Section 15 of
the Securities Act, against any and all losses, claims, damages or liabilities,
joint and several, to which the Depositor or any such person or entity may
become subject, under the Securities Act or otherwise, and will reimburse the
Depositor and each such controlling person for any legal or other expenses
incurred by the Depositor or such controlling person in connection
28
<PAGE>
with investigating or defending any such loss, claim, damage, liability or
action, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Prospectus Supplement or
any amendment or supplement to the Prospectus Supplement or the omission or the
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements in the Prospectus Supplement or any
amendment or supplement to the Prospectus Supplement approved in writing by the
Originators or the Unaffiliated Seller, in light of the circumstances under
which they were made, not misleading, but only to the extent that such untrue
statement or alleged untrue statement or omission or alleged omission relates to
the information contained in the Prospectus Supplement referred to in Section
3.01(d). This indemnity agreement will be in addition to any liability which the
Originators and the Unaffiliated Seller may otherwise have.
(ii) The Originators and the Unaffiliated Seller, jointly and
severally, agree to indemnify and to hold the Depositor harmless
against any and all claims, losses, penalties, fines, forfeitures,
legal fees and related costs, judgments, and any other costs, fees and
expenses that the Depositor may sustain in any way related to the
failure of any of the Originators or the Unaffiliated Seller to perform
its duties in compliance with the terms of this Agreement. The
Originators or the Unaffiliated Seller shall immediately notify the
Depositor if a claim is made by a third party with respect to this
Agreement, and the Originators or the Unaffiliated Seller shall assume
the defense of any such claim and pay all expenses in connection
therewith, including reasonable counsel fees, and promptly pay,
discharge and satisfy any judgment or decree which may be entered
against the Depositor in respect of such claim. Pursuant to the Pooling
and Servicing Agreement, the Trustee shall reimburse the Unaffiliated
Seller in accordance with the Pooling and Servicing Agreement for all
amounts advanced by the Unaffiliated Seller pursuant to the preceding
sentence except when the claim relates directly to the failure of the
Unaffiliated Seller to perform its duties in compliance with the terms
of this Agreement.
(b) The Depositor agrees to indemnify and hold harmless each
of the Originators and the Unaffiliated Seller, each of their respective
directors and each person or entity who controls the Originators or 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 Originators or the Unaffiliated Seller or any
such person or entity may become subject, under the Securities Act or otherwise,
and will reimburse the Originators and the Unaffiliated Seller and any such
director or controlling person for any legal or other expenses incurred by such
party or any such director or controlling person in connection with
investigating or defending any such loss, claim, damage, liability or action,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement, the
Prospectus, the Prospectus Supplement, any amendment or supplement to the
Prospectus or the Prospectus Supplement or the omission or the alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, but only to the extent that such untrue statement or
alleged untrue statement or omission or alleged omission is other than a
statement or omission relating to the information set forth in subsection (a)(i)
of this Section 4.04. This indemnity agreement will be in addition to any
liability which the Depositor may otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section 4.04 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 4.04, notify the
29
<PAGE>
indemnifying party in writing of the commencement thereof, but the omission to
so notify the indemnifying party will not relieve the indemnifying party from
any liability which the indemnifying party may have to any indemnified party
hereunder except to the extent such indemnifying party has been prejudiced
thereby. In case any such action is brought against any indemnified party, and
it notifies the indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate therein and, to the extent that it may
elect by written notice delivered to the indemnified party promptly after
receiving the aforesaid notice from such indemnified party, to assume the
defense thereof with counsel reasonably satisfactory to such indemnified party.
After notice from the indemnifying party to such indemnified party of its
election to assume the defense thereof, the indemnifying party will not be
liable to such indemnified party under this Section 4.04 for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation; provided, however,
if the defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be legal defenses available to it that are different from or
additional to those available to the indemnifying party, the indemnified party
or parties shall have the right to select separate counsel to assert such legal
defenses and to otherwise participate in the defense of such action on behalf of
such indemnified party or parties. The indemnifying party shall not be liable
for the expenses of more than one separate counsel.
