================================================================================
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) September 24, 1997
Prudential Securities Secured Financing Corporation
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 333-27355 13-3526694
- ----------------------------- ------------ -------------------
(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
c/o Prudential Securities
Secured Financing
Corporation
Attention: Norman Chaleff
One New York Plaza, 12th Fl. 10292
New York, New York --------------------
- ------------------------------- (Zip Code)
(Address of Principal
Executive Offices)
Registrant's telephone number, including area code (212)214-7435
-------------
No Change
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
================================================================================
<PAGE>
Item 2. Acquisition or Disposition of Assets
Description of the Certificates and the Mortgage Loans
Prudential Securities Secured Financing Corporation, as Depositor
(the "Depositor"), has registered issuances of securities backed by mortgage
loans, on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, as amended (the "Act"), by a Registration Statement on
Form S-3 (Registration File No. 333-27355) (as amended, the "Registration
Statement"). The Depositor formed the Emergent Home Equity Loan Trust 1997-3
(the "Trust"), pursuant to a Pooling and Servicing Agreement, dated as of August
10, 1997 (the "Pooling and Servicing Agreement"), among the Depositor, Emergent
Mortgage Corp., as servicer (the "Servicer") and First Union National Bank, as
trustee (the "Trustee"). Pursuant to the Registration Statement, the Trust
issued $170,000,000 in aggregate principal amount of its Emergent Home Equity
Loan Pass-Through Certificates, Class A (the "Certificates"), on September 24,
1997. This Current Report on Form 8-K is being filed to satisfy an undertaking
to file copies of certain agreements executed in connection with the issuance of
the Certificates, the forms of which are being filed as exhibits to the Pooling
and Servicing Agreement attached hereto as Exhibit 4.1.
The Certificates were issued pursuant to the Pooling and Servicing
Agreement attached hereto as Exhibit 4.1. The Certificates consist of six senior
classes, the Class A-1 Certificates, the Class A-2 Certificates, the Class A-3
Certificates, the Class A-4 Certificates, the Class A-5 Certificates and the
Class A-6 Certificates, together the "Class A Certificates" and the Class R
Certificates. Only the Class A Certificates were issued pursuant to the
Registration Statement.
The assets of the Trust consist of a segregated pool of mortgage
loans (the "Mortgage Loans"), together with the Mortgage Files relating thereto,
and together with all collections thereon or in respect thereof after the
Cut-off Date (including amounts due on or before the Cut-off Date but received
after the Cut-off Date), any REO Property, together with all collections thereon
and proceeds thereof, the Trustee's rights with respect to the Mortgage Loans
under the insurance policies required to be maintained pursuant to the Pooling
and Servicing Agreement and any proceeds thereof, the Depositor's rights under
the Unaffiliated Seller's Agreement (including any security interest created
thereby), the Collection Account, the
2
<PAGE>
Distribution Account, any REO Account and the Expense Account and such assets
that are deposited therein from time to time and any investments thereof and the
Trustee's rights under the Policy, together with any and all income, proceeds
and payments with respect thereto (all such capitalized terms as defined in the
Pooling and Servicing Agreement). On and prior to September 24, 1997 (the
"Closing Date"), Emergent Mortgage Corp. (the "Originator") transferred the
Mortgage Loans and the related assets (with the exception of the Pre-Funded
Mortgage Loans, which may be transferred on one or more Pre-Funded Loan Transfer
Dates hereafter) to Emergent Mortgage Holdings Corporation (the "Seller")
pursuant to the Purchase Agreement and Assignment, dated as of August 10, 1997,
attached hereto as Exhibit 4.4, between the Originator, the Seller and Emergent
Group, Inc. On the Closing Date, the Seller transferred the Mortgage Loans and
the related assets (with the exception of the Pre-Funded Mortgage Loans, which
may be transferred on one or more Pre-Funded Loan Transfer Dates hereafter) to
the Depositor pursuant to the Unaffiliated Seller's Agreement, dated as of
August 10, 1997, attached hereto as Exhibit 4.3, among the Seller, Emergent
Group, Inc. and the Depositor. The Depositor, in turn, then transferred the
Mortgage Loans and the related assets (with the exception of the Pre-Funded
Mortgage Loans, which may be transferred on one or more Pre-Funded Loan Transfer
Dates hereafter) to the Trust pursuant to the Pooling and Servicing Agreement,
attached hereto as Exhibit 4.1.
Interest payments on the Class A Certificates are based on the
outstanding Certificate Principal Balance for the related Class A Certificates
and the applicable Pass-Through Rate. The Class A-1 Pass-Through Rate will be
6.545% per annum; the Class A-2 Pass-Through Rate will be 6.540% per annum; the
Class A-3 Pass-Through Rate will be 6.670% per annum; the Class A-4 Pass-Through
Rate will be 6.925% per annum; the Class A-5 Pass-Through Rate will be 7.290%
per annum; and the Class A-6 Pass-Through Rate will be 6.930% per annum. The
Class A-1 Certificates have an initial Class A-1 Certificate Principal Balance
of $45,000,000; the Class A-2 Certificates have an initial Class A-2 Certificate
Principal Balance of $20,000,000; the Class A-3 Certificates have an initial
Class A-3 Certificate Principal Balance of $25,000,000; the Class A-4
Certificates have an initial Class A-4 Certificate Principal Balance of
$33,000,000; the Class A-5 Certificates have an initial Class A-5 Certificate
Principal Balance of $30,000,000 and the Class A-6 Certificates have an initial
Class A-6 Certificate Principal Balance of $17,000,000.
3
<PAGE>
As of the Closing Date, the Mortgage Loans generally possessed the
characteristics described in the Prospectus dated June 10, 1997 and the
Prospectus Supplement dated September 17, 1997 filed pursuant to Rule 424(b) of
the Act on September 19, 1997.
Item 5. Other Events
Pursuant to Rule 424(b) under the Securities Act of 1933, as
amended, Prudential Securities Secured Financing Corporation has filed a
Prospectus Supplement with the Securities and Exchange Commission relating to an
offering of Emergent Home Equity Loan Trust 1997-3, Emergent Home Equity Loan
Pass-Through Certificates, Series 1997-3. In connection with such offering,
Prudential Securities Incorporated, as underwriter, has prepared certain
materials describing the characteristics of the Initial Mortgage Loans and the
Additional Mortgage Loans included, as of the Closing Date, in the Trust Fund
described in such Prospectus Supplement (the "Characteristics of Initial
Mortgage Loans and Additional Mortgage Loans").
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits
(a) Not applicable
(b) Not applicable
(c) Exhibits:
1.1 Underwriting Agreement, dated August 28, 1997, between
Prudential Securities Secured Financing Corporation and Prudential Securities
Incorporated.
1.2 Indemnification Agreement, dated as of September 24, 1997 among
Financial Security Assurance Inc., Prudential Securities Secured Financing
Corporation, Emergent Group, Inc., Emergent Mortgage Holdings Corporation,
Emergent Mortgage Corp. and Prudential Securities Incorporated.
4.1 Pooling and Servicing Agreement, dated as of August 10, 1997,
among Prudential Securities Secured Financing Corporation, as depositor,
Emergent Mortgage Corp., as servicer and First Union National Bank, as trustee.
4.2 Form of Certificate Insurance Policy and
4
<PAGE>
Endorsement No. 1 thereto dated September 24, 1997.
4.3 Unaffiliated Seller's Agreement, dated as of August 10, 1997,
among Prudential Securities Secured Financing Corporation, Emergent Group, Inc.
and Emergent Mortgage Holdings Corporation.
4.4 Purchase Agreement and Assignment, dated as of August 10, 1997,
between the Originator, Emergent Mortgage Holdings Corporation and Emergent
Group, Inc.
23.1 Consent of Coopers & Lybrand dated September 23, 1997.
99.1 Characteristics of Initial Mortgage Loans and Additional
Mortgage Loans.
5
<PAGE>
EXHIBIT INDEX
================================================================================
Exhibit No. Description Page No.
- ----------- ----------- --------
- --------------------------------------------------------------------------------
1.1 Underwriting Agreement, dated August 28, 1997
between Prudential Securities Secured
Financing Corporation and Prudential
Securities Incorporated.
- --------------------------------------------------------------------------------
1.2 Indemnification Agreement, dated as of
September 24, 1997 among Financial Security
Assurance Inc., Prudential Securities Secured
Financing Corporation, Emergent Group, Inc.,
Emergent Mortgage Corp., Emergent Mortgage
Holdings Corporation and Prudential
Securities Incorporated.
- --------------------------------------------------------------------------------
4.1 Pooling and Servicing Agreement, dated as of
August 10, 1997, among Prudential Securities
Secured Financing Corporation, as depositor,
Emergent Mortgage Corp., as servicer, and
First Union National Bank, as trustee.
- --------------------------------------------------------------------------------
4.2 Form of Certificate Insurance Policy and
Endorsement No. 1 thereto dated September 24,
1997.
- --------------------------------------------------------------------------------
4.3 Unaffiliated Seller's Agreement, dated as of
August 10, 1997, among Prudential Securities
Secured Financing Corporation, Emergent
Mortgage Holdings Corporation and Emergent
Group, Inc.
- --------------------------------------------------------------------------------
4.4 Purchase Agreement and Assignment, dated as
of August 10, 1997, between Emergent Mortgage
Holdings Corporation, Emergent Mortgage Corp.
and Emergent Group, Inc.
- --------------------------------------------------------------------------------
23.1 Consent of Coopers & Lybrand dated September
23, 1997
- --------------------------------------------------------------------------------
6
<PAGE>
================================================================================
Exhibit No. Description Page No.
- ----------- ----------- --------
- --------------------------------------------------------------------------------
99.1 Characteristics of Initial Mortgage Loans and
Additional Mortgage Loans (as defined in Item
5 above).
================================================================================
7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Prudential Securities Secured
Financing Corporation, as
Depositor
By: /s/ Norman Chaleff
--------------------------------
Name: Norman Chaleff
Title: Vice President
Dated: October 7, 1997
8
EXECUTION COPY
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION
EMERGENT HOME EQUITY LOAN PASS-THROUGH CERTIFICATES
SERIES 1997-3
UNDERWRITING AGREEMENT
August 28, 1997
<PAGE>
UNDERWRITING AGREEMENT
PRUDENTIAL SECURITIES INCORPORATED
One New York Plaza, 17th Floor
New York, New York 10292
August 28, 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 August 28, 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.
1
<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.
Very truly yours,
PRUDENTIAL SECURITIES SECURED
FINANCING CORPORATION
By:
------------------------------
Name: Glen Stein
Title: Vice President
Accepted as of the date hereof:
PRUDENTIAL SECURITIES INCORPORATED
By:
--------------------------------
Name: Glen Stein
Title: Vice President
2
<PAGE>
SCHEDULE I
- --------------------------------------------------------------------------------
Title of Offered Securities: Emergent Home Equity Loan Pass-Through
Certificates, Series 1997-3, Class A-1,
Class A-2, Class A-3, Class A-4, Class A-5
and Class A-6 (together, the "Class A
Certificates.")
- --------------------------------------------------------------------------------
Terms of Offered Securities: The Offered Securities shall have the
terms set forth in the Prospectus and
shall conform in all material respects to
the descriptions thereof contained
therein, and shall be issued pursuant to a
Pooling and Servicing Agreement among the
Depositor, Emergent Mortgage Corp., as
servicer, and First Union National Bank,
as trustee.
- --------------------------------------------------------------------------------
Purchase Price: The purchase price for the Class A-1
Certificates shall be $44,842,500.00 plus
accrued interest at the rate of 6.545% per
annum from September 1, 1997 to the date
of payment thereof. The purchase price for
the Class A-2 Certificates shall be
$19,930,000.00 plus accrued interest at
the rate of 6.540% per annum from
September 1, 1997 to the date of payment
thereof. The purchase price for the Class
A-3 Certificates shall be $24,912,500.00
plus accrued interest at the rate of
6.670% per annum from September 1, 1997 to
the date of payment thereof. The purchase
price for the Class A-4 Certificates shall
be $32,879,343.75 plus accrued interest at
the rate of 6.925% per annum from
September 1, 1997 to the date of payment
thereof. The purchase price for the Class
A-5 Certificates shall be $29,890,312.50
plus accrued interest at the rate of
7.290% per annum from September 1, 1997 to
the date of payment thereof. The purchase
price for the Class A-6 Certificates shall
be $16,936,515.71 plus accrued interest at
the rate of 6.930% per annum from
September 1, 1997 to the date of payment
thereof. Total accrued interest on the
Class A-1, Class A-2, Class A-3, Class
A-4, Class A-5
- --------------------------------------------------------------------------------
3
<PAGE>
- --------------------------------------------------------------------------------
and Class A-6 Certificates is $739,264.72.
- --------------------------------------------------------------------------------
Specified funds for payment of Federal Funds (immediately available
Purchase Price: funds).
- --------------------------------------------------------------------------------
Required Rating: Aaa by Moody's Investors Service, Inc.
- --------------------------------------------------------------------------------
AAA by Standard & Poor's Ratings Services,
a division of The McGraw-Hill Companies,
Inc.
- --------------------------------------------------------------------------------
Closing Date: On or about September 24, 1997 at 12:00
noon eastern standard time or at such
other time as the Depositor and the
Underwriter shall agree.
- --------------------------------------------------------------------------------
Closing Location: Offices of Dewey Ballantine, 1301 Avenue
of the Americas, New York, New York.
- --------------------------------------------------------------------------------
Name and address of Designated Representative: Prudential
Representative: Securities Incorporated.
- --------------------------------------------------------------------------------
Address for Notices, One New York Plaza, 17th Floor
etc.: New York, New York 10292
Attn: Glen Stein.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4
<PAGE>
STANDARD PROVISIONS TO UNDERWRITING AGREEMENT
August 28, 1997
From time to time, Prudential Securities Secured Financing
Corporation, a Delaware corporation (the "Depositor") may enter into one or more
underwriting agreements (each, an "Underwriting Agreement") that provide for the
sale of designated securities to the several underwriters named therein (such
underwriters constituting the "Underwriters" with respect to such Underwriting
Agreement and the securities specified therein). The several underwriters named
in an Underwriting Agreement will be represented by one or more representatives
as named in such Underwriting Agreement (collectively, the "Representative").
The term "Representative" also refers to a single firm acting as sole
representative of the Underwriters and to Underwriters who act without any firm
being designated as their representative. The standard provisions set forth
herein (the "Standard Provisions") may be incorporated by reference in any
Underwriting Agreement. This Agreement shall not be construed as an obligation
of the Depositor to sell any securities or as an obligation of any of the
Underwriters to purchase such securities. The obligation of the Depositor to
sell any securities and the obligation of any of the Underwriters to purchase
any of the securities shall be evidenced by the Underwriting Agreement with
respect to the securities specified therein. An Underwriting Agreement shall be
in the form of an executed writing (which may be in counterparts), and may be
evidenced by an exchange of telegraphic communications or any other rapid
transmission device designed to produce a written record of the communications
transmitted. The obligations of the underwriters under this Agreement and each
Underwriting Agreement shall be several and not joint. Unless otherwise defined
herein, the terms defined in the Underwriting Agreement are used herein as
defined in the Prospectus referred to below.
1. The Offered Securities. The Depositor proposes to sell pursuant
to the applicable Underwriting Agreement to the several Underwriters named
therein home equity loan pass-through certificates (the "Securities")
representing beneficial ownership interests in a trust, the trust property of
which consists of a pool of Mortgage Loans and certain related property. The
Securities will be issued pursuant to a pooling and servicing agreement dated as
of August 10, 1997 (the "Pooling and Servicing Agreement") by and among the
Depositor, Emergent Mortgage Corp. (the "Servicer") and First Union National
Bank, as trustee (the "Trustee").
The terms and rights of any particular issuance of Securities shall
be as specified in the Underwriting Agreement relating thereto and in or
pursuant to the Pooling and Servicing Agreement identified in such Underwriting
Agreement. The Securities which are the subject of any particular Underwriting
Agreement into which this Agreement is incorporated are herein referred to as
the "Offered Securities."
The Depositor has filed with the Securities and Exchange Commission
(the "Commission") a registration statement on Form S-3 (File No. 333-27355),
including
5
<PAGE>
a prospectus relating to the Securities under the Securities Act of 1933, as
amended (the "1933 Act"). The term "Registration Statement" means such
registration statement as amended to the date of the Underwriting Agreement. The
term "Basic Prospectus" means the prospectus included in the Registration
Statement. The term "Prospectus" means the Basic Prospectus together with the
prospectus supplement specifically relating to the Offered Securities, as first
filed with the Commission pursuant to Rule 424. The term "Preliminary
Prospectus" means a preliminary prospectus supplement specifically relating to
the Offered Securities together with the Basic Prospectus.
2. Offering by the Underwriters. Upon the execution of the
Underwriting Agreement applicable to any Offered Securities and the
authorization by the Representative of the release of such Offered Securities,
the several Underwriters propose to offer for sale to the public the Offered
Securities at the prices and upon the terms set forth in the Prospectus.
3. Purchase, Sale and Delivery of the Offered Securities. Unless
otherwise specified in the Underwriting Agreement, payment for the Offered
Securities shall be made by certified or official bank check or checks payable
to the order of the Depositor in immediately available or next day funds, at the
time and place set forth in the Underwriting Agreement, upon delivery to the
Representative for the respective accounts of the several Underwriters of the
Offered Securities registered in definitive form and in such names and in such
denominations as the Representative shall request in writing not less than five
full business days prior to the date of delivery. The time and date of such
payment and delivery with respect to the Offered Securities are herein referred
to as the "Closing Date".
4. Conditions of the Underwriters' Obligations. The respective
obligations of the several Underwriters pursuant to the Underwriting Agreement
shall be subject, in the discretion of the Representative, to the accuracy in
all material respects of the representations and warranties of the Depositor
contained herein as of the date of the Underwriting Agreement and as of the
Closing Date as if made on and as of the Closing Date, to the accuracy in all
material respects of the statements of the officers of the Depositor and the
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
6
<PAGE>
therein, there shall have been no material adverse change in the
condition, financial or otherwise, earnings, affairs, regulatory situation
or business prospects of the Depositor; (v) there are no material actions,
suits or proceedings pending before any court or governmental agency,
authority or body or threatened, affecting the Depositor or the
transactions contemplated by the Underwriting Agreement; (vi) the
Depositor is not in violation of its charter or its by-laws or in default
in the performance or observance of any obligation, agreement, covenant or
condition contained in any contract, indenture, mortgage, loan agreement,
note, lease or other instrument to which it is a party or by which it or
its properties may be bound, which violations or defaults separately or in
the aggregate would have a material adverse effect on the Depositor; and
(vii) the Representative shall have received, on the Closing Date a
certificate, dated the Closing Date and signed by an executive officer of
the Depositor, to the foregoing effect.
(c) Subsequent to the execution of the Underwriting Agreement, there
shall not have occurred any of the following: (i) if at or prior to the
Closing Date, trading in securities on the New York Stock Exchange shall
have been suspended or any material limitation in trading in securities
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
7
<PAGE>
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 Securities, the Registration Statement, the
Prospectus and other related matters as the Underwriters may reasonably
require, and the Depositor shall have furnished to such counsel such
documents as they request for the purpose of enabling them to pass upon
such matters.
(i) The Representative shall have received, on or prior to the date
of first use of the prospectus supplement relating to the Offered
Securities, and on the Closing Date if requested by the Representative,
letters of independent accountants of the Depositor in the form and
reflecting the performance of the procedures previously requested by the
Representative.
(j) The Depositor shall have furnished or caused to be furnished to
the Representative on the Closing Date a certificate of an executive
officer of the Depositor satisfactory to the Representative as to the
accuracy of the representations and warranties of the Depositor herein at
and as of such Closing Date as if made as of such date, as to the
performance by the Depositor of all of its obligations hereunder to be
performed at or prior to such Closing Date, and as to such other matters
as the Representative may reasonably request;
(k) The Servicer shall have furnished or caused to be furnished to
the Representative on the Closing Date a certificate of officers of such
Servicer in form and substance reasonably satisfactory to the
Representative;
(l) The Policy shall have been duly executed and issued at or prior
to the Closing Date and shall conform in all material respects to the
description thereof in the Prospectus Supplement.
(m) The Representative shall have received, on the Closing Date, an
opinion of counsel to Financial Security Assurance Inc. ("the Certificate
Insurer"), dated the Closing Date, in form and substance satisfactory to
the Representative and counsel for the Underwriters and containing
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
8
<PAGE>
paying ability by any "nationally recognized statistical rating
organization," as such term is defined for purposes of the 1933 Act.
(o) There shall not have occurred any change, or any development
involving a prospective change, in the condition, financial or otherwise,
or in the earnings, business or operations, since December 31, 1994, of
the Certificate Insurer, that is in the Representative's judgment material
and adverse and that makes it in the Representative's judgment
impracticable to market the Offered Securities on the terms and in the
manner contemplated in the Prospectus.
(p) The Representative shall have been furnished such further
information, certificates, documents and opinions as the Representative
may reasonably request.
5. Covenants of the Depositor. In further consideration of the
agreements of the Underwriters contained in the Underwriting Agreement, the
Depositor covenants as follows:
(a) To furnish the Representative, without charge, copies of the
Registration Statement and any amendments thereto including exhibits and
as many copies of the Prospectus and any supplements and amendments
thereto as the Representative may from time to time reasonably request.
(b) Immediately following the execution of the Underwriting
Agreement, the Depositor will prepare a prospectus supplement setting
forth the principal amount, notional amount or stated amount, as
applicable, of Offered Securities covered thereby, the price at which the
Offered Securities are to be purchased by the Underwriters from the
Depositor, either the initial public offering price or prices or the
method by which the price or prices at which the Offered Securities are to
be sold will be determined, the selling concessions and 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
9
<PAGE>
Securities by the Underwriters, and will use its best efforts to cause the
same to become effective as promptly as possible. The Depositor will
advise the Representative, promptly after it receives notice thereof, of
the time when any amendment to the Registration Statement or any amended
Registration Statement has become effective or any supplement to the
Prospectus or any amended Prospectus has been filed. The Depositor will
advise the Representative, promptly after it receives notice or obtains
knowledge thereof, of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or any order
preventing or suspending the use of any Preliminary Prospectus or the
Prospectus, or the suspension of the qualification of the Offered
Securities for offering or sale in any jurisdiction, or of the initiation
or threatening of any proceeding for any such purpose, or of any request
made by the Commission for the amending or supplementing of the
Registration Statement or the Prospectus or for additional information,
and the Depositor will use its best efforts to prevent the issuance of any
such stop order or any order suspending any such 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
10
<PAGE>
on which the filing of the Prospectus, as amended or supplemented,
pursuant to Rule 424 under the 1933 Act first occurs, an earnings
statement of the Depositor covering a twelve-month period beginning after
the date of the Underwriting Agreement, which shall satisfy the provisions
of 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.
11
<PAGE>
(b) On the effective date of the Registration Statement, the
Registration Statement and the Basic Prospectus conformed in all material
respects to the requirements of the 1933 Act and the rules and regulations
thereunder, and did not include any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary
to make the statements therein not misleading; on the date of the
Underwriting Agreement and as of the Closing Date, the Registration
Statement and the Prospectus conform, and as amended or supplemented, if
applicable, will conform in all material respects to the requirements of
the 1933 Act and the rules and regulations thereunder, and on the date of
the Underwriting Agreement and as of the Closing Date, neither of such
documents includes any untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary to make
the statements therein not misleading, and neither of such documents as
amended or supplemented, if applicable, will include any untrue statement
of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading;
provided, however, that the foregoing does not apply to statements or
omissions in any of such documents based upon written information
furnished to the Depositor by any Underwriter specifically for use
therein.
(c) Since the respective dates as of which information is given in
the Registration Statement and the Prospectus, except as otherwise stated
therein, there has been no material adverse change in the condition,
financial or otherwise, earnings, affairs, regulatory situation or
business prospects of the Depositor, whether or not arising in the
ordinary course of the business of the Depositor.
(d) The Depositor has been duly organized and is validly existing as
a corporation in good standing under the laws of the State of Delaware.
(e) The Depositor has all requisite power and authority (corporate
and other) and all requisite authorizations, approvals, order, licenses,
certificates and permits of and from all government or regulatory
officials and bodies to own its properties, to conduct its business as
described in the Registration Statement and the Prospectus and to execute,
deliver and perform this Agreement, the Underwriting Agreement, the
Pooling and Servicing Agreement and, if applicable, the Custodial
Agreement, except such as may be required under state securities or Blue
Sky laws in connection with the purchase and distribution by the
Underwriter of the Offered Securities; all such authorizations, approvals,
orders, licenses, certificates are in full force and effect and contain no
unduly burdensome provisions; and, except as set forth or contemplated in
the Registration Statement or the Prospectus, there are no legal or
governmental proceedings pending or, to the best knowledge of the
Depositor, threatened that would result in a material modification,
suspension or revocation thereof.
(f) The Offered Securities have been duly authorized, and when the
Offered Securities are issued and delivered pursuant to the Underwriting
Agreement, the Offered Securities will have been duly executed, issued and
12
<PAGE>
delivered and will be entitled to the benefits provided by the applicable
Pooling and Servicing Agreement, subject, as to the enforcement of
remedies, to applicable bankruptcy, reorganization, insolvency, moratorium
and other laws affecting the rights of creditors generally, and to general
principles of equity (regardless of whether the entitlement to such
benefits is considered in a proceeding in equity or at law), and will
conform in substance to the description thereof contained in the
Registration Statement and the Prospectus, and will in all material
respects be in the form contemplated by the Pooling and Servicing
Agreement.
(g) The execution and delivery by the Depositor of this Agreement,
the Underwriting Agreement and the Pooling and Servicing Agreement are
within the corporate power of the Depositor and neither the execution and
delivery by the Depositor of this Agreement, the Underwriting Agreement
and the 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
13
<PAGE>
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 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 Pre-Funded Loan 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 Pre-Funded Loan 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 Pre-Funded Loan 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 Pre-Funded Loan Transfer Date, as
the case may be, the Trustee will have
14
<PAGE>
good and marketable title to the Mortgage Loans and each of the
Underwriters will have good and marketable title to the Offered
Securities, in each case free and clear of any Liens.
(p) The Pooling and Servicing Agreement is not required to be
qualified under the Trust Indenture Act of 1939, as amended, and the Trust
Fund (as defined in the Pooling and Servicing Agreement) is not required
to be registered under the Investment Company Act of 1940, as amended.
(q) Any taxes, fees and other governmental charges in connection
with the execution, delivery and issuance of the Underwriting Agreement,
this Agreement, the Pooling and Servicing Agreement and the Offered
Securities have been or will be paid at or prior to the Closing Date.
7. Indemnification and Contribution. 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.
(a) 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
15
<PAGE>
fact contained in the Registration Statement, any Preliminary Prospectus,
the Prospectus, or any amendment or supplement thereto, or any other
prospectus relating to the Offered Securities, or arise out of or are
based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the
extent, that such untrue statements or alleged untrue statement or
omission or alleged omission was made in reliance upon and in conformity
with written information furnished to the Depositor by any Underwriter
through the Representative specifically for use therein; and each
Underwriter will reimburse any legal or other expenses reasonably incurred
by the Depositor or any such director, officer or controlling person in
connection with investigating or defending any such 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.
(b) 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
16
<PAGE>
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).
(c) In order to provide for just and equitable contribution in
circumstances in which the indemnity agreement provided for in the
preceding parts of this Section 7 is for any reason held to be unavailable
to or insufficient to hold harmless an indemnified party under subsection
(a) or (b) above in respect of any losses, claims, damages or liabilities
(or actions in respect thereof) referred to therein, then the indemnifying
party shall contribute to the amount paid or payable by the indemnified
party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof); provided, however, that no person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
1933 Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. In determining the amount of
contribution to which the respective parties are entitled, there shall be
considered the relative benefits received by the Depositor on the one
hand, and the Underwriters on the other, from the offering of the Offered
Securities (taking into account the portion of the proceeds of the
offering realized by each), the Depositor's and the Underwriters' relative
knowledge and access to information concerning the matter with respect to
which the claim was asserted, the opportunity to correct and prevent any
statement or omission, and any other equitable considerations appropriate
in the circumstances. The Depositor and the Underwriters agree that it
would not be equitable if the amount of such contribution were determined
by pro rata or per capita allocation (even if the Underwriters were
treated as one entity for such purpose). No Underwriter or person
controlling such Underwriter shall be obligated to make contribution
hereunder which in the aggregate exceeds the total public offering price
of the Offered Securities purchased by such Underwriter under the
Underwriting Agreement, less the aggregate amount of any damages which
such Underwriter and its controlling persons have otherwise been required
to pay in respect of 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.
(d) The parties hereto agree that the first sentence of Section 5 of
the Indemnification Agreement (the "Indemnification Agreement") dated as
of the Closing Date among the Certificate Insurer, the Servicer, the
Depositor and the Underwriter shall not be construed as limiting the
Depositor's right to enforce its rights under Section 7 of this Agreement.
The parties further agree that, as between the parties hereto, to the
extent that the provisions of Section 4, 5 and 6
17
<PAGE>
of the Indemnification Agreement conflict with Section 7 hereof, the
provisions of Section 7 hereof shall govern.
(e) Each Underwriter agrees to provide the Depositor no later the
date on which the Prospectus Supplement is required to be filed pursuant
to Rule 424 with a copy of its Derived Information (defined below) for
filing with the Commission on Form 8-K.
(f) Each Underwriter severally agrees, assuming all
Depositor-Provided Information (defined below) is accurate and complete in
all material respects, to indemnify and hold harmless the Depositor, its
respective officers and directors and each person who controls the
Depositor within the meaning of the Securities Act or the Exchange Act
against any and all losses, claims, damages or liabilities, joint or
several, to which they may become subject under the Securities Act or the
Exchange Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon
any untrue statement of a material fact contained in the Derived
Information provided by such Underwriter, or arise out of or are based
upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not
misleading, and agrees to reimburse each such indemnified party for any
legal or other expenses reasonably incurred by him, her or it in
connection with investigating or defending or preparing to defend any such
loss, claim, damage, liability or action as such expenses are incurred.
The obligations of an Underwriter under this Section 8(E) shall be in
addition to any liability which such Underwriter may otherwise have.
The procedures set forth in Section 8(C) shall be equally applicable
to this Section 8(E).
For purposes of this Section 8, the term "Derived Information" means
such portion, if any, of the information delivered to the Depositor pursuant to
Section 8(D) for filing with the Commission on Form 8-K as: (i) is not contained
in the Prospectus without taking into account information incorporated therein
by reference; and (ii) does not constitute Depositor-Provided Information.
"Depositor-Provided Information" means any computer tape furnished to the
Underwriter by the Depositor concerning the assets comprising the Trust.
8. Survival of Certain Representations and Obligations. The
respective representations, warranties, agreements, covenants, indemnities and
other statements of the Depositor, its officers and the several Underwriters set
forth in, or made pursuant to, the Underwriting Agreement shall remain in full
force and effect, regardless of any investigation, or statement as to the result
thereof, made by or on behalf of any Underwriter, the Depositor, or any of the
officers or directors or any controlling person of any of the foregoing, and
shall survive the delivery of and payment for the Offered Securities.
18
<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
19
<PAGE>
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 thereto, (iii) fees and expenses of rating agencies,
accountants and counsel for the Depositor, (iv) the expenses referred to
in Section 5(e) hereof, and (v) all miscellaneous expenses referred to in
Item 30 of the Registration Statement;
(b) all out-of-pocket expenses, including counsel fees,
disbursements and expenses, reasonably incurred by the Underwriters in
connection with investigating, preparing to market and marketing the
Offered Securities and proposing to purchase and purchasing the Offered
Securities under the Underwriting Agreement will be borne and paid by the
Depositor if the Underwriting Agreement is terminated by the Depositor
pursuant to Section 9(a) hereof or by the Representative on account of the
failure, refusal or inability on the part of the Depositor to perform all
obligations and satisfy all conditions on the part of the Depositor to be
performed or satisfied hereunder; and
(c) the Depositor will pay the cost of preparing the certificates
for the Offered Securities.
Except as otherwise provided in this Section 11, the Underwriters
agree to pay all of their expenses in connection with investigating, preparing
to market and marketing the Offered Securities and proposing to purchase and
purchasing the Offered Securities under the Underwriting Agreement, including
the fees and expenses of their counsel and any advertising expenses incurred by
them in making offers and sales of the Offered Securities.
12. Notices. All communications under the Underwriting Agreement
shall be in writing and, if sent to the Underwriters, shall be mailed, delivered
or telegraphed and confirmed to the Representative at the address and to the
attention of the person specified in the Underwriting Agreement, and, if sent to
the Depositor, shall be mailed, delivered or telegraphed and confirmed to
Prudential Securities Secured Financing Corporation, 199 Water Street, 26th
Floor, New York, New York 10292, Attention: Director-Mortgage Finance Group;
provided, however, that any notice to any Underwriter pursuant to the
Underwriting Agreement shall be mailed, delivered or telegraphed and confirmed
to such Underwriter at the address furnished by it.
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
20
<PAGE>
respective successors and legal representatives, and nothing expressed or
mentioned herein or in the Underwriting Agreement is intended or shall be
construed to give any other person any legal or equitable right, remedy or claim
under or in respect of the Underwriting Agreement, or any provisions herein
contained, the Underwriting Agreement and all conditions and provisions hereof
being intended to be and being for the sole and exclusive benefit of such
persons and for the benefit of no other person except that (i) the
representations and warranties of the Depositor contained herein or in the
Underwriting Agreement shall also be for the benefit of any person or persons
who controls or control any Underwriter within the meaning of Section 15 of the
1933 Act, and (ii) the indemnities by the several Underwriters shall also be for
the benefit of the directors of the Depositor, the officers of the Depositor who
have signed the Registration Statement and any person or persons who control the
Depositor within the meaning of Section 15 of the 1933 Act. No purchaser of the
Offered Securities from any Underwriter shall be deemed a successor because of
such purchase. This Agreement and each Underwriting Agreement may be executed in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
15. Time of the Essence. Time shall be of the essence of each
Underwriting Agreement.
16. Governing Law. This Agreement and each Underwriting Agreement
shall be governed by and construed in accordance with the laws of the State of
New York.
21
<PAGE>
Exhibit A
Opinions of Dewey Ballantine,
Special Counsel for the Depositor
(i) Each of the Documents constitutes the valid, legal and binding
agreement of the Depositor, and is enforceable against the Depositor in
accordance with its terms.
(ii) The Certificates, assuming the due execution by the Trustee and
due authentication by the Trustee and payment therefor pursuant to the
Underwriting Agreement, are validly issued and outstanding and are entitled to
the benefits of the Pooling and Servicing Agreement.
(iii) No consent, approval, authorization or order of, registration
or filing with, or notice to, any governmental authority or court is required
under federal laws or the laws of the State of New York for the execution,
delivery and performance of the Documents or the offer, issuance, sale or
delivery of the Certificates or the consummation of any other transaction
contemplated thereby by the Depositor, except such which have been obtained.
(iv) The Registration Statement and the Prospectus (other than the
financial and statistical data included therein, as to which we are not called
upon to express any opinion), at the time the Registration Statement became
effective, as of the date of execution of the Underwriting Agreement and as of
the date hereof comply as to form in all material respects with the requirements
of the Securities Act of 1933, as amended, and the rules and regulations
thereunder, and the Exchange Act and the rules and regulations thereunder, and
we do not know of any amendment to the Registration Statement required to be
filed, or of any contracts, indentures or other documents of a character
required to be filed as an exhibit to the Registration Statement or required to
be described in the Registration Statement or the Prospectus, which has not been
filed or described as required.
(v) Neither the qualification of the Pooling and Servicing Agreement
under the Trust Indenture Act of 1939, as amended, nor the registration of the
Trust Fund created by the Pooling and Servicing Agreement under the Investment
Company Act of 1940 is required.
(vi) The statements in the Prospectus Supplement set forth under the
caption "DESCRIPTION OF THE CERTIFICATES," to the extent such statements purport
to summarize certain provisions of the Certificates or of the Pooling and
Servicing Agreement or of the Unaffiliated Seller's Agreement, are fair and
accurate in all material respects.
<PAGE>
Exhibit B
Opinions of Counsel
to the Servicer
(i) The Servicer has been duly organized and is validly existing as
a corporation in good standing under the laws of the State of South Carolina and
is qualified to transact business in the State of South Carolina.
(ii) The Servicer has the requisite power and authority to execute
and deliver, engage in the transactions contemplated by, and perform and observe
the conditions of, the Pooling and Servicing Agreement.
(iii) The Pooling and Servicing Agreement has been duly and validly
authorized, executed and delivered by the Servicer, all requisite corporate
action having been taken with respect thereto, and constitutes the valid, legal
and binding agreement of the Servicer, and is enforceable against the Servicer
in accordance with its respective terms.
(iv) The execution, delivery or performance by the Servicer of the
Pooling and Servicing Agreement does not (A) conflict or will not conflict with
or result or will result in a breach of, or constitute or will constitute a
default under or violate or will violate, (i) any term or provision of the
Articles of Incorporation or By-laws of the Servicer; (ii) any term or provision
of any material agreement, contract, instrument or indenture, to which the
Servicer or any of its subsidiaries is a party or is bound; or (iii) any order,
judgment, writ, injunction or decree of any court or governmental agency or body
or other tribunal having jurisdiction over the Servicer or any of its
properties; or (B) result in, or will result in the creation or imposition of
any lien, charge or encumbrance upon the Trust Fund or upon the Certificates,
except as otherwise contemplated by the Pooling and Servicing Agreement.
(v) No consent, approval, authorization or order of, registration or
qualification of or with or notice to, any courts, governmental agency or body
or other tribunal is required under the laws of New York or South Carolina, for
the execution, delivery and performance of the Pooling and Servicing Agreement
or the consummation of any other transaction contemplated thereby by the
Servicer, except such which have been obtained.
(vi) There are no legal or governmental suits, proceedings or
investigations pending or, to such counsel's knowledge, threatened against the
Servicer before any court, governmental agency or body or other tribunal (A)
which, if determined adversely to the Servicer, would individually or in the
aggregate have a material adverse effect on (i) the consolidated financial
position, business prospects, stockholders's equity or results of operations of
the Servicer; or (ii) the Servicer's ability to perform its obligations under,
or the validity or enforceability of the Pooling and Servicing Agreement; or (B)
which have not otherwise been disclosed in the Registration Statement
<PAGE>
and to the best of such counsel's knowledge, no such proceedings or
investigations are threatened or contemplated by governmental authorities or
threatened by others.
B-2
<PAGE>
Exhibit C
Opinions of Counsel
to the Trustee
(i) The Trustee is a national banking association duly organized,
validly existing and in good standing under the laws of the United States and
has the power and authority to enter into and to take all actions required of it
under the Pooling and Servicing Agreement;
(ii) The Pooling and Servicing Agreement has been duly authorized,
executed and delivered by the Trustee and the Pooling and Servicing Agreement
constitutes the legal, valid and binding obligation of the Trustee, enforceable
against the Trustee in accordance with its terms, except as enforceability
thereof may be limited by (A) bankruptcy, insolvency, reorganization or other
similar laws affecting the enforcement of creditors' rights generally, as such
laws would apply in the event of a bankruptcy, insolvency or reorganization or
similar occurrence affecting the Trustee, and (B) general principles of equity
regardless of whether such enforcement is sought in a proceeding at law or in
equity;
(iii) No consent, approval, authorization or other action by any
governmental agency or body or other tribunal is required on the part of the
Trustee in connection with its execution and delivery of the Pooling and
Servicing Agreement or the performance of its obligations thereunder;
(iv) The Certificates have been duly executed, authenticated and
delivered by the Trustee; and
(v) The execution and delivery of, and performance by the Trustee of
its obligations under, the Pooling and Servicing Agreement do not conflict with
or result in a violation of any statute or regulation applicable to the Trustee,
or the charter or bylaws of the Trustee, or to the best knowledge of such
counsel, any governmental authority having jurisdiction over the Trustee or the
terms of any indenture or other agreement or instrument to which the Trustee is
a party or by which it is bound.
<PAGE>
Exhibit D
Opinions of Counsel
to the Certificate Insurer
(i) The Certificate Insurer is a stock insurance corporation, duly
incorporated and validly existing under the laws of the State of New York. The
Certificate Insurer is validly licensed and authorized to issue the Policy and
perform its obligations under the Policy in accordance with the terms thereof,
under the laws of the State of New York.
(ii) The execution and delivery by the Certificate Insurer of the
Policy, the Insurance and Indemnity Agreement and the Indemnification Agreement
are within the corporate power of the Certificate Insurer and has been
authorized by all necessary corporate action on the part of the Certificate
Insurer; the Policy has been duly executed and is the valid and binding
obligation of the Certificate Insurer enforceable in accordance with its terms
except that the enforcement of the Policy may be limited by laws relating to
bankruptcy, insolvency, reorganization, moratorium, receivership and other
similar laws affecting creditors' rights generally and by general principles of
equity.
(iii) The Certificate Insurer is authorized to deliver the
Indemnification Agreement and the Insurance and Indemnity Agreement, and each
Agreement has been duly executed and is the valid and binding obligation of the
Certificate Insurer enforceable in accordance with its terms except that the
enforcement thereof may be limited by laws relating to bankruptcy, insolvency,
reorganization, moratorium, receivership and other similar laws affecting
creditors' rights generally and by general principles of equity and by public
policy considerations relating to indemnification for securities law violations.
(iv) No consent, approval, authorization or order of any state or
federal court or governmental agency or body is required on the part of the
Certificate Insurer, the lack of which would adversely affect the validity or
enforceability of the Policy; to the extent required by applicable legal
requirements that would adversely affect validity or enforceability of the
Policy, the form of the Policy has been filed with, and approved by, all
governmental authorities having jurisdiction over the Certificate Insurer in
connection with such Policy.
(v) To the extent the Policy constitutes a security within the
meaning of Section 2(1) of the 1933 Act, it is a security that is exempt from
the registration requirements of the Act.
(vi) The information set forth under the captions "THE INSURER" in
the Prospectus insofar as such statements constitute a description of the
Policy, accurately summarizes the Policy.
INDEMNIFICATION AGREEMENT
among
FINANCIAL SECURITY ASSURANCE INC.,
EMERGENT MORTGAGE HOLDINGS CORPORATION,
EMERGENT MORTGAGE CORP.,
EMERGENT GROUP, INC.,
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION
and
PRUDENTIAL SECURITIES INCORPORATED
Dated as of September 24, 1997
Emergent Home Equity Loan Pass-Through
Certificates, Series 1997-3
$170,000,000 Class A Certificates
<PAGE>
TABLE OF CONTENTS
Page
Section 1. Definitions....................................................... 1
Section 2. Representations, Warranties and Agreements of Financial Security.. 3
Section 3. Representations, Warranties and Agreements of the Underwriter..... 5
Section 4. Indemnification................................................... 6
Section 5. Indemnification Procedures........................................ 6
Section 6. Contribution...................................................... 7
Section 7. Miscellaneous..................................................... 8
EXHIBIT
Exhibit A Opinion of General Counsel
<PAGE>
INDEMNIFICATION AGREEMENT
INDEMNIFICATION AGREEMENT dated as of September 24, 1997, among
FINANCIAL SECURITY ASSURANCE INC. ("Financial Security"), PRUDENTIAL SECURITIES
SECURED FINANCING CORPORATION (the "Depositor"), EMERGENT GROUP, INC. (the
"Company"), EMERGENT MORTGAGE HOLDINGS CORPORATION (the "Seller"), EMERGENT
MORTGAGE CORP. (the "Originator") and PRUDENTIAL SECURITIES INCORPORATED (the
"Underwriter"):
Section 1. Definitions. For purposes of this Agreement, the
following terms shall have the meanings provided below:
"Agreement" means this Indemnification Agreement, as amended from
time to time.
"Company Party" means any of the Company, its parent, subsidiaries
and affiliates and any shareholder, director, officer, employee, agent or
"controlling person" (as such term is used in the Securities Act) of any of the
foregoing.
"Depositor Party" means any of the Depositor, its parent,
subsidiaries and affiliates and any shareholder, director, officer, employee,
agent or "controlling person" (as such term is used in the Securities Act) of
any of the foregoing.
"Financial Security Agreements" means this Agreement and the
Insurance Agreement.
"Financial Security Information" has the meaning provided in Section
2(g) hereof.
"Financial Security Party" means any of Financial Security, its
parent, subsidiaries and affiliates, and any shareholder, director, officer,
employee, agent or "controlling person" (as such term is used in the Securities
Act) of any of the foregoing.
"Indemnified Party" means any party entitled to any indemnification
pursuant to Section 4 hereof.
"Indemnifying Party" means any party required to provide
indemnification pursuant to Section 4 hereof.
"Insurance Agreement" means the Insurance and Indemnity Agreement,
dated as of August 10, 1997, by and among Financial Security, the Depositor, the
Company, the Originator and the Seller.
"Losses" means (a) any actual out-of-pocket damages incurred by the
party entitled to indemnification or contribution hereunder, (b) any actual
out-of-pocket costs or actual expenses reasonably incurred by such party,
including reasonable fees or expenses of its counsel and other
<PAGE>
-2-
expenses incurred in connection with investigating or defending any claim,
action or other proceeding which entitle such party to be indemnified hereunder
(subject to the limitations set forth in Section 5 hereof), to the extent not
paid, satisfied or reimbursed from funds provided by any other Person other than
an affiliate of such party (provided that the foregoing shall not create or
imply any obligation to pursue recourse against any such other Person), plus (c)
interest on the amount paid by the party entitled to indemnification or
contribution from the date of such payment to the date of payment by the party
who is obligated to indemnify or contribute hereunder at the statutory rate
applicable to judgments for breach of contract.
"Offering Circular" means the Prospectus dated June 10, 1997,
including the Prospectus Supplement thereto dated September 17, 1997, relating
to the Securities, including, without limitation, Derived Information, as
defined in the Underwriting Agreement (which includes but is not limited to any
Computational Materials).
"Offering Document" means the Offering Circular and any amendments
or supplements thereto and any other material or documents delivered by the
Underwriter to any Person in connection with the offer or sale of the
Securities.
"Originator Party" means any of the Originator, its parent,
subsidiaries and affiliates and any shareholder, director, officer, employee,
agent or "controlling person" (as such term is used in the Securities Act) of
any of the foregoing.
"Person" means any individual, partnership, joint venture,
corporation, trust, unincorporated organization or other organization or entity
(whether governmental or private).
"Policy" means the financial guaranty insurance policy delivered by
Financial Security with respect to the Securities.
"Securities" means the Class A-1 Certificates, Class A-2
Certificates, Class A-3 Certificates, Class A-4 Certificates, Class A-5
Certificates and the Class A-6 Certificates issued pursuant to a Pooling and
Servicing Agreement, dated as of August 10, 1997 by and among, the Depositor,
the Originator and First Union National Bank, as trustee.
"Securities Act" means the Securities Act of 1933, as amended from
time to time.
"Seller Party" means any of the Seller, its parent, subsidiaries and
affiliates, and any shareholder, director, officer, employee, agent or
"controlling person" (as such term is used in the Securities Act) of any of the
foregoing.
"Underwriting Agreement" means the Underwriting Agreement dated as
of August 10, 1997, between the Depositor and the Underwriter in respect of the
Securities.
"Underwriter Information" has the meaning provided in Section 3(c)
hereof.
<PAGE>
-3-
"Underwriter Party" means any of the Underwriter, its parent,
subsidiaries and affiliates and any shareholder, director, officer, employee,
agent or "controlling person" (as such term is used in the Securities Act) of
any of the foregoing.
Section 2. Representations, Warranties and Agreements of Financial
Security. Financial Security represents, warrants and agrees, as of the date
hereof and as of the Closing Date, as follows:
(a) Organization, Etc. Financial Security is a stock insurance
company duly organized, validly existing, in good standing and authorized to
transact financial guaranty insurance business under the laws of the State of
New York.
(b) Authorization, Etc. The Policy and the Financial Security
Agreements have been duly authorized, executed and delivered by Financial
Security.
(c) Validity, Etc. The Policy and the Financial Security Agreements
constitute legal, valid and binding obligations of Financial Security,
enforceable against Financial Security in accordance with their terms, subject,
as to the enforcement of remedies, to bankruptcy, insolvency, reorganization,
rehabilitation, moratorium and other similar laws affecting the enforceability
of creditors' rights generally applicable in the event of the bankruptcy or
insolvency of Financial Security and to the application of general principles of
equity and subject, in the case of this Agreement, to principles of public
policy limiting the right to enforce the indemnification provisions contained
herein.
(d) Exemption From Registration. The Policy is exempt from
registration under the Securities Act.
(e) No Conflicts. Neither the execution or delivery by Financial
Security of the Policy or the Financial Security Agreements, nor the performance
by Financial Security of its obligations thereunder, will conflict with any
provision of the certificate of incorporation or the bylaws of Financial
Security nor result in a breach of, or constitute a default under, any material
agreement or other instrument to which Financial Security is a party or by which
any of its property is bound nor violate any judgment, order or decree
applicable to Financial Security of any governmental or regulatory body,
administrative agency, court or arbitrator having jurisdiction over Financial
Security (except that, in the published opinion of the Securities and Exchange
Commission, the indemnification provisions of this Agreement, insofar as they
relate to indemnification for liabilities arising under the Securities Act, are
against public policy as expressed in the Securities Act and are therefore
unenforceable).
(f) Financial Information. The consolidated balance sheets of
Financial Security as of December 31, 1996 and December 31, 1995 and the related
consolidated statements of income, changes in shareholder's equity and cash
flows for the fiscal years then ended and the interim consolidated balance sheet
of Financial Security as of June 30, 1997, and the related statements of income,
changes in shareholder's equity and cash flows for the interim period then
ended, furnished by Financial Security for use in the Offering Circular, fairly
present in all material respects the financial
<PAGE>
-4-
condition of Financial Security as of such dates and for such periods in
accordance with generally accepted accounting principles consistently applied
except as noted therein (subject as to interim statements to normal year-end
adjustments) and since the date of the most current interim consolidated balance
sheet referred to above there has been no change in the financial condition of
Financial Security which would materially and adversely affect its ability to
perform its obligations under the Policy.
(g) Financial Security Information. The information in the Offering
Circular set forth under the caption "The Insurer" (as revised from time to time
in accordance with the provisions hereof, the "Financial Security Information")
is limited and does not purport to provide the scope of disclosure required to
be included in a prospectus with respect to a registrant in connection with the
offer and sale of securities of such registrant registered under the Securities
Act. Within such limited scope of disclosure, however, as of the date of the
Offering Circular and as of the date hereof, the Financial Security Information
does not contain any untrue statement of a material fact, or omit to state a
material fact necessary to make the statements contained therein, in light of
the circumstances under which they were made, not misleading.
(h) Additional Information. Financial Security will furnish to the
Underwriter, the Company, the Originator or the Depositor, upon request of the
Underwriter, the Company, the Originator or the Depositor, as the case may be,
copies of Financial Security's most recent financial statements (annual or
interim, as the case may be) which fairly present in all material respects the
financial condition of Financial Security as of the dates and for the periods
indicated, in accordance with generally accepted accounting principles
consistently applied except as noted therein (subject, as to interim statements,
to normal year-end adjustments); provided, however, that, if the Underwriter,
the Company, the Seller, the Originator or the Depositor shall require a
manually signed report or consent of Financial Security's auditors in connection
with such financial statements, such report or consent shall be at the expense
of the Underwriter, the Company, the Originator, the Seller or the Depositor, as
the case may be. In addition, if the delivery of an Offering Circular relating
to the Securities is required at any time prior to the expiration of nine months
after the time of issue of the Offering Circular in connection with the offering
or sale of the Securities, the Depositor or the Underwriter will notify
Financial Security of such requirement to deliver an Offering Circular and
Financial Security will promptly provide the Underwriter and the Depositor with
any revisions to the Financial Security Information that are in the judgment of
Financial Security necessary to prepare an amended Offering Circular or a
supplement to the Offering Circular which will correct such statement or
omission.
(i) Opinion of Counsel. Financial Security will furnish to the
Seller, the Originator, the Depositor, the Underwriter and the Company on the
closing date for the sale of the Securities an opinion of its Associate General
Counsel, to the effect set forth in Exhibit A attached hereto, dated such
closing date and addressed to the Seller, the Originator, the Depositor, the
Underwriter and the Company.
(j) Consents and Reports of Independent Accountants. Financial
Security will furnish to the Underwriter, the Company, the Originator and the
Depositor, upon request, as comfort from its independent accountants in respect
of its financial condition, (i) at the expense of the Person specified in the
Insurance Agreement, a copy of the Offering Circular, including
<PAGE>
-5-
either a manually signed consent or a manually signed report of Financial
Security's independent accountants and (ii) the quarterly review letter by
Financial Security's independent accountants in respect of the most recent
interim financial statements of Financial Security.
Nothing in this Agreement shall be construed as a representation or
warranty by Financial Security concerning the rating of its claims-paying
ability by Standard & Poor's Ratings Services or Moody's Investors Service, Inc.
or any other rating agency (collectively, the "Rating Agencies"). The Rating
Agencies, in assigning such ratings, take into account facts and assumptions not
described in the Offering Circular and the facts and assumptions which are
considered by the Rating Agencies, and the ratings issued thereby, are subject
to change over time.
Section 3. Representations, Warranties and Agreements of the
Underwriter. The Underwriter represents, warrants and agrees, as of the date
hereof and as of the Closing Date, as follows:
(a) Compliance With Laws. The Underwriter will comply in all
material respects with all legal requirements in connection with offers and
sales of the Securities and make such offers and sales in the manner provided in
the Offering Circular.
(b) Offering Document. The Underwriter will not use, or distribute
to other broker-dealers for use, any Offering Document in connection with the
offer and sale of the Securities unless such Offering Document includes such
information as has been furnished by Financial Security for inclusion therein
and the information therein concerning Financial Security has been approved by
Financial Security in writing. Financial Security hereby consents to the
information in respect of Financial Security included in the Offering Circular.
Each Offering Document will include the following statement: "The Policy is not
covered by the property/casualty insurance security fund specified in Article
76 of the New York Insurance Law".
(c) Underwriting Information. All material provided by the
Underwriter for inclusion in the Offering Documents, insofar as such information
relates to the Underwriter, and any Derived Information (as defined in the
Underwriting Agreement) (as revised from time to time, collectively the
"Underwriter Information") is true and correct in all material respects. In
respect of the Offering Documents, the Underwriter Information is limited to the
information set forth under the caption "Plan of Distribution" in the Offering
Documents.
Section 4. Indemnification. (a) Financial Security agrees, upon the
terms and subject to the conditions provided herein, to indemnify, defend and
hold harmless each Depositor Party, each Company Party, each Seller Party, each
Originator Party and each Underwriter Party against (i) any and all Losses
incurred by them with respect to the offer and sale of the Securities and
resulting from Financial Security's breach of any of its representations,
warranties or agreements set forth in Section 2 hereof and (ii) any and all
Losses to which any Depositor Party, Company Party, Seller Party, Originator
Party or Underwriter Party may become subject, under the Securities Act or
otherwise, insofar as such Losses arise out of or result from an untrue
statement of a material fact
<PAGE>
-6-
contained in any Offering Document or the omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, in each case to the extent, but only to the extent, that such
untrue statement or omission was made in the Financial Security Information
included therein in accordance with the provisions hereof.
(b) The Underwriter agrees, upon the terms and subject to the
conditions provided herein, to indemnify, defend and hold harmless each
Financial Security Party against (i) any and all Losses incurred by them with
respect to the offer and sale of the Securities and resulting from the
Underwriter's breach of any of its representations, warranties or agreements set
forth in Section 3 hereof and (ii) any and all Losses to which any Financial
Security Party may become subject, under the Securities Act or otherwise,
insofar as such Losses arise out of or result from an untrue statement of a
material fact contained in any Offering Document or the omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent, but only to the
extent, that such untrue statement or omission was made in the Underwriter
Information included therein.
(c) Upon the incurrence of any Losses for which a party is entitled
to indemnification hereunder, the Indemnifying Party shall reimburse the
Indemnified Party promptly upon establishment by the Indemnified Party to the
Indemnifying Party of the Losses incurred.
Section 5. Indemnification Procedures. Except as provided below in
Section 6 with respect to contribution or in Section 7(e), the indemnification
provided herein by an Indemnifying Party shall be the exclusive remedy of any
and all Indemnified Parties for the breach of a representation, warranty or
agreement hereunder by an Indemnifying Party; provided, however, that each
Indemnified Party shall be entitled to pursue any other remedy at law or in
equity for any such breach so long as the damages sought to be recovered shall
not exceed the Losses incurred thereby resulting from such breach. In the event
that any action or regulatory proceeding shall be commenced or claim asserted
which may entitle an Indemnified Party to be indemnified under this Agreement,
such party shall give the Indemnifying Party written or telegraphic notice of
such action or claim reasonably promptly after receipt of written notice
thereof. The Indemnifying Party shall be entitled to participate in and, upon
notice to the Indemnified Party, assume the defense of any such action or claim
in reasonable cooperation with, and with the reasonable cooperation of, the
Indemnified Party. The Indemnified Party will have the right to employ its own
counsel in any such action in addition to the counsel of the Indemnifying Party,
but the fees and expenses of such counsel will be at the expense of such
Indemnified Party, unless (a) the employment of counsel by the Indemnified Party
at its expense has been authorized in writing by the Indemnifying Party, (b) the
Indemnifying Party has not in fact employed counsel to assume the defense of
such action within a reasonable time after receiving notice of the commencement
of the action, or (c) the named parties to any such action or proceeding
(including any impleaded parties) include both the Indemnifying Party and one or
more Indemnified Parties, and the Indemnified Parties shall have been advised by
counsel that there may be one or more legal defenses available to them which are
different from or additional to those available to the Indemnifying Party (it
being understood, however, that the Indemnifying Party shall not, in connection
with any one such action or proceeding or separate but substantially similar or
related actions or proceedings in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the reasonable fees and
expenses of more than one separate firm of attorneys at any time for
<PAGE>
-7-
all Depositor Parties, one such firm for all Underwriter Parties, one such firm
for all Company Parties, one such firm for all Seller Parties, one such firm for
all Originator Parties and one such firm for all Financial Security Parties, as
the case may be, which firm shall be designated in writing by the Depositor in
respect of the Depositor Parties, by the Underwriter in respect of the
Underwriter Parties, by the Company in respect of the Company Parties, by the
Seller in respect of the Seller Parties, by the Originator in respect of the
Originator Parties and by Financial Security in respect of the Financial
Security Parties), in each of which cases the fees and expenses of counsel will
be at the expense of the Indemnifying Party and all such fees and expenses will
be reimbursed promptly as they are incurred. The Indemnifying Party shall not be
liable for any settlement of any such claim or action unless the Indemnifying
Party shall have consented thereto or be in default in its obligations
hereunder. Any failure by an Indemnified Party to comply with the provisions of
this Section shall relieve the Indemnifying Party of liability only if such
failure is prejudicial to the position of the Indemnifying Party and then only
to the extent of such prejudice.
Section 6. Contribution. (a) To provide for just and equitable
contribution if the indemnification provided by any Indemnifying Party is
determined to be unavailable for any Indemnified Party (other than due to
application of this Section), each Indemnifying Party shall contribute to the
Losses arising from any breach of any of its representations, warranties or
agreements contained in this Agreement in such proportion as is appropriate to
reflect (i) the benefits received by such Indemnifying Party relative to the
benefits received by the Indemnified Party or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Indemnifying Party on the one hand and
the Indemnified Party on the other in connection with such Loss; provided,
however, that an Indemnifying Party shall in no event be required to contribute
to all Indemnified Parties an aggregate amount in excess of the Losses incurred
by such Indemnified Parties resulting from the breach of representations,
warranties or agreements contained in this Agreement.
(b) The relative fault of each Indemnifying Party, on the one hand,
and of each Indemnified Party, on the other, shall be determined by reference
to, among other things, whether the breach of, or alleged breach of, any
representations, warranties or agreements contained in this Agreement relates to
information supplied by, or action within the control of, the Indemnifying Party
or the Indemnified Party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such breach.
(c) The parties agree that Financial Security shall be solely
responsible for the Financial Security Information, the Underwriter shall be
solely responsible for the Underwriter Information and that, as and to the
extent provided in the Insurance Agreement, the balance of the Offering Document
shall be the responsibility of the Company, the Originator, the Seller and the
Depositor.
(d) Notwithstanding anything in this Section 6 to the contrary, the
Underwriter shall not be required to contribute an amount greater than the
excess, if any, of (x) the purchase prices paid by investors to the Underwriter
for the Certificates over (y) the purchase price paid by the Underwriter for the
Certificates.
<PAGE>
-8-
(e) No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
(f) Upon the incurrence of any Losses entitled to contribution
hereunder, the contributor shall reimburse the party entitled to contribution
promptly upon establishment by the party entitled to contribution to the
contributor of the Losses incurred.
(g) The provisions relating to contribution set forth in this
Section 6 do not limit the rights of any party to indemnification under Section
4.
Section 7. Miscellaneous.
(a) Notices. All notices and other communications provided for under
this Agreement shall be delivered to the address set forth below or to such
other address as shall be designated by the recipient in a written notice to the
other party or parties hereto.
If to Financial Security:
Financial Security Assurance Inc.
350 Park Avenue
New York, NY 10022
Attention: Surveillance Department
Re: Emergent Home Equity Loan
Pass-Through Certificates, Series 1997-3
If to the Depositor: Prudential Securities Secured Financing Corporation
One New York Plaza, 15th Floor
Attention: Managing Director, Asset-Backed Finance Group
If to the Company: Emergent Group, Inc.
15 South Main Street, Suite 750
Greenville, South Carolina 29606
Attention: Kevin J. Mast
If to the Underwriter: Prudential Securities Incorporated
One New York Plaza, 15th Floor
New York, New York 10292
Attention: Manager-Asset Finance Group
If to the Seller: Emergent Mortgage Holdings Corporation
44 East Camperdown Way
Greenville, South Carolina 29601
Attention: William P. Crawford, Jr.
<PAGE>
-9-
If to the Originator: Emergent Mortgage Corp.
50 Datastream Plaza, Suite 201
Greenville, South Carolina 29605
(b) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York.
(c) Assignments. This Agreement may not be assigned by any party
without the express written consent of each other party. Any assignment
made in violation of this Agreement shall be null and void.
(d) Amendments. Amendments of this Agreement shall be in writing
signed by each party hereto.
(e) Survival, Etc. The indemnity and contribution agreements
contained in this Agreement shall remain operative and in full force and
effect, regardless of (i) any investigation made by or on behalf of any
Indemnifying Party, (ii) the issuance of the Securities or (iii) any
termination of this Agreement or the Policy. The indemnification provided
in this Agreement will be in addition to any liability which the parties
may otherwise have and shall in no way limit any obligations of the
Company, the Depositor, the Seller, the Originator, Financial Security or
the Underwriter under the Underwriting Agreement or the Insurance
Agreement, as applicable.
(f) Counterparts. This Agreement may be executed in counterparts by
the parties hereto, and all such counterparts shall constitute one and the
same instrument.
<PAGE>
-10-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the date first above written.
FINANCIAL SECURITY ASSURANCE INC.
By
-------------------------------
Name:
-----------------------------
Authorized Officer
EMERGENT MORTGAGE HOLDINGS
CORPORATION
By
-------------------------------
Name:
Title:
EMERGENT GROUP, INC.
By
-------------------------------
Name:
Title:
EMERGENT MORTGAGE CORP.
By
-------------------------------
Name:
Title:
PRUDENTIAL SECURITIES SECURED
FINANCING CORPORATION
By
-------------------------------
Name:
Title:
PRUDENTIAL SECURITIES
INCORPORATED
By
-------------------------------
Name:
Title:
<PAGE>
EXHIBIT A
OPINION OF GENERAL COUNSEL
Based upon the foregoing, I am of the opinion that:
1. Financial Security is a stock insurance company duly organized,
validly existing and authorized to transact financial guaranty insurance
business under the laws of the State of New York.
2. The Policy and the Agreements have been duly authorized, executed
and delivered by Financial Security.
3. The Policy and the Agreements constitute valid and binding
obligations of Financial Security, enforceable against Financial Security in
accordance with their terms, subject, as to the enforcement of remedies, to
bankruptcy, insolvency, reorganization, rehabilitation, moratorium and other
similar laws affecting the enforceability of creditors' rights generally
applicable in the event of the bankruptcy or insolvency of Financial Security
and to the application of general principles of equity and subject, in the case
of the Indemnification Agreement, to principles of public policy limiting the
right to enforce the indemnification provisions contained therein insofar as
they relate to indemnification for liabilities arising under applicable
securities laws.
4. The Policy is exempt from registration under the Securities Act
of 1933, as amended (the "Act").
5. Neither the execution or delivery by Financial Security of the
Policy or the Agreements, nor the performance by Financial Security of its
obligations thereunder, will conflict with any provision of the certificate of
incorporation or the by-laws of Financial Security or, to the best of my
knowledge, result in a breach of, or constitute a default under, any agreement
or other instrument to which Financial Security is a party or by which it or any
of its property is bound or, to the best of my knowledge, violate any judgment,
order or decree applicable to Financial Security of any governmental or
regulatory body, administrative agency, court or arbitrator having jurisdiction
over Financial Security (except that in the published opinion of the Securities
and Exchange Commission the indemnification provisions of the Indemnification
Agreement, insofar as they relate to indemnification for liabilities arising
under the Act, are against public policy as expressed in the Act and are
therefore unenforceable).
In addition, please be advised that I have reviewed the description
of Financial Security under the caption "The Insurer" in the Prospectus
Supplement dated September 17, 1997 (the "Offering Document") of the Depositor
with respect to the Securities. The information provided in the Offering
Document with respect to Financial Security is limited and does not purport to
provide the scope of disclosure required to be included in a prospectus with
respect to a registrant under the Act in connection with a public offering and
sale of securities of such registrant. Within such limited scope of disclosure,
however, there has not come to my attention any information which would cause me
to believe that the description of Financial Security referred to
<PAGE>
above, as of the date of the Offering Document or as of the date of this
opinion, contained or contains any untrue statement of a material fact or
omitted or omits to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading (except that I express no opinion with respect to any financial
statements or other financial information contained or referred to therein).
EXECUTION COPY
================================================================================
POOLING AND SERVICING AGREEMENT
Dated as of August 10, 1997
by and among
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION
(Depositor)
and
EMERGENT MORTGAGE CORP.,
(Servicer)
and
FIRST UNION NATIONAL BANK
(Trustee)
Emergent Home Equity Loan Pass-Through Certificates,
Series 1997-3
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE 1. DEFINITIONS.........................................................2
SECTION 1.01. DEFINED TERMS.................................................2
ARTICLE 2. CONVEYANCE OF MORTGAGE LOANS; ORIGINAL ISSUANCE OF CERTIFICATES....32
SECTION 2.01. CONVEYANCE OF MORTGAGE LOANS.................................32
SECTION 2.02. PURCHASE AND SALE OF PRE-FUNDED MORTGAGE LOANS...............32
SECTION 2.03. MORTGAGE FILES AND DOCUMENTS.................................34
SECTION 2.04. ACCEPTANCE BY TRUSTEE........................................36
SECTION 2.05. REPURCHASE OR SUBSTITUTION OF MORTGAGE LOANS.................38
SECTION 2.06. REPRESENTATIONS AND WARRANTIES OF THE DEPOSITOR..............40
SECTION 2.07. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE SERVICER....41
SECTION 2.08. ISSUANCE OF CERTIFICATES.....................................43
ARTICLE 3. ADMINISTRATION AND SERVICING OF THE TRUST FUND.....................43
SECTION 3.01. SERVICER TO ACT AS SERVICER..................................43
SECTION 3.02. SUB-SERVICING AGREEMENTS BETWEEN SERVICER AND SUB-SERVICERS..45
SECTION 3.03. SUCCESSOR SUB-SERVICERS......................................46
SECTION 3.04. LIABILITY OF THE SERVICER....................................46
SECTION 3.05. NO CONTRACTUAL RELATIONSHIP BETWEEN SUB-SERVICERS AND
TRUSTEE OR CERTIFICATEHOLDERS................................47
SECTION 3.06. ASSUMPTION OR TERMINATION OF SUB-SERVICING AGREEMENTS
BY TRUSTEE...................................................47
SECTION 3.07. COLLECTION OF CERTAIN MORTGAGE LOAN PAYMENTS.................47
SECTION 3.08. SUB-SERVICING ACCOUNTS.......................................48
SECTION 3.09. COLLECTION OF TAXES, ASSESSMENTS AND SIMILAR ITEMS;
SERVICING ACCOUNTS...........................................48
SECTION 3.10. COLLECTION AND DISTRIBUTION ACCOUNTS.........................49
SECTION 3.11. WITHDRAWALS FROM THE COLLECTION ACCOUNT AND DISTRIBUTION
ACCOUNT......................................................51
SECTION 3.12. THE PRE-FUNDING ACCOUNT......................................53
SECTION 3.13. THE INTEREST COVERAGE ACCOUNT................................53
SECTION 3.14. INVESTMENT OF FUNDS IN THE INVESTMENT ACCOUNTS...............54
SECTION 3.15. [INTENTIONALLY OMITTED]......................................55
SECTION 3.16. MAINTENANCE OF HAZARD INSURANCE AND ERRORS AND OMISSIONS AND
FIDELITY COVERAGE.....................................................55
SECTION 3.17. ENFORCEMENT OF DUE-ON-SALE CLAUSES, ASSUMPTION AGREEMENTS....56
SECTION 3.18. REALIZATION UPON DEFAULTED MORTGAGE LOANS....................57
SECTION 3.19. TRUSTEE TO COOPERATE; RELEASE OF MORTGAGE FILES..............59
SECTION 3.20. SERVICING COMPENSATION.......................................60
SECTION 3.21. REPORTS TO THE TRUSTEE; COLLECTION ACCOUNT STATEMENTS........61
SECTION 3.22. STATEMENT AS TO COMPLIANCE...................................61
SECTION 3.23. INDEPENDENT PUBLIC ACCOUNTANTS' SERVICING REPORT.............62
SECTION 3.24. ACCESS TO CERTAIN DOCUMENTATION..............................62
SECTION 3.25. TITLE, MANAGEMENT AND DISPOSITION OF REO PROPERTY............62
SECTION 3.26. OBLIGATIONS OF THE SERVICER IN RESPECT OF PREPAYMENT
INTEREST SHORTFALLS..........................................66
SECTION 3.27. EXPENSE ACCOUNT..............................................66
SECTION 3.28. OBLIGATIONS OF THE SERVICER IN RESPECT OF MONTHLY PAYMENTS...66
SECTION 3.29. REDEMPTION ACCOUNT...........................................67
ARTICLE 4. PAYMENTS TO CERTIFICATEHOLDERS.....................................67
SECTION 4.01. DISTRIBUTIONS................................................67
SECTION 4.02. STATEMENTS TO CERTIFICATEHOLDERS.............................72
SECTION 4.03. [RESERVED]; MONTHLY ADVANCES.................................75
SECTION 4.04. DETERMINATION OF REALIZED LOSSES.............................77
(i)
<PAGE>
SECTION 4.05. COMPLIANCE WITH WITHHOLDING REQUIREMENTS.....................77
ARTICLE 5. THE CERTIFICATES...................................................77
SECTION 5.01. THE CERTIFICATES.............................................77
SECTION 5.02. REGISTRATION OF TRANSFER AND EXCHANGE OF CERTIFICATES........79
SECTION 5.03. MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATES............84
SECTION 5.04. PERSONS DEEMED OWNERS........................................84
SECTION 5.05. CERTAIN AVAILABLE INFORMATION................................84
ARTICLE 6. THE DEPOSITOR AND THE SERVICER.....................................85
SECTION 6.01. LIABILITY OF THE DEPOSITOR AND THE SERVICER..................85
SECTION 6.02. MERGER OR CONSOLIDATION OF THE DEPOSITOR OR THE SERVICER.....85
SECTION 6.03. LIMITATION ON LIABILITY OF THE DEPOSITOR, THE SERVICER
AND OTHERS...................................................85
SECTION 6.04. LIMITATION ON RESIGNATION OF THE SERVICER....................86
SECTION 6.05. RIGHTS OF THE DEPOSITOR AND OTHERS IN RESPECT OF
THE SERVICER.................................................87
ARTICLE 7. DEFAULT............................................................87
SECTION 7.01. SERVICER EVENTS OF DEFAULT...................................87
SECTION 7.02. TRUSTEE TO ACT; APPOINTMENT OF SUCCESSOR.....................90
SECTION 7.03. NOTIFICATION TO CERTIFICATEHOLDERS...........................92
SECTION 7.04. WAIVER OF SERVICER EVENTS OF DEFAULT.........................92
ARTICLE 8. CONCERNING THE TRUSTEE.............................................92
SECTION 8.01. DUTIES OF TRUSTEE............................................92
SECTION 8.02. CERTAIN MATTERS AFFECTING THE TRUSTEE........................94
SECTION 8.03. TRUSTEE NOT LIABLE FOR CERTIFICATES OR MORTGAGE LOANS........95
SECTION 8.04. TRUSTEE MAY OWN CERTIFICATES.................................96
SECTION 8.05. TRUSTEE'S FEES AND EXPENSES..................................96
SECTION 8.06. ELIGIBILITY REQUIREMENTS FOR TRUSTEE.........................96
SECTION 8.07. RESIGNATION AND REMOVAL OF THE TRUSTEE.......................97
SECTION 8.08. SUCCESSOR TRUSTEE............................................97
SECTION 8.09. MERGER OR CONSOLIDATION OF TRUSTEE...........................98
SECTION 8.10. APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE................98
SECTION 8.11. APPOINTMENT OF OFFICE OR AGENCY..............................99
SECTION 8.12. REPRESENTATIONS AND WARRANTIES OF THE TRUSTEE...............100
ARTICLE 9. CERTAIN MATTERS REGARDING THE CERTIFICATE INSURER.................101
SECTION 9.01. RIGHTS OF THE CERTIFICATE INSURER TO EXERCISE RIGHTS OF
CLASS A CERTIFICATEHOLDERS..................................101
SECTION 9.02. TRUSTEE TO ACT SOLELY WITH CONSENT OF THE CERTIFICATE
INSURER.....................................................101
SECTION 9.03. TRUST FUND AND ACCOUNTS HELD FOR BENEFIT OF THE
CERTIFICATE INSURER.........................................102
SECTION 9.04. CLAIMS UPON THE POLICY; POLICY PAYMENTS ACCOUNT.............102
SECTION 9.05. EFFECT OF PAYMENTS BY THE CERTIFICATE INSURER; SUBROGATION..104
SECTION 9.06. NOTICES TO THE CERTIFICATE INSURER..........................104
SECTION 9.07. THIRD-PARTY BENEFICIARY.....................................104
SECTION 9.08. TRUSTEE TO HOLD THE POLICY..................................105
SECTION 9.09. TERMINATION OF THE SERVICER.................................105
ARTICLE 10. TERMINATION......................................................105
SECTION 10.01. TERMINATION UPON REPURCHASE OR LIQUIDATION OF ALL
MORTGAGE LOANS..............................................105
SECTION 10.02. ADDITIONAL TERMINATION REQUIREMENTS.........................107
ARTICLE 11. REMIC PROVISIONS.................................................108
SECTION 11.01. REMIC ADMINISTRATION........................................108
SECTION 11.02. PROHIBITED TRANSACTIONS AND ACTIVITIES......................111
SECTION 11.03. SERVICER AND TRUSTEE INDEMNIFICATION........................111
ARTICLE 12. MISCELLANEOUS PROVISIONS.........................................112
(ii)
<PAGE>
SECTION 12.01. AMENDMENT...................................................112
SECTION 12.02. RECORDATION OF AGREEMENT; COUNTERPARTS......................114
SECTION 12.03. LIMITATION ON RIGHTS OF CERTIFICATEHOLDERS..................114
SECTION 12.04. GOVERNING LAW...............................................115
SECTION 12.05. NOTICES.....................................................115
SECTION 12.06. SEVERABILITY OF PROVISIONS..................................116
SECTION 12.07. NOTICE TO RATING AGENCIES AND CERTIFICATE INSURER...........116
SECTION 12.08. ARTICLE AND SECTION REFERENCES..............................117
SECTION 12.09. CONFIRMATION OF INTENT......................................117
Exhibit A-1 Form of Class A-1 Certificate
Exhibit A-2 Form of Class A-2 Certificate
Exhibit A-3 Form of Class A-3 Certificate
Exhibit A-4 Form of Class A-4 Certificate
Exhibit A-5 Form of Class A-5 Certificate
Exhibit A-6 Form of Class A-6 Certificate
Exhibit A-7 Form of Class R Certificate
Exhibit B Form of Financial Guaranty Insurance Policy
Exhibit C-1 Form of Trustee's Initial Certification
Exhibit C-2 Form of Trustee's Final Certification
Exhibit D Form of Unaffiliated Seller's Agreement
Exhibit E-1 Form of Temporary Request for Release of Mortgage File
Exhibit E-2 Form of Permanent Request for Release of Mortgage File
Exhibit F-1 Form of 144A Transfer Letter
Exhibit F-2 Form of Transfer Affidavit and Agreement
Exhibit G Form of Pre-Funded Mortgage Loan Transfer Agreement
Schedule 1 Mortgage Loan Schedule
(iii)
<PAGE>
This Pooling and Servicing Agreement, dated and effective as of August 10, 1997,
among PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION, as Depositor,
EMERGENT MORTGAGE CORP., as Servicer, and FIRST UNION NATIONAL BANK, as Trustee
PRELIMINARY STATEMENT:
The Depositor intends to sell pass-through certificates
(collectively, the "Certificates"), to be issued hereunder in multiple classes,
which in the aggregate will evidence the entire beneficial ownership interest in
the Trust Fund created hereunder.
As provided herein, the Trustee will elect to treat the segregated
pool of assets consisting of the Mortgage Loans and certain other related assets
subject to this Agreement as a real estate mortgage investment conduit (a
"REMIC") for federal income tax purposes. The Class R Certificates will be the
sole class of "residual interests" in the REMIC for purposes of the REMIC
Provisions. The Class A Certificates will be the "regular interests" in the
REMIC.
The following table irrevocably sets forth the Pass-Through Rates,
initial Certificate Principal Balance and "latest possible maturity date" for
the Certificates.
Initial Certificate Latest Possible
Description Pass-Through Rate(1) Principal Balance Maturity Date(2)
- ----------- ----------------- ----------------- -------------
Class A-1 6.545% $45,000,000 9/20/07
Class A-2 6.540% $20,000,000 8/20/10
Class A-3 6.670% $25,000,000 9/20/12
Class A-4 6.925% $33,000,000 10/20/12
Class A-5 7.290% $30,000,000 10/20/28
Class A-6 6.930% $17,000,000 10/20/28
Class R N/A 0 N/A
- ----------
(1) Subject to Available Funds Cap Rate.
(2) Solely for purposes of Section 1.860G-1(a)(4)(iii) of the Treasury
regulations, the Distribution Date immediately following the maturity date
for the Mortgage Loan with the latest maturity date has been designated as
the "latest possible maturity date" for the Class A Certificates.
As of their respective Cut-off Dates, the Initial Mortgage Loans and
the Additional Mortgage Loans had an aggregate Stated Principal Balance equal to
$131,121,432.01.
In consideration of the mutual agreements herein contained, the
Depositor, the Servicer and the Trustee agree as follows:
<PAGE>
ARTICLE 1.
DEFINITIONS
Section 1.01. Defined Terms.
Whenever used in this Agreement, including, without limitation, in
the Preliminary Statement hereto, the following words and phrases, unless the
context otherwise requires, shall have the meanings specified in this Article.
Unless otherwise specified, all calculations described herein shall be made on
the basis of a 360-day year consisting of twelve 30-day months.
"Accrued Certificate Interest": With respect to each Distribution
Date and any Class A Certificate, interest accrued during the related Interest
Accrual Period at the applicable Pass-Through Rate for such Class A Certificate
for such Distribution Date on the Certificate Principal Balance of such Class A
Certificate immediately prior to such Distribution Date. All distributions of
interest on the Class A Certificates will be calculated on the basis of a
360-day year consisting of twelve 30-day months. Accrued Certificate Interest
with respect to each Distribution Date, as to any Class A Certificate, shall be
reduced by an amount equal to the portion allocable to such Certificate of the
aggregate amount of any Relief Act Interest Shortfall and/or Prepayment Interest
Shortfall, if any, for such Distribution Date.
"Additional Mortgage Loans": Any Mortgage Loans included in the
Mortgage Pool as of the Closing Date but not identified by the Originator before
the close of business on August 10, 1997, but excluding any Qualified Substitute
Mortgage Loans.
"Addition Notice": A written notice from the Seller to the
Depositor, the Trustee, the Rating Agencies and the Certificate Insurer that the
Seller desires to make a Pre-Funded Loan Transfer.
"Affiliate": With respect to any specified Person, any other Person
controlling or controlled by or under common control with such specified Person.
For the purposes of this definition, "control" when used with respect to any
specified Person means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Agreement": This Pooling and Servicing Agreement and all amendments
hereof and supplements hereto.
"Assignment": An assignment of Mortgage, notice of transfer or
equivalent instrument, in recordable form, which is sufficient under the laws of
the jurisdiction wherein the related Mortgaged Property is located to reflect of
record the sale of the Mortgage.
2
<PAGE>
"Available Distribution Amount": With respect to any Distribution
Date, an amount equal to the excess of (i) the sum of (a) the aggregate of the
Monthly Payments, Liquidation Proceeds, Insurance Proceeds, Principal
Prepayments and other unscheduled recoveries of principal and interest in
respect of the Mortgage Loans received during or with respect to the related
Collection Period, (b) the aggregate of any amounts received in respect of an
REO Property withdrawn from any REO Account and deposited in the Distribution
Account for such Distribution Date pursuant to Section 3.25, (c) the aggregate
of any amounts deposited in the Distribution Account by the Servicer in respect
of Prepayment Interest Shortfalls for such Distribution Date pursuant to Section
3.26, (d) the aggregate of any Monthly Advances made by the Servicer for such
Distribution Date pursuant to Section 4.03, (e) the aggregate of any advances
made by the Trustee for such Distribution Date pursuant to Section 7.02, (f) the
Stated Principal Balance of any Mortgage Loan that was purchased during the
related Collection Period pursuant to or as contemplated by Sections 2.05,
3.18(c) or 10.01 and the amount of any shortfall deposited into the Collection
Account in connection with the substitution of a Deleted Mortgage Loan pursuant
to Section 2.05 during the related Collection Period and (g) the aggregate of
any amounts deposited into the Distribution Account by the Trustee from the
Interest Coverage Account, the Pre-Funding Account and the Redemption Account
over (ii) the sum of (a) amounts reimbursable or payable to the Depositor, the
Servicer, the Trustee, the Seller or any Sub-Servicer pursuant to Section 3.11
or Section 3.14 or otherwise payable in respect of extraordinary Trust Fund
expenses, (b) Stayed Funds, (c) amounts deposited in the Collection Account or
the Distribution Account, as the case may be, in error, (d) amounts reimbursable
to the Trustee for an advance made pursuant to Section 7.02(b) which advance the
Trustee has determined to be nonrecoverable from the Stayed Funds in respect of
which it was made, (e) the Certificate Insurer Premium payable to the
Certificate Insurer pursuant to Section 3.27(b), and (f) the Trustee Fee payable
from the Distribution Account pursuant to Section 8.05.