(d) In order to provide for just and equitable contribution in
circumstances in which the indemnity agreement provided for in the preceding
parts of this Section 4.04 is for any reason held to be unavailable to or
insufficient to hold harmless an indemnified party under subsection (a) or
subsection (b) of this Section 4.04 in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, the
indemnifying party shall contribute to the amount paid or payable by the
indemnified party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof); provided, however, that no person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. In determining the amount of
contribution to which the respective parties are entitled, there shall be
considered the relative benefits received by the Originators and the
Unaffiliated Seller on the one hand, and the Depositor on the other, the
Originators', the Unaffiliated Seller's and the Depositor's relative knowledge
and access to information concerning the matter with respect to which the claim
was asserted, the opportunity to correct and prevent any statement or omission,
and any other equitable considerations appropriate in the circumstances. The
Originators, the Unaffiliated Seller and the Depositor agree that it would not
be equitable if the amount of such contribution were determined by pro rata or
per capita allocation. For purposes of this Section 4.04, each director of the
Depositor, each officer of the Depositor who signed the Registration Statement,
and each person, if any who controls the Depositor within the meaning of Section
15 of the Securities Act, shall have the same rights to contribution as the
Depositor, and each director of the Originators or the Unaffiliated Seller, and
each person, if any who controls the Originators or the Unaffiliated Seller
within the meaning of Section 15 of the Securities Act, shall have the same
rights to contribution as the Originators and the Unaffiliated Seller.
30
<PAGE>
ARTICLE FIVE
CONDITIONS OF CLOSING
Section 5.01. Conditions of Depositor's Obligations. The
obligations of the Depositor to purchase the Mortgage Loans will be subject to
the satisfaction on the Closing Date of the following conditions. Upon payment
of the purchase price for the Mortgage Loans, such conditions shall be deemed
satisfied or waived.
(a) Each of the obligations of the Unaffiliated Seller
required to be performed by it on or prior to the Closing Date pursuant to the
terms of this Agreement shall have been duly performed and complied with and all
of the representations and warranties of the Unaffiliated Seller under this
Agreement shall be true and correct as of the Closing Date and no event shall
have occurred which, with notice or the passage of time, would constitute a
default under this Agreement, and the Depositor shall have received a
certificate to the effect of the foregoing signed by an authorized officer of
the Unaffiliated Seller.
(b) The Depositor shall have received a letter dated the date
of this Agreement, in form and substance acceptable to the Depositor and its
counsel, prepared by Deloitte & Touche LLP, independent certified public
accountants, regarding the numerical information contained in the Prospectus
Supplement under the captions "Prepayment Yield Considerations" and "The
Mortgage Pool."
(c) The Mortgage Loans will be acceptable to the Depositor, in
its sole discretion.
(d) The Depositor shall have received the following additional
closing documents, in form and substance satisfactory to the Depositor and its
counsel:
(i) the Mortgage Loan Schedule;
(ii) the Pooling and Servicing Agreement dated as of March 1,
1997 and the Underwriting Agreement dated as of March 14, 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) officer's certificates of an officer of each of the
Originators and the Unaffiliated Seller, dated as of the Closing Date,
and attached thereto resolutions of the board of directors and a copy
of the charter and by-laws;
(iv) copy of each of the Originators and the Unaffiliated
Seller's charter and all amendments, revisions, and supplements
thereof, certified by a secretary of each entity;
(v) an opinion of the counsel for the Originators and the
Unaffiliated Seller 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, S&P and Moody's as to
such matters as shall be required for the assignment of a rating to the
Class A Certificates of AAA by S&P, and Aaa by Moody's
31
<PAGE>
(it being agreed that such opinions shall expressly provide that the
Trustee shall be entitled to rely on such opinions);
(vii) a letter from Moody's that it has assigned a rating of
Aaa to the Class A Certificates;
(viii) a letter from S&P that it has assigned a rating of AAA
to the Class A Certificates;
(ix) an opinion of counsel for the Trustee in form and
substance acceptable to the Depositor, its counsel, Moody's and S&P (it
being agreed that the opinion shall expressly provide that the
Unaffiliated Seller shall be entitled to rely on the opinion);
(x) an opinion or opinions of counsel for the Servicer, in
form and substance acceptable to the Depositor, its counsel, Moody's
and S&P (it being agreed that the opinion shall expressly provide that
the Unaffiliated Seller shall be entitled to rely on the opinion); and
(xi) an opinion or opinions of counsel for the Certificate
Insurer, in each case in form and substance acceptable to the
Depositor, its counsel, Moody's and S&P (it being agreed that the
opinion shall expressly provide that the Unaffiliated Seller shall be
entitled to rely on the opinion).
(e) The Certificate Insurance Policy shall have been duly
executed, delivered and issued with respect to the Class A Certificates.
(f) All proceedings in connection with the transactions
contemplated by this Agreement and all documents incident hereto shall be
satisfactory in form and substance to the Depositor and its counsel.
(g) The Unaffiliated Seller shall have furnished the Depositor
with such other certificates of its officers or others and such other documents
or opinions as the Depositor or its counsel may reasonably request.
Section 5.02. Conditions of Unaffiliated Seller's Obligations.
The obligations of the Unaffiliated Seller under this Agreement shall be subject
to the satisfaction, on the Closing Date, of the following conditions:
(a) Each of the obligations of the Depositor required to be
performed by it at or prior to the Closing Date pursuant to the terms of this
Agreement shall have been duly performed and complied with and all of the
representations and warranties of the Depositor contained in this Agreement
shall be true and correct as of the Closing Date and the Unaffiliated Seller
shall have received a certificate to that effect signed by an authorized officer
of the Depositor.
(b) The Unaffiliated Seller shall have received the following
additional documents:
(i) the Pooling and Servicing Agreement, and all documents
required thereunder, in each case executed by the Depositor as
applicable; and
32
<PAGE>
(ii) a copy of a letter from Moody's to the Depositor to the
effect that it has assigned a rating of Aaa to the Class A Certificates
and a copy of a letter from S&P to the Depositor to the effect that it
has assigned a rating of AAA to the Class A Certificates.
(iii) an opinion of counsel for the Trustee in form and
substance acceptable to the Unaffiliated Seller and its counsel;
(iv) an opinion or opinions of counsel for the Certificate
Insurer, in each case in form and substance acceptable to the
Unaffiliated Seller and its counsel;
(v) an opinion of the counsel for the Depositor as to
securities and tax matters; and
(vi) an opinion of the counsel for the Depositor as to true
sale matters.
(c) The Depositor shall have furnished the Unaffiliated Seller
with such other certificates of its officers or others and such other documents
to evidence fulfillment of the conditions set forth in this Agreement as the
Unaffiliated Seller may reasonably request.
Section 5.03. Termination of Depositor's Obligations. The
Depositor may terminate its obligations hereunder by notice to the Unaffiliated
Seller at any time before delivery of and payment of the purchase price for the
Mortgage Loans if: (a) any of the conditions set forth in Section 5.01 are not
satisfied when and as provided therein; (b) there shall have been the entry of a
decree or order by a court or agency or supervisory authority having
jurisdiction in the premises for the appointment of a conservator, receiver or
liquidator in any insolvency, readjustment of debt, marshalling of assets and
liabilities or similar proceedings of or relating to the Unaffiliated Seller, or
for the winding up or liquidation of the affairs of the Unaffiliated Seller; (c)
there shall have been the consent by the Unaffiliated Seller to the appointment
of a conservator or receiver or liquidator in any insolvency, readjustment of
debt, marshalling of assets and liabilities or similar proceedings of or
relating to the Unaffiliated Seller or of or relating to substantially all of
the property of the Unaffiliated Seller; (d) any purchase and assumption
agreement with respect to the Unaffiliated Seller or the assets and properties
of the Unaffiliated Seller shall have been entered into; or (e) a Termination
Event shall have occurred. The termination of the Depositor's obligations
hereunder shall not terminate the Depositor's rights hereunder or its right to
exercise any remedy available to it at law or in equity.