"Available Funds Cap Rate": For any Distribution Date, an amount,
expressed as a per annum rate, equal to (a) the aggregate amount of interest due
and collected (or advanced) on the Mortgage Loans for the related Collection
Period, minus the amounts reimbursable or payable to the Servicer or any
Sub-Servicer pursuant to Section 3.11 or Section 3.14 and the Certificate
Insurer Premium payable to the Certificate Insurer pursuant to Section 3.27(b),
divided by (b) the Stated Principal Balance of the Mortgage Loans immediately
prior to such Distribution Date.
"Balloon Mortgage Loan": A Mortgage Loan that provides for the
payment of the unamortized principal balance of such Mortgage Loan in a single
payment at the maturity of such Mortgage Loan that is substantially greater than
the preceding monthly payment.
"Balloon Payment": The final payment due on a Balloon Mortgage Loan.
"Bankruptcy Code": The Bankruptcy Reform Act of 1978 (Title 11 of
the United States Code), as amended.
3
<PAGE>
"Book-Entry Certificate": The Class A Certificates for so long as
such Certificates shall be registered in the name of the Depository or its
nominee.
"Business Day": Any day other than a Saturday, a Sunday or a day on
which banking or savings and loan institutions in the State of South Carolina,
or in the city in which the Certificate Insurer or the Corporate Trust Office of
the Trustee is located, are authorized or obligated by law or executive order to
be closed.
"Cash-Out Refinancing": A Refinanced Mortgage Loan the proceeds of
which were more than $1000 in excess of the principal balance of any existing
first mortgage or subordinate mortgage on the related Mortgaged Property and
related closing costs.
"Certificate": Any one of the Emergent Home Equity Loan Pass-Through
Certificates, Series 1997-3, Class A or Class R, issued under this Agreement.
"Certificate Factor": With respect to any Class of Regular
Certificates as of any Distribution Date, a fraction, expressed as a decimal
carried to six places, the numerator of which is the Class Certificate Balance
of such Class of Certificates on such Distribution Date (after giving effect to
any distributions of principal in reduction of the Class Certificate Balance of
such Class of Certificates to be made on such Distribution Date), and the
denominator of which is the initial Class Certificate Balance of such Class of
Certificates as of the Closing Date.
"Certificate Insurer": Financial Security Assurance, Inc. a stock
insurance company organized and created under the laws of the State of New York,
and any successors thereto.
"Certificate Insurer Default": The existence and continuance of any
of the following:
(a) The Certificate Insurer fails to make a payment required
under the Policy in accordance with its terms; or
(b) the Certificate Insurer shall have (i) filed a petition or
commenced any case or proceeding under any provision or chapter of the
United States Bankruptcy Code, the New York State Insurance Law or any
other similar federal or state law relating to insolvency, bankruptcy,
rehabilitation, liquidation, or reorganization, (ii) made a general
assignment for the benefit of its creditors or (iii) had an order for
relief entered against it under the United States Bankruptcy Code, the New
York State Insurance Law or any other similar federal or state law
relating to insolvency, bankruptcy, rehabilitation, liquidation, or
reorganization that is final and nonappealable; or
(c) a court of competent jurisdiction, the New York Department
of Insurance or any other competent regulatory authority shall have
entered a final and nonappealable order, judgment or decree (i) appointing
a custodian, trustee, agent, or receiver for the Certificate Insurer or
for all or any material portion of its property or (ii) authorizing the
taking of possession by a custodian, trustee,
4
<PAGE>
agent, or receiver of the Certificate Insurer of all or any material
portion of its property.
"Certificate Insurer Premium": The Policy premium payable pursuant
to Section 3.25(b) hereof.
"Certificate Insurer Premium Rate": 0.18% per annum.
"Certificateholder" or "Holder": The Person in whose name a
Certificate is registered in the Certificate Register, and the Certificate
Insurer to the extent of Cumulative Insurance Payments, except that a
"disqualified organization" (as defined in Section 860E(e)(5) of the Code) or a
Non-United States Person shall not be a Holder of a Residual Certificate for any
purposes hereof and, solely for the purposes of giving any consent pursuant to
this Agreement, any Certificate registered in the name of the Servicer or any
Affiliate thereof shall be deemed not to be outstanding and the Voting Rights to
which it is entitled shall not be taken into account in determining whether the
requisite percentage of Voting Rights necessary to effect any such consent has
been obtained, except as otherwise provided in Section 12.01. The Trustee may
conclusively rely upon a certificate of the Servicer in determining whether a
Certificate is held by an Affiliate thereof. All references herein to "Holders"
or "Certificateholders" shall reflect the rights of Certificate Owners as they
may indirectly exercise such rights through the Depository and participating
members thereof, except as otherwise specified herein; provided, however, that
the Trustee shall be required to recognize as a "Holder" or "Certificateholder"
only the Person in whose name a Certificate is registered in the Certificate
Register.
"Certificate Owner": With respect to a Book-Entry Certificate, the
Person who is the beneficial owner of such Certificate as reflected on the books
of the Depository or on the books of a Depository Participant or on the books of
an indirect participating brokerage firm for which a Depository Participant acts
as agent.
"Certificate Principal Balance": With respect to each Class A
Certificate as of any date of determination, the Certificate Principal Balance
of such Class A Certificate on the Distribution Date immediately prior to such
date of determination, minus all distributions allocable to principal made
thereon on such immediately prior Distribution Date (or, in the case of any date
of determination up to and including the first Distribution Date, the initial
Certificate Principal Balance of such Class A Certificate, as stated on the face
thereof). With respect to each Class R Certificate, as of any date of
determination, an amount equal to the Percentage Interest evidenced by such
Certificate times the excess, if any, of (A) the then aggregate Stated Principal
Balance of the Mortgage Loans over (B) the then aggregate Certificate Principal
Balance of all Class A Certificates then outstanding.
"Certificate Register" and "Certificate Registrar": The register
maintained and the registrar appointed pursuant to Section 5.02.
"Class": Collectively, all of the Certificates bearing the same
class designation.
5
<PAGE>
"Class A Certificateholder": Any Holder of a Class A-1, Class A-2,
Class A-3, Class A-4, Class A-5 or Class A-6 Certificate.
"Class A Certificate Principal Balance": The sum of the Class A-1
Certificate Principal Balance, the Class A-2 Certificate Principal Balance, the
Class A-3 Certificate Principal Balance, the Class A-4 Certificate Principal
Balance, the Class A-5 Certificate Principal Balance and the Class A-6
Certificate Principal Balance.
"Class A-1 Certificate": Any one of the Class A-1 Certificates
executed by the Trustee, and authenticated and delivered by the Certificate
Registrar, substantially in the form annexed hereto as Exhibit A-1 and
evidencing a Regular Interest in the REMIC Trust for purposes of the REMIC
Provisions.
"Class A-1 Certificate Principal Balance": The Class Certificate
Balance for the Class A-1 Certificates.
"Class A-1 Interest Distribution Amount": On any Distribution Date,
the amount equal to the aggregate Accrued Certificate Interest on the Class A-1
Certificates.
"Class A-1 Pass-Through Rate": For each Distribution Date, a rate
per annum equal to the lesser of 6.545% and the Available Funds Cap Rate for
such Distribution Date.
"Class A-2 Certificate": Any one of the Class A-2 Certificates
executed by the Trustee, and authenticated and delivered by the Certificate
Registrar, substantially in the form annexed hereto as Exhibit A-2 and
evidencing a Regular Interest in the REMIC Trust for purposes of the REMIC
Provisions.
"Class A-2 Certificate Principal Balance": The Class Certificate
Balance for the Class A-2 Certificates.
"Class A-2 Interest Distribution Amount": On any Distribution Date,
the amount equal to the aggregate Accrued Certificate Interest on the Class A-2
Certificates.
"Class A-2 Pass-Through Rate": For each Distribution Date, a rate
per annum equal to the lesser of 6.540% and the Available Funds Cap Rate for
such Distribution Date.
"Class A-3 Certificate": Any one of the Class A-3 Certificates
executed by the Trustee, and authenticated and delivered by the Certificate
Registrar, substantially in the form annexed hereto as Exhibit A-3 and
evidencing a Regular Interest in the REMIC Trust for purposes of the REMIC
Provisions.
"Class A-3 Certificate Principal Balance": The Class Certificate
Balance for the Class A-3 Certificates.
6
<PAGE>
"Class A-3 Interest Distribution Amount": On any Distribution Date,
the amount equal to the aggregate Accrued Certificate Interest on the Class A-3
Certificates.
"Class A-3 Pass-Through Rate": For each Distribution Date, a rate
per annum equal to the lesser of 6.670% and the Available Funds Cap Rate for
such Distribution Date.
"Class A-4 Certificate": Any one of the Class A-4 Certificates
executed by the Trustee, and authenticated and delivered by the Certificate
Registrar, substantially in the form annexed hereto as Exhibit A-4 and
evidencing a Regular Interest in the REMIC Trust for purposes of the REMIC
Provisions.
"Class A-4 Certificate Principal Balance": The Class Certificate
Balance for the Class A-4 Certificates.
"Class A-4 Interest Distribution Amount": On any Distribution Date,
the amount equal to the aggregate Accrued Certificate Interest on the Class A-4
Certificates.
"Class A-4 Pass-Through Rate": For each Distribution Date, a rate
per annum equal to the lesser of 6.925% and the Available Funds Cap Rate for
such Distribution Date.
"Class A-5 Certificate": Any one of the Class A-5 Certificates
executed by the Trustee, and authenticated and delivered by the Certificate
Registrar, substantially in the form annexed hereto as Exhibit A-5 and
evidencing a Regular Interest in the REMIC Trust for purposes of the REMIC
Provisions.
"Class A-5 Certificate Principal Balance": The Class Certificate
Balance for the Class A-5 Certificates.
"Class A-5 Pass-Through Rate": For each Distribution Date, a rate
per annum equal to the lesser of 7.290% and the Available Funds Cap Rate for
such Distribution Date.
"Class A-5 Interest Distribution Amount": On any Distribution Date,
the amount equal to the aggregate Accrued Certificate Interest on the Class A-5
Certificates.
"Class A-6 Certificate": Any one of the Class A-6 Certificates
executed by the Trustee, and authenticated and delivered by the Certificate
Registrar, substantially in the form annexed hereto as Exhibit A-6 and
evidencing a Regular Interest in the REMIC Trust for purposes of the REMIC
Provisions.
"Class A-6 Certificate Principal Balance": The Class Certificate
Balance for the Class A-6 Certificates.
7
<PAGE>
"Class A-6 Interest Distribution Amount": On any Distribution Date,
the amount equal to the aggregate Accrued Certificate Interest on the Class A-6
Certificates.
"Class A-6 Lockout Distribution Amount": For any Distribution Date,
an amount equal to the product of (x) the applicable Class A-6 Lockout
Percentage for such Distribution Date and (y) the Class A-6 Lockout Pro-Rata
Distribution Amount for such Distribution Date.
"Class A-6 Lockout Percentage": For each Distribution Date, the
percentage specified below for the period in which such Distribution Date
occurs:
Distribution Date Lockout Percentage
----------------- ------------------
October 1997 - September 2000 0%
October 2000 - September 2002 45%
October 2002 - September 2003 80%
October 2003 - September 2004 100%
Subsequent to September 2004 300%
"Class A-6 Lockout Pro-Rata Distribution Amount": For any
Distribution Date, an amount equal to the product of (x) a fraction, the
numerator of which is the Class A-6 Certificate Principal Balance immediately
prior to such Distribution Date and the denominator of which is the Class A
Certificate Principal Balance immediately prior to such Distribution Date, and
(y) the Principal Distribution Amount for such Distribution Date.
"Class A-6 Pass-Through Rate": For each Distribution Date, a rate
per annum equal to the lesser of 6.930% and the Available Funds Cap Rate for
such Distribution Date.
"Class Certificate Balance": As to any Class of Certificates and any
date of determination, the aggregate of the Certificate Principal Balances of
all Certificates of such Class as of such date of determination.
"Class R Certificate": Any one of the Class R Certificates executed
by the Trustee, and authenticated and delivered by the Certificate Registrar,
substantially in the form annexed hereto as Exhibit A-6 and evidencing the
Residual Interest in the REMIC Trust for purposes of the REMIC Provisions.
"Closing Date": September 24, 1997.
"Code": The Internal Revenue Code of 1986.
"Collection Account": The account or accounts created and maintained
by the Servicer pursuant to Section 3.10(a), which shall be entitled "Emergent
Mortgage Corp., as Servicer for First Union National Bank, as Trustee, in trust
for (A) registered
8
<PAGE>
holders of Emergent Home Equity Loan Pass-Through Certificates, Series 1997-3,
and (B) Financial Security Assurance, Inc." and which must be an Eligible
Account.
"Collection Period": In the case of the initial Distribution Date,
the period from the close of business on August 10, 1997 through September 30,
1997 and, in the case of each subsequent Distribution Date, the calendar month
immediately preceding the calendar month in which such Distribution Date occurs.
"Corporate Trust Office": The principal corporate trust office of
the Trustee at which at any particular time its corporate trust business in
connection with this Agreement shall be administered, which office at the date
of the execution of this instrument is located at 230 South Tryon Street, 9th
Floor, Charlotte, North Carolina 28288-1179, Attention: Corporate Trust
Department, or at such other address as the Trustee may designate from time to
time by notice to the Certificateholders, the Depositor, the Servicer and the
Certificate Insurer.
"Cumulative Insurance Payments": As of any time of determination,
the aggregate of all Insurance Payments previously made by the Certificate
Insurer plus interest thereon from the date such amount became due until paid in
full, at a rate of interest calculated as provided in the Insurance Agreement
minus all payments previously made to the Certificate Insurer pursuant to
Section 4.01 hereof as reimbursement for such amounts.
"Cumulative Loss Percentage": For any Distribution Date, the
percentage equivalent of a fraction, the numerator of which is aggregate amount
of Realized Losses incurred from and including the first Collection Period to
and including the most recently ended Collection Period, and the denominator of
which is the Original Pool Balance.
"Cut-off Date": With respect to each Initial Mortgage Loan, the
close of business on August 10, 1997; with respect to each Additional Mortgage
Loan and each Pre-Funded Mortgage Loan, the respective origination dates
thereof; and with respect to all Qualified Substitute Mortgage Loans, the first
day of the calendar month in which the substitution occurs. References herein to
the "Cut-off Date," when used with respect to more than one Mortgage Loan, shall
be to the respective Cut-off Dates for such Mortgage Loans.
"Debt Service Reduction": With respect to any Mortgage Loan, a
reduction in the scheduled Monthly Payment for such Mortgage Loan by a court of
competent jurisdiction in a proceeding under the Bankruptcy Code, except such a
reduction resulting from a Deficient Valuation.
"Deficiency Amount": With respect to the Class A Certificates as of
any Distribution Date (i) any shortfall in amounts available in the Distribution
Account to pay the Interest Distribution Amount, net of any Relief Act Interest
Shortfalls and Prepayment Interest Shortfalls allocated to the Class A
Certificates, (ii) the Remaining Overcollateralization Deficit, if any, for such
Distribution Date and (iii) without duplication of the amount specified in
clause (ii), the applicable Class A Certificate Principal Balance to the extent
unpaid on the final Distribution Date for each Class of
9
<PAGE>
the Class A Certificates or the earlier termination of the Trust Fund pursuant
to the terms of this Agreement.
"Deficiency Event": The inability of the Trustee to make the
Guaranteed Distribution on any Distribution Date due to a shortage of funds for
such purpose then held in the Distribution Account and the failure of the
Certificate Insurer to pay in full a claim made in accordance with the Policy
with respect to such Distribution Date.
"Deficient Valuation": With respect to any Mortgage Loan, a
valuation of the related Mortgaged Property by a court of competent jurisdiction
in an amount less than the then outstanding principal balance of the Mortgage
Loan, which valuation results from a proceeding initiated under the Bankruptcy
Code.
"Definitive Certificates": As defined in Section 5.01(b).
"Deleted Mortgage Loan": A Mortgage Loan replaced or to be replaced
by a Qualified Substitute Mortgage Loan.
"Delinquent": A Mortgage Loan is Delinquent if the Monthly Payment
due on a Due Date is not paid on or before the next succeeding Due Date, at
which time, such Mortgage Loan is 30 days Delinquent. If the Monthly Payment due
on a Due Date is not paid on or before the second or third succeeding Due Date,
respectively, such Mortgage Loan is 60 or 90 days Delinquent, as the case may
be.
"Delinquency Percentage": As of the last day of any Collection
Period, the percentage equivalent of a fraction, the numerator of which equals
the aggregate Stated Principal Balances of all Mortgage Loans that are 90 or
more days Delinquent, in foreclosure or converted to REO Properties as of such
last day of such Collection Period, and the denominator of which is the
aggregate Stated Principal Balance of the Mortgage Loans as of the last day of
such Collection Period.
"Depositor": Prudential Securities Secured Financing Corporation, a
Delaware corporation, or its successor in interest.
"Depository": The Depository Trust Company, or any successor
Depository hereafter named. The nominee of the initial Depository, for purposes
of registering those Certificates that are to be Book-Entry Certificates, is
CEDE & Co. The Depository shall at all times be a "clearing corporation" as
defined in Section 8-102(3) of the Uniform Commercial Code of the State of New
York and a "clearing agency" registered pursuant to the provisions of Section
17A of the Securities Exchange Act of 1934, as amended.
"Depository Institution": Any depository institution or trust
company, including the Trustee, that (a) is incorporated under the laws of the
United States of America or any State thereof, (b) is subject to supervision and
examination by federal or state banking authorities and (c) has outstanding
unsecured commercial paper or other short-term unsecured debt obligations (or,
in the case of a depository institution that is the principal subsidiary of a
holding company, such holding company has unsecured commercial paper or other
short-term unsecured debt obligations) that are rated at least
10
<PAGE>
P-1 by Moody's and A-1 by S&P (or comparable ratings if Moody's and S&P are not
the Rating Agencies).
"Depository Participant": A broker, dealer, bank or other financial
institution or other Person for whom from time to time a Depository effects
book-entry transfers and pledges of securities deposited with the Depository.
"Determination Date": With respect to each Distribution Date, the
fifth Business Day prior to such Distribution Date.
"Directly Operate": With respect to any REO Property, the furnishing
or rendering of services to the tenants thereof, the management or operation of
such REO Property, the holding of such REO Property primarily for sale to
customers, the performance of any construction work thereon or any use of such
REO Property in a trade or business conducted by the Trust Fund other than
through an Independent Contractor; provided, however, that the Trustee (or the
Servicer on behalf of the Trustee) shall not be considered to Directly Operate
an REO Property solely because the Trustee (or the Servicer on behalf of the
Trustee) establishes rental terms, chooses tenants, enters into or renews
leases, deals with taxes and insurance, or makes decisions as to repairs or
capital expenditures with respect to such REO Property.
"Disqualified Organization": Any of the following: (i) the United
States, any State or political subdivision thereof, any possession of the United
States, or any agency or instrumentality of any of the foregoing (other than an
instrumentality which is a corporation if all of its activities are subject to
tax and, except for the FHLMC, a majority of its board of directors is not
selected by such governmental unit), (ii) any foreign government, any
international organization, or any agency or instrumentality of any of the
foregoing, (iii) any organization (other than certain farmers' cooperatives
described in Section 521 of the Code) which is exempt from the tax imposed by
Chapter 1 of the Code (including the tax imposed by Section 511 of the Code on
unrelated business taxable income), (iv) rural electric and telephone
cooperatives described in Section 1381(a)(2)(C) of the Code and (v) any other
Person so designated by the Trustee based upon an Opinion of Counsel that the
holding of an Ownership Interest in a Residual Certificate by such Person may
cause the Trust Fund or any Person having an Ownership Interest in any Class of
Certificates (other than such Person) to incur a liability for any federal tax
imposed under the Code that would not otherwise be imposed but for the Transfer
of an Ownership Interest in a Residual Certificate to such Person. The terms
"United States," "State" and "international organization" shall have the
meanings set forth in Section 7701 of the Code or successor provisions.
"Distribution Account": The trust account or accounts created and
maintained by the Trustee pursuant to Section 3.10(b) which shall be entitled
"First Union National Bank, as Trustee, in trust for (A) registered holders of
Emergent Home Equity Loan Pass-Through Certificates, Series 1997-3, and (B)
Financial Security Assurance, Inc." and which must be an Eligible Account.
11
<PAGE>
"Distribution Date": The 20th day of any month, or if such 20th day
is not a Business Day, the Business Day immediately following such 20th day,
commencing in October 1997.
"Due Date": With respect to each Distribution Date, the day of the
month on which the Monthly Payment is due on a Mortgage Loan during the related
Collection Period, exclusive of any days of grace.
"Eligible Account": Any of (i) an account or accounts maintained
with a federal or state chartered depository institution or trust company the
short-term unsecured debt obligations of which (or, in the case of a depository
institution or trust company that is the principal subsidiary of a holding
company, the short-term unsecured debt obligations of such holding company) are
rated at least P-1 by Moody's and A-1 by S&P (or comparable ratings if Moody's
and S&P are not the Rating Agencies) at the time any amounts are held on deposit
therein, (ii) an account or accounts the deposits in which are fully insured by
the FDIC or (iii) a trust account or accounts maintained with the trust
department of a federal or state chartered depository institution or trust
company acting in its fiduciary capacity. Eligible Accounts may bear interest.
"Escrow Payments": As defined in Section 3.09.
"Estate in Real Property": A fee simple estate in a parcel of land.
"Excess Subordinated Amount": With respect to the Class A
Certificates and any Distribution Date, the excess, if any, of (i) the
Subordinated Amount for such Distribution Date over (ii) the Required
Subordinated Amount for such Distribution Date.
"Expense Account": The account established and maintained pursuant
to Section 3.25.
"FDIC": Federal Deposit Insurance Corporation or any successor
thereto.
"FHLMC": Federal Home Loan Mortgage Corporation or any successor
thereto.
"Final Recovery Determination": With respect to any defaulted
Mortgage Loan or any REO Property (other than a Mortgage Loan or REO Property
purchased by the Seller, the Depositor, the Servicer or the Certificate Insurer
pursuant to or as contemplated by Section 2.05, 3.18(c) or 10.01), a
determination made by the Servicer that all Insurance Proceeds, Liquidation
Proceeds and other payments or recoveries which the Servicer, in its reasonable
good faith judgment, expects to be finally recoverable in respect thereof have
been so recovered. The Servicer shall maintain records, prepared by a Servicing
Officer, of each Final Recovery Determination made thereby.
"FNMA": Federal National Mortgage Association or any successor
thereto.
12
<PAGE>
"Guaranteed Distribution": As defined in the Policy.
"Independent": When used with respect to any specified Person, any
such Person who (a) is in fact independent of the Depositor, the Servicer and
their respective Affiliates, (b) does not have any direct financial interest in
or any material indirect financial interest in the Depositor or the Servicer or
any Affiliate thereof, and (c) is not connected with the Depositor or the
Servicer or any Affiliate thereof as an officer, employee, promoter,
underwriter, trustee, partner, director or Person performing similar functions;
provided, however, that a Person shall not fail to be Independent of the
Depositor or the Servicer or any Affiliate thereof merely because such Person is
the beneficial owner of 1% or less of any class of securities issued by the
Depositor or the Servicer or any Affiliate thereof, as the case may be.
"Independent Contractor": Either (i) any Person (other than the
Servicer) that would be an "independent contractor" with respect to the REMIC
Trust within the meaning of Section 856(d)(3) of the Code if the REMIC Trust
were a real estate investment trust (except that the ownership tests set forth
in that section shall be considered to be met by any Person that owns, directly
or indirectly, 35 percent or more of any Class of Certificates), so long as the
REMIC Trust does not receive or derive any income from such Person and provided
that the relationship between such Person and the Trust Fund is at arm's-length,
all within the meaning of Treasury Regulation Section 1.856-4(b)(5), or (ii) any
other Person (including the Servicer) if the Trustee has received an Opinion of
Counsel to the effect that the taking of any action in respect of any REO
Property by such Person, subject to any conditions therein specified, that is
otherwise herein contemplated to be taken by an Independent Contractor will not
cause such REO Property to cease to qualify as "foreclosure property" within the
meaning of Section 860G(a)(8) of the Code (determined without regard to the
exception applicable for purposes of Section 860D(a) of the Code), or cause any
income realized in respect of such REO Property to fail to qualify as Rents from
Real Property.
"Initial Mortgage Loan": Any Mortgage Loan identified by the
Originator as of the close of business on August 10, 1997, which Mortgage Loans
will have a Cut-off Date as of the close of business on August 10, 1997.
"Insurance Agreement": The Insurance and Indemnity Agreement, dated
as of August 10, 1997, among the Depositor, the Servicer, the Seller, Emergent
Group, Inc. and the Certificate Insurer, as amended or supplemented in
accordance with the provisions thereof.
"Insurance Payment": Any payment made by the Certificate Insurer
under the Policy with respect to the Class A Certificates.
"Insurance Proceeds": Proceeds of any title policy, hazard policy or
other insurance policy covering a Mortgage Loan, to the extent such proceeds are
not to be applied to the restoration of the related Mortgaged Property or
released to the Mortgagor in accordance with the procedures that the Servicer
would follow in servicing mortgage loans held for its own account, subject to
the terms and conditions of the related Mortgage Note and Mortgage.
13
<PAGE>
"Interest Accrual Period": With respect to any Distribution Date and
the Class A Certificates, the calendar month immediately preceding the month in
which such Distribution Date occurs.
"Interest Coverage Account": As defined in Section 3.13.
"Interest Distribution Amount": With respect to any Distribution
Date and the Class A Certificates, the aggregate Accrued Certificate Interest on
the Class A Certificates for such Distribution Date.
"Investment Account": As defined in Section 3.14.
"Late Collections": With respect to any Mortgage Loan, all amounts
received subsequent to the Determination Date immediately following any
Collection Period, whether as late payments of Monthly Payments or as Insurance
Proceeds, Liquidation Proceeds or otherwise, which represent late payments or
collections of principal and/or interest due (without regard to any acceleration
of payments under the related Mortgage and Mortgage Note) but delinquent for
such Collection Period and not previously recovered.
"Liquidation Event": With respect to any Mortgage Loan, any of the
following events: (i) such Mortgage Loan is paid in full; (ii) a Final Recovery
Determination is made as to such Mortgage Loan, or (iii) such Mortgage Loan is
removed from the Trust Fund by reason of its being purchased, sold or replaced
pursuant to or as contemplated by Section 2.05, Section 3.18(c) or Section
10.01. With respect to any REO Property, either of the following events: (i) a
Final Recovery Determination is made as to such REO Property; or (ii) such REO
Property is removed from the Trust Fund by reason of its being purchased
pursuant to Section 10.01.
"Liquidation Proceeds": The amount (other than Insurance Proceeds or
amounts received in respect of the rental of any REO Property prior to REO
Disposition) received by the Servicer in connection with (i) the taking of all
or a part of a Mortgaged Property by exercise of the power of eminent domain or
condemnation and (ii) the liquidation of a defaulted Mortgage Loan by means of a
trustee's sale, foreclosure sale or otherwise.
"Loan-to-Value Ratio": As of any date of determination, the
fraction, expressed as a percentage, the numerator of which is the principal
balance of the related Mortgage Loan at such date and the denominator of which
is the Value of the related Mortgaged Property.
"Lost Note Affidavit": With respect to any Mortgage Loan as to which
the original Mortgage Note has been permanently lost or destroyed and has not
been replaced, an affidavit from the Seller certifying that the original
Mortgage Note has been lost, misplaced or destroyed (together with a copy of the
related Mortgage Note).
"Majority Class R Certificateholder": Any single Holder of Class R
Certificates representing a greater than 50% Percentage Interest in such Class.
14
<PAGE>
"Monthly Advance": As to any Mortgage Loan or REO Property, any
advance made by the Servicer in respect of any Distribution Date pursuant to
Section 4.03.
"Monthly Payment": With respect to any Mortgage Loan, the scheduled
monthly payment of principal and interest on such Mortgage Loan which is payable
by the related Mortgagor from time to time under the related Mortgage Note,
determined: (a) after giving effect to (i) any Deficient Valuation and/or Debt
Service Reduction with respect to such Mortgage Loan and (ii) any reduction in
the amount of interest collectible from the related Mortgagor pursuant to the
Relief Act; (b) without giving effect to any extension granted or agreed to by
the Servicer pursuant to Section 3.07; and (c) on the assumption that all other
amounts, if any, due under such Mortgage Loan are paid when due.
"Moody's": Moody's Investors Service, Inc. or its successor in
interest.
"Mortgage": The mortgage, deed of trust or other instrument creating
a first lien on, or first priority security interest in, a Mortgaged Property
securing a Mortgage Note.
"Mortgage File": The mortgage documents listed in Section 2.03
pertaining to a particular Mortgage Loan and any additional documents required
to be added to the Mortgage File pursuant to this Agreement.
"Mortgage Loan": Each mortgage loan transferred and assigned to the
Trustee pursuant to Section 2.01, Section 2.02 or Section 2.05(d) as from time
to time held as a part of the Trust Fund, the Mortgage Loans so held being
identified in the Mortgage Loan Schedule.
"Mortgage Loan Schedule": As of any date, the list of Mortgage Loans
included in the Trust Fund on such date. The Mortgage Loan Schedule shall set
forth following information with respect to each Mortgage Loan:
1. the Seller's Mortgage Loan identifying number;
2. the Mortgagor's name;
3. the street address of the Mortgaged Property including the
state and zip code;
4. a code indicating whether the Mortgaged Property is
owner-occupied;
5. the type of Residential Dwelling constituting the Mortgaged
Property;
6. the original months to maturity;
7. the remaining months to stated maturity from the Cut-off
Date based on the original amortization schedule;
15
<PAGE>
8. the Loan-to-Value Ratio at origination;
9. (A) the date on which the first Monthly Payment was due on
the Mortgage Loan and, (B) if such date is not consistent with the Due
Date currently in effect, such Due Date;
10. the stated maturity date;
11. the amount of the Monthly Payment due on the first Due
Date on or after the Cut-off Date;
12. the last Due Date on which a Monthly Payment was actually
applied to the unpaid Stated Principal Balance;
13. the original principal amount of the Mortgage Loan;
14. the outstanding principal balance of the Mortgage Loan as
of the close of business on the Cut-off Date;
15. a code indicating the purpose of the Mortgage Loan (i.e.,
purchase financing, Rate/Term Refinancing, Cash-Out Refinancing);
16. the Mortgage Rate;
17. a code indicating the documentation style program;
18. the risk grade;
19. the Value of the Mortgaged Property;
20. the sale price of the Mortgaged Property, if applicable;
21. whether the Mortgage Loan has a due-on-sale clause; and
22. the program code.
The Mortgage Loan Schedule shall set forth the following
information, as of the Cut-off Date with respect to the Mortgage Loans in the
aggregate: (1) the number of Mortgage Loans; (2) the current principal balance
of the Mortgage Loans; (3) the weighted average Mortgage Rate of the Mortgage
Loans; and (4) the weighted average maturity of the Mortgage Loans. The Mortgage
Loan Schedule shall be amended from time to time by the Servicer in accordance
with the provisions of this Agreement.
"Mortgage Note": The original executed note or other evidence of
indebtedness evidencing the indebtedness of a Mortgagor under a Mortgage Loan.
"Mortgage Pool": The pool of Mortgage Loans, identified on the
Mortgage Loan Schedule from time to time, and any REO Properties acquired in
respect thereof.
16
<PAGE>
"Mortgage Rate": With respect to each Mortgage Loan, the annual rate
at which interest accrues on such Mortgage Loan in accordance with the
provisions of the related Mortgage Note.
"Mortgaged Property": The underlying property securing a Mortgage
Loan, including any REO Property, consisting of an Estate in Real Property.
"Mortgagor": The obligor on a Mortgage Note.
"Net Monthly Excess Cashflow": With respect to any Distribution
Date, an amount equal to the excess of (x) the Available Distribution Amount for
such Distribution Date over (y) the sum for such Distribution Date of (A) the
amount described in Section 4.01(a)(i) hereof and (B) the amount described in
clauses (b)(i)-(iii) of the definition of Principal Distribution Amount minus
the amount of any Subordination Reduction Amount for the Class A Certificates
for such Distribution Date.
"Net Mortgage Rate": With respect to any Mortgage Loan (or the
related REO Property), as of any date of determination, a per annum rate of
interest equal to the then applicable Mortgage Rate for such Mortgage Loan minus
the Servicing Fee Rate.
"New Lease": Any lease of REO Property entered into on behalf of the
Trust Fund, including any lease renewed or extended on behalf of the Trust Fund
if the Trust Fund has the right to renegotiate the terms of such lease.
"Nonrecoverable Monthly Advance": Any Monthly Advance or Servicing
Advance previously made or proposed to be made in respect of a Mortgage Loan or
REO Property that, in the good faith business judgment of the Servicer, will not
or, in the case of a proposed Monthly Advance, would not be ultimately
recoverable from related late payments, Insurance Proceeds or Liquidation
Proceeds on such Mortgage Loan or REO Property as provided herein.
"Non-United States Person": Any Person other than a United States
Person.
"Officers' Certificate": A certificate signed by the Chairman of the
Board, the Vice Chairman of the Board, the President or a vice president
(however denominated), or by the Treasurer, the Secretary, or one of the
assistant treasurers or assistant secretaries of the Servicer, the Seller or the
Depositor, as applicable.
"Opinion of Counsel": A written opinion of counsel, who may, without
limitation, be salaried counsel for the Depositor or the Servicer acceptable to
the Trustee and the Certificate Insurer, except that any opinion of counsel
relating to (a) the qualification of the Trust Fund as a REMIC or (b) compliance
with the REMIC Provisions must be an opinion of Independent counsel.
"Original Pool Balance": An amount equal to the aggregate of the
Stated Principal Balances of the Mortgage Loans as of the Cut-off Date.
17
<PAGE>
"Original Pre-Funded Amount": U.S. $38,878,567.99, being the amount
of cash to be deposited in the Pre-Funding Account on the Closing Date.
"Originator": Emergent Mortgage Corp.
"Overcollateralization Deficit": With respect to any Distribution
Date, the excess, if any, of (i) the Class A Certificate Principal Balance,
after taking into account the distribution of the Principal Distribution Amount
(other than any portion thereof constituting the Overcollateralization Deficit
or the Subordination Increase Amount) over (ii) the sum of the aggregate Stated
Principal Balances of the Mortgage Loans then outstanding;
"Ownership Interest": As to any Certificate, any ownership or
security interest in such Certificate, including any interest in such
Certificate as the Holder thereof and any other interest therein, whether direct
or indirect, legal or beneficial, as owner or as pledgee.
"Pass-Through Rate": With respect to the Class A-1 Certificates, the
Class A-1 Pass-Through Rate, with respect to the Class A-2 Certificates, the
Class A-2 Pass-Through Rate, with respect to the Class A-3 Certificates, the
Class A-3 Pass-Through Rate, with respect to the Class A-4 Certificates, the
Class A-4 Pass-Through Rate, with respect to the Class A-5 Certificates, the
Class A-5 Pass-Through Rate, and with respect to the Class A-6 Certificates, the
Class A-6 Pass-Through Rate.
"Percentage Interest": With respect to the Class A-1 Certificates,
the Class A-2 Certificates, the Class A-3 Certificates, the Class A-4
Certificates, the Class A-5 Certificates and the Class A-6 Certificates, the
undivided percentage ownership in the related Class evidenced by such
Certificate, expressed as a percentage, the numerator of which is the initial
Certificate Principal Balance represented by such Certificate and the
denominator of which is the initial aggregate Certificate Principal Balance of
such Class. The Class A Certificates are issuable only in minimum Percentage
Interests corresponding to minimum initial Certificate Principal Balances of
$1,000 and increments of $1,000 in excess thereof. With respect to any Class R
Certificate, the undivided percentage ownership in such Class evidenced by such
Certificate, as set forth on the face of such Class R Certificate. The Class R
Certificates are issuable only in minimum Percentage Interests of 25%.
"Permitted Investments": Any one or more of the following
obligations or securities acquired at a purchase price of not greater than par,
regardless of whether issued by the Depositor, the Servicer, the Trustee or any
of their respective Affiliates:
(i) direct obligations of, or obligations fully guaranteed as
to timely payment of principal and interest by, the United States or any
agency or instrumentality thereof, provided such obligations are backed by
the full faith and credit of the United States; provided, however, that
any obligation of, or guaranteed by, FHLMC or FNMA, other than a senior
debt or a mortgage participation or pass-through certificate guaranteed by
FHLMC or FNMA shall be a Permitted Investment only if, at the time of
investment, such investment is acceptable to the Certificate Insurer;
18
<PAGE>
(ii) demand and time deposits in, certificates of deposit of,
or bankers' acceptances issued by, any Depository Institution;
(iii) repurchase obligations with respect to any security
described in clause (i) above entered into with a Depository Institution
(acting as principal);
(iv) securities bearing interest or sold at a discount that
are issued by any corporation incorporated under the laws of the United
States of America or any State thereof and that are rated by each Rating
Agency in its highest long-term unsecured rating categories at the time of
such investment or contractual commitment providing for such investment;
(v) commercial paper (including both non-interest-bearing
discount obligations and interest-bearing obligations payable on demand or
on a specified date not more than 30 days after the date of acquisition
thereof) that is rated by each Rating Agency in its highest short-term
unsecured debt rating available at the time of such investment;
(vi) units of money market funds that have been rated "Aaa" by
Moody's and "AAA" by S&P; and
(vii) if previously confirmed in writing to the Trustee, any
other demand, money market or time deposit, or any other obligation,
security or investment, as may be acceptable to the Rating Agencies and
the Certificate Insurer as a permitted investment of funds backing
securities that have been rated "Aaa" by Moody's and "AAA" by S&P;
provided that no instrument described hereunder shall evidence either the right
to receive (a) only interest with respect to the obligations underlying such
instrument or (b) both principal and interest payments derived from obligations
underlying such instrument and the interest and principal payments with respect
to such instrument provide a yield to maturity at par greater than 120% of the
yield to maturity at par of the underlying obligations.
"Permitted Transferee": Any Transferee of a Residual Certificate
other than a Disqualified Organization or Non-United States Person.
"Person": Any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Policy": The Financial Guaranty Insurance Policy (No. 50624-N)
issued by the Certificate Insurer relating to the Class A Certificates,
including any endorsements thereto, attached hereto as Exhibit B.
"Policy Payments Account": The account established pursuant to
Section 9.04 hereof.
"Pre-Funded Loan Transfer": The transfer and assignment by the
Depositor to the Trust of the Pre-Funded Mortgage Loans pursuant to the terms
hereof.
19
<PAGE>
"Pre-Funded Loan Transfer Date": The Business Day on which a
Pre-Funded Loan Transfer occurs.
"Pre-Funded Mortgage Loans": As defined in Section 2.02.
"Pre-Funding Account": The Pre-Funding Account established in
accordance with Section 3.12 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 November 1, 1997.
"Prepayment Assumption": The Prepayment Assumption assumes that the
pool of loans prepays in the first month at a constant annual prepayment rate of
1.7% and increases by an additional 1.7% each month thereafter until the tenth
month, where it remains at a constant annual prepayment rate equal to 17%.
"Prepayment Interest Shortfall": With respect to any Distribution
Date, for each Mortgage Loan that was during the related Collection Period the
subject of a Principal Prepayment in full or in part that was applied by the
Servicer to reduce the outstanding principal balance of such loan on a date
preceding the Due Date in the succeeding Collection Period, an amount equal to
the excess of (i) interest at the applicable Net Mortgage Rate on the amount of
such Principal Prepayment for the number of days commencing on the date on which
the prepayment is applied and ending on the last day of the related Collection
Period over (ii) the amount, if any, of the interest paid by the Mortgagor in
connection with such Principal Prepayment. The obligations of the Servicer in
respect of any Prepayment Interest Shortfall are set forth in Section 3.26.
"Principal Distribution Amount": With respect to any Distribution
Date, the lesser of:
(a) the excess of the Available Distribution Amount over the amount
payable on the Class A Certificates pursuant to Section 4.01 (a)(i) and
4.01(g); and
(b) the sum of:
(i) the principal portion of each Monthly Payment due during
the related Collection Period, to the extent received, on each Mortgage
Loan;
(ii) the Stated Principal Balance of any Mortgage Loan that
was purchased during the related Collection Period pursuant to or as
contemplated by Section 2.05, 3.18(c) or 10.01 and the amount of any
shortfall deposited in
20
<PAGE>
the Collection Account in connection with the substitution of a Deleted
Mortgage Loan pursuant to Section 2.05 during the related Collection
Period;
(iii) the principal portion of all other unscheduled
collections (including, without limitation, Principal Prepayments,
Insurance Proceeds, Liquidation Proceeds, payments pursuant to Section
3.28 and REO Principal Amortization) received during the related
Collection Period, net of any portion thereof that represents a recovery
of principal for which an advance was made by the Servicer pursuant to
Section 4.03 in respect of a preceding Distribution Date, and deposits
into the Distribution Account from the Pre-Funding Account pursuant to
Section 3.12(c) and the Redemption Account pursuant to Section 3.29, if
any, not required to be distributed pursuant to Section 4.01(g);
(iv) the amount of any Overcollateralization Deficit for such
Distribution Date; and
(v) the amount of any Subordination Increase Amount for the
Class A Certificates for such Distribution Date; minus:
(vi) the amount of any Subordination Reduction Amount for the
Class A Certificates for such Distribution Date.
"Principal Prepayment": Any payment of principal made by the
Mortgagor on a Mortgage Loan which is received in advance of its scheduled Due
Date and which is not accompanied by an amount of interest representing the full
amount of scheduled interest due on any Due Date in any month or months
subsequent to the month of prepayment.
"Purchase and Assignment Agreement": The Agreement dated as of
August 10, 1997 between the Originator and the Seller providing for the sale of
the Mortgage Loans from the Originator to the Seller.
"Purchase Price": With respect to any Mortgage Loan or REO Property
to be purchased pursuant to or as contemplated by Section 2.05, 3.18(c) or
10.01, and as confirmed by an Officers' Certificate from the Servicer to the
Trustee, an amount equal to the sum of (i) 100% of the Stated Principal Balance
thereof as of the date of purchase (or such other price as provided in Section
10.01), (ii) in the case of (x) a Mortgage Loan, accrued interest on such Stated
Principal Balance at the applicable Net Mortgage Rate in effect from time to
time from the Due Date as to which interest was last covered by a payment by the
Mortgagor or an advance by the Servicer, which payment or advance had as of the
date of purchase been distributed pursuant to Section 4.01, through the next
date corresponding to such Due Date which is on or after the date on which such
purchase is to be effected, and (y) an REO Property, the sum of (1) accrued
interest on such Stated Principal Balance at the applicable Net Mortgage Rate in
effect from time to time from the Due Date as to which interest was last covered
by a payment by the Mortgagor or an advance by the Servicer through the next
date corresponding to such Due Date which is on or after the date on which such
REO Property was acquired,
21
<PAGE>
plus (2) REO Imputed Interest for such REO Property from such corresponding date
through the next such corresponding date which is on or after the date on which
such purchase is to be effected, net of the total of all net rental income,
Insurance Proceeds, Liquidation Proceeds and Monthly Advances that as of the
date of purchase had been distributed as or to cover REO Imputed Interest
pursuant to Section 4.01, (iii) any unreimbursed Servicing Advances and Monthly
Advances and any unpaid Servicing Fees allocable to such Mortgage Loan or REO
Property, (iv) any amounts previously withdrawn from the Collection Account in
respect of such Mortgage Loan or REO Property pursuant to Sections 3.11(ix) and
3.18(b), and (v) in the case of a Mortgage Loan required to be purchased
pursuant to Section 2.05, expenses reasonably incurred or to be incurred by the
Servicer or the Trustee in respect of the breach or defect giving rise to the
purchase obligation.
"Qualified Substitute Mortgage Loan": A mortgage loan substituted
for a Deleted Mortgage Loan pursuant to the terms of this Agreement which must,
on the date of such substitution, (i) have a Stated Principal Balance, after
application of all scheduled payments of principal and interest due during or
prior to the month of substitution, not in excess of the outstanding principal
balance of the Deleted Mortgage Loan as of the Due Date in the calendar month
during which the substitution occurs, (ii) have a Mortgage Rate not less than
(and not more than one percentage point in excess of) the Mortgage Rate of the
Deleted Mortgage Loan, (iii) have a remaining term to maturity not greater than
(and not more than one year less than) that of the Deleted Mortgage Loan, (iv)
[intentionally left blank], (v) have a Loan-to-Value Ratio as of the date of
substitution equal to or lower than the Loan-to-Value Ratio of the Deleted
Mortgage Loan as of such date, (vi) have a risk grading determined by the
Seller, with the approval of the Certificate Insurer, at least equal to the risk
grading assigned on the Deleted Mortgage Loan, (vii) is a "qualified mortgage"
as defined in the REMIC Provisions and (viii) conform to each representation and
warranty set forth in the Unaffiliated Seller's Agreement applicable to the
Deleted Mortgage Loan. In the event that one or more mortgage loans are
substituted for one or more Deleted Mortgage Loans, the amounts described in
clause (i) hereof shall be determined on the basis of aggregate principal
balances, the Mortgage Rates described in clause (ii) hereof shall be determined
on the basis of weighted average Mortgage Rates, the risk gradings described in
clause (vi) hereof shall be satisfied as to each such mortgage loan, the terms
described in clause (iii) hereof shall be determined on the basis of weighted
average remaining term to maturity, the Loan-to-Value Ratios described in clause
(v) hereof shall be satisfied as to each such mortgage loan and, except to the
extent otherwise provided in this sentence, the representations and warranties
described in clause (viii) hereof must be satisfied as to each Qualified
Substitute Mortgage Loan or in the aggregate, as the case may be.
"Rate/Term Refinancing": A Refinanced Mortgage Loan, the proceeds of
which are not more than $1000 in excess of the existing first mortgage loan and
any subordinate mortgage loan on the related Mortgaged Property and related
closing costs, and were used exclusively (except for up to $1000) to satisfy the
then existing first mortgage loan and any subordinate mortgage loan of the
Mortgagor on the related Mortgaged Property and to pay related closing costs.
22
<PAGE>
"Rating Agency or Rating Agencies": Moody's and S&P or their
successors. If such agencies or their successors are no longer in existence,
"Rating Agencies" shall be such nationally recognized statistical rating
agencies, or other comparable Persons, designated by the Depositor and the
Certificate Insurer, notice of which designation shall be given to the Trustee
and Servicer.
"Realized Loss": With respect to each Mortgage Loan as to which a
Final Recovery Determination has been made an amount (not less than zero) equal
to (i) the unpaid principal balance of such Mortgage Loan as of the commencement
of the calendar month in which the Final Recovery Determination was made, plus
(ii) accrued interest from the Due Date as to which interest was last paid by
the Mortgagor through the end of the calendar month in which such Final Recovery
Determination was made, calculated in the case of each calendar month during
such period (A) at an annual rate equal to the annual rate at which interest was
then accruing on such Mortgage Loan and (B) on a principal amount equal to the
Stated Principal Balance of such Mortgage Loan as of the close of business on
the Distribution Date during such calendar month, plus (iii) any amounts
previously withdrawn from the Collection Account in respect of such Mortgage
Loan pursuant to Sections 3.11(ix) and 3.18(b), minus (iv) the proceeds, if any,
received in respect of such Mortgage Loan during the calendar month in which
such Final Recovery Determination was made, net of amounts that are payable
therefrom to the Servicer with respect to such Mortgage Loan pursuant to clause
(iii) of Section 3.11.
With respect to any REO Property as to which a Final Recovery
Determination has been made an amount (not less than zero) equal to (i) the
unpaid principal balance of the related Mortgage Loan as of the date of
acquisition of such REO Property on behalf of the Trust Fund, plus (ii) accrued
interest from the Due Date as to which interest was last paid by the Mortgagor
in respect of the related Mortgage Loan through the end of the calendar month
immediately preceding the calendar month in which such REO Property was
acquired, calculated in the case of each calendar month during such period (A)
at an annual rate equal to the annual rate at which interest was then accruing
on the related Mortgage Loan and (B) on a principal amount equal to the Stated
Principal Balance of the related Mortgage Loan as of the close of business on
the Distribution Date during such calendar month, plus (iii) REO Imputed
Interest for such REO Property for each calendar month commencing with the
calendar month in which such REO Property was acquired and ending with the
calendar month in which such Final Recovery Determination was made, plus (iv)
any amounts previously withdrawn from the Collection Account in respect of the
related Mortgage Loan pursuant to Sections 3.11(ix) and 3.18(b), minus (v) the
aggregate of all Monthly Advances made by the Servicer in respect of such REO
Property or the related Mortgage Loan for which the Servicer has been or, in
connection with such Final Recovery Determination, will be reimbursed pursuant
to Section 3.25 out of rental income, Insurance Proceeds and Liquidation
Proceeds received in respect of such REO Property, minus (vi) the total of all
net rental income, Insurance Proceeds and Liquidation Proceeds received in
respect of such REO Property that has been, or in connection with such Final
Recovery Determination, will be transferred to the Distribution Account pursuant
to Section 3.25.
23
<PAGE>
With respect to each Mortgage Loan which has become the subject of a
Deficient Valuation, the difference between the principal balance of the
Mortgage Loan outstanding immediately prior to such Deficient Valuation and the
principal balance of the Mortgage Loan as reduced by the Deficient Valuation.
With respect to each Mortgage Loan which has become the subject of a
Debt Service Reduction, the portion, if any, of the reduction in each affected
Monthly Payment attributable to a reduction in the Mortgage Rate imposed by a
court of competent jurisdiction. Each such Realized Loss shall be deemed to have
been incurred on the Due Date for each affected Monthly Payment.
A Realized Loss within the meaning of the foregoing provisions shall
constitute a Realized Loss regardless of how such Realized Loss shall have
arisen (e.g., whether by virtue of any default, bankruptcy, fraud, special
hazard or any other reason).
"Record Date": With respect to each Distribution Date, the last
Business Day of the month immediately preceding the month in which such
Distribution Date occurs.
"Redemption Account": As defined in Section 3.29.
"Refinanced Mortgage Loan": A Mortgage Loan the proceeds of which
were not used to purchase the related Mortgaged Property.
"Regular Certificate": Any Class A Certificate.
"Regular Interest": A "regular interest" in a REMIC within the
meaning of Section 860G(a)(l) of the Code.
"Relief Act": The Soldiers' and Sailors' Civil Relief Act of 1940,
as amended.
"Relief Act Interest Shortfall": With respect to any Distribution
Date and any Mortgage Loan, any reduction in the amount of interest collectible
on such Mortgage Loan for the most recently ended calendar month as a result of
the application of the Relief Act.
"Remaining Overcollateralization Deficit": With respect to any
Distribution Date, the excess, if any, of (i) the Overcollateralization Deficit
for such Distribution Date over (ii) the Net Monthly Excess Cashflow for such
Distribution Date.
"REMIC": A "real estate mortgage investment conduit" within the
meaning of Section 860D of the Code.
"REMIC Provisions": Provisions of the federal income tax law
relating to real estate mortgage investment conduits, which appear at Section
860A-860G of the Code, and related provisions, and proposed, temporary and final
regulations and published rulings, notices and announcements promulgated
thereunder, as the foregoing may be in effect from time to time.
24
<PAGE>
"REMIC Trust": The segregated pool of assets comprising the Trust
Fund excluding the Policy and the Interest Coverage Account.
"Remittance Report": As defined in Section 4.02.
"Rents from Real Property": With respect to any REO Property, gross
income of the character described in Section 856(d) of the Code as being
included in the term "rents from real property."
"REO Account": The account or accounts maintained by the Servicer in
respect of an REO Property pursuant to Section 3.25.
"REO Disposition": The sale or other disposition of an REO Property
on behalf of the Trust Fund.
"REO Imputed Interest": As to any REO Property, for any calendar
month during which such REO Property was at any time part of the Trust Fund, one
month's interest at the applicable Net Mortgage Rate on the Stated Principal
Balance of such REO Property (or, in the case of the first such calendar month,
of the related Mortgage Loan if appropriate) as of the close of business on the
Distribution Date in such calendar month.
"REO Principal Amortization": With respect to any REO Property, for
any calendar month, the excess, if any, of (a) the aggregate of all amounts
received in respect of such REO Property during such calendar month, whether in
the form of rental income, sale proceeds (including, without limitation, that
portion of the Termination Price paid in connection with a purchase of all of
the Mortgage Loans and REO Properties pursuant to Section 10.01 that is
allocable to such REO Property) or otherwise, net of any portion of such amounts
(i) payable pursuant to Section 3.25(c) in respect of the proper operation,
management and maintenance of such REO Property or (ii) payable or reimbursable
to the Servicer pursuant to Section 3.25(d) for unpaid Servicing Fees in respect
of the related Mortgage Loan and unreimbursed Servicing Advances and Monthly
Advances in respect of such REO Property or the related Mortgage Loan, over (b)
the REO Imputed Interest in respect of such REO Property for such calendar
month.
"REO Property": A Mortgaged Property acquired by the Servicer on
behalf of the Trust Fund through foreclosure or deed-in-lieu of foreclosure, as
described in Section 3.25.
"Request for Release": A release signed by a Servicing Officer, in
the form of Exhibit E-1 or Exhibit E-2 attached hereto.
"Required Subordinated Amount": With respect to any Distribution
Date, an amount equal to 3.75% of the Original Pool Balance, subject to the
following: (i) if the Step Up Trigger has occurred with respect to such
Distribution Date, the Required Subordinated Amount for such Distribution Date
will be an amount equal to the entire aggregate Stated Principal Balance of the
Mortgage Loans as of such Distribution Date, (ii) if the Step Down Trigger has
occurred, the Required
25
<PAGE>
Subordinated Amount for such Distribution Date will be an amount equal to the
greater of (A) 0.50% of the Original Pool Balance and (B) the lesser of (x)
3.75%, of the Original Pool Balance and (y) the Stepped Down Required
Subordinated Percentage of the aggregate Stated Principal Balance of the
Mortgage Loans as of such Distribution Date.
"Residential Dwelling": Any one of the following: (i) a detached
one-family dwelling, (ii) a detached two- to four-family dwelling, (iii) a
one-family dwelling unit in a FNMA eligible condominium project, (iv) a detached
one-family dwelling in a planned unit development or (v) a manufactured home
treated as real property under local law, none of which is a co-operative,
mobile or manufactured home (as defined in 42 United States Code, Section
5402(6)).
"Residual Certificate": Any one of the Class R Certificates.
"Residual Interest": The sole class of "residual interests" in a
REMIC within the meaning of Section 860G(a)(2) of the Code.
"Responsible Officer": When used with respect to the Trustee, any
officer of the Corporate Trust Department of the Trustee, including any Senior
Vice President, any Assistant Vice President, any Assistant Secretary, any Trust
Officer or any other officer of the Trustee customarily performing functions
similar to those performed by any of the above designated officers to whom, with
respect to a particular matter, such matter is referred.
"Rolling Delinquency Percentage": For any Distribution Date, the
average of the Delinquency Percentages as of the last day of each of the three
(or one or two, in the case of the first and second Distribution Dates) most
recently ended Collection Periods.
"Rolling Loss Percentage": As of any Distribution Date, the
percentage equivalent of a fraction, the numerator of which is the aggregate
amount of Realized Losses incurred during the preceding twelve Collection
Periods, and the denominator of which is the aggregate Stated Principal Balance
of the Mortgage Loans as of the first day of the twelfth preceding Collection
Period.
"Seller": Emergent Mortgage Holdings Corporation, or its
successor-in-interest, in its capacity as seller under the Unaffiliated Seller's
Agreement.
"Servicer": Emergent Mortgage Corp., a South Carolina corporation,
or any successor servicer appointed as herein provided, in its capacity as
Servicer hereunder.
"Servicer Event of Default": One or more of the events described in
Section 7.01.
"Servicer Extension Notice": As described in Section 7.01.
"Servicer Remittance Date": With respect to any Distribution Date,
12:00 noon New York time on the fourth Business Day prior to such Distribution
Date.
26
<PAGE>
"Servicing Account": The account or accounts created and maintained
pursuant to Section 3.09.
"Servicing Advances": The reasonable "out-of-pocket" costs and
expenses incurred by the Servicer in connection with a default, delinquency or
other unanticipated event by the Servicer in the performance of its servicing
obligations, including, but not limited to, the cost of (i) the preservation,
restoration and protection of a Mortgaged Property, (ii) any enforcement or
judicial proceedings, including foreclosures, in respect of a particular
Mortgage Loan, (iii) the management (including reasonable fees in connection
therewith) and liquidation of any REO Property, and (iv) the performance of its
obligations under Sections 3.01, 3.09, 3.16, 3.18 and 3.25. The Servicer shall
not be required to make any Servicing Advance in respect of a Mortgage Loan or
REO Property that, in the good faith business judgment of the Servicer, would
not be ultimately recoverable from related Insurance Proceeds or Liquidation
Proceeds on such Mortgage Loan or REO Property as provided herein.
"Servicing Fee": With respect to each Mortgage Loan and for any
calendar month, an amount equal to one month's interest (or in the event of any
payment of interest which accompanies a Principal Prepayment in full made by the
Mortgagor during such calendar month, interest for the number of days covered by
such payment of interest) at the Servicing Fee Rate on the same principal amount
on which interest on such Mortgage Loan accrues for such calendar month. A
portion of such Servicing Fee may be retained by any Sub-Servicer as its
servicing compensation.
"Servicing Fee Rate": 0.50% per annum.
"Servicing Officer": Any officer of the Servicer involved in, or
responsible for, the administration and servicing of Mortgage Loans, whose name
and specimen signature appear on a list of servicing officers furnished by the
Servicer to the Trustee and the Certificate Insurer and the Depositor on the
Closing Date, as such list may from time to time be amended.
"Single Certificate": With respect to any Class of Certificates
(other than the Residual Certificates), a hypothetical Certificate of such Class
evidencing a Percentage Interest for such Class corresponding to an initial
Certificate Principal Balance of $1,000. With respect to the Residual
Certificates, a hypothetical Certificate of such Class evidencing a 100%
Percentage Interest in such Class.
"S&P": Standard & Poor's Ratings Services, a division of McGraw-Hill
Inc., or its successor in interest.
"Startup Day": The day designated as such pursuant to Section
11.01(b) hereof.
"Stated Principal Balance": With respect to any Mortgage Loan: (a)
as of any date of determination up to but not including the Distribution Date on
which the proceeds, if any, of a Liquidation Event with respect to such Mortgage
Loan would be distributed, the outstanding principal balance of such Mortgage
Loan as of the Cut-off Date, as shown in the Mortgage Loan Schedule, minus the
sum of (i) the principal
27
<PAGE>
portion of each Monthly Payment due on a Due Date subsequent to the Cut-off
Date, to the extent received from the Mortgagor or included in a Monthly Advance
and distributed pursuant to Section 4.01 on or before such date of
determination, (ii) all Principal Prepayments received after the Cut-off Date,
to the extent distributed pursuant to Section 4.01 on or before such date of
determination, (iii) all Liquidation Proceeds and Insurance Proceeds applied by
the Servicer as recoveries of principal in accordance with the provisions of
Section 3.18, to the extent distributed pursuant to Section 4.01 on or before
such date of determination, and (iv) any Realized Loss incurred with respect
thereto coinciding with or preceding such date of determination; and (b) as of
any date of determination coinciding with or subsequent to the Distribution Date
on which the proceeds, if any, of a Liquidation Event with respect to such
Mortgage Loan would be distributed, zero. With respect to any REO Property: (a)
as of any date of determination up to but not including the Distribution Date on
which the proceeds, if any, of a Liquidation Event with respect to such REO
Property would be distributed, an amount (not less than zero) equal to the
Stated Principal Balance of the related Mortgage Loan as of the date on which
such REO Property was acquired on behalf of the Trust Fund, minus the aggregate
amount of REO Principal Amortization in respect of such REO Property for all
previously ended calendar months, to the extent distributed pursuant to Section
4.01 on or before such date of determination, and (b) as of any date of
determination coinciding with or subsequent to the Distribution Date on which
the proceeds, if any, of a Liquidation Event with respect to such REO Property
would be distributed, zero.
"Stayed Funds": As defined in Section 7.02(b).
"Step Down Cumulative Loss Test": The Step Down Cumulative Loss Test
will be met with respect to a Distribution Date as follows: (i) for the 30th
through the 41st Distribution Dates, if the Cumulative Loss Percentage for such
Distribution Date is 2.00% or less, (ii) for the 42nd through the 53rd
Distribution Dates, if the Cumulative Loss Percentage for such Distribution Date
is 2.50% or less, (iii) for the 54th through the 65th Distribution Dates, if the
Cumulative Loss Percentage for such Distribution Date is 2.90% or less and (iv)
for 66th Distribution Date and any Distribution Date thereafter, if the
Cumulative Loss Percentage for such Distribution Date is 3.25% or less.
"Step Down Rolling Delinquency Test": The Step Down Rolling
Delinquency Test will be met with respect to a Distribution Date if the Rolling
Delinquency Percentage for such Distribution Date is 8.00% or less.
"Step Down Rolling Loss Test": The Step Down Rolling Loss Test will
be met with respect to a Distribution Date if the Rolling Loss Percentage for
such Distribution Date is less than 1.00%.
"Step Down Trigger": For any Distribution Date after the 30th
Distribution Date, the Step Down Trigger will have occurred if each of the Step
Down Cumulative Loss Test, the Step Down Rolling Delinquency Test and the Step
Down Rolling Loss Test is met. In no event will the Step Down Trigger be deemed
to have occurred for the 30th Distribution Date or any preceding Distribution
Date.
28
<PAGE>
"Stepped Down Required Subordinated Percentage": For any
Distribution Date for which the Step Down Trigger has occurred, a percentage
equal to (i) the percentage equivalent of a fraction, the numerator of which is
3.75% of the Original Pool Balance, and the denominator of which is the
aggregate Stated Principal Balance of the Mortgage Loans as of such Distribution
Date, minus (ii) the percentage equivalent of a fraction, the numerator of which
is the product of (A) the percentage calculated under clause (i) above minus
7.50%, multiplied by (B) the number of consecutive Distribution Dates through
and including the Distribution Date for which the Stepped Down Required
Subordinated Percentage is being calculated, up to a maximum of six, for which
the Step Down Trigger has occurred, and the denominator of which is six.
"Step Up Cumulative Loss Test": The Step Up Cumulative Loss Test
will be met with respect to a Distribution Date as follows (i) for the 1st
through the 12th Distribution Dates, if the Cumulative Loss Percentage for such
Distribution Date is more than 1.00%, (ii) for the 13th through the 24th
Distribution Dates, if the Cumulative Loss Percentage for such Distribution Date
is more than 1.50%, (iii) for the 25th through the 36th Distribution Dates, if
the Cumulative Loss Percentage for such Distribution Date is more than 2.15%,
(iv) for the 37th through the 48th Distribution Dates, if the Cumulative Loss
Percentage for such Distribution Date is more than 2.65% and (v) for the 49th
Distribution Date and any Distribution Date thereafter, if the Cumulative Loss
Percentage for such Distribution Date is more than 3.25%.
"Step Up Rolling Delinquency Test": The Step Up Rolling Delinquency
Test will be met with respect to a Distribution Date if the Rolling Delinquency
Percentage for such Distribution Date is more than 10.00%.
"Step Up Rolling Loss Test": The Step Up Rolling Loss Test will be
met with respect to a Distribution Date if the Rolling Loss Percentage for such
Distribution Date is 1.50% or more.
"Step Up Trigger": For any Distribution Date, the Step Up Trigger
will have occurred if any one of the Step Up Cumulative Loss Test, the Step Up
Rolling Delinquency Test or the Step Up Rolling Loss Test is met with respect to
such Distribution Date.
"Subordinated Amount": With respect to any Distribution Date, the
excess, if any, of (a) the sum of (i) the aggregate Stated Principal Balances of
the Mortgage Loans immediately following such Distribution Date and (ii) the
amount on deposit in the Pre-Funding Account immediately following such
Distribution Date; over (b) the Class A Certificate Principal Balance as of such
Distribution Date (after taking into account the payment of the amounts
described in clauses (b)(i) through (iv) of the definition of Principal
Distribution Amount on such Distribution Date); provided, however, that such
amount shall not be less than zero.
"Subordination Deficiency Amount": With respect to any Distribution
Date, the excess, if any, of (a) the Required Subordinated Amount applicable to
such Distribution Date over (b) the Subordinated Amount applicable to such
Distribution
29
<PAGE>
Date prior to taking into account the payment of any Subordination Increase
Amounts on such Distribution Date.
"Subordination Increase Amount": With respect to any Distribution
Date, the lesser of (a) the Subordination Deficiency Amount as of such
Distribution Date (after taking into account the payment of the Principal
Distribution Amount, on such Distribution Date, exclusive of the payment of any
Subordination Increase Amount) and (b) the amount of Net Monthly Excess Cashflow
on such Distribution Date as reduced by any Cumulative Insurance Payments or
payments allocated to the Overcollateralization Deficit.
"Subordination Reduction Amount": With respect to any Distribution
Date, an amount equal to the lesser of (a) the Excess Subordinated Amount and
(b) the sum of the amounts available for distribution specified in clauses
(b)(i) through (iii) of the definition of Principal Distribution Amount.
"Sub-Servicer": Any Person with which the Servicer has entered into
a Sub-Servicing Agreement and which meets the qualifications of a Sub-Servicer
pursuant to Section 3.02.
"Sub-Servicing Account": An account established by a Sub-Servicer
which meets the requirements set forth in Section 3.08 and is otherwise
acceptable to the Servicer.
"Sub-Servicing Agreement": The written contract between the Servicer
and a Sub-Servicer relating to servicing and administration of certain Mortgage
Loans as provided in Section 3.02.
"Substitution Shortfall Amount": As defined in Section 2.05(d).
"Tax Returns": The federal income tax return on Internal Revenue
Service Form 1066, U.S. Real Estate Mortgage Investment Conduit Income Tax
Return, including Schedule Q thereto, Quarterly Notice to Residual Interest
Holders of REMIC Taxable Income or Net Loss Allocation, or any successor forms,
to be filed on behalf of the Trust Fund due to its classification as a REMIC
under the REMIC Provisions, together with any and all other information reports
or returns that may be required to be furnished to the Certificateholders or
filed with the Internal Revenue Service or any other governmental taxing
authority under any applicable provisions of federal, state or local tax laws.
"Termination Price": As defined in Section 10.01.
"Terminator": As defined in Section 10.01.
"Transfer": Any direct or indirect transfer, sale, pledge,
hypothecation, or other form of assignment of any Ownership Interest in a
Certificate.
"Transferee": Any Person who is acquiring by Transfer any Ownership
Interest in a Certificate.
30
<PAGE>
"Transferor": Any Person who is disposing by Transfer of any
Ownership Interest in a Certificate.
"Trust Fund": The segregated pool of assets subject hereto,
constituting the primary trust created hereby and to be administered hereunder,
consisting of: (i) such Mortgage Loans as from time to time are subject to this
Agreement, together with the Mortgage Files relating thereto, and together with
all collections thereon and proceeds thereof, (ii) any REO Property, together
with all collections thereon and proceeds thereof, (iii) the Trustee's rights
with respect to the Mortgage Loans under all insurance policies required to be
maintained pursuant to this Agreement and any proceeds thereof, (iv) the
Depositor's rights under the Unaffiliated Seller's Agreement (including any
security interest created thereby), (v) the Collection Account, the Distribution
Account, any REO Account and the Expense Account and such assets that are
deposited therein from time to time and any investments thereof, (vi) any
amounts on deposit in the Pre-Funding Account and the Redemption Account and
(vii) the Trustee's rights under the Policy, together with any and all income,
proceeds and payments with respect thereto. Notwithstanding the foregoing,
however, the Trust Fund specifically excludes all payments and other collections
of principal and interest on the Mortgage Loans received on or before the
Cut-off Date.
"Trustee": First Union National Bank, a national banking
association, or its successor-in-interest, or any successor trustee appointed as
herein provided.
"Trustee's Fee": The amount payable to the Trustee on each
Distribution Date pursuant to Section 8.05 as compensation for all services
rendered by it in the execution of the trust hereby created and in the exercise
and performance of any of the powers and duties of the Trustee hereunder, which
amount shall equal one twelfth of the product of (i) the Trustee's Fee Rate,
multiplied by (ii) the aggregate Stated Principal Balance of the Mortgage Loans
and any REO Properties as of the preceding Distribution Date (or, in the case of
the initial Distribution Date, as of the Cut-off Date).
"Trustee's Fee Rate": 0.015% per annum.
"Unaffiliated Seller's Agreement": The agreement dated as of August
10, 1997 between the Seller and the Depositor and providing for the transfer of
Mortgage Loans from the Seller to the Depositor.
"Uninsured Cause": Any cause of damage to a Mortgaged Property such
that the complete restoration of such property is not fully reimbursable by the
hazard insurance policies required to be maintained pursuant to Section 3.16.
"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 ineludible in gross
income for United States federal income tax purposes regardless of its
connection with the conduct of a trade or business within the United States. The
term "United States" shall have the meaning set forth in Section 7701 of the
Code.
31
<PAGE>
"Value": With respect to any Mortgaged Property, the lesser of (i)
the lesser of (a) the value thereof as determined by an appraisal made for the
originator of the Mortgage Loan at the time of origination of the Mortgage Loan
by an appraiser who met the minimum requirements of FNMA and FHLMC, and (b) the
value thereof as determined by a review appraisal conducted by the Seller in the
event any such review appraisal determines an appraised value ten percent or
more lower than the value thereof as determined by the appraisal referred to in
clause (i)(a) above and (ii) the purchase price paid for the related Mortgaged
Property by the Mortgagor with the proceeds of the Mortgage Loan; provided,
however, in the case of a Refinanced Mortgage Loan, such value of the Mortgaged
Property is based solely upon the lesser of (1) the value determined by an
appraisal made for the originator of such Refinanced Mortgage Loan at the time
of origination of such Refinanced Mortgage Loan by an appraiser who met the
minimum requirements of FNMA and FHLMC and (2) the value thereof as determined
by a review appraisal conducted by the Seller in the event any such review
appraisal determines an appraised value ten percent or more lower than the value
thereof as determined by the appraisal referred to in clause (ii)(l) above.
"Voting Rights": The portion of the voting rights of all of the
Certificates which is allocated to any Certificate. With respect to any date of
determination, the percentage of all the Voting Rights allocated among Holders
of each Class of Certificates shall be the fraction, expressed as a percentage,
the numerator of which is the aggregate Certificate Principal Balance of all the
Certificates of such Class then outstanding and the denominator of which is the
aggregate Stated Principal Balance of the Mortgage Loans then outstanding. The
Voting Rights allocated to each Class of Certificate shall be allocated among
Holders of each such Class in accordance with their respective Percentage
Interests as of the most recent Distribution Date.
ARTICLE 2.
CONVEYANCE OF MORTGAGE LOANS;
ORIGINAL ISSUANCE OF CERTIFICATES
Section 2.01. Conveyance of Mortgage Loans.
(a) The Depositor, concurrently with the execution and delivery
hereof, does hereby transfer, assign, set over and otherwise convey to the
Trustee without recourse for the benefit of the Certificateholders and the
Certificate Insurer all the right, title and interest of the Depositor,
including any security interest therein for the benefit of the Depositor, in and
to the Initial Mortgage Loans and the Additional Mortgage Loans, the rights of
the Depositor under the Unaffiliated Seller's Agreement, and all other assets
included or to be included in the Trust Fund. Such assignment includes all
interest and principal received by the Depositor or the Servicer on or after the
Cut-off Date with respect to the Initial Mortgage Loans and Additional Mortgage
Loans.
Section 2.02. Purchase and Sale of Pre-Funded 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
Pre-Funded Loan
32
<PAGE>
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 (exclusive of Pre-Funding Earnings)
as provided herein, the Depositor shall on any Pre-Funded Transfer Date sell 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
additional Mortgage Loans ("Pre-Funded Mortgage Loans"), including the
outstanding principal of and interest due on such Pre-Funded 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. The amount released from the
Pre-Funding Account with respect to a transfer of Pre-Funded Mortgage Loans
shall be one-hundred percent (100%) of the aggregate Stated Principal Balances
as of the related Cut-Off Date of the Pre-Funded Mortgage Loans so transferred.
In connection with each sale of Pre-Funded Mortgage Loans hereunder, the
Originator, the Seller, the Depositor and the Trustee shall execute and deliver
an instrument of transfer substantially in the form of Exhibit G hereto (the
"Pre-Funded Mortgage Loan Transfer Agreement").
(b) The obligation of the Trustee to accept any Pre-Funded Mortgage
Loans, and to release funds in respect thereof from the Pre-Funding Account to
the Depositor, pursuant to this Section 2.02 shall be subject to the
satisfaction of each of the following conditions on or prior to the related
Pre-Funded Loan 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 Pre-Funded
Mortgage Loans, and shall have provided any other information
reasonably requested by any of the foregoing with respect to the
Pre-Funded Mortgage Loans;
(ii) the Originator and the Seller shall have executed and
delivered a Pre-Funded Mortgage Loan Transfer Agreement with respect
to the Pre-Funded Mortgage Loans;
(iii) the Seller shall have deposited in the Collection
Account all collections of (x) principal in respect of the
Pre-Funded Mortgage Loans received after the related Cut-Off Date of
the Pre-Funded Mortgage Loans so transferred and (y) interest due on
the Pre-Funded Loan Mortgage Loans after the related Cut-Off Date of
such Pre-Funded Mortgage Loans;
(iv) the Depositor shall not be insolvent, aware of any
pending insolvency and the transfer of the Pre-Funded Mortgage Loans
as contemplated hereby shall not result in the insolvency of the
Depositor;
(v) such addition will not result in a material adverse tax
consequence to the Trust or the Holders of the Certificates;
(vi) the Pre-Funding Period shall not have terminated;
33
<PAGE>
(vii) the Seller shall have delivered to the Depositor and the
Trustee an Officer's Certificate confirming the satisfaction of each
condition precedent specified in Section 2.02(d) of the Unaffiliated
Seller's Agreement in relation to such Pre-Funded Mortgage Loans;
and
(viii) there shall have been delivered to the Certificate
Insurer, the Rating Agencies and the Trustee, Opinions of Counsel
with respect to the transfer of the Pre-Funded Loan Mortgage Loans
substantially in the form of the Opinions of Counsel delivered to
the Certificate Insurer and the Trustee on the Startup Date (i.e.,
bankruptcy, corporate and tax opinions).
(c) The obligation of the Trust to purchase the Pre-Funded Loan
Mortgage Loans on a Pre-Funded Loan Transfer Date is subject to the following
requirements, any of which requirements (except for the requirement stated in
clause (v) of this paragraph) may be waived or modified in any respect by the
Insurer: (i) such Pre-Funded Mortgage Loan may not be 60 or more days
contractually delinquent as of the related Pre-Funded Loan Transfer Date; (ii)
the remaining term to stated maturity of such Pre-Funded Mortgage Loan will not
exceed 30 years for fully amortizing loans or 15 years for "Balloon Loans";
(iii) such Pre-Funded Mortgage Loan will be secured by a Mortgage in a first
lien position; (iv) such Pre-Funded Mortgage Loan will not have a Mortgage Rate
less than 8.5%; (v) such Pre-Funded Mortgage Loan will be otherwise acceptable
to the Depositor and the Insurer; (vi) following the purchase of such Pre-Funded
Mortgage Loan by the Trust Fund, the Mortgage Loans (including Pre-Funded
Mortgage Loans) as of the Pre-Funded Loan Transfer Date: (a) will have a
weighted average Mortgage Rate of at least 11.00%; (b) will have a weighted
average remaining term to stated maturity of less than 205 months; (c) will not
have more than 40% by aggregate principal balance "Balloon Loans"; (d) will have
no Mortgage Loan with a principal balance in excess of $400,000; (e) will have a
state concentration not in excess of 20% for any one state; (f) will have not
more than 5% in aggregate principal balance of the Mortgage Loans concentrated
in any single ZIP code; and (g) will have no more than 5% Mortgage Loans
relating to non-owner occupied properties.
(d) In connection with the transfer and assignment of the Pre-Funded
Loan Mortgage Loans, the Depositor shall satisfy the document delivery
requirements set forth in Section 2.03(a).
Section 2.03. Mortgage Files and Documents.
(a) In connection with each transfer and assignment contemplated by
Section 2.01 and 2.02 hereof, the Depositor will cause the Seller to deliver to,
and deposit with, the Trustee the following documents or instruments with
respect to each Mortgage Loan (a "Mortgage File") so transferred and assigned:
(i) the original Mortgage Note, endorsed in the following
form: "Pay to the order of First Union National Bank, as Trustee for
the registered holders of Emergent Home Equity Loan Pass-Through
Certificates, Series 1997-3, without recourse", with all prior and
34
<PAGE>
intervening endorsements showing a complete chain of endorsement
from the originator to the Person so endorsing to the Trustee;
(ii) the original Mortgage with evidence of recording thereon,
and the original recorded power of attorney, if the Mortgage was
executed pursuant to a power of attorney, with evidence of recording
thereon or, if such Mortgage or power of attorney has been submitted
for recording but has not been returned form the applicable public
recording office or is not otherwise available, a copy of such
Mortgage or power of attorney, as the case may be, certified by the
Servicer to be a true and complete copy of the original submitted
for recording with the recorded original to be delivered by the
Servicer to the Trustee promptly after receipt thereof;
(iii) an original Assignment of the Mortgage executed in the
following form: "First Union National Bank, as Trustee for the
registered holders of Emergent Home Equity Loan Pass-Through
Certificates, Series 1997-3";
(iv) the original recorded Assignment or Assignments of the
Mortgage showing a complete chain of assignment from the originator
to the Person assigning the Mortgage to the Trustee as contemplated
by the immediately preceding clause (iii) or, if any such Assignment
has been submitted for recording but has not been returned from the
applicable public recording office or is not otherwise available, a
copy of such Assignment certified by the Servicer to be a true and
complete copy of the original submitted for recording with the
recorded original to be delivered by the Servicer to the Trustee
promptly after receipt thereof;
(v) the original or copies of each assumption, modification,
written assurance or substitution agreement, if any; and
(vi) the original lender's title insurance policy, together
with all endorsements or riders that were issued with or subsequent
to the issuance of such policy, insuring the priority of the
Mortgage as a first lien on the Mortgaged Property represented
therein as a fee interest vested in the Mortgagor, or in the event
such original title policy is unavailable, a written commitment or
uniform binder or preliminary report of title issued by the title
insurance or escrow company.
(b) The Depositor shall cause the Seller, no later than 30 days
following the Seller's receipt of original recording information and in any
event within one year following the Closing Date, to submit or cause to be
submitted for recording, at no expense to the Trust Fund, the Trustee or the
Certificate Insurer, in the appropriate public office for real property records,
each Assignment referred to in Sections 2.03(a)(iii) and (iv) above. In the
event that any such Assignment is lost or returned unrecorded because of a
defect therein, the Depositor shall promptly prepare or cause to
35
<PAGE>
be prepared a substitute Assignment or cure or cause to be cured such defect, as
the case may be, and thereafter cause each such Assignment to be duly recorded.
(c) If any original Mortgage Note referred to in Section 2.03(a)(i)
cannot be located, the obligations of the Depositor to cause the Seller to
deliver such documents shall be deemed to be satisfied upon delivery to the
Trustee of a photocopy of the original of such Mortgage Note, with a Lost Note
Affidavit to follow within one Business Day. If any of the documents referred to
in Sections 2.03(a)(ii), (iii) or (iv) above has as of the Closing Date or
Pre-Funded Loan Transfer Date been submitted for recording but either (x) has
not been returned from the applicable public recording office or (y) such public
recording office has retained the original of such document, the obligations of
the Depositor to cause the Seller to deliver such documents shall be deemed to
be satisfied upon (1) delivery to the Trustee of a copy of each such document
certified by the Seller in the case of (x) above or the applicable public
recording office in the case of (y) above to be a true and complete copy of the
original that was submitted for recording and (2) if such copy is certified by
the Seller, delivery to the Trustee promptly upon receipt thereof of either the
original or a copy of such document certified by the applicable public recording
office to be a true and complete copy of the original. Notice shall be provided
to the Trustee, the Certificate Insurer and the Rating Agencies by the Seller if
delivery pursuant to clause (2) above will be made more than 180 days after the
Closing Date or Pre-Funded Loan Transfer Date, as the case may be. If the
original lender's title insurance policy was not delivered pursuant to Section
2.03(a)(vi) above, the Depositor shall cause the Seller to deliver to the
Trustee, promptly after receipt thereof, the original lender's title insurance
policy. The Depositor shall cause the Seller to deliver to the Trustee promptly
upon receipt thereof any other original documents constituting a part of a
Mortgage File received with respect to any Mortgage Loan, including, but not
limited to, any original documents evidencing an assumption or modification of
any Mortgage Loan.
(d) All original documents relating to the Mortgage Loans that are
not delivered to the Trustee are and shall be held by or on behalf of the
Seller, the Depositor or the Servicer, as the case may be, in trust for the
benefit of the Trustee on behalf of the Certificateholders and the Certificate
Insurer. In the event that any such original document is required pursuant to
the terms of this Section to be a part of a Mortgage File, such document shall
be delivered promptly to the Trustee. Any such original document delivered to or
held by the Depositor or the Seller that is not required pursuant to the terms
of this Section to be a part of a Mortgage File, shall be delivered promptly to
the Servicer.
(e) The Depositor herewith delivers to the Trustee an executed copy
of the Unaffiliated Seller's Agreement. In addition to the foregoing, the
Depositor shall cause the Certificate Insurer to deliver the Policy to the
Trustee for the benefit of the Certificateholders.
Section 2.04. Acceptance by Trustee.
(a) The Trustee acknowledges receipt of the Policy and, subject to
the provisions of Section 2.03 and subject to the review described in the next
paragraph below and any exceptions noted on the exception report described in
the next paragraph
36
<PAGE>
below, the documents referred to in Section 2.03 (other than such documents
described in Section 2.03(a)(v)) above and all other assets included in the
definition of "Trust Fund" (to the extent of amounts deposited into the
Collection Account, the Redemption Account and the Pre-Funding Account) and
declares that it holds and will hold such documents and the other documents
delivered and to be delivered to it constituting a Mortgage File, and that it
holds or will hold all such assets and such other assets included in the
definition of "Trust Fund" in trust for the exclusive use and benefit of all
present and future Certificateholders and the Certificate Insurer.