ARTICLE SIX
MISCELLANEOUS
Section 6.01. Notices. All demands, notices and communications
hereunder shall be in writing and shall be deemed to have been duly given if
personally delivered to or mailed by registered mail, postage prepaid, or
transmitted by telex or telegraph and confirmed by a similar mailed writing, if
to the Depositor, addressed to the Depositor at Prudential Securities Secured
Financing Corporation, One New York Plaza, 15th Floor, New York, New York 10292,
Attention: Asset Finance Group, or to such other address as the Depositor may
designate in writing to the Unaffiliated Seller and if to the Unaffiliated
Seller, addressed to the Unaffiliated Seller at ABFS 1997-1, Inc., Balapointe
Office Centre, 111 Presidential Boulevard, Suite 215,
33
<PAGE>
Bala Cynwyd, Pennsylvania 19004, Attention: Mr. Anthony Santilli, Jr., or to
such other address as the Unaffiliated Seller may designate in writing to the
Depositor.
Section 6.02. Severability of Provisions. Any part, provision,
representation, warranty or covenant of this Agreement which is prohibited or
which is held to be void or unenforceable shall be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof. Any part, provision, representation, warranty or covenant of
this Agreement which is prohibited or unenforceable or is held to be void or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction as to any Mortgage Loan shall not invalidate or render
unenforceable such provision in any other jurisdiction. To the extent permitted
by applicable law, the parties hereto waive any provision of law which prohibits
or renders void or unenforceable any provision hereof.
Section 6.03. Agreement of Unaffiliated Seller. The
Unaffiliated Seller agrees to execute and deliver such instruments and take such
actions as the Depositor may, from time to time, reasonably request in order to
effectuate the purpose and to carry out the terms of this Agreement.
Section 6.04. Survival. The parties to this Agreement agree
that the representations, warranties and agreements made by each of them herein
and in any certificate or other instrument delivered pursuant hereto shall be
deemed to be relied upon by the other party hereto, notwithstanding any
investigation heretofore or hereafter made by such other party or on such other
party's behalf, and that the representations, warranties and agreements made by
the parties hereto in this Agreement or in any such certificate or other
instrument shall survive the delivery of and payment for the Mortgage Loans.
Section 6.05. Effect of Headings and Table of Contents. The
Article and Section headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.
Section 6.06. Successors and Assigns. This Agreement shall
inure to the benefit of and be binding upon the parties hereto and their
respective successors and permitted assigns. Except as expressly permitted by
the terms hereof, this Agreement may not be assigned, pledged or hypothecated by
any party hereto to a third party without the written consent of the other party
to this Agreement and the Certificate Insurer; provided, however, that the
Depositor may assign its rights hereunder without the consent of the
Unaffiliated Seller.
Section 6.07. Confirmation of Intent; Grant of Security
Interest. It is the express intent of the parties hereto that the conveyance of
the Mortgage Loans by the Originators to the Unaffiliated Seller and 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 of the
Mortgage Loans. It is, further, not the intention of the parties that such
conveyance be deemed a pledge of the Mortgage Loans by Originator to the
Unaffiliated Seller or by the Unaffiliated Seller to the Depositor to secure a
debt or other obligation of the Originators or the Unaffiliated Seller, as the
case may be. However, in the event that, notwithstanding the intent of the
parties, the Mortgage Loans are held to continue to be property of the
Originators or 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
Originators to the Unaffiliated
34
<PAGE>
Seller and by the Unaffiliated Seller to the Depositor of a security interest in
all of such parties' 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 Notes and such other items of property as constitute
instruments, money, negotiable documents or chattel paper shall be deemed to be
"possession by the secured party" for purposes of perfecting the security
interest pursuant to Section 9-305 of the 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 Originators, 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 will be maintained as such throughout the term of this
Agreement.
Section 6.08. Miscellaneous. This Agreement supersedes all
prior agreements and understandings relating to the subject matter hereof.
Section 6.09. Amendments. (a) This Agreement may be amended
from time to time by the Originators, the Unaffiliated Seller and the Depositor
by written agreement, upon the prior written consent of the Certificate Insurer,
without notice to or consent of the Certificateholders to cure any ambiguity, to
correct or supplement any provisions herein, to comply with any changes in the
Code, or to make any other provisions with respect to matters or questions
arising under this Agreement which shall not be inconsistent with the provisions
of this Agreement; provided, however, that such action shall not, as evidenced
by an Opinion of Counsel, at the expense of the party requesting the change,
delivered to the Trustee, adversely affect in any material respect the interests
of any Certificateholder; and provided, further, that no such amendment shall
reduce in any manner the amount of, or delay the timing of, payments received on
Mortgage Loans which are required to be distributed on any Certificate without
the consent of the Holder of such Certificate, or change the rights or
obligations of any other party hereto without the consent of such party.
(b) This Agreement may be amended from time to time by the
Unaffiliated Seller and the Depositor with the consent of the Certificate
Insurer, the Majority Certificateholders and the Holders of the majority of the
Percentage Interest in the Class R Certificates for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Agreement or of modifying in any manner the rights of the Holders;
provided, however, that no such amendment shall be made unless the Trustee
receives an Opinion of Counsel, at the expense of the party requesting the
change, that such change will not adversely affect the status of the REMIC Trust
as a REMIC or cause a tax to be imposed on the REMIC, and provided further, that
no such amendment shall reduce in any manner the amount of, or delay the timing
of, payments received on Mortgage Loans which are required to be distributed on
any Certificate without the consent of the Holder of such Certificate or reduce
the percentage for each Class the Holders of which are required to consent to
any such amendment without the consent of the Holders of 100% of each Class of
Certificates affected thereby.
35
<PAGE>
(c) It shall not be necessary for the consent of Holders under
this Section to approve the particular form of any proposed amendment, but it
shall be sufficient if such consent shall approve the substance thereof.
Section 6.10. Third-Party Beneficiaries. The parties agree
that each of the Certificate Insurer and the Trustee is an intended third-party
beneficiary of this Agreement 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 and
the Certificate Insurer 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 4.01 and 4.04(a)(ii) 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 4.04(a)(i) of this
Agreement.
Section 6.11. GOVERNING LAW; CONSENT TO JURISDICTION;
WAIVER OF JURY TRIAL. (a) THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS (AS OPPOSED TO
CONFLICT OF LAWS PROVISIONS) OF THE STATE OF NEW YORK.
(b) THE DEPOSITOR AND THE UNAFFILIATED SELLER EACH HEREBY
SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK
AND THE UNITED STATES DISTRICT COURT LOCATED IN THE BOROUGH OF MANHATTAN IN NEW
YORK CITY, AND EACH WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND
CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE BY REGISTERED MAIL DIRECTED TO
THE ADDRESS SET FORTH IN SECTION 6.01 OF THIS AGREEMENT AND SERVICE SO MADE
SHALL BE DEEMED TO BE COMPLETED FIVE DAYS AFTER THE SAME SHALL HAVE BEEN
DEPOSITED IN THE U.S. MAIL, POSTAGE PREPAID. THE DEPOSITOR AND THE UNAFFILIATED
SELLER EACH HEREBY WAIVE ANY OBJECTION BASED ON FORUM NON CONVENIENS, AND ANY
OBJECTION TO VENUE OF ANY ACTION INSTITUTED HEREUNDER AND CONSENTS TO THE
GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY THE
COURT. NOTHING IN THIS SECTION SHALL AFFECT THE RIGHT OF THE DEPOSITOR AND THE
UNAFFILIATED SELLER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW
OR AFFECT EITHER'S RIGHT TO BRING ANY ACTION OR PROCEEDING IN THE COURTS OF ANY
OTHER JURISDICTION.