(b) The Trustee agrees, for the benefit of the Certificateholders,
to review each Mortgage File relating to the Initial Mortgage Loans and the
Additional Mortgage Loans within 30 days after the Closing Date, and to review
each Mortgage File relating to each Pre-Funded Mortgage Loan within 90 days of
the Pre-Funded Loan Transfer Date for such Pre-Funded Mortgage Loan, and to
certify in substantially the form attached hereto as Exhibit C-1 that, as to
each Mortgage Loan (other than any Mortgage Loan which has been certified as
having been paid in full or any Mortgage Loan specifically identified in the
exception report annexed thereto as not being covered by such certification),
(i) all documents constituting part of such Mortgage File required to be
delivered to it pursuant to this Agreement are in its possession, (ii) such
documents have been reviewed by it and appear regular on their face and relate
to such Mortgage Loan, (iii) based on its examination and only as to the
foregoing, the information set forth in the Mortgage Loan Schedule that
corresponds to items (1) through (3), (6), (9)(A), (10), (13) and (16) of the
definition of "Mortgage Loan Schedule" accurately reflects information set forth
in the Mortgage File. It is herein acknowledged that, in conducting such review,
the Trustee is under no duty or obligation (i) to inspect, review or examine any
such documents, instruments, certificates or other papers to determine that they
are genuine, enforceable, or appropriate for the represented purpose or that
they have actually been recorded or that they are other than what they purport
to be on their face, or (ii) to determine whether any Mortgage File should
include any of the documents specified in clause (v) of Section 2.03(a).
(c) Prior to the first anniversary date of this Agreement the
Trustee shall deliver to the Depositor, the Servicer and the Certificate Insurer
a final certification in the form annexed hereto as Exhibit C-2 evidencing the
completeness of the Mortgage Files, with any applicable exceptions noted
thereon.
(d) If in the process of reviewing the Mortgage Files and making or
preparing, as the case may be, the certifications referred to above, the Trustee
finds any document or documents constituting a part of a Mortgage File to be
missing or defective in any material respect, at the conclusion of its review
the Trustee shall so notify the Depositor, the Servicer and the Certificate
Insurer. In addition, upon the discovery by the Depositor, the Servicer or the
Trustee of a breach of any of the representations and warranties made by the
Seller in the related Unaffiliated Seller's Agreement or by the Originator in
the Purchase and Assignment Agreement in respect of any Mortgage Loan which
materially adversely affects such Mortgage Loan or the interests of the related
Certificateholders in such Mortgage Loan, the party discovering such breach
shall give prompt written notice to the other parties and the Certificate
Insurer.
37
<PAGE>
Section 2.05. Repurchase or Substitution of Mortgage Loans.
(a) Upon discovery or receipt of notice of any materially defective
document in, or that a document is missing from, a Mortgage File or of the
breach by the Seller of any representation, warranty or covenant under the
Unaffiliated Seller's Agreement or by the Originator in the Purchase and
Assignment Agreement in respect of any Mortgage Loan which materially adversely
affects the value of such Mortgage Loan or the interest therein of the
Certificateholders, the Trustee or the Originator, as the case may be, shall
promptly notify the Originator, the Seller, the Servicer, the Depositor and the
Certificate Insurer of such defect, missing document or breach and request that
the Seller and the Originator deliver such missing document or cure such defect
or breach within 60 days from the date the Seller and the Originator were
notified of such missing document, defect or breach, and if the Seller or the
Originator does not deliver such missing document or cure such defect or breach
in all material respects during such period, the Trustee shall enforce the
Seller's obligation under the Unaffiliated Seller's Agreement and the
Originator's obligation under the Purchase and Assignment Agreement (i) in
connection with any such breach that could not reasonably have been cured within
such 60 day period, if the Seller or the Originator shall have commenced to cure
such breach within such 60 day period, to proceed thereafter diligently and
expeditiously to cure the same within the period provided under the Unaffiliated
Seller's Agreement or the Purchase and Assignment Agreement and (ii) in
connection with any such breach (subject to clause (i) above) or in connection
with any missing document defect, to repurchase such Mortgage Loan from the
Trust Fund at the Purchase Price within 60 days after the date on which it was
notified (subject to Section 2.05(e)) of such missing document, defect or
breach, if and to the extent that the Seller is obligated to do so under the
Unaffiliated Seller's Agreement and the Originator is obligated to do so under
the Purchase and Assignment Agreement. The Purchase Price for the repurchased
Mortgage Loan shall be deposited in the Collection Account and the Trustee, upon
receipt of written certification from the Servicer of such deposit, shall
release the related Mortgage File to the Seller or the Originator, as the case
may be, and shall execute and deliver such instruments of transfer or
assignment, in each case without recourse, as the Seller or the Originator shall
furnish to it and as shall be necessary to vest in the Seller or the Originator,
as the case may be, any Mortgage Loan released pursuant hereto and the Trustee
shall have no further responsibility with regard to such Mortgage File. In lieu
of repurchasing any such Mortgage Loan as provided above, if so provided in the
Purchase and Assignment Agreement, the Originator may cause such Mortgage Loan
to be removed from the Trust Fund (in which case it shall become a Deleted
Mortgage Loan) and substitute one or more Qualified Substitute Mortgage Loans in
the manner and subject to the limitations set forth in Section 2.05(d). It is
understood and agreed that the obligation of the Seller and the Originator to
cure or to repurchase (or to substitute for) any Mortgage Loan as to which a
document is missing, a material defect in a constituent document exists or as to
which such a breach has occurred and is continuing shall constitute the sole
remedy respecting such omission, defect or breach available to the Trustee on
behalf of the Certificateholders and the Certificate Insurer.
(b) [Reserved]
(c) [Reserved]
38
<PAGE>
(d) Any substitution of Qualified Substitute Mortgage Loans for
Deleted Mortgage Loans made pursuant to Section 2.05(a), must be effected prior
to the date which is two years after the Startup Day for the Trust Fund.
As to any Deleted Mortgage Loan for which the Originator substitutes
a Qualified Substitute Mortgage Loan or Loans, such substitution shall be
effected by the Originator delivering to the Trustee, for such Qualified
Substitute Mortgage Loan or Loans, the Mortgage Note, the Mortgage, the
Assignment to the Trustee, and such other documents and agreements, with all
necessary endorsements thereon, as are required by Section 2.03, together with
an Officers' Certificate providing that each such Qualified Substitute Mortgage
Loan satisfies the definition thereof and specifying the Substitution Shortfall
Amount (as described below), if any, in connection with such substitution. The
Trustee shall acknowledge receipt for such Qualified Substitute Mortgage Loan or
Loans and, within ten Business Days thereafter, review such documents as
specified in Section 2.04 and deliver to the Depositor, the Servicer and the
Certificate Insurer, with respect to such Qualified Substitute Mortgage Loan or
Loans, a certification substantially in the form attached hereto as Exhibit C-1,
with any applicable exceptions noted thereon. Within one year of the date of
substitution, the Trustee shall deliver to the Depositor, the Servicer and the
Certificate Insurer a certification substantially in the form of Exhibit C-2
hereto with respect to such Qualified Substitute Mortgage Loan or Loans, with
any applicable exceptions noted thereon. Monthly Payments due with respect to
Qualified Substitute Mortgage Loans in the month of substitution are not part of
the Trust Fund and will be retained by the Originator. For the month of
substitution, distributions to Certificateholders will reflect the collections
and recoveries in respect of such Deleted Mortgage Loan in the Collection Period
preceding the month of substitution and the Originator shall thereafter be
entitled to retain all amounts subsequently received in respect of such Deleted
Mortgage Loan. The Servicer shall amend the Mortgage Loan Schedule to reflect
the removal of such Deleted Mortgage Loan from the terms of this Agreement and
the substitution of the Qualified Substitute Mortgage Loan or Loans and shall
deliver a copy of such amended Mortgage Loan Schedule to the Trustee. Upon such
substitution, such Qualified Substitute Mortgage Loan or Loans shall constitute
part of the Mortgage Pool and shall be subject in all respects to the terms of
this Agreement and, in the case of a substitution effected by the Originator,
the Purchase and Assignment Agreement, including, in the case of a substitution
effected by the Originator all applicable representations and warranties thereof
included in the Purchase and Assignment Agreement as of the date of
substitution.
For any month in which the Originator substitutes one or more
Qualified Substitute Mortgage Loans for one or more Deleted Mortgage Loans, the
Servicer will determine the amount (the "Substitution Shortfall Amount"), if
any, by which the aggregate Purchase Price of all such Deleted Mortgage Loans
exceeds the aggregate, as to each such Qualified Substitute Mortgage Loan, of
the Stated Principal Balance thereof as of the related Cut-Off Date, together
with one month's interest on such principal balance at the applicable Net
Mortgage Rate. On the date of such substitution, the Originator will deliver or
cause to be delivered to the Servicer for deposit in the Collection Account an
amount equal to the Substitution Shortfall Amount, if any, and the Trustee, upon
receipt of the related Qualified Substitute Mortgage Loan or Loans and
certification by the Servicer of such deposit, shall release to the Originator
the
39
<PAGE>
related Mortgage File or Files and shall execute and deliver such instruments of
transfer or assignment, in each case without recourse, as the Originator shall
deliver to it and as shall be necessary to vest therein any Deleted Mortgage
Loan released pursuant hereto.
In addition, the Originator shall obtain at its own expense and
deliver to the Trustee and the Certificate Insurer an Opinion of Counsel to the
effect that such substitution will not cause (a) any federal tax to be imposed
on the REMIC Trust, including, without limitation, any federal tax imposed on
"prohibited transactions" under Section 860F(a)(l) of the Code or on
"contributions after the startup date" under Section 860G(d)(1) of the Code, or
(b) the REMIC Trust to fail to qualify as a REMIC at any time that any
Certificate is outstanding.
(e) Upon discovery by the Depositor, the Originator, the Seller, the
Servicer, the Trustee or the Certificate Insurer that any Mortgage Loan does not
constitute a "qualified mortgage" within the meaning of Section 860G(a)(3) of
the Code, the party discovering such fact shall within two Business Days give
written notice thereof to the other parties and the Certificate Insurer. In
connection therewith, the Originator and the Seller shall be obligated to
repurchase or, subject to the limitations set forth in Section 2.05(d),
substitute one or more Qualified Substitute Mortgage Loans for the affected
Mortgage Loan within 90 days of the earlier of discovery or receipt of such
notice with respect to such affected Mortgage Loan. Any such repurchase or
substitution shall be made in the same manner as set forth in Section 2.05(a).
The Trustee shall reconvene to the Seller or the Originator, as the case may be,
the Mortgage Loan to be released pursuant hereto in the same manner, and on the
same terms and conditions, as it would a Mortgage Loan repurchased for breach of
a representation or warranty.
Section 2.06. Representations and Warranties of the Depositor.
(a) The Depositor hereby represents and warrants to the Trustee for
the benefit of the Certificateholders and the Certificate Insurer that as of the
Closing Date the assignment of the Depositor's rights, but none of its
obligations, under the Unaffiliated Seller's Agreement is valid, enforceable and
effective to permit the Trustee to enforce the obligations of the Seller
thereunder.
(b) It is understood and agreed that the representations and
warranties set forth in this Section 2.06 shall survive delivery of the Mortgage
Files to the Trustee and shall inure to the benefit of the Certificateholders
and the Certificate Insurer notwithstanding any restrictive or qualified
endorsement or assignment. Upon discovery by any of the Depositor, the Servicer
or the Trustee of a breach of any of the foregoing representations and
warranties which materially and adversely affects the value of any Mortgage Loan
or the interests therein of the Certificateholders and the Certificate Insurer,
the party discovering such breach shall give prompt written notice to the other
parties, and in no event later than two Business Days from the date of such
discovery.
(c) The Depositor is duly organized, validly existing and in good
standing as a corporation under the laws of the state of its incorporation.
40
<PAGE>
(d) The Depositor has the full power and authority to conduct its
business as presently conducted by it and to execute, deliver and perform, and
to enter into and consummate, all transactions contemplated by this Agreement.
The Depositor has duly authorized the execution, delivery and performance of
this Agreement, has duly executed and delivered this Agreement, and this
Agreement, assuming due authorization, execution and delivery by the Depositor
and the Trustee, constitutes a legal, valid and binding obligation of the
Depositor, enforceable against it in accordance with its terms except as the
enforceability thereof may be limited by bankruptcy, insolvency, reorganization
or similar laws affecting the enforcement of creditors' rights generally and by
general principles of equity.
(e) The execution and delivery of this Agreement by the Depositor
and the performance of and compliance with the terms of this Agreement will not
(a) violate the Depositor's charter or by-laws or any law, rule, regulation,
order, judgment, award, administrative interpretation, injunction, writ, decree
or the like affecting the Depositor or by which the Depositor is bound or (b)
result in a breach of or constitute a default under any indenture or other
material agreement to which the Depositor is a party or by which the Depositor
is bound, which in the case of either clause (a) or (b) will have a material
adverse effect on the Depositor's ability to perform its obligations under this
Agreement.
(f) There are no actions or proceedings against, investigations
known to it of, the Depositor before any court, administrative or other tribunal
(A) that might prohibit its entering into this Agreement, (B) seeking to prevent
the consummation of the transactions contemplated by this Agreement or (C) that
might prohibit or materially and adversely affect the performance by the
Depositor of its obligations under, or validity or enforceability of, this
Agreement.
(g) No consent, approval, authorization or order of any court or
governmental agency or body is required for the execution, delivery and
performance by the Depositor of, or compliance by the Depositor with, this
Agreement or the consummation of the transactions contemplated by this
Agreement, except for such consents, approvals, authorizations or orders, if
any, that have been obtained prior to the Closing Date.
Section 2.07. Representations, Warranties and Covenants of the
Servicer.
The Servicer hereby represents, warrants and covenants to the
Trustee, for the benefit of each of the Trustee, the Certificateholders, the
Certificate Insurer and to the Depositor that as of the Closing Date or as of
such date specifically provided herein:
(i) The Servicer is duly organized, validly existing and in
good standing as a corporation under the laws of the state of its
incorporation and is and will remain duly licensed under and in
compliance with the laws of each state in which any Mortgaged
Property is located to the extent necessary to ensure the
enforceability of each Mortgage Loan and
41
<PAGE>
the servicing of the Mortgage Loan in accordance with the terms of
this Agreement;
(ii) The Servicer has the full power and authority to conduct
its business as presently conducted by it and to execute, deliver
and perform, and to enter into and consummate, all transactions
contemplated by this Agreement. The Servicer has duly authorized the
execution, delivery and performance of this Agreement, has duly
executed and delivered this Agreement, and this Agreement, assuming
due authorization, execution and delivery by the Depositor and the
Trustee, constitutes a legal, valid and binding obligation of the
Servicer, enforceable against it in accordance with its terms except
as the enforceability thereof may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting the enforcement
of creditors' rights generally and by general principles of equity;
(iii) The execution and delivery of this Agreement by the
Servicer and the performance of and compliance with the terms of
this Agreement will not (a) violate the Servicer's charter or
by-laws or any law, rule, regulation, order, judgment, award,
administrative interpretation, injunction, writ, decree or the like
affecting the Servicer or by which the Servicer is bound or (b)
result in a breach of or constitute a default under any indenture or
other material agreement to which the Servicer is a party or by
which the Servicer is bound, which in the case of either clause (a)
or (b) will have a material adverse effect on the Servicer's ability
to perform its obligations under this Agreement;
(iv) [reserved];
(v) The Servicer does not believe, nor does it have any reason
or cause to believe, that it cannot perform each and every covenant
of it contained in this Agreement;
(vi) With respect to each Mortgage Loan, the Servicer will
deliver possession of a complete Mortgage File, except for such
documents as have been delivered to the Trustee;
(vii) There are no actions or proceedings against,
investigations known to it of, the Servicer before any court,
administrative or other tribunal (A) that might prohibit its
entering into this Agreement, (B) seeking to prevent the
consummation of the transactions contemplated by this Agreement or
(C) that might prohibit or materially and adversely affect the
performance by the Servicer of its obligations under, or validity or
enforceability of, this Agreement; and
(viii) No consent, approval, authorization or order of any
court or governmental agency or body is required for the execution,
delivery and performance by the Servicer of, or compliance by the
Servicer with, this Agreement or the consummation of the
transactions contemplated by
42
<PAGE>
this Agreement, except for such consents, approvals, authorizations
or orders, if any, that have been obtained prior to the Closing
Date.
It is understood and agreed that the representations, warranties and
covenants set forth in this Section 2.07 shall survive delivery of the Mortgage
Files to the Trustee and shall inure to the benefit of the Trustee, the
Depositor, the Certificateholders and the Certificate Insurer. Upon discovery by
any of the Depositor, the Servicer or the Trustee of a breach of any of the
foregoing representations, warranties and covenants which materially and
adversely affects the value of any Mortgage Loan or the interests therein of the
Certificateholders and the Certificate Insurer, the party discovering such
breach shall give prompt written notice (but in no event later than two Business
Days following such discovery) to the Trustee and the Certificate Insurer.
Section 2.08. Issuance of Certificates.
The Trustee acknowledges the assignment to it of the Mortgage Loans
and the delivery to it of the Mortgage Files, subject to the provisions of
Sections 2.03 and 2.04, together with the assignment to it of all other assets
included in the Trust Fund, receipt of which is hereby acknowledged.
Concurrently with such assignment and delivery and in exchange therefor, the
Trustee, pursuant to the written request of the Depositor executed by an officer
of the Depositor, has executed, authenticated and delivered to or upon the order
of the Depositor, the Certificates in authorized denominations. The interests
evidenced by the Certificates constitute the entire beneficial ownership
interest in the Trust Fund.
ARTICLE 3.
ADMINISTRATION AND SERVICING
OF THE TRUST FUND
Section 3.01. Servicer to Act as Servicer.
The Servicer shall service and administer the Mortgage Loans on
behalf of the Trustee and in the best interests of and for the benefit of the
Certificateholders and the Certificate Insurer (as determined by the Servicer in
its reasonable judgment) in accordance with the terms of this Agreement and the
respective Mortgage Loans and, to the extent consistent with such terms, in the
same manner in which it services and administers similar mortgage loans for its
own portfolio, giving due consideration to customary and usual standards of
practice of prudent mortgage lenders and loan servicers administering similar
mortgage loans but without regard to:
(i) any relationship that the Servicer, any Sub-Servicer or
any Affiliate of the Servicer or any Sub-Servicer may have with the
related Mortgagor;
(ii) the ownership of any Certificate by the Servicer or any
Affiliate of the Servicer;
43
<PAGE>
(iii) the Servicer's obligation to make Monthly Advances or
Servicing Advances; or
(iv) the Servicer's or any Sub-Servicer's right to receive
compensation for its services hereunder or with respect to any
particular transaction.
To the extent consistent with the foregoing, the Servicer shall also seek to
maximize the timely and complete recovery of principal and interest on the
Mortgage Notes. Subject only to the above-described servicing standards and the
terms of this Agreement and of the respective Mortgage Loans, the Servicer shall
have full power and authority, acting alone or through Sub-Servicers as provided
in Section 3.02, to do or cause to be done any and all things in connection with
such servicing and administration which it may deem necessary or desirable.
Without limiting the generality of the foregoing, the Servicer in its own name
or in the name of a Sub-Servicer is hereby authorized and empowered by the
Trustee when the Servicer believes it reasonably necessary in its best judgment
in order to comply with its servicing duties hereunder, to execute and deliver,
on behalf of the Certificateholders and the Trustee or any of them, and upon
notice to the Trustee, any and all instruments of satisfaction or cancellation,
or of partial or full release or discharge, and all other comparable
instruments, with respect to the Mortgage Loans and the Mortgaged Properties and
to institute foreclosure proceedings or obtain a deed-in-lieu of foreclosure so
as to convert the ownership of such properties, and to hold or cause to be held
title to such properties, on behalf of the Trustee and Certificateholders. The
Servicer shall service and administer the Mortgage Loans in accordance with
applicable state and federal law and shall provide to the Mortgagors any reports
required to be provided to them thereby. The Servicer shall also comply in the
performance of this Agreement with all reasonable rules and requirements of each
insurer under any standard hazard insurance policy. Subject to Section 3.19, the
Trustee shall execute, at the written request of the Servicer, and furnish the
Servicer and any Sub-Servicer any special or limited powers of attorney and
other documents necessary or appropriate to enable the Servicer or any
Sub-Servicer to carry out their servicing and administrative duties hereunder
and the Trustee shall not be liable for the actions of the Servicer or any
Sub-Servicers under such powers of attorney.
In accordance with the standards of the preceding paragraph, the
Servicer shall advance or cause to be advanced funds as necessary for the
purpose of effecting the timely payment of taxes and assessments on the
Mortgaged Properties, which advances shall be reimbursable in the first instance
from related collections from the Mortgagors pursuant to Section 3.09, and
further as provided in Section 3.11. Any cost incurred by the Servicer or by
Sub-Servicers in effecting the timely payment of taxes and assessments on a
Mortgaged Property shall not, for the purpose of calculating the Stated
Principal Balance of a Mortgage Loan or distributions to Certificateholders, be
added to the unpaid principal balance of the related Mortgage Loan,
notwithstanding that the terms of such Mortgage Loan so permit.
Notwithstanding anything in this Agreement to the contrary, the
Servicer may not make any future advances with respect to a Mortgage Loan and
the Servicer shall not (unless the Mortgagor is in default with respect to the
Mortgage Loan or such default is, in the judgment of the Servicer, reasonably
foreseeable) permit any
44
<PAGE>
modification with respect to any Mortgage Loan that would change the Mortgage
Rate, reduce or increase the principal balance (except for reductions resulting
from actual payments of principal) or change the final maturity date on such
Mortgage Loan or any modification, waiver or amendment of any term of any
Mortgage Loan that would both (A) effect an exchange or reissuance of such
Mortgage Loan under Section 1001 of the Code (or final, temporary or proposed
Treasury regulations promulgated thereunder) and (B) cause the REMIC Trust to
fail to qualify as a REMIC under the Code or the imposition of any tax on
"prohibited transactions" or "contributions after the startup date" under the
REMIC Provisions.
The Servicer may delegate its responsibilities under this Agreement;
provided, however, that no such delegation shall release the Servicer from the
responsibilities or liabilities arising under this Agreement.
Section 3.02. Sub-Servicing Agreements Between Servicer and
Sub-Servicers.
(a) The Servicer may enter into Sub-Servicing Agreements (provided
that the Servicer shall have obtained the consent of the Certificate Insurer and
provided such agreements would not result in a withdrawal or a downgrading by
any Rating Agency of the rating or any shadow rating on any Class of
Certificates) with Sub-Servicers, for the servicing and administration of the
Mortgage Loans.
Each Sub-Servicer shall be (i) authorized to transact business in
the state or states where the related Mortgaged Properties it is to service are
situated, if and to the extent required by applicable law to enable the
Sub-Servicer to perform its obligations hereunder and under the Sub-Servicing
Agreement, (ii) an institution approved as a mortgage loan originator by the
Federal Housing Administration or an institution the deposit accounts in which
are insured by the FDIC and (iii) a FHLMC or FNMA approved mortgage servicer.
Each Sub-Servicing Agreement must impose on the Sub-Servicer requirements
conforming to the provisions set forth in Section 3.08 and provide for servicing
of the Mortgage Loans consistent with the terms of this Agreement. The Servicer
will examine each Sub-Servicing Agreement and will be familiar with the terms
thereof. The terms of any Sub-Servicing Agreement will not be inconsistent with
any of the provisions of this Agreement. The Servicer and the Sub-Servicers may
enter into and make amendments to the Sub-Servicing Agreements or enter into
different forms of Sub-Servicing Agreements; provided, however, that any such
amendments or different forms shall be consistent with and not violate the
provisions of this Agreement, and that no such amendment or different form shall
be made or entered into which could be reasonably expected to be materially
adverse to the interests of the Certificateholders, without the consent of the
Certificate Insurer. Any variation without the consent of the Certificate
Insurer from the provisions set forth in Section 3.08 relating to insurance or
priority requirements of Sub-Servicing Accounts, or credits and charges to the
Sub-Servicing Accounts or the timing and amount of remittances by the
Sub-Servicers to the Servicer, are conclusively deemed to be inconsistent with
this Agreement and therefore prohibited. The Servicer shall deliver to the
Trustee and the Certificate Insurer copies of all Sub-Servicing Agreements, and
any amendments or modifications thereof, promptly upon the Servicer's execution
and delivery of such instruments.
45
<PAGE>
(b) As part of its servicing activities hereunder, the Servicer, for
the benefit of the Trustee, the Certificateholders and the Certificate Insurer,
shall enforce the obligations of each Sub-Servicer under the related
Sub-Servicing Agreement and of the Seller under the Unaffiliated Seller's
Agreement, including, without limitation, any obligation to make advances in
respect of delinquent payments as required by a Sub-Servicing Agreement, or to
purchase a Mortgage Loan on account of missing or defective documentation or on
account of a breach of a representation, warranty or covenant, as described in
Section 2.05(a). Such enforcement, including, without limitation, the legal
prosecution of claims, termination of Sub-Servicing Agreements, and the pursuit
of other appropriate remedies, shall be in such form and carried out to such an
extent and at such time as the Servicer, in its good faith business judgment,
would require were it the owner of the related Mortgage Loans. The Servicer
shall pay the costs of such enforcement at its own expense, and shall be
reimbursed therefor only (i) from a general recovery resulting from such
enforcement, to the extent, if any, that such recovery exceeds all amounts due
in respect of the related Mortgage Loans, or (ii) from a specific recovery of
costs, expenses or attorneys' fees against the party against whom such
enforcement is directed. Enforcement of the Unaffiliated Seller's Agreement
against the Seller shall be effected by the Servicer to the extent it is not the
Seller, otherwise by the Trustee, in accordance with the foregoing provisions of
this paragraph.
Section 3.03. Successor Sub-Servicers.
The Servicer shall be entitled to terminate any Sub-Servicing
Agreement and the rights and obligations of any Sub-Servicer pursuant to any
Sub-Servicing Agreement in accordance with the terms and conditions of such
Sub-Servicing Agreement but only with the prior consent of the Certificate
Insurer. In the event of termination of any Sub-Servicer, all servicing
obligations of such Sub-Servicer shall be assumed simultaneously by the Servicer
without any act or deed on the part of such Sub-Servicer or the Servicer, and
the Servicer either shall service directly the related Mortgage Loans or shall
enter into a Sub-Servicing Agreement with a successor Sub-Servicer which
qualifies under Section 3.02.
Any Sub-Servicing Agreement shall include the provision that (i)
such agreement may be immediately terminated by the Trustee without fee, in
accordance with the terms of this Agreement, in the event that the Servicer
shall, for any reason, no longer be the Servicer (including termination due to a
Servicer Event of Default) or (ii) clearly and unambiguously states that any
termination fee is the sole responsibility of the Servicer and none of the
Trustee, the Certificateholders or the Certificate Insurer, has any liability
therefor, regardless of the circumstances surrounding such termination.
Section 3.04. Liability of the Servicer.
Notwithstanding any Sub-Servicing Agreement, any of the provisions
of this Agreement relating to agreements or arrangements between the Servicer
and a Sub-Servicer or reference to actions taken through a Sub-Servicer or
otherwise, the Servicer shall remain obligated and primarily liable to the
Trustee, the Certificateholders and the Certificate Insurer for the servicing
and administering of the Mortgage Loans in accordance with the provisions of
Section 3.01 without diminution of such obligation or
46
<PAGE>
liability by virtue of such Sub-Servicing Agreements or arrangements or by
virtue of indemnification from the Sub-Servicer and to the same extent and under
the same terms and conditions as if the Servicer alone were servicing and
administering the Mortgage Loans. The Servicer shall be entitled to enter into
any agreement with a Sub-Servicer for indemnification of the Servicer by such
Sub-Servicer and nothing contained in this Agreement shall be deemed to limit or
modify such indemnification.
Section 3.05. No Contractual Relationship Between Sub-Servicers and
Trustee or Certificateholders.
Any Sub-Servicing Agreement that may be entered into and any
transactions or services relating to the Mortgage Loans involving a Sub-Servicer
in its capacity as such shall be deemed to be between the Sub-Servicer and the
Servicer alone, and the Trustee and Certificateholders or the Certificate
Insurer shall not be deemed parties thereto and shall have no claims, rights,
obligations, duties or liabilities with respect to the Sub-Servicer except as
set forth in Section 3.06. The Servicer shall be solely liable for all fees owed
by it to any Sub-Servicer, irrespective of whether the Servicer's compensation
pursuant to this Agreement is sufficient pay such fees.
Section 3.06. Assumption or Termination of Sub-Servicing Agreements
by Trustee.
In the event the original Servicer shall for any reason no longer be
the servicer (including by reason of the occurrence of a Servicer Event of
Default), the Trustee or its designee shall thereupon assume all of the rights
and obligations of the Servicer under each Sub-Servicing Agreement that the
Servicer may have entered into, unless the Trustee elects to terminate any
Sub-Servicing Agreement in accordance with its terms as provided in Section
3.03. Upon such assumption, the Trustee, its designee or the successor servicer
for the Trustee appointed pursuant to Section 7.02 shall be deemed, subject to
Section 3.03, to have assumed all of the Servicer's interest therein and to have
replaced the Servicer as a party to each Sub-Servicing Agreement to the same
extent as if each Sub-Servicing Agreement had been assigned to the assuming
party, except that the Servicer shall not thereby be relieved of any liability
or obligations under any Sub-Servicing Agreement.
The Servicer at its expense shall, upon request of the Trustee,
deliver to the assuming party all documents and records relating to each
Sub-Servicing Agreement and the Mortgage Loans then being serviced and an
accounting of amounts collected and held by or on behalf of it, and otherwise
use its best efforts to effect the orderly and efficient transfer of the
Sub-Servicing Agreements to the assuming party.
Section 3.07. Collection of Certain Mortgage Loan Payments.
The Servicer shall make reasonable efforts to collect all payments
called for under the terms and provisions of the Mortgage Loans, and shall, to
the extent such procedures shall be consistent with this Agreement, follow such
collection procedures as it would follow with respect to mortgage loans
comparable to the Mortgage Loans and held for its own account. Consistent with
the foregoing, the Servicer may in its discretion (i) waive any late payment
charge or, if applicable, penalty interest, (ii)
47
<PAGE>
extend the due dates for the Monthly Payments due on a Mortgage Note for a
period of not greater than 90 days or (iii) if the Servicer provides prior
written notice to the Certificate Insurer to which the Certificate Insurer does
not object within two Business Days, extend the due dates for Monthly Payments
due on a Mortgage Loan for a period of not greater than 180 days; provided, that
any extension pursuant to clause (ii) or clause (iii) above shall not affect the
amortization schedule of any Mortgage Loan for purposes of any computation
hereunder, and provided, further, that no more than two such extensions shall be
granted with respect to any single Mortgage Loan.
Section 3.08. Sub-Servicing Accounts.
In those cases where a Sub-Servicer is servicing a Mortgage Loan
pursuant to a Sub-Servicing Agreement, the Sub-Servicer will be required to
establish and maintain one or more accounts (collectively, the "Sub-Servicing
Account"). The Sub-Servicing Account shall be an Eligible Account and shall
comply with all requirements of this Agreement relating to the Collection
Account. The Sub-Servicer will be required to deposit into the Sub-Servicing
Account no later than the first Business Day after receipt all proceeds of
Mortgage Loans received by the Sub-Servicer, less its servicing compensation to
the extent permitted by the Sub-Servicing Agreement and to remit such proceeds
to the Servicer for deposit in the Collection Account not later than the first
Business Day thereafter. For purposes of this Agreement, the Servicer shall be
deemed to have received payments on the Mortgage Loans when the Sub-Servicer
receives such payments.
Section 3.09. Collection of Taxes, Assessments and Similar Items;
Servicing Accounts.
The Servicer shall establish and maintain one or more accounts (the
"Servicing Accounts"), into which all collections from the Mortgagors (or
related advances from Sub-Servicers) for the payment of taxes, assessments,
hazard insurance premiums, and comparable items for the account of the
Mortgagors ("Escrow Payments") shall be deposited and retained. Servicing
Accounts shall be Eligible Accounts. The Servicer shall deposit in the clearing
account in which it customarily deposits payments and collections on mortgage
loans in connection with its mortgage loan servicing activities on a daily
basis, and in no event more than one Business Day after the Servicer's receipt
thereof, all Escrow Payments collected on account of the Mortgage Loans and
shall thereafter deposit such Escrow Payments in the Servicing Account, in no
event more than one Business Day after the deposit of such Escrow Payments, for
the purpose of effecting the timely payment of any such items as required under
the terms of this Agreement. Withdrawals of amounts from a Servicing Account may
be made only to (i) effect timely payment of taxes, assessments, hazard
insurance premiums, and comparable items; (ii) reimburse the Servicer (or a
Sub-Servicer to the extent provided in the related Sub-Servicing Agreement) out
of related collections for any advances made pursuant to Section 3.01 (with
respect to taxes and assessments) and Section 3.16 (with respect to hazard
insurance); (iii) refund to Mortgagors any sums as may be determined to be
overages; (iv) pay interest, if required and as described below, to Mortgagors
on balances in the Servicing Account; or (v) clear and terminate the Servicing
Account at the termination of the Servicer's obligations and responsibilities in
respect of the Mortgage Loans under this Agreement in accordance with Article X.
As
48
<PAGE>
part of its servicing duties, the Servicer or Sub-Servicers shall pay to the
Mortgagors interest on funds in Servicing Accounts, to the extent required by
law and, to the extent that interest earned on funds in the Servicing Accounts
is insufficient, to pay such interest from its or their own funds, without any
reimbursement therefor. Notwithstanding the foregoing, neither the Servicer nor
any Sub-Servicer shall be obligated to collect Escrow Payments if the related
Mortgage Loan does not require such payments but the Servicer and each
Sub-Servicer shall nevertheless be obligated to make Servicing Advances as
provided in Section 3.01.
Section 3.10. Collection and Distribution Accounts.
(a) On behalf of the Trust Fund, the Servicer shall establish and
maintain one or more accounts (such account or accounts, the "Collection
Account"), held in trust for the benefit of the Trustee, the Certificateholders
and the Certificate Insurer. On behalf of the Trust Fund, the Servicer shall
deposit or cause to be deposited in the clearing account in which it customarily
deposits payments and collections on mortgage loans in connection with its
mortgage loan servicing activities on a daily basis, and in no event more than
one Business Day after the Servicer's receipt thereof, and shall thereafter
deposit in the Collection Account, in no event more than one Business Day after
the deposit of such payments into such clearing account, the following payments
and collections received or made by it on or subsequent to the Cut-off Date:
(i) all payments on account of principal, including Principal
Prepayments, on the Mortgage Loans;
(ii) all payments on account of interest (net of the related
Servicing Fee) on each Mortgage Loan;
(iii) all Insurance Proceeds and Liquidation Proceeds (other
than proceeds collected in respect of any particular REO Property
and amounts paid by the Servicer in connection with a purchase of
Mortgage Loans and REO Properties pursuant to Section 10.01);
(iv) any amounts required to be deposited pursuant to Section
3.14 in connection with any losses realized on Permitted Investments
with respect to funds held in the Collection Account;
(v) any amounts required to be deposited by the Servicer
pursuant to the second paragraph of Section 3.16(a) in respect of
any blanket policy deductibles; and
(vi) any Purchase Price or Substitution Shortfall Amount
delivered to the Servicer.
For purposes of the immediately preceding sentence, the Cut-off Date with
respect to any Qualified Substitute Mortgage Loan shall be deemed to be the date
of substitution.
The foregoing requirements for deposit in the Collection Accounts
shall be exclusive, it being understood and agreed that, without limiting the
generality of the
49
<PAGE>
foregoing, payments in the nature of prepayment or late payment charges or
assumption fees need not be deposited by the Servicer in the Collection Account.
In the event the Servicer shall deposit in the Collection Account any amount not
required to be deposited therein, it may at any time withdraw such amount from
the Collection Account, any provision herein to the contrary notwithstanding.
(b) On behalf of the Trust Fund, the Trustee shall establish and
maintain one or more accounts (such account or accounts, the "Distribution
Account"), held in trust for the benefit of the Certificateholders and the
Certificate Insurer. On behalf of the Trust Fund, the Servicer shall deliver to
the Trustee in immediately available funds for deposit in the Distribution
Account on or before 3:00 p.m. New York time (i) on the Servicer Remittance
Date, that portion of the Available Distribution Amount for the related
Distribution Date then on deposit in the Collection Account, and (ii) on each
Business Day as of the commencement of which the balance on deposit in the
Collection Account exceeds $75,000 following any withdrawals pursuant to the
next succeeding sentence, the amount of such excess, but only if the Collection
Account constitutes an Eligible Account solely pursuant to clause (ii) of the
definition of "Eligible Account." If the balance on deposit in the Collection
Account exceeds $75,000 as of the commencement of business on any Business Day
and the Collection Account constitutes an Eligible Account solely pursuant to
clause (ii) of the definition of "Eligible Account," the Servicer shall, on or
before 3:00 p.m. New York time on such Business Day, withdraw from the
Collection Account any and all amounts payable or reimbursable to the Depositor,
the Servicer, the Trustee, the Seller or any Sub-Servicer pursuant to Section
3.11 and shall pay such amounts to the Persons entitled thereto.
(c) Funds in the Collection Account and the Distribution Account may
be invested in Permitted Investments in accordance with the provisions set forth
in Section 3.12. The Servicer shall give notice to the Trustee and the
Certificate Insurer of the location of the Collection Account maintained by it
when established and prior to any change thereof. The Trustee shall give notice
to the Servicer, the Depositor and the Certificate Insurer of the location of
the Distribution Account when established and prior to any change thereof. (d)
Funds held in the Collection Account at any time may be delivered by the
Servicer to the Trustee for deposit in the Distribution Account. In the event
the Servicer shall deliver to the Trustee for deposit in the Distribution
Account any amount not required to be deposited therein, it may at any time
request that the Trustee withdraw such amount from the Distribution Account and
remit to it any such amount, any provision herein to the contrary
notwithstanding. In addition, the Servicer shall deliver to the Trustee from
time to time for deposit the amounts set forth in clauses (i) through (v) below,
and the Trustee shall deposit such amounts in the Distribution Account:
(i) any Monthly Advances, as required pursuant to Section
4.03;
(ii) any amounts required to be deposited pursuant to Section
3.25(d) or (f) in connection with any REO Property;
50
<PAGE>
(iii) any amounts to be paid by the Terminator in connection
with a purchase of Mortgage Loans and REO Properties pursuant to
Section 10.01;
(iv) any amounts required to be deposited pursuant to Section
3.26 in connection with any Prepayment Interest Shortfalls; and
(v) any Stayed Funds, as soon as permitted by the federal
bankruptcy court having jurisdiction in such matters.
(e) Promptly upon receipt of any Stayed Funds, whether from the
Servicer, a trustee in bankruptcy, or federal bankruptcy court or other source,
the Trustee shall deposit such funds in the Distribution Account, subject to
withdrawal thereof pursuant to Section 7.02(b) or as otherwise permitted
hereunder. In addition, the Servicer shall deposit in the Distribution Account
any amounts required to be deposited pursuant to Section 3.14 in connection with
losses realized on Permitted Investments with respect to funds held in the
Distribution Account.
(f) Notwithstanding any contrary provision of this Agreement
(including the provisions of this Section 3.10), (i) the Servicer shall be
deemed to be in compliance with the provisions of this Section 3.10 if amounts
in any clearing account referred to in Section 3.10(a) which the Servicer would
otherwise be required by this Section 3.10 to deposit or cause to be deposited
into the Collection Account are instead deposited or caused to be deposited into
the Distribution Account provided that such deposit into the Distribution
Account is made within the time period that such amount would otherwise have
been required to be deposited into the Collection Account (i.e., within one
Business Day of the Servicer's receipt thereof), (ii) amounts otherwise payable
or distributable from the Collection Account may be paid or distributed from the
Distribution Account to the extent of any funds deposited into the Distribution
Account rather than the Collection Account pursuant to clause (i) (as certified
by the Servicer), and (iii) the provisions of this Agreement (including
references herein to the Collection Account and the Distribution Account) shall
be interpreted and construed to give effect to the foregoing.
Section 3.11. Withdrawals from the Collection Account and
Distribution Account.
The Servicer shall, from time to time, make withdrawals from the
Collection Account for any of the following purposes or as described in Section
4.03:
(i) to remit to the Trustee for deposit in the Distribution
Account the amounts required to be so remitted pursuant to Section
3.10(b) or permitted to be so remitted pursuant to the first
sentence of Section 3.10(d);
(ii) subject to Section 3.18(d), to reimburse the Servicer for
Monthly Advances, but only to the extent of amounts received which
represent Late Collections (net of the related Servicing Fees) of
Monthly Payments on Mortgage Loans with respect to which such
51
<PAGE>
Monthly Advances were made in accordance with the provisions of
Section 4.03;
(iii) subject to Section 3.18(d), to pay the Servicer or any
Sub-Servicer any unpaid Servicing Fees and reimburse any
unreimbursed Servicing Advances with respect to each Mortgage Loan,
but only to the extent of any Liquidation Proceeds and Insurance
Proceeds received with respect to such Mortgage Loan;
(iv) to pay to the Servicer as servicing compensation (in
addition to the Servicing Fee) on the Servicer Remittance Date any
interest or investment income earned on funds deposited in the
Collection Account and the Distribution Account;
(v) to pay to the Servicer, the Depositor or the Seller, as
the case may be, with respect to each Mortgage Loan that has
previously been purchased or replaced pursuant to Section 2.05 or
Section 3.18(c) all amounts received thereon not included in the
Purchase Price or the Substitution Shortfall Amount;
(vi) to reimburse the Servicer for any Monthly Advance or
Servicing Advance previously made which the Servicer has determined
to be a Nonrecoverable Monthly Advance in accordance with the
provisions of Section 4.03;
(vii) to reimburse the Servicer or the Depositor for expenses
incurred by or reimbursable to the Servicer or the Depositor, as the
case may be, pursuant to Section 6.03;
(viii) to reimburse the Servicer or the Trustee, as the case
may be, for expenses reasonably incurred in respect of the breach or
defect giving rise to the purchase obligation under Section 2.05 or
Section 2.06 of this Agreement that were included in the Purchase
Price of the Mortgage Loan, including any expenses arising out of
the enforcement of the purchase obligation;
(ix) to pay, or to reimburse the Servicer for advances in
respect of, expenses incurred in connection with any Mortgage Loan
pursuant to Section 3.18(b); and
(x) to clear and terminate the Collection Account pursuant to
Section 10.01.
In addition to the foregoing, the Trustee shall be entitled to
withdraw amounts from the Distribution Account and to transfer funds to the
Expense Account on the Business Day immediately preceding each Distribution Date
pursuant to Section 3.27(b) prior to any payments as required pursuant to
Section 4.01. The Servicer shall keep and maintain separate accounting, on a
Mortgage Loan by Mortgage Loan basis, for the purpose of justifying any
withdrawal from the Collection Account, to the extent
52
<PAGE>
held by or on behalf of it, pursuant to subclauses (ii), (iii), (v), (vi),
(viii) and (ix) above. The Servicer shall provide written notification to the
Trustee, on or prior to the next succeeding Servicer Remittance Date, upon
making any withdrawals from the Collection Account pursuant to subclauses (vi)
and (vii) above.
Section 3.12. The Pre-Funding Account
(a) The Trustee shall establish and maintain the Pre-Funding Account
which shall be titled "Pre-Funding Account, First Union National Bank, as
trustee for the registered holders of Emergent Home Equity Loan Trust 1997-3,
Mortgage Pass-Through Certificates, Series 1997-3, Class A-1, Class A-2, Class
A-3, Class A-4, Class A-5, Class A-6 and Class R" (the "Pre-Funding Account").
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 in the Pre-Funding Account, the Original
Pre-Funded Amount.
(b) On any Pre-Funding Loan 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 Pre-Funding Loan
Cut-Off Date of the Pre-Funding Loans sold to the Trust on such Pre-Funding Loan
Transfer Date and pay such amount to or upon the order of the Seller upon
satisfaction of the conditions set forth in Section 2.02(b) and (c) hereof with
respect to such transfer. The Trustee may conclusively rely on such written
instructions from the Seller.
(c) If the Pre-Funding Amount (other than Pre-Funding Earnings) has
not been reduced to zero by November 1, 1997, after giving effect to any
reductions in the Pre-Funding Amount pursuant to Section 3.12(b), the Trustee
shall withdraw from the Pre-Funding Account on such date and deposit in the
Distribution Account the entire remaining Pre-Funding Amount (exclusive of
Pre-Funding Earnings) for distribution as provided in Section 4.01(a) or
4.01(g), as applicable.
(d) On the October 20, 1997 and November 20, 1997 Distribution Dates
the Trustee shall transfer from the Pre-Funding Account to the Distribution
Account the Pre-Funding Earnings, if any, applicable, respectively, to such
Distribution Dates.
Section 3.13. The Interest Coverage Account
(a) On behalf of the Trust Fund, the Trustee, as trustee, shall
establish and maintain an account, titled the "Interest Coverage Account for the
registered holders of Emergent Home Equity Loan Trust 1997-3, Mortgage
Pass-Through Certificates, Series 1997-3, Class A-1, Class A-2, Class A-3, Class
A-4, Class A-5, Class A-6 and Class R" (the "Interest Coverage Account"), into
which cash will be deposited by the Seller in the amount of $422,828.00 on the
Closing Date. The Trustee shall invest amounts on deposit in the Interest
Coverage Account in Eligible Investments. The Interest Coverage Account will not
be an asset of the REMIC.
53
<PAGE>
(b) On the October 20, 1997 Distribution Date, the Trustee shall
withdraw $260,834.00 from the Interest Coverage Account and deposit it into the
Distribution Account. On the November 20, 1997 Distribution Date, the Trustee
shall withdraw $161,949.00 from the Interest Coverage Account and deposit it
into the Distribution Account.
(c) The Trustee shall pay any amounts remaining in the Interest
Coverage Account after the November 20, 1997 Distribution Date to the Seller
immediately after such Distribution Date. The Trustee shall thereupon terminate
the Interest Coverage Account.
Section 3.14. Investment of Funds in the Investment Accounts.
(a) The Servicer may direct any depository institution maintaining
the Collection Account, the Expense Account, the Distribution Account, the
Servicing Accounts, the Redemption Account and the Pre-Funding Account, (each,
for purposes of this Section 3.14, an "Investment Account"), to invest the funds
in such Investment Account in one or more Permitted Investments bearing interest
or sold at a discount, and maturing, unless payable on demand, (i) no later than
the Business Day immediately preceding the next Distribution Date, if a Person
other than the Trustee is the obligor thereon, and (ii) no later than the next
Distribution Date, if the Trustee is the obligor thereon. All such Permitted
Investments shall be held to maturity, unless payable on demand. Any investment
of funds in an Investment Account shall be made in the name of the Trustee (in
its capacity as such) or in the name of a nominee of the Trustee. The Trustee
shall be entitled to sole possession over each such investment and the income
thereon, and any certificate or other instrument evidencing any such investment
shall be delivered directly to the Trustee or its agent, together with any
document of transfer necessary to transfer title to such investment to the
Trustee or its nominee. In the event amounts on deposit in an Investment Account
are at any time invested in a Permitted Investment payable on demand, the
Trustee shall at the direction of the Servicer:
(x) consistent with any notice required to be given thereunder, demand
that payment thereon be made on the last day such Permitted
Investment may otherwise mature hereunder in an amount equal to the
lesser of (1) all amounts then payable thereunder and (2) the amount
required to be withdrawn on such date; and
(y) demand payment of all amounts due thereunder promptly upon
determination by a Responsible Officer of the Trustee that such
Permitted Investment would not constitute a Permitted Investment in
respect of funds thereafter on deposit in the Investment Account.
(b) All income and gain realized from the investment of funds
deposited in the Collection Account, the Expense Account, the Distribution
Account and the Servicing Accounts held by or on behalf of the Servicer or the
Trustee, shall be for the benefit of the Servicer and shall be subject to its
withdrawal in accordance with Section 3.11. The Servicer shall deposit in the
Collection Account, the Expense Account or the Distribution Account, as
applicable, the amount of any loss incurred in
54
<PAGE>
respect of any such Permitted Investment made with funds in such accounts
immediately upon realization of such loss.
(c) Except as otherwise expressly provided in this Agreement, if any
default occurs in the making of a payment due under any Permitted Investment, or
if a default occurs in any other performance required under any Permitted
Investment, the Trustee may and, subject to Section 8.01 and Section 8.02(a)(v),
upon the request of the Certificate Insurer, take such action as may be
appropriate to enforce such payment or performance, including the institution
and prosecution of appropriate proceedings.
Section 3.15. [intentionally omitted]
Section 3.16. Maintenance of Hazard Insurance and Errors and
Omissions and Fidelity Coverage.
(a) The Servicer shall cause to be maintained for each Mortgaged
Property fire and hazard insurance with extended coverage on the related
Mortgaged Property in an amount which is at least equal to the lesser of the
current principal balance of such Mortgage Loan and the amount necessary to
fully compensate for any damage or loss to the improvements which are a part of
such property on a replacement cost basis, in each case in an amount not less
than such amount as is necessary to avoid the application of any coinsurance
clause contained in the related hazard insurance policy. The Servicer shall also
cause to be maintained fire and hazard insurance with extended coverage on each
REO Property in an amount which is at least equal to the lesser of (i) the
maximum insurable value of the improvements which are a part of such property
and (ii) the outstanding principal balance of the related Mortgage Loan at the
time it became an REO Property, plus accrued interest at the Mortgage Rate and
related Servicing Advances. The Servicer will comply in the performance of this
Agreement with all reasonable rules and requirements of each insurer under any
such hazard policies. Any amounts to be collected by the Servicer under any such
policies (other than amounts to be applied to the restoration or repair of the
property subject to the related Mortgage or amounts to be released to the
Mortgagor in accordance with the procedures that the Servicer would follow in
servicing loans held for its own account, subject to the terms and conditions of
the related Mortgage and Mortgage Note) shall be deposited in the Collection
Account, subject to withdrawal pursuant to Section 3.11, if received in respect
of a Mortgage Loan, or in the REO Account, subject to withdrawal pursuant to
Section 3.25, if received in respect of an REO Property. Any cost incurred by
the Servicer in maintaining any such insurance shall not, for the purpose of
calculating distributions to Certificateholders and the Certificate Insurer, be
added to the unpaid principal balance of the related Mortgage Loan,
notwithstanding that the terms of such Mortgage Loan so permit. It is understood
and agreed that no earthquake or other additional insurance is to be required of
any Mortgagor other than pursuant to such applicable laws and regulations as
shall at any time be in force and as shall require such additional insurance. If
the Mortgaged Property or REO Property is at any time in an area identified in
the Federal Register by the Federal Emergency Management Agency as having
special flood hazards, the Servicer will cause to be maintained a flood
insurance policy in respect thereof. Such flood insurance shall be in an amount
equal to the lesser of (i) the unpaid principal balance of the related Mortgage
Loan and (ii) the maximum amount of such insurance available for the related
Mortgaged
55
<PAGE>
Property under the national flood insurance program (assuming that the area in
which such Mortgaged Property is located is participating in such program).
In the event that the Servicer shall obtain and maintain a blanket
policy with an insurer having a General Policy Rating of A:X or better in Best's
Key Rating Guide insuring against hazard losses on all of the Mortgage Loans, it
shall conclusively be deemed to have satisfied its obligations as set forth in
the first two sentences of this Section 3.16, it being understood and agreed
that such policy may contain a deductible clause, in which case the Servicer
shall, in the event that there shall not have been maintained on the related
Mortgaged Property or REO Property a policy complying with the first two
sentences of this Section 3.16, and there shall have been one or more losses
which would have been covered by such policy, deposit to the Collection Account
from its own funds the amount not otherwise payable under the blanket policy
because of such deductible clause. In connection with its activities as
administrator and servicer of the Mortgage Loans, the Servicer agrees to prepare
and present, on behalf of itself, the Trustee, Certificateholders and the
Certificate Insurer, claims under any such blanket policy in a timely fashion in
accordance with the terms of such policy.
(b) The Servicer shall keep in force during the term of this
Agreement a policy or policies of insurance covering errors and omissions for
failure in the performance of the Servicer's obligations under this Agreement,
which policy or policies shall be in such form and amount that would meet the
requirements of FNMA or FHLMC if it were the purchaser of the Mortgage Loans.
The Servicer shall also maintain a fidelity bond in the form and amount that
would meet the requirements of FNMA or FHLMC, unless the Servicer has obtained a
waiver of such requirements from FNMA or FHLMC. The Servicer shall be deemed to
have complied with this provision if an Affiliate of the Servicer has such
errors and omissions and fidelity bond coverage and, by the terms of such
insurance policy or fidelity bond, the coverage afforded thereunder extends to
the Servicer. Any such errors and omissions policy and fidelity bond shall by
its terms not be cancelable without thirty days' prior written notice to the
Trustee. The Servicer shall also cause each Sub-Servicer to maintain a policy of
insurance covering errors and omissions and a fidelity bond which would meet
such requirements.
Section 3.17. Enforcement of Due-On-Sale Clauses, Assumption
Agreements.
The Servicer will, to the extent it has knowledge of any conveyance
or prospective conveyance of any Mortgaged Property by any Mortgagor (whether by
absolute conveyance or by contract of sale, and whether or not the Mortgagor
remains or is to remain liable under the Mortgage Note and/or the Mortgage),
exercise its rights to accelerate the maturity of such Mortgage Loan under the
"due-on-sale" clause, if any, applicable thereto; provided, however, that the
Servicer shall not exercise any such rights if prohibited by law from doing so.
If the Servicer reasonably believes it is unable under applicable law to enforce
such "due-on-sale" clause, or if any of the other conditions set forth in the
proviso to the preceding sentence apply, the Servicer will enter into an
assumption and modification agreement from or with the person to whom such
property has been conveyed or is proposed to be conveyed, pursuant to which such
person becomes liable under the Mortgage Note and, to the extent permitted by
56
<PAGE>
applicable state law, the Mortgagor remains liable thereon. The Servicer is also
authorized to enter into a substitution of liability agreement with such person,
pursuant to which the original Mortgagor is released from liability and such
person is substituted as the Mortgagor and becomes liable under the Mortgage
Note, provided that no such substitution shall be effective unless such person
satisfies the underwriting criteria of the Servicer and has a credit risk rating
at least equal to that of the original Mortgagor. In connection with any
assumption or substitution, the Servicer shall apply such underwriting standards
and follow such practices and procedures as shall be normal and usual in its
general mortgage servicing activities and as it applies to other mortgage loans
owned solely by it. The Servicer shall not take or enter into any assumption and
modification agreement, however, unless (to the extent practicable in the
circumstances) it shall have received confirmation, in writing, of the continued
effectiveness of any applicable hazard insurance policy. Any fee collected by
the Servicer in respect of an assumption or substitution of liability agreement
will be retained by the Servicer as additional servicing compensation. In
connection with any such assumption, no material term of the Mortgage Note
(including but not limited to the related Mortgage Rate and the amount of the
Monthly Payment) may be amended or modified, except as otherwise required
pursuant to the terms thereof. The Servicer shall notify the Trustee that any
such substitution or assumption agreement has been completed by forwarding to
the Trustee the executed original of such substitution or assumption agreement,
which document shall be added to the related Mortgage File and shall, for all
purposes, be considered a part of such Mortgage File to the same extent as all
other documents and instruments constituting a part thereof.
Notwithstanding the foregoing paragraph or any other provision of
this Agreement, the Servicer shall not be deemed to be in default, breach or any
other violation of its obligations hereunder by reason of any assumption of a
Mortgage Loan by operation of law or by the terms of the Mortgage Note or any
assumption which the Servicer may be restricted by law from preventing, for any
reason whatever. For purposes of this Section 3.17, the term "assumption" is
deemed to also include a sale (of the Mortgaged Property) subject to the
Mortgage that is not accompanied by an assumption or substitution of liability
agreement.
Section 3.18. Realization Upon Defaulted Mortgage Loans.
(a) The Servicer shall use its best efforts, consistent with the
servicing standard set forth in Section 3.01, to foreclose upon or otherwise
comparably convert the ownership of properties securing such of the Mortgage
Loans as come into and continue in default and as to which no satisfactory
arrangements can be made for collection of delinquent payments pursuant to
Section 3.07. The Servicer shall be responsible for all costs and expenses
incurred by it in any such proceedings; provided, however, that such costs and
expenses will be recoverable as Servicing Advances by the Servicer as
contemplated in Section 3.11 and 3.25. The foregoing is subject to the provision
that, in any case in which Mortgaged Property shall have suffered damage from an
Uninsured Cause, the Servicer shall not be required to expend its own funds
toward the restoration of such property unless it shall determine in its
discretion that such restoration will increase the proceeds of liquidation of
the related Mortgage Loan after reimbursement to itself for such expenses.
57
<PAGE>
(b) Notwithstanding the foregoing provisions of this Section 3.18 or
any other provision of this Agreement, with respect to any Mortgage Loan as to
which the Servicer has received actual notice of, or has actual knowledge of,
the presence of any toxic or hazardous substance on the related Mortgaged
Property, the Servicer shall not, on behalf of the Trustee, either (i) obtain
title to such Mortgaged Property as a result of or in lieu of foreclosure or
otherwise, or (ii) otherwise acquire possession of, or take any other action
with respect to, such Mortgaged Property, if, as a result of any such action,
the Trustee, the Certificateholders or the Certificate Insurer would be
considered to hold title to, to be a "mortgagee-in-possession" of, or to be an
"owner" or "operator" of such Mortgaged Property within the meaning of the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended from time to time, or any comparable law, unless the Servicer has also
previously determined, based on its reasonable judgment and a prudent report
prepared by a Person who regularly conducts environmental audits using customary
industry standards, that:
(1) such Mortgaged Property is in compliance with applicable
environmental laws or, if not, that it would be in the best economic
interest of the Trust Fund to take such actions as are necessary to bring
the Mortgaged Property into compliance therewith; and
(2) there are no circumstances present at such Mortgaged
Property relating to the use, management or disposal of any hazardous
substances, hazardous materials, hazardous wastes or petroleum-based
materials for which investigation, testing, monitoring, containment,
clean-up or remediation could be required under any federal, state or
local law or regulation, or that if any such materials are present for
which such action could be required, that it would be in the best economic
interest of the Trust Fund to take such actions with respect to the
affected Mortgaged Property.
The cost of the environmental audit report contemplated by this
Section 3.18 shall be advanced by the Servicer, subject to the Servicer's right
to be reimbursed therefor from the Collection Account as provided in Section
3.11(ix), such right of reimbursement being prior to the rights of
Certificateholders to receive any amount in the Collection Account received in
respect of the affected Mortgage Loan or other Mortgage Loans.
If the Servicer determines, as described above, that it is in the
best economic interest of the Trust Fund to take such actions as are necessary
to bring any such Mortgaged Property into compliance with applicable
environmental laws, or to take such action with respect to the containment,
clean-up or remediation of hazardous substances, hazardous materials, hazardous
wastes, or petroleum-based materials affecting any such Mortgaged Property, then
the Servicer shall take such action as it deems to be in the best economic
interest of such Trust Fund. The cost of any such compliance, containment,
cleanup or remediation shall be advanced by the Servicer, subject to the
Servicer's right to be reimbursed therefor from the Collection Account as
provided in Section 3.11 (ix), such right of reimbursement being prior to the
rights of Certificateholders to receive any amount in the Collection Account
received in respect of the affected Mortgage Loan or other Mortgage Loans.
58
<PAGE>
(c) The Servicer may at its option purchase from the Trust Fund any
Mortgage Loan that is 90 days or more delinquent, which the Servicer determines
in good faith will otherwise become subject to foreclosure proceedings (evidence
of such determination to be delivered in writing to the Trustee and the
Certificate Insurer prior to purchase), at a price equal to the Purchase Price.
The Purchase Price for any Mortgage Loan purchased hereunder shall be deposited
in the Collection Account, and the Trustee, upon receipt of written
certification from the Servicer of such deposit, shall release or cause to be
released to the Servicer the related Mortgage File and shall execute and deliver
such instruments of transfer or assignment, in each case without recourse, as
the Servicer shall furnish and as shall be necessary to vest in the Servicer
title to any Mortgage Loan released pursuant hereto.
(d) Proceeds received in connection with any Final Recovery
Determination, as well as any recovery resulting from a partial collection of
Insurance Proceeds or Liquidation Proceeds, in respect of any Mortgage Loan,
will be applied in the following order of priority: first, to reimburse the
Servicer or any Sub-Servicer for any related unreimbursed Servicing Advances and
Monthly Advances, pursuant to Section 3.11(ii) or (iii); second, to accrued and
unpaid interest on the Mortgage Loan, to the date of the Final Recovery
Determination, or to the Due Date prior to the Distribution Date on which such
amounts are to be distributed if not in connection with a Final Recovery
Determination; and third, as a recovery of principal of the Mortgage Loan. If
the amount of the recovery allocated to interest is less than the full amount of
accrued and unpaid interest due on such Mortgage Loan, the amount of such
recovery will be allocated by the Servicer as follows: first, to unpaid
Servicing Fees; and second, to the balance of the interest then due and owing.
The portion of the recovery so allocated to unpaid Servicing Fees shall be
reimbursed to the Servicer or any Sub-Servicer pursuant to Section 3.11(iii).
The portion of the recovery allocated to interest (net of unpaid Servicing Fees)
and the portion of the recovery allocated to principal of the Mortgage Loan
shall be applied as follows: first, to reimburse the Servicer for any related
unreimbursed Monthly Advances in accordance with Section 3.11 (ii), and second,
as part of the amounts to be transferred to the Distribution Account in
accordance with Section 3.10(b).
Section 3.19. Trustee to Cooperate; Release of Mortgage Files.
Upon the payment in full of any Mortgage Loan, or the receipt by the
Servicer of a notification that payment in full shall be escrowed in a manner
customary for such purposes, the Servicer will immediately notify the Trustee
and the Certificate Insurer by a certification in the form of Exhibit E-2 (which
certification shall include a statement to the effect that all amounts received
or to be received in connection with such payment which are required to be
deposited in the Collection Account pursuant to Section 3.10 have been or will
be so deposited) of a Servicing Officer and shall request delivery to it of the
Mortgage File. Upon receipt of such certification and request, the Trustee shall
promptly release the related Mortgage File to the Servicer. No expenses incurred
in connection with any instrument of satisfaction or deed of reconveyance shall
be chargeable to the Collection Account or the Distribution Account.
Subject to the following sentence from time to time and as
appropriate for the servicing or foreclosure of any Mortgage Loan, including,
for this purpose,
59
<PAGE>
collection under any insurance policy relating to the Mortgage Loans, the
Trustee shall, upon request of the Servicer and delivery to the Trustee of a
Request for Release in the form of Exhibit E-1, release the related Mortgage
File to the Servicer, and the Trustee shall, at the direction of the Servicer,
execute such documents as shall be necessary to the prosecution of any such
proceedings. Such Request for Release shall obligate the Servicer to return each
and every document previously requested from the Mortgage File to the Trustee
when the need therefor by the Servicer no longer exists, unless the Mortgage
Loan has been liquidated and the Liquidation Proceeds no longer exist, unless
the Mortgage Loan has been liquidated and the Liquidation Proceeds relating to
the Mortgage Loan have been deposited in the Collection Account or the Mortgage
File or such document has been delivered to an attorney, or to a public trustee
or other public official as required by law, for purposes of initiating or
pursuing legal action or other proceedings for the foreclosure of the Mortgaged
Property either judicially or nonjudicially, and the Servicer has delivered to
the Trustee a certificate of a Servicing Officer certifying as to the name and
address of the Person to which such Mortgage File or such document was delivered
and the purpose or purposes of such delivery. Upon receipt of a certificate of a
Servicing Officer stating that such Mortgage Loan was liquidated and that all
amounts received or to be received in connection with such liquidation that are
required to be deposited into the Collection Account have been so deposited, or
that such Mortgage Loan has become an REO Property, a copy of the Request for
Release shall be released by the Trustee to the Servicer.
Upon written certification of a Servicing Officer, the Trustee shall
execute and deliver to the Servicer, with copies to the Certificate Insurer to
be delivered by the Servicer, any court pleadings, requests for trustee's sale
or other documents necessary to the foreclosure or trustee's sale in respect of
a Mortgaged Property or to any legal action brought to obtain judgment against
any Mortgagor on the Mortgage Note or Mortgage or to obtain a deficiency
judgment, or to enforce any other remedies or rights provided by the Mortgage
Note or Mortgage or otherwise available at law or in equity. Each such
certification shall include a request that such pleadings or documents be
executed by the Trustee and a statement as to the reason such documents or
pleadings are required and that the execution and delivery thereof by the
Trustee will not invalidate or otherwise affect the lien of the Mortgage, except
for the termination of such a lien upon completion of the foreclosure or
trustee's sale.
Section 3.20. Servicing Compensation.
As compensation for the activities of the Servicer hereunder, the
Servicer shall be entitled to the Servicing Fee with respect to each Mortgage
Loan payable solely from payments of interest in respect of such Mortgage Loan,
subject to Section 3.26. In addition, the Servicer shall be entitled to recover
unpaid Servicing Fees out of Insurance Proceeds or Liquidation Proceeds to the
extent permitted by Section 3.11(iii) and out of amounts derived from the
operation and sale of an REO Property to the extent permitted by Section 3.25.
The right to receive the Servicing Fee may not be transferred in whole or in
part except in connection with the transfer of all of the Servicer's
responsibilities and obligations under this Agreement; provided, however, that
the Servicer may pay any fee to a Sub-Servicer out of the Servicing Fee.
60
<PAGE>
Additional servicing compensation in the form of late payment
charges or otherwise shall be retained by the Servicer (subject to Section 3.26)
only to the extent such fees or charges are received by the Servicer. The
Servicer shall also be entitled pursuant to Section 3.11(iv) to withdraw from
the Collection Account, pursuant to Section 3.27 to withdraw from the Expense
Account, and pursuant to Section 3.25(b) to withdraw from any REO Account, as
additional servicing compensation, interest or other income earned on deposits
therein, subject to Section 3.14 and Section 3.26. The Servicer shall be
required to pay all expenses incurred by it in connection with its servicing
activities hereunder (including premiums for the insurance required by Section
3.16, to the extent such premiums are not paid by the related Mortgagors or by a
Sub-Servicer, servicing compensation of each Sub-Servicer, and to the extent
provided herein in Section 8.05, the fees and expenses of the Trustee) and shall
not be entitled to reimbursement therefor except as specifically provided
herein.
Section 3.21. Reports to the Trustee; Collection Account Statements.
Not later than fifteen days after each Distribution Date, the
Servicer shall forward to the Trustee, the Certificate Insurer and the Depositor
a statement prepared by the Servicer setting forth the status of the Collection
Account as of the close of business on such Distribution Date and showing, for
the period covered by such statement, the aggregate amount of deposits into and
withdrawals from the Collection Account of each category of deposit specified in
Section 3.10(a) and each category of withdrawal specified in Section 3.11. Such
statement may be in the form of the then current FNMA Monthly Accounting Report
for its Guaranteed Mortgage Pass-Through Program with appropriate additions and
changes, and shall also include information as to the aggregate of the
outstanding principal balances of all of the Mortgage Loans as of the last day
of the calendar month immediately preceding such Distribution Date. Copies of
such statement shall be provided by the Trustee to any Certificateholder and to
any Person identified to the Trustee as a prospective transferee of a
Certificate, upon request at the expense of the requesting party, provided such
statement is delivered by the Servicer to the Trustee.
Section 3.22. Statement as to Compliance.
The Servicer will deliver to the Trustee, the Certificate Insurer
and the Depositor not later than 90 days following the end of the fiscal year of
the Servicer, which as of the Closing Date ends on the last day in December, an
Officers' Certificate stating, as to each signatory thereof, that (i) a review
of the activities of the Servicer during the preceding year and of performance
under this Agreement has been made under such officers' supervision and (ii) to
the best of such officers' knowledge, based on such review, the Servicer has
fulfilled all of its obligations under this Agreement throughout such year, or,
if there has been a default in the fulfillment of any such obligation,
specifying each such default known to such officer and the nature and status
thereof. Copies of any such report shall be provided by the Trustee to any
Certificateholder and to any Person identified to the Trustee as a prospective
transferee of a Certificate, upon request at the expense of the requesting
party, provided such report is delivered by the Servicer to the Trustee.
61
<PAGE>
Section 3.23. Independent Public Accountants' Servicing Report.
Not later than 90 days following the end of each fiscal year of the
Servicer, the Servicer, at its expense, shall cause a nationally recognized firm
of independent certified public accountants to furnish to the Servicer a report
stating that (i) it has obtained a letter of representation regarding certain
matters from the management of the Servicer which includes an assertion that the
Servicer has complied with certain minimum residential mortgage loan servicing
standards, identified in the Uniform Single Audit Program for Mortgage Bankers
established by the Mortgage Bankers Association of America, with respect to the
servicing of residential mortgage loans during the most recently completed
fiscal year and (ii) on the basis of an examination conducted by such firm in
accordance with standards established by the American Institute of Certified
Public Accountants, such representation is fairly stated in all material
respects, subject to such exceptions and other qualifications that may be
appropriate. In rendering its report such firm may rely, as to matters relating
to the direct servicing of residential mortgage loans by Sub-Servicers, upon
comparable reports of firms of independent certified public accountants rendered
on the basis of examinations conducted in accordance with the same standards
(rendered within one year of such report) with respect to those Sub-Servicers.
Immediately upon receipt of such report, the Servicer shall furnish a copy of
such report to the Trustee, the Certificate Insurer and each Rating Agency.
Copies of such report shall be provided by the Trustee to any Certificateholder
upon request at the Servicer's expense, provided that such report is delivered
by the Servicer to the Trustee and such report does not prohibit such delivery.
Section 3.24. Access to Certain Documentation.
The Servicer shall provide to the Office of Thrift Supervision, the
FDIC, and any other federal or state banking or insurance regulatory authority
that may exercise authority over any Certificateholder, access to the
documentation regarding the Mortgage Loans required by applicable laws and
regulations. Such access shall be afforded without charge, but only upon
reasonable request and during normal business hours at the offices of the
Servicer designated by it. In addition, access to the documentation regarding
the Mortgage Loans will be provided to any Certificateholder, the Certificate
Insurer, the Trustee and to any Person identified to the Servicer as a
prospective transferee of a Certificate, upon reasonable request during normal
business hours at the offices of the Servicer designated by it at the expense of
the Person requesting such access.
Section 3.25. Title, Management and Disposition of REO Property.
(a) The deed or certificate of sale of any REO Property shall be
taken in the name of the Trustee, or its nominee, on behalf of the
Certificateholders and the Certificate Insurer. The Servicer, on behalf of the
Trust Fund, shall either sell any REO Property within three years after the
Trust Fund acquires ownership of such REO Property for purposes of Section
860(a)(8) of the Code or request from the Internal Revenue Service, more than 60
days before the day on which the three-year grace period would otherwise expire
an extension of the three-year grace period, unless the Servicer had delivered
to the Trustee an Opinion of Counsel, addressed to the Trustee,
62
<PAGE>
the Depositor and the Certificate Insurer, to the effect that the holding by the
Trust Fund of such REO Property subsequent to three years after its acquisition
will not result in the imposition on the REMIC Trust of taxes on "prohibited
transactions" thereof, as defined in Section 860F of the Code, or cause the
REMIC Trust to fail to qualify as a REMIC under Federal law at any time that any
Certificates are outstanding. The Servicer shall manage, conserve, protect and
operate each REO Property for the Certificateholders solely for the purpose of
its prompt disposition and sale in a manner which does not cause such REO
Property to fail to qualify as "foreclosure property" within the meaning of
Section 860G(a)(8) of the Code or result in the receipt by the REMIC Trust of
any "income from non-permitted assets" within the meaning of Section
860F(a)(2)(B) of the Code, or any "net income from foreclosure property" which
is subject to taxation under the REMIC Provisions.
(b) The Servicer shall segregate and hold all funds collected and
received in connection with the operation of any REO Property separate and apart
from its own funds and general assets and shall establish and maintain with
respect to REO Properties an account held in trust for the Trustee for the
benefit of the Certificateholders and the Certificate Insurer (the "REO
Account"), which shall be an Eligible Account. The Servicer shall be permitted
to allow the Collection Account to serve as the REO Account, subject to separate
ledgers for each REO Property. The Servicer shall be entitled to retain or
withdraw any interest income paid on funds deposited in the REO Account.
(c) The Servicer shall have full power and authority, subject only
to the specific requirements and prohibitions of this Agreement, to do any and
all things in connection with any REO Property as are consistent with the manner
in which the Servicer manages and operates similar property owned by the
Servicer or any of its Affiliates, on such terms and for such period as the
Servicer deems to be in the best interests of Certificateholders. In connection
therewith, the Servicer shall deposit, or cause to be deposited, on a daily
basis in the REO Account all revenues received by it with respect to an REO
Property and shall withdraw therefrom funds necessary for the proper operation,
management and maintenance of such REO Property including, without limitation:
(i) all insurance premiums due and payable in respect of such
REO Property;
(ii) all real estate taxes and assessments in respect of such
REO Property that may result in the imposition of a lien thereon;
and
(iii) all costs and expenses necessary to maintain such REO
Property.
To the extent that amounts on deposit in the REO Account with respect to an REO
Property are insufficient for the purposes set forth in clauses (i) through
(iii) above with respect to such REO Property, the Servicer shall advance from
its own funds such amount as is necessary for such purposes if, but only if, the
Servicer would make such advances if the Servicer owned the REO Property and if
in the Servicer's judgment, the
63
<PAGE>
payment of such amounts will be recoverable from the rental or sale of the REO
Property.
Notwithstanding the foregoing, the Servicer shall not:
(i) permit the Trust Fund to enter into, renew or extend any
New Lease with respect to any REO Property, if the New Lease by its
terms will give rise to any income that does not constitute Rents
from Real Property;
(ii) permit any amount to be received or accrued under any New
Lease other than amounts that will constitute Rents from Real
Property;
(iii) authorize or permit any construction on any REO
Property, other than the completion of a building or other
improvement thereon, and then only if more than ten percent of the
construction of such building or other improvement was completed
before default on the related Mortgage Loan became imminent, all
within the meaning of Section 856(e)(4)(B) of the Code; or
(iv) allow any Person to Directly Operate any REO Property on
any date more than 90 days after its date of acquisition by the
Trust Fund;
unless, in any such case, the Servicer has obtained an Opinion of Counsel,
provided to the Trustee and the Certificate Insurer, to the effect that such
action will not cause such REO Property to fail to qualify as "foreclosure
property" within the meaning of Section 860G(a)(8) of the Code at any time that
it is held by the Trust Fund, in which case the Servicer may take such actions
as are specified in such Opinion of Counsel.
The Servicer may contract with any Independent Contractor for the
operation and management of any REO Property, provided that:
(i) the terms and conditions of any such contract shall not be
inconsistent herewith;
(ii) any such contract shall require, or shall be administered
to require, that the Independent Contractor pay all costs and
expenses incurred in connection with the operation and management of
such REO Property, including those listed above and remit all
related revenues (net of such costs and expenses) to the Servicer
soon as practicable, but in no event later than thirty days
following the receipt thereof by such Independent Contractor;
(iii) none of the provisions of this Section 3.25(c) relating
to any such contract or to actions taken through any such
Independent Contractor shall be deemed to relieve the Servicer of
any of its duties and obligations to the Trustee on behalf of the
Certificateholders and the Certificate Insurer with respect to the
operation and management of any such REO Property; and
64
<PAGE>
(iv) the Servicer shall be obligated with respect thereto to
the same extent as if it alone were performing all duties and
obligations in connection with the operation and management of such
REO Property.
The Servicer shall be entitled to enter into any agreement with any Independent
Contractor performing services for it related to its duties and obligations
hereunder for indemnification of the Servicer by such Independent Contractor,
and nothing in this Agreement shall be deemed to limit or modify such
indemnification. The Servicer shall be solely liable for all fees owed by it to
any such Independent Contractor, irrespective of whether the Servicer's
compensation pursuant to Section 3.20 is sufficient to pay such fees, subject to
the Servicer's rights under Section 3.25(c)(iii).
(d) In addition to the withdrawals permitted under Section 3.25(c),
the Servicer may from time to time make withdrawals from the REO Account for any
REO Property: (i) to pay itself or any Sub-Servicer unpaid Servicing Fees in
respect of the related Mortgage Loan; and (ii) to reimburse itself or any
Sub-Servicer for unreimbursed Servicing Advances and Monthly Advances made in
respect of such REO Property or the related Mortgage Loan. On the Servicer
Remittance Date, the Servicer shall withdraw from each REO Account maintained by
it and deposit into the Distribution Account in accordance with Section
3.10(d)(ii), for distribution on the related Distribution Date in accordance
with Section 4.01, the income from the related REO Property received during the
prior calendar month, net of any withdrawals made pursuant to Section 3.25(c) or
this Section 3.25(d).
(e) Subject to the time constraints set forth in Section 3.25(a),
each REO Disposition shall be carried out by the Servicer at such price and upon
such terms and conditions as the Servicer shall deem necessary or advisable, as
shall be normal and usual in its general servicing activities and as are in
accordance with general FNMA guidelines.
(f) The proceeds from the REO Disposition, net of any amount
required by law to be remitted to the Mortgagor under the related Mortgage Loan
and net of any payment or reimbursement to the Servicer or any Sub-Servicer as
provided above, shall be deposited in the Distribution Account in accordance
with Section 3.10(d)(ii) on the Servicer Remittance Date in the month following
the receipt thereof for distribution on the related Distribution Date in
accordance with Section 4.01. Any REO Disposition shall be for cash only (unless
changes in the REMIC Provisions made subsequent to the Startup Day allow a sale
for other consideration).
(g) The Servicer shall file information returns with respect to the
receipt of mortgage interest received in a trade or business, reports of
foreclosures and abandonments of any Mortgaged Property and cancellation of
indebtedness income with respect to any Mortgaged Property as required by
Sections 6050H, 6050J and 6050P of the Code, respectively. Such reports shall be
in form and substance sufficient meet the reporting requirements imposed by such
Sections 6050H, 6050J and 6050P of the Code.
65
<PAGE>
Section 3.26. Obligations of the Servicer in Respect of Prepayment
Interest Shortfalls.
The Servicer shall deliver to the Trustee for deposit into the
Distribution Account on or before 3:00 p.m. New York time on the Servicer
Remittance Date from its own funds an amount equal to the lesser of (i) the
aggregate of the Prepayment Interest Shortfalls for the related Distribution
Date resulting solely from Principal Prepayments during the related Collection
Period and (ii) the total amount of its Servicing Fee for the most recently
ended calendar month.
Section 3.27. Expense Account.
(a) The Trustee shall establish and maintain in its name, for the
benefit of the Trustee in trust for (1) the Certificateholders and (2) the
Certificate Insurer, the Expense Account. The Expense Account shall be an
Eligible Account, and funds on deposit therein shall be held separate and apart
from, and shall not be commingled with, any other moneys, including, without
limitation, other moneys of the Trustee held pursuant to this Agreement.
(b) On the Business Day immediately preceding each Distribution
Date, the Trustee shall withdraw from the Distribution Account and deposit into
the Expense Account an amount equal to the product of (i) l/12 of the
Certificate Insurer Premium Rate and (ii) the Class A Certificate Principal
Balance after giving effect to distributions of principal on such Distribution
Date.
(c) The Trustee shall make withdrawals from the Expense Account to
pay the Certificate Insurer Premium on each Distribution Date.
(d) Funds in the Expense Account may be invested in Permitted
Investments in accordance with the provisions set forth in Section 3.14. Any
earnings on such amounts shall be payable to the Servicer as additional
servicing compensation, and the Servicer shall deposit in the Expense Account
the amount of any loss incurred in respect of any such Permitted Investments
made with funds in the Expense Account immediately upon the realization of such
loss. The Trustee shall give notice to the Depositor and the Certificate Insurer
of the location of the Expense Account on the Closing Date and prior to any
change thereof.
(e) Upon termination of the Trust Fund in accordance with Section
10.01, any amounts remaining in the Expense Account following the payment of all
unpaid Certificate Insurer Premiums shall be released to the Servicer as
additional servicing compensation.
Section 3.28. Obligations of the Servicer in Respect of Monthly
Payments.
In the event that a shortfall in any collection on or liability with
respect to any Mortgage Loan results from or is attributable to adjustments to
Monthly Payments or Stated Principal Balances that were made by the Servicer in
a manner not consistent with the terms of the related Mortgage Note and this
Agreement, the
66
<PAGE>
Servicer, upon discovery or receipt of notice thereof, immediately shall deliver
to the Trustee for deposit in the Distribution Account from its own funds the
amount of any such shortfall and shall indemnify and hold harmless the Trust
Fund, the Trustee, the Certificate Insurer, the Depositor and any successor
servicer in respect of any such liability. Such indemnities shall survive the
termination or discharge of this Agreement.
Section 3.29. Redemption Account.
On the Closing Date, U.S. $0.00 will be deposited by the
Seller in an account which will be in the name of, and maintained by, the
Trustee on behalf of the Trust Fund (the "Redemption Account"). On the October
20, 1997 Distribution Date, the Trustee will transfer the entire remaining
amount (other than the reinvestment income described below) on deposit in the
Redemption Account into the Distribution Account for distribution as provided in
Section 4.01(a) or 4.01(g), as applicable. The Trustee shall invest amounts on
deposit in the Redemption Account in Eligible Investments. The Trustee shall pay
any reinvestment income earned on amounts on deposit in the Redemption Account
to the Seller. The Trustee shall terminate the Redemption Account immediately
after the October 20, 1997 Distribution Date and such account will not be an
asset of the REMIC.
ARTICLE 4.
PAYMENTS TO CERTIFICATEHOLDERS
Section 4.01. Distributions.
(a) On each Distribution Date, the Trustee shall, based solely on
information contained in the Remittance Report for such Distribution Date,
withdraw from the Distribution Account an amount equal to the Available
Distribution Amount (less any amount distributed on such Distribution Date as
provided in Section 4.01(g)) and distribute to the following parties the
following amounts, in the following order of priority:
(i) concurrently:
(1) the Holders of the Class A-1 Certificates an amount
equal to (A) the Class A-1 Interest Distribution Amount
for such Distribution Date, plus (B) any undistributed
amount described in the immediately preceding clause (A)
from any previous Distribution Date for which no
Insurance Payment has been previously paid to Holders of
the Class A-1 Certificates;
(2) the Holders of the Class A-2 Certificates an amount
equal to (A) the Class A-2 Interest Distribution Amount
for such Distribution Date, plus (B) any undistributed
amount described in the immediately preceding clause (A)
from any previous Distribution Date for which no
Insurance
67
<PAGE>
Payment has been previously paid to Holders of the Class
A-2 Certificates;
(3) the Holders of the Class A-3 Certificates an amount
equal to (A) the Class A-3 Interest Distribution Amount
for such Distribution Date, plus (B) any undistributed
amount described in the immediately preceding clause (A)
from any previous Distribution Date for which no
Insurance Payment has been previously paid to Holders of
the Class A-3 Certificates;
(4) the Holders of the Class A-4 Certificates an amount
equal to (A) the Class A-4 Interest Distribution Amount
for such Distribution Date, plus (B) any undistributed
amount described in the immediately preceding clause (A)
from any previous Distribution Date for which no
Insurance Payment has been previously paid to Holders of
the Class A-4 Certificates; and
(5) the Holders of the Class A-5 Certificates an amount
equal to (A) the Class A-5 Interest Distribution Amount
for such Distribution Date, plus (B) any undistributed
amount described in the immediately preceding clause (A)
from any previous Distribution Date for which no
Insurance Payment has been previously paid to Holders of
the Class A-5 Certificates;
(6) the Holders of the Class A-6 Certificates an amount
equal to (A) the Class A-6 Interest Distribution Amount
for such Distribution Date, plus (B) an undistributed
amount described in the immediately preceding clause (A)
from any previous Distribution Date for which no
Insurance Payment has been previously paid to Holders of
the Class A-6 Certificates.
(ii) to the Holders of the Class of Class A Certificates then
entitled to receive payment of principal, as provided in paragraph
(b) below, a distribution of principal in an amount equal to the
Principal Distribution Amount (except for any portion thereof
consisting of any related Subordination Increase Amount);
(iii) to the Certificate Insurer, to reimburse the Certificate
Insurer for claims under the Policy, to the extent of Cumulative
Insurance Payments;
(iv) to the Holders of the Class of Class A Certificates then
entitled to receive payment of principal, as provided in paragraph
(b) below, a distribution of principal in an amount equal to the
portion of
68
<PAGE>
the Principal Distribution Amount consisting of any Subordination
Increase Amount;
(v) to the Certificate Insurer, any amounts remaining due to
the Certificate Insurer under the terms of the Insurance Agreement;
and
(vi) to the Holders of the Class A Certificates, payable from
the remaining Net Monthly Excess Cashflow, an amount equal to any
Relief Act Interest Shortfalls and/or any Prepayment Interest
Shortfalls that were allocated to such holders and therefore not
distributed pursuant to clause (i) above or this clause (vi) for all
prior Distribution Dates;
(vii) to the Holders of the Class R Certificates, the balance,
if any, of the amount in the Distribution Account for such
Distribution Date;
provided, however, that if a Certificate Insurer Default shall have occurred and
be continuing, the distributions with respect to clauses (ii) and (iv) above
shall be made pro-rata to the Class A-1 Certificateholders, the Class A-2
Certificateholders, the Class A-3 Certificateholders, the Class A-4
Certificateholders, the Class A-5 Certificateholders and the Class A-6
Certificateholders on such Distribution Date.
(b) All references above to the Certificate Principal Balance of any
Class of Certificates shall be to the Certificate Principal Balance of such
Class immediately prior to the relevant Distribution Date. All principal
distributed with respect to the Class A Certificates pursuant to Sections
4.01(a)(ii), 4.01(a)(iv) and 4.01(a)(vi) shall be distributed in the following
order: first, to the Holders of the Class A-6 Certificates, to the extent of the
least of (x) the Principal Distribution Amount, (y) the Class A-6 Certificate
Principal Balance and (z) the Class A-6 Lockout Distribution Amount; second, to
the Holders of the Class A-1 Certificates, to reduce the Class A-1 Certificate
Principal Balance to zero; third, to the Holders of the Class A-2 Certificates,
to reduce the Class A-2 Certificate Principal Balance to zero; fourth, to the
Holders of the Class A-3 Certificates, to reduce the Class A-3 Principal Balance
to zero; fifth, to the Holders of the Class A-4 Certificates, to reduce the
Class A-4 Certificate Principal Balance to zero; and sixth, to the Holders of
the Class A-5 Certificates, to reduce the Class A-5 Principal Balance to zero.
In addition to making the distributions required pursuant to Section 4.01(a), on
each Distribution Date for which there exists a Deficiency Amount, the Trustee
shall withdraw from the Distribution Account any amount therein that was
transferred from the Policy Payments Account to the Distribution Account
pursuant to Section 9.04 and distribute to the Holders of the Class A
Certificates (i) an amount equal to any amount required to be paid to such Class
pursuant to Section 4.01(a)(i) for such Distribution Date remaining unpaid after
giving effect to all distributions made pursuant to Section 4.01(a) for such
Distribution Date, (ii) an amount equal to any Remaining Overcollateralization
Deficit on such Distribution Date after giving effect to all distributions made
pursuant to Section 4.01(a) for such Distribution Date and (iii) without
duplication, any other amount constituting a Deficiency Amount.
(c) Each Holder of a Certificate, by its acceptance of such
Certificate, hereby agrees that, in the event any distribution is made to any
Holder of a
69
<PAGE>
Class A Certificate from amounts paid under the Policy, (i) the Certificate
Insurer shall be subrogated in the manner herein provided to the rights of the
Holder of such Class A Certificate to receive from amounts on deposit in the
Distribution Account the distributions allocable to principal and interest that
would have been distributable to such Holder if no such distribution to such
Holder had been made from amounts paid under the Policy; and (ii) in addition to
the rights of the Class A Certificateholders that the Certificate Insurer may
exercise in accordance with the provisions of Section 9.01, the Certificate
Insurer may exercise any option, vote, right, power or the like with respect to
each Class A Certificate for which Cumulative Insurance Payments are
outstanding.
(d) All distributions made with respect to each Class of
Certificates on each Distribution Date shall be allocated pro rata among the
outstanding Certificates in such Class based on their respective Percentage
Interests. Payments in respect of each Class of Certificates on each
Distribution Date will be made to the Holders of the respective Class of record
on the related Record Date (except as otherwise provided in Section 4.01(f) or
Section 10.01 respecting the final distribution on such Class), based on the
aggregate Percentage Interest represented by their respective Certificates. So
long as the Book-Entry Certificates are registered in the name of the Depository
or its nominee, the Trustee shall make all distributions on such Certificates by
wire transfers of immediately available funds to the Depository or its nominee.
In the case of Certificates issued in fully-registered, certificated form,
distributions shall be made by wire transfer of immediately available funds to
the account of any such Holder at a bank or other entity having appropriate
facilities therefor, if such Holder shall have so notified the Trustee in
writing at least five Business Days prior to the Record Date immediately prior
to such Distribution Date and is the registered owner of Certificates having an
initial aggregate Certificate Principal Balance that is in excess of the lesser
of (i) $5,000,000 or (ii) two-thirds of the initial Class Certificate Balance
(or, in the case of the Class R Certificates, a 66% Percentage Interest) of such
Class of Certificates, or otherwise by check mailed by first class mail to the
address of such Holder appearing in the Certificate Register. The Trustee may
deduct a reasonable wire transfer fee from any payment made by wire transfer.
The final distribution on each Certificate will be made in like manner, but only
upon presentment and surrender of such Certificate at the Corporate Trust Office
or such other location specified in the notice to Certificateholders of such
final distribution. Payments to the Certificate Insurer on any Distribution Date
will be made by wire transfer of immediately available funds to the account
designated by the Certificate Insurer.
Each distribution with respect to a Book-Entry Certificate shall be
paid to the Depository, as Holder thereof, and the Depository shall be
responsible for crediting the amount of such distribution to the accounts of its
Depository Participants in accordance with its normal procedures. Each
Depository Participant shall be responsible for disbursing such distribution to
the Certificate Owners that it represents and to each indirect participating
brokerage firm (a "brokerage firm" or "indirect participating firm") for which
it acts as agent. Each brokerage firm shall be responsible for disbursing funds
to the Certificate Owners that it represents. None of the Trustee, the
Certificate Registrar, the Depositor or the Servicer shall have any
responsibility therefor except as otherwise provided by this Agreement or
applicable law.
70
<PAGE>
(e) The rights of the Certificateholders to receive distributions in
respect of the Certificates, and all interests of the Certificateholders in such
distributions, shall be as set forth in this Agreement. Neither the Holders of
any Class of Certificates nor the Trustee nor the Servicer shall in any way be
responsible or liable to the Holders of any other Class of Certificates in
respect of amounts properly previously distributed on the Certificates.
(f) Except as otherwise provided in Section 10.01, whenever the
Trustee expects that the final distribution with respect to any Class of
Certificates will be made on the next Distribution Date, the Trustee shall, no
later than three (3) Business Days after the related Determination Date, mail to
each Holder on such date of such Class of Certificates and to the Certificate
Insurer a notice to the effect that:
(i) the Trustee expects that the final distribution with
respect to such Class of Certificates will be made on such
Distribution Date but only upon presentation and surrender of such
Certificates at the office of the Trustee therein specified, and
(ii) no interest shall accrue on such Certificates from and
after the end of the related Interest Accrual Period.
Any funds not distributed to any Holder or Holder of Certificates of such Class
on such Distribution Date because of the failure of such Holder or Holders to
tender their Certificates shall, on such date, be set aside and held in trust
and credited to the account of the appropriate non-tendering Holder or Holders.
If any Certificate as to which notice has been given pursuant to this Section
4.01(f) shall not have been surrendered for cancellation within six months after
the time specified in such notice, the Trustee shall mail a second notice to the
remaining non-tendering Certificateholders to surrender their Certificates for
cancellation in order to receive the final distribution with respect thereto. If
within one year after the second notice all such Certificates shall not have
been surrendered for cancellation, the Trustee shall, directly or through an
agent, contact the remaining non-tendering Certificateholders concerning
surrender of their Certificates in the manner reasonably specified to the
Trustee by the Servicer in writing. The costs and expenses of maintaining the
funds in trust and of contacting such Certificateholders shall be paid out of
the assets so held in trust for such Certificateholders. If in one year after
the second notice any such Certificates shall not have been surrendered for
cancellation, the Servicer shall pay to the Certificate Insurer any amount of
such funds that were paid by the Certificate Insurer under the Policy but shall
continue to hold any remaining funds for the benefit of the non-tendering
Certificateholders, and such Certificateholders shall thereafter look solely to
the Servicer for payment thereof, and all liability of the Certificate Insurer
with respect to such trust funds shall thereupon cease. No interest shall accrue
or be payable to any Certificateholder on any amount held in trust by the
Servicer as a result of such Certificateholder's failure to surrender its
Certificate(s) for final payment thereof in accordance with this Section
4.01(f).
(g) If the amount withdrawn from the Redemption Account and
deposited into the Distribution Account pursuant to Section 3.29 is $100,000 or
more (but not otherwise), the entire amount so withdrawn and deposited shall be
distributed
71
<PAGE>
by the Trustee on the October 20, 1997 Distribution Date as a prepayment of
principal of the Class A Certificates, pro rata, on the basis of their
respective Certificate Principal Balances. If the amount withdrawn from the
Pre-Funding Account and deposited into the Distribution Account pursuant to
Section 3.12(c) is $100,000 or more (but not otherwise), the entire amount so
withdrawn and deposited shall be distributed by the Trustee on the November 20,
1997 Distribution Date as a prepayment of principal of the Class A Certificates,
pro rata, on the basis of their respective Certificate Principal Balances.
Section 4.02. Statements to Certificateholders.
On each Servicer Remittance Date, the Servicer shall deliver to the
Trustee, the Certificate Insurer and the Rating Agencies by telecopy (or by such
other means as the Servicer and the Trustee, the Certificate Insurer or the
Rating Agencies, as the case may be, may agree from time to time) a report
prepared by the Servicer as to the distributions to be made on the related
Distribution Date and shall forward to the Trustee by overnight mail a computer
readable magnetic tape or diskette of such report. Both reports (each a
"Remittance Report") shall contain the following information:
1. the amount of the distribution to be made on such Distribution
Date to the Holders of each class of Class A Certificates
allocable to principal (separately indicating the amount to be
distributed as a prepayment of principal pursuant to Section
4.01(g));
2. the amount of the distribution to be made on such Distribution
Date to the Holders of each class of Class A Certificates
allocable to interest;
3. the aggregate amount of servicing compensation received by the
Servicer during the related Collection Period and such other
customary information within the knowledge of the Trustee as
the Trustee deems necessary or desirable, or which a
Certificateholder reasonably requests, to enable
Certificateholders to prepare their tax returns;
4. the Guaranteed Distribution for such Distribution Date and the
respective provisions thereof allocable to principal and
interest;
5. the Available Distribution Amount for such Distribution Date
(separately indicating the amount to be distributed as a
prepayment of principal pursuant to Section 4.01(g));
6. the amount, if any, by which the Guaranteed Distribution for
such Distribution Date exceeds the Available Distribution
Amount expected to be on deposit in the Distribution Account
on such Distribution Date;
7. the amount of Monthly Advances to be made by the Servicer in
respect of the related Distribution Date, the aggregate amount
of
72
<PAGE>
Monthly Advances outstanding after giving effect to such
Monthly Advances, and the aggregate amount of Nonrecoverable
Monthly Advances in respect of such Distribution Date;
8. with respect to any reimbursement to be made to the
Certificate Insurer on such Distribution Date pursuant to
Section 4.01(a)(iv), (xi) and (xvi), the amount, if any,
allocable to principal and the amount allocable to interest;
9. Cumulative Insurance Payments after giving effect to the
distributions to be made on such Distribution Date;
10. the Delinquency Percentage for the related Collection Period;
11. the Cumulative Loss Percentage for such Distribution Date;
12. the amount of any Insurance Payment to be made to Class A
Certificateholders on such Distribution Date, the amount of
any reimbursement payment to be made to the Certificate
Insurer on such Distribution Date pursuant to Section
4.01(a)(iii) and the amount of Cumulative Insurance Payments
after giving effect to any such Insurance Payment to Class A
Certificateholders or any such reimbursement payment to the
Certificate Insurer;
13. the aggregate Stated Principal Balance of the Mortgage Loans
and any REO Properties at the close of business on such
Distribution Date;
14. the number, aggregate principal balance, weighted average
remaining term to maturity and weighted average Mortgage Rate
of the Mortgage Loans as of the related Due Date;
15. the number and aggregate unpaid principal balance of Mortgage
Loans (a) 30 days past due, (b) 60 days past due, (c) 90 or
more days past due and (d) as to which foreclosure proceedings
have been commenced;
16. with respect to any Mortgage Loan that became an REO Property
during the preceding calendar month, the loan number of such
Mortgage Loan, the unpaid principal balance and the Stated
Principal Balance of such Mortgage Loan as of the date it
became an REO Property;
17. the book value of any REO Property as of the close of business
on the last Business Day of the calendar month preceding the
Distribution Date;
18. the aggregate amount of Principal Prepayments made during the
related Collection Period;
73
<PAGE>
19. the aggregate amount of Realized Losses incurred during the
related Collection Period;
20. the aggregate amount of extraordinary Trust Fund expenses
withdrawn from the Collection Account or the Distribution
Account for such Distribution Date;
21. the Class A-1 Certificate Principal Balance, Class A-2
Certificate Principal Balance, Class A-3 Certificate Principal
Balance, Class A-4 Certificate Principal Balance, Class A-5
Certificate Principal Balance and Class A-6 Certificate
Principal Balance, after giving effect to the distributions to
be made on such Distribution Date;
22. the Certificate Factor for each such Class of Certificates
applicable to such Distribution Date;
23. the Interest Distribution Amount in respect of the Class A
Certificates for such Distribution Date and the respective
portions thereof, if any, paid under the Policy or (in the
event of a Deficiency Event) remaining unpaid following the
distributions to be made in respect of such Certificates on
such Distribution Date;
24. the aggregate amount of any Prepayment Interest Shortfalls for
such Distribution Date, to the extent not covered by payments
by the Servicer pursuant to Section 3.26;
25. the aggregate amount of Relief Act Interest Shortfalls for
such Distribution Date;
26. the Required Subordinated Amount for such Distribution Date;
27. the Subordination Increase Amount, if any, for such
Distribution Date;
28. the Subordination Reduction Amount, if any, for such
Distribution Date; and
29. the amount of the distribution to be made on such Distribution
Date to the Holders of the Class R Certificates.
In the case of information furnished pursuant to clauses (1) through
(3) above, the amounts shall be expressed as a dollar amount per Single
Certificate of the relevant Class.
The Trustee shall forward such Remittance Report to each Holder of
the Class A Certificates on each Distribution Date. To the extent that there are
inconsistencies between the telecopy of the Remittance Report and the hard copy
thereof and information set forth in the computer tape or other media provided
by the Servicer hereunder, the Trustee shall be entitled to rely upon the
telecopy.
74
<PAGE>
Within a reasonable period of time after the end of each calendar
year, the Servicer shall furnish to the Trustee, and the Trustee shall forward
to each Person who at any time during the calendar year was a Holder of a
Regular Certificate (a) a statement containing the information set forth in
clauses (1) through (3) above, aggregated for such calendar year or applicable
portion thereof during which such person was a Certificateholder and (b) such
information contained in the Remittance Reports as required to enable the
Holders of the Regular Certificates to prepare their tax returns. Such
obligation of the Servicer shall be deemed to have been satisfied to the extent
that substantially comparable information shall be provided by the Servicer
pursuant to any requirements of the Code as from time to time are in force.
On each Distribution Date, the Trustee shall forward to the
Depositor, to each Holder of a Residual Certificate, to the Certificate Insurer
and to the Servicer, a copy of the reports forwarded to the Class A
Certificateholders on such Distribution Date and, if different from the amounts
stated in the Remittance Report, a statement setting forth the amounts, if any,
actually distributed with respect to the Residual Certificates, respectively, on
such Distribution Date.
Within a reasonable period of time after the end of each calendar
year, the Servicer shall furnish to the Trustee, and the Trustee shall forward
to each Person who at any time during the calendar year was a Holder of a
Residual Certificate a statement setting forth the amount, if any, actually
distributed with respect to the Residual Certificates, as appropriate,
aggregated for such calendar year or applicable portion thereof during which
such Person was a Certificateholder.
Upon request, the Servicer shall furnish to the Trustee, and the
Trustee shall forward to each Certificateholder, during the term of this
Agreement, such periodic, special, or other reports or information, whether or
not provided for herein, as shall be reasonable with respect to the
Certificateholder, or otherwise with respect to the purposes of this Agreement,
all such reports or information to be provided at the expense of the
Certificateholder in accordance with such reasonable and explicit instructions
and directions as the Certificateholder may provide. For purposes of this
Section 4.02, the Trustee's duties are limited to the extent that the Trustee
receives timely reports as required from the Servicer.
Section 4.03. [Reserved]; Monthly Advances.
(a) [Reserved]
(b) The amount of Monthly Advances to be made by the Servicer for
any Distribution Date shall equal, subject to Section 4.03(d), the sum of (i)
the aggregate amount of Monthly Payments allocable to interest (with each
interest portion thereof net of the related Servicing Fee), due during the
related Collection Period in respect of the Mortgage Loans, which Monthly
Payments were delinquent as of the close of business on the related
Determination Date and (ii) with respect to each REO Property, which REO
Property was acquired during or prior to the related Collection Period and as to
which REO Property an REO Disposition did not occur during the related
Collection Period, an amount equal to the excess, if any, of the REO Imputed
Interest on such REO Property for the most recently ended calendar month, over
the net
75
<PAGE>
income from such REO Property transferred to the Distribution Account pursuant
to Section 3.25 for distribution on such Distribution Date. For purposes of the
preceding sentence, the Monthly Payment on each Balloon Mortgage Loan with a
delinquent Balloon Payment is equal to the assumed monthly interest payment that
would have been due on the related Due Date based on the original principal
amortization schedule for such Balloon Mortgage Loan.
On or before 3:00 p.m. New York time on the Servicer Remittance
Date, the Servicer shall remit in immediately available funds to the Trustee for
deposit in the Distribution Account an amount equal to the aggregate amount of
Monthly Advances, if any, to be made in respect of the Mortgage Loans and REO
Properties for the related Distribution Date either (i) from its own funds or
(ii) from the Collection Account, to the extent of funds held therein for future
distribution (in which case it will cause to be made an appropriate entry in the
records of the Collection Account that amounts held for future distribution have
been, as permitted by this Section 4.03, used by the Servicer in discharge of
any such Monthly Advance) or (iii) in the form of any combination of (i) and
(ii) aggregating the total amount of Monthly Advances to be made by the Servicer
with respect to the Mortgage Loans and REO Properties. Any amounts held for
future distribution and so used shall be appropriately reflected in the
Servicer's records and replaced by the Servicer by deposit in the Collection
Account on or before any future Servicer Remittance Date to the extent that the
Available Distribution Amount for the related Distribution Date (determined
without regard to Monthly Advances to be made on the Servicer Remittance Date)
shall be less than the total amount that would be distributed to the Classes of
Certificateholders pursuant to Section 4.01 on such Distribution Date if such
amounts held for future distributions had not been so used to make Monthly
Advances. The Trustee will provide notice to the Servicer and the Certificate
Insurer by telecopy by the close of business on any Servicer Remittance Date in
the event that the amount remitted by the Servicer to the Trustee on such date
is less than the Monthly Advances required to be made by the Servicer for the
related Distribution Date.
(c) The obligation of the Servicer to make such Monthly Advances is
mandatory, notwithstanding any other provision of this Agreement but subject to
(d) below, and, with respect to any Mortgage Loan or REO Property, shall
continue until a Final Recovery Determination in connection therewith or the
removal thereof from the Trust Fund pursuant to any applicable provision of this
Agreement, except as otherwise provided in this Section.
(d) Notwithstanding anything herein to the contrary, no Monthly
Advance or Servicing Advance shall be required to be made hereunder by the
Servicer if such Monthly Advance or Servicing Advance would, if made, constitute
a Nonrecoverable Monthly Advance or Servicing Advance. The determination by the
Servicer that it has made a Nonrecoverable Monthly Advance or that any proposed
Monthly Advance, if made, would constitute a Nonrecoverable Monthly Advance,
shall be evidenced by an Officers' Certificate of the Servicer delivered to the
Depositor, the Trustee and the Certificate Insurer.
(e) If, at the close of business on the third Business Day prior to
any Distribution Date, the funds on deposit in the Distribution Account are less
than the
76
<PAGE>
Guaranteed Distribution for such Distribution Date, the Trustee shall give
notice by telephone or telecopy of the amount of such deficiency, confirmed in
writing in the form set forth as Exhibit A to the Policy, to the Certificate
Insurer and the Fiscal Agent (as defined in the Policy), if any, at or before
10:00 a.m., New York time, on the second Business Day prior to such Distribution
Date.
Section 4.04. Determination of Realized Losses.
Prior to each Determination Date, the Servicer shall determine as to
each Mortgage Loan and REO Property, the total amount of Realized Losses, if
any, incurred in connection with any Final Recovery Determinations made during
the related Collection Period. Prior to each Determination Date, the Servicer
shall also determine as to each Mortgage Loan: (i) the total amount of Realized
Losses, if any, incurred in connection with any Deficient Valuations made during
the related Collection Period; and (ii) the total amount of Realized Losses, if
any, incurred in connection with Debt Service Reductions in respect of Monthly
Payments due during the related Collection Period. Such information shall be
evidenced by an Officers' Certificate delivered to the Trustee and the
Certificate Insurer by the Servicer prior to the Determination Date immediately
following the end of the Collection Period during which any such Realized Loss
was incurred.
Section 4.05. Compliance with Withholding Requirements.
Notwithstanding any other provision of this Agreement, the Trustee
shall comply with all federal withholding requirements respecting payments to
Certificateholders of interest or original issue discount that the Trustee
reasonably believes are applicable under the Code. The consent of
Certificateholders shall not be required for such withholding. In the event the
Trustee does withhold any amount from interest or original issue discount
payments or advances thereof to any Certificateholder pursuant to federal
withholding requirements, the Trustee shall indicate the amount withheld to such
Certificateholders.
ARTICLE 5.
THE CERTIFICATES
Section 5.01. The Certificates.
(a) The Certificates in the aggregate will represent the entire
beneficial ownership interest in the Mortgage Loans and all other assets
included in the Trust Fund. At the Closing Date, the Class A Certificate
Principal Balance will be equal to or less than the aggregate principal balance
of the Mortgage Loans in the Mortgage Pool as of the Cut-off Date.
The Certificates will be substantially in the forms annexed hereto
as Exhibits A-1 through A-7. The Certificates of each Class will be issuable in
registered form only, in denominations of authorized Percentage Interests as
described in the definition thereof. Each Certificate will share ratably in all
rights of the related Class.
77
<PAGE>
Upon original issue, the Certificates shall be executed and
delivered by the Trustee and the Trustee shall cause the Certificates to be
authenticated by the Certificate Registrar to or upon the order of the
Depositor. The Certificates shall be executed by manual or facsimile signature
on behalf of the Trustee by an authorized signatory. Certificates bearing the
manual or facsimile signatures of individuals who were at any time the proper
officers of the Trustee shall bind the Trustee to the authentication and
delivery of such Certificates, notwithstanding that such individuals or any of
them have ceased to hold such offices or did not hold such offices at the date
of such Certificates. No Certificate shall be entitled to any benefit under this
Agreement or be valid for any purpose, unless there appears on such Certificate
a certificate of authentication substantially in the form provided herein
executed by the Certificate Registrar by manual signature, and such certificate
of authentication shall be conclusive evidence, and the only evidence, that such
Certificate has been duly authenticated and delivered hereunder. All
Certificates shall be dated the date of their authentication.
(b) The Class A Certificates shall initially be issued as one or
more Certificates registered in the name of the Depository or its nominee and,
except as provided below, registration of such Certificates may not be
transferred by the Trustee except to another Depository that agrees to hold such
Certificates for the respective Certificate Owners with Ownership Interests
therein. The Certificate Owners shall hold their respective Ownership Interests
in and to such Certificates through the book-entry facilities of the Depository
and, except as provided below, shall not be entitled to definitive, fully
registered Certificates ("Definitive Certificates") in respect of such Ownership
Interests. All transfers by Certificate Owners of their respective Ownership
Interests in the Book-Entry Certificates shall be made in accordance with the
procedures established by the Depository Participant or brokerage firm
representing such Certificate Owner. Each Depository Participant shall only
transfer the Ownership Interests in the Book-Entry Certificates of Certificate
Owners it represents or of brokerage firms for which it acts as agent in
accordance with the Depository's normal procedures.
The Trustee, the Servicer, the Depositor and the Certificate Insurer
may for all purposes (including the making of payments due on the Book-Entry
Certificates) deal with the Depository as the authorized representative of the
Certificate Owners with respect to the Book-Entry Certificates for the purposes
of exercising the rights of Certificateholders hereunder. The rights of
Certificate Owners with respect to the Book-Entry Certificates shall be limited
to those established by law and agreements between such Certificate Owners and
the Depository Participants and brokerage firms representing such Certificate
Owners. Multiple requests and directions from, and votes of, the Depository as
Holder of the Book-Entry Certificates with respect to any particular matter
shall not be deemed inconsistent if they are made with respect to different
Certificate Owners. The Trustee may establish a reasonable record date in
connection with solicitations of consents from or voting by Certificateholders
and shall give notice to the Depository of such record date.
If (i)(A) the Depositor or the Depository advises the Trustee in
writing that the Depository is no longer willing or able to properly discharge
its responsibilities as Depository, and (B) the Depositor is unable to locate a
qualified successor, (ii) the
78
<PAGE>
Depositor at its option advises the Trustee in writing that it elects to
terminate the book-entry system through the Depository or (iii) after the
occurrence of a Servicer Event of Default, Certificate Owners representing in
the aggregate not less than 51% of the Ownership Interests of the Book-Entry
Certificates advise the Trustee through the Depository, in writing, that the
continuation of a book-entry system through the Depository is no longer in the
best interests of the Certificate Owners, the Trustee shall notify all
Certificate Owners, through the Depository, of the occurrence of any such event
and of the availability of Definitive Certificates to Certificate Owners
requesting the same. Upon surrender to the Trustee of the Book-Entry
Certificates by the Depository, accompanied by registration instructions from
the Depository for registration of transfer, the Trustee shall issue the
Definitive Certificates. Such Definitive Certificates will be issued in minimum
denominations of $1,000. None of the Depositor, the Servicer or the Trustee
shall be liable for any delay in the delivery of such instructions and may
conclusively rely on, and shall be protected in relying on, such instructions.
Upon the issuance of Definitive Certificates all references herein to
obligations imposed upon or to be performed by the Depository shall be deemed to
be imposed upon and performed by the Trustee, to the extent applicable with
respect to such Definitive Certificates, and the Trustee shall recognize the
Holders of the Definitive Certificates as Certificateholders hereunder.
Section 5.02. Registration of Transfer and Exchange of Certificates.
(a) The Trustee shall cause to be kept at one of the offices or
agencies to be appointed by the Trustee in accordance with the provisions of
Section 8.11 a Certificate Register for the Certificates in which, subject to
such reasonable regulations as it may prescribe, the Trustee shall provide for
the registration of Certificates and of transfers and exchanges of Certificates
as herein provided. The Trustee will initially serve as Certificate Registrar
for the purpose of registering Certificates and transfers and exchanges of
Certificates as herein provided. The Certificate Registrar may appoint, by a
written instrument delivered to the Servicer and the Depositor, any other bank
or trust company to act as Certificate Registrar under such conditions as the
predecessor Certificate Registrar may prescribe, provided that the predecessor
Certificate Registrar shall not be relieved of any of its duties or
responsibilities hereunder by reason of such appointment. If the Trustee shall
at any time not be the Certificate Registrar, the Trustee shall have and
maintain the right to inspect the Certificate Register or to obtain a copy
thereof at all reasonable times, and to rely conclusively upon a certificate of
the Certificate Registrar as to the information set forth in the Certificate
Register.
(b) No transfer of any Residual Certificate shall be made unless
that transfer is made pursuant to an effective registration statement under the
Securities Act of 1933, as amended (the "1933 Act"), and effective registration
or qualification under applicable state securities laws, or is made in a
transaction that does not require such registration or qualification. In the
event that such a transfer of a Residual Certificate is to be made without
registration or qualification, the Trustee and the Certificate Registrar shall
each require receipt of: (i) if such transfer is purportedly being made in
reliance upon Rule 144A under the 1933 Act, written certifications from the
Certificateholder desiring to effect the transfer and from such
Certificateholder's prospective transferee, substantially in the forms attached
hereto as Exhibit F-1; and (ii)
79
<PAGE>
in all other cases, an Opinion of Counsel satisfactory to it that such transfer
may be made without such registration under the 1933 Act (which Opinion of
Counsel shall not be an expense of the Trust Fund or of the Depositor, the
Trustee or the Servicer in its capacity as such), together with copies of the
written certification(s) of the Certificateholder desiring to effect the
transfer and/or such Certificateholder's prospective transferee upon which such
Opinion of Counsel is based, if any. None of the Depositor, the Certificate
Registrar or the Trustee is obligated to register or qualify the Residual
Certificates under the 1933 Act or any other securities laws or to take any
action not otherwise required under this Agreement to permit the transfer of
such Certificates without registration or qualification. Any Certificateholder
desiring to effect the transfer of a Residual Certificate shall, and does hereby
agree to, indemnify the Trustee, the Depositor, the Certificate Registrar, the
Servicer and the Certificate Insurer against any liability that may result if
the transfer is not so exempt or is not made in accordance with such federal and
state laws.
(c) No transfer of a Residual Certificate or any interest therein
shall be made unless the prospective transferee of any Residual Certificate
certifies that it is not (i) an employee benefit plan or other retirement
arrangement, including individual retirement accounts and annuities, Keogh plans
and collective investment funds and separate accounts in which such plans,
accounts or arrangements are invested, that is subject to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or the Code (each,
a "Plan") or (ii) a Person who is directly or indirectly purchasing the Residual
Certificate or interest therein on behalf of, as named fiduciary of, as trustee
of, or with assets of, a Plan.
(d) (i) Each Person who has or who acquires any Ownership Interest
in a Residual Certificate shall be deemed by the acceptance or acquisition of
such Ownership Interest to have agreed to be bound by the following provisions
and to have irrevocably authorized the Trustee or its designee under clause
(iii)(A) below to deliver payments to a Person other than such Person and to
negotiate the terms of any mandatory sale under clause (iii)(B) below and to
execute all instruments of Transfer and to do all other things necessary in
connection with any such sale. The rights of each Person acquiring any Ownership
Interest in a Residual Certificate are expressly subject to the following
provisions:
(A) Each Person holding or acquiring any Ownership
Interest in a Residual Certificate shall be a Permitted
Transferee and shall promptly notify the Trustee of any change
or impending change in its status as a Permitted Transferee.
(B) In connection with any proposed Transfer of
any Ownership Interest in a Residual Certificate, the Trustee
shall require delivery to it, and shall not register the
Transfer of any Residual Certificate until its receipt of, an
affidavit agreement (a "Transfer Affidavit and Agreement"
attached hereto as Exhibit F-2) from the proposed Transferee,
in form and substance satisfactory to the Trustee,
representing and warranting, among other things, that such
Transferee is a Permitted Transferee, that it is not acquiring
its Ownership Interest in the Residual Certificate
80
<PAGE>
that is the subject of the proposed Transfer as a nominee,
trustee or agent for any Person that is not a Permitted
Transferee, that for so long as it retains its Ownership
Interest in a Residual Certificate, it will endeavor to remain
a Permitted Transferee, and that it has reviewed the
provisions of this Section 5.02(d) and agrees to be bound by
them.
(C) Notwithstanding the delivery of a Transfer
Affidavit and Agreement by a proposed Transferee under clause
(B) above, if a Responsible Officer of the Trustee who is
assigned to this transaction has actual knowledge that the
proposed Transferee is not a Permitted Transferee, no Transfer
of an Ownership Interest in a Residual Certificate to such
proposed Transferee shall be effected.
(D) Each Person holding or acquiring any Ownership
Interest in a Residual Certificate shall agree (x) to require
a Transfer Affidavit and Agreement (in the form attached
hereto as Exhibit F-2) from any other Person to whom such
Person attempts to transfer its Ownership Interest in a
Residual Certificate and (y) not to transfer its Ownership
Interest unless it provides a Transferor Affidavit (in the
form attached hereto as Exhibit F-2) to the Trustee stating
that, among other things, it has no actual knowledge that such
other Person is not a Permitted Transferee.
(E) Each Person holding or acquiring an Ownership
Interest in a Residual Certificate, by purchasing an Ownership
Interest in such Certificate, agrees to give the Trustee
written notice that it is a "pass through interest holder"
within the meaning of temporary Treasury regulation Section
1.67-3T(a)(2)(i)(A) immediately upon acquiring an Ownership
Interest in a Residual Certificate, if it is, or is holding an
Ownership Interest in a Residual Certificate on behalf of, a
"pass-through interest holder."
(ii) The Trustee will register the Transfer of any Residual
Certificate only if it shall have received the Transfer Affidavit
Agreement and all of such other documents as shall have been
reasonably required by the Trustee as a condition to such
registration. In addition, no Transfer of a Residual Certificate
shall be made unless the Trustee shall have received a
representation letter from the Transferee of such Certificate to the
effect that such Transferee is a Permitted Transferee.
(iii) (A) If any purported Transferee shall become a Holder of
a Residual Certificate in violation of the provisions of this
Section 5.02(d), then the last preceding Permitted Transferee shall
be restored, to the extent permitted by law, to all rights as holder
thereof retroactive to the date of registration of such Transfer of
such Residual
81
<PAGE>
Certificate. The Trustee shall be under no liability to any Person
for any registration of Transfer of a Residual Certificate that is
in fact not permitted by this Section 5.02(d) or for making any
payments due on such Certificate to the holder thereof or for taking
any other action with respect to such holder under the provisions of
this Agreement.
(B) If any purported Transferee shall become a
Holder of a Residual Certificate in violation of the
restrictions in this Section 5.02(d) and to the extent that
the retroactive restoration of the rights of the holder of
such Residual Certificate as described in clause (iii)(A)
above shall be invalid, illegal or unenforceable, then the
Trustee shall have the right, without notice to the holder or
any prior holder of such Residual Certificate, to sell such
Residual Certificate to a purchaser selected by the Trustee on
such terms as the Trustee may choose. Such purported
Transferee shall promptly endorse and deliver each Residual
Certificate in accordance with the instructions of the
Trustee. Such purchaser may be the Trustee itself or any
Affiliate of the Trustee. The proceeds of such sale, net of
the commissions (which may include commissions payable to the
Trustee or its Affiliates), expenses and taxes due, if any,
will be remitted by the Trustee to such purported Transferee.
The terms and conditions of any sale under this clause
(iii)(B) shall be determined in the sole discretion of the
Trustee, and the Trustee shall not be liable to any Person
having an Ownership Interest in a Residual Certificate as a
result of its exercise of such discretion.
(iv) The Trustee shall make available to the Internal Revenue
Service and those Persons specified by the REMIC Provisions all
information necessary to compute any tax imposed (A) as a result of
the Transfer of an Ownership Interest in a Residual Certificate to
any Person who is a Disqualified Organization, including the
information described in Treasury regulations sections
1.860D-1(b)(5) and 1.860E-2(a)(5) with respect to the "excess
inclusions" of such Residual Certificate and (B) as a result of any
regulated investment company, real estate investment trust, common
trust fund, partnership, trust, estate or organization described in
Section 1381 of the Code that holds an Ownership Interest in a
Residual Certificate having as among its record holders at any time
any Person which is a Disqualified Organization. Reasonable
compensation for providing such information may be accepted by the
Trustee.
(v) The provisions of this Section 5.02(d) set forth prior to
this subsection (v) may be modified, added to or eliminated,
provided that there shall have been delivered to the Trustee at the
expense of the party seeking to modify, add to or eliminate any such
provision the following:
82
<PAGE>
(A) written notification from each Rating Agency
to the effect that the modification, addition to or
elimination of such provisions will not cause such Rating
Agency to downgrade its then-current ratings of any Class of
Certificates; and
(B) an Opinion of Counsel, in form and substance
satisfactory to the Trustee, to the effect that such
modification of, addition to or elimination of such provisions
will not cause the REMIC Trust to cease to qualify as a REMIC
and will not cause the REMIC Trust to be subject to an
entity-level tax caused by the Transfer of any Residual
Certificate to a Person that is not a Permitted Transferee or
(y) a Person other than the prospective transferee to be
subject to a REMIC-tax caused by the Transfer of a Residual
Certificate to a Person that is not a Permitted Transferee.
(e) Subject to the preceding subsections, upon surrender for
registration of transfer of any Certificate at any office agency of the Trustee
maintained for such purpose pursuant to Section 8.11, the Trustee shall execute
and the Certificate Registrar shall authenticate and deliver, in the name of the
designated Transferee or Transferees, one or more new Certificates of the same
Class of a like aggregate Percentage Interest.
(f) At the option of the Holder thereof, any Certificate may be
exchanged for other Certificates of the same Class with authorized denominations
and a like aggregate Percentage Interest, upon surrender of such Certificate to
be exchanged at any office or agency of the Trustee maintained for such purpose
pursuant to Section 8.11. Whenever any Certificates are so surrendered for
exchange the Trustee shall execute and cause the Certificate Registrar to
authenticate and deliver the Certificates which the Certificateholder making the
exchange is entitled to receive. Every Certificate presented or surrendered for
transfer or exchange shall (if so required by the Trustee) be duly endorsed by,
or be accompanied by a written instrument of transfer in the form satisfactory
to the Trustee and the Certificate Registrar duly executed by, the Holder
thereof or his attorney duly authorized in writing.
(g) No service charge to the Certificateholders shall be made for
any transfer or exchange of Certificates, but the Trustee may require payment of
a sum sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer or exchange of Certificates.
(h) All Certificates surrendered for transfer and exchange shall be
canceled and destroyed by the Certificate Registrar in accordance with its
customary procedures.
(i) The Trustee will cause the Certificate Registrar (unless the
Trustee is acting as Certificate Registrar) to provide notice to the Trustee of
each transfer of a Certificate and to provide the Trustee with an updated copy
of the
83
<PAGE>
Certificate Register on the first Business Day in January and June of each year,
commencing January 1998.
Section 5.03. Mutilated, Destroyed, Lost or Stolen Certificates.
If (i) any mutilated Certificate is surrendered to the Trustee or
the Certificate Registrar, or the Trustee and the Certificate Registrar receive
evidence to their satisfaction of the destruction, loss or theft of any
Certificate, and (ii) there is delivered to the Trustee and the Certificate
Registrar such security or indemnity as may be required by them to save each of
them harmless, then, in the absence of actual knowledge by the Trustee or the
Certificate Registrar that such Certificate has been acquired by a bona fide
purchaser, the Trustee shall execute and deliver, in exchange for or in lieu of
any such mutilated, destroyed, lost or stolen Certificate, a new Certificate of
the same Class and of like denomination and Percentage Interest. Upon the
issuance of any new Certificate under this Section, the Trustee may require the
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in relation thereto and any other expenses (including the fees
and expenses of the Certificate Registrar) connected therewith. Any replacement
Certificate issued pursuant to this Section shall constitute complete and
indefeasible evidence of ownership in the Trust Fund created hereunder, as if
originally issued, whether or not the lost, stolen or destroyed Certificate
shall be found at any time.
Section 5.04. Persons Deemed Owners.
The Depositor, the Servicer, the Trustee, the Certificate Registrar,
the Certificate Insurer and any agent of any of them may treat the Person in
whose name any Certificate is registered as the owner of such Certificate for
the purpose of receiving distributions pursuant to Section 4.01 and for all
other purposes whatsoever, and none of the Depositor, the Servicer, the Trustee,
the Certificate Registrar or any agent of any of them shall be affected by
notice to the contrary.
Section 5.05. Certain Available Information.
The Trustee shall maintain at its Corporate Trust Office and make
available free of charge during normal business hours for review by any Holder
of a Certificate or any Person identified to the Trustee as a prospective
transferee of a Certificate, originals or copies of the following items: (A)
this Agreement and any amendments hereof entered into pursuant to Section 12.01,
(B) all monthly statements required to be delivered to Certificateholders of the
relevant Class pursuant to Section 4.02 since the Closing Date, and all other
notices, reports, statements and written communications delivered to the
Certificateholders of the relevant Class pursuant to this Agreement since the
Closing Date, (C) all certifications delivered by a Responsible Officer of the
Trustee since the Closing Date pursuant to Section 11.01(h), (D) any and all
Officers' Certificates delivered to the Trustee by the Servicer since the
Closing Date to evidence the Servicer's determination that any Monthly Advance
or Servicing Advance was, or if made, would be a Nonrecoverable Monthly Advance
and (E) any and all Officers' Certificates delivered to the Trustee by the
Servicer since the Closing Date pursuant to Section 4.04(a). Copies and mailing
of any and all of the foregoing
84
<PAGE>
items will be available from the Trustee upon request at the expense of the
Person requesting the same.
ARTICLE 6.
THE DEPOSITOR AND THE SERVICER
Section 6.01. Liability of the Depositor and the Servicer.
The Depositor and the Servicer each shall be liable in accordance
herewith only to the extent of the obligations specifically imposed by this
Agreement and undertaken hereunder by the Depositor and the Servicer herein.
Section 6.02. Merger or Consolidation of the Depositor or the
Servicer.
Subject to the following paragraph, the Depositor will keep in full
effect its existence, rights and franchises as a corporation under the laws of
the jurisdiction of its incorporation. Subject to the following paragraph, the
Servicer will keep in full effect its existence, rights and franchises as a
corporation under the laws of the jurisdiction of its incorporation. The
Depositor and the Servicer each will obtain and preserve its qualification to do
business as a foreign corporation in each jurisdiction in which such
qualification is or shall be necessary to protect the validity and
enforceability of this Agreement, the Certificates or any of the Mortgage Loans
and to perform its respective duties under this Agreement.
The Depositor or the Servicer may be merged or consolidated with or
into any Person, or transfer all or substantially all of its assets to any
Person, in which case any Person resulting from any merger or consolidation to
which the Depositor or the Servicer shall be a party, or any Person succeeding
to the business of the Depositor or the Servicer, shall be the successor of the
Depositor or the Servicer, as the case may be, hereunder, without the execution
or filing of any paper or any further act on the part of any of the parties
hereto, anything herein to the contrary notwithstanding; provided, however, that
(i) the successor or surviving Person to the Servicer shall be qualified to
service mortgage loans on behalf of FNMA or FHLMC, (ii) that the Rating Agencies
ratings and shadow ratings of the Class A Certificates in effect immediately
prior to such merger or consolidation will not be qualified, reduced or
withdrawn as a result thereof (as evidenced by a letter to such effect from the
Rating Agencies) and (iii) in the case of the Servicer, the Certificate Insurer
delivers its written consent to such successor.
Section 6.03. Limitation on Liability of the Depositor, the Servicer
and Others.
None of the Depositor, the Servicer or any of the directors,
officers, employees or agents of the Depositor or the Servicer shall be under
any liability to the Trust Fund or the Certificateholders for any action taken
or for refraining from the taking of any action in good faith pursuant to this
Agreement, or for errors in judgment; provided, however, that this provision
shall not protect the Depositor, the Servicer or
85
<PAGE>
any such person against any breach of warranties, representations or covenants
made herein, or against any specific liability imposed on the Servicer pursuant
hereto, or against any liability which would otherwise be imposed by reason of
willful misfeasance, bad faith or gross negligence in the case of the Depositor,
and willful misfeasance, bad faith or negligence in the case of the Servicer, in
the performance of duties or by reason of reckless disregard of obligations and
duties hereunder. The Depositor, the Servicer and any director, officer,
employee or agent of the Depositor or the Servicer may rely in good faith on any
document of any kind which, prima facie, is properly executed and submitted by
any Person respecting any matters arising hereunder. The Depositor, the Servicer
and any director, officer, employee or agent of the Depositor or the Servicer
shall be indemnified and held harmless by the Trust Fund against any loss,
liability or expense incurred in connection with any legal action relating to
this Agreement or the Certificates, other than any loss, liability or expense
relating to any specific Mortgage Loan or Mortgage Loans (except as any such
loss, liability or expense shall be otherwise reimbursable pursuant to this
Agreement) or any loss, liability or expense incurred by reason of willful
misfeasance, bad faith or gross negligence in the case of the Depositor, and
willful misfeasance, bad faith or negligence in the case of the Servicer, in the
performance of duties hereunder or by reason of reckless disregard of
obligations and duties hereunder. Neither the Depositor nor the Servicer shall
be under any obligation to appear in, prosecute or defend any legal action
unless such action is related to its respective duties under this Agreement and,
in its opinion, does not involve it in any expense or liability; provided,
however, that each of the Depositor and the Servicer may in its discretion
undertake any such action which it may deem necessary or desirable with respect
to this Agreement and the rights and duties of the parties hereto and the
interests of the Certificateholders hereunder. In such event, unless the
Depositor or the Servicer acts without the consent of the Certificate Insurer
prior to a Certificate Insurer Default or without the consent of Holders of
Certificates entitled to at least 51% of the Voting Rights after a Certificate
Insurer Default, the legal expenses and costs of such action and any liability
resulting therefrom (except any loss, liability or expense incurred by reason of
willful misfeasance, bad faith or gross negligence in the case of the Depositor,
and willful misfeasance, bad faith or negligence in the case of the Servicer, in
the performance of duties hereunder or by reason of reckless disregard of
obligations and duties hereunder) shall be expenses, costs and liabilities of
the Trust Fund, and the Depositor and the Servicer shall be entitled to be
reimbursed therefor from the Collection Account as and to the extent provided in
Section 3.11, any such right of reimbursement being prior to the rights of the
Certificateholders to receive any amount in the Collection Account.
Section 6.04. Limitation on Resignation of the Servicer.
The Servicer shall not resign from the obligations and duties hereby
imposed on it except upon determination that its duties hereunder are no longer
permissible under applicable law. Any such determination pursuant to the
preceding sentence permitting the resignation of the Servicer shall be evidenced
by an Opinion of Counsel to such effect obtained at the expense of the Servicer
and delivered to the Trustee. No resignation of the Servicer shall become
effective until the Trustee or a successor servicer shall have assumed the
Servicer's responsibilities, duties, liabilities (other than those liabilities
arising prior to the appointment of such successor) and obligations under this
Agreement.
86
<PAGE>
Except as expressly provided herein, the Servicer shall not assign
or transfer any of its rights, benefits or privileges hereunder to any other
Person, or delegate to or subcontract with, or authorize or appoint any other
Person to perform any of the duties, covenants or obligations to be performed by
the Servicer hereunder. If, pursuant to any provision hereof, the duties of the
Servicer are transferred to a successor servicer, the entire amount of the
Servicing Fee and other compensation payable to the Servicer pursuant hereto
shall thereafter be payable to such successor servicer.
Section 6.05. Rights of the Depositor and Others in Respect of the
Servicer.
The Servicer shall afford the Depositor, the Trustee and the
Certificate Insurer, upon reasonable notice, during normal business hours,
access to all records maintained by the Servicer in respect of its rights and
obligations hereunder and access to officers of the Servicer responsible for
such obligations. Upon request, the Servicer shall furnish to the Depositor, the
Trustee and the Certificate Insurer its most recent financial statements and
such other information relating to its capacity to perform its obligations under
this Agreement it possesses. To the extent such information is not otherwise
available to the public, the Depositor, the Trustee and the Certificate Insurer
shall not disseminate any information obtained pursuant to the preceding two
sentences without the Servicer's written consent, except as required pursuant to
this Agreement or to the extent that it is appropriate to do so (i) in working
with legal counsel, auditors, taxing authorities or other governmental agencies
or (ii) pursuant to any law, rule, regulation, order, judgment, writ, injunction
or decree of any court or governmental authority having jurisdiction over the
Depositor, the Trustee, the Certificate Insurer or the Trust Fund, and in either
case, the Depositor, the Certificate Insurer or the Trustee, as the case may be,
shall use its best efforts to assure the confidentiality of any such
disseminated non-public information. The Depositor may, but is not obligated to,
enforce the obligations of the Servicer under this Agreement and may, but is not
obligated to, perform, or cause a designee to perform, any defaulted obligation
of the Servicer under this Agreement or exercise the rights of the Servicer
under this Agreement; provided that the Servicer shall not be relieved of any of
its obligations under this Agreement by virtue of such performance by the
Depositor or its designee. The Depositor shall not have any responsibility or
liability for any action or failure to act by the Servicer and is not obligated
to supervise the performance of the Servicer under this Agreement or otherwise.
ARTICLE 7.
DEFAULT
Section 7.01. Servicer Events of Default.
"Servicer Event of Default," wherever used herein, means any one of
the following events:
(i) any failure by the Servicer to remit to the Trustee for
distribution to the Certificateholders any payment (other than a
Monthly Advance required to be made from its own funds on any
Servicer
87
<PAGE>
Remittance Date pursuant to Section 4.03) required to be made under
the terms of the Certificates and this Agreement which continues
unremedied for the later of (x) a period of one Business Day after
the date upon which written notice of such failure, requiring the
same to be remedied, shall have been given to the Servicer by the
Depositor, the Certificate Insurer or the Trustee (in which case
notice shall be provided by telecopy), or to the Servicer, the
Depositor, the Certificate Insurer and the Trustee by the Holders of
Certificates entitled to at least 25% of the Voting Rights or (y) 5
days; or
(ii) any failure (other than a failure identified in clause
(vi) below) on the part of the Servicer duly to observe or perform
in any material respect any other of the covenants or agreements on
the part of the Servicer contained in the Certificates or in this
Agreement which continues unremedied for a period of 30 days (or 10
days in the case of a failure to maintain any insurance policy on
any of the Mortgage Loans or Mortgaged Properties) after the earlier
of (i) the date on which written notice of such failure, requiring
the same to be remedied, shall have been given to the Servicer by
the Depositor, the Certificate Insurer or the Trustee, or to the
Servicer, the Depositor, the Certificate Insurer and the Trustee by
the Holders of Certificates entitled to at least 25% of the Voting
Rights and (ii) actual knowledge of such failure by a Servicing
Officer of the Servicer; or
(iii) a decree or order of a court or agency or supervisory
authority having jurisdiction in the premises in an involuntary case
under any present or future federal or state bankruptcy, insolvency
or similar law or the appointment of a conservator or receiver or
liquidator in any insolvency, readjustment of debt, marshalling of
assets and liabilities or similar proceeding, or for the winding-up
or liquidation of its affairs, shall have been entered against the
Servicer and such decree or order shall have remained in force
undischarged or unstayed for a period of 90 days; or
(iv) the Servicer shall consent to the appointment of a
conservator or receiver or liquidator in any insolvency,
readjustment of debt, marshalling of assets and liabilities or
similar proceedings of or relating to it or of or relating to all or
substantially all of its property; or
(v) the Servicer shall admit in writing its inability to pay
its debts generally as they become due, file a petition to take
advantage of any applicable insolvency or reorganization statute,
make an assignment for the benefit of its creditors, or voluntarily
suspend payment of its obligations; or
(vi) any failure of the Servicer to make any Monthly Advance
on any Servicer Remittance Date required to be made from its own
funds pursuant to Section 4.03 or failure to make any payment
required pursuant to Section 3.26 which continues unremedied until
3:00 p.m.
88
<PAGE>
New York time on the Business Day immediately following the Servicer
Remittance Date; or
(vii) any breach of a representation or warranty of the
Servicer relating to such Servicer's authority to enter into, and
its ability to perform its obligations under, this Pooling and
Servicing Agreement; or
(viii) the occurrence of a Performance Test Violation (as
defined in the Insurance Agreement).
Subject to Article IX, if a Servicer Event of Default described in
clauses (i) through (v) and (vii) and (viii) of this Section shall occur, then,
and in each and every such case, so long as such Servicer Event of Default shall
not have been remedied, the Depositor, the Certificate Insurer or the Trustee
may, and at the written direction of the Holders of Certificates entitled to at
least 25% of Voting Rights (with the consent of the Certificate Insurer to the
extent there is no Certificate Insurer Default), the Trustee shall, by notice in
writing to the Servicer (and to the Depositor and the Certificate Insurer if
given by the Trustee or to the Trustee if given by the Depositor or the
Certificate Insurer), terminate all of the rights and obligations of the
Servicer in its capacity as Servicer under this Agreement, to the extent
permitted by law, and in and to the Mortgage Loans and the proceeds thereof. If
a Servicer Event of Default described in clause (vi) hereof shall occur, the
Trustee shall, by notice in writing to the Servicer, the Certificate Insurer and
the Depositor, terminate all of the rights and obligations of the Servicer in
its capacity as Servicer under this Agreement and in and to the Mortgage Loans
and the proceeds thereof. On or after the receipt by the Servicer of such
written notice, all authority and power of the Servicer under this Agreement,
whether with respect to the Certificates (other than as a Holder of any
Certificate) or the Mortgage Loans or the Policy or otherwise, shall pass to and
be vested in the Trustee pursuant to and under this Section, and, without
limitation, the Trustee is hereby authorized and empowered, as attorney-in-fact
or otherwise, to execute and deliver, on behalf of and at the expense of the
Servicer, any and all documents and other instruments and to do or accomplish
all other acts or things necessary or appropriate to effect the purposes of such
notice of termination, whether to complete the transfer and endorsement or
assignment of the Mortgage Loans and related documents, or otherwise. The
Servicer agrees promptly (and in any event no later than ten Business Days
subsequent to such notice) to provide the Trustee with all documents and records
requested by it to enable it to assume the Servicer's functions under this
Agreement, and to cooperate with the Trustee in effecting the termination of the
Servicer's responsibilities and rights under this Agreement, including, without
limitation, the transfer within one Business Day to the Trustee for
administration by it of all cash amounts which at the time shall be or should
have been credited by the Servicer to the Collection Account held by or on
behalf of the Servicer, the Distribution Account, the Policy Payments Account or
any REO Account or Servicing Account held by or on behalf of the Servicer or
thereafter be received with respect to the Mortgage Loans or any REO Property
serviced by the Servicer (provided, however, that the Servicer shall continue to
be entitled to receive all amounts accrued or owing to it under this Agreement
on or prior to the date of such termination, whether in respect of Monthly
Advances or otherwise, and shall continue to be entitled to the benefits of
Section 6.03 notwithstanding any such termination). For purposes of this Section
7.01, the Trustee
89
<PAGE>
shall not be deemed to have knowledge of a Servicer Event of Default unless a
Responsible Officer of the Trustee assigned to and working in the Trustee's
Corporate Trust Office has actual knowledge thereof or unless written notice of
any event which is in fact such a Servicer Event of Default is received by the
Trustee and such notice references the Certificates, the Trust Fund or this
Agreement.
The Servicer hereby covenants and agrees to act as the Servicer
under this Agreement for an initial term, commencing on the Closing Date and
ending on December 26, 1997, which term shall be extendable by the Certificate
Insurer for successive terms of three calendar months thereafter, until the
termination of the Trust Fund pursuant to Article X. Each such notice of
extension (a "Servicer Extension Notice") shall be delivered by the Certificate
Insurer to the Trustee and the Servicer. The Servicer hereby agrees that, upon
its receipt of any such Servicer Extension Notice, the Servicer shall become
bound for the duration of the term covered by such Servicer Extension Notice to
continue as the Servicer subject to and in accordance with the other provisions
of this Agreement. The Trustee agrees that if as of the fifteenth (15th) day
prior to the last day of any term of the Servicer the Trustee shall not have
received any Servicer Extension Notice from the Certificate Insurer, the Trustee
will within five (5) days thereafter, give written notice of such non-receipt to
the Certificate Insurer and the Servicer. The failure of the Certificate Insurer
to deliver a Servicer Extension Notice by the end of a calendar term shall
result in the termination of the Servicer. The foregoing provisions of this
paragraph shall not apply to the Trustee in the event the Trustee succeeds to
the rights and obligations of the Servicer and the Trustee shall continue in
such capacity until the earlier of the termination of this Agreement pursuant to
Article X or the appointment of a successor servicer.
Section 7.02. Trustee to Act; Appointment of Successor.
(a) On and after the time the Servicer receives a notice of
termination or the Servicer's term is not extended pursuant to Section 7.01, the
Trustee shall be the successor in all respects to the Servicer in its capacity
as Servicer under this Agreement and the transactions set forth or provided for
herein and shall be subject to all the responsibilities, duties and liabilities
relating thereto and arising thereafter placed on the Servicer (except for any
representations or warranties of the Servicer under this Agreement and its
obligation to deposit amounts in respect of losses pursuant to Section 3.14) by
the terms and provisions hereof including, without limitation, the Servicer's
obligations to make Monthly Advances pursuant to Section 4.03; provided,
however, that if the Trustee is prohibited by law or regulation from obligating
itself to make advances regarding delinquent mortgage loans, then the Trustee
shall not be obligated to make Monthly Advances pursuant to Section 4.03 or to
make payments in respect of Prepayment Interest Shortfalls pursuant to Section
3.26; and provided, further, that any failure to perform such duties or
responsibilities caused by the Servicer's failure to provide information
required by Section 7.01 shall not be considered a default by the Trustee as
successor to the Servicer hereunder. As compensation therefor, the Trustee shall
be entitled to the Servicing Fees and all funds relating to the Mortgage Loans
to which the Servicer would have been entitled if it had continued to act
hereunder. Notwithstanding the above, the Trustee may, if it shall be unwilling
to so act, or shall, if it is unable to so act or if it is prohibited by law
from making advances regarding delinquent mortgage loans or if the Certificate
Insurer or if the Holders of Certificates
90
<PAGE>
entitled to at least 51% of the Voting Rights so request in writing to the
Trustee, promptly appoint, with the consent of the Certificate Insurer, or
petition a court of competent jurisdiction to appoint, an established mortgage
loan servicing institution acceptable to each Rating Agency and the Certificate
Insurer and having a net worth of not less than $15,000,000 and which is a FNMA
and FHLMC approved Seller/Servicer, as the successor to the Servicer under this
Agreement in the assumption of all or any part of the responsibilities, duties
or liabilities of the Servicer under this Agreement. No appointment of a
successor to the Servicer under this Agreement shall be effective until the
assumption by the successor of all of the Servicer's responsibilities, duties
and liabilities hereunder. In connection with such appointment and assumption
described herein, the Trustee may make such arrangements for the compensation of
such successor out of payments on Mortgage Loans as it and such successor shall
agree; provided, however, that no such compensation shall be in excess of that
permitted the Servicer as such hereunder. The Depositor, the Trustee and such
successor shall take such action, consistent with this Agreement, as shall be
necessary to effectuate any such succession. Pending appointment of a successor
to the Servicer under this Agreement, the Trustee shall act in such capacity as
hereinabove provided.
(b) If the Servicer fails to remit to the Trustee for distribution
to the Certificateholders any payment required to be made under the terms of the
Certificates and this Agreement (for purposes of this Section 7.02(b), a
"Remittance") because the Servicer is the subject of a proceeding under the
federal Bankruptcy Code and the making of such Remittance is prohibited by
Section 362 of the federal Bankruptcy Code, the Trustee shall upon notice of
such prohibition, regardless of whether it has received a notice of termination
under Section 7.01, advance the amount of such Remittance by depositing such
amount in the Distribution Account on the related Distribution Date. The Trustee
shall be obligated to make such advance only if (i) such advance, in the good
faith judgment of the Trustee, can reasonably be expected to be ultimately
recoverable from funds which are in the custody of the Servicer, a trustee in
bankruptcy or a federal bankruptcy court and should have been the subject of
such Remittance absent such prohibition (the "Stayed Funds") and (ii) the
Trustee is not prohibited by law from making such advance or obligating itself
to do so. Upon remittance of the Stayed Funds to the Trustee or the deposit
thereof in the Distribution Account by the Servicer, a trustee in bankruptcy or
a federal bankruptcy court, the Trustee may recover the amount so advanced,
without interest, by withdrawing such amount from the Distribution Account;
provided, however, that nothing in this Agreement shall be deemed to affect the
Trustee's rights to recover from the Servicer's own funds interest at the prime
rate (as set forth in the Wall Street Journal) as of the date of such advance on
the amount of any such advance. If the Trustee at any time makes an advance
under this subsection which it later determines in its good faith judgment will
not be ultimately recoverable from the Stayed Funds with respect to which such
advance was made, the Trustee shall be entitled to reimburse itself for such
advance, without interest, by withdrawing from the Distribution Account, out of
amounts on deposit therein, an amount equal to the portion of such advance
attributable to the Stayed Funds. The Servicer shall pay the Trustee, from the
Servicer's own funds, interest on any advance made by the Trustee pursuant to
this paragraph at a rate equal to the prime rate (as set forth in the Wall
Street Journal) as of the date of such advance.
91
<PAGE>
Section 7.03. Notification to Certificateholders.
(a) Upon any termination of the Servicer pursuant to Section 7.01
above or any appointment of a successor to the Servicer pursuant to Section 7.02
above, the Trustee shall give prompt written notice thereof to
Certificateholders at their respective addresses appearing in the Certificate
Register.
(b) Not later than the later of 60 days after the occurrence of any
event, which constitutes or which, with notice or lapse of time or both, would
constitute a Servicer Event of Default or five days after a Responsible Officer
of the Trustee becomes aware of the occurrence of such an event, the Trustee
shall transmit by mail to all Holders of Certificates notice of each such
occurrence, unless such default or Servicer Event of Default shall have been
cured or waived.
Section 7.04. Waiver of Servicer Events of Default.
The Holders representing at least 66% of the Voting Rights evidenced
by all Classes of Certificates affected by any default or Servicer Event of
Default hereunder, with the written consent of the Certificate Insurer, may
waive such default or Servicer Event of Default; provided, however, that a
default or Servicer Event of Default under clause (i) or (vi) of Section 7.01
may be waived only by all of the Holders of the Regular Certificates with the
written consent of the Certificate Insurer. Upon any such waiver of a default or
Servicer Event of Default, such default or Servicer Event of Default shall cease
to exist and shall be deemed to have been remedied for every purpose hereunder.
No such waiver shall extend to any subsequent or other default or Servicer Event
of Default or impair any right consequent thereon except to the extent expressly
so waived.
ARTICLE 8.
CONCERNING THE TRUSTEE
Section 8.01. Duties of Trustee.
The Trustee, prior to the occurrence of a Servicer Event of Default
and after the curing of all Servicer Events of Default which may have occurred,
undertakes to perform such duties and only such duties as are specifically set
forth in this Agreement. During a Servicer Event of Default, the Trustee shall
exercise such of the rights and powers vested in it by this Agreement, and use
the same degree of care and skill in their exercise as a prudent person would
exercise or use under the circumstances in the conduct of such person's own
affairs. Any permissive right of the Trustee enumerated in this Agreement shall
not be construed as a duty.
The Trustee, upon receipt of all resolutions, certificates,
statements, opinions, reports, documents, orders or other instruments furnished
to the Trustee which are specifically required to be furnished pursuant to any
provision of this Agreement, shall examine them to determine whether they
conform to the requirements of this Agreement. If any such instrument is found
not to conform to the requirements of this
92
<PAGE>
Agreement in a material manner, the Trustee shall take such action as it deems
appropriate to have the instrument corrected, and if the instrument is not
corrected to the Trustee's satisfaction, the Trustee will provide notice thereof
to the Certificateholders and the Certificate Insurer.
No provision of this Agreement shall be construed to relieve the
Trustee from liability for its own gross negligent action, its own gross
negligent failure to act or its own misconduct; provided, however, that:
(i) Prior to the occurrence of a Servicer Event of Default,
and after the curing of all such Servicer Events of Default which
may have occurred, the duties and obligations of the Trustee shall
be determined solely by the express provisions of this Agreement,
the Trustee shall not be liable except for the performance of such
duties and obligations as are specifically set forth in this
Agreement, no implied covenants or obligations shall be read into
this Agreement against the Trustee and, in the absence of bad faith
on the part of the Trustee, the Trustee may conclusively rely, as to
the truth of the statements and the correctness of the opinions
expressed therein, upon any certificates or opinions furnished to
the Trustee that conform to the requirements of this Agreement;
(ii) The Trustee shall not be personally liable for an error
of judgment made in good faith by a Responsible Officer or
Responsible Officers of the Trustee, unless it shall be proved that
the Trustee was negligent in ascertaining the pertinent facts;
(iii) The Trustee shall not be personally liable with respect
to any action taken, suffered or omitted to be taken by it in good
faith in accordance with the direction of the Certificate Insurer or
Holders of Certificates entitled to at least 25% of the Voting
Rights (with the consent of the Certificate Insurer) relating to the
time, method and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power conferred
upon the Trustee, under this Agreement;
(iv) In the absence of actual knowledge of a Servicer Event of
Default (which knowledge shall be presumed in the case of Sections
7.01(i) and (vi)), the Trustee shall not be required to take notice
or be deemed to have notice or knowledge of any default or Servicer
Event of Default unless the Trustee shall be specifically notified
in writing by the Servicer, the Certificate Insurer or any of the
Certificateholders. In the absence of actual knowledge or receipt of
such notice, the Trustee may conclusively assume that there is no
default or Servicer Event of Default;
(v) The Trustee shall not be required to expend or risk its
own funds or otherwise incur financial liability for the performance
of any of its duties hereunder or the exercise of any of its rights
or powers if there is reasonable ground for believing that the
repayment of such funds
93
<PAGE>
or adequate indemnity against such risk or liability is not
reasonably assured to it; and
(vi) In the event the Trustee serves as successor to the
Servicer hereunder, no implied duties or obligations shall be
imposed on the Trustee as successor Servicer and the terms and
conditions of this Agreement and the performance thereof by the
Trustee in its conformity as successor to the Servicer shall not
create any additional fiduciary duty on the Trustee to the
Certificateholders, the Certificate Insurer, the Servicer or any
other person. In the event the Trustee serves as successor to the
Servicer hereunder, the Trustee agrees to serve as Servicer pursuant
to the terms of the Agreement.
Section 8.02. Certain Matters Affecting the Trustee.
(a) Except as otherwise provided in Section 8.01:
(i) The Trustee may request and rely upon and shall be
protected in acting or refraining from acting upon any resolution,
Officers' Certificate, certificate of auditors or any other
certificate, statement, instrument, opinion, report, notice,
request, consent, order, appraisal, bond or other paper or document
reasonably believed by it to be genuine and to have been signed or
presented by the proper party or parties;
(ii) The Trustee may consult with counsel and any advice of
counsel shall be full and complete authorization and protection in
respect of any action taken or suffered or omitted by it hereunder
in good faith and in accordance with such advice of counsel;
(iii) The Trustee shall be under no obligation to exercise any
of the trusts or powers vested in it by this Agreement or to
institute, conduct or defend any litigation hereunder or in relation
hereto at the request, order or direction of any of the
Certificateholders, pursuant to the provisions of this Agreement,
unless such Certificateholders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and
liabilities which may be incurred therein or thereby; nothing
contained herein shall, however, relieve the Trustee of the
obligation, upon the occurrence of a Servicer Event of Default
(which has not been cured or waived), to exercise such of the rights
and powers vested in it by this Agreement, and to use the same
degree of care and skill in their exercise as a prudent person would
exercise or use under the circumstances in the conduct of such
person's own affairs;
(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;
94
<PAGE>
(v) Prior to the occurrence of a Servicer Event of Default
hereunder and after the curing of all Servicer Events of Default
which may have occurred, the Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice,
request, consent, order, approval, bond or other paper or document,
unless requested in writing to do so by the Certificate Insurer or
by Holders of Certificates entitled to at least 25% of the Voting
Rights (with the consent of the Certificate Insurer as long as there
is no Certificate Insurer Default); provided, however, that if the
payment within a reasonable time to the Trustee of the costs,
expenses or liabilities likely to be incurred by it in the making of
such investigation is, in the opinion of the Trustee, not reasonably
assured to the Trustee by such Certificateholders or the Certificate
Insurer, the Trustee may require reasonable indemnity against such
expense, or liability from such Certificateholders or the
Certificate Insurer as a condition to taking any such action;
(vi) The Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents or attorneys; and
(vii) The Trustee shall not be personally liable for any loss
resulting from the investment of funds held in any Investment
Account at the direction of the Servicer pursuant to Section 3.14.
(b) All rights of action under this Agreement or under any of the
Certificates, enforceable by the Trustee, may be enforced by it without the
possession of any of the Certificates, or the production thereof at the trial or
other proceeding relating thereto, and any such suit, action or proceeding
instituted by the Trustee shall be brought in its name for the benefit of all
the Holders of such Certificates, subject to the provisions of this Agreement.
Section 8.03. Trustee Not Liable for Certificates or Mortgage Loans.
The recitals contained herein and in the Certificates (other than
the signature of the Trustee, the authentication of the Certificate Registrar on
the Certificates, the acknowledgments of the Trustee contained in Article II and
the representations and warranties of the Trustee in Section 8.12) shall be
taken as the statements of the Depositor and the Trustee assumes no
responsibility for their correctness. The Trustee makes no representations or
warranties as to the validity or sufficiency of this Agreement (other than as
specifically set forth in Section 8.12) or of the Certificates (other than the
signature of the Trustee and authentication of the Certificate Registrar on the
Certificates) or of any Mortgage Loan or related document. The Trustee shall not
be accountable for the use or application by the Depositor of any of the
Certificates or of the proceeds of such Certificates, or for the use or
application of any funds paid to the Depositor or the Servicer in respect of the
Mortgage Loans or deposited in or withdrawn from the Collection Account by the
Servicer, other than any funds held by or on behalf of the Trustee in accordance
with Section 3.10.
95
<PAGE>
Section 8.04. Trustee May Own Certificates.
The Trustee in its individual capacity or any other capacity may
become the owner or pledges of Certificates with the same rights it would have
if it were not Trustee.
Section 8.05. Trustee's Fees and Expenses.
The Trustee shall withdraw from the Distribution Account on each
Distribution Date and pay to itself the Trustee's Fee and, to the extent that
the funds therein are at anytime insufficient for such purpose, the Servicer
shall pay such fees. The Trustee and any director, officer, employee or agent of
the Trustee shall be indemnified by the Trust Fund and held harmless against any
loss, liability or expense (not including expenses, disbursements and advances
incurred or made by the Trustee, including the compensation and the expenses and
disbursements of its agents and counsel, in the ordinary course of the Trustee's
performance in accordance with the provisions of this Agreement) incurred by the
Trustee arising out of or in connection with the acceptance or administration of
its obligations and duties under this Agreement, other than any loss, liability
or expense (i) resulting from the Servicer's actions or omissions in connection
with the Agreement and the Mortgage Loans (but only to the extent the Trustee is
actually indemnified by the Servicer pursuant hereto), (ii) that constitutes a
specific liability of the Trustee pursuant to Section 11.01(c) or (iii) any
loss, liability or expense incurred by reason of willful misfeasance, bad faith
or gross negligence in the performance of duties hereunder or by reason of
reckless disregard of obligations and duties hereunder or as a result of a
breach of the Trustee's obligations under Article XI hereof. The Servicer agrees
to indemnify the Trustee from, and hold it harmless against, any loss, liability
or expense arising in respect of such Servicer's acts or omissions in connection
with this Agreement and the Mortgage Loans serviced by such Servicer. Such
indemnity shall survive the termination or discharge of this Agreement and the
resignation or removal of the Trustee. Any indemnity payment hereunder made by
the Servicer to the Trustee shall be from the Servicer's own funds, without
reimbursement from the Trust Fund therefor.
Section 8.06. Eligibility Requirements for Trustee.
The Trustee hereunder shall at all times be a corporation or an
association organized and doing business under the laws of any state or the
United States of America, authorized under such laws to exercise corporate trust
powers, having a combined capital and surplus of at least $50,000,000 and
subject to supervision or examination by federal or state authority. If such
corporation or association publishes reports of conditions at least annually,
pursuant to law or to the requirements of the aforesaid supervising or examining
authority, then for the purposes of this Section the combined capital and
surplus of such corporation or association shall be deemed to be its combined
capital and surplus as set forth in its most recent report of conditions so
published. In case at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section, the Trustee shall resign
immediately in the manner and with the effect specified in Section 8.07.
96
<PAGE>
Section 8.07. Resignation and Removal of the Trustee.
The Trustee may at any time resign and be discharged from the trust
hereby created by giving written notice thereof to the Depositor, the
Certificate Insurer, the Servicer and to the Certificateholders. Upon receiving
such notice of resignation, the Servicer shall, with the written consent of the
Certificate Insurer, promptly appoint a successor trustee by written instrument,
in duplicate, which instrument shall be delivered to the resigning Trustee and
to the successor trustee. A copy of such instrument shall be delivered to the
Certificateholders, the Certificate Insurer, and the Servicer by the Depositor.
If no successor trustee shall have been so appointed and have accepted
appointment within 30 days after the giving of such notice of resignation, the
resigning Trustee may petition any court of competent jurisdiction for the
appointment of a successor trustee.
If at any time the Trustee shall cease to be eligible in accordance
with the provisions of Section 8.06 and shall fail to resign after written
request therefor by the Servicer or the Certificate Insurer, or if at any time
the Trustee shall become incapable of acting, or shall be adjudged bankrupt or
insolvent, or a receiver of the Trustee or of its property shall be appointed,
or any public officer shall take charge or control of the Trustee or of its
property or affairs for the purpose of rehabilitation, conservation or
liquidation or to charge the situs of the Trust Fund for state-tax reasons, then
the Depositor may remove the Trustee and appoint a successor trustee by written
instrument, in duplicate, which instrument shall be delivered to the Trustee so
removed and to the successor trustee. A copy of such instrument shall be
delivered to the Certificateholders, the Certificate Insurer and the Servicer by
the Depositor.
The Certificate Insurer or the Holders of Certificates entitled to
at least 51% of the Voting Rights (excluding any Certificates registered in the
name of the Depositor or the Servicer or any affiliate thereof), with the
written consent of the Certificate Insurer, may at any time remove the Trustee
and appoint a successor trustee by written instrument or instruments, in
triplicate, signed by the Certificate Insurer or such Holders or their
attorneys-in-fact duly authorized, one complete set of which instruments shall
be delivered to the Depositor, one complete set to the Trustee so removed and
one complete set to the successor so appointed. A copy of such instrument shall
be delivered to the Certificateholders, the Certificate Insurer and the Servicer
by the Depositor.
Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to any of the provisions of this Section shall not
become effective until acceptance of appointment by the successor trustee as
provided in Section 8.08.
Section 8.08. Successor Trustee.
Any successor trustee appointed as provided in Section 8.07 shall
execute, acknowledge and deliver to the Depositor, the Certificate Insurer and
to its predecessor trustee an instrument accepting such appointment hereunder,
and thereupon the resignation or removal of the predecessor trustee shall become
effective and such successor trustee, without any further act, deed or
conveyance, shall become fully
97
<PAGE>
vested with all the rights, powers, duties and obligations of its predecessor
hereunder, with the like effect as if originally named as trustee herein. The
predecessor trustee shall deliver to the successor trustee all Mortgage Files
and related documents and statements, as well as all moneys, held by it
hereunder, and the Depositor and the predecessor trustee shall execute and
deliver such instruments and do such other things as may reasonably be required
for more fully and certainly vesting and confirming in the successor trustee all
such rights, powers, duties and obligations.
No successor trustee shall accept appointment as provided in this
Section unless at the time of such acceptance such successor trustee shall be
eligible under the provisions of Section 8.06 and the appointment of such
successor trustee shall not result in a downgrading or withdrawal of the rating
of any Class of Class A Certificates (including any shadow rating thereof) by
either Rating Agency, as evidenced by a letter from each Rating Agency.
Upon acceptance of appointment by a successor trustee as provided in
this Section, the Depositor shall mail notice of the succession of such trustee
hereunder to the Certificate Insurer, the Rating Agencies and to all Holders of
Certificates at their addresses as shown in the Certificate Register. If the
Depositor fails to mail such notice within 10 days after acceptance of
appointment by the successor trustee, the successor trustee shall cause such
notice to be mailed at the expense of the Depositor.
Notwithstanding anything to the contrary contained herein, so long
as no Certificate Insurer Default has occurred and is continuing, the
appointment of any successor trustee pursuant to any provision of this Agreement
will be subject to the prior written consent of the Certificate Insurer.
Section 8.09. Merger or Consolidation of Trustee.
Any corporation or association into which the Trustee may be merged
or converted or with which it may be consolidated or any corporation or
association resulting from any merger, conversion or consolidation to which the
Trustee shall be a party, or any corporation or association succeeding to the
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation or association shall be eligible under the provisions
of Section 8.06, without the execution or filing of any paper or any further act
on the part of any of the parties hereto, anything herein to the contrary
notwithstanding.
Section 8.10. Appointment of Co-Trustee or Separate Trustee.
Notwithstanding any other provisions hereof, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any part
of the Trust Fund or property securing the same may at the time be located, the
Servicer and the Trustee acting jointly shall have the power and shall execute
and deliver all instruments to appoint one or more Persons approved by the
Trustee to act as co-trustee or co-trustees, jointly with the Trustee, or
separate trustee or separate trustees, of all or any part of the Trust Fund, and
to vest in such Person or Persons, in such capacity, such title to the Trust
Fund, or any part thereof, and, subject to the other provisions of this Section
8.10, such powers, duties, obligations, rights and trusts as the Servicer and
the Trustee
98
<PAGE>
may consider necessary or desirable. If the Servicer shall not have joined in
such appointment within 15 days after the receipt by it of a request so to do,
or in case a Servicer Event of Default shall have occurred and be continuing,
the Trustee alone shall have the power to make such appointment. No co-trustee
or separate trustee hereunder shall be required to meet the terms of eligibility
as a successor trustee under Section 8.06 hereunder and no notice to Holders of
Certificates of the appointment of co-trustee(s) or separate trustee(s) shall be
required under Section 8.08 hereof.
In the case of any appointment of a co-trustee or separate trustee
pursuant to this Section 8.10 all rights, powers, duties and obligations
conferred or imposed upon the Trustee shall be conferred or imposed upon and
exercised or performed by the Trustee and such separate trustee or co-trustee
jointly, except to the extent that under any law of any jurisdiction in which
any particular act or acts are to be performed by the Trustee (whether as
Trustee hereunder or as successor to a defaulting Servicer hereunder), the
Trustee shall be incompetent or unqualified to perform such act or acts, in
which event such rights, powers, duties and obligations (including the holding
of title to the Trust Fund or any portion thereof in any such jurisdiction)
shall be exercised and performed by such separate trustee or co-trustee at the
direction of the Trustee.
Any notice, request or other writing given to the Trustee shall be
deemed to have been given to each of the then separate trustees and co-trustees,
as effectively as if given to each of them. Every instrument appointing any
separate trustee or co-trustee shall refer to this Agreement and the conditions
of this Article VIII. Each separate trustee and co-trustee, upon its acceptance
of the trust conferred, shall be vested with the estates or property specified
in its instrument of appointment, either jointly with the Trustee or separately,
as may be provided therein, subject to all the provisions of this Agreement,
specifically including every provision of this Agreement relating to the conduct
of, affecting the liability of, or affording protection to, the Trustee. Every
such instrument shall be filed with the Trustee.
Any separate trustee or co-trustee may, at any time, constitute the
Trustee, its agent or attorney-in-fact, with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. If any separate trustee or co-trustee
shall die, become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Trustee, to the extent permitted by law, without the appointment of a new or
successor trustee.
Section 8.11. Appointment of Office or Agency.
The Trustee will maintain or appoint an office or agency where the
Certificates may be surrendered for registration of transfer or exchange, and
presented for final distribution, and where notices and demands to or upon the
Trustee in respect of the Certificates and this Agreement may be served.
99
<PAGE>
Section 8.12. Representations and Warranties of the Trustee.
The Trustee hereby represents and warrants to the Servicer, the
Depositor and the Certificate Insurer, as of the Closing Date, that:
(i) The Trustee is a national banking association duly
organized, validly existing and in good standing under the laws of
the United States.
(ii) The execution and delivery of this Agreement by the
Trustee, and the performance and compliance with the terms of this
Agreement by the Trustee, will not violate the Trustee's charter or
bylaws or constitute a default (or an event which, with notice or
lapse of time, or both, would constitute a default) under, or result
in the breach of, any material agreement or other instrument to
which it is a party or which is applicable to it or any of its
assets.
(iii) The Trustee has the full power and authority to enter
into and consummate all transactions contemplated by this Agreement,
has duly authorized the execution, delivery and performance of this
Agreement, and has duly executed and delivered this Agreement.
(iv) This Agreement, assuming due authorization, execution and
delivery by the Servicer and the Depositor, constitutes a valid,
legal and binding obligation of the Trustee, enforceable against the
Trustee in accordance with the terms hereof, subject to (A)
applicable bankruptcy, insolvency, receivership, reorganization,
moratorium and other laws affecting the enforcement of creditors'
rights generally, and (B) general principles of equity, regardless
of whether such enforcement is considered in a proceeding in equity
or at law.
(v) The Trustee is not in violation of, and its execution and
delivery of this Agreement and its performance and compliance with
the terms of this Agreement will not constitute a violation of, any
law, any order or decree of any court or arbiter, or any order,
regulation or demand of any federal, state or local governmental or
regulatory authority, which violation, in the Trustee's good faith
and reasonable judgment, is likely to affect materially and
adversely either the ability of the Trustee to perform its
obligations under this Agreement or the financial condition of the
Trustee.
(vi) No litigation is pending or, to the best of the Trustee's
knowledge, threatened against the Trustee which would prohibit the
Trustee from entering into this Agreement or, in the Trustee's good
faith reasonable judgment, is likely to materially and adversely
affect either the ability of the Trustee to perform its obligations
under this Agreement or the financial condition of the Trustee.
100
<PAGE>
ARTICLE 9.
CERTAIN MATTERS REGARDING THE CERTIFICATE INSURER
Section 9.01. Rights of the Certificate Insurer To Exercise Rights
of Class A Certificateholders.