(c) THE DEPOSITOR AND THE UNAFFILIATED SELLER EACH HEREBY
WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER
SOUNDING IN CONTRACT, TORT, OR OTHERWISE ARISING OUT OF, CONNECTED WITH, RELATED
TO, OR IN CONNECTION WITH THIS AGREEMENT. INSTEAD, ANY DISPUTE RESOLVED IN COURT
WILL BE RESOLVED IN A BENCH TRIAL WITHOUT A JURY.
36
<PAGE>
Section 6.12. Execution in Counterparts. This Agreement may be
executed in any number of counterparts, each of which so executed shall be
deemed to be an original, but all such counterparts shall together constitute
but one and the same instrument.
[Remainder of Page Intentionally Left Blank]
37
<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: /s/ Norman Chaleff
---------------------------------
Name: Norman Chaleff
Title: Vice President
ABFS 1997-1, INC.
By: /s/ Anthony J. Santilli, Jr.
---------------------------------
Name: Anthony J. Santilli, Jr.
Title: President
AMERICAN BUSINESS CREDIT, INC.
By: /s/ Beverly Santilli
---------------------------------
Name: Beverly Santilli
Title: President
HOMEAMERICAN CREDIT, INC., D/B/A
UPLAND MORTGAGE
By: /s/ Jeffrey M. Ruben
---------------------------------
Name: Jeffrey M. Ruben
Title: Senior Vice President
[Signature Page to Unaffiliated Seller's Agreement]
<PAGE>
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
On March 27, 1997 before me, the undersigned, a Notary Public
in and for said County and State, personally appeared Norman Chaleff, personally
known to me (or proved to me on the basis of satisfactory evidence) to be a Vice
President 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.
/s/ Mary Jane Constant
---------------------------------------
Notary Public
My Commission expires: January 2, 1998
<PAGE>
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
On March 27, 1997 before me, the undersigned, a Notary Public
in and for said County and State, personally appeared Anthony J. Santilli,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be President of ABFS 1997-1, Inc., the entity that executed the within
Unaffiliated Seller's Agreement; on behalf of said corporation, and acknowledged
to me that said corporation executed it.
/s/ Mary Jane Constant
---------------------------------------
Notary Public
My Commission expires: January 2, 1998
<PAGE>
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
On March 27, 1997 before me, the undersigned, a Notary Public
in and for said County and State, personally appeared Beverly Santilli,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be President of American Business Credit, Inc., the entity that executed the
within Unaffiliated Seller's Agreement; on behalf of said corporation, and
acknowledged to me that said corporation executed it.
/s/ Mary Jane Constant
---------------------------------------
Notary Public
My Commission expires: January 2, 1998
<PAGE>
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
On March 27, 1997 before me, the undersigned, a Notary Public
in and for said County and State, personally appeared Jeffrey M. Ruben,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be a Senior Vice President of HomeAmerican Credit, Inc., d/b/a Upland
Mortgage the entity that executed the within Unaffiliated Seller's Agreement; on
behalf of said corporation, and acknowledged to me that said corporation
executed it.
/s/ Mary Jane Constant
---------------------------------------
Notary Public
My Commission expires: January 2, 1998
<PAGE>
EXHIBIT 23.1
[Coopers & Lybrand L.L.P. Letterhead]
CONSENT of INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in thr Prospectus Supplement dated
March 24, 1997 (to Prospectus dated December 4, 1996) of Prudential Securities
Secured Financing Corporation relating to ABFS Mortgage Loan Trust 1997-1 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
March 25, 1997