Each of the Depositor, the Servicer and the Trustee, and by
accepting its Certificate, each Class A Certificateholder, agrees that unless a
Certificate Insurer Default has occurred and is continuing, the Certificate
Insurer shall have the right to exercise all rights of the Class A
Certificateholders under this Agreement (including all Voting Rights) (except as
provided in clause (i) of the second paragraph of Section 12.01) without any
further consent of the Class A Certificateholders, including, without
limitation:
(a) the right to direct foreclosures upon Mortgage Loans upon
failure of the Servicer to do so;
(b) the right to require the Seller to repurchase, or substitute
for, Mortgage Loans pursuant to Section 2.05;
(c) the right to give notices of breach or to terminate the rights
and obligations of the Servicer as Servicer pursuant to Section 7.01;
(d) the right to direct the actions of the Trustee during the
continuance of a Servicer Event of Default pursuant to Sections 7.01 and 7.02;
(e) the right to consent to or direct any waivers of Servicer Event
of Defaults pursuant to Section 7.04;
(f) the right to direct the Trustee to investigate certain matters
pursuant to Section 8.02(a)(v); and
(g) the right to remove the Trustee pursuant to Section 8.07 hereof.
In addition, each Class A Certificateholder agrees that, unless a
Certificate Insurer Default has occurred and is continuing, the rights
specifically set forth above may be exercised by the Class A Certificateholders
only with the prior written consent of the Certificate Insurer.
Section 9.02. Trustee To Act Solely with Consent of the Certificate
Insurer.
Unless a Certificate Insurer Default has occurred and is continuing,
the Trustee shall not:
(a) agree to any amendment pursuant to Section 12.01;
101
<PAGE>
(b) undertake any litigation pursuant to Section 8.02(a)(iii); or
(c) terminate the Servicer pursuant to Section 7.01
without the prior written consent of the Certificate Insurer which consent shall
not be unreasonably withheld.
Section 9.03. Trust Fund and Accounts Held for Benefit of the
Certificate Insurer.
The Trustee shall hold the Trust Fund and the Mortgage Files for the
benefit of the Certificateholders and the Certificate Insurer and all references
in this Agreement (including, without limitation, in Sections 2.03 and 2.04) 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.
The Servicer hereby acknowledges and agrees that it shall service
and administer the Mortgage Loans and any REO Properties, and shall maintain the
Collection Account and any REO Account, for the benefit of the
Certificateholders and for the benefit of the Certificate Insurer, and all
references in this Agreement (including, without limitation, in Sections 3.01
and 3.10) to the benefit of or actions on behalf of the Certificateholders shall
be deemed to include the Certificate Insurer. Unless a Certificate Insurer
Default has occurred and is continuing, the Servicer shall not terminate any
Sub-Servicing Agreements without cause without the prior consent of the
Certificate Insurer. Unless a Certificate Insurer Default has occurred and is
continuing, neither the Servicer nor the Depositor shall undertake any
litigation pursuant to Section 6.03 (other than litigation to enforce their
respective rights hereunder) without the prior consent of the Certificate
Insurer. The Trustee and the Servicer shall provide such information as may be
reasonably requested by, and shall otherwise cooperate with all reasonable
requests of the Certificate Insurer with respect to the Mortgage Loans or the
Certificates; provided that such information is within the control of or
reasonably accessible to such party without undue expense.
Section 9.04. Claims Upon the Policy; Policy Payments Account.
(a) If, by the close of business on the third Business Day prior to
a Distribution Date, the Trustee determines, based on the Remittance Report,
that a Deficiency Amount for any Distribution Date is greater than zero, then
the Trustee shall give notice to the Certificate Insurer by telephone or
telecopy of the amount of such Deficiency Amount. Such notice of such Deficiency
Amount shall be confirmed in writing in the form set forth as Exhibit A to the
Policy to the Certificate Insurer and the Fiscal Agent (as defined in the
Policy), if any, at or before 10:00 a.m., New York time, on the second Business
Day prior to such Distribution Date. Following receipt by the Certificate
Insurer of such notice in such form, the Certificate Insurer will pay any amount
payable under the Policy on the later to occur of (i) 12:00 noon, New York time,
on the second Business Day following such receipt and (ii) 12:00 noon, New York
102
<PAGE>
time, on the Distribution Date to which such deficiency relates, as provided in
Exhibit A to the Policy.
(b) The Trustee shall establish a separate special purpose trust
account for the benefit of Holders of the Class A Certificates and the
Certificate Insurer referred to herein as the "Policy Payments Account" over
which the Trustee shall have exclusive control and sole right of withdrawal. The
Trustee shall deposit any amount paid under the Policy in the Policy Payments
Account and distribute such amount only for purposes of payment to Holders of
Class A Certificates of the Guaranteed Distribution for which a claim was made
and such amount may not be applied to satisfy any costs, expenses or liabilities
of the Servicer, the Trustee or the Trust Fund. Amounts paid under the Policy
shall be transferred to the Distribution Account in accordance with the next
succeeding paragraph and disbursed by the Trustee to Holders of Class A
Certificates in accordance with Section 4.01(b) or Section 10.01, as applicable.
It shall not be necessary for such payments to be made by checks or wire
transfers separate from the checks or wire transfers used to pay the Guaranteed
Distribution with other funds available to make such payment. However, the
amount of any payment of principal of or interest on the Class A Certificates to
be paid from funds transferred from the Policy Payments Account shall be noted
as provided in paragraph (c) below in the Certificate Register and in the
statement to be furnished to Holders of the Class A Certificates and Residual
Certificates pursuant to Section 4.02. Funds held in the Policy Payments Account
shall not be invested.
On any Distribution Date with respect to which a claim has been made
under the Policy, the amount of any funds received by the Trustee as a result of
any claim under the Policy, to the extent required to make the Guaranteed
Distribution on such Distribution Date, shall be withdrawn from the Policy
Payments Account and deposited in the Distribution Account and applied by the
Trustee, together with the other funds to be withdrawn from the Distribution
Account pursuant to Section 4.01(b) or Section 10.01, as applicable, directly to
the payment in full of the Guaranteed Distribution due on the Class A
Certificates. Funds received by the Trustee as a result of any claim under the
Policy shall be deposited by the Trustee in the Policy Payments Account and used
solely for payment to the Holders of the Class A Certificates and may not be
applied to satisfy any costs, expenses or liabilities of the Servicer, the
Trustee or the Trust Fund. Any funds remaining in the Policy Payments Account on
the first Business Day following a Distribution Date shall be remitted to the
Certificate Insurer, pursuant to the instructions of the Certificate Insurer, by
the end of such Business Day.
(c) The Trustee shall keep a complete and accurate record of the
amount of interest and principal paid in respect of any Class A Certificate from
moneys received under the Policy. The Certificate Insurer shall have the right
to inspect such records at reasonable times during normal business hours upon
one Business Day's prior notice to the Trustee.
(d) The Trustee shall promptly notify the Certificate Insurer and
Fiscal Agent of any proceeding or the institution of any action, of which a
Responsible Officer the Trustee has actual knowledge, seeking the avoidance as a
preferential transfer under applicable bankruptcy, insolvency, receivership or
similar law (a "Preference Claim") of any distribution made with respect to the
Class A Certificates.
103
<PAGE>
Each Class A Certificateholder, by its purchase of Class A Certificates, the
Servicer and the Trustee hereby agree that the Certificate Insurer (so long as
no Certificate Insurer Default has occurred and is continuing) may at any time
during the continuation of any proceeding relating to a Preference Claim direct
all matters relating to such Preference Claim, including, without limitation,
(i) the direction of any appeal of any order relating to such Preference Claim
and (ii) the posting of any surety, supersedes or performance bond pending any
such appeal. In addition and without limitation of the foregoing, the
Certificate Insurer shall be subrogated to the rights of the Servicer, the
Trustee and each Class A Certificateholder in the conduct of any such Preference
Claim, including, without limitation, all rights of any party to an adversary
proceeding action with respect to any court order issued in connection with any
such Preference Claim.
Section 9.05. Effect of Payments by the Certificate Insurer;
Subrogation.
Anything herein to the contrary notwithstanding, any payment with
respect to principal of or interest on any of the Class A Certificates which is
made with moneys received pursuant to the terms of the Policy shall not be
considered payment of such Class A Certificates from the Trust Fund and shall
not result in the payment of or the provision for the payment of the principal
of or interest on such Class A Certificates within the meaning of Section 4.01.
The Depositor, the Servicer and the Trustee acknowledge, and each Holder by its
acceptance of a Certificate agrees, that without the need for any further action
on the part of the Certificate Insurer, the Depositor, the Servicer, the Trustee
or the Certificate Registrar (a) to the extent the Certificate Insurer makes
payments, directly or indirectly, on account of principal of or interest on any
Class A Certificates to the Holders of such Certificates, the Certificate
Insurer will be fully subrogated to the rights of such Holders to receive such
principal and interest from the Trust Fund and (b) the Certificate Insurer shall
be paid such principal and interest but only from the sources and in the manner
provided herein for the payment of such principal and interest.
The Trustee and the Servicer shall cooperate in all respects with
any reasonable request by the Certificate Insurer for action to preserve or
enforce the Certificate Insurer's rights or interests under this Agreement
without limiting the rights or affecting the interests of the Holders as
otherwise set forth herein.
Section 9.06. Notices to the Certificate Insurer.
All notices, statements, reports, certificates or opinions required
by this Agreement to be sent to any other party hereto or to any of the
Certificateholders shall also be sent to the Certificate Insurer.
Section 9.07. Third-Party Beneficiary.
The Certificate Insurer shall be a third-party beneficiary of this
Agreement, entitled to enforce the provisions hereof as if a party hereto.
104
<PAGE>
Section 9.08. Trustee to Hold the Policy.
The Trustee will hold the Policy in trust as agent for the Holders
of the Class A Certificates for the purpose of making claims thereon and
distributing the proceeds thereof. The Policy, prior to any distributions
thereon deposited into the Policy Payments Account, will not constitute part of
the Trust Fund or assets of the REMIC Trust created by this Agreement. Each
Holder of Class A Certificates, by accepting its Class A Certificates, appoints
the Trustee as attorney-in-fact for the purpose of making claims on the Policy.
Section 9.09. Termination of the Servicer.
Notwithstanding anything this Agreement to the contrary, the
Certificate Insurer may terminate or refuse to renew the term of the Servicer at
such time as permitted under any separate agreements between them so long as no
Certificate Insurer Default has occurred and is continuing.
ARTICLE 10.
TERMINATION
Section 10.01. Termination Upon Repurchase or Liquidation of All
Mortgage Loans.
Subject to Section 10.02, the respective obligations and
responsibilities under this Agreement of the Depositor, the Servicer and the
Trustee (other than the obligations of the Servicer to the Trustee pursuant to
Section 8.05 and of the Servicer to provide for and the Trustee to make payments
to Certificateholders as hereafter set forth) shall terminate upon payment to
the Certificateholders and the deposit of all amounts held by or on behalf of
the Trustee and required hereunder to be so paid or deposited on the
Distribution Date coinciding with or following the earlier to occur (i) the
purchase by the Terminator (as defined below) of all Mortgage Loans and each REO
Property remaining in the Trust Fund at a price equal to the greater of (A) the
aggregate Purchase Price of all the Mortgage Loans included in the Trust Fund,
plus the appraised value of each REO Property, if any, included in the Trust
Fund, such appraisal to be conducted by an appraiser mutually agreed upon by the
Terminator and the Trustee in their reasonable discretion (and approved by the
Certificate Insurer in its reasonable discretion) and (B) the aggregate fair
market value of all of the assets of the Trust Fund (as determined by the
Terminator, the Certificate Insurer (to the extent the Certificate Insurer is
not the Terminator) and the Trustee, as of the close of business on the third
Business Day next preceding the date upon which notice of any such termination
is furnished to Certificateholders pursuant to the third paragraph of this
Section 10.01) (the "Termination Price") and (ii) the later of the final payment
or other liquidation (or any advance with respect thereto) of the last Mortgage
Loan or REO Property remaining in the Trust Fund; provided, however, that in no
event shall the trust created hereby continue beyond the expiration of 21 years
from the death of the last survivor of
105
<PAGE>
the descendants of Joseph P. Kennedy, the late ambassador of the United States
to the Court of St. James, living on the date hereof.
Subject to this Section 10.01, the Majority Class R
Certificateholder and the Certificate Insurer shall have the right (the
"Terminator"), to purchase all of the Mortgage Loans and each REO Property
remaining in the Trust Fund pursuant clause (i) of the preceding paragraph no
later than the Determination Date in the month immediately preceding the
Distribution Date on which the Certificates will be retired; provided, however,
that the Terminator may elect to purchase all of the Mortgage Loans and each REO
Property remaining in the Trust Fund pursuant to clause (i) above only if the
aggregate Stated Principal Balance of the Mortgage Loans and each REO Property
remaining in the Trust Fund at the time of such election is equal to or less
than 10%, in the case of the Majority Class R Certificateholder, and 5% or less,
in the case of the Certificate Insurer, of the Original Pool Balance and
provided, further, that such purchase is evidenced by receipt of an Opinion of
Counsel that such purchase (x) will be part of a "qualified liquidation" or
other evidence as defined in Code Section 860F(a)(4)(A), (y) will not otherwise
subject the Trust Fund to tax and (z) will not cause the Trust Fund to fail to
qualify as a REMIC.
Notice of any termination shall be given promptly by the Trustee by
letter to Certificateholders and the Certificate Insurer mailed (a) in the event
such notice is given in connection with the purchase of the Mortgage Loans and
each REO Property by the Terminator, not earlier than the 10th day and not later
than the 15th day of the month next preceding the month of the final
distribution on the Certificates or (b) otherwise during the month of such final
distribution on or before the Determination Date in such month, in each case
specifying (i) the Distribution Date upon which the Trust Fund will terminate
and final payment of the Certificates will be made upon presentation and
surrender of Certificates at the office of the Trustee therein designated, (ii)
the amount of any such final payment, (iii) that no interest shall accrue in
respect of the Certificates from and after the Interest Accrual Period relating
to the final Distribution Date therefor and (iv) that the Record Date otherwise
applicable to such Distribution Date is not applicable, payments being made only
upon presentation and surrender of the Certificates at the office. The Trustee
shall give such notice to the Certificate Registrar at the time such notice is
given to Certificateholders. In the event such notice is given in connection
with the purchase of all of the Mortgage Loans and each REO Property remaining
in the Trust Fund by the Terminator, the Terminator shall deliver to the Trustee
for deposit in the Distribution Account not later than the last Business Day of
the month next preceding the month of the final distribution on the Certificates
an amount in immediately available funds equal to the above described purchase
price. Upon certification to the Trustee by a Servicing Officer (a copy of which
certification shall be delivered to the Certificate Insurer) of the making of
such final deposit, the Trustee shall promptly release to the Terminator the
Mortgage Files for the remaining Mortgage Loans, and the Trustee shall execute
all assignments, endorsements and other instruments necessary to effectuate such
transfer.
Upon presentation of the Certificates by the Certificateholders on
the final Distribution Date, the Trustee shall distribute to each
Certificateholder so presenting and surrendering its Certificates the amount
otherwise distributable on such Distribution Date in accordance with Section
4.01 in respect of the Certificates so
106
<PAGE>
presented and surrendered. Any funds not distributed to any Holder or Holder of
Certificates of such Class on such Distribution Date because of the failure of
such Holder or Holders to tender their Certificates shall, on such date, be set
aside and held in trust and credited to the account of the appropriate
non-tendering Holder or Holders. If any Certificate as to which notice has been
given pursuant to this Section 10.01 shall not have been surrendered for
cancellation within six months after the time specified in such notice, the
Trustee shall mail a second notice to the remaining non-tendering
Certificateholders to surrender their Certificates for cancellation in order to
receive the final distribution with respect thereto. If within one year after
the second notice all such Certificates shall not have been surrendered for
cancellation, the Trustee shall, directly or through an agent, contact the
remaining non-tendering Certificateholders concerning surrender of their
Certificates in the manner reasonably specified to the Trustee by the Servicer
in writing. The costs and expenses of maintaining the funds in trust and of
contacting such Certificateholders shall be paid out of the assets so held in
trust for such Certificateholders. If in one year after the second notice any
such Certificates shall not have been surrendered for cancellation, the Servicer
shall pay to the Certificate Insurer any amount of such funds that were paid by
the Certificate Insurer under the Policy but shall continue to hold any
remaining funds for the benefit of the non-tendering Certificateholders, and
such Certificateholders shall thereafter look solely to the Servicer for payment
thereof, and all liability of the Certificate Insurer with respect to such trust
funds shall thereupon cease. No interest shall accrue or be payable to any
Certificateholder on any amount held in trust by the Servicer as a result of
such Certificateholder's failure to surrender its Certificate(s) for final
payment thereof in accordance with this Section 10.01.
No such termination shall be permitted without the prior written
consent of the Certificate Insurer if it would result in a draw under the Policy
or in any outstanding Cumulative Insurance Payment or other amounts remaining
due under the Insurance Agreement.
Immediately following the deposit of funds in trust hereunder in
respect of the Certificates, the Trust Fund shall terminate.
Section 10.02. Additional Termination Requirements.
(a) In the event that the Terminator purchases all the Mortgage
Loans and each REO Property or the final payment on or other liquidation of the
last Mortgage Loan or REO Property remaining in the Trust Fund pursuant to
Section 10.01, the Trust Fund shall be terminated in accordance with the
following additional requirements:
(i) The Trustee shall specify the first day in the 90-day
liquidation period in a statement attached to the Trust Fund's final
Tax Return pursuant to Treasury regulation Section 1.860F-1 and
shall satisfy all requirements of a qualified liquidation under
Section 860F of the Code and any regulations thereunder, as
evidenced by an Opinion of Counsel obtained at the expense of the
Terminator;
107
<PAGE>
(ii) During such 90-day liquidation period, and at or prior to
the time of making of the final payment on the Certificates, the
Trustee shall sell all of the assets of the Trust Fund to the
Terminator for cash; and
(iii) At the time of the making of the final payment on the
Certificates, the Trustee shall distribute, credit, or cause to be
distributed or credited, to the Holders of the Residual Certificates
all cash on hand in the Trust Fund (other than cash retained to meet
claims), and the Trust Fund shall terminate at that time.
(b) The Majority Class R Certificateholder shall prepare the
documentation required in connection with the adoption of a plan of liquidation
of a Trust Fund pursuant to this Section 10.02.
(c) By their acceptance of Certificates, the Holders thereof hereby
agree to authorize the Trustee to specify the 90-day liquidation period for the
Trust Fund, which authorization shall be binding upon all successor
Certificateholders.
ARTICLE 11.
REMIC PROVISIONS
Section 11.01. REMIC Administration.
(a) The Trustee shall elect to treat the REMIC Trust, as a REMIC
under the Code and, if necessary, under applicable state law, provided, however,
that such election shall not be made with respect to the Redemption Account,
Pre-Funding Account or Interest Coverage Account and shall specifically exclude
such accounts from the assets for which a REMIC election is made. Such election
will be made on Form 1066 or other appropriate federal tax or information return
or any appropriate state return for the taxable year ending on the last day of
the calendar year in which the Certificates are issued. For the purposes of the
REMIC election in respect of the REMIC Trust, the Class A Certificates shall be
designated as the Regular Interests in the REMIC and the Residual Certificates
shall be designated as the single class of Residual Interest in the REMIC. The
Trustee shall not permit the creation of any "interests" in the REMIC (within
the meaning of Section 860G of the Code) other than the interests represented by
the Certificates.
The Interest Coverage 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 Interest Coverage Account for purposes
of Treasury Regulations Section 1.860G-2(h). For all federal income tax
purposes, amounts transferred by the REMIC to the Interest Coverage Account, if
any, will be treated as amounts distributed by the REMIC to the Seller.
108
<PAGE>
(b) The Closing Date is hereby designated as the "Startup Day" of
the REMIC Trust within the meaning of Section 860G(a)(9) of the Code.
(c) The Trustee shall pay out of its own funds, without any right of
reimbursement, any and all expenses (not including taxes) relating to any tax
audit of the Trust Fund (including, but not limited to, any professional fees or
any administrative or judicial proceedings with respect to the Trust Fund that
involve the Internal Revenue Service or state tax authorities), other than the
expense of obtaining any tax related Opinion of Counsel except as specified
herein. The Trustee, as agent for the Trust Fund's tax matters person, shall (i)
act on behalf of the Trust Fund in relation to any tax matter or controversy
involving the Trust Fund and (ii) represent the Trust Fund in any administrative
or judicial proceeding relating to an examination or audit by any governmental
taxing authority with respect thereto. The holder of the largest Percentage
Interest of the Residual Certificates shall be designated, in the manner
provided under Treasury regulations section 1.860F-4(d) and temporary Treasury
regulations section 301.6231(a)(7)-IT, as the tax matters person of the Trust
Fund. By their acceptance thereof, the holder of the largest Percentage Interest
of the Residual Certificates hereby agrees to irrevocably appoint the Trustee or
an Affiliate as its agent to perform all of the duties of the tax matters person
for the Trust Fund.
(d) The Trustee shall prepare, sign and file all of the Tax Returns
in respect of the REMIC created hereunder. The expenses of preparing and filing
such returns shall be borne by the Trustee without any right of reimbursement
therefor. The Servicer shall provide on a timely basis to the Trustee or its
designee such information with respect to the assets of the Trust Fund as is in
its possession or within its control to obtain and reasonably required by the
Trustee to enable it to perform its obligations under this Article.
(e) The Trustee shall perform on behalf of the Trust Fund all
reporting and other tax compliance duties that are the responsibility of the
REMIC under the Code, the REMIC Provisions or other compliance guidance issued
by the Internal Revenue Service or any state or local taxing authority. Among
its other duties, as required by the Code, the REMIC Provisions or other such
compliance guidance, the Trustee shall provide (i) to any Transferor of a
Residual Certificate such information as is necessary for the application of any
tax relating to the transfer of a Residual Certificate to any Person who is not
a Permitted Transferee, (ii) to the Certificateholders such information or
reports as are required by the Code or the REMIC Provisions including reports
relating to interest, original issue discount and market discount or premium
(using the Prepayment Assumption as required) and (iii) to the Internal Revenue
Service the name, title, address and telephone number of the person who will
serve as the representative of the Trust Fund. The Servicer shall provide on a
timely basis to the Trustee such information with respect to the assets of the
Trust Fund, including, without limitation, the Mortgage Loans, as is in its
possession or within its control to obtain and reasonably required by the
Trustee to enable it to perform its obligations under this subsection. In
addition, the Depositor shall provide or cause to be provided to the Trustee,
within ten (10) days after the Closing Date, all information or data that the
Trustee reasonably determines to be relevant for tax purposes as to the
valuations and issue prices of the Certificates, including, without limitation,
the price, yield, prepayment assumption and projected cash flow of the
Certificates.
109
<PAGE>
(f) The Trustee shall take such action and shall cause the REMIC
created hereunder to take such action as shall be necessary to create or
maintain the status thereof as a REMIC under the REMIC Provisions (and the
Servicer shall assist it, to the extent reasonably requested by it). The Trustee
shall not take any action, cause the Trust Fund to take any action or fail to
take (or fail to cause to be taken) any action that, under the REMIC Provisions,
if taken or not taken, as the case may be, could (i) endanger the status of the
REMIC Trust as a REMIC or (ii) result in the imposition of a tax upon the REMIC
Trust (including but not limited to the tax on prohibited transactions as
defined in Section 860F(a)(2) of the Code and the tax on contributions to a
REMIC set forth in Section 860G(d) of the Code) (either such event, an "Adverse
REMIC Event") unless the Trustee has received an Opinion of Counsel, addressed
to the Trustee and the Certificate Insurer (at the expense of the party seeking
to take such action but in no event at the expense of the Trustee) to the effect
that the contemplated action will not, with respect to the REMIC Trust created
hereunder, endanger such status or result in the imposition of such a tax, nor
shall the Servicer take or fail to take any action (whether or not authorized
hereunder) as to which the Trustee has advised it in writing that it has
received an Opinion of Counsel to the effect that an Adverse REMIC Event could
occur with respect to such action. In addition, prior to taking any action with
respect to the Trust Fund or the assets of the Trust Fund, or causing the Trust
Fund to take any action, which is not expressly permitted under the terms of
this Agreement, the Servicer will consult with the Trustee or its designee, in
writing, with respect to whether such action could cause an Adverse REMIC Event
to occur with respect to the REMIC Trust, and the Servicer shall not take any
such action or cause the Trust Fund to take any such action as to which the
Trustee has advised it in writing that an Adverse REMIC Event could occur. The
Trustee may consult with counsel to make such written advice, and the cost of
same shall be borne by the party seeking to take the action not permitted by
this Agreement, but in no event shall such cost be an expense of the Trustee. At
all times as may be required by the Code, upon notice or discovery that
substantially all of the assets of the REMIC Trust created hereunder do not
consist of "qualified mortgages" as defined in Section 860G(a)(3) of the Code
and "permitted investments" as defined in Section 860G(a)(5) of the Code, the
Trustee shall take such action as shall be necessary to maintain the status of
the REMIC as a REMIC under the REMIC Provisions.
(g) In the event that any tax is imposed on "prohibited
transactions" of the REMIC Trust created hereunder as defined in Section
860F(a)(2) of the Code, on the "net income from foreclosure property" of the
REMIC Trust as defined in Section 860G(c) of the Code, on any contributions to
the REMIC Trust after the Startup Day therefor pursuant to Section 860G(d) of
the Code, or any other tax is imposed by the Code or any applicable provisions
of state or local tax laws, such tax shall be charged (i) to the Trustee
pursuant to Section 11.03 hereof, if such tax arises out of or results from a
breach by the Trustee of any of its obligations under this Article XI, (ii) to
the Servicer pursuant to Section 11.03 hereof, if such tax arises out of or
results from a breach by the Servicer of any of its obligations under Article
III or this Article XI, or otherwise (iii) against amounts on deposit in the
Distribution Account and shall be paid by withdrawal therefrom.
(h) On or before April 15 of each calendar year, commencing April
15, 1998, the Trustee shall deliver to the Servicer and each Rating Agency a
110
<PAGE>
Certificate from a Responsible Officer of the Trustee stating the Trustee's
compliance with this Article XI.
(i) The Trustee and the Servicer shall, for federal income tax
purposes, maintain books and records with respect to the Trust Fund on a
calendar year and on an accrual basis.
(j) Following the Startup Day, the Trustee shall not accept any
contributions of assets to the Trust Fund other than in connection with any
Qualified Substitute Mortgage Loan delivered in accordance with Section 2.05
unless it shall have received an Opinion of Counsel to the effect that the
inclusion of such assets in the REMIC Trust will not cause the REMIC Trust to
fail to qualify as a REMIC at any time that any Certificates are outstanding or
subject the REMIC Trust to any tax under the REMIC Provisions or other
applicable provisions of federal, state and local law or ordinances.
(k) Neither the Trustee nor the Servicer shall enter into any
arrangement by which the Trust Fund will receive a fee or other compensation for
services nor permit the REMIC Trust to receive any income from assets other than
"qualified mortgages" as defined in Section 860G(a)(3) of the Code or "permitted
investments" as defined in Section 860G(a)(5) of the Code.
Section 11.02. Prohibited Transactions and Activities.
None of the Depositor, the Servicer or the Trustee shall sell,
dispose of or substitute for any of the Mortgage Loans (except in connection
with (i) the foreclosure of a Mortgage Loan, including but not limited to, the
acquisition or sale of a Mortgaged Property acquired by deed in lieu of
foreclosure, (ii) the bankruptcy of the Trust Fund (iii) the termination of the
Trust Fund pursuant to Article X of this Agreement, (iv) a substitution pursuant
to Article II of this Agreement or (v) a purchase of Mortgage Loans pursuant to
Article II or III of this Agreement), nor acquire any assets for the Trust Fund
(other than a REO Property acquired in respect of a defaulted Mortgage Loan),
nor sell or dispose of any investments in the Collection Account or the
Distribution Account for gain, nor accept any contributions to the Trust Fund
after the Closing Date (other than a Qualified Substitute Mortgage Loan
delivered in accordance with Section 2.05), unless it has received an Opinion of
Counsel, addressed to the Certificate Insurer and the Trustee (at the expense of
the party seeking to cause such sale, disposition, substitution, acquisition or
contribution but in no event at the expense of the Trustee) that such sale,
disposition, substitution, acquisition or contribution will not (a) affect
adversely the status of the REMIC Trust as a REMIC or (b) cause the REMIC Trust
to be subject to a tax on "prohibited transactions" or "contributions" pursuant
to the REMIC Provisions.
Section 11.03. Servicer and Trustee Indemnification.
(a) The Trustee agrees to indemnify the Trust Fund, the Depositor,
the Certificate Insurer and the Servicer for any taxes and costs including,
without limitation, any reasonable attorneys' fees imposed on or incurred by the
Trust Fund, the
111
<PAGE>
Depositor, the Certificate Insurer or the Servicer, as a result of a breach of
the Trustee's covenants set forth in this Article XI.
(b) The Servicer agrees to indemnify the Trust Fund, the Depositor,
the Certificate Insurer and the Trustee for any taxes and costs including,
without limitation, any reasonable attorneys' fees imposed on or incurred by the
Trust Fund, the Depositor, the Certificate Insurer or the Trustee, as a result
of a breach of the Servicer's covenants set forth in Article III or this Article
XI.
ARTICLE 12.
MISCELLANEOUS PROVISIONS
Section 12.01. Amendment.
This Agreement may be amended from time to time by the Depositor,
the Servicer and the Trustee without the consent of any of the
Certificateholders, (i) to cure any ambiguity, to correct any defect or to give
effect to the expectations of Holders, (ii) to correct, modify or supplement any
provisions herein, to modify, eliminate or add to any of its provisions to such
extent as shall be necessary to maintain the qualification of the Trust Fund as
a REMIC at all times that any Certificates are outstanding or to avoid or lessen
the risk of the imposition of any tax on the Trust Fund pursuant to the Code
that would be a claim against the Trust Fund, provided that the Trustee has
received an Opinion of Counsel to the effect that such action is necessary or
desirable to maintain such qualification or to avoid or minimize the risk of the
imposition of any such tax and such action will not, as evidenced by such
Opinion of Counsel, adversely affect in any material respect the interests of
any Certificateholder, (iii) to change the timing and/or nature of deposits in
the Collection Account, provided that such change will not, as evidenced by an
Opinion of Counsel, adversely affect in any material respect the interests of
any Certificateholder and that such change will not adversely affect the then
current rating or shadow rating assigned to any Class A Certificates, as
evidenced by a letter from each Rating Agency to such effect, (iv) to add to,
modify or eliminate any provisions therein restricting transfers of certain
Certificates, which are inserted in response to Code provisions, or (v) to make
any other provisions with respect to matters or questions arising under this
Agreement which shall not be inconsistent with the provisions of this Agreement,
provided that such action shall not, as evidenced by an Opinion of Counsel
delivered to the Trustee and the Certificate Insurer, adversely affect in any
material respect the interests of any Certificateholder, provided, further, that
if the Person requesting such amendment delivers to the Trustee and the
Certificate Insurer written confirmation from each Rating Agency that such
amendment will not cause such Rating Agency to revise or withdraw its then
current rating or shadow rating of the Class A Certificates, such amendment will
be deemed to not adversely affect in any material respect the interests of the
Certificateholders and no such Opinion of Counsel shall be required.
112
<PAGE>
This Agreement may also be amended from time to time by the
Depositor, the Servicer and the Trustee with the consent of the Certificate
Insurer and the Holders of Certificates entitled to at least 66% of the Voting
Rights for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Agreement or of modifying in any
manner the rights of the Holders of Certificates; provided, however, that no
such amendment shall (i) reduce in any manner the amount of, or delay the timing
of, payments received on Mortgage Loans which are required to be distributed on
any Certificate without the consent of the Holder of such Certificate, (ii)
adversely affect in any material respect the interests of the Holders of any
Class of Certificates in a manner, other than as described in (i), without the
consent of the Holders of Certificates of such Class evidencing at least 66% of
the Voting Rights allocated to such Class, or (iii) modify the consents required
by the immediately preceding clauses (i) and (ii) without the consent of the
Certificate Insurer and the Holders of all Certificates then outstanding.
Notwithstanding the foregoing, this Agreement may be amended by the Depositor,
the Servicer, where applicable, and the Trustee provided that such action is
approved by holders of Certificates evidencing 100% of the Percentage Interest
of each Class that, as evidenced by an Opinion of Counsel, is adversely affected
in any material respect by such action. For purposes of giving any such consent
(other than a consent to an action which would adversely affect in any material
respect the interests of the Certificateholders of any Class, while the Servicer
or any affiliate thereof is the holder of Certificates aggregating not less than
66% of the Percentage Interest of such Class), any Certificates registered in
the name of the Servicer or any affiliate thereof shall be deemed not to be
outstanding.
Notwithstanding any contrary provision of this Agreement, the
Trustee shall not consent to any amendment to this Agreement unless it shall
have first received an Opinion of Counsel to the effect that such amendment will
not result in the imposition of any tax on the REMIC Trust pursuant to the REMIC
Provisions or cause the REMIC Trust to fail to qualify as a REMIC at any time
that any Certificates are outstanding. Any such amendment pursuant to the first
paragraph of this Section 12.01 shall not be deemed to adversely affect in any
material respect the interests of any Certificateholder if such change is
required by the Certificate Insurer, so long as no Certificate Insurer Default
has occurred and is continuing, and the Servicer receives written confirmation
from each Rating Agency that such amendment will not cause such Rating Agency to
reduce the then current rating or any shadow rating of the affected
Certificates.
Promptly after the execution of any such amendment with the consent
of Holders the Trustee shall furnish a copy of such amendment to each
Certificateholder, the Rating Agencies and the Certificate Insurer.
It shall not be necessary for the consent of Certificateholders
under this Section 12.01 to approve the particular form of any proposed
amendment, but it shall be sufficient if such consent shall approve the
substance thereof. The manner of obtaining such consents and of evidencing the
authorization of the execution thereof by Certificateholders shall be subject to
such reasonable regulations as the Trustee may prescribe.
113
<PAGE>
The cost of any Opinion of Counsel to be delivered pursuant to this
Section 12.01 shall be borne by the Person seeking the related amendment, but in
no event shall such Opinion of Counsel be an expense of the Trustee.
The Trustee may, but shall not be obligated to enter into any
amendment pursuant to this Section that affects its rights, duties and
immunities under this Agreement or otherwise.
Section 12.02. Recordation of Agreement; Counterparts.
To the extent permitted by applicable law, this Agreement is subject
to recordation in all appropriate public offices for real property records in
all the counties or other comparable jurisdictions in which any or all of the
properties subject to the Mortgages are situated, and in any other appropriate
public recording office or elsewhere, such recordation to be effected by the
Servicer at the expense of the Certificateholders, but only upon direction of
the Trustee accompanied by an Opinion of Counsel to the effect that such
recordation materially and beneficially affects the interests of the
Certificateholders.
For the purpose of facilitating the recordation of this Agreement as
herein provided and for other purposes, this Agreement may be executed
simultaneously in any number of counterparts, each of which counterparts shall
be deemed to be an original, and such counterparts shall constitute but one and
the same instrument.
Section 12.03. Limitation on Rights of Certificateholders.
The death or incapacity of any Certificateholder shall not operate
to terminate this Agreement or the Trust Fund, nor entitle such
Certificateholder's legal representatives or heirs to claim an accounting or to
take any action or proceeding in any court for a partition or winding up of the
Trust Fund, nor otherwise affect the rights, obligations and liabilities of the
parties hereto or any of them.
No Certificateholder shall have any right to vote (except as
expressly provided for herein) or in any manner otherwise control the operation
and management of the Trust Fund, or the obligations of the parties hereto, nor
shall anything herein set forth, or contained in the terms of any of the
Certificates, be construed so as to constitute the Certificateholders from time
to time as partners or members of an association; nor shall any
Certificateholder be under any liability to any third person by reason of any
action taken by the parties to this Agreement pursuant to any provision hereof.
No Certificateholder shall have any right by virtue of any provision
of this Agreement to institute any suit, action or proceeding in equity or at
law upon or under or with respect to this Agreement, unless such Holder
previously shall have given to the Trustee a written notice of default and of
the continuance thereof, as hereinbefore provided, and unless also the Holders
of Certificates entitled to at least 25% of the Voting Rights shall have made
written request upon the Trustee to institute such action, suit or proceeding in
its own name as Trustee hereunder and shall have offered to the
114
<PAGE>
Trustee such reasonable indemnity as it may require against the costs, expenses
and liabilities to be incurred therein or thereby, and the Trustee, for 15 days
after its receipt of such notice, request and offer of indemnity, shall have
neglected or refused to institute any such action, suit or proceeding. It is
understood and intended, and expressly covenanted by each Certificateholder with
every other Certificateholder and the Trustee, that no one or more Holders of
Certificates shall have any right in any manner whatsoever by virtue of any
provision of this Agreement to affect, disturb or prejudice the rights of the
Holders of any other of such Certificates, or to obtain or seek to obtain
priority over or preference to any other such Holder, or to enforce any right
under this Agreement, except in the manner herein provided and for the equal,
ratable and common benefit of all Certificateholders. For the protection and
enforcement of the provisions of this Section, each and every Certificateholder
and the Trustee shall be entitled to such relief as can be given either at law
or in equity.
Section 12.04. GOVERNING LAW.
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
Section 12.05. Notices.
All directions, demands and notices hereunder shall be in writing
and shall be deemed to have been duly given when received if personally
delivered at or mailed by first class mail, postage prepaid, or by express
delivery service or delivered in any other manner specified herein, to (a) in
the case of the Depositor, One New York Plaza, New York, NY 10292, Attention:
Asset-Backed Finance Group (phone number (212) 778-1000), or such other address
or telecopy number as may hereafter be furnished to the Servicer, the
Certificate Insurer and the Trustee in writing by the Depositor, (b) in the case
of the Servicer, 15 South Main Street, Suite 750, Greenville, SC 29606,
Attention: Wade Hall (telecopy number: (864) 271-8374, or such other address or
telecopy number as may hereafter be furnished to the Trustee and the Depositor
in writing by the Servicer, (c) in the case of the Trustee, First Union National
Bank, 230 South Tryon Street, 9th Floor, Charlotte, NC 28288-1179, Attention:
Corporate Trust Department (telecopy number 704-383-7316, or such other address
or telecopy number as may hereafter be furnished to the Servicer and the
Depositor in writing by the Trustee and (d) in the Case of the Certificate
Insurer, Financial Security Assurance Inc., 350 Park Avenue, New York, NY 10022,
Attention: Surveillance Department Re: Emergent Home Equity Loan Trust 1997-3
(telecopy number 212-888-5278) or such other address or telecopy number as may
hereafter be furnished to the Trustee, the Depositor and the Servicer in writing
by the Certificate Insurer. Any party hereto may change the address, telephone
number or telecopier number by notice to the other parties hereto in accordance
with the terms hereof. In each case in which a notice or other communication to
the Certificate Insurer refers to a Servicer Event of Default or a claim under
the Policy or with respect to which failure on the part of the Certificate
Insurer to respond shall be deemed to constitute consent or acceptance, then a
copy of such notice or other communication should also be sent to the attention
of the General
115
<PAGE>
Counsel and the Head-Financial Guaranty Group and shall be marked to indicate
"URGENT MATERIAL ENCLOSED". Any notice required or permitted to be given to a
Certificateholder shall be given by first class mail, postage prepaid, at the
address of such Holder as shown in the Certificate Register. Any notice so
mailed within the time prescribed in this Agreement shall be conclusively
presumed to have been duly given when mailed, whether or not the
Certificateholder receives such notice. A copy of any notice required to be
telecopied hereunder also shall be mailed to the appropriate party in the manner
set forth above.
Section 12.06. Severability of Provisions.
If any one or more of the covenants, agreements, provisions or terms
of this Agreement shall be for any reason whatsoever held invalid, then such
covenants, agreements, provisions or terms shall be deemed severable from the
remaining covenants, agreements, provisions or terms of this Agreement and shall
in no way affect the validity or enforceability of the other provisions of this
Agreement or of the Certificates or the rights of the Holders thereof.
Section 12.07. Notice to Rating Agencies and Certificate Insurer.
The Trustee shall use its best efforts promptly to provide notice to
the Rating Agencies and the Certificate Insurer with respect to each of the
following of which it has actual knowledge:
1. Any material change or amendment to this Agreement;
2. The occurrence of any Servicer Event of Default that has not
been cured or waived;
3. The resignation or termination of the Servicer or the Trustee;
4. The repurchase or substitution of Mortgage Loans pursuant to
or as contemplated by Section 2.05;
5. The final payment to the Holders of any Class of Certificates;
6. Any change in the location of the Collection Account or the
Distribution Account;
7. Any event that would result in the inability of the Trustee to
make advances regarding delinquent mortgage loans; and
8. Any Certificate Insurer Default that has not been cured.
In addition, the Trustee shall promptly furnish to each Rating
Agency and the Certificate Insurer copies of each report to Certificateholders
described in Section 4.02 and the Servicer shall promptly furnish to each Rating
Agency copies of the following:
116
<PAGE>
1. Each annual statement as to compliance described in Section
3.22; and
2. Each annual independent public accountants' servicing report
described in Section 3.23.
Any such notice pursuant to this Section 12.07 shall be in writing
and shall be deemed to have been duly given if personally delivered at or mailed
by first class mail, postage prepaid, or by express delivery service to Moody's
Investors Service, Inc., 99 Church Street, New York, New York 10007, and to
Standard & Poor's Ratings Services, 25 Broadway, New York, New York 10004, or
such other addresses as the Rating Agencies may designate in writing to the
parties hereto.
Section 12.08. Article and Section References.
All article and section references used in this Agreement, unless
otherwise provided, are to articles and sections in this Agreement.
Section 12.09. Confirmation of Intent.
It is the express intent of the parties hereto that the conveyance
of the Mortgage Loans and the other assets constituting the Trust Fund by the
Depositor to the Trustee as contemplated by this Agreement be, and be treated
for all purposes as, a sale by the Depositor to the Trustee of the Mortgage
Loans and the other assets constituting the Trust Fund. It is, further, not the
intention of the parties that such conveyance be deemed a pledge of the Mortgage
Loans and the other assets constituting the Trust Fund by the Depositor to the
Trustee to secure a debt or other obligation of the Depositor. However, in the
event that, notwithstanding the intent of the parties, the Mortgage Loans and
the other assets constituting the Trust Fund are held to continue to be property
of the Depositor then (a) this Agreement shall also be deemed to be a security
agreement within the meaning of Articles 8 and 9 of the Uniform Commercial Code;
(b) the transfer of the Mortgage Loans and the other assets constituting the
Trust Fund provided for herein shall be deemed to be a grant by the Depositor to
the Trustee of a security interest in all of the Depositor's right, title and
interest in and to the Mortgage Loans and the other assets constituting the
Trust Fund and all amounts payable on the Mortgage Loans in accordance with the
terms thereof and all proceeds of the conversion, voluntary or involuntary, of
the foregoing into cash, instruments, securities or other property; (c) the
possession by the Trustee of Mortgage Loans and such other items of property as
constitute instruments, money, negotiable documents or chattel paper shall be
deemed to be "possession by the secured party" for purposes of perfecting the
security interest pursuant to Section 9-305 of the Uniform Commercial Code; and
(d) notifications to persons holding such property, and acknowledgments,
receipts or confirmations from persons holding such property, shall be deemed
notifications to, or acknowledgments, receipts or confirmations from, financial
intermediaries, bailees or agents (as applicable) of the Trustee for the purpose
of perfecting such security interest under applicable law. Any assignment of the
interest of the Trustee pursuant to any provision hereof shall also be deemed to
be an assignment of any security interest created hereby. The Servicer and the
Depositor shall, to the extent consistent with this Agreement, take such actions
as may be necessary to ensure
117
<PAGE>
that, if this Agreement were deemed to create a security interest in the
Mortgage Loans and the other assets constituting the Trust Fund, such security
interest would be deemed to be a perfected security interest of first priority
under applicable law and would be maintained as such throughout the term of this
Agreement.
118
<PAGE>
IN WITNESS WHEREOF, the Depositor, the Servicer and the Trustee have
caused their names to be signed hereto by their respective officers thereunto
duly authorized, in each case as of the day and year first above written.
PRUDENTIAL SECURITIES SECURED
FINANCING CORPORATION,
as Depositor
By:
-----------------------------------
Name: Glen Stein
Title: Vice President
EMERGENT MORTGAGE CORP.,
as Servicer
By:
-----------------------------------
Name: J. Phil Cox
Title: Senior Executive Vice President
FIRST UNION NATIONAL BANK,
solely in its capacity as Trustee
and not in its individual capacity
By:
-----------------------------------
Name: Pablo de la Canal
Title: Assistant Vice President
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 24th day of September, 1997, before me, a notary public in
and for said State, personally appeared Glen Stein, known to me to be a Vice
President of Prudential Securities Secured Financing Corporation, one of the
corporations that executed the within instrument, and also known to me to be the
person who executed it on behalf of said corporation, and acknowledged to me
that such corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
-----------------------------------
Notary Public
[Seal]
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 24th day of September, 1997, before me, a notary public in
and for said State, personally appeared J. Phil Cox, known to me to be a Senior
Executive Vice President of Emergent Mortgage Corp., one of the corporations
that executed the within instrument, and also known to me to be the person who
executed it on behalf of said corporation, and acknowledged to me that such
corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
-----------------------------------
Notary Public
[Seal]
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 24th day of September, 1997, before me, a notary public in
and for said State, personally appeared Pablo de la Canal, known to me to be an
officer of First Union National Bank, a national banking association that
executed the within instrument, and also known to me to be the person who
executed it on behalf of said banking association, and acknowledged to me that
such banking association executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
-----------------------------------
Notary Public
[Seal]
<PAGE>
EXHIBIT A-1
FORM OF CLASS A-1 CERTIFICATE
Unless this certificate is presented by an authorized representative
of The Depository Trust Company, a New York corporation ("DTC"), to the Trustee
or its agent for registration of transfer, exchange or payment, and any
certificate issued is registered in the name of Cede & Co. or in such other name
as is requested by an authorized representative of DTC (and any payment is made
to Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
"REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS
THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE
INTERNAL REVENUE CODE OF 1986 (THE "CODE").
================================================================================
Series 1997-3, Class A-1 Class A-1 Certificate Principal
Balance as of the Issue Date:
- --------------------------------------------------------------------------------
Pass-Through Rate: 6.545% $45,000,000
- --------------------------------------------------------------------------------
Date of Pooling and Servicing Agreement: Denomination: $____________
August 10, 1997
- --------------------------------------------------------------------------------
First Distribution Date: Servicer:
October 20, 1997 Emergent Mortgage Corp.
- --------------------------------------------------------------------------------
No. 1 Trustee: First Union National Bank
- --------------------------------------------------------------------------------
Issue Date: September 24, 1997
- --------------------------------------------------------------------------------
CUSIP: 29088X AJ0
================================================================================
THE PASS-THROUGH RATE INDICATED ABOVE IS SUBJECT TO THE AVAILABLE FUNDS
CAP RATE SPECIFIED IN THE POOLING AND SERVICING AGREEMENT.
DISTRIBUTIONS IN REDUCTION OF THE CERTIFICATE PRINCIPAL BALANCE OF THIS
CERTIFICATE MAY BE MADE MONTHLY AS SET FORTH HEREIN. ACCORDINGLY, THE
OUTSTANDING CERTIFICATE PRINCIPAL BALANCE HEREOF AT ANY TIME MAY BE LESS
THAN THE AMOUNT SHOWN ABOVE.
A-1-1
<PAGE>
EMERGENT HOME EQUITY LOAN PASS-THROUGH CERTIFICATE
evidencing a beneficial ownership interest in a portion of a Trust Fund
consisting primarily of a pool of closed end, fixed rate home equity loans
secured by mortgages on single-family residences (which may be attached,
detached, part of a two- to four-family dwelling, a condominium, townhouse, or a
unit in a planned unit development) and manufactured housing (the "Mortgage
Loans") formed and sold by
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN THE
SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES. NEITHER THIS CERTIFICATE
NOR THE UNDERLYING MORTGAGE LOANS ARE GUARANTEED BY ANY AGENCY OR
INSTRUMENTALITY OF THE UNITED STATES.
This certifies that Cede & Co. is the registered owner of a
Percentage Interest (obtained by dividing the denomination of this Certificate
by the Class A-1 Certificate Principal Balance) in that certain beneficial
ownership interest evidenced by all the Class A-1 Certificates in the Trust Fund
created pursuant to a Pooling and Servicing Agreement, dated as specified above
(the "Agreement"), among Prudential Securities Secured Financing Corporation
(hereinafter called the "Depositor," which term includes any successor entity
under the Agreement), the Servicer and the Trustee, a summary of certain of the
pertinent provisions of which is set forth hereafter. To the extent not defined
herein, the capitalized terms used herein have the meanings assigned in the
Agreement. This Certificate is issued under and is subject to the terms,
provisions and conditions of the Agreement, to which Agreement the Holder of
this Certificate by virtue of the acceptance hereof assents and by which such
Holder is bound.
Pursuant to the terms of the Agreement, distributions will be made
on the 20th day of each month or, if such 20th day is not a Business Day, the
Business Day immediately following (a "Distribution Date"), commencing on the
First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the last Business Day of the month immediately
preceding the month of such distribution (the "Record Date"), from funds in the
Distribution Account in an amount equal to the product of the Percentage
Interest evidenced by this Certificate and the amount required to be distributed
to the Holders of Class A-1 Certificates on such Distribution Date pursuant to
the Agreement.
So long as this Certificate is registered in the name of a
Depository or its nominee, the Trustee will make payments of principal and
interest on this Certificate by wire transfers of immediately available funds to
the Depository or its nominee. Otherwise all distributions to the Holder of this
Certificate under the Agreement will be made or caused to be made by or on
behalf of the Trustee by wire transfer in immediately available funds to the
account of the Person entitled thereto if such Person shall have so notified the
Trustee in writing at least five Business Days prior to the Record Date
immediately prior to such Distribution Date and is the registered owner of Class
A-1 Certificates the aggregate initial Certificate Principal Balance of which is
in excess of
A-1-2
<PAGE>
$5,000,000, or by check mailed by first class mail to the address of the Person
entitled thereto, as such name and address shall appear on the Certificate
Register, provided that the Trustee may deduct a reasonable wire transfer fee
from any payment made by wire transfer. Notwithstanding the above, the final
distribution on this Certificate will be made after due notice by the Trustee of
the pendency of such distribution and only upon presentation and surrender of
this Certificate at the office or agency appointed by the Trustee for that
purpose as provided in the Agreement.
The Pass-Through Rate on the Class A-1 Certificates on each
Distribution Date will be a rate per annum equal to 6.545% per annum (subject to
the applicable Available Funds Cap Rate specified in the Agreement).
This Certificate is one of a duly authorized issue of Certificates
designated as Emergent Home Equity Loan Pass-Through Certificates of the Series
specified on the face hereof (herein called the "Certificates") and representing
a Percentage Interest in the Class A-1 Certificates.
The Class A-1 Certificates are limited in right of payment to
certain collections and recoveries respecting the Mortgage Loans and payments
under the Policy, all as more specifically set forth herein and in the Agreement
and the policy. As provided in the Agreement, withdrawals from the Collection
Accounts and the Distribution Account may be made from time to time for purposes
other than distributions to Certificateholders, such purposes including
reimbursement of advances made, or certain expenses incurred, with respect to
the Mortgage Loans.
The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Depositor, the Servicer, the Trustee and the rights of the Certificateholders
under the Agreement at any time by the Depositor, the Servicer, the Trustee with
the consent of the Holders of Certificates entitled to at least 66% of the
Voting Rights and the Certificate Insurer. Any such consent by the Holder of
this Certificate shall be conclusive and binding on such Holder and upon all
future Holders of this Certificate and of any Certificate issued upon the
transfer hereof or in exchange hereof or in lieu hereof whether or not notation
of such consent is made upon this Certificate. The Agreement also permits the
amendment thereof, in certain limited circumstances, without the consent of the
Holders of any of the Certificates.
As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies appointed by the Trustee as provided in the
Agreement, duly endorsed by, or accompanied by an assignment in the form below
or other written instrument of transfer in form satisfactory to the Trustee and
the Certificate Registrar duly executed by, the Holder hereof or such Holder's
attorney duly authorized in writing, and thereupon one or more new Certificates
of the same Class in authorized denominations evidencing the same aggregate
Percentage Interest will be issued to the designated transferee or transferees.
A-1-3
<PAGE>
The Certificates are issuable in fully registered form only without
coupons in Classes and denominations representing Percentage Interests specified
in the Agreement. As provided in the Agreement and subject to certain
limitations therein set forth, Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.
No service charge will be made for any such registration of transfer
or exchange of Certificates, but the Trustee may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any transfer or exchange of Certificates.
The Depositor, the Servicer, the Trustee, the Certificate Insurer
and the Certificate Registrar and any agent of the Depositor, any Servicer, the
Trustee, the Certificate Insurer or the Certificate Registrar may treat the
Person in whose name this Certificate is registered as the owner hereof for all
purposes, and none of the Depositor, the Servicer, the Trustee, the Certificate
Insurer, the Certificate Registrar nor any such agent shall be affected by
notice to the contrary.
The obligations created by the Agreement and the Trust Fund created
thereby shall terminate upon payment to the Certificateholders of all amounts
held by or on behalf of the Trustee and required to be paid to them pursuant to
the Agreement following the earlier of (i) the later of the final payment or
other liquidation (or any advance with respect thereto) of the last Mortgage
Loan or REO Property remaining in the Trust Fund, and (ii) the purchase by the
party designated in the Agreement at a price determined as provided in the
Agreement from the Trust Fund of all Mortgage Loans and all property acquired in
respect of such Mortgage Loans. The Agreement permits, but does not require, the
party designated in the Agreement to purchase from the Trust Fund all Mortgage
Loans and all property acquired in respect of any Mortgage Loan at a price
determined as provided in the Agreement. The exercise of such right will effect
early retirement of the Certificates; however, such right to purchase is subject
to the aggregate Stated Principal Balance of the Mortgage Loans and each REO
Property at the time of purchase being 10% or less of the Original Pool Balance.
The recitals contained herein shall be taken as statements of the
Depositor and the Trustee assumes no responsibility for their correctness.
Unless the certificate of authentication hereon has been executed by
the Certificate Registrar, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
A-1-4
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be
duly executed.
Dated:
FIRST UNION NATIONAL BANK, solely in its
capacity as Trustee and not in its individual capacity
By
-----------------------------------
Authorized Officer
CERTIFICATE OF AUTHENTICATION
This is one of the Class A-1 Certificates referred to in the
within-mentioned Agreement.
FIRST UNION NATIONAL BANK, as Certificate Registrar
BY:
-----------------------------------
Authorized Signatory
A-1-5
<PAGE>
ABBREVIATIONS
The following abbreviations, when used in the inscription on the
face of this instrument, shall be construed as though they were written out in
full according to applicable laws or regulations:
TEN COM - as tenants in common
UNIF GIFT MIN ACT - Custodian
---------
(Cuss) (Minor)
TEN ENT - as tenants by the entireties
under Uniform Gifts to Minors Act
JT TEN - as joint tenants with right
if survivorship and not as (State)
tenants in common
Additional abbreviations may also be used though not in the above
list.
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto _______________________________________________________
________________________________________________________________________ (Please
print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee) __________________________________________
________________________________________________________________________________
a Percentage Interest equal to ____% evidenced by the within Emergent Home
Equity Loan Pass-Through Certificate Series 1997-3, Class A-1 and hereby
authorize(s) the registration of transfer of such interest to assignee on the
Certificate Register of the Trust Fund.
I (we) further direct the Certificate Registrar to issue a new
Certificate of a like Percentage Interest and Class to the above named assignee
and deliver such Certificate to the following address:
________________________________________.
Dated:
------------------------------------------
Signature by or on behalf of assignor
------------------------------------------
Signature Guaranteed
A-1-6
<PAGE>
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for purposes of
distribution:
Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to _____________________________________________
________________________________________________________________________ for the
account of _________________, account number _______________________, or, if
mailed by check, to _________________________________________________
_______________________________________________________________________.
Applicable statements should be mailed to ____________________________________
______________________________________________________________________. This
information is provided by ___________________________________________, the
assignee named above, or ________________________________, as its agent.
A-1-7
<PAGE>
EXHIBIT A-2
FORM OF CLASS A-2 CERTIFICATE
Unless this certificate is presented by an authorized representative
of The Depository of The Depository Trust Company, a New York corporation
("DTC"), to the Trustee or its agent for registration of transfer, exchange or
payment, and any certificate issued is registered in the name of Cede & Co. or
in such other name as is requested by an authorized representative of DTC (and
any payment is made to Cede & Co. or to such other entity as is requested by an
authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered
owner hereof, Cede & Co., has an interest herein.
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
"REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS
THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE
INTERNAL REVENUE CODE OF 1986 (THE "CODE").
================================================================================
Series 1997-3, Class A-2 Class A-2 Certificate Principal Balance
as of the Issue Date:
- --------------------------------------------------------------------------------
Pass-Through Rate: 6.540% $20,000,000
- --------------------------------------------------------------------------------
Date of Pooling and Servicing Denomination: $____________
Agreement:
August 10, 1997
- --------------------------------------------------------------------------------
First Distribution Date: Servicer:
October 20, 1997 Emergent Mortgage Corp.
- --------------------------------------------------------------------------------
No. 1 Trustee: First Union National Bank
- --------------------------------------------------------------------------------
Issue Date: September 24, 1997
- --------------------------------------------------------------------------------
CUSIP: 29088X AK7
================================================================================
THE PASS-THROUGH RATE INDICATED ABOVE IS SUBJECT TO THE AVAILABLE FUNDS
CAP RATE SPECIFIED IN THE POOLING AND SERVICING AGREEMENT.
DISTRIBUTIONS IN REDUCTION OF THE CERTIFICATE PRINCIPAL BALANCE OF THIS
CERTIFICATE MAY BE MADE MONTHLY AS SET FORTH HEREIN. ACCORDINGLY, THE
OUTSTANDING CERTIFICATE PRINCIPAL BALANCE HEREOF AT ANY TIME MAY BE LESS
THAN THE AMOUNT SHOWN ABOVE.
A-2-1
<PAGE>
EMERGENT HOME EQUITY LOAN PASS-THROUGH CERTIFICATE
evidencing a beneficial ownership interest in a portion of a Trust Fund
consisting primarily of a pool of closed end, fixed rate home equity loans
secured by mortgages on single-family residences (which may be attached,
detached, part of a two- to four-family dwelling, a condominium, townhouse, or a
unit in a planned unit development) and manufactured housing (the "Mortgage
Loans") formed and sold by
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN THE
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION, THE TRUSTEE OR ANY OF
THEIR AFFILIATES. NEITHER THIS CERTIFICATE NOR THE UNDERLYING MORTGAGE
LOANS ARE GUARANTEED BY ANY AGENCY OR INSTRUMENTALITY OF THE UNITED
STATES.
This certifies that Cede & Co. is the registered owner of a
Percentage Interest (obtained by dividing the denomination of this Certificate
by the Class A-2 Certificate Principal Balance) in that certain beneficial
ownership interest evidenced by all the Class A-2 Certificates in the Trust Fund
created pursuant to a Pooling and Servicing Agreement, dated as specified above
(the "Agreement"), among Prudential Securities Secured Financing Corporation
(hereinafter called the "Depositor," which term includes any successor entity
under the Agreement), the Servicer and the Trustee, a summary of certain of the
pertinent provisions of which is set forth hereafter. To the extent not defined
herein, the capitalized terms used herein have the meanings assigned in the
Agreement. This Certificate is issued under and is subject to the terms,
provisions and conditions of the Agreement, to which Agreement the Holder of
this Certificate by virtue of the acceptance hereof assents and by which such
Holder is bound.
Pursuant to the terms of the Agreement, distributions will be made
on the 20th day of each month or, if such 20th day is not a Business Day, the
Business Day immediately following (a "Distribution Date"), commencing on the
First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the last Business Day of the month immediately
preceding the month of such distribution (the "Record Date"), from funds in the
Distribution Account in an amount equal to the product of the Percentage
Interest evidenced by this Certificate and the amount required to be distributed
to the Holders of Class A-2 Certificates on such Distribution Date pursuant to
the Agreement.
So long as this Certificate is registered in the name of a
Depository or its nominee, the Trustee will make payments of a principal and
interest on this Certificate by wire transfer of immediately available funds to
the Depository or its nominee. Otherwise, all distributions to the Holder of
this Certificate under the Agreement will be made or caused to be made by or on
behalf of the Trustee by wire transfer in immediately available funds to the
account of the Person entitled thereto if such Person shall have so notified the
Trustee in writing at least five Business Days prior to the Record Date
immediately prior to such Distribution Date and is the registered owner of Class
A-2
A-2-2
<PAGE>
Certificates the aggregate initial Certificate Principal Balance of which is in
excess of $5,000,000, or by check mailed by first class mail to the address of
the Person entitled thereto, as such name and address shall appear on the
Certificate Register, provided that the Trustee may deduct a reasonable wire
transfer fee from any payment made by wire transfer. Notwithstanding the above,
the final distribution on this Certificate will be made after due notice by the
Trustee of the pendency of such distribution and only upon presentation and
surrender of this Certificate at the office or agency appointed by the Trustee
for that purpose as provided in the Agreement.
The Pass-Through Rate on the Class A-2 Certificates on each
Distribution Date will be a rate per annum equal to 6.540% per annum (subject to
the Available Funds Cap Rate specified in the Agreement).
This Certificate is one of a duly authorized issue of Certificates
designated as Emergent Home Equity Loan Pass-Through Certificates of the Series
specified on the face hereof (herein called the "Certificates") and representing
a Percentage Interest in the Class A-2 Certificates.
The Class A-2 Certificates are limited in right of payment to
certain collections and recoveries respecting the Mortgage Loans and payments
under the Policy, all as more specifically set forth herein and in the Agreement
and the policy. As provided in the Agreement, withdrawals from the Collection
Accounts and the Distribution Account may be made from time to time for purposes
other than distributions to Certificateholders, such purposes including
reimbursement of advances made, or certain expenses incurred, with respect to
the Mortgage Loans.
The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Depositor, the Servicer, the Trustee and the rights of the Certificateholders
under the Agreement at any time by the Depositor, the Servicer, the Trustee with
the consent of the Holders of Certificates entitled to at least 66% of the
Voting Rights and the Certificate Insurer. Any such consent by the Holder of
this Certificate shall be conclusive and binding on such Holder and upon all
future Holders of this Certificate and of any Certificate issued upon the
transfer hereof or in exchange hereof or in lieu hereof whether or not notation
of such consent is made upon this Certificate. The Agreement also permits the
amendment thereof, in certain limited circumstances, without the consent of the
Holders of any of the Certificates.
As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies appointed by the Trustee as provided in the
Agreement, duly endorsed by, or accompanied by an assignment in the form below
or other written instrument of transfer in form satisfactory to the Trustee and
the Certificate Registrar duly executed by, the Holder hereof or such Holder's
attorney duly authorized in writing, and thereupon one or more new Certificates
of the same Class in authorized denominations evidencing the same aggregate
Percentage Interest will be issued to the designated transferee or transferees.
A-2-3
<PAGE>
The Certificates are issuable in fully registered form only without
coupons in Classes and denominations representing Percentage Interests specified
in the Agreement. As provided in the Agreement and subject to certain
limitations therein set forth, Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.
No service charge will be made for any such registration of transfer
or exchange of Certificates, but the Trustee may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any transfer or exchange of Certificates.
The Depositor, the Servicer, the Trustee, the Certificate Insurer
and the Certificate Registrar and any agent of the Depositor, any Servicer, the
Trustee, the Certificate Insurer or the Certificate Registrar may treat the
Person in whose name this Certificate is registered as the owner hereof for all
purposes, and none of the Depositor, the Servicer, the Trustee, the Certificate
Insurer, the Certificate Registrar nor any such agent shall be affected by
notice to the contrary.
The obligations created by the Agreement and the Trust Fund created
thereby shall terminate upon payment to the Certificateholders of all amounts
held by or on behalf of the Trustee and required to be paid to them pursuant to
the Agreement following the earlier of (i) the later of the final payment or
other liquidation (or any advance with respect thereto) of the last Mortgage
Loan or REO Property remaining in the Trust Fund, and (ii) the purchase by the
party designated in the Agreement at a price determined as provided in the
Agreement from the Trust Fund of all Mortgage Loans and all property acquired in
respect of such Mortgage Loans. The Agreement permits, but does not require, the
party designated in the Agreement to purchase from the Trust Fund all Mortgage
Loans and all property acquired in respect of any Mortgage Loan at a price
determined as provided in the Agreement. The exercise of such right will effect
early retirement of the Certificates; however, such right to purchase is subject
to the aggregate Stated Principal Balance of the Mortgage Loans and each REO
Property at the time of purchase being 10% or less of the Original Pool Balance.
The recitals contained herein shall be taken as statements of the
Depositor and the Trustee assumes no responsibility for their correctness.
Unless the certificate of authentication hereon has been executed by
the Certificate Registrar, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
A-2-4
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be
duly executed.
Dated:
FIRST UNION NATIONAL BANK, solely in its
capacity as Trustee and not in its individual capacity
By
-----------------------------------
Authorized Officer
CERTIFICATE OF AUTHENTICATION
This is one of the Class A-2 Certificates referred to in the
within-mentioned Agreement.
FIRST UNION NATIONAL BANK, as Certificate Registrar
BY:
-----------------------------------
Authorized Signatory
A-2-5
<PAGE>
ABBREVIATIONS
The following abbreviations, when used in the inscription on the
face of this instrument, shall be construed as though they were written out in
full according to applicable laws or regulations:
TEN COM - as tenants in common
UNIF GIFT MIN ACT - Custodian
---------
(Cuss) (Minor)
TEN ENT - as tenants by the entireties
under Uniform Gifts to Minors Act
JT TEN - as joint tenants with right
if survivorship and not as (State)
tenants in common
Additional abbreviations may also be used though not in the above
list.
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto _______________________________________________________
________________________________________________________________________ (Please
print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee) __________________________________________
________________________________________________________________________________
a Percentage Interest equal to ____% evidenced by the within Emergent Home
Equity Loan Pass-Through Certificate Series 1997-3, Class A-2 and hereby
authorize(s) the registration of transfer of such interest to assignee on the
Certificate Register of the Trust Fund.
I (we) further direct the Certificate Registrar to issue a new
Certificate of a like Percentage Interest and Class to the above named assignee
and deliver such Certificate to the following address:
________________________________________.
Dated:
------------------------------------------
Signature by or on behalf of assignor
------------------------------------------
Signature Guaranteed
A-2-6
<PAGE>
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for purposes of
distribution:
Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to _____________________________________________
________________________________________________________________________ for the
account of _________________, account number _______________________, or, if
mailed by check, to _________________________________________________
_______________________________________________________________________.
Applicable statements should be mailed to ____________________________________
______________________________________________________________________. This
information is provided by ___________________________________________, the
assignee named above, or ________________________________, as its agent.
A-2-7
<PAGE>
EXHIBIT A-3
FORM OF CLASS A-3 CERTIFICATE
Unless this certificate is presented by an authorized representative
of The Depository of The Depository Trust Company, a New York corporation
("DTC"), to the Trustee or its agent for registration of transfer, exchange or
payment, and any certificate issued is registered in the name of Cede & Co. or
in such other name as is requested by an authorized representative of DTC (and
any payment is made to Cede & Co. or to such other entity as is requested by an
authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered
owner hereof, Cede & Co., has an interest herein.
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
"REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS
THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE
INTERNAL REVENUE CODE OF 1986 (THE "CODE").
================================================================================
Series 1997-3, Class A-3 Class A-3 Certificate Principal Balance
as of the Issue Date:
- --------------------------------------------------------------------------------
Pass-Through Rate: 6.670% $25,000,000
- --------------------------------------------------------------------------------
Date of Pooling and Servicing Denomination: $____________
Agreement:
August 10, 1997
- --------------------------------------------------------------------------------
First Distribution Date: Servicer:
October 20, 1997 Emergent Mortgage Corp.
- --------------------------------------------------------------------------------
No. 1 Trustee: First Union National Bank
- --------------------------------------------------------------------------------
Issue Date: September 24, 1997
- --------------------------------------------------------------------------------
CUSIP: 29088X AL5
================================================================================
THE PASS-THROUGH RATE INDICATED ABOVE IS SUBJECT TO THE AVAILABLE FUNDS
CAP RATE SPECIFIED IN THE POOLING AND SERVICING AGREEMENT.
DISTRIBUTIONS IN REDUCTION OF THE CERTIFICATE PRINCIPAL BALANCE OF THIS
CERTIFICATE MAY BE MADE MONTHLY AS SET FORTH HEREIN. ACCORDINGLY, THE
OUTSTANDING CERTIFICATE PRINCIPAL BALANCE HEREOF AT ANY TIME MAY BE LESS
THAN THE AMOUNT SHOWN ABOVE.
A-3-1
<PAGE>
EMERGENT HOME EQUITY LOAN PASS-THROUGH CERTIFICATE
evidencing a beneficial ownership interest in a portion of a Trust Fund
consisting primarily of a pool of closed end fixed rate home equity loans
secured by mortgages on single-family residences (which may be attached,
detached, part of a two- to four-family dwelling, a condominium, townhouse, or a
unit in a planned unit development) and manufactured housing (the "Mortgage
Loans") formed and sold by
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN THE
SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES. NEITHER THIS CERTIFICATE
NOR THE UNDERLYING MORTGAGE LOANS ARE GUARANTEED BY ANY AGENCY OR
INSTRUMENTALITY OF THE UNITED STATES.
This certifies that Cede & Co. is the registered owner of a
Percentage Interest (obtained by dividing the denomination of this Certificate
by the Class A-3 Certificate Principal Balance) in that certain beneficial
ownership interest evidenced by all the Class A-3 Certificates in the Trust Fund
created pursuant to a Pooling and Servicing Agreement, dated as specified above
(the "Agreement"), among Prudential Securities Secured Financing Corporation
(hereinafter called the "Depositor," which term includes any successor entity
under the Agreement), the Servicer and the Trustee, a summary of certain of the
pertinent provisions of which is set forth hereafter. To the extent not defined
herein, the capitalized terms used herein have the meanings assigned in the
Agreement. This Certificate is issued under and is subject to the terms,
provisions and conditions of the Agreement, to which Agreement the Holder of
this Certificate by virtue of the acceptance hereof assents and by which such
Holder is bound.
Pursuant to the terms of the Agreement, distributions will be made
on the 20th day of each month or, if such 20th day is not a Business Day, the
Business Day immediately following (a "Distribution Date"), commencing on the
First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the last Business Day of the month immediately
preceding the month of such distribution (the "Record Date"), from funds in the
Distribution Account in an amount equal to the product of the Percentage
Interest evidenced by this Certificate and the amount required to be distributed
to the Holders of Class A-3 Certificates on such Distribution Date pursuant to
the Agreement.
So long as this Certificate is registered in the name of a
Depository or its nominee, the Trustee will make payments of a principal and
interest on this Certificate by wire transfer of immediately available funds to
the Depository or its nominee. Otherwise, all distributions to the Holder of
this Certificate under the Agreement will be made or caused to be made by or on
behalf of the Trustee by wire transfer in immediately available funds to the
account of the Person entitled thereto if such Person shall have so notified the
Trustee in writing at least five Business Days prior to the Record Date
immediately prior to such Distribution Date and is the registered owner of Class
A-3 Certificates the aggregate initial Certificate Principal Balance of which is
in excess of
A-3-2
<PAGE>
$5,000,000, or by check mailed by first class mail to the address of the Person
entitled thereto, as such name and address shall appear on the Certificate
Register, provided that the Trustee may deduct a reasonable wire transfer fee
from any payment made by wire transfer. Notwithstanding the above, the final
distribution on this Certificate will be made after due notice by the Trustee of
the pendency of such distribution and only upon presentation and surrender of
this Certificate at the office or agency appointed by the Trustee for that
purpose as provided in the Agreement.
The Pass-Through Rate on the Class A-3 Certificates on each
Distribution Date will be a rate per annum equal to 6.670% per annum (subject to
the applicable available Funds Cap Rate specified in the Agreement).
This Certificate is one of a duly authorized issue of Certificates
designated as Emergent Home Equity Loan Pass-Through Certificates of the Series
specified on the face hereof (herein called the "Certificates") and representing
a Percentage Interest in the Class A-3 Certificates.
The Class A-3 Certificates are limited in right of payment to
certain collections and recoveries respecting the Mortgage Loans and payments
under the Policy, all as more specifically set forth herein and in the Agreement
and the policy. As provided in the Agreement, withdrawals from the Collection
Accounts and the Distribution Account may be made from time to time for purposes
other than distributions to Certificateholders, such purposes including
reimbursement of advances made, or certain expenses incurred, with respect to
the Mortgage Loans.
The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Depositor, the Servicer, the Trustee and the rights of the Certificateholders
under the Agreement at any time by the Depositor, the Servicer, the Trustee with
the consent of the Holders of Certificates entitled to at least 66% of the
Voting Rights and the Certificate Insurer. Any such consent by the Holder of
this Certificate shall be conclusive and binding on such Holder and upon all
future Holders of this Certificate and of any Certificate issued upon the
transfer hereof or in exchange hereof or in lieu hereof whether or not notation
of such consent is made upon this Certificate. The Agreement also permits the
amendment thereof, in certain limited circumstances, without the consent of the
Holders of any of the Certificates.
As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies appointed by the Trustee as provided in the
Agreement, duly endorsed by, or accompanied by an assignment in the form below
or other written instrument of transfer in form satisfactory to the Trustee and
the Certificate Registrar duly executed by, the Holder hereof or such Holder's
attorney duly authorized in writing, and thereupon one or more new Certificates
of the same Class in authorized denominations evidencing the same aggregate
Percentage Interest will be issued to the designated transferee or transferees.
A-3-3
<PAGE>
The Certificates are issuable in fully registered form only without
coupons in Classes and denominations representing Percentage Interests specified
in the Agreement. As provided in the Agreement and subject to certain
limitations therein set forth, Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.
No service charge will be made for any such registration of transfer
or exchange of Certificates, but the Trustee may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any transfer or exchange of Certificates.
The Depositor, the Servicer, the Trustee, the Certificate Insurer
and the Certificate Registrar and any agent of the Depositor, any Servicer, the
Trustee, the Certificate Insurer or the Certificate Registrar may treat the
Person in whose name this Certificate is registered as the owner hereof for all
purposes, and none of the Depositor, the Servicer, the Trustee, the Certificate
Insurer, the Certificate Registrar nor any such agent shall be affected by
notice to the contrary.
The obligations created by the Agreement and the Trust Fund created
thereby shall terminate upon payment to the Certificateholders of all amounts
held by or on behalf of the Trustee and required to be paid to them pursuant to
the Agreement following the earlier of (i) the later of the final payment or
other liquidation (or any advance with respect thereto) of the last Mortgage
Loan or REO Property remaining in the Trust Fund, and (ii) the purchase by the
party designated in the Agreement at a price determined as provided in the
Agreement from the Trust Fund of all Mortgage Loans and all property acquired in
respect of such Mortgage Loans. The Agreement permits, but does not require, the
party designated in the Agreement to purchase from the Trust Fund all Mortgage
Loans and all property acquired in respect of any Mortgage Loan at a price
determined as provided in the Agreement. The exercise of such right will effect
early retirement of the Certificates; however, such right to purchase is subject
to the aggregate Stated Principal Balance of the Mortgage Loans and each REO
Property at the time of purchase being 10% or less of the Original Pool Balance.
The recitals contained herein shall be taken as statements of the
Depositor and the Trustee assumes no responsibility for their correctness.
Unless the certificate of authentication hereon has been executed by
the Certificate Registrar, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
A-3-4
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be
duly executed.
Dated:
FIRST UNION NATIONAL BANK, solely in its
capacity as Trustee and not in its individual capacity
By
-----------------------------------
Authorized Officer
CERTIFICATE OF AUTHENTICATION
This is one of the Class A-3 Certificates referred to in the
within-mentioned Agreement.
FIRST UNION NATIONAL BANK, as Certificate Registrar
BY:
-----------------------------------
Authorized Signatory
A-3-5
<PAGE>
ABBREVIATIONS
The following abbreviations, when used in the inscription on the
face of this instrument, shall be construed as though they were written out in
full according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT - Custodian
TEN COM - as tenants in common ---------
UNIF GIFT MIN ACT - Custodian
---------
(Cuss) (Minor)
TEN ENT - as tenants by the entireties
under Uniform Gifts to Minors Act
JT TEN - as joint tenants with right
if survivorship and not as (State)
tenants in common
Additional abbreviations may also be used though not in the above
list.
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto _______________________________________________________
________________________________________________________________________ (Please
print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee) __________________________________________
________________________________________________________________________________
a Percentage Interest equal to ____% evidenced by the within Emergent Home
Equity Loan Pass-Through Certificate Series 1997-3, Class A-3 and hereby
authorize(s) the registration of transfer of such interest to assignee on the
Certificate Register of the Trust Fund.
I (we) further direct the Certificate Registrar to issue a new
Certificate of a like Percentage Interest and Class to the above named assignee
and deliver such Certificate to the following address:
________________________________________.
Dated:
------------------------------------------
Signature by or on behalf of assignor
------------------------------------------
Signature Guaranteed
A-3-6
<PAGE>
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for purposes of
distribution:
Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to _____________________________________________
________________________________________________________________________ for the
account of _________________, account number _______________________, or, if
mailed by check, to _________________________________________________
_______________________________________________________________________.
Applicable statements should be mailed to ____________________________________
______________________________________________________________________. This
information is provided by ___________________________________________, the
assignee named above, or ________________________________, as its agent.
A-3-7
<PAGE>
EXHIBIT A-4
FORM OF CLASS A-4 CERTIFICATE
Unless this certificate is presented by an authorized representative
of The Depository Trust Company, a New York corporation ("DTC"), to the Trustee
or its agent for registration of transfer, exchange or payment, and any
certificate issued is registered in the name of Cede & Co. or in such other name
as is requested by an authorized representative of DTC (and any payment is made
to Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
"REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS
THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE
INTERNAL REVENUE CODE OF 1986 (THE "CODE").
================================================================================
Series 1997-3, Class A-4 Class A-4 Certificate Principal Balance
as of the Issue Date:
- --------------------------------------------------------------------------------
Pass-Through Rate: 6.925% $33,000,000
- --------------------------------------------------------------------------------
Date of Pooling and Servicing Denomination: $____________
Agreement:
August 10, 1997
- --------------------------------------------------------------------------------
First Distribution Date: Servicer:
October 20, 1997 Emergent Mortgage Corp.
- --------------------------------------------------------------------------------
No. 1 Trustee: First Union National Bank
- --------------------------------------------------------------------------------
Issue Date: September 24, 1997
- --------------------------------------------------------------------------------
CUSIP: 29088X AM3
================================================================================
THE PASS-THROUGH RATE INDICATED ABOVE IS SUBJECT TO THE AVAILABLE FUNDS
CAP RATE SPECIFIED IN THE POOLING AND SERVICING AGREEMENT.
DISTRIBUTIONS IN REDUCTION OF THE CERTIFICATE PRINCIPAL BALANCE OF THIS
CERTIFICATE MAY BE MADE MONTHLY AS SET FORTH HEREIN. ACCORDINGLY, THE
OUTSTANDING CERTIFICATE PRINCIPAL BALANCE HEREOF AT ANY TIME MAY BE LESS
THAN THE AMOUNT SHOWN ABOVE.
A-4-1
<PAGE>
EMERGENT HOME EQUITY LOAN PASS-THROUGH CERTIFICATE
evidencing a beneficial ownership interest in a portion of a Trust Fund
consisting primarily of a pool of closed end, fixed rate home equity loans
secured by mortgages on single-family residences (which may be attached,
detached, part of a two- to four-family dwelling, a condominium, townhouse, or a
unit in a planned unit development) and manufactured housing (the "Mortgage
Loans") formed and sold by
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN THE
SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES. NEITHER THIS CERTIFICATE
NOR THE UNDERLYING MORTGAGE LOANS ARE GUARANTEED BY ANY AGENCY OR
INSTRUMENTALITY OF THE UNITED STATES.
This certifies that Cede & Co. is the registered owner of a
Percentage Interest (obtained by dividing the denomination of this Certificate
by the Class A-4 Certificate Principal Balance) in that certain beneficial
ownership interest evidenced by all the Class A-4 Certificates in the Trust Fund
created pursuant to a Pooling and Servicing Agreement, dated as specified above
(the "Agreement"), among Prudential Securities Secured Financing Corporation
(hereinafter called the "Depositor," which term includes any successor entity
under the Agreement), the Servicer and the Trustee, a summary of certain of the
pertinent provisions of which is set forth hereafter. To the extent not defined
herein, the capitalized terms used herein have the meanings assigned in the
Agreement. This Certificate is issued under and is subject to the terms,
provisions and conditions of the Agreement, to which Agreement the Holder of
this Certificate by virtue of the acceptance hereof assents and by which such
Holder is bound.
Pursuant to the terms of the Agreement, distributions will be made
on the 20th day of each month or, if such 20th day is not a Business Day, the
Business Day immediately following (a "Distribution Date"), commencing on the
First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the last Business Day of the month immediately
preceding the month of such distribution (the "Record Date"), from funds in the
Distribution Account in an amount equal to the product of the Percentage
Interest evidenced by this Certificate and the amount required to be distributed
to the Holders of Class A-4 Certificates on such Distribution Date pursuant to
the Agreement.
So long as this Certificate is registered in the name of a
Depository or its nominee, the Trustee will make payments of principal and
interest on this Certificate by wire transfers of immediately available funds to
the Depository or its nominee. Otherwise all distributions to the Holder of this
Certificate under the Agreement will be made or caused to be made by or on
behalf of the Trustee by wire transfer in immediately available funds to the
account of the Person entitled thereto if such Person shall have so notified the
Trustee in writing at least five Business Days prior to the Record Date
immediately prior to such Distribution Date and is the registered owner of Class
A-4 Certificates the aggregate initial Certificate Principal Balance of which is
in excess of
A-4-2
<PAGE>
$5,000,000, or by check mailed by first class mail to the address of the Person
entitled thereto, as such name and address shall appear on the Certificate
Register, provided that the Trustee may deduct a reasonable wire transfer fee
from any payment made by wire transfer. Notwithstanding the above, the final
distribution on this Certificate will be made after due notice by the Trustee of
the pendency of such distribution and only upon presentation and surrender of
this Certificate at the office or agency appointed by the Trustee for that
purpose as provided in the Agreement.
The Pass-Through Rate on the Class A-4 Certificates on each
Distribution Date will be a rate per annum equal to 6.925% per annum (subject to
the applicable Available Funds Cap Rate specified in the Agreement).
This Certificate is one of a duly authorized issue of Certificates
designated as Emergent Home Equity Loan Pass-Through Certificates of the Series
specified on the face hereof (herein called the "Certificates") and representing
a Percentage Interest in the Class A-4 Certificates.
The Class A-4 Certificates are limited in right of payment to
certain collections and recoveries respecting the Mortgage Loans and payments
under the Policy, all as more specifically set forth herein and in the Agreement
and the policy. As provided in the Agreement, withdrawals from the Collection
Accounts and the Distribution Account may be made from time to time for purposes
other than distributions to Certificateholders, such purposes including
reimbursement of advances made, or certain expenses incurred, with respect to
the Mortgage Loans.
The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Depositor, the Servicer, the Trustee and the rights of the Certificateholders
under the Agreement at any time by the Depositor, the Servicer, the Trustee with
the consent of the Holders of Certificates entitled to at least 66% of the
Voting Rights and the Certificate Insurer. Any such consent by the Holder of
this Certificate shall be conclusive and binding on such Holder and upon all
future Holders of this Certificate and of any Certificate issued upon the
transfer hereof or in exchange hereof or in lieu hereof whether or not notation
of such consent is made upon this Certificate. The Agreement also permits the
amendment thereof, in certain limited circumstances, without the consent of the
Holders of any of the Certificates.
As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies appointed by the Trustee as provided in the
Agreement, duly endorsed by, or accompanied by an assignment in the form below
or other written instrument of transfer in form satisfactory to the Trustee and
the Certificate Registrar duly executed by, the Holder hereof or such Holder's
attorney duly authorized in writing, and thereupon one or more new Certificates
of the same Class in authorized denominations evidencing the same aggregate
Percentage Interest will be issued to the designated transferee or transferees.
A-4-3
<PAGE>
The Certificates are issuable in fully registered form only without
coupons in Classes and denominations representing Percentage Interests specified
in the Agreement. As provided in the Agreement and subject to certain
limitations therein set forth, Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.
No service charge will be made for any such registration of transfer
or exchange of Certificates, but the Trustee may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any transfer or exchange of Certificates.
The Depositor, the Servicer, the Trustee, the Certificate Insurer
and the Certificate Registrar and any agent of the Depositor, any Servicer, the
Trustee, the Certificate Insurer or the Certificate Registrar may treat the
Person in whose name this Certificate is registered as the owner hereof for all
purposes, and none of the Depositor, the Servicer, the Trustee, the Certificate
Insurer, the Certificate Registrar nor any such agent shall be affected by
notice to the contrary.
The obligations created by the Agreement and the Trust Fund created
thereby shall terminate upon payment to the Certificateholders of all amounts
held by or on behalf of the Trustee and required to be paid to them pursuant to
the Agreement following the earlier of (i) the later of the final payment or
other liquidation (or any advance with respect thereto) of the last Mortgage
Loan or REO Property remaining in the Trust Fund, and (ii) the purchase by the
party designated in the Agreement at a price determined as provided in the
Agreement from the Trust Fund of all Mortgage Loans and all property acquired in
respect of such Mortgage Loans. The Agreement permits, but does not require, the
party designated in the Agreement to purchase from the Trust Fund all Mortgage
Loans and all property acquired in respect of any Mortgage Loan at a price
determined as provided in the Agreement. The exercise of such right will effect
early retirement of the Certificates; however, such right to purchase is subject
to the aggregate Stated Principal Balance of the Mortgage Loans and each REO
Property at the time of purchase being 10% or less of the Original Pool Balance.
The recitals contained herein shall be taken as statements of the
Depositor and the Trustee assumes no responsibility for their correctness.
Unless the certificate of authentication hereon has been executed by
the Certificate Registrar, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
A-4-4
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be
duly executed.
Dated:
FIRST UNION NATIONAL BANK, solely in its
capacity as Trustee and not in its individual capacity
By
-----------------------------------
Authorized Officer
CERTIFICATE OF AUTHENTICATION
This is one of the Class A-4 Certificates referred to in the
within-mentioned Agreement.
FIRST UNION NATIONAL BANK, as Certificate Registrar
BY:
-----------------------------------
Authorized Signatory
A-4-5
<PAGE>
ABBREVIATIONS
The following abbreviations, when used in the inscription on the
face of this instrument, shall be construed as though they were written out in
full according to applicable laws or regulations:
TEN COM - as tenants in common
UNIF GIFT MIN ACT - Custodian
---------
(Cuss) (Minor)
TEN ENT - as tenants by the entireties
under Uniform Gifts to Minors Act
JT TEN - as joint tenants with right
if survivorship and not as (State)
tenants in common
Additional abbreviations may also be used though not in the above
list.
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto _______________________________________________________
________________________________________________________________________ (Please
print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee) __________________________________________
________________________________________________________________________________
a Percentage Interest equal to ____% evidenced by the within Emergent Home
Equity Loan Pass-Through Certificate Series 1997-3, Class A-4 and hereby
authorize(s) the registration of transfer of such interest to assignee on the
Certificate Register of the Trust Fund.
I (we) further direct the Certificate Registrar to issue a new
Certificate of a like Percentage Interest and Class to the above named assignee
and deliver such Certificate to the following address:
________________________________________.
Dated:
------------------------------------------
Signature by or on behalf of assignor
------------------------------------------
Signature Guaranteed
A-4-6
<PAGE>
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for purposes of
distribution:
Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to _____________________________________________
________________________________________________________________________ for the
account of _________________, account number _______________________, or, if
mailed by check, to _________________________________________________
_______________________________________________________________________.
Applicable statements should be mailed to ____________________________________
______________________________________________________________________. This
information is provided by ___________________________________________, the
assignee named above, or ________________________________, as its agent.
A-4-7
<PAGE>
EXHIBIT A-5
FORM OF CLASS A-5 CERTIFICATE
Unless this certificate is presented by an authorized representative
of The Depository Trust Company, a New York corporation ("DTC"), to the Trustee
or its agent for registration of transfer, exchange or payment, and any
certificate issued is registered in the name of Cede & Co. or in such other name
as is requested by an authorized representative of DTC (and any payment is made
to Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
"REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS
THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE
INTERNAL REVENUE CODE OF 1986 (THE "CODE").
================================================================================
Series 1997-3, Class A-5 Class A-5 Certificate Principal Balance
as of the Issue Date:
- --------------------------------------------------------------------------------
Pass-Through Rate: 7.290% $30,000,000
- --------------------------------------------------------------------------------
Date of Pooling and Servicing Denomination: $____________
Agreement:
August 10, 1997
- --------------------------------------------------------------------------------
First Distribution Date: Servicer:
October 20, 1997 Emergent Mortgage Corp.
- --------------------------------------------------------------------------------
No. 1 Trustee: First Union National Bank
- --------------------------------------------------------------------------------
Issue Date: September 24, 1997
- --------------------------------------------------------------------------------
CUSIP: 29088X AN1
================================================================================
THE PASS-THROUGH RATE INDICATED ABOVE IS SUBJECT TO THE AVAILABLE FUNDS
CAP RATE SPECIFIED IN THE POOLING AND SERVICING AGREEMENT.
DISTRIBUTIONS IN REDUCTION OF THE CERTIFICATE PRINCIPAL BALANCE OF THIS
CERTIFICATE MAY BE MADE MONTHLY AS SET FORTH HEREIN. ACCORDINGLY, THE
OUTSTANDING CERTIFICATE PRINCIPAL BALANCE HEREOF AT ANY TIME MAY BE LESS
THAN THE AMOUNT SHOWN ABOVE.
A-5-1
<PAGE>
EMERGENT HOME EQUITY LOAN PASS-THROUGH CERTIFICATE
evidencing a beneficial ownership interest in a portion of a Trust Fund
consisting primarily of a pool of closed end, fixed rate home equity loans
secured by mortgages on single-family residences (which may be attached,
detached, part of a two- to four-family dwelling, a condominium, townhouse, or a
unit in a planned unit development) and manufactured housing (the "Mortgage
Loans") formed and sold by
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN THE
SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES. NEITHER THIS CERTIFICATE
NOR THE UNDERLYING MORTGAGE LOANS ARE GUARANTEED BY ANY AGENCY OR
INSTRUMENTALITY OF THE UNITED STATES.
This certifies that Cede & Co. is the registered owner of a
Percentage Interest (obtained by dividing the denomination of this Certificate
by the Class A-5 Certificate Principal Balance) in that certain beneficial
ownership interest evidenced by all the Class A-5 Certificates in the Trust Fund
created pursuant to a Pooling and Servicing Agreement, dated as specified above
(the "Agreement"), among Prudential Securities Secured Financing Corporation
(hereinafter called the "Depositor," which term includes any successor entity
under the Agreement), the Servicer and the Trustee, a summary of certain of the
pertinent provisions of which is set forth hereafter. To the extent not defined
herein, the capitalized terms used herein have the meanings assigned in the
Agreement. This Certificate is issued under and is subject to the terms,
provisions and conditions of the Agreement, to which Agreement the Holder of
this Certificate by virtue of the acceptance hereof assents and by which such
Holder is bound.
Pursuant to the terms of the Agreement, distributions will be made
on the 20th day of each month or, if such 20th day is not a Business Day, the
Business Day immediately following (a "Distribution Date"), commencing on the
First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the last Business Day of the month immediately
preceding the month of such distribution (the "Record Date"), from funds in the
Distribution Account in an amount equal to the product of the Percentage
Interest evidenced by this Certificate and the amount required to be distributed
to the Holders of Class A-5 Certificates on such Distribution Date pursuant to
the Agreement.
So long as this Certificate is registered in the name of a
Depository or its nominee, the Trustee will make payments of principal and
interest on this Certificate by wire transfers of immediately available funds to
the Depository or its nominee. Otherwise all distributions to the Holder of this
Certificate under the Agreement will be made or caused to be made by or on
behalf of the Trustee by wire transfer in immediately available funds to the
account of the Person entitled thereto if such Person shall have so notified the
Trustee in writing at least five Business Days prior to the Record Date
immediately prior to such Distribution Date and is the registered owner of Class
A-5 Certificates the aggregate initial Certificate Principal Balance of which is
in excess of
A-5-2
<PAGE>
$5,000,000, or by check mailed by first class mail to the address of the Person
entitled thereto, as such name and address shall appear on the Certificate
Register, provided that the Trustee may deduct a reasonable wire transfer fee
from any payment made by wire transfer. Notwithstanding the above, the final
distribution on this Certificate will be made after due notice by the Trustee of
the pendency of such distribution and only upon presentation and surrender of
this Certificate at the office or agency appointed by the Trustee for that
purpose as provided in the Agreement.
The Pass-Through Rate on the Class A-5 Certificates on each
Distribution Date will be a rate per annum equal to 7.290% per annum (subject to
the applicable Available Funds Cap Rate specified in the Agreement).
This Certificate is one of a duly authorized issue of Certificates
designated as Emergent Home Equity Loan Pass-Through Certificates of the Series
specified on the face hereof (herein called the "Certificates") and representing
a Percentage Interest in the Class A-5 Certificates.
The Class A-5 Certificates are limited in right of payment to
certain collections and recoveries respecting the Mortgage Loans and payments
under the Policy, all as more specifically set forth herein and in the Agreement
and the policy. As provided in the Agreement, withdrawals from the Collection
Accounts and the Distribution Account may be made from time to time for purposes
other than distributions to Certificateholders, such purposes including
reimbursement of advances made, or certain expenses incurred, with respect to
the Mortgage Loans.
The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Depositor, the Servicer, the Trustee and the rights of the Certificateholders
under the Agreement at any time by the Depositor, the Servicer, the Trustee with
the consent of the Holders of Certificates entitled to at least 66% of the
Voting Rights and the Certificate Insurer. Any such consent by the Holder of
this Certificate shall be conclusive and binding on such Holder and upon all
future Holders of this Certificate and of any Certificate issued upon the
transfer hereof or in exchange hereof or in lieu hereof whether or not notation
of such consent is made upon this Certificate. The Agreement also permits the
amendment thereof, in certain limited circumstances, without the consent of the
Holders of any of the Certificates.
As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies appointed by the Trustee as provided in the
Agreement, duly endorsed by, or accompanied by an assignment in the form below
or other written instrument of transfer in form satisfactory to the Trustee and
the Certificate Registrar duly executed by, the Holder hereof or such Holder's
attorney duly authorized in writing, and thereupon one or more new Certificates
of the same Class in authorized denominations evidencing the same aggregate
Percentage Interest will be issued to the designated transferee or transferees.
A-5-3
<PAGE>
The Certificates are issuable in fully registered form only without
coupons in Classes and denominations representing Percentage Interests specified
in the Agreement. As provided in the Agreement and subject to certain
limitations therein set forth, Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.
No service charge will be made for any such registration of transfer
or exchange of Certificates, but the Trustee may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any transfer or exchange of Certificates.
The Depositor, the Servicer, the Trustee, the Certificate Insurer
and the Certificate Registrar and any agent of the Depositor, any Servicer, the
Trustee, the Certificate Insurer or the Certificate Registrar may treat the
Person in whose name this Certificate is registered as the owner hereof for all
purposes, and none of the Depositor, the Servicer, the Trustee, the Certificate
Insurer, the Certificate Registrar nor any such agent shall be affected by
notice to the contrary.
The obligations created by the Agreement and the Trust Fund created
thereby shall terminate upon payment to the Certificateholders of all amounts
held by or on behalf of the Trustee and required to be paid to them pursuant to
the Agreement following the earlier of (i) the later of the final payment or
other liquidation (or any advance with respect thereto) of the last Mortgage
Loan or REO Property remaining in the Trust Fund, and (ii) the purchase by the
party designated in the Agreement at a price determined as provided in the
Agreement from the Trust Fund of all Mortgage Loans and all property acquired in
respect of such Mortgage Loans. The Agreement permits, but does not require, the
party designated in the Agreement to purchase from the Trust Fund all Mortgage
Loans and all property acquired in respect of any Mortgage Loan at a price
determined as provided in the Agreement. The exercise of such right will effect
early retirement of the Certificates; however, such right to purchase is subject
to the aggregate Stated Principal Balance of the Mortgage Loans and each REO
Property at the time of purchase being 10% or less of the Original Pool Balance.
The recitals contained herein shall be taken as statements of the
Depositor and the Trustee assumes no responsibility for their correctness.
Unless the certificate of authentication hereon has been executed by
the Certificate Registrar, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
A-5-4
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be
duly executed.
Dated:
FIRST UNION NATIONAL BANK, solely in its
capacity as Trustee and not in its individual capacity
By
-----------------------------------
Authorized Officer
CERTIFICATE OF AUTHENTICATION
This is one of the Class A-5 Certificates referred to in the
within-mentioned Agreement.
FIRST UNION NATIONAL BANK, as Certificate Registrar
BY:
-----------------------------------
Authorized Signatory
A-5-5
<PAGE>
ABBREVIATIONS
The following abbreviations, when used in the inscription on the
face of this instrument, shall be construed as though they were written out in
full according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT - Custodian
TEN COM - as tenants in common ---------
UNIF GIFT MIN ACT - Custodian
---------
(Cuss) (Minor)
TEN ENT - as tenants by the entireties
under Uniform Gifts to Minors Act
JT TEN - as joint tenants with right
if survivorship and not as (State)
tenants in common
Additional abbreviations may also be used though not in the above
list.
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto _______________________________________________________
________________________________________________________________________ (Please
print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee) __________________________________________
________________________________________________________________________________
a Percentage Interest equal to ____% evidenced by the within Emergent Home
Equity Loan Pass-Through Certificate Series 1997-3, Class A-5 and hereby
authorize(s) the registration of transfer of such interest to assignee on the
Certificate Register of the Trust Fund.
I (we) further direct the Certificate Registrar to issue a new
Certificate of a like Percentage Interest and Class to the above named assignee
and deliver such Certificate to the following address:
________________________________________.
Dated:
------------------------------------------
Signature by or on behalf of assignor
------------------------------------------
Signature Guaranteed
A-5-6
<PAGE>
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for purposes of
distribution:
Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to _____________________________________________
________________________________________________________________________ for the
account of _________________, account number _______________________, or, if
mailed by check, to _________________________________________________
_______________________________________________________________________.
Applicable statements should be mailed to ____________________________________
______________________________________________________________________. This
information is provided by ___________________________________________, the
assignee named above, or ________________________________, as its agent.
A-5-7
<PAGE>
EXHIBIT A-6
FORM OF CLASS A-6 CERTIFICATE
Unless this certificate is presented by an authorized representative
of The Depository Trust Company, a New York corporation ("DTC"), to the Trustee
or its agent for registration of transfer, exchange or payment, and any
certificate issued is registered in the name of Cede & Co. or in such other name
as is requested by an authorized representative of DTC (and any payment is made
to Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
"REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS
THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE
INTERNAL REVENUE CODE OF 1986 (THE "CODE").
================================================================================
Series 1997-3, Class A-6 Class A-6 Certificate Principal Balance
as of the Issue Date:
- --------------------------------------------------------------------------------
Pass-Through Rate: 6.930% $17,000,000
- --------------------------------------------------------------------------------
Date of Pooling and Servicing Denomination: $____________
Agreement:
August 10, 1997
- --------------------------------------------------------------------------------
First Distribution Date: Servicer:
October 20, 1997 Emergent Mortgage Corp.
- --------------------------------------------------------------------------------
No. 1 Trustee: First Union National Bank
- --------------------------------------------------------------------------------
Issue Date: September 24, 1997
- --------------------------------------------------------------------------------
CUSIP: 29088X AP6
================================================================================
THE PASS-THROUGH RATE INDICATED ABOVE IS SUBJECT TO THE AVAILABLE FUNDS
CAP RATE SPECIFIED IN THE POOLING AND SERVICING AGREEMENT.
DISTRIBUTIONS IN REDUCTION OF THE CERTIFICATE PRINCIPAL BALANCE OF THIS
CERTIFICATE MAY BE MADE MONTHLY AS SET FORTH HEREIN. ACCORDINGLY, THE
OUTSTANDING CERTIFICATE PRINCIPAL BALANCE HEREOF AT ANY TIME MAY BE LESS
THAN THE AMOUNT SHOWN ABOVE.
A-6-1
<PAGE>
EMERGENT HOME EQUITY LOAN PASS-THROUGH CERTIFICATE
evidencing a beneficial ownership interest in a portion of a Trust Fund
consisting primarily of a pool of closed end, fixed rate home equity loans
secured by mortgages on single-family residences (which may be attached,
detached, part of a two- to four-family dwelling, a condominium, townhouse, or a
unit in a planned unit development) and manufactured housing (the "Mortgage
Loans") formed and sold by
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN THE
SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES. NEITHER THIS CERTIFICATE
NOR THE UNDERLYING MORTGAGE LOANS ARE GUARANTEED BY ANY AGENCY OR
INSTRUMENTALITY OF THE UNITED STATES.
This certifies that Cede & Co. is the registered owner of a
Percentage Interest (obtained by dividing the denomination of this Certificate
by the Class A-6 Certificate Principal Balance) in that certain beneficial
ownership interest evidenced by all the Class A-6 Certificates in the Trust Fund
created pursuant to a Pooling and Servicing Agreement, dated as specified above
(the "Agreement"), among Prudential Securities Secured Financing Corporation
(hereinafter called the "Depositor," which term includes any successor entity
under the Agreement), the Servicer and the Trustee, a summary of certain of the
pertinent provisions of which is set forth hereafter. To the extent not defined
herein, the capitalized terms used herein have the meanings assigned in the
Agreement. This Certificate is issued under and is subject to the terms,
provisions and conditions of the Agreement, to which Agreement the Holder of
this Certificate by virtue of the acceptance hereof assents and by which such
Holder is bound.
Pursuant to the terms of the Agreement, distributions will be
made on the 20th day of each month or, if such 20th day is not a Business Day,
the Business Day immediately following (a "Distribution Date"), commencing on
the First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the last Business Day of the month immediately
preceding the month of such distribution (the "Record Date"), from funds in the
Distribution Account in an amount equal to the product of the Percentage
Interest evidenced by this Certificate and the amount required to be distributed
to the Holders of Class A-6 Certificates on such Distribution Date pursuant to
the Agreement.
So long as this Certificate is registered in the name of a
Depository or its nominee, the Trustee will make payments of principal and
interest on this Certificate by wire transfers of immediately available funds to
the Depository or its nominee. Otherwise all distributions to the Holder of this
Certificate under the Agreement will be made or caused to be made by or on
behalf of the Trustee by wire transfer in immediately available funds to the
account of the Person entitled thereto if such Person shall have so notified the
Trustee in writing at least five Business Days prior to the Record Date
immediately prior to such Distribution Date and is the registered owner of Class
A-6 Certificates the aggregate initial Certificate Principal Balance of which is
in excess of
A-6-2
<PAGE>
$5,000,000, or by check mailed by first class mail to the address of the Person
entitled thereto, as such name and address shall appear on the Certificate
Register, provided that the Trustee may deduct a reasonable wire transfer fee
from any payment made by wire transfer. Notwithstanding the above, the final
distribution on this Certificate will be made after due notice by the Trustee of
the pendency of such distribution and only upon presentation and surrender of
this Certificate at the office or agency appointed by the Trustee for that
purpose as provided in the Agreement.
The Pass-Through Rate on the Class A-6 Certificates on each
Distribution Date will be a rate per annum equal to 6.930% per annum (subject to
the applicable Available Funds Cap Rate specified in the Agreement).
This Certificate is one of a duly authorized issue of Certificates
designated as Emergent Home Equity Loan Pass-Through Certificates of the Series
specified on the face hereof (herein called the "Certificates") and representing
a Percentage Interest in the Class A-6 Certificates.
The Class A-6 Certificates are limited in right of payment to
certain collections and recoveries respecting the Mortgage Loans and payments
under the Policy, all as more specifically set forth herein and in the Agreement
and the policy. As provided in the Agreement, withdrawals from the Collection
Accounts and the Distribution Account may be made from time to time for purposes
other than distributions to Certificateholders, such purposes including
reimbursement of advances made, or certain expenses incurred, with respect to
the Mortgage Loans.
The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Depositor, the Servicer, the Trustee and the rights of the Certificateholders
under the Agreement at any time by the Depositor, the Servicer, the Trustee with
the consent of the Holders of Certificates entitled to at least 66% of the
Voting Rights and the Certificate Insurer. Any such consent by the Holder of
this Certificate shall be conclusive and binding on such Holder and upon all
future Holders of this Certificate and of any Certificate issued upon the
transfer hereof or in exchange hereof or in lieu hereof whether or not notation
of such consent is made upon this Certificate. The Agreement also permits the
amendment thereof, in certain limited circumstances, without the consent of the
Holders of any of the Certificates.
As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies appointed by the Trustee as provided in the
Agreement, duly endorsed by, or accompanied by an assignment in the form below
or other written instrument of transfer in form satisfactory to the Trustee and
the Certificate Registrar duly executed by, the Holder hereof or such Holder's
attorney duly authorized in writing, and thereupon one or more new Certificates
of the same Class in authorized denominations evidencing the same aggregate
Percentage Interest will be issued to the designated transferee or transferees.
A-6-3
<PAGE>
The Certificates are issuable in fully registered form only without
coupons in Classes and denominations representing Percentage Interests specified
in the Agreement. As provided in the Agreement and subject to certain
limitations therein set forth, Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.
No service charge will be made for any such registration of transfer
or exchange of Certificates, but the Trustee may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any transfer or exchange of Certificates.
The Depositor, the Servicer, the Trustee, the Certificate Insurer
and the Certificate Registrar and any agent of the Depositor, any Servicer, the
Trustee, the Certificate Insurer or the Certificate Registrar may treat the
Person in whose name this Certificate is registered as the owner hereof for all
purposes, and none of the Depositor, the Servicer, the Trustee, the Certificate
Insurer, the Certificate Registrar nor any such agent shall be affected by
notice to the contrary.
The obligations created by the Agreement and the Trust Fund created
thereby shall terminate upon payment to the Certificateholders of all amounts
held by or on behalf of the Trustee and required to be paid to them pursuant to
the Agreement following the earlier of (i) the later of the final payment or
other liquidation (or any advance with respect thereto) of the last Mortgage
Loan or REO Property remaining in the Trust Fund, and (ii) the purchase by the
party designated in the Agreement at a price determined as provided in the
Agreement from the Trust Fund of all Mortgage Loans and all property acquired in
respect of such Mortgage Loans. The Agreement permits, but does not require, the
party designated in the Agreement to purchase from the Trust Fund all Mortgage
Loans and all property acquired in respect of any Mortgage Loan at a price
determined as provided in the Agreement. The exercise of such right will effect
early retirement of the Certificates; however, such right to purchase is subject
to the aggregate Stated Principal Balance of the Mortgage Loans and each REO
Property at the time of purchase being 10% or less of the Original Pool Balance.
The recitals contained herein shall be taken as statements of the
Depositor and the Trustee assumes no responsibility for their correctness.
Unless the certificate of authentication hereon has been executed by
the Certificate Registrar, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
A-6-4
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be
duly executed.
Dated:
FIRST UNION NATIONAL BANK, solely in its
capacity as Trustee and not in its individual capacity
By
-----------------------------------
Authorized Officer
CERTIFICATE OF AUTHENTICATION
This is one of the Class A-6 Certificates referred to in the
within-mentioned Agreement.
FIRST UNION NATIONAL BANK, as Certificate Registrar
BY:
-----------------------------------
Authorized Signatory
A-6-5
<PAGE>
ABBREVIATIONS
The following abbreviations, when used in the inscription on the
face of this instrument, shall be construed as though they were written out in
full according to applicable laws or regulations:
TEN COM - as tenants in common
UNIF GIFT MIN ACT - Custodian
---------
(Cuss) (Minor)
TEN ENT - as tenants by the entireties
under Uniform Gifts to Minors Act
JT TEN - as joint tenants with right
if survivorship and not as (State)
tenants in common
Additional abbreviations may also be used though not in the above
list.
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto _______________________________________________________
________________________________________________________________________ (Please
print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee) __________________________________________
________________________________________________________________________________
a Percentage Interest equal to ____% evidenced by the within Emergent Home
Equity Loan Pass-Through Certificate Series 1997-3, Class A-6 and hereby
authorize(s) the registration of transfer of such interest to assignee on the
Certificate Register of the Trust Fund.
I (we) further direct the Certificate Registrar to issue a new
Certificate of a like Percentage Interest and Class to the above named assignee
and deliver such Certificate to the following address:
________________________________________.
Dated:
------------------------------------------
Signature by or on behalf of assignor
------------------------------------------
Signature Guaranteed
A-6-6
<PAGE>
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for purposes of
distribution:
Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to _____________________________________________
________________________________________________________________________ for the
account of _________________, account number _______________________, or, if
mailed by check, to _________________________________________________
_______________________________________________________________________.
Applicable statements should be mailed to ____________________________________
______________________________________________________________________. This
information is provided by ___________________________________________, the
assignee named above, or ________________________________, as its agent.
A-6-7
<PAGE>
EXHIBIT A-7
CLASS R CERTIFICATE
THIS CERTIFICATE MAY NOT BE TRANSFERRED TO A NON-UNITED STATES PERSON.
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
"RESIDUAL INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT"
("REMIC"), AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND
860D OF THE INTERNAL REVENUE CODE OF 1986 (THE "CODE").
THIS CLASS R CERTIFICATE IS SUBORDINATE TO THE CLASS A CERTIFICATES OF
THIS SERIES TO THE EXTENT DESCRIBED HEREIN AND IN THE POOLING AND
SERVICING AGREEMENT REFERRED TO HEREIN.
THIS CLASS R CERTIFICATE WILL NOT BE ENTITLED TO PAYMENTS UNTIL SUCH TIME
AS DESCRIBED IN THE POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN.
THIS CLASS R CERTIFICATE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR THE SECURITIES
LAWS OF ANY STATE. ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS
CERTIFICATE WITHOUT SUCH REGISTRATION OR QUALIFICATION MAY BE MADE ONLY IN
A TRANSACTION THAT DOES NOT REQUIRE SUCH REGISTRATION OR QUALIFICATION AND
IN ACCORDANCE WITH THE PROVISIONS OF SECTION 5.02 OF THE POOLING AND
SERVICING AGREEMENT REFERRED TO HEREIN.
AS DESCRIBED HEREIN, NO TRANSFER OF THIS CERTIFICATE TO AN EMPLOYEE
BENEFIT PLAN OR OTHER RETIREMENT ARRANGEMENT (OR AN ENTITY USING THE
ASSETS OF SUCH A PLAN OR ARRANGEMENT) SUBJECT TO THE EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974, AS AMENDED, OR THE CODE WILL BE REGISTERED.
ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CLASS R CERTIFICATE MAY
BE MADE ONLY IF THE PROPOSED TRANSFEREE PROVIDES (1) AN AFFIDAVIT TO THE
CERTIFICATE REGISTRAR AND THE TRUSTEE THAT SUCH TRANSFEREE IS NOT (A) THE
UNITED STATES, ANY STATE OR POLITICAL SUBDIVISION THEREOF, ANY FOREIGN
GOVERNMENT, ANY INTERNATIONAL ORGANIZATION, OR ANY AGENCY OR
INSTRUMENTALITY OF
A-7-1
<PAGE>
ANY OF THE FOREGOING, (B) ANY ORGANIZATION (OTHER THAN A COOPERATIVE
DESCRIBED IN SECTION 521 OF THE CODE) WHICH IS EXEMPT FROM THE TAX IMPOSED
BY CHAPTER 1 OF THE CODE UNLESS SUCH ORGANIZATION IS SUBJECT TO THE TAX
IMPOSED BY SECTION 511 OF THE CODE, (C) ANY ORGANIZATION DESCRIBED IN
SECTION 1381(a)(2)(C) OF THE CODE (ANY SUCH PERSON DESCRIBED IN THE
FOREGOING CLAUSES (A), (B) OR (C) BEING HEREINAFTER REFERRED TO AS A
"DISQUALIFIED ORGANIZATION"), OR (D) AN AGENT OF A DISQUALIFIED
ORGANIZATION AND (2) NO PURPOSE OF SUCH TRANSFER IS TO IMPEDE THE
ASSESSMENT OR COLLECTION OF TAX, AND (3) SUCH TRANSFEREE SATISFIES CERTAIN
ADDITIONAL CONDITIONS RELATING TO THE FINANCIAL CONDITION OF THE PROPOSED
TRANSFEREE. NOTWITHSTANDING REGISTRATION IN THE CERTIFICATE REGISTER OR
ANY TRANSFER, SALE OR OTHER DISPOSITION OF THIS CLASS R CERTIFICATE TO A
DISQUALIFIED ORGANIZATION OR AN AGENT OF A DISQUALIFIED ORGANIZATION, SUCH
REGISTRATION SHALL BE DEEMED TO BE OF NO LEGAL FORCE OR EFFECT WHATSOEVER
AND SUCH PERSON SHALL NOT BE DEEMED TO BE A CERTIFICATEHOLDER FOR ANY
PURPOSE HEREUNDER, INCLUDING, BUT NOT LIMITED TO, THE RECEIPT OF
DISTRIBUTIONS ON THIS CERTIFICATE. EACH HOLDER OF A CLASS R CERTIFICATE BY
ACCEPTANCE OF THIS CERTIFICATE SHALL BE DEEMED TO HAVE CONSENTED TO THE
PROVISIONS OF THIS PARAGRAPH AND THE PROVISIONS OF SECTION 5.02(d) OF THE
POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN. ANY PERSON THAT IS A
DISQUALIFIED ORGANIZATION IS PROHIBITED FROM ACQUIRING BENEFICIAL
OWNERSHIP OF THIS CLASS R CERTIFICATE.
================================================================================
Series 1997-3, Class R Certificate Principal Balance of the
Class R Certificates as of the Issue
Date: $0.00
- --------------------------------------------------------------------------------
Date of Pooling and Servicing Agreement:
August 10, 1997
- --------------------------------------------------------------------------------
First Distribution Date: Servicer:
October 20, 1997 Emergent Mortgage Corp.
- --------------------------------------------------------------------------------
No. 1 Trustee: First Union National Bank
- --------------------------------------------------------------------------------
Issue Date: September 24, 1997
- --------------------------------------------------------------------------------
Percentage Interest: 100%
================================================================================
A-7-2
<PAGE>
EMERGENT HOME EQUITY LOAN PASS-THROUGH
evidencing a beneficial ownership interest in a portion of a Trust Fund
consisting primarily of a pool of closed end fixed rate home equity loans
secured by mortgages on single-family residences (which may be attached,
detached, part of a two- to four-family dwelling, a condominium, townhouse, or a
unit in a planned unit development) and manufactured housing (the "Mortgage
Loans") formed and sold by
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION, THE SERVICER, THE
TRUSTEE OR ANY OF THEIR AFFILIATES. NEITHER THIS CERTIFICATE NOR THE
UNDERLYING MORTGAGE LOANS ARE GUARANTEED BY ANY AGENCY OR INSTRUMENTALITY
OF THE UNITED STATES.
This certifies that Emergent Mortgage Corp. is the registered owner
of a Percentage Interest set forth above in that certain beneficial ownership
interest evidenced by all the Class R Certificates in the Trust Fund created
pursuant to a Pooling and Servicing Agreement, dated as specified above (the
"Agreement"), among Prudential Securities Secured Financing Corporation
(hereinafter called the "Depositor," which term includes any successor entity
under the Agreement), the Servicer and the Trustee, a summary of certain of the
pertinent provisions of which is set forth hereafter. To the extent not defined
herein, the capitalized terms used herein have the meanings assigned in the
Agreement. This Certificate is issued under and is subject to the terms,
provisions and conditions of the Agreement, to which Agreement the Holder of
this Certificate by virtue of the acceptance hereof assents and by which such
Holder is bound.
Pursuant to the terms of the Agreement, distributions will be made
on the 20th day of each month or, if such 20th day is not a Business Day, the
Business Day immediately following (a "Distribution Date"), commencing on the
First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the last Business Day of the month immediately
preceding the month of such distribution (the "Record Date"), from funds in the
Distribution Account in an amount equal to the product of the Percentage
Interest evidenced by this Certificate and the amount required to be distributed
to the Holders of Class R Certificates on such Distribution Date pursuant to the
Agreement.
All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by or on behalf of the Trustee by
wire transfer in immediately available funds to the account of the Person
entitled thereto if such Person shall have so notified the Trustee in writing at
least five Business Days prior to the Record Date immediately prior to such
Distribution Date and is the registered owner of Class R Certificates the
aggregate Percentage Interest of which is in excess of a 66% Percentage Interest
of the Class R Certificates, or by check mailed by first class mail to the
address of the Person entitled thereto, as such name and address shall appear on
the Certificate Register, provided that the Trustee may deduct a reasonable wire
transfer fee
A-7-3
<PAGE>
from any payment made by wire transfer. Notwithstanding the above, the final
distribution on this Certificate will be made after due notice by the Trustee of
the pendency of such distribution and only upon presentation and surrender of
this Certificate at the office or agency appointed by the Trustee for that
purpose as provided in the Agreement.
This Certificate is one of a duly authorized issue of Certificates
designated as Emergent Home Equity Loan Pass-Through Certificates of the Series
specified on the face hereof (herein called the "Certificates") and representing
the Percentage Interest specified on the face hereof.
The Class R Certificates are limited in right of payment to certain
collections and recoveries respecting the Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Account and the Distribution Account
may be made from time to time for purposes other than distributions to
Certificateholders, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Mortgage Loans.
The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Depositor, the Servicer, the Trustee and the rights of the Certificateholders
under the Agreement at any time by the Depositor, the Servicer, the Trustee with
the consent of the Holders of Certificates entitled to at least 66% of the
Voting Rights and the Certificate Insurer. Any such consent by the Holder of
this Certificate shall be conclusive and binding on such Holder and upon all
future Holders of this Certificate and of any Certificate issued upon the
transfer hereof or in exchange hereof or in lieu hereof whether or not notation
of such consent is made upon this Certificate. The Agreement also permits the
amendment thereof, in certain limited circumstances, without the consent of the
Holders of any of the Certificates.
As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies appointed by the Trustee as provided in the
Agreement, duly endorsed by, or accompanied by an assignment in the form below
or other written instrument of transfer in form satisfactory to the Trustee and
the Certificate Registrar duly executed by, the Holder hereof or such Holder's
attorney duly authorized in writing, and thereupon one or more new Certificates
of the same Class in authorized denominations evidencing the same aggregate
Percentage Interest will be issued to the designated transferee or transferees.
The Certificates are issuable in fully registered form only without
coupons in Classes and denominations representing Percentage Interests specified
in the Agreement. As provided in the Agreement and subject to certain
limitations therein set forth, Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.
A-7-4
<PAGE>
No transfer of this Certificate shall be made unless that transfer
is made pursuant to an effective registration statement under the 1933 Act and
effective registration or qualification under applicable state securities laws,
or is made in a transaction that does not require such registration or
qualification. In the event that a transfer is to be made without registration
or qualification, the Trustee and the Certificate Registrar shall require, in
order to assure compliance with such laws, (i) if such transfer is purportedly
being made in reliance upon Rule 144A under the 1933 Act, written certifications
from the Certificateholder desiring to effect the transfer and from such
Certificateholder's prospective transferee, in the form described by the
Agreement certifying to the Trustee and the Certificate Registrar the facts
surrounding the transfer, or (ii) in all other cases, an Opinion of Counsel
satisfactory to them that such transfer may be made without such registration or
qualification, which Opinion of Counsel shall not be an expense of the
Depositor, the Trustee or the Certificate Registrar, in their respective
capacities as such, together with copies of the written certification(s) of the
Certificateholder desiring to effect the transfer and/or such
Certificateholder's prospective transferee upon which such Opinion of Counsel is
based, if any. None of the Depositor, the Certificate Registrar nor the Trustee
is obligated to register or qualify the Class of Certificates specified on the
face hereof under the 1933 Act or any other securities law or to take any action
not otherwise required under the Agreement to permit the transfer of such
Certificates without registration or qualification. Any such Certificateholder
desiring to effect such transfer shall, and does hereby agree to, indemnify the
Trustee, the Depositor, the Certificate Registrar, the Servicer and the
Certificate Insurer against any liability that may result if the transfer is not
so exempt or is not made in accordance with such federal and state laws.
No transfer of a Certificate or any interest therein may be made to
employee benefit plans and certain other retirement plans and arrangements,
including individual retirement accounts and annuities, Keogh plans and
collective investment funds and separate accounts in which such plans, accounts
or arrangements are invested that are subject to the fiduciary responsibility
provisions of ERISA and Section 4975 of the Code ("Plans") or any person who is
directly or indirectly purchasing the Certificate or interest therein on behalf
of, as named fiduciary of, as trustee of, or with assets of a Plan.
The Holder of this Certificate, by its acceptance hereof, shall be
deemed for all purposes to have consented to the provisions of Section 5.02 of
the Agreement and to any amendment of the Agreement deemed necessary by counsel
of the Depositor to ensure that the transfer of this Certificate to any Person
other than a Permitted Transferee or any other Person will not cause the REMIC
Trust to cease to qualify as a REMIC or cause the imposition of a tax upon the
REMIC Trust.
No service charge will be made for any such registration of transfer
or exchange of Certificates, but the Trustee may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any transfer or exchange of Certificates.
The Depositor, the Servicer, the Trustee, the Certificate Insurer
and the Certificate Registrar and any agent of the Depositor, any Servicer, the
Trustee, the Certificate Insurer or the Certificate Registrar may treat the
Person in whose name this
A-7-5
<PAGE>
Certificate is registered as the owner hereof for all purposes, and none of the
Depositor, the Servicer, the Trustee, the Certificate Insurer, the Certificate
Registrar nor any such agent shall be affected by notice to the contrary.
The obligations created by the Agreement and the Trust Fund created
thereby shall terminate upon payment to the Certificateholders of all amounts
held by or on behalf of the Trustee and required to be paid to them pursuant to
the Agreement following the earlier of (i) the later of the final payment or
other liquidation (or any advance with respect thereto) of the last Mortgage
Loan or REO Property remaining in the Trust Fund, and (ii) the purchase by the
party designated in the Agreement at a price determined as provided in the
Agreement from the Trust Fund of all Mortgage Loans and all property acquired in
respect of such Mortgage Loans. The Agreement permits, but does not require, the
party designated in the Agreement to purchase from the Trust Fund all Mortgage
Loans and all property acquired in respect of any Mortgage Loan at a price
determined as provided in the Agreement. The exercise of such right will effect
early retirement of they Certificates; however, such right to purchase is
subject to the aggregate Stated Principal Balance of the Mortgage Loans and each
REO Property at the time of purchase being 10% or less of the Original Pool
Balance.
The recitals contained herein shall be taken as statements of the
Depositor and the Trustee assumes no responsibility for their correctness.
Unless the certificate of authentication hereon has been executed by
the Certificate Registrar, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
A-7-6
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be
duly executed.
Dated:
FIRST UNION NATIONAL BANK,
solely in its capacity as Trustee and
not in its individual capacity
By
-----------------------------------
Authorized Officer
CERTIFICATE OF AUTHENTICATION
This is one of the Class R Certificates referred to in the
within-mentioned Agreement.
FIRST UNION NATIONAL BANK,
as Certificate Registrar
BY:
-----------------------------------
Authorized Signatory
A-7-7
<PAGE>
ABBREVIATIONS
The following abbreviations, when used in the inscription on the
face of this instrument, shall be construed as though they were written out in
full according to applicable laws or regulations:
TEN COM - as tenants in common
UNIF GIFT MIN ACT - Custodian
---------
(Cuss) (Minor)
TEN ENT - as tenants by the entireties
under Uniform Gifts to Minors Act
JT TEN - as joint tenants with right
if survivorship and not as (State)
tenants in common
Additional abbreviations may also be used though not in the above
list.
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto _______________________________________________________
________________________________________________________________________ (Please
print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee) __________________________________________
________________________________________________________________________________
a Percentage Interest equal to ____% evidenced by the within Emergent Home
Equity Loan Pass-Through Certificate Series 1997-3, Class R and hereby
authorize(s) the registration of transfer of such interest to assignee on the
Certificate Register of the Trust Fund.
I (we) further direct the Certificate Registrar to issue a new
Certificate of a like Percentage Interest and Class to the above named assignee
and deliver such Certificate to the following address:
________________________________________.
- --------------------------------------------------------------------------------
Dated:
------------------------------------------
Signature by or on behalf of assignor
------------------------------------------
Signature Guaranteed
A-7-8
<PAGE>
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for purposes of
distribution:
Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to _____________________________________________
________________________________________________________________________ for the
account of _________________, account number _______________________, or, if
mailed by check, to _________________________________________________
_______________________________________________________________________.
Applicable statements should be mailed to ____________________________________
______________________________________________________________________. This
information is provided by ___________________________________________, the
assignee named above, or ________________________________, as its agent.
A-7-9
<PAGE>
EXHIBIT B
FORM OF FINANCIAL GUARANTY INSURANCE POLICY
Please see Tab 12
B-1
<PAGE>
EXHIBIT C-1
FORM OF TRUSTEE'S INITIAL CERTIFICATION
__________, 1997
Prudential Securities Secured
Financing Corporation
One New York Plaza
New York, New York 10292
Attn: Asset-Backed Finance Group
Emergent Mortgage Corp.
50 Datastream Plaza, Suite 201
Greenville, SC 29605
Re: Pooling and Servicing Agreement, dated as of August 10, 1997,
among Prudential Securities Secured Financing Corporation,
Emergent Mortgage Corp. and First Union National Bank
Ladies and Gentlemen:
Pursuant to Section 2.04 of the Agreement, we certify that, as to
each Mortgage Loan listed in the Mortgage Loan Schedule (other than any Mortgage
Loan paid in full or any Mortgage Loan specifically identified in the exception
report annexed hereto as not being covered by this certification), (i) the
Mortgage Note included in each Mortgage File required to be delivered to us
pursuant to the Agreement is in our possession and (ii) such Mortgage Note has
been reviewed by us and appears regular on its face and relates to such Mortgage
Loan.
Attached is the Trustee's preliminary exceptions in accordance with
Section 2.04 of the Agreement. Capitalized terms used but not otherwise defined
herein shall have the meanings ascribed to them in the Agreement.
The Trustee has made no independent examination of any documents
contained in each Mortgage File beyond the review specifically required in the
above-referenced Pooling and Servicing Agreement. The Trustee makes no
representations as to: (i) the validity, legality, sufficiency, enforceability
due authorization, recordability or genuineness of any of the documents
contained in the Mortgage File of any of the Mortgage Loans identified on the
Mortgage Loan Schedule, or (ii) the collectability, insurability, effectiveness
or suitability of any such Mortgage Loan.
C-1-1
<PAGE>
FIRST UNION NATIONAL BANK,
solely in its
capacity as Trustee and not in its
individual capacity
By:___________________________________
Name:_________________________________
Title:________________________________
C-1-2
<PAGE>
EXHIBIT C-2
FORM OF TRUSTEE'S FINAL CERTIFICATION
_________, 1997
Prudential Securities Secured
Financing Corporation
One New York Plaza
New York, New York 10292
Attn: Asset-Backed Finance Group
Emergent Mortgage Corp.
50 Datastream Plaza, Suite 201
Greenville, SC 29605
Re: Pooling and Servicing Agreement, dated as of August 10, 1997,
among Prudential Securities Secured Financing Corporation,
Emergent Mortgage Corp. and First Union National Bank
Ladies and Gentlemen:
In accordance with Section 2.04 of the above-captioned Pooling and
Servicing Agreement, the undersigned, as Trustee, hereby certifies that as to
each Mortgage Loan listed in the Mortgage Loan Schedule (other than any Mortgage
Loan paid in full or listed on the attachment hereto), it or a Custodian on its
behalf has received:
(a) the original recorded Mortgage, and the original recorded power
of attorney, if the Mortgage was executed pursuant to a power of attorney,
or a certified copy thereof in those instances where the public recording
office retains the original or where the original has been lost; and
(b) an original recorded Assignment of the Mortgage to the Trustee
together with the original recorded Assignment or Assignments of the
Mortgage showing a complete chain of assignment from the originator, or a
certified copy of such Assignments in those instances where the public
recording retains the original or where original has been lost; and
(c) the original lender's title insurance policy.
The Trustee has made no independent examination of any documents
contained in each Mortgage File beyond the review specifically required in the
above-referenced Pooling and Servicing Agreement. The Trustee makes no
representations as to: (i) the validity, legality, sufficiency, enforceability
or genuineness of any of the documents contained in the Mortgage File of any of
the Mortgage Loans
C-2-1
<PAGE>
identified on the Mortgage Loan Schedule, or (ii) the collectability,
insurability, effectiveness or suitability of any such Mortgage Loan.
Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the above-captioned Pooling and Servicing
Agreement.
FIRST UNION NATIONAL BANK,
solely in its capacity as Trustee
and not in its individual capacity
By:___________________________________
Name:_________________________________
Title:________________________________
C-2-2
<PAGE>
EXHIBIT D
FORM OF UNAFFILIATED SELLER'S AGREEMENT
Please see Tab 8
D-1
<PAGE>
Exhibit E-1
REQUEST FOR RELEASE
(for Trustee/Custodian)
Loan Information
Name of Mortgagor:
Servicer
Loan No.:
Trustee/Custodian
Name: First Union National Bank
Address: 230 S. Tryon Street, Charlotte, NC 28288
Trustee/Custodian
Mortgage File No.:
Depositor
Name: Prudential Securities Secured
Financing Corporation
Address: One New York Plaza, New York 10292
Certificates: Emergent Home Equity Loan Pass-Through
Certificates, Series 1997-3.
E-1-1
<PAGE>
The undersigned Servicer hereby acknowledges that it has received
from First Union National Bank, as Trustee for the Holders of Emergent Home
Equity Loan Pass-Through Certificates, Series 1997-3, the documents referred to
below (the "Documents"). All capitalized terms not otherwise in this Request for
Release shall have the meanings given them in the Pooling and Servicing
Agreement, dated as of August 10, 1997, among the Trustee, the Depositor and the
Servicer (the "Pooling and Servicing Agreement").
(a) Promissory Note dated __________, 19__, in the original principal sum of
$________, made by ______________, payable to, or endorsed to the order
of, the Trustee.
(b) Mortgage recorded on ____________________ as instrument no. __________ in
the County Recorder's Office of the County of _______________, State of
_______________ in book/reel/docket _________________ of official records
at page/image ______________.
(c) Deed of Trust recorded on _______________ as instrument no. ___________ in
the County Recorder's Office of the County of _______________, State of
________________ in book/reel/docket ________________ of official records
at page/image _____________.
(d) Assignment of Mortgage or Deed of Trust to the Trustee, recorded on ______
as instrument no. _______ in the County Recorder's Office of the County of
______________, State of ______________ in book/reel/docket __________ of
official records at page/image ___________.
(e) Other documents, including any amendments, assignments or other
assumptions of the Mortgage Note or Mortgage.
(f) __________________________________________
(g) __________________________________________
(h) __________________________________________
(i) __________________________________________
The undersigned Servicer hereby acknowledges and agrees as follows:
(1) The Servicer shall hold and retain possession of the Documents
in trust for the benefit of the Trustee, solely for the purposes provided
in the Agreement.
(2) The Servicer shall not cause or permit the Documents to become
subject to, or encumbered by, any claim, liens, security interest,
charges, writs of
E-1-2
<PAGE>
attachment or other impositions nor shall the Servicer assert or seek to
assert any claims or rights of setoff to or against the Documents or any
proceeds thereof.
(3) The Servicer shall return each and every Document previously
requested from the Mortgage File to the Trustee when the need therefor no
longer exists, unless the Mortgage Loan relating to the Documents has been
liquidated and the proceeds thereof have been remitted to the Collection
Account and except as expressly provided in the Agreement.
(4) The Documents and any proceeds thereof, including any proceeds
of proceeds, coming into the possession or control of the Servicer shall
at all times be earmarked for the account of the Trustee, and the Servicer
shall keep the Documents and any proceeds separate and distinct from all
other property in the Servicer's possession, custody or control.
Dated:
EMERGENT MORTGAGE CORP.
By:___________________________________
Name:_________________________________
Title:________________________________
E-1-3
<PAGE>
EXHIBIT E-2
REQUEST FOR RELEASE
[Mortgage Loans Paid in Full]
OFFICERS' CERTIFICATE AND TRUST RECEIPT
EMERGENT HOME EQUITY LOAN PASS-THROUGH CERTIFICATES
SERIES 1997-3
____________________________________________ HEREBY CERTIFIES THAT HE/SHE IS AN
OFFICER OF THE SERVICER, HOLDING THE OFFICE SET FORTH BENEATH HIS/HER SIGNATURE,
AND HEREBY FURTHER CERTIFIES AS FOLLOWS:
WITH RESPECT TO THE MORTGAGE LOANS, AS THE TERM IS DEFINED IN THE POOLING AND
SERVICING AGREEMENT DESCRIBED IN THE ATTACHED SCHEDULE:
ALL PAYMENTS OF PRINCIPAL, PREMIUM (IF ANY), AND INTEREST HAVE BEEN MADE.
LOAN NUMBER:_____________ BORROWER'S NAME:
COUNTY:
WE HEREBY CERTIFY THAT ALL AMOUNTS RECEIVED IN CONNECTION WITH SUCH PAYMENTS,
WHICH ARE REQUIRED TO BE DEPOSITED IN THE COLLECTION ACCOUNT PURSUANT TO SECTION
3.10 OF THE POOLING AND SERVICING AGREEMENT, HAVE BEEN OR WILL BE CREDITED.
DATED:
/ / VICE PRESIDENT
/ / ASSISTANT VICE PRESIDENT
E-2-1
<PAGE>
EXHIBIT F-1
FORM OF RULE 144A CERTIFICATE
FROM OWNER
First Union National Bank, as Trustee
230 South Tryon Street, 9th Floor
Charlotte, North Carolina 28288-1179
Attention: Corporate Trust Department
Re: Emergent Home Equity Loan Pass-Through
Certificates, Series 1997-3, Class R
Reference is hereby made to the Pooling and Servicing Agreement
dated as of August 10, 1997 (the "Pooling and Servicing Agreement") among
Prudential Securities Secured Financing Corporation, as Depositor, Emergent
Mortgage Corp., as Servicer, and First Union National Bank, as Trustee.
Capitalized terms used by not defined herein shall have the meanings given to
them in the Pooling and Servicing Agreement.
___________________, a ___________________ of ___________________
(the "Owner"), proposes to transfer to ___________________ (the "Transferee")
$___________________ principal amount of Class R Certificates (the
"Certificates"). In connection with such transfer, the Owner hereby represents,
warrants and certifies as follows:
1. The Certificates are being transferred by the Owner to the
Transferee in accordance with (i) the provisions of the Pooling and Servicing
Agreement (including Section 5.02 thereof), and (ii) Rule 144A ("Rule 144A")
under the Securities Act of 1933, as amended, and (iii) any other applicable
securities laws of the United States, any State thereof and any other applicable
jurisdiction.
2. Without limitation of the foregoing, the Transferee is a
"qualified institutional buyer" within the meaning of Rule 144A purchasing for
its own account or for the account of a "qualified institutional buyer."
F-1-1
<PAGE>
3. The Transferee is aware that the transfer to it is being made in
reliance upon Rule 144A.
[Insert Name of Owner]
By:__________________________________
Name:
Title:
Date: ___________, ____
F-1-2
<PAGE>
EXHIBIT F-1
FORM OF RULE 144A CERTIFICATE
FROM TRANSFEREE
First Union National Bank, as Trustee
230 South Tryon Street, 9th Floor
Charlotte, North Carolina 28288-1179
Attention: Corporate Trust Department
Re: Emergent Home Equity Loan Pass-Through
Certificates, Series 1997-3, Class R
Reference is hereby made to the Pooling and Servicing Agreement
dated as of August 10, 1997 (the "Pooling and Servicing Agreement") among
Prudential Securities Secured Financing Corporation, as Depositor, Emergent
Mortgage Corp., as Servicer, and First Union National Bank, as Trustee.
Capitalized terms used but not defined herein shall have the meanings given to
them in the Pooling and Servicing Agreement.
___________________, a ___________________ of ___________________
(the "Transferee"), proposes to acquire from ___________________ (the "Owner")
$___________________ principal amount of Class R Certificates (the
"Certificates"). In connection with such acquisition, the Transferee hereby
represents, warrants and certifies as follows:
The Transferee's intention is to acquire the Certificates (a) for
investment for the Transferee's own account (or for the account of one or more
other institutional investors for which it is acting as duly authorized
fiduciary or agent, including, without limitation, an insurance company separate
account), or (b) for resale to "qualified institutional buyers" in transactions
under Rule 144A ("Rule 144A") promulgated under the Securities Act of 1933, as
amended (the "1933 Act") and not in any event with the view to, or for resale in
connection with, any distribution thereof. It understands that the Certificates
have not been registered under the 1933 Act, by reason of a specified exemption
from the registration provisions of the 1933 Act which depends upon, among other
things, the bona fide nature of the Transferee's investment intent (or intent to
resell only in Rule 144A transactions) as expressed herein.
The Transferee (i) understands that the Owner is relying upon the
exemption from the provisions of Section 5 of the 1933 Act provided by Rule 144A
in connection with the transfer of the Certificates to the Transferee and (ii)
will take reasonable steps to ensure that any purchaser of the Certificates from
the Transferee is aware that the Transferee is relying on such exemption in
connection with any such resale.
F-1-3
<PAGE>
The Transferee is a "qualified institutional buyer" within the
meaning of Rule 144A.
The Transferee acknowledges either (a) that it has not requested
from any person the information required to be received by the Transferee, upon
request, pursuant to Rule 144A(d)(4)(i) (the "Required Information"), or (b)
that it has requested and received the Required Information from the Owner or
the Trustee.
The Transferee will not sell or otherwise transfer any of the
Certificates, except in compliance with the provisions of the Pooling and
Servicing Agreement (including Section 5.02 thereof) and unless either such
Certificates are registered or qualified under the 1933 Act and the applicable
law any state or other applicable jurisdiction or an exemption from such
registration or qualification is available. The Purchaser understands and
acknowledges that the Certificates bear a legend to such effect.
Very truly yours,
[TRANSFEREE]
By:___________________________________
Name:_________________________________
Title:________________________________
F-1-4
<PAGE>
EXHIBIT F-2
FORM OF TRANSFER AFFIDAVIT AND AGREEMENT
STATE OF NEW YORK )
:ss.:
COUNTY OF NEW YORK )
, being duly sworn, deposes, represents and warrants as
follows:
I am a ________________ of ___________________________ (the "Owner")
a corporation duly organized and existing under the laws of ________, the record
owner of Emergent Home Equity Loan Pass-Through Certificates, Series 1997-3,
Class R (the "Class R Certificates"), on behalf of whom I have the authority to
make this affidavit and agreement. Capitalized terms used but not defined herein
have the respective meanings assigned thereto in the Pooling and Servicing
Agreement, dated as of August 10, 1997, among Prudential Securities Secured
Financing Corporation, Depositor, Emergent Mortgage Corp., Servicer, and First
Union National Bank, Trustee (the "Pooling and Servicing Agreement") pursuant to
which the Class R Certificates were issued.
The Owner (i) is and will be a "Permitted Transferee" as of
____________, 199_ and (ii) is acquiring the Class R Certificates, in the
initial principal amount of $0.00 for its own account or for the account of
another Owner from which it has received an affidavit in substantially the same
form as this affidavit. A "Permitted Transferee" is any person other than a
"disqualified organization" or a possession of the United States. For this
purpose, a "disqualified organization" means the United States, any state or
political subdivision thereof, any agency or instrumentality of any of the
foregoing (other than an instrumentality all of the activities of which are
subject to tax and, except for the Federal Home Loan Mortgage Corporation, a
majority of whose board of directors is not selected by any such governmental
entity) or any foreign government, international organization or any agency or
instrumentality of such foreign government or organization, any rural electric
or telephone cooperative, or any organization (other than certain farmers'
cooperatives) that is generally exempt from federal income tax unless such
organization is subject to the tax on unrelated business taxable income.
The Owner is aware (i) of the tax that would be imposed on transfers
of the Class R Certificates to disqualified organizations under the Internal
Revenue Code of 1986 that applies to all transfers of the Class R Certificates
after March 31, 1988; (ii) that such tax would be on the transferor or, if such
transfer is through an agent (which person includes a broker, nominee or
middleman) for a non-Permitted Transferee, on the agent; (iii) that the person
otherwise liable for the tax shall be relieved of liability for the tax if the
transferee furnishes to such person an affidavit that the transferee is a
Permitted Transferee and, at the time of transfer, such person does not have
actual knowledge that the affidavit is false; and (iv) that each of the Class R
Certificates may be a "noneconomic residual interest" within the meaning of
proposed Treasury regulations promulgated under the Code and that the transferor
of a "noneconomic residual interest"
F-2-1
<PAGE>
will remain liable for any taxes due with respect to the income on such residual
interest, unless no significant purpose of the transfer is to impede the
assessment or collection of tax.
The Owner is aware of the tax imposed on a "pass-through entity"
holding the Class R Certificates if, at any time during the taxable year of the
pass-through entity, a non-Permitted Transferee is the record holder of an
interest in such entity. (For this purpose, a "pass-through entity" includes a
regulated investment company, a real estate investment trust or common trust
fund, a partnership, trust or estate, and certain cooperatives.)
The Owner is aware that the Trustee will not register the transfer
of any Class R Certificate unless the transferee, or the transferee's agent,
delivers to the Trustee, among other things, an affidavit substantially in the
same form as this affidavit. The Owner expressly agrees that it will not
consummate any such transfer if it knows or believes that any of the
representations contained in such affidavit and agreement are false.
The Owner consents to any additional restrictions or arrangements
that shall be deemed necessary upon advice of counsel to constitute a reasonable
arrangement to ensure that the Class R Certificates will only be owned, directly
or indirectly, by an Owner that is a Permitted Transferee.
The Owner's Taxpayer Identification number is _____________.
The Owner has reviewed the restrictions set forth on the face of the
Class R Certificates and the provisions of Section 5.02(d) of the Pooling and
Servicing Agreement under which the Class R Certificates were issued (in
particular, clauses (iii)(A) and (iii)(B) of Section 5.02(d) which authorize the
Trustee to deliver payments to a person other than the Owner and negotiate a
mandatory sale by the Trustee in the event that the Owner holds such Certificate
in violation of Section 5.02(d)), and that the Owner expressly agrees to be
bound by and to comply with such restrictions and provisions.
The Owner is not acquiring and will not transfer the Class R
Certificates in order to impede the assessment or collection of any tax.
The Owner anticipates that it will, so long as it holds the Class R
Certificates, have sufficient assets to pay any taxes owed by the holder of such
Class R Certificates, and hereby represents to and for the benefit of the person
from whom it acquired the Class R Certificates that the Owner intends to pay
taxes associated with holding such Class R Certificates as they become due,
fully understanding that it may incur tax liabilities in excess of any cash
flows generated by the Class R Certificates.
The Owner has no present knowledge that it may become insolvent or
subject to a bankruptcy proceeding for so long as it holds the Class R
Certificates.
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.
F-2-2
<PAGE>
The Owner is not acquiring the Class R Certificates with the intent
to transfer the Class R Certificates to any person or entity that will not have
sufficient funds to pay any taxes owed by the holder of such Class R
Certificates, or that may become insolvent or subject to a bankruptcy
proceeding, for so long as the Class R Certificates remain outstanding.
The Owner will, in connection with any transfer that it makes of the
Class R Certificates, obtain from its transferee the representations required by
Section 5.02(d) of the Pooling and Servicing Agreement under which the Class R
Certificate were issued and will not consummate any such transfer if it knows,
or knows facts that should lead it to believe, that any such representations are
false.
The Owner will, in connection with any transfer that it makes of the
Class R Certificates, deliver to the Trustee an affidavit, which represents and
warrants that it is not transferring the Class R Certificates to impede the
assessment or collection of any tax and that it has no actual knowledge that the
proposed transferee: (i) has insufficient assets to pay any taxes owed by such
transferee as holder of the Class R Certificates; (ii) may become insolvent or
subject to a bankruptcy proceeding for so long as the Class R Certificates
remains outstanding; and (iii) is not a "Permitted Transferee".
The Owner is a citizen or resident of the United States, a
corporation, partnership or other entity created or organized in, or under the
laws of, the United States or any political subdivision thereof, or an estate or
trust whose income from sources without the United States may be included in
gross income for United States federal income tax purposes regardless of its
connection with the conduct of a trade or business within the United States.
F-2-3
<PAGE>
IN WITNESS WHEREOF, the Owner has caused this instrument to be
executed on its behalf, pursuant to the authority of its Board of Directors, by
its [Vice] President, attested by its [Assistant] Secretary, this ____ day of
________, 199_.
[OWNER]
By:__________________________________
Name:________________________________
Title: [Vice] President
Personally appeared before me the above-named __________, known or
proved to me to be the same person who executed the foregoing instrument and to
be a [Vice] President of the Owner, and acknowledged to me that [he/she]
executed the same as [his/her] free act and deed and the free act and deed of
the Owner.
Subscribed and sworn before me this ____ day of ____________, 199_.
Notary Public
County of ___________
State of ____________
My Commission expires:
F-2-4
<PAGE>
FORM OF TRANSFEROR AFFIDAVIT
STATE OF NEW YORK )
:ss.:
COUNTY OF NEW YORK )
___________________________________, being duly sworn, deposes, represents and
warrants as follows:
I am a ___________________ of _________________________ (the
"Owner"), a corporation duly organized and existing under the laws of
_____________, on behalf of whom I make this affidavit.
The Owner is not transferring the Residual Certificates to impede
the assessment or collection of any tax.
The Owner has no actual knowledge that the Person that is the
proposed transferee (the "Purchaser") of the Class R Certificates: (i) has
insufficient assets to pay any taxes owed by such proposed transferee as holder
of the Class R Certificates; (ii) may become insolvent or subject to a
bankruptcy proceeding for so long as the Class R Certificates remain outstanding
and (iii) is not a Permitted Transferee.
The Owner understands that the Purchaser has delivered to the
Trustee a transfer affidavit and agreement in the form attached to the Pooling
and Servicing Agreement as Exhibit F. The Owner does not know or believe that
any representation contained therein is false.
The Owner has no knowledge that the Purchaser is not both a United
States Person and a Permitted Transferee.
At the time of transfer, the Owner has conducted a reasonable
investigation of the financial condition of the Purchaser as contemplated by
Treasury Regulations Section 1.860E-1(c)(4)(i) and, as a result of that
investigation, the Owner has determined that the Purchaser has historically paid
its debts as they became due and has found no significant evidence to indicate
that the Purchaser will not continue to pay its debts as they become due in the
future. The Owner understands that the transfer of a Residual Certificate may
not be respected for United States income tax purposes (and the Owner may
continue to be liable for United States income taxes associated therewith)
unless the Owner has conducted such an investigation.
Capitalized terms not otherwise defined herein shall have the
meanings ascribed to them in the Pooling and Servicing Agreement.
F-2-5
<PAGE>
IN WITNESS WHEREOF, the Owner has caused this instrument to be
executed on its behalf, pursuant to the authority of its Board of Directors, by
its [Vice] President, attested by its [Assistant] Secretary, this ____ day of
________, 199_.
[OWNER]
By:__________________________________
Name:________________________________
Title: [Vice] President
Personally appeared before me the above-named __________, known or
proved to me to be the same person who executed the foregoing instrument and to
be a [Vice] President of the Owner, and acknowledged to me that [he/she]
executed the same as [his/her] free act and deed and the free act and deed of
the Owner.
Subscribed and sworn before me this ____ day of ____________, 199_.
Notary Public
County of ___________
State of ____________
My Commission expires:
F-2-6
<PAGE>
Schedule 1
MORTGAGE LOAN SCHEDULE
Please see Tab 7
<PAGE>
EXHIBIT G
PRE-FUNDED MORTGAGE LOAN TRANSFER AGREEMENT
EMERGENT HOME EQUITY LOAN TRUST 1997-3
Emergent Mortgage Corp. ("Originator"), Emergent Mortgage Holdings
Corporation ("Seller"), Prudential Securities Secured Financing Corporation
("Depositor"), and First Union National Bank, as Trustee (the "Trustee"),
pursuant to (i) the Purchase Agreement and Assignment dated as of August 10,
1997 among Originator, Seller and Emergent Group, Inc. ("Emergent Group"), (ii)
the Unaffiliated Seller's Agreement dated as of August 10, 1997 (the
"Unaffiliated Seller's Agreement") among Seller, Depositor and Emergent Group,
and (iii) the Pooling and Servicing Agreement dated as of August 10, 1997 (the
"Pooling and Servicing Agreement") among the Depositor, the Originator and the
Trustee, hereby confirm, as of this day of , 1997, their understanding and
agreement as follows with respect to the sale by the Originator to the Seller,
the sale by the Seller to the Depositor, and the sale by the Depositor to the
Purchaser of the Mortgage Loans listed on the attached Mortgage Loan Schedule
(the "Pre-Funded Mortgage Loans").
The Originator hereby irrevocably sells to the Seller without
recourse (except as otherwise explicitly provided for in the Purchase Agreement,
the Unaffiliated Seller's Agreement and/or the Pooling and Servicing Agreement)
all of its right, title and interest in and to the Pre-Funded Mortgage Loans,
including, without limitation, the Mortgages, the Mortgage Files, the Mortgage
Notes, all other documents, materials and properties appurtenant thereto, all
interest and principal collected by the Originator on or with respect to the
Pre-Funded Mortgage Loans on or after the related Cut-off Dates, and all
proceeds received on or after such Cut-off Dates of any related insurance
policies. The Originator shall deliver the original Mortgage Note, Mortgage or
mortgage assignment with evidence of recording thereon and other required
documentation in accordance with the delivery requirements of the Seller set
forth in Section 2.04 of the Unaffiliated Seller's Agreement..
The Seller does hereby irrevocably sell to the Depositor without
recourse (except as otherwise explicitly provided for in the Purchase Agreement,
the Purchase Agreement, the Unaffiliated Seller's Agreement and/or the Pooling
and Servicing Agreement) all of its right, title and interest in and to the
Pre-Funded Mortgage Loans, including, without limitation, the Mortgages, the
Mortgage Files, the Mortgage Notes, all other documents, materials and
properties appurtenant thereto, all interest and principal collected by the
Seller on or with respect to the Pre-Funded Mortgage Loans on or after the
related Cut-off Dates and all proceeds received on or after such Cut-off Dates
of any related insurance policies. The Seller shall deliver the original
Mortgage Note, Mortgage or mortgage assignment with evidence of recording
thereon and other required documentation in accordance Section 2.04 of the
Unaffiliated Seller's Agreement.
The Depositor does hereby irrevocably sell to the Purchaser without
recourse (except as otherwise explicitly provided for in the Purchase Agreement,
the Unaffiliated Seller's Agreement and/or the Pooling and Servicing Agreement)
all of its
G-1
<PAGE>
right, title and interest in and to the Pre-Funded Mortgage Loans, including,
without limitation, the Mortgages, the Mortgage Files, Mortgages Notes, all
other documents, materials and properties appurtenant thereto, all interest and
principal collected by the Depositor on or with respect to the Pre-Funded
Mortgage Loans on or after the related Cut-off Dates and all proceeds received
on or after such Cut-off Dates of any related insurance policies. The Depositor
shall deliver the original Mortgage or mortgage assignment with evidence of
recording thereon and other required documentation in accordance with the terms
set forth in Section 2.03 of the Pooling and Servicing Agreement.
The expenses and costs relating to the transfers of the Pre-Funded
Mortgage Loans contemplated hereby shall be borne by the Seller.
The Originator and the Seller hereby affirm the representations and
warranties made by each of them set forth in the Purchase Agreement and the
Unaffiliated Seller's Agreement, respectively, that relate to the Pre-Funded
Mortgage Loans on and as of the date hereof. The Originator and the Seller each
hereby deliver notice and confirm that each of the conditions set forth in
Section 2.02(c) of the Pooling and Servicing Agreement are satisfied on and as
of the date hereof in respect of the Pre-Funded Mortgage Loans.
The Depositor hereby affirms each of its representations and
warranties set forth in the Unaffiliated Seller's Agreement that relate to the
Pre-Funded Mortgage Loans on and as of the date hereof. The Depositor hereby
delivers notice and confirms that each of the conditions set forth in Section
2.02(c) of the Pooling and Servicing Agreement are satisfied as of the date
hereof in respect of the Pre-Funded Mortgage Loans.
Additional terms of sale are attached hereto as Attachment A.
To the extent permitted by applicable law, this Pre-Funded Mortgage
Loan Transfer 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 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, but only upon the
direction of the Trustee accompanied by an opinion of counsel to the effect that
such recordation materially and beneficially affects the interests of the
Certificateholders.
Capitalized terms used herein but not defined herein shall have the
meanings ascribed thereto in the Pooling and Servicing Agreement.
This Pre-Funded Mortgage Loan Transfer Agreement shall be construed
in accordance with the laws of the State of New York and the obligations, rights
and remedies of the parties hereunder shall be determined in accordance with
such laws, without giving effect to the principles of conflicts of laws.
This Pre-Funded Mortgage Loan Transfer Agreement may be executed in
one or more counterparts and by the different parties hereto on separate
counterparts, each of
G-2
<PAGE>
which, when so executed, shall be deemed to be an original; such counterparts,
together, shall constitute one and the same agreement.
Terms capitalized herein and not otherwise defined herein shall have
the respective meanings ascribed thereto in the Pooling and Servicing Agreement.
EMERGENT MORTGAGE CORP.
By:
--------------------------------
Name:
Title:
EMERGENT MORTGAGE
HOLDINGS CORPORATION
By:
--------------------------------
Name:
Title:
PRUDENTIAL SECURITIES SECURED
FINANCING CORPORATION
By:
--------------------------------
Name:
Title:
FIRST UNION NATIONAL BANK,
as Trustee
By:
--------------------------------
Name:
Title:
G-3
<PAGE>
ATTACHMENTS
A. Additional Terms of Sale
B. Mortgage Loan Schedule
G-4
ENDORSEMENT NO. 1 TO
FINANCIAL GUARANTY INSURANCE POLICY
FINANCIAL SECURITY ASSURANCE INC.
TRUST: Established pursuant to the Pooling and Servicing Agreement,
dated as of August 10, 1997, among Emergent Mortgage Corp. as
servicer, Prudential Securities Secured Financing Corporation
as depositor and First Union National Bank as trustee.
POLICY NO.: 50624-N
SECURITIES: Emergent Home Equity Loan Pass-Through Certificates, Series
1997-3, Class A-1, Class A-2, Class A-3, Class A-4, Class A-5
and Class A-6 Certificates (collectively, the "Class A
Certificates") having an aggregate original Certificate
Principal Balance of $170,000,000.
DATE OF ISSUANCE: September 24, 1997
1. Definitions. For all purposes of this Policy, the terms specified below
shall have the meanings or constructions provided below. Capitalized terms used
herein and not otherwise defined herein shall have the meanings provided in the
Pooling and Servicing Agreement unless the context shall otherwise require.
"Business Day" means any day other than (i) a Saturday or Sunday, or (ii)
a day on which banking institutions in New York are authorized or obligated by
law or executive order to be closed.
"Guaranteed Distributions" means, with respect to the Class A Certificates
and any Distribution Date, the sum of (i) the Interest Distribution Amount for
the Class A Certificates on such Distribution Date, (ii) any Remaining
Overcollateralization Deficit and (iii) without duplication of the amount
specified in clause (ii), on the final Distribution Date for any Class of Class
A Certificates, the outstanding Certificate Principal Balance of such Class A
Certificates, if any, in each case in accordance with the original terms of the
Securities without regard to any amendment or modification of the Securities or
the Pooling and Servicing Agreement except amendments or modifications to which
Financial Security has given its prior written consent. Guaranteed Distributions
shall not include, nor shall coverage be provided under this Policy in respect
of shortfalls, if any, attributable to the application of the Relief Act,
Prepayment Interest Shortfalls or any taxes, withholding or other charge imposed
by any governmental authority due in connection with the payment of any
Guaranteed Distribution to a Holder.
"Policy" means this Financial Guaranty Insurance Policy and includes each
endorsement thereto.
<PAGE>
"Pooling and Servicing Agreement" means the Pooling and Servicing
Agreement, dated as of August 10, 1997, among Emergent Mortgage Corp. as
servicer, Prudential Securities Secured Financing Corporation as depositor and
First Union National Bank as trustee, as amended from time to time as required
by the Pooling and Servicing Agreement in accordance with the terms of the
Pooling and Servicing Agreement and with the consent of Financial Security.
"Receipt" and "Received" mean actual delivery to Financial Security and to
the Fiscal Agent (as defined below), if any, at or prior to 12:00 noon, New York
City time, on a Business Day; delivery either on a day that is not a Business
Day, or after 12:00 noon, New York City time, shall be deemed to be Received on
the next succeeding Business Day. If any notice or certificate given hereunder
by the Trustee is not in proper form or is not properly completed, executed or
delivered, it shall be deemed not to have been Received, and Financial Security
or its Fiscal Agent shall promptly so advise the Trustee and the Trustee may
submit an amended notice.
"Term of This Policy" means the period from and including the Date of
Issuance to and including the date on which (i) the aggregate Certificate
Principal Balance of the Securities is zero, (ii) any period during which any
payment on the Securities could have been avoided in whole or in part as a
preference payment under applicable bankruptcy, insolvency, receivership or
similar law has expired, and (iii) if any proceedings requisite to avoidance as
a preference payment have been commenced prior to the occurrence of (i) and
(ii), a final and non-appealable order in resolution of each such proceeding has
been entered.
"Trustee" means First Union National Bank, in its capacity as Trustee
under the Pooling and Servicing Agreement and any successor in such capacity.
2. Notices and Conditions to Payment in Respect of Guaranteed
Distributions. Following Receipt by Financial Security of a notice and
certificate from the Trustee in the form attached as Exhibit A to this
Endorsement, Financial Security will pay any amount payable hereunder in respect
of Guaranteed Distributions out of the funds of Financial Security on the later
to occur of (a) 12:00 noon, New York City time, on the second Business Day
following such Receipt; and (b) 12:00 noon, New York City time, on the
Distribution Date to which such claim relates. Payments due hereunder in respect
of Guaranteed Distributions will be disbursed by wire transfer of immediately
available funds to the Policy Payments Account established pursuant to the
Pooling and Servicing Agreement or, if no such Policy Payments Account has been
established, to the Trustee.
Financial Security shall be entitled to pay any amount hereunder in
respect of Guaranteed Distributions, including any acceleration payment, whether
or not any notice and certificate shall have been Received by Financial Security
as provided above. Guaranteed Distributions insured hereunder shall not include
interest in respect of principal paid hereunder on an accelerated basis
accruing from after the date of such payment of principal. Financial Security's
obligations hereunder in respect of Guaranteed Distributions shall be discharged
to the extent funds are disbursed by Financial Security as provided herein
whether or not such funds are properly applied by the Trustee.
-2-
<PAGE>
3. Notices and Conditions to Payment in Respect of Guaranteed
Distributions Avoided as Preference Payments. If any amount previously
distributed on the Class A Certificates is avoided as a preference payment under
applicable bankruptcy, insolvency, receivership or similar law, Financial
Security will pay such amount out of the funds of Financial Security on the
later of (a) the date when due to be paid pursuant to the Order referred to
below or (b) the first to occur of (i) the fourth Business Day following Receipt
by Financial Security from the Trustee of (A) a certified copy of the order of
the court or other governmental body which exercised jurisdiction to the effect
that the relevant Holder is required to return principal or interest distributed
with respect to the Class A Certificate during the Term of this Policy because
such distributions were avoidable as preference payments under applicable
bankruptcy law (the "Order"), (B) a certificate of the relevant Holder that the
Order has been entered and is not subject to any stay and (C) an assignment duly
executed and delivered by the relevant Holder, in such form as is reasonably
required by Financial Security and provided to the relevant Holder by Financial
Security, irrevocably assigning to Financial Security all rights and claims of
the relevant Holder relating to or arising under the Class A Certificate against
the debtor which made such preference payment or otherwise with respect to such
preference payment or (ii) the date of Receipt by Financial Security from the
Trustee of the items referred to in clauses (A), (B) and (C) above if, at least
four Business Days prior to such date of Receipt, Financial Security shall have
Received written notice from the Trustee that such items were to be delivered on
such date and such date was specified in such notice. Such payment shall be
disbursed to the receiver, conservator, debtor-in-possession or trustee in
bankruptcy named in the Order and not to the Trustee or any Holder directly
(unless a Holder has previously paid such amount to the receiver, conservator,
debtor-in-possession or trustee in bankruptcy named in the Order, in which case
such payment shall be disbursed to the Trustee for distribution to such Holder
upon proof of such payment reasonably satisfactory to Financial Security). In
connection with the foregoing, Financial Security shall have the rights provided
pursuant to Section 9.04(d) of the Pooling and Servicing Agreement.
4. Governing Law. This Policy shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to the
conflict of laws principles thereof.
5. Fiscal Agent. At any time during the Term of This Policy, Financial
Security may appoint a fiscal agent (the "Fiscal Agent") for purposes of this
Policy by written notice to the Trustee at the notice address specified in the
Pooling and Servicing Agreement specifying the name and notice address of the
Fiscal Agent. From and after the date of receipt of such notice by the Trustee,
(i) copies of all notices and documents required to be delivered to Financial
Security pursuant to this Policy shall be simultaneously delivered to the Fiscal
Agent and to Financial Security and shall not be deemed Received until Received
by both and (ii) all payments required to be made by Financial Security under
this Policy may be made directly by Financial Security or by the Fiscal Agent on
behalf of Financial Security. The Fiscal Agent is the agent of Financial
Security only and the Fiscal Agent shall in no event be liable to any Holder for
any acts of the Fiscal Agent or any failure of Financial Security to deposit, or
cause to be deposited, sufficient funds to make payments due under this Policy.
-3-
<PAGE>
6. Waiver of Defenses. To the fullest extent permitted by applicable
law, Financial Security agrees not to assert, and hereby waives, for the benefit
of each Holder, all rights (whether by counterclaim, setoff or otherwise) and
defenses (including, without limitation, the defense of fraud), whether acquired
by subrogation, assignment or otherwise, to the extent that such rights and
defenses may be available to Financial Security to avoid payment of its
obligations under this Policy in accordance with the express provisions of this
Policy.
7. Notices. All notices to be given hereunder shall be in writing (except
as otherwise specifically provided herein) and shall be mailed by registered
mail or personally delivered or telecopied to Financial Security as follows:
Financial Security Assurance Inc.
350 Park Avenue
New York, NY 10022
Attention: Senior Vice President
- Surveillance Department
Telecopy No.: (212) 339-3518
Confirmation: (212) 826-0100
Financial Security may specify a different address or addresses by writing
mailed or delivered to the Trustee.
8. Priorities. In the event any term or provision of the face of this
Policy is inconsistent with the provisions of this Endorsement, the provisions
of this Endorsement shall take precedence and shall be binding.
9. Exclusions From Insurance Guaranty Funds. This Policy is not covered by
the Property/Casualty Insurance Security Fund specified in Article 76 of the New
York Insurance Law. This Policy is not covered by the Florida Insurance Guaranty
Association created under Part II of Chapter 631 of the Florida Insurance Code.
In the event Financial Security were to become insolvent, any claims arising
under this Policy are excluded from coverage by the California Insurance
Guaranty Association, established pursuant to Article 14.2 of Chapter 1 of Part
2 of Division 1 of the California Insurance Code.
10. Surrender of Policy. The Trustee shall surrender this Policy to
Financial Security for cancellation upon expiration of the Term of this Policy.
-4-
<PAGE>
IN WITNESS WHEREOF, FINANCIAL SECURITY ASSURANCE INC. has caused this
Endorsement No. 1 to be executed by its Authorized Officer.
FINANCIAL SECURITY ASSURANCE INC.
By: ________________________________________
Authorized Officer
-5-
<PAGE>
Exhibit A
To Endorsement 1
NOTICE OF CLAIM AND CERTIFICATE
Financial Security Assurance Inc.
350 Park Avenue
New York, NY 10022
The undersigned, a duly authorized officer of First Union National Bank
(the "Trustee"), hereby certifies to Financial Security Assurance Inc. ("FSA"),
with reference to Financial Guaranty Insurance Policy No.50624-N, dated
September 24, 1997 (the "Policy") issued by FSA in respect of Emergent Home
Equity Loan Pass-Through Certificates, Series 1997-3, Class A-1, Class A-2,
Class A-3, Class A-4, Class A-5 Certificates and Class A-6 Certificates
(collectively, the "Class A Certificates") that:
(i) The Trustee is the Trustee under the Pooling and Servicing
Agreement for the Holders.
(ii) the sum of all amounts on deposit (or scheduled to be on
deposit) in the Distribution Account and available for distribution to the
Holders of the Class A Certificates (the "Securities") pursuant to the
Pooling and Servicing Agreement will be $______________ (the "Shortfall")
less than the Guaranteed Distributions with respect to the Distribution
Date.
(iii) The Trustee is making a claim under the Policy for the
Shortfall to be applied to distributions of principal or interest or both
with respect to the Securities.
(iv) The Trustee agrees that, following receipt of funds from FSA,
it shall (a) hold such amounts in trust and apply the same directly to the
payment of Guaranteed Distributions on the Securities when due; (b) not
apply such funds for any other purpose; (c) not commingle such funds with
other funds held by the Trustee and (d) maintain an accurate record of
such payments with respect to each Security and the corresponding claim on
the Policy and proceeds thereof and, if the Security is required to be
surrendered for such payment, shall stamp on each such Security the legend
"$[insert applicable amount] paid by FSA and the balance hereof has been
cancelled and reissued" and then shall deliver such Security to FSA.
(v) The Trustee, on behalf of the Holders, hereby assigns to FSA the
rights of the Holders with respect to the Trust Fund to the extent of any
payments under the Policy, including, without limitation, any amounts due
to the Holders in respect of securities law violations arising from the
offer and sale of the Trust Fund. The foregoing assignment is in addition
to, and not in limitation of, rights of subrogation otherwise available to
FSA
A-1
<PAGE>
in respect of such payments. The Trustee shall take such action and
deliver such instruments as may be reasonably requested or required by FSA
to effectuate the purpose or provisions of this clause (v).
(vi) The Trustee, on its behalf and on behalf of the Holders, hereby
appoints FSA as agent and attorney-in-fact for the Trustee and each such
Holder in any legal proceeding with respect to the Trust Fund. The Trustee
hereby agrees that FSA may at any time during the continuation of any
proceeding by or against any debtor under the United States Bankruptcy
Code or any other applicable bankruptcy, insolvency, receivership,
rehabilitation or similar law (an "Insolvency Proceeding") direct all
matters relating to such Insolvency Proceeding, including without
limitation, (A) all matters relating to any claim in connection with an
Insolvency Proceeding seeking the avoidance as a preferential transfer of
any payment with respect to the Trust Fund (a "Preference Claim"), (B) the
direction of any appeal of any order relating to any Preference Claim at
the expense of FSA but subject to reimbursement as provided in the
Insurance Agreement and (C) the posting of any surety, supersedeas or
performance bond pending any such appeal. In addition, the Trustee hereby
agrees that FSA shall be subrogated to, and the Trustee on its behalf and
on behalf of each Holder, hereby delegates and assigns, to the fullest
extent permitted by law, the rights of the Trustee and each Holder in the
conduct of any Insolvency Proceeding, including, without limitation, all
rights of any party to an adversary proceeding or action with respect to
any court order issued in connection with any such Insolvency Proceeding.
(vii) Payment should be made by wire transfer directed to the
[SPECIFY POLICY PAYMENTS ACCOUNT].
Unless the context otherwise requires, capitalized terms used in this
Notice of Claim and Certificate and not defined herein shall have the meanings
provided in the Policy.
A-2
<PAGE>
IN WITNESS WHEREOF, the Trustee has executed and delivered this Notice of
Claim and Certificate as of the _______ day of _____________________, _____.
FIRST UNION NATIONAL BANK,
as Trustee
By: ______________________________________
Title:______________________________________
- --------------------------------------------------------------------------------
For FSA or Fiscal Agent Use Only
Wire transfer sent _____________ by _____________________________________
Confirmation Number ___________________________________________
A-3
EXECUTION COPY
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION
Depositor
EMERGENT MORTGAGE HOLDINGS CORPORATION
Unaffiliated Seller
and
EMERGENT GROUP, INC.
---------------------------
UNAFFILIATED SELLER'S AGREEMENT
Dated as of August 10, 1997
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE ONE DEFINITIONS ................................................... 1
Section 1.01. Definitions ........................................... 1
ARTICLE TWO PURCHASE, SALE AND CONVEYANCE OF THE MORTGAGE LOANS ........... 4
Section 2.01. Agreement to Purchase Initial and Additional
Mortgage Loans ...................................... 4
Section 2.02. Agreement to Purchase Pre-Funded Mortgage Loans ....... 5
Section 2.03. Purchase Price ........................................ 7
Section 2.04. Delivery of Mortgage Loan Files ....................... 7
Section 2.05. Transfer of Mortgage Loans; Assignment of Agreement ... 7
Section 2.06. Examination of Mortgage Loan File ..................... 7
Section 2.07. Books and Records ..................................... 8
ARTICLE THREE REPRESENTATIONS AND WARRANTIES .............................. 8
Section 3.01. Representations and Warranties as
to the Unaffiliated Seller .......................... 8
Section 3.02. Representations and Warranties Relating
to the Mortgage Loans ............................... 10
Section 3.03. Covenants of the Unaffiliated Seller .................. 17
Section 3.04. Representations and Warranties of the Depositor ....... 18
Section 3.05. Repurchase Obligation for Breach of a
Representation or Warranty .......................... 19
Section 3.06. Reassignment of Purchased Mortgage Loans .............. 20
Section 3.07. Waivers ............................................... 20
Section 3.08. Representations and Warranties of Emergent Group ...... 20
ARTICLE FOUR THE UNAFFILIATED SELLER ...................................... 21
Section 4.01. Liability of the Unaffiliated Seller .................. 21
Section 4.02. Merger or Consolidation ............................... 21
Section 4.03. Costs ................................................. 22
Section 4.04. Servicing ............................................. 23
Section 4.05. Mandatory Delivery .................................... 23
Section 4.06. Indemnification ....................................... 23
ARTICLE FIVE CONDITIONS OF CLOSING ........................................ 26
Section 5.01. Conditions of Depositor's Obligations ................. 26
Section 5.02. Conditions of Unaffiliated Seller's Obligations ....... 28
Section 5.03. Termination of Depositor's Obligations ................ 29
ARTICLE SIX MISCELLANEOUS ................................................. 29
Section 6.01. Notices ............................................... 29
Section 6.02. Severability of Provisions ............................ 30
Section 6.03. Agreement of Unaffiliated Seller ...................... 30
Section 6.04. Survival .............................................. 30
Section 6.05. Effect of Headings and Table of Contents .............. 30
Section 6.06. Successors and Assigns ................................ 30
Section 6.07. Governing Law ......................................... 30
Section 6.08. Confirmation of Intent ................................ 31
Section 6.09. Execution in Counterparts ............................. 31
i
<PAGE>
Section 6.10. Amendments ............................................ 31
Section 6.11. Miscellaneous ......................................... 32
EXHIBITS
Exhibit A - Schedule of Mortgage Loans
Exhibit B - Officer's Certificate
ii
<PAGE>
This Unaffiliated Seller's Agreement, dated as of August 10, 1997, among
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION, a Delaware corporation (the
"Depositor"), EMERGENT MORTGAGE HOLDINGS CORPORATION, a Delaware corporation
(the "Unaffiliated Seller"), and EMERGENT GROUP, INC., a South Carolina
corporation ("Emergent Group").
W I T N E S S E T H:
WHEREAS, the Depositor has agreed to purchase from the Unaffiliated Seller
and the Unaffiliated Seller, pursuant to this Agreement, is selling to the
Depositor the Mortgage Loans and Other Conveyed Property;
WHEREAS, it is the intention of the Unaffiliated Seller and the Depositor
that simultaneously with the Unaffiliated Seller's conveyance of the Mortgage
Loans and Other Conveyed Property to the Depositor (a) the Depositor shall
deposit the Mortgage Loans and Other Conveyed Property in a trust pursuant to a
Pooling and Servicing Agreement to be dated as of August 10, 1997 (the "Pooling
and Servicing Agreement"), to be entered into by and among the Depositor, as
depositor, Emergent Mortgage Corp., as servicer, and First Union National Bank,
as trustee (the "Trustee") and (b) the Trustee shall issue certificates (the
"Certificates") evidencing beneficial ownership interests in the property of the
trust fund formed by the Pooling and Servicing Agreement (the "Trust Fund") to
the Depositor;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
hereinafter set forth, the parties hereto agree as follows:
ARTICLE ONE
DEFINITIONS
Section 1.01. Definitions. Whenever used herein, the following words and
phrases, unless the context otherwise requires, shall have the meanings
specified in this Article:
"Additional Mortgage Loans" means the mortgage loans listed on the
Schedule of Mortgage Loans which were identified subsequent to August 10, 1997
but prior to the Closing Date.
"Agreement" means this Unaffiliated Seller's Agreement, as amended or
supplemented in accordance with the provisions hereof.
"Certificate Insurer" means Financial Security Assurance Inc., a stock
insurance company organized and created under the laws of the State of New York,
and any successors thereto.
<PAGE>
"Commission" means the Securities and Exchange Commission and its
successors.
"Cut-off Date" means the close of business on August 10, 1997 for any
Initial Mortgage Loans and the respective origination dates thereof for any
Additional Mortgage Loans or any Pre-Funded Mortgage Loans.
"Cut-off Date Principal Balance" means as to each Mortgage Loan, its
unpaid principal balance as of the Cut-off Date.
"Depositor Information" shall have the meaning given to such term in
Section 4.06(b).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"FSA Information" means any information furnished by the Certificate
Insurer in writing expressly for the use in the Offering Document, it being
understood that in respect of the initial Offering Document, the FSA Information
is limited to the information included under the caption "The Insurer" and the
financial statements of the Certificate Insurer incorporated by reference
therein.
"Initial Mortgage Loans" means the mortgage loans listed on the Schedule
of Mortgage Loans which were identified as of August 10, 1997.
"Lien" means a security interest, lien, charge, pledge, equity or
encumbrance of any kind other than tax liens, mechanics liens and any liens that
attach to a Mortgaged Property by operation of law.
"Mortgage Loans" means the Initial Mortgage Loans, the Additional Mortgage
Loans and the Pre-Funded Mortgage Loans and any mortgage loan substituting or
replacing a Mortgage Loan pursuant to the terms of the Pooling & Servicing
Agreement.
"Original Pool Balance" means the aggregate unpaid principal balance of
the Mortgage Loans as of the Cut-off Date.
"Originator" means Emergent Mortgage Corp., a South Carolina corporation.
"Other Conveyed Property" means all monies at any time paid or payable on
the Mortgage Loans or in respect thereof after the Cut-off Date (including
amounts due on or before the Cut-off Date but received by the Originator, the
Unaffiliated Seller or the Depositor after the Cut-off Date), the insurance
policies relating to the Mortgage Loans and all Insurance Proceeds, rights of
the Unaffiliated Seller against the Originator under the Purchase Agreement and
Assignment, all items contained in the Mortgage Files, and any REO Property,
together with all collections thereon and proceeds thereof.
2
<PAGE>
"Pre-Funded Mortgage Loans" has the meaning ascribed thereto in Section
2.02.
"Prospectus" means the Prospectus dated June 10, 1997 relating to the
offering by the Depositor from time to time of its pass-through certificates
(issuable in series) in the form in which it was or will be filed with the
Securities and Exchange Commission pursuant to Rule 424(b) under the Securities
Act with respect to the offer and sale of the Certificates.
"Prospectus Supplement" means the Prospectus Supplement dated September
17, 1997, relating to the offering of the Certificates in the form in which it
was or will be filed with the Commission pursuant to Rule 424(b) under the
Securities Act with respect to the offer and sale of the Certificates.
"Purchase Agreement and Assignment" means the Agreement dated as of August
10, 1997 among the Originator, the Unaffiliated Seller and Emergent Group, Inc.
"Registration Statement" means that certain registration statement on Form
S-3, as amended (Registration No. 333-27355) relating to the offering by the
Depositor from time to time of its pass-through certificates (issuable in
series) as heretofore declared effective by the Commission.
"Related Documents" means the Insurance Agreement and the Indemnification
Agreement dated as of August 10, 1997 among the Originator, the Unaffiliated
Seller, Emergent Group, the Depositor, Prudential Securities Incorporated and
Financial Security Assurance Inc.
"Schedule of Mortgage Loans" means the schedule of Initial Mortgage Loans
and Additional Mortgage Loans and related mortgage notes attached hereto as
Schedule A, which schedule shall be deemed to be amended to reflect any Mortgage
Loan Schedule relating to any Pre-Funded Mortgage Loans to be transferred to the
Depositor pursuant to Section 2.02.
"Securities Act" means the Securities Act of 1933, as amended.
"Termination Event" means the existence of any one or more of the
following conditions:
(a) A stop order suspending the effectiveness of the Registration
Statement shall have been issued or a proceeding for that purpose shall
have been initiated or threatened by the Commission; or
(b) Subsequent to the execution and delivery of this Agreement, a
downgrading, or public notification of a possible change, without
indication of direction, shall have occurred in the rating accorded any of
the debt securities or claims paying ability of any person providing any
form of credit
3
<PAGE>
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 Emergent Mortgage Holdings Corporation, in its
capacity as Unaffiliated Seller of the Mortgage Loans under this Agreement and
any successor to Emergent Mortgage Holdings Corporation, whether through merger,
consolidation, purchase and assumption of Emergent Mortgage Holdings Corporation
or all or substantially all of its assets or otherwise.
"Unaffiliated Seller Repurchase Event" means the occurrence of a breach of
any of the Unaffiliated Seller's representations and warranties under Section
3.02 herein.
Capitalized terms used herein that are not otherwise defined shall have
the respective meanings ascribed thereto in the Pooling and Servicing Agreement.
ARTICLE TWO
PURCHASE, SALE AND CONVEYANCE OF THE MORTGAGE LOANS
Section 2.01. Agreement to Purchase Initial and Additional Mortgage Loans.
Subject to the terms and conditions of this Agreement, the Unaffiliated Seller
hereby sells, transfers, assigns, and otherwise conveys to the Depositor without
recourse (but without limitation of its obligations and representations in this
Agreement), and the Depositor hereby purchases, all right, title and interest of
the Unaffiliated Seller in and to the Initial Mortgage Loans, the Additional
Mortgage Loans and the Other Conveyed Property relating thereto. It is the
intention of the Unaffiliated Seller and the Depositor that the transfer and
assignment contemplated by this Agreement shall constitute a sale of the Initial
Mortgage Loans, the Additional Mortgage Loans and the Other Conveyed
4
<PAGE>
Property relating thereto from the Unaffiliated Seller to the Depositor,
conveying good title thereto free and clear of any Liens, and such Mortgage
Loans and Other Conveyed Property shall not be part of the Unaffiliated Seller's
estate in the event of the filing of a bankruptcy petition by or against the
Unaffiliated Seller under any bankruptcy or similar law.
Section 2.02. Agreement to Purchase Pre-Funded Mortgage Loans. (a) Subject
to the terms and conditions of this Agreement, the Unaffiliated Seller hereby
agrees to sell to the Depositor without recourse (but without limitation of its
obligations and representations in this Agreement), and the Depositor hereby
agrees to purchase, all right, title and interest of the Unaffiliated Seller in
and to additional mortgage loans satisfying the requirements of Section 2.02(c)
of the Pooling and Servicing Agreement ("Pre-Funded Mortgage Loans"), having an
aggregate Stated Principal Balance as of their respective Cut-off Dates of up to
the Original Pre-Funded Amount, together with the Other Conveyed Property
relating thereto. It is the intention of the Unaffiliated Seller and the
Depositor that each such transfer and assignment of Pre-Funded Mortgage Loans
and the Other Conveyed Property relating thereto shall constitute a sale of such
Pre-Funded Mortgage Loans and Other Conveyed Property from the Unaffiliated
Seller to the Depositor, conveying good title thereto free and clear of any
liens, and such Pre-Funded Mortgage Loans and Other Conveyed Property shall not
be part of the Unaffiliated Seller's estate in the event of the filing of a
bankruptcy petition by or against the Unaffiliated Seller under any bankruptcy
or similar law.
(b) The Seller shall be obligated to sell Pre-Funded Mortgage Loans
and Other Conveyed Property relating thereto pursuant to this Section 2.02
subject only to the availability thereof to the Seller during the
Pre-Funding Period under the Purchase Agreement and Assignment. To the
extent Pre-Funded Mortgage Loans shall become available to the Seller
under the Purchase Agreement and Assignment during the Pre-Funded Period,
the Seller shall execute and deliver to the Depositor an Addition Notice,
accompanied by a Mortgage Loan Schedule with respect to such Pre-Funded
Mortgage Loans.
(c) Subject to the satisfaction of the conditions set forth in
paragraph (d) below, in consideration of the Depositor's delivery on the
related Pre-Funded Loan Transfer Dates to or upon the order of the
Unaffiliated Seller of the purchase price therefor, the Unaffiliated
Seller shall on such Pre-Funded Loan Transfer Dates sell to the Depositor
without recourse but subject to terms and provisions of this Agreement,
all of the right, title and interest of the Unaffiliated Seller in and to
the relevant Pre-Funded Mortgage Loans, including all principal
outstanding as of, and all interest due after, the related Cut-off Dates,
and all other assets included or to be included in the Trust Fund for the
benefit of the Certificateholders and the Insurer. In connection with each
such sale, the Originator, the Unaffiliated Seller, the Depositor and the
Trustee shall execute and deliver an instrument of transfer substantially
in the form of Exhibit G to the
5
<PAGE>
Pooling and Servicing Agreement (the "Pre-Funded Mortgage Loan Transfer
Agreement").
(d) The obligation of the Depositor to purchase Pre-Funded Mortgage
Loans and any other property and rights related thereto pursuant to this
Section 2.02 shall be subject to the satisfaction of each of the following
conditions on or prior to the related Pre-Funded Transfer Date:
(i) the Unaffiliated Seller shall have provided the Depositor,
the Trustee, the Rating Agencies and the Certificate Insurer with a
timely Addition Notice, which shall include a Mortgage Loan Schedule
listing such Pre-Funded Mortgage Loans, and shall have provided any
other information reasonably requested by any of the foregoing with
respect to the Pre-Funded Mortgage Loans;
(ii) the Originator and the Unaffiliated Seller shall have
executed and delivered a Pre-Funded Mortgage Loan Transfer Agreement
with respect to the Pre-Funded Mortgage Loans;
(iii) the Unaffiliated Seller shall have deposited in the
Collection Account all collections of (x) principal in respect of
the Pre-Funded Mortgage Loans received after the related Cut-off
Date and (y) interest due on the Pre-Funded Mortgage Loans after the
related Cut-off Date;
(iv) as of such Pre-Funded Loan Transfer Date, the
Unaffiliated Seller shall not be insolvent or aware of any pending
insolvency and the transfer of such Pre-Funded Mortgage Loans to the
Depositor on such Pre-Funded Loan Transfer Date shall not result in
the insolvency of the Unaffiliated Seller;
(v) such addition will not result in a material adverse tax
consequence to the Trust or the Holders of the Certificates;
(vi) the Pre-Funding Period shall not have terminated;
(vii) the addition of such Pre-Funded Mortgage Loans shall not
result in any representation or warranty set forth in Section 3.02
being or becoming untrue or inaccurate and such Pre-Funded Mortgage
Loans shall satisfy the requirements of Section 2.02(c) of the
Pooling and Servicing Agreement;
(viii) 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
(ix) there shall have been delivered to the Depositor, the
Certificate Insurer, the Rating Agencies and the Trustee,
independent
6
<PAGE>
Opinions of Counsel with respect to the transfer of the Pre-Funded
Mortgage Loans substantially in the form of the Opinions of Counsel
delivered to the Depositor, the Certificate Insurer and the Trustee,
respectively on the Closing Date (bankruptcy, corporate and tax
opinions).
Section 2.03. Purchase Price.
(a) On the Closing Date, as full consideration for the Unaffiliated
Seller's sale of the Initial Mortgage Loans and the Additional Mortgage
Loans and the Other Conveyed Property relating thereto to the Depositor,
the Depositor will deliver to the Unaffiliated Seller (i) an amount in
cash equal to $131,251,868.69 (which amount represents $170,130,436.68
less the Original Pre-Funded Amount), less certain expenses and (ii) the
Residual Certificate to be issued pursuant to the Pooling and Servicing
Agreement.
(b) On each Pre-Funded Loan Transfer Date, as full consideration for
the Unaffiliated Seller's sale of the Pre-Funded Mortgage Loans to be sold
to the Depositor on such Pre-Funded Loan Transfer Date and the Other
Conveyed Property relating thereto, the Depositor will deliver to the
Unaffiliated Seller an amount in cash equal to the sum of 100% of the
aggregate Principal Balance of the Pre-Funded Mortgage Loans as of the
related Pre-Funded Loan Cut-off Date.
Section 2.04. Delivery of Mortgage Loan Files. On or prior to the Closing
Date or Pre-Funded Loan Transfer Date, as the case may be, the Unaffiliated
Seller shall deliver or shall cause to be delivered to the Trustee (as assignee
of the Depositor pursuant to the Pooling and Servicing Agreement), the documents
listed in Section 2.03(a) of the Pooling and Servicing Agreement with respect to
each Mortgage Loan being sold to the Depositor on such date.
Section 2.05. Transfer of Mortgage Loans; Assignment of Agreement. The
Depositor has the right to assign its interest under this Agreement to the
Trustee as may be required to effect the purposes of the Pooling and Servicing
Agreement, without further notice to, or consent of, the Unaffiliated Seller,
and the Trustee shall succeed to such of the rights and obligations of the
Depositor hereunder as shall be so assigned. The Depositor shall, pursuant to
the Pooling and Servicing Agreement, assign all of its right, title and interest
in and to the Mortgage Loans and its right to exercise the remedies created by
this Section 2.05 and Section 3.05 hereof to the Trustee for the benefit of the
Certificateholders. The Unaffiliated Seller agrees that, upon such assignment to
the Trustee, such representations, warranties, agreements and covenants will run
to and be for the benefit of the Trustee and the Trustee may enforce diligently,
without joinder of the Depositor, the repurchase obligations of the Unaffiliated
Seller set forth herein with respect to breaches of such representations,
warranties, agreements and covenants.
Section 2.06. Examination of Mortgage Loan File. Prior to the Closing Date
and each Pre-Funded Loan 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
7
<PAGE>
reasonably specify. Such examination may be made by the Depositor or its
designee at any time on or before the Closing Date and each Pre-Funded Loan
Transfer Date, as applicable. If the Depositor or its designee makes such
examination prior to the Closing Date and each Pre-Funded Loan Transfer Date, as
applicable, and identifies any Mortgage Loans that do not conform to the
requirements of the Depositor as described in this Agreement, such Mortgage
Loans shall be deleted from the Schedule of Mortgage Loans. The Depositor may,
at its option and without notice to the Unaffiliated Seller, purchase all or
part of the Mortgage Loans without conducting any partial or complete
examination. The fact that the Depositor or the Trustee has conducted or has
failed to conduct any partial or complete examination of the Mortgage Files
shall not affect the rights of the Depositor or the Trustee to demand repurchase
or other relief as provided in this Agreement.
Section 2.07. Books and Records. The sale of each Mortgage Loan shall be
reflected on the Unaffiliated Seller's balance sheet and other financial
statements as a sale of assets by the Unaffiliated Seller. The Unaffiliated
Seller shall be responsible for maintaining, and shall maintain, a complete set
of books and records for each Mortgage Loan which shall be clearly marked to
reflect the ownership of each Mortgage Loan by the Trustee for the benefit of
the Certificateholders and the Certificate Insurer.
ARTICLE THREE
REPRESENTATIONS AND WARRANTIES
Section 3.01. Representations and Warranties as to the Unaffiliated
Seller. The Unaffiliated Seller hereby represents and warrants to the Depositor,
as of the Closing Date, and as of each Pre-Funded Loan Transfer Date, that:
(a) Organization and Good Standing. The Unaffiliated Seller has been
duly organized and is validly existing as a corporation in good standing
under the laws of the State of Delaware, with power and authority to own
its properties and to conduct its business as such properties are
currently owned and such business is currently conducted, and had at all
relevant times, and now has, power, authority and legal right to acquire,
own and sell the Mortgage Loans and the Other Conveyed Property
transferred to the Depositor.
(b) Due Qualification. The Unaffiliated Seller is duly qualified to
do business as a foreign corporation in good standing, and has obtained
all necessary licenses and approvals, in all jurisdictions in which the
ownership or lease of its property or the conduct of its business requires
such qualification.
(c) Power and Authority. The Unaffiliated Seller has the power and
authority to execute and deliver this Agreement and to carry out its
terms; the Unaffiliated Seller has full power and authority to sell and
assign the Mortgage Loans and the Other Conveyed Property to be sold and
assigned to and deposited with the Depositor by it and has duly authorized
such sale and
8
<PAGE>
assignment to the Depositor by all necessary corporate action; the
execution, delivery and performance of this Agreement and the Related
Documents to which it is a party have been duly authorized by the
Unaffiliated Seller by all necessary corporate action; and this Agreement
has been duly and validly executed and delivered by the Unaffiliated
Seller.
(d) Valid Sale; Binding Obligations. This Agreement shall effect a
valid sale, transfer and assignment of the Mortgage Loans and the Other
Conveyed Property, enforceable against the Unaffiliated Seller and
creditors of and purchasers from the Unaffiliated Seller; and this
Agreement constitutes a legal, valid and binding obligation of the
Unaffiliated Seller enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization or
other similar laws affecting the enforcement of creditors' rights
generally and by equitable limitations on the availability of specific
remedies, regardless of whether such enforceability is considered in a
proceeding in equity or at law.
(e) No Violation. The consummation of the transactions contemplated
by this Agreement and the fulfillment of the terms of this Agreement shall
not conflict with, result in any breach of any of the terms and provisions
of or constitute (with or without notice, lapse of time or both) a default
under, the certificate of incorporation or by-laws of the Unaffiliated
Seller, or any material indenture, agreement, mortgage, deed of trust or
other instrument to which the Unaffiliated Seller is a party or by which
it is bound, or result in the creation or imposition of any Lien upon any
of its properties pursuant to the terms of any such indenture, agreement,
mortgage, deed of trust or other instrument, other than this Agreement, or
violate any law, order, rule or regulation applicable to the Unaffiliated
Seller of any court or of any federal or state regulatory body,
administrative agency or other governmental instrumentality having
jurisdiction over the Unaffiliated Seller or any of its properties.
(f) No Proceedings. There are no material proceedings or
investigations pending or, to the Unaffiliated Seller's knowledge,
threatened against the Unaffiliated Seller, before any court, regulatory
body, administrative agency or other tribunal or governmental
instrumentality having jurisdiction over the Unaffiliated Seller or its
properties (i) asserting the invalidity of this Agreement, (ii) seeking to
prevent the issuance of the Certificates or the consummation of any of the
transactions contemplated by this Agreement, (iii) seeking any
determination or ruling that might materially and adversely affect the
performance by the Unaffiliated Seller of its obligations under, or the
validity or enforceability of, this Agreement, (iv) involving the
Unaffiliated Seller and which might adversely affect the federal income
tax or other federal, state or local tax attributes of the Certificates,
or (v) that could have a material adverse effect on the Mortgage Loans.
9
<PAGE>
(g) Approvals. All approvals, authorizations, consents, orders or
other actions of any person, corporation or other organization, or of any
court, governmental agency or body or official, required in connection
with the execution and delivery by the Unaffiliated Seller of this
Agreement and the consummation of the transactions contemplated hereby
have been or will be taken or obtained on or prior to the Closing Date.
(h) Chief Executive Office. The chief executive office of the
Unaffiliated Seller is at 44 East Camperdown Way, Greenville, South
Carolina 29601, Attention: William P. Crawford.
Section 3.02. Representations and Warranties Relating to the Mortgage
Loans. The Unaffiliated Seller represents and warrants to the Depositor, as of
the Closing Date, as to each Initial Mortgage Loan and Additional Mortgage Loan,
and as of each Pre-Funded Loan Transfer Date, as to each Pre-Funded Mortgage
Loan, that immediately prior to the sale and transfer of the relevant Mortgage
Loans on such date by the Unaffiliated Seller to the Depositor:
(a) The information with respect to each Mortgage Loan set forth in
the Schedule of Mortgage Loans is true and correct as of the related
Cut-off Date;
(b) The information provided by the Unaffiliated Seller to the
Depositor in connection with a Pre-Funded Mortgage Loan is true and
correct in all material respects at the date or dates respecting which
such information was furnished and such Pre-Funded Mortgage Loans comply
with the requirements of Section 2.02(d);
(c) All of the original or certified documentation required to be
delivered to the Trustee pursuant to the Pooling and Servicing Agreement
(including all material documents related thereto) with respect to each
Mortgage Loan has been or will be delivered to the Trustee in accordance
with the terms of such Pooling and Servicing Agreement. Each of the
documents and instruments specified to be included therein has been duly
executed and in due and proper form, and each such document or instrument
is in a form generally acceptable to prudent mortgage lenders that
regularly originate or purchase mortgage loans comparable to the Mortgage
Loans for sale to prudent investors in the secondary market that invest in
mortgage loans such as the Mortgage Loans.
(d) Each Mortgaged Property is improved by a single (one-to-four)
family residential dwelling, which may include condominiums, townhouses
and units in planned unit developments, or manufactured housing, but shall
not include cooperatives;
(e) No Mortgage Loan had a Loan-to-Value Ratio in excess of 98.01%;
10
<PAGE>
(f) Each Mortgage is a valid and subsisting first lien of record on
the Mortgaged Property subject in all cases to the exceptions to title set
forth in the title insurance policy, with respect to the related Mortgage
Loan, which exceptions are generally acceptable to banking institutions in
connection with their regular mortgage lending activities, and such other
exceptions to which similar properties are commonly subject and which do
not individually, or in the aggregate, materially and adversely affect the
benefits of the security intended to be provided by such Mortgage;
(g) Immediately prior to the transfer and assignment herein
contemplated, the Unaffiliated Seller held good and indefeasible title to,
and was the sole owner of, each Mortgage Loan conveyed by it subject to no
Liens, except Liens which will be released simultaneously with such
transfer and assignment and subordinate Liens on the related Mortgaged
Property;
(h) As of the related Cut-off Date, no Initial Mortgage Loan is 30
or more days delinquent and no Additional Mortgage Loan or Pre-Funded
Mortgage Loan is 60 or more days delinquent;
(i) There is no delinquent tax or assessment lien on any Mortgaged
Property, and each Mortgaged Property is free of substantial damage and is
in good repair;
(j) There is no valid and enforceable right of rescission, offset,
defense or counterclaim to any Mortgage Note or Mortgage, including the
obligation of the related Mortgagor to pay the unpaid principal of or
interest on such Mortgage Note or the defense of usury, nor will the
operation of any of the terms of the Mortgage Note or the Mortgage, or the
exercise of any right thereunder, render either the Mortgage Note or the
Mortgage unenforceable in whole or in part, or subject to any right of
rescission, set-off, counterclaim or defense, including the defense of
usury, and no such right of rescission, set-off, counterclaim or defense
has been asserted with respect thereto;
(k) There is no mechanics' lien or claim for work, labor or material
affecting any Mortgaged Property which is or may be a lien prior to, or
equal with, the lien of the related Mortgage except those which are
insured against by any title insurance policy referred to in paragraph (m)
below;
(l) Each Mortgage Loan at the time it was made complied in all
material respects with all applicable state and federal laws and
regulations, including, without limitation, the federal Truth-in-Lending
Act and other consumer protection laws, real estate settlement procedure,
usury, equal credit opportunity, disclosure and recording laws;
11
<PAGE>
(m) With respect to each Mortgage Loan, a lender's title insurance
policy, issued in standard American Land Title Association form, or other
form acceptable in a particular jurisdiction by a title insurance company
authorized to transact business in the state in which the related
Mortgaged Property is situated, in an amount at least equal to the initial
Stated Principal Balance of such Mortgage Loan insuring the mortgagee's
interest under the related Mortgage Loan as the holder of a valid first
mortgage lien of record on the real property described in the related
Mortgage, as the case may be, subject only to exceptions of the character
referred to in paragraph (f) above, was effective on the date of the
origination of such Mortgage Loan, and, as of the Cut-off Date such policy
will be valid and thereafter such policy shall continue in full force and
effect;
(n) The improvements upon each Mortgaged Property are covered by a
valid and existing hazard insurance policy (which may be a blanket policy
of the type described in the related Pooling and Servicing Agreement) with
a generally acceptable carrier that provides for fire and extended
coverage representing coverage not less than the least of (A) the
outstanding principal balance of the related Mortgage Loan and (B) the
minimum amount required to compensate for damage or loss on a replacement
cost basis;
(o) If any Mortgaged Property is in an area identified in the
Federal Register by the Federal Emergency Management Agency as having
special flood hazards, a flood insurance policy (which may be a blanket
policy of the type described in the Pooling and Servicing Agreement) in a
form meeting the requirements of the current guidelines of the Federal
Insurance Administration is in effect with respect to such Mortgaged
Property with a generally acceptable carrier in an amount representing
coverage not less than the least of (A) the outstanding principal balance
of the related Mortgage Loan and (B) the maximum amount of insurance that
is available under the Flood Disaster Protection Act of 1973;
(p) Each Mortgage and Mortgage Note is the legal, valid and binding
obligation of the maker thereof and is enforceable in accordance with its
terms, except only as such enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and by general principles of
equity (whether considered in a proceeding or action in equity or at law),
and all parties to each Mortgage Loan had full legal capacity to execute
all documents relating to such Mortgage Loan and convey the estate therein
purported to be conveyed;
(q) The Unaffiliated Seller has caused and will cause to be
performed any and all acts required to be performed to preserve the rights
and remedies of the servicer in any insurance policies applicable to any
Mortgage Loans delivered by such Unaffiliated Seller including, to the
extent such
12
<PAGE>
Mortgage Loan is not covered by a blanket policy described in the Pooling
and Servicing Agreement, any necessary notifications of insurers,
assignments of policies or interests therein, and establishments of
co-insured, joint loss payee and mortgagee rights in favor of the
servicer;
(r) Each original Mortgage was recorded or is in the process of
being recorded, and all subsequent assignments of the original Mortgage
have been recorded or are in the process of being recorded in the
appropriate jurisdictions wherein such recordation is necessary to perfect
the lien thereof for the benefit of the Trustee, subject to the provisions
of Section 2.03 of the Pooling and Servicing Agreement;
(s) The terms of each Mortgage Note and each Mortgage have not been
impaired, altered or modified in any respect, except by a written
instrument which has been recorded, if necessary, to protect the interest
of the owners and which has been delivered to the Trustee;
(t) The proceeds of each Mortgage Loan have been fully disbursed,
and there is no obligation on the part of the mortgagee to make future
advances thereunder. Any and all requirements as to completion of any
on-site or off-site improvements and as to disbursements of any escrow
funds therefor have been complied with. All costs, fees and expenses
incurred in making or closing or recording such Mortgage Loans have been
paid;
(u) Except as otherwise required by law or pursuant to the statute
under which the related Mortgage Loan was made, the related Mortgage Note
is not and has not been secured by any collateral, pledged account or
other security except the lien of the corresponding Mortgage;
(v) No Mortgage Loan was originated under a buydown plan;
(w) No Mortgage Loan provides for negative amortization, has a
shared appreciation feature, or other contingent interest feature;
(x) Each Mortgaged Property is located in the state identified in
the Schedule of Mortgage Loans, and consists of one or more parcels of
real property with a residential dwelling thereon;
(y) Each Mortgage contains a provision for the acceleration of the
payment of the unpaid principal balance of the related Mortgage Loan in
the event the related Mortgaged Property is sold without the prior consent
of the mortgagee thereunder;
(z) Any advances made after the date of origination of a Mortgage
Loan but prior to the Cut-off Date, have been consolidated with the
outstanding principal amount secured by the related Mortgage, and the
secured
13
<PAGE>
principal amount, as consolidated, bears a single interest rate and single
repayment term reflected on the Schedule of Mortgage Loans. The
consolidated principal amount does not exceed the original principal
amount of the related Mortgage Loan. No Mortgage Note permits or obligates
the Originator to make future advances to the related Mortgagor at the
option of the Mortgagor;
(aa) There is no proceeding pending or threatened for the total or
partial condemnation of any Mortgaged Property, nor is such a proceeding
currently occurring, and each Mortgaged Property is undamaged by waste,
fire, earthquake or earth movement, flood, tornado or other casualty, so
as to affect adversely the value of the Mortgaged Property as security for
the Mortgage Loan or the use for which the premises were intended;
(bb) All of the improvements of any Mortgaged Property lie wholly
within the boundaries and building restriction lines of such Mortgaged
Property, and no improvements on adjoining properties encroach upon such
Mortgaged Property, and, if a title insurance policy exists with respect
to such Mortgaged Property, are stated in such title insurance policy and
affirmatively insured;
(cc) No improvement located on or being part of any Mortgaged
Property is in violation of any applicable zoning law or regulation. All
inspections, licenses and certificates required to be made or issued with
respect to all occupied portions of each Mortgaged Property and, with
respect to the use and occupancy of the same, including, but not limited
to, certificates of occupancy and fire underwriting certificates, have
been made or obtained from the appropriate authorities and such Mortgaged
Property is lawfully occupied under the applicable law;
(dd) With respect to each Mortgage constituting a deed of trust, a
trustee, duly qualified under applicable law to serve as such, has been
properly designated and currently so serves and is named in such Mortgage,
and no fees or expenses are or will become payable by the Originator or
the Trust Fund to the trustee under the deed of trust, except in
connection with a trustee's sale after default by the related Mortgagor;
(ee) Each Mortgage contains customary and enforceable provisions
which render the rights and remedies of the holder thereof adequate for
the realization against the related Mortgaged Property of the benefits of
the security, including (A) in the case of a Mortgage designated as a deed
of trust, by trustee's sale and (B) otherwise by judicial foreclosure.
There is no homestead or other exemption available which materially
interferes with the right to sell the related Mortgaged Property at a
trustee's sale or the right to foreclose the related Mortgage;
14
<PAGE>
(ff) There is no default, breach, violation or event of acceleration
existing under any Mortgage or the related Mortgage Note and no event
which, with the passage of time or with notice and the expiration of any
grace or cure period, would constitute a default, breach, violation or
event of acceleration; and neither the Originator or the Unaffiliated
Seller has waived any default, breach, violation or event of acceleration;
(gg) No instrument of release or waiver has been executed in
connection with any Mortgage Loan, and no Mortgagor has been released, in
whole or in part;
(hh) The credit underwriting guidelines applicable to each Mortgage
Loan conform in all material respects to the Originator's underwriting
guidelines;
(ii) All parties to the Mortgage Note and the Mortgage had legal
capacity to execute the Mortgage Note and the Mortgage and each Mortgage
Note and Mortgage have been duly and properly executed by such parties;
(jj) The Unaffiliated Seller has no actual knowledge that there
exist on any Mortgaged Property any hazardous substances, hazardous wastes
or solid wastes, as such terms are defined in the Comprehensive
Environmental Response Compensation and Liability Act, the Resource
Conservation and Recovery Act of 1976, or other federal, state or local
environmental legislation;
(kk) None of the Mortgage Loans shall be due from the United States
of America or any State or from any agency, department, subdivision or
instrumentality thereof;
(ll) At the Cut-off Date, no Mortgagor had been identified on the
records of the Originator as being the subject of a current bankruptcy
proceeding;
(mm) By the Closing Date, the Unaffiliated Seller will have caused
the portions of the Unaffiliated Seller's records relating to the Initial
Mortgage Loans and the Additional Mortgage Loans to be clearly and
unambiguously marked to show that such Loans constitute part of the Trust
Fund and are owned by the Trust Fund in accordance with the terms of the
Pooling and Servicing Agreement, and by each Pre-Funded Loan Transfer
Date, the Unaffiliated Seller will have caused the portions of the
Unaffiliated Seller's records relating to the related Pre-Funded Mortgage
Loans to be clearly and unambiguously marked to show that such Mortgage
Loans constitute part of the Trust Fund and are owed by the Trust Fund in
accordance with the terms of the Pooling and Servicing Agreement;
15
<PAGE>
(nn) No Mortgage Loan was originated in, or is subject to the laws
of, any jurisdiction the laws of which would make unlawful, void or
voidable the sale, transfer and assignment of such Mortgage Loan under
this Agreement or pursuant to transfers of the Certificates. The
Unaffiliated Seller has not entered into any agreement with any account
debtor that prohibits, restricts or conditions the assignment of any
portion of the Mortgage Loans;
(oo) All filings (including, without limitation, UCC filings)
required to be made by any Person and actions required to be taken or
performed by any Person in any jurisdiction to give the Trustee a first
priority perfected lien on, or ownership interest in, the Mortgage Loans
and the proceeds thereof and the other property of the Trust Fund have
been made, taken or performed;
(pp) The Unaffiliated Seller has not done anything to convey any
right to any Person that would result in such Person having a right to
payments due under the Mortgage Loan or otherwise to impair the rights of
the Trust Fund and the Certificateholders in any Mortgage Loan or the
proceeds thereof;
(qq) No Mortgage Loan is assumable (without the consent of the
Originator which consent has not been given) by another Person in a manner
which would release the Mortgagor thereof from such Mortgagor's
obligations to the Unaffiliated Seller with respect to such Mortgage Loan;
(rr) With respect to the Initial Mortgage Loans as of the Cut-off
Date: the aggregated Stated Principal Balance was $64,502,306.83; each of
the Stated Principal Balances was at least $13,000 but no more than
$348,300; the average Stated Principal Balance was $67,471.03; the
Mortgage Rates were at least 8.500% but no more than 14.890%; the weighted
average Mortgage Rate was 11.109%; the original Loan-to-Value Ratios were
at least 18.52% but no more than 98.01%; the weighted average original
Loan-to-Value Ratio was 77.67%; the remaining terms to stated maturity
were at least 60 months but no more than 360 months; the weighted average
remaining term to stated maturity was 201 months; the original terms to
stated maturity were at least 60 months but no more than 361 months; the
weighted average original term to stated maturity was 201 months; and no
more than 0.59% of the Mortgage Loans are secured by Mortgaged Properties
located in any one postal zip code area;
(ss) No selection procedures adverse to the Certificateholders or to
the Certificate Insurer have been utilized in selecting such Mortgage Loan
from all other similar Mortgage Loans originated by the Originator;
(tt) The related Mortgaged Property has not been subject to any
foreclosure proceeding or litigation;
16
<PAGE>
(uu) There was no fraud involved in the origination of the Mortgage
Loan by the mortgagee or the Mortgagor, any appraiser or any other party
involved in the origination of the Mortgage Loan; and
(vv) Each Mortgage File contains an appraisal of the Mortgaged
Property indicating an appraised value equal to the appraised value of
such Mortgaged Property on the Mortgage Loan Schedule. Each appraisal has
been performed in accordance with the requirements of FNMA or FHLMC.
(ww) Each Mortgage Loan is a "qualified mortgage" as defined in
Section 860G(a)(3) of the Code.
Section 3.03. Covenants of the Unaffiliated Seller. The Unaffiliated
Seller covenants to the Depositor as follows:
(a) The Unaffiliated Seller shall cooperate with the Depositor and
the firm of independent certified public accountants retained with respect
to the issuance of the Certificates in making available all information
and taking all steps reasonably necessary to permit the accountants'
letters required hereunder to be delivered within the times set for
delivery herein.
(b) The Unaffiliated Seller agrees to satisfy or cause to be
satisfied on or prior to the Closing Date all of the conditions to the
Depositor's obligations set forth in Section 5.01 hereof that are within
the Unaffiliated Seller's (or its agents') control.
(c) The Unaffiliated Seller hereby agrees to do all acts,
transactions, and things and to execute and deliver all agreements,
documents, instruments, and papers by and on behalf of the Unaffiliated
Seller as the Depositor or its counsel may reasonably request in order to
consummate the transfer of the Mortgage Loans to the Depositor and the
subsequent transfer thereof to the Trustee, and the rating, issuance and
sale of the Certificates.
(d) The Unaffiliated Seller hereby agrees to arrange separately to
pay to the Trustee all of the Trustee's fees and expenses in connection
with the transactions contemplated by the Pooling and Servicing Agreement,
including, without limitation, all of the Trustee's fees and expenses in
connection with any actions taken by the Trustee pursuant to Section 8.10
thereof. For the avoidance of doubt, the parties hereto acknowledge that
it is the intention of the parties that the Depositor shall not pay any of
the Trustee's fees and expenses in connection with the transactions
contemplated by the Pooling and Servicing Agreement.
17
<PAGE>
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, as of the Closing Date and as of
each Pre-Funded Loan Transfer 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;
(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.
18
<PAGE>
Section 3.05. Repurchase Obligation for Breach of a Representation or
Warranty. Each of the representations and warranties contained in Sections 3.01
and 3.02 shall survive the purchase by the Depositor of the Mortgage Loans and
the subsequent transfer thereof by the Depositor to the Trustee and shall
continue in full force and effect, notwithstanding any restrictive or qualified
endorsement on the Mortgage Loans and notwithstanding subsequent termination of
this Agreement or the Pooling and Servicing Agreement.
(a) Upon the occurrence of a breach of any of the Unaffiliated
Seller's representations and warranties under Section 3.02 hereof that
materially and adversely affects the related Mortgage Loan, the
Unaffiliated Seller shall, unless such breach shall have been cured in all
material respects or unless the Originator shall have repurchased such
Mortgage Loan directly from the Trustee, repurchase the related Mortgage
Loan from the Trustee within 60 days following discovery by or notice to
the Unaffiliated Seller of such breach pursuant to Section 2.04 of the
Pooling and Servicing Agreement, and, the Unaffiliated Seller shall pay
the Purchase Price to the Trustee pursuant to the Pooling and Servicing
Agreement. To the extent such Unaffiliated Seller fails to effect its
repurchase obligation, Emergent Group shall repurchase the related
Mortgage Loans and pay the Purchase Price to the Trustee on such date. The
provisions of this Section 3.05 are intended to grant the Trustee a direct
right against the Unaffiliated Seller and the Emergent Group to demand
performance hereunder, and in connection therewith, the Unaffiliated
Seller and Emergent Group waive any requirement of prior demand against
the Depositor with respect to such repurchase obligation. Any such
purchase resulting from the Unaffiliated Seller Repurchase Event shall
take place in the manner specified in Section 2.04 of the Pooling and
Servicing Agreement. Notwithstanding any other provision of this Agreement
or the Pooling and Servicing Agreement to the contrary, the obligation of
the Unaffiliated Seller and Emergent Group under this Section shall be
performed in accordance with the terms hereof notwithstanding the failure
of the Depositor or the Servicer to perform any of their respective
obligations with respect to such Mortgage Loan under this Agreement or
under the Pooling and Servicing Agreement.
(b) In addition to the foregoing and notwithstanding whether the
related Mortgage Loan shall have been purchased by the Unaffiliated Seller
or Emergent Group, the Unaffiliated Seller shall indemnify the Depositor,
the Trustee, the Certificate Insurer, Emergent Group and the
Certificateholders against all costs, expenses, losses, damages, claims
and liabilities, including reasonable fees and expenses of counsel, which
may be asserted against or incurred by any of them as a result of third
party claims arising out of the events or facts giving rise to
Unaffiliated Seller Repurchase Events.
19
<PAGE>
Section 3.06. Reassignment of Purchased Mortgage Loans. Upon deposit in
the Collection Account of the Purchase Price of any Mortgage Loan repurchased by
the Unaffiliated Seller under Section 3.05 hereof, the Depositor and the Trustee
shall take such steps as may be reasonably requested by the Unaffiliated Seller
in order to assign to the Unaffiliated Seller all of the Depositor's and the
Trust Fund's right, title and interest in and to such Mortgage Loan and all
security and documents and all Other Conveyed Property conveyed to the Depositor
and the Trust Fund directly relating thereto, without recourse, representation
or warranty, except as to the absence of Liens created by or arising as a result
of actions of the Depositor or the Trustee. Such assignment shall be a sale and
assignment outright, and not for security. If, following the reassignment of a
Purchased Mortgage Loan, in any enforcement suit or legal proceeding, it is held
that the Unaffiliated Seller may not enforce any such Mortgage Loan on the
ground that it shall not be a real party in interest or a holder entitled to
enforce the Mortgage Loan, the Depositor and the Trustee shall, at the expense
of the Unaffiliated Seller, take such steps as the Unaffiliated Seller deems
reasonably necessary to enforce the Mortgage Loan, including bringing suit in
the Depositor's or the Trustee's name or the names of the Certificateholders.
3.07. Waivers. No failure or delay on the part of the Depositor or the
Trustee as assignee of the Depositor, in exercising any power, right or remedy
under this Agreement shall operate as a waiver thereof, nor shall any single or
partial exercise of any such power, right or remedy preclude any other or future
exercise thereof or the exercise of any other power, right or remedy.
3.08. Representations and Warranties of Emergent Group. Emergent Group
hereby represents and warrants to the Depositor as of the date of execution of
this Agreement, as of the Closing Date and as of each Pre-Funded Loan Transfer
Date, that:
(a) Emergent Group is a corporation duly organized, validly existing
and in good standing under the laws of the State of South Carolina;
(b) Emergent Group has the corporate power and authority to execute,
deliver and perform, and to enter into and consummate all the transactions
contemplated by this Agreement;
(c) This Agreement has been duly and validly authorized, executed
and delivered by Emergent Group, and constitutes the legal, valid and
binding agreement of Emergent Group, enforceable against Emergent Group in
accordance with its terms, except as such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting the rights of creditors generally, and by general
equity principles (regardless of whether such enforcement is considered in
a proceeding in equity or at law);
20
<PAGE>
(d) No consent, approval, authorization or order of or registration
or filing with, or notice to, any governmental authority or court is
required for the execution, delivery and performance of or compliance by
Emergent Group with this Agreement or the consummation by Emergent Group
of any of the transactions contemplated hereby or thereby, except such as
have been made on or prior to the Closing Date;
(e) None of the execution and delivery of this Agreement, the
consummation of the other transactions contemplated hereby, or the
fulfillment of or compliance with the terms and conditions of this
Agreement, (i) conflicts or will conflict with the charter or bylaws of
Emergent Group or conflicts or will conflict with or results or will
result in a breach of, or constitutes or will constitute a default or
results or will result in an acceleration under, any term, condition or
provision of any material indenture, deed of trust, contract or other
agreement or other instrument to which Emergent Group is a party or by
which it is bound and which is material to Emergent Group, or (ii) results
or will result in a violation of any law, rule, regulation, order,
judgment or decree of any court or governmental authority having
jurisdiction over Emergent Group.
ARTICLE FOUR
THE UNAFFILIATED SELLER
Section 4.01. Liability of the Unaffiliated Seller. The Unaffiliated
Seller shall be liable in accordance herewith only to the extent of the
obligations in this Agreement specifically undertaken by such Unaffiliated
Seller and its representations and warranties.
Section 4.02. Merger or Consolidation. The Unaffiliated Seller will keep
in full effect its existence, rights and franchises as a corporation and will
obtain and preserve its qualification to do business as a foreign corporation,
in each jurisdiction necessary to protect the validity and enforceability of
this Agreement or any of the Mortgage Loans and to perform its duties under this
Agreement.
Any corporation or other entity (i) into which the Unaffiliated Seller or
Emergent Group may be merged or consolidated, (ii) resulting from any merger or
consolidation to which the Unaffiliated Seller or Emergent Group is a party or
(iii) succeeding to the business of the Unaffiliated Seller or Emergent Group,
which corporation has a certificate of incorporation containing provisions
relating to limitations on business and other matters substantively identical to
those contained in the Unaffiliated Seller's certificate of incorporation, shall
execute an agreement of assumption to perform every obligation of the
Unaffiliated Seller or Emergent Group, as the case may be, under this Agreement
and, whether or not such assumption agreement is executed, shall be the
successor to the Unaffiliated Seller or Emergent Group, as the case may be,
hereunder (without relieving the Unaffiliated Seller or Emergent Group, as the
case may be, of its responsibilities hereunder, if it survives such merger or
consolidation) without the execution
21
<PAGE>
or filing of any document or any further act by any of the parties to this
Agreement. Notwithstanding the foregoing, so long as a Certificate Insurer
Default shall not have occurred and be continuing, the Unaffiliated Seller shall
not merge or consolidate with any other Person or permit any other Person to
become the successor to the Unaffiliated Seller's business without the prior
written consent of the Certificate Insurer. The Unaffiliated Seller or Emergent
Group, as the case may be, shall promptly inform the other party, the Trustee
and, so long as a Certificate Insurer Default shall not have occurred and be
continuing, the Certificate Insurer of such merger, consolidation or purchase
and assumption. Notwithstanding the foregoing, as a condition to the
consummation of the transactions referred to in clauses (i), (ii) and (iii)
above, (x) immediately after giving effect to such transaction, no
representation or warranty made pursuant to Sections 3.01, 3.02 and 3.08 or
covenant made pursuant to Section 3.03, shall have been breached (for purposes
hereof, such representations and warranties shall speak as of the date of the
consummation of such transaction) and no event that, after notice or lapse of
time, or both, would become an event of default under the Insurance Agreement,
shall have occurred and be continuing, (y) the Unaffiliated Seller or Emergent
Group, as the case may be, shall have delivered to the Trustee an Officer's
Certificate and an Opinion of Counsel each stating that such consolidation,
merger or succession and such agreement of assumption comply with this Section
4.02 and that all conditions precedent, if any, provided for in this Agreement
relating to such transaction have been complied with, and (z) the Unaffiliated
Seller shall have delivered to the Trustee an Opinion of Counsel, stating, in
the opinion of such counsel, either (A) all financing statements and
continuation statements and amendments thereto have been executed and filed that
are necessary to preserve and protect the interest of the Trustee in the Trust
Fund and reciting the details of the filings or (B) no such action shall be
necessary to preserve and protect such interest.
Section 4.03. Costs. In connection with the transactions contemplated
under this Agreement and the Pooling and Servicing Agreement, the Unaffiliated
Seller shall promptly pay (or shall promptly reimburse the Depositor to the
extent that the Depositor shall have paid or otherwise incurred): (i) the fees
and disbursements of the Unaffiliated Seller's counsel; (ii) the fees of the
Depositor's counsel, not to exceed $175,000; (iii) the fees and disbursements of
Ernst & Young, the Unaffiliated Seller's independent certified public
accountants, in rendering a comfort letter in connection with the Prospectus
Supplement and in comforting the Derived Information; (iv) the fees of Standard
& Poor's Ratings Group and Moody's Investors Service, Inc.; (v) the fees of the
Trustee, the fees and disbursements of the Trustee's counsel, if any and the
fees of the Trustee for custodial acceptance and loan deposit; (vi) expenses
incurred in connection with printing the Prospectus, the Prospectus Supplement,
any amendment or supplement thereto, any preliminary prospectus and the
Certificates; (vii) fees and expenses relating to the filing of documents with
the Securities and Exchange Commission (including without limitation periodic
reports under the Exchange Act); (viii) the shelf registration amortization fee
paid in connection with the issuance of Certificates; and (ix) to the extent not
covered above, all of the initial upfront expenses of the Depositor and the
Underwriter including, without limitation, legal fees and expenses, accountant
fees and expenses and expenses in connection with due diligence conducted on the
Mortgage Loan File. The Unaffiliated Seller also will promptly pay (or shall
promptly reimburse the
22
<PAGE>
Depositor to the extent that the Depositor shall have paid or otherwise
incurred) all of the initial upfront expenses of the Certificate Insurer
including, without limitation, legal fees and expenses, accountant fees and
expenses and expenses in connection with due diligence conducted on the Mortgage
Loan File. All other costs and expenses in connection with the transactions
contemplated hereunder shall be borne by the party incurring such expenses.
4.04. Servicing. The Mortgage Loans shall be serviced by the Servicer in
accordance with the Pooling and Servicing Agreement.
4.05. Mandatory Delivery. Each document specified in Section 2.03 of the
Pooling and Servicing Agreement for each Mortgage Loan shall be delivered to the
Depositor on or before the Closing Date or relevant Pre-Funded Loan Transfer
Date (except as otherwise provided in such Section 2.03).
4.06. Indemnification.
(a)(i) Emergent Group agrees to indemnify and hold harmless the
Depositor, each of its directors, each of its officers who have signed the
Registration Statement, Prudential Securities Incorporated and each of its
directors and each person or entity who controls the Depositor or
Prudential Securities Incorporated or any such person, within the meaning
of Section 15 of the Securities Act, against any and all losses, claims,
damages or liabilities, joint and several, to which the Depositor,
Prudential Securities Incorporated or any such person or entity may become
subject, under the Securities Act or otherwise, and will reimburse the
Depositor, Prudential Securities Incorporated and each such controlling
person for any legal or other expenses incurred by the Depositor,
Prudential Securities Incorporated or such controlling person in
connection with investigating or defending any such loss, claim, damage,
liability or action, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of any material fact
contained in the Prospectus Supplement or any amendment or supplement to
the Prospectus Supplement or the omission or the alleged omission to state
therein a material fact required to be stated therein or necessary to make
the statements in the Prospectus Supplement or any amendment or supplement
to the Prospectus Supplement, in light of the circumstances under which
they were made, not misleading, except insofar as such claims arise out of
or are based upon any untrue statement or omission in the FSA Information
or the Depositor Information. This indemnity agreement will be in addition
to any liability which Emergent Group may otherwise have.
(ii) Emergent Group agrees to indemnify and to hold each of the
Depositor, the Trustee, the Certificate Insurer and each Certificateholder
harmless against any and all claims, losses, penalties, fines,
forfeitures, legal fees and related costs, judgments, and any other costs,
fees and expenses that the Depositor, the Trustee, the Certificate Insurer
and any Certificateholder may sustain in any way related to (i) the
failure of the Unaffiliated Seller or Emergent Group to perform its
23
<PAGE>
duties in compliance with the terms of this Agreement or (ii) the breach
by either the Unaffiliated Seller or Emergent Group of any of the
representations or warranties made by it in this Agreement.
(b) The Depositor agrees to indemnify and hold harmless the
Unaffiliated Seller, each of its directors and each person or entity who
controls the Unaffiliated Seller or any such person, within the meaning of
Section 15 of the Securities Act, against any and all losses, claims,
damages or liabilities, joint and several, to which the Unaffiliated
Seller or any such person or entity may become subject, under the
Securities Act or otherwise, and will reimburse the Unaffiliated Seller
and any such director or controlling person for any legal or other
expenses incurred by the Unaffiliated Seller or any such director or
controlling person in connection with investigating or defending any such
loss, claim, damage, liability or action, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement, the Prospectus, the
Prospectus Supplement, any amendment or supplement to the Prospectus or
the Prospectus Supplement or the omission or the alleged omission to state
therein a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they
were made, not misleading, but with respect to the Prospectus Supplement,
only to the extent that such untrue statement or alleged untrue statement
or omission or alleged omission relates to the information contained in
the Prospectus Supplement under the caption "Plan of Distribution" (the
information contained under the caption "Plan of Distribution" the
"Depositor Information"). This indemnity agreement will be in addition to
any liability which the Depositor may otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section 4.06 of notice of the commencement of any action, such indemnified
party will, if a claim in respect thereof is to be made against the
indemnifying party under this Section 4.06, notify the indemnifying party
in writing of the commencement thereof, but the omission to so notify the
indemnifying party will not relieve the indemnifying party from any
liability which the indemnifying party may have to any indemnified party
hereunder except to the extent such indemnifying party has been prejudiced
thereby. In case any such action is brought against any indemnified party,
and it notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein and, to the
extent that it may elect by written notice delivered to the indemnified
party promptly after receiving the aforesaid notice from such indemnified
party, to assume the defense thereof with counsel reasonably satisfactory
to such indemnified party. After notice from the indemnifying party to
such indemnified party of its election to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under this
Section 4.06 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than
reasonable costs of investigation; provided, however, if the defendants in
any such action
24
<PAGE>
include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be legal
defenses available to it that are different from or additional to those
available to the indemnifying party, the indemnified party or parties
shall have the right to select separate counsel to assert such legal
defenses and to otherwise participate in the defense of such action on
behalf of such indemnified party or parties. The indemnifying party shall
not be liable for the expenses of more than one separate counsel.
(d) The Depositor agrees, assuming all Emergent Group-Provided
Information (defined below) is accurate and complete in all material
respects, to indemnify and hold harmless Emergent Group, its respective
officers and directors and each person who controls Emergent Group within
the meaning of the Securities Act or the Exchange Act against any and all
losses, claims, damages or liabilities, joint or several, to which they
may become subject under the Securities Act or the Exchange Act or
otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue
statement of a material fact contained in the Derived Information provided
by the Depositor, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and agrees to
reimburse each such indemnified party for any legal or other expenses
reasonably incurred by him, her or it in connection with investigating or
defending or preparing to defend any such loss, claim, damage, liability
or action as such expenses are incurred. The obligations of the Depositor
under this Section 4.06(d) shall be in addition to any liability which the
Depositor may otherwise have.
The procedures set forth in Section 4.06(c) shall be equally
applicable to this Section 4.06(d).
(e) For purposes of this Section 4.06, the term "Derived
Information" means such portion, if any, of the information used by the
Depositor for filing with the Commission on Form 8-K as: (i) is not
contained in the Prospectus without taking into account information
incorporated therein by reference; and (ii) does not constitute Emergent
Group-Provided Information. "Emergent Group-Provided Information" means
any computer tape furnished to the Depositor by Emergent Group or the
Originator concerning the assets comprising the Trust Fund.
(f) In order to provide for just and equitable contribution in
circumstances in which the indemnity agreement provided for in the
preceding parts of this Section 4.06 is for any reason held to be
unavailable to or insufficient to hold harmless an indemnified party under
subsection(a) or subsection (b) of this Section 4.06 in respect of any
losses, claims, damages or liabilities (or actions in respect thereof)
referred to therein, the indemnifying party shall contribute to
25
<PAGE>
the amount paid or payable by the indemnified party as a result of such
losses, claims, damages or liabilities (or actions in respect thereof);
provided, however, that no person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be
entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. In determining the amount of contribution to
which the respective parties are entitled, there shall be considered the
relative benefits received by Emergent Group and the Unaffiliated Seller
on the one hand, and the Depositor on the other, Emergent Group and the
Unaffiliated Seller's, Emergent Group's and the Depositor's relative
knowledge and access to information concerning the matter with respect to
which the claim was asserted, the opportunity to correct and prevent any
statement or omission, and any other equitable considerations appropriate
in the circumstances. Emergent Group and the Unaffiliated Seller and the
Depositor agree that it would not be equitable if the amount of such
contribution were determined by pro rata or per capita allocation. For
purposes of this Section 4.06, each director of the Depositor, each
officer of the Depositor who signed the Registration Statement, and each
person, if any who controls the Depositor within the meaning of Section 15
of the Securities Act, shall have the same rights to contribution as the
Depositor, and each director of the Unaffiliated Seller, and each person,
if any who controls the Unaffiliated Seller within the meaning of Section
15 of the Securities Act, shall have the same rights to contribution as
the Unaffiliated Seller.
ARTICLE FIVE
CONDITIONS OF CLOSING
Section 5.01. Conditions of Depositor's Obligations. The obligations of
the Depositor to purchase the Initial Mortgage Loans and Additional Mortgage
Loans will be subject to the satisfaction, on the Closing Date, of the following
conditions. Upon payment of the purchase price for the Mortgage Loans, such
conditions shall be deemed satisfied or waived.
(a) Each of the obligations of the Unaffiliated Seller required to
be performed by it on or prior to the Closing Date pursuant to the terms
of this Agreement shall have been duly performed and complied with and all
of the representations and warranties of the Unaffiliated Seller and
Emergent Group under this Agreement shall be true and correct as of the
Closing Date and no event shall have occurred which, with notice or the
passage of time, would constitute a default under this Agreement, and the
Depositor shall have received a certificate to the effect of the foregoing
signed by an authorized officer of the Unaffiliated Seller.
(b) The Depositor shall have received a letter dated the date of
this Agreement, in form and substance acceptable to the Depositor and its
counsel, prepared by Ernst & Young, independent certified public
accountants, regarding the numerical information contained in the
Prospectus Supplement
26
<PAGE>
under the caption "The Mortgage Pool."
(c) [This subsection is reserved.]
(d) The Depositor shall have received the following additional
closing documents, in form and substance satisfactory to the Depositor and
its counsel:
(i) the Schedule of Mortgage Loans;
(ii) the Pooling and Servicing Agreement and the Underwriting
Agreement, dated as of August 28, 1997, between the Depositor and
Prudential Securities Incorporated and all documents required
thereunder, duly executed and delivered by each of the parties
thereto other than the Depositor;
(iii) an officer's certificate, dated as of the Closing Date,
in the form of Exhibit B hereto, and attached thereto resolutions of
the board of directors of the Unaffiliated Seller and a copy of the
by-laws of the Unaffiliated Seller;
(iv) copy of the Unaffiliated Seller's and Emergent Group's
charter and all amendments, revisions, and supplements thereof,
certified as of a recent date by the Secretary of State of the State
of Delaware and the State of South Carolina, respectively;
(v) an opinion of the counsel for the Unaffiliated Seller and
Emergent Group as to various corporate matters (it being agreed that
the opinion shall expressly provide that the Trustee shall be
entitled to rely on the opinion);
(vi) opinions of counsel for the Unaffiliated Seller, in forms
acceptable to the Depositor, its counsel, Standard & Poor's Ratings
Group and Moody's Investors Service, Inc. as to such matters as
shall be required for the assignment of a rating to the Class A
Certificates of "AAA" by Standard & Poor's Ratings Group, and "Aaa"
by Moody's Investors Service, Inc. (it being agreed that such
opinions shall expressly provide that the Trustee shall be entitled
to rely on such opinions);
(vii) a letter from Moody's Investors Service, Inc. that it
has assigned a rating of "Aaa" to the Class A Certificates;
27
<PAGE>
(viii) a letter from Standard & Poor's Ratings Group that it
has assigned a rating of "AAA" to the Class A Certificates;
(ix) an opinion of counsel for the Trustee in form and
substance acceptable to the Depositor, its counsel, Moody's
Investors Service, Inc. and Standard & Poor's Ratings Group (it
being agreed that the opinion shall expressly provide that the
Unaffiliated Seller shall be entitled to rely on the opinion);
(x) an opinion or opinions of counsel for the Certificate
Insurer, in each case in form and substance acceptable to the
Depositor, its counsel, Moody's Investors Service, Inc. and Standard
& Poor's Ratings Group (it being agreed that the opinion shall
expressly provide that the Unaffiliated Seller shall be entitled to
rely on the opinion); and
(e) The Policy shall have been duly executed, delivered and issued
with respect to the Certificates.
(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;
28
<PAGE>
and
(ii) a copy of a letter from Moody's Investors Service, Inc.
to the Depositor to the effect that it has assigned a rating of
"Aaa" to the Class A Certificates and a copy of a letter from
Standard & Poor's Ratings Group to the Depositor to the effect that
it has assigned a rating of "AAA" to the Class A Certificates.
(c) The Depositor shall have furnished the Unaffiliated Seller with
such other certificates of its officers or others and such other documents
to evidence fulfillment of the conditions set forth in this Agreement as
the Unaffiliated Seller may reasonably request.
Section 5.03. Termination of Depositor's Obligations. The Depositor may
terminate its obligations hereunder by notice to the Unaffiliated Seller at any
time before delivery of and payment of the Purchase Price for the Initial
Mortgage Loans and Additional Mortgage Loans if: (i) any of the conditions set
forth in Section 5.01 are not satisfied when and as provided therein; (ii) there
shall have been the entry of a decree or order by a court or agency or
supervisory authority having jurisdiction in the premises for the appointment of
a conservator, receiver or liquidator in any insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings of or relating to
the Unaffiliated Seller or Emergent Group, or for the winding up or liquidation
of the affairs of the Unaffiliated Seller; (iii) there shall have been the
consent by the Unaffiliated Seller or Emergent Group to the appointment of a
conservator or receiver or liquidator in any insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings of or relating to
the Unaffiliated Seller or Emergent Group or of or relating to substantially all
of the property of the Unaffiliated Seller or Emergent Group; (iv) any purchase
and assumption agreement with respect to the Unaffiliated Seller or Emergent
Group or the assets and properties of the Unaffiliated Seller or Emergent Group
shall have been entered into; or (v) a Termination Event shall have occurred.
The termination of the Depositor's obligations hereunder shall not terminate the
Depositor's rights hereunder or its right to exercise any remedy available to it
at law or in equity.
ARTICLE SIX
MISCELLANEOUS
Section 6.01. Notices. All demands, notices and communications hereunder
shall be in writing and shall be deemed to have been duly given if personally
delivered to or mailed by registered mail, postage prepaid, or transmitted by
telex or telegraph and confirmed by a similar mailed writing, if to the
Depositor, addressed to the Depositor at Prudential Securities Secured Financing
Corporation, One New York Plaza, New York, New York 10292, if to the
Unaffiliated Seller, addressed to the Unaffiliated Seller at Emergent Mortgage
Holdings Corporation, 44 E. Camperdown Way, Greenville, South Carolina 29601,
Attention: William P. Crawford or to such other address as the Unaffiliated
Seller may designate in writing to the Depositor and if to Emergent Group,
29
<PAGE>
addressed to Emergent Group, Inc., 15 South Main Street, Suite 750, Greenville,
South Carolina 29601, Attention: Kevin J. Mast.
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 and
Emergent Group.
Section 6.07. Governing Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of New York (without
regard to conflicts of laws principles), and the obligations, rights and
remedies of the parties hereunder shall be determined in accordance with such
laws.
30
<PAGE>
Section 6.08. Confirmation of Intent. It is the express intent of the
parties hereto that the conveyance of the Mortgage Loans by the Unaffiliated
Seller to the Depositor as contemplated by this Unaffiliated Seller's Agreement
be, and be treated for all purposes as, a sale by the Unaffiliated Seller to the
Depositor of the Mortgage Loans. It is, further, not the intention of the
parties that such conveyance be deemed a pledge of the Mortgage Loans by the
Unaffiliated Seller to the Depositor to secure a debt or other obligation of the
Unaffiliated Seller. However, in the event that, notwithstanding the intent of
the parties, the Mortgage Loans are held to continue to be property of the
Unaffiliated Seller then (a) this Unaffiliated Seller's Agreement shall also be
deemed to be a security agreement within the meaning of Articles 8 and 9 of the
Uniform Commercial Code; (b) the transfer of the Mortgage Loans provided for
herein shall be deemed to be a grant by the Unaffiliated Seller to the Depositor
of a security interest in all of the Unaffiliated Seller's right, title and
interest in and to the Mortgage Loans and all amounts payable on the Mortgage
Loans in accordance with the terms thereof and all proceeds of the conversion,
voluntary or involuntary, of the foregoing into cash, instruments, securities or
other property; (c) the possession by the Depositor of Mortgage Loans and such
other items of property as constitute instruments, money, negotiable documents
or chattel paper shall be deemed to be "possession by the secured party" for
purposes of perfecting the security interest pursuant to Section 9-305 of the
Uniform Commercial Code; and (d) notifications to persons holding such property,
and acknowledgments, receipts or confirmations from persons holding such
property, shall be deemed notifications to, or acknowledgments, receipts or
confirmations from, financial intermediaries, bailees or agents (as applicable)
of the Depositor for the purpose of perfecting such security interest under
applicable law. Any assignment of the interest of the Depositor pursuant to any
provision hereof shall also be deemed to be an assignment of any security
interest created hereby. The Unaffiliated Seller and the Depositor shall, to the
extent consistent with this Unaffiliated Seller's Agreement, take such actions
as may be necessary to ensure that, if this Unaffiliated Seller's Agreement were
deemed to create a security interest in the Mortgage Loans, such security
interest would be deemed to be a perfected security interest of first priority
under applicable law and would be maintained as such throughout the term of this
Agreement.
Section 6.09. Execution in Counterparts. This Agreement may be executed in
any number of counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instrument.
Section 6.10. Amendments. This Agreement supersedes all prior agreements
and understandings relating to the subject matter hereof.
(a) This Agreement may be amended by the Unaffiliated Seller, the
Depositor and Emergent Group, with the prior written consent of the
Certificate Insurer (so long as a Certificate Insurer Default shall not
have occurred and be continuing) but without the consent of the Trustee or
any of the Certificateholders (unless a Certificate Insurer Default shall
have occurred, in
31
<PAGE>
which event the consent of the Certificateholders with Voting Rights equal
to or in excess of 50% shall be obtained) (i) to cure any ambiguity or
(ii) to correct any provisions in this Agreement; provided, however, that
such action shall not, as evidenced by an Opinion of Counsel delivered to
the Trustee, adversely affect in any material respect the interests of any
Certificateholder.
(b) This Agreement may also be amended from time to time by the
Unaffiliated Seller, the Depositor and Emergent Group with the prior
written consent of the Certificate Insurer (so long as a Certificate
Insurer Default shall not have occurred and be continuing) and with the
consent of the Trustee and Certificateholders having Voting Rights equal
to or in excess of 50%, for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this
Agreement, or of modifying in any manner the rights of the
Certificateholders; provided, however, that no such amendment shall (i)
increase or reduce in any manner the amount of, or accelerate or delay the
timing of, collections of payments on Mortgage Loans or distributions that
shall be required to be made on any Certificate or the Pass-Through Rates
or (ii) reduce the aforesaid percentage required to consent to any such
amendment or any waiver hereunder, without the consent of the Holders of
all Certificates then outstanding.
(c) Prior to the execution of any such amendment or consent,
Emergent Group shall have furnished written notification of the substance
of such amendment or consent to each Rating Agency.
(d) Promptly after the execution of any such amendment or consent,
the Trustee shall furnish written notification of the substance of such
amendment or consent to each Certificateholder.
(e) It shall not be necessary for the consent of Certificateholders
pursuant to this Section to approve the particular form of any proposed
amendment or consent, but it shall be sufficient if such consent shall
approve the substance thereof. The manner of obtaining such consents and
of evidencing the authorization of the execution thereof by
Certificateholders shall be subject to such reasonable requirements as the
Trustee may prescribe, including the establishment of record dates. The
consent of any Holder of a Certificate given pursuant to this Section or
pursuant to any other provision of this Agreement shall be conclusive and
binding on such Holder and on all future Holders of such Certificate and
of any Certificate issued upon the transfer thereof or in exchange thereof
or in lieu thereof whether or not notation of such consent is made upon
the Certificate.
Section 6.11. Miscellaneous.
(a) The parties agree that each of the Certificate Insurer and the
Trustee is an intended third-party beneficiary of this Agreement to the
extent necessary to enforce the rights and to obtain the benefit of the
remedies of the
32
<PAGE>
Depositor under this Agreement which are assigned to the Trustee for the
benefit of the Certificateholders pursuant to the Pooling and Servicing
Agreement and to the extent necessary to obtain the benefit of the
enforcement of the obligations and covenants of the Unaffiliated Seller
under Section 3.05 and 4.06 of this Agreement. The parties further agree
that Prudential Securities Incorporated and each of its directors and each
person or entity who controls Prudential Securities Incorporated or any
such person, within the meaning of Section 15 of the Securities Act (each,
an "Underwriter Entity") is an intended third-party beneficiary of this
Agreement to the extent necessary to obtain the benefit of the enforcement
of the obligations and covenants of the Unaffiliated Seller with respect
to each Underwriter Entity under Section 4.06 of this Agreement.
(b) The Depositor, Emergent Group and the Unaffiliated Seller intend
the conveyance by the Unaffiliated Seller to the Depositor of all of its
right, title and interest in and to the Mortgage Loans pursuant to this
Agreement to constitute a purchase and sale and not a loan.
[Signatures Commence on Following Page]
33
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their names to be
signed by their respective officers thereunto duly authorized as of the date
first above written.
PRUDENTIAL SECURITIES SECURED
FINANCING CORPORATION
By:________________________________
Name: Glen Stein
Title: Vice President
EMERGENT MORTGAGE HOLDINGS
CORPORATION
By:________________________________
Name: Kevin J. Mast
Title: Vice President
EMERGENT GROUP, INC.
By:________________________________
Name: Kevin J. Mast
Title: Vice President, CFO
and Treasurer
<PAGE>
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
On September 24, 1997 before me, the undersigned, a Notary Public in and
for said County and State, personally appeared Glen Stein, personally known to
me (or proved to me on the basis of satisfactory evidence) to be Glen Stein of
Prudential Securities Secured Financing Corporation, a Delaware corporation, the
corporation that executed the within Unaffiliated Seller's Agreement on behalf
of said corporation, and acknowledged to me that said corporation executed it.
----------------------------------
Notary Public
My Commission expires:
<PAGE>
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
On September 24, 1997 before me, the undersigned, a Notary Public in and
for said County and State, personally appeared Kevin J. Mast, personally known
to me (or proved to me on the basis of satisfactory evidence) to be Kevin J.
Mast of Emergent Group, Inc., the corporation that executed the within
Unaffiliated Seller's Agreement on behalf of said corporation, and acknowledged
to me that said corporation executed it.
----------------------------------
Notary Public
My Commission expires:
<PAGE>
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
On September 24, 1997 before me, the undersigned, a Notary Public in and
for said County and State, personally appeared Kevin J. Mast, personally known
to me (or proved to me on the basis of satisfactory evidence) to be Kevin J.
Mast of Emergent Mortgage Holdings Corporation, the corporation that executed
the within Unaffiliated Seller's Agreement on behalf of said corporation, and
acknowledged to me that said corporation executed it.
----------------------------------
Notary Public
My Commission expires:
<PAGE>
EXHIBIT A
SCHEDULE OF MORTGAGE LOANS
<PAGE>
EXHIBIT B
OFFICER'S CERTIFICATE
I, Kevin J. Mast, Vice President of EMERGENT MORTGAGE HOLDINGS CORPORATION
(the "Company") do hereby certify as follows:
(1) No financing statements or other filings have been filed naming the
Company as debtor or seller in any State of the United States of America to
perfect a sale, transfer or assignment of or lien, encumbrance, security
interest or other interest in, or which otherwise pertains to, the Mortgage
Loans other than those filed in connection with the Unaffiliated Seller's
Agreement and the Pooling and Servicing Agreement.
(2) The Company's chief executive office is located at 44 East Camperdown
Way, Greenville, South Carolina 29601.
Capitalized terms used herein and not otherwise defined shall have the
meanings ascribed to such terms in the Pooling and Servicing Agreement dated as
of August 10, 1997, among Prudential Securities Secured Financing Corporation,
as Depositor, Emergent Mortgage Corp., as Servicer, and First Union National
Bank, as Trustee.
IN WITNESS WHEREOF, I have set my hand this 24th day of September, 1997.
EMERGENT MORTGAGE HOLDINGS
CORPORATION
By:_____________________________
Name: Kevin J. Mast
Title: Vice President
B-1
EXECUTION COPY
PURCHASE AGREEMENT AND ASSIGNMENT
among
EMERGENT MORTGAGE HOLDINGS CORPORATION
as Purchaser
EMERGENT MORTGAGE CORP.
as Seller
and
EMERGENT GROUP, INC.
dated as of
August 10, 1997
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITIONS ...................................................... 1
SECTION 1.1 GENERAL .................................................. 1
SECTION 1.2 SPECIFIC TERMS ........................................... 1
SECTION 1.3 USAGE OF TERMS ........................................... 2
SECTION 1.4 CERTAIN REFERENCES ....................................... 2
SECTION 1.5 NO RECOURSE .............................................. 3
SECTION 1.6 ACTION BY OR CONSENT OF CERTIFICATEHOLDERS ............... 3
SECTION 1.7 MATERIAL ADVERSE EFFECT .................................. 3
ARTICLE II CONVEYANCE OF THE MORTGAGE LOANS AND THE OTHER CONVEYED
PROPERTY ........................................................ 3
SECTION 2.1 CONVEYANCE OF INITIAL AND ADDITIONAL MORTGAGE LOANS ...... 3
SECTION 2.2 CONVEYANCE OF PRE-FUNDED MORTGAGE LOANS ................. 3
SECTION 2.3 PURCHASE PRICE ........................................... 4
ARTICLE III REPRESENTATIONS AND WARRANTIES ................................. 4
SECTION 3.1 REPRESENTATIONS AND WARRANTIES OF THE SELLER ............. 4
SECTION 3.2 REPRESENTATIONS AND WARRANTIES OF PURCHASER .............. 7
SECTION 3.3 INDEMNIFICATION .......................................... 8
SECTION 3.4 REPRESENTATIONS AND WARRANTIES OF EMERGENT GROUP ......... 10
ARTICLE IV COVENANTS OF THE SELLER ......................................... 11
SECTION 4.1 PROTECTION OF TITLE OF PURCHASER, THE DEPOSITOR
AND THE TRUST ............................................ 11
SECTION 4.2 OTHER LIENS OR INTERESTS ................................. 12
SECTION 4.3 COSTS AND EXPENSES ....................................... 12
ARTICLE V REPURCHASES ...................................................... 13
SECTION 5.1 REPURCHASE OF MORTGAGE LOANS UPON BREACH OF WARRANTY ..... 13
SECTION 5.2 REASSIGNMENT OF PURCHASED MORTGAGE LOANS ................. 13
SECTION 5.3 WAIVERS .................................................. 14
ARTICLE VI MISCELLANEOUS ................................................... 14
SECTION 6.1 LIABILITY OF THE SELLER .................................. 14
SECTION 6.2 MERGER OR CONSOLIDATION OF ANY SELLER OR PURCHASER ....... 14
SECTION 6.3 LIMITATION ON LIABILITY OF THE SELLER AND OTHERS ......... 15
SECTION 6.4 AMENDMENT ................................................ 15
SECTION 6.5 NOTICES .................................................. 16
SECTION 6.6 MERGER AND INTEGRATION ................................... 16
SECTION 6.7 SEVERABILITY OF PROVISIONS ............................... 16
SECTION 6.8 INTENTION OF THE PARTIES ................................. 17
SECTION 6.9 GOVERNING LAW ............................................ 17
SECTION 6.10 COUNTERPARTS ............................................. 17
SECTION 6.11 CONVEYANCE OF THE MORTGAGE LOANS AND THE OTHER
CONVEYED PROPERTY TO THE TRUST ........................... 17
SECTION 6.12 NONPETITION COVENANT ..................................... 18
SECTION 6.13 MISCELLANEOUS ............................................ 18
i
<PAGE>
Schedules
Schedule A - Schedule of Mortgage Loans Conveyed
Schedule B - Schedule of Representations
ii
<PAGE>
PURCHASE AGREEMENT AND ASSIGNMENT
THIS PURCHASE AGREEMENT AND ASSIGNMENT, dated as of August 10, 1997,
executed among Emergent Mortgage Holdings Corporation, a Delaware corporation
(the "Purchaser"), Emergent Mortgage Corp., a South Carolina corporation (the
"Seller") and Emergent Group, Inc., a South Carolina corporation ("Emergent
Group").
W I T N E S S E T H:
WHEREAS, Purchaser has agreed to purchase from Seller, and Seller,
pursuant to this Agreement, is transferring to Purchaser the Mortgage Loans and
Other Conveyed Property.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements hereinafter contained, and for other good and valuable consideration,
the receipt of which is acknowledged, Purchaser and Seller, intending to be
legally bound, hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 General. The specific terms defined in this Article
include the plural as well as the singular. The words "herein", "hereof" and
"hereunder" and other words of similar import refer to this Agreement as a whole
and not to any particular Article, Section or other subdivision, and Article,
Section, Schedule and Exhibit references, unless otherwise specified, refer to
Articles and Sections of and Schedules and Exhibits to this Agreement.
Capitalized terms used herein without definition shall have the respective
meanings assigned to such terms in the Pooling and Servicing Agreement (defined
herein).
Section 1.2 Specific Terms. Whenever used in this Agreement, the
following words and phrases, unless the context otherwise requires, shall have
the following meanings:
"Additional Mortgage Loans" means the mortgage loans listed on the
Schedule of Mortgage Loans Conveyed which were identified subsequent to August
10, 1997 but prior to the Closing Date.
"Agreement" shall mean this Purchase Agreement and Assignment and
all amendments hereof and supplements hereto.
"Initial Mortgage Loans" means the mortgage loans listed on the
Schedule of Mortgage Loans Conveyed which were identified as of August 10, 1997.
"Lien" means a security interest, lien, charge, pledge, equity or
encumbrance of any kind other than tax liens, mechanics liens and liens that
attach to a Mortgaged Property by operation of law.
"Mortgage Loans" means the Initial Mortgage Loans, the Additional
Mortgage Loans and the Pre-Funded Mortgage Loans and any mortgage loan
substituting or replacing a Mortgage Loan pursuant to the terms of the Pooling
and Servicing Agreement.
<PAGE>
"Other Conveyed Property" means all monies at any time paid or
payable on the Mortgage Loans or in respect thereof after the Cut-off Date
(including amounts due on or before the Cut-off Date but received by the Seller
after the Cut-off Date), the insurance policies relating to the Mortgage Loans
and all Insurance Proceeds, the Mortgage Files, and any REO Property, together
with all collections thereon and proceeds thereof.
"Pooling and Servicing Agreement" means the Pooling and Servicing
Agreement, dated as of August 10, 1997, among Prudential Securities Secured
Financing Corporation, as Depositor, Emergent Mortgage Corp. as Servicer, and
First Union National Bank, as Trustee, as the same may be amended, modified or
supplemented from time to time.
"Pre-Funded Mortgage Loans" has the meaning ascribed thereto in
Section 2.2.
"Purchaser" means Emergent Mortgage Holdings Corporation.
"Related Documents" means the Unaffiliated Seller's Agreement, the
Insurance Agreement and the Indemnification Agreement among the Seller, the
Purchaser, Prudential Securities Incorporated, the Depositor, Emergent Group and
Financial Securities Assurance Corporation relating to the Policy.
"Schedule of Mortgage Loans Conveyed" means the schedule of Initial
Mortgage Loans and Additional Mortgage Loans and related mortgage notes attached
hereto as Schedule A, which Schedule shall be deemed to be amended to reflect
any Mortgage Loan Schedule relating to any Pre-Funded Mortgage Loans to be
transferred to the Purchaser pursuant to Section 2.2.
"Schedule of Representations" means the Schedule of Representations
and Warranties attached hereto as Schedule B.
"Seller Repurchase Event" means with respect to the Seller, the
occurrence of a breach of any of Seller's representations and warranties under
Schedule B hereto.
"Seller" means Emergent Mortgage Corp.
Section 1.3 Usage of Terms. With respect to all terms used in this
Agreement, the singular includes the plural and the plural the singular; words
importing any gender include the other genders; references to "writing" include
printing, typing, lithography, and other means of reproducing words in a visible
form; references to agreements and other contractual instruments include all
subsequent amendments thereto or changes therein entered into in accordance with
their respective terms and not prohibited by this Agreement or the Pooling and
Servicing Agreement; references to Persons include their permitted successors
and assigns; and the terms "include" or "including" mean "include without
limitation" or "including without limitation."
Section 1.4 Certain References. All references to the Stated
Principal Balance of a Mortgage Loan as of a Record Date shall refer to the
close of business on such day, or as of
2
<PAGE>
the first day of a Collection Period shall refer to the opening of business on
such day. All references to the last day of a Collection Period shall refer to
the close of business on such day
Section 1.5 No Recourse. Without limiting the obligations of Seller
hereunder, no recourse may be taken, directly or indirectly, under this
Agreement or any certificate or other writing delivered in connection herewith
or therewith, against any stockholder, officer or director, as such, of the
Seller, or of any predecessor or successor of any of the Seller.
Section 1.6 Action by or Consent of Certificateholders. Whenever any
provision of this Agreement refers to action to be taken, or consented to, by
Certificateholders, such provision shall be deemed to refer to
Certificateholders of record as of the Record Date immediately preceding the
date on which such action is to be taken, or consent given, by
Certificateholders. Solely for the purposes of any action to be taken, or
consented to, by Certificateholders, any Certificate registered in the name of
the Seller or any Affiliate thereof shall be deemed not to be outstanding and
the Percentage Interest evidenced thereby shall not be taken into account in
determining whether the requisite Percentage Interest necessary to effect any
such action or consent has been obtained; provided, however, that, solely for
the purpose of determining whether the Trustee is entitled to rely upon any such
action or consent, only Certificates which the Trustee knows to be so owned
shall be so disregarded.
Section 1.7 Material Adverse Effect. Whenever a determination is to
be made under this Agreement as to whether a given event, action, course of
conduct or set of facts or circumstances could or would have a material adverse
effect on the Trust Fund or the Certificateholders (or any similar or analogous
determination), such determination shall be made without taking into account the
funds available from claims under the Policy.
ARTICLE II
CONVEYANCE OF THE MORTGAGE LOANS
AND THE OTHER CONVEYED PROPERTY
Section 2.1 Conveyance of Initial and Additional Mortgage Loans.
Subject to the terms and conditions of this Agreement, the Seller hereby sells,
to Purchaser without recourse (but without limitation of its obligations in this
Agreement), and Purchaser hereby purchases, all right, title and interest of the
Seller in and to the Mortgage Loans, the Additional Mortgage Loans and the Other
Conveyed Property relating thereto. It is the intention of the Seller and
Purchaser that the transfer and assignment contemplated by this Agreement shall
constitute a sale of such Mortgage Loans and the Other Conveyed Property
relating thereto from the Seller to Purchaser, conveying good title thereto free
and clear of any Liens, and such Mortgage Loans and Other Conveyed Property
shall not be part of the Seller's estate in the event of the filing of a
bankruptcy petition by or against the Seller under any bankruptcy or similar
law.
Section 2.2 Conveyance of Pre-Funded Mortgage Loans. (a) Subject to
the terms and conditions of this Agreement, the Seller hereby agrees to
sell, and the Purchaser agrees to purchase, additional mortgage loans
satisfying the requirements of Section 2.02(c) of the Pooling and
Servicing Agreement ("Pre-Funded Mortgage Loans"),
3
<PAGE>
having an aggregate Stated Principal Balance as of their respective
Cut-off dates of up to the Original Pre-Funded Amount, together with the
Other Conveyed Property relating thereto. It is the intention of the
Seller and Purchaser that the transfer and assignment contemplated by this
Agreement shall constitute a sale of such Pre-Funded Mortgage Loans and
Other Conveyed Property from the Seller to Purchaser, conveying good title
thereto free and clear of any liens, and such Mortgage Loans and Other
Conveyed Property shall not be part of the Seller's estate in the event of
the filing of a bankruptcy petition by or against the Seller under any
bankruptcy or similar law.
(b) The Seller shall be obligated to sell Pre-Funded Mortgage Loans
and Other Conveyed Property relating thereto pursuant to this Section 2.2
subject only to the availability thereof during the Pre-Funding Period
through the Seller's normal mortgage loan origination and acquisition
activities.
(c) In consideration of the Purchaser's delivery on the related
Pre-Funded Loan Transfer Dates to or upon the order of the Seller of the
purchase price therefor, the Seller shall 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
Seller in and to the relevant Pre-Funded Mortgage Loans, including all
principal outstanding as of, and all interest due after, the related
Cut-off Date, and all other assets in respect of the relevant Pre-Funded
Mortgage Loans included or to be included in the Trust Fund for the
benefit of the Certificateholders and the Certificate Insurer. In
connection with each such sale, the Seller and the Purchaser shall execute
and deliver an instrument of transfer substantially in the form of Exhibit
G to the Pooling and Servicing Agreement (the "Pre-Funded Mortgage Loan
Transfer Agreement").
Section 2.3 Purchase Price. (a) Simultaneously with the conveyance
of the Initial Mortgage Loans and Additional Mortgage Loans and the Other
Conveyed Property relating thereto to Purchaser, Purchaser has paid or
caused to be paid to or upon the order of Seller, as full consideration
therefor, $131,251,868.69 (which amount represents $170,130,436.68 less
the Original Pre-Funded Amount), less certain expenses, by wire transfer
of immediately available funds (representing the proceeds to Purchaser
from the sale of the Initial Mortgage Loans to the Depositor and the
Additional Mortgage Loans).
(b) On each Pre-Funded Loan Transfer Date, as full consideration for
Seller's sale to the Purchaser of the related Pre-Funded Mortgage Loans
and Other Conveyed Property relating thereto, the Purchaser will deliver
to the Seller an amount in cash equal to the sum of 100% of the aggregate
Stated Principal Balance of the Pre-Funded Mortgage Loans as of the
related Cut-off Date.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.1 Representations and Warranties of the Seller. Seller
makes the following representations and warranties, on which Purchaser relies in
purchasing the Mortgage Loans and the Other
4
<PAGE>
Conveyed Property and in transferring the Mortgage Loans and the Other Conveyed
Property to the Depositor under the Unaffiliated Seller's Agreement, on which
the Depositor will rely in transferring the Mortgage Loans and the Other
Conveyed Property to the Trustee under the Pooling and Servicing Agreement and
on which the Certificate Insurer will rely in issuing the Policy. Such
representations are made (i) as of the execution and delivery of this Agreement
, (ii) as of the Closing Date and (iii) as of each Pre-Funded Loan Transfer
Date, but shall survive the sale, transfer and assignment of the Mortgage Loans
and the Other Conveyed Property hereunder, the sale, transfer and assignment
thereof by the Seller to the Depositor under the Unaffiliated Seller's Agreement
and the sale, transfer and assignment thereof by the Depositor to the Trustee
under the Pooling and Servicing Agreement. Seller and Purchaser agree that
Purchaser will assign to the Depositor all of Purchaser's rights under this
Agreement, the Depositor will assign to the Trustee all of Purchaser's rights
under this Agreement and that the Trustee will thereafter be entitled to enforce
this Agreement directly against the Seller in the Trustee's own name on behalf
of the Certificateholders and the Certificate Insurer.
(a) Schedule of Representations. The representations and warranties
made by the Seller and set forth on the Schedule of Representations are
true and correct.
(b) Organization and Good Standing. The Seller has been duly
organized and is validly existing as a corporation in good standing under
the laws of the State of South Carolina, with power and authority to own
its properties and to conduct its business as such properties are
currently owned and such business is currently conducted, and had at all
relevant times and now has, power, authority and legal right to enter into
and perform its obligations under this Agreement.
(c) Due Qualification. The Seller is duly qualified to do business
as a foreign corporation in good standing, and has obtained all necessary
licenses and approvals, in all jurisdictions in which the ownership or
lease of its property or the conduct of its business requires such
qualification.
(d) Power and Authority. The Seller has the power and authority to
execute and deliver this Agreement and to carry out its terms; the Seller
has full power and authority to sell and assign the Mortgage Loans and
Other Conveyed Property to be sold and assigned to and deposited with
Purchaser hereunder and has duly authorized such sale and assignment to
Purchaser by all necessary corporate action and the execution, delivery
and performance of this Agreement has been duly authorized by the Seller
by all necessary corporate action.
(e) No False Statement. Neither this Agreement nor the information
contained in the Prospectus Supplement, other than under the captions "The
Insurer" and "Plan of Distribution," nor any statement, report or other
document prepared by the Seller and furnished or to be furnished pursuant
to this Agreement or in connection with the transactions contemplated
hereby contains any untrue statement or alleged untrue statement of any
material fact or omits to state a material fact necessary to make the
statements contained herein or therein, in light of the circumstances
under which they were made, not misleading.
5
<PAGE>
(f) Valid Sale; Binding Obligations. This Agreement has been duly
executed and delivered, shall effect a valid sale, transfer and assignment
of the Mortgage Loans and the Other Conveyed Property, enforceable against
the Seller and creditors of and purchasers from the Seller, and this
Agreement constitutes the legal, valid and binding obligation of the
Seller enforceable in accordance with its respective terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization or
other similar laws affecting the enforcement of creditors' rights
generally and by equitable limitations on the availability of specific
remedies, regardless of whether such enforceability is considered in a
proceeding in equity or at law.
(g) No Violation. The consummation of the transactions contemplated
by this Agreement and the fulfillment of the terms of this Agreement does
not conflict with, result in any breach of any of the terms and provisions
of, or constitute (with or without notice or lapse of time) a default
under, the articles of incorporation or bylaws of the Seller, or any
material indenture, agreement, mortgage, deed of trust or other instrument
to which the Seller is a party or by which it is bound or any of its
properties are subject, or result in the creation or imposition of any
lien upon any of its properties pursuant to the terms of any such
indenture, agreement, mortgage, deed of trust or other instrument, other
than this Agreement or violate any law, order, rule or regulation
applicable to the Seller of any court or of any federal or state
regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Seller or any of its
properties, or in any way materially adversely affect the interest of the
Certificateholders or the Trustee in any Mortgage Loan, or affect the
Seller's ability to perform its obligations under this Agreement;
(h) No Proceedings. There are no proceedings or investigations
pending or, to the Seller's knowledge, threatened against the Seller,
before any court, regulatory body, administrative agency or other tribunal
or governmental instrumentality having jurisdiction over the Seller or its
properties (i) asserting the invalidity of this Agreement, (ii) seeking to
prevent the issuance of the Certificates or the consummation of any of the
transactions contemplated by this Agreement, (iii) seeking any
determination or ruling that might materially and adversely affect the
performance by the Seller of its obligations under, or the validity or
enforceability of, this Agreement, (iv) involving the Seller or which
might adversely affect the federal income tax or other federal, state or
local tax attributes of the Certificates or (v) that could have a material
adverse effect on the Mortgage Loans. To the Seller's knowledge, there are
no proceedings or investigations pending or threatened against the Seller,
before any court, regulatory body, administrative agency or other tribunal
or governmental instrumentality having jurisdiction over the Seller or its
properties relating to the Seller which might adversely affect the federal
income tax or other federal, state or local tax attributes of the
Certificates;
(i) No Consents. The Seller is not required to obtain the consent of
any other party or any consent, license, approval or authorization, or
registration or declaration with, any governmental authority, bureau or
agency in connection with the execution, delivery, performance, validity
or enforceability of this Agreement except such consents as have been
obtained;
6
<PAGE>
(j) Approvals. All approvals, authorizations, orders or other
actions of any person, corporation or other organization, or of any court,
governmental agency or body or official, required in connection with the
execution and delivery by the Seller of this Agreement and the
consummation of the transactions contemplated hereby have been or will be
taken or obtained on or prior to the Closing Date.
(k) Chief Executive Office. The chief executive office of Emergent
Mortgage Corp. is located at 50 Datastream Plaza, Suite 201, Greenville,
South Carolina 29605.
Section 3.2 Representations and Warranties of Purchaser. Purchaser
makes the following representations and warranties, on which Seller relies in
selling, assigning, transferring and conveying the Mortgage Loans and the Other
Conveyed Property to Purchaser hereunder. Such representations are made (i) as
of the execution and delivery of this Agreement, (ii) as of the Closing Date,
and (iii) as of each Pre-Funded Loan Transfer Date, but shall survive the sale,
transfer and assignment of the Mortgage Loans and the Other Conveyed Property
hereunder, the sale, transfer and assignment thereof by Purchaser to the
Depositor under the Unaffiliated Seller's Agreement and the sale, transfer and
assignment thereof by the Depositor to the Trustee under the Pooling and
Servicing Agreement.
(a) Organization and Good Standing. Purchaser has been duly
organized and is validly existing and in good standing as a corporation
under the laws of the State of Delaware, with the power and authority to
own its properties and to conduct its business as such properties are
currently owned and such business is currently conducted, and had at all
relevant times, and has, full power, authority and legal right to acquire
and own the Mortgage Loans and the Other Conveyed Property, and to
transfer the Mortgage Loans and the Other Conveyed Property to the
Depositor pursuant to the Unaffiliated Seller's Agreement.
(b) Due Qualification. Purchaser is duly qualified to do business as
a foreign corporation in good standing, and has obtained all necessary
licenses and approvals in all jurisdictions where the failure to do so
would materially and adversely affect Purchaser's ability to acquire the
Mortgage Loans or the Other Conveyed Property or the validity or
enforceability of the Mortgage Loans and the Other Conveyed Property or to
perform Purchaser's obligations hereunder and under the Related Documents.
(c) Power and Authority. Purchaser has the power, authority and
legal right to execute and deliver this Agreement and to carry out the
terms hereof and to acquire the Mortgage Loans and the Other Conveyed
Property hereunder; and the execution, delivery and performance of this
Agreement and all of the documents required pursuant hereto have been duly
authorized by Purchaser by all necessary action.
(d) No Consent Required. Purchaser is not required to obtain the
consent of any other Person, or any consent, license, approval or
authorization or registration or declaration with, any governmental
authority, bureau or agency in connection with the execution, delivery or
performance of this Agreement and the Related Documents, except for such
as have been obtained, effected or made.
7
<PAGE>
(e) Binding Obligation. This Agreement constitutes a legal, valid
and binding obligation of Purchaser, enforceable against Purchaser in
accordance with its terms, subject, as to enforceability, to applicable
bankruptcy, insolvency, reorganization, conservatorship, receivership,
liquidation and other similar laws and to general equitable principles.
(f) No Violation. The execution, delivery and performance by
Purchaser of this Agreement, the consummation of the transactions
contemplated by this Agreement and the Related Documents and the
fulfillment of the terms of this Agreement and the Related Documents do
not and will not conflict with, result in any breach of any of the terms
and provisions of, or constitute (with or without notice or lapse of time)
a default under, the certificate of incorporation or bylaws of Purchaser,
or conflict with or breach any of the terms or provisions of, or
constitute (with or without notice or lapse of time) a default under, any
indenture, agreement, mortgage, deed of trust or other instrument to which
Purchaser is a party or by which Purchaser is bound or to which any of its
properties are subject, or result in the creation or imposition of any
lien upon any of its properties pursuant to the terms of any such
indenture, agreement, mortgage, deed of trust or other instrument (other
than the Unaffiliated Seller's Agreement, or violate any law, order, rule
or regulation, applicable to Purchaser or its properties, of any federal
or state regulatory body, any court, administrative agency, or other
governmental instrumentality having jurisdiction over Purchaser or any of
its properties.
(g) No Proceedings. There are no proceedings or investigations
pending, or, to the knowledge of Purchaser, threatened against Purchaser,
before any court, regulatory body, administrative agency, or other
tribunal or governmental instrumentality having jurisdiction over
Purchaser or its properties: (i) asserting the invalidity of this
Agreement or any of the Related Documents, (ii) seeking to prevent the
consummation of any of the transactions contemplated by this Agreement or
any of the Related Documents, (iii) seeking any determination or ruling
that might materially and adversely affect the performance by Purchaser of
its obligations under, or the validity or enforceability of, this
Agreement or any of the Related Documents or (iv) that may adversely
affect the federal or state income tax attributes of, or seeking to impose
any excise, franchise, transfer or similar tax upon, the transfer and
acquisition of the Mortgage Loans and the Other Conveyed Property
hereunder or the transfer by Purchaser of the Mortgage Loans and the Other
Conveyed Property to the Depositor pursuant to the Unaffiliated Seller's
Agreement.
In the event of any breach of a representation and warranty made by Purchaser
hereunder, the Seller covenants and agrees that it will take any action to
pursue any remedy that it may have hereunder, in law, in equity or otherwise,
until a year and a day have passed since the date on which all pass-through
certificates or other similar securities issued by the Trust Fund, or a trust or
similar vehicle formed by Purchaser, have been paid in full. The Seller and
Purchaser agree that damages will not be an adequate remedy for such breach and
that this covenant may be specifically enforced by Purchaser or by the Trustee
on behalf of the Trust Fund.
Section 3.3 Indemnification. (a) The Seller shall defend, indemnify
and hold harmless Purchaser, the Depositor, the Trustee, the Certificateholders
and the Certificate
8
<PAGE>
Insurer from and against any and all costs, expenses, losses, damages, claims,
and liabilities, arising out of or resulting from any breach of any of the
Seller's representations and warranties contained herein.
(b) The Seller shall defend, indemnify and hold harmless Purchaser,
the Depositor, the Trustee, the Certificateholders and the Certificate
Insurer from and against any and all costs, expenses, losses, damages,
claims, and liabilities, arising out of or resulting, from the use,
ownership or operation by the Seller or any affiliate thereof of a
Mortgaged Property.
(c) The Seller will defend and indemnify Purchaser, the Depositor,
the Trustee, the Certificate Insurer and the Certificateholders against
any and all costs, expenses, losses, damages, claims and liabilities
arising out of or resulting from any action taken, or any action failed to
be taken that is required to be taken under this Agreement, by it in
respect of any portion of the Trust Fund other than in accordance with
this Agreement.
(d) The Seller agrees to pay, and shall defend, indemnify and hold
harmless Purchaser, the Depositor, the Trustee, the Certificateholders and
the Certificate Insurer from and against any taxes that may at any time be
asserted against Purchaser, the Depositor, the Trustee, the
Certificateholders or the Certificate Insurer with respect to the
transactions contemplated in this Agreement, including, without
limitation, any sales, gross receipts, general corporation, tangible or
intangible personal property, privilege, or license taxes (but, not
including any taxes asserted with respect to, and as of the date of, the
sale, transfer and assignment of the Mortgage Loans and the Other Conveyed
Property to Purchaser, the conveyance of the Mortgage Loans or Other
Conveyed Property under the Unaffiliated Seller's Agreement and the
conveyance of the Trust Fund to the Trustee or the issuance and original
sale of the Certificates, or asserted with respect to ownership of the
Mortgage Loans and Other Conveyed Property or the Trust Fund which shall
be indemnified by each Seller pursuant to clause (e) below, or federal,
state or other income taxes, arising out of distributions on the
Certificates or transfer taxes arising in connection with the transfer of
Certificates) and costs and expenses in defending against the same,
arising by reason of the acts to be performed by the Seller under this
Agreement or imposed against such Persons.
(e) The Seller agrees to pay, and to indemnify, defend and hold
harmless Purchaser, the Depositor, the Trustee, the Certificateholders and
the Certificate Insurer from, any taxes which may at any time be asserted
against such Persons with respect to, and as of the date of, the
conveyance or ownership of the Mortgage Loans or the Other Conveyed
Property hereunder, the conveyance or ownership of the Mortgage Loans or
Other Conveyed Property under the Unaffiliated Seller's Agreement and the
conveyance or ownership of the Trust Fund under the Pooling and Servicing
Agreement or the issuance and original sale of the Certificates,
including, without limitation, any sales, gross receipts, personal
property, tangible or intangible personal property, privilege or license
taxes (but not including any federal or other income taxes, including
franchise taxes, arising out of the transactions contemplated hereby or
transfer taxes arising in connection with the transfer of Certificates)
and costs and expenses in defending against
9
<PAGE>
the same, arising by reason of the acts to be performed by each Seller
under this Agreement or imposed against such Persons.
(f) The Seller shall defend, indemnify, and hold harmless Purchaser,
the Depositor, the Trustee, the Certificateholders and the Certificate
Insurer from and against any and all costs, expenses, losses, claims,
damages, and liabilities to the extent that such cost, expense, loss,
claim, damage, or liability arose out of, or was imposed upon Purchaser,
the Depositor, the Trustee, the Certificateholders and the Certificate
Insurer through, the negligence, willful misfeasance, or bad faith of the
Seller in the performance of its duties under this Agreement or by reason
of reckless disregard of each Seller's obligations and duties under this
Agreement.
(g) The Seller shall indemnify, defend and hold harmless Purchaser,
the Depositor, the Trustee, the Certificate Insurer and the
Certificateholders from and against any loss, liability or expense
incurred by reason of the violation by the Seller of federal or state
securities laws in connection with the registration or the sale of the
Certificates.
(h) The Seller shall indemnify, defend and hold harmless Purchaser,
the Depositor, the Trustee, the Certificate Insurer and the
Certificateholders from and against any loss, liability or expense imposed
upon, or incurred by, Purchaser, the Depositor, the Trustee, the
Certificate Insurer or the Certificateholders as a result of the failure
of any Mortgage Loan, or the sale of the related Mortgage Property to
comply with all requirements of applicable law.
Indemnification under this Section 3.3 shall include reasonable fees
and expenses of counsel and expenses of litigation and shall survive termination
of the Trust Fund. The indemnity obligations hereunder shall be in addition to
any obligation that the Seller may otherwise have.
Section 3.4 Representations and Warranties of Emergent Group.
Emergent Group hereby represents and warrants to the Purchaser as of the date of
execution of this Agreement, as of the Closing Date and as of each Pre-Funded
Loan Transfer Date, that:
(a) Emergent Group is a corporation duly organized, validly existing
and in good standing under the laws of the State of South Carolina;
(b) Emergent Group has the corporate power and authority to execute,
deliver and perform, and to enter into and consummate all the transactions
contemplated by this Agreement;
(c) This Agreement has been duly and validly authorized, executed
and delivered by Emergent Group, and constitutes the legal, valid and
binding agreement of Emergent Group, enforceable against Emergent Group in
accordance with its terms, except as such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting the rights of creditors generally, and by general
equity principles (regardless of whether such enforcement is considered in
a proceeding in equity or at law);
10
<PAGE>
(d) No consent, approval, authorization or order of or registration
or filing with, or notice to, any governmental authority or court is
required for the execution, delivery and performance of or compliance by
Emergent Group with this Agreement or the consummation by it of any of the
transactions contemplated hereby or thereby, except such as have been made
on or prior to the Closing Date;
(e) None of the execution and delivery of this Agreement, the
consummation of the other transactions contemplated hereby, or the
fulfillment of or compliance with the terms and conditions of this
Agreement, (i) conflicts or will conflict with the charter or bylaws of
Emergent Group or conflicts or will conflict with or results or will
result in a breach of, or constitutes or will constitute a default or
results or will result in an acceleration under, any term, condition or
provision of any material indenture, deed of trust, contract or other
agreement or other instrument to which Emergent Group is a party or by
which it is bound and which is material to Emergent Group, or (ii) results
or will result in a violation of any law, rule, regulation, order,
judgment or decree of any court or governmental authority having
jurisdiction over Emergent Group.
ARTICLE IV
COVENANTS OF THE SELLER
Section 4.1 Protection of Title of Purchaser, the Depositor and the
Trust.
(a) At or prior to the Closing Date or relevant Pre-Funded Loan
Transfer Date, as the case may be, the Seller shall have filed or caused
to be filed a UCC-1 financing statement, executed by the Seller as seller
or debtor, naming Purchaser as purchaser or secured party and describing
the Mortgage Loans and the Other Conveyed Property being sold by it to
Purchaser as collateral, with the office of the Secretary of State of the
State of South Carolina and in such other locations as Purchaser shall
have required. From time to time thereafter, the Seller shall execute and
file such financing statements and cause to be executed and filed such
continuation statements, all in such manner and in such places as may be
required by law fully to preserve, maintain and protect the interest of
Purchaser under this Agreement, of the Depositor under the Unaffiliated
Seller's Agreement and of the Trustee under the Pooling and Servicing
Agreement in the Mortgage Loans and the Other Conveyed Property, as the
case may be, and in the proceeds thereof. The Seller shall deliver (or
cause to be delivered) to Purchaser, the Depositor, the Trustee, and the
Certificate Insurer file-stamped copies of, or filing receipts for, any
document filed as provided above, as soon as available following such
filing. In the event that each Seller fails to perform its obligations
under this subsection, Purchaser, the Depositor or the Trustee may do so,
at the expense of the Seller.
(b) The Seller shall not change its name, identity, or corporate
structure in any manner that would, could or might make any financing
statement or continuation statement filed by the Seller (or by Purchaser
or the Trustee on behalf of the Seller) in accordance with paragraph (a)
above seriously misleading within the meaning of ss. 9-402(7) of the UCC,
unless the Seller shall have given Purchaser, the Depositor, the Trustee
and the Certificate Insurer at least 60 days prior written notice thereof,
and shall
11
<PAGE>
promptly file appropriate amendments to all previously filed financing
statements and continuation statements.
(c) The Seller shall give Purchaser, the Depositor, the Certificate
Insurer (so long as an Insurer Default shall not have occurred and be
continuing) and the Trustee at least 60 days prior written notice of any
relocation of its principal executive office if, as a result of such
relocation, the applicable provisions of the UCC would require the filing
of any amendment of any previously filed financing or continuation
statement or of any new financing statement. The Seller shall at all times
maintain each office from which it services Mortgage Loans and its
principal executive office within the United States of America.
(d) The Seller shall maintain its computer systems so that, from and
after the time of sale under this Agreement of the Mortgage Loans to
Purchaser, the conveyance of the Mortgage Loans by Purchaser to the
Depositor and the conveyance of the Mortgage Loans by the Depositor to the
Trustee on behalf of the Certificateholders and the Certificate Insurer,
the Seller's master computer records (including archives) that shall refer
to a Mortgage Loan indicate clearly that such Mortgage Loan has been sold
to Purchaser and has been conveyed by Purchaser to the Depositor and by
the Depositor to the Trustee on behalf of the Certificateholders and the
Certificate Insurer. Indication of the Trustee's ownership of a Mortgage
Loan shall be deleted from or modified on each Seller's computer systems
when, and only when, the Mortgage Loan shall become a Deleted Mortgage
Loan, shall have been repurchased or shall have been paid in full.
(e) If at any time the Seller shall propose to sell, grant a
security interest in, or otherwise transfer any interest in mortgage loans
to any prospective purchaser, lender or other transferee, the Seller shall
give to such prospective purchaser, lender, or other transferee computer
tapes, records, or print-outs (including any restored from archives) that,
if they shall refer in any manner whatsoever to any Mortgage Loan shall
indicate clearly that such Mortgage Loan has been sold to Purchaser, sold
by Purchaser to the Depositor, and is owned by the Trust Fund.
Section 4.2 Other Liens or Interests. Except for the conveyances
hereunder, the Seller will not sell, pledge, assign or transfer to any other
Person, or grant, create, incur, assume or suffer to exist any Lien on the
Mortgage Loans or the Other Conveyed Property or any interest therein, and the
Seller shall defend the right, title, and interest of Purchaser, the Depositor
and the Trustee in and to the Mortgage Loans and the Other Conveyed Property
against all claims of third parties claiming through or under the Seller.
Section 4.3 Costs and Expenses. The Seller shall pay all reasonable
costs and disbursements in connection with the performance of its obligations
hereunder and its Related Documents.
12
<PAGE>
ARTICLE V
REPURCHASES
Section 5.1 Repurchase of Mortgage Loans Upon Breach of Warranty.
Upon the occurrence of a Seller Repurchase Event, the Seller shall, unless
such breach shall have been cured in all material respects, repurchase the
related Mortgage Loan from the Trustee within 60 days following discovery
or notice to the Seller of such breach pursuant to Section 2.04 of the
Pooling and Servicing Agreement and the Seller shall pay the Purchase
Price to the Trustee as provided in the Pooling and Servicing Agreement.
In lieu of repurchasing any such Mortgage Loan, the Seller may cause such
Mortgage Loan to be removed from the Trust Fund and substitute one or more
Qualified Substitute Mortgage Loans in the manner provided in Section 2.05
of the Pooling and Servicing Agreement. To the extent the Seller fails to
effect its repurchase obligation, Emergent Group shall repurchase the
related Mortgage Loan and pay the Purchase Price to the Trustee on such
date. The provisions of this Section 5.1 are intended to grant the Trustee
a direct right against the Seller to demand performance hereunder, and in
connection therewith the Seller and Emergent Group waive any requirement
of prior demand against the Depositor or Purchaser with respect to such
repurchase or substitution obligation. Any such purchase or substitution
resulting from a Seller Repurchase Event shall take place in the manner
specified in Section 2.05 of the Pooling and Servicing Agreement.
Notwithstanding any other provision of this Agreement or the Pooling and
Servicing Agreement to the contrary, the obligation of the Seller and
Emergent Group under this Section shall be performed in accordance with
the terms hereof notwithstanding the failure of the Servicer, the
Unaffiliated Seller and the Depositor to perform any of their respective
obligations with respect to such Mortgage Loan under the Pooling and
Servicing Agreement.
(b) In addition to the foregoing, the Seller shall promptly purchase
from Purchaser (or provide for the substitution of a Qualified Substitute
Mortgage Loan) any Mortgage Loan repurchased by Purchaser (in its capacity
as Seller under the Unaffiliated Seller's Agreement) upon the occurrence
of an Unaffiliated Seller Repurchase Event (as defined therein) involving
a breach by Purchaser (in its capacity as Seller under the Unaffiliated
Seller's Agreement) pursuant to Section 3.05 of the Unaffiliated Seller's
Agreement.
(c) In addition to the foregoing and notwithstanding whether the
related Mortgage Loan shall have been purchased by the Seller or Emergent
Group, the Seller shall indemnify the Trustee, the Depositor, the
Certificate Insurer and the Certificateholders against all costs,
expenses, losses, damages, claims and liabilities, including reasonable
fees and expenses of counsel, which may be asserted against or incurred by
any of them as a result of third party claims arising out of the events or
facts giving rise to a repurchase or substitution under Section 2.05 of
the Pooling and Servicing Agreement Section 3.05 of the Unaffiliated
Seller's Agreement or this Section 5.1 hereof.
Section 5.2 Reassignment of Purchased Mortgage Loans. Upon deposit
in the Collection Account of the Purchase Price of any Mortgage Loan repurchased
by the Seller or the
13
<PAGE>
substitution of a Qualified Substitute Mortgage Loan under Section 5.1 hereof,
the Servicer and the Trustee shall take such steps as may be reasonably
requested by the Seller in order to assign to the Seller all of Purchaser's, the
Depositor's and the Trustee's right, title and interest in and to such
repurchased Mortgage Loan or Mortgage Loan for which substitution was made and
all security and documents and all Other Conveyed Property conveyed to
Purchaser, the Depositor and the Trustee directly relating thereto, without
recourse, representation or warranty, except as to the absence of liens, charges
or encumbrances created by or arising as a result of actions of Purchaser, the
Depositor or the Trustee. Such assignment shall be a sale and assignment
outright, and not for security. If, following the reassignment of a Mortgage
Loan, in any enforcement suit or legal proceeding, it is held that the Seller
may not enforce any such Mortgage Loan on the ground that it shall not be a real
party in interest or a holder entitled to enforce the Mortgage Loan, the
Servicer and the Trustee shall, at the expense of the Seller, take such steps as
the Seller deems reasonably necessary to enforce the Mortgage Loan, including
bringing suit in Purchaser's or the Trustee's name or the names of the
Certificateholders.
Section 5.3 Waivers. No failure or delay on the part of Purchaser,
the Depositor or the Trustee as assignee of Purchaser, in exercising any power,
right or remedy under this Agreement shall operate as a waiver thereof, nor
shall any single or partial exercise of any such power, right or remedy preclude
any other or future exercise thereof or the exercise of any other power, right
or remedy.
ARTICLE VI
MISCELLANEOUS
Section 6.1 Liability of the Seller. The Seller shall be liable in
accordance herewith only to the extent of the obligations in this Agreement
specifically undertaken by the Seller and its representations and warranties.
Section 6.2 Merger or Consolidation of Any Seller or Purchaser. Any
corporation or other entity (i) into which the Seller, Purchaser or Emergent
Group may be merged or consolidated, (ii) resulting from any merger or
consolidation to which the Seller, Purchaser or Emergent Group is a party or
(iii) succeeding to the business of the Seller, Purchaser or Emergent Group, in
the case of Purchaser, which corporation has a certificate of incorporation
containing provisions relating to limitations on business and other matters
substantively identical to those contained in Purchaser's certificate of
incorporation, and in each of the foregoing cases such corporation shall execute
an agreement of assumption to perform every obligation of the Seller, Purchaser
or Emergent Group, as the case may be, under this Agreement, provided that,
whether or not such assumption agreement is executed, shall be the successor to
the Seller, Purchaser or Emergent Group, as the case may be, hereunder (without
relieving the Seller, Purchaser or Emergent Group of its responsibilities
hereunder, if it survives such merger or consolidation) without the execution or
filing of any document or any further act by any of the parties to this
Agreement. Notwithstanding the foregoing, so long as a Certificate Insurer
Default shall not have occurred and be continuing, Purchaser shall not merge or
consolidate with any other Person or permit any other Person to become the
successor to Purchaser's business without the prior written consent of the
Certificate Insurer. The Seller, Purchaser or Emergent Group shall promptly
inform the other party, the Trustee and, so long as a
14
<PAGE>
Certificate Insurer Default shall not have occurred and be continuing, the
Certificate Insurer of such merger, consolidation or purchase and assumption.
Notwithstanding the foregoing, as a condition to the consummation of the
transactions referred to in clauses (i), (ii) and (iii) above, (x) immediately
after giving effect to such transaction, no representation or warranty made
pursuant to Sections 3.1, 3.2 and 3.4 or covenant made pursuant to Section 3.3,
shall have been breached (for purposes hereof, such representations and
warranties shall speak as of the date of the consummation of such transaction)
and no event that, after notice or lapse of time, or both, would become an event
of default under the Insurance Agreement, shall have occurred and be continuing,
(y) the Seller, Purchaser or Emergent Group, as applicable, shall have delivered
to the Trustee an Officer's Certificate and an Opinion of Counsel each stating
that such consolidation, merger or succession and such agreement of assumption
comply with this Section 6.2 and that all conditions precedent, if any, provided
for in this Agreement relating to such transaction have been complied with, and
(z) the Seller, Purchaser or Emergent Group, as applicable, shall have delivered
to the Trustee an Opinion of Counsel, stating, in the opinion of such counsel,
either (A) all financing statements and continuation statements and amendments
thereto have been executed and filed that are necessary to preserve and protect
the interest of the Trustee in the Trust Fund and reciting the details of the
filings or (B) no such action shall be necessary to preserve and protect such
interest.
Section 6.3 Limitation on Liability of the Seller and Others. The
Seller and any director, officer, employee or agent of the Seller may rely in
good faith on the advice of counsel or on any document of any kind prima facie
properly executed and submitted by any Person respecting any matters arising
under this Agreement. The Seller shall not be under any obligation to appear in,
prosecute or defend any legal action that is not incidental to its obligations
under this Agreement or its Related Documents and that in its opinion may
involve it in any expense or liability.
Section 6.4 Amendment.
(a) This Agreement may be amended by the Seller, Purchaser and
Emergent Group, with the prior written consent of the Certificate Insurer
(so long as a Certificate Insurer Default shall not have occurred and be
continuing) but without the consent of the Trustee or any of the
Certificateholders (unless a Certificate Insurer Default shall have
occurred, in which event the consent of the Certificateholders with Voting
Rights equal to or in excess of 50% of the Voting Rights shall be
obtained) (i) to cure any ambiguity or (ii) to correct any provisions in
this Agreement; provided, however, that such action shall not, as
evidenced by an Opinion of Counsel delivered to the Trustee, adversely
affect in any material respect the interests of any Certificateholder.
(b) This Agreement may also be amended from time to time by the
Seller, Purchaser and Emergent Group with the prior written consent of the
Certificate Insurer (so long as a Certificate Insurer Default shall not
have occurred and be continuing) and with the consent of the Trustee and
Certificateholders having Voting Rights equal to or in excess of 50%, for
the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Agreement, or of modifying in
any manner the rights of the Certificateholders; provided, however, that
no such amendment shall (i) increase or reduce in any manner the amount
of, or accelerate or delay the timing of,
15
<PAGE>
collections of payments on Mortgage Loans or distributions that shall be
required to be made on any Certificate or the Pass-Through Rates or (ii)
reduce the aforesaid percentage required to consent to any such amendment
or any waiver hereunder, without the consent of the Holders of all
Certificates then outstanding.
(c) Prior to the execution of any such amendment or consent,
Emergent Group shall have furnished written notification of the substance
of such amendment or consent to each Rating Agency.
(d) Promptly after the execution of any such amendment or consent,
the Trustee shall furnish written notification of the substance of such
amendment or consent to each Certificateholder.
(e) It shall not be necessary for the consent of Certificateholders
pursuant to this Section to approve the particular form of any proposed
amendment or consent, but it shall be sufficient if such consent shall
approve the substance thereof. The manner of obtaining such consents and
of evidencing the authorization of the execution thereof by
Certificateholders shall be subject to such reasonable requirements as the
Trustee may prescribe, including the establishment of record dates. The
consent of any Holder of a Certificate given pursuant to this Section or
pursuant to any other provision of this Agreement shall be conclusive and
binding on such Holder and on all future Holders of such Certificate and
of any Certificate issued upon the transfer thereof or in exchange thereof
or in lieu thereof whether or not notation of such consent is made upon
the Certificate.
Section 6.5 Notices. All demands, notices and communications to any
of the Seller, Purchaser or Emergent Group hereunder shall be in writing,
personally delivered, or sent by telecopier (subsequently confirmed in writing),
reputable overnight courier or mailed by certified mail, return receipt
requested, and shall be deemed to have been given upon receipt (a) in the case
of the Seller, to Emergent Mortgage Corp., 50 Datastream Plaza, Suite 201,
Greenville, South Carolina 29605, Attention: Laird Minor, (b) in the case of
Emergent Group, to Emergent Group, Inc., 15 South Main Street, Suite 750,
Greenville, South Carolina 29601, Attention: Kevin J. Mast, or (c) in the case
of Purchaser, to Emergent Mortgage Holdings Corporation, 44 East Camperdown Way,
Greenville, South Carolina 29601, Attention: William P. Crawford, Jr.
Section 6.6 Merger and Integration. Except as specifically stated
otherwise herein, this Agreement, the Pooling and Servicing Agreement and the
Related Documents set forth the entire understanding of the parties relating to
the subject matter hereof, and all prior understandings, written or oral, are
superseded by this Agreement, the Pooling and Servicing Agreement and the
Related Documents. This Agreement may not be modified, amended, waived or
supplemented except as provided herein.
Section 6.7 Severability of Provisions. If any one or more of the
covenants, provisions or terms of this Agreement shall be for any reason
whatsoever held invalid, then such covenants, provisions or terms shall be
deemed severable from the remaining covenants,
16
<PAGE>
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement.
Section 6.8 Intention of the Parties. The execution and delivery of
this Agreement shall constitute an acknowledgment by the Seller and Purchaser
that they intend that the assignment and transfer herein contemplated constitute
a sale and assignment outright, and not for security, of the Mortgage Loans and
the Other Conveyed Property conveying good title thereto free and clear of any
Liens, from the Seller to Purchaser, and that none of the Mortgage Loans and the
Other Conveyed Property shall be a part of the Seller's estate in the event of
the bankruptcy, reorganization, arrangement, insolvency or liquidation
proceeding, or other proceeding under any federal or state bankruptcy or similar
law, or the occurrence of another similar event, of, or with respect to, the
Seller. In the event that such conveyance is determined to be made as security
for a loan made by Purchaser, the Depositor, the Trustee or the
Certificateholders to the Seller, as applicable, the parties intend that the
Seller shall have granted to Purchaser a security interest in all right, title
and interest in and to the Mortgage Loans and the Other Conveyed Property
conveyed pursuant to Section 2.1 hereof, and that this Agreement shall
constitute a security agreement under applicable law.
Section 6.9 Governing Law. This Agreement shall be construed in
accordance with, the laws of the State of New York without regard to the
principles of conflicts of laws thereof and the obligations, rights and remedies
of the parties under this Agreement shall be determined in accordance with such
laws.
Section 6.10 Counterparts. For the purpose of facilitating the
execution of this Agreement and for other purposes, this Agreement may be
executed simultaneously in any number of counterparts, each of which
counterparts shall be deemed to be an original, and all of which counterparts
shall constitute but one and the same instrument.
Section 6.11 Conveyance of the Mortgage Loans and the Other Conveyed
Property to the Trust. The Seller acknowledges that Purchaser intends, pursuant
to the Unaffiliated Seller's Agreement, to convey the Initial Mortgage Loans,
the Additional Mortgage Loans and the Other Conveyed Property relating thereto,
together with its respective rights under this Agreement, to the Depositor on
the date hereof, and with respect to the Pre-Funded Mortgage Loans, on the
respective Pre-Funded Loan Transfer Dates therefor, and that the Depositor
intends, pursuant to the Pooling and Servicing Agreement, to convey such
Mortgage Loans and the Other Conveyed Property, together with its respective
rights under this Agreement, to the Trustee on the date hereof or, in the case
of such Pre-Funded Mortgage Loans, on such Pre-Funded Loan Transfer Dates, as
the case may be. The Seller acknowledges and consents to such conveyance and
waives any further notice thereof and covenants and agrees that the
representations and warranties of the Seller contained in this Agreement and the
rights of Purchaser hereunder are intended to benefit the Depositor, the
Certificate Insurer, the Trustee and the Certificateholders. In furtherance of
the foregoing, the Seller covenants and agrees to perform its duties and
obligations hereunder, in accordance with the terms hereof for the benefit of
the Depositor, the Certificate Insurer, the Trustee and the Certificateholders
and that, notwithstanding anything to the contrary in this Agreement, the Seller
shall be directly liable to the Trustee, the Certificate Insurer and the
Certificateholders (notwithstanding any failure by the Servicer or Purchaser to
perform its duties and obligations hereunder or under the Pooling and
17
<PAGE>
Servicing Agreement) and that the Trustee may enforce the duties and obligations
of the Seller under this Agreement against the Seller for the benefit of the
Certificate Insurer, the Trustee and the Certificateholders.
Section 6.12 Nonpetition Covenant. Until one year and one day after
the termination of the Trust Fund, neither the Seller, nor Emergent Group nor
the Purchaser shall petition or otherwise invoke the process of any court or
government authority for the purpose of commencing or sustaining a case against
the Trust Fund (or, in the case of the Seller and Emergent Group, against
Purchaser) under any federal or state bankruptcy, insolvency or similar law or
appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or
other similar official of the Trust Fund (or Purchaser) or any substantial part
of its property, or ordering the winding up or liquidation of the affairs of the
Trust Fund (or Purchaser).
Section 6.13 Miscellaneous. The parties agree that each of the
Certificate Insurer, the Depositor and the Trustee is an intended third-party
beneficiary of this Agreement to the extent necessary to enforce the rights and
to obtain the benefit of the remedies of the Purchaser under this Agreement
which are assigned to the Depositor pursuant to the Unaffiliated Seller's
Agreement and to the Trustee for the benefit of the Certificateholders pursuant
to the Pooling and Servicing Agreement and to the extent necessary to obtain the
benefit of the enforcement of the obligations and covenants of the Seller under
Section 3.3 and 5.1 of this Agreement.
18
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed by their respective officers as of the day and year first above
written.
EMERGENT MORTGAGE HOLDINGS
CORPORATION, as Purchaser
By:
----------------------------------------
Name: Kevin J. Mast
Title: Vice President, CFO and Treasurer
EMERGENT MORTGAGE CORP., as Seller
By:
----------------------------------------
Name: J. Phil Cox
Title: Executive Senior Vice President
EMERGENT GROUP, INC.
By:
----------------------------------------
Name: Kevin J. Mast
Title: Vice President, CFO and Treasurer
19
<PAGE>
SCHEDULE OF MORTGAGE LOANS CONVEYED
SCHEDULE A
A-1
<PAGE>
SCHEDULE B
SCHEDULE OF REPRESENTATIONS
1. The information with respect to each Mortgage Loan set forth in
the Schedule of Mortgage Loans is true and correct as of the related Cut-off
Date;
2. All of the original or certified documentation required to be
delivered to the Trustee pursuant to the Pooling and Servicing Agreement
(including all material documents related thereto) with respect to each Mortgage
Loan has been or will be delivered to the Trustee in accordance with the terms
of such Pooling and Servicing Agreement. Each of the documents and instruments
specified to be included therein has been duly executed and in due and proper
form, and each such document or instrument is in a form generally acceptable to
prudent mortgage lenders that regularly originate or purchase mortgage loans
comparable to the Mortgage Loans for sale to prudent investors in the secondary
market that invest in mortgage loans such as the Mortgage Loans.
3. Each Mortgaged Property is improved by a single (one-to-four)
family residential dwelling, which may include condominiums, townhouses and
units in planned unit developments, or manufactured housing, but shall not
include cooperatives;
4. No Mortgage Loan had a Loan-to-Value Ratio in excess of 98.01%;
5. Each Mortgage is a valid and subsisting first lien of record on
the Mortgaged Property subject in all cases to the exceptions to title set forth
in the title insurance policy, with respect to the related Mortgage Loan, which
exceptions are generally acceptable to banking institutions in connection with
their regular mortgage lending activities, and such other exceptions to which
similar properties are commonly subject and which do not individually, or in the
aggregate, materially and adversely affect the benefits of the security intended
to be provided by such Mortgage;
6. Immediately prior to the transfer and assignment herein
contemplated, the Seller held good and indefeasible title to, and was the sole
owner of, each Mortgage Loan conveyed by it subject to no liens, charges,
mortgages, encumbrances or rights of others except liens which will be released
simultaneously with such transfer and assignment; and immediately upon the
transfer and assignment herein contemplated, the Purchaser will hold good and
indefeasible title to, and be the sole owner of, each Mortgage Loan subject to
no Liens, except Liens which will be released simultaneously with such transfer
and assignment and subordinate Liens on the related Mortgaged Property;
7. As of the related Cut-off Date, no Initial Mortgage Loan is 30 or
more days delinquent and no Additional Mortgage Loan or Pre-Funded Mortgage Loan
is 60 or more days delinquent.
B-1
<PAGE>
8. There is no delinquent tax or assessment lien on any Mortgaged
Property, and each Mortgaged Property is free of substantial damage and is in
good repair;
9. There is no valid and enforceable right of rescission, offset,
defense or counterclaim to any Mortgage Note or Mortgage, including the
obligation of the related Mortgagor to pay the unpaid principal of or interest
on such Mortgage Note or the defense of usury, nor will the operation of any of
the terms of the Mortgage Note or the Mortgage, or the exercise of any right
thereunder, render either the Mortgage Note or the Mortgage unenforceable in
whole or in part, or subject to any right of rescission, set-off, counterclaim
or defense, including the defense of usury, and no such right of rescission,
set-off, counterclaim or defense has been asserted with respect thereto;
10. There is no mechanics' lien or claim for work, labor or material
affecting any Mortgaged Property which is or may be a lien prior to, or equal
with, the lien of the related Mortgage except those which are insured against by
any title insurance policy referred to in paragraph 12 below;
11. Each Mortgage Loan at the time it was made complied in all
material respects with all applicable state and federal laws and regulations,
including, without limitation, the federal Truth-in-Lending Act and other
consumer protection laws, real estate settlement procedure, usury, equal credit
opportunity, disclosure and recording laws;
12. With respect to each Mortgage Loan, a lender's title insurance
policy, issued in standard American Land Title Association form, or other form
acceptable in a particular jurisdiction by a title insurance company authorized
to transact business in the state in which the related Mortgaged Property is
situated, in an amount at least equal to the initial Stated Principal Balance of
such Mortgage Loan insuring the mortgagee's interest under the related Mortgage
Loan as the holder of a valid first mortgage lien of record on the real property
described in the related Mortgage, as the case may be, subject only to
exceptions of the character referred to in paragraph 5 above, was effective on
the date of the origination of such Mortgage Loan, and, as of the Cut-off Date
such policy will be valid and thereafter such policy shall continue in full
force and effect;
13. The improvements upon each Mortgaged Property are covered by a
valid and existing hazard insurance policy (which may be a blanket policy of the
type described in the related Pooling and Servicing Agreement) with a generally
acceptable carrier that provides for fire and extended coverage representing
coverage not less than the least of (A) the outstanding principal balance of the
related Mortgage Loan and (B) the minimum amount required to compensate for
damage or loss on a replacement cost basis;
14. If any Mortgaged Property is in an area identified in the
Federal Register by the Federal Emergency Management Agency as having special
flood hazards, a flood insurance policy (which may be a blanket policy of the
type described in the Pooling and Servicing Agreement) in a form meeting the
requirements of the current guidelines of the Federal Insurance Administration
is in effect with respect to such Mortgaged Property with a generally acceptable
carrier in an amount representing coverage not less than the least of (A) the
2
<PAGE>
outstanding principal balance of the related Mortgage Loan and (B) the maximum
amount of insurance that is available under the Flood Disaster Protection Act of
1973;
15. Each Mortgage and Mortgage Note is the legal, valid and binding
obligation of the maker thereof and is enforceable in accordance with its terms,
except only as such enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity (whether
considered in a proceeding or action in equity or at law), and all parties to
each Mortgage Loan had full legal capacity to execute all documents relating to
such Mortgage Loan and convey the estate therein purported to be conveyed;
16. The Seller has caused and will cause to be performed any and all
acts required to be performed to preserve the rights and remedies of the
servicer in any insurance policies applicable to any Mortgage Loans delivered by
the Seller including, to the extent such Mortgage Loan is not covered by a
blanket policy described in the Pooling and Servicing Agreement, any necessary
notifications of insurers, assignments of policies or interests therein, and
establishments of co-insured, joint loss payee and mortgagee rights in favor of
the servicer;
17. Each original Mortgage was recorded or is in the process of
being recorded, and all subsequent assignments of the original Mortgage have
been recorded (or are in the process of being recorded) in the appropriate
jurisdictions wherein such recordation is necessary to perfect the lien thereof
for the benefit of the Trustee, subject to the provisions of Section 2.03 of the
Pooling and Servicing Agreement;
18. The terms of each Mortgage Note and each Mortgage have not been
impaired, altered or modified in any respect, except by a written instrument
which has been recorded, if necessary, to protect the interest of the owners and
which has been delivered to the Trustee;
19. The proceeds of each Mortgage Loan have been fully disbursed,
and there is no obligation on the part of the mortgagee to make future advances
thereunder. Any and all requirements as to completion of any on-site or off-site
improvements and as to disbursements of any escrow funds therefor have been
complied with. All costs, fees and expenses incurred in making or closing or
recording such Mortgage Loans have been paid;
20. Except as otherwise required by law or pursuant to the statute
under which the related Mortgage Loan was made, the related Mortgage Note is not
and has not been secured by any collateral, pledged account or other security
except the lien of the corresponding Mortgage;
21. No Mortgage Loan was originated under a buydown plan;
22. No Mortgage Loan provides for negative amortization, has a
shared appreciation feature, or other contingent interest feature;
23. Each Mortgaged Property is located in the state identified in
the Schedule of Mortgage Loans and consists of one or more parcels of real
property with a residential dwelling erected thereon;
3
<PAGE>
24. Each Mortgage contains a provision for the acceleration of the
payment of the unpaid principal balance of the related Mortgage Loan in the
event the related Mortgaged Property is sold without the prior consent of the
mortgagee thereunder;
25. Any advances made after the date of origination of a Mortgage
Loan but prior to the Cut-off Date, have been consolidated with the outstanding
principal amount secured by the related Mortgage, and the secured principal
amount, as consolidated, bears a single interest rate and single repayment term
reflected on the Schedule of Mortgage Loans. The consolidated principal amount
does not exceed the original principal amount of the related Mortgage Loan. No
Mortgage Note permits or obligates the Seller to make future advances to the
related Mortgagor at the option of the Mortgagor;
26. There is no proceeding pending or threatened for the total or
partial condemnation of any Mortgaged Property, nor is such a proceeding
currently occurring, and each Mortgaged Property is undamaged by waste, fire,
earthquake or earth movement, flood, tornado or other casualty, so as to affect
adversely the value of the Mortgaged Property as security for the Mortgage Loan
or the use for which the premises were intended;
27. All of the improvements of any Mortgaged Property lie wholly
within the boundaries and building restriction lines of such Mortgaged Property,
and no improvements on adjoining properties encroach upon such Mortgaged
Property, and, if a title insurance policy exists with respect to such Mortgaged
Property, are stated in such title insurance policy and affirmatively insured;
28. No improvement located on or being part of any Mortgaged
Property is in violation of any applicable zoning law or regulation. All
inspections, licenses and certificates required to be made or issued with
respect to all occupied portions of each Mortgaged Property and, with respect to
the use and occupancy of the same, including but not limited to certificates of
occupancy and fire underwriting certificates, have been made or obtained from
the appropriate authorities and such Mortgaged Property is lawfully occupied
under the applicable law;
29. With respect to each Mortgage constituting a deed of trust, a
trustee, duly qualified under applicable law to serve as such, has been properly
designated and currently so serves and is named in such Mortgage, and no fees or
expenses are or will become payable by the Seller or the Trust Fund to the
trustee under the deed of trust, except in connection with a trustee's sale
after default by the related Mortgagor;
30. Each Mortgage contains customary and enforceable provisions
which render the rights and remedies of the holder thereof adequate for the
realization against the related Mortgaged Property of the benefits of the
security, including (A) in the case of a Mortgage designated as a deed of trust,
by trustee's sale and (B) otherwise by judicial foreclosure. There is no
homestead or other exemption available which materially interferes with the
right to sell the related Mortgaged Property at a trustee's sale or the right to
foreclose the related Mortgage;
31. There is no default, breach, violation or event of acceleration
existing under any Mortgage or the related Mortgage Note and no event which,
with the passage of time
4
<PAGE>
or with notice and the expiration of any grace or cure period, would constitute
a default, breach, violation or event of acceleration; and neither the Seller or
the Purchaser has waived any default, breach, violation or event of
acceleration;
32. No instrument of release or waiver has been executed in
connection with any Mortgage Loan, and no Mortgagor has been released, in whole
or in part;
33. The credit underwriting guidelines applicable to each Mortgage
Loan conform in all material respects to the Seller's underwriting guidelines;
34. All parties to the Mortgage Note and the Mortgage had legal
capacity to execute the Mortgage Note and the Mortgage and each Mortgage Note
and Mortgage have been duly and properly executed by such parties;
35. The Seller has no actual knowledge that there exist on any
Mortgaged Property any hazardous substances, hazardous wastes or solid wastes,
as such terms are defined in the Comprehensive Environmental Response
Compensation and Liability Act, the Resource Conservation and Recovery Act of
1976, or other federal, state or local environmental legislation;
36. None of the Mortgage Loans shall be due from the United States
of America or any State or from any agency, department, subdivision or
instrumentality thereof;
37. At the Cut-off Date, no Mortgagor had been identified by the
Seller as being the subject of a current bankruptcy proceeding;
38. By the Closing Date, the Seller will have caused the portions of
the Seller's servicing records relating to the Initial Mortgage Loans and the
Additional Mortgage Loans to be clearly and unambiguously marked to show that
such Mortgage Loans have been sold to the Trust Fund and are owned by the Trust
Fund in accordance with the terms of the Pooling and Servicing Agreement, and by
each Pre-Funded Loan Transfer Date, the Seller will have caused the portions of
the Seller's servicing records relating to the related Pre-Funded Mortgage Loans
to be clearly and unambiguously marked to show that such Mortgage Loans
constitute part of the Trust Fund and are owned by the Trust in accordance with
the terms of the Pooling and Servicing Agreement;
39. No Mortgage Loan was originated in, or is subject to the laws
of, any jurisdiction the laws of which would make unlawful, void or voidable the
sale, transfer and assignment of such Mortgage Loan under this Agreement or
pursuant to transfers of the Certificates. The Seller has not entered into any
agreement with any account debtor that prohibits, restricts or conditions the
assignment of any portion of the Mortgage Loans;
40. All filings (including, without limitation, UCC filings)
required to be made by any Person and actions required to be taken or performed
by any Person in any jurisdiction to give the Trustee a first priority perfected
lien on, or ownership interest in, the Mortgage Loans and the proceeds thereof
and the other property of the Trust Fund have been made, taken or performed;
5
<PAGE>
41. The Seller has not done anything to convey any right to any
Person that would result in such Person having a right to payments due under the
Mortgage Loan or otherwise to impair the rights of the Trust Fund and the
Certificateholders in any Mortgage Loan or the proceeds thereof;
42. No Mortgage Loan is assumable (without the Seller's consent
which consent has not been given) by another Person in a manner which would
release the Mortgagor thereof from such Mortgagor's obligations to the Seller
with respect to such Mortgage Loan;
43. With respect to the Initial Mortgage Loans as of the Cut-off
Date: the aggregated Stated Principal Balance was $64,502,306.83; each of the
Stated Principal Balances was at least $13,000.00 but no more than $348,300.00:
the average Stated Principal Balance was $67,471.03; the Mortgage Rates were at
least 8.500% but no more than 14.890%; the weighted average Mortgage Rate was
11.109%; the original Loan-to-Value Ratios were at least 18.52% but no more than
98.01%; the weighted average original Loan-to-Value Ratio was 77.67%; the
remaining terms to stated maturity were at least 60 months but no more than 360
months; the weighted average remaining term to stated maturity was approximately
201 months; the original terms to stated maturity were at least 60 months but no
more than 361 months; the weighted average original term to stated maturity was
approximately 201 months; and no more than 0.59% of the Mortgage Loans are
secured by Mortgaged Properties located in any one postal ZIP code area; and
44. No selection procedures adverse to the Certificateholders or to
the Certificate Insurer have been utilized in selecting such Mortgage Loan from
all other similar Mortgage Loans originated by the Seller;
45. The related Mortgaged Property has not been subject to any
foreclosure proceeding or litigation;
46. There was no fraud involved in the origination of the Mortgage
Loan by the mortgagee or by the Mortgagor, any appraiser or any other party
involved in the origination of the Mortgage Loan; and
47. Each Mortgage File contains an appraisal of the Mortgaged
Property indicating an appraised value equal to the appraised value of such
Mortgaged Property on the Mortgage Loan Schedule. Each appraisal has been
performed in accordance with the requirements of FNMA or FHLMC.
48. Each Mortgage Loan is a "qualified mortgage" as defined in
Section 860G(a)(3) of the Code.
6
[Letterhead of Coopers & Lybrand L.L.P.]
CONSENT of INDEPENDENT ACCOUNTANTS
----------
We consent to the incorporation by reference in the Prospectus Supplement dated
September 17, 1997 (To Prospectus Dated June 10, 1997) of Emergent Mortgage
Corp. relating to the Emergent Home Equity Loan Trust 1997-3 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
September 23, 1997
- --------------------------------------------------------------------------------
- EMERGENT 1997-3
- Cut Off Date of Tape is 8/10/97
- FIXED RATE COLLATERAL
- $131,121,432.01
- --------------------------------------------------------------------------------
Number of Mortgage Loans: 1,919
Aggregate Unpaid Principal Balance: $131,121,432.01
Aggregate Original Principal Balance: $131,196,015.29
Weighted Average Gross Coupon: 11.188%
Gross Coupon Range: 8.500% - 15.170%
- --------------------------------------------------------------------------------
Average Unpaid Principal Balance: $68,328.00
Average Original Principal Balance: $68,366.87
Maximum Unpaid Principal Balance: $400,000.00
Minimum Unpaid Principal Balance: $10,849.23
Maximum Original Principal Balance: $400,000.00
Minimum Original Principal Balance: $10,849.23
Weighted Avg. Stated Rem. Term (LPD to Mat/Bln Date): 199.896
Stated Rem Term Range: 59.000 - 361.000
Weighted Average Age (First Pay thru Last Pay): 0.390
Age Range: 0.000 - 2.000
Weighted Average Original Term (to Mat/Bln Date): 200.287
Original Term Range: 60.000 - 361.000
Weighted Average Original LTV: 77.398
Original LTV Range: 12.000% - 95.000%
Weighted Average Combined LTV: 91.964
Combined LTV Range: 12.000% - 129.000%
- --------------------------------------------------------------------------------
<PAGE>
GROSS MORTGAGE INTEREST RATE RANGE
Percentage of
Aggregate Cut-Off Date
Gross Mortgage Number of Unpaid Aggregate
Interest Rate Mortgage Principal Principal
Range Loans Balance Balance
8.25% < Gross Coupon <= 8.50% 9 523,793.73 0.40
8.75% < Gross Coupon <= 9.00% 5 228,543.93 0.17
9.00% < Gross Coupon <= 9.25% 2 206,847.19 0.16
9.25% < Gross Coupon <= 9.50% 135 8,497,456.39 6.48
9.50% < Gross Coupon <= 9.75% 38 3,463,118.30 2.64
9.75% < Gross Coupon <= 10.00% 183 12,018,312.23 9.17
10.00% < Gross Coupon <= 10.25% 84 6,238,393.93 4.76
10.25% < Gross Coupon <= 10.50% 85 6,826,875.26 5.21
10.50% < Gross Coupon <= 10.75% 85 5,762,644.88 4.39
10.75% < Gross Coupon <= 11.00% 164 12,567,617.02 9.58
11.00% < Gross Coupon <= 11.25% 292 18,008,264.68 13.73
11.25% < Gross Coupon <= 11.50% 110 8,780,169.32 6.70
11.50% < Gross Coupon <= 11.75% 127 7,839,678.95 5.98
11.75% < Gross Coupon <= 12.00% 126 8,837,764.22 6.74
12.00% < Gross Coupon <= 12.25% 103 6,718,726.53 5.12
12.25% < Gross Coupon <= 12.50% 112 7,892,124.51 6.02
12.50% < Gross Coupon <= 12.75% 80 5,288,721.60 4.03
12.75% < Gross Coupon <= 13.00% 68 4,463,491.38 3.40
13.00% < Gross Coupon <= 13.25% 27 1,580,551.39 1.21
13.25% < Gross Coupon <= 13.50% 25 1,530,915.54 1.17
13.50% < Gross Coupon <= 13.75% 21 1,399,217.39 1.07
13.75% < Gross Coupon <= 14.00% 13 866,152.33 0.66
14.00% < Gross Coupon <= 14.25% 9 689,116.67 0.53
14.25% < Gross Coupon <= 14.50% 6 414,360.29 0.32
14.50% < Gross Coupon <= 14.75% 4 139,732.70 0.11
14.75% < Gross Coupon <= 15.00% 4 280,257.05 0.21
15.00% < Gross Coupon <= 15.25% 2 58,584.60 0.04
- --------------------------------------------------------------------------------
Total.......... 1919 $131,121,432.01 100.00%
================================================================================
REMAINING MONTHS TO STATED MATURITY
Percentage of
Aggregate Cut-Off Date
Number of Unpaid Aggregate
Mortgage Principal Principal
Remaining Term Loans Balance Balance
48 < Rem Term <= 60 10 282,379.50 0.22%
60 < Rem Term <= 72 4 228,788.89 0.17%
72 < Rem Term <= 84 12 493,952.20 0.38%
84 < Rem Term <= 96 8 293,115.65 0.22%
96 < Rem Term <= 108 4 382,620.93 0.29%
108 < Rem Term <= 120 99 5,283,826.51 4.03%
120 < Rem Term <= 132 20 1,021,089.31 0.78%
132 < Rem Term <= 144 22 1,282,519.12 0.98%
144 < Rem Term <= 156 7 432,181.38 0.33%
156 < Rem Term <= 168 5 320,087.14 0.24%
168 < Rem Term <= 180 1,192 81,089,787.20 61.84%
180 < Rem Term <= 192 162 11,694,374.18 8.92%
192 < Rem Term <= 204 1 80,000.23 0.06%
216 < Rem Term <= 228 1 56,537.20 0.04%
228 < Rem Term <= 240 182 13,419,082.33 10.23%
240 < Rem Term <= 252 18 1,347,586.42 1.03%
252 < Rem Term <= 264 1 100,915.60 0.08%
288 < Rem Term <= 300 13 1,026,372.08 0.78%
300 < Rem Term <= 312 1 218,623.86 0.17%
348 < Rem Term <= 360 140 10,767,187.98 8.21%
360 < Rem Term <= 370 17 1,300,404.30 0.99%
- ----------------------------------------------------------------------
Total............ 1,919 131,121,432.01 100.00%
======================================================================
<PAGE>
YEARS OF ORIGINATION
Percentage of
Aggregate Cut-Off Date
Number of Unpaid Aggregate
Year of Mortgage Principal Principal
Origination Loans Balance Balance
1997 1919 131,121,432.01 100.00
- --------------------------------------------------------------------------
Total................. 1919 $131,121,432.01 100.00%
==========================================================================
LOAN SUMMARY STRATIFIED BY
PAID THRU DATE
Percentage of
Aggregate Cut-Off Date
Number of Unpaid Aggregate
Mortgage Principal Principal
Loans Balance Balance
07/07/97 5 262,150.00 0.20
07/08/97 2 128,200.00 0.10
07/09/97 2 107,000.00 0.08
07/10/97 2 99,660.00 0.08
07/13/97 1 48,000.00 0.04
07/14/97 5 384,100.00 0.29
07/15/97 3 156,701.44 0.12
07/16/97 5 277,339.93 0.21
07/18/97 4 186,200.00 0.14
07/21/97 10 720,080.33 0.55
07/22/97 10 627,651.00 0.48
07/23/97 9 401,796.57 0.31
07/24/97 3 136,750.00 0.10
07/25/97 10 732,092.34 0.56
07/28/97 58 4,294,149.21 3.27
07/29/97 42 2,994,502.88 2.28
07/30/97 81 5,363,028.82 4.09
07/31/97 38 2,754,952.62 2.10
08/01/97 32 2,166,426.93 1.65
08/02/97 15 1,061,199.81 0.81
08/03/97 5 280,921.84 0.21
08/04/97 60 3,953,225.68 3.01
08/05/97 28 1,991,997.12 1.52
08/06/97 30 2,105,227.95 1.61
08/07/97 31 2,111,885.22 1.61
08/08/97 41 2,685,525.48 2.05
08/09/97 7 376,217.00 0.29
08/10/97 8 578,486.85 0.44
08/11/97 85 5,256,654.93 4.01
08/12/97 53 3,406,922.31 2.60
08/13/97 47 3,767,337.77 2.87
08/14/97 23 1,349,089.90 1.03
08/15/97 52 3,990,318.79 3.04
08/16/97 10 674,810.58 0.51
08/17/97 8 493,145.73 0.38
08/18/97 94 6,102,467.56 4.65
08/19/97 36 2,412,845.08 1.84
08/20/97 55 3,916,675.85 2.99
08/21/97 38 2,127,683.32 1.62
08/22/97 40 2,770,000.88 2.11
08/23/97 7 407,374.19 0.31
08/24/97 7 702,433.35 0.54
08/25/97 94 6,295,310.00 4.80
08/26/97 30 1,977,111.84 1.51
08/27/97 12 755,478.66 0.58
08/28/97 17 1,157,074.98 0.88
08/29/97 26 1,448,553.84 1.10
08/30/97 20 1,469,780.14 1.12
08/31/97 1 59,334.50 0.05
09/01/97 247 16,784,682.80 12.80
<PAGE>
LOAN SUMMARY STRATIFIED BY
PAID THRU DATE
Percentage of
Aggregate Cut-Off Date
Number of Unpaid Aggregate
Mortgage Principal Principal
Loans Balance Balance
09/02/97 22 1,716,057.50 1.31
09/03/97 27 1,789,505.12 1.36
09/04/97 25 1,982,103.62 1.51
09/05/97 6 526,020.00 0.40
09/08/97 43 2,817,609.86 2.15
09/09/97 27 1,933,942.22 1.47
09/10/97 33 2,261,638.71 1.72
09/11/97 10 697,012.20 0.53
09/12/97 34 2,621,024.16 2.00
09/14/97 1 296,303.85 0.23
09/15/97 76 5,508,714.40 4.20
09/16/97 30 2,237,913.40 1.71
09/17/97 36 2,423,030.95 1.85
- --------------------------------------------------------------------------
Total.................. 1919 $131,121,432.01 100.00%
==========================================================================
ORIGINAL LOAN-TO-VALUE RATIOS
Percentage of
Aggregate Cut-Off Date
Original Number of Unpaid Aggregate
Loan-To-Value Mortgage Principal Principal
Ratio Loans Balance Balance
10.000 < LTV <= 15.000 1 35,000.00 0.03
15.000 < LTV <= 20.000 3 229,241.00 0.17
20.000 < LTV <= 25.000 3 111,706.00 0.09
25.000 < LTV <= 30.000 4 136,621.54 0.10
30.000 < LTV <= 35.000 1 20,520.42 0.02
35.000 < LTV <= 40.000 6 207,978.51 0.16
40.000 < LTV <= 45.000 3 78,524.65 0.06
45.000 < LTV <= 50.000 10 281,276.94 0.21
50.000 < LTV <= 55.000 19 790,355.40 0.60
55.000 < LTV <= 60.000 32 1,354,678.24 1.03
60.000 < LTV <= 65.000 72 3,699,329.33 2.82
65.000 < LTV <= 70.000 316 18,973,687.40 14.47
70.000 < LTV <= 75.000 583 36,951,616.10 28.18
75.000 < LTV <= 80.000 511 33,690,014.36 25.69
80.000 < LTV <= 85.000 184 16,044,118.57 12.24
85.000 < LTV <= 90.000 170 18,453,908.71 14.07
90.000 < LTV <= 95.000 1 62,854.84 0.05
- --------------------------------------------------------------------------
Total.................... 1919 $131,121,432.01 100.00%
==========================================================================
<PAGE>
COMBINED LOAN-TO-VALUE RATIOS
Percentage of
Aggregate Cut-Off Date
Combined Number of Unpaid Aggregate
Loan-To-Value Mortgage Principal Principal
Ratio Loans Balance Balance
10.000 <Comb LTV<= 15.000 1 35,000.00 0.03
15.000 <Comb LTV<= 20.000 3 229,241.00 0.17
20.000 <Comb LTV<= 25.000 3 111,706.00 0.09
25.000 <Comb LTV<= 30.000 4 136,621.54 0.10
30.000 <Comb LTV<= 35.000 1 20,520.42 0.02
35.000 <Comb LTV<= 40.000 6 207,978.51 0.16
40.000 <Comb LTV<= 45.000 2 49,724.65 0.04
45.000 <Comb LTV<= 50.000 10 281,276.94 0.21
50.000 <Comb LTV<= 55.000 15 574,299.95 0.44
55.000 <Comb LTV<= 60.000 25 1,121,574.45 0.86
60.000 <Comb LTV<= 65.000 33 1,877,209.11 1.43
65.000 <Comb LTV<= 70.000 105 6,633,928.04 5.06
70.000 <Comb LTV<= 75.000 181 10,994,705.45 8.39
75.000 <Comb LTV<= 80.000 228 14,677,721.66 11.19
80.000 <Comb LTV<= 85.000 129 9,003,063.75 6.87
85.000 <Comb LTV<= 90.000 164 13,680,149.43 10.43
90.000 <Comb LTV<= 95.000 131 9,580,439.53 7.31
95.000 <Comb LTV<= 100.000 649 44,611,826.25 34.02
100.000 <Comb LTV<= 105.000 44 3,533,127.48 2.69
105.000 <Comb LTV<= 110.000 5 309,520.60 0.24
110.000 <Comb LTV<= 115.000 16 1,148,704.93 0.88
115.000 <Comb LTV<= 120.000 30 2,806,459.33 2.14
120.000 <Comb LTV<= 125.000 133 9,440,095.79 7.20
125.000 <Comb LTV<= 130.000 1 56,537.20 0.04
- --------------------------------------------------------------------------
Total.................... 1919 $131,121,432.01 100.00%
==========================================================================
CURRENT MORTGAGE LOAN AMOUNTS
Percentage of
Aggregate Cut-Off Date
Current Number of Unpaid Aggregate
Mortgage Loan Mortgage Principal Principal
Principal Balance Loans Balance Balance
10,000 < Balance <= 15,000 12 158,608.78 0.12
15,000 < Balance <= 20,000 10 177,870.91 0.14
20,000 < Balance <= 25,000 47 1,071,865.17 0.82
25,000 < Balance <= 30,000 60 1,664,961.23 1.27
30,000 < Balance <= 35,000 95 3,127,182.85 2.38
35,000 < Balance <= 40,000 120 4,500,218.91 3.43
40,000 < Balance <= 45,000 163 6,981,583.05 5.32
45,000 < Balance <= 50,000 153 7,272,224.73 5.55
50,000 < Balance <= 55,000 165 8,651,726.29 6.60
55,000 < Balance <= 60,000 173 9,968,433.39 7.60
60,000 < Balance <= 65,000 143 8,920,414.96 6.80
65,000 < Balance <= 70,000 122 8,260,130.15 6.30
70,000 < Balance <= 75,000 110 7,955,854.69 6.07
75,000 < Balance <= 80,000 92 7,154,635.05 5.46
80,000 < Balance <= 85,000 66 5,428,615.46 4.14
85,000 < Balance <= 90,000 43 3,780,840.40 2.88
90,000 < Balance <= 95,000 38 3,512,412.54 2.68
95,000 < Balance <= 100,000 54 5,277,330.76 4.02
100,000 < Balance <= 105,000 34 3,488,232.17 2.66
105,000 < Balance <= 110,000 27 2,903,561.85 2.21
110,000 < Balance <= 115,000 15 1,688,647.47 1.29
115,000 < Balance <= 120,000 26 3,064,467.81 2.34
120,000 < Balance <= 125,000 14 1,717,479.55 1.31
125,000 < Balance <= 130,000 18 2,295,346.47 1.75
130,000 < Balance <= 135,000 15 1,991,092.35 1.52
135,000 < Balance <= 140,000 9 1,236,176.29 0.94
140,000 < Balance <= 145,000 7 988,170.84 0.75
145,000 < Balance <= 150,000 6 882,760.95 0.67
150,000 < Balance <= 200,000 44 7,426,778.40 5.66
200,000 < Balance <= 250,000 24 5,395,610.37 4.11
250,000 < Balance <= 300,000 9 2,465,123.81 1.88
300,000 < Balance <= 350,000 4 1,313,074.36 1.00
350,000 < Balance <= 400,000 1 400,000.00 0.31
- --------------------------------------------------------------------------
Total.................... 1919 $ 131,121,432.01 100.00%
==========================================================================
<PAGE>
GEOGRAPHICAL DISTRIBUTION OF MORTGAGED PROPERTIES
Percentage of
Aggregate Cut-Off Date
Number of Unpaid Aggregate
Mortgage Principal Principal
State Loans Balance Balance
AK 1 44,250.00 0.03
AZ 51 3,677,462.91 2.80
CO 23 2,130,451.20 1.62
CT 1 212,500.00 0.16
DE 1 84,000.00 0.06
FL 174 10,239,466.73 7.81
GA 177 13,286,399.74 10.13
IA 12 574,015.44 0.44
ID 8 671,655.05 0.51
IL 41 4,359,569.62 3.32
IN 90 5,089,698.01 3.88
KS 10 701,334.92 0.53
KY 48 3,041,860.42 2.32
LA 147 9,437,497.42 7.20
MD 34 4,313,243.97 3.29
ME 1 52,412.95 0.04
MI 143 10,530,602.90 8.03
MO 3 232,380.43 0.18
MS 54 2,819,940.06 2.15
MT 4 314,351.22 0.24
NC 286 18,603,931.06 14.19
ND 1 33,000.00 0.03
NE 27 1,643,542.37 1.25
NM 16 1,104,103.91 0.84
OH 7 380,865.09 0.29
OK 21 948,936.60 0.72
OR 18 1,704,810.75 1.30
PA 1 145,800.00 0.11
RI 7 662,484.41 0.51
SC 229 14,034,131.48 10.70
SD 13 758,148.24 0.58
TN 152 9,750,112.27 7.44
UT 19 1,848,388.93 1.41
VA 85 6,867,821.51 5.24
WV 11 582,147.96 0.44
WY 3 240,114.44 0.18
- --------------------------------------------------------------------------
Total............... 1919 $ 131,121,432.01 100.00%
==========================================================================
PROPERTY TYPE DISTRIBUTION
Percentage of
Aggregate Cut-Off Date
Number of Unpaid Aggregate
Mortgage Principal Principal
Loans Balance Balance
Investor/Rental Property 66 4,567,190.37 3.48
Mobile/Manufactured Homes 254 13,428,110.72 10.24
Primary Financing Only 3 173,599.99 0.13
Residential Property 1596 112,952,530.93 86.14
- -----------------------------------------------------------------------------
Total............... 1919 $131,121,432.01 100.00%
=============================================================================
<PAGE>
LOAN SUMMARY STRATIFIED BY
OWNER OCCUPANCY
Percentage of
Aggregate Cut-Off Date
Number of Unpaid Aggregate
Mortgage Principal Principal
Loans Balance Balance
Owner Occ. 1844 126,129,689.64 96.19
Non Owner Occ. 75 4,991,742.37 3.81
- --------------------------------------------------------------------------
Total.................. 1919 $131,121,432.01 100.00%
==========================================================================
LOAN SUMMARY STRATIFIED BY
DOCUMENTATION LEVEL
Percentage of
Aggregate Cut-Off Date
Number of Unpaid Aggregate
Mortgage Principal Principal
Loans Balance Balance
Full Documentation 1848 126,063,973.53 96.14
Stated Documentation 24 1,609,181.02 1.23
Lite Documentation 47 3,448,277.46 2.63
- ---------------------------------------------------------------------------
Total.................. 1919 $131,121,432.01 100.00%
===========================================================================
LOAN SUMMARY STRATIFIED BY
LOAN PURPOSE
Percentage of
Aggregate Cut-Off Date
Number of Unpaid Aggregate
Mortgage Principal Principal
Loans Balance Balance
Purchase 252 17,741,033.40 13.53
Refinance/No ETO 188 13,281,312.85 10.13
Refinance/ETO 193 12,605,490.21 9.61
Home Improvement 12 585,455.97 0.45
Contract of Deed 17 671,469.38 0.51
Debt Consolidation 358 26,233,388.66 20.01
Workout 184 12,748,823.34 9.72
Personal Credit 245 16,187,895.78 12.35
Refi-ETO-No Appraisal 452 29,901,156.61 22.80
Code/No Doc. 18 1,165,405.81 0.89
- --------------------------------------------------------------------------
Total.................. 1919 $131,121,432.01 100.00%
==========================================================================
<PAGE>
LOAN GRADE DISTRIBUTION
Percentage of
Aggregate Cut-Off Date
Number of Unpaid Aggregate
Mortgage Principal Principal
Loans Balance Balance
AA 233 16,744,978.47 12.77
A 1160 81,926,407.51 62.48
B 380 24,595,266.12 18.76
C 146 7,854,779.91 5.99
- --------------------------------------------------------------------------
Total............... 1919 $131,121,432.01 100.00%
==========================================================================
LOAN SUMMARY STRATIFIED BY AMORTIZATION
Percentage of
Aggregate Cut-Off Date
Number of Unpaid Aggregate
Mortgage Principal Principal
AMORTIZATION Loans Balance Balance
Fully Amortizing 1404 92,194,812.77 70.31
Partially Amortizing 515 38,926,619.24 29.69
- --------------------------------------------------------------------------
Total.................. 1919 $131,121,432.01 100.00%
==========================================================================
DISTRIBUTION OF LOANS WHICH HAVE A SECOND
LIEN BEHIND THE SECURITIZED FIRST LIEN
Percentage of
Aggregate Cut-Off Date
Number of Unpaid Aggregate
Mortgage Principal Principal
Loans Balance Balance
NO 790 52,369,111.48 39.94
YES 1129 78,752,320.53 60.06
- --------------------------------------------------------------------------
Total............... 1919 $131,121,432.01 100.00%
==========================================================================
LOAN SUMMARY STRATIFIED BY
ORIGINATOR
Percentage of
Aggregate Cut-Off Date
Number of Unpaid Aggregate
Mortgage Principal Principal
Originator Loans Balance Balance
Greenville 337 22,174,359.15 16.91
Indiana Home 443 31,043,183.70 23.68
Phoenix Home 290 19,270,232.83 14.70
Sterling 85 4,567,919.88 3.48
Wholesale 764 54,065,736.45 41.23
- --------------------------------------------------------------------------
Total.................. 1919 $131,121,432.01 100.00%
==========================================================================
